OB &L (Lecture 2)

The tip for today :

“The achievements of an organization are the results
of the combined effort of each individual.”

Vince Lombardi
American Coach
 Plan 2
 Introduction
 Discussion:
 Organizational Structure
– Fundamental process
– Elements of OS
 Revision:
– Management, its content, basic functions, roles
– OB, OB History, its content
– Goals and objectives
– Wegmans
 Plan for the coming class –Quiz 1
 HW
 Qs
1. What is OB?
2. What it studies
3. History of development
4. Contribution of different disciplines
5. Factors affecting OB
6. Limitations
7. Objectives of OB
8. MNG
9. How has technology and the flattening world affected you in
the last 10 years? Please share examples of this.
10. Do you think the sustainability movement in business is a
trend that’s here to stay or a business fad? Why or why not?
11. Do you see the aging (and retiring) workforce as an
opportunity or a threat for businesses? How do you think this
will affect your career?
 Organizational structure
 …the division of labour as well as the patterns of
coordination, communication, work flow, formal power
that direct org activities
– S. McShane
 …the patters of jobs and groups withing an org
 .. It is a cause of individual and group behaviour
 Fundamental process
 Division of labor
 Coordination
 Division of labor

 … refers to subdivision of work into separate

jobs assigned to different people
 It leads to :
– Specialization (subset of tasks)
 Increased efficiency
 Decreased training costs
 Easy match of people to jobs
 Coordinating activity
 .. to ensure everyone works in concert.
 Three mechanisms:
– Informal communication
 Sharing info, common mental models and
 Can org cross functional teams, integrators
– Formal hierarchy
 Legitimate power to direct work and allocate recourses
 Can coordinate work among executives
– Standardization
 a) creating routine patter of behavior or output; b) via team goals or
service output; c) skills and training
 Elements of organizational structure
 Span of Control
– tall vs flat
 Centralization (de-)
 Formalization
– Mechanistic vs organic structure
 Departmentalization
– Simple; Functional; Divisional; Matrix; Hybrid;
Network.
 Span of Control
( as an element of organizational structure)
… number of people reporting directly to the next level
of hierarchy
 20 employees (Henry Fayol, etc.)
31 employees (best performing manufacturing entr.) or 37?
75 employees (scholars late XX c, e.g. Sheridan)
9-??
Vancom Zuid Limburg C (40 drivers vs 8 as average) – self
directed team
S of C depends on existence of other coordinating
mechanism
 Span of Control
(DB of SF: 4-3 mng level; 74-27 mng,
Royal mail:16- 6 levels))
 merits and demerits
 Tall  Flat

more opportunities for promotion which can

lead to greater staff motivation
staff gain more support from their line
manager
there is a higher degree of supervision as
each line manager has a limited number of
people they are responsible for
Disadvantages
many levels of hierarchy
span of control is narrow, and the chain of
command is long, making communication
slower as instructions take longer to travel
through the levels of the organisation
longer lines of communication can make
the firm less responsive to change
can be expensive to run due to high wage
 Tall vs Flat
Tall structure is an organizational Flat structure is an organizational
structure with many levels of hierarchy. structure with a limited number of
levels of hierarchy.
Span of Control
A narrow span of control is thin in a tall In a flat structure, the span of control is
structure. wide.
Structure
More time is taken to make decisions in Speed of decision making high in flat
a tall structure since there are many structures due to the wide span of
levels of personnel to consider. control.

Costs
Cost of managing a tall structure is Costs related to a flat structure is
costly since there are more layers of relatively low compared to a tall
staff structure.
Opportunity
Opportunity for promotion is high in a Limited opportunities are available for
tall structure. promotion in a flat structure.
 Centralization
 … the formal decision making authority is held by
small group of TM
 … retention of power and authority with respect to
planning and decisions
 Centralisation vs decentralisation
The decision-making authority The decision-making authority
is retained by the top order of is delegated among the
management subordinates
The process is slow as it passesThe process is fast as the
through a long chain of line decision is made by the
subordinates according to the
experience and situation
It does not enable subordinates The subordinate get the chance
to work freely to utilize their abilities and
knowledge to tackle a situation
There are too many burdens on There are fewer burdens
the top management
 Formalization
 ….is the degree to which organizations
standardize behavior by means of rules,
procedures, training and other mechanisms
 Merits: increased efficiency, ensuring security
 Demerits: reduced flexibility, decreased
productivity, feeling powerless
 Mechanistic vs organic structure
 Narrow span of  Wide..
command
 High degree of  Little formalization
formalization
 High degree of
 Decentralization
centralization
 Tall hierarchy
 Values knowledge
 Tasks are defined
 More suitable for
 Valuable is stable env .
changing environment
 Formalization
 Comparison of Mechanistic and Organic
structures Mechanistic
Process Organic

Leadership Includes no perceived confidence and includes

trust between superiors and
subordinates
Motivation Taps only physical, security, Full range of motives
economic motives (fear and (participatory methods)
sanctions)
Communication Downward flow, tends to be distorted, Freely flow, info is
inaccurate, viewed with suspicion by accurate, undistorted
subordinated
Interaction Closed and restricted, subordinates Open and extensive.
have little effect on goals, methods, Influence by both:
activity superiors and subordinates
 Formalization
Process Mechanistic Organic

Decision Relatively centralized; occurs at the Relatively decentralized. Occurs at

top of the org all levels though group processes

Goal setting Located at the top of the org, Encourages group participation in
discouraging group participation setting realistic obj.

