CH 18

Organizational
Behavior, 9/E
Schermerhorn, Hunt, and
Osborn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc.

Chapter 18 Study Questions
 What is organizational design and how is it
linked to strategy?
 What is information technology and how is it
used?
 Can the design of the firm co-evolve with the
environment?
 How does a firm learn and continue to learn over
time?
Organizational Behavior: Chapter 18 2
Study question 1: What is organizational
design and how is it linked to strategy?
 Organizational design.
– The process of choosing and implementing a
structural configuration.
– The choice of an appropriate organizational
design depends on the firm’s:
• Size.
• Operations and information technology.
• Environment.
• Strategy for growth and survival.

 The structural configuration of organizations

should:
– Enable senior executives to emphasize the skills and
abilities that their firms need to compete, and to
remain agile and dynamic in a rapidly changing world.
– Allow individuals to experiment, grow, and develop
competencies so that the strategy of the firm can
evolve.
 Co-evolution.
– The firm can adjust to external changes even
as it shapes some of the challenges facing it.
– Shaping capabilities via the organization’s
design is a dynamic aspect of co-evolution.
– Even with co-evolution, managers must
maintain a recognizable pattern of choices in
organizational design.

 Organizational size.
– As the number of employees increase, the
possible interconnections among them
increase even more.
– The design of small firms is directly
influenced by core operations technology.
– Larger firms have many core operations
technologies in a variety of specialized units.
 The simple design for smaller units and firms.

– A configuration involving one or two ways of
specializing individuals and units.
– Vertical specialization and control emphasize levels of
supervision without elaborate formal mechanisms.
– Appropriate for many smaller firms because of
simplicity, flexibility, and responsiveness to a central
manager.

 Organizational design must be adjusted to fit
technological opportunities and requirements.
– Operations technology.
• The combination of resources, knowledge, and techniques
that creates a product or service output.
– Information technology.
• The combination of machines, artifacts, procedures, and
systems used to gather, store, analyze, and disseminate
information for translating it into knowledge.

 Thomson’s view of technology.

– Technologies classified according to the
degree of specification and degree of
interdependence of work units.
– Intensive technology.
• Uncertainty as to how to produce desired
outcomes.

 Thomson’s view of technology (cont.).

– Mediating technology.
• Links parties that want to become interdependent.
– Long-linked technology.
• The way to produce desired outcomes is known
and broken down into a number of sequential
steps.
 Woodward’s view of technology.
– Small-batch production.
• The organization tailor makes a variety of custom
products to fit customer specifications.
– Mass production.
• The organization produces one or a few products
through an assembly line system.
– Continuous-process technology.
• The organization produces a few products using
considerable automation.
 Woodward’s view of technology (cont.).
– The proper matching of structure and
technology is critical to organizational
success.
• Successful small-batch and continuous-process
plants have flexible structures with small work
groups at the bottom.
• Successful mass production operations are rigidly
structured and have large work groups at the
bottom.
 Adhocracy.
– An appropriate structural design when
managers and employees do not know the
appropriate way to service a client or produce
a particular product.

 An adhocracy is characterized by:
– Few rules, policies, and procedures.
– Substantial decentralization.
– Shared decision making among members.
– Extreme horizontal specialization.
– Few levels of management.
– Virtually no formal controls.

 An adhocracy is useful when:
– The tasks facing the firm vary considerably
and provide many exceptions.
– Problems are difficult to define and solve.

Study Question 2:What is information
technology and how is it used?
 Why IT makes a difference.

– IT provides a partial substitute for:
• Some operations.
• Some process controls.
• Some impersonal methods of coordination.
– IT provides a strategic capability.
– IT provides a capability for transforming
information to knowledge for learning.

 Information technology as a substitute.

– Initial implementation of IT often displaced
routine, highly specified, and repetitious jobs.
• Did not alter fundamental character or design of
the organization.
– A second wave of substitution replaced
process controls and informal coordination
mechanisms with IT.
• Brought some marginal changes in organizational
design.
 Information technology as a strategic capability.

– IT has been used to improve the efficiency, speed of
responsiveness, and effectiveness of operations.
– IT provides individuals the information they need to
plan, make choices, coordinate with others, and
control their own operations.
– This new strategic IT capability resulted from IT
being broadly available to everyone.

 IT and learning.
– IT systems empower individuals and expand
their jobs.
– IT encourages the development of a “virtual”
network.
– IT transforms how people manage.

 IT and e-business.
– Many dot-com firms adopted some variation
of adhocracy.
– As the dot-coms grew, the adhocracy design
became problematic.
• Limits on the size of an effective adhocracy.
• Actual delivery of products and services rested
more on responsiveness to clients and maintaining
efficiency than on continual innovation.
Study Question 3: Can the design of the
firm co-evolve with the environment?
 Understanding the environment is important
because an organization is an open system.
 General environment.
– The set of cultural, economic, legal-political, and
educational conditions found in the areas in which the
organization operates.
 Specific environment.
– The owners, suppliers, distributors, government
agencies, and competitors with which an organization
must interact to grow and survive.
 Environmental complexity.
– The magnitude of problems and opportunities
in the organization’s environment, as reflected
in:
• Degree of richness.
• Degree of interdependence.
• Degree of uncertainty.
– More complex environments provide more

problems and opportunities.
 Environmental richness.
– The environment is richer when:
• The economy is growing.
• Individuals are improving their education.
• Those on whom the organization relies are
prospering.
– A rich environment has more opportunities
and dynamism.
– The opposite of richness is decline.
 Environmental interdependence.
– Linkage between environmental independence
and organization design may be subtle and
indirect.
• Organization may co-opt powerful outsiders.
• Organization may absorb or buffer demands of
powerful external elements.

 Environmental uncertainty.
– Uncertainty and volatility can be particularly
damaging to large bureaucracies.
– A more organic form is the appropriate
organizational design response to uncertainty
and volatility.
– Adhocracy may be needed extreme
uncertainty and volatility.
 In a complex global economy, firms must

learn to co-evolve by altering their
environment.
 Two important ways of co-evolution:
– Management of networks.
– Development of alliances.

 Networks and alliances around the world.
– Informal combines or cartels exist in Europe
but are illegal in the United States except in
rare cases.
– Networks are called keiretsu in Japan.
• Bank-centered keiretsu.
• Vertical keiretsu.
– In the United States, outsourcing is developing
as a specialized form of network organization.
 Interfirm alliances.
– Announced cooperative agreements or joint
ventures between two independent firms.
– Alliances are quite common in high
technology industries.
– Since firms cooperate rather than compete;
consequently, both the alliance managers and
sponsoring executives must be patient,
flexible, and creative in pursuing goals.
 Virtual organization.
– An ever-shifting constellation of firms, with a
lead corporation, that pool skills, resources,
and experiences to thrive jointly.
– A design option when internal and external
contingencies are changing quickly.

 Key to making a virtual organization work.
– The production system needs to be in a partner
network bound together by mutual trust and survival.
– The partner network needs to develop and maintain an
advanced IT, trust and cross-owning of problems and
solutions, and a common shared culture.
– The lead firm must take responsibility for the whole
network and coordinate member firm actions.
– The lead corporation and the partners need to rethink
how they are internally organized and managed.

 Boundaryless organization.
– A design option that eliminates vertical,
horizontal, external, and geographic barriers
that block desired action.
– Actions to create a boundaryless organization.
• Executives should systematically examine the
organization and its processes.
• Organization members should initiate a process of
improving their cooperation.
Study Question 4: How does a firm learn
and continue to learn over time?
 Organizational learning.
– Process of knowledge acquisition, information
distribution, information interpretation, and
information retention in adapting successfully to
changing circumstances.
– Adjustment of organization’s and individual’s actions
based on experience.
– The key to successful co-evolution.

 Mimicry.
– Occurs when managers copy what they believe
are the successful practices of others
– Is important to new firms.
• Provides workable, if not ideal, solutions to many
problems.
• Reduces the number of decisions that need to be
analyzed separately.
• Establishes legitimacy or acceptance and narrows
the choices requiring detailed explanation.

 Experience.
– A primary way to acquire knowledge.
– Besides learning by doing, managers can also
systematically embark on structured programs
to capture the lessons to be learned.
– The major problem with emphasizing learning
by doing is the inability to precisely forecast
changes.

 Scanning.
– Involves looking outside the firm and bringing
back useful solutions.
 Grafting.
– The process of acquiring individuals, units, or
firms to bring in useful knowledge.

 Common problems in information
interpretation.
– Self-serving interpretations.
• People seeing what they want to see, rather than
seeing what is.
– Managerial scripts.
• A series of well-known routines for problem
identification and alternative generation and
analysis that are commonly used by a firm’s
managers.
 Organizational myths.
– Commonly held cause-effect relationships or
assertions that cannot be empirically
supported.
– Common myths.
 Single organizational truth.
 Presumption of competence.
 Denial of tradeoffs.

 Information retention mechanisms.
– Individuals.
– Organizational culture.
– Transformation mechanisms.
– Formal organizational structures.
– Ecology.
– External archives.
– Internal information technologies.

 Deficit cycles.
– A pattern of deteriorating performance that is
followed by even further deterioration.
– Factors associated with deficit cycles.
• Organizational inertia.
• Hubris.
• Detachment.

 Benefit cycles.
– A pattern of successful adjustment followed
by further improvements.
– Firms can successfully co-evolve by initiating
a benefit cycle.
– The firm develops adequate mechanisms for
learning.
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CH 18

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Organizational

John Wiley & Sons, Inc.

Organizational Behavior: Chapter 18 3

 The structural configuration of organizations

Organizational Behavior: Chapter 18 5

 The simple design for smaller units and firms.

Organizational Behavior: Chapter 18 7

Organizational Behavior: Chapter 18 8

 Thomson’s view of technology.

Organizational Behavior: Chapter 18 9

 Thomson’s view of technology (cont.).

Organizational Behavior: Chapter 18 13

Organizational Behavior: Chapter 18 14

 An adhocracy is useful when:

– The tasks facing the firm vary considerably

and provide many exceptions.

– Problems are difficult to define and solve.

Organizational Behavior: Chapter 18 15

 Why IT makes a difference.

Organizational Behavior: Chapter 18 16

 Information technology as a substitute.

 Information technology as a strategic capability.

Organizational Behavior: Chapter 18 18

Organizational Behavior: Chapter 18 19

– More complex environments provide more

Organizational Behavior: Chapter 18 24

 In a complex global economy, firms must

Organizational Behavior: Chapter 18 26

Organizational Behavior: Chapter 18 29

Organizational Behavior: Chapter 18 30

Organizational Behavior: Chapter 18 32

Organizational Behavior: Chapter 18 33

Organizational Behavior: Chapter 18 35

Organizational Behavior: Chapter 18 36

Organizational Behavior: Chapter 18 38

Organizational Behavior: Chapter 18 39

Organizational Behavior: Chapter 18 40

Organizational Behavior: Chapter 18 42

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