This Document Contains Chapters 14 to 15 Chapter 14 Conflict and Negotiation Chapter Overview Managers in organizations need to be able to effectively deal with conflict and to negotiate with people inside and outside of the organization. These two skill sets are critical for managerial success. Chapter Objectives After studying this chapter, the student should be able to: 1. Differentiate between the traditional and interactionist views of conflict. 2. Describe the three types of conflict and the three loci of conflict. 3. Outline the conflict process. 4. Contrast distributive and integrative bargaining. 5. Apply the five steps of the negotiation process. 6. Show how individual differences influence negotiations. Suggested Lecture Outline I. INTRODUCTION A. This chapter examines both the positive and negative impacts of conflict, as well as describing how conflicts develop. B. One of the ways to end conflict, negotiation, is also presented. II. A DEFINITION OF CONFLICT 1. Conflict: A process that begins when one party perceives another party has negatively affected, or is about to negatively affect something that the first party cares about. a. This definition is flexible enough to cover the full range of conflict levels, from overt and violent acts to subtle forms of disagreement. 2. There has been disagreement over the role of conflict in groups and organizations. One school of thought argues that conflict must be avoided – that conflict indicates a malfunction within the group. a. We call this the traditional view. 3. Another perspective proposes not only that conflict can be a positive force in a group but that some conflict is absolutely necessary for a group to perform effectively. a. We call this the interactionist view. B. The Traditional View of Conflict. 1. In the earliest approach (1930s through 1940s) to conflict in organizations, it was assumed that all conflict was harmful and needed to be avoided. 2. With this traditional view of conflict, conflict was seen as a dysfunctional outcome resulting from poor communication, a lack of openness and trust between people, and the failure of managers to be responsive to the needs and aspirations of their employees. 3. Conflict was discussed with the terms violence, destruction, and irrationality. 4. While the idea that all conflict is bad and should be avoided certainly offers a simple approach to looking at the behavior of people who create disagreements, researchers realized that some level of conflict was inevitable. a. We need merely to study the causes of conflict and correct malfunctions to improve group and organizational performance. C. The Interactionist View of Conflict. 1. The interactionist view of conflict encourages conflict on the grounds that a harmonious, peaceful, tranquil, and cooperative group is prone to becoming static, apathetic, and unresponsive to needs for change and innovation. a. The major contribution of this view is recognizing that a minimal level of conflict can help keep a group viable, self-critical, and creative. 2. Functional conflict is conflict that supports the goals of the group and improves its performance: it is constructive. 3. Dysfunctional conflict is conflict that hinders group performance: it is destructive. III. TYPES AND LOCI OF CONFLICT A. Types of conflict. 1. Task Conflict. This type of conflict relates to the content and goals of the work. High levels of task conflict become dysfunctional when they create uncertainty about task roles; increase the time needed to complete tasks; or lead to members working at cross-purposes. Low-to-moderate levels of task conflict are functional as they consistently demonstrate a positive effect on group performance as it stimulates discussion of ideas. 2. Relationship Conflict. This type of conflict focuses on interpersonal relationships. Almost all conflict of this type is dysfunctional and its resolution can consume a fair portion of a manager’s time. 3. Process Conflict. This final type of conflict relates to how the work is accomplished. Low levels of process conflict are functional, while moderate-to-high levels of process conflict are dysfunctional. B. Studies demonstrate that relationship conflicts, at least in work settings, are almost always dysfunctional. Why? It appears that the friction and interpersonal hostilities inherent in relationship conflicts increase personality clashes and decrease mutual understanding, which hinders the completion of organizational tasks. 1. Of the three types, relationship conflicts also appear to be the most psychologically exhausting to individuals. a. Because they tend to revolve around personalities, you can see how relationship conflicts can become destructive. After all, we can’t expect to change our co-workers’ personalities, and we would generally take offense at criticisms directed at who we are as opposed to how we behave. 2. There is considerably less agreement as to whether task and process conflicts are functional. Early research suggested that task conflict was associated with higher group performance, but a recent review of 116 studies found that task conflict was essentially unrelated to group performance. 3. One such factor was whether the conflict included top management or occurred lower in the organization. a. Task conflict among top management teams was positively associated with their performance, whereas conflict lower in the organization was negatively associated with group performance. b. This review also found that it mattered whether other types of conflict were occurring at the same time. 1) If task and relationship conflict occurred together, task conflict was more likely negative, whereas if task conflict occurred by itself, it was more likely positive. c. Finally, some scholars have argued that the strength of the conflict is important – if task conflict is very low, people aren’t really engaged or addressing the important issues. If task conflict is too high, however, infighting will quickly degenerate into relationship conflict. d. According to this view, moderate levels of task conflict are optimal. 4. Finally, the personalities of the teams appear to matter. a. A recent study demonstrated that teams made up of individuals who are, on average, high in openness and emotional stability, are better able to turn task conflict into increased group performance. 5. What about process conflict? a. Researchers found that process conflict revolves around delegation and roles. Conflicts over delegation often revolves around shirking, and conflicts over roles can leave some group members feeling marginalized. b. Thus, process conflict often becomes highly personalized and quickly devolves into relationship conflict. C. Loci of Conflict. D. Another way to understand conflict is to consider its locus, or where the conflict occurs. 1. Dyadic conflict is conflict between two people. 2. Intragroup conflict occurs within a group or team. 3. Intergroup conflict is conflict between groups or teams. E. Nearly all the literature on task, relationship, and process conflict considers intragroup conflict. However, it doesn’t necessarily tell us about the other loci of conflict. 1. For example, research has found that for intragroup task conflict to influence performance within the team, it is important that the teams have a supportive climate in which mistakes aren’t penalized and every team member “(has) the other’s back.” 2. One study that focused on intergroup conflict found an interplay between an individual’s position within a group and the way that individual managed conflict between groups. a. Group members who were relatively peripheral in their own group were better at resolving conflicts between their group and another one. 1) But this happened only when those peripheral members were still accountable to their group. Thus, being at the core of your work group does not necessarily make you the best person to manage conflict with other groups. 3. Another intriguing question about loci is whether conflicts interact or buffer one another. a. One study found, for example, that high levels of conflict between teams caused individuals to focus on complying with norms within their teams. 4. Thus, understanding functional and dysfunctional conflict requires not only that we identify the type of conflict; we also need to know where it occurs. It’s possible that while the concepts of task, relationship, and process conflict are useful in understanding intragroup or even dyadic conflict, they are less useful in explaining the effects of intergroup conflict. 5. In sum, the traditional view took a shortsighted view in assuming all conflict should be eliminated. IV. THE CONFLICT PROCESS A. There are five stages in the conflict process. 1. Stage I: Potential Opposition or Incompatibility. a. This indicates the presence of conditions that create opportunities for conflict to arise. b. These conditions don’t need to directly lead to conflict, but one of these conditions is necessary for conflict to surface. c. There are three general categories of these conditions (causes or sources of conflict): 2. Communication. This source of conflict arises from semantic difficulties, misunderstandings, and “noise” in the communication channels. Differing word connotations, jargon, insufficient exchange information, and other barriers to communication are potential antecedents to conflict. a. The potential for conflict increases when: 1) Communication barriers exist. 2) Too little or too much communication takes place. 3. Structure. a. This includes variables such as: 1) size, 2) degree of specialization in the tasks assigned to group members, 3) jurisdictional clarity, 4) member-goal compatibility, 5) leadership styles, 6) reward systems, and 7) the degree of dependence between groups. b. The potential for conflict increases when: 1) Groups are larger or more specialized. 2) Group members are younger or have less tenure. 3) Turnover is high. 4) Jurisdiction and/or responsibility for action are ambiguous. 5) Diversity of goals exists among groups. 6) Reward systems are designed so that one member gains at another's expense. 7) The group is dependent upon another group. 8) One group can gain at another group’s expense. 4. Personal Variables. a. Personality types, values, and emotions can lead to conflict. b. The potential for conflict increases when: 1) Conflict-oriented personality types, such as highly authoritarian or dogmatic personalities, exist in the work group. 2) Members are highly emotional in the work environment (no matter what the cause of those emotions). B. Stage II: Cognition and Personalization. 1. If the antecedent conditions of the first stage negatively affect something one party cares about, then the potential for conflict or incompatibility becomes actualized in the second stage. 2. As we noted in our definition of conflict, one or more of the parties must be aware that antecedent conditions exist. a. However, because a conflict is a perceived conflict does not mean it is personalized. b. In other words, “A may be aware that B and A are in serious disagreement... but it may not make A tense or anxious, and it may have no effect whatsoever on A’s affection toward B.” It is at the felt conflict level, when individuals become emotionally involved, that parties experience anxiety, tension, frustration, or hostility. 3. Keep in mind two points. a. First, stage II is important because it’s where conflict issues tend to be defined. 1) This is the point when the parties decide what the conflict is about. 2) The definition of a conflict is important because it typically delineates the set of possible settlements. b. Second, emotions play a major role in shaping perceptions. 