04/12/2014

Session 11-15

Organizing Assemble ongoing interdependent actions into

sensible sequences that generate sensible outcomes

Organizing What? Interdependent actions/ interlocked

behaviors

What is an Organization?

What is an Organization?
“An Organization is a system of consciously coordinated activities or efforts
of two or more persons”.- Chester Barnard

Organizations can also be thought as “social entities that are goal directed,
deliberately structured activity systems with a permeable boundary”
- Bedeian and Zamnuto.

•Formal planning
•Division of labor
•Leadership
• Goal
• Social orientation
• Boundary spanning

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What is an Organization?

“A social unit of people that is structured and managed to meet a need or to

pursue collective goals. All organizations have a management structure that
determines relationships between the different activities and the members,
and subdivides and assigns roles, responsibilities, and authority to carry out
different tasks in a systematic way in order to get what they value or generate
value for themselves.”

•Formal planning
•Division of labor
System
•Leadership Value Creation
• Goal
• Social orientation
• Boundary spanning

How Organizations Create Value

•Production
•Maintenance
• Raw Materials
•Management
• People
• Financials
• Information and Knowledge

Input

Transformation
Process

Output

• Goods
•Services
•Dividends
•Salaries and Incentives
Value creation takes place at three stages

Close systems Open systems

Rational systems Natural systems

Input

Transformation
Process

Output Uncertainty
Certainty

Environment

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Closed Systems: Certainty & Efficiency

• Repetitive tasks
Scientific Management: Taylor, • Known goals
1911 • Uniform availability of resources
• Sure output consumption

• Specializing and grouping tasks

Administrative Management:
• Departmentalization
Fayol, 1925
• Control

• Defining jurisdiction
Bureaucracy:
• Calculable Rules and pattern of work
Weber, 1947
• Salary & Career advancement

Open Systems: A complex organization

• Sentiments
Informal organization: • Cliques
Dickson, 1939 • Social control via informal norm
• Status and status striving

• Environmental interaction
Unlabelled • Interdependence
Bernard, 1938 • Plans resulting unintended
consequence

• Individual Differences
Hawthorne effect: • Motivation
Mayo, 1949 • Mutual interest and human dignity

• Uncertainty
Norm of rationality:
• Quest for survival
Thompson, 1967

Limited
capacity
Satisficing
Searching Learning Deciding
Bounded
Rationality

Uncertainty Open System Survival

Certainty Closed System Goal Achievement

Rationality

Maximizing

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Institutional Level
Meaning
Legitimacy
Higher-level support

Controls

Technology Level Managerial Level

Effectiveness
External Resource Approach

Control Innovation

Internal Systems Approach

Efficiency

Technical Approach

Technology Environment

Uncertainty Open system Survival

Certainty Closed System Goal Achievement

Technology: The combination of skills, equipments and

relevant technical knowledge needed to bring about desired
transformations in materials, information or people.

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Theory of Joan Woodward

Technical complexity
The extent to which a production process can be programmed
so that it can be controlled and made predictable

Low Technical Complexity

High Technical Complexity
(Depends primarily on KSA of
(Automation)
people)

J. D. Thompson

Long-linked Technology
(Sequential interdependence)

Mediating Technology
(Pooled Interdependence)

Intensive Technology
(Reciprocal Interdependence)

Form of Main type of Communication Strategy to reduce

Interdependence coordination uncertainty

Increase number
Pooled Standardization Low of Customers
served
Planning Slack Resources/
Sequential & Medium Vertical
Scheduling Integration
Mutual Specialism of task
Reciprocal High
Adjustment activities

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General Environment:  Specific environment and

Organization’s ability to secure resources

Legal Economic International Cultural

Suppliers Customers

The
Union
Organization

Competitors Distributors

Technological Political Demographic Ecological

Specific Environment  Organization’s ability to secure resources

Environmental complexity: The strength, number, and

interconnectedness of the specific and general forces that an
organization has to manage

Wider variety of products for different groups of customers

Environmental
Complexity Predicting and
Uncertainty about the
Controlling flow of
environment
resources

Environmental dynamism: The degree to which forces in the

specific and general environments change over time

– Stable environment
– Unstable (dynamic) environment

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• Environmental richness/ Munificence: Amount of

resources available to support an organization’s domain

– Environments may not be munificence because:

• The organization is located in a poor country or in a

poor region of a country

• There is a high level of competition, and organizations

are fighting over available resources

Enacted
Complexity Dynamism
Environment

Munificence
Organizational
Response

Organizational
Domain Defenders
Response U
N
C
E Reluctant Reactors
R
T
A
I Anxious Analyzers
N
T
Y
Enthusiastic Prospectors

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Content Analytical Categories

Conditions
Complexity Dynamism Munificence
Technological

Legal

Political

Economic

Demographic

Ecological

Cultural

International

Adapting to Environmental Uncertainty

Environmental
Complexity

Number of Positions and

Departments

Differentiation Integration

Dynamism
Mechanistic Organic

Tasks are broken down into specialized, Employees contribute to the common
separate parts tasks of the department

Tasks are rigidly defined Tasks are adjusted and redefined

There is a strict hierarchy of authority Less hierarchy

and control, and there are many rules

Knowledge and Control of tasks are Knowledge and control of tasks are
centralized at the top of the organization located anywhere in the organization

Communication is vertical Communication is horizontal

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Manufacturing Sales R&D

Mechanistic Organic
structure structure

Manufacturing Sales R&D

Tall Flat
organization organization

Manufacturing Sales R&D

Centralized Decentralized
decision decision
making making

Manufacturing Sales R&D

Standardization Mutual
adjustment

External Environment and Uncertainty

High
High-Moderate High
Uncertainty Uncertainty

Rate of
Change in
Factors in
Environment

Low Low-Moderate
Uncertainty Uncertainty
Low
Low High

Number of Factors in Organization Environment

High-Moderate Uncertainty High Uncertainty

Unstable

Low Uncertainty Low-Moderate Uncertainty

Stable

Simple Complex

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High-Moderate Uncertainty High Uncertainty

Organic Structure, teamwork:
participative, decentralized
Few Deptts, much boundary
Unstable spanning
Few integrating roles
Planning Orientation; fast response
Low Uncertainty
Mechanistic Structure:
Formal, Centralized
Organic Structure, teamwork:
participative, decentralized
Many Deptts differentiated,
extensive boundary spanning
Many Integrating roles
Extensive Planning, forecasting;
high-speed response
Low-Moderate Uncertainty
Mechanistic Structure: Formal,
Centralized

Few Departments Many Deptts, some boundary

Stable spanning
No integrating Roles Few integrating roles
Current operations orientation: Some planning: moderate-speed
low-speed response response
Simple Complex

Greater Differentiation
Complex and More Integration

High
Uncertainty
Dynamic Organic Structure
(Low Centralization,
formalization, and low
standardization)
Environment

Strategies for Managing Resource Dependencies

Two basic types of interdependencies cause uncertainty

– Symbiotic interdependencies: Interdependencies that

exist between an organization and its suppliers and
distributors

– Competitive interdependencies: Interdependencies that

exist among organizations that compete for scarce inputs
and outputs

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Establish Interorganizational Linkages

(Symbiotic Interdependency)

Informal Formal

Co- Strategic Merger &

Reputation
optation Alliance Takeover

Establish Interorganizational Linkages

(Competitive Interdependency)

Strategic Merger &

Cartel Collusion
Alliance Takeover

Controlling the Environmental Domain

• Change the Domain

• Political Activity, Regulation (Influence Govt. Legislation and
Regulation)
• Trade Associations
• Illegitimate Activities

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Greater Differentiation
Complex and More Integration

High
Uncertainty
Dynamic Organic Structure
(Low Centralization,
formalization, and low
standardization)
Environment

Establishment of
favorable linkage
Resource
Munificence
Dependence
Control of
environmental domain

Approaches to Measure Organizational

Effectiveness

Approaches to Measure Organizational

Effectiveness

External Resource Approach

– How effectively an organization manages and
controls its external environment
Internal System Approach
– How effectively an organization functions and
operates
Technical Approach
– How efficiently an organization converts a fixed
amount of resources into finished goods and services

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Entrepreneurial Structure

• It facilitates fast innovative responses

• Run by self-driven entrepreneurs (expertise, know each other,
Company survival)
• No formal structure and control system

Reasons for the failure of Circular Structure

The structure of an organization helps in

• Division of labor
• Defining the Identity within the organization and
• How they relate to each other

Basic Dimensions of Organization Structure

• Division of Labor
• Coordination Mechanisms
• Distribution of Decision rights
• Organizational Boundaries
• Informal Organization
• Political Alignments
• Legitimate basis of Authority

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Was the functional structure a good way for

Appex to solve its earlier problems?
CEO

Groups people on the basis of

their common skills, expertise, or
resources they use

Engineering Marketing Finance R&D

CEO

VP VP
VP VP
Sales & Materials
R&D Finance
Marketing Management

Division of labor for essential activities

Defining responsibility
Completing the task
Define their identity and career path

Why Shikhar change functional structure?

• Proliferation of jobs both horizontally and vertically

(Communication Problem)
• Emergence of organizational politics
• Differentiation and integration
• Lot of pressure on CEO (Strategic Problem)
• Dilutes accountability for the financial performance of the
organization (Measurement problem)
• Can lead to diminished zeal to produce new and innovative
products and services

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British Navy
1914-1928: No of ships in operation decreased by 68%

No of dockyard officials responsible for maintaining the fleet

increased by 40%

No of top brass responsible for managing the fleet increased

by 79%

The Parkinson’s law problem

•The officials want to multiply subordinates and not rivalry
•The officials make work for one another

• Functional structure is appropriate if the organization:

– Limits itself to producing a small number of similar

products
– Produces those products in one or a few locations
– Sells them to only one general type of client or
customer

Divisional structure: To solve some of the control problems

– Create smaller, more manageable subunits
• Product structure
• Geographic structure
• Market structure

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Product Structure

Multi Divisional Product Division

Product Team Structure
Structure Structure

Product Team Structure

CEO

Functions

Engineering Marketing Sales Finance R&D

Product Teams
PT PT PT
Manager Manager Manager
Functional
specialists

Product Product Product

Division Division Division

Do you think the Product and Business team

structures were useful ways of addressing the
limitations of functional structure?

• Strategic focus to the development and performance of various

products and services
• Reduced integrative role of Shikhar
• Greater emphasis on product development
• Ambiguity and conflict over who had what decisions right
• Resource allocation

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Multi Divisional Structure

CEO
Corporate
Corporate Headquarter Staff Managers

VP VP VP VP
Finance Marketing MM R&D

Divisional
Managers

Division Division Division Division

A B C D

Functional
Support Functions
Managers

Product Division Structure

CEO

VP VP
VP VP
Sales & Materials
R&D Finance
Marketing Management

PDM PDM PDM PDM

Frozen Canned Frozen Baked

Entrees Soups Veg. Goods
Division Division Division Division

Organization Structure Start up, 1984 to May 1988

The division of Labor Projects, interest & Skills

Coordination Mechanism Senior leadership/ face to face

Conflict resolution Persuasion

Distribution of decision rights Informal

Control Commitment

Identity and careers Entrepreneur

Strength Responsive, innovative, fast

•Short term focus
Weakness •No accountability
•No career path
•Service suffered

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Organization Structure Circular May 1988- Feb 1989

The division of Labor Expertise

Coordination Mechanism Not clear

Conflict resolution Consensus

Distribution of decision rights Not clear

Control Not specified

Identity and careers Experts

Strength Egalitarian

Weakness •Difficult to understand

Organization Structure Functional Feb 1989- Mar 1989

The division of Labor Functional expertise

Ghosh and Functional managers-
Coordination Mechanism
Vertical
Conflict resolution CEO
Partitioned, Ghosh involved in
Distribution of decision rights
everything
Control Compliance action

Identity and careers Functional experts

Focused people on specific task,
Strength
efficient pooling
Weakness •Inefficient operations,
•Built wall around functions

Organization Structure Product Business Mar 1989- Aug 1990

Product & Functional

The division of Labor expertise
Business team managers-
Coordination Mechanism negotiate

Conflict resolution Team persuasion

Business team- Product

Distribution of decision rights managers

Control Compliance action

Identity and careers Product and management

Improved coordination,
Strength balanced approach
•Unclear responsibilities between product
Weakness and function managers,
•no focus on company-wide profitability,
•lack cost effectiveness

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Organization Structure Divisional Aug 1990- Jan 1991

The division of Labor Products

Coordination Mechanism Authority of division head

Conflict resolution Senior management

Distribution of decision rights Division head

Control Profit and loss results

Identity and careers General management

Strength Profit focused, strategic responsiveness

•Wall between divisions,
Weakness •Innovation down
•Duplication
•No company wide standards/Senior execs out
of touch

