CH-13-16 Conflict and Stress – Organizational Behaviour: Understanding and Managing Life at Work : Chapter Notes

This Document Contains Chapters 13 to 16 CHAPTER 13 CONFLICT AND STRESS CHAPTER LEARNING OBJECTIVES After reading Chapter 13, students should be able to: LO13.1 Define interpersonal conflict and review its causes in organizations. LO13.2 Explain the types of conflict and the process by which conflict occurs. LO13.3 Discuss the various modes of managing conflict. LO13.4 Review a range of negotiation techniques. LO13.5 Discuss the merits of stimulating conflict. LO13.6 Distinguish among stressors, stress, and stress reactions. LO13.7 Discuss the role that personality plays in stress. LO13.8 Review the sources of stress encountered by various organizational role occupants. LO13.9 Describe behavioural, psychological, and physiological reactions to stress and discuss techniques for managing stress. CHAPTER OUTLINE AND TEACHING NOTES Conflict occurs in many groups — be they family or work groups. Students must realize that conflict is not always “bad” and you can use the illustrations from history (great works of art and literature) that grew out of conflict, or the Oakland A’s baseball team that won two world series and came to be known as the fighting A’s’. The topic of stress is a fairly new one in the organizational literature. However, this does not reduce its significance for organizational members and, therefore, for organizational behaviour. What Is Conflict? Interpersonal conflict is a process that occurs when one person, group, or organizational subunit frustrates the goal attainment of another. Conflict often involves antagonistic attitudes and behaviours. Causes of Organizational Conflict Several factors contribute to organizational conflict. Group Identification and Intergroup Bias Identification with a particular group or class of people can set the stage for organizational conflict. Since individuals develop a more positive view of their own group and a less positive view of other groups, intergroup bias can be a source of organizational conflict. Self-esteem probably is a critical factor as identifying with the successes of one’s own group and disassociating oneself from out-group failures boosts self-esteem and provides comforting feelings of social solidarity. Given today’s emphasis on self-managed teams and small work groups, this is an area that may prove to be a great source of organizational conflict in the years to come given the high premium placed on getting employees to identify strongly with their team. Interdependence When individuals or subunits depend on each other to accomplish their own goals, the potential for conflict exists. Interdependence necessitates interaction between the parties so that they can coordinate their interests. Since interdependence implies that each party has some power over the other, it is easy for one side or the other to abuse its power and create antagonism. However, interdependence often provides a good basis for collaboration through mutual assistance and does not always lead to conflict. Differences in Power, Status, and Culture Conflict can erupt when parties differ significantly in power, status, or culture. Power. If dependence is not mutual, but one way, the potential for conflict increases. Antagonism may develop and the dependent party may feel hostile toward the other party. Status. Status differences provide little impetus for conflict when people of lower status are dependent on those of higher status. However, sometimes individuals who have technically lower status find themselves giving orders to, or controlling the tasks of, higher status persons. Such a situation may promote conflict. Culture. Differences in culture that develop in organizations can result in a clash of beliefs and values that leads to overt conflict. Such differences are especially apparent when dissimilar cultures are merged. Ambiguity Ambiguous goals, jurisdictions, or performance criteria may lead to conflict. Under such ambiguity, the formal and informal rules that govern interaction break down. Ambiguous performance criteria are a frequent cause of conflict between managers and employees. Scarce Resources Differences in power are magnified when resources become scarce, and conflict often surfaces in the process of power jockeying. Scarcity may cause latent or disguised conflict to turn into overt conflict. Types of Conflict It is useful to distinguish among relationship, task, and process conflict. Relationship conflict concerns interpersonal tensions among individuals that have to do with their relationship per se, not the task at hand. So-called “personality clashes” are examples of relationship conflicts. Task conflict concerns disagreements about the nature of the work to be done. Differences of opinion about goals or technical matters are examples of task conflict. Process conflict involves disagreements about how work should be organized and accomplished. Disagreements about responsibility, authority, resource allocation, and who should do what all constitute process conflict. In the context of work groups and teams, task, relationship and process conflict tend to be detrimental to member satisfaction and team performance. Such conflict prevents the development of cohesiveness. Sometimes task conflict can be beneficial for team performance. Thus, not all conflict is detrimental. Conflict Dynamics A number of events occur when one or more of the causes of conflict take effect. • “Winning” the conflict becomes more important than developing a good solution to the problem at hand. • The parties begin to conceal information from each other, or to pass distorted information. • Each group becomes more cohesive. • Contact with the opposite party is discouraged except under formalized, restricted conditions. • While the opposite party is negatively stereotyped, the image of one’s own position is boosted. • On each side, more aggressive persons who are skilled at engaging in conflict may emerge as leaders. The difficulty with this is that problems escalate to the point that the conflict process itself becomes an additional problem and this can work against the achievement of a peaceful solution. Modes of Managing Conflict Managers should be aware of various approaches to managing organizational conflict. They must be aware that they need to consider their assertiveness and how willing they are to satisfy the other party’s needs. Conflict resolution strategies attempt to reduce or eliminate conflict. Five approaches to managing organizational conflict are discussed. They are a function of how assertive you are in trying to satisfy your own or your group’s concerns and how cooperative you are in trying to satisfy those of the other party or group. None of the five styles for dealing with conflict is inherently superior. Each style might have its place given the situation in which the conflict episode occurs. Avoiding The avoiding style is characterized by low assertiveness of one’s own interests and low cooperation with the other party. Although it can provide some short-term stress reduction it does not really change the situation and so its effectiveness is limited. If the issue is trivial, information is lacking, people need to cool down, or the opponent is very powerful and very hostile, avoidance might be a sensible response. Accommodating Accommodating is conflict management style in which one cooperates with the other party, while not asserting one’s own interests. It can be an effective reaction when you are wrong, the issue is more important to the other party, or you want to build good will. Competing A competing style maximizes assertiveness for your own position and minimizes cooperation. You can provide an example where this style can lead to “constructive conflict” and can actually be beneficial to organizations. The competing style holds promise when you have a lot of power, you are sure of your facts, the situation is truly win-lose, or you will not have to interact with the other party in the future. This style is featured in the chapter-opening vignette. You might ask students to read it and see what style they think is being used. Compromise Compromise combines intermediate levels of assertiveness and cooperation. Each party gives up something with the expectation that it will receive something in exchange. The goal is to establish rules of exchange between the two parties. It does not always result in the most creative response to conflict. Compromise is not so useful for resolving conflicts that stem from power asymmetry, because the weaker party may have little to offer the stronger party. However, it is a sensible reaction to conflict stemming from scarce resources. It is a good fall-back position if other strategies fail. Collaborating Collaborating maximizes both assertiveness and cooperation in an attempt to reach an integrative agreement that satisfies the interests of both parties. The emphasis is on a win-win resolution. It probably works best when the conflict is not intense and when each party has information that is useful to the other. Although, effective collaboration can take time and practice to develop, it frequently enhances productivity and achievement. Many examples of collaboration are those between companies and suppliers. Collaboration between organizational departments is particularly important for providing good customer service. Managing Conflict with Negotiation Negotiation is a decision making process among interdependent parties who do not share identical preferences. Negotiation constitutes conflict management, in that it is an attempt to either prevent conflict or resolve existing conflict. It is an attempt to reach a satisfactory exchange among or between the parties. Distributive negotiation assumes a zero-sum, win-lose situation in which a fixed amount of assets is divided between parties. Integrative negotiation is a win-win negotiation that assumes that mutual problem solving can enlarge the assets to be divided between parties. It is a process where gains can be made by all parties involved. Distributive Negotiation Tactics Distributive negotiation is essentially a single-issue negotiation. Three types of distributive negotiation tactics are outlined in the text: threats and promises; firmness versus concessions; and persuasion. Threats and Promises. Threat consists of implying that punishment will be forthcoming if the opponent does not concede to your position. Promises are pledges that concessions will lead to rewards in the future. Threat has some merit as a bargaining tactic if one party has power over the other that corresponds to the nature of the threat, especially if no future negotiations are expected or if the threat can be posed in a civil and subtle way. Promises have merit when your side lacks power and anticipates future negotiations with the other side. Both threats and promises work best when they send interpretable signals to the other side about your true position, what really matters to you. Careful timing is critical. Firmness versus Concessions. Intransigence—sticking to your target position—can yield superior economic results, especially in face-to-face negotiations. Some concessions are thought to be appropriate and good negotiators often use face-saving techniques to explain them. Persuasion. Verbal persuasion or debate is common in negotiations. It is an attempt to change the attitudes of the other party toward your target position. Persuaders are most effective when they are perceived as expert, likable, and unbiased. The problem is that each party knows the other is self-interested so it helps to introduce some unbiased parties. Salary negotiation is a traditional example of distributive bargaining. Men have been found to negotiate better outcomes than women although the overall difference is small. Training programs that enable women to negotiate better staring salaries can have short- and long-term benefits. New hires who negotiate have been found to receive a $5000 salary premium. Collaborating and competing strategies were found to be superior to compromising and accommodating. Integrative Negotiation Tactics Integrative negotiation rejects a fixed-pie assumption and strives for collaborative problem solving that advances the interests of both parties. People have a bias for fixed-pie thinking. This is because integrative negotiation requires creativity and many role models that negotiators have are more likely to use distributive tactics. A number of examples of integrative negotiation tactics are described in the text: copious information exchange; framing differences as opportunities; cutting costs; increasing resources; and introducing superordinate goals. Copious Information Exchange. A freer flow of information is critical to finding an integrative settlement. Parties need to give away non-critical information early to start the ball rolling, ask lots of questions and listen to the answers. Trust must be built slowly so that “positions” will give way to the communication of true interests, not just their current positions. Framing Differences as Opportunities. Traditionally, differences are framed as barriers to negotiations. Differences need not represent mutually exclusive options and can serve as a basis for integrative agreements because they contain information that can telegraph the other party’s real interests. Cutting Costs. If you can somehow cut the costs that the other party associates with an agreement, the chance of an integrative settlement increases. Integrative solutions are especially attractive when they reduce costs for all parties in a dispute. Increasing Resources. Increasing available resources is a very literal way of getting around the fixed-pie syndrome. The ultimate solution to “fixed-pie” bargaining is to have the parties use their combined power to obtain greater resources which they can then divide. Introducing Superordinate Goals. Superordinate goals are attractive outcomes that can be achieved only by collaboration. Neither party can achieve the goal on its own. Superordinate goals represent the best example of creativity in integrative negotiation because they change the entire landscape of the negotiation episode. Third Party Involvement Third parties may come into play to intervene between negotiating parties when an impasse is reached (labour/management disputes) or may be involved from the start as a normal part of the process of bargaining (real estate agents). Two approaches to third party involvement are mediation and arbitration. Mediation. This occurs when a neutral third party helps to facilitate a negotiated agreement by aiding the process or atmosphere of the negotiation or by intervening in the content of the negotiation. Mediation has a fairly successful track record in dispute resolution. It works best when the conflict is not too intense and the parties are resolved to use negotiation to deal with their conflict. Arbitration. This occurs when a third party is given the authority to dictate the terms of settlement of a conflict. This usually happens when negotiation has broken down and the arbitrator has to make a final distributive allocation. In conventional arbitration, the arbitrator can choose any outcome, such as splitting the difference between the two parties. In final offer arbitration, each party makes a final offer and the arbitrator chooses one of them. One of the most commonly arbitrated disputes between employers and employees is dismissal for excessive absenteeism. Is All Conflict Bad? Some students may come to class thinking that all conflict is bad. It is important to have students realize that there is some sentiment that conflict is good for organizations. It may be useful to relate conflict in organizations to conflict in the natural world, where the “strong” survive. It is important to make students aware that some conflict may be helpful and that there are some potential benefits of organizational conflict as long as it does not become dysfunctional. Recently, here has been growing awareness of some potential benefits of organizational conflict. The argument that conflict can be functional rests mainly on the idea that it promotes necessary organizational change. One advocate of this position puts it this way: CONFLICT  CHANGE  ADAPTATION  SURVIVAL In other words, for organizations to survive, they must adapt to their environments. This requires changes in strategy that may be stimulated through conflict. Conflict can promote change by brining into consideration new ideas or because each party begins to monitor the other’s performance more carefully. Conflict might also promote change by signaling that a redistribution of power is necessary. Sometimes conflict stimulation, a strategy of increasing conflict in order to motivate change, may be necessary to cause needed changes in the organization. Very often the underlying