1) Negative emotions allow us to oversimplify issues, lose trust, and put negative interpretations on the other party’s behavior. 2) In contrast, positive feelings increase our tendency to see potential relationships among the elements of a problem, take a broader view of the situation, and develop more innovative solutions. C. Stage III: Intentions. 1. Intentions intervene between people’s perceptions and emotions and their overt behavior. a. They are decisions to act in a given way. b. We separate out intentions as a distinct stage because we have to infer the other’s intent to know how to respond to his or her behavior. c. A lot of conflicts are escalated simply because one party attributes the wrong intentions to the other. d. There is also typically a great deal of slippage between intentions and behavior, so behavior does not always accurately reflect a person’s intentions. 2. Using two dimensions—cooperativeness (the degree to which one party attempts to satisfy the other party’s concerns) and assertiveness (the degree to which one party attempts to satisfy his or her own concerns)—we can identify five conflict-handling intentions: competing (assertive and uncooperative), collaborating (assertive and cooperative), avoiding (unassertive and uncooperative), accommodating (unassertive and cooperative), and compromising (midrange on both assertiveness and cooperativeness). a. Competing. 1) When one person seeks to satisfy his or her own interests regardless of the impact on the other parties to the conflict, that person is competing. 2) You compete when you place a bet that only one person can win, for example. b. Collaborating. 1) When parties in conflict each desire to fully satisfy the concerns of all parties, there is cooperation and a search for a mutually beneficial outcome. 2) In collaborating, the parties intend to solve a problem by clarifying differences rather than by accommodating various points of view. 3) If you attempt to find a win–win solution that allows both parties’ goals to be completely achieved, that’s collaborating. c. Avoiding. 1) A person may recognize a conflict exists and want to withdraw from or suppress it. 2) Examples of avoiding include trying to ignore a conflict and avoiding others with whom you disagree. d. Accommodating. 1) A party who seeks to appease an opponent may be willing to place the opponent’s interests above his or her own, sacrificing to maintain the relationship. 2) We refer to this intention as accommodating. 3) Supporting someone else’s opinion despite your reservations about it, for example, is accommodating. e. Compromising. 1) In compromising, there is no clear winner or loser. 2) Rather, there is a willingness to ration the object of the conflict and accept a solution that provides incomplete satisfaction of both parties’ concerns. 3) The distinguishing characteristic of compromising, therefore, is that each party intends to give up something. 3. Intentions are not always fixed. 1) During the course of a conflict, they might change if the parties are able to see the other’s point of view or respond emotionally to the other’s behavior. 2) However, research indicates people have preferences among the five conflict-handling intentions we just described and tend to rely on them quite consistently. 3) We can predict a person’s intentions rather well from a combination of intellectual and personality characteristics. D. Stage IV: Behavior. 1. When most people think of conflict situations, they tend to focus on Stage IV because this is where conflicts become visible. 2. The behavior stage includes the statements, actions, and reactions made by the conflicting parties, usually as overt attempts to implement their own intentions. 3. As a result of miscalculations or unskilled enactments, overt behaviors sometimes deviate from these original intentions. 4. It helps to think of Stage IV as a dynamic process of interaction. 5. For example, a. you make a demand on me, b. I respond by arguing, you threaten me, c. I threaten you back, and so on. 6. Exhibit 14-2 provides a way of visualizing conflict behavior. a. All conflicts exist somewhere along this continuum. b. At the lower part are conflicts characterized by subtle, indirect, and highly controlled forms of tension, such as a student questioning in class a point the instructor has just made. c. Conflict intensities escalate as they move upward along the continuum until they become highly destructive. d. Strikes, riots, and wars clearly fall in this upper range. e. For the most part, you should assume conflicts that reach the upper ranges of the continuum are almost always dysfunctional. f. Functional conflicts are typically confined to the lower range of the continuum. g. If a conflict is dysfunctional, what can the parties do to de-escalate it? h. Or, conversely, what options exist if conflict is too low and needs to be increased? 1) This brings us to techniques of conflict management. We have already described several as conflict-handling intentions. 2) Under ideal conditions, a person’s intentions should translate into comparable behaviors. E. Stage V: Outcomes. 1. The action–reaction interplay between the conflicting parties results in consequences. 2. As our model demonstrates (see Exhibit 14-1), these outcomes may be functional, if the conflict improves the group’s performance, or dysfunctional, if it hinders performance. 3. Functional Outcomes. a. Normally associated with low-to-moderate levels of task and process conflict (and excluding relationship conflict) these outcomes result in an improvement in the group's performance. b. Functional Outcome Indicators. Conflicts can be considered to have functional outcomes when any of the following end-conditions exist. 1) The quality of decisions is improved by allowing multiple points of view to be considered: reduces the potential for groupthink. 2) Creativity and innovation are stimulated by challenging the status quo. 3) Interest and curiosity among group members is encouraged. 4) Problems are aired and tensions are released. 5) An environment of self-evaluation and change is created. c. Research Results. 1) Studies in diverse settings confirm the functionality of conflict and its ability to increase group performance. 2) Additionally, heterogeneous groups (those with a greater likelihood for conflict than homogenous groups) were also found to produce higher-quality solutions. 4. Dysfunctional Outcomes. a. Uncontrolled opposition breeds discontent, which acts to dissolve common ties, and eventually leads to the destruction of the group. b. Dysfunctional Outcome Indicators. 1) Group effectiveness is reduced. 2) Group communication is retarded. 3) Group cohesiveness is reduced. 4) Group goals are subordinated to infighting among members. 5) The group is threatened with destruction. c. Research Results. 1) A substantial body of the literature has shown dysfunctional conflict to reduce group effectiveness. 5. Managing Functional Conflict. a. If managers recognize that in some situations conflict can be beneficial, what can they do to manage conflict effectively in their organizations? b. One of the keys to minimizing counterproductive conflict is recognizing when there really is a disagreement. Many apparent conflicts are due to people using a different language to discuss the same general course of action. 1) Successful conflict management recognizes these different approaches and attempts to resolve them by encouraging open, frank discussion focused on interests rather than issues. 2) Another approach is to have opposing groups pick the issues that are most important to them and then focus on how each side can get its top needs satisfied. Neither side may get exactly what it wants, but each side will get the most important parts of its agenda. c. Groups that resolve conflicts successfully discuss differences of opinion openly and are prepared to manage conflict when it arises. 1) The most disruptive conflicts are those that are never addressed directly. 2) An open discussion makes it much easier to develop a shared perception of the problems at hand; it also allows groups to work toward a mutually acceptable solution. 3) Managers need to emphasize shared interests in resolving conflicts, so groups that disagree with one another don’t become too entrenched in their points of view and start to take the conflicts personally. 4) Groups with cooperative conflict styles and a strong underlying identification to the overall group goals are more effective than groups with a more competitive style. d. Differences across countries in conflict resolution strategies may be based on collectivistic tendencies and motives. e. Collectivist cultures see people as deeply embedded in social situations, whereas individualist cultures see them as autonomous. 1) As a result, collectivists are more likely to seek to preserve relationships and promote the good of the group as a whole. 2) They will avoid direct expression of conflicts, preferring indirect methods for resolving differences of opinion. f. Collectivists may also be more interested in demonstrations of concern and working through third parties to resolve disputes, whereas individualists will be more likely to confront differences of opinion directly and openly. V. NEGOTIATION A. Negotiation permeates the interactions of almost everyone in groups and organizations. 1. There’s the obvious: Labor bargains with management. 2. There’s the not so obvious: Managers negotiate with employees, peers, and bosses; salespeople negotiate with customers; purchasing agents negotiate with suppliers. 3. And there’s the subtle: An employee agrees to cover for a colleague for a few minutes in exchange for some past or future benefit. 4. In today’s loosely structured organizations, in which members work with colleagues over whom they have no direct authority and with whom they may not even share a common boss, negotiation skills become critical. 5. We can define negotiation as a process that occurs when two or more parties decide how to allocate scarce resources. a. Although we commonly think of the outcomes of negotiation in one-shot economic terms, like negotiating over the price of a car, every negotiation in organizations also affects the relationship between the negotiators and the way the negotiators feel about themselves. b. Depending on how much the parties are going to interact with one another, sometimes maintaining the social relationship and behaving ethically will be just as important as the immediate outcome of each bargain. 6. Note that we use the terms negotiation and bargaining interchangeably. a. In this section, we contrast two bargaining strategies, provide a model of the negotiation process, ascertain the role of moods and personality traits on bargaining, review gender and cultural differences in negotiation, and take a brief look at third-party negotiations. B. Bargaining Strategies. 1. There are two general approaches to negotiation: distributive bargaining and integrative bargaining. 2. Distributive Bargaining. a. This type of bargaining operates under zero-sum (or fixed pie) conditions: one party’s gains reflect losses by the other. b. A classic example of this type of bargaining is labor-management negotiations over wages. c. This model reflects zero-sum distributive bargaining positions. Each party is a negotiator. 1) Each has a unique target point (what he or she would like to achieve) and resistance point (the lowest acceptable outcome before negotiations are broken off). 2) The area between each negotiator’s target and resistance points is that negotiator’s aspiration range. a) If the two ranges overlap, this common area is referred to as the settlement range. 3) When you are engaged in distributive bargaining, research consistently shows one of the best things you can do is make the first offer—and make it an aggressive one. a) One reason for this is that making the first offer shows power; individuals in power are much more likely to make initial offers, speak first at meetings, and thereby gain the advantage. b) Another reason is the anchoring bias. People tend to fixate on initial information. c) Once that anchoring point is set, they fail to adequately adjust it based on subsequent information. 4) A savvy negotiator sets an anchor with the initial offer, and scores of negotiation studies show that such anchors greatly favor the person who sets it. 3. Integrative Bargaining. a. This type of bargaining operates under the assumption that one or more settlements can create a win-win solution. b. In terms of intraorganizational behavior, all things being equal, integrative bargaining is preferable to distributive bargaining because the former builds long-term relationships. 1) Integrative bargaining bonds negotiators and allows them to leave the bargaining table feeling they have achieved a victory. 2) Distributive bargaining, however, leaves one party a loser. It tends to build animosities and deepen divisions when people have to work together on an ongoing basis. c. Research shows that over repeated bargaining episodes, when the “losing” party feels positive about the negotiation outcome, he is much more likely to bargain cooperatively in subsequent negotiations. d. This points to an important advantage of integrative negotiations: even when you “win,” you want your opponent to feel good about the negotiation. e. Necessary Conditions. Because of these requirements for integrative bargaining, is not as common in business as perhaps it should be. 1) Parties must be open with information and candid about their concerns. 2) There must be sensitivity by both parties regarding the other's needs. 3) The parties must be able to trust each other. 4) Both parties must be willing to maintain flexibility. f. Integrative Bargaining Tactics. To achieve higher joint-gain settlements, put more issues on the table: this allows for better outcome as issues are traded. 1) Avoid compromise as it reduces the pressure to bargain integratively. g. Results of Using Integrative Bargaining. This is the preferable means of bargaining as it builds long-term relationships and positive feelings about the other party for both parties. C. Negotiation Process. 1. This simplified model of the negotiation process is composed of five steps. a. Step One: Preparation and Planning. 1) Before you start negotiating, you need to do your homework. a) What’s the nature of the conflict? b) What’s the history leading up to this negotiation? c) Who’s involved and what are their perceptions of the conflict? d) What do you want from the negotiation? e) What are your goals? (1) It often helps to put your goals in writing and develop a range of outcomes—from “most hopeful” to “minimally acceptable”—to keep your attention focused. (2) You also want to assess what you think are the other party’s goals. (3) What are they likely to ask/request? (4) How entrenched is their position likely to be? (5) What intangible or hidden interests may be important to them? (6) On what might they be willing to settle? (7) When you can anticipate your opponent’s position, you are better equipped to counter arguments with the facts and figures that support your position. 2) Determine Strategic Limits. a) An important consideration in any negotiation is to determine the best alternative to a negotiated agreement (BATNA) for both the negotiator and the opponent. b) This is similar in concept to a resistance point: the negotiator must determine when it is better strategically to cease negotiations and accept some other alternative. c) One possible negotiation strategy is to get the opponent to modify his or her BATNA to increase the settlement range. b. Step Two: Definition of Ground Rules. 1) In this initial stage of negotiations, the methodology of the negotiation itself is determined. 2) The step determines the who, what, when, and how of the negotiation process. 3) The initial proposals or demands will be exchanged between the parties. c. Step Three: Clarification and Justification. 1) In this step each party will explain, amplify, clarify, bolster, and justify the original demands or proposals. 2) This step should be more explanatory in nature, rather than confrontational; it should be used to build understanding between the parties. d. Step Four: Bargaining and Problem Solving. 1) This step is what is typically thought of as negotiations. 2) It is the actual give-and-take necessary to accomplish agreement. 3) It is likely that both parties will have to make some concessions in order to reach agreement. e. Step Five: Closure and Implementation. 1) The final step in the process is formalizing the negotiated agreement and developing any necessary procedures for implementing and monitoring that agreement. 2) This step can be accomplished by anything from creating a formal contract through simply shaking hands on it. D. Individual Differences in Negotiation Effectiveness. 1. Personality Traits in Negotiation. a. Can you predict an opponent’s negotiating tactics if you know something about his or her personality? 1) Because personality and negotiation outcomes are related but only weakly, the answer is, at best, “sort of.” 2) Most research has focused on the Big Five trait of agreeableness, for obvious reasons – agreeable individuals are cooperative, compliant, kind, and conflict-adverse. a) We might think such characteristics make agreeable individuals easy prey in negotiations, especially distributive ones. b) The evidence suggests, however, that overall agreeableness is weakly related to negotiation outcomes. 3) It appears that the degree to which agreeableness and personality more generally affects negotiation outcomes depends on the situation. a) The importance of being extraverted in negotiations depends on how the other party reacts to someone who is assertive and enthusiastic. b) One complicating factor for agreeableness is that it has two facets: (1) The tendency to be cooperative and compliant is one, but so is the tendency to be warm and empathetic. c) It may be that while the former is a hindrance to negotiating favorable outcomes, the latter helps. Empathy, after all, is the ability to take the perspective of another person and to gain insight/understanding of them. d) We know so-called perspective-taking benefits integrative negotiations, so perhaps the null effect for agreeableness is due to the two tendencies pulling against one another. 2. Moods/Emotions in Negotiations. a. Do moods and emotions influence negotiation? 1) They do, but the way they do appears to depend on the emotion as well as the context. 2) A negotiator who shows anger generally induces concessions because the other negotiator believes no further concessions from the angry party are possible. 3) One factor that governs this outcome, however, is power – you should show your anger in negotiations only if you have at least as much power as your counterpart. If you have less, showing anger actually seems to provoke “hardball” reactions from the other side. 4) Another facet is how genuine your anger is – “faked” anger, or anger produced from so-called surface acting (see Chapter 4), is not effective, but showing anger that is genuine (so-called deep acting) does. 5) It also appears that having a history of showing anger, rather than sowing the seeds of revenge, actually induces more concessions because the other party perceives the negotiator as “tough.” 6) Finally, culture seems to matter. a) One study found that when East Asian participants showed anger, it induced more concessions than when the negotiator expressing anger was from the United States or Europe, perhaps because of the stereotype of East Asians refusing to show anger. b. Another relevant emotion is disappointment. Generally, a negotiator who perceives disappointment from her counterpart concedes more because disappointment makes many negotiators feel guilty. c. Anxiety also appears to have an impact on negotiation. 1) One study found that individuals who experienced more anxiety about a negotiation used more deceptions in dealing with others. 2) Another study found that anxious negotiators expect lower outcomes, respond to offers more quickly, and exit the bargaining process more quickly, leading them to obtain worse outcomes. d. As you can see, emotions – especially negative ones – matter to negotiation. Even emotional unpredictability affects outcomes; researchers have found that negotiators who express positive and negative emotions in an unpredictable way extract more concessions because it makes the other party feel less in control. 3. Culture in Negotiations. a. It appears that people generally negotiate more effectively within cultures than between them. b. It appears that in cross-cultural negotiations, it is especially important that the negotiators be high in openness. 1) This suggests choosing cross-cultural negotiators who are high in openness to experience, but also avoiding factors – such as time pressures – that tend to inhibit learning to understand the other party. c. Finally, because emotions are culturally sensitive, negotiators need to be especially aware of the emotional dynamics in cross-cultural negotiation. 1) One study, for example, explicitly compared how U.S. and Chinese negotiators reacted to an angry counterpart. Chinese negotiators increased their use of distributive negotiating tactics, whereas U.S. negotiators decreased their use of these tactics. That is, Chinese negotiators began to drive a harder bargain once they saw that their negotiation partner was becoming angry. 2) Why the difference? It may be that individuals from East Asian cultures feel that using anger to get their way in a negotiation is not a legitimate tactic, so they respond by refusing to cooperate when their opponents become upset. 4. Gender Differences in Negotiations. a. Although men and women do not tend to negotiate differently, the negotiation outcomes do differ based on gender. b. Men tend to place a higher value on status, power, and recognition, whereas women tend to place a higher value on compassion and altruism. Moreover, women tend to value relationship outcomes more than men, and men tend to value economic outcomes more than women. c. These differences affect both negotiation behavior and negotiation outcomes. 1) Compared to men, women tend to behave in a less assertive, less self-interested, and more accommodating manner. d. Evidence suggests that women’s own attitudes and behaviors hurt them in negotiations. 1) Managerial women demonstrate less confidence than men in anticipation of negotiating and are less satisfied with their performance afterward, even when their performance and the outcomes they achieve are similar to those for men. 2) Women are also less likely than men to see an ambiguous situation as an opportunity for negotiation. 3) Women may unduly penalize themselves by failing to engage in negotiations that would be in their best interests. Some research suggests that women are less aggressive in negotiations because they are worried about backlash from others. a) Women are more likely to engage in assertive negotiations when they are bargaining on behalf of someone else than when they are bargaining on their own behalf. VI. IMPLICATIONS FOR MANAGERS 1. Managing Conflict a. Authoritarian. Use this method when: 1) Quick, decisive action is vital (emergencies). 2) Deciding important issues for which unpopular actions need to be implemented (such as cost cutting and discipline). 3) Deciding issues vital to the organization's welfare when you know you are right and your opponents are wrong. 4) Negotiating with people who take advantage of noncompetitive behavior. b. Collaboration. Use this method when: 1) There is a need to find an integrative solution when both sets of concerns are too important to be compromised. 2) Your objective is to learn. 3) The desire is to merge insights from people with different perspectives. 4) Wishing to gain commitment by incorporating concerns into a consensus. 5) Working through feelings that interfered with the relationship. c. Accommodation. Use this method when: 1) You find you are wrong and wish to allow a better position to be heard in order to learn and to show your reasonableness. 2) Issues are more important to others than to yourself and you wish to satisfy others and maintain cooperation. 3) You wish to build social credits for later issues. 4) You desire to minimize loss when you are outmatched and losing. 5) Harmony and stability are especially important. 6) You wish to allow subordinates to develop by learning from their mistakes. d. Compromise. Use this method when: 1) Goals are important but not worth the potential disruption caused by approaches that are more assertive. 2) Opponents have power equal to yours and they are committed to mutually exclusive goals. 3) Desiring to achieve temporary settlements to complex issues. 4) Wishing to arrive at expedient solutions under time pressure. 5) Needing a backup when collaboration or competition is unsuccessful. 2. When engaged in negotiation, make sure you set aggressive goals and try to find creative ways to achieve the goals of both parties, especially when you value the long-term relationship with the other party. a. That doesn’t mean sacrificing your self-interest; rather, it means trying to find creative solutions that give both parties what they really want. VII. KEEP IN MIND A. Conflict is an inherent part of organizational life: probably necessary for optimal organizational function. B. Task conflict is the most constructive. C. Most effective negotiators use both types of bargaining and know the appropriate tactics. VIII. SUMMARY 1. Although many people assume conflict lowers group and organizational performance, this assumption is frequently incorrect. Conflict can be either constructive or destructive to the functioning of a group or unit. 2. As shown in Exhibit 14-6, levels of conflict can be either too high or too low. Either extreme hinders performance. 3. An optimal level is one that prevents stagnation, stimulates creativity, allows tensions to be released, and initiates the seeds of change, without being disruptive or preventing coordination of activities. Discussion Questions 1. Define conflict. Answer: Conflict is a process that begins when one party perceives another party has negatively affected, or is about to negatively affect something that the first party cares about. 2. Differentiate between the traditional and interactionist views of conflict. Answer: The Traditional View: in the earliest approach (1930s through 1940s) to conflict in organizations, it was assumed that all conflict was harmful and needed to be avoided. Conflict was seen as a dysfunctional outcome resulting from poor communication, a lack of openness and trust between people, and the failure of managers to be responsive to the needs and aspirations of their employees. This somewhat simplistic view of conflict allowed for relatively easy solutions: seek out the sources of conflict and correct those malfunctions. The Interactionist View: this most recent view of conflict moves beyond accepting conflict in groups and organizations to actively encouraging it. It is believed that encouraging group leaders to maintain an ongoing minimum level of conflict keeps groups viable, self-critical, and creative. Not all conflict is to be encouraged; however, there are two main categories: functional and dysfunctional. 3. Contrast task, relationship, and process conflict. Answer: Task Conflict: this type of conflict relates to the content and goals of the work. High levels of task conflict become dysfunctional when they create uncertainty about task roles; increase the time needed to complete tasks; or lead to members working at cross-purposes. Low-to-moderate levels of task conflict are functional as they consistently demonstrate a positive effect on group performance. Relationship Conflict: this type of conflict focuses on interpersonal relationships. Almost all conflict of this type is dysfunctional. Process Conflict: this type of conflict relates to how the work is accomplished. Low levels of process conflict are functional, while moderate-to-high levels of process conflict are dysfunctional. 4. Outline the conflict process. Answer: There are five stages in the conflict process: (1) potential opposition or compatibility, in which there is a reason for conflict, (2) cognition and personalization, where the potential for conflict is recognized and perhaps felt, (3) intentions, where the feelings generated by the felt conflict are focused by behavioral intentions, (4) behavior, the actual physical and verbal aspects of the conflict, and (5) outcomes, the consequences of the behavior. 5. Contrast distributive and integrative bargaining. Answer: Distributive Bargaining: this type of bargaining operates under zero-sum (or “fixed pie”) conditions: one party’s gains reflect losses by the other. Integrative Bargaining: this type of bargaining operates under the assumption that one or more settlements can create a win-win solution. Unlike distributive bargaining, for integrative bargaining, the negotiator’s true interests must be disclosed to the other party, which requires a certain amount of trust. Additionally, both parties must be aware of the other party's interests and sensitive to their needs. The exact opposite conditions exist in distributive bargaining. 6. Identify the five steps in the negotiation process. Answer: (1) Preparation and planning, (2) definition of ground rules, (3) clarification and justification, (4) bargaining and problem solving, and (5) closure and implementation. 7. Discuss whether there are individual differences in negotiator effectiveness. Answer: (1) Personality. There is little evidence to support the idea that personality can predict negotiation ability. However, it may be that several of the Big Five traits are related to negotiation outcomes. A disagreeable introvert may be the best distributive bargainer; agreeable or extraverted people are not very successful. Individuals who are strongly concerned with appearing confident or successful in negotiations tend to have a negative effect on the outcome of the negotiation process, no matter which type of negotiation is being pursued. (2) Gender. While men and women do not tend to negotiate differently, the negotiation outcomes do differ based on gender. Men have been found to negotiate better outcomes than do women, although the difference is relatively small. When typical gender stereotypes are activated, (women are nice and men are tough), it becomes a self-fulfilling prophecy and the negotiator will act according to type. Women's attitudes toward negotiation and toward themselves as negotiators are quite different from and more negative than are those of men. Exercises 1. Self-analysis. Remember your last negotiation activity. This activity could have been as simple as asking someone out for a date or as complex as trying to purchase a home. Describe that negotiation using the terms and concepts from this chapter. What could you have done better to increase your likelihood of success in the negotiation? Be specific. 2. Web Crawling. Using your favorite search engine, seek out the term “conflict management.” Find five different and varied sources (perhaps one from a consultant, one from an institute of higher learning, one from a government source, one from a general-purpose site, and one from a business site) and read them carefully to see what they would tell the average manager about conflict management. Write up a brief synopsis of your findings. Compare and contrast your findings with the materials from this chapter and be ready to present them in class. 3. Teamwork. Have students work in small groups to develop a script to role-play the following scenarios in front of the class. You can assign a different scenario to each group, or have two groups role-play the same scenario to discuss comparisons and contrasts in style. Require each group to first role-play the scenario from a distributive bargaining perspective, and then from an integrative bargaining perspective. This should allow for comparison and contrast of the two styles of bargaining, and then encourage students to discuss which style they believed was more effective for achieving a final outcome. Scenario 1: A group of students wants a faculty member to postpone the next exam until after Spring Break. Currently the exam is scheduled for the Friday before Spring Break, and you would prefer to have the exam on the Monday, or even Wednesday, after Spring Break. The week before Break is getting quite busy, and you need the time to study over Spring Break in order to do well on the exam. Scenario 2: The firm you currently work for does not have any educational reimbursement benefit available. You would like to have your employer offer this benefit, as you and many of your fellow workers would like to go back to school (part-time) and earn your MBA degree. But, the cost of tuition is expensive, and you would like your company to help with the expenses. Many of the other companies in your locale and industry do offer their employees this educational reimbursement, and you would like your company to do so as well. Scenario 3: The University is considering adding a computer fee to all students who are enrolled at your campus. The reason for the computer fee is to be able to generate funds in order to provide better computer instruction and facilities (labs and classrooms). But, fees are already relatively high. You and your group want to have the facilities, but you are reluctant to have fees increase. Scenario 4: You would like to have your company allow you to work on a flexible schedule. You would agree to core hours of 10 a.m. to 2 p.m., when every employee is required to be at the workplace, but you would like to choose the other four hours you work each day. Your job is such that it would support this type of schedule, i.e., you do not work on an assembly line. Present a persuasive discussion to encourage your employer to go to a “flextime schedule.” 4. Analyzing Your Organization (Cumulative Project). Observe the negotiations that take place around you at work. Focus on one negotiation that appears typical for your organization. Disguise the names of those involved and write up a case study on the negotiation process you observed. Utilizing the terms and concepts from this chapter, report your assessment of the effectiveness of both negotiators, their negotiating styles, and provide suggestions for improvement of each person’s negotiation skills. 5. Try It in Real Life. Have students create a negotiation scenario where they may not have thought of negotiating. For example, it is common and accepted that in the U.S. culture we will negotiate for automobiles, but not as widely accepted when purchasing furniture, for example. Challenge the class to negotiate their next non-convenience purchase, and have them bring to the class the results of their negotiation attempts. For example, was the negotiation integrative or distributive? Did they implement any of the methods discussed in class for improving negotiation skills? What was the outcome? Did gender or other variables affect the outcome? Did they actually save any money? This can be submitted as a written report or given as an in-class exercise. Suggested Assignment Conflict-Management Style Survey.* Make copies of the survey instrument provided in the next two pages and distribute them to your class. Give the students the following instructions: When you have completed all fifteen items, add your scores into the “column total” spaces provided. Your highest score is your dominant conflict management strategy. All of us use all four strategies at one time or another. Your dominant style is the one you prefer and will certainly come out in more intense conflict situations. Knowing your style will help you be more effective in dealing with conflict. Column 1. Competition. When one party seeks to achieve certain goals or to further personal interests, regardless of the impact on the parties to the conflict, he or she competes and dominates. Column 2. Collaboration. When each of the parties in conflict desires to satisfy fully the concerns of all parties, we have cooperation and the search for a mutually beneficial outcome. In collaboration, the behavior of the parties is aimed at solving the problem and at clarifying the differences rather than accommodating various points of view. Column 3. Accommodation. When the parties seek to appease their opponents, they may be willing to place their opponents’ interests above their own. In order to maintain the relationship, one party is willing to be self-sacrificing. Column 4. Avoidance. A party may recognize that a conflict exists but react by withdrawing from it or suppressing the conflict. Indifference or the desire to evade overt demonstration of a disagreement can result in withdrawal. Now add the totals for the first and second columns in the space provided for Score A and add the third and fourth column totals in the space provided for Score B. If Score A is significantly higher than Score B (25 points or more), it may indicate a tendency toward assertive conflict management. A significantly higher B score signals a more conciliatory approach. * Adapted from the work of Marc Robert, in the 1987 University Associates, Inc. Conflict-Management Style Survey Instructions: Answer the following questions from a single frame of reference—work-related conflicts, family conflicts, or social conflicts. Allocate ten points among the four alternative answers given for each of the fifteen items below. Example: When the people I supervise become involved in a personal conflict, I usually: Intervene to settle the dispute. Call a meeting to talk over the problem. Offer to help if I can. Ignore the problem. Point Total 3 6 1 0 =10 Be certain that your answers add up to 10. 1. When someone I care about is actively hostile toward me, (yelling, threatening, abusive), I tend to: Respond in a hostile manner. Try to persuade person to give up the hostile behavior. Stay and listen as long as possible. Walk away. 2. When someone who is unimportant to me is actively hostile toward me, i.e., yelling, threatening, abusive, and so on, I tend to: Respond in a hostile manner. Try to persuade the person to give up the hostile behavior. Stay and listen as long as possible. Walk away. 3. When I observe people in conflict, where anger, threats, hostility, and strong opinions are present, I tend to: Become involved and take a position. Attempt to mediate. Observe to see what happens. Leave as quickly as possible. 4. When I perceive another person as meeting his or her needs at my expense, I am apt to: Work to do anything I can to change that person. Rely on persuasion and “facts” when attempting to have that person change Work hard at changing how I relate to that person. Accept the situation as it is. 5. When involved in an interpersonal dispute, I generally: Draw the other person into seeing the problem as I do. Examine the issues between us as logically as possible. Look hard for a workable compromise. Let time take its course and hope the problem works itself out. 6. The quality that I value the most in dealing with conflict would be: Emotional strength and security. Intelligence. Love and openness. Patience. 7. Following a serious altercation with someone I care for deeply, I: Strongly desire to go back and settle things my way. Want to go back and work it out, whatever it takes. Worry about it a lot, but do not initiate/plan for further contact. Let it lie and do not plan. 8. When I see a serious conflict developing between two people I care about, I tend to: Express my disappointment that this had to happen. Attempt to persuade them to resolve their differences. Watch to see what develops. Leave the scene. 9. When I see a serious conflict developing between two people who are unimportant to me, I tend to: Express my disappointment that this happened. Attempt to persuade them to resolve their differences. Watch to see what develops. Leave the scene. 10. The feedback that I receive from most people about how I behave when faced with conflict and opposition indicates that I: Try hard to get my way. Try to work out differences cooperatively. I'm easy-going and take a software conciliatory position. Usually avoid the conflict. 11. When communicating with someone with whom I am having a serious conflict, I: Try to overpower the other person with my speech. Talk a little bit more than I listen. Am an active listener (feeding back words and feelings). Am a passive listener (agreeing and apologizing). 12. When involved in an unpleasant conflict, I: Use humor with the other party. Make an occasional quip or joke about the situation. Relate humor only to myself. Suppress all attempts at humor. 13. When someone does something that irritates me (e.g., smokes in a nonsmoking area or crowds in line in front of me), my tendency in communicating with the offending person is to: (select an answer for each row) Insist that the person look me in the eye. Look the person directly in the eye and maintain eye contact. Maintain intermittent eye contact. Avoid looking directly at the person. Stand close and make physical contact. Use my hands and body to illustrate my point. Stand close to the person without touching him or her. Stand back and keep my hands to myself. Use strong, direct language and tell the person to stop. Try to persuade the person to stop Talk gently and tell the person what my feelings are. Say and do nothing Total of Column 1 Total of Column 2 Total of Column 3 Total of Column 4 Column 1 + Column 2 = Score A Column 3 + Column4 = Score B Chapter 15 Foundations of Organization Structure Chapter Overview This chapter examines some of the various means in which organizations can be structured for maximum effectiveness. Chapter Objectives After studying this chapter, the student should be able to: 1. Identify the six elements of an organization’s structure. 2. Identify the characteristics of the three most common organizational designs. 3. Describe the characteristics of the virtual organization, the boundaryless organizations, and leaner organizations. 4. Demonstrate how organizational structures differ, and contrast mechanistic and organic structural models. 5. Analyze the behavioral implications of different organizational designs. Suggested Lecture Outline I. INTRODUCTION A. The theme of this chapter is that organizations have different structures and the structures have a bearing on employee attitudes and behavior. B. Therefore, it is important that managers be able to identify the correct structure to use in a given situation. II. WHAT IS ORGANIZATIONAL STRUCTURE? A. Definition. 1. An organizational structure defines how job tasks are formally divided, grouped, and coordinated. 2. There are six key elements used to determine the proper structure for an organization: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. B. Work Specialization. 1. Also known as division of labor, this is the degree to which activities in the organization are subdivided into separate jobs. 2. The essence of work specialization is that an entire activity is broken down into a number of steps, with each step (job) being completed by a separate individual, rather than one individual completing the entire activity. 3. By the late 1940s, most manufacturing jobs in industrialized countries featured high work specialization. a. Because not all employees in an organization have the same skills, management saw specialization as a means of making the most efficient use of its employees’ skills and even successfully improving them through repetition. b. Less time is spent in changing tasks, putting away tools and equipment from a prior step, and getting ready for another. c. Equally important, it’s easier and less costly to find and train workers to do specific and repetitive tasks, especially in highly sophisticated and complex operations. d. Finally, work specialization increases efficiency and productivity by encouraging the creation of special inventions and machinery. 4. For much of the first half of the twentieth century, managers thus viewed work specialization as an unending source of increased productivity. And they were probably right. a. When specialization was not widely practiced, its introduction almost always generated higher productivity. b. But by the 1960s, it increasingly seemed a good thing can be carried too far. c. Human diseconomies from specialization began to surface as boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover, which more than offset the economic advantages. d. Managers could increase productivity now by enlarging, rather than narrowing, the scope of job activities. e. Giving employees a variety of activities to do, allowing them to do a whole and complete job, and putting them into teams with interchangeable skills often achieved significantly higher output, with increased employee satisfaction. f. Most managers today recognize the economies specialization provides in certain jobs and the problems when it’s carried too far. 1) Amazon’s Mechanical Turk program, Top Coder, and others like it, have facilitated a new trend in micro specialization in which extremely small pieces of programming, data processing, or evaluation tasks are delegated to a global network of individuals by a program manager who then assembles the results. 2) This emerging trend suggests that there still may be advantages to be had in specialization, particularly for offices where job sharing and part-time work are prevalent. C. Departmentalization. 1. This is the basis by which jobs are grouped together so that common tasks can be coordinated. 2. Jobs can be grouped on a number of bases: functional, product, geography, process, consumer, or any reasonable combination of these bases. 3. One of the most popular ways to group jobs is by the functions performed. a. Functional departmentalization seeks to achieve economies of scale by placing people with common skills and orientations into common units. 4. Workers can be organized by the type of product or service the organization produces. a. This type of grouping provides the major advantage of increased accountability for product performance, since all activities related to a specific product are under the direction of a single manager. 5. Departments can be built based on geography or territory. a. If an organization's customers are scattered over a large geographic area and have similar needs based on their location, then this form of departmentalization can be valuable. 6. Process departmentalization works for processing customers as well as products. a. Each department specializes in one specific phase in the production as each phase requires different skills; this method offers a basis for homogenous categorizing of activities. 7. The assumption underlying customer departmentalization is that the various groups of customers have common sets of problems and needs that can best be met by having specialists for each type of customer. D. Chain of Command. 1. This describes the unbroken line of authority that extends from the top of the organization to its lowest echelon and clarifies who reports to whom. 2. While it has become far less important in recent years, it still is a valid concern when structuring organizations. 3. Authority. a. This refers to the rights inherent in a managerial position to give orders and expect the orders to be obeyed. b. Typically, the level of authority is matched to the responsibilities of a given position. 4. Unity-of-Command. a. This principle helps preserve the concept of an unbroken line of authority: it states that a person should have one and only one superior to whom the person is directly responsible. b. While this principle is often broken in modern organizations, the result may be increased conflicting demands or priorities given to workers. 5. Due to the increased use of networked computers, employee empowerment, and self-managed teams in modern organizations, the concept of chain of command has become seemingly less relevant. E. Span of Control. 1. This is the number of employees a manager is expected to effectively and efficiently direct (often known as the number of “direct reports”). 2. This span, to a large degree, determines the number of levels and managers an organization has. 3. Wide/Large Span of Control. a. All other things being equal, the wider or larger the span, the more cost-efficient the organization. b. Managerial effectiveness, however, may be diminished by larger spans of control. 1) The use of wider spans of control has become more prevalent in recent years due to the desire to reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, and empower employees by reducing the number of managerial layers in an organization. 2) Wider spans of control do increase training costs as workers must be much more knowledgeable about their jobs in order to allow managers to reduce the closeness of control. 4. Narrow/Small Span of Control. a. Keeping the span of control to five or six employees allows for close control by management. b. But there are three potential drawbacks: 1) Increased costs due to the additional levels of management. 2) Vertical communication in the organization becomes more complex and slower. 3) Larger hierarchies tend to slow the decision-making process down and may isolate upper management. 4) Overly tight supervision may discourage employee autonomy. F. Centralization and Decentralization. 1. This refers to the degree to which decision making is concentrated at a single point in the organization. 2. The concept only includes formal authority: the rights inherent in one's position. 3. Primary Difference. Centralized organizations have all key decisions made at the upper levels of the organization while decentralized organizations have decisions made at the lowest possible level. 4. Benefits of Decentralization. The current trend in organizations is toward decentralization, in order to become more flexible and responsive. 5. Recent research indicates that the effects of centralization and decentralization can be predicted: Centralized organizations are better for avoiding commission errors (bad choices), while decentralized organizations are better for avoiding omission errors (lost opportunities). G. Formalization. 1. This is the degree to which jobs in the organization are standardized. a. If a job is highly formalized, the incumbent has a minimum amount of discretion over what is to be done, when it is to be done, and how it is to be done. b. There is consistent and uniform output driven by explicit job descriptions, organizational rules, and clearly defined procedures. c. Where formalization is low, job behaviors are relatively non-programmed, and employees have a great deal of freedom to exercise discretion in their work. 1) Formalization not only eliminates the need for employees to consider alternatives. d. The degree of formalization can vary widely between and within organizations. 1) In general, research from 94 high-technology Chinese firms showed that formalization is a detriment to team flexibility in decentralized organization structures, suggesting that formalization does not work as well where duties are inherently interactive, or where there is a need to be flexible and innovative. III. COMMON ORGANIZATIONAL DESIGNS A. We now turn to three of the more common organizational designs: the simple structure, the bureaucracy, and the matrix structure. B. The Simple Structure. 1. The structure has a low degree of departmentalization, wide spans of control, authority is centralized in a single person, and there is little formalization. 2. Simple structures tend to be “flat” organizations, with only two or three vertical levels. 3. Often used for small organizations and organizations in times of temporary crises. 4. Advantages. a. The strength of the structure is its simplicity: it's fast, flexible, and expensive to maintain. b. Accountability is clear. 5. Disadvantages. a. The structure is difficult to maintain for anything other than small organizations. b. The focus of all decision making on one person can result very quickly in information overload as the organization increases in size. c. This slows down decision making and increases risk as the loss of the single decision maker can cripple the entire firm. C. The Bureaucracy. 1. Standardization is the key concept that underlies all bureaucracies. 2. Bureaucracies are characterized by highly routine operating tasks achieved through specialization, formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command. 3. Advantages. a. Bureaucracies can perform standardized activities in a highly efficient manner due to economies of scale, minimum duplication of personnel and equipment, and specialized employees. b. They do not require talented low- to mid-level managers: the formalized rules and procedures are substitutes for managerial discretion. 4. Disadvantages. a. Bureaucracies tend to create subunit conflicts due to specialization of workers and departments. b. Functional unit goals can override the overall goals of the organization. c. There tends to be an obsessive concern with following the rules and little ability to react to unique situations. D. Matrix Structure. 1. This organizational structure combines two forms of departmentalization: functional and product. 2. The most obvious structural characteristic of a matrix is that it breaks the unity-of-command concept. 3. Employees in a matrix have two bosses (their functional department manager and their product manager), thus making a dual chain of command. 4. Advantages. a. The matrix attempts to gain the strengths of both functional and product departmentalization while avoiding each of their weaknesses. b. A matrix facilitates coordination, especially when organizations have a multiplicity of complex and interdependent activities. c. The direct and frequent contact between different specialties in the matrix can make for better communication; faster data flow; more flexibility; and enhanced focus on organizational goals instead of departmental ones. d. It also facilitates the effective allocation of specialists. 5. Disadvantages. a. This type of structure tends to create confusion, foster power struggles, and place undue stress and insecurity on individuals. b. Ambiguity is significantly increased, which often leads to the greater potential for conflict. IV. NEW DESIGN OPTIONS A. The Virtual Organization. 1. Also known as a network or modular organization, this highly flexible structure typically features a small core organization that outsources major business functions. 2. It is highly centralized with little or no departmentalization. 3. The structure allows for the employment of highly skilled workers only for as long as they are needed (thus reducing costs while improving quality), reduces long-term risks, and minimizes bureaucratic overhead. 4. This organizational option is often used by large firms who contract out the manufacturing process or other business functions in which they do not have a competitive advantage while maintaining those areas they do very well. 5. Managers in virtual organizations spend most of their time coordinating and controlling external relations, typically by way of computer-network links. 6. Exhibit 15-5 shows a virtual organization in which management outsources all the primary functions of the business. a. The core of the organization is a small group of executives whose job is to oversee directly any activities done in-house and to coordinate relationships with the other organizations that manufacture, distribute, and perform other crucial functions for the virtual organization. b. The dotted lines represent the relationships typically maintained under contracts. In essence, managers in virtual structures spend most of their time coordinating and controlling external relations, typically by way of computer-network links. 7. Advantage: flexibility. Virtual organizations also save a great deal of money by eliminating permanent offices and hierarchial roles. 8. Disadvantages: a. They are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear: 1) This sets the stage for political behavior. b. Those who work frequently with virtual organizations also note cultural alignment and shared goals can be lost because of the low degree of interaction among members. 1) Team members who are geographically dispersed and communicate only intermittently find it difficult to share information and knowledge, which can limit innovation and slow response time. 2) Ironically, some virtual organizations are less adaptable and innovative than those with well-established communication and collaboration networks. a) A leadership presence that reinforces the organization’s purpose and facilitates communication is thus especially valuable. B. The Boundaryless Organization. 1. This type of organization seeks to eliminate vertical and horizontal boundaries and break down the external barriers between the company and its customers and suppliers. 2. The goal is to reduce internal boundaries by eliminating the chain of command, having limitless spans of control, and replacing departments with cross-functional and cross-hierarchical empowered teams. 3. By removing vertical boundaries, management flattens the hierarchy and minimizes status and rank. 4. Functional departments create horizontal boundaries that stifle interaction among functions, product lines, and units. a. The way to reduce them is to replace functional departments with cross-functional teams and organize activities around processes. 5. Another way management can cut through horizontal barriers is to use lateral transfers, rotating people into and out of different functional areas. a. This approach turns specialists into generalists. 6. When fully operational, the boundaryless organization also breaks down geographic barriers. a. Today, most large U.S. companies see themselves as global corporations; many, like Coca-Cola and McDonald’s, do almost as much business overseas as in the United States, and some struggle to incorporate geographic regions into their structure. 7. The boundaryless organization provides one solution because it considers geography more of a tactical, logistical issue than a structural one. a. In short, the goal is to break down cultural barriers. 8. One way to do this is through strategic alliances. a. Alliances blur the distinction between one organization and another as employees work on joint projects. b. And some companies allow customers to perform functions previously done by management. 9. Finally, telecommuting is blurring organizational boundaries. C. The Leaner Organization: Organization Downsizing. 1. The goal of the new organizational forms we’ve described is to improve agility by creating a lean, focused, and flexible organization. 2. Downsizing is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff. a. It has been very controversial because of its potential negative effects on employees. b. Some companies probably need to downsize just to survive. c. Others downsize to direct all their efforts toward their core competencies. 3. Despite the advantages of being a lean organization, the impact of downsizing on organizational performance has been very controversial. a. Reducing the size of the workforce has an immediately positive outcome in the huge reduction in wage costs. b. Companies downsizing to improve strategic focus often see positive effects on stock prices after the announcement. c. On the other hand, among companies that only cut employees but don’t restructure, profits and stock prices usually decline. d. Part of the problem is the effect of downsizing on employee attitudes. e. Those who remain often feel worried about future layoffs and may be less committed to the organization. f. Stress reactions can lead to increased sickness absences, lower concentration on the job, and lower creativity. 4. In companies that don’t invest much in their employees, downsizing can also lead to more voluntary turnover, so vital human capital is lost. a. The result is a company that is more anemic than lean. 5. Companies can reduce negative effects by preparing for the post-downsizing environment in advance, thus alleviating some employee stress and strengthening support for the new strategic direction. 6. The following are some effective strategies for downsizing and suggestions for implementing them linked to principles of organizational justice. a. Investment. 1) Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward. b. Communication. 1) When employers make efforts to discuss downsizing with employees early, employees are less worried about the outcomes and feel the company is taking their perspective into account. c. Participation. 1) Employees worry less if they can participate in the process in some way. In some companies, voluntary early retirement programs or severance packages can help achieve leanness without layoffs. d. Assistance. 1) Providing severance, extended health care benefits, and job search assistance demonstrates a company does really care about its employees and honors their contributions. e. Companies that make themselves lean can be more agile, efficient, and productive—but only if they make cuts carefully and help employees through the process. V. WHY DO STRUCTURES DIFFER? A. Models of Organizational Design. 1. There are two extreme models of organizational design, the mechanistic and the organic, which may aid in the discussion of these forces. a. The Mechanistic Model. 1) Generally synonymous with bureaucracy, in that it has extensive departmentalization, high formalization, a limited information network (normally downward communication), and little participation by low-level members in decision making. b. The Organic Model. 1) Similar to the boundaryless organization, this structure is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network (using lateral and upward communication as well as downward), and involves high participation in decision making. 2. The forces that influence structure. a. Organizational Strategy. 1) An organization's structure is a means to help management to achieve its objectives. 2) Because objectives are derived from an organization's overall strategy, strategy and structure are closely linked. 3) Structure should follow strategy. 4) There are three strategic dimensions that affect structural design: a) Innovation strategy. (1) The degree to which an organization plans to introduce new products or services, not merely superficial changes to present offerings. (2) Innovative firms will use competitive pay and benefits to attract top candidates and motivate employees to take risks. b) Cost minimization strategy. (1) These organizations tightly control costs, refrain from incurring unnecessary innovation or marketing expenses, and cut price by selling a basic product. (2) Cost-minimizing organizations pursue fewer policies meant to develop commitment among their workforce. c) Imitation strategy. (1) These organizations try to capitalize on the best of both of the previous strategies. (2) Imitators try to minimize risk, while maximizing the opportunity for profit. (3) These firms are market followers who move into new products or new markets only after viability has been proven by the innovators. b. Organizational Size. 1) The size of an organization significantly affects its structure. Larger firms tend to be more mechanistic. 2) They develop more specialization, departmentalization, vertical levels, and rules and regulations. 3) But size affects structure at a decreasing rate: once an organization has become fairly mechanistic (around 2,000 employees), additional increases in size have little effect on organizational structure. c. Technology. 1) This refers to how an organization transfers its inputs into outputs. a) What differentiates technologies is their degree of routineness. (1) Routine activities are characterized by automated and standardized operations. (2) Nonroutine activities are customized and require frequent revision and updating. b) In general, organizations engaged in nonroutine activities tend to prefer organic structures, those performing routine activities prefer mechanistic structures. d. Environment. 1) Composed of institutions or forces outside the organization that potentially affects the organization's performance such as suppliers, competitors, government, and pressure groups. 2) An organization's environmental uncertainty, and is a key determinant of structure. 3) To minimize uncertainty, managers may broaden their structure to sense and respond to threats. 4) Any organization’s environment has three dimensions: capacity, volatility, and complexity. a) Capacity (1) Capacity refers to the degree to which the environment can support growth. (2) Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. b) Volatility (1) Volatility describes the degree of instability in the environment. (2) A dynamic environment with a high degree of unpredictable change makes it difficult for management to make accurate predictions. (3) Because information technology changes at such a rapid pace, for instance, more organizations’ environments are becoming volatile. c) Complexity (1) Finally, complexity is the degree of heterogeneity and concentration among environmental elements. (2) Simple environments—like in the tobacco industry—are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion—like the broadband industry—are complex and diverse, with numerous competitors. (3) Organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty because they have high unpredictability, little room for error, and a diverse set of elements in the environment to monitor constantly. d) Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrangements. (1) The more scarce, dynamic, and complex the environment, the more organic a structure should be. (2) The more abundant, stable, and simple the environment, the more the mechanistic structure will be preferred. VI. ORGANIZATIONAL DESIGNS AND EMPLOYEE BEHAVIOR A. It is impossible to generalize any link between organizational structures and employee performance and/or satisfaction due to the high variance caused by individual differences. B. Different factors stand out in different structures as well. C. In highly formalized, heavily structured, mechanistic organizations, the level of fairness in formal policies and procedures is a very important predictor of satisfaction. In more personal, individually adaptive organic organizations, employees value interpersonal justice more. D. Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized—that is, in mechanistic structures. So any discussion of the effect of organizational design on employee behavior has to address individual differences. E. To do so, let’s consider employee preferences for work specialization, span of control, and centralization. 1. Any discussion of the effect of organizational design on employee behavior has to address individual differences. Let’s focus on work specialization, span of control, and centralization. a. Work Specialization. 1) Work specialization generally contributes to higher employee productivity at the price of reduced job satisfaction, but not always. 2) While the point at which the human costs of specialized work overtakes the economies of specialization seems to be reached more quickly now than in the past, there are still those who enjoy routine labor. 3) The negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. b. Span of Control. 1) There is no evidence to suggest a relationship between span of control and employee performance or satisfaction. 2) Individual differences may be confounding the results of research in this area. One assumption, based on several of the contingency theories (presented in Chapter 12), is that factors such as employees’ experience and abilities along with the degree of structure in their tasks, would explain when wide or narrow spans of control are likely to contribute to performance and job satisfaction. 3) Managers seem to have increasing job satisfaction as the number of employees they supervise increases. c. Centralization. 1) There is fairly strong evidence that the degree of centralization is linked to job satisfaction. 2) Decentralized organizations tend to have more autonomy, which is positively related to job satisfaction. 3) However, the individual need for autonomy varies, which moderates the relationship. 2. Conclusions. a. To maximize employee performance and satisfaction, individual differences must be taken into account. 1) This includes the differences created by culture. 2) The effect of structure of employee behavior is undoubtedly reduced when the selection process properly matches individual and organizational characteristics. 3) Although research is slim, it does suggest national culture influences the preference for structure. 4) Organizations that operate with people from high power-distance cultures, such as Greece, France, and most of Latin America, find their employees are much more accepting of mechanistic structures than are employees from low power-distance countries. VII. IMPLICATIONS FOR MANAGERS A. Specialization can make operations more efficient, but remember that excessive specialization also can create dissatisfaction and reduced motivation. B. Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy. C. Balance the advantages of virtual and boundaryless organizations against the potential pitfalls before adding flexible workplace options. D. Downsize your organization to realize major cost savings, and focus the company around core competencies – but only if necessary because downsizing can have a significant negative impact on employee affect. E. Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanistic elements when designing an organizational structure. VIII. KEEP IN MIND A. As tasks become more complex and required skills more diverse, more use of cross-functional teams. B. Simple structures are easy to create but difficult to grow. C. External boundaries can be reduced through globalization, strategic alliances, customer-organizational links, and telecommuting. IX. SUMMARY A. The theme of this chapter is that an organization’s internal structure contributes to explaining and predicting behavior. 1. That is, in addition to individual and group factors, the structural relationships in which people work has a bearing on employee attitudes and behavior. B. To the degree that an organization’s structure reduces ambiguity for employees and clarifies concern, it shapes their attitudes and facilitates and motivates them to higher levels of performance. Discussion Questions 1. Identify the six key elements that define an organization’s structure. Answer: (1) Work Specialization, or division of labor, is the degree to which activities in the organization are subdivided into separate jobs. (2) Departmentalization is the basis by which jobs are grouped together so that common tasks can be coordinated. Jobs can be grouped by: function, product, geography, process, consumer, or any reasonable combination of these bases. (3) Chain of Command. This describes the unbroken line of authority that extends from the top of the organization to its lowest echelon and clarifies who reports to whom. (4) Span of Control. This is the number of employees a manager is expected to effectively and efficiently direct. (5) Centralization and Decentralization. This refers to the degree to which decision making is concentrated at a single point in the organization. The concept only includes formal authority: the rights inherent in one's position. (6) Formalization. This is the degree to which jobs in the organization are standardized. 2. Describe the characteristics of a bureaucracy. Answer: Standardization is the key concept that underlies all bureaucracies. Bureaucracies are characterized by routine operating tasks achieved through specialization, formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command. 3. Describe a matrix organization. Answer: This organizational structure combines two forms of departmentalization: functional and product. The most obvious structural characteristic of a matrix is that it breaks the unity-of-command concept. Employees in a matrix have two bosses, (their functional and their product managers). The matrix attempts to gain the strengths of both functional and product departmentalization while avoiding each of their weaknesses. A matrix facilitates coordination, especially when organizations have a multiplicity of complex and interdependent activities. The direct and frequent contact between different specialties in the matrix can make for better communication; faster data flow; more flexibility; and enhanced focus on organizational goals instead of departmental ones. It also facilitates the effective allocation of specialists. But this type of structure tends to create confusion, foster power struggles, and place undue stress and insecurity on individuals. Ambiguity is significantly increased, which often leads to greater potential for conflict. 4. Describe the characteristics of a virtual organization. Answer: Also known as a network or modular organization, this highly flexible structure typically features a small core organization that outsources major business functions. It is highly centralized with little or no departmentalization. The structure allows for the employment of highly skilled workers only for as long as they are needed (thus reducing costs while improving quality), reduces long-term risks, and minimizes bureaucratic overhead. Managers in virtual organizations spend most of their time coordinating and controlling external relations, typically by way of computer-network links. 5. Summarize why managers want to create boundaryless organizations. Answer: This structure is the result of management's desire to reduce costs and increase flexibility in the global environment. It seeks to eliminate vertical and horizontal boundaries and break down the external barriers between the company and its customers and suppliers, which should reduce structure, costs, and decision-making time. Using cross-functional and cross-hierarchical empowered teams will increase organizational agility, flexibility, and communication. By removing external barriers through globalization, strategic alliances, customer-organization links, and telecommuting, organizations can hire the best workers or organizations to complete necessary tasks. 6. Contrast mechanistic and organic structural models. Answer: The mechanistic model is generally synonymous with bureaucracy, in that it has extensive departmentalization, high formalization, a limited information network (normally downward communication), and little participation by low-level members in decision making. The organic model is similar to the boundaryless organization. This structure is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network (using lateral and upward communication as well as downward), and involves high participation in decision making. 7. List the factors that favor different organizational structures. Answer: An organization’s strategy, size, use of technology, and environmental uncertainty all have an influence on the appropriate structure for the organization. 8. Explain the behavioral implications of different organizational designs. Answer: It is impossible to generalize any link between organizational structures and employee performance and satisfaction due to the high variance in individual differences. These individual differences must become the focus of the discussion. The text examines three aspects of organizational design: work specialization, span of control, and centralization. Work specialization contributes to higher employee productivity at the price of reduced job satisfaction, but not for everyone. While the point at which the human costs of specialized work overtake the economies of specialization seems to be reached more quickly now than in the past, there are still those who enjoy routine labor. The negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. There is no evidence to suggest a relationship between span of control and employee performance or high satisfaction. Individual differences may be confounding the results of research in this area. One assumption, based on several of the contingency theories (presented in Chapter 11), is that factors such as employees’ experience and abilities along with the degree of structure in their tasks, would explain when wide or narrow spans of control are likely to contribute to performance and job satisfaction. There is fairly strong evidence that the degree of centralization is linked to job satisfaction. Decentralized organizations tend to have a greater amount of participative decision making, which is positively related to job satisfaction. This relationship is strongest with employees who have low self-esteem. Exercises 1. Self-analysis. Examine your own work life: consider the jobs you have held and organizations with which you have been associated. Based on your experiences, what type of organizational structure appears to suit your best? Why? Relate your own attitudes, behaviors, and values to the organizational structures described in this chapter. 2. Web Crawling. Search the web to find three articles on an organization that has changed its structure in the recent past (downsized or increased in scale). Carefully read the articles and describe what happened using structural terms from this chapter. What kinds of internal and external reactions were there to the structural change? What was the impact of the change on the organization’s effectiveness (e.g., perhaps as measured by its stock price)? 3. Teamwork. Students will learn how to analyze organizational structure by examining the structure of their current college or university. Divide the class into groups of three to five students, six groups in total. As a class, create a form for analysis of the organization: a. Use the key elements and their corresponding questions given in Exhibit 15-1 to create the form. b. Use a scale of 1 (low) to 5 (high) for each of the six key elements. c. Leave space for written comments explaining the rating and giving details of each structural element. If you are analyzing a large university, give each team one structural element to study. If you are analyzing a smaller college or school within the university, have each team look at the entire organization. Each team should prepare to report orally or in writing on their findings. The reports should address: a. How is the organization currently structured? b. What type of organizational structure is it: organic/mechanistic, simple, bureaucratic, matrix? c. Could this organization benefit from a new organizational structure; virtual, team, or boundaryless? How would it benefit? As a class, discuss each group’s findings and come to a consensus on the restructuring action, if any, needed to be taken by the organization. 4. Analyzing Your Organization (Cumulative Project). Have students discuss with the top managers in their organization the concept of restructuring. When do they make the decision to restructure? In general, restructurings occur as organizations grow, but there are other variables also. Have them discuss how the past changes in structure affected the employees. You might also discuss any plans they might have to restructure in the future, how they determine when to do this, and the scope of the project. After the interview, have the students relate their notes to the six key elements. Did any one element stand out? As a class, were there patterns with various types of organizations? Suggested Assignment Divide the class into groups of three to five students each. Then ask them to follow these assignments. 1. Brick & Mortar vs. Brick & Click vs. Click & Buy. Today’s retail world is increasingly moving online in an effort to woo customers. Research and identify a retailer from each of these three types: (1) brick & mortar: on-ground presence only, (2) brick & click: on-ground and online presence, (3) click & buy: online presence only. Describe the structures of each of these three firms in terms of the six key elements given in the chapter. If possible, draw a generalized organizational chart for each type of retail organization based on your research. 2. Mom & Pop Compared to a National Chain. Identify and compare two retailers that sell similar products, one of which is a small “Mom & Pop” local operation and the other belonging to a national chain. Compare the two organizations based on the six key elements given for structure. Consider the following: a. What are the advantages and disadvantages of the national chain’s structure? b. What are the advantages and disadvantages of the Mom & Pop structure? c. At which organization would you prefer to work? Why? Does the structure have anything to do with your decision? Instructor Manual for Essentials of Organizational Behavior Stephen P. Robbins, Timothy A. Judge 9789332587984, 9780133920819, 9780133973013, 9781292090078, 9781292090184, 9780134523859, 9780132968508
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