CH-13-14 Organizational Structure – Organizational Behaviour: Improving Performance and Commitment in the Workplace : Book Guide

This Document Contains Chapters 13 to 14 Chapter 13 Organizational Structure CHAPTER OVERVIEW This chapter identifies and describes the key factors in designing an organization’s structure, including work specialization, chain of command, span of control, centralization of decision making, formalization, business environment, strategy, technology, size, and organizational form. It also points out some of the pitfalls inherent in restructuring and describes how to manage them. LEARNING GOALS After reading this chapter, you should be able to answer the following questions: 13.1 What is an organization’s structure, and what does it consist of? 13.2 What are the major elements of an organizational structure? 13.3 What is organizational design, and what factors does the organizational design process depend on? 13.4 What are some of the more common organizational forms that an organization might adopt for its structure? 13.5 When an organization makes changes to its structure, how does that restructuring affect job performance and organizational commitment? 13.6 What steps can organizations take to reduce the negative effects of restructuring efforts? CHAPTER OUTLINE I. Organizational Structure A. An organizational structure formally dictates how jobs and tasks are divided among and coordinated between individuals and groups within the company II. Why Do Some Organizations Have Different Structures Than Others? A. Organizational chart – a drawing that represents every job in the organization, and the formal relationship between jobs B. Elements of Organizational Structure 1. Work Specialization – the way in which the tasks in an organization are divided into separate jobs a. Highly specialized jobs, where workers do only one kind of task, may be efficient, but workers will lack flexibility and job satisfaction 2. Chain of Command – deals with reporting relationships within an organization, capturing the flow of authority down through the levels of the organization a. Modern organizations may have very complex chains of command, with people reporting to two or more managers OB on Screen: The Departed. If you have access to this movie, please play it for your students during class. This scene depicts Colin Sullivan and Police Captain Queenan discussing the fact the ramifications of the fact that Sullivan is going to be investigating other members of the SIU to find a “rat” that has been tipping off a major criminal (Frank Costello). The situation provides an example of how, by creating a subunit, the information flow between two different groups is blocked. One topic for class discussion is under what circumstances a company might want to create units like this on purpose. Following that, a discussion of how many companies do this inadvertently (creating silos) and then spend lots of time and money trying to keep the information flowing between the groups. It is a great time to discuss how this has happened in the Sony example in the book (or through the extra case provided below in the IM). (Instructor note: Be careful when you start this scene – it should begin immediately as Matt Damon enters the Captain’s office. If you start it too early, right at the beginning of the chapter – you will end up with some questionable language.) Try This! Use the Departed clip for a different chapter. Captain Queenan’s directives provide an example of high initiating structure but low consideration from Chapter 12 on Leadership: Styles and Behaviours. The situation that Colin Sullivan finds himself in brings to mind a number of concepts from Chapter 7 on Trust, Justice, and Ethics. He is unable to trust the other members of the SIU, as the existence of the rat creates doubts about others’ integrity and benevolence. He may also feel low levels of disposition-based trust due to the time spent working in a profession where the consequences of misplaced trust are so high. Bonus OB on Screen: Star Wars II: Attack of the Clones. Chapter 37 of the DVD (beginning at 1:33:34 and ending at 1:35:22 for a total running time of 1 minute, 49 seconds) depicts Chancellor Palpatine being awarded “emergency powers” over the Galactic Senate. This move centralizes all decision-making authority within the organizational structure of the Republic. Clearly, Yoda and Mace Windu (the two characters at the beginning and ending of the scene) recognize what has just been done – even if the rest of the assembly does not. In addition to discussing what this might mean for Star Wars, encourage students to think about the structures they come into contact with every day. How might the structure of the university or system they belong to affect them? What about the structure of the groups they belong to? 3. Span of Control – represents how many people report to a given manager a. Narrow spans of control allow for close working relationships, but can significantly increase labor costs, and cause employees to become resentful of being too closely supervised b. Current research suggests that a moderate span of control is best for an organization’s productivity, but spans of control in organizations have increased significantly in recent years, creating flatter structures c. Small spans of control create “tall” organizational structures, while large spans of control create “flat” structures 4. Centralization – shows where decisions are made in the organization a. Centralized – managers at the top of the organizational chart make decisions b. Decentralized – managers at the bottom of the organizational chart make decisions OB Assessments: Centralization. This assessment determines whether or not a student’s job is centralized or decentralized, based on the hierarchy of authority and the level of participation in decision making. Have the students fill out the assessment based on their current job or the last job they held. Focus discussion on whether the students preferred the structure they experienced, or whether they would have liked a different kind of structure better. 