Escp O&m

ORGANISATION & MANAGEMENT 
Topic 1: Historical perspective

Berlin, London, Madrid, Paris, Turin
2020/2021
(Version 24-08-2020)
Professor of Management &
Alessandro Entrepreneurship
Lanteri, PhD Regular Contributor to Harvard Business
INSTRUCTOR
Review Arabia
Advisor, Trainer to Multinationals,
Professor of Management &
Entrepreneurship
Int’l Organizations, Governments, Startups
Keynote & TEDx Speaker https://goo.gl/fAeTck
Author of CLEVER http://bit.ly/CLEVER_book
@ALESSANDRO LANTERI
https://goo.gl/LDTv9L
2
94% of professors believe
that they are better than
the average professor
about half of them
must be wrong!

I am in the other half !
about half of them

must be wrong!

Course Overview
• Seven topics, each with two frameworks/sub-topics

• All included in the final exam
• We’ll cover them as follows:
• Week One: topics 1 and 2
• Week Two: topics 3, 4, and 5
• Week Three: topics 6 and 7
• You will need to read some materials before coming to class
• You will need to study some materials on your own (ie., we won’t be covering in details in class)
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Assessment weights
• Final exam (case study analysis): 50%

• Individual journal (due at the end of the course): 10% + 20% + 20%
• I will provide you with further instructions (and templates for the journal) later this week
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Organisation & Management Overview
INTRODUCTION
Historical perspective of
Organizing & Managing
DESIGNING ORGANIZATIONS
Work Structure Culture
MANAGING ORGANIZATIONS
Power &
Incentives Decision Making
Legitimacy
Historical Perspective Overview
Introduction
Focus 1: Focus 2: Focus 3:

Defining the field Founding fathers Taylorism today
of study
Conclusion
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Introduction

of study
Conclusion
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Introduction
Perspective and aims of the Organization & Management course
Most courses within a business degree are:

• Specific to one function or field of expertise (marketing / finance / HR, information systems, etc.)
• Oriented towards the acquisition of some applied technical skills (financial valuation, designing business plan, mkg mix, etc.)
By comparison, the Organization & Management course:

• Adopts a transversal perspective: relevant for anyone or any function, as well as for a manager or a worker being managed.
• Covers key concerns for top managers:
…When and how to transform organizational culture / structure?
…How to make decisions?
…How to analyze conflicts and manage power relationships within teams?
The objectives of the course are to sharpen your understanding of management & organizations’ diversity and complexity…
• Through theories and analytical frameworks
• In connection to real life managerial situations
This course does not provide recipes or ready-made solutions for good management, but ways to boost your managerial intelligence, wisdom
and self-judgment.
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Use the code below:
55 76 44 3
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Career progress and skills importance
Importance assigned by organizations
VUCA
Strategic Skills
Leadership Skills
source: Culpin (2020)

Managing Skills
Technical Skills
Career progress
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We live in VUCA times
Volatile
Uncertain
Complex
Ambiguous
source: Taleb (2007)

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Introduction
Analysing complex organizations: A key managerial competency
“Very quickly, when managers reach their thirties,

professional potential and trajectories cease to be
driven by mere technical competencies. Those who
emerge out of the crowd are able to go beyond technical
considerations and managerial fads. […] A key issue is to
develop a fine grained understanding of complex
organizational phenomena”
Audencia & Essec (2014) report for Les Echos et l’Institut de l’Entreprise
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Introduction
Overview
ORGANIZATION &
MANAGEMENT
“Organization & How the organization is

Management” at ESCP structured, coordinated,
and transformed
Business School is one
of the courses studying
human dimensions in
business PSYCHOLOGY & HUMAN RESOURCE
MANAGEMENT MANAGEMENT
Individual Formal policies
Interpersonal Practice and systems
Group behaviour Evaluation
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Introduction
Course objective: Understanding for acting!
Improve your understanding of organizations:

• Characterize different organizational forms and their culture
• Develop analytic skills to understand organizational mechanisms (power, incentives, decisions)
Improve your managerial skills:

• Formulate diagnosis and propose actions
• Anticipate unintended / side effects, and make more informed decisions
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Introduction
Those who succeed are those ...
…who analyse the context and who know how to adapt to it,
…who understand how decisions are made, to better channel their ideas to
decision makers
…who detect possible areas of conflict to offset them
…who know how to anticipate the unintended consequences of the
reorganization of their services
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Introduction
A basic starting point for the course
In a given organization of n individuals
n
Organizational performance
Perf (orga) = Perf (i) differs from the sum of individual
i=1
performances
Where does the difference come from?