Matrix Structure
CEO

VP VP VP VP VP
Engineering Marketing Finance R&D Purchasing

Manager
Product A

Manager
Product B

Manager
Product C

Manager
Product D

Product
Team

Network Structure

• A cluster of different organizations whose actions are

coordinated by contracts and agreements rather than through a
formal hierarchy of authority

• Very complex as companies form agreements with many

suppliers, manufacturers, and distributors

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Relative Advantage and Disadvantage of Different

Structures
Functional Divisional Matrix Network

Resource Efficiency Excellent Poor Moderate Good

Time Efficiency Poor Good Moderate Excellent

Responsiveness Poor Moderate Good Excellent

Adaptability Poor Good Moderate Excellent

Accountability Good Excellent Poor Moderate

Heterogen
Suited Environment Stable Complex Volatile
eous

Functional Divisional Matrix Network

Division of By Inputs By Outputs By Both By Knowledge
Labor
Coordination Hierarchy, Division Dual Reporting CFT
Supervision, manager and Relationships
plans Corporate staff
Decision Rights Highly Separation of Shared Highly
Centralized Strategy and decentralized
execution
Boundaries Core/Periphery Internal/ Multiple Porous and
External interfaces Changing
Markets

Importance of Low Modest Considerable

Informal High
Structure

Comparison among Different Structures

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Key Forces in Organizational Development

• Age of the Organization

• Size of the Organization
• Stages of Evolution
• Stages of Revolution
• Growth rate of the Industry

What is the Challenge before Southwest

Airlines?

United’s Shuttle
Airlines-within-an-airlines
Continental Life

Kiwi, Reno Airlines

Market has driven down the Stock price of Southwest

Airlines

The set of shared values

and norms that have been
internalized (to a greater
or lesser extent) by the
organization’s members

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Components of Organizational Culture

Observed behaviors,
Artifacts structures, systems,
Norms procedures, rules …
Values
Guides how members should
behave

ObservedBasic
behaviors, What is important in the
Assumptions
structures, systems, organizations and what
procedures, rules … deserves their attention

Non-confrontable
and non-debatable

• Members agree about what is important for their

organization but they do not care and unwilling to go
extra mile.
• Vacuous culture

Strategy Culture

• An effective culture is related to business strategy

• It must be strategically relevant

• Culture is a leadership tool

How clearly employees understand the culture and how

intensely they feel about it

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E
Clarity N
C
O
U To care intensely about
Consistency executing strategic objective
R
A
G
Comprehensiveness E
S

What does it take to execute this Strategy?

• Critical task
– Keep costs down, productivity up
– Consistency
– High utilization
• People
– Energetic
– Positive
– Committed

What does it take to execute this Strategy?

• Culture
– Initiative
– Fun
– Teamwork
– Cost conscious
• Formal organization
– Flat structure
– Compensation
• Leadership

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How does SW get its competitive advantage

1. Recruitment and
Selection

2. Socialization, Orientation
and Training

3. Reward and Leadership

Forming, strengthening and

changing Culture

The WSCI
Promote welfare and Learning for employment

In-group and out-group dynamics

• How difficult it is to create effective communication and

decisions even with best of intentions.

• Experience of dilemmas and conflicts of power

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Appreciation for structural injustice and its effect on

individuals
• Individual efforts and goodwill can be distorted and
wasted in the absence of a social system that permits their
expression
• Our understanding of power and authority

Complex interplay between structure and the individuals

• Regardless of individual beliefs and make-up, being on the top
is very different from being on the bottom

• Life generally seems good for high-power persons

• Usually hard to move towards cooperation, conciliation,

and compromise.

• Protect their superior power

• High-power members tend to be more angered by low

power member’s insult than when the position is reversed

Reward Referent

Bases
Coercive of Expert
Power

Legitimate Informational

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Dynamics of Power

• Change in one power base affects other power bases

• Change in one person’s power affects other’s Power

• Power accumulates and erodes over time

Bosses offer subordinates

• A link to the rest of the organization
• Necessary resources
• Fair rewards
Subordinates offer bosses
• Knowledge that s/he will deliver
• A source of information, especially from below
• A sounding board

• Subordinates often have difficulty recognizing the many

ways in which their bosses are dependent on them.

• They tend to be much more aware of the ways in which

they are dependent on their bosses.

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Thank You

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