GYAAN KOSH

TERM 4
Learning and
Management of Organizations
C

This document covers the basic concepts of Management of

Organizations covered in Term 4. The document only
summarizes the main concepts and is not intended to be an
instructive material on the subject.
Gyaan Kosh Term 4 MGTO

CONTENTS

1. Introduction

2. Structuring Organizations for Optimal Performance

3. Designing Strategic Human Resource Management Processes and Systems

4. Developing and Maintaining Organization Culture

5. Motivating Superior Performance

6. Perfecting Managerial Decision Making

7. Group Decision Making

8. Leading Through Social Capital: The Power of Networks

9. Values Based Leadership

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INTRODUCTION

The Importance of Alignment: McKinsey’s 7-S Framework

The 7-S Model is used as a tool to assess and monitor changes in the internal situation of an organization.

For an organization to perform well, these seven elements

need to be aligned and mutually reinforcing. So, the model
can be used to help identify what needs to be realigned to
improve performance.

What are the seven elements and how are they

used to understand the situation in organizations?

1. Strategy: the plan devised to maintain and build

competitive advantage over the competition.
• What is our strategy? How do we intend to achieve our objectives?
• How do we deal with competitive pressure?
• How are changes in customer demands dealt with?

2. Structure: the way the organization is structured and who reports to whom.
• How is the company/team divided? What is the hierarchy?
• How do the various departments coordinate activities? Where are the lines of communication?
• How do the team members organize and align themselves?
• Is decision making and controlling centralized or decentralized?

3. Systems: The daily activities and procedures that staff members engage in to get the job done.
• What are the main systems that run the organization? Consider financial and HR systems
as well as communications and document storage.
• Where are the controls and how are they monitored and evaluated?
• What internal rules and processes does the team use to keep on track?

4. Shared Values: Called "super ordinate goals" when the model was first developed, these are the
core values of the company that are evidenced in the corporate culture and the general work ethic.
• What are the fundamental values that the company/team was built on?
• What is the corporate/team culture?
• How strong are the values? In critical situations, are the values side-stepped?

5. Style: The style of leadership adopted.

• How participative is the management/leadership style? How effective is that leadership?
• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just nominal groups?
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6. Staff: The employees and their general capabilities.

• What positions or specializations are represented within the team?
• What positions need to be filled?
• Are there gaps in required competencies?

7. Skills: The actual skills and competencies of the employees working for the company.
• What are the strongest skills represented within the company/team?
• Are there any skills gaps? How are skills monitored and assessed?
• What is the company/team known for doing well? Do the current employees/team
members have that ability?

Managing the Right Tension

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Balancing the Tensions – the Six Traps

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STRUCTURING ORGANIZATIONS FOR OPTIMAL PERFORMANCE

1. Division of Labor: Includes deciding about-

a. Extent of horizontal and vertical specialization of jobs
b. Grouping of activities according to the output of the company

2. Coordination mechanism
a. Balance between effective integration and careful differentiation
b. Coordination issues related to unusual (non-routine) matters require mechanisms
such as plans and budgets, negotiation, coordination committees etc.
c. Coordination is costly – so need to strike the right balance

3. Distribution of decision rights

a. How should information flow and who should take the decision
b. Issue of appropriate degree of centralization vs decentralization of decision making
c. Horizontal vs vertical decision making authority (engineering vs marketing to
decide on product specs)
d. Issue of who should take the decision – information availability vs actions in self interest

4. Organizational boundaries
a. Inside vs outside execution of activities (outsourcing)
b. Make vs buy, strategic alliances with vendors

5. Informal structure
a. Relationships between employees important
b. Managers need to be aware of the informal network and should be careful about
it while making changes

6. Political Structure
a. Varying or competing interests among employees or divisions and departments –
managers need to be aware of this political landscape

7. Legitimate basis of authority

a. Basis of authority (formal position vs one based on expertise) should be clear

Forms of Organizations:

1. Functional:
 Activities grouped by common functions – R&D, marketing, production
 Vertical coordination by hierarchy
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Benefits
 High collaboration, efficiency, quality
 Helpful for scaling up of organizations
 Reduces duplication of efforts and resources
 Career paths well defined
 High functional expertise

Disadvantages
 Issue of coordination across departments
 Inflexible to respond to environment
 Restricted view of broad picture of organization
 Diffused accountability

When useful
 Competitive issues require organization to stress functional expertise, efficiency and quality
 Stable environment
 High economies of scale are required
 For small to mid-size companies

2. Divisional:
 Activities grouped by products, geographies– R&D, marketing, production in each division
 Vertical coordination by hierarchy

Benefits
 High coordination in divisions
 Each division a profit center
 General management skills
 Fast response to external factors
 High accountability

