Organizational Structure and Culture

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Chapter 13

• Organizational Structure and Culture

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Chapter Outline

• Fundamental Elements of Structure
• Factors Affecting Structure
• The Role of Strategy
• The Role of the Environment
• Elements of Organizational Culture

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Fundamental Elementsof Structure

• Organizational Structure formal system
• of work roles authority relationships
• Organizational chart is visual representation
• Used as a tool for change
• Support or inhibit communication/relationships

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Fundamental Elementsof Structure

• Coca-Cola decentralized its organizational
  structure by cutting half of its Atlanta
  headquarters staff and moving regional
  chieftains closer to their local markets.

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Fundamental Elementsof Structure

• Structural Characteristics
• Basic shape appearance of organizations
  hierarchy
• Structuring Characteristics
• Policies approaches used to directly affect
  behavior

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Fundamental Elementsof Structure

• Structural Characteristics
• Span of Control
• Height
• Departmentation
• Structuring Characteristics
• Centralization
• Standardization
• Formalization
• Specialization

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Fundamental Elements of Structure Structural
Characteristics

• Height
• Number of hierarchical levels in an organization,
  from CEO to lowest level
• Span of Control
• Number of employees a manager directly oversees

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Fundamental Elements of Structure Structural
Characteristics

• Narrow span of control
• Taller structure
• Communication problems
• Expensive
• Broad span of control
• Flatter structure
• Possible with similar tasks or routine jobs and
  self-directed teams

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Narrow Span
Broad Span
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Fundamental Elements of Structure Structural
Characteristics

• Forms of Departmentation
• Simple Structure
• Functional Structure
• Divisional Structure
• Matrix Structure
• Network Structure

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Fundamental Elements of Structure Structural
Characteristics

• Simple Structure
• The Alaska Chip Company
• Few employees
• Minimal hierarchy
• Centralized decisions made by founder

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Fundamental Elements of Structure Structural
Characteristics

• Simple Structure
• Employ only a few people
• Offer only one distinct product or service
• Minimal hierarchy
• Insufficient economies of scale
• Broadly defined roles
• Flexible
• Depend on owners direct supervision

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Fundamental Elements of Structure Structural
Characteristics

• Functional Structure
• Organizes employees around specific
• knowledge or other resources

CEO
Finance
Production
Marketing
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Fundamental Elements of Structure Structural
Characteristics

• Functional Structure
• Advantages
• Foster professional identity, clarify career path
• Permit greater specialization
• Economies of scale
• Disadvantages
• Narrow perspective
• Poor coordination across units
• Dysfunctional conflict

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Fundamental Elements of Structure Structural
Characteristics

• Geographic Divisional Structure
• Organizes employees around geographic areas

CEO
European Operations
U.S. Operations
Latin American Operations
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Fundamental Elements of Structure Structural
Characteristics

• Product/Service Divisional Structure
• Organizes employees around output areas

CEO
Chevrolet
Pontiac
Cadillac
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Fundamental Elements of Structure Structural
Characteristics

• Client Divisional Structure
• Organizes employees around client areas

CEO
Consumer Products
Knowledge Workers
Software Developers
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Fundamental Elements of Structure Structural
Characteristics

• Divisional Structure
• Advantages
• Accommodates growth easily
• Each unit is self-contained
• Better coordination in diverse markets
• Disadvantages
• Loss of economies of scale
• Lack of knowledge sharing
• Reduces cooperation across groups

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Fundamental Elements of Structure Structural
Characteristics
Matrix Structure
President
Project 1 Manager
Project 2 Manager
Project 3 Manager
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Fundamental Elements of Structure Structural
Characteristics

• Matrix Structure
• Overlays a divisional structure with a functional
  structure dual-boss reporting system
• Advantages
• Flexible use of resources
• Disadvantages
• Require high level of coordination
• Dual-boss reporting may dilute accountability
• Conflict, stress, organizational politics

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Fundamental Elements of Structure Structural
Characteristics
Network Structure
ProductDevelopmentFirm(France)
MarketingFirm(U.K.)
CoreFirm
ProductionFirm(China)
CustomerServiceFirm(Canada)
AccountingFirm(U.S.A.)
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Fundamental Elements of Structure Structural
Characteristics

• Network Structure alliance of several
  organizations
• Core competency held by hub or core firm
• Outsourcing is used for all noncritical tasks
• Advantages
• Flexibility
• Disadvantages
• Expose core firm to market forces

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Fundamental Elementsof Structure

• Structural Characteristics
• Span of Control
• Height
• Departmentation
• Structuring Characteristics
• Centralization
• Standardization
• Formalization
• Specialization

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Fundamental Elements of Structure Structuring
Characteristics

• Centralization
• Amount of decision power at the top
• Centralized is not consistent with
  high-involvement management
• Generally perform less well
• Standardization
• Rules and standard operating procedures
• Negatively affects motivation satisfaction
• Efficiency safety

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Fundamental Elements of Structure Structuring
Characteristics

• Formalization
• Degree to which rules procedures are documented
• Specialization
• Degree to which employees have narrow jobs with
  little variety
• Increase efficiency
• May negatively affect motivation, satisfaction,
  performance

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The Modern Organization
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Factors Affecting Structure The Role of Strategy

• Corporate Strategy
• Growth through internal development
• Larger marketing and R D
• Authority for decisions decentralized
• Growth through external acquisition
• Well-developed financial and legal functions
• Diversification
• Adopt the divisional structure

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Factors Affecting Structure The Role of Strategy

• Business Strategy
• Cost Leadership
• Efficiency and control
• More mechanistic structure
• Differentiation
• Flexibility and initiative
• More organic structure

Structure Follows Strategy
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Factors Affecting Structure The Role of the
Environment
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Factors Affecting Structure The Role of the
Environment
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Elements of Organizational Culture

• Physical Structures
• Rituals Ceremonies
• Stories
• Language
• Beliefs
• Values
• Assumptions

Artifacts of Organizational Culture
Organizational Culture
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Elements of Organizational Culture

• Assumptions
• Deepest part of culture, unconscious shared
  mental models that guide behaviors
• Beliefs
• Perceptions of reality
• Values
• Stable, long-lasting beliefs
• Espoused
• Enacted

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Elements of Organizational Culture

• Brown Brown, Inc. --
• an aggressive culture
• Annual sales meeting, managers of poorly
  performing divisions are led to the podium by
  medieval executioners while a funeral dirge plays