CH-15 Foundations of Organization Structure – Organizational Behavior : Chapter Notes

Chapter 15 Foundations of Organization Structure LEARNING OBJECTIVES After studying this chapter, students should be able to: Identify seven elements of an organization’s structure. Identify the characteristics of the functional structure, the divisional structure, and the matrix structure. Identify the characteristics of the virtual structure, the team structure, and the circular structure. Describe the effects of downsizing on organizational structures and employees. Contrast the reasons for mechanistic and organic structural models. Analyze the behavioral implications of different organizational designs. INSTRUCTOR’S RESOURCES Instructors may wish to use the following resources when presenting this chapter. Text Exercises Career Objectives: What Structure Should I Choose? An Ethical Choice: Flexible Structures, Deskless Workplaces Personal Inventory Assessments: Organizational Structure Assessment Myth or Science?: “Employees Can Work Just as Well from Home” Point/Counterpoint: The End of Management Questions for Review Experiential Exercise: The Sandwich Shop Ethical Dilemma: Post-Millennium Tensions in the Flexible Organization Text Cases Case Incident 1: Kuuki: Reading the Atmosphere Case Incident 2: Boeing Dreamliner: Engineering Nightmare or Organizational Disaster? Instructor’s Choice This section presents an exercise that is NOT found in the student's textbook. Instructor's Choice reinforces the text's emphasis through various activities. Some Instructor's Choice activities are centered on debates, group exercises, Internet research, and student experiences. Some can be used in class in their entirety, while others require some additional work on the student's part. The course instructor may choose to use these at any time throughout the class—some may be more effective as icebreakers, while some may be used to pull together various concepts covered in the chapter. Web Exercises At the end of each chapter of this Instructor’s Manual, you will find suggested exercises and ideas for researching OB topics on the Internet. The exercises “Exploring OB Topics on the Web” are set up so that you can simply photocopy the pages, distribute them to your class, and make assignments accordingly. You may want to assign the exercises as an out-of-class activity or as lab activities with your class. Summary and Implications for Managers The theme of this chapter is that an organization’s internal structure contributes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work have a bearing on employee attitudes and behavior. What’s the basis for this argument? To the degree that an organization’s structure reduces ambiguity for employees and clarifies concerns such as “What am I supposed to do?” “How am I supposed to do it?” “To whom do I report?” and “To whom do I go if I have a problem?” shapes their attitudes and facilitates and motivates them to higher levels of performance. Exhibit 15-10 summarizes what we’ve discussed. Specific implications for managers are below: Specialization can make operations more efficient, but remember that excessive specialization can create dissatisfaction and reduced motivation. Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy. Balance the advantages of virtual and boundaryless organizations against the potential pitfalls before adding flexible workplace options. Downsize your organization to realize major cost savings, and focus the company around core competencies—but only if necessary, because downsizing can have a significant negative impact on employee affect. Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanistic elements when designing an organizational structure. Chapter 15 begins with a discussion of whether an organization that is experiencing growth can maintain an organic, flat structure. Even for a startup with only a few employees, choosing an organizational structure requires far more than simply deciding who’s the boss and how many employees are needed. The organization’s structure will determine what relationships form, the formality of those relationships, and many work outcomes. The structure may also change as organizations grow and shrink, as management trends dictate, and as research uncovers better ways of maximizing productivity. Structural decisions are arguably the most fundamental ones a leader has to make toward sustaining organizational growth. In this chapter, we’ll explore how structure affects employee behavior and the organization as a whole. BRIEF CHAPTER OUTLINE What Is Organizational Structure? Introduction An organizational structure defines how job tasks are formally divided, grouped, and coordinated. There are six key elements. (Exhibit 15-1) Work Specialization Henry Ford became rich and famous by building automobiles on an assembly line, demonstrating that work can be performed more efficiently by using a work specialization strategy. By the 1960s, there became increasing evidence that a good thing can be carried too far. The human diseconomies from specialization—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—more than offset the economic advantages. (Exhibit 15-2) Most managers today recognize the economies specialization provides in certain jobs and the problems when it’s carried too far. Thus, whereas specialization of yesteryear focused on breaking manufacturing tasks into specific duties within the same plant, today’s specialization breaks complex tasks into specific elements by technology, by expertise, and often globally. Departmentalization Grouping jobs together so common tasks can be coordinated is called departmentalization. One of the most popular ways to group activities is by functions performed. Tasks can also be departmentalized by the type of product or service the organization produces. Another way to departmentalize is on the basis of geography or territory. Process departmentalization can be used for processing customers as well as products. A final category of departmentalization is by type of customer. Chain of Command The chain-of-command was once a basic cornerstone in the design of organizations; it is far less important today. The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom. Two complementary concepts: authority and unity of command. Authority—the rights inherent to management to give orders and expect the orders to be obeyed. The unity-of-command principle helps preserve the concept of an unbroken line of authority. It states that a person should have only one superior to whom he/she is directly responsible. Times change, and so do the basic tenets of organizational design. The concepts of chain of command have less relevance today because of technology and the trend of empowering employees. A low-level employee today can access information in seconds that a generation ago was available only to top managers. Operating employees are empowered to make decisions previously reserved for management. Add the popularity of self-managed and cross-functional teams and the creation of new structural designs that include multiple bosses, and you can see why authority and unity of command hold less relevance. Many organizations still find they can be most productive by enforcing the chain of command. Span of Control How many employees a manager can efficiently and effectively direct is an important question. All things being equal, the wider or larger the span of control, the more efficient the organization. Exhibit 15-3 illustrates that reducing the number of managers leads to significant savings. Wider spans are more efficient in terms of cost. However, at some point, wider spans reduce effectiveness. Narrow or small spans have their advocates. By keeping the span of control to five or six employees, a manager can maintain close control. Narrow spans have three major drawbacks: First, as already described, they are expensive because they add levels of management. Second, they make vertical communication in the organization more complex. Third, narrow spans of control encourage overly tight supervision and discourage employee autonomy. The trend in recent years has been toward wider spans of control. Centralization and Decentralization Centralization refers to the degree to which decision making is concentrated at a single point in the organization. The concept of centralization includes only formal authority—that is, the rights inherent in a position. An organization characterized by centralization is inherently different structurally from one that’s decentralized. Research investigating a large number of Finnish organizations demonstrates that companies with decentralized research and development offices in multiple locations were better at producing innovation than companies that centralized all research and development in a single office. Formalization Formalization refers to the degree to which jobs within the organization are standardized. Low formalization—job behaviors are relatively nonprogrammed, and employees have a great deal of freedom to exercise discretion in their work. The degree of formalization can vary widely between organizations and within organizations. Boundary Spanning We’ve described ways that organizations create well-defined task structures and chains of authority. These systems facilitate control and coordination for specific tasks, but if there is too much division within an organization, attempts to coordinate across groups can be disastrous. One way to overcome compart mentalization and retain the positive elements of structure is to encourage or create boundary-spanning roles. Within a single organization, boundary spanning occurs when individuals form relationships with people outside their formally assigned groups. Boundary-spanning activities occur not only within but also between organizations. Gathering information