Disadvantages
 Issue – degree of autonomy to each division
 No Economies of scale
 Lack of functional expertise
 Lack of coordination among divisions
 Duplication of efforts and competition among division for selling products to same customers

When useful
 Environment uncertainty is moderate to high
 Competitive environment require you to innovate
 Medium to large organizations
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3. Matrix Structure

 Attempts to combine best of functional and divisional structures

 Dual reporting relationship - Straight-line to business head for day-to-day role activities -
Dotted-line to parent function for career growth and development

Benifits
 Customer, market, product focus
 Faster communication and decision-making
 Better business orientation/ownership
 Opportunity for employees to either develop either functional skills or general
management skills

Disadvantages
 Complex, Dual reporting , chances of conflict (divisional vs functional boss)
 Potential role ambiguity due to dual reporting
 Potential lack of accountability
 Potentially time-consuming

When useful:
 Organizations need both technological expertise and horizontal coordination across functions
 Economies of scale as well as flexibility is required

Network Structure
 “Why own when you can rent” philosophy
 Outsourcing of non-core functions
 Flattened hierarchy structures
 Small core, with strong ties to other organizations/individuals
 All virtual organizations are network organizations, but all network organizations are not
virtual organizations.

Benefits
 Highly flexible and responsive structure
 Real time interaction with vendors and customers
 Informal structure and highly adaptable culture

Key Disadvantages
 Reduces management’s control over key parts of its business
 Blurring of boundaries
 Accountability is poorly diffused

When useful
 Innovation is the strategic advantage of the organization, most suited for Volatile environment
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DESIGNING STRATEGIC HUMAN RESOURCE MANAGEMENT PROCESSES AND SYSTEMS

Strategic HR Alignment:

 Building sustainable, competitive advantage through superior human resource management

 Linking HR practices into a congruent ‘whole’ that delivers superior performance
 Viewing people as assets, not costs; developing and leveraging human assets for
competitive success

Strategic HR Alignment and Firm Performance:

The Strategic Logic of Workforce Management:

A players – High performance and high potential employees.

A positions – Positions that are strategically important to the company. The two defining
characteristics of an A position is:

1. First, as you might expect, its disproportionate importance to a company’s ability to execute
some part of its strategy and,
2. Second—and this is not nearly as obvious—the wide variability in the quality of the work
displayed among the employees in the position.

 Superior talent gives a company its competitive edge. But your star performers aren’t
going to add much value to the org if they are not engaged in work that is essential to
company strategy. Seems obvious but very few companies do it.

 If a company hasn’t identified those “A positions,” they may be drastically

mismanaging their workforce—rewarding high performers in nonstrategic jobs, or
keeping B or even C players in mission-critical roles.
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 Businesses need to adopt a portfolio approach to workforce management, placing the

very best employees in strategic positions, good performers in support positions, and
eliminating nonperforming employees and jobs that don’t add value.

To manage your workforce strategically:

1. Identify Your “A Positions”

 A positions are crucial to your company’s ability to execute some part of its strategy. To
identify these positions, clarify the basis on which your company competes: Price?
Quality? Mass customization? Then identify the technologies, information, and skills
required to create your intended competitive advantage.

 Ask which jobs employ those critical capabilities in the execution of your strategy.

2. Manage Your A Positions

Manage your A positions using these techniques:

1. Evaluation
Determine what differentiates high and low performance in each A position and measure people
against those criteria.

2. Development
Actively develop people in A positions by providing training and professional development opportunities.

3. Compensation
Generously compensate A players in A positions.

4. Succession
Build bench strength for each A position.

Manage Your Workforce Portfolio

Intelligently managing your A positions isn’t enough: manage B and C positions, too. B positions
can support A positions (think IBM’s feeder roles). Consider outsourcing or eliminating C jobs. At
minimum, move C players out of A positions and help B players in those roles become A players.
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DEVELOPING AND MAINTAINING ORGANIZATION CULTURE

What is Culture

Culture is a system of shared values (defining what is important) and norms (defining appropriate
behaviors and attitudes.)

Culture enhances performance of an organization in two ways:

 By energizing employees
 Boost performance by shaping and coordinating employees’ behavior. Stated values focus
employee attention to organizational priorities that then guide employee behavior & decision making

Values and Culture:

Espoused Values (“talk”): Has five key components

• Concepts or beliefs
• pertain to desirable end-states or behaviors
• transcend situations
• guide selection or evaluation of behavior
• are ordered by relative importance

Enacted Values (“walk”): what is actually exhibited by employees

Core Values: The primary values (which may or may not be included in the “espoused values”)
that are accepted throughout the organization, which trump all other decision-making criteria.

