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Chapter 1: Introduction to Organizations
Coping with the rapid change is the most common problem facing managers and organizations. Some specific challenges are:
- Globalization ; environment for companies is becoming extremely complex and extremely competitive. Learn to cross lines of time, culture and geography.
- Ethics and Social Responsibility ; heet hangijzer (vooral in Amerika), betreft frauduleuze praktijken etc. Corporate executives face tremendous pressure to hold their organizations and employees to high ethical and professional standards.
- Speed of Responsiveness ; respond quicky to environmental changes, organizational crises, or shifting customer expectations. Caused by globalization and advancing technology. Financial basis of today’s economy is information, not machines.
- The Digital Workplace ; disintermediation = eliminating the middleman. Executives should have a virtual network.
- Supporting Diversity; demographic diversity, people of all nationalities should be admitted to chair the company, as well as women. Try to balance between a strong corporate culture and supporting diversity, balancing work and family and cultures.
Organizations are social entities that are goal-directed , are designed as deliberately structured and coordinated activity systems and are linked to the external environment. Organizations are made up of people and their relationships with one another. Managers deliberately structure and coordinate organizational resources to achieve the organization’s purpose. The modern organization may be the most significant innovation of the past 100 years. What contribution do organizations make:
- Organizations bring together resources (labour, materials) to achieve desired goals and outcomes;
- Produce goods and services efficiently (competitive prices, benefits);
- Facilitate innovation (e-business, computers, redesigning organizational structures etc);
- Use modern manufacturing and information technologies (e-business, computers);
- Adapt to and influence a changing environment (globalization);
- Create value for owners, customers and employees;
- Accommodate ongoing challenges of diversity, ethics and the motivation and coordination of employees (cope with growing concerns about ethics and social responsibility).
Organizational behaviour = micro approach to organizations because it focuses on the individuals within the organizations as the relevant units of analysis. Like motivation, leadership style etc. Organization theory = macro examination of organizations because it analyzes the whole organization as a unit. Like differences in structure and behaviour at the level of analysis. Meso theory = concerns the integration of both micro and macro levels of analysis.
Profit organizations : managers direct their activities toward earning money for the company. Non-profit Organizations: Managers direct their effort toward generating some kind of social impact. Problems: securing a steady income, difficult to measure the effect, marketing as well for the clients but also for volunteers and donors.
Perspectives on Organizations , two important perspectives:
- Open system : must interact with the environment to survive. It consumes resources and exports resources to the environment. It cannot seal itself off. Every system that must interact with the environment to survive is an open system.
- Organizational configuration : Mintzberg said that every organization has five parts: the technical core (people who do the basic work ), top management (provides direction, strategy, goals and policies for the entire organization), middle management (responsible for implementation and coordination on department level), technical support (R&D, Marketing research) and administrative support (responsible for the smooth operation and upkeep of the organization).
A system is a set of interacting elements that acquire inputs from the environment, transforms them, and discharges outputs to the external environment. A system is made up of several subsystems , they perform the specific functions required for organizations to survive. Boundary subsystems are responsible for exchanges with the external environment (purchasing supplies, marketing products). Further there are Production, Maintenance, Adaption and Management subsystems.
Closed system : would not depend on its environment. It’s autonomous, enclosed and sealed of from the outside world.
Briefcase 1: Design the organization so that the five basic parts – technical core, technical support, administrative support, top management and middle management – adequately perform the subsystem functions of production, maintenance, adaptation, management and boundary spanning. Try to maintain a balance among the five parts so that they work together for organizational effectiveness.
Dimensions of organizational design: Organizational dimensions fall into two types:
- Structural dimensions: provide labels to describe the internal characteristics of an organization. They create a basis for measuring and comparing organizations. a. Formalization: amount of written documentation/rules etc. b. Specialization: the degree in which organizational tasks are subdivided. c. Hierarchy of authority: who reports to whom and the span of control for managers. d. Centralization: refers to the hierarchical level that has authority to make a decision. e. Professionalism: level of formal education and training of employees. f. Personnel ratios: deployment of people to various functions and departments. Measured by dividing the number employees in a classification by the total.
Briefcase 2: Think of the organization as an entity distinct from the individuals who work in it. Describe the organization according to its size, formalization, decentralization, specialization, professionalism, personnel ratios and the like. Use these characteristics to analyze the organization and to compare it with other organizations.
