Organizational Learning

Organizational Learning

Module 5

Sreenath B.Roll No.45

The Nature of Organizational Learning

Organizational learningThe process of improving organization member’s

capacity to understand and manage the organization and its

environment so that managers can make decisions that continuously raise organizational effectiveness.

Good decision-making requires learning new behaviours

and unlearning inefficient ones. Organizational learning assists mangers in making better non-programmed decisions.

Re-engineering has been driven by learning efficientoperating methods.

Types of Organizational LearningJames March suggests two learning strategies, exploration

and exploitation.

Exploration

Organizational members search for and experimentation with new kinds or forms of organizational activities and procedure.

• Exploration seeks new activities and procedures to enhance effectiveness, discovering new management methods such as network organizations.

• Exploration seeks new activities and procedures to enhance effectiveness.

Exploitation

Organizational members learning of ways to refine and improve existing organizational procedures.

Exploitation refines existing activities and procedures to enhance effectiveness

Learning organization

• An organization that purposefully designs and constructs its structure, culture, and strategy to enhance and maximize the potential for organizational learning to take place.

• A learning organization is a company that intentionally designs its structure, culture, and strategy to foster learning.

• A learning organization encourages all employees to make suggestions for performing activities

Levels of organizational learning

organizational

Interorganizational

Group

Individual

Individual

• Managers need to do all work to facilitate the learning of new skills, norms and values so that individuals can increase their own skills and abilities and there by help org. to develop core competences.

• Senge suggests that each organizational member has to develop personal mastery, meaning employees should be empowered.

• Organizations should encourage complex mental models that challenge employees to improve tasks.

• Individuals should be involved and committed to their jobs in order to experiment and take risks

Group• Group: Self-managed and cross-functional

teams allow individuals to share problemsolving skills.

• Groups create synergies to increase performance.

• Group interactions produce “group routines” or team learning, which is important as decisions are made in subunits.

• Toyota used teams to revitalize GM’s plant.

Organization• Organization: Managers promote learning through

structure and culture. • Mechanistic structures promote exploitative learning

whereas organic structures promote explorative learning. • Organizations should take advantage of both types of

learning.• Senge stressed the significance of building shared vision,

a frame of reference for problems or opportunities. • Both terminal and instrumental values direct behavior.• Culture fosters organizational learning and change.• Kotter and Heskett distinguish between adaptive and inert

cultures. Adaptive cultures value innovation and support experimentation and risk-taking. Inert cultures do not reward risk-taking.

Cont,d

• Adaptive cultures have higher levels of learning because they can rapidly implement change.

• Organization with adaptive cultures have a higher probability of surviving in changing environments.

Inter organizational• Structure and culture determine learning at the

inter-organizational level. Companies with adaptive cultures find new approaches to managing inter-organizational linkages.

• Inter-organizational learning allows for copying of core competences. Mimetic, coercive, and normative processes can increase effectiveness.

• Organizations promote explorative and exploitative learning by cooperating with suppliers and distributors.

• Tools for increasing learning include strategic alliances and network organizations.

Factors Affecting Organizational Learning

• Nystrom and Starbuck developed a model of factors that reduces learning. To understand poor decision-making, it is helpful to review factors that hurt decision making, known as cognitive biases.

• As organizations make decisions, they design rules and SOPs to handle programmed decisions. Success achieved through rules can impede learning from new experiences and result in inertia.

• If programmed decisions eliminate non-programmed decisions, a crisis may emerge.

• Managers frequently ignore signs of problems and attribute problems to temporary interruptions in the environment.

• Nystrom and Starbuck state that managers use “weathering the storm strategies,” such as centralizing decision-making.

• An incrementalist approach to decision-making is less risky than starting in new directions.

Organizational Learning Cognitive Structures

• Cognitive structures—systems of beliefs, expectations, and values—develop over time and predetermine an individual’s interpretation of events.

• Opinions are formed based on past experience, and may be distorted.

• Cognitive structures not only shape top management decision-making but also determine environmental threats and opportunities.

• Managers view the same environment differently due to individual cognitive structures.

Types of Cognitive Biases

• Researchers have identified factors that prevent organizational learning and environmental adaptation.

• Cognitive biases cause managers to misinterpret information and reduce the qualityof decision making.

1.Cognitive dissonance is the interpretation of information to reinforce beliefs and ignore other information.

• IBM ignored research on personal computers and invested heavily in main frames,a familiar computer area.

