rd MANAGEMENT SKILLS II: PLANNING AND ORGANIZING (3 Ed.) Chapter 4 Managing Organizational Structure and Culture CHAPTER OUTLINE I. DESIGNING ORGANIZATIONAL STRUCTURE A. Organizing is the process by which managers establish the structure of working relationships among employees to allow them to achieve organizational goals efficiently and effectively. 1. Organizational structure is the formal system of task and reporting relationships that determines how employees use resources to achieve goals. 2. Organizational culture is the shared set of beliefs, values, and norms that influence the way people and groups work together to achieve organizational goals. 3. Organizational design is the process by which managers make specific organizing choices that result in the construction of a particular organizational structure. a. The challenge facing all companies is to design a structure and culture that i. motivates managers and employees to work hard and to develop supportive job behaviors and attitudes, and ii. coordinates the actions of employees, groups, functions and divisions to ensure they work together efficiently and effectively. b. According to contingency theory, managers design organizational structures to fit the factors or circumstances that are affecting the company and causing them the greatest uncertainty. c. Thus, there is no one best way to design an organization. 4. Four factors are important determinants of the type of organizational structure or culture a manager selects: They are 1): the nature of the organizational environment; 2) the type of strategy the organization pursues; 3) the technology the organization uses; 4) the characteristics of the organization’s human resources. 1 rd MANAGEMENT SKILLS II: PLANNING AND ORGANIZING (3 Ed.) B. The Organizational Environment: The more quickly the external environment is changing and the greater the uncertainty within it, the greater the need to speed decision-making and communication so that scarce resources can be obtained. 1. In such situations, the manager’s goal is to make organizing decisions that result in greater flexibility and an entrepreneurial culture. a. Therefore, they are likely to decentralize authority, empower lower- level employees, and encourage values and norms that emphasize change and innovation. 2. In contrast, if the external environment is relatively stable, uncertainty is low, and resources are readily available, managers make organizing decisions that bring more stability or formality to the organization’s structure. a. They also choose values and norms that emphasize obedience and being a team player. b. Managers in this situation prefer a clearly defined hierarchy of authority, standard operating procedures, and restrictive norms to guide employee activities. 3. In today’s marketplace, increasing competition is putting pressure on managers to find ways to structure organizations that allow people and departments to behave flexibly. C. Strategy: Different strategies often call for the use of different organizational structures and cultures. 1. For example, a differentiation strategy aimed at increasing quality usually succeeds best in a flexible structure with a culture that values innovation. 2. In contrast, a low-cost strategy aimed at driving down costs works best in a more formal structure with more conservative norms, which gives managers greater control. 3. At the corporate level, when managers pursue a strategy of vertical integration or diversification, a flexible structure is needed to provide sufficient coordination between different business divisions. 4. Managers are also challenged to create organizational structures that allow flexibility on a global level. D. Technology is the combination of skills, knowledge, tools, machines, computers, and equipment that are used in the design, production, and distribution of goods and services. 1. The more complicated the technology, the greater the need for a more flexible structure that allows managers to respond quickly to unexpected situations. 2 rd MANAGEMENT SKILLS II: PLANNING AND ORGANIZING (3 Ed.) 2. If technology is routine, a formal structure is more appropriate because tasks are simple and procedures for performing tasks can be outlined in advance. 3. Two factors determine how complicated or nonroutine technology is, according to researcher Charles Perrow. They are task variety and task analyzabilitiy. a. Nonroutine technologies are characterized by high task variety and low task analyzability. b. Routine technologies are characterized by low task variety and high task analyzability. 4. Examples of nonroutine technology are found in the work of scientists in a research and development laboratory who develop new products. 5. Examples of routine technology include typical mass production or assembly operations, where workers perform the same task repeatedly and managers identify programmed solutions necessary to perform a task efficiently. E. Human Resources: The more highly skilled a workforce and the more people are required to work together in groups or teams to perform tasks, the more likely an organization is to use a flexible, decentralized structure and a professional culture based on values and norms that foster employee autonomy and self-control. 