CH-15-16 Organizational Structure – Organizational Behavior: Improving Performance and Commitment in the Workplace : Chapter Notes

This Document Contains Chapters 15 to 16 Instructor’s Manual: Ch. 15: Organizational Structure CHAPTER OVERVIEW This chapter identifies and describes the key factors in designing an organization’s structure, including work specialization, chain of command, span of control, centralization of decision making, formalization, business environment, strategy, technology, size, and organizational form. It also points out some of the pitfalls inherent in restructuring and describes how to manage them. LEARNING GOALS After reading this chapter, you should be able to answer the following questions: 15.1 What is an organization’s structure, and what does it consist of? 15.2 What are the major elements of an organizational structure? 15.3 What is organizational design, and what factors does the organizational design process depend on? 15.4 What are some of the more common organizational forms that an organization might adopt for its structure? 15.5 When an organization makes changes to its structure, how does that restructuring affect job performance and organizational commitment? 15.6 What steps can organizations take to reduce the negative effects of restructuring efforts? CHAPTER OUTLINE I. Organizational Structure A. An organizational structure formally dictates how jobs and tasks are divided among and coordinated between individuals and groups within the company Asset Gallery (Organizational Structure & Technology/OB Video DVD): One Smooth Stone. This McGraw-Hill video provides an overview of the operations of One Smooth Stone, a “business theatre company” that specializes in corporate sales meetings and new product launches. The video describes a number of different elements and facets of organizational structure. II. Why Do Some Organizations Have Different Structures Than Others? A. Organizational chart – a drawing that represents every job in the organization, and the formal relationship between jobs B. Elements of Organizational Structure 1. Work Specialization – the way in which the tasks in an organization are divided into separate jobs a. Highly specialized jobs, where workers do only one kind of task, may be efficient, but workers will lack flexibility and job satisfaction 2. Chain of Command – deals with reporting relationships within an organization, capturing the flow of authority down through the levels of the organization a. Modern organizations may have very complex chains of command, with people reporting to two or more managers 3. Span of Control – represents how many people report to a given manager a. Narrow spans of control allow for close working relationships, but can significantly increase labor costs, and cause employees to become resentful of being too closely supervised b. Current research suggests that a moderate span of control is best for an organization’s productivity, but spans of control in organizations have increased significantly in recent years, creating flatter structures c. Small spans of control create “tall” organizational structures, while large spans of control create “flat” structures 4. Centralization – shows where decisions are made in the organization a. Centralized – managers at the top of the organizational chart make decisions b. Decentralized – managers at the bottom of the organizational chart make decisions OB Assessments: Centralization. This assessment determines whether a student’s job is centralized or decentralized, based on the hierarchy of authority and the participation in decision making. Focus discussion on whether the students preferred the structure they experienced, or whether they would have liked a different kind of structure. Please see the Instructor PowerPoints for a Bonus Assessment on Formalization. Please see the Connect assignments for this chapter for an assessments on Structure Preferences. Please email me at [email protected] if you have any questions about using these assessments in your teaching. 5. Formalization – refers to the number of rules and procedures that are used to standardize behaviors and decisions – companies that have a lot of rules are formal, those with fewer rules, less formal a. Formalization is a necessary coordination mechanism when organizations want to deliver a standardized product or service 6. Elements in Combination a. All of the above elements can be combined to paint a picture of two different types of organizations: i. Mechanistic – Efficient, rigid, standardized, these companies thrive in stability. They have a structure that relies on formalization, a hierarchical chain of command, work specialization, centralization of decision-making, and narrow spans of control. ii. Organic – Flexible, adaptive, outward-focused organizations that thrive in dynamic environments. They have structures that rely on low levels of formalization, weak or multiple chains of command, low levels of work specialization, and wide spans of control. iii. Most organizations fall somewhere between the two types, and whether or not a type is effective depends on the environment of the organization Asset Gallery (Organizational Structure & Technology/Self Assessment): Identify Your Preferred Organizational Structure. This selfassessment measures students’ preferences for organic vs. mechanistic organizational structures. It offers a good complement to the OB Assessment on centralization. Ask students who worked in organizations that were high in hierarchy of authority and low in participation in decision making if they liked the organizational structure. C. Organizational Design 1. Organizational design is the process of creating, selecting, or changing the structure of an organization OB at the Bookstore: The Idea Factory. Students rarely sit around thinking about the structure of an organization. However, very few examples epitomize its power more so than the story of Bell Labs. Ask students to give you the names of companies they picture as being “creative” or “ahead of the curve”. Push them to think about what sets these companies apart from others. You’ll get answers like technology, leadership, etc. One of the core similarities in many of these firms is their organic and open organizational structure. You literally can’t imagine a more bureaucratic organization than what AT&T was back in the 1940’s. However, the simple shifting of people both in groups and physical space sparked a behemoth in creativity and collaboration that spanned decades. Ask students why they think doing that made such a big difference. Why don’t all companies do this? 2. Factors Influencing Organizational Design a. Business Environment i. Consists of customers, competitors, suppliers, distributors, and other factors external to the firm a. Stable environments don’t change rapidly – more suitable to mechanistic designs b. Dynamic environments change rapidly – more suitable to organic designs b. Company Strategy i. Describes the organization’s objectives and goals and how it will capitalize on its assets to make money a. Low cost producers rely on selling products at the lowest possible cost and being as efficient as they can, often taking a mechanistic approach b. Differentiators focus on providing high quality or unusual products and adapting to their environment quickly, often taking an organic approach c. Technology i. The method by which an organization transforms inputs into outputs a. Research suggests that the more routine a technology is, the more mechanistic a structure should be d. Company Size i. The larger an organization becomes, the more likely it will be to have a mechanistic design D. Common Organizational Forms 1. Simple Structure a. A small organization with one person at the top who is the owner/manager, companies with simple structures have little specialization or formalization Try This! Ask students if any of them grew up in a family business. Have them describe the business to see if it fits the characteristics of a simple structure. Does the student see anything limiting or inefficient about the business’s current structure? Can the student point to the need for a structure that is more bureaucratic in nature? 