signal is the existence of a “friendly rut” in which peaceful relationships take precedence over organizational goals, when parties that should be interacting have chosen to withdraw from each other, and when conflict is suppressed or downplayed. Conflict stimulation involves manipulating those factors that are known to cause conflict, for example by making resources less available or increasing ambiguity. Conflict in organizations often causes considerable stress. A Model of Stress in Organizations Stress has become a serious concern for individuals and organizations. Stress can be part of the everyday routine of organizations. A model of a stress episode can provide a better understanding of stress. There are three stages to the typical stress episode. Stressors Stressors are environmental events or conditions which have the potential to induce stress. Some conditions such as extreme heat or cold, isolation, or hostile people would prove stressful for just about everyone. Whether or not these environmental events or conditions are stressors and actually lead to stress depends in part on an individual’s personality. Stress Stress is a psychological reaction to the demands inherent in a stressor that has the potential to make a person feel tense or anxious because of an inability to cope with them. However, stress is not intrinsically bad, since individuals require a certain level of stimulation from their environment. Stress does become a problem when it leads to especially high levels of anxiety and tension. Stress Reactions Stress reactions are the behavioural, psychological, and physiological consequences of stress. These reactions may be passive responses over which the individual has little direct control or active coping responses. Coping responses involve active attempts to deal with some previous aspect of the stress episode. Coping attempts might be directed toward dealing directly with the stressor or simply reducing anxiety. The former strategy has more potential for effectiveness because of the chances that the stress episode might be terminated. Some reactions that are useful for the individual in dealing with a stress episode may be very costly to the organization (e.g., absenteeism), which suggests that organizations should be concerned about employee stress. The stress model presented here appears to generalize across cultures. Similar factors provoke stress and lead to similar stress reactions around the globe Personality and Stress Personality can affect both the extent to which potential stressors are perceived as stressful and the types of stress reactions that occur. Three key personality traits are locus of control, Type A behaviour pattern, and negative affectivity. Locus of Control. Locus of control concerns people’s beliefs about the factors that control their behaviour. Internals believe that they control their own behaviour, while externals believe that their behaviour is controlled by luck, fate, or powerful people. Compared with internals, externals are more likely to feel anxious in the face of potential stressors since they feel less in control. Internals are more likely to confront stressors directly, while externals are more prone to simple anxiety-reduction strategies that only work in the short term. Type A Behaviour Pattern. Individuals who exhibit the Type A behaviour pattern tend to be aggressive and ambitious. Their hostility is easily aroused, and they feel a great sense of time urgency. They are impatient, competitive, and preoccupied with their work. Compared with Type B individuals who do not exhibit these extreme characteristics, Type A people report heavier workloads, longer work hours, and more conflicting work demands. Type A people encounter more stressful situations than Type B people do, or they perceive themselves as doing so. Type A individuals are likely to exhibit adverse physiological reactions in response to stress and frustrating, difficult, or competitive events are especially likely to prompt these adverse reactions. They seem to have a strong need to control their work environment. The major component of Type A behaviour that contributes to adverse physiological reactions is hostility and repressed anger which may also be accompanied by exaggerated cynicism and distrust of others. When these factors are prominent in a Type A individual’s personality, stress is most likely to take its toll. Negative Affectivity. Negative affectivity is the propensity to view the world, including oneself and other people, in a negative light. It is a stable personality trait that is a major component of the neuroticism component of the Big Five. People high in negative affectivity tend to be pessimistic and downbeat. As a consequence, they tend to report more stressors in the work environment and to feel more subjective stress. They are particularly likely to feel stressed in response to the demands of a heavy workload. Factors that might be responsible for the susceptibility to stress of those who are high in negative affectivity include (a) a predisposition to perceive stressors in the workplace, (b) hypersensitivity to existing stressors, (c) a tendency to gravitate to stressful jobs, (d) a tendency to provoke stress through their negativity, and (e) the use of passive, indirect coping styles that avoid the real sources of stress. Stressors in Organizational Life A study found that among a sample of employed Canadians, the most common source of stress is workplace stressors. There are many stress-provoking situations that occur in organizational life that may affect all organizational members. However, there are other stressors that are especially likely to affect persons performing particular roles in organizations. Executive and Managerial Stressors Executives and managers make key organizational decisions and direct the work of others. As a result, they experience special forms of stress. Role Overload. Role overload occurs when one must perform too many tasks in too short a time period. It is a common stressor for managers. The open-ended nature of the managerial process results in a very heavy and protracted workload. A heavy workload often provokes conflict between the manager’s role as an organizational member and his or her role as a spouse or parent. Thus, role overload not only provokes stress but can prevent the manager from enjoying the pleasures of life that can reduce stress. Heavy Responsibility. Executives are responsible for the major decisions made by the organization that can have important consequences for organization members and the organization. The personal consequences of an incorrect decision can be staggering. The influence and responsibility over the future of others also has the potential to induce stress. Operative-Level Stressors Operatives are individuals who occupy non-professional and non-managerial positions in organizations. They are sometimes exposed to a special set of stressors. Poor Physical Working Conditions. Many operative workers are exposed to physically unpleasant and even dangerous working conditions. Accidents as well as a variety of long-term illnesses may develop because of poor working conditions. Have students evaluate what they might consider as “poor working conditions” (e.g., excessive heat, cold, noise, pollution, chance of accidents). Poor Job Design: Jobs that are too simple or not challenging enough can act as stressors. Monotony and boredom can prove extremely frustrating to people who feel capable of handling more complex tasks. Job scope can be a stressor at levels that are either too low or too high. Boundary Role Stressors, Burnout, and Emotional Labour Boundary roles are positions in which organizational members are required to interact with members of other organizations or with the public. They exist at all levels in the organization. People are especially likely to experience stress as they straddle the imaginary boundary between the organization and its environment. Boundary role occupants may experience stress from role conflict as their role as an organizational member might be incompatible with the demands made by the public or other organizations. A good example of this described in the text are sales reps. A particular form of stress experienced by some boundary role occupants is burnout. Burnout is a syndrome made up of emotional exhaustion, cynicism, and reduced self-efficacy. Burnout was originally studied among those working in some capacity with people such as teachers, nurses, paramedics, social workers, and police. However, it has now been established that burnout can occur even among non-boundary spanners. Burnout follows a process that begins with emotional exhaustion that leads one to become cynical and distance oneself from clients, the “cause” of the exhaustion. In the extreme, this might involve depersonalizing them, treating them like objects, and lacking concern for what happens to them. The burned-out individual develops feelings of low self-efficacy and low personal accomplishment. Burnout seems to be most common among people who entered their jobs with especially high ideals. Gender and personality are also related to burnout. Women are more likely to report emotional exhaustion and men are more likely to report depersonalization. Those with high self-esteem, high conscientiousness, and internal control report less burnout. The consequences of burnout include the pursuit of a new occupation, staying in the same occupation but seeking a new job, while some people pursue administrative careers in their profession. Some people stay in their jobs and become part of the legion of “deadwood,” collecting their paycheques but doing little to contribute to the mission of the organization. Much boundary role stress stems from the frequent need for employees to engage in “emotional labour”. The suppression of negative emotions and exaggerating positive ones takes a toll on cognitive and emotional resources over time. The Job Demands-Resources Model and Work Engagement Organizations should strive to avoid causing burnout and should strive foster the opposite of burnout – engagement. Work engagement can be defined as “a positive work-related state of mind that is characterized by vigor, dedication, and absorption.” Vigor involves high levels of energy and mental resilience at work; dedication means being strongly involved in your work and experiencing a sense of significance, enthusiasm, and challenge; absorption refers to being fully concentrated on and engrossed in your work. The first two dimensions—vigor and dedication— position engagement as the opposite of burnout. According to the job demands-resources model, the work environment can be described in terms of demands and resources. Job demands are physical, psychological, social, or organizational features of a job that require sustained physical or psychological effort that in turn can result in physiological or psychological costs (e.g., work overload, time pressure, role ambiguity, role conflict). Job resources refer to features of a job that are functional in that they help achieve work goals, reduce job demands, and stimulate personal growth, learning, and development. Job resources can come from the organization, interpersonal and social relations, the organization of work, and the task itself. A central assumption of the model is that high job resources foster work engagement, while high job demands exhaust employees physically and mentally and lead to burnout. Research has found that job demands are related to burnout, disengagement, and health problems, while job resources lead to work engagement, organizational citizenship behaviour, and organizational commitment. In addition, resources can buffer the negative impact of job demands on well-being. Some General Stressors Some stressors are probably encountered equally by occupants of all roles. Interpersonal Conflict. Interpersonal conflict can be a potent stressor. When people don’t get along, stress may be encountered. The entire range of conflict, from personality clashes to intergroup strife, is especially likely to cause stress when it leads to real or perceived attacks on our self-esteem or integrity. A particular manifestation of interpersonal conflict which has received increased attention in recent years is workplace bullying. Bullying refers to repeated negative behaviour directed toward one or more individuals of lower power or status that creates a hostile work environment. It is a potent source of stress and negative well-being. Although bullying can involve physical aggression, it is most commonly a more subtle form of psychological aggression and intimidation that can include incessant teasing, demeaning criticism, social isolation, or sabotaging others’ tools and equipment. An essential feature of bullying is its persistence. It is the repeated teasing, criticism, or undermining that signals bullying. Another key feature of the bullying process is some degree of power or status imbalance between the bully and the victim. A phenomenon closely associated to bullying is mobbing which occurs when a number of individuals, usually direct co-workers, “gang up” on a particular employee. Mobbing can be especially intimidating and stressful because it restricts the availability of social support that might be present when there is only a single bully. Victims of bullying and mobbing experience stress because they feel powerless to deal with the perpetrator(s). Several countries and Canadian provinces have enacted laws that pertain to bullying in the workplace and various organizations have anti-bulling programs. Work-Family Conflict. An increasingly important stressor in organizational life is work-family conflict. Work-family conflict costs Canadian companies billions of dollars a year in absenteeism. Two facts of life have increased the stress stemming from the inter-role conflict between being a member of one’s family and the member of an organization. The increase in households in which both parents work and an increase in single-parent families has led to stressors centred around child care and increased life spans has led to stressors associated with elder care. Women are particularly victimized by stress due to work-family conflict, although it is a rapidly growing problem for men as well. Occupations that require a high degree of teamwork or responsibilities for others tend to provoke the most work-family conflict. People who are highly engaged in their work have been shown to have elevated work to family conflict. More conscientious employees seem to handle this tension between work and family better. Job Insecurity and Change. Stress is encountered when secure employment is threatened. Major organizational changes have left many workers unemployed and threatened the security of those who have been fortunate enough to remain in their jobs but must live with the threat of more layoffs, the loss of friends and co-workers, and an increased workload. The fear of job loss has become a way of life for employees at all organizational levels. From the threat of technology for operatives, to over qualification or overspecialization for professionals, to pressures for corporate performance and cost-cutting in the executive suite, all employees are affected. Role Ambiguity. Role Ambiguity can provoke stress. It exists when the goals of one’s job, or the methods of performing it, are unclear to an employee. Stress from a lack of direction is common. Such a lack of direction can prove stressful, especially for people who are low in their tolerance for such ambiguity. Sexual Harassment. Sexual harassment is a major workplace stressor with serious consequences for employees and the organization that are similar to or more negative than other types of job stressors. The negative effects include decreased morale, job satisfaction, organizational commitment, and job performance, and increased absenteeism, turnover, and job loss. Sexual harassment has serious effects on the psychological and physical well-being of harassment victims. Organizations in which sexual harassment is most likely to be a problem are those that have a climate that is tolerant of sexual harassment and where women are working in traditional male-dominated jobs and in a male-dominated workplace. Reactions to Organizational Stress Reactions to organizational stress can be divided into behavioural, psychological, and physiological responses. In general, reactions that result in an addition to one’s resources can be seen as good coping with stress. Reactions that increase demands contribute to bad coping. Behavioural Reactions to Stress Behavioural reactions to stress involve overt activities that the stressed individual uses in an attempt to cope with the stress. They include problem solving, seeking social support, modified performance, withdrawal, and the use of addictive substances. Problem Solving. Problem solving is directed