from external knowledge sources is especially advantageous in highly innovative industries where keeping up with the competition is challenging. Positive results are especially strong in organizations that encourage extensive internal communication; in other words, external boundary spanning is most effective when it is followed up with internal boundary spanning. Organizations can use formal mechanisms to facilitate boundary-spanning activities through their structures. One method is to assign formal liaison roles or develop committees of individuals from different areas of the organization. Development activities can also facilitate boundary spanning. Employees with experience in multiple functions, such as accounting and marketing, are more likely to engage in boundary spanning. Many organizations try to set the stage for these sorts of positive relationships by creating job rotation programs so new hires get a better sense of different areas of the organization. A final method to encourage boundary spanning is to bring attention to overall organizational goals and shared identity concepts. Common Organizational Designs The Simple Structure The simple structure is characterized most by what it is not rather than what it is. It is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is a “flat” organization; it usually has only two or three vertical levels. One individual has the decision-making authority. The simple structure is most widely practiced in small businesses in which the manager and the owner are one and the same. (Exhibit 15-4) The strength of the simple structure lies in its simplicity. It is fast, flexible, inexpensive to maintain, and accountability is clear. One major weakness is that it is difficult to maintain in anything other than small organizations. It becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. As size increases, it is very difficult for the owner-manager to make all the choices. The simple structure’s other weakness is that it is risky—everything depends on one person. Illness can literately destroy the information and decision- making center of the company. The Bureaucracy Standardization—the key concept for all bureaucracies. The bureaucracy is characterized by: Highly routine operating tasks achieved through specialization. Very formalized rules and regulations. Tasks that are grouped into functional departments. Centralized authority. Narrow spans of control. Decision making that follows the chain of command. Its primary strength is in its ability to perform standardized activities in a highly efficient manner. Weaknesses Specialization creates subunit conflicts; functional unit goals can override the organization’s goals. Obsessive concern with following the rules. The bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules. The Functional Structure The functional structure groups employees by their similar specialties, roles, or tasks. An organization organized into production, marketing, human resources, and accounting departments is an example. Many large organizations utilize this structure, although this is evolving to allow for quick changes in response to business opportunities. Still, there are advantages, including that the functional structure allows specialists to become experts more easily than if they worked in diversified units. Employees can also be motivated by a clear career path to the top of the organization chart specific to their specialties. The functional structure works well if the organization is focused on one product or service. Unfortunately it creates rigid, formal communications because the hierarchy dictates the communication protocol. Coordination among many units is a problem, and infighting in units and between units can lead to reduced motivation. The Divisional Structure The divisional structure groups employees into units by product, service, customer, or geographical market area. It is highly departmentalized. Sometimes this structure is known by the type of division structure it uses: product/service organizational structure (like units for cat food, dog food, and bird food that report to an animal food producer), customer organizational structure (like units for outpatient care, inpatient care, and pharmacy that report to hospital administration), or geographic organizational structure (like units for Europe, Asia, and South America that report to corporate headquarters). The divisional structure has the opposite benefits and disadvantages of the functional structure. It facilitates coordination in units to achieve on-time completion, budget targets, and development and introduction of new products to market, while addressing the specific concerns of each unit. It provides clear responsibility for all activities related to a product, but with duplication of functions and costs. The Matrix Structure The matrix structure is used in advertising agencies, aerospace firms, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies. It combines two forms of departmentalization—functional and product. Functional departmentalization puts like specialists together and pools the shared specialized resources across products. Product departmentalization facilitates coordination and provides clear responsibility for all activities related to a product, but with duplication of activities and costs. The most obvious structural characteristic of the matrix is that it breaks the unity-of-command concept. (Exhibit 15-5) Its strength is its ability to facilitate coordination when the organization has a multiplicity of complex and interdependent activities. The dual lines of authority reduce tendencies of departmental members to protect their worlds. It facilitates the efficient allocation of specialists. The major disadvantages of the matrix lie in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals. Violation of unity-of-command concept increases ambiguity that often leads to conflict. Confusion and ambiguity also create the seeds of power struggles. Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity. Alternate Design Options The Virtual Organization The essence of the virtual organization is that it is typically a small, core organization that outsources major business functions. Also referred to as modular or network organization. It is highly centralized, with little or no departmentalization. Exhibit 15-6 shows a virtual organization in which management outsources all of the primary functions of the business. The dotted lines in this exhibit represent those relationships typically maintained under contracts. In essence, managers in virtual structures spend most of their time coordinating and controlling external relations, typically by way of computer-network links. The major advantage to the virtual organization is its flexibility. Virtual organizations’ drawbacks have become increasingly clear as their popularity has grown. They are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear, setting the stage for political behavior. Cultural alignment and shared goals can be lost because of the low degree of interaction among members. Team members who are geographically dispersed and communicate infrequently find it difficult to share information and knowledge, which can limit innovation and slow response time. Ironically, some virtual organizations are less adaptable and innovative than those with well-established communication and collaboration networks. The Team Structure The team structure seeks to eliminate the chain of command and replace departments with empowered teams. This structure removes vertical and horizontal boundaries in addition to breaking down external barriers between the company and its customers and suppliers. By removing vertical boundaries, management flattens the hierarchy and minimizes status and rank. Cross-hierarchical teams (which include top executives, middle managers, supervisors, and operative employees), participative decision-making practices, and the use of 360-degree performance appraisals(in which peers and others evaluate performance) can be used. When fully operational, the team structure may break down geographic barriers. Today, most large U.S. companies see themselves as team-oriented global corporations; many, like Coca-Cola and McDonald’s, do as much business overseas as in the United States, and some struggle to incorporate geographic regions into their structure. The Circular Structure Picture the concentric rings of an archery target. In the center are the executives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers. This is the circular structure. The circular structure has intuitive appeal for creative entrepreneurs, and some small innovative firms have claimed it. However, as in many of the current hybrid approaches, employees are apt to be unclear about whom they report to and who is running the show. We are still likely to see the popularity of the circular structure spread. The concept may have intuitive appeal for spreading a vision of corporate social responsibility (CSR) initiatives, for instance. The Leaner Organization: Organizational Downsizing The goal of the new organizational forms we’ve described is to improve agility by creating a lean, focused, and flexible organization. Downsizing is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff. Despite the advantages of being a lean organization, the impact of downsizing on organizational performance has been very controversial. Part of the problem is the effect of downsizing on employee attitudes. In companies that don’t invest much in their employees, downsizing can also lead to more voluntary turnover so vital human capital is lost. Companies can reduce negative impacts by preparing for the post-downsizing environment in advance, thus, alleviating some employee stress and strengthening support for the new strategic direction. The following are some effective strategies for downsizing and suggestions for implementing them. Invest. Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward. Communicate. When employers make efforts to discuss downsizing with employees early, employees are less worried about the outcomes and feel the company is taking their perspective into account. Participate. Employees worry less if they can participate in the process in some way. In some companies, voluntary early retirement programs or severance packages can help achieve leanness without layoffs. Assist. Providing severance, extended health care benefits, and job search assistance demonstrates a company does really care about its employees and honors their contributions. Companies that make themselves lean can be more agile, efficient, and productive—but only if they make cuts carefully and help employees through the process. Why Do Structures Differ? Introduction The mechanistic model (Exhibit 15-7)—synonymous with the bureaucracy—has extensive departmentalization, high formalization, a limited information network (mostly downward), and little participation in decision making. The organic model (Exhibit 15-7) looks a lot like the boundaryless organization; it uses cross-hierarchical and cross-functional teams, low formalization, a comprehensive information network, and high participation in decision making. Why are some organizations structured along mechanistic lines while others are organic? Organizational Strategy An organization’s structure is a means to help management achieve its Objectives. Most current strategy frameworks focus on three strategy dimensions—innovation, cost minimization, and imitation—and the structural design that works best with each. An innovation strategy means a strategy for meaningful and unique innovations. This strategy may appropriately characterize 3M Company. A cost-minimization strategy tightly controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product. This describes Walmart’s strategy. An imitation strategy tries to capitalize on the best of both minimize risk and maximize opportunity for profit. Exhibit 15-8 describes the structural option that best matches each strategy. Innovators need the flexibility of the organic structure, whereas cost minimizers seek the efficiency and stability of the mechanistic structure. Imitators combine the two structures. They use a mechanistic structure to maintain tight controls and low costs in their current activities but create organic subunits in which to pursue new undertakings. Organizational Size An organization’s size significantly affects its structure. Large organizations—employing 2, 000 or more people—tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations. The impact of size becomes less important as an organization expands. Technology Technology refers to how an organization transfers its inputs into outputs. Every organization has at least one technology for converting financial, human, and physical resources into products or services. The Chinese consumer electronics company Haier uses an assembly-line process to make its products. Colleges may use a number of instruction technologies—the ever-popular formal lecture method, the case analysis method, the experiential exercise method, the programmed learning method, etc.—to educate its students. Environment An organization’s environment includes outside institutions or forces that can affect its performance, such as suppliers, customers, competitors, government regulatory agencies, and public pressure groups. Dynamic environments create significantly more uncertainty for managers than do static ones. Any organization’s environment has three dimensions: capacity, volatility, and complexity. Capacity The degree to which it can support growth. Volatility Refers to the degree of instability in an environment. Complexity The degree of heterogeneity and concentration among environmental elements. In contrast, environments characterized by heterogeneity and dispersion are called complex. Exhibit 15-9 summarizes our definition of the environment along its three dimensions. The arrows indicate movement toward higher uncertainty. Thus, organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty because they have high unpredictability, little room for error, and a diverse set of elements in the environment to monitor constantly. Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrangements. The more scarce, dynamic, and complex the environment, the more organic a structure should be. The more abundant, stable, and simple the environment, the more the mechanistic structure will be preferred. Institutions Another factor that shapes organizational structure is institutions. These are cultural factors that act as guidelines for appropriate behavior. Institutional theory describes some of the forces that lead many organizations to have similar structures and, unlike the theories we’ve described so far, focuses on pressures that aren’t necessarily adaptive. The most obvious institutional factors come from regulatory pressures; certain industries under government contracts, for instance, must have clear reporting relationships and strict information controls. Sometimes simple inertia determines an organizational form—companies can be structured in a particular way just because that’s the way things have always been done. Organizations in countries with high power distance might have a structural form with strict authority relationships because it’s seen as more legitimate in that culture. Some have attributed problems in adaptability in Japanese organizations to the institutional pressure to maintain authority relationships. Sometimes organizations start to have a particular structure because of fads or trends. Many companies have recently tried to copy the organic form of a company like Google only to find that such structures are a very poor fit with their operating environment. Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful. Organizational Designs and Employee Behavior We opened this chapter by implying that an organization’s structure can have significant effects on its members. A review of the evidence leads to a pretty clear conclusion: you can’t generalize! Not everyone prefers the freedom and flexibility of organic structures. Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized—that is, in mechanistic structures. So, any discussion of the effect of organizational design on employee behavior has to address individual differences. Let’s consider employee preferences for work specialization, span of control, and centralization. The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of reduced job satisfaction. It is probably safe to say no evidence supports a relationship between span of control and employee satisfaction or performance. We find fairly strong evidence linking centralization and job satisfaction. We can draw one obvious insight: other things equal, people don’t select employers randomly. They are attracted to, are selected by, and stay with organizations that suit their personal characteristics. Job candidates who prefer predictability are likely to seek out and take employment in mechanistic structures, and those who want autonomy are more likely to end up in an organic structure. Thus, the effect of structure on employee behavior is undoubtedly reduced when the selection process facilitates proper matching of individual characteristics with organizational characteristics. Research suggests national culture influences the preference for structure. Organizations that operate with people from high power-distance cultures, such as Greece, France, and most of Latin America, find their employees are much more accepting of mechanistic structures than are employees from low power-distance countries. So consider cultural differences along with individual differences when predicting how structure will affect employee performance and satisfaction. Summary and Implications for Managers The theme of this chapter is that an organization’s internal structure contributes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work has a bearing on employee attitudes and behavior. What’s the basis for this argument? To the degree that an organization’s structure reduces ambiguity for employees and clarifies concerns such as “What am I supposed to do?” “How am I supposed to do it?” “To whom do I report?” and “To whom do I go if I have a problem?” shapes their attitudes and facilitates and motivates them to higher levels of performance. Exhibit 15-10 summarizes what we’ve discussed. Specific implications for managers are below: Specialization can make operations more efficient, but remember that excessive specialization can create dissatisfaction and reduced motivation. Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy. Balance the advantages of virtual and boundaryless organizations against the potential pitfalls before adding flexible workplace options. Downsize your organization to realize major cost savings, and focus the company around core competencies—but only if necessary, because downsizing can have a significant negative impact on employee affect. Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanistic elements when designing an organizational structure. EXPANDED CHAPTER OUTLINE What Is Organizational Structure? Introduction An organizational structure defines how job tasks are formally divided, grouped, and coordinated. There are six key elements: (Exhibit 15-1) Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization Work Specialization Henry Ford became rich and famous by building automobiles on an assembly line, demonstrating that work can be performed more efficiently by using a work specialization strategy. Every Ford worker was assigned a specific, repetitive task. By dividing jobs up into small standardized tasks, Ford was able to produce cars at the rate of one every 10 seconds, while using employees who had relatively limited skills. Work specialization, or division of labor, describes the degree to which activities in the organization are subdivided into separate jobs. In essence, an entire job is broken into a number of steps, each completed by a separate individual. By the 1960s, there became increasing evidence that a good thing can be carried too far. The human diseconomies from specialization—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—more than offset the economic advantages. (Exhibit 15-2) In such cases, enlarging the scope of job activities could increase productivity. Most managers today recognize the economies specialization provides in certain jobs and the problems when it’s carried too far. High work specialization helps McDonald’s make and sell hamburgers and fries efficiently and aids medical specialists in most health maintenance organizations. Amazon’s Mechanical Turk program, Top Coder, and others like it have facilitated a new trend in micro specialization in which extremely small pieces of programming, data processing, or evaluation tasks are delegated to a global network of individuals by a program manager who then assembles the results. This emerging trend suggests there still may be advantages to be had in specialization. Thus, whereas specialization of yesteryear focused on breaking manufacturing tasks into specific duties within the same plant, today’s specialization breaks complex tasks into specific elements by technology, by expertise, and often globally. Departmentalization Grouping jobs together so common tasks can be coordinated is called departmentalization. One of the most popular ways to group activities is by functions performed. For example, a manufacturing manager might organize a plant by separating engineering, accounting, manufacturing, personnel, and purchasing specialists into common departments. The advantage to this type of grouping is obtaining efficiencies from putting like specialists together. Tasks can also be departmentalized by the type of product or service the organization produces. Procter & Gamble recently reorganized along these lines. Each major product—such as Tide, Pampers, Charmin, and Pringles—will be placed under the authority of an executive who will have complete global responsibility for that product. The major advantage to this type of grouping is increased accountability for product performance under a single manager. Another way to departmentalize is on the basis of geography or territory. The sales function, for instance, may have western, southern, mid-western, and eastern regions. Process departmentalization can be used for processing customers as well as products. For example, at the state motor vehicles office you might find: Validation by motor vehicles division. Processing by the licensing department. Payment collection by the treasury department. A final category of departmentalization is by type of customer. Microsoft, for instance, recently reorganized around four customer markets: consumers, large corporations, software developers, and small businesses. Chain of Command The chain of command was once a basic cornerstone in the design of organizations; it is far less important today. The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom. Two complementary concepts: authority and unity of command. Authority—the rights inherent to management to give orders and expect the orders to be obeyed. The unity-of-command principle helps preserve the concept of an unbroken line of authority. It states that a person should have only one superior to whom he/she is directly responsible. Times change, and so do the basic tenets of organizational design. The concepts of chain of command have less relevance today because of technology and the trend of empowering employees. A low-level employee today can access information in seconds that a generation ago was available only to top managers. Operating employees are empowered to make decisions previously reserved for management. Add the popularity of self-managed and cross-functional teams and the creation of new structural designs that include multiple bosses, and you can see why authority and unity of command hold less relevance. Many organizations still find they can be most productive by enforcing the chain of command. Indeed, one survey of more than 1, 000 managers found that 59 percent of them agreed with the statement, “There is an imaginary line in my company’s organizational chart. Strategy is created by people above this line, while strategy is executed by people below the line.” However, this same survey found that buy-in to the organization’s strategy by lower-level employees was inhibited by too much reliance on hierarchy for decision making. Span of Control How many employees a manager can efficiently and effectively direct is an important question. All things being equal, the wider or larger the span of control, the more efficient the organization. Exhibit 15-3 illustrates that reducing the number of managers leads to significant savings. Wider spans are more efficient in terms of cost. However, at some point, wider spans reduce effectiveness. Narrow or small spans have their advocates. By keeping the span of control to five or six employees, a manager can maintain close control. Narrow spans have three major drawbacks. First, as already described, they are expensive because they add levels of management. Second, they make vertical communication in the organization more complex. Third, narrow spans of control encourage overly tight supervision and discourage employee autonomy. The trend in recent years has been toward wider spans of control. They are consistent with recent efforts by companies to reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, and empower employees. To ensure that performance does not suffer because of these wider spans, organizations have been investing heavily in employee training. Centralization and Decentralization Centralization refers to the degree to which decision making is concentrated at a single point in the organization. In centralized organizations, top managers make all the decisions, and lower-level managers merely carry out their directives. In organizations at the other extreme, decentralized decision making is pushed down to the managers closest to the action. The concept of centralization includes only formal authority—that is, the rights inherent in a position. An organization characterized by centralization is inherently different structurally from one that’s decentralized. A decentralized organization can act more quickly to solve problems, more people provide input into decisions, and employees are less likely to feel alienated from those who make decisions that affect their work lives. Management efforts to make organizations more flexible and responsive have produced a recent trend toward decentralized decision making by lower-level managers, who are closer to the action and typically have more detailed knowledge about problems than top managers. Sears and JCPenney have given their store managers considerably more discretion in choosing what merchandise to stock. This allows those stores to compete more effectively against local merchants. Similarly, when Procter & Gamble empowered small groups of employees to make many decisions about new-product development independent of the usual hierarchy, it was able to rapidly increase the proportion of new products ready for market. Research investigating a large number of Finnish organizations demonstrates that companies with decentralized research and development offices in multiple locations were better at producing innovation than companies that centralized all research and development in a single office. Formalization Formalization refers to the degree to which jobs within the organization are standardized. A highly formalized job gives the job incumbent a minimum amount of discretion over what is to be done, when it is to be done, and how he or she should do it. Employees can be expected always to handle the same input in exactly the same way. Low formalization—job behaviors are relatively nonprogrammed, and employees have a great deal of freedom to exercise discretion in their work. The degree of formalization can vary widely between organizations and within organizations. Boundary Spanning We’ve described ways that organizations create well-defined task structures and chains of authority. These systems facilitate control and coordination for specific tasks, but if there is too much division within an organization, attempts to coordinate across groups can be disastrous. One way to overcome compartmentalization and retain the positive elements of structure is to encourage or create boundary-spanning roles. Within a single organization, boundary spanning occurs when individuals form relationships with people outside their formally assigned groups. Boundary-spanning activities occur not only within but also between organizations. Gathering information from external knowledge sources is especially advantageous in highly innovative industries where keeping up with the competition is challenging. Positive results are especially strong in organizations that encourage extensive internal communication; in other words, external boundary spanning is most effective when it is followed up with internal boundary spanning. Organizations can use formal mechanisms to facilitate boundary-spanning activities through their structures. One method is to assign formal liaison roles or develop committees of individuals from different areas of the organization. Development activities can also facilitate boundary spanning. Employees with experience in multiple functions, such as accounting and marketing, are more likely to engage in boundary spanning. Many organizations try to set the stage for these sorts of positive relationships by creating job rotation programs so new hires get a better sense of different areas of the organization. A final method to encourage boundary spanning is to bring attention to overall organizational goals and shared identity concepts. Common Organizational Designs The Simple Structure The simple structure is characterized most by what it is not rather than what it is. It is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is a “flat” organization; it usually has only two or three vertical levels. One individual has the decision making authority. The simple structure is most widely practiced in small businesses in which the manager and the owner are one and the same. (Exhibit 15–4) The strength of the simple structure lies in its simplicity. It is fast, flexible, inexpensive to maintain, and accountability is clear. One major weakness is that it is difficult to maintain in anything other than small organizations. It becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. As size increases, it is very difficult for the owner-manager to make all the choices. If the structure is not changed and made more elaborate, the firm often loses momentum and can eventually fail. The simple structure’s other weakness is that it is risky—everything depends on one person. Illness can literately destroy the information and decision- making center of the company. The Bureaucracy Standardization—the key concept for all bureaucracies. The bureaucracy is characterized by: Highly routine operating tasks achieved through specialization. Very formalized rules and regulations. Tasks that are grouped into functional departments. Centralized authority. Narrow spans of control. Decision making that follows the chain of command. Its primary strength is in its ability to perform standardized activities in a highly efficient manner. Putting like specialties together in functional departments results in economies of scale, minimum duplication of personnel and equipment, etc. Bureaucracies get by nicely with less talented and less costly middle- and lower-level managers. Weaknesses Specialization creates subunit conflicts; functional unit goals can override the organization’s goals. Obsessive concern with following the rules. The bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules. The Functional Structure The functional structure groups employees by their similar specialties, roles, or tasks. An organization organized into production, marketing, human resources, and accounting departments is an example. Many large organizations utilize this structure, although this is evolving to allow for quick changes in response to business opportunities. Still, there are advantages, including that the functional structure allows specialists to become experts more easily than if they worked in diversified units. Employees can also be motivated by a clear career path to the top of the organization chart specific to their specialties. The functional structure works well if the organization is focused on one product or service. Unfortunately it creates rigid, formal communications because the hierarchy dictates the communication protocol. Coordination among many units is a problem, and infighting in units and between units can lead to reduced motivation. The Divisional Structure The divisional structure groups employees into units by product, service, customer, or geographical market area. It is highly departmentalized. Sometimes this structure is known by the type of division structure it uses: product/service organizational structure (like units for cat food, dog food, and bird food that report to an animal food producer), customer organizational structure (like units for outpatient care, inpatient care, and pharmacy that report to hospital administration), or geographic organizational structure (like units for Europe, Asia, and South America that report to corporate headquarters). The divisional structure has the opposite benefits and disadvantages of the functional structure. It facilitates coordination in units to achieve on-time completion, budget targets, and development and introduction of new products to market, while addressing the specific concerns of each unit. It provides clear responsibility for all activities related to a product, but with duplication of functions and costs. The Matrix Structure The matrix structure is used in advertising agencies, aerospace firms, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies. It combines two forms of departmentalization—functional and product: The strength of functional departmentalization—putting like specialists together and the pooling and sharing of specialized resources across products. Its major disadvantage is the difficulty of coordinating the tasks. Product departmentalization facilitates coordination. It provides clear responsibility for all activities related to a product, but with duplication of activities and costs. The most obvious structural characteristic of the matrix is that it breaks the unity-of-command concept. (Exhibit 15-5) Its strength is its ability to facilitate coordination when the organization has a multiplicity of complex and interdependent activities. The dual lines of authority reduce tendencies of departmental members to protect their worlds. It facilitates the efficient allocation of specialists. The major disadvantages of the matrix lie in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals. Violation of unity-of-command concept increases ambiguity that often leads to conflict. Confusion and ambiguity also create the seeds of power struggles. Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity. Alternate Design Options The Virtual Organization The essence of the virtual organization is that it is typically a small, core organization that outsources major business functions. Also referred to as modular or network organization. It is highly centralized, with little or no departmentalization. The prototype of the virtual structure is today’s movie-making organization. In Hollywood’s golden era, movies were made by huge, vertically integrated corporations. Nowadays, most movies are made by a collection of individuals and small companies who come together and make films project by project. This structural form allows each project to be staffed with the talent most suited to its demands, rather than having to choose just from those people the studio employs. Exhibit 15-6 shows a virtual organization in which management outsources all of the primary functions of the business. The dotted lines in this exhibit represent those relationships typically maintained under contracts. In essence, managers in virtual structures spend most of their time coordinating and controlling external relations, typically by way of computer-network links. The major advantage to the virtual organization is its flexibility. Virtual organizations’ drawbacks have become increasingly clear as their popularity has grown. They are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear, setting the stage for political behavior. Cultural alignment and shared goals can be lost because of the low degree of interaction among members. Team members who are geographically dispersed and communicate infrequently find it difficult to share information and knowledge, which can limit innovation and slow response time. Ironically, some virtual organizations are less adaptable and innovative than those with well-established communication and collaboration networks. A leadership presence that reinforces the organization’s purpose and facilitates communication is thus especially valuable. The Team Structure The team structure seeks to eliminate the chain of command and replace departments with empowered teams. This structure removes vertical and horizontal boundaries in addition to breaking down external barriers between the company and its customers and suppliers. By removing vertical boundaries, management flattens the hierarchy and minimizes status and rank. Cross-hierarchical teams (which include top executives, middle managers, supervisors, and operative employees), participative decision-making practices, and the use of 360-degree performance appraisals(in which peers and others evaluate performance) can be used. When fully operational, the team structure may break down geographic barriers. Today, most large U.S. companies see themselves as team-oriented global corporations; many, like Coca-Cola and McDonald’s, do as much business overseas as in the United States, and some struggle to incorporate geographic regions into their structure. The Circular Structure Picture the concentric rings of an archery target. In the center are the executives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers. This is the circular structure. The circular structure has intuitive appeal for creative entrepreneurs, and some small innovative firms have claimed it. However, as in many of the current thybrid approaches, employees are apt to be unclear about whom they report to and who is running the show. We are still likely to see the popularity of the circular structure spread. The concept may have intuitive appeal for spreading a vision of corporate social responsibility (CSR) initiatives, for instance. The Leaner Organization: Organizational Downsizing The goal of the new organizational forms we’ve described is to improve agility by creating a lean, focused, and flexible organization. Downsizing is a systematic effort to make an organization leaner by selling off business units, closing locations, or reducing staff. It has been very controversial because of its potential negative impacts on employees. The radical shrinking of Motorola Mobility in recent years was a case of downsizing due to loss of market share and changes in consumer demand. Some companies downsize to focus on their core competencies. Some companies focus on lean management techniques to reduce bureaucracy and speed decision making. Despite the advantages of being a lean organization, the impact of downsizing on organizational performance has been very controversial. Reducing the size of the workforce has an immediately positive outcome in the huge reduction in wage costs. Companies downsizing to improve strategic focus often see positive effects on stock prices after the announcement. Part of the problem is the effect of downsizing on employee attitudes. Those who remain often feel worried about future layoffs and may be less committed to the organization. Stress reactions can lead to increased sickness absences, lower concentration on the job, and lower creativity. In companies that don’t invest much in their employees, downsizing can also lead to more voluntary turnover so vital human capital is lost. The result is a company that is more anemic than lean. Companies can reduce negative impacts by preparing for the post-downsizing environment in advance, thus alleviating some employee stress and strengthening support for the new strategic direction. The following are some effective strategies for downsizing and suggestions for implementing them. Invest. Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward. Communicate. When employers make efforts to discuss downsizing with employees early, employees are less worried about the outcomes and feel the company is taking their perspective into account. Participate. Employees worry less if they can participate in the process in some way. In some companies, voluntary early retirement programs or severance packages can help achieve leanness without layoffs. Assist. Providing severance, extended health care benefits, and job search assistance demonstrates a company does really care about its employees and honors their contributions. Companies that make themselves lean can be more agile, efficient, and productive—but only if they make cuts carefully and help employees through the process. Why Do Structures Differ? Introduction The mechanistic model (Exhibit 15-7)—synonymous with the bureaucracy—has extensive departmentalization, high formalization, a limited information network (mostly downward), and little participation in decision making. The organic model (Exhibit 15-7) looks a lot like the boundaryless organization; it uses cross-hierarchical and cross-functional teams, low formalization, a comprehensive information network, and high participation in decision making. Why are some organizations structured along mechanistic lines while others are organic? Organizational Strategy An organization’s structure is a means to help management achieve its Objectives. Objectives derive from the organization’s overall strategy. Structure should follow strategy. Most current strategy frameworks focus on three strategy dimensions—innovation, cost minimization, and imitation—and the structural design that works best with each. An innovation strategy means a strategy for meaningful and unique innovations. This strategy may appropriately characterize 3M Company. A cost-minimization strategy tightly controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product. This describes Walmart’s strategy. An imitation strategy tries to capitalize on the best of both minimize risk and maximize opportunity for profit. It moves into new products or new markets only after viability has been proven by innovators. It copies successful ideas of innovators. Exhibit 15-8 describes the structural option that best matches each strategy. Innovators need the flexibility of the organic structure, whereas cost minimizers seek the efficiency and stability of the mechanistic structure. Imitators combine the two structures. They use a mechanistic structure to maintain tight controls and low costs in their current activities but create organic subunits in which to pursue new undertakings. Organizational Size An organization’s size significantly affects its structure. Large organizations—employing 2, 000 or more people—tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations. The impact of size becomes less important as an organization expands. Once an organization has around 2, 000 employees, it’s already fairly mechanistic. An additional 500 employees will not have much impact. However, adding 500 employees to a 300-employee firm is likely to result in a mechanistic structure. Technology Technology refers to how an organization transfers its inputs into outputs. Every organization has at least one technology for converting financial, human, and physical resources into products or services. The Chinese consumer electronics company Haier uses an assembly-line process to make its products. Colleges may use a number of instruction technologies—the ever-popular formal lecture method, the case analysis method, the experiential exercise method, the programmed learning method, etc. to educate its students. Environment An organization’s environment includes outside institutions or forces that can affect its performance, such as suppliers, customers, competitors, government regulatory agencies, and public pressure groups. Dynamic environments create significantly more uncertainty for managers than do static ones. To minimize uncertainty, managers may broaden their structure to sense and respond to threats. For example, most companies, including Pepsi and Southwest Airlines, have added social networking departments to counter negative information posted on blogs. Any organization’s environment has three dimensions: capacity, volatility, and complexity. Capacity The degree to which it can support growth. Rich and growing environments generate excess resources, which can buffer times of relative scarcity. Volatility Refers to the degree of instability in an environment. A dynamic environment with a high degree of unpredictable change makes it difficult for management to make accurate predictions. At the other extreme is a stable environment. Complexity The degree of heterogeneity and concentration among environmental elements. Simple environments are homogeneous and concentrated. In contrast, environments characterized by heterogeneity and dispersion are called complex. Exhibit 15-9 summarizes our definition of the environment along its three dimensions. The arrows indicate movement toward higher uncertainty. Thus, organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty because they have high unpredictability, little room for error, and a diverse set of elements in the environment to monitor constantly. Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrangements. The more scarce, dynamic, and complex the environment, the more organic a structure should be. The more abundant, stable, and simple the environment, the more the mechanistic structure will be preferred. Institutions Another factor that shapes organizational structure is institutions. These are cultural factors that act as guidelines for appropriate behavior. Institutional theory describes some of the forces that lead many organizations to have similar structures and, unlike the theories we’ve described so far, focuses on pressures that aren’t necessarily adaptive. The most obvious institutional factors come from regulatory pressures; certain industries under government contracts, for instance, must have clear reporting relationships and strict information controls. Sometimes simple inertia determines an organizational form—companies can be structured in a particular way just because that’s the way things have always been done. Organizations in countries with high power distance might have a structural form with strict authority relationships because it’s seen as more legitimate in that culture. Some have attributed problems in adaptability in Japanese organizations to the institutional pressure to maintain authority relationships. Sometimes organizations start to have a particular structure because of fads or trends. Many companies have recently tried to copy the organic form of a company like Google only to find that such structures are a very poor fit with their operating environment. Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful. Organizational Designs and Employee Behavior We opened this chapter by implying that an organization’s structure can have significant effects on its members. A review of the evidence leads to a pretty clear conclusion: you can’t generalize! Not everyone prefers the freedom and flexibility of organic structures. Different factors stand out in different structures as well. In highly formalized, heavily structured, mechanistic organizations, the level of fairness in formal policies and procedures is a very important predictor of satisfaction. In more personal, individually adaptive organic organizations, employees value interpersonal justice more. Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized—that is, in mechanistic structures. So, any discussion of the effect of organizational design on employee behavior has to address individual differences. Let’s consider employee preferences for work specialization, span of control, and centralization. The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of reduced job satisfaction. However, work specialization is not an unending source of higher productivity. Problems start to surface, and productivity begins to suffer, when the human diseconomies of doing repetitive and narrow tasks overtake the economies of specialization. As the workforce has become more highly educated and desirous of jobs that are intrinsically rewarding, we seem to reach the point at which productivity begins to decline more quickly than in the past. There is still a segment of the workforce that prefers the routine and repetitiveness of highly specialized jobs. Some individuals want work that makes minimal intellectual demands and provides the security of routine; for them, high work specialization is a source of job satisfaction. The question, of course, is whether they represent 2 percent of the workforce or 52 percent. Given that some self-selection operates in the choice of careers, we might conclude that negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. It is probably safe to say no evidence supports a relationship between span of control and employee satisfaction or performance. Although it is intuitively attractive to argue that large spans might lead to higher employee performance because they provide more distant supervision and more opportunity for personal initiative, the research fails to support this notion. Some people like to be left alone; others prefer the security of a boss who is quickly available at all times. Consistent with several of the contingency theories of leadership discussed in Chapter 12, we would expect factors such as employees’ experiences and abilities and the degree of structure in their tasks to explain when wide or narrow spans of control are likely to contribute to their performance and job satisfaction. However, some evidence indicates that a manager’s job satisfaction increases as the number of employees supervised increases. We find fairly strong evidence linking centralization and job satisfaction. In general, less centralized organizations have a greater amount of autonomy. And autonomy appears positively related to job satisfaction. But, again, while one employee may value freedom, another may find autonomous environments frustratingly ambiguous. We can draw one obvious insight: other things equal, people don’t select employers randomly. They are attracted to, are selected by, and stay with organizations that suit their personal characteristics. Job candidates who prefer predictability are likely to seek out and take employment in mechanistic structures, and those who want autonomy are more likely to end up in an organic structure. Thus, the effect of structure on employee behavior is undoubtedly reduced when the selection process facilitates proper matching of individual characteristics with organizational characteristics. Research suggests national culture influences the preference for structure. Organizations that operate with people from high power-distance cultures, such as Greece, France, and most of Latin America, find their employees are much more accepting of mechanistic structures than are employees from low power-distance countries. So consider cultural differences along with individual differences when predicting how structure will affect employee performance and satisfaction. Summary and Implications for Managers The theme of this chapter is that an organization’s internal structure contributes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work has a bearing on employee attitudes and behavior. What’s the basis for this argument? To the degree that an organization’s structure reduces ambiguity for employees and clarifies concerns such as “What am I supposed to do?” “How am I supposed to do it?” “To whom do I report?” and “To whom do I go if I have a problem?” shapes their attitudes and facilitates and motivates them to higher levels of performance. Exhibit 15-10 summarizes what we’ve discussed. Specific implications for managers are below: Specialization can make operations more efficient, but remember that excessive specialization can create dissatisfaction and reduced motivation. Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy. Balance the advantages of virtual and boundaryless organizations against the potential pitfalls before adding flexible workplace options. Downsize your organization to realize major cost savings, and focus the company around core competencies—but only if necessary, because downsizing can have a significant negative impact on employee affect. Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanistic elements when designing an organizational structure. Career Objectives How can I get a better job? I’m running a small but growing business and need help figuring out how to keep people flexible as we expand. What advice can you give me about designing job structures that will help combine my success today with growth for tomorrow? — Anika Dear Anika: A surprising number of small businesses fail right at the point where they begin to grow. There are many reasons, including financing deficits and competitors that copy their good ideas. However, a common problem is that the structure the company began with is simply not right for a larger firm. There are ways to meet the challenge. Start by looking at individual jobs and their responsibilities. Make a list for each job. When job roles and responsibilities aren’t defined, you do pick up a great deal of flexibility, assigning employees to tasks exactly when needed. Unfortunately, this flexibility also means it’s hard to determine which skills are available or to identify gaps between planned strategies and available human resources. Second, you may want to now define roles based on broad sets of competencies that span multiple levels of organizational functioning. In this strategic competency model, job roles and incentives are defined based on a clear structure. Here are the steps: Look at the top level and think about the future. In the competency model, you should use the mission statement and overall organizational strategies to evaluate your organization's future needs. Once you’ve identified the organization's future needs, figure out a smart way to assign responsibilities to individuals. You’ll obviously need some specialization, but at the same time, consider general skills that will be useful for both growth and long-term sustainability. As your business grows, identify applicants with the potential to meet future needs and develop employee incentives to encourage broad skill profiles. You’ll want to structure your plan so employees increase in competency as they move up the organizational chart. The most important thing to remember is that you aren’t creating a job structure just for today—make sure it’s ready to grow and change with your business. Grow well! Sources: G. W. Stevens, “A Critical Review of the Science and Practice of Competency Modeling,"” Human Resource Development Review 12 (March 2013): 86–107; P. Capelli and J. R. Keller, “Talent Management: Conceptual Approaches and Practical Challenges,"” Annual Review of Organizational Psychology and Organizational Behavior 1 (March 2014): 305–31; and C. Fernández-Aráoz, “21st Century Talent Spotting,"” Harvard Business Review, June 2014, https://hbr.org/2014/06/21st-century-talent-spotting. An Ethical Choice Flexible Structures, Deskless Workplaces Once upon a time, students fresh from business schools couldn't wait for that first cubicle to call home, mid-level managers aspired to an office of their own, and executives coveted the corner office. These days, the walls are coming down. As organizational structures change, so do their physical environments. Many organizations have been trying to make the physical environment reflect the organizational structures they adopt. At online retailer Zappos, the CEO does not want an office, and all 1,500 employees are welcome throughout the open spaces. Firms like Google have workplace designs of public rooms with lounge areas and large, multi person tables. According to Edward Danyo, manager of workplace strategy at pharmaceutical firm GlaxoSmithKline, shared environments create great work gains, including what he estimates is a 45 percent increase in the speed of decision-making. But there are ethical concerns about the dismantling of the physical and mental organizational structure: Where will confidential discussions take place? In some contemporary workplace designs, ad hoc conference rooms address the need for separate gatherings. This may not be optimal if the walls are made of glass, if employees will feel stigmatized when called into a meeting room, or if they become reluctant to approach human resources staff with issues because of privacy concerns. How can differences in personality traits be overcome? Employees high in extraversion will be more comfortable building collaborative relationships without assigned workspaces, while introverted individuals may be uncomfortable without an established office structure where they can get to know others over time. How can personal privacy be maintained? Zappos gives employees personal lockers, asks employees to angle laptop screens away from neighbours, and tries to make open spaces more private by encouraging ear buds to create a sound barrier between working employees. How can you assure your clients of confidentiality? Even walled, soundproof rooms for virtual or live meetings may not provide the desired level of security for clients who need to know their business will stay on a need-to-know basis. How will expectations and accountability be enforced? In an environment without offices and sometimes without job titles, there is an even greater need for clearly assigned goals, roles, and expectations. Otherwise, open, collaborative structures may foster the diffusion of responsibility and confusion. Sources: S. Henn, “‘Serendipitous Interaction Key to Tech Firm’s Workplace Design,” NPR, March 13, 2013, www.npr.org/blogs/alltechconsidered/2013/03/13/174195695/serendipitous-interaction-key-to-tech-firms workplace-design; H. El Nasser, “What Office? Laptops Are Workspace,” USA Today, June 6, 2012, 1B–2B; R. W. Huppke, “Thinking Outside the Cubicle,” Chicago Tribune, October 29, 2012, 2-1, 2-3; “Inside the New Deskless Office,” Forbes, July 16, 2012, 34; and E. Maltby, “My Space Is Our Space,” The Wall Street Journal, May 21, 2012, R9. Class Exercise Pair the students for a role-playing exercise. Ask one of the students in the pair to play the part of a company executive and to read the article