- Contextual dimensions: characterize the whole organization. They represent both the organization and the environment. a. Size: Organizations are social systems, thus size is measured by the number of people in the organization. b. Organizational technology: Tools, techniques and actions used to transform inputs to outputs. c. Environment: all elements outside the boundary of the organization. d. Goals and strategy: define the purpose and competitive techniques. e. Culture: the underlying set of values, beliefs, understandings and norms shared by employees. These dimensions provide a basis for the measurement and analysis of characteristics that cannot be seen by the casual observer. Managers strive, in their company policy, to at least minimally satisfy the interests of all stakeholders (= belanghebbenden) Stakeholders are: owners and stockholders (financial return), employees (satisfaction, pay, supervision), customers (high-quality goods, service, value), suppliers (satisfactory transactions, revenue from purchases), community (good corporate citizen, contribution to community affairs), union (workers pay, benefits), government (obedience to laws and regulations, fair competition), creditors (creditworthiness, fiscal responsibility), management (efficiency, effectiveness)
Efficiency = refers to the amount of resources ( materials, money, employees) used to achieve the organizations goals. Effectiveness = meaning the degree to which an organization achieves its goals.
Briefcase 3: Consider the needs and interests of all stakeholders when setting goals and designing the organization to achieve effectiveness.
The evolution of organization theory and design. Organization theory is a way of thinking about organizations. It’s a way to see and analyze organizations more accurately and deeply than one otherwise could. There are general patterns and insights into organizational functioning.
Historical perspectives : the classical perspective is associated with the development of hierarchy and bureaucratic organizations and remains the basis of much of modern management theory and practice. (Mechanical System Design)
- Efficiency is everything : Scientific management should be based on precise, standard procedures for doing each job. The role of management is to maintain stability and efficiency, with top managers doing the thinking and workers doing what they’re told. (1900)
Chapter 2: The External Environment
The environmental domain Organizational environment = all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization. Domain = the chosen environment field of action. It defines the organization’s niche and those external sectors with which the organization will interact to accomplish it’s goals. Sector = subdivision of the external environment that contain similar elements. For each organization there are ten sectors (briefcase 1)
Briefcase 1: Organize elements in the external environment into ten sectors for analysis: a) Industry: competitors, industry size and competitiveness, related industries; b) Raw materials: Suppliers, manufacturers, real estate, services; c) Human resources: Labor market, employment agencies, universities, training schools, employees in other companies, unionization; d) Financial resources: stock markets, banks, savings and loans, private investors; e) Market: Customers, clients, potential users of products and services; f) Technology: Techniques of production, science, computers, information technology, e-commerce; g) Economic conditions: recession, unemployment rate, inflation rate, rate of investment, economics, growth; h) Government: city, state, federal laws and regulations, taxes, services, court system, political processes; i) Sociocultural: age, values, beliefs, education, religion, work ethics, consumer and green movements; j) International: competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate. Focus on sectors that may experience significant change at any time.
Task Environment: includes sectors with which the organization interacts directly and that have a direct impact on the organization’s ability to achieve it’s goals. Task environment typically includes a, b, e and perhaps c and j.
General Environment: includes those sectors that might not have a direct impact on daily operations of a firm but will indirectly influence them. General environment often includes h, i, g, f and d.
International Context: growing importance from the international sector. The environment for all organizations is becoming extremely complex and competitive.
Environmental uncertainty: several dimensions like stable/unstable, homogeneous/heterogeneous, simple/complex, the munifence (= amount of resources available) etc. These dimensions come together in two essential ways the environment influences organizations: need for information about environment and need for resources from the environment.
Uncertainty = when decision makers don’t have sufficient information about the environmental factors and have a difficult time predicting environmental factors.
Simple-complex dimension: concerns environmental complexity, which refers to heterogeneity, or the number and dissimilarity of external elements relevant to an organization’s operations. Complex environment: organization is influenced by numerous diverse external elements. Simple environment: organization interacts with/ is influenced by only a few similar external components.
Stable-unstable dimension: refers to whether elements in the environment are dynamic. Stable environment: if it remains the same over a period of months or a year. Unstable environment: environmental elements shift abruptly. May occur when competitors react with aggressive moves.
Framework: for assessing environmental uncertainty which combines the simple-complex and stable- unstable dimensions.
Stable
Environmental
Simple + Stable = Low Uncertainty
- Small number of external elements and elements are similar
- Elements remain the same or change slow. Examples: soft drink bottlers, beer distributors, container manufacturers, food processors.
Complex + Stable = Low-moderate Uncertainty
- Large number of external elements and elements are dissimilar
- Elements remain the same or change slowly Examples: Universities, appliance manufacturers, chemical companies, insurance companies.
