Thomson Learning © 20041-1 ILMU ORGANISASI Dosen : Dedi Purwana E.S. SKS: 2 Email: [email protected]@yahoo.com HP: 0818605827.

Thomson Learning© 2004 1-1

ILMU ORGANISASI

Dosen : Dedi Purwana E.S. SKS : 2 Email : [email protected] HP : 0818605827


Chapter One

Organizations andOrganization Theory


Organization Theory in Action Topics Current Challenges

Global Competition Ethics and and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity


What is an Organization? Definition Importance of Organizations

Bring together resources to achieve desired goals and outcomes

Produce goods and services efficiently Facilitate innovation Use modern manufacturing and

information technologies


Importance of Organizations Importance of Organizations

(cont’d) Adapt to and influence a changing

environment Create value for owners, customers

and employees Accommodate ongoing challenges of

diversity, ethics, and the motivation and coordination of employees


Transformation

Process

An Open System and Its Subsystems

Environment

Raw MaterialsPeopleInformation resourcesFinancial resources

Input

SubsystemsBoundarySpanning

Production,Maintenance,Adaptation, Management

BoundarySpanning

Products andServices

Output


Five Basic Parts of an Organization

TopManagement

TechnicalSupport

Technical Core

AdministrativeSupport

MiddleManagement

Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.


Goals and Strategy

Environment Size

Culture TechnologyStructure

1. Formalization2. Specialization3. Hierarchy of Authority4. Centralization5. Professionalism6. Personnel Ratios


Organization Chart Illustrating the Hierarchy of Authorityfor a Community Job Training Program

Board of Directors

Assistant Executive Directorfor Human Services

ExecutiveCommittee

ExecutiveDirector

AdvisoryCommittee

DirectorEconomic Dev.

Assistant Executive Directorfor Community Service

DirectorReg. Planning

DirectorHousing

DirectorCriminal Justice

DirectorFinance

DirectorAAA

DirectorCETA

Secretary

LeadCounsel

LeadCounsel

Asst. DirectorFinance

RecordsClerk Secretary Adm. Asst Payroll Clerk Secretary MIS Specialist Staff Clerk Adm. Asst.

AlcoholCoord.

PublicInfo

Coord.

Account.

ContractFiscal

Manager

CETACouns.Devs.

Title II D&VI&VII

CETAPlanner

HousingCoord.

CETACouns.Devs.

Title IIABC

CETAIntake

&Orient

CETACouns.Devs.Youth

IV

ProgramSpec.AAA

ProgramPlannerAAA

Level 1

Level 2

Level 3

Level 4

Level 5


Characteristics of Three Organizations

0

50

100

W.L. Gore &Associates

Wal-Mart State ArtsAgency

Formalization

Specialization

Centralization

Configuration(%nonworkflowpersonnel)

TECHNOLOGY Manufacturing Retailing Government Service

SIZE (#employees) 6,000 250,000 35


Two Organization Design Approaches

VerticalStructure

RoutineTasks

RigidCulture

CompetitiveStrategy

FormalSystems

HorizontalStructure

AdaptiveCulture

EmpoweredRoles

CollaborativeStrategy

SharedInformation

Organizational Changein the Service of

Performance

Mechanical System Design

Natural System Design

Stable EnvironmentEfficient Performance

Turbulent EnvironmentLearning Organization

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)


Organizational Dimensions High Formalization 1 - 4 5 - 6 7 - 10 Low Formalization

High Specialization 1 - 4 5 - 6 7 - 10 Low Specialization

Tall Hierarchy 1 - 4 5 - 6 7 - 10 Flat Hierarchy

Product Technology 1 - 4 5 - 6 7 - 10 Service Technology

Stable Environment 1 - 4 5 - 6 7 - 10 Unstable Environment

Strong Culture 1 - 4 5 - 6 7 - 10 Weak Culture

High Professionalism 1 - 4 5 - 6 7 - 10 Low Professionalism

Well-Defined Goals 1 - 4 5 - 6 7 - 10 Poorly-Defined Goals

Small Size 1 - 4 5 - 6 7 - 10 Large Size

Modern 1 - 4 5 - 6 7 - 10 Postmodern

WorkbookActivity


Xerox

High Formalization 1 - 4 5 - 6 7 - 10 Low Formalization

High Specialization 1 - 4 5 - 6 7 - 10 Low Specialization

Tall Hierarchy 1 - 4 5 - 6 7 - 10 Flat Hierarchy

Product Technology 1 - 4 5 - 6 7 - 10 Service Technology

Stable Environment 1 - 4 5 - 6 7 - 10 Unstable Environment

Strong Culture 1 - 4 5 - 6 7 - 10 Weak Culture

High Professionalism 1 - 4 5 - 6 7 - 10 Low Professionalism

Well-Defined Goals 1 - 4 5 - 6 7 - 10 Goals Not Defined

Small Size 1 - 4 5 - 6 7 - 10 Large Size

Modern 1 - 4 5 - 6 7 - 10 Postmodern

Use for 1959-1990, Use for 1990-present

Workbook

Activity


Chapter Two

Strategy, Organization Design,

and Effectiveness


Top Management Role in Organization Direction, Design, and Effectiveness

CEO, TopManagement

Team

External Environment

OpportunitiesThreats

UncertaintyResource Availability

Internal SituationStrengths

WeaknessesDistinctive Competence

Leadership StylePast Performance

Strategic Direction

Organization Design

Effectiveness Outcomes

Definemission,officialgoals

Selectoperationalgoals,competitivestrategies

ResourcesEfficiencyGoal attainmentCompeting values

Structural Form – learning vs. efficiencyInformation and control systemsProduction technologyHuman resource policies, incentivesOrganizational cultureInterorganizational linkages

Source: Adapted from Arie Y. Lewin and Carroll U. Stephens,“Individual Properties of the CEO as Determinants of OrganizationDesign,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewinand Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design:An integrated Model,” Organization Studies 15, no. 2 (1994): 183-212


Goal Type and Purpose

Type of Goals Purpose of Goals

Official Goals, mission: Legitimacy

Operative goals: Employee direction and motivationDecision guidelinesStandard of performance


Porter’s Competitive StrategiesCompetitive Scope

CompetitiveAdvantage Strategy Example

Broad Low CostLow-Cost

Leadership Dell Computer

Broad Uniqueness DifferentiationStarbucksCoffee Co.

Narrow Low CostFocused Low-

CostLeadership

EnterpriseRent-a- Car

Narrow UniquenessFocused

DifferentiationEdward Jones

Investments


Miles and Snow’sStrategy Typology Prospector

Learning orientation; flexible, fluid, decentralized structure

Strong capability in research Values creativity, risk-taking, and innovation

Defender Efficiency orientation; centralized authority and

tight cost control Emphasis on production efficiency, low

overhead Close supervision; little employee empowermentSource: Based on Michael Treacy and Fred Wiersema,

“How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; andRaymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,”Academy of Management Review 3 (1978), 546-562


Miles and Snow’sStrategy Typology (cont’d) Analyzer

Balances efficiency and learning; tight cost control with flexibility and adaptability

Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation

Reactor No clear organizational approach; design

characteristics may shift abruptly depending on current needsSource: Based on Michael Treacy and Fred Wiersema,

“How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; andRaymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,”Academy of Management Review 3 (1978), 546-562


Contingency FactorsAffecting Organization Design

Strategy

Environment Technolog

y

Size/Life Cycle Culture

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors


Contingency Approaches to the Measurement of Organizational Effectiveness

Organization

Internalactivities

andprocesses

ResourceInputs

Product andServiceOutputs

Resource-basedapproach

Internalprocess

approach

Goalapproach

External Environment


Reported Goalsof U.S. Corporations

Goal % CorporationsProfitability 89Growth 82Market Share 66Social Responsibility 65Employee welfare 62Product quality and service 60Research and development 54Diversification 51Efficiency 50Financial stability 49Resource conservation 39Management development 35

Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,” California Management Review 22, no. 2 (1979), pp. 71-19.