toward terminating the stressor or reducing its potency, and not toward simply making the person feel better in the short run. It is reality-oriented. It reveals flexibility and realistic use of feedback. Problem solving is generally a routine, sensible, and obvious approach. Examples include delegation, time management, talking it out, asking for help, and searching for alternatives. Seeking Social Support. Social support has to do with having close ties with other people. These close ties can reduce stress and promote positive coping. People with stronger social networks exhibit better psychological and physical well being. When people encounter stressful events, those with good social networks are likely to cope more positively. Thus, the social network acts as a buffer against stress. One’s spouse, family, and friends as well as co-workers can provide needed social support to stress-prone individuals. The buffering aspects of social support are most potent when they are directly connected to the source of stress. Thus, co-workers and superiors may be the best sources of support for dealing with work-related stress. Performance Changes. Some stressors like role ambiguity and interpersonal conflict are "hindrance" stressors in that they directly damage goal attainment and performance. Other stressors such as heavy workload and responsibility are challenging. While they can damage performance, they sometimes stimulate it via added motivation. Withdrawal. Withdrawal from the stressor is one of the most basic reactions to stress and takes the form of absence and turnover. Absenteeism is an attempt to reduce anxiety prompted by a stressor in the short term. However, it fails to attack the stressor directly. Thus, it is a dysfunctional reaction to stress for the individual and the organization. The same is true of turnover unless the intent is to assume a different, less stressful job. In that case the reaction may be a problem-solving one and should benefit the individual and the organization. Absence, turnover, and turnover intentions have often been linked with stress and its causes. Use of Addictive Substances. Smoking, drinking, and drug use represent the least satisfactory behavioural responses to stress since they fail to terminate stress episodes, and they leave employees less physically and mentally prepared to perform their jobs. Cigarette and alcohol use are associated with work-related stress. Psychological Reactions to Stress Psychological reactions to stress involve emotions and thought processes, rather than overt behaviour. The most common of these reactions to stress is the use of defence mechanisms. Defence mechanisms are psychological attempts to reduce the anxiety associated with stress. They do not actually confront or deal with the stressor. Some common defence mechanisms are the following: • Rationalization. Attributing socially acceptable reasons or motives to one’s actions so that they will appear reasonable and sensible, at least to oneself. • Projection. Attributing one’s own undesirable ideas and motives to others so that they seem less negative. • Displacement. Directing feelings of anger at a “safe” target rather than expressing them where they may be punished. • Reaction formation. Expressing oneself in a manner that is directly opposite to the way one truly feels, rather than risking negative reactions to one’s true position. • Compensation. Applying one’s skills in a particular area to make up for failure in another area. Defence mechanisms can be a useful reaction for temporarily reducing anxiety when employed occasionally. As short-term anxiety-reducers they can benefit the individual and the organization. However, when they are used chronically the stress may increase, since the basic problem remains unresolved. Physiological Reactions to Stress There is evidence that work stress is associated with electrocardiogram irregularities and elevated levels of blood pressure, cholesterol, and pulse. Stress has also been associated with the onset of diseases such as respiratory and bacterial infections. The accumulation of stress into burnout has been particularly implicated in cardiovascular problems. Organizational Strategies for Managing Stress There are a number of personal and organizational strategies to manage stress. These strategies either reduce demands on employees or enhance their resources. Job Redesign Organizations can redesign jobs to reduce their stressful characteristics. Most formal job redesign efforts have involved enhancing operative-level jobs to make them more stimulating and challenging. Especially for service jobs, there is growing evidence that providing more autonomy in how service is delivered can alleviate stress and burnout. Boundary role service jobs require a high degree of emotional regulation and some degree of autonomy allows employees to cope with emotional labour by adjusting their responses to the needs of the moment in line with their own personalities. “Family Friendly” Human Resource Policies These programs are meant to reduce the stress associated with dual careers, child care, and elder care. Individuals are provided with relief from the stresses of the regular job by programs such as child care for workers with pre-school aged children. These policies usually include some combination of formalized social support (newsletters, support groups), material support (corporate daycare centres), and increased flexibility (flex-time, telecommuting, and job sharing) to adapt to employee needs. Such policies can contribute to improved health, lower turnover, and higher organizational performance. Research shows that perceptions of flexibility, a reasonable workload, supportive supervision, and a supportive culture are associated with less work-family conflict and higher job satisfaction and organizational commitment. Stress Management Programs Some organizations use programs designed to help employees “manage” work-related stress. These programs can help healthy employees prevent problems due to stress or they can be aimed at individuals who are already experiencing stress problems. Although the exact content of programs varies, most involve one or more of the following techniques: meditation; training muscle relaxation exercises; biofeedback training to control physiological processes; training in time management; and training to think more positively and realistically about sources of job stress. Evidence suggests that these applications are useful in reducing physiological arousal, sleep disturbances, and self-reported tension and anxiety. Work-Life Balance, Fitness, and Wellness Programs For some organizations, work-life balance programs and quality-of-life benefits have become a strategic retention tool. Employees are increasingly demanding work-life benefits, and employers are realizing that by providing them they can increase commitment and reduce turnover. These programs are designed to help employees lead more productive and balanced lives and can include fitness programs, cafeteria health food, and weight-loss programs. Studies show that fitness training is associated with improved mood, a better self-concept, reduced absenteeism, enhanced job satisfaction, and reports of better performance. Work–life programs are also believed to result in lower health care costs. Some of these improvements probably stem from stress reduction. VIDEO ON PRESENTEESIM IN THE WORKPLACE You may wish to have a discussion on the topic of presenteeism in the workplace which is described in the Research Focus feature on page 477. You can show your class the following video which features Gary Johns discussing presenteeism and his research on the topic: http://www.concordia.ca/now/newsmakers/beyond-the-headlines/presenteeism-hurts-productivity/#video To generate class discussion, you might focus on the following questions: 1. What is presenteeism? Answer: Presenteeism is when employees attend work despite being unwell, distracted, or otherwise unable to perform at full capacity. It contrasts with absenteeism, where employees stay home when unwell. 2. How do you measure presenteeism? Answer: Presenteeism can be measured through self-reported surveys, assessments of productivity loss, and observation of employee behavior and performance metrics. Surveys may ask about the frequency and impact of working while unwell. 3. What are some of the reasons for presenteeism? Are some people more likely than other to be absent and present at work? Answer: Reasons for presenteeism include job insecurity, high workload, workplace culture, lack of sick leave, and fear of judgment from colleagues or managers. Employees in highly competitive environments or those without adequate sick leave benefits are more likely to exhibit presenteeism. 4. What are the findings from research on presenteeism? Answer: Research shows that presenteeism can lead to decreased productivity, increased errors, and longer recovery times. It can also spread illness in the workplace, leading to a broader impact on organizational health and productivity. 5. What are the effects of presenteeism on employees, their co-workers, and organizations? What are the consequences? Answer: Presenteeism can negatively affect employee well-being, increase stress, and exacerbate health issues. It can lower morale among co-workers and lead to decreased overall productivity. Organizations may face higher healthcare costs and reduced efficiency. 6. What are organizations doing about presenteeism in the workplace? Why are they not doing more about it? Answer: Some organizations offer flexible work arrangements, wellness programs, and encourage a supportive work culture. However, many are not doing enough due to a lack of awareness, inadequate policies, or a focus on immediate productivity over long-term employee health. 7. What should organizations do about presenteeism in the workplace? Answer: Organizations should create a supportive environment that encourages employees to take necessary sick leave without fear of repercussions. They can implement policies for flexible work, provide adequate sick leave, and promote employee well-being through health and wellness programs. Additionally, training managers to recognize and address presenteeism can help mitigate its impact. CHAPTER 14 ORGANIZATIONAL STRUCTURE CHAPTER LEARNING OBJECTIVES After reading Chapter 14, students should be able to: LO14.1 Define organizational structure and explain how it corresponds to division of labour. LO14.2 Discuss the relative merits of various forms of departmentation. LO14.3 Review the more basic and more elaborate means of achieving organizational coordination. LO14.4 Discuss the nature and consequences of traditional structural characteristics. LO14.5 Explain the distinction between organic and mechanistic structures. LO14.6 Discuss the emergence of ambidextrous, network, virtual, modular, and boundaryless organizations. LO14.7 Review important considerations concerning downsizing. LO14.8 Identify symptoms of structural problems in organizations. CHAPTER OUTLINE AND TEACHING NOTES What Is Organizational Structure? Organizational structure is the manner in which an organization divides its labour into specific tasks and achieves coordination among these tasks. It broadly refers to how the organization’s individuals and groups are put together or organized to accomplish work. Organizational structure intervenes between goals and accomplishments and thus influences organizational effectiveness. Structure affects how effectively and efficiently group effort is coordinated. To achieve its goals, an organization has to divide labour among its members and then coordinate what has been divided. The Division and Coordination of Labour Labour has to be divided because individuals have physical and intellectual limitations. There are two basic dimensions to the division of labour, a vertical dimension and a horizontal dimension. Once labour is divided, it must be coordinated to achieve organizational effectiveness. Vertical Division of Labour Vertical division of labour apportions authority for planning and decision making. It is reflected in the hierarchical levels of organizations. Key themes in the vertical division of labour include its impact on employees’ autonomy and control and communication. Increased vertical division reduces autonomy and puts a strain on communications. Autonomy and Control. The domain of decision making and authority is reduced as the number of levels in the hierarchy increases. A flatter hierarchy pushes authority lower and involves people further down the hierarchy in more decisions. Communication. As labour is progressively divided vertically, timely communication and coordination can become harder to achieve. As the number of levels in the hierarchy increases, filtering is more likely to occur. Horizontal Division of Labour Horizontal division of labour groups tasks into jobs and jobs into departments so that the organization can achieve its goals. Required workflow is the main basis for this decision. Key themes in the horizontal division of labour include its impact on job design and on differentiation. Job Design. The horizontal division of labour strongly affects job design and it has profound implications for the degree of coordination necessary. It also has implications for the vertical division of labour and where control over work processes should logically reside. Differentiation. Differentiation is the tendency for managers in separate units, functions, or departments to differ in terms of goals, time spans, and interpersonal styles. As organizations engage in increased horizontal division of labour, they usually become more and more differentiated. Under high differentiation, various organizational units tend to operate more autonomously. Differentiation points to the need for coordination. Departmentation Departmentation refers to the assignment of jobs into departments and is an important aspect of the horizontal division of labour. There are several common methods of departmentation each of which has its strengths and weaknesses. Functional Departmentation. Under functional departmentation, employees with closely related skills and responsibilities (functions) are located in the same department. The most cited advantage is efficiency. Other advantages include enhanced communication within departments, enhanced career ladders and training opportunities within functions, and performance of functional specialists should be easier to measure and evaluate. The disadvantages stem from the specialization within departments that occurs in the functional department. As a result, a high degree of differentiation can occur between functional departments which can lead to conflict between departments. Functional departmentation works best in small to medium-sized firms that offer relatively few product lines or services. Product Departmentation. Under product departmentation, departments are formed on the basis of a particular product, product line, or service. A key advantage is better coordination among the functional specialists who work on a particular product line. Also, product-focused departments can be evaluated as profit centres. Another advantage is flexibility and the ability to serve the customer or client better and the potential to respond to customers in a timely way. Disadvantages are that professional development might suffer and economies of scale might be threatened and inefficiency might occur. Matrix Departmentation. Under matrix departmentation, employees remain members of a functional department while also reporting to a product or project manager. It is an attempt to capitalize on the strengths of both functional and product departmentation. It provides a degree of balance between the abstract demands of the product or project and the people who actually do the work, resulting in a better outcome. It is also very flexible and can lead to better communication among the representatives from the various functional areas. The disadvantages are that project managers might not see eye-to-eye with various functional managers which can create conflict. As well, employees assigned to a product and project team in essence report to two managers and can result in role conflict and stress. Thus, managers need to be well trained under matrix structures. There may also be some cultural limitations in countries such as China due to discomfort with the vague reporting relationships. Other Forms of Departmentation. Several other forms of departmentation also exist. Under geographic departmentation, relatively self-contained units deliver the organization’s products or services in a specific geographic territory. It shortens communication channels, caters to regional tastes, and gives some appearance of local control to clients and customers. Under customer departmentation, relatively self-contained units deliver the organization’s products or services to specific customer groups. The goal is to provide better service to each customer group through specialization. The advantages and disadvantages of geographic and customer departmentation parallel those for product departmentation. A hybrid departmentation is a structure based on some mixture of functional, product, geographic, or customer departmentation. It is an attempt to capitalize on the strengths of various structures, while avoiding the weaknesses of others. The key contrast is between functional and product departmentation, since the other forms are to some degree variations on product departmentation. Functional departmentation is efficient because it does not duplicate effort, and it enhances communication within functions. It provides clear career ladders within functions. However, it may lead to excessive differentiation between functions. Within product lines, product departmentation solves this problem, but it is at the expense of potential duplication of effort. As organizations grow and offer more products or services, product departmentation is preferable. Basic Methods of Coordinating Divided Labour When the tasks that will help the organization achieve its goals have been divided among individuals and departments, they must be coordinated so that goal accomplishment is actually realized. Coordination is the process of facilitating timing, communication, and feedback among work tasks. Five basic methods of coordination are identified. Direct Supervision. This is a very traditional form of coordination. Working through the chain of command, designated supervisors or managers coordinate the work of their subordinates. Standardization of Work Processes. Some jobs are so routine that the technology itself provides a means of coordination and little direct supervision is necessary. Work processes can also be standardized by rules and regulations. Standardization of Outputs. Coordination is achieved by ensuring that the work meets certain physical or economic standards. Standardization of outputs if often used to coordinate the work of separate product or geographic divisions. Standardization of Skills. Technicians and professionals who work together closely may be coordinated because of their standard training and through standardization of skills. They know what to expect of each other due to their standard training. Mutual Adjustment. Mutual adjustment relies on informal communication to coordinate tasks. It is useful for coordinating the most simple and the most complicated divisions of labour. The five methods of coordinating divided labour can be crudely ordered in terms of the degree of discretion they permit individual workers in terms of task performance. Exhibit 14.7 illustrates this continuum. Direct supervision permits little discretion. Standardization of processes and outputs permits successively more discretion. Finally, standardization of skills and mutual adjustment put even more control into the hands of those who are actually doing the work. Movement from direct supervision to mutual discretion is associated with greater potential for jobs to be designed in an enriched manner. An improper coordination strategy can destroy the intrinsic motivation of a job. The use of the various methods of coordination tends to vary across different parts of the organization, and they may change as task demands change. Other Methods of Coordination Sometimes coordination problems require more customized, elaborate mechanisms to achieve coordination. This is especially the case for lateral coordination across highly differentiated departments. Integration is the process of attaining coordination across differentiated departments. It specifies who is accountable for what, enables one department to predict the activities of another, and creates a shared understanding of overarching goals. In ascending order of elaboration, three methods of achieving integration include the use of liaison roles, task forces and teams, and full-time integrators. Liaison Roles. Liaison roles are those in which a person is assigned to help achieve coordination between his or her department and another department. One person serves as a part-time link between two departments. Task Forces and Teams. Task forces are temporary groups set up to solve coordination problems across several departments. Self-managed and cross-functional teams are also an effective means of achieving coordination. They are especially useful for new-product development and introduction. Integrators. Integrators are organizational members who are permanently assigned to facilitate coordination between departments. They are especially useful for dealing with conflict between (1) highly interdependent departments, (2) which have very diverse goals and orientations, (3) in a very ambiguous environment. A special kind of person is required to do this job since he/she has great responsibility but no direct authority in either department. The integrator must be unbiased, “speak the language” of both departments, and rely heavily on expert power. He or she should identify strongly with the overall organization and its goals. Traditional Structural Characteristics Over the years, management scholars and practising managers have agreed on a number of characteristics that summarize the structure of organizations. Span of Control The span of control is the number of subordinates supervised by a manager. The larger the span, the less potential there is for coordination by direct supervision. As the span increases, the attention that a supervisor can devote to each subordinate decreases. Spans at upper levels tend to be smaller. Flat versus Tall A flat organization has relatively few levels in its hierarchy of authority, while a tall organization has many levels. Flatness versus tallness is an index of the vertical division of labour. Flatter structures tend to push decision making powers downward in an organization because a given number of decisions are apportioned among fewer levels. Flatter structures generally enhance vertical communication and coordination. There has been a North American trend toward flatter organizations. Formalization Formalization refers to the extent to which work roles are highly defined by an organization. A more formalized organization tolerates little variability in the way members perform their tasks. Very complex tasks dictate high formalization. Centralization Centralization refers to the extent that decision-making power is localized in a particular part of the organization. In a more centralized organization, it is concentrated at the top with a single individual such as the president. In a more decentralized organization, decision-making power is dispersed down through the hierarchy and across departments. The proper degree of centralization should put decision-making power where the best knowledge is located. This often means decentralizing functions with direct customer contact, while centralizing functions that have a more internal orientation. Complexity Complexity is the extent to which an organization divides labour vertically, horizontally, and geographically. A fairly simple organization will have few management levels and not many separate job titles. A very complex organization will be tall, will have a large number of job titles and departments, and might be spread around the world. The essential characteristic of complexity is variety. As the organization becomes more complex, it has more kinds of people performing more kinds of tasks in more places, whether these places are departments or geographic territories. Summarizing Structure – Organic versus Mechanistic There have been two traditional viewpoints on organizational structure. Mechanistic structures are characterized by tallness, narrow spans of control, specialization, high centralization, and high formalization. Functional structures tend to be rather mechanistic. Mechanistic structures are closely associated with Weber’s bureaucracy as described in Chapter 1. Mechanistic structures can be contrasted with organic structures. Organic structures are characterized by flatness, low specialization, low formalization, and decentralization. They have wider spans of control and fewer authority levels. Flexibility and informal communication are emphasized over rigidity and a strict chain of command. They are more in line with the human relations movement. The labels mechanistic and organic represent theoretical extremes, structures can and do fall between them. There is no “one best way” to organize. Organic structures are not superior to mechanistic ones — each type has advantages and disadvantages. The one that allows better performance depends on an organization’s environment and technology. In general, more mechanistic structures are called for when an organization’s environment is more stable and its technology is more routine. Organic structures tend to work better when the environment is uncertain, the technology is less routine, and innovation is important. Many organizations do not have only a single structure and that structure can and should change over time. Contemporary Organic Structures Recent years have seen the advent of new, more organic organizational structures that remove unnecessary bureaucracy and decentralize decision making. The result is a more adaptable organization. Some examples are described below. The Ambidextrous Organization An ambidextrous organization is one that can simultaneously exploit current competencies and explore emerging opportunities. The ideal ambidextrous organization is partly organic in form and also exhibits more mechanistic characteristics. There is an essential tension between getting the most out of existing technology and the bread-and-butter products or services being offered (the firm’s current competencies) and at the same time searching for new opportunities and innovating. This distinction is sometimes described as exploiting versus exploring. It is generally believed that proper structuring is part of the solution to managing the tension. Ambidexterity has been associated with superior innovation, better financial performance, and longer survival because it provides a dynamic capability for change. There is general agreement among experts that exploration and its quest for innovation require a more organic structure, while exploitation—extracting value from existing competencies—requires a more mechanistic approach. One study found that the most successful structure for achieving ambidexterity was one in which an innovative unit maintained its own culture, structure, and processes, but was integrated with the core of the firm by existing senior management. This structure provided resources and protection for the innovative unit and allowed established units to perfect their own business. This suggests that with proper structure, exploitation and exploration are complimentary rather than contradictory. The findings from another study suggest that innovations have life cycles and that organizational structures have to correspond to these cycles. Autonomy and differentiation are helpful for introducing innovations, but more integration leads to efficiency as the innovation becomes familiar. Network and Virtual Organizations Network organizations involve liaisons between specialist organizations that rely strongly on market mechanisms for coordination. In other words, the emphasis is placed on the structure and individuals who can perform a function most effectively and economically. Ideally, network members cooperate, share information, and customize their services to meet the needs of the network. The diffusion of information and innovation are two important outcomes of network forms. The most interesting networks are dynamic or virtual organizations. In a virtual organization, an alliance of independent companies share skills, costs, and access to one another’s markets. It consists of a network of continually evolving independent companies. Each partner in a virtual organization contributes only in its area of core competencies. The key advantage of the network form is its flexibility and adaptability. A virtual organization is even more flexible than a matrix. Networks also allow organizations to specialize in what they do best. Networking and virtual organizations face some special problems. Problems can occur when stable networks deteriorate and the companies dealing with the core firm devote so much of their effort to this firm that they are isolated from normal market demands. This can make them “lazy,” resulting in a loss of their technological edge. Virtual organizations lose their organic advantage when they become legalistic, secretive, and too binding of the other partners. Virtual partners sometimes exploit their loose structure to profit at the expense of the core firm. Network firms can also suffer from “structural inertia” when network ties are maintained even when they are not economical. This may occur especially among older, larger organizations with large networks. The Modular Organization A modular organization is an organization that performs a few core functions and outsources other activities to specialists and suppliers. Services that are often outsourced include the manufacturing of parts, trucking, catering, data processing, and accounting. Thus, modular organizations are like hubs that are surrounded by networks of suppliers that can be added or removed as needed. Unlike a virtual organization, modular organizations maintain complete strategic control. By outsourcing non-core activities, modular organizations are able to keep unit costs low and develop new products more rapidly. They work best when they focus on the right specialty and have good suppliers. However, because they are dependent on so many outsiders, it is critical that they find suppliers who are reliable and loyal and can be trusted with trade secrets. As well, they must be careful not to outsource critical technologies, which could diminish future competitive advantages. Another disadvantage is that it decreases operational control due to its dependence on outsiders. The modular organization is particularly well suited to organizations in rapidly changing environments. Many modular organizations have become extremely profitable and competitive. The Boundaryless Organization Traditional organizational structures consists of boundaries or barriers that divide people at different hierarchical levels and separate those in different departments. These barriers can stifle productivity and innovation. In a boundaryless organization, the boundaries that divide employees such as hierarchy, job function, and geography as well as those that distance companies from suppliers and customers are broken down. A boundaryless organization seeks to remove vertical, horizontal, and external barriers so that employees, managers, customers, and suppliers can work together, share ideas, and identify the best ideas for the organization. Instead of being organized around functions with many hierarchical levels, the boundaryless organization is made up of self-managing and cross-functional teams that are organized around core business processes that are critical for satisfying customers, such as new-product development or materials handling. The traditional vertical hierarchy is flattened and replaced by layers of teams, making the organization look more horizontal than vertical. Boundaryless organizations are able to achieve greater integration and coordination within the organization and with external stakeholders. While there are advantages such as the ability to adapt to environmental changes, there are some disadvantages. For example, it can be difficult to overcome political and authority boundaries, and it can be time-consuming to manage the democratic process required to coordinate the efforts of many stakeholders. The Impact of Size Organizational size has a number of effects on the structure of organizations. Size and Structure In general, large organizations are more complex and less centralized than small organizations. Larger organizations have greater horizontal specialization and require more integrators and other coordination functions. Complexity means coordination problems. Control in large organizations is maintained with formalization. Large organizations tend to be more formal than small organizations. Rules, regulations, and standard procedures help to ensure that decentralized decisions fall within accepted boundaries. Logically, organizations with product departmentation should exhibit more complexity and more decentralization than those with functional departmentaiton. It should be noted that size is only one determinant of organizational structure. Even at a given size, organizations might require different structures to be maximally effective. Exhibit 14.12 illustrates the relationship between organizational size and structure. Downsizing An organizational trend in recent years is downsizing. Downsizing refers to the intentional reduction in workforce size with the goal of improving organizational efficiency or effectiveness. The implications of downsizing for organizational structure as well as problems of downsizing are examined. Downsizing and Structure. Downsizing usually results in a different organization, not just a mini version of the old structure. That is because there are different forces at work than those which drive growth. Also, white collar managerial and staff jobs have been hit hardest. Downsizing can be accompanied in a variety of ways although layoffs have been common. In practice, downsizing is often accompanied by reducing horizontal and vertical complexity. Organizations have become flatter and self-managed teams act as substitutes for a level of management. Horizontally, functions can be combined or removed altogether by contracting them out. Problems with Downsizing. Many organizations have not done a good job of anticipating and managing the structural and human consequences of downsizing. Organizations have a tendency to become mechanistic, particularly more formalized and centralized when threatened which works against needed flexibility in times of change. A good rule to follow is to avoid unnecessary formalization or centralization of matters that might have a negative impact on customers or clients. Firms may also be overzealous in their cutting and end up sub-contracting work to consultants which can be more expensive. A good rule to follow is to think very carefully about the work that needs to be done and who should do it before downsizing. A common downsizing structural error has been to flatten organizations by removing management levels without considering the implications for job design and workload. The increased spans that accompany flatter structures have also been implicated in some cases of ethical violation and corporate fraud. Less direct supervision coupled with unclear responsibilities mean that traditional guards against unethical activities may be lacking. Finally, surprising people with workforce cuts is likely to result in low morale, reduced productivity, and continuing distrust of management. Although downsizing has the potential to improve organizational effectiveness in certain circumstances, its impact on structure and morale must be anticipated and managed. Downsizing often leads to reduced satisfaction and commitment, increased absenteeism, and damaged health. Contrary to expectations, downsizing tends to have a negative effect on stock prices and mixed effects on profitability. The negative effects are primarily due to poor implementation such as a lack of supporting activities. However, when carefully and properly implemented, downsizing can have positive consequences A Footnote: Symptoms of Structural Problems The chapter concludes with some symptoms of structural problems. These include bad job design, coordination problems, conflict between departments, slow response time, incomplete information in decision-making, and a proliferation of committees. • Bad job design. There is a reciprocal relationship between job design and organizational structure. Frequently, improper structural arrangements turn good jobs into poor jobs in practice. • The right hand does not know what the left is doing. If repeated examples of duplication of effort occur, or if parts of the organization work at cross-purposes, structure is suspect. • Persistent conflict between departments. Managers often attribute conflicts to personality clashes between key personnel in the warring departments. Just as often, a failure of integration is the problem. • Slow response times. Delayed responses might be due to improper structure. • Decisions made with incomplete information. If decisions have been made with incomplete information and the information existed somewhere in the organization, structure could be at fault. • A proliferation of committees. When committee is piled on committee, or when task forces are being formed with great regularity, it is often a sign that the basic structure of the organization is being “patched up” because it does not work well. A structural review might be necessary if too many people are spending too much time in committee meetings. CHAPTER 15 ENVIRONMENT, STRATEGY, AND TECHNOLOGY CHAPTER LEARNING OBJECTIVES After reading Chapter 15, students should be able to: LO15.1.Discuss the open systems concept of an organization and the components of an organization’s external environment. LO15.2 Explain how environmental uncertainty and resource dependence affect what happens in organizations. LO15.3 Define strategy and describe how organizational structure can serve as a strategic response to environmental demands. LO15.4 Explain how vertical integration, mergers, acquisitions, strategic alliances, interlocking directorates, and the establishment of legitimacy reflect strategic responses. LO15.5 Describe the basic dimensions of organizational technology. LO15.6 Explain how organizations must match organizational structure to technology. LO15.7 Discuss the impact of advanced information technology on job design and organizational structure. CHAPTER OUTLINE AND TEACHING NOTES The External Environment of Organizations The external environment includes those events and conditions surrounding an organization that influence its activities. The external environment has a tremendous influence on organizations and profoundly shapes organizational behaviour. Examples include the OPEC oil embargo of 1973, the oil surplus in the mid-1980s, the SARS outbreak of 2003, and the recent economic crisis and global recession. Organizations as Open Systems Organizations are open systems that take inputs from the external environment, transform some of these inputs, and send them back into the external environment as outputs. This concept is important because it sensitizes us to the need for organizations to cope with environmental demands on both the input and the output side. Some of this coping involves adaptation to environmental demands and some coping may be oriented toward changing the environment. Components of the External Environment The external environment involves any person, group, event, or condition outside the direct domain of the organization. The components of the external environment include the following: The General Economy. The general economy affects organizations as they profit from an upturn or suffer from a downturn. Customers. All organizations have potential customers for their products and services. Organizations must be sensitive to changes in customer demands. Successful firms are highly sensitive to customer reactions. Suppliers. Organizations are dependent on the environment for supplies which include labour, raw materials, equipment, and component parts. Shortages can cause severe difficulties. Many firms have changed their strategy for dealing with suppliers and have developed exclusive relationships on the basis of quality and reliable delivery. Competitors. Environmental competitors vie for resources that include both customers and suppliers. Successful organizations devote considerable energy to monitoring the activities of competitors. For some organizations, the competition has become so aggressive that their environments are described as hypercompetitive. As a result, they must become extremely flexible to respond quickly to changes. Social/Political Factors. Organizations cannot ignore the social and political events that occur around them. Organizations must cope with a series of legal regulations that prescribe fair employment practices, proper competitive activities, product safety, and clients’ rights as well as changes in public attitudes. Technology. The environment contains a variety of technologies that are useful for achieving organizational goals. The ability to adopt the proper technology should enhance an organization’s effectiveness. In addition to these basic components of organizational environments, there are a large number of interest groups that can exist in an organization’s environment. Interest groups are parties or organizations other than direct competitors that have some vested interest in how an organization is managed. Often, interest groups make competing and conflicting demands because they evaluate organizational effectiveness according to different criteria. Different parts of the organization will often be concerned with different environmental components. Also, events in various components of the environment provide both constraints and opportunities for organizations. Environmental Uncertainty Environmental uncertainty is a condition that exists when the external environment is vague, difficult to diagnose, and unpredictable. Uncertainty depends on the environment’s complexity (simple versus complex) and its rate of change (static versus dynamic). • Simple environment. A simple environment involves relatively few factors, and these factors are fairly similar to each other. • Complex environment. A complex environment contains a large number of dissimilar factors that affect an organization. • Static environment. The components of a static environment remain fairly stable over time. • Dynamic environment. The components of a highly dynamic environment are in a constant state of change. This change is unpredictable and irregular, not cyclical. Rate of change and complexity can be arranged in a matrix. A simple/static environment should provoke the least uncertainty, while a complex/dynamic environment should provoke the most. A static/complex environment should be somewhat more certain than a dynamic/simple environment. Increasing uncertainty has several predictable effects on organizations and their decision makers including being less clear about cause-and-effect relationships, more difficulty agreeing on priorities, political jockeying within the organization, and more information must be processed by the organization to make adequate decisions. Organizations will act to cope with or reduce uncertainty because uncertainty increases the difficulty of decision-making and thus threatens organizational effectiveness. Resource Dependence Because organizations are open systems that receive inputs from the external environment and transfer outputs into this environment, they are in a state of resource dependence with regard to their environments. Resource dependence refers to the dependency of organizations on environmental inputs, such as capital, raw materials, and human resources as well as outputs such as customers. Carefully managing and coping with this resource dependence is a key to survival and success. Although all organizations are dependent on their environments for resources, some organizations are more dependent than others. As well, resource dependence can be fairly independent of environmental uncertainty, and dealing with one issue will not necessarily have an effect on the other. Resource dependence does not mean that organizations are totally at the mercy of their environments. It means that they must develop strategies for managing both resource dependence and environmental uncertainty. Strategic Responses to Uncertainty and Resource Dependence Strategy is the process by which top executives seek to cope with the constraints and opportunities posed by an organization’s environment. Strategy formulation follows from executives’ perceptions of the objective organizational environment. These perceptions are influenced by their experience and personality. Thus, it is the perceived environment that comprises the basis for strategy formulation. Strategy formulation determines the missions, goals, and objectives of an organization. There is no single correct strategy. The chosen strategy must correspond to the constraints and opportunities of the environment. Organizational Structure as a Strategic Response One important method of strategy implementation involves the structure of the organization. Lawrence and Lorsch studied more and less successful organizations in three industries—plastics, packaged food products, and paper containers. The environment of the plastics firms was perceived as very uncertain, the container firms faced an environment that was perceived as much more certain, and the perceived uncertainty faced by the producers of packaged foods fell between that experienced by the plastics producers and that faced by container firms. Lawrence and Lorsch also examined the sectors of the environment that were faced by three departments in each company: sales (market environment), production (technical environment), and research (scientific environment). In the container companies, producing, selling, and research (mostly quality control) were all fairly certain activities. In contrast, the range of uncertainty encountered by the plastics firms was quite broad. Research worked in a scientific environment that was extremely uncertain. On the other hand, production faced a technical environment that was more routine. Lawrence and Lorsch found that the plastics firms tended to be highly differentiated, the container firms were not highly differentiated, and the food packaging firms were more differentiated than the container firms but less differentiated than the plastic companies. In terms of structure, the container firms had adopted mechanistic structures. The most successful was organized along strict functional lines and was highly centralized. Coordination was achieved through direct supervision and formalized written schedules. At the other extreme, the most successful plastics company had adopted an organic structure. This was the most sensible way to deal with an uncertain environment and high differentiation. Decision-making power was decentralized to locate it where the appropriate knowledge existed. Coordination was achieved through informal mutual adjustment, ad hoc teams that cut across departments, and special integrators who coordinated between departments. In addition, the departments themselves were structured somewhat differently, research being the most organic and production the least organic. The Lawrence and Lorsch study demonstrates the close connections between environment, strategy, structure, and effectiveness. The argument that strategy determines structure is a reasonable conclusion when considering an organization undergoing great change or the formulation of a new organization. However, for ongoing organizations, structure sometimes dictates strategy formulation. Other Forms of Strategic Response Variations on organizational structure are not the only strategic response that organizations can make. Structural variations often accompany other responses that are oriented toward coping with environmental uncertainty or resource dependence. Some more elaborate forms of strategic responses concern relationships between organizations. Vertical Integration. Vertical integration involves taking control of sources of resource supply and distribution. It can reduce risk for an organization, however, when the environment becomes very turbulent, it can reduce flexibility and increase risk. However, the benefits seem to outweigh the costs. Mergers and Acquisitions. Mergers and acquisitions involve the joining of two organizations and the acquiring of one organization by another. Attempts to improve economies of scale, vertical integration, or to reduce uncertainty due to competition are common motives for mergers and acquisitions. However, the benefits and success of mergers and acquisitions are often disappointing. Strategic Alliances. Strategic alliances consist of actively cooperative relationships between legally separate organizations. Alliances can reduce risk and uncertainty for all parties. They can occur with competitors, suppliers, customers, and unions. A research and development consortium is a common example. Another example of an alliance between competitors is a joint venture. In a joint venture, two or more organizations form an alliance in the creation of a new organizational entity. Organizations form joint ventures to create new products and services and in the case of international joint ventures (IJV), to enter new and foreign markets. Sometimes competitors form strategic alliances to tackle economic and social concerns. There are many risks associated with strategic alliances and almost half of them fail. Strategic alliances are most successful when there is a vice-president or director of strategic alliances with his or her own staff and resources. Strategic alliances are also more likely to be successful and stable when the senior managers of the firms meet frequently and when the firms behave “transparently” toward one another, exchanging information quickly and accurately. A prior history of cooperation and a feeling that the partner is not taking unfair advantage of the alliance are also important. Interlocking Directorates. Interlocking directorates exist when one person serves on two or more boards of directors. The shared information provided by interlocks can provide an effective means of coping with environmental uncertainty and resource dependence. Interlocks may also provide price, payment terms, or delivery schedule advantages between firms. Interlocks can also serve as a means of influencing public opinion. Establishing Legitimacy. One way for organizations to respond to the dilemma of making correct organizational responses when it is hard to know which response is correct is to do things that make the organization appear legitimate to various constituents. Establishing legitimacy involves taking actions that conform to prevailing norms and expectations. It will often be strategically correct, but equally important, it will have the appearance of being strategically correct. In turn, management will appear to be rational, and providers of resources will feel comfortable with the organization’s actions. Legitimacy can be achieved by associating with higher status individuals or organizations, doing good deeds in the community, or making visible responses to social trends and legal legislation. The most common way of achieving legitimacy is to imitate management practices that other firms have institutionalized. The Technologies of Organizations Technology consists of the activities, equipment, and knowledge necessary to turn organizational inputs into desired outputs. Choice of technology is yet another strategic response. The concepts of technology and environment are closely related. Organizations choose their technologies. In general, this choice will be predicated on a desired strategy. Also, different parts of an organization rely on different technologies, just as they respond to different aspects of the environment as a whole. Basic Dimensions of Technology Three classification schemes of technology that can be applied to manufacturing firms and to service organizations are those of Charles Perrow, James D. Thompson, and Joan Woodward. Perrow’s Routineness. According to Perrow, the key factor that differentiates various technologies is the routineness of the transformation task that confronts the department or organization Technological routineness is a function of two factors. Exceptions. How standard or varied are the inputs and outputs? Technology becomes less routine as exceptions increase. Problems. When exceptions occur, how easy or difficult are the problems to analyze? Technology becomes less routine as problems become more difficult to analyze. Thus, technological routineness is the extent to which exceptions and problems affect the task of converting inputs into outputs. The exceptions and problems dimensions can be arranged to produce a matrix of technologies. • Craft technologies typically deal with standardized inputs and outputs, but analysis of exceptions may be difficult. • Routine technologies deal with standardized inputs and outputs, and problems can be easily analyzed. • Non-routine technologies deal with exceptional inputs and outputs, and analysis of exceptions is often difficult. • Engineering technologies encounter many exceptions of input or required output, but these exceptions can be dealt with using standardized responses. From most routine to least routine, we can order Perrow’s four technological classifications in the following manner: routine, engineering, craft, non-routine. Thompson’s Interdependence. James D. Thompson was interested in the way in which work activities are sequenced or “put together” during the transformation process. A key factor here is technological interdependence, the extent to which organizational subunits depend on each other for resources, raw materials, or information. More interdependence requires increased coordination and communication. Thompson proposed three types of technology in increasing order of interdependence. • Mediating technologies operate under pooled interdependence. Each organizational unit is to some extent dependent on the pooled resources generated by the other units but is otherwise fairly independent of those units. • Long-linked technologies operate under sequential interdependence. Each unit is dependent on the resources generated by the units that precede them in a sequence of work. • Intensive technologies operate under reciprocal interdependence. All units must engage in considerable interplay and mutual feedback to accomplish a task. As technologies become increasingly interdependent, problems of coordination, communication, and decision making increase. To perform effectively, each technology requires a tailored structure to facilitate these tasks. Woodward’s Production Processes. The most famous study of the relationship between technology and structure is that of Joan Woodward. She studied 100 firms in southern Essex, England and classified the technologies of the 80 firms in her sample that had clear-cut, stable production processes. She classified technologies in the following manner: • Unit (production of single units or small batches). • Mass (production of large batches or mass production). • Process (input transformed as an ongoing process). From top to bottom, this scale of technology reflects both increasing smoothness of production and increasing impersonalization of task requirements. Less and less personal intervention is necessary as machines control more and more of the work. Woodward’s mass technology incorporates aspects of Perrow’s routine technology and Thompson’s long-linked technology. Her unit technology seems to cover Perrow’s craft and engineering technologies and some aspects of Thompson’s intensive technology. Structuring to Cope with Technology How does technology affect organizational structure? Perrow. According to Perrow, routine technologies should function best under mechanistic structures, while non-routine technologies call for more organic structures. The craft and engineering technologies fall between these prescriptions. Research has generally supported his notion that more routine technologies adopt more mechanistic structures. Thompson. According to Thompson, increasing technological interdependence must be accompanied by increased coordination or integration mechanisms and the methods used to achieve coordination should be reflected in structural differences across the technologies. Mediating and long-linked technologies should be structured mechanistically while intensive technologies require intensive coordination which is best achieved by mutual adjustment and an organic structure. Woodward. In general, Woodward’s research indicates that organizational structures do vary with technology and that this variance is related to organizational effectiveness. Successful firms with unit and process technologies relied on organic structures, while successful firms that engaged in mass production relied on mechanistic structures. Woodward’s research is a landmark in demonstrating the general proposition that structure must be tailored to the technology the organization adopts to achieve its strategic goals. Implications of Advanced Information Technology Advanced information technology refers to the generation, aggregation, storage, modification, and speedy transmission of information made possible by the advent of computers and related devices. The Two Faces of Advanced Technology Advanced information technology has two faces. This means that a given form of advanced information technology can have exactly opposite effects, depending on how it is employed. This is possible because information technology is so flexible that it enables it to be used in ways that have opposite effects (e.g., checking up on employees versus sending them more timely information). This flexibility gives organizations choices about how to organize work. Such choices are a function of organizational culture and management values rather than inherent in the hardware. They should match the strategy the organization is pursuing. Advanced Manufacturing Technology Advanced manufacturing technology is oriented toward catering to niche markets and integrating various functional aspects from design to production to inspection to ordering materials. Three major trends underlie advanced manufacturing technology. The first is an obvious capitalization on computer intelligence and memory. The second is flexibility, in that the technology can accomplish a changing variety of tasks. The third is that advanced manufacturing technologies are increasingly being designed to be integrated with other advanced technologies that organizations use. The CAD/CAM system or computer-aided-design/computer-aided-manufacturing system is an example of the applied use of advanced information technology. Advanced manufacturing technology has implications for organizational behaviour. Such technology tends to automate the more routine information-processing and decision-making tasks. Depending on job design, what might remain for operators are more complex, non-routine tasks – those dealing with system problems and exceptions. In addition, task interdependence tends to increase under advanced technologies. Many advanced technological systems result in non-routine, highly interdependent tasks that are embedded in an uncertain environment. Organizational Structure. This shift in technology results in a movement toward flatter, more organic structures to capitalize on the technology’s flexibility and greater integration among specialties. Some things might become more highly centralized while in other cases decentralization might be called for. This suggests the increased use of integrators, task forces, planning committees, and other mechanisms that stimulate coordination. Job Design. Advanced manufacturing technology can also be expected to affect the design of jobs. When applied to job design, this technology can reduce worker control and water down existing skills or provide the ability for employees to have greater input into their jobs and enrich skills. Since advanced technology tends to automate routine tasks, operative workers must usually acquire advanced skills and they must be flexible and fast to respond to problems. All this points to the design of jobs for advanced manufacturing technology according to the principles of job enrichment and self-managed teams. Advanced Office Technology Advanced office technology combines computers, office machines, and telecommunications. The most common basic functions of the technology are text processing, communication, information storage and retrieval, analysis and manipulation of information, and administrative support. Some environmental and strategic concerns that have stimulated the adoption of advanced office technology include the potential for labour saving, responsiveness, and improved decision making. Organizational Structure. Technology has impacted organizational structure by tending to create more flatness in organizations and reducing the number of supervisors and middle management personnel. The impact on centralization of decision making is variable. Advanced technology also implies a freer, more democratic flow of information and general communication. This enables a wider range of people at more levels to be involved in organizational decision making. Job Design. This technology can also affect job design, although the effects on the quality of working life vary with job status. Clerks and secretaries are affected the most by job loss or de-skilling and reduced motivating potential. However, technology can actually upgrade skills if it is used to optimal capacity and the work is not highly fragmented. In terms of quality of working life, word processing and related video display work have been known to provoke eyestrain, muscular strain, and stress symptoms. Computer monitoring has also been linked to stress reactions. Many organizations have had poor success in introducing advanced technology because they ignored the human dimension. MINI-LECTURE: ENVIRONMENTAL INFLUENCE The first thirteen chapters of text focus primarily (although not exclusively) on the internal environment of organizations. Your students may appreciate some help in understanding the role of the external environment. Jeffrey Pfeffer and Gerald R. Salancik have provided the following fine example of the external environment’s impact on organizational functioning with which students will be able to identify. Consider the following case, described by a student at the University of Illinois. The student had worked in a fast-food restaurant near the campus and was concerned about how the workers (himself) were treated. Involved in what he was studying the student read a great deal about self-actualizing, theories of motivation, and the management of human resources. He observed at the restaurant that workers would steal food, make obscene statements about the boss behind his back, and complain about the low pay. The student’s analysis of the situation was a concise report summarizing the typical human relations palliatives: make the boring, greasy work more challenging and the indifferent management more democratic. The student was asked why he thought management was unresponsive to such suggestions. He considered the possibility that management was cruel and interested only in making a profit (and the operation was quite profitable). He was then asked why the employees permitted management to treat them in such a fashion — after all, they could always quit. The student responded that the workers needed the money and that jobs were hard to obtain. This fact, that the workers were drawn from an almost limitless labour pool of students looking for any kind of part-time employment was nowhere to be found in the student’s discussion of the operation of the restaurant. Yet, it was precisely this characteristic of the labour market which permitted the operation to disregard the feelings of the workers. Since there were many who wanted to work, the power of an individual worker was severely limited. More critical to the organization’s success was its location and its ability both to keep competition to a minimum and to maintain a steady flow of supplies to serve a virtually captive market. If the workers were unsatisfied, it was not only because they did not like the organization’s policies; in the absence of any base of power and with few alternative jobs, the workers had neither the option of voice nor exit (Hirschman, 1970). More important to this organization’s success than the motivation of its workers was its location on a block between the campus and dormitories, the path of thousands of students. Changes in policies and facilities for housing and transportation of students would have a far greater effect than some disgruntled employees. Our example illustrates, first, the importance of attending to contextual variables in understanding organizations, but also that organizational survival and success are not always achieved by making internal adjustments. Dealing with and managing the environment is just as important a component of organizational effectiveness. Source: Pfeifer, J., & Salancik, G.R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row, pp. 3-4. CHAPTER 16 ORGANIZATIONAL CHANGE, DEVELOPMENT, AND INNOVATION CHAPTER LEARNING OBJECTIVES After reading Chapter 16, students should be able to: LO16.1 Explain the environmental forces that motivate organizational change and describe the factors that organizations can change. LO16.2 Explain how organizations learn and what makes an organization a learning organization. LO16.3 Describe the basic change process and the issues that require attention at various stages of change. LO16.4 Explain how organizations can deal with resistance to change. LO16.5 Define organizational development and discuss its general philosophy. LO16.6 Discuss team building, survey feedback, total quality management, and reengineering as organizational development efforts. LO16.7 Discuss the problems involved in evaluating organizational development efforts. LO16.8 Define innovation and discuss the factors that contribute to successful organizational innovation. LO16.9 Understand the factors that help and hurt the diffusion of innovations. CHAPTER OUTLINE AND TEACHING NOTES The Concept of Organizational Change Common experience indicates that organizations are far from static. They change and these changes have a strong impact on people. In and of themselves, such changes are neither good nor bad. Rather, it is the way in which the changes are implemented and managed that is crucial to both customers and organizational members. Why Organizations Must Change All organizations face two basic sources of pressure to change — external sources and internal sources. Organizations are strongly influenced by their external environments because they are open systems that take inputs from the environment, transform some of these inputs, and send them back into the environment as outputs. Although organizations try to stabilize their inputs and outputs, environmental changes occur, and they must be matched by organizational changes if the organization is to remain effective. External sources include the global economy, deregulation, and changing technology. Change can also be provoked by forces in the internal environment of the organization such as low productivity, conflict, strikes, sabotage, high absenteeism, and turnover. As environments change, organizations must keep pace and internal changes often occur in response to organizational changes that are designed to deal with the external environment. Sometimes, when threat is perceived, organizations “unfreeze,” scan the environment for solutions, and use the threat as a motivator for change. Other times, though, organizations seem paralyzed by threat, behave rigidly, and exhibit extreme inertia. Without an investment of resources and some modification of routines and processes, inertia will occur. Internal and external environments of various organizations will be more or less dynamic. As a result, organizations will differ in the amount of change they should exhibit. Organizations in a dynamic environment must generally exhibit more change to be effective than those operating in a more stable environment. Change in and of itself is not a good thing and organizations can exhibit too much change as well as too little. What Organizations Can Change Organizations can change virtually any aspect of their operations. Some of the possibilities include changes in goals and strategies, technology, job design, structure, processes, culture, and people. Goals and strategies. Organizations frequently change the goals and the strategies they use to reach these goals. Technology. Technological changes can vary from minor to major. Job design. Companies can redesign individual groups of jobs to offer more or less variety, autonomy, identity, significance, and feedback. Structure. Organizations can be modified from a functional to a product form or vice versa. Traditional structural characteristics of organizations such as formalization and centralization can also be changed. Processes. The basic processes by which work is accomplished can be changed. Culture. One of the most important and difficult changes that an organization can make is to change its culture. Changing an organization’s culture is considered to be a fundamental aspect of organizational change. People. The membership of an organization can be changed either through a revised hiring process or by changing the skills and attitudes of existing members through training and development. Two important points should be made about the various areas in which organizations can introduce change. First, a change in one area often calls for changes in others. Failure to recognize the systematic nature of change can lead to severe problems. Second, changes in goals, strategies, technology, structure, processes, job design, and culture usually require that serious attention be given to “people” changes. As much as possible, necessary skills and favourable attitudes should be fostered before these changes are introduced. The Change Process Change involves a sequence of organizational events or a psychological process that occurs over time. There are three stages to the change process: unfreezing, changing, and refreezing. Unfreezing. Unfreezing occurs when recognition exists that some current state of affairs is unsatisfactory. Crises are especially likely to stimulate unfreezing. Employee attitude surveys, customer surveys, and accounting data are often used to anticipate problems and to initiate change before crises are reached. Change. Change occurs when some program or plan is implemented to move the organization or its members to a more satisfactory state. Change efforts can range from minor (a simple skills training program) to major (extensive job enrichment). Refreezing. Refreezing occurs when the newly developed behaviours, attitudes, or structures become an enduring part of the organization. The effectiveness of the change program can be examined and the desirability of extending it further can be considered. In recent years there has been much debate about whether Lewin’s simple model of change, especially the refreezing component, applies to firms in so called hyper-turbulent environments, where constant, unpredictable, non-linear change is the norm. While the model probably applies, there is little doubt that organizations in hyper-turbulent environments face special challenges that require them to be constantly acquiring, assimilating, and disseminating information so that they are ready for rapid change. Ideally, this permits something that looks like seamless “morphing” rather than the step-like process described by Lewin. The Learning Organization Organizational learning refers to the process through which organizations acquire, develop, and transfer knowledge throughout the organization. There are two primary methods of organizational learning. First, organizations learn through knowledge acquisition. This involves the acquisition, distribution, and interpretation of knowledge that already exists but which is external to the organization. Second, organizations also learn through knowledge development. This involves the development of new knowledge that occurs in an organization primarily through dialogue and experience. Organizational learning occurs when organizational members interact and share experiences and knowledge, and through the distribution of new knowledge and information throughout the organization. A learning organization is an organization that has systems and processes for creating, acquiring, and transferring knowledge in order to modify and change its behaviour to reflect new knowledge and insights. As a result, organizational change is much more likely to occur in a learning organization. There are four key dimensions that are critical for a learning organization: • Vision/support. Leaders must communicate a clear vision of the organization’s strategy and goals, in which learning is a critcial part and key to organizational success. • Culture. A learning organization has a culture that supports learning. • Learning systems/dynamics. Employees are challenged to think, solve problems, make decisions, and act according to a systems approach by considering patterns of interdependencies and by “learning by doing.” • Knowledge management/infrastructure. Learning organizations have established systems and structures to acquire, code, store, and distribute important information and knowledge so that it is available to those who need it, when they need it. This requires integration of people, processes, and technology. Learning organizations have been found to be almost 50 percent more likely to have higher overall levels of profitability than those organizations not rated as learning organizations, and they are also better able to retain essential employees. One study found a positive relationship between learning organization practices and a firm’s financial performance. Learning organizations are better able to change and transform themselves because of their greater capacity for acquiring and transferring knowledge. Learning is an important prerequistie for organizational change and transformation. Issues in the Change Process There are several important issues that organizations must confront during the change process. These issues represent problems that must be overcome if the process is to be effective. These problems include diagnosis, resistance, evaluation, and institutionalization. Diagnosis Diagnosis is the systematic collection of information relevant to impending organizational change. Accurate organizational diagnosis serves two functions. Diagnosis can provide information that contributes to unfreezing by showing that a problem exists. Once unfreezing occurs, further diagnosis can clarify the problem and suggest what changes should be implemented. Diagnosis can take a variety of forms and be performed by a variety of individuals. Relatively routine problems might be handled through existing channels. For more complex, non-routine problems, a change agent might be useful. Change agents are experts in the application of behavioural science knowledge to organizational diagnosis and change. The change agent brings an independent, objective perspective to the diagnosis while working with those who are about to undergo change. Proper diagnosis clarifies the problems and suggests what should be changed and the appropriate strategy for implementing change without resistance. Resistance People are creatures of habit, and change is frequently resisted by those at whom it is targeted. It occurs because organizational members fear that the costs of change will outweigh the benefits. Both unfreezing and change may be resisted. At the unfreezing stage, defence mechanisms may be activated to deny or rationalize the signals that change is needed. Even if there is agreement that change is necessary, any specific plan for change may be resisted. Causes of Resistance. Resistance to change occurs when people either overtly or covertly fail to support the change effort. Common reasons for resistance include the following: • Politics and self-interest. People feel they might lose status, power, or even their jobs with the advent of the change. • Low individual tolerance for change. Some people are just uncomfortable with changes in established routines. • Lack of trust. People might not trust the motives of those proposing the change. • Different assessments of the situation. The targets of the change might feel that the situation does not warrant the proposed change and the advocates of change have misread the situation. • Strong emotions. Change has the capacity to induce strong emotions that often make people feel helpless and resistant. • A resistant organizational culture. Some organizational cultures have stressed and rewarded stability and tradition and as a result advocates of change are viewed as misguided deviants or aberrant outsiders. Underlying these various reasons for resistance are two major themes: (1) change is unnecessary because there is only a small gap between the organization’s current identity and its ideal identity; (2) change is unobtainable (and threatening) because the gap between the current and ideal identities is too large. Therefore, a moderate identity gap is probably the most conducive to increased acceptance of change because it unfreezes people while provoking maximum resistance. Dealing with Resistance. Low tolerance for change is mainly an individual matter, and it can often be overcome with supportive, patient supervision. Dealing with resistance requires an understanding of the causes for resistance. If politics and self-interest are at the root of resistance, it might be possible to co-opt the reluctant by giving them a special, desirable role in the change process or by negotiating special incentives for change. Resistance to change can often be reduced by involving the people who are the targets of change in the change process and ensuring good communication. Finally, transformational leaders are particularly adept at overcoming resistance to change. One way they accomplish this is by “striking while the iron is hot”. The other way is to unfreeze current thinking by installing practices that constantly examine and question the status quo. One research study of CEOs who were transformational leaders found that they used a number of unfreezing practices to create a revised vision for followers about what the organization can do or be. Often, a radically reshaped culture is the result. Evaluation and Institutionalization Organizations are notorious for doing a weak job of evaluating “soft” change programs that involve skills, attitudes, and values. It is possible to do a thorough evaluation by considering the following variables: Reactions — did participants like the change program? Learning — what knowledge was acquired in the program? Behaviour — what changes in job behaviour occurred? Outcomes — what changes in productivity, absence, and so on occurred? Many evaluations of change efforts never go beyond the measurement of reactions, partly because those who propose the change effort fear reprisal if failure occurs. However, if the outcome of change is evaluated favourably, the organization may make the change a permanent part of the organizational system, a social fact that persists over time despite possible turnover by the members who originally experienced the change. Because change programs often go unevaluated or are only weakly evaluated, the hard proof of success that is necessary for institutionalization is often lacking. As a result, it is easy for institutionalization to be rejected by disaffected parties. This is a special problem for extensive, broad-based change programs that call for a large amount of commitment from a variety of parties. A number of factors can inhibit institutionalization. Promised extrinsic rewards may not be developed to accompany changes. Initial changes may provide intrinsic rewards that create higher expectations which cannot be fulfilled. New hires might not be carefully socialized to understand the unique environment of the changed organization. Key management supporters of the change effort may resign or be transferred. Environmental pressures may cause management to abandon change efforts. Many of these problems can be overcome by careful planning and goal setting during the diagnostic stage. Organizational Development: Planned Organizational Change Organizational development is a planned, ongoing effort to change organizations to be more effective and more human. It uses the knowledge of behavioural science to foster a culture of organizational self-examination and readiness for change. A strong emphasis is placed on interpersonal and group processes. OD seeks to modify cultural norms and roles so that the organization remains self-conscious and prepared for adaptation. A focus on interpersonal and group processes recognizes that all organizational change affects members and that their cooperation is necessary to implement change. A joint concern with both people and performance has become the credo of many contemporary OD change agents. Some Specific Organizational Development Strategies There are a wide variety of specific techniques for organizational development including job enrichment, management by objectives, diversity training, self-managed and cross-functional teams, and empowerment. Four additional strategies include team building, survey feedback, total quality management, and reengineering. Team Building Team building attempts to increase the effectiveness of work teams by improving interpersonal processes, goal clarification, and role clarification. It can facilitate communication and coordination. Team building usually begins with a diagnostic session often held away from the workplace. The team explores its current level of functioning with the goal of paining a picture of the current strengths and weaknesses of the team. The ideal outcomes is a list of the needed changes to improve team functioning. Subsequent meetings focus on how to implement the changes. A change agent acts as a catalyst and resource person. When team building is used to develop new work teams the preliminary diagnostic session attempts to clarify expected role relationships and additional training to build trust among team members. Ideally, team-building is a continuing process that involves regular diagnostic sessions and further development exercises as needed. This permits the team to anticipate new problems and to avoid the tendency to regress to less effective predevelopment habits. Survey Feedback Survey feedback involves the collection of data from organizational members and the provision of feedback about the results in a series of meetings in which members explore and discuss the data. Organizational members generate data that is fed back to them in a series of meetings in which the data is discussed. The purpose of the meetings is to formulate changes based on the data. The data generally consists of questionnaires completed by organizational members. Before the data are collected, a number of critical decisions must be made by the change agent. The change agent must decide who should participate in the survey and what questions the survey should ask. All members of a target group should be surveyed. Feedback seems to be most effective when it is presented to natural working units in face-to-face meetings. Many change agents prefer the manager of the working unit conduct the feedback meeting. Surveys have the most beneficial effects when the results are reviewed with employees and when action is taken in response to the survey. Total Quality Management Total quality management (TQM) involves a systematic attempt to achieve continuous improvement in the quality of an organization’s products or services. Typical characteristics of TQM programs include an obsession with customer satisfaction; a concern for good relations with suppliers; continuous improvement of work processes; the prevention of quality errors; frequent measurement and assessment; extensive training; and high employee involvement and teamwork. Prominent names associated with the quality movement include W. Edwards Deming, Joseph Juran, and Philip Crosby. All three were concerned with using teamwork to achieve continuous improvement to please customers. Each of these principles is associated with certain practices and specific techniques that typify TQM and is shown in Exhibit 16.7. TQM is mainly about achieving small gains over a long period of time. A continuum of continuous improvement exists which extends from reactive strategies such as responding to product or service problems to more proactive strategies like preventing errors, upgrading performance, and creating new products and services. Exhibit 16.8 illustrates this continuum. Continuous improvement can come from small gains over time or from more radical innovation. The goal is long-term improvement not a short-term fix. Improvement requires knowing where we are in the first place and so TQM is very concerned with measurement and data collection. TQM also stresses teamwork among employees and with suppliers and customers. Finally, TQM relies heavily on training to achieve continuous improvement. TQM is particularly known for using specialized training in tools that empower employees to diagnose and solve quality problems on an on-going basis. Some of these tools include: • Flowcharts of work processes. Flowcharts illustrate graphically the operations and steps in accomplishing some task, noting who does what, and when. • Pareto analysis. Pareto analysis collects frequency data on the causes of errors and problems, showing where attention should be directed for maximum improvement. • Fishbone diagrams. Fishbone (cause-and-effect) diagrams illustrate graphically the factors that could contribute to a particular quality problem. • Statistical process control. Statistical process control gives employees hard data about the quality of their own output that enables them to correct any deviations from standard. TQM places particular emphasis on reducing variation in performance over time. These tools to improve the diagnosis and correction of quality problems will not have the desired impact if they fail to improve quality in the eyes of the customer. Organizations with a real commitment to TQM make heavy use of customer surveys, focus groups, mystery shoppers, and customer clinics to stay close to their customers. TQM programs reveal a large number of successes in many firms. TQM is mainly about achieving small gains over a long period of time which can be hard to maintain. Despite some problems, the quality movement continues to be one of the most popular of the more elaborate OD efforts. Reengineering Reengineering involves the radical redesign of organizational processes to achieve major improvements in factors such as time, cost, quality, or service. It is one of the most fundamental and radical of all forms of change. It asks basic questions such as “What business are we really in?” and “If we were creating this organization today, what would it look like?” Then, jobs, structure, technology, and policy are redesigned around the answers to these questions. A key part of reengineering is processes. Organizational processes are activities or work that have to be accomplished to create outputs that internal or external customers value. In theory, the gains from reengineering will be greatest when the process is complex and cuts across a number of jobs and departments. By comparison, TQM usually seeks incremental improvements in existing processes rather than radical revisions of processes. Reengineering has been stimulated in organizations where “creeping bureaucracy” has become a problem, and as a result of new advanced information technology that allows organizations to radically modify important organizational processes. Reengineering is oriented toward one or both of the following goals: • The number of mediating steps in a process is reduced, making the process more efficient. • Collaboration among the people involved in the process is enhanced. Reengineering can include the following practices: • Jobs are redesigned and usually enriched. • A strong emphasis is placed on teamwork. • Work is performed by the most logical people. • Unnecessary checks and balances are removed. • Advanced technology is exploited. Reengineering is most extensive in industries where (1) much creeping bureaucracy has set in, (2) large gains were available with advanced technology, and (3) deregulation increased the heat of competition. Because reengineering has the goal of radical change, it requires strong CEO support and transformational leadership qualities. Strategic clarification is also important before reengineering begins. Strong CEO support and a clear strategy are important for overcoming resistance. Reengineering must be both broad and deep to have long-lasting, bottom-line results. It should span a large number of activities that cut costs or add customer value, and it should affect a number of elements, including skills, values, roles, incentives, structure, and technology. Half-hearted attempts do not pay off. Does Organizational Development Work? Although most OD efforts are not carefully evaluated, two large-scale reviews of a wide variety of OD techniques reached the following conclusions: • Most OD techniques have a positive impact on productivity, job satisfaction, or other work attitudes. • OD seems to work better for supervisors or managers than for blue-collar workers. • Changes that use more than one technique seem to have more impact. • There are great differences across sites in the success of OD interventions. Exhibit 16.9 shows the effects of organizing arrangements, social factors, technology, and physical setting interventions. In general, a high percentage of studies have reported positive changes following an OD effort. However, many studies also reported no change. This underlines the difficulty of introducing change, and it also suggests that variations in how organizations actually implement change may greatly determine its success. Weak methodology sometimes plagues research evaluations of the success of OD interventions. Some specific problems include: • OD efforts involve a complex series of changes making it difficult to know which of these changes produce changes in processes or outcomes. • Novelty effects or special treatment might produce short-term gains that do not persist. • Self-reports of changes after OD might be unconscious attempts to please the change agent. • Organizations may be reluctant to publicize failures. The Innovation Process The innovation process can help us to understand the ability of some individuals and organizations to think up and exploit innovative ideas. What Is Innovation? Innovation is the process of developing and implementing new ideas in an organization. An essential point is a degree of creativity. Innovations can be classified as product (including service) innovations, process innovations, or managerial innovations. Product innovations have a direct impact on the cost, quality, style, or availability of a product or service. Process innovations are new ways of designing products, making products, or delivering services. New technology is a process innovation. Managerial innovations are new forms of strategy, structure, human resource systems, and managerial practices that facilitate organizational change and adaptation. Innovation is often conceived of as a stage-like process that begins with idea generation and proceeds to idea implementation. For some kinds of innovations, it is also hoped that the implemented innovation will diffuse to other sites or locations: IDEA GENERATION → IDEA IMPLEMENTATION→ IDEA DIFFUSION Several interesting themes underlie the process of innovation. First, much idea generation is due to serendipity. Second, the beginning of innovation can be pretty haphazard and chaotic. The conditions necessary to create new ideas might be very different from the conditions necessary to get these ideas implemented and the innovation process is frequently a highly political process. Both the champions of innovation and the resisters might behave politically to secure or hold onto critical organizational resources. The generation of good ideas is no guarantee that they will be implemented and diffused. Generating and Implementing Innovative Ideas Generating and implementing innovative ideas requires someone to fight for these ideas, good communication, and the appropriate application of resources and rewards. Individual Creativity. Creative thinking by individuals and groups is at the core of the innovation process. Creativity is the production of novel but potentially useful ideas. Creative people are technical experts in their own domains and have creativity-relevant skills such as the ability to tolerate ambiguity, withhold early judgment, see things in new ways, and be open to new and diverse experiences. Creative people tend to be socially skilled but lower than average in need for social approval. Many creativity-related skills can be improved by training people to think in divergent ways and to withhold early evaluation of ideas. Creativity is more responsive to intrinsic rather than extrinsic motivation. Idea Champions. Idea champions are people who see the kernel of an innovative idea and guide it through to implementation. The role of idea champion is often an informal emergent role. Champions often have a real sense of mission about the innovation. Their function is one of sponsorship and support. For complex and radical innovations, it is common to see more than one idea champion emerge during the innovation process. Idea champions have been found to have very broad interests and to see their role as being broad. They often exhibit transformational leadership qualities and use a wide variety of influence tactics to gain support for the new system. Some idea champions feel compelled to engage in creative deviance, which means they defy orders by management to stop work on a creative idea. External Communication. Effective communication with the external environment and effective communication within the organization are vital for successful innovation. The most innovative firms seem to be those that are best at recognizing the relevance of new, external information, importing and assimilating this information, and then applying it. Communication with the environment can be enhanced by gatekeepers who span organizational boundaries to import new information, translate it for local use, and disseminate it to project members. They tend to have well-developed communication networks with other professionals outside the organization and with the professionals on their own team or project. Gatekeeping is essentially an informal, emergent role. In addition, many successful innovative firms excel at going directly to users, clients, or customers to obtain ideas for product or service innovation. Information can also be extracted from the environment by hiring employees with multicultural experience or providing opportunities for such experience, which has been shown to enhance creativity. Firms that put R&D activities in several geographic locations exhibit higher levels of imitative innovation. Internal Communication. Internally, organic structures facilitate innovation more easily than mechanistic structures. Mixing people with a variety of backgrounds together can also stimulate cross-fertilization of ideas. Inter-division communication is a driver of innovation. Internal communication can be stimulated with in-house training, cross-functional transfers, and varied job assignments. The physical location of gatekeepers is important for conveying new information to co-workers. R&D project groups seem to communicate best and perform best when group members have been together a medium length of time. Although organic structures seem best in the idea-generation and design phases of innovation, more mechanistic structures are often better for actually implementing innovations. Resources and Rewards. Money, time to pursue new ideas, and autonomy from tight organizational controls are critical for innovation. Abundant resources greatly enhance the chances of successful innovation. Resources also serve as a strong cultural symbol that the organization truly supports innovation. Funds for innovation are seen as an investment not a cost. Time can be an even more crucial factor for some innovations. Reward systems much match the culture that is seeded by the resource system. One study of research scientists found that freedom and autonomy were the most cited organizational factors leading to creativity. Many firms now offer career ladders that enable scientists and engineers to be extrinsically rewarded while still doing actual science or engineering. We can conclude that innovation depends on individual factors (creativity), social factors (a dedicated champion and good communication), and organizational factors (resources and rewards). Diffusing Innovative Ideas Diffusion is the process by which innovations move through an organization. A study of eight major process innovations found that substantial diffusion occurred in only on of the observed firms (Volvo). Factors associated with this poor record of diffusion include: • Lack of support and commitment from top management. • Significant differences between the technology or setting of the pilot project and those of other units in the organization. • Attempts to diffuse particular techniques rather than goals that could be tailored to other situations. • Management reward systems that concentrate on traditional performance measures and ignore success at implementing innovation. • Union resistance to extending the negotiated “exceptions” in the pilot project. • Fears that pilot projects begun in non-unionized locations could not be implemented in unionized portions of the firm. • Conflict between the pilot project and the bureaucratic structures in the rest of the firm. These problems can lead to a “diffuse or die” situation such that if diffusion does not occur, the pilot project and its leaders become more and more isolated form the mainstream of the organization and less and less able to proceed alone. Some research suggests that innovations are especially difficult to diffuse in organizations dominated by professionals. A number of factors have been found to be critical determinants of the rate of diffusion: • Relative advantage. Diffusion is more likely when the new idea is perceived as truly better than the one it replaces. • Compatibility. Diffusion is easier when the innovation is compatible with the values, beliefs, needs, and current practices of potential new adopters. • Complexity. Complex innovations that are fairly difficult to comprehend and use are less likely to diffuse. • Trialability. If an innovation can be given a limited trial run, its chances of diffusion will be improved. • Observability. When the consequences of an innovation are more visible, diffusion will be more likely to occur. Also important is adaptability, since innovations often have to be custom-tailored to diffuse effectively. In combination, these determinants suggest that there is considerable advantage in thinking about how innovations are “packaged” and “sold” so to increase their chances of widespread adoption. They also suggest the value of finding strong champions to sponsor the innovation at the new site. A Footnote: The Knowing-Doing Gap Despite the need for organizations to change, develop, and innovate, they often exhibit considerable inertia. It seems that many managers know what to do, but have considerable trouble implementing this knowledge in the form of action. In a very insightful book, Jeffrey Pfeffer and Robert Sutton describe this situation as the knowing-doing gap. Pfeffer and Sutton cite a number of reasons for the knowing-doing gap including the tendency for some organizational cultures to reward short-term talk rather than longer-term action; many changes require cooperation between organizational units, but many organizations foster internal competition that is not conducive to such cooperation; and when managers do manage to make changes, these changes sometimes fail because techniques are adopted without understanding their underlying philosophy. Instructor Manual for Organizational Behaviour: Understanding and Managing Life at Work Gary Johns, Alan M. Saks 9780133347500, 9780133951622