Norms:

Definition: Legitimate, socially shared standards against which the appropriateness of

behavior can be evaluated

Categories of norms:
• Performance norms
• Appearance norms
• Social arrangement norms
• Allocation of resources norms

Artifacts
The observable symbols and signs of an organization’s culture. Typical/common artifacts include:
• Physical structures and spaces
• Symbols & Slogans
• Rituals and ceremonies
• Language
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Leading by Leveraging Culture

 Leveraging culture is but one of a number of key leadership tools. By actively managing culture, an
organization is more likely to deliver on its strategic objectives over the long run. However, the first
criterion to using culture as a leadership tool is that it must be strategically relevant.

 To effectively use culture as a leadership tool – the less formal direction you give employees
about how to execute strategy, the more ownership they take over their actions & the better
they perform. Eg – Nordstrom tells employees “use your good judgment in all situations.” So,
the second criterion for using culture as a leadership tool is that it must be strong

 The third & final criterion for using culture as a leadership tool involves the content of
organizational culture. Research shows firms where culture included norms & values
promoting innovation & change were most successful. Managers should be able to also
quickly implement promising ideas.

Tools for leveraging culture for performance

1. Recruiting & selecting people for culture fit

2. Managing culture through socialization & training
3. Managing culture through the Reward System

MOTIVATING SUPERIOR PERFORMANCE

Definition of Motivation: Psychological processes that account for an individual’s Intensity,

Direction and Persistence of effort toward attaining a goal.

Classification of Motivation Theories

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1) NEEDS THEORIES

• MASLOW’S HIERARCHY:
This is one of the oldest theories – It has 5 categories of need. In the order of importance they are
1. Physiological (basic necessities) 2. Safety 3. Social 4. Esteem (internal: self-respect, external: status) and
5. Self-Actualization (achieving one’s potential)
As per the theory people fulfill needs in this order

• ALDERFER’S ERG THEORY:

Revised need theory and categorized it based on Existence, Relatedness and Growth. This theory
also states that multiple needs may be operative at the same time.
a) Existence needs map to Physiological and Safety needs of Maslow model
b) Relatedness maps to Social and some
part of Esteem needs of Maslow model
c) Growth maps to part of Esteem and
Self-Actualization of Maslow model

• MCCLELLAND’S LEARNED
NEEDS THEORY:
People are influenced by a need for
achievement (nArch), need for power
(nPow) and need for affiliation (nAff)

• HERZBERG’S 2- FACTOR (MOTIVATORS HYGIENE) MODEL:

a) Hygiene – job related factors which prevent dissatisfaction but do not promote employee
growth or development (lower- order needs)
b) Motivator - job related factors that encourage growth ( these are higher order needs)

2) JOB RELATED THEORIES:

• JOB-DESIGN MODEL:
Motivation through job design i.e. allocation of tasks can be down in three ways:
a) Job Rotation: Moving employees from one specialized job to another
b) Job Enlargement: Horizontal expansion of job and increasing more tasks at same level
c) Job Enrichment: Vertical expansion of job and assigning more responsibility.

• JOB CHARACTERISITCS MODEL (HACKMAN &

OLDHAM): Core job characteristics:
a) Skill Variety
b) Task Identity (responsible for a whole piece instead of a
fragmented task) c) Task significance
d) Autonomy
e) Feedback from job
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3) FAIRNESS-RELATED-EQUITY THEORY (DISTRIBUTIVE JUSTICE):

Basic Premise: Motivation as a function of fairness in social exchanges. Specifically:

i. What is compared? => Ratio of job outcomes / job inputs
ii. Who is the “Comparison Other”?
Other- inside (someone within the org/dept)
Other-outside (similar job other org)
Self- inside(own exp elsewhere in other parts of the org)
Self-outside (own exp elsewhere in some other org)
iii. Results of comparison

•EQUITY THEORY (DISTRIBUTIVE JUSTICE):

a) Addresses perceived inequity through perception:

 Change perception of one’s own ratio and comparison others ratio
 Change comparison other

b) Addresses perceived inequity through behaviors:

 If perceived “under-rewarded” - will produce lesser quantities in case they are paid by time
and will produce lesser quality products when paid by quantity.

 If perceived “Over-rewarded” – will produce more in case they are paid by time and will
produce fewer but more quality products when paid by quantity.

4) PROCESS RELATED THEORIES:

• VROOMS EXPECTANCY THEORY:

Expectancy x Instrumentality x Valence
(value of rewards) = Motivation.
If any of these are zero, the motivation
itself is missing
Effort and performance form expectancy,
performance and rewards form instrumentality,
rewards and need form the valence.

• LOCKE’S GOAL-SETTING THEORY:

Theory basically says that it is important to have specific and difficult goals with feedback. It is not
important how the goals are set (self-set or assigned). The feedback on these goals leads to
higher performance and goal commitment is strengthened by the effect of goal-setting on
performance. Goals direct attention, regulated effort, increase persistence and foster development.

There are basically four drives that underlie motivation:

• The drive to acquire • The drive to bond • The drive to
comprehend • The drive to defend
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MANAGERIAL DECISION MAKING

Two Types of Decisions

 Programmed decisions
 Non –programmed decisions

Traditional (Classical) Decision Making Process (Eight Step Process)

1. Understand the situation
2. Define the problem
3. Define the objectives
4. Diagnose the problem
5. List all alternative courses of action to address problem or opportunity
6. List the costs or consequences of each alternative
7. Determine preferences for each alternative and each set of consequences
8. Select the most preferred alternative that minimizes the costs or consequences

Problems with the Classical Model

1. Decision makers have incomplete information
2. They may not know all of the alternatives
3. They may not recognize all of the costs or consequences
4. They may not know their preferences
5. Costs of obtaining complete information may be prohibitive or inefficient
6. Decision makers have limited cognitive ability

Administrative Decision Making

(Bounded Rationality – March and Simon)

Satisficing – choosing acceptable alternative to resolving a problem or pursuing an opportunity

Steps are similar to classical decision making except:

1. A list of criteria for assessing alternatives is usually developed
2. Not all alternatives are listed or evaluated
3. Focus is on acceptable alternative rather than optimal solution
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Sources of Error in Decision Making:

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Summary

 Purely rational decision making is rarely used and often not practical
 Individuals rely on heuristics to make decisions and these are often biased and are
sometimes not appropriate
 Individuals need to be aware of their heuristics and the conditions under which they are used
 Decision making can be improved using IT, structure, and more conscious processing of information
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GROUP DECISION MAKING

Introduction

The most common source of mistakes in management decisions is the emphasis on finding the
right answer rather than the right question. - Peter Drucker

3 Major Facets of Groups

 Organizational Context (Organizational Culture, Task Design, Mission Clarity, Autonomy,
Feedback, Reward Systems, Training, Physical Environment)
 Boundaries (Work team differentiation, External Integration)
 Team Development (Interpersonal Process, Norms, Roles, Cohesion)

Strategies for promoting a good decision making

Common Information Effect:

Contrary to our expectations, groups spend the vast majority of their time discussing information
members all have in common, unique information is rarely shared and not widely discussed.

Groupthink:
 Need for unanimity renders group incapable of
rational decision making
 Cohesion and avoidance of conflict
 “Closed” Leadership (Reduce consideration of
alternatives)
 A “disease” that infects groups.

“If you have a yes-man working for you, one of you is

redundant.”– Barry Rand,CEO, Avis

Group Decision Making Techniques

 Group problem solving - Free flow discussion

 Devil's advocate - Provides some structure for disagreement
 Dialectical method - Provides some structure for disagreement
 Nominal Group Technique (NGT) - High level of structure (Individual Brainstorming, Round
Robin Recording of Ideas, Interactive discussion of ideas, Prioritization through rank voting,
Assess outcomes, Closure)
 Delphi technique - High level of structure (Similar to NGT, but no face to face interaction,
opinion given in private through a memo for example)
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Take-aways: Group Decision-Making

• Confirmation Bias
– Data should be used carefully
• Question the data – seek disconfirming evidence
• Frame and present data carefully
• Decision-making heuristics and biases amplified in groups
– Common information effect
– Groupthink
• A-priori biases compound and influence others’ decisions
• Heuristics can boost or undermine (risky-shift) operational effectiveness

LEADING THROUGH SOCIAL CAPITAL: THE POWER OF NETWORKS

The Types of Capital and Its Benefits

Who do you want to be?

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Principles of Networking

Self-Similarity Principle
We are inclined to pick ties that have similar intellectual backgrounds, training, and experience.

Proximity Principle
We are inclined to pick ties that are in the same departments, units, and teams as ourselves
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Shared Activity Principle

Gives you everything the Self-similarity Principle gives you without any of the drawbacks;
solves the Trust/Diversity Paradox; and builds brokerage networks

Role of Brokers:

Brokers Connect Echo Chambers

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Take-Aways: Social Networks

• Develop a “diversified portfolio” of social contacts

– A mix of redundant (social support & trust) and entrepreneurial (information & control
benefits) ties.
– Include those that are “undervalued”
• Expand networks through
– Shared activities – try something different
– Seek opportunities to use your human and social capital that can
assist others
– Use of brokers – do you know who they are?
• Find opportunities to broker (find structural holes)
– Become a resource broker and make yourself non-substitutable
– Actively “maintain” your social network (e.g. trust); Be generous with resources to build
the trust and credibility you need
– Seek goals that are aligned with organizational goals and generate commitment for your resources

LEADING STRATEGIC CHANGE

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Innovation Adoption Lifecycle – How to spot, understand and influence different types of people
in the lifecycle:
Market Mavens

Brokers

Pragmatists
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Conservatives

Resistors
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Takeaways from Leading Strategic Change: