1515. CHAPTER 15 Organizational Structure and Culture Copyright © 1999 Addison Wesley Longman 2 Organizational Design The process by which managers select.

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Copyright © 1999 Addison Wesley Longman

2 CHAPTER 15 Organizational Structure and Culture

Organizational Design

• The process by which managers select and manage various dimensions and components of organizational structure and culture so that an organization can achieve its goals.



Organizational Structure

• The formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization’s goals.



Organizational Culture

• The informal set of values and norms that controls the way people and groups in an organization interact with each other and with people outside the organization.



FIGURE 15.1 The Nature of Organizational Design



Differentiation

• The grouping of people and tasks into functions and divisions to produce goods and services.



Function

• A set of people who perform the same types of tasks or hold similar positions in an organization.



Division

• A group of functions created to allow an organization to produce and dispose of its goods and services to customers.



FIGURE 15.2 PepsiCo's Organizational Chart



Functional Structure

• An organizational structure that groups together people who hold similar positions, perform a similar set of tasks, or use the same kinds of skills.



FIGURE 15.3 Dell's Functional Structure



Advantages of a Functional Structure

• Coordination Advantages

• Motivational Advantages



Disadvantages of a Functional Structure

• When a range of products or services that a company produces increases, the various functions can have difficulty efficiently servicing the needs of a wide range of products.

• Coordination problems may arise.• As companies grow, they often expand their

operations nationally, and servicing needs becomes difficult.



Divisional Structures

• Product Structure - groups functions by types of products so that each division contains the functions it needs to service the products it produces.



FIGURE 15.4 Three Types of Divisional Structure



Divisional Structures

• Market Structure - groups functions by types of customers so that each division contains the functions it needs to service a specific segment of the market.



Figure 15.4 (Continued)



Divisional Structure

• Geographic Structure - groups functions by region so that each division contains the functions it needs to service customers in a specific geographic area.






Advantages of Divisional Structures

• Coordination Advantages

• Motivation Advantages



Disadvantages of Divisional Structures

• Operating costs

• Communication may suffer

• Divisions may start to compete for organizational resources

• Divisions may pursue own goals at the expense of organizational goals



Matrix Structure

• An organizational structure that simultaneously groups people by function and by product team.



FIGURE 15.5 A Matrix Structure




Advice to Managers

• Examine the way your organization groups its activities by function, and determine whether this grouping meets the organization’s current product or customer needs.

• If the number of goods and services you are producing has increased, examine whether you should change to a product structure.



Advice to Managers

• If you are currently servicing the needs of a number of different groups of customers, examine whether you should change to a market structure.

• If you are expanding nationally, examine whether you should change to a geographic structure.



Advice to Managers

• If your current need is to speed the development of new products, examine whether you should choose a matrix structure.



Organizational Structure -Key Terms

• Integration - coordinating the activities of different functions and divisions.

• Authority - the power that enables one person to hold another person accountable for his or her actions.




• Span of Control - the number of employees who report to a manager.



FIGURE 15.6 Using the Hierarchy to Manage Intergroup Relations







• Decentralization - the distribution of authority and responsibility for decision making to managers at all levels of an organization’s hierarchy.

• Centralization - the concentration of authority and responsibility for decision making in the hands of managers at the top of an organization’s hierarchy.



FIGURE 15.7 Examples of Flat and Tall Hierarchies





• Mutual Adjustment - the ongoing informal communication among different people and functions that is necessary for an organization to achieve its goals.




• Teams - a permanent group made up of representatives from two or more functions that meets regularly to discuss important on-going problems facing the organizations.



FIGURE 15.8 Using a Team to Increase Coordination Between Functions




• Cross-Functional Teams - are composed of people from different functions who are permanently assigned to work full-time on a team to bring a new good or service to the market.



FIGURE 15.9 A Cross-Functional Team Structure





• Integrating Role - a permanent managerial position in which the manager’s only role is to coordinate the activities of different divisions.



FIGURE 15.10 Using Integrating Roles in a Product Structure to Increase Integration




• Standardization - the development of routine responses to recurring problems or opportunities.

• Formalization - the use of rules and standard operating procedures to control an organization’s activities.



Organizational Culture -Key Terms

• Terminal Value - a desired goal that an organization seeks to achieve.

• Instrumental Value - a desired mode of behavior that an organization wants its members to observe.



Organizational Culture -Key Term

• Ethical Values - the moral values and norms that establish the appropriate way for an organization and its members to deal with each other and with those outside the organization.



Organizational Rites

• Rites of Passage

• Rites of Integration

• Rites of Enhancement

• Rites of Degradation



Rites of Passage

• Purpose is to learn and internalize the norms and values of the organization. An example is induction and basic training.



Rites of Integration

• Purpose is to build common norms and values. An example is an annual office party.



Rites of Enhancement

• Purpose is to motivate commitment to norms and values. An example is the presentation of an annual award.



Rites of Degradation

• Purpose is to change or reaffirm norms and values. An example is firing a top executive.



Advice to Managers

• Always study the culture of your organization, and identify the terminal and instrumental values on which it is based in order to assess how it affects organizational behavior.

• Assess whether organizational norms are effectively transmitting the values of your organization’s culture to organizational members.



Advice to Managers

• Examine how your organization socializes new members. Assess whether socialization practices are effective in helping newcomers to learn the organization’s culture, and look for ways to improve the process.



Advice to Managers

• Try to identify ceremonies or rites that your organization can use to help employees to learn cultural values, enhance employee commitment, and bond employees to the organization.

1515. CHAPTER 15 Organizational Structure and Culture Copyright © 1999 Addison Wesley Longman 2 Organizational Design The process by which managers select.

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