• Quality of cooperation (interdependancies and complementarity)
• Culture
• Structure
• Decision making processes
• Organizational choices
• Etc.
Framing of individual performance to build collective performance!
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Introduction

of study
Conclusion
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Focus 1: Defining the field of study
Concepts & definitions
What is an organization?
• Talcott Parsons (1964) : “An organization is a set of social units essentially meant to reach specific objectives”
• Daniel Katz et Robert Kahn (1966) : “Organizations are open systems consisting of activities interwoven with individuals”
• Edgar Schein (1970) : “An organization is the rational coordination of activities of a certain amount of people in order to pursue common implicit
objectives and goals, through a division of work and functions, hierarchy and responsibilities”.
• Michel Crozier (1977) : "An organization is an answer to the problem of collective action".
• Howard Aldrich (1979) : "An organization is a set of activity systems orientated toward an end and maintaining their frontiers".
• Henry Mintzberg (1989) : “The organization defines itself as a collective action in search of a common mission”
Organizations consists in a stable collaboration of actors, following common general objectives through division of work
and functions, and through specific coordination mechanisms
Managers are in charge / responsible for the conduct of an organization (or some of its parts).
• Management is an action, an art, a way of conducting an organization and leading it, in order to plan its development and to control it (Thiétard, 1960)
• Management is a set of processes through which those formally in charge of the organization (or a part of it) try to lead it, or at least to orient it in its
activities (Mintzberg, 1979)
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Focus 1: Defining the field of study
Brief history of organization theory
A century long quest to balance “the things of
production” and “the humanity of production”
Associated Reading:
Kiechel (2012) - The
management century,
Harvard Business Review
Associated Reading: Hatch

and Cunliffe (2013).
Organization
Theory: Modern, Symbolic,
and Postmodern
Perspectives; Chapter 2: A
brief history of organization
theory, p. 19-53, Oxford
University Press
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Source: Hatch and Cunliffe, 2013, p.20
Introduction

of study
Conclusion
27
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Use the code below:
55 76 44 3
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According to Adam Smith (1776) division of labor
increases productivity thanks to:
- no time wasted changing tasks
- accelerated learning
- more innovation
Focus 2: Founding fathers
Overview
The economic relevance of the division of labor was first formalized by Adam Smith in 1776 (An Inquiry into the Nature and Causes of the Wealth of
Nations – description of the Pin Factory)
Large bureaucratic organizations became the dominant form of capitalism after the second industrial revolution, as part of a major social transformation
of our societies
Max Weber (1864 - 1920) Frederick Winslow Taylor (1856 - 1926) Henri Fayol (1841 - 1925)
Sociologist Max Weber related the Taylor identified and promoted principles to Fayol formalized principles for managers
emergence of bureaucracy to a broader develop rational operations
movement of social transformation based on
rationality (rather than tradition), and Both Taylor and Fayol were engineers.
analyzed the characteristics and foundations They favor a rational, universal, and
of such modern bureaucracies
scientific approach to management
. (« one best way »), who should
enable, in all situations, to balance the
interests of top managers and
operational workers
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Max Weber (1864 - 1920)
Max Weber was a lawyer and then became professor in Heidelberg and Freiburg. His writings on organization represent only a fraction of his research (e.g. “Protestant
ethics and the spirit of capitalism"). He is considered as one of the founding fathers of sociology.
His writings on bureaucracy can be found in « Economy and Society » (1922), which develops the key weberian concepts on contemporary capitalism.
While researchers were usually concerned with the reasons why individuals would break the rules, he tried to understand instead what would makes them
obey.
He identifies three types of legitimacy that make people obey to authority:

• Traditional legitimacy : authority is founded on tradition, customs, “because it has always been so”
• Charismatic legitimacy : authority is founded on the belief, devotion, dedication to a sacred/heroic leader
• Rational-Legal legitimacy : authority is founded on stable, explicit, fair, impersonal rules. It lies in the hands of those who are rationally considered the most
capable and qualified for exercising it
Only this third type of legitimacy can replace discrimination, arbitrary power, and obedience to one’s free-will by the establishment of a new system where people obey
to rational and fair rules, to the function rather than the individual. This type of legitimacy is incarnated into organizations which Weber calls the bureaucratic type.
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Frederick Winslow Taylor (1856 - 1926) (1/2)
Biographical elements :
• Taylor was born in 1856 in a wealthy Quaker family in Germantown, Philadelphia, Pennsylvania.
• In 1874, Taylor passed the Harvard Law entrance examinations with honors. However, due allegedly to rapidly deteriorating eyesight, Taylor chose a
different path.
• After a four-year apprenticeship, he became a machine-shop laborer at Midvale Steel Works in 1878. He was quickly promoted to foreman, shop
manager, and chief engineer.
• He got formal recognition as an inventor (Taylor authored 42 patents, designed the « one best way » for steel industrial cutting, and won a golden
medal at the Universal Exposition in Paris in 1900)
• After his experience at Midvale Steel, he settled as a consulting engineer for systematizing Shop Management and decreasing Manufacturing Costs
• He published after 1890; his main work, « Scientific Management », was published in 1911
During his experience as a Shop Manager, Taylor observed a “powerless hierarchy”:

• hierarchical control is not the best tool for efficient coordination
• workers were not working nearly as hard as they could (a phenomenon Taylor called « soldiering »), in order to avoid being caught by management
in a spiral of rising objectives without proportional wage increase. Interests between workers and managers were not aligned.
• Because they master a unique technical know-how (which managers do not master), workers have the power to select their own working processes,
regardless of efficiency concerns.
As a result, Taylor designed an efficient system for coordinating and optimizing production, founded on a strict division between design and
production, as well as specialization and standardization of tasks
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Frederick Winslow Taylor (1856 - 1926) (2/2)
The Principles of Taylorism : specializing and standardizing work:
1. Taylor wishes to replace empirical and inefficient management by Scientific Management:

• Observation of 10 to 15 skilled worker highly trained in their work
• Division of Work into a sequence of tasks
• Timing of each task for each individual. Any gesture not contributing to the completion of task is removed
• The best method (generally the fastest) is defined as the One Best Way, i.e. a performance standard which must be followed by
each worker.
2. Scientific Management is completed by a selection system (« the right man in the right place ») and a wage system founded
on individual performance (with a possibility for workers to get an extra 30% to 100% of salary according to extra performance).
3. Lastly, the organization is founded on a form of supervision that is strictly separated from production, and founded on
two elements:
• Direct supervision from four different foremen, each in charge of a specific functional task. Each worker has several hierarchical
bosses.
• A centralized and powerful department, in charge of working methods, i.e. to prepare work, execution, hiring, paying and discipline
https://www.youtube.com/watch?v=8PdmNbqtDdI
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Henri Fayol (1841 - 1925)
Fayol was a French engineer from the École des Mines de St Etienne, and became the General Manager of the Comentry-Fourchambault
company, mining coal and transforming metal. Within a few years, he brought this company back to profits.
After his successful experience as a top manager, he published a book in 1916 (“Administration Industrielle et Générale”). The book is
considered as one of the first book on management. Its influence has been very strong in Europe and in the United States.
Whereas Taylor argued for a one best way in production systems, Fayol foresees the possibility for rational principles for the organization
as a whole at each different levels.
Fayol identifies 6 different management functions within the company:

• Technical: production, processing, manufacturing
• Commercial: purchases, sales and exchanges
• Finance: fund raising and asset management
• Security: property and people protection
• Accounting: inventory, balance sheet, P&L, statistics
• Administration: planning, organizing, leading, controlling.
Saw the need for delivering systematic training to managers
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Questions
Can you give some examples of modern day applications of
Taylor’s “one best way” principles?
remember: (1) put the right person on the job with the correct tools and equipment; (2) have a
standardized method of doing the job; (3) provide an economic incentive to the worker.
What do you think about these principles?

there’s no right and wrong answer here, but there are good and bad answers. make sure to
justify your opinion using arguments relevant to business (eg., efficiency, fairness…).
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Young Wage Slaves
Case Analysis
Case Study
1. Review the “Young Wage Slaves” case study.
2. Perform the following tasks (in group):
- Analyse the gap between prescribed work and real work at Fasty.
First, identify and list these gaps.
Next, try to prioritize these gaps according to the urgency of action (provide justifications).
Finally, give recommendations for reducing the largest gaps.
- Analyse internal interdependencies.

