INTRODUCTION

1. Discuss the traditional and contemporary views of each of the six key elements of organizational
design.

Traditionally, work specialization was viewed as a way to divide work activities into separate job
tasks. Today’s view is that it is an important organizing mechanism but it can lead to problems. The
chain of command and its companion concepts—authority, responsibility, and unity of command—
were viewed as important ways of maintaining control in organizations. The contemporary view is
that they are less relevant in today’s organizations. The traditional view of span of control was that
managers should directly supervise no more than five to six individuals. The contemporary view is
that the span of control depends on the skills and abilities of the manager and the employees and on
the characteristics of the situation.

2. Can an organization’s structure be changed quickly? Why or why not? Should it be changed
quickly? Explain.

The speed with which structural changes can be implemented depends partly upon an organization’s
size. A small organization is usually able to change its structure more rapidly than a larger one
because a smaller company has fewer employees who are involved in the restructuring process.
However, a large organization can change its structure and often does in response to changing
environmental conditions and changing strategies.

3. Contrast mechanistic and organic organizations.

A mechanistic organization is a rigid and tightly controlled structure. An organic organization is

highly adaptive and flexible.

4. Would you rather work in a mechanistic or an organic organization? Why?

Students’ answers to this question will vary. Many students prefer the structure provided by a
mechanistic organization, whereas others would be less productive in an organization with structural
rigidity. Note that SAL #III.A.1 “What Type of Organization Structure Do I Prefer?” addresses whether
each of your students would like to work in a bureaucracy (a mechanistic organization). Students
might want to revisit this assessment in answering this question.

5. Explain the contingency factors that affect organizational design.

An organization’s structure should support the strategy. If the strategy changes, the structure also
should change. An organization’s size can affect its structure up to a certain point. Once an
organization reaches a certain size (usually around 2,000 employees), it’s fairly mechanistic. An
organization’s technology can affect its structure. An organic structure is most effective with unit
production and process production technology. A mechanistic structure is most effective with mass
production technology. The more uncertain an organization’s environment, the more it needs the
flexibility of an organic design.

6. Contrast the three traditional organizational designs.

A simple structure is one with low departmentalization, wide spans of control, authority centralized
in a single person, and little formalization. A functional structure groups similar or related
occupational specialties together. A divisional structure is made up of separate business units or
divisions.

7. With the availability of advanced information technology that allows an organization’s work to be
done anywhere at any time, is organizing still an important managerial function? Why or why not?

Although an organization’s work may be done anywhere at any time, organizing remains a vital
managerial function because the work that must be accomplished still must be divided, grouped,
and coordinated.

8. Researchers are now saying that efforts to simplify work tasks actually have negative results for
both companies and their employees. Do you agree? Why or why not?

Studies as far back as 1924 show that simplified jobs lead to boredom. In 1950 other researchers
found that highly segmented and simplified jobs resulted in lower employee morale and output.
Other consequences of low employee motivation include absenteeism and high employee turnover,
both very costly for businesses.

Answers to Case Application Questions

Ask Chuck

1. Describe and evaluate what Charles Schwab is doing.

It is easy for a company to lose sight of their goals. While other lines of business may be potential
money makers, going beyond a firm’s core competence can lead a firm into financial trouble. In this
case, students should see how Charles Schwab has stayed true to its primary business - making stock
trades for investors who make their own financial decisions. Another goal of Schwab is customer
service. In the example of Cheryl Pasquale, we can see how she uses the company’s information
system to closely monitor her sales representatives to make sure they are meeting the needs of
customers.

2. How might the company’s culture of not buying into hype and not taking excessive risks affect its
organizational structural design?

Schwab’s conservative culture would foster a simple structure characterized by low

departmentalization, wide spans of control, centralized authority, and little formalization. This
structure fast, flexible, inexpensive to maintain and has clear lines of accountability.

3. What structural implications—good and bad—might Schwab’s intense focus on customer

feedback have?

Schwab’s focus on customer feedback would indicate a flexible structure that is able to adapt to
meet customer demands. This structure would allow employees to spend more time and energy
devoted to improving relationships with customers and possibly provide for exceptions to improve
customer satisfaction. On the other hand, building strong customer relationships takes time and
money. By paying so much attention to the customer there is the potential loss of efficiency that
Schwab has to maintain to keep stock transactions low.

4. Do you think this arrangement would work for other types of organizations? Why or why not?

This type of customer focus would not work well for firms that operate on a thin margin. For
example, manufacturing firms that operate in the maturity phase of the industry life cycle focus on
keeping production costs as low as possible. This arrangement may also not work well in situations
where organizations are set up around processes.