Four Models ofEffectiveness Values

Human Relations Emphasis

Primary Goal: human resource developmentSubgoals: cohesion, morale, training

Internal Process Emphasis

Primary Goal: stability, equilibrium

Subgoals: information management, communication

Rational Goal Emphasis

Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting

Open Systems Emphasis

Primary Goal: growth, resource acquisitionSubgoals: flexibility, readiness, external evaluation

Flexibility

Control

Internal External

STRUCTURE

FOCUS

Adapted from Robert E. Quinn and John Rohrbaugh, “A Spatial Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis,” Management Science 29 (1983): 363-377; and Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51.


ORGANIZATIONB

ORGANIZATIONA

Effectiveness Valuesfor Two Organizations

Human RelationsEmphasis

Internal ProcessEmphasis

Rational Goal Emphasis

Open Systems Emphasis

STRUCTURE

FOCUS

FLEXIBILITY

CONTROL

INTERNAL EXTERNAL


Identifying CompanyGoals and Strategies

Goals fromExhibit 2.8

Strategiesfrom Porter

Company #1

Company #2

Company #3

Workbook

Activity


Competing Values andOrganizational Effectiveness

WorkshopActivity

Goal or subgoal

Performance Gauge

How to measure

Source of data

What do you consider effective?

(Example) Equilibrium

Turnover rates

Compare percentages of workers

who left HRM files

25% reduction in

first year

1Open

System 2

3Human

Relations 4

5 Internal Process 6

7Rational

Goal 8


Chapter Three

Fundamentals ofOrganization Structure


A Sample Organization Chart

C h ie fA cco u nta n t

B u dg etA n a lyst

V ice P re sid e n tF in an ce

P la n tS u pe rin ten de nt

M a in te na n ceS u pe rin ten de nt

V ice P re sid e n tM a nu fa c tu ring

T ra in ingS p e c ia list

B e ne fitsA d m in is tra to r

D ire c to rH u m an R e so u rces

C E O


The Relationship of Organization Design to Efficiency vs. Learning Outcomes

Horizontal OrganizationDesigned for Learning

Vertical OrganizationDesigned for Efficiency

DominantStructuralApproach

Horizontal structure is dominant• Shared tasks, empowerment• Relaxed hierarchy, few rules• Horizontal, face-to-face communication• Many teams and task forces• Decentralized decision making

Vertical structure is dominant• Specialized tasks• Strict hierarchy, many rules• Vertical communication and reporting systems• Few teams, task forces or integrators• Centralized decision making


Ladder of Mechanisms for Horizontal Linkage and Coordination

HIGH

LOW

LOW

Information Systems

Direct Contact

Task Forces

Full-time Integrators

Teams

Am

ount

of

Hori

zonta

lC

oord

inati

on R

equir

ed

Cost of Coordination in Time and Human Resources

H IGH


Project Manager Locationin the Structure

President

FinanceDepartment

FinancialAccountant

BudgetAnalyst

ManagementAccountant

EngineeringDepartment

ProductDesigner

Draftsperson

ElectricalDesigner

MarketingDepartment

MarketResearcher

AdvertisingSpecialist

MarketPlanner

PurchasingDepartment

Buyer

Buyer

Buyer

Project ManagerNew

Product B

Project ManagerNew

Product A

Project ManagerNew

Product C


Teams Used for Horizontal Coordination at Wizard Software Company

VideogamesChief Engineer

Programming Vice Pres

Customer ServiceManager

Videogames Basic Research Supervisor

Research Vice Pres

Applications and Testing Supervisor

ProcurementSupervisor

Videogames Sales Manager

Marketing Vice Pres.

Memory Products International Manager

Advertising Manager

Memory Products Chief Programmer

Memory ProductsResearch Supervisor

Memory Products Sales Manager

President

Videogames Product Team

Memory Products Team


Structural Design Options for Grouping Employees into Departments

P ro du ctD iv is io n 1



C E O

Engineering Marketing Manufacturing

CEO

FunctionalGrouping

DivisionalGrouping

Source: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.


Strengths and Weaknesses of Functional Organization Structure

STRENGTHS: Allows economies of

scale within functional departments

Enables in-depth knowledge and skill development

Enables organization to accomplish functional goals

Is best with only one or a few products

WEAKNESSES: Slow response time to

environmental changes May cause decisions to

pile on top, hierarchy overload

Leads to poor horizontal coordination among departments

Results in less innovation Involves restricted view

of organizational goalsSource: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 429.


Strengths and Weaknesses of Divisional Organization Structure

STRENGTHS: Suited to fast change in

unstable environment Leads to client satisfaction

because product responsibility and contact points are clear

Involves high coordination across functions

Allows units to adapt to differences in products, regions, clients

Best in large organizations with several products

Decentralizes decision-making

WEAKNESSES: Eliminates economies

of scale in functional departments

Leads to poor coordination across product lines

Eliminates in-depth competence and technical specialization

Makes integration and standardization across product lines difficult

Source: Adapted from Robert Duncan, “What Is theRight Organization Structure? Decision Tree AnalysisProvides the Answer,” Organizational Dynamics(Winter 1979): 431.


Reorganization from Functional Structure to Divisional Structure at Info-Tech

R&D Manufacturing Accounting Marketing

Info-TechPresident

FunctionalStructure

R & D M fg A c c tg M k tg

E le c tro n ic

P ub lis h ing


O ffi c e

A uto m a tio n


V irtua l

R e a lity

I n fo -T e c h

P re s ide n t

DivisionalStructure


Structural Design Options for Grouping Employees (Continued)

MultifocusedGrouping

CEO

ManufacturingMarketing

ProductDivision 2

ProductDivision 1

Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.


Structural Design Options for Grouping Employees (Continued)

HorizontalGrouping

CEO

FinanceHuman Resources

CoreProcess 2

CoreProcess 1

Source: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.


Geographical Structurefor Apple Computer

CEOSteve Jobs

AppleEurope

ApplePacific

France

AppleProducts

Asia

Japan

Australia

AppleAmericas

Canada

Latin America/Caribbean

SalesService andMarketingto Regions

Source: www.apple.com


Product

Manager A

Product

Manager B

Product

Manager C

Product

Manager D

Directorof ProductOperations

DesignVice

President

MfgVice

President

MarketingVice

PresidentController

Procure-ment

Manager

President

Dual-Authority Structure in a Matrix Organization


STRENGTHS: Achieves coordination

necessary to meet dual demands from customers

Flexible sharing of human resources across products

Suited to complex decisions and frequent changes in unstable environment

Provides opportunity for both functional and product skill development

Best in medium-sized organizations with multiple products

WEAKNESSES: Causes participants to experience

dual authority, which can be frustrating and confusing

Means participants need good interpersonal skills and extensive training

Is time consuming; involves frequent meetings and conflict resolution sessions

Will not work unless participants understand it and adopt collegial rather than vertical-type relationships

Requires great effort to maintain power balance

Strengths and Weaknesses of Matrix Organization Structure

Source: Adapted from Robert Duncan, “What Is the RightOrganization Structure? Decision Tree Analysis Provides theAnswer,”Organizational Dynamics (Winter 1979): 429.


