Managing Organizational Structure & Culture

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Organizational Structure

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The formal framework by which job tasks are divided, grouped, and coordinated

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Two Pillars of Organizational Structure

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Specialization and Coordination

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Specialization

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Dividing up the work

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Coordination

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Keeping everyone working in sync

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Four Major Kinds of Organizational Structures

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Simple, Functional, Divisional, Matrix

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Simple Structure

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Everyone reports to "the boss," and job definitions are often fairly informal

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Advantages and Limitations of Simple Structure

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Advantages: Low-cost; low overhead; flexible; adaptive
Limitations: Relies on the boss, so only as good or bad as the boss; only usable in very small organizations

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Functional Structure

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Groups similar jobs together into a series of departments, each headed by a manager (Ex: Marketing, Sales, Finance, Manufacturing, etc.)

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Advantages of Functional Structure

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Allows for high specialization; little duplication of resources; can achieve huge economics of scale in production; huge organizations become possible with multiple levels

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Limitations of Functional Structure

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Silo Effect, "Throwing it Over the Wall"

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Silo Effect

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Slow communication and decisions, action is up and down the hierarchy instead of across it; preoccupation with departmental rather than organizational goals.

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"Throwing it Over the Wall"

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Doing your job without really involving the next group/function; the next group first sees the project once your group is finished.

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Divisional Structure

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Organizational structure made up of separate, semiautonomous units called "divisions"

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Division

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Produces specific products, operates in specific geographies, or serves specific customers; each has a full complement of functions

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Advantages and Limitations of Divisional Structure

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Advantages: Each division specializes on a specific product, region, or customer, and so performs better
Limitations: Resources are duplicated across divisions; divisions find it tough to cooperate with other divisions

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How to Decide Which Divisions are Appropriate

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Mirror the complexity of your environment; consider efficiency, environment/regions, and differences across products

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Matrix Structre

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Simultaneously groups people by the function of which they are a member and by the product team on which they are currently working

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Advantages of Matrix Structure

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Develops new products rapidly; maximizes communication and cooperation; innovation and creativity

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Coordination Occurs...

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Within the job: Formalization
Vertically: Hierarchy & authority, chain of command, centralization/decentralization
Horizontally: Across departments, integrating mechanisms

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Formalization

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The degree to which jobs are guided by standardized rules and procedures

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Higher Formalization

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More explicit job descriptions; more clearly defined procedures; less discretion for workers.
Appropriate when: jobs are relatively simple and routine; importance of consistency is high.

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Mutual Adjustment

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Workers agree between themselves on an ongoing basis how to coordinate their work

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Hierarchy

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An organization's chain of command that defines the relative authority each manager has

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Chain of Command

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The continuous line of authority from top to bottom of an organization

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Unity of Command

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A person should report to only one manager

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Centralization

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The degree to which decisions are made at higher organizational levels

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Decentralization

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The degree to which decisions are made at lower levels

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Integration

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Coordination across departments

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Integrating Mechanisms

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Structural arrangements to increase coordination across horizontal boundaries (the horizontal counterpart to hierarchy)

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Direct Contact*

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Marketing manager and R&D manager meet to brainstorm new product ideas

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Liaison Roles*

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Assistant manager and project team leader identify best product suggestions to put into development

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Task Forces*

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Representatives from marketing, R&D, and manufacturing meet to discuss launch of new product

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Cross-Functional Team

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A cross-functional team composed of all functions is formed to manage product to its launch in the market

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Integrating Roles and Departments

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Senior managers provide members of cross-functional team with relevant information from other teams and from other divisions

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Culture

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A system of shared meanings and beliefs in an organization that influence how people act

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Levels of Culture

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Artifacts, Espoused Values, Basic Assumptions

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Artifacts

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Visible organizational structures and processes

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Espoused Values

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Strategies, goals, philosophies (espoused justifications)

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Basic Assumptions

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Unconscious, taken-for-granted beliefs, perceptions, thoughts, and feelings (ultimate sources of values and actions)

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Seven Underlying Dimensions of Culture

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Attention to Detail, Outcome Orientation, People Orientation, Team Orientation, Aggressiveness, Stability, Innovation and Risk-Taking

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Common Types of Organizational Cultures

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Bureaucratic, Clan, Entrepreneurial, Market

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Bureaucratic Culture ("Command and Control")

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Formalization; rules; standard operating procedures; hierarchical coordination

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Clan Culture

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Tradition; loyalty; personal commitment; extensive socialization; teamwork

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Entrepreneurial Culture (Adhocracy)

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High levels of risk-taking; dynamism; creativity

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Market Culture

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Achievement of measurable and demanding goals (especially those that are financial and/or market-based); very contractual arrangement

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Cultural Dimensions - Bureaucracy

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Low risk-taking; high attention to detail; high stability

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Cultural Dimensions - Clan

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High people and team orientation

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Cultural Dimensions - Entrepreneurial

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High risk orientation; low stability; likely to be some of the following: high people, high team, high outcome, high aggressiveness

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Cultural Dimensions - Market

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High outcome orientation and risk-taking

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How Culture is Translated

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Ceremonies, Rites, Rituals, Stories, Myths, Heroes, Symbols, Langauge

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Strong Cultures

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Key components of culture are intensely held and widely shared; associated with greater influence on employees and more committed employees