A New Kind of Structure

1. Describe and evaluate what Pfizer is doing.

What Jordan Cohen has created at Pfizer is a network organization. It’s a form of the boundaryless
organization structure where company employees concentrate on the important aspects of the job,
i.e. those elements that are related to the company’s core competencies, and other tasks are
outsourced to another organization.

2. What structural implications—good and bad—does this approach have? (Think in terms of the six
organizational design elements.)

Have students break into groups and discuss how the advantages and disadvantages of using a
network organizational structure from the perspective of:

• Work Specialization

• Departmentalization

• Chain Of Command

• Span Of Control

• Centralization And Decentralization

• Formalization

Some groups may be assigned more than one design element. For more information on Pfizer’s new
structure, go to the web

3. Do you think this arrangement would work for other types of organizations? Why or why not?

The network organization design used by Pfizer has helped to balance recent layoffs the company
experienced after a nearly $4 billion yearly budget cut. According to managers in the Fast Company
article, the OOF has cut some project costs by 100%. While this program has been a success for
Pfizer, it may not be realistic for other companies that either (a) have not experienced such deep
cuts in personnel, or (b) have such high personnel costs.
4. What role do you think organizational structure plays in an organization’s efficiency and
effectiveness? Explain.

Organizational structure plays a key role in enabling a company to function smoothly, to remain
responsive to its internal and external stakeholders, and to adapt to changes in the marketplace.
Innovation is facilitated by fewer layers of management, and students have already learned that the
survival and success of a company is usually dependent upon its ability to function as a learning
organization that promotes innovation.
PLANNING

1. Explain what studies have shown about the relationship between planning and performance. It
should be noted that one cannot say that organizations that formally plan always outperform those
that don’t plan. However, studies have indicated that formal planning is often associated with
positive financial results. Generally, performance is also higher in those organizations where
planning is present. And, when higher performance is not the result of formal planning, often the
reason is due to something in the external environment. Finally, studies indicate that at least four
years of formal planning are necessary before performance is affected.

2. Discuss the contingency factors that affect planning. The first contingency factor is a manager’s
level in the organization. Typically, lower-level managers are operational planners, while upper-level
managers are strategic planners. Second, with environmental uncertainty, plans should be specific,
but flexible. And third, the length of future commitments can greatly affect planning.

3. Describe how managers can effectively plan in today’s dynamic environment. Environmental
uncertainty is a constant. Therefore, managers should develop plans that are specific yet remain
flexible. If managers recognize that planning is an ongoing process, then when a dynamic
environment is encountered, managers can adapt readily. Another way to assist with planning is to
craft an organizational hierarchy that is relatively flat. Allowing lower level managers to set goals
and develop plans is an effective way to deal with a dynamic environment.

4. Will planning become more or less important to managers in the future? Why?

Planning will become more important to managers in the future because of the uncertainty in an
increasingly dynamic environment. Changes constantly occur in both the general and specific
environments of organizations, and many of these changes take place rapidly. Planning helps
managers cope with the uncertainty by forcing managers to look ahead, anticipate change, consider
the impact of the change, and develop appropriate responses.

5. If planning is so crucial, why do some managers choose not to do it? What would you tell these
managers?

Managers may choose not to devote time to planning because they do not know how to plan or feel
that they do not have the necessary time. Others may say that planning is a waste of time, that the
future is going to happen whether or not they plan. However, these reasons do not discount the
importance of planning. Every manager should engage in planning.

6. Explain how planning involves decisions today that will have an impact later.

As managers plan, they make decisions that influence how activities are organized, how employees
are managed, and what control mechanisms are implemented. As managers look to the future by
planning, the decisions they make as they plan will have an impact on their other managerial
activities.

7. How might planning in a not-for-profit organization such as the American Cancer Society differ
from planning in a for-profit organization such as Coca-Cola?
 The process of planning is similar, but the content of the plans will differ. The types of objectives
that are established and the plans that are formulated will be influenced by the fact that a not-for-
profit organization does not have profit as its major objective. However, a not-for-profit organization
must devote efforts and resources to planning how to raise funds and to recruit volunteers to
achieve its mission.

8. What types of planning do you do in your personal life? Describe these plans in terms of being
(a) strategic or operational plans, (b) short or long term plans, and (c) specific or directional plans.

Students’ responses to this question will, of course, vary. Students may mention their planning to
meet educational and career goals. Encourage your students to think about their everyday lives and
the types of daily, weekly, monthly, and yearly planning they do.