Matrix Structure forWorldwide Steel Company

President

IndustrialRelations

Vice President

Mfg.Services

Vice President

FinanceVice

President

MarketingVice

President

Mfg.Vice

President

MetallurgyVice

President

Field SalesVice

President

Open DieBusiness Mgr.

Ring ProductsBusiness Mgr.

Wheels & AxlesBusiness Mgr.

SteelmakingBusiness Mgr.

Vertical Functions

Hori

zon

tal Pro

du

ct L

ines


A Horizontal Structure

Team3

Team2

Team1

TopManagement

Team

Team3

Team2

Team1

Customer

Customer

ProcessOwner

ProcessOwner

Testing Product Planning

Research Market

Analysis

New Product Development Process

Distrib. Material

Flow Purchasing Analysis

Procurement and Logistics ProcessSources: Based on Frank Ostroff,The Horizontal Organization, (New York:Oxford University Press, 1999); John A. Byrne,“The Horizontal Corporation,” Business Week, December 20, 1993, 76-81; and Thomas A. Stewart,“The Search for the Organization of Tomorrow,”Fortune, May 19, 1992, 92-98.


Strengths and Weaknesses of Horizontal Structure

STRENGTHS: Flexibility and rapid response to

changes in customer needs Directs the attention of everyone

toward the production and delivery of value to the customer

Each employee has a broader view of organizational goals

Promotes a focus on teamwork and collaboration—common commitment to meeting objectives

Improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes

WEAKNESSES: Determining core processes to

organize around is difficult and time-consuming

Requires changes in culture, job design, management philosophy, and information and reward systems

Traditional managers may balk when they have to give up power and authority

Requires significant training of employees to work effectively in a horizontal team environment

Can limit in-depth skill development

Sources: Based on Frank Ostroff, The Horizontal Organization: What the Organization of the Future Looks Like and How It Delivers Value to Customers, (New York: Oxford University Press, 1999);and Richard L. Daft, Organization Theory and Design, 6th ed.,(Cincinnati, Ohio: South-Western College Publishing, 1998) 253.


FunctionalStructure

Hybrid StructurePart 1. Sun Petrochemical Products

President

TechnologyVice

President

FinancialServices

Vice Pres.

HumanResourcesDirector

ChiefCounsel

ChemicalsVice

President

LubricantsVice

President

FuelsVice

President

ProductStructure

Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66;and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.


Hybrid StructurePart 2. Ford Customer Service Division

Director andProcess Owner

Director andProcess Owner

Sources: Based on Linda S. Ackerman, “Transition Management:An In-Depth Look at Managing Complex Change,” Organizational Dynamics(Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.

HumanResources

Strategy andCommunicationFinance

Vice President andGeneral Manager

Teams

Teams

Director andProcess Owner Teams

Technical Support Group

Vehicle Service Group

Parts Supply / Logistics Group

FunctionalStructure

Hori

zon

tal S

truct

ure

Teams

Teams


Organization Contextual Variables that Influence Structure

Structure(learning vs. efficiency)

EnvironmentChapters 4, 6

CultureChapter 10

SizeChapter 9

Strategy,Goals

Chapter 2

TechnologyChapters 7,8

Sources: Adapted from Jay R. Galbraith,Competing with Flexible Lateral Organizations, 2nd ed. (Reading, Mass.: Addison-Wesley, 1994), Ch.1; Jay R. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977), Ch. 1.


The Relationship of Structure to Organization’s Need for Efficiency vs. Learning

Horizontal

Structure

DominantStructuralApproach

Horizontal:• Coordination• Learning• Innovation• Flexibility

Vertical:• Control• Efficiency• Stability• Reliability

MatrixStructu

re

DivisionalStructure

Functional withcross-functional

teams, integratorsFunctionalStructure

Modular

Structure


Symptoms of Structural Deficiency Decision making is delayed or

lacking in quality The organization does not respond

innovatively to a changing environment

Too much conflict is evident


Chapter Four

The External Environment


(a) Competitors, industry size and competitiveness, related issues(b) Suppliers, manufacturers, real estate, services(c) Labor market, employment agencies, universities, training schools, employees in other companies, unionization(d) Stock markets, banks, savings and loans, private investors(e) Customers, clients, potential users of products and services(f) Techniques of production, science, computers, information technology

(g) Recession, unemployment rate,inflation rate, rate of investment,

economics, growth(h) City, state, federal laws

and regulations, taxes,services, court system,

political processes(i) Age, values, beliefs,

education, religion,work ethic, consumer

and greenmovements

(j) Competition fromand acquisition by

foreign firms,entry into overseas

markets, foreign customs, regulations,

exchange rates

An Organization’s Environment

(j)International

Sector

(d)Financial

ResourcesSector

(e)MarketSector

(f)Technolo

gySector

(g)EconomicConditions

Sector

(a)IndustrySector

(h)Government

Sector

(c)Human Resourc

esSector

(b)Raw

MaterialsSector

(i)Sociocultur

alSector

ORGANIZATION

DOMAIN


MarketSub-environment

Customers AdvertisingCompetitors agencies

Distributionsystem

ManufacturingSub-environment

Labor Raw Suppliersmaterials

Productionequipment

ScientificSub-environment

Scientific Researchjournals centers

Professionalassociations

Organizational Departments Differentiate to Meet Needs of

Sub-environments

President

R & DDivision

SalesDivision

ManufacturingDivision


Differences in Goals and Orientations Among

Organizational Departments

Characteristic

R & DDepartment

Manufacturing

Department

SalesDepartment

GoalsNew developments, quality

Efficient production

Customer satisfaction

TimeHorizon Long Short Short

InterpersonalOrientation Mostly task Task Social

Formality ofStructure Low High HighSource: Based on Paul R. Lawrence and Jay W. Lorsch,Organization and Environment (Homewood, Ill.: Irwin, 1969), pp. 23-29.


Environmental Uncertainty and Organizational

Integrators

Industry: Plastics Foods Container

Environmental

UncertaintyHigh Moderate Low

Departmental

Differentiation

High Moderate Low

Percent of management in integrating

roles

22% 17% 0%Source: Based on Jay W. Lorsch and Paul R. Lawrence,“Environmental Factors and Organizational Integration,”Organization Planning: Cases and Concepts (Homewood, Ill.:Irwin and Dorsey, 1972), 45.


Organization Forms Mechanistic: Organic:

Tasks are broken down into specialized, separate parts.

Tasks are rigidly defined. There is a strict hierarchy

of authority and control, and there are many rules.

Knowledge and control of tasks are centralized at the top of the organization.

Communication is vertical.

Employees contribute to the common task of the department.

Tasks are adjusted and redefined through teamwork.

