Management

A Practical Introduction
Third Edition
Angelo Kinicki &
Brian K. Williams

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin

 Chapter 8: Organizational Culture,
Structure, & Design

Building Blocks of the Organization

What Kind of Organizational Culture Do We Have?
Developing High Performance Cultures
What is an Organization?
Elements of an Organization
Types of Organizational Cultures
Creating the Best Structure
Building a Learning Organization

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 8.1 What Kind Of Organizational Culture
Will You Be Operating In?

WHAT IS AN ORGANIZATIONAL CULTURE?

Organizational culture (also called corporate

culture) is a system of shared beliefs and values that
develops within an organization and guides the
behavior of its members
It is the organization’s personality

There are two levels of corporate culture:

The invisible level
The visible level

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 Layers of Organizational Culture

 Invisible Level: Core Culture

 Not seen by the naked eye.
 Consists of values, beliefs, and assumptions
 Core culture might be associated with “it’s the
way we do things around here”

 Often has two sources:

1) Visions, assumptions, and biases of founders
2) Outlook that initial employees learned from
their own experiences

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 Layers of Organizational Culture

Visible Level:
Observable culture
Manifestations of culture:
Symbols
Stories
Heroes
Rites and rituals

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 8.1 What Kind Of Organizational Culture
Will You Be Operating In?
-symbols are objects, acts, qualities, or events that
convey meaning to others
-stories are narratives based on true events which
are repeated and sometimes embellished to
emphasize a particular value
-heroes are people whose accomplishments
embody the values of the organization
-rites and rituals are the activities and ceremonies,
planned and unplanned, that celebrate important
occasions and accomplishments in the organization’s
life

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 8.1 What Kind Of Organizational Culture
Will You Be Operating In?

WHY IS CULTURE IMPORTANT?

1. Culture provides an opportunity to reinforce the
company’s message
2. Culture helps to get everyone on board
3. Culture helps companies manage conflict and
change effectively
4. Culture helps employees understand why the
company does what it does and how it will achieve its
long term goals

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 Four Functions of Organizational Culture

It gives members an organizational identity

It facilitates collective commitment
It promotes social-system stability
It shapes behavior by helping employees make
sense of their surroundings

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 8.1 What Kind Of Organizational Culture
Will You Be Operating In?

Figure 8.1: Four Functions Of Organizational Culture

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 8.2 Developing High-Performance Cultures

WHAT ORGANIZATIONAL CULTURE ENHANCES

ECONOMIC PERFORMANCE?
There are three perspectives of how culture can enhance
performance:
1. The strength perspective assumes that the strength of a
corporate culture is related to a firm’s long-term financial
success
2. The fit perspective assumes that an organization’s culture
must align or fit with its business or strategic context
3. The adaptive perspective assumes that the most effective
cultures help organizations anticipate and adapt to
environmental changes
Studies show that in the long-term, financial performance is
highest for firms with an adaptive culture

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 8.2 Developing High-Performance Cultures

HOW CAN CULTURE BE EMBEDDED IN AN

ORGANIZATION?
The values and beliefs of a culture are shared with
members of the organization using a variety of mechanisms:
1. Formal Statements - culture can be embedded in an
organization through formal statements of philosophy,
mission, vision, and values
2. Slogans & Sayings - corporate cultures can be promoted
through slogans and sayings
3. Stories, Legends, & Myths - telling stories, legends, and
myths can help embed desirable values in an organization
4. Leader Reactions to Crises - how top managers respond to
critical incidents sends a message to employees

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 8.2 Developing High-Performance Cultures

5. Role Modeling, Training, & Coaching - organizational

culture can be promoted through role modeling, training
programs, teaching, and coaching
6. Physical Design - the physical design of workspaces,
buildings, and so on can also help embed corporate culture
7. Rewards, Titles, Promotions, & Bonuses - companies use
rewards, status symbols, promotions, and so on to encourage
desirable organizational behavior
8. Organizational Goals & Performance Criteria - desired
organizational behavior and goals can be promoted through
criteria for recruiting, selecting, promoting, and dismissing
people

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 8.2 Developing High-Performance Cultures

9. Measurable & Controllable Activities - companies can

measure and control certain activities to foster a certain
culture
10. Organizational Structure - how an organization is
structured can send a clear message about its organizational
culture
11. Procedures For Self-Development - procedures can be
established to help employees develop according to
organizational goals

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 Practical Action: Fitting into an
Organization’s Culture

 Get to know some people and listen to what they have to

say
 Remember the seven second rule for first impressions
 Make it easy for others to give you feedback
 Get something done

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 Practical Action: When You Should and
Shouldn’t Delegate

 Delegate routine and technical matters

 Delegate tasks that help your subordinates grow
 Don’t delegate confidential and personal matters
 Don’t delegate emergencies
 Don’t delegate special tasks that your boss asked you to
do—unless you have his or her permission
 Match the tasks delegated to your subordinates’ skills and
abilities

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 8.3 What Is An Organization?

 Organization: is a system of consciously coordinated

activities or forces of two or more people.
For profit organizations
Formed to make money by offering products or
services
Not-for-profit organizations
Formed to offer services to clients, not to make
profit for its owners (hospitals, colleges)
Mutual-benefit organizations
Voluntary collectives whose purpose is to advance
member interests (unions, trade associations)
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 8.3 What Is An Organization?

HOW ARE ORGANIZATIONS STRUCTURED?

Organizations can be represented in an organization chart (a
box-and-lines illustration showing the formal lines of authority
and the organization’s official positions)

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 8.3 What Is An Organization?

Figure 8.2: Organization Chart

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 The Organization Chart
Board of
Directors

Strategic Chief Executive Legal Counsel

Planning Advisor Officer

Cost Containment
President Staff

Executive Executive
Administrative Medical Director
Director

Director of Director of Director of Director of Director of Chief

Personnel Admissions Nutrition & X-Ray & Pharmacy Physician
Food Laboratory
Services Services

Director of Director of Director of Director of

Patient & Accounting Surgery Outpatient
Public Services
Relations
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 8.3 What Is An Organization?

The vertical hierarchy of an organization shows the

chain of command, and the official communication
network
The horizontal specialization shows the different
jobs or work specialization of an organization

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 8.4 The Major Elements Of An Organization

WHAT ARE THE COMMON ELEMENTS OF AN

ORGANIZATION?

There are seven elements common to all organizations:

1. Common Purpose - a common purpose unifies employees
or members and gives everyone an understanding of the
firm’s reason for being - mission
2. Coordinated Effort - organizations achieve a common
purpose by coordinating individual efforts into a group or
organization-wide effort
3. Division Of Labor - the arrangement of having discrete parts
of a task done by different people is referred to as work
specialization

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 8.4 The Major Elements Of An Organization

4. Hierarchy Of Authority - the control mechanism for making

sure the right people do the right things at the right time is
called the hierarchy of authority or chain of command
5. Span Of Control - the span of control or span of
management refers to the number of people reporting directly
to a given manager

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 Spans of Control: Narrow versus Wide
Key:
T = Top manager
Narrow CEO M = Middle manager
F = First-line (supervisory)
manager

T T T

M M M M M M M M M

F F F F F F F F F F F F F F

F F F F F F F F F F F F F

Wide CEO

M M M M M M M M M

F F F F F F F F F F F F F F

F F F F F F F F
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 8.4 The Major Elements Of An Organization

6. Authority, Responsibility, & Delegation – authority,

accountability, responsibility, and the ability to delegate are all
part of an organization’s elements
7. Centralization Versus Decentralization - when important
decisions are made by higher-level managers, the
organization has centralized authority, when important
decisions are made by middle-level and supervisory-level
managers, the organization has decentralized authority

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 Eight Organizational Structures

1) Simple structure: for the small firm

2) Functional structure: grouping by similar work specialties
3) Division structure: grouping by similarity of purpose
4) Conglomerate structure: grouping by industry
5) Hybrid structure: functional & divisional used within the same
organization
6) Matrix structure: a grid of functional & divisional for two chains of
command
7) Team-based structure: eliminating functional barriers to solve
problems
8) Network structure: connecting a central core to outside firms by
computer connections
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 8.5 Basic Types Of
Organizational Structures

WHAT ARE THE BASIC TYPES OF

ORGANIZATIONAL STRUCTURES?

1. The simple structure has authority

centralized in a single person, a flat hierarchy,
few rules, and low work specialization and is
often used in the very early stages of a firm

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 8.5 Basic Types Of
Organizational Structures
Figure 8.4: Simple Structure: An Example

There is only one hierarchical level of

management beneath the owner
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 8.5 Basic Types Of
Organizational Structures

WHAT ARE THE BASIC TYPES OF

ORGANIZATIONAL STRUCTURES?

2. In a functional structure, common in both

profit and nonprofit organizations, people with
similar occupational specialties are put
together in formal groups

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 8.5 Basic Types Of
Organizational Structures
Figure 8.5: Functional Structure: Two Examples

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 8.5 Basic Types Of
Organizational Structures

3. When people with diverse occupational specialties

are put together in formal groups, a divisional
structure is in place
Product divisions group activities around similar
products or services
Customer divisions group activities around
common customers or clients
Geographic divisions group activities around
regional locations

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 Divisional Structure
Product Divisional President
Structure

Motion Magazine & Internet

Music
Pictures & TV Book Products
Division
Division Division Division

Customer Divisional President

Structure

Consumer Mortgage Business Agriculture

Loans Loans Loans Loans

Geographic President
Divisional Structure

Western Northern Southern Eastern

Region Region Region Region
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 8.5 Basic Types Of
Organizational Structures

4. The conglomerate structure groups divisions

or business units around similar businesses or
industries

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 Conglomerate Structure

This resembles the

structure of Tyco
International
President

Engineered
Fire & Plastics &
Electronics Healthcare Products
Security Adhesives
& Services

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 8.5 Basic Types Of
Organizational Structures

5. A hybrid structure uses functional and divisional

structures in different parts of the same organization

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 Hybrid Structure
Product
Divisional
President
Structure

President President President President

Cadillac Buick Pontiac Chevrolet

Vice-
Vice- Vice- Vice- Functional
President,
President, President, President, divisional
Human
Production Marketing Finance structure
Resources

Manager Manager Manager Manager Geographical

Region I Region II Region III Region IV divisional structure

A Hypothetical example of what GM might

use

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 8.5 Basic Types Of
Organizational Structures
6. When an organization combines functional and
divisional chains of command in a grid so that there a
two command structures, vertical and horizontal, a
matrix structure is used

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 8.5 Basic Types Of
Organizational Structures
Example of Ford motor company

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 8.5 Basic Types Of
Organizational Structures

7. In a team-based structure, teams, both temporary

and permanent, are used to improve horizontal
relations and solve problems throughout the
organization

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 8.5 Basic Types Of
Organizational Structures
Figure 8.10: Team-Based Structure

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 8.5 Basic Types Of
Organizational Structures
8. The network structure or virtual organization has a
central core that is linked to outside independent
firms by computer connections which are used to
operate as if all were a single organization

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 Network Structure
Design Components
Studio Assembly

Sweden Mexico, Asia

Core of
personal
computer
company
USA
Engineering Distribution
Company Company

Japan Canada
Accounting
& Finance

USA
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 8.6 Contingency Design: Factors In
Creating The Best Structure
WHAT IS THE BEST STRUCTURE?

Contingency Design is the process of fitting the

organization to its environment
Firms must consider:
1. The environment (mechanistic versus organic)
Mechanistic organizations are characterized by centralized
authority, clearly specified tasks and rules, and close
supervision of employees
When authority is decentralized, there are few rules and
procedures, and networks of employees are encouraged to
cooperate and respond quickly to unexpected tasks, an
organic organization exists

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 Mechanistic Vs. Organic

Mechanistic Organic
organizations: organizations:
authority is centralized, authority is decentralized,
tasks and rules are there are fewer rules and
clearly specified, and procedures, and networks
employees are closely of employees are
supervised. encouraged to cooperate
 When rigidity and and respond quickly to
uniformity work best unexpected tasks.
 McDonald's  When looseness and
flexibility work best
 Information and
Technology
 “adhocracies”

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 Chapter 8: Organizational Culture,
Structure, & Design

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not a characteristic of a

mechanistic organization?

A) clearly specified tasks

B) decentralized authority
C) close supervision
D) clearly specified rules

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 Chapter 8: Organizational Culture,
Structure, & Design

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not a characteristic of a

mechanistic organization?

A) clearly specified tasks

B) decentralized authority
C) close supervision
D) clearly specified rules

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 8.6 Contingency Design: Factors In
Creating The Best Structure

2. The Environment (differentiation versus

integration)
Differentiation is the tendency of the parts of
an organization to disperse and fragment
Integration is the tendency to come together
to achieve a common purpose
3. Size
Organizational size is usually measured by
the number of full-time employees
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 8.6 Contingency Design: Factors In
Creating The Best Structure

4. Technology
Technology (the tools and ideas for
transforming materials, data, or labor into
goods and services) influences organizational
design
5. Organizational life cycle
The organizational life cycle involves birth,
youth, midlife, and maturity

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 Life Cycle: Four Stages in the
Life of an Organization

 The organizational life

cycle has a natural
sequence of stages:
1. Birth
2. Youth
3. Midlife
4. Maturity

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 Life Cycle: Four Stages in the
Life of an Organization

 As organization moves
through the stages, it
becomes not only larger, but
more mechanistic,
specialized, decentralizes,
and bureaucratic
 There are different
managerial challenges and
different organizational
design issues in each stage

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 Life Cycle: Four Stages in the
Life of an Organization

 Stage 1: The Birth Stage

 – nonbureaucratic
 Stage which organization is
created
 No written rules and little
supporting staff
 Founder may be a lone
entrepreneur or two friends
who have gotten together
 Text: Apple Computer’s
early development

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 Life Cycle: Four Stages in the
Life of an Organization

 Stage 2: The Youth Stage

– prebureaucratic
 Stage of growth and
expansion
 People are added to the
payroll, and some division of
labor and setting of rules is
instituted
 Text: Apple Computer from
1978 to 1981 with Apple II
product line

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 Life Cycle: Four Stages in the
Life of an Organization

 Stage 3: The Midlife Stage

– bureaucratic
 Period of growth evolving
into stability
 Organization has formalized
bureaucratic structure, staff
of specialists,
decentralization of
functional divisions, and
many rules
 Text: Apple Computer in the
1980s under John Scully

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 Life Cycle: Four Stages in the
Life of an Organization

 Stage 4: The Maturity

Stage – very bureaucratic
 Organization large and
mechanistic
 Danger at this point is lack
of flexibility and innovation
 Text: Apple Computer
floundered in the late 1980s
until Steve Jobs returned

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 Life Cycle: Four Stages in the
Life of an Organization

 Holding on to the
prebureaucratic way of
life for too long hinders
the organization’s ability
to deliver goods and
services efficiently

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 Building Learning Organizations

A Learning Organization is an:

Organization that actively creates, acquires, and
transfers knowledge within itself and is able to
modify its behavior to reflect new knowledge

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 Building Learning Organizations

 Organizations must continually learn new

things or face obsolescence

 A key challenge for managers is to

establish a culture that will enhance their
employees ability to learn
 But, there may be resistance, and some
firms unconsciously resist learning
because:

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 8.7 Toward Building A
Learning Organization

WHY DO ORGANIZATIONS RESIST

LEARNING?

-people believe that competition is always better

than collaboration
-fragmentation leads to specialized fiefdoms that
resist learning
-unless encouraged, people won’t take risks, the
basis for learning

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 The New Paradigm: “We’re All Stakeholders”

 Paradigms are generally accepted ways of

viewing the world
 The paradigm underlying American
business today is that competition is
superior to collaboration
 Many established paradigms have outlived
their usefulness

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 8.7 Toward Building A
Learning Organization

WHAT IS THE NEW PARADIGM?

A new paradigm suggests that everyone in an

organization is business together- and everyone has
a responsibility for working toward common goals

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 The New Paradigm: “We’re All Stakeholders”

 One challenge is to create a climate in

which managers and employees stop
thinking in terms of “us” versus “them” and
start thinking of themselves as mutual
stakeholders

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