found at http: //www.businessweek.com/managing/content/sep2008/ca20080912_135498.htm He or she should prepare a plan to deliver the news to the other student about downsizing. The other student is playing Marketing Support Administrator for the firm. The firm has suffered reduced income from sales during the recession. To reduce expenses in comparison with the reduced revenue, some downsizing must be initiated. The Marketing Support Administrator is one of 15 employees across the company that must be released. Teaching Notes This exercise is applicable to face-to-face classes or synchronous online classes such as Black Board 9.1, Breeze, WIMBA, and Second Life Virtual Classrooms. See http: //www.baclass.panam.edu/imob/SecondLife for more information. Personal Inventory Assessments Organizational Structural Assessment To learn more about how organizations are structured, complete the PIA. Myth or Science? “Employees Can Work Just as Well from Home” This statement is true, but not unequivocally. Employees who work from home even part of the time report they are happier and, as we saw in Chapter 3, happier employees are likely to be more productive than their dissatisfied counterparts. From an organization’s perspective, companies are realizing gains of 5 to 7 extra work hours a week for each employee working from home. There are also cost savings, from reduced overhead for office space and utilities to elimination of unproductive social time. Employers of a home-based workforce can establish work teams and organizational reporting relationships with little attention to office politics, opening the potential to more objectively assign roles and responsibilities. These may be some of the reasons organizations have increasingly endorsed the concept of telecommuting, to the point where 3.1 million U.S. employees are now company-employed to work from home. Although we can all think of jobs that may never be conducive to working from home (such as many in the service industry), not all positions that could be based from home should be. Research indicates the success of a work-from-home position depends on the job’s structure even more than on its tasks. The amount of interdependence needed between employees within a team or in a reporting relationship sometimes requires epistemic interdependence, which is each employee’s ability to predict what other employees will do. Organization consultants pay attention to how employee roles relate in the architecture of the organization chart, realizing that intentional relationship building is key. Thus, while an employee may complete the tasks of a job well by working alone from home, the benefits of teamwork can be lost. We don’t yet fully understand the impact of working at a physical distance without sharing time or space with others, but it is perhaps the reason that Yahoo!, Best Buy, and other corporations are reining their employees back into the office. The success of a work-from-home program depends on the individual, the job, and the culture of the organization. Work from home can be satisfying for employees and efficient for organizations, but we are learning that there are limits. Sources: M. Mercer, “Shirk Work? Working at Home Can Mean Longer Hours, ” TriCities.com (March 4, 2013), http: //www.tricities.com/news/opinion_columns/article_d04355b8-83cb-11e2-bc31-0019bb30f31a.html; P. Puranam, M. Raveendran, and T. Knudsen, “Organization Design: The Epistemic Interdependence Perspective, ” Academy of Management Review, 37, no. (3) (2012), pp. 419–-440; N. Shah, “More Americans Working Remotely, ” The Wall Street Journal (March 6, 2013), p. A3; and R. E. Silverman and Q. Fottrell, “The Home Office in the Spotlight, ” The Wall Street Journal (February 27, 2013) p. B6. Class Exercise Divide the class into groups of three to five students each. Have the teams prepare a presentation on the importance of face-to-face interaction in the workplace and the benefits of teamwork. See for example http: //www.businessweek.com/articles/2013-02-25/why-wont-yahoo-let-employees-work-from-home Ask the teams to present their findings and ask the remainder of the class to discuss the reasons that a firm might consider bringing employees that had been home-based back to the office. Teaching Notes This exercise is applicable to face-to-face classes or synchronous online classes such as Black Board 9.1, Breeze, WIMBA, and Second Life Virtual Classrooms. See http: //www.baclass.panam.edu/imob/SecondLife for more information. Point/Counterpoint The End of Management Point Management—at least as we know it—is dying. Formal organizational structures are giving way to flatter, less bureaucratic, less formal structures. And that’s a good thing. Innovative companies like Apple, Google, Facebook, Twitter, and Groupon were born and now thrive thanks not to a multilayered bureaucracy but to an innovative idea that was creatively executed by a flexible group of people freely collaborating. Management in those companies exists to facilitate rather than control. The scope of what managers do has broadened to include typing, taking notes, and managing their own files and schedules, while the scope of what administrative assistants do has broadened to include making social media posts and assuming technical duties. The most innovative firms have questioned whether they need job titles at all, instead emphasizing collaboration throughout the organization. The best companies have eliminated offices altogether and encouraged employees to mingle and form teams according to their project interests. This suits younger workers who aspire to work with the top players rather than report to them and who value flexible hours and work-from-home options. Job titles are gone, roles are ambiguous, and reporting relationships morph by project. “There’s a struggle right now between the old and the new,” noted Adam Leitman Bailey, a New York real estate lawyer. “We don’t know what works. In the end, it’s what’s going to be best for the talent we hire." The talent is ready for the elimination of management as we know it. The successful corporation of the future will have a flatter organizational structure and accountability based on performance. Counterpoint There is no “right size fits all” approach to organizational structure. How flat, informal, and collaborative an organization should be depends on many factors, but no matter what, management structure is needed. Let’s consider two cases. People lauded how loosely and informally Warren Buffett structured his investment firm, Berkshire Hathaway, until it was discovered his CFO and heir apparent, David Sokol, was on the take. Wouldn’t Buffett have known Sokol was compromised if he supervised more closely or had structures in place to check such “freedom”? It’s hard to argue with Berkshire Hathaway’s past successes, but they don’t prove the company is ideally structured. At Honeywell International, CEO David Cote seems relaxed and fun-loving (he rides a Harley and wears a leather bomber jacket and jeans to work), but his hard-hitting work ethic and firm hand on there ins are legendary. Cote’s control focus doesn’t end at the executive suite. At the factories, job titles are painted literally on the floor to indicate who needs to be present—and standing—at organizational meetings limited to 15 minutes by the clock. Is Cote a control freak? Maybe, but he successfully merged three disparate company cultures and more than 250 factories—the new Honeywell has climbed the Fortune 500 ranks and pulled in over $40 billion in annual sales. Profits have increased even faster than sales, in part due to Cote’s insistence on freezing raises and hiring only two to three employees for every four to five who exit. Berkshire Hathaway and Honeywell illustrate the strong need for management structure in an ever-changing, diverse, worldwide marketplace. Sources: A. Bryant, “Structure? The Flatter the Better, ” The New York Times (January 17, 2010), p. BU2; Business section, “Honeywell International: From Bitter to Sweet, ” The Economist (April 14, 2012), http: //www.economist.com/node/21552631; A. Efrati and S. Morrison, “Chief Seeks More Agile Google, ” The Wall Street Journal (January 22, 2011), pp. B1, B4; H. El Nasser, “What Office? Laptops Aare Workspace, ” USA Today (June 6, 2012); Fortune 500 rankings, from http: //money.cnn.com/magazines/fortune/fortune500/2012/full_list/; ICIS.com posting “Honeywell | Company Structure Information from ICIS, ” ICIS.com, http: //www.icis.com/v2/companies/9145292/honeywell/structure.html; K. Linebaugh, “Honeywell’s Hiring Is Bleak, ” The Wall Street Journal (March 6, 2013), p. B3; A. Murray, “The End of Management, ” The Wall Street Journal (August 21, 2010), p. W3; A. R. Sorkin, “Delegator in Chief, ” The New York Times (April 24, 2011), p. B4; and S. Tully, “How Dave Cote Got Honeywell's Groove Back, ” CNN Money (May 14, 2012), http: //management.fortune.cnn.com/2012/05/14/500-honeywell-cote/. Class Exercise Create debate teams of three to five students each, with half the teams in your class assigned the Point position and the other half the Counterpoint position. Ask the students to prepare to defend the position represented in the exercise, with the advice that they should seek additional ideas and resources to support their positions. On a defined day, select a team from each position to debate the conflict. After the debate, ask the remaining students to comment for or against the concept, regardless of the position prepared. Teaching Notes This exercise is applicable to face-to-face classes or synchronous online classes such as Black Board 9.1, Breeze, WIMBA, and Second Life Virtual Classrooms. See http: //www.baclass.panam.edu/imob/SecondLife for more information. Instructor Manual for Organizational Behavior Timothy A. Judge Stephen P. Robbins 9781292146300, 9780133507645, 9780136124016