5. Formalization – refers to the number of rules and procedures that are used to standardize behaviours and decisions – companies that have a lot of rules are formal, those with fewer rules, less formal a. Formalization is a necessary coordination mechanism when organizations want to deliver a standardized product or service 6. Elements in Combination a. All of the above elements can be combined to paint a picture of two different types of organizations: i. Mechanistic – Efficient, rigid, predictable, standardized, these companies thrive in a stable environment. They have a structure that relies on high levels of formalization, a rigid and hierarchical chain of command, high degrees of work specialization, centralization of decision-making, and narrow spans of control. ii. Organic – Flexible, adaptive, outward-focused organizations that thrive in dynamic environments. They have structures that rely on low levels of formalization, weak or multiple chains of command, low levels of work specialization, and wide spans of control. iii. Most organizations fall somewhere between the two types, and whether or not a type is effective depends on the environment of the organization C. Organizational Design 1. Organizational design is the process of creating, selecting, or changing the structure of an organization 2. Factors Influencing Organizational Design a. Business Environment i. Consists of customers, competitors, suppliers, distributors, and other factors external to the firm a.) Stable environments don’t change rapidly – more suitable to mechanistic designs b.) Dynamic environments change rapidly – more suitable to organic designs b. Company Strategy i. Describes the organization’s objectives and goals and how it will capitalize on its assets to make money a.) Low cost producers rely on selling products at the lowest possible cost and being as efficient as they can, often taking a mechanistic approach b.) Differentiators focus on providing high quality or unusual products and adapting to their environment quickly, often taking an organic approach c. Technology i. The method by which an organization transforms inputs into outputs a.) Research suggests that the more routine a technology is, the more mechanistic a structure should be d. Company Size i. The larger an organization becomes, the more likely it will be to have a mechanistic design D. Common Organizational Forms 1. Simple Structure a. A small organization with one person at the top who is the owner/manager, companies with simple structures have little specialization or formalization Try This! Ask students if any of them grew up in a family business. Have them describe the business to see if it fits the characteristics of a simple structure. Does the student see anything limiting or inefficient about the business’s current structure? Can the student point to the need for a structure that is more bureaucratic in nature? 2. Bureaucratic Organizations a. Bureaucracies are designed for efficiency, and rely on high levels of work specialization, formalization, centralization of authority, rigid and well-defined chains of command, and relatively narrow spans of control b. Functional Structure i. Groups employees by the functions they perform for the organization – most mechanistic of bureaucratic organizations c. Multi-Divisional Structure i. Product structure – employees are grouped around products ii. Geographic structure – employees are grouped by location OB Internationally. This text box looks at IBM’s organizational structure, noting that IBM is moving from a geographic structure to a more functional structure. As the world becomes flatter through technology, clients expect the best talent from around the world, not just the best talent that happens to be sitting in their city. One discussion question that might be asked is, “Are there any drawbacks to this approach?” Students should consider time zones, language difficulties, and cultural differences in their answers. iii. Client structure – employees are grouped around a specific client iv. Matrix structures – combine two types of structure into one, typically based on functional and projects or product divisions a.) Matrix structures are very flexible, and allow organizations to put together teams based on employee experience and skill b.) Matrix structures give each employee two chains of command, two groups with which to interact, and two sources of information to consider – can create high stress levels for employees E. Summary: Why Do Some Organizations Have Different Structures Than Others? (Figure 13-6) III. How Important Is Structure? A. Changes to an organization’s structure (restructuring) can have negative effects on performance, at least in the short term, because they hinder learning and decision making and increase employee stress B. Restructuring has a moderate negative effect on commitment, with affect commitment being much lower in organizations that restructure IV. Application: Restructuring A. Organizations today frequently restructure – often laying off managers in an attempt to create a flatter organization B. One of the best ways in which managers can help a restructuring to succeed is to help to manage the guilt and remorse felt by layoff survivors – those people who don’t leave the company – by giving them a stronger sense of control and communicating with them frequently and honestly. Try This! Ask students to give you a show of hands if their families have been affected by the restructuring of an organization. The show of hands will likely be larger than you might expect. For those students who have not been affected, this demonstration helps to bring home how widespread this issue is, especially over the last two decades. How did their families feel about the companies that restructured? Perhaps some of them have been affected personally as well. DISCUSSION QUESTIONS 13.1 Is it possible to be a great leader of employees in a highly mechanistic organization? What special talents or abilities might be required? Answer: In a highly mechanistic organization, great leaders often have one of two types of skills – they are either technically expert, or they are proficient at improving the processes by which work is done, so employees are able to work more efficiently. On the other hand, a leader who had high levels of consideration may stand out in a highly mechanistic organization, simply for providing care and concern in an environment dominated by production issues. 13.2 Why do the elements of structure, such as work specialization, formalization, span of control, chain of command, and centralization, have a tendency to change together? Which of the five do you feel is the most important? Answer: As one of these elements of structure changes, the others must change as well. Take, for example, work specialization. As employees are given more and more specialized jobs to do, senior level managers are more and more likely to develop rules by which those jobs should be done, and the organization becomes more formalized and centralized. In addition, with increasing specialization, senior management may perceive an increased need to control employees, which will lead to hiring more managers and a decreased span of control. 13.3 Which is more important for an organization: the ability to be efficient or the ability to adapt to its environment? What does this say about how an organization’s structure should be set up? Answer: Much of this depends on how dynamic the organization’s environment is. The more dynamic, the more adaptable a company needs to be. To some extent, increasing efficiency is one way in which organizations adapt to a changing environment. When the environment is characterized by high competition and decreasing prices, increased efficiency may be the only way in which the organization is able to compete. 