Change
Unstable
Simple + Unstable = High-moderate Uncertainty
- Small number of external elements and elements are similar
- Elements change frequently and unpredictably Examples: E-commerce, fashion clothing, music industry, toy manufacturers
Complex + Unstable = High Uncertainty
- Large number of external elements an elements are dissimilar
- Elements change frequently and unpredictably Examples: Computer firms, aerospace firms, telecommunications firms, airlines
Simple Environmental Complexity Complex
Adapting to environmental Uncertainty Aspects of organizations that differ as the uncertainty increases:
- Positions and Departments: As the complexity and uncertainty increases, so do the number of positions and departments in the organization. This increases internal complexity.
- Buffering and boundary spanning: when environmental uncertainty increases, traditionally, buffer departments were established. More recently, organizations drop buffers because they believe being well connected to customers and suppliers is more important than internal efficiency. Opening up the organization makes it more fluid and adaptable. Boundary-spanning roles are introduced.
- Differentiation and integration: when the external environment is complex and rapidly changing, organizational departments become highly specialized to handle the uncertainty in their external sector. One outcome of high differentiation is that coordination among departments becomes difficult. With uncertainty, frequent changes require more information processing to achieve horizontal coordination so integrators become a necessary addition to the organization structure.
- Organic versus Mechanistic Management Processes: when the external environment is stable, the internal organization is characterized by rules, procedures and a clear hierarchy of authority = mechanistic organization. In rapidly changing environments, the internal organization is much looser, free-flowing and adaptive. The hierarchy of authority is not clear and rules and regulations are often not written down = organic organization.
(2) Buffering roles: purpose is to absorb uncertainty from the environment. They support the technical core and exchange materials, resources and money between the environment and the organization.
Boundary spanning roles: link and coordinate an organization with key elements in the external environment. Purpose of boundary spanning is the exchange of information to: a. Detect and bring into the organization information about changes in the environment; b. Send information into the environment that presents the organization in a favourable light. Boundary spanners prevent the organization from stagnating by keeping top managers informed about environmental changes. Business intelligence : is an approach to boundary spanning. It refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. BI is related to another important area of boundary spanning, known as competitive intelligence. This gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions. Use of internet, digging trash cans etc.
Briefcase 2: Scan the external environment for threats, changes and opportunities. Use boundary- spanning roles, such as market research and competitive-intelligence departments, to bring into the organization information about changes in the environment. Enhance boundary-spanning capabilities when the environment is uncertain.
(3) Differentiation = the differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments.
b. Shape the environment domain. Establish Interorganizational Linkages Controlling the environment domain
- Ownership
- Contracts, joint ventures
- Cooptation, interlocking directorates
- Executive recruitment
- Advertising, public relations
- Change of domain
- Political activity, regulation
- Trade associations
- Illegitimate activities
Establish Interorganizational Linkages Ownership: When a company buys a part of or a controlling interest in another company, this gives the company access to technology, products or other resources. Acquisition : involves the purchase of one organization by another so that the buyer assumes control. Merger: is the unification of two or more organizations into a single unit. Formal strategic alliances: When there is a high level of complementarity between the business lines, geographical positions, or skills of two companies, the firms often go the route of a strategic alliance rather than ownerships through merger or acquisition. Contracts: license agreements (1) that involve the purchase of the right to use an asset for a specific time (bijv. nieuwe technologie) or supplier arrangements (2) that contract for the sale of one firm’s output to another. Joint ventures: creation of a new organization that is formally independent of the parents, although the parents will have some control. Sharing of risks and costs with large projects or innovations. Cooptation, interlocking directorates: cooptation: when leaders from important sectors in the environment are made part of an organization (board of directors). Interlocking directorate: formal linkage that occurs when a member of the board of directors of one company sits on the board of directors of another company (can influence policies and decisions). Direct interlock = this person is the direct link between two companies. Indirect interlock = When director of company A and B are both in the board of directors from company C. Executive recruitment: transferring or exchanging executives. Advertising and public relations
Controlling the environmental domain
Change of domain: An organization may try to find a domain where there is little competition, no government regulation, abundant suppliers, affluent customers, and barriers to keep competitors out. Acquisition: deals with company’s in other domains. Divestment: afstoten bedrijfsgedeelten.
Political Activity, regulation: techniques to influence government legislation and regulation, like lobbyists and working with other organizations, also lobbying by CEO.
Trade associations: Accomplished jointly with other organizations that have similar interests.
Illegitimate activities: certain conditions (low profits, pressure from senior managers, scarce environmental resources etc) may lead managers to adopt illegitimate behaviour.