Control Centralized. Emphasizes fixing Non centralized. Emphasizes self-

blame for mistakes control and problem solving

Performance Low and passively sought by mngs, High and actively sought by mngs,
goal no commitment to develop HR who recognize the need for
commitment via development of
HR
1. What are the advantages and disadvantages of
decentralization?
2. All else being equal, would you prefer to work in a tall
or flat organization? Why?
3. What are the advantages of departmentalization by
product?
4. Have you ever reported to more than one manager?
What were the challenges of such a situation?
 Planning for a Change in Org Structure
 Imagine that your company is switching to a matrix structure.
Before, you were working in a functional structure. Now, every
employee is going to report to a team leader as well as a
department manager.
• Draw a hypothetical organizational chart for the previous and
new structures.
• Create a list of things that need to be done before the change
occurs.
• Create a list of things that need to be done after the change
occurs.
• What are the sources of resistance you foresee for a change
such as this? What is your plan of action to overcome this
potential resistance?
Organizational Change Role Play (group
work)
Discussion Questions

Was the manager successful in securing the

cooperation of the employee? Why or why not?
What could the manager have done differently to
secure the employee’s cooperation?
Why was the employee resisting change?
 Ethical Dilemma
 Imagine that you are a manager at a consumer products company.
Your company is in negotiations for a merger. If and when the two
companies merge, it seems probable that some jobs will be lost, but
you have no idea how many or who will be gone. You have five
subordinates. One is in the process of buying a house while
undertaking a large debt. The second just received a relatively
lucrative job offer and asked for your opinion as his mentor. You feel
that knowing about the possibility of this merger is important to them
in making these life choices. At the same time, you fear that once you
let them know, everyone in the company will find out and the
negotiations are not complete yet. You may end up losing some of
your best employees, and the merger may not even happen. What do
you do? Do you have an ethical obligation to share this piece of news
with your employees? How would you handle a situation such as this?
 Key Takeaway
 The degree to which a company is centralized and formalized, the number of
levels in the company hierarchy, and the type of departmentalization the
company uses are key elements of a company’s structure. These elements of
structure affect the degree to which the company is effective and innovative as
well as employee attitudes and behaviors at work. These elements come
together to create mechanistic and organic structures. Rigid and bureaucratic,
mechanistic structures help companies achieve efficiency, while organic
structures, which are decentralized and flexible, aid companies in achieving
innovativeness. The changing environment of organizations creates the need
for newer forms of organizing. Matrix structures are a cross between
functional and product-based divisional structures. They facilitate information
flow and reduce response time to customers but have challenges, because each
employee reports to multiple managers. Boundaryless organizations blur the
boundaries between departments or the boundaries between the focal
organization and others in the environment. These organizations may take the
form of a modular organization, strategic alliance, or self-managing teams.
Learning organizations institutionalize experimentation and benchmarking.
 Home Assignment

Reading
 Ppt 1-2
 Ch 1-online (1-4):
 Ch 17 (McShane) uploaded
 Task
 What OB studies?
 … the power and organizational politics. If you don’t
understand these topics, you will struggle as an
employee, especially in large organizations.
 …and applies the knowledge gained from individuals,
groups, and the effect of structure on behavior in order to
make organizations work more effectively.
 … what people do in an organization and how that
behavior affects the performance of the organization.
 … the interrelation between an individual and an
organization
 Studies interrele (an individual and an
organization) in the following way:
1. OB helps to learn about thyself and how to deal with others
2. Organizational Behavior is a way of thinking.
3. Organizational Behavior is multidisciplinary and it
helps us multiple ways.
4. The field of organizational behavior is performance
oriented.
5. Organizational Behavior satisfies the need to
understand and predict.
6. It helps us to test personal theories.
 2
7. OB helps the mngs to understand the basis of
motivation and what he should do to motivate his
subordinates.
8. OB helps to maintain cordial industrial relations,
which help to increase the overall productivity.
9. The subject of OB is useful in the field of marketing.
10. This helps greatly in improving bur inter-personal
relations in the organizations and create friendly work
environment.
 Home Assignment

Reading
 Ppt 1-2
 Ch 1-online (1-4):
 Ch 17 (McShane) uploaded pp to 515
 Task, slide 18-(organic) Q: 2-5
 Fill in slide 10
 Cs: highly (De) centralised
 wegmans