13.4 Which of the organizational forms described in this chapter do you think leads to the highest levels of motivation among workers? Why? Answer: Although there are so many variables that preclude a clear answer to this question, divisional structures, especially those centered around clients, are likely to lead to the highest levels of motivation, because they allow employees to get a better understanding of the importance of their work (how what they do impacts customers.) 13.5 If you worked in a matrix organization, what would be some of the career development challenges that you might face? Does the idea of working in a matrix structure appeal to you? Why or why not? Answer: Matrix organizations are highly political, due to their dual reporting relationship structure. Employees may be torn between becoming a generalist (moving from product to product, using different skills) and becoming a specialist (focusing on skill development in their functional areas.) It may be hard for employees to find the right mentor, especially since they change work groups on a regular basis. Whether or not a student will find a matrix structure appealing, depends in large part on their design for a rapidly changing, highly politically charged, work environment. 13.6 Should an organization consult with rank-and-file employees before it restructures? Should it be open about its intentions to restructure or more secretive about key details? Why? Answer: Yes. By consulting with rank and file employees, managers may find that there are alternatives to restructuring that would accomplish the same cost decreases, while retaining the company’s knowledge base. Most companies are more secretive about the key details of restructuring, since disclosing those details can often give competitors insight into the company’s strategies and target goals. CASE: CISCO SYSTEMS Questions: 13.1 Given the technology available at Cisco, is it possible for other companies to emulate its organizational structure? What might prevent other companies from doing so? Answer: It is difficult to keep other organizations from copying an organizational structure per se – especially when Cisco has been very open about sharing the structure with just about anyone. However, the success of a structure does not come simply from the lines on an organizational chart, it is a function of matching the structure with Cisco’s unique environment, culture, and technology. Other companies would be hard pressed to try to duplicate the structure and get the same effects. 13.2 Evaluate Cisco’s organizational structure in terms of its ability to compete effectively with its competitors. What specific advantages does it provide? Answer: Cisco’s structure allows it to process information and make decisions much more quickly than most companies. For the type of business Cisco’s operates in, technology and the environment changes at an incredibly rapid pace which allows Cisco’s structure to give it an advantage that other companies are hard pressed to match. 13.3 What types of employees is Cisco likely to attract with the structure it has put in place? Does this prediction bode well or ill for the future? Answer: Cisco will probably tend to attract employees who are comfortable with ambiguity, willing to change, and interested in technology. These types of employees should suit Cisco well as they move into the future, but will become a hindrance if they have to shift their strategy or change their structure to become more traditional. BONUS CASE: SONY Sony is one of the most recognized brand names in the world for audio and video equipment, televisions, information and communications equipment, semiconductors, and a variety of electronic components. In Canada, Sony employs approximately 1,100 people and is divided into two major sales and marketing groups: wholesale sales and retail sales. The wholesale group is responsible for marketing and sales of Sony products to consumers through a dealer network, and to professionals through multiple direct sales channels. The retail group operates approximately 80 Sony Style retail locations across the country. Few people may realize that behind the scenes, supporting the sales and marketing activities of Sony Canada Ltd., is one of the most bureaucratic organizations in the world—Sony Corporation of Japan. Sir Howard Stringer. Perhaps not the name you would expect for the CEO of Sony Corporation. Stringer is now the first non-Japanese head of Sony. When Stringer took over as CEO, the corporation consisted of multiple, diverse business units that, for the most part, operated independently and without regard for one another. As a result, Sony’s performance had slipped dramatically in both profits and market share. Indeed, the once proud and respected technology giant was now considered a laggard, and its 160,000-employee workforce lacked the ability to work together toward common goals. One of the major reasons for Sony’s problems was the development of “silos” or “fiefdoms” that divided up the company’s business. Many of these silos were created by separating workers according to the type of work that they performed. In Sony’s case, one of the biggest problems originated from separating hardware engineers from software developers. Sony grouped its hardware engineers together to encourage them to be creative and focus on major technological advances. This strategy worked very well for a long time as Sony developed hardware, like the Sony Walkman, that was smaller and lighter than that offered by its competitors. However, significant environmental changes required better integration between the hardware engineers and software developers. Specifically, consumers began to want their various electronic devices to “talk to one another” and be easier to use than ever before. Both of those new demands required hardware engineers and software developers to collaborate—something that Sony had inadvertently discouraged. One of the greatest capitalizers on this networking trend was Apple: Its iPod became the epitome of everything people wanted in a portable, personal music player. Much of this appeal emerged because the iPod’s software allowed even the most computer illiterate user to download and network digital music. Apple had beaten Sony at its own game. One of the biggest disappointments for Sony was its development of the digital-based “Network Walkman”—two years prior to the creation of the iPod! However, because Sony’s engineers and software developers didn’t communicate or work together, the Network Walkman was unbelievably complicated to use. The way Sony organized its workers—its organizational structure—had essentially kept the company from taking advantage of the biggest shift in music media in the past 20 years. Even today, Sony has an incredibly complex organizational structure. Entertainment units are split by geographic regions and operate completely independently of one another. Consumer electronics divisions each have their own marketing departments that often compete for the same