There is less hierarchy of authority and control, and there are few rules.

Knowledge and control of tasks are located anywhere in the organization.

Communication is horizontal.

Source: Adapted from Gerald Zaltman, Robert Duncan, and Jonny Holbek,Innovations and Organizations (New York: Wiley, 1973), 131.


Low Uncertainty

1. Mechanistic structure; formal, centralized2. Few departments

3. No integrating roles

4. Current operations orientation; low speed response

High-Moderate Uncertainty

1. Organic structure, teamwork; participative, decentralized2. Few departments, much boundary spanning3. Few integrating roles4. Planning orientation; fastresponse

High Uncertainty

1. Organic structure, teamwork; participative, decentralized2. Many departments differentiated, extensive boundary spanning3. Many integrating roles

4. Extensive planning, forecasting; high speed response

Low-Moderate Uncertainty

1. Mechanistic structure; formal, centralized2. Many departments, some boundary spanning3. Few integrating roles4. Some planning; moderate speed response

Contingency Framework for Environmental Uncertainty and

Organizational Responses

Uncertainty

Uncertainty

ENVIRONMENTALCHANGE

STABLE

ENVIRONMENTAL COMPLEXITY

UNSTABLE

SIMPLE COMPLEX


Organization Strategies for Controlling the External

Environment Establishing

Interorganizational Linkages:

Ownership Contracts, joint

ventures Cooptation, interlocking

directorates Executive recruitment Advertising, public

relations

Controlling the Environmental Domain: Change of domain Political activity,

regulation Trade associations Illegitimate

activities


Relationship Between Environmental Characteristics and

Organizational Actions

Environmentaldomain

(ten sectors)

High complexity

Establishment of favorable linkages:ownership, strategic alliances, cooptations,

interlocking directorates, executive recruitment, advertising, and public relations

Organic structure and systems with low formalization, decentralization,

and low standardization to enable a high-speed response

Many departments and boundary rolesGreater differentiation and more

integrators for internal coordinationHighuncertainty

High rateof change

Scarcity ofvalued

resources

Resourcedependence Control of the environmental domain:

change of domain, political activity,regulation, trade associations, and

illegitimate activities

Environment Organization


Chapter Five

Interorganizational Relationships


A Framework of Interorganizational

Relationships*

*Thanks to Anand Narasimhan for suggesting this framework.

ResourceDependence

CollaborativeNetwork

Institutionalism

PopulationEcology

Organization Type

OrganizationRelationship

Dissimilar Similar

Cooperative

Competitive


Changing Characteristics of Interorganizational Relationships

Traditional Orientation:Adversarial

New Orientation:Partnership

Suspicion, competition, arm’s length

Price, efficiency, own profits

Limited information and feedback

Legal resolution of conflict

Minimal involvement and up-front investment, separate resources

Short-term contracts

Contract limiting the relationship

Trust, addition of value to both sides, high commitment

Equity, fair dealing, both profit

Electronic linkages to share key information, problem feedback and discussion

Mechanisms for close coordination, people on-site Involvement in partner’s product design and production, shared resources

Long-term contracts

Business assistance beyond the contract


Elements in the Population Ecology Model of Organizations

Variation

Large numberof variationsappear in thepopulation oforganizations

Selection

Someorganizationsfind a nicheand survive

Retention

A feworganizationsgrow large andbecomeinstitutionalizedin theenvironment


Three Mechanisms for Institutional Adaptation

Example: Accounting standards, consultant training

Pollution controls, school

regulations

Reengineering, benchmarking

MoralLegalCulturallysupported

Socialbasis:

Professionalism—certification, accreditation

Political law,rules, sanctions

InnovationvisibilityEvents:

Duty,obligation

DependenceUncertaintyReasons tobecome similar:

NormativeCoerciveMimetic

Source: Adapted from W. Richard Scott,Institutions and Organizations (Thousand Oaks,Calif.: Sage, 1995).


Chapter Six

Designing Organizations for the International Environment


Four Stages of International Evolution

I.Domestic

II.International

III.Multinational

IV.Global

StrategicOrientation

Domestically oriented

Export-oriented, multidomestic

Multinational Global

Stage of Development

Initial foreign involvement

Competitive positioning

Explosion Global

Structure

Domestic structure plus export department

Domestic structure plus international division

Worldwide geographic, product

Matrix, trans-national

MarketPotential

Moderate, mostly domestic

Large, multidomestic

Very large, multinational

Whole world

Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational OrganizationStructure: An Interorganizational Relationships Perspective,”Academy of Management Review 9 (1984): 259-71.


Matching Organizational Structure to International Advantage

When Forces for Global

Integration are . . .

And Forces for National

Responsiveness are . . .

Strategy Structure

Low Low Export International Division

High Low Globalization Global Product Structure

Low High Multidomestic Global Geographic Structure

High High Globalization and

Multidomestic

Global Matrix Structure


Domestic Hybrid Structure with International Division

ScientificProductsDivision

Research &Development

HumanResources

MedicalProductsDivision

Europe(Sales)

ElectricalProductsDivision

CorporateFinance

CEO

InternationalDivision

Brazil(Subsidiary)

Mid East(Sales)

Staff (Legal,Licensing)


Partial Global Product Structure Used by Eaton Corporation

Engineering President InternationalLaw &CorporateRelations

Chairman

Finance & Administration

RegionalCoordinators

Global AutomotiveComponents

Group

GlobalIndustrial

Group

GlobalInstruments

ProductGroup

GlobalMaterialsHandling

Group

GlobalTruck

ComponentsGroup

Source: Based on New Directions in Multinational CorporateOrganization (New York: Business International Corp., 1981).


Global Matrix StructureInternational

ExecutiveCommittee

PowerTransformers

Germany NorwayArgentina/

BrazilSpain/

Portugal

Transportation

Industry

BusinessAreas

Country Managers

LocalCompanies


Building Global Capabilities

The Global Organizational ChallengeIncreased Complexity and Differentiation

Need for IntegrationKnowledge Transfer

Global Coordination MechanismsGlobal Teams

Headquarters PlanningExpanded Coordination Roles


Cultural Differences in Coordination and Control

National Value SystemsPower Distance

Uncertainty Avoidance

Three National Approaches to Coordination and Control

Centralized Coordination in Japanese Companies

European Firms’ Decentralized ApproachThe United States: Coordination and Control

through Formalization


Transnational Model of Organizations

Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships.

Structures are flexible and ever-changing. Subsidiary managers initiate strategies and

innovations that become strategy for the corporation as a whole.

Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems


Chapter Seven

Manufacturing and Service Technologies


Core Transformation Process for a Manufacturing Company

ENVIRONMENT

Organization

Raw MaterialInputs

Product or ServiceOutputs

Core Work Processes

MaterialsHandling

Milling Inspection

Assembly


Woodward’s Classification Based on System of Production

Group I Small-batch and unit production

Group II Large-batch and mass production

Group III Continuous process production


Flexible Manufacturing Systems

Computer-aided design (CAD)

Computer-aided manufacturing (CAM)

Integrated Information Network


NEW CHOICES TRADITIONAL CHOICES

MassProduction

Small batchFlexible

ManufacturingMass

Customization

ContinuousProcess

Relationship of Flexible Manufacturing Technology to Traditional Technologies

BATCH SIZESmall Unlimited

Customized

Standardized

PR

OD

UC

T F

LEX

IBIL

ITY

Source: Based on Jack Meredith, “The Strategic Advantages of New Manufacturing Technologies For Small Firms.” Strategic ManagementJournal 8 (1987): 249-58; Paul Adler, “Managing Flexible Automation,”California Management Review (Spring 1988): 34-56; andOtis Port, “Custom-made Direct from the Plant.” Business Week/21st Century Capitalism, 18 November 1994, 158-59.