Briefcase 4: Reach out and control external sector that threaten needed resources. Influence the domain by engaging in political activity, joining trade associations, and establishing favourable linkages. Establish linkages through ownership, strategic alliances, cooptation, interlocking directorates and executive recruitment. Reduce the amount of change or threat from the external environment so the organization will not have to change internally.
Organization-Environment Integrative Framework: two themes about organiz-environm relationships:
- The amount of complexity and change in an organization’s domain influences the need for information and hance the uncertainty felt within an organization.
- The more dependent an organizations is on other organizations for material and financial resources, the more important it is to either establish favourable linkages for those resources or control entry into the domain.
Forces for
Global Integration
High
Low
Globalization Strategy: Global Product Structure
Export Strategy: International Division
Both Globalization and Multidomestic Strategy: Global Matrix Structure
Multidomestic Strategy: Global Geographic Structure
Low High Forces for national responsiveness
International Division (low-low) : export department grows into international division when companies begin to explore international opportunities. Geographical structure instead of functional structure because lines of functional hierarchy would extend too long.
Global Product Division Structure (high-low) : the product divisions take responsibility for global operations in their specific product area. Each division’s manager is responsible for planning, organizing and controlling all functions for the production and distribution of its products for any market around the world. This structure works best when products are standardized. A problem of this structure is that product divisions often do not work well together and some countries may be ignored by product managers.
Global Geographical Structure (low-high) : divides the world into geographical regions, with each geographical division reporting to the CEO. Customization of products to meet specific needs. A problem occurring is the autonomy of each regional division. How to increase efficiency and coordination without losing the benefits of the global geographical structure? Possible solution: use staff departments which have an overall view.
Global Matrix Structure (high-high) : A matrix structure provides a way to achieve vertical and horizontal coordination simultaneously along two dimensions. For multinational corporation the geographical distances for communication are great and the coordination is more complex. Uitleg: bedrijf is onderverdeeld in verschillende ‘business areas’, elke business area is wereldwijd verantwoordelijk voor zijn onderdeel (bijv. transportation). Hiernaast zijn er ‘country managers’ verantwoordelijk voor een bepaald land. Business managers (global boss) en country managers moeten goed samenwerken en sturen op hun beurt regiomanagers aan.
Briefcase 3: Choose a global product structure when the organization can gain competitive advantages through a globalization strategy (global integration). Choose a global geographical structure when the company has advantages with a multidomestic strategy (national responsiveness). Use an international division when the company is primarily domestic and has only a few international operations.
The Global Organizational Challenge : drie primaire segmenten voor ‘the global organizational challenge’:
- Increased complexity and differentiation : greater level of internal and external complexity due to differences between countries. Although countries may appear to offer a lot of advantages, there are often very complex issues like economic situation, infrastructure etc. Another problem is that global consumers are rejecting homogenized products. Organizations must grow more highly differentiated, for example by a variety of strategies, a broader array of activities and a larger number of products to meet the needs of a diverse market.
- Need for integration : integration refers to the quality of collaboration across organizational units. Coordination is easier in smaller and less scattered companies. It is necessary that managers all over the world share ideas and set joint priorities.
- Transfer of knowledge and innovation : companies must learn from their international experiences by sharing knowledge and innovations across the enterprise. The diversity of the international environment offers extraordinary opportunities for learning and the development of diverse capabilities. Vaak krijgen organisaties niet alle kennis omdat kennis verborgen blijft door taal- en cultuurverschillen, of wordt gezien als machtsmiddel door divisies etc.
Global Coordination Mechanisms:
- Global teams : also called transnational teams, are cross-border work groups made up of multiskilled, multinational members whose activities span multiple countries. There are two types of teams, intercultural teams who meet face to face and virtual teams who conduct their work electronically. Global teams help companies in the differentiation challenge (more local responsiveness), provide integration benefits (by developing regional or worldwide cost advantages and standardizing designs and operations across countries) and contribute to continuous organizational learning, knowledge transfers and adaptation on a global level.
- Headquarters Planning : active role in planning, scheduling and control to keep the widely distributed pieces of the global organization working together and moving in the same direction.
- Expanded Coordination Roles : implementing structural solutions to achieve stronger coordination and collaboration. Managers should be aware of new developments wherever they occur and for using their knowledge to improve the organization. International companies today have a hard time staying competitive without strong interunit coordination and collaboration. Benefits are: cost savings, better decision making, greater revenues, increased innovation.
Briefcase 4: Use mechanisms such as global teams, headquarters planning and specific coordination roles to provide needed coordination and integration among far-flung international units. Emphasize information and knowledge sharing to help the organization learn and improve on a global scale.
Cultural differences in coordination and control : Appreciate cultural value differences and strive to use coordination mechanisms that are in tune with local values. When broader coordination mechanisms are needed, focus on education and corporate culture as ways to gain understanding and acceptance. Denk aan systeem Hofstede! Power distance, uncertainty avoidance are reflected within organizations in beliefs regarding the need for hierarchy, centralized decision making and control, formal rules and procedures and specialized jobs.
Volgens Gesteland zijn er vier culturele patronen, logic patterns, die landen karakteriseren:
- Deal-focussed versus relationship-focussed;
- Informal versus formal;
- Rigid-time versus fluid-time;
- Expressive versus reserved.
Briefcase 5: Appreciate cultural value differences and strive to use coordination mechanisms that are in tune with local values. When broader coordination mechanisms are needed, focus on education and corporate culture as ways to gain understanding and acceptance.
Three national approaches to coordination and control:
- Centralized Coordination in Japanese companies : R&D in the home country, relying on strong, centrally directed coordination and control. Pros: global efficiencies, coordination across units to obtain synergies and avoid turf battles. Cons: as the organization expands headquarters can be overloaded.
- European firms’ decentralized approach : international units tend to have a high level of independence and decision-making autonomy. Companies rely on a strong mission, shared values and informal personal relationships. Pros: each international unit focuses on its local markets, enabling the company to excel in meeting diverse needs. Cons: cost of ensuring, through training and development programs, that managers share goals, values and priorities.
- United States, coordination and control through formalization : formal systems, policies, standards of performance and a regular flow of information from divisions to headquarters are the primary means of coordination and control. High costs of setting up such systems, high costs headquarters (overhead costs) and inflexibility through standard procedures. Omdat, naarmate bedrijven groter worden, de nadelen van bovenstaande benaderingswijzen steeds duidelijker naar voren komen gaan steeds meer bedrijven over op het ‘transnational model’.
The transnational model of organization : most advanced kind of international organization. Use it when the company has to respond to multiple global forces simultaneously and needs to promote worldwide integration, learning and knowledge sharing. Dealing with multiple, interrelated, complex issues requires a complex form of organization and structure. Four characteristics distinguish the transnational organization from other globalization forms (such as the matrix):
- Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Each group has to cooperate to achieve it’s own
Chapter 5: Strategy, Organization Design and Effectiveness
Organizational goal: a desired state of affairs that the organization attempts to reach.
The role of Strategic Direction in Organization Design: the primary responsibility of top management is to determine an organization’s goals, strategy, and design, therein adapting the organization to a changing environment. Organizational design is used to implement goals and strategy and also determines organization success.
Organizational purpose: Major distinction between the officially stated goals, or mission, of the organization and the operative goals the organization actually pursues.
Mission = official goals = mission statement , the organization’s reason for existence. It describes the organization’s vision, it’s shared values and beliefs and its reason for being. Refers to the formally stated definition of business scope and outcomes the organization is trying to achieve. One of the primary reasons is to serve as a communication tool.
Briefcase 1: Establish and communicate organizational mission and goals. Communicate official goals to provide a statement of the organization’s mission to external constituents. Communicate operational goals to provide internal direction, guidelines and standards of performance for employees.
Operative goals = designate the ends sought through the actual operating procedures of the organization and explain what the organization is actually trying to do. These goals concern overall performance, boundary spanning, maintenance, adaptation and production activities. They provide direction for the day-to-day decisions and activities within departments. Operative goals: a. Overall performance : reflected in profitability (net income, return on investment etc), growth in sales or profits over time and the volume of sales. b. Resources: acquisition of needed material and financial resources. c. Market: market share or market standing desired by the organization. d. Employee development: training, promotion, safety and growth of employees. e. Innovation and change: internal flexibility, readiness to adapt f. Productivity: amount of output achieved from available resources.
Type of goals Purpose of goals Official goals, mission: Legitimacy
Define mission, official goals
Select operational goals, competitive strategy
CEO,
Top management team
Strategic direction Effectiveness Outcomes
- Resources
- Efficiency
- Goal attainment
- Competing values
Internal Situation
- Strengths
- Weaknesses
- Distinctive competence
- Leader style
- Past performance
External Environment
- Opportunities
- Threats
- Uncertainty
- Resource availability
Organization Design
- Structural form: Learning vs efficiency
- Information and control systems
- Production technology
- Human resource policies, incentives
- Organizational culture
- Interorganizational linkages
Operative goals: => describe a value system Employee direction and motivation, decision guidelines, standard of performance => represent the primary tasks of the organization
A framework for selecting strategy and design: two models for formulating strategy are Porter’s model of competitive strategies and Miles and Snow’s strategy typology. The essence of formulating strategies is choosing whether the organization will perform different activities than it’s competitors or similar activities more efficiently. Strategy: plan for interacting with the competitive environment to achieve organizational goals.
Briefcase 2: After goals have been defined, select strategies for achieving those goals. Define specific strategies based on Porter’s competitive strategies or Miles and Snow’s strategy typology.
Porter’s competitive strategies:
Broad
Competitive
Low-cost leadership
Example: Ryanair
Differentiation
Example: Starbucks Coffee
Scope
Narrow
Focused low-cost leadership
Example: Edward Jones Investments
Focused differentiation
Example: Puma
Low Cost Competitive Advantage Uniqueness
Miles and Snow’s Strategy typology: Organizations strive for a fit among internal organization characteristics, strategy, and the external environment. Four strategies:
- Prospector: to innovate, take risks, seek out new opportunities, and grow. Suited to a dynamic, growing environment, where creativity is more important than efficiency. Ex: Microsoft.
- Defender: almost the opposite of the prospector. The strategy is concerned with stability and seeks to hold onto current customers, but it neither innovates nor seeks to grow. Internal efficiency and producing reliable, high-quality products are important. Ex:Paramount Pictures.
- Analyzer: tries to maintain a stable business while innovating on the periphery. Midway between prospector and defender. Ex: Sony.
- Reactor: not really a strategy at all. Response to environmental threats and opportunities in an ad hoc fashion. McDonald’s heeft lang zo geopereerd.
Briefcase 3: Design the organization to support the firm’s competitive strategy. With a low-cost leadership or defender strategy, select design characteristics associated with an efficiency orientation. For a differentiation or prospector strategy, choose characteristics that encourage learning, innovation, and adaptation. Use a balanced mixture of characteristics for an analyzer strategy.
Porter’s competitive stragegies Miles and Snow’s Strategy Typology Strategy: Differentiation Organization design:
- Learning orientation; acts in a flexible, loosely knit way, with strong horizontal coordination;
- Strong capability in research;
- Values and builds in mechanisms for customer intimacy;
- Rewards employee creativity, risk taking, and innovation.
Strategy: Low-cost leadership Organization design:
- Efficiency orientation; strong central authority; tight cost control, with frequent, detailed control reports;
- Standard operating procedures;
Strategy: Prospector Organization design:
- Learning orientation; flexible, decentralized structure;
- Strong capability in research Strategy: Defender Organization design:
- Efficiency orientation; centralized authority and tight cost control;
- Emphasis on production efficiency; low overhead;
- Close supervision; little employee empowerment. Strategy: Analyzer Organization design:
- Balances efficiency and learning; tight cost control with flexibility and adaptability;
Flexibility Structure Control a. Indicators: whether the focus lies on internal or external environment and the structure emphasizes stability or flexibility. b. Usefulness: The model integrates diverse concepts of effectiveness into a single perspective. The model calls attention to effectiveness criteria as management values and shows how opposing values exist at the same time.
Chapter 6: Fundamentals of Organization Structure
Organization structure , three key components:
- Organization structure designates formal reporting relationships , including the number of levels in the hierarchy and the span of control of managers and supervisors = structural framework , vertical hierarchy;
- Organization structure identifies the grouping together of individuals into departments and of departments into the total organization = structural framework , vertical hierarchy;
- Organization structure includes the design of systems to ensure effective communication coordination and integration of efforts across departments = pattern of interactions among organizational employees.
Briefcase 1: Develop organization charts (organogrammen) that describe task responsibilities, reporting relationships, and the grouping of individuals into departments. Provide sufficient documentation so that all people within the organization know to whom they report and how they fit into the total organization picture.
Eerst was de organisatie structuur zodanig (laat in de 19e eeuw/begin 20ste eeuw) dat de top van het bedrijf het denken deed. In een snel veranderende omgeving is dit niet effectief. Tegenwoordig zijn organisaties vaker horizontaal geformeerd = decentralisatie.
