OVERVIEW OF THE CHAPTER 8

8.1 Aligning Strategy, Culture, and Structure

Managers must determine organizational culture and structure to implement a
particular strategy. Organizational culture, sometimes called corporate culture,
consists of the set of shared, taken-for-granted implicit assumptions that a group holds
in the workplace. Organizational structure describes who reports to whom and who
does what.

8.2 What Kind of Organizational Culture Will You Be Operating In?

Organizational culture appears as three layers: observable artifacts, espoused
values, and basic assumptions. According to the competing values framework,
there are four types of cultures defined by their preference for flexibility and their
orientation toward their internal or external environments. Clan cultures value
flexibility and have an internal focus. Adhocracy cultures value flexibility and have
an external focus. Market cultures value stability and have an external focus.
Hierarchy cultures value stability and have an internal focus. Culture is transmitted
to employees in symbols, stories, heroes, rites and rituals, and organizational
socialization. Person-organization (PO) fit reflects the extent to which one’s
personality and values match the climate and culture in an organization.

8.3 The Process of Culture Change

Changing organizational culture involves a process in which members instruct each
other about the organization’s preferred values, beliefs, expectations, and behaviors.
There are 12 ways a culture becomes established in an organization: formal
statements; slogans and sayings; rites and rituals; stories, legends and myths; leader
reactions to crises; role modeling, training and coaching; physical design; rewards,
titles, promotions and bonuses; organizational goals and performance criteria;
measurable and controllable activities; organizational structure; and organizational
systems and procedures. Changes to any of these mechanisms can foster culture
change.

8.4 Organizational Structure

For-profit, nonprofit, and mutual-benefit organizations have different purposes for
which they are formed. An organizational chart is a box-and-lines illustration
showing the formal lines of authority and the organization’s official positions or work
specializations. The vertical hierarchy identifies who reports to whom. The horizontal
specialization identifies who specializes in what work.
8.5 The Major Elements of an Organization
There are seven basic elements or features of an organization. First, there is a
common purpose, which unifies members with an understanding of the
organization’s reason for being. Second, there is coordinated effort with people
working together for the common purpose. A third element is the division of labor
with work being specialized for greater efficiency. The hierarchy of authority
ensures that the right people do the right things at the right time. Organizations will
have a span of control, either narrow or wide, which determines the number of
people reporting directly to a given manager. Through delegation, organizations
determine authority and responsibility, distributed to line and staff positions.
Finally, organizations must determine centralization versus decentralization of
authority.

8.6 Basic Types of Organizational Structures

There are three broad categories of organizational structures: traditional, horizontal,
and designs that open boundaries. Traditional designs include simple structures,
which are used by small organizations that don’t require much work specialization;
functional structures, in which work is divided according to function; divisional
structures, in which work is divided according to product or customer type or
location; and matrix structures, which combine functional and divisional chains of
command. In a horizontal structure, teams or workgroups are created to improve
collaboration and work on common projects. Open designs bring together members,
linked by information technology, to collaborate on common tasks. Organizations
defined by an open approach have hollow, modular, or virtual structures. Hollow
organizations outsource functions; modular organizations outsource the production
of a product’s components; and virtual organizations have geographically dispersed
members but appear to customers as a single, unified organization with a real physical
location.

8.7 Contingency Design: Factors in Creating the Best Structure

The process of fitting the organization to its environment is called contingency
design. Mechanistic organizations are rigid bureaucracies with strict rules, narrowly
defined tasks, and top-down communication. Organic organizations have
decentralized authority, fewer rules, and revolve around networks of employees. With
differentiation, parts of the organization disperse and fragment, while with
integration, specialists work together to achieve a common goal. A company’s
organizational culture and organizational structure should be aligned with its vision
and strategies.