Comparison of Organizational Characteristics Associated with Mass Production and

Flexible Manufacturing Systems

Characteristic Mass Production FMS

Structure:

Span of Control Wide Narrow

Hierarchical levels Many Few

Tasks Routine, repetitive Adaptive, craft-like

Specialization High Low

Decision making Centralized Decentralized

Overall Bureaucratic, mechanistic

Self-regulating, organic

Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulationand Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.



Flexible Manufacturing Systems (cont.)


Human Resources:

Interactions Standalone Teamwork

Training Narrow, one time Broad, frequent

Expertise Manual, technical Cognitive, socialSolve problems




Flexible Manufacturing Systems (cont.)


Interorganizational:

Customer Demand Stable Changing

Suppliers Many, arm’s length

Few, close relations



Differences Between Manufacturing and Service Technologies

Manufacturing Technology1. Tangible product2. Products can be inventoried

for later consumption 3. Capital asset intensive4. Little direct customer

interaction5. Human element may be less

important6. Quality is directly measured7. Longer response time is

acceptable8. Site of facility is moderately

important

Service Technology1. Intangible product2. Production and consumption

take place simultaneously 3. Labor and knowledge

intensive4. Customer interaction

generally high5. Human element very

important6. Quality is perceived and

difficult to measure7. Rapid response time is usually

necessary8. Site of facility is extremely

important

Service: Airlines, Hotels,Consultants,

Healthcare, Law firms

Product and Service: Fast-food outlets, Cosmetics,

Real estate, Stockbrokers,Retail stores

Product: Soft drink companies,

Steel companies, Auto manufacturers,

Food processing plantsSources: Based on F. F. Reichheld and W. E. Sasser, Jr.,“Zero Defections: Quality Comes to Services,” Harvard Business Review 68 (September-October 1990): 105-11; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Frameworkfor Analyzing Customer Service Orientations in Manufacturing,”Academy of Management Review 14 (1989): 75-95.


Configuration and Structural Characteristics of Service Organizations vs.

Product Organizations

Service ProductStructure:

Separate boundary roles Few Many

Geographical dispersion Much Little

Decision making Decentralized Centralized

Formalization Lower Higher

Human Resources:

Employee skill level Higher Lower

Skill emphasis Interpersonal Technical


Departmental Technologies

CRAFT Low analyzability Low variety Examples:

Performing arts Trades Fine goods

manufacturing

ROUTINE High analyzability Low variety Examples:

Sales Clerical Drafting Auditing


ENGINEERING High analyzability High variety Examples:

Legal Engineering Tax accounting General accounting

NONROUTINE Low analyzability High variety Examples:

Strategic planning Social science

research Applied research

Departmental Technologies


Relationship of Department Technology to Structural and Management Characteristics

Mechanistic Structure1. High formalization2. High centralization 3. Little training or experience4. Wide span5. Vertical, written communications

ROUTINE

Mostly Mechanistic Structure1. Moderate formalization2. Moderate centralization 3. Formal training4. Moderate span5. Written and verbal communications

ENGINEERING

Mostly Organic Structure1. Moderate formalization2. Moderate centralization 3. Work experience4. Moderate to wide span5. Horizontal, verbal communications

CRAFT

Organic Structure1. Low formalization2. Low centralization 3. Training plus experience4. Moderate to narrow span5. Horizontal communications meetings

NONROUTINE


Thompson’s Classification of Interdependence and Management

Implications

Form of Interdependence

Demands on Horizontal

Communications, Decision Making

Type of Coordination

Required

Priority for Locating Units Close Together

Pooled (bank)Low

communication

Standardization, rules, procedures

Divisional StructureLow

Sequential (assembly line) Medium

communication

Plans, schedules, feedback

Task ForcesMedium

Reciprocal (hospital)High

communication

Mutual adjustment, cross-departmental meetings, teamwork

Horizontal Structure

High

Client

Client

Client


Primary Means to Achieve Coordination for Different Levels of Task Interdependence in

a Manufacturing Firm

Reciprocal(new product development)

Sequential(product manufacture)

Pooled(product delivery)

COORDINATIONINTERDEPENDENCEHigh

Low

Horizontal structure,cross-functional teams

Face-to-face communication,Unscheduled meetings,Full-time integrators

Scheduled meetings, task forces

Vertical communication

Plans

Rules

MutualAdjustment

Planning

Standardization

Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and Richard Koenig, “Determinants of Communication Modes WithinOrganizations,” American Sociological Review 41 (1976): 330.


Relationships Among Interdependence and Other Characteristics of Team Play

Baseball Football Basketball

Interdependence: Pooled Sequential Reciprocal

Physical dispersion of players:

High Medium Low

Coordination:Rules that govern the sport

Game plan and position roles

Mutual adjustment and shared responsibility

Key management job:Select players and develop their skills

Prepare and execute game

Influence flow of game

Source: Based on William Passmore, Carol E. Francis, and JeffreyHalderman, “Sociotechnical Systems: A North American ReflectionOn the Empirical Studies of the 70’s,” Human Relations 35 (1982):1179-1204.


Design for Joint Optimization

Work roles, tasks,workflow

Goals and values

Skills and abilities

Design for Joint Optimization

Work roles, tasks,workflow

Goals and values

Skills and abilities

Sociotechnical Systems Model

The Social SystemIndividual and teambehaviors

Organizational/teamculture

Management practices

Leadership style

Degree of communicationand openness

Individual needs and desires

The Social SystemIndividual and teambehaviors

Organizational/teamculture

Management practices

Leadership style

Degree of communicationand openness

Individual needs and desires

The Technical System Type of production technology (small batch, mass production, FMS, etc.)

Level of interdependence (pooled, sequential, reciprocal)

Physical work setting

Complexity of production process (variety and analyzability)

Nature of raw materials

Time pressure

The Technical System Type of production technology (small batch, mass production, FMS, etc.)

Level of interdependence (pooled, sequential, reciprocal)

Physical work setting

Complexity of production process (variety and analyzability)

Nature of raw materials

Time pressureSources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-TechnicalSynthesis,” Academy of Management Review 3 (1978): 625-34; Don Hellriegel, John W.Slocum, and Richard W. Woodman, Organizational Behavior, 8th ed. (Cincinnati, Ohio:South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and MargaretA. Neale, Organizational Behavior: A Management Challenge, 2nd ed. (Fort Worth, Tex.:The Dryden Press, 1994), 551.


