Chapter 13 Organizational Structure and Culture

1. Chapter 13Organizational Structure and Culture Michael A. Hitt C. Chet Miller Adrienne Colella Slides by Ralph R. Braithwaite

2. Integrated Portfolio at FedEx Exploring Behavior in Action With all the acquisitions by FedEx, there was a need to change their structure. It adopted a multi-divisional structure. Corporate provides strategic direction and consolidated financial reporting. Significant authority has been delegated to the divisions. Each division manages its own specialized network of services. Do you know of other companies that operate in a similar fashion? Is this a good model for organizations to follow as they grow and develop?

3. FedEx Organization FedExSupplyChain FedExFreight FedExCustomCritical FedExCorp. FedExExpress FedExTradeNetwork FedExKinko’sServices FedExGround

4. Organizational Structure and Culture OrganizationalStructure OrganizationalCulture The formal system of work roles andauthority relationships that governhow associates and managersinteract with one another. Involves the values and normsshared by managers and associatesthat influence behavior. It is apowerful force in organizations.

5. Knowledge Objectives • Define key elements of organizational structure, including both structural and structuring dimensions. • Explain how corporate and business strategies relate to structure. • Explain how environment, technology, and size relate to structure. • Define organizational culture, and discuss the competing-values cultural framework. • Discuss socialization. • Describe cultural audits and subcultures. • Explain the importance of a fit between individual values and organizational culture.

6. Hierarchy Structural Characteristics Structuring Characteristics Fundamental Elements of Organizational Structure

7. Departmentation Height Span of Control Structural Characteristics

8. Highest 1 1 10 4 100 17 Organizational Level 1000 63 Associates 250 1000 Associates Lowest Span of Control Average span of Four Average span of Ten Adapted from Exhibit 13-1: Average Span of Control: Effects on Height of the Hierarchy

9. CEO VP Research and Development VP Research and Development VP Operations VP Human Resources VP Marketing VP Finance Functional Organization Adapted from Exhibit 13-2: Simplified Functional Organization

10. Head of Human Resources Head of Human Resources Head of Human Resources Head of Finance Head of Finance Head of Finance Head of R&D Head of R&D Head of R&D Head of Operations Head of Operations Head of Operations CEO Head of Marketing Head of Marketing Head of Marketing V.P. Product/Service Area 1 V.P. Product/Service Area 1 V.P. Product/Service Area 1 Divisional Organization Adapted from Exhibit 13-3: Simplified Divisional Organization

11. Standardization Centralization Specialization Formalization Structuring Characteristics

12. The Modern Organization Flexible empowering type of structure Organic Mechanistic Learning Non-Learning Boundaryless Traditional Fewer management levels, broader spans of control, less centralization, standardization, formalization and specialization.

13. Freedom • Substantial freedom may exist, but • Freedom is not unlimited • Alternative mechanisms are used to ensure that individuals are working for the good of the organization • Values are shared • Reward systems are used to promote appropriate behavior

14. CorporateStrategy Growth Diversification Factors Affecting Structure

15. Diversification Structure Single product Functional Dominant product (few products) Functional Dominant product (several products) Divisional Related product Divisional Unrelated product Divisional Unrelated product Holding Company Diversification Strategy and Structure Adapted from Exhibit 13-4: Matches between Diversification Strategy and Structure

16. Business Strategy How a firm competes for success against other organizations in a particular market. • Low cost/low price • Product/service differentiation • Supporting structure including strategic business units – SBUs

17. IDEO and Differentiation Strategy IDEO demonstrates a differentiation strategy, highlights that occasionally organizations supplement their human capital, and they value teams with diverse members. Is this an effective approach to business? How can this approach help other businesses and organizations? What are your thoughts about IDEO’s approaches: • Form a diverse team • Team members brainstorm • Team members engage in rapid prototyping • Team members implement the fruits of their labors ExperiencingStrategic OB

18. Paul R. Lawrence Jay W. Lorsch Environment and Basic Structure Environmental uncertainty – the degree to which an environment is complex and changing; uncertain environments are difficult to monitor and understand. • Effective organizations experiencing high environmental uncertainty tend to be more organic. • Effective organizations experiencing low environmental uncertainty tend to be less organic.

19. Lateral Relations Information Technology Increasing Richness of Information Processing Self-Contained Tasks Slack Resources Increasing Implementation Complexity Environment and Integration Adapted from Exhibit 13-5: Integration in Organizations

20. Direct Contact Liaison Roles Matrix Designs Taskforces Lateral Processes Managerial Linking Roles Teams Integrating Roles Alternative Lateral Processes

21. Manufacturing Joan Woodward Technology and Structure Mass Production Technology Process Production Technology Small-Batch Technology Mass Customization

22. Charles Perrow Four categories of technology Technology and Structure Task Variability Task Analyzability Routine Craft Engineering Nonroutine

23. Non-Routine Engineering Specialized Engineering Consulting Firm Research and Development Firm High Task Variability Routine Craft Mass-Production Firm Low Public School High Task Analyzability Low Organizations and Technology Adapted from Exhibit 13-6: Organizations and Technology

24. Google Culture Attracts High-Quality Associates Larry Page and Sergy Brin Do you think Google would have enjoyed its success had a different type of structure and culture been introduced? What types of organizations could benefit with a similar structure and culture? What types of organizations might have difficulty? As Google continues to grow, will the culture survive or will it possibly be replaced by a more traditional culture? ExperiencingStrategic OB

25. Shared Values Organizational Culture Reinforcing Outcomes Norms Individual and Group Behavior Developing Organizational Culture Adapted from Exhibit 13-7: Process of Developing Organizational Culture

26. Clan Adhocracy Leadership Entrepreneurs and Innovators Leadership Mentors and Coaches Flexibility/Discretion Effectiveness Cohesion and Morale Effectiveness Creativity and Innovation Hierarchy Market Leadership Hard Drivers and Competitors Leadership Monitors and Organizers Stability/Control Effectiveness Goal Achievement and Winning Effectiveness Efficiency and Order Internal Focus/Integration External Focus/Differentiation Organizational Culture Adapted from Exhibit 13-8: Competing Values Model of Organizational Culture

27. Cultural Socialization A process through which an organization imparts its values to newcomers Content Context SocialDynamics

28. Analyze process and content Analyze responses to critical incidents Analyze values and beliefs of culture creators Explore anomalies or puzzling features Examine linkage – culture with goals Cultural Audit A tool for assessing and understanding the culture of an organization. Use these five steps for conducting the cultural audit: Subcultures – groups that share values that differ from the main values of the organization.

29. Finding a Fit at Home Depot ManagerialAdvice Robert Nardelli Do you agree that an individual’s management style and values should agree with the organization’s culture? Why or why not? Do you think Nardelli is what Home Depot needed at the time? Have you worked with a leader whose style was very different than the culture of the organization? What was that like? Can some organizations benefit from a major change in leadership philosophy?

30. Person-Organization Fit Values Abstract ideals that relate to proper life goals and methods for reaching those goals. End-Means Dimension Types of personal goals that one ought to have Types of behaviors thatone ought to use in reaching those goals

31. Types of Personal Values End(Goal)Values Means(Behavior)Values Adapted from Exhibit 13-9: Types of Personal Values

32. The Strategic Lens • Consider an organization of which you are a member or an associate. What is the structure in this organization? Is it centralized or decentralized? Is it organic and flexible? How would you change the structure in this organization to make it more effective? • How would you describe the culture in the organization discussed in question #1? How does the culture affect members’ behavior in the organization? • When you become a manager, what type of culture will you establish in your unit? What values do you want to emphasize? Why?

33. Questions