customer! However, using the same structure that cost it in its competition with Apple also allowed Sony to finish producing the most advanced gaming system in the world: the PlayStation 3. Howard Stringer’s challenge is to find a way to organize Sony to take advantage of what many believe is the greatest accumulation of assets in the entertainment industry. He has to find a way to structure the organization so that it builds synergy between the company’s movie, games, music, and consumer electronics divisions—all while preparing Sony to react to the “next big change” in entertainment. In his role as CEO, Sir Howard Stringer could not have arrived at a more critical time for the company. Sony’s organizational structure has become bloated with multiple “silos” that divide the company into seemingly separate entities. The different silos are not committed to a common Sony vision, which has caused the organization to fail to capitalize on market shifts. Sony also includes a number of non-core businesses that have taken capital away from key areas that historically were successful. Thus, Sony’s organizational structure is not integrated with its organizational strategy. Currently, Sony is attempting to create a leaner company to combat the competitive problems facing its core businesses. The television division represents a significant portion of its revenue and is in need of restructuring. Stringer will attempt to revitalize this division by focusing plant production on HDTV products rather than cathode ray tube TV products. Sony also will begin integrating the various divisions of the company to create, build, and market HDTV products. Another division within Sony needing restructuring is the computer entertainment arm. Sony’s PlayStation3 is struggling to break even in fiscal 2007, largely due to the lack of communication among various departments of the company. Because the various divisions of Sony are separate, the company cannot effectively compete with its competitors. Stringer will have an uphill battle to restructure Sony to integrate the various divisions of the company to regain its stature in the industry. Sources: Brenner, B. “Sony’s Sudden Samurai.” BusinessWeek, March 21, 2005, pp. 28–32. Singer, M. “Stringer’s Way.” The New Yorker, June 5, 2006, pp. 46–57. Kane, Y.I., and P. Dvorak. “Howard Stringer, Japanese CEO.” The Wall Street Journal, March 3, 2007, pp. A1, A6. Questions: 13.1 Evaluate Sony’s organizational structure in terms of its inability to compete effectively with its competitors. Answer: Sony has an organizational structure that mixes functional, product, and geographic structures. The problem is that as the organization has evolved, separate divisions have turned into “silos” which compete against each other for resources instead of working together. As Sony’s competitors become more numerous, Sony’s environment has become less stable and more dynamic. Unfortunately, Sony’s bureaucratic structure does not offer the flexibility the company needs to adapt to this rapidly changing environment. 13.2 Why has Sony been missing the mark with its recent product releases? Answer: Sony has been missing the mark with its recent product releases because they have neither incorporated nor gone beyond new technological advances in the industry. A big part of the reason for this is a lack of communication between Sony’s organizational “silos” and the “bloat” of running so many large bureaucracies. 13.3 How easy do you think it would be for Sony to change its structure to be more organic? Answer: Restructuring is never easy for any company. It’s especially not going to be easy for a behemoth like Sony with lots of different and diverse businesses. It will require employees who don’t normally have contact with one another to start working closely with a diverse set of co-workers. In addition, it will take a strong leader to show employees the benefits of these types of changes. Regardless, it will be imperative for Sony to manage the process of restructuring well. EXERCISE: CREATIVE CARD COMPANY Instructions: This exercise allows students to analyze the effectiveness of a given organizational structure (shown below), and to create a new structure that is more effective. If possible, give students time to work on their structures in class, then tell them to take the structures home and prepare to report on them during the next class period. Then, in the next class period, have all the groups present their structures to the class, and as a class, identify which structure would be most effective for the company. Another option is to assign each student group a particular type of structure – functional, product, geographic, customer, or matrix, and to see how easy or difficult it is to structure the company along those lines. Finally, you can encourage the students to experiment with mixed structures by asking them to create a structure that combines two different structures - for example, functional and geographic. OMITTED TOPICS The field of organizational behaviour is extremely broad and different textbooks focus on different aspects of the field. A brief outline of topics that are not covered in this text, but which the professor might want to include in his or her lecture, is included below. In cases where these topics are covered in other chapters in the book, we note those chapters. In cases where they are omitted entirely, we provide some references for further reading. 1. Other organizational structures – Boundaryless, Networked (Virtual), Team, etc. are all other “names” for structures. This list can be somewhat endless. While there are many other “forms” of structure, most are simply versions of the types of structures already covered in the chapter. 2. Organizational Strategy – It is difficult to have a conversation about structure without discussing which types of organizational structures are “the best”. While our focus is mainly on how structure affects individuals within organizations, which structure is best for the organization itself is a different question altogether and depends largely on the strategy of an organization. For more on organizational strategy and the implications of strategy on structure, see: Porter, M. Competitive Strategy. New York, N.Y.: Free Press, 1980. 3. Culture – Most of the effects of organizational structure happen because of the general feelings it might create among organizational members. A detailed discussion of organizational culture follows in chapter 14. Chapter 14 Organizational Culture and Change CHAPTER OVERVIEW The focus of Chapter 14 is organizational culture – the shared social knowledge that shapes the attitudes and behaviour of employees – and how culture is maintained and changed. Four general culture types are presented – networked, communal, fragmented, and mercenary – along with the concepts of strong and weak cultures. A three-step change process is reviewed as well as the issues that threaten the change process. Finally, the chapter looks at how organizations maintain their cultures and how person-organization fit impacts job performance. LEARNING OUTCOMES After reading this chapter, you should be able to answer the following questions: 14.1 What is organizational culture, and what are its components? 