Technology Comparison

WorkbookActivity

McDonald’s SubwayFamily

Restaurant

Organization Goals

Authority Structure

Woodward’s Technology Type

Mechanistic vs. Organic

Teamwork vs. Individual

Interdependence

Routine vs. Nonroutine tasks

Task Specialization

Task Standardization

Technical vs. Social Expertise

Centralized vs. Decentralized


Chapter Eight

Information Technology and Control


Evolution of Organizational Applications of Information

Technology

1. Operations

2. Business Resource

3. Strategic Weapon

• Transaction processing systems• Data warehousing

• Management Information systems• Decision Support Systems• Executive information systems· Management control systems· Balanced Scorecard

• Knowledge Management• Intranets• Enterprise resource planning

• Extranets• E-Commerce• Integrated Enterprise

INTERNAL EXTERNAL

LOW SYSTEM COMPLEXITY HIGH

Direction of InformationSystemEvolution

MANAGEMENTLEVEL

TOP(strategy, plans,

non-programmed)

FIRST-LINE(operational, past,

programmed)


A Simplified Feedback Control Model

Set Strategic Goals

Measure Actual Performance and

Compare to Standards

Take Corrective Action

as Needed

Establish Standards of Performance


Major Perspectives of the Balanced Scorecard

MissionStrategy

Goals

Internal Business ProcessesDoes the chain of internal activities and processes add value for customers andshareholders?Examples of measures: order-ratefulfillment, cost-per-order

FinancialDo actions contribute to improving financial performance? Examples of measures: profits, return on investment

Learning and GrowthAre we learning and changing?

Examples of measures: continuous process improvement, employee retention, new product introductions

Customers

How well do we serve our customers?

Examples of measures: customer satisfaction, customer loyalty

Sources: Based on Robert S. Kaplan and David P. Norton, “UsingThe Balanced Scorecard as a Strategic Management System,”Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, No. 2 (August 1997), 21-27; andCathy Lazere, “All Together Now,” CFO, February 1998, 28-36.


Example of ERP Network

Central Database

Financial andAccountingSales

Distribution

Purchasing

Inventory andManufacturing

Human Resources


Two Approaches to Knowledge Management

ExplicitProvide high-quality, reliable, and fast

information systems for access of codified, reusable knowledge

TacitChannel individual expertise to provide creative advice

on strategic problems

KnowledgeManagement

Strategy

People-to-documents

Develop an electronic document system thatcodifies, stores,disseminates, and allowsreuse of knowledge

Invest heavily in informationtechnology, with a goal ofconnecting people withReusable, codified knowledge

Person-to-person

Develop networks forlinking people so thattacit knowledge canbe shared

Invest moderately ininformation technology,with a goal of facilitatingconversations and the ex-change of tacit knowledge

Technology

Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney,“What’s Your Strategy for Managing Knowledge?” Harvard BusinessReview, March-April 1999, 106-116.


Electronic Data Interchange for International Transactions

Export FreightForwarder

Manufacturer’sBank’

ExportCustoms

ImportCustoms

ImportClearing Agent

CustomerMANUFACTURER

Customer’sBank

Suppliers


Key Characteristics of Traditional vs. Emerging Interorganizational

Relationships

Traditional InterorganizationalRelationships

Emerging InterorganizationalRelationships

Suppliers

Customers

Arm’s-length relationship

Use of telephone, mail, someEDI for ordering, invoicing, payments

Direct access to manufacturer,real-time information exchange

Electronic access to product information, consumer ratings,customer service data

Limited communication withmanufacturer

Mix of phone response, mailhard copy information

Interactive, electronic relationship

Electronic ordering, invoicing,payments

Source: Based on Charles V. Callahan and Bruce A. Pasternack,“Corporate Strategy in the Digital Age,” Strategy & Business, Issue 15,Second Quarter 1999, 10-14.


Chapter Nine

Organization Size,Life Cycle, and Decline


Differences Between Large and Small Organizations

LARGE Economies of scale Global reach Vertical hierarchy Mechanistic Complex Stable market Career longevity and

stability

SMALL Responsive Flexible Regional reach Flat structure Organic Simple Niche finding Entrepreneurs

Source: Based on John A. Byrne,“Is Your Company Too Big?”Business Week, 27 March 1989, 84-94.


Organizational Life Cycle

ORGANIZATION STAGES OF DEVELOPMENT

1.Entrepreneurial

Stage

2.Collectivity

Stage

3.Formalization

Stage

4.Elaboration

Stage

Crisis:Need to dealwith too much

red tapeCrisis:Need for

delegationwith control

Crisis:Need for

leadership

Creativity

Provision of clear direction

Addition of internal systems

Development of teamwork

Crisis:Need for

revitalization

Decline

Continuedmaturity

Streamlining,small-company

thinking

SIZE

Large

Small

Sources: Adapted from Robert E. Quinn and Kim Cameron, “OrganizationalLife Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,“Evolution and Revolution as Organizations Grow,” Harvard BusinessReview 50 (July-August 1972): 37-46.


Organization Characteristics During Four Stages of Life Cycle

1.Entrepreneurial

2.Collectivity

3. Formalization

4.Elaboration

Characteristic Nonbureaucratic Prebureaucratic Bureaucratic Very Bureaucratic

Structure

Informal, one-person show

Mostly informal, some procedures

Formal procedures, division of labor, specialties added

Teamwork within bureaucracy, small-company thinking

Products or services

Single product or service

Major product or service with variations

Line of products or services

Multiple product or services lines

Reward and control systems

Personal, paternalistic Personal, contribution to success

Impersonal, formalized systems

Extensive, tailored to product and department

Innovation

By owner-manager By employees and managers

By separate innovation group

By institutionalizedR&D

Goal

Survival Growth Internal stability, market expansion

Reputation, complete organization

Top Management Style

Individualistic, entrepreneurial

Charismatic, direction-giving

Delegation with control

Team approach, attack bureaucracy

Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard BusinessReview 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “OrganizationalLife Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.


Weber’s Dimensions of Bureaucracy and Bases of Organizational

Authority

BUREAUCRACY1. 1. Rules and

procedures2. Specialization and

division of labor3. Hierarchy of authority4. Technically qualified

personnel5. Separate position and

incumbent6. Written

communications and records

LEGITIMATE BASES OF AUTHORITY

1. Rational-legal

2. Traditional

3. Charismatic


Percentage of Personnel Allocated to Administrative and Support Activities

50

75

25

0

Organization Size

Small Large

Line employees

Top administrators

Clerical

Professional staff

Percentageof

Employees


Three Organizational Control Strategies

TYPE

Bureaucratic

Market

Clan

REQUIREMENTS

Rules, standards, hierarchy, legitimate authority

Prices, competition, exchange relationship

Tradition, shared values and beliefs, trust

Source: Based upon William G. Ouchi, “A Conceptual Frameworkfor the Design of Organizational Control Mechanisms,” ManagementScience 25 (1979): 833-48.


Evaluation of Control On the Job

WorkbookActivity

1.

2.

3.

4.

Your jobresponsibilities

How yourboss controls

Positives ofthis control

Negatives ofthis control

How you wouldimprove control


Evaluation of Control At the University

WorkbookActivity

1.

2.

3.

4.