9. The late Peter Drucker, an eminent management author, coined the SMART format for setting
goals back in 1954: S (specific), M (measurable), A (attainable), R (relevant), and T (time bound). Are
these still relevant today? Discuss.

Of all of the material presented in this chapter, most students will readily recall this acronym for goal
setting. These qualities from Drucker have remained basically unaltered and have been cited in
numerous texts and studies. As a part of student discussion, try to find other application for
Drucker’s work in this area beyond the management of employees. What about for school children?
Volunteers working for a community program?

10. Many companies have a goal of becoming more environmentally sustainable. One of the most
important steps they can take is controlling paper waste. Choose a company—any type, any size.
Imagine that you’ve been put in charge of creating a program to control paper waste for the
company. Set goals and develop plans. Prepare a report for your boss (that is, your professor),
outlining these goals and plans.

It should also be stressed to students that plans must be accepted by top management and as well
as employees at lower levels if it is to be effectively implemented. Have students discuss the
difficulty of implementing a plan such as this across levels. How could students increase buy-in of
the plan? How would such a plan be ultimately evaluated to determine its success? Using criteria
discussed in the previous question, have students check that their goals match the SMART format

CASE 1:

Building a Future

1. What role do you think goals would play in planning for the wise use of this gift? List some goals
you think might be important. (Make sure these goals have the characteristics of well-written goals.)

Goals play a substantial role in an organization’s planning for situations requiring coordination of
resources. Habitat for Humanity’s goal to effectively use the $100 million gift should follow the
SMART format introduced by Drucker. In addition to being written, have students suggest ways that
the goal can meet the qualities of S (specific), M (measurable), A (attainable), R (relevant), and T
(time bound).
2. What types of plans would be needed in wisely using this gift? (For instance, long-term or short-
term, or both?) Explain why you think these plans would be important.

Planning involves defining the organization’s goals, establishing an overall strategy for achieving
those goals, and developing a comprehensive set of plans to integrate and coordinate organizational
work. Determining how and where the $100 million gift should be allocated requires careful
planning – in both the long-term and short-term. Have students think of short term plans involved
for the initial allocation of some of the gift and then long-term plans to not only evaluate what has
been allocated, but how the remaining funds should be used. In addressing the importance of these
plans, have students think of the possible outcomes for the plan if they decided to invest a
percentage of the gift (and the investment results in a significant return; or the investment results in
a substantial loss).

3. What contingency factors might affect the planning Habitat executives have to do for the wise use
of this gift? How might those contingency factors affect the planning?

A gift of this size will ultimately be managed by the top executives at Habitat for Humanity.
Therefore, at the top organizational level, the planning will be strategic in nature. As smaller pieces
of the gift are passed down through the organization for allocation, lower-level managers will be
engaged in operational planning. Second, environmental uncertainty will affect the planning process
in that natural disasters, greater need for housing, or a myriad of other unexpected occurrences
could cause the executives to rethink how the gift is used. And third, the time frame for the use of
this gift is important. Students might think in terms of a five-year plan, but shorter and longer plans
are also possible if properly supported by the students.

4. What planning challenges do you think Habitat executives face with getting the most use out of
this gift? How should they cope with those challenges?

A plan involving such a large amount of money would be quite challenging. Very likely, not all the
executives will agree on specifically how the money should be utilized. Reaching consensus on the
actual use of the gift could be a difficult process. In addition, once agreed, others (the media,
Habitat employees, volunteers, and even needy families benefitting from Habitat homes) may view
the use of the gift in a negative fashion – in other words, executives might face some scrutiny.
Students should be able to identify the importance of effective communication throughout the
organization once the plans and goals are set. Getting buy-in from others will facilitate the plan’s
acceptance by constituents.

CASE 2:

1. Could a company even plan for this type of situation? If yes, how? If not, why not?

This situation epitomizes the importance of understanding environmental uncertainty. A company

may not be able to plan specifically for a volcano eruption that interrupts air traffic; however, a
company’s plans should remain flexible in the event of sudden, unexpected obstacles. Students
should be able to explain how a firm develops specific plans, but builds in a degree of flexibility to
those plans.

2. Would goals be useful in this type of situation? What types of goals might a manufacturing
company like BMW have in such a situation? How about a global airline? How about a small flower
grower in Kenya?

Goals are important in situations of this type – especially short-term goals. An organization’s quick
response to the volcanic eruption will lessen the negative impact of the delays on shipping,
communication, travel, etc. All three situations (BMW, global airline, and Kenyan flower grower)
would set both strategic and financial goals. Specific strategic goals would assist each organization
with how it adapts to the air traffic delays, while financial goals would attempt to lessen the financial
hit each organization suffers.