14.2 What general and specific types can be used to describe an organization’s culture? 14.3 What makes a culture strong, and is it always good for an organization to have a strong culture? 14.4 How do organizations maintain their culture and how do they change it? 14.5 What is person–organization fit and how does it affect job performance and organizational commitment? 14.6 What steps can organizations take to make sure that newcomers will fit with their culture? CHAPTER OUTLINE I. Organizational Culture A. There are many different definitions of the term “organizational culture”, but for the purposes of the chapter, organizational culture is the shared social knowledge within an organization regarding the rules, norms, and values that shape the attitudes and behaviours of employees II. Why Do Some Organizations Have Different Cultures Than Others? 1. Culture Components a. Observable Artifacts – manifestations of culture that employees can easily see and discuss i. Symbols – everything from corporate logos to employee uniforms ii. Physical Structures – things like office layout, location of buildings, etc. iii. Language – the jargon, slang, and slogans used within the walls of an organization iv. Stories – anecdotes, accounts, legends, and myths that are passed down from cohort to cohort in an organization v. Rituals – daily or weekly planned routines in an organization vi. Ceremonies – formal events, generally performed in front of an audience of organizational members b. Espoused Values – the beliefs, philosophies, and norms that a company explicitly states i. Enacted Values – what a company does – in other words, whether or not a company’s actions live up to its espoused values c. Basic Underlying Assumptions – taken-for-granted beliefs and philosophies that are so ingrained that employees simply act on them rather than questioning the validity of their behaviour in a given situation – for example, safety in an engineering firm B. General Culture Types 1. Fragmented – low sociability, low solidarity 2. Mercenary – low sociability, high solidarity 3. Communal – high sociability, low solidarity 4. Networked – high sociability, high solidarity C. Specific Culture Types 1. Customer Service Culture – focused on service quality 2. Safety Culture – a culture where safe behaviours at work are expected and valued 3. Diversity Culture – a culture that values diversity of all types 4. Creativity Culture – a company focused on fostering innovation OB Assessments: Creativity Culture. This assessment determines whether or not students have held a job at an organization with a creativity culture. Ask students to fill out the assessment relative to their current job, or the last job they held. Then focus discussion on whether the students viewed themselves as a good “fit” for their particular culture. For example, if the students are low in openness to experience (see Chapter 9 on Personality, Cultural Values, and Ability), did they feel like a good fit in a culture that emphasized high innovation and low formalization? D. Culture Strength 1. A high level of culture strength exists when employees definitively agree about the way things are supposed to happen within the organization (high consensus) and when their subsequent behaviours are consistent with those expectations (high intensity) 2. Weak cultures exist when employees disagree about the way things are supposed to be or what is expected of them 3. Strong cultures are not necessarily the same as “good” cultures – they may not lead to the most positive organizational outcomes 4. Subcultures unite smaller subsets of an organization’s employees a. Subcultures can turn into countercultures when their values don’t match those of the larger organization Try This! This is a great time to ask students about organizations they perceive as having strong cultures. Have they ever worked for an organization with a strong culture? What did it feel like? What were the expectations placed on them? Was it a positive or negative experience? Try to draw out varying experiences students have had in the places they have worked. Explore whether “everyone” thought it was a bad place to work or whether it was just them as an individual who didn’t fit. OB on Screen: New In Town. If you have access to this movie, please play it for your students during class. This scene depicts corporate office, executive-in-waiting Lucy Hill’s first day of work at a food processing plant in New Ulm, Minnesota. The scene provides a case study of how different subunits of a large company can have radically different cultures and perspectives. Students will find the stereotypical depictions of Minnesotans to be funny, but push them to understand the differences in perspective between a manufacturing plant and corporate offices. Neither type of culture is right or wrong, but they can be dramatically different. How might Lucy Hill have been better prepared for this meeting? What could she have done differently? How important is it to fit in with the culture of a group you are trying to influence? Encourage the students to try to think of times when it might be beneficial NOT to fit in with the culture. Are there advantages to allowing organizational subunits to have a different culture? When might this not be the case? Try This! Use the New in Town clip for a different chapter. The mechanization and modernization Hill discusses reflects organizational design and technology issues from Chapter 13 on Organizational Structure. Hill’s argument with her assistant ties into work-family conflict from Chapter 5 on Stress. Both Hill and the employees in the plant are relying on stereotypes, reflecting content from Chapter 8 on Learning and Decision Making. Finally, the clip reveals low levels of trust, especially affect-based trust, from Chapter 7 on Trust, Justice, and Ethics. Bonus OB on Screen: In Good Company. Chapter 18 of the DVD (beginning at 1:25:02 and ending at 1:30:50 for a total running time of 5 minutes, 48 seconds) depicts the arrival of Teddy K for a speech at his recently acquired company, Sports America Magazine. In the scene it is evident that the surface-level, synergistic culture of Globecom doesn’t match very well with its newly acquired company (or its new employees). One topic for class discussion is why many mergers fail. What happens when two distinct cultures come together and are forced to interact? Have any of the students worked for a culture that didn’t match their own personality? What did that make them feel like every day when they went to work in that environment? E. Maintaining an Organizational Culture 1. Attraction-Selection-Attrition (ASA) framework holds that companies maintain their organizational cultures by: a. attracting people whose