First, identify if any interdependencies (see Thompson's framework) are present.
Next, determine if these interdependencies cause any problems.
If so, give recommendations for improving these interdependencies.
3. Fasty has been accused of ‘Taylorization’ by the labor unions.

Do you agree? How can the situation be improved?
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Introduction

of study
Conclusion
38
Focus 3: Taylorism Today
Why the ‘Fourth Industrial Revolution’ Looks Much Like the First
• “Seen from one angle, “The Fourth Industrial Revolution” is a marvel of enlightened scientific objectivity. It promises
to replace obsolete habits and mind-sets with frictionless, data-driven solutions. Unshackled from analogue-era
limitations, organisations and employees alike should be freer than ever to follow pathways to their own flourishing.”
• “So far, it hasn’t exactly worked out that way. At worst, waves of technological disruption have the potential to
dehumanise business, both literally and figuratively. The literal level consists of automation that may put as many as
half of all jobs at risk in the coming years. (The COVID-19 crisis adds a dangerous new wrinkle, as the system’s
insufficiencies – of leading and organising – are producing flagrant failures to safeguard human lives.) But algorithmic
efficiencies can also exert a more insidious squeeze upon the soul of the organisation. Increasingly, employees
are dancing breathlessly to a manic tune orchestrated by machines – with ruthless penalties for those who fall
behind."
Associated Reading: Kessler 2020 - Why the

Fourth Industrial Revolution Looks Much Like the
First - INSEAD Knowledge
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Digital Taylorism
• “Taylor’s appeal lay in his promise that management could be made into a science, and workers into cogs in an
industrial machine.”
• “The best way to boost productivity, he argued, was to embrace three rules: break complex jobs down into simple
ones; measure everything that workers do; and link pay to performance, giving bonuses to high-achievers and sacking
sluggards.”
• The “new version of Taylor’s theory starts with his three basic principles of good management but supercharges them
with digital technology and applies them to a much wider range of employees —not just Taylor’s industrial
workers but also service workers, knowledge workers and managers themselves.”
• “In Taylor’s world, managers were the lords of creation. In the digital world they are mere widgets in the giant
corporate computer.”
Associated Reading: The Economist (2015) -

Digital Taylorism 40
Example: Amazon
2016 invented employee tracking wristbands

• To locate employee’s location in the warehouse
• Use vibrations to nudge the employees‘ hand to the correct direction
Amazon warehouse working environment

• Over hundreds of packages per day
• 1 package to be handle for every few seconds
• Penalized on point system
• Fired if too many points
• Employees get rewarded for $500 to report on their colleague
Associated Reading: Mcclelland (2012) I Was a

Warehouse Wage Slave (Mother Jones)
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Introduction

of study
Conclusion
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Conclusion
I can…
… explain the evolution of the Organisation & Management

research field.
… explain the writings and thoughts of the three founding fathers of
the field.
… explain how Taylorism is still present today.
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ORGANISATION & MANAGEMENT 
Topic 1: Historical perspective
2020/2021
(Version 24-08-2020)
ORGANISATION & MANAGEMENT
Topic 2: Work
2020/2021
INTRODUCTION
Power &
Legitimacy
Work Overview
Introduction
Framework 1: Framework 2:
Prescribed vs. Internal
Real Work Interdependence
3
Work Overview
Introduction
4
Introduction
After this session …
I can distinguish prescribed work from real work.