1. Flexible structures, characterized by decentralized authority and empowered employees, are well suited to the needs of highly skilled people. 2. Similarly, when people work in teams, they must be allowed to interact freely and develop norms and guide their own work interactions, which is also possible in a flexible organizational structure. 3. The way an organization’s structure works depends upon the organizing choices that managers make about three issues: a. how to group tasks into individual jobs b. how to group jobs into functions and divisions c. how to allocate authority and coordinate or integrate jobs, functions, and divisions. II. GROUPING TASKS INTO JOBS: JOB DESIGN A. The first step in organizational design is job design. Job design is the process by which managers decide how to divide into specific jobs the tasks that have to be performed. B. The result of the job design process is a division of labor among employees. Establishing an appropriate division of labor among employees is vital to increasing efficiency and effectiveness. 3 rd MANAGEMENT SKILLS II: PLANNING AND ORGANIZING (3 Ed.) C. When deciding how to assign tasks to individual jobs, managers must be careful not to oversimplify jobs. Job simplification is the process of reducing the number of tasks that each worker performs. Too much job simplification may reduce efficiency rather than increase it, if workers become bored and unhappy. D. Job Enlargement and Job Enrichment 1. Job enlargement is increasing the number of different tasks in a given job by changing the division of labor. a. By increasing the range of tasks performed by a worker, managers hope to reduce boredom and increase motivation to perform at a high level. 2. Job enrichment is increasing the degree of responsibility a worker has over his or her job by a. empowering workers to experiment to find new or better ways of doing the job b. encouraging workers to develop new skills c. allowing workers to decide how to do the work and giving them the responsibility for deciding how to respond to unexpected situations d. allowing workers to monitor and measure their own performance. e. By enriching an employee’s job, managers are expecting that employee’s level of involvement in their work to increase, thereby increasing productivity. 3. Managers who make design choices such as these are likely to increase the degree to which workers behave flexibly rather than mechanically. 4. Narrow, specialized jobs lead people to behave in predictable ways. 5. In contrast, workers who perform a variety of tasks are encouraged to discover new ways to perform their jobs and are more likely to act flexibly and creatively. E. The Job Characteristics Model : J. R. Hackman and G. R. Oldham’s Job Characteristics Model explains how managers can make jobs more interesting and motivating. According to Hackman and Oldham, every job has five characteristics that determine how motivating the job is. They are: 1. Skill variety, which examines the extent to which a job requires an employee to use a wide range of different skills, abilities, or knowledge. 2. Task identity, which examines the extent to which a job requires a worker to perform all the tasks from the beginning to the end of the production process. 3. Task significance, which examines the degree to which a worker feels his or her job is meaningful because of its effect on people outside of the organization. 4 rd MANAGEMENT SKILLS II: PLANNING AND ORGANIZING (3 Ed.) 4. Autonomy, which examines the degree to which a job gives an employee the freedom and discretion needed to schedule different tasks and decide how to carry them out. 5. Feedback, which is the extent to which a worker receives clear and direct information regarding how well he or she has performed the job. 6. The five job characteristics affect an employee’s motivation by impacting three critical psychological states. They are: a. feeling that one’s work is meaningful b. feeling responsible for work outcomes c. feeling responsible for knowing how those outcomes affect others. III. GROUPING JOBS INTO FUNCTIONS AND DIVISIONS A. The next organizing decision is how to group jobs together to best match the needs of the organization’s environment, strategy, technology, and human resources. 1. Most top-management teams group jobs into departments and develop a functional structure. 2. As the organization grows, managers design a divisional structure or a more complex matrix or product team structure. B. Functional Structure: A function is a group of people working together who possess similar skills or use the same knowledge, tools, or techniques to perform their jobs. A functional structure is a structure composed of all the departments that an organization requires to produce its goods or services. 1. The advantages of grouping jobs according to function are: a. When people who perform similar jobs are grouped together, they can learn from observing one another.