3. What types of plans could companies use in this type of situation? Explain why you think these
plans would be important.

A sudden, unexpected event such as a volcanic eruption would create a need for several different
kinds of plans. Though long-term plans would be in place, some flexibility in those plans would
probably be necessary. Students should be able to identify the importance of short-term plans in
handling the situation. Again, flexibility would be key. Additionally, students may point to
operational plans to provide specifics on certain areas of an organization and directional plans that
ensure flexibility during the crisis.

4. What lessons about planning can managers learn from this crisis?

Students should grasp the importance of flexibility with the planning process. Environmental
uncertainty is the expectation and not the exception, therefore, rigid adherence to any plan could
create challenges for managers. The ability to quickly adapt to a crisis is also critical as it enables
managers to assess a situation and work with his or her team to overcome the obstacles.
STRATEGIC MANAGEMENT

Answers to Review and Discussion Questions

1. Explain why strategic management is important.

Strategic management is important for three reasons. First, it makes a difference in how well
organizations perform. Second, it’s important for helping managers cope with continually changing
situations. Finally, strategic management helps coordinate and focus employee efforts on what’s
important.

2. Describe the six steps in the strategic management process.

The six steps in the strategic management process encompass strategy planning, implementation,
and evaluation. These steps include the following: (1) identify the current mission, goals, and
strategies; (2) do an external analysis; (3) do an internal analysis (steps 2 and 3 collectively are
known as SWOT analysis); (4) formulate strategies; (5) implement strategies; and (6) evaluate
strategies. Strengths are any activities the organization does well or unique resources that it has.
Weaknesses are activities the organization doesn’t do well or resources it needs but doesn’t have.
Opportunities are positive trends in the external environment. Threats are negative trends.

3. How could the Internet be helpful to managers as they follow the steps in the strategic
management process?

The Internet provides voluminous information conveniently and quickly about competitors,
environmental factors, and customers. This information improves the manager’s ability to make
sound strategic management decisions as he or she faces continuously changing environmental
conditions.

4. How might the process of strategy formulation, implementation, and evaluation differ for (a) large
businesses, (b) small businesses, (c) not-for-profit organizations, and (d) global businesses?

All companies, large or small, profit or not-for-profit, domestic or global benefit from the process of
strategy formulation. The major difference that exists between the different types of companies
and the process they go through centers around the development of their mission and goals. For
example, the owners of a small business might not want to pursue the goal of growth and instead
focus on stability. For not-for-profit organizations, the goal is not about making money for owners
or stockholders but about how to find a way to effectively and efficiently maximize their resources
to benefit others. In a global organization, while the SWOT would be more involved due to the
number of potential elements involved, it remains the same except the goals extend beyond serving
one country or market.

5. Should ethical considerations be included in analyses of an organization’s internal and external

environments? Why or why not?

Ethical considerations should permeate every activity of an organization. As a firm’s strategy is the
basis for their plans, when ethics are not considered then the organization is likely to ignore
potential ethical problems.
6. Describe the three major types of corporate strategies and how the BCG matrix is used to manage
those corporate strategies.

A growth strategy is when an organization expands the number of markets served or products
offered, either through current or new businesses. The types of growth strategies include
concentration, vertical integration (backward and forward), horizontal integration, and
diversification (related and unrelated). A stability strategy is when an organization makes no
significant changes in what it’s doing. Both renewal strategies—

retrenchment and turnaround—address organizational weaknesses that are leading to performance

declines. The BCG matrix is a way to analyze a company’s portfolio of businesses by looking at a
business’s market share and its industry’s anticipated growth rate. The four categories of the BCG
matrix are cash cows, stars, question marks, and dogs.

7. Describe the role of competitive advantage and how Porter’s competitive strategies help an
organization develop competitive advantage.

An organization’s competitive advantage is what sets it apart, its distinctive edge. A company’s
competitive advantage becomes the basis for choosing an appropriate competitive strategy. Porter’s
five forces model assesses the five competitive forces that dictate the rules of competition in an
industry: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power
of suppliers, and current rivalry. Porter’s three competitive strategies are as follows: cost leadership
(competing on the basis of having the lowest costs in the industry), differentiation (competing on
the basis of having unique products that are widely valued by customers), and focus (competing in a
narrow segment with either a cost advantage or a differentiation advantage).

8. “The concept of competitive advantage is as important for not-for-profit organizations as it is for

profit organizations.” Do you agree or disagree with this statement? Explain, using examples to make
your case.