2. Bureaucratic Organizations a. Bureaucracies are designed for efficiency, and rely on high levels of work specialization, formalization, centralization of authority, rigid and well-defined chains of command, and relatively narrow spans of control b. Functional Structure i. Groups employees by the functions they perform for the organization – most mechanistic of bureaucratic organizations c. Multi-Divisional Structure i. Product structure – employees are grouped around " products ii. Geographic structure – employees are grouped by location OB Internationally. This text box looks at IBM’s organizational structure, noting that IBM is moving from a geographic structure to a more functional structure. As the world becomes flatter through technology, clients expect the best talent from around the world, not just the best talent that happens to be sitting in their city. One discussion question that might be asked is, “Are there any drawbacks to this approach?” Students should consider time zones, language difficulties, and cultural differences in their answers. iii. Client structure – employees are grouped around a specific client iv. Matrix structures – combine two types of structure into one, typically based on functional and projects or product divisions a. Matrix structures are very flexible, and allow organizations to put together teams based on employee experience and skill b. Matrix structures give each employee two chains of command, two groups with which to interact, and two sources of information to consider – can create high stress levels for employees E. Summary: Why Do Some Organizations Have Different Structures Than Others? (Figure 15-6) III. How Important Is Structure? A. Changes to an organization’s structure (restructuring) can have negative effects on performance, at least in the short term, because they hinder learning and decision making and increase employee stress B. Restructuring has a moderate negative effect on commitment, with affect commitment being much lower in organizations that restructure IV. Application: Restructuring A. Organizations today frequently restructure – often laying off managers in an attempt to create a flatter organization OB on Screen: Company Men. The clip referenced in the book begins around the 41:40 mark of the film, continuing until about the 43:20 mark. Be careful in loading the scene for viewing based on the time listed above. The scene immediately preceding this one ends with a profanity. The clip depicts Gene McLary (Jones) at a boardroom table headed by CEO James Sallinger (Nelson). The CEO is determined to raise the stock price of the company at all costs and the most expedient way to do that in his eyes (although there are other options) is to layoff more people within the company. McClary does not believe this is the correct or moral course of action. Students will likely not sympathize with the CEO partly because the movie is designed in such a way that you are not supposed to. However, it is worth pressing them on how they think somebody gets to this stage in their career and (at least seemingly) has little regard for employees within the company. How would they feel as employees of a company if their CEO acted and thought like Sallinger does in the clip? Would their mind change if they were a major stakeholder? Another course of discussion could revolve around those employees that are caught in the crossfire (McClary) or those who are left behind after the layoffs are completed. Please email Jason Colquitt ([email protected]) if you have any questions about using OB on Screen in your teaching. Try This! Use the Company Men clip for a different chapter. Consider restructuring decisions from the perspective of the timesensitive model in Chapter 14 on Leadership: Styles and Behaviors. What style should be used for restructuring decisions, and does that style seem to be in use in the clip? Drawing on Chapter 7 on Trust, Justice, and Ethics, what are the issues in play in such decisions? Clearly a company’s handling of such issues will impact their reputation, perceived trustworthiness, and perceived justice. Are their ethical issues involved as well, in terms of the four component model of ethical decision-making? Bonus OB on Screen (from 2nd ed): The Departed. The clip begins around the 1:36:53 mark of the film, continuing until about the 1:38:03 mark. The clip depicts Colin Sullivan and Police Captain Queenan discussing the fact the ramifications of the fact that Sullivan is going to be investigating other members of the SIU to find a “rat” that has been tipping off a major criminal (Frank Costello). The situation provides an example of how, by creating a subunit, the information flow between two different groups is blocked. One topic for class discussion is under what circumstances a company might want to create units like this on purpose. Following that, a discussion of how many companies do this inadvertently (creating silos) and then spend lots of time and money trying to keep the information flowing between the groups. It is a great time to discuss how this has happened in the Sony example in the book (or through the extra case provided below in the IM). (Instructor note: Be careful when you start this scene – it should begin immediately as Matt Damon enters the Captain’s office. If you start it too early, right at the beginning of the chapter – you will end up with some questionable language.) Bonus OB on Screen (from 1st ed): Star Wars II: Attack of the Clones. The clip begins around the 1:33:34 mark of the film, continuing until about the 1:35:22 mark. The clip depicts Chancellor Palpatine being awarded “emergency powers” over the Galactic Senate. This move centralizes all decision-making authority within the organizational structure of the Republic. Clearly, Yoda and Mace Windu (the two characters at the beginning and ending of the scene) recognize what has just been done – even if the rest of the assembly does not. In addition to discussing what this might mean for Star Wars, encourage students to think about the structures they come into contact with everyday. How might the structure of the university or system they belong to affect them? What about the structure of the groups they belong to? B. One of the best ways in which managers can help a restructuring to succeed is to help to manage the guilt and remorse felt by layoff survivors – those people who don’t leave the company – by giving them a stronger sense of control and communicating with them frequently and honestly. Try This! Ask students to give you a show of hands if their families have been affected by the restructuring of an organization. The show of hands will likely be larger than you might expect. For those students who have not been affected, this demonstration helps to bring home how widespread this issue is, especially over the last two decades. How did their families feel about the companies that restructured? Perhaps some of them have been affected personally as well. DISCUSSION QUESTIONS 15.1 Is it possible to be a great leader of employees in a highly mechanistic organization? What special talents or abilities might be required? Answer: In a highly mechanistic organization, great leaders often have one of two types of skills – they are either technically expert, or they are proficient at improving the processes by which work is done, so employees are able to work more efficiently. On the other hand, a leader who had high levels of consideration may stand out in a highly mechanistic organization, simply for providing care and concern in an environment dominated by production issues. 15.2 Why do the elements of structure, such as work specialization, formalization, span of control, chain of command, and centralization, have a tendency to change together? Which of the five do you feel is the most important? Answer: As one of these elements of structure changes, the others must change as well. Take, for example, work specialization. As employees are given more and more specialized jobs to do, senior level managers are more and more likely to develop rules by which those jobs should be done, and the organization becomes more formalized and centralized. In addition, with increasing specialization, senior management may perceive an increased need to control employees, which will lead to hiring more managers and a decreased span of control. 15.3 Which is more important for an organization: the ability to be efficient or the ability to adapt to its environment? What does this say about how an organization’s structure should be set up? Answer: Much of this depends on how dynamic the organization’s environment is. The more dynamic, the more adaptable a company needs to be. To some extent, increasing efficiency is one way in which organizations adapt to a changing environment. When the environment is characterized by high competition and decreasing prices, increased efficiency may be the only way in which the organization is able to compete. 15.4 Which of the organizational forms described in this chapter do you think leads to the highest levels of motivation among workers? Why? Answer: Although there are so many variables that preclude a clear answer to this question, divisional structures, especially those centered around clients, are likely to lead to the highest levels of motivation, because they allow employees to get a better understanding of the importance of their work (how what they do impacts customers.) 15.5 If you worked in a matrix organization, what would be some of the career development challenges that you might face? Does the idea of working in a matrix structure appeal to you? Why or why not? Answer: Matrix organizations are highly political, due to their dual reporting relationship structure. Employees may be torn between becoming a generalist (moving from product to product, using different skills) and becoming a specialist (focusing on skill development in their functional areas.) It may be hard for employees to find the right mentor, especially since they change work groups on a regular basis. Whether or not a student will find a matrix structure appealing, depends in large part on their design for a rapidly changing, highly politically charged, work environment. 15.6 Should an organization consult with rank-and-file employees before it restructures? Should it be open about its intentions to restructure or more secretive about key details? Why? Answer: Yes. By consulting with rank and file employees, managers may find that there are alternatives to restructuring that would accomplish the same cost decreases, while retaining the company’s knowledge base. Most companies are more secretive about the key details of restructuring, since disclosing those details can often give competitors insight into the company’s strategies and target goals. CASE: CHEESECAKE FACTORY Questions: 15.1 What aspects of the Cheesecake Factory’s business do you think are helped by becoming larger? What aspects might be hurt? Answer: By becoming larger and having such a hierarchical structure, The Cheesecake Factory enjoys economies of scale in many things such as purchasing, developing training processes, etc. They could be hurt if customers begin to perceive more of a “factory” nature when eating there or when their employees no longer want to work for a company that gives them that feeling. 15.2 Would you like to work for a company with the hierarchical structure and standardization that the Cheesecake Factory has? How might the company overcome some of these issues when it comes to its employees? Answer: Most people don’t like the idea of working for a highly standardized and very hierarchical organization. Cheesecake Factory overcomes some of these issues by trying to make employees feel like they are part of a family and that each individual has an important role to play in the restaurant. Each restaurant needs to develop its own sense of belonging and the fact that being an employee there makes you part of the in-group. Giving people a sense of where they can go in their jobs is important as well. 15.3 Based on what you’ve read, would you say the Cheesecake Factory has a centralized or decentralized structure? Does this help or hurt the company in your opinion? Answer: The Cheesecake Factory’s success seems to come from the fact that they have a weird balance of being a very centralized organization, but yet employees feel like what they are doing is important and that they are making decisions on their own every day. However, by any reasonable measurement of centralization – we would say the company is very highly centralized. This helps them tremendously in terms of efficiency and being able to maintain consistency across restaurants. BONUS CASE (from 2nd ed): CISCO Cisco Systems, based in San Jose, California, is the world’s largest provider of Internet networking and communications equipment and also an employer of more than 65,000 persons. The company plays the role of the “plumber of the technology world,” because three-quarters of its business comes from routers, switches, and other networking products, all designed to keep information flowing around the globe. John Chambers, the CEO of Cisco Systems, states, “From a business-model and leadership perspective, we’re seeing a massive shift from management by command and control to management by collaboration and teamwork. You could almost say this shift is as revolutionary as the assembly line. Business processes are being turned upside down to better compete in a global environment.” So how has Cisco met this challenge head on? By making changes to its organizational structure that allow its employees and executives to gain “speed, skill, and flexibility.” These organizational changes are many, from adopting matrix structures in which employees report to more than one boss to instituting highly developed and formalized cross-functional teams at multiple levels within the organization. The transition has not been easy. The restructuring required immense collaboration between employees and executives, who were used to a more traditional, hierarchical structure. The new system receives support from the compensation system, which rewards collaborative abilities instead of individual performance. Approximately 20 percent of Cisco’s top managers were not cut out for the change— according to Chambers, “It’s not that they weren’t successful working on their own or that that they weren’t good people; they just couldn’t collaborate effectively.” The goal for the reorganization has been to spread leadership and decision making throughout the company, to such a wide level that people and teams feel as if they have the authority to move ahead with important initiatives. For example, Cisco’s three-year-old Emerging Technologies Group already has generated eight products, each expected to earn around $1 billion in revenue. And, says Chambers, “We now have a whole pool of talent who can lead these working groups, like mini CEOs and COOs.” Although some parts of this reorganization have been informal, many of the structural changes represent formal initiatives. Major priorities are no longer managed at the top but rather through “councils” and “boards” that consist of multiple executives and managers. For example, Cisco’s engineering organization (one-third of its employee base) reports to a “Development Council,” which comprises nine senior vice presidents. The combination of multiple managers from various disciplines across the organization attempts to reduce the silo mentality that keeps people from developing a broad picture, allowing them to make better and faster decisions. Cisco says that this team structure enabled it to make a decision about a major acquisition in a mere eight days—something that would have been impossible under the old structure. Despite the constant state of flux, Cisco maintains at least 10 boards and more than 30 councils (the councils target $10 billion plus market opportunities). In this sense, Cisco’s ability to adjust to an ever-changing technology market appears better than ever. Prior to its reorganization, Cisco Systems had a reputation for having a kind of “cowboy culture” in which people with the most aggressive and strong personalities pushed and shoved to try to gain John Chambers’s approval. Those who controlled the most resources had the most power, and they used that power for personal gain instead of the best interest of the company. Now the company exhibits a sense of pride in managers who do something to help others succeed, even if they don’t receive explicit or instant credit for it. John Chambers will be the first to tell you that the current collaborative structure could not have emerged without the systems put in place to facilitate communication between employees spread across the globe. Cisco had to figure out a way to allow everyone to work together without hopping on a plane every time they needed a meeting. Therefore, the company developed a technology called “TelePresence,” which Chambers calls “a lifelike, ultra-high-definition videoconferencing system that enables meetings so realistic that they truly feel like everyone is in the same room even if they’re thousands of miles away.” The technology seems to provide a competitive advantage to Cisco, though for $300,000, it will set up the very same system for anyone who wants one! An issue that keeps popping up, however, is what happens when Chambers (who, at age 59, is recognized as one of the top CEOs in the world) retires. The current structure is mainly a result of his influence, though he also argues that the new structure minimizes his importance. The succession plan remains up in the air. One thing is for certain though: The nimble decision-making ability of Cisco’s councils and boards might be put to use very shortly, because as of late 2009, Cisco had $26 billion in cash laying around, waiting to be spent. Sources: “50 of the World’s Most Innovative Companies.” Fast Company, March 2009, p. 52; Fryer, B.; and T.A. Stewart. “Cisco Sees the Future.” Harvard Business Review, November 2008, pp. 72–79; Kimes, M. “Cisco Layers It On.” Fortune, December 8, 2008, p. 24.; McGirt, E. “Revolution in San Jose.” Fast Company, January 2009, p. 88. Questions: 15.1 Given the technology available at Cisco, is it possible for other companies to emulate its organizational structure? What might prevent other companies from doing so? Answer: It is difficult to keep other organizations from copying an organizational structure per se – especially when Cisco has been very open about sharing the structure with just about anyone. However, the success of a structure does not come simply from the lines on an organizational chart, it is a function of matching the structure with Cisco’s unique environment, culture, and technology. Other companies would be hard pressed to try to duplicate the structure and get the same effects. 15.2 Evaluate Cisco’s organizational structure in terms of its ability to compete effectively with its competitors. What specific advantages does it provide? Answer: Cisco’s structure allows it to process information and make decisions much more quickly than most companies. For the type of business Cisco’s operates in, technology and the environment changes at an incredibly rapid pace which allows Cisco’s structure to give it an advantage that other companies are hard pressed to match. 15.3 What types of employees is Cisco likely to attract with the structure it has put in place? Does this prediction bode well or ill for the" future? Answer: Cisco will probably tend to attract employees who are comfortable with ambiguity, willing to change, and interested in technology. These types of employees should suit Cisco well as they move into the future, but will become a hindrance if they have to shift their " strategy or change their structure to become more traditional. INTERNET CASE: THE NEW SCIENCE OF WHO SITS WHERE AT " WORK by Rachel Feintzeig "h"p://online.wsj.com/news/ar3cles/SB10001424052702304441404579123230310600884?KEYWORDS=the+new+science+of+who+sits+where Questions: 15.1 The article lists a lot more positives than negatives for moving people around on a regular basis. Can you think of reasons not to do this? Are there some companies that this idea would not work " well for? Answer: A company shouldn’t care about doing this if they don’t “need” collaboration and cooperation from their employees. For some companies the cost of moving people and the disruption of work flow could have negative effects especially if the moves occurred " on a regular basis. 15.2 Do you believe that people with the same temperament and personality should sit next to one another? Would this be better for " an organization than sitting people based on work-flow? Answer: There is little evidence out there that grouping people based on their personality would have positive or negative effects in the workplace. There certainly isn’t enough evidence that doing so would bring larger effects than putting people together that you need to collaborate together which is the primary reason for a company wanting to do this. EXERCISE: CREATIVE CARD COMPANY Instructions: This exercise allows students to analyze the effectiveness of a given organizational structure (shown below), and to create a new structure that is more effective. If possible, give students time to work on their structures in class, then tell them to take the structures home and prepare to report on them during the next class period. Then, in the next class period, have all the groups present their structures to the class, and as a class, identify which structure would be most effective for the company. Another option is to assign each student group a particular type of structure – functional, product, geographic, customer, or matrix, and to see how easy or difficult it is to structure the company along those lines. Finally, you can encourage the students to experiment with mixed structures by asking them to create a structure that combines two different structures - for example, functional and geographic. Organizational Chart – Creative Cards Mixed Functional and Geographic Structure Problems with Organization Structure for Creative Cards Note that the problems listed below are just a sample – students will find many more! • Administrative Assistant is at the same level (reporting directly to President) as Vice Presidents and Directors. • Levels of senior staff are inconsistent – some are Vice Presidents, some are Directors – they should be one or the other. • Creative Director reports to both Executive Vice President and CEO. • HR V.P. doesn’t report to anyone. • Company structure at the top is not consistent – is it a functional or a geographic organization? • East Coast Sales Manager doesn’t report to anyone. • H.R. V.P. is in charge of employees from the Sales, Operations, and Distribution areas. • Sanitation Engineer and Janitors would be better off reporting to production managers, since they work on the shop floor. • Art Design Manager, Verse Writer, and Printing Supervisor don’t report to anyone. • If there is a Creative Director, there should also be corresponding Manufacturing and Sales Directors. • The Printing Supervisor is not a Creative Position. • The various “product supervisors” (sympathy, birthday, etc.) all report to both the art design manager and the verse writer. • The Birthday Card Supervisor has 60 people reporting to him or her. That span of control is too broad. OMITTED TOPICS The field of organizational behavior is extremely broad and different textbooks focus on different aspects of the field. A brief outline of topics that are not covered in this text, but which the professor might want to include in his or her lecture, is included below. In cases where these topics are covered in other chapters in the book, we note those chapters. In cases where they are omitted entirely, we provide some references for further reading. • Other organizational structures – Boundaryless, Networked (Virtual), Team, etc. are all other “names” for structures. This list can be somewhat endless. While there are many other “forms” of structure, most are simply versions of the types of structures already covered in the chapter. • Organizational Strategy – It is difficult to have a conversation about structure without discussing which types of organizational structures are “the best”. While our focus is mainly on how structure affects individuals within organizations, which structure is best for the organization itself is a different question altogether and depends largely on the strategy of an organization. For more on organizational strategy and the implications of strategy on structure, see;
 Porter, M. Competitive Strategy. New York, N.Y.: Free Press, 1980. • Culture – Most of the effects of organizational structure happen because of the general feelings it might create among organizational members. A detailed discussion of organizational culture follows in chapter 16. • Instructor’s Manual: Ch. 16: Organizational Culture CHAPTER OVERVIEW The focus of Chapter 16 is organizational culture – the shared social knowledge that shapes the attitudes and behavior of employees. Four general culture types are presented – networked, communal, fragmented, and mercenary – along with the concepts of strong and weak cultures. Finally, the chapter looks at how organizations maintain their cultures and how person-organization fit impacts job performance. LEARNING GOALS After reading this chapter, you should be able to answer the following questions: 16.1 What is organizational culture, and what are its components? 16.2 What general and specific types can be used to describe an organization’s culture? 16.3 What is a strong culture, and is it always good for an organization to have a strong culture? 16.4 How do organizations maintain their culture and how do they change it? 16.5 What is person–organization fit and how does it affect job performance and organizational commitment? 16.6 What steps can organizations take to make sure that newcomers will fit with their culture? CHAPTER OUTLINE I. Organizational Culture A. There are many different definitions of the term “organizational culture”, but for the purposes of the chapter, organizational culture is the shared social knowledge within an organization regarding the rules, norms, and values that shape the attitudes and behaviors of employees II. Why Do Some Organizations Have Different Cultures Than Others? 1. Culture Components a. Observable Artifacts – manifestations of culture that employees can easily see and discuss i. Symbols – everything from corporate logos to employee uniforms ii. Physical Structures – things like office layout, location of buildings, etc. iii. Language – the jargon, slang, and slogans used within the walls of an organization iv. Stories – anecdotes, accounts, legends, and myths that are passed down from cohort to cohort in an organization v. Rituals – daily or weekly planned routines in an organization vi. Ceremonies – formal events, generally performed in front of an audience of organizational members b. Espoused Values – the beliefs, philosophies, and norms that a company explicitly states i. Enacted Values – what a company does – in other words, whether or not a company’s actions live up to its espoused values c. Basic Underlying Assumptions – taken-for-granted beliefs and philosophies that are so ingrained that employees simply act on them rather than questioning the validity of their behavior in a given situation – for example, safety in an engineering firm Asset Gallery (Culture/Mgmt Video DVD): New Belgium Brewery Org Culture. This McGraw-Hill video provides an overview of the operations of the concept of organizational culture as it plays out at New Belgium Brewery (the video also discusses organizational structure). New Belgium seems to prioritize core values such as employee participation and honesty and ethics. Both of those are reflected in the brewery’s “open book management” philosophy. B. General Culture Types 1. Fragmented – low sociability, low solidarity 2. Mercenary – low sociability, high solidarity 3. Communal – high sociability, low solidarity 4. Networked – high sociability, high solidarity C. Specific Culture Types 1. Customer Service Culture – focused on service quality 2. Safety Culture – a culture where safe behaviors at work are expected and valued 3. Diversity Culture – a culture that values diversity of all types 4. Creativity Culture – a company focused on fostering innovation OB Assessments: Creativity Culture. This assessment determines whether or not students have held a job at an organization with a creativity culture. Ask students to fill out the assessment relative to their current job, or the last job they held. Then focus discussion on whether the students viewed themselves as a good “fit” for their particular culture. For example, if the students are low in openness to experience (see Chapter 9 on Personality and Cultural Values), did they feel like a good fit in a culture that emphasized high innovation and low formalization? Please see the Instructor PowerPoints for Bonus Assessments on Change Cynicism and PersonOrganization Fit. Please see the Connect assignments for this chapter for assessments on Culture Preference and Culture Strength. Please email me at [email protected] if you have any questions about using these assessments in your teaching. D. Culture Strength 1. A high level of culture strength exists when employees definitively agree about the way things are supposed to happen within the organization (high consensus) and when their subsequent behaviors are consistent with those expectations (high intensity) 2. Weak cultures exist when employees disagree about the way things are supposed to be or what is expected of them 3. Strong cultures are not necessarily the same as “good” cultures – they may not lead to the most positive organizational outcomes 4. Subcultures unite smaller subsets of an organization’s employees a. Subcultures can turn into countercultures when their values don’t match those of the larger organization Try This! This is a great time to ask students about organizations they perceive as having strong cultures. Have they ever worked for an organization with a strong culture? What did it feel like? What were the expectations placed on them? Was it a positive or negative experience? Try to draw out varying experiences students have had in the places they have worked. Explore whether “everyone” thought it was a bad place to work or whether it was just them as an individual who didn’t fit. OB at the Bookstore: Turn the Ship Around! It is worth discussing the notion of a subculture with students. Is it ever desirable for an organization with a really strong culture to allow the development of subcultures within its boundaries? When might that be the case? Using the book as an example, Captain Marquet was able to create a subculture within perhaps one of the strongest organizational culture environments there is: the U.S. military. For the sailors on the USS Santa Fe this culture was one of empowerment and leadership and led to superlative results. What are the dangers of allowing the crew of a nuclear submarine to create its own culture? (Or is that too obvious?) Push students to talk about when they have been part of a subculture – was it a positive or negative experience for them? What allowed that subculture to form and do they think the overall organization would have been happy about that? Sometimes a strong subculture is created within an organization that doesn’t have a strong culture to begin with – when might this be good or bad? E. Maintaining an Organizational Culture 1. Attraction-Selection-Attrition (ASA) framework holds that companies maintain their organizational cultures by: a. attracting people whose personalities fit the culture b. selecting candidates based on whether or not their personalities match the culture c. letting people go whose personalities don’t fit the culture 2. Socialization a. The primary process by which employees learn the social knowledge that enables them to understand and adapt to an organization’s culture b. Three Stages of Socialization i. Anticipatory Stage – begins as soon as a potential employee develops an image of what it must be like to work for an organization ii. Encounter Stage – begins the day an employee starts work a. Reality shock – when expectations don’t match reality iii. Understanding and Adaptation Stage – when newcomers change to internalize the norms and expected behaviors of the organization F. Changing an Organizational Culture 1. Two primary ways to change a culture: a. Changes in Leadership OB on Screen: Price Check. The clip referenced in the book begins around the 5:15 mark of the film, continuing until about the 6:43 mark. (Note the use of the use of a profane word at the immediate beginning of the transition to this scene and avoid it by starting the clip immediately after the two men have their discussion at the table.) The clip depicts a newly promoted manager in Susan Felders (Parker Posey) meeting all of her subordinates for the first time in a conference room where she takes the floor. The talk she gives to the group leaves much to be desired on every level. Most students will find her talk to be awkward and will laugh at times. Encourage them to think about how difficult that first moment is for a newly promoted manager (especially one from the outside). Would they want to meet all of their new employees in a format like this? To some degree a meeting like this is probably expected so is there another way to do it? Ask them how big an effect they think a first meeting like this will have on the ongoing culture of the group. How would they picture the culture being on a goforward basis? Make them be specific. Ask students to picture themselves sitting around that conference table during that meeting. What would the manager have to do to overcome it now? It’s also worth discussing how a manager/ leader creates a subculture within the larger firm. Even though the larger organization might have a very different culture, can that culture outweigh a strong culture created within a group by a manager? When might that happen? Bonus OB on Screen (from 2nd and 3rd ed): New In Town. The clip referenced in the book begins around the 18:34 mark of the film, continuing until about the 25:53 mark. The clip depicts corporate office, executive-in-waiting Lucy Hill’s first day of work at a food processing plant in New Ulm, Minnesota. The scene provides a case study of how different subunits of a large company can have radically different cultures and perspectives. Students will find the stereotypical depictions of Minnesotans to be funny, but push them to understand the differences in perspective between a manufacturing plant and corporate offices. Neither type of culture is right or wrong, but they can be dramatically different. How might Lucy Hill have been better prepared for this meeting? What could she have done differently? How important is it to fit in with the culture of a group you are trying to influence? Encourage the students to try to think of times when it might be beneficial NOT to fit in with the culture. Are there advantages to allowing organizational subunits to have a different culture? When might this not be the case? Please email Jason Colquitt ([email protected]) if you have any questions about using OB on Screen in your teaching. Bonus OB on Screen (from 1st ed): In Good Company. The clip referenced in the book begins around the 1:25:02 mark of the film, continuing until about the 1:30:50 mark. The clip depicts the arrival of Teddy K for a speech at his recently acquired company, Sports America Magazine. In the scene it is evident that the surface-level, synergistic culture of Globecom doesn’t match very well with its newly acquired company (or its new employees). One topic for class discussion is why many mergers fail. What happens when two distinct cultures come together and are forced to interact? Have any of the students worked for a culture that didn’t match their own personality? What did that make them feel like everyday when they went to work in that environment? b. Mergers and Acquisitions OB Internationally. This box points out the role culture plays in the success or failure of mergers and acquisitions. When companies with two strong cultures merge, they will only be successful if they take steps to handle cultural integration directly. Asset Gallery (Change/Hot Seat): Change: More Pain than Gain. This Hot Seat feature shows a manager dealing with two of his employees as they experience difficulty in the aftermath of a merger. Both employees are having trouble adjusting to their new coworkers, their new roles, and their new status quo. The clip illustrates the impact that organizational change can have on organizational commitment. G. Summary: Why Do Some Organizations Have Different Cultures Than Others? (Figure 16-6) III. How Important Is Organizational Culture? A. Person-organization fit is the degree to which a person’s personality and values match the culture of an organization (Table 16-3) B. Employees who have high person-organization fit have more job satisfaction and trust toward their managers, and experience lower stress than people who have low levels of person-organization fit C. Person-organization fit is more related to citizenship behaviors than task performance IV. Application: Managing Socialization A. Realistic Job Previews – Companies can give job applicants an accurate picture of what working for an organization is going to be like by providing information on both the positive and negative aspects of the job B. Orientation Programs – Companies that have newcomer orientation programs have increased levels of employee satisfaction, commitment, and performance, compared to those who don’t C. Mentoring – A process by which a junior-level employee develops a deep and lasting relationship with a more senior-level employee within the organization DISCUSSION QUESTIONS 16.1 Have you or a family member worked for an organization that you would consider to have a strong culture? If so, what made the culture strong? Did you or they enjoy working there? What do you think led to that conclusion? Answer: Answers will differ from student to student, but in most cases, people leave companies with strong cultures because of poor person-organization fit. Yes, a family member worked for an organization with a strong culture characterized by clear values, open communication, and a strong sense of community among employees. They enjoyed working there because the culture fostered collaboration, recognition, and a shared commitment to the company's mission. The alignment between the company's values and the employees' daily experiences led to a positive work environment and job satisfaction. 16.2 Is it possible for an employee to have personal values that are inconsistent with the values of the organization? If so, how is this inconsistency likely to affect the employee’s behavior and attitudes while at work? Answer: If an employee has personal values that are inconsistent with the organization, they may feel dissatisfied, but as the text points out, there may not be any impact on their task performance. In the long run, however, people who have less satisfaction at work are more likely to leave the organization than those who are more satisfied. 16.3 If you had to describe the culture of your university, what would it be like? What observable artifacts are present to be perceived by students? Are there any underlying assumptions that guide your behavior at your university? Answer: See student responses to the “What’s the Culture of Your University” exercise for answers to this question. The culture of my university is collaborative and academically driven, with a strong emphasis on innovation and inclusivity. Observable artifacts include student-led organizations, research opportunities, and events promoting diversity. Underlying assumptions guiding behavior include the belief in continuous learning, mutual respect, and the importance of contributing positively to the campus community. 16.4 How can two companies with very different cultures that operate in the same industry both be successful? Shouldn’t one company’s culture automatically be a better fit for the environment? Answer: Not necessarily. There are multiple ways to service customers and different strategies for making money. Similar to organizational structure (which is a good point of comparison here), there is not a “one size fits all”, best culture. Companies that learn to take advantage of and use the culture they have created are more likely to be successful. 16.5 If an organization wanted to foster a diversity culture, what steps might management take to ensure that employees will support the new culture? What observable artifacts might a company change to instill this culture? Answer: Managers who want to foster a diversity culture must have espoused values that are consistent with that culture, and their actions must be in alignment with their espoused values. They can also use the ASA model to attract, select, and retain diverse employees, and those who support diversity. 16.6 When you think of the U.S. Postal Service’s culture, what kinds of words come to mind? Where do these impressions come from? Do you think your impressions are accurate? What has the potential to make them inaccurate? Answer: When most students think of the U.S. Postal Service, they think of the terms “going postal” or “snail mail”. These terms leave the impression of a lumbering bureaucracy that forces employees into taking desperate action, a perception that is enhanced by media depictions of the U.S.P.S. With almost 700,000 employees, the U.S.P.S. is the size of a large city, such as Jacksonville, FL, or Seville, Spain. When you consider that the USPS had six people murdered in 2006, and compare that with the 40 people murdered in Richmond, CA (a city of only 99,000 people), the Post Office fares quite well with regard to safety. Words that come to mind regarding the U.S. Postal Service’s culture include "traditional," "reliable," and "bureaucratic." These impressions come from the USPS's long-standing history, its role in providing essential services, and the structured nature of its operations. While these impressions are generally accurate, they might be skewed by a focus on certain aspects, such as outdated practices or challenges faced by the organization, which can overlook more modern improvements and the dedication of its workforce. 16.7 Think about the last job you started. What are some unique things that companies might do to reduce the amount of reality shock that new employees encounter? Are these methods likely to be expensive? Answer: Student answers to this question will differ, but most techniques designed to reduce reality shock are not expensive. Realistic Job Previews, for example, simply involve giving the potential employee a little extra information during the interview process. To reduce reality shock for new employees, companies might implement comprehensive onboarding programs, provide mentorship or buddy systems, and offer clear role expectations and feedback. These methods can be costly, especially if they involve extensive training or dedicated resources, but they often lead to higher employee satisfaction and retention, making them a valuable investment. CASE: YAHOO Questions: 16.1 Is it possible for a company the size of Yahoo to change its culture dramatically without the push of a forceful leader? If yes, how could that happen? Answer: It’s possible, but certainly more difficult to change a culture without the push of a strong leader - especially if company leadership wants to be in control of that culture. However, culture change can come from a number of places including major shifts in the outside environment, a groundswell of employees pushing for a change, or a merger with another firm. The real worry for a company is that the culture morphs into something that isn’t effective if it isn’t being done actively from the top. 16.2 What are the dangers for Yahoo in having Marissa Mayer trying to duplicate much of the culture at Google? Answer: It’s possible that the employees at Yahoo simply don’t match the culture that has been created at Google. This could result in the loss of a number of key employees and much stress and anxiety among employees who stay. It’s also possible that developing a “Google-like” culture is not what Yahoo needs to be successful in the market-place because it doesn’t allow them to differentiate themselves in any meaningful way. 16.3 Do employees have to be present to have a strong culture? As a tech company, what are the advantages and disadvantages of Yahoo’s no-telecommuting policy? Answer: If a company wanted to have a culture of freedom and independence, having employees work from home could be a key aspect of what a company’s culture is. So, employees don’t have to be present for a strong culture to exist as long as the company does other things to foster and encourage that culture. Yahoo’s (or Marissa Mayer’s) belief is that Yahoo needs its employees to collaborate and cooperate for them to be successful. Having employees present makes that much easier and some would even argue that it can’t happen without employee interaction. The downside would be if Yahoo starts to lose employees and ends up at a recruiting disadvantage as a result of their policy. BONUS CASE (from 2nd ed): THE MAYO CLINIC The Mayo Clinic, headquartered in Rochester, Minnesota, but with facilities in Arizona and Florida as well, is considered one of the single best healthcare-providing systems in the country. Every day, more than 42,000 persons work on one of its three campuses, all following a single mantra: “Put the patient first.” Although you wouldn’t think it, within the healthcare industry, Mayo provides a surprisingly unique environment focused singularly on patient care. William and Charles Mayo, the original founders of the Mayo Clinic, established a core set of values in the early 1900s that, through significant effort, continue to thrive today. These values are embodied in the way current employees treat and react to patients and have made the Mayo Clinic world-renowned for its service excellence. In an industry that has its own set of rules and regulations, the Mayo Clinic stands apart. Why? The answer is very clear: organizational culture. The Mayo Clinic has established a customer service–oriented culture that permeates every aspect of its business: the organization’s structure, the types of employees it hires, the way in which it organizes work, and how it manages its people. Although it goes against almost everything the outside medical community practices and incentivizes, the Mayo Clinic puts all of its employees on salary (including doctors), focuses them on a single goal, and practices what it preaches—namely, regardless of cost, the needs of the patient come first. What might surprise you is that the nonprofit Mayo Clinic is also one of the lowest costing health care systems, operating in the lowest 15 percent of spending per patient. By encouraging doctors to work as a team, the hospital actually performs significantly fewer expensive scans and procedures. Denis Cortese, CEO of the Mayo Clinic, claims, “When doctors put their heads together in a room, when they share expertise, you get more thinking and less testing.” As the clinic’s culture thrived in Minnesota, most experts believed that it couldn’t survive in other locations when it expanded. Those experts turned out to be wrong. The Mayo Clinic’s two other major healthcare facilities, in Florida and Arizona (two of the most expensive states for healthcare), are excelling with the same culture in place. Part of the reason is that the Mayo Clinic has set up a “service infrastructure” that allows its culture to survive virtually anywhere. This infrastructure finds ways to engage physicians, focuses front-line employees on providing good first impressions, raises awareness of and education about the Mayo Service Values, and finds ways to measure and improve service processes continuously. You can see its culture at all three locations by the way the buildings are built, by the stories the employees tell, by the symbols they hold up to others, and by what the company celebrates as an organization. The Mayo Clinic’s culture is what differentiates it from other healthcare providers. One of the Mayo Clinic’s continual struggles is to make sure that the people it hires fit into its organization’s culture and match its values. One high-level administrator estimates that the Mayo Clinic hits that target approximately 80 percent of the time. The Mayo Clinic’s voluntary turnover rate is far below that for the rest of the service industry; for physicians, this rate sits at approximately 2.5 percent, and for non-physician employees, it is 5 percent. Luckily for Mayo, its culture is widely known, and people come from all over the world wanting to work in it. Doctors accept lower salaries than they could make working in private practice to work in the patient-oriented environment that the Mayo Clinic provides. For example, R.J. Karnes completed his surgery residency at the Mayo Clinic, went to work somewhere else, and then came back, mainly due to the sense of the collegiality he enjoyed among the staff. “That easy exchange of knowledge helps afford us the ability to provide the highest level of care for our patients”, Karnes says. As it expands, making sure that new employees integrate into the culture effectively is of paramount importance. To help focus new hires on things they might not know and to strengthen the culture, the Clinic sends new employees through an orientation program that focuses heavily on the values, history, and culture of Mayo. Needless to say, the healthcare industry in the United States is going through massive turbulence and upheaval. The Mayo Clinic is being held up as an example for others of what healthcare could be, if done with the right culture and system. Officials at Mayo believe that they’re in a good position to weather whatever healthcare storms might be coming; indeed, they could very well be the model for reform. As such, they’re working hard to ensure that their three campuses act and react as one entity and that they continue to improve their healthcare delivery and healthcare management processes. Sources: Bendix, J. “Mayo Clinic.” Medical Economics, March 6, 2009, p.27; Berry, L.L; and K.D. Seltman. Management Lessons from Mayo Clinic. New York: McGraw Hill, 2008; Finkel, E. “Brand of Brothers.” Modern Healthcare, March 23, 2009, pp. H4–5; Frey, K.A.; J.A. Leighton; and K.K. Cecala. “Building a Culture of Service Excellence.” Physician Executive 31 (2005), pp. 40–44; Gawande, A. “The Cost Conundrum: What a Texas Town Can Teach Us about Health Care.” New Yorker, June 1, 2009, pp. 36–44; Hicks, S. “Orientation Redesign.” T + D, July 2006, pp. 43–45. Questions: 16.1 Is Mayo’s corporate culture something that other healthcare systems can copy? Would it be possible to develop a national healthcare system modeled on the Mayo Clinic? Explain. Answer: Probably not exactly. Although Mayo does some things in very unique ways that contribute to its culture that other healthcare providers could copy if they wanted to. A culture like Mayo’s develops over a long period of time – it would be difficult to just “install” it. In order to model national healthcare after the Mayo model, the medical industry culture as a whole would need to drastically change. That would be a big task. 16.2 Under most scenarios, companies work hard to keep their culture unique so that it gives them a competitive advantage over others. Do you think Mayo should follow this philosophy? Why or why not? Answer: A very interesting question. Under most circumstances a company would attempt to use their culture to a complete competitive advantage. In the end, it would depend on whether Mayo leaders believed that the greater medical good was served by others becoming more like them. As a company they are not shy about sharing and opening up their culture to others, so they have probably taken the latter approach. 16.3 Do you think it’s possible that the Mayo Clinic’s culture could fall to the wayside under the enormous amounts of outside pressure that would occur if healthcare were standardized in the United States? What can it do to keep this collapse from happening? Answer: Outside environmental pressures always affect a company’s culture. However, Mayo has held pretty steady in the face of an overwhelming medical industry culture up to this point. One could argue that their culture would become even stronger under this scenario. Mayo has many things in place that perpetuate their culture (hiring, orientation, constant focus on the culture), Mayo would simply need to continue to operate the way they have while adjusting some practices as dictated by law. Patient care coming first will never change. INTERNET CASE: ONE BIG HAPPY BROKERAGE by Catherine Dunn http://money.cnn.com/2013/10/31/leadership/scottrade-great-places.pr.fortune/index.html 16.1 Is it possible to build a culture like this without the support of the CEO and other top management? Answer: It would be very difficult. It’s clear that Scottrade’s CEO Rodger Riney is a big believer in creating the kind of corporate culture where workers are expected to “have fun”. It’s almost impossible to imagine this kind of culture being present if that kind of a CEO isn’t in power. 16.2 What are the advantages to Scottrade of having a culture like this? Do you think it gives them an advantage over competitors such as TD Ameritrade and Charles Schwab? Answer: One would think that attraction and retention would be the main advantages. Does this kind of culture help employees be better stockbrokers? Probably not. Over time, the hope for Scottrade is that they hire employees that “fit” – when they do, they can expect to have higher levels of commitment, but not necessarily higher levels of employee task performance. Whether that attraction and retention allows them to have a competitive advantage over their competitors probably depends on how good a job they do at using it as a part of their recruitment strategy. Being #53 on Fortune’s Best 100 Place to Work can’t hurt. EXERCISE: WHAT’S THE CULTURE OF YOUR UNIVERSITY Instructions: Put students into groups and make sure they each have a copy of the exercise and Table 16-3 (the list of values used in Step 2 of the exercise). In Step 1, ask the groups to consider the questions associated with the six cultural artifacts (symbols, physical structures, language, stories, rituals, ceremonies). Some artifacts will be more relevant to the university’s culture than others—it’s fine if groups feel like they need to skip some artifacts to devote more attention to others. For example, a given university may not have any physical structures that stand out but may have a wide variety of symbols and language factors that convey the culture. Once the groups have finished discussing the artifacts, have them move on to Step 2 by analyzing Table 16-3. What one value seems to be most intensely transmitted through the cultural artifacts? Have groups present the one value that they came up with, along with the three artifacts that most transmit that value, to the class. Teaching Tips: Students will likely vary in the degree to which they like the depiction of their university’s culture in the group presentations. There may be disagreement in the key values of the university, which would be indicative of a weak culture. Even if there is a high level of agreement about the key values, students will vary in their degree of person-organization fit. That is, some students may appreciate the university’s values whereas others would prefer a different set of priorities. Regardless, the culture of the organization can only be changed by altering the artifacts that transmit the culture. Symbols can be changed, physical structures can be altered, new ceremonies and rituals can be instituted, and so forth. OMITTED TOPICS The field of organizational behavior is extremely broad and different textbooks focus on different aspects of the field. A brief outline of topics that are not covered in this text, but which the professor might want to include in his or her lecture, is included below. In cases where these topics are covered in other chapters in the book, we note those chapters. In cases where they are omitted entirely, we provide some references for further reading. International Cultures – This chapter focuses exclusively on organizational culture. Many aspects of international culture can be found in the OB Internationally boxes throughout the textbook and a thorough discussion of cultural values (Hofstede’s in particular) can be found in Chapter 9 – Personality and Cultural Values. Culture of Ethics – Many organizations are trying to create cultures where ethics is at the forefront and it tends to be a popular topic for class discussion. Ethics is covered in detail in the textbook in Chapter 7 – Trust, Justice, and Ethics. Instructor Manual for Organizational Behavior: Improving Performance and Commitment in the Workplace Jason Colquitt, Jeffery LePine, Michael Wesson 9780077862565, 9781260261554