personalities fit the culture b. selecting candidates based on whether or not their personalities match the culture c. letting people go whose personalities don’t fit the culture 2. Socialization a. The primary process by which employees learn the social knowledge that enables them to understand and adapt to an organization’s culture b. Three Stages of Socialization i. Anticipatory Stage – begins as soon as a potential employee develops an image of what it must be like to work for an organization ii. Encounter Stage – begins the day an employee starts work a.) Reality shock – when expectations don’t match reality iii. Understanding and Adaptation Stage – when newcomers change to internalize the norms and expected behaviours of the organization F. Culture Change 1. The change process involves three sequential steps: a. Unfreezing b. The Change Initiative c. Refreezing 2. Issues that Threaten the change process a. Failure to properly diagnose the underlying problem b. Resistance OB Internationally. This box points out the role culture plays in the success or failure of mergers and acquisitions. When companies with two strong cultures merge, they will only be successful if they take steps to handle cultural integration directly. 3. Common change initiatives a. Changes in leadership b. Mergers and acquisitions G. Summary: Why Do Some Organizations Have Different Cultures Than Others? (Figure 14-6) III. How Important Is Organizational Culture? A. Person-organization fit is the degree to which a person’s personality and values match the culture of an organization (Table 14-2) B. Employees who have high person-organization fit have more job satisfaction and trust toward their managers, and experience lower stress than people who have low levels of person-organization fit C. Person-organization fit is more related to citizenship behaviours than task performance IV. Application: Managing Socialization A. Realistic Job Previews – Companies can give job applicants an accurate picture of what working for an organization is going to be like by providing information on both the positive and negative aspects of the job B. Orientation Programs – Companies that have newcomer orientation programs have increased levels of employee satisfaction, commitment, and performance, compared to those who don’t C. Mentoring – A process by which a junior-level employee develops a deep and lasting relationship with a more senior-level employee within the organization DISCUSSION QUESTIONS 14.1 Have you or a family member worked for an organization that you would consider to have a strong culture? If so, what made the culture strong? Did you or they enjoy working there? What do you think led to that conclusion? Answer: Answers will differ from student to student, but in most cases, people leave companies with strong cultures because of poor person-organization fit. Yes, my family member worked for an organization with a strong culture. The culture was characterized by clear values, open communication, employee recognition, and a supportive environment. They enjoyed working there due to the sense of belonging and motivation fostered by the positive culture. The strong leadership, consistent values, and emphasis on employee well-being led to this conclusion. 14.2 Is it possible for an employee to have personal values that are inconsistent with the values of the organization? If so, how is this inconsistency likely to affect the employee’s behaviour and attitudes while at work? Answer: If an employee has personal values that are inconsistent with the organization, they may feel dissatisfied, but as the text points out, there may not be any impact on their task performance. In the long run, however, people who have less satisfaction at work are more likely to leave the organization than those who are more satisfied. 14.3 If you had to describe the culture of your university, what would it be like? What observable artifacts are present to be perceived by students? Are there any underlying assumptions that guide your behaviour at your university? Answer: See student responses to the “What’s the Culture of Your University” exercise for answers to this question. The culture of my university is collaborative, diverse, and innovation-driven. Observable artifacts include state-of-the-art facilities, diverse student organizations, and frequent campus events promoting inclusivity and creativity. Underlying assumptions guiding behavior include a commitment to academic excellence, respect for diversity, and a focus on interdisciplinary collaboration. 14.4 How can two companies with very different cultures that operate in the same industry both be successful? Shouldn’t one company’s culture automatically be a better fit for the environment? Answer: Not necessarily. There are multiple ways to service customers and different strategies for making money. Similar to organizational structure (which is a good point of comparison here), there is not a “one size fits all”, best culture. Companies that learn to take advantage of and use the culture they have created are more likely to be successful. In the chapter opening profile and case we feature Westjet. Have students compare their perceptions of Westjet’s culture with that of Air Canada’s. 14.5 If an organization wanted to foster a diversity culture, what steps might management take to ensure that employees will support the new culture? What observable artifacts might a company change to instill this culture? Answer: Managers who want to foster a diversity culture must have espoused values that are consistent with that culture, and their actions must be in alignment with their espoused values. They can also use the ASA model to attract, select, and retain diverse employees, and those who support diversity. 14.6 When you think of Canada Post’s culture, what kinds of words come to mind? Where do these impressions come from? Do you think your impressions are accurate? What has the potential to make them inaccurate? Answer: When most students think of Canada Post they think of the terms “going postal” or “snail mail”. These terms leave the impression of a lumbering bureaucracy that forces employees into taking desperate action, a perception that is enhanced by media depictions. 