2. Illusion of control occurs when managers over estimate their control over an outcome.

• Uncertainty is stressful, and managers decrease stress through confidence in their ability to control the environment

3. Frequency and representativeness are ways of misinterpreting information.

• Frequency is the belief that extreme events occur more often than they really do.

• If one batch of supplies is defective, a firm assumes that all supplies are defective. This bias leads to vertical integration to ensure quality.

• Representativeness is a judgment based on small and unrepresentative samples. A company receives a few international orders and launches global expansion.

• Frequency and representativeness inhibit organizational learning.

4.Projection and ego-defensiveness. • Projection allows managers to justify and reinforce

personal preferences and values by attributing them to others.

• A manager who cant solve a problem blames subordinates. This practice erodes an organizations culture.

• Ego-defensiveness leads managers to interpret events favorably, instead of admitting to mistakes. Projection and ego-defensiveness inhibit organization learning.

5. Escalation of Commitment is a cognitive bias that leads managers to rema in committed to a losing course of action and refuse to admit a mistake.

• Managers may remain committed to an incorrect action due to ego defensiveness or the illusion of control. This bias is reinforced by incrementalist decision-making, which is destructive and managers may be faced with rapidly changing competition or technology.

• These biases prevent managers from having a clear view of problems, so they can develop new responses. Biased decision-making impedes organizational learning and growth.

Improving Organizational learning

• Managers can improve decision-making. • They can adopt strategies for organizational learning,

increase the breadth and diversity of the top-management team, use devil’s advocacy and dialectic inquiry, and develop a collateral organizational structure.

1.Listening to dissenters: – To improve decision-making, top managers can surround

themselves with people who express opposing points of view.

– They can collect information from dissenters. However, managers often select people who agree with them. This occurred at Nissan.

– Managers hesitate to encourage dissent because of bounded rationality; dissent increases the amount of information to process.

Improving Organizational Learning

2. Converting events into learning opportunities: – The right organizational structure and culture can lead to

new responses to a situation. – Research in California shows how structure affected a

hospital’s ability to respond to a doctors’ strike. – An organic, decentralized structure handled the strike

better than a centralized, mechanistic structure.– Experimenting is the process of generating new

alternatives and testing the validity of old ones. Experimenting leads to explorative learning.

– Managers can take an incremental or garbage can approach to experiments.

– A garbage can approach uses brainstorming to devise new solutions.

Cont’d

3. Utilizing Game Theory: – This approach views interactions between organizations

as a competitive game. – It involves analyzing what competitors will do if a certain

decision is made, – which involves looking forward into the future to try and

predict what rivals will do, – and also reason backwards to determine what they

should do given what the competitor’s future moves will be.

4. Nature of the Top-Management Team: – The members of the team and the team organization

affect the level of organizational learning. – Top management sets the tone for the organization.

– Two team configurations are possible, the wheel or the circle.

Cont’d

– A wheel has a CEO who receives data and makes decisions. Top-level managers have no interaction, so this design works only for simple problems with minimum coordination.

– Complex problems require a circle with a CEO and top managers who interact; they function as a team, which promotes organizational learning.

– The level and quality of learning are also a function of the personal traits and backgrounds of team members. Diversity offers various perspectives, as members from different industries and functions generate a variety of ideas.

– Diversity avoids groupthink, the conformity that emerges when like-minded people reinforce each other’s tendencies and interpret events and information in similar ways.

– Sometimes, the CEO or top management team must be replaced to promote organizational learning.

Cont’d

– The fastest way to delete organizational memory and programmed decision-making is to replace the top-management team.

– Eg: IBM and GM.

5. Devil’s advocacyA person who is willing to stand up and question the

beliefs of more powerful people, resists influence attempts and works to convince others that new ideas are wrong, harmful.

– reduce cognitive biases and the problems associated with incrementalism.

– Managers become cognizant of alternatives and analyze the pros and cons of each proposed course of action.

– Devil’s advocacy officially appoints a person to disagree by evaluating decision-making and questioning assumptions.

Cont’d

6. Dialectic inquiry – establishes teams to produce and evaluate alternatives

and recommend the best one.– Parts of each team’s proposal are merged into a final

plan.

7. Collateral organizational structure improves decision-making by – creating a collateral organizational structure, an

informal organization of managers that operates parallel to the formal structure.

– Informal managers evaluate the decisions of formal managers. Because formal managers know about the evaluations, they review decisions more carefully.

– A collateral structure promotes change, whereas a formal structure maintains stability.

Thank You