Item

How Prof. A(small class)controls

How thesecontrols influence you

What you thinkis a bettercontrol

How Prof. B(large class)controls


Chapter Ten

Organizational Cultureand Ethical Values


Levels of Corporate Culture

Observable SymbolsCeremonies, Stories, Slogans,

Behaviors, Dress, Physical Settings

Underlying Values,

Assumptions,Beliefs, Attitudes,

Feelings


A Typology of Organizational Rites and Their Social Consequences

Type of Rite Example Social Consequences

Passage Induction and basic training; US Army

Facilitate transition of person into new social roles and statuses

Enhancement Annual awards night Enhance social identities and increase status of members

Renewal Organizational development activities

Refurbish social structures and improve organization functioning

Integration Office holiday party Encourage and revive common feelings that bind members together and commit them to the organization

Source: Adapted from Harrison M. Trice and Janice M. Beyer, “Studying Organizational Cultures through Rites and Ceremonials,”Academy of Management Review 9 (1984), 653-659. Used with permission.


Relationship of Environment and Strategy to Corporate Culture

Needs of the EnvironmentS

trate

gic

Focu

s

AdaptabilityCulture

ClanCulture

BureaucraticCulture

MissionCulture

Flexibility

External

Internal

Stability

Sources: Based on Daniel R. Denison and Aneil K. Mishra, “Toward a Theory of Organizational Culture and Effectiveness,”Organization Science 6, no. 2 (March-April 1995): 204-23; R. Hooijberg and F. Petrock, “On Culture Change: Using the CompanyValues Framework to Help Leaders Execute a TransformationalStudy,” Human Resource Management 32 (1993): 29-50; and R. E. Quinn, Beyond Rational Management: Mastering the ParadoxesAnd Competing Demands of High Performance (San Francisco:Jossey-Bass, 1988).


Ethical Values in Organizations

Ethics

Rule of Law Managerial Ethics Social Responsibility Ethical Dilemma


Forces That Shape Managerial Ethics

IsDecision

or BehaviorEthical and

SociallyResponsible?

Beliefs and ValuesMoral DevelopmentEthical Framework

Rituals, CeremoniesStories, HeroesLanguage, SlogansSymbolsFounder, History

Government RegulationsCustomersSpecial Interest GroupsGlobal Market Forces

StructurePolicies, RulesCode of EthicsReward SystemSelection, Training

External StakeholdersOrganizational Systems

Personal Ethics Organizational Culture


Formal Structure and Systems of the Organization

Ethics committee Chief Ethics Officer Whistle-blowing Code of ethics Training programs


Shop ‘Til You Drop

WorkbookActivity

Culture Item Discount Store

Department Store

1. Mission of store:

2. Individual initiative:

3. Reward system:

4. Teamwork:

5. Company loyalty:

6. Dress:

7. Diversity of employees:

8. Service orientation:

9. Human resource development:


Chapter Eleven

Innovation and Change


Forces Driving the Need for Major Organizational Change

More Large-Scale Changes in OrganizationsStructure change Mergers, joint ventures, consortiaStrategic change Horizontal organizing, teams, networksCulture change New technologies, productsKnowledge management, enterprise New business processesresource planning E-businessQuality programs Learning organizations

More ThreatsMore domestic competitionIncreased SpeedInternational competition

Global Changes, Competition and Markets• Technological Change• International Economic Integration• Maturation of Markets in Developed Countries• Fall of Communist and Socialist Regimes

More OpportunitiesBigger marketsFewer barriersMore international markets

Source: Based on John P. Kotter, The New Rules: How to Succeed in Today’s Post-Corporate World(New York: The Free Press, 1995).


Incremental vs. Radical Change

Continuousprogression

Paradigm-breakingburst

Through normal structure and management

processes

Transform entireorganization

Affect organizational

part

Create new structureand management

Technologyimprovements

Breakthroughtechnology

Productimprovement

New products,new markets

Sources: Based on Alan D. Meyer, James B. Goes, and Geoffrey R. Brooks, “Organizations in Disequilibrium: Environmental Jolts and Industry Revolutions,” in George Huber and William H. Glick, eds., Organizational Change and Redesign (New York: Oxford UniversityPress, 1992), 66-111; and Harry S. Dent, Jr., “Growth through New

Product Development,” Small Business Reports (November 1990): 30-40.

Incremental Change Radical Change


Four Types of Change Technology

Changes in production process Products and Services

Changes in outputs Strategy and Structure

Administrative changes Culture

Changes in values, attitudes, behaviors


Sequence of Elements for Successful Change

Environment

SuppliersProfessionalAssociationsConsultantsResearchliterature

CustomersCompetitionLegislationRegulationLabor force

1. Ideas

2. Needs

3. Adoption 4.Implementation

5. Resources

InternalCreativity and

Inventions

PerceivedProblems or

Opportunities

Organization


Division of Labor Between Departments to Achieve Changes in

Technology

GeneralManager

CreativeDepartment

(Organic Structure)

Using Department

(Mechanistic Structure)


Probability of New Product Success

PROBABILITY

Technical completion (technical objectives achieved) .57

Commercialization (full-scale marketing) .31

Market Success (earns economic returns) .12

Source: Based on Edwin Mansfield, J. Rapaport, J. Schnee,S. Wagner, and M. Hamburger, Research and Innovation in Modern Corporations (New York: Norton, 1971), 57.


Horizontal Linkage Model for New Product Innovations

Environment

TechnicalDevelopments

Environment

CustomerNeeds

Organization

GeneralManager

R&DDepartment

MarketingDepartment

ProductionDepartment

Linkage

Linkage Linka

ge

Linkage Linkage


Dual-Core Approach to Organization Change

Type of Innovation DesiredAdministrative

Structure Technology

Direction of Change: Top-Down Bottom-Up

Examples of Change: Strategy Production Downsizing techniques Structure WorkflowBest Organizational Design for Change: Mechanistic Organic

AdministrativeCore

TechnicalCore


Culture Change

Reengineering and Horizontal Organization

Diversity

The Learning Organization


OD Culture Change Interventions

Large Group Intervention

Team Building

Interdepartmental Activities


Stages of Commitment to Change

Preparation Initial contact Awareness

Acceptance Understanding Decision to implement

Commitment Installation Institutionalization


Barriers to Change Excessive focus on costs Failure to perceive benefits Lack of coordination and

cooperation Uncertainty avoidance Fear of loss


Techniques for Change Implementation

Establish a sense of urgency for change. Establish a coalition to guide the

change. Create a vision and strategy for change. Find an idea that fits the need. Develop plans to overcome resistance. Create change teams. Foster idea champions.


Innovation MeasuresMeasure

AYour Organization

BOther Organization

CYour Ideal

1. Creativity encouraged

2. Diverse problem-solving

3. Time for creative ideas

4. Rewards for innovation

5. Flexible, open to change

6. Follow orders from top

7. Think and act like others

8. Concern for status quo

9. Don’t rock the boat

10. New ideas not funded

WorkbookActivity


Chapter Twelve

Decision-Making Processes


Today’s Business Environment

New strategies Reengineering Restructuring Mergers/Acquisitions Downsizing New product/market development . . . Etc.


Decisions Made Inside the Organization

Complex, emotionally charged issues

More rapid decisions Less certain environment Less clarity about means/outcomes Requires more cooperation


A New Decision-Making Process

Required because no one person has enough info to

make all major decisions No one person has enough time and

credibility to convince many Relies less on hard data Guided by powerful coalition Permits trial and error approach


Steps in the Rational Approach to Decision-Making

MonitorDecision

Environment

ImplementChosen

Alternative

DefineDecisionProblem

Specify Decision

Objectives

DiagnoseProblem

DevelopAlternativeSolutions

EvaluateAlternatives

ChooseBest

Alternative1

2

345

6

78


Trade-off

Trade-off

Trade-off

Constraints and Trade-offs During Non-programmed Decision-

Making

Personal Constraints:Desire for prestige, success;personal decision style; and

the need to satisfy emotional needs, cope with pressure,

maintain self-concept

Organizational Constraints:Need for agreement, sharedperspective, cooperation,

support, corporate culture and structure, ethical values

Bounded Rationality:Limited time, information,

resources to deal with complex,multidimensional issues

Decision/Choice:

Search fora high-quality

decisionalternative

Trade-off

Trade-off

Sources: Adapted from Irving L. Janis, Crucial Decisions(New York: Free Press, 1989); and A. L. George, PresidentialDecision Making in Foreign Policy: The Effective Use ofInformation and Advice (Boulder, Colo.: Westview Press, 1980).


Choice Processes in the Carnegie Model

Hold joint discussionand interpret goals and problems

Share opinions

Establish problem priorities

Obtain social supportfor problem, solution

Adopt the firstalternativethat is acceptableto the coalition

Conduct a simple,local search

Use established procedures ifappropriate

Create a solutionif needed

Managers havediverse goals,opinions, values,experience

Information is limitedManagers havemany constraints

Uncertainty Coalition Formation Search

Satisficing

Conflict


The Incremental Decision Process Model

· Identification Phase Recognition Diagnosis

Development Phase Search Screen Design

Selection Phase Judgment (evaluation – choice) Analysis (evaluation) Bargaining (evaluation – choice) AuthorizationDynamic Factors


Learning Organization Decision Process When Problem Identification and Problem

Solution Are Uncertain

When problem identification isuncertain, Carnegie model applies

Political and social process isneeded

Build coalition, seek agreement,and resolve conflict about goalsand problem priorities

When problem solution is uncertain, Incremental process model applies

Incremental, trial-and-errorprocess is needed

Solve big problems in little steps

Recycle and try again when blocked

PROBLEM IDENTIFICATION PROBLEM SOLUTION


Illustration of Independent Streams of Events in the Garbage Can Model of

Decision-Making

ProblemsSolutionsChoice

OpportunitiesParticipants





Choice OpportunitiesChoice Opportunities

Participants Participants

Middle Management

Problems Solutions

Solutions

Participants

ProblemsProblems

Solutions

ChoiceOpportunities

Problems

Participants

Participants

Solutions

Department A Department B


Certain Uncertain

Contingency Framework for Using Decision Models

ProblemConsensus

Individual: Rational Approach Computation

Organization: Management Science

Individual: Bargaining, Coalition Formation

Organization: Carnegie Model

Individual: Judgment Trial-and-error

Organization: Incremental Decision Process Model

Individual: Bargaining and Judgment Inspiration and ImitationLearning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can

SolutionKnowledge

Certain

Uncertain

4

21

3


Special Decision Circumstances

High-Velocity Environments

Decision Mistakes and Learning

Escalating Commitment


Decision Styles

WorkbookActivity

Your decisions Approach used

Advantages and disadvantages

Your recommended decision style

1.

2.

Decisions by others

1.

2.


Chapter Thirteen

Conflict, Power and Politics


Marketing – Manufacturing Areas of Potential Goal Conflict

MARKETING VS. MANUFACTURING Operative goal is Operative goal isGoal Conflict customer satisfaction production efficiency

Conflict Area Typical Comment Typical Comment

Breadth of product line: “Our customers “The product line is too demand variety.” broad, all we get are

short, uneconomical runs.”

New product introduction: “New products are our “Unnecessary design changes lifeblood.” are prohibitively expensive.”

Production scheduling: “We need faster response. “We need realistic customer Lead times are too long.” commitments that don’t

change like the wind direction

Physical distribution: “Why don’t we ever have “We can’t afford to keep huge the right merchandise inventories.”

in inventory?”

Quality: “Why can’t we have “Why must we always offer reasonable quality options that are too at low cost?” expensive and offer little

customer utility?” Sources: Based on Benson S. Shapiro, “Can Marketing and Manufacturing

Coexist?” Harvard Business Review 55 (September-October 1977): 104-14; and Victoria L. Crittenden, Lorraine R. Gardiner, and Antonie Stam, “Reducing Conflict Between Marketing and Manufacturing,” Industrial Marketing Management 22 (1993): 299-309.


Sources of Conflict and Use of Rational vs. Political Model

Sources of Potential

Inter-group Conflict

Goal Incompatibility

Differentiation

Task Interdependence

Limited Resources

Consistent acrossparticipants

Centralized

Orderly, logical,rational

Norm of efficiency

Extensive, systematic, accurate

When Conflict Is Low,

Rational Model describes

organization

Inconsistent, pluralisticwithin the organization

Decentralized, shiftingcoalitions and interestgroups

Disorderly, result of bargaining and interplayamong interests

Free play of market forces, conflict is legitimate and expected

Ambiguous, information usedand withheld strategically

When Conflict Is High,

Political Model describes

organization

Goals

Power andControl

DecisionProcess

Rules and Norms

Information

OrganizationVariables


Individual vs. Organizational Power

Legitimate power Reward power Coercive power Expert power Referent power


Power vs. Authority POWER

Ability to influence others to bring about desired outcomes

AUTHORITY Flows down the vertical hierarchy Prescribed by the formal hierarchy Vested in the position held


Vertical Sources of Power Formal Position

Resources

Control of Decision Premises and Information

Network Centrality


125

150175200

225250275

300325350

Co. B Co. C Co. I Avg.

Sales

Production

R&D

Finance

Horizontal Sources of Power

HighPower

LowPower

Source: Charles Perrow, “Departmental Power and Perspectivein Industrial Firms,” in Mayer N. Zald, ed., Power in Organizations(Nashville, Tenn.: Vanderbilt University Press, 1970), 64.


Strategic Contingencies That Influence Horizontal Power Among

Departments

Dependency

Financial Resources

Centrality

Nonsubstitutability

Coping with Uncertainty

Department Power


Power and Political Tactics in Organizations

Tactics for Increasing the Power Base

Political Tactics for Using Power

Tactics for EnhancingCollaboration

1. Enter areas of high uncertainty

1. Build coalitions 1. Create integration devices

2. Create dependencies

2. Expand networks 2. Use confrontation and negotiation

3. Provide resources 3. Control decision premises

3. Schedule inter-group consultation

4. Satisfy strategic contingencies

4. Enhance legitimacy and expertise

4. Practice member rotation

5. Make preferences explicit, but keep power implicit

5. Create superordinate goals


Win-Win Strategy1. Define the conflict as a

mutual problem2. Pursue joint outcomes3. Find creative agreements

that satisfy both groups4. Use open, honest, and

accurate communication5. Avoid threats6. Communicate flexibility

Win-Lose Strategy

1. Define the conflict as a win-lose situation

2. Pursue self outcomes3. Force other group into

submission4. Use deceitful, inaccurate

communication5. Use threats

6. Communicate rigidity

Negotiating Strategies

Source: Adapted from David W. Johnson and Frank P. Johnson, Joining Together: Group Theory and Group Skills (Englewood Cliffs,N. J.: Prentice-Hall, 1975), 182-83.

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