Information-Processing perspective on structure : the organization should be designed to provide both vertical and horizontal information flows as necessary to accomplish the organization’s overall goals. Or else: too little information, irrelevant information. Vertical linkages = designed primarily for efficiency and control on the organization. When a vertical structure is dominant there are: specialized tasks, strict hierarchy with many rules , vertical information system (database with reports etc), few teams/task forces/integrators, centralized decision making. Horizontal linkages = designed for learning (reducing control, more coordination and collaboration) Refers to the amount of communication and coordination horizontally across organizational departments. When a horizontal structure is dominant, there are: shared tasks and empowerment, relaxed hierarchy with few rules, horizontal (face-to-face) communication, many teams and task forces, decentralized decision making. Horizontal linkage mechanisms are often not drawn on the organization chart.
According to Malone there will be more horizontal organizations, his key points on the future of work:
- Information technology is the key driver of the transformation;
- Managers will move from command-and-control to coordinate-and-cultivate;
- Every organization needs standards.
Briefcase 2 : Provide vertical and horizontal information linkages to integrate diverse departments into a coherent whole. Achieve vertical linkage through hierarchy referral, rules and plans, and vertical information systems. Achieve horizontal linkage through cross functional information systems, direct contact (by liaison roles = persoon die tussen twee afdelingen staat), task forces (tijdelijk team van verschillende deskundigen), full-time integrators (located outside departments, responsibility for coordinating several departments) and teams (permanent task forces).
Amount of horizontalcoordination required
High
Low
Teams Ο Full-time integrators Ο Task Forces Ο Direct Contact Ο Information Systems Low High Cost of coordination in time and human resources
Briefcase 3 : Recognize that the strongest horizontal linkage mechanisms are more costly in terms of time and human resources but are necessary when the organization needs a high degree of horizontal coordination to achieve its goals.
Organization design alternatives , the overall design of organization structure indicates three things:
- Required work activities : have several departments for certain work activities. If new activities appear (like e-business), create new departments.
- Reporting relationships : the chain of command, vertical lines in the organization chart.
- Departmental grouping options : affects employees because they share a common supervisor and common resources, are jointly responsible for performance and tend to identify and collaborate with one another. Five structural design options for grouping employees into departments: a. Functional grouping : bringing employees together who perform similar functions; b. Divisional grouping : grouping per product; c. Multifocused grouping : two structural grouping structures simultaneously, matrix or hybrid structures. Example: each division is divided per product. d. Horizontal grouping : hrm and finance are in departments, but the other employees are organized around core work processes (dus van inkoop tot eindproduct naar de klant) e. Virtual network grouping : most recent approach to departmental grouping. Electronic connection for the sharing of information and completion of tasks.
Functional, divisional and geographical designs : functional and divisional are most common.
- Functional structure : this structure is most effective when in-depth expertise is critical to meeting organizational goals, when the organization needs to be controlled and coordinated through the vertical hierarchy, and when efficiency is important. Strengths Weaknesses Allows economies of scale within functional departments
Slow response time to environmental changes Enables in-depth knowledge and skill development
May cause decisions to pile on top, hierarchy overloaded Enables organization to accomplish functional goals
Leads to poor horizontal coordination among departments Is best with only one or a few products Results in less innovation Involves restricted view of organizational goals
- Functional structure with horizontal linkages : organizations compensate for the vertical functional hierarchy by installing horizontal linkages.
- Divisional Structure : is the same as product structure or strategic business units. Unless effective horizontal mechanisms are in place, a divisional structure can cause real problems when divisions don’t know what the other divisions are doing and products aren’t compatible. Strengths Weaknesses Suited to fast change in unstable environment Eliminates economies of scale in functional departments Leads to customer satisfaction because product responsibility and contact points are clear
Leads to poor coordination across product lines Involves high coordination across functions Eliminates in-depth competence and technical specialization Allows units to adapt to differences in products, regions, customers
Makes integration and standardization across product lines difficult
- People on the team are given the skills, tools, motivation and authority to make decisions central to the team’s performance;
- Teams have the freedom to think creatively and respond flexibly to new challenges;
- Customers drive the horizontal corporation;
- The culture is one of openness, trust and collaboration, focused on continuous improvement.
Briefcase 6 : Consider a horizontal structure when customer needs and demands change rapidly and when learning and innovation are critical to organizational success. Carefully determine core processes and train managers and employees to work within the horizontal structure.