I can distinguish the three types of interdependences and which
team coordination modi they require.
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Work Overview
Introduction
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Framework 1: Prescribed vs. Real Work
Overview
• Different analysts (for example Clot or Desjours) have revealed the existence of a gap between work as prescribed by the organization,
and « real » work, i.e. work as it is lived by individuals who perform the activity.
• This gap is observed through the existence of informal competencies, official rules being bypassed by operational workers, or informal
rules which are central for operational workers but unseen by managers.
• This gap can be more or less important according to managerial situations. Within a certain limit, it can be positive for the company and/or
individuals. However, when badly designed, prescribed work can be a source of constraint and generate organizational malfunctioning
(e.g. safety problems) and psychological disturbances among individuals.
Prescribed work Real work
Definition Set of formal rules and official objectives, as defined by work Set of rules and competences used by individuals to
engineers, which organizes and structure an activity perform their tasks
Rules are made by Corporate managers (managers who evaluate the task). Working teams who perform the tasks.
Can be observed Formal working procedures, methods, working referentials, Direct observation of work situations
through competencies and policies defined by human resources
Role played within the Reporting to managerial objectives (operational and financial Adjusting to the constraints generated by individuals and
organization objectives) work activities.
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Framework 1: Prescribed vs. Real Work
Example: Hospitals
Work as imagined: what designers,
managers, regulators and authorities
believe happens or should happen, which
becomes the basis for training and
control.
work-as-done: what truly occurs and what
people actually do
Often complete understanding is an
unattainable ideal but it provides info
based on conceptual processes and it
may be used to develop theoretical
concepts and generalizable knowledge.
Work as observed occurs when workers
know they are being watched, and the
work in this case may not fully represent
the work that occurs in normal situations.
Associated Reading: Deutsch (2017).
Bridging the Gap between Work-as-
Imagined and Work-as-Done,
Pennsylvania Patient Safety Authority
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Work Overview
Introduction
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Framework 2 : Three Types of Internal Interdependence
Overview
James D. Thompson defines 3 types of interdependence to describe the intensity of interactions and behaviors within an organizational
structure. The study of interdependence helps understand how the different departments or units within the organization depend on the
performance of others
1. Pooled Interdependence: the loosest form of the 3. each Activities’ results are pooled together,
department or BU performs completely separate functions, do not the individual activities can be
directly interact and do not directly depend on each other ; but they conducted without coordinating with
can share common resources and each does contribute individual Resources
other activities.
pieces to the same overall puzzle. This creates an almost blind,
indirect dependence on the performance of others. Low levels of coordination
when one firm cannot perform its tasks until another
2. Sequential Interdependence: when one unit in the overall
process produces an output necessary for the performance by the firm has completed its tasks and passed on the
next unit. The demand for coordination to prevent slowdown is results.
greater than for pooled task interdependence (e.g. an assembly line) oteam members must meet together more regularly
and consistently to coordinate their work
Good performance is achieved through work done in a
3. Reciprocal Interdependence: similar to sequential simultaneous and repetitive process in which each
interdependence in that the output of one department individual must work in close coordination with other team
becomes the input of another, with the addition of being
cyclical. In this model, BUs and departments are at their
members because they can complete their tasks only
highest intensity of interaction. Reciprocal models are the through a process of iterative knowledge sharing
most complex and difficult to manage High degree of coordination
Associated Reading: Thompson (2007). Organizations in

Action: Social Science Bases of Administrative Theory, p. 54-55 10
Framework 2 : Three Types of Internal Interdependence
Example: Team coordination & interdependence
Standardization is the appropriate type of coordination for pooled interdependence. By agreeing in advance on a set of rules and
processes that everyone will follow, everyone’s output can be easily combined to achieve the task. The standardized process remains
unchanged as long as the situation is stable. That’s why in pooled interdependence, you may hear someone say, “Please, all I’m asking is
that each of you complete the online forms correctly and on time. It’s not that difficult! If you just do that, we’ll be able to roll up our numbers
each week.”
Planning is the appropriate type of coordination for sequential interdependence. Planning means coordinating schedules, deadlines, and
other relevant information at the beginning of the process, as well as outlining cases where the process might need to change.
Mutual adjustment is the appropriate type of coordination for reciprocal interdependence. Mutual adjustment means that at any time, any
team member may introduce new information which affects who will need to coordinate with whom moving forward. It can handle the most
uncertainty, and it also has the greatest risks. Effective teams -> design:
- degree to which members are interdependent
- coordination of interdependence
Insufficient coordination: team members have difficulty
getting information from each other, completing tasks,
and making decisiosn
More coordination than required: team members will
Associated Reading: Schwarz (2017). Is Your Team Coordinating Too spend unnecessary time and effort on tasks, slowing
down the team.
Much, or Not Enough?, Harvard Business Review 11
Topic 3: Structure
2020/2021
INTRODUCTION
Power &
Legitimacy
Structure Overview
Introduction
Basic Structure Mintzberg’s
Types Typology
Conclusion
3
Structure Overview
Introduction
Types Typology
Conclusion
4
Introduction
Definition of organizational structure
• Organizational structure: the arrangement of activities (allocation and deployment of organizational