Not-for-profit and for-profit companies compete for customers. In the case of not-for-profit
companies, those customers are donors and like any market are limited in size. To be effective non-
for-profit companies need something that will attract donors like for-profit companies attract
customers. For example, United Way has an established network of businesses that regularly
donate money as part of their yearly pledge drives. Another example is Mary Komen’s, known for
their work with breast cancer awareness, that has established a series of runs and walks across the
United States and has even had success in publicizing their cause with the NFL.

9. Explain why strategic leadership and strategic flexibility are important.

Strategic leadership is the ability to anticipate, envision, maintain flexibility, think strategically, and
work with others in the organization to initiate changes that will create a viable and valuable future
for the organization and includes eight key dimensions. Strategic flexibility—that is, the ability to
recognize major external environmental changes, to quickly commit resources, and to recognize
when a strategic decision isn’t working— is important because managers often face highly uncertain
environments

10. Describe e-business, customer service, and innovation strategies.

Using the Internet, companies have created knowledge bases that employees can tap into anytime,
anywhere. E-business as a strategy can be used to develop a sustainable competitive advantage; it
can also be used to establish a basis for differentiation or focus. Customer service strategies give
customers what they want, communicate effectively with them, and provide employees with
customer service training. Innovation strategies focus on breakthrough products and can include the
application of existing technology to new uses. An organization that is first to bring a product
innovation to the market or to use a new process innovation is called a first mover.

Answers to Case Application Questions

Gaga Over Gaga

1. How is strategic management illustrated by this case story?

There is a lot at stake when a label decides to invest in a new star. In today’s highly competitive
music industry, there is a great deal of planning that goes on behind the scenes – just like a company
that launches a new product. According to the case, “Gaga’s persona has been a calculated
strategy.” It would be risky for any record label to put in the time and energy into a new star without
planning for competitive advantage or strategic planning.

2. How might SWOT analysis be helpful to Lady Gaga as she and her advisors manage her career?

A SWOT can be used for many purposes. In this case, a SWOT analysis could help point the singer
into the best type of music, considering her singing ability, and point toward new technological
opportunities that might be under utilized by other artist.

3. What competitive advantage do you think Lady Gaga is pursuing? How is she exploiting that
competitive advantage?

From the case, Lady Gaga has “savvy awareness of the power of digital media and her exceptional
ability to exploit it.” and “Her persona is built for the online generation.” This is important as fans
often download songs from the internet for free and in the process deny record labels revenue for
record sales. Gaga has also taken advantage of new contract formats, such as the 360-degree deal,
where a label invests more money upfront—on marketing, for example—but in return, gets a piece
of merchandise sales, touring revenue, and other earnings artists usually kept for themselves. And
last but not least, Gaga's persona is one that “cuts across disparate subcultures” which results in the
potential to attract a diversified fan base.

4. Do you think Lady Gaga’s success is due to external or internal factors or both? Explain.

Students may have a strong opinion on Gaga’s talent. However, it is possible that Gaga could be in
the right place at the right time - taking advantage of an opportunity that exists in the record
industry. Remember Vanilla Ice? Whether she has the pipe’s to stay in the music biz will show in the
long term.

5. What strategic implications does the suggestion that her ability to remain a music industry
mainstay depends on her ability to evolve have?
For companies to remain on top for any length of time, they must be flexible and continually
innovate. On the other hand, it is difficult to radically change a product without losing the image the
company has worked so hard to build. As Lady Gaga is currently riding the fashion ‘wave,’ she and
her team will have to tread carefully the line between totally re-inventing herself to stay relevant or
staying true to what made her a success to begin with.

Faded Signal

1. What strategic mistakes did Nokia make in the U.S. market?

While Nokia still does well in other countries, it has recently struggled in the US. Nokia’s biggest
mistake in the US was that it thought it knew better what the customer wanted than the customers
themselves. Seeing the buzz created by the iphone, Nokia neglected the growing fondness for apps
and touch screens and believed that its products were superior. Another mistake has to do with the
different technologies used by cellphones (GSM vs. CDMA). Nokia was initially slow to adapt to the
technology currently used by a majority of US cell phone users.

2. Why do you think a “smart” company makes “dumb” mistakes?

One of the paradoxes of businesses is that many times they are the victims of their own success. A
good example of this phenomenon is Ford’s model T. Having designed a great car, Ford didn’t see
the need to update the model it believed was superior to its competitors. While Ford rested on his
laurels, other car manufacturers were listening to customers and providing the options and features
that customers wanted.

3. What strategies is Nokia using to revitalize its North American business?

Nokia is using its partnerships with AT&T, Qualcomm, and Microsoft to expand their reach in the
United States. On one hand, this could be viewed as a growth strategy. Take this statement from
the case, “Everything you see us doing is to build the broad set of capabilities to take us broader and
deeper into the U.S. market.” On the other hand, in light of their resent failures what they are doing
could be viewed as a turnaround strategy.

4. How could Nokia have done better at using strategic management? What does this case story tell
you about strategic management?

Obviously, Nokia made the mistake of underestimating the competition (i.e. Apple) and not paying
attention to the customer. When companies fail to take these considerations into account when
determining their strategy, then they are sure to fail. The principle that they neglected is that
strategic management cannot be made in a vacuum. The external environment and the competitive
environment must be considered when planning.
ORGANIZING:

1. Discuss the traditional and contemporary views of each of the six key elements of organizational
design.

Traditionally, work specialization was viewed as a way to divide work activities into separate job
tasks. Today’s view is that it is an important organizing mechanism but it can lead to problems. The
chain of command and its companion concepts—authority, responsibility, and unity of command—
were viewed as important ways of maintaining control in organizations. The contemporary view is
that they are less relevant in today’s organizations. The traditional view of span of control was that
managers should directly supervise no more than five to six individuals. The contemporary view is
that the span of control depends on the skills and abilities of the manager and the employees and on
the characteristics of the situation.

2. Can an organization’s structure be changed quickly? Why or why not? Should it be changed
quickly? Explain.

The speed with which structural changes can be implemented depends partly upon an organization’s
size. A small organization is usually able to change its structure more rapidly than a larger one
because a smaller company has fewer employees who are involved in the restructuring process.
However, a large organization can change its structure and often does in response to changing
environmental conditions and changing strategies.

3. Contrast mechanistic and organic organizations.

A mechanistic organization is a rigid and tightly controlled structure. An organic organization is

highly adaptive and flexible.

4. Would you rather work in a mechanistic or an organic organization? Why?

Students’ answers to this question will vary. Many students prefer the structure provided by a
mechanistic organization, whereas others would be less productive in an organization with structural
rigidity. Note that SAL #III.A.1 “What Type of Organization Structure Do I Prefer?” addresses whether
each of your students would like to work in a bureaucracy (a mechanistic organization). Students
might want to revisit this assessment in answering this question.

5. Explain the contingency factors that affect organizational design.

An organization’s structure should support the strategy. If the strategy changes, the structure also
should change. An organization’s size can affect its structure up to a certain point. Once an
organization reaches a certain size (usually around 2,000 employees), it’s fairly mechanistic. An
organization’s technology can affect its structure. An organic structure is most effective with unit
production and process production technology. A mechanistic structure is most effective with mass
production technology. The more uncertain an organization’s environment, the more it needs the
flexibility of an organic design.

6. Contrast the three traditional organizational designs.

A simple structure is one with low departmentalization, wide spans of control, authority centralized
in a single person, and little formalization. A functional structure groups similar or related
occupational specialties together. A divisional structure is made up of separate business units or
divisions.

7. With the availability of advanced information technology that allows an organization’s work to be
done anywhere at any time, is organizing still an important managerial function? Why or why not?

Although an organization’s work may be done anywhere at any time, organizing remains a vital
managerial function because the work that must be accomplished still must be divided, grouped,
and coordinated.

8. Researchers are now saying that efforts to simplify work tasks actually have negative results for
both companies and their employees. Do you agree? Why or why not?

Studies as far back as 1924 show that simplified jobs lead to boredom. In 1950 other researchers
found that highly segmented and simplified jobs resulted in lower employee morale and output.
Other consequences of low employee motivation include absenteeism and high employee turnover,
both very costly for businesses.

Answers to Case Application Questions

Ask Chuck

1. Describe and evaluate what Charles Schwab is doing.

It is easy for a company to lose sight of their goals. While other lines of business may be potential
money makers, going beyond a firm’s core competence can lead a firm into financial trouble. In this
case, students should see how Charles Schwab has stayed true to its primary business - making stock
trades for investors who make their own financial decisions. Another goal of Schwab is customer
service. In the example of Cheryl Pasquale, we can see how she uses the company’s information
system to closely monitor her sales representatives to make sure they are meeting the needs of
customers.

2. How might the company’s culture of not buying into hype and not taking excessive risks affect its
organizational structural design?

Schwab’s conservative culture would foster a simple structure characterized by low

departmentalization, wide spans of control, centralized authority, and little formalization. This
structure fast, flexible, inexpensive to maintain and has clear lines of accountability.

3. What structural implications—good and bad—might Schwab’s intense focus on customer

feedback have?