Strengths Weaknesses Promotes flexibility and rapid response to changes in customer needs
Determining core processes is difficult and time consuming Directs the attention of everyone toward the production and delivery of value to the customer
Requires changes in culture, job design, management philosophy and information and reward systems Each employee has a broader view of organizational goals
Traditional managers may balk when they have to give up power and authority Promotes a focus on teamwork and collaboration
Requires significant training of employees to work effectively in a horizontal team environment Improves quality of life for employees by offering them the opportunity to share responsibilities, make decisions and be accountable for outcomes
Can limit in-depth skill development
Virtual Network Structure : extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization. With a virtual network structure ( modular structure ) the firm subcontracts many or most of its major processes to separate companies and coordinates their activities from a small headquarters organization. Outsourcing = to contract out certain corporate functions, such as manufacturing, information technology, or credit processing to other companies. Strengths Weaknesses Enables even small organizations to obtain talent and resources worldwide
Managers do not have hands-on control over many activities and employees Gives a company immediate scale and reach without huge investments in factories, equipment, or distribution facilities
Requires a great deal of time to manage relationships and potential conflicts with contract partners Enables the organization to be highly flexible and responsive to changing needs
There is a risk of organizational failure if a partner fails to deliver or goes out of business Reduces administrative overhead costs Employee loyalty and corporate culture might be weak because employees feel they can be replaced by contract services
Briefcase 7 : Use a virtual network structure for extreme flexibility and rapid response to changing market conditions. Focus on key activities that give the organization its competitive advantage and outsource other activities to carefully selected partners.
Hybrid structure: many structures in the real world do not exist in the pure forms that are outlined in this chapter. Organizations often use a hybrid structure that combines characteristics of various approaches tailored to specific strategic needs.
Briefcase 8 : Implement hybrid structures, when needed, to combine characteristics of functional, divisional and horizontal structures. Use a hybrid structure in complex environments to take advantage of the strengths of various structural characteristics and avoid some of the weaknesses.
Applications of structural design Briefcase 9: Find the correct balance between vertical control and horizontal coordination to meet the needs of the organization. Consider a structural reorganisation when symptoms of structural deficiency are observed.
Vertical control = goals of efficiency and stability. Horizontal coordination = learning, innovation and flexibility.
Symptons of Structural deficiency:
- Decision making is delayed or lacking in quality: delay caused by hierarchy, when information not reaches the correct people.
- The organization does not respond innovatively to a changing environment: departments are not coordinated horizontally, department responsibilities must be specified.
- Employee performance declines and goals are not being met: the structure should reflect the complexity of the market environment and be straightforward to effectively work within.
- Too much conflict is evident: organization structure should allow conflicting departmental goals to combine into a single set of goals for the entire organization.
Chapter 7: Organizational Culture and Ethical Values
Social Capital (goodwill) = refers to the quality of interactions among people and whether they share a common perspective. In organizations with a high degree of social capital, relationships are based on trust, mutual understandings, and shared norms and values that enable people (inside and outside the organization) to cooperate and coordinate their activities to achieve organizational goals.
Organizational culture Culture = the set of values, norms, guiding beliefs and understandings that is shared by members of an organization and is taught to new members. Organizational culture operates on two levels:
- Visible artefacts and observable behaviour: like ceremonies, stories, slogans, behaviour, dresscode, physical settings.
- Values in the minds of organization members: underlying values, assumptions, beliefs, attitudes, feelings. These form the true culture.
Emergence and purpose of culture: culture provides members with a sense of organizational identity and generates in them a commitment to beliefs and values that are greater than themselves. Culture generally begins with a founder or early leader who articulates and implements ideas and values as a vision, philosophy or business strategy. When these ideas and values lead to success they become institutionalized. Cultures serve two critical functions in organizations :
- Internal integration : to integrate members so that they know how to relate to one another;
- External adaptation : to help the organization adapt to the external environment.
Interpreting culture: to identify and interpret culture requires that people make inferences based on observable artefacts.
1) Rites and ceremonies: are important artefacts for culture. These are the elaborate, planned activities that make up a special event and are often conducted for the benefit of an audience. Four types of rites that appear in organizations are: Type of rite Example Social consequences Rites of passage (doorgang/nieuwe functie))
Induction and basic training, US army
Facilitate transition of persons into social roles and statuses that are new for them. Rites of enhancement (prestige)
Annual awards night Enhance social identities and increase status of employees Rites of renewal Organization development parties
Refurbish social structures and improve organization functioning Rites of integration Office holiday party, cheering
Encourage and revive common feelings that bind members together and commit them to the organization
Briefcase 1: Pay attention to corporate culture. Understand the underlying values, assumptions, and beliefs on which culture is based as well as its observable manifestations. Evaluate corporate culture based on rites and ceremonies, stories and heroes, symbols and language.
Culture of discipline : according to Collins, this is one of the aspects that define truly great companies. Some of the key factors of a culture of discipline are:
