Chapter 16 DETERMINANTS OF ORGANIZATION STRUCTURE AND CULTURE.

chapter

1616DETERMINANTS OF

ORGANIZATION STRUCTUREAND CULTURE

CHAPTER 16 Determinants of Organization Structure and Culture

Copyright © 2002 Prentice-Hall

Design Contingencies

The organization’s environment

The technology the organization uses

The organization’s strategy

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Organizational Environment• The organizational environment is the set of

forces surrounding an organization that determine its ability to obtain resources.

• Because resources are often scarce and many organizations compete for the same resources, obtaining them is a difficult and uncertain process.

• The structure and culture of an organization must be designed in a way that allows organizational members to secure and protect the organization’s access to the resources it needs to achieve its goals.

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Insert Figure 16.1 here



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Differentiation and Integration• Managers of organizations have to create a

structure with the right levels of both differentiation and integration to match the uncertainty of the environment in which it operates.

• Differentiation measures the degree to which a function or division develops orientations that allow its members to manage the specific environmental force that each function or division is dealing with.

• Integration measures the degree of coordination or mutual adjustment between functions.

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Mechanistic and Organic Structures• A mechanistic structure is an organizational

structure that is designed so that individuals and functions behave in predictable ways and can be held accountable for their actions.

• An organic structure is an organizational structure that is designed so that individuals and functions can behave flexibly and respond quickly to frequently changing and unusual situations.

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Mechanistic and Organic Structures(Table 16.1)

Mechanistic Structures

Tall, centralized hierarchyof authority

Top-down communicationand decision making

Great use of standardization:many detailed rules andstandard operating procedures

Clearly specified tasks and rolesand a defined division of labor

Organic Structures

Flat, decentralized hierarchyof authority

Lateral communication anddecision making between peoplein different departments

Great use of mutual adjustment:much face-to-face communicationin task forces and teams

Deliberately ill-defined tasks androles and a loose division of labor

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Organizational CultureOrganizations with organic structures develop very different cultures than organizations with mechanistic structures.

Typical instrumental values in a mechanistic organization stress being cautious, obeying superior authority, and the importance of staying inside one’s role and respecting tradition.

Typical instrumental values in an organic organization stress being creative, taking risks, and challenging established traditions and opinions.

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Advice to Managers• Analyze the set of forces in the environment

surrounding your organization and the degree of uncertainty associated with each force.

• Evaluate the way your organizational structure and culture are designed to manage these forces. Are the levels of differentiation and integration appropriate? Is your organization sufficiently mechanistic or organic?

• Implement organizational design changes that will improve your organization’s ability to respond to its environment.

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Technology

The combination of human resources and raw materials and equipment that workers use to convert raw materials into finished goods and services.

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Woodward’s Model of Technology• Small-batch technology relies on the skills and

knowledge of individual workers to produce one-of-a-kind, customized goods and services or small quantities of goods and services.

• Mass production technology results in the production of large numbers of identical products.

• Continuous-process technology is one in which the manufacturing process is entirely mechanized and the workers’ role is to monitor the machines and computers that actually produce the goods.

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Perrow’s Model of Technology• Task Variety: The number of new

and different demands that a task places on an individual or a function.

• Task Analyzability: The degree to which standardized solutions are available to solve problems that arise.

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The Effects of New Information Technology

• IT has increased the mechanistic side of organizations because it has made it much easier to coordinate between jobs and functions and has given managers much more power to monitor and control organizational activities.

• IT has increased the organic side of organizations because people and teams far down the hierarchy have access to more information so that they can perform their jobs more autonomously.

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Advice to Managers• Use Woodward’s, Thompson’s, and Perrow’s

frameworks to identify the main contingencies associated with operating the technologies in your organization.

• Decide whether your organization’s current structure and culture are matched to the needs of your technology.

• Implement any changes in organizational design, such as decentralizing authority or raising the level of integration by empowering workers, that may allow you to operate your technology more effectively.

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StrategyAn organization pursues a strategy to develop the skills, knowledge, and capabilities that will allow it to compete successfully in its environment for resources and gain a competitive advantage, outperforming its competitors.

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Types of Organizational StrategiesCost-Leadership Strategy - aims to attract customers with low prices that are made possible by low costs.Differentiation Strategy - aims to attract customers with unique or distinctive goods and services.Focused Cost-Leadership Strategy - aims to attract one kind of customer or group of customers with a low-cost product.Focused Differentiation Strategy - aims to attract one kind of customer or group of customers with a differentiated product.

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Benefits of Organizational DesignOrganizational design can help an organization achieve increases in efficiency, quality, innovation and creativity, and responsiveness to customers.Increasing efficiency is most closely associated with a cost-leadership strategy.Increases in quality, innovation, and customer responsiveness are most closely associated with a differentiation strategy.

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Increasing Efficiency• Designing structure

– Keep the structure as flat as possible– Decentralize authority– Reevaluate form of differentiation being

used– Reevaluate integrating mechanisms being

used• Managing culture

– Create a cost-cutting culture

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Increasing Quality

• Designing structure– Keep the structure as flat as possible

– Decentralize authority

– Use cross-functional teams

– Increase standardization

• Managing culture– Create a quality-oriented culture

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Increasing Innovation• Designing structure

– Use a matrix structure

– Use cross-functional teams

• Managing culture– Create a creative and innovation-oriented

culture

– Stress instrumental values of risk taking and exploration

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Increasing Customer Responsiveness

• Designing structure– Employ a geographic structure

– Employ a market structure

• Managing culture– Create a quality-oriented culture

– Promote instrumental values of caring for customers, attentive service, and speedy after-sales support

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Advice to Managers• Evaluate the way you are currently pursuing your

strategy, and decide how you might improve efficiency, quality, innovation, or customer responsiveness to increase performance.

• Consider implementing a T.Q.M. program to discover ways to increase performance.

• Evaluate how your organization’s structure and culture are helping or hurting organizational performance, and implement any organizational design changes that will help to increase your competitive advantage.

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Chapter 16 DETERMINANTS OF ORGANIZATION STRUCTURE AND CULTURE.

Documents

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culture copyright

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prenticehall differentiation

organizations environment

organizational members

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