Schwab’s focus on customer feedback would indicate a flexible structure that is able to adapt to
meet customer demands. This structure would allow employees to spend more time and energy
devoted to improving relationships with customers and possibly provide for exceptions to improve
customer satisfaction. On the other hand, building strong customer relationships takes time and
money. By paying so much attention to the customer there is the potential loss of efficiency that
Schwab has to maintain to keep stock transactions low.

4. Do you think this arrangement would work for other types of organizations? Why or why not?

This type of customer focus would not work well for firms that operate on a thin margin. For
example, manufacturing firms that operate in the maturity phase of the industry life cycle focus on
keeping production costs as low as possible. This arrangement may also not work well in situations
where organizations are set up around processes.

A New Kind of Structure

1. Describe and evaluate what Pfizer is doing.

What Jordan Cohen has created at Pfizer is a network organization. It’s a form of the boundaryless
organization structure where company employees concentrate on the important aspects of the job,
i.e. those elements that are related to the company’s core competencies, and other tasks are
outsourced to another organization.

2. What structural implications—good and bad—does this approach have? (Think in terms of the six
organizational design elements.)

Have students break into groups and discuss how the advantages and disadvantages of using a
network organizational structure from the perspective of:

• Work Specialization

• Departmentalization

• Chain Of Command

• Span Of Control

• Centralization And Decentralization

• Formalization

Some groups may be assigned more than one design element. For more information on Pfizer’s new
structure, go to the web

3. Do you think this arrangement would work for other types of organizations? Why or why not?

The network organization design used by Pfizer has helped to balance recent layoffs the company
experienced after a nearly $4 billion yearly budget cut. According to managers in the Fast Company
article, the OOF has cut some project costs by 100%. While this program has been a success for
Pfizer, it may not be realistic for other companies that either (a) have not experienced such deep
cuts in personnel, or (b) have such high personnel costs.
4. What role do you think organizational structure plays in an organization’s efficiency and
effectiveness? Explain.

Organizational structure plays a key role in enabling a company to function smoothly, to remain
responsive to its internal and external stakeholders, and to adapt to changes in the marketplace.
Innovation is facilitated by fewer layers of management, and students have already learned that the
survival and success of a company is usually dependent upon its ability to function as a learning
organization that promotes innovation.
LEADING

LEADERSHIP:

1. Define leader and leadership and explain why managers should be leaders.

Students should be able to provide the definitions in the text – that a leader is someone who
influences others and that leadership is the process of influencing others to achieve a goal.
However, encourage students to think about their own definitions of who a leader is and how they
personally define leadership.

2. What does each of the four behavioral leadership theories say about leadership?

The University of Iowa Studies explored three styles of leadership: autocratic, democratic, and
laissez-faire. Initial results found that a democratic style leader was more effective. However, later
studies had mixed results. When group member satisfaction was examined, it was found that a
democratic style was more effective than an autocratic one. The Ohio State Studies found that a
leader who was high in both initiating structure and consideration sometimes achieved high group
task performance and high group member satisfaction, but not always. The University of Michigan
Studies presented two dimensions of leadership: employee orientation and production orientation.
Researchers concluded that leaders who were employee oriented were able to get high group
productivity and high group member satisfaction. Finally, the Managerial Grid attempted to
categorize various leadership behaviors. Ultimately, the grid offered no answers to the question of
what made a manager an effective leader; it only provided a framework for conceptualizing
leadership style.

3. Explain Fiedler’s contingency model of leadership.

Fiedler’s model proposed that group performance was based upon the leader’s style and the
amount of control in a given situation. After a leader’s style is assessed through the least-preferred
coworker questionnaire, three contingency dimensions are examined: leader-member relations,
task structure, and position power. Ultimately, the model suggests that effectiveness is achieved
when a leader is matched to a particular situation or if the situation is changed.

4. How do situational leadership theory and path-goal theory each explain leadership?

Situational leadership theory focuses upon the readiness of followers. It treats the leader and
follower relationship like that of a parent and child. As the child (follower) matures, the parent
(leader) relinquishes more control. Path-goal theory puts the focus on the leader and his or her
ability to guide followers and remove obstacles.

5. What is leader-member exchange theory and what does it say about leadership?

Leader-member exchange theory states that leaders establish “in-groups” and “out-groups.” Those
in the in-group will have higher performance, lower turnover, and greater job satisfaction. This is
due to the leader and follower investing in the relationship.
6. Differentiate between transactional and transformational leaders and between charismatic and
visionary leaders.

A transactional leader guides and influences followers by exchanging rewards for the followers’
productivity. A transformational leader stimulates and inspires followers to achieve extraordinary
outcomes. A charismatic leader is an enthusiastic, self-confident leader whose personality and
actions influence people to behave in certain ways. A visionary leader is one who articulates an
appropriate vision for the future.

7. What are the five sources of a leader’s power?

The five sources of a leader’s power are legitimate, coercive, reward, expert, and referent.

8. What issues do today’s leaders face?

Today’s leaders face the issues of managing power, developing trust, empowering employees,
leading across cultures, and becoming an effective leader.

9. Do you think that most managers in real life use a contingency approach to increase their
leadership effectiveness? Explain.

As managers participate in mentoring, development training, networking, and on-the-job

experience, they should become more comfortable and adept in their use of a contingency approach
to increase their leadership effectiveness. Organizations that offer leadership training often include
contingency approaches. Ask your students to give examples to illustrate how their managers in the
workplace use a contingency approach for successful leadership.

10. Do the followers make a difference in whether a leader is effective? Discuss.

It is the leader’s ability to get the follower to carry out the goals of the organization that ultimately
determines a leader’s success. However, if the followers are not skilled or do not have the
appropriate knowledge to accomplish the task then the effectiveness of the leader suffers. You may
want to use the example of a coach who has lost key players due to unexpected injuries. If this
player is taken out of the game, then the team may lose the game regardless of the quality of the
coaching.

CASE 1:

Growing Leaders

1. What do you think about Buckley’s statement that leaders and managers differ? Do you agree?
Why or why not?

Student responses will vary. However, those who see a difference between management and
leadership should be able to identify “influencing” as a key term associated with leadership. Have
students think of analogies where a manager and a leader may be two different individuals – such as
a team captain and the coach.
2. What leadership models/theories/issues do you see in this case? List and describe.

In this case, students may see various contingency theories of leadership as leaders are trained in
one part of 3M for roles in potentially other parts of the company. In addition, because of the
attributes leaders are expected to have at 3M, students may associate these with transformational
leadership. Also, in Buckley himself, some students may recognize a visionary leadership style.

3. Take each of the six leadership attributes that the company feels is important. Explain what you
think each one involves. Then discuss how those attributes might be developed and measured.

Student responses will vary greatly, but encourage students to think in terms of what they would
expect from 3M employees if they were managers. Also, when it comes to developing and
measuring the attributes, have students apply good goal setting practices by ensuring that the
measures are achievable, specific, and measurable.

4. What did this case teach you about leadership?

Though students may share their opinions regarding this question, encourage them to think about
their own leadership styles. What style of leadership are they already developing? If they play a
sport or are involved in a campus organization, how do they think teammates would characterize
their leadership style? Is that congruent with their own self-assessment? Also, ask students if,
based upon what they read, would they find 3M an enjoyable environment in which to work? Why
or why not?

CASE 2:

1. What do you think of this description of Captain Holly Graf’s leader style? Do you think that
Captain Graf could even be called a leader? Discuss.

This case epitomizes the difference between a manager and a leader. Students should question
whether legitimate power does indeed make a leader. In other words, does title alone ensure that
subordinates will view the person “in charge” as a leader.

2. What kinds of power do you think Graf used as a ship commander? Explain your choices.

Though the case may not present a daily log of Graf’s actions, from what is illustrated, students
should be able to point to legitimate power as the obvious source of power. But, they may also
identify coercive power in the way Graf behaved toward crews.

3. Not surprisingly, this whole scenario rocked the Navy to its core since it reflected on the way the
Navy chooses, promotes, and then monitors its handpicked leaders. What changes, if any, do you
think need to take place in its leadership training and development?

Student responses will vary, but encourage them to think about the hierarchy involved. If the
students were Graf’s superior officer, how would that individual view the training process? Or, if
one of Graf’s crew members, what would that person view as important in terms of training and
development? Students might also consider the differences in leadership styles when one is
operating in a time of war versus managing say, a retail store or a restaurant. Is an autocratic style
of leadership necessary on a Navy ship? In every situation?
4. Some critics of Graf’s treatment have said that institutional sexism played a role in her removal.
Do you think that could be possible? Discuss. Would that “excuse” the way she led? Explain.

As students consider this question, have them think about the pioneering steps Graf took in her
career. Being the first woman to command a destroyer is a significant accomplishment in the U.S.
Navy. Have students explore the contingency theory of leadership. What if a leader chooses the
wrong style of leadership in a given situation? Is it possible that Graf was varying her leadership
style, but in an incorrect fashion – such as using an autocratic style when she should have been more
democratic or even laissez-faire? And, is a military environment completely different than the
private, business sector?