resources and responsibilities) through an orderly set of reporting relationships and communication
channels that best manage the fundamental contradiction between division of labor and integration (or
coordination) of labor
• Division of labor ensures that all essential tasks are performed with accurate attention: it is the process of
breaking work into different jobs, units and departments : assign tasks and responsibilities associated with
individual jobs; cluster jobs into units and divide activity into departments and hierarchical levels.
• Integration (or coordination) of labor ensures the consistency of the organization as a whole. It is the
process of setting relationships among individuals, groups and departments, establishing formal lines of
authority, reporting and communication
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Introduction
I can identify the structure of a given company.
For each type of structure:
• I can explain the main advantages and disadvantages.
• I can identify if a particular structure is suitable for a given organisation (its
environment, its maturity,…) or if a structural deficiency exist.
• I can formulate recommendations to overcome these problems
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Structure Overview
Introduction
Types Typology
Conclusion
7
Framework 1: Basic Structure Types
Overview
Functional Divisional Matrix

Structure Structure Structure
Associated Reading: Draft (2009). Organization Theory and Design,

Chapter 3 Fundamentals of Organization Structure, p.104-108 & p.110-115, South-
Western, Cengage Learning
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Functional Structure
A functional structure groups people on the basis of their common skills, expertise or
resources they use. It is appropriate for companies with a limited number of products or
services. Activities are grouped together by common function from the bottom to the top of the organization
All human knowledge and skills with respect to specific activities are consolidated, providing a valuable depth of knowledge for the organization
STRENGTHS: WEAKNESSES:
• Deeper level of specialization and productivity: reduce • Inappropriate for companies with a variety of products,
duplication of efforts; promotes standardization; easier to services, channels, or customers
monitor and evaluate individuals • Poor horizontal coordination: barriers created across
• Better control of people that supervise one another on functions (e.g., marketing may not communicate with
the basis of common skills and norms product development or sales)
• Better Knowledge transfer when employees are grouped • Risk of overloaded hierarchy: decisions pile up on top
together : common pool of talents, coherent professional • Risk of "moving targets": higher conflict between
identity and career paths departments
• Increase buying power for purchasing and economies of • Poor adaptation to change or local needs: different
scale in manufacturing areas, new type of customer
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Functional Structure
Source: Draft 2009, p. 107
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Divisional structure
A divisional structure is a superposition of “single activity sub-companies” where management has
large autonomy. Each division is responsible for all tasks related to a product, product line, a
geographic area or type of customer (R & D, manufacturing, marketing, etc.). Each business unit
has all resources and functions needed (finance, R&D, human resources, etc.). The firm is divided
into separate business units, each being an independent profit center.
• Suited to fast change in unstable environment • Eliminates economies of scale in functional departments
• Leads to customer satisfaction because product • Leads to poor coordination across product lines
responsibility and contact points are clear • Eliminates in-depth competence and technical
• Involves high coordination across functions specialization
• Allows units to adapt to differences in products, regions, • Makes integration and standardization across product
customers lines difficult
• Best in large organizations with several products (vs. • Duplication across product lines or markets
functional structure) • Compete for resources between divisions
• Decentralizes decision making
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Divisional structure
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Matrix Structure
A matrix structure groups people and resources in two ways simultaneously, by function and
products. It is a rectangular grid that shows a vertical flow of functional responsibilities and
a horizontal flow of product responsibility. Its main objective is to preserve the common
potential of the organization: horizontal processes are as important as vertical ones
• Achieves coordination necessary to meet dual demands • Dual authority: Frustration and confusion
from customers (no one can do it all) • Participants need good