14.7 Think about the last job you started. What are some unique things that companies might do to reduce the amount of reality shock that new employees encounter? Are these methods likely to be expensive? Answer: Student answers to this question will differ, but most techniques designed to reduce reality shock are not expensive. Realistic Job Previews, for example, simply involve giving the potential employee a little extra information during the interview process. To reduce reality shock for new employees, companies can offer comprehensive onboarding programs, assign mentors or buddies, provide clear job expectations, and create a welcoming environment. These methods, such as mentorship and detailed onboarding, are not typically expensive and can significantly improve employee adjustment and satisfaction. CASE: WESTJET Questions: 14.1 Given the current demographic realities (e.g., retiring baby boomers; skill shortages), how does the company’s organizational culture contributes to its ability to locate, hire, train and retain the new employees it needs to be successful. How does this relate to the ASA framework? What role does socialization play? Answer: Culture can greatly facilitate Human Resources activities. The first stage of the ASA model (page 399) is attraction. Job applicants will be attracted to organizations whose cultures match their own personality and values. In the case of Westjet, building an organizational culture that values, customer service, fun, engagement, and high performance ensures that the company will maximize its ability to attract those who have these personal qualities to not only fit with others but be successful. In an era of skill shortages and retirements, the ability to attract applicants greatly facilitates selection processes (e.g., greater number of applicants means that the company can be more selective during the hiring process). If people come into the job with attitudes, values and personalities that match, it will be easier to socialize and train these individuals – and the early adjustment process will be smoother. Moreover, the ASA model predicts that new hires who are similar to the coworkers on core personal attributes, will exhibit are less likely to leave – thus reducing the need to recruit in a tight labour market. Thus, the ASA model speaks to the retention as well as the attraction of talent. 14.2 Using the typology described in Figure 14-2, how would you classify the organizational culture at WestJet? As the company continues to grow and become more complex, do you expect the culture to evolve? Explain. Answer: Westjet is an example of a strong-culture firm. According to the typology, organizations with friendly employees who all think alike are referred to as communal cultures. As the company grows, sub-cultures might slowly evolve around structural divisions (e.g., functional areas). That risk is offset by the fact that Westjet values and actively maintains a strong service-oriented culture, making it less likely that a qualitatively-different sub-cultures to emerge. 14.3 Why might it be hard for WestJet to maintain its unique corporate culture? Will this increase or decrease labour costs? What advice would you give senior management? Answer: Rapid expansion can make it harder for employees to be connected. As organizations grow and entertain more complex structures, it is often necessary to formalize and introduce formal controls to ensure coordination. An emphasis on formal control may undermine or conflict with social controls inherent with strong culture firms. Moreover, excessive formalization and control may reduce feelings of personal discretion, autonomy, and self-determination. Right now that company has been able to function without a union in place. If one or more employee groups unionize (which creates a sub-culture of its own), the level of conflict might increase. Advice would be to continue to place utmost importance on corporate culture – it is a valuable resource and a source of sustainable competitive advantage (Chapter 1). Strategic decisions need to consider the role of culture, and how this can be fortified and maintained. Culture not only can enable HR practices, but it can allow a company to more fully implement its strategic plan. 14.4 Will the Owners program described in the chapter-opening profile have the same effects on employees if the airline runs into a period of “economic turbulence” where the company loses money? What might motivate employees in these circumstances? What advice would you give senior management? Answer: Develop a reward system that is broader than just profit-based. Other ideas would be to implement gain sharing which focuses attention on saving money – rewards are self-generated by ideas that result in cost savings (Chapter 10). If work satisfies a broad range of personal needs (Chapters 4 and 6), then work can be satisfying even when financial rewards are modest or non-existent. Advice to senior management would be to adopt a broader view of rewards. Also, stress the importance of culture. People will find it much harder to leave strong-culture firms, especially when they like each other and think alike. Rather than leave, individuals may decide to stick it out until conditions improve. If affective commitment is high, those emotional bonds will be harder to break. BONUS CASE: GENERAL ELECTRIC AND ENRON General Electric. Enron. Not two companies that you would expect to be mentioned in the same breath at the beginning of a textbook chapter. After all, General Electric was recently named the World’s Most Admired Company by Fortune magazine, and Enron will go down in history as one of the greatest organizational failures and financial scandals ever. So why would we mention both of these firms together? Because the fact is that throughout the 1990s and into the early 2000s, these companies actually approached their businesses and treated their employees in very similar ways. Both were extremely successful enterprises whose stock performance rewarded investors handsomely and caused them to be recognized as companies of excellence by numerous publications of all types. On the surface, both companies used terms like “creativity,” “competitiveness,” “people,” “integrity,” and “excellence” to describe their core values. On an annual basis, GE and Enron both fired managers who were at the bottom of their performance scales, with Enron removing the bottom 20 percent of performers and GE removing the bottom 10 percent. Employees were paid well above average market levels, and managers received large bonuses that were tied directly to performance goals. Both had strong-minded and well-respected leaders—GE was led by Jack Welch, who has been described as a legend, a hero, and the world’s greatest business leader, and Enron was led by Jeff Skilling, known as a brilliant visionary and perhaps one of the smartest CEOs on the planet. Underneath the surface though, these two organizations could not have been more different. What was it that made these two companies move in such opposite directions? One potential answer lies with organizational culture. Whereas GE’s culture led to continued success, high levels of employee commitment and performance, low employee turnover, and generally a perception as one of the top companies in world, Enron’s culture failed miserably over the long term on almost every level. Many blame Enron’s failure on a culture of greed that favoured maximizing real or perceived profits to boost stock prices. In the late 1990s, an Enron taskforce put together to help communicate Enron’s “Visions and Values” considered replacing words such as “integrity,” “excellence,” “trust,” and “respect” with words like “smart,” “bold,” and “aggressive.” The changes were never made, but the fact that they were considered says quite a bit about the underlying culture within Enron. There was also no doubt that the culture at Enron had a powerful effect on employees. Jeff Skilling told others, “People didn’t just go to work for Enron; it became a part of your life, just as important as your family. More important than your family.” General Electric and Enron can be compared on the basis of their seemingly similar company practices throughout the 1990s and into the early 2000s. From the outside looking in, both companies attracted the best and the brightest by offering premium wages and other financial bonuses. Each company had a similar policy to retain only their best performing employees; Enron annually retained its top 80 percent of employees, whereas General Electric retained its top 90 percent. Both companies also developed cultures driven by success. But Enron’s culture actually caused its downward spiral that led to its ultimate demise. Was it Enron’s accounting practices, initiated at the top of the company, that caused its organizational failure? Although accounting was a major piece of the equation, another factor really enabled one of the largest financial scandals in history. The so-called “entrepreneurial culture” emphasized the importance of financial performance and aggressive employee initiatives. The ends justified the means at Enron, which may explain why a distinct lack of controls monitored the performance of employees. General Electric’s fixation on bottom-line performance and risk taking is complemented by its core values, which include a high sense of ethical behaviour. The culture that Jack Welch helped establish at GE remains relatively the same, even since the new CEO, Jeffrey R. Immelt, took control of the company. Immelt has realized that GE’s culture, focused on teamwork, innovation, ethics, and financial performance, is a culture that can continue to give the company a competitive advantage in the future. Sources: Useem, J. “America’s Most Admired Companies. Fortune, March 7, 2005, p. 67; McLean, B., and P. Elkind. Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. New York: Portfolio Publishing, 2003; Useem, J. “Another Boss, Another Revolution.” Fortune, April 5, 2004, pp. 112–17; Haasen, A., and G.F. Shea. New Corporate Cultures that Motivate. Westport, CT: Praeger, 2003; Lear, R.W. “Jack Welch Speaks: Wisdom from the World’s Greatest Business Leader.” Chief Executive, July/August 1998, p. 64; Fowler, T. “The Pride and Fall of Enron.” Houston Chronicle, Oct. 20, 2002. Accessed on www.chron.com on January 29, 2007; “At Enron, ‘the Environment Was Ripe for Abuse,’” BusinessWeek, February 25, 2002; “The Immelt Revolution,” BusinessWeek, March 28, 2005; “What Really Went Wrong with Enron? A Culture of Evil?” 2002, www.scu.edu/ethics/publications/ethicalperspectives/enronpanel.html (June 26, 2007). Questions 14.1 Is corporate culture the underlying cause of corporate scandal? Explain. Answer: Corporate culture certainly contributes to corporate scandals, but it is not the only cause of corporate scandals. Jack Welch may be the “world’s greatest business leader”, but his divorce in 2002 brought to light numerous “perks”, including the use of a company-owned apartment, that were ethically questionable at best. Having said that, Enron’s “entrepreneurial culture” certainly contributed to the lack of controls it placed on employee behaviour, and GE’s culture of continuous improvement and diversification helped make it into the powerhouse it is today. 14.2 Is General Electric’s absolute employee evaluation process (firing the bottom 10 percent) a good strategic decision? Explain. Answer: When evaluated from the perspective of the ASA model, G.E.’s model of firing the bottom 10 percent of their employees makes an excellent strategy. The bottom 10 percent of employees are likely to be the people that don’t fit into the GE culture, and their attrition only makes the GE culture stronger. EXERCISE: WHAT’S THE CULTURE OF YOUR UNIVERSITY Instructions: Put students into groups and make sure they each have a copy of the exercise and Table 14-2 (the list of values used in Step 2 of the exercise). In Step 1, ask the groups to consider the questions associated with the six cultural artifacts (symbols, physical structures, language, stories, rituals, ceremonies). Some artifacts will be more relevant to the university’s culture than others—it’s fine if groups feel like they need to skip some artifacts to devote more attention to others. For example, a given university may not have any physical structures that stand out but may have a wide variety of symbols and language factors that convey the culture. Once the groups have finished discussing the artifacts, have them move on to Step 2 by analyzing Table 14-2. What one value seems to be most intensely transmitted through the cultural artifacts? Have groups present the one value that they came up with, along with the three artifacts that most transmit that value, to the class. Teaching Tips: Students will likely vary in the degree to which they like the depiction of their university’s culture in the group presentations. There may be disagreement in the key values of the university, which would be indicative of a weak culture. Even if there is a high level of agreement about the key values, students will vary in their degree of person-organization fit. That is, some students may appreciate the university’s values whereas others would prefer a different set of priorities. Regardless, the culture of the organization can only be changed by altering the artifacts that transmit the culture. Symbols can be changed, physical structures can be altered, new ceremonies and rituals can be instituted, and so forth. OMITTED TOPICS The field of organizational behaviour is extremely broad and different textbooks focus on different aspects of the field. A brief outline of topics that are not covered in this text, but which the professor might want to include in his or her lecture, is included below. In cases where these topics are covered in other chapters in the book, we note those chapters. In cases where they are omitted entirely, we provide some references for further reading. International Cultures – This chapter focuses exclusively on organizational culture. Many aspects of international culture can be found in the OB Internationally boxes throughout the textbook and a thorough discussion of cultural values (Hofstede’s in particular) can be found in Chapter 9 – Personality, Cultural Values, and Ability. Culture of Ethics – Many organizations are trying to create cultures where ethics is at the forefront and it tends to be a popular topic for class discussion. Ethics is covered in detail in the textbook in Chapter 7 – Trust, Justice, and Ethics. Solution Manual for Organizational Behaviour: Improving Performance and Commitment in the Workplace Jason A Colquitt, Michael J. Wesson, Jeffery A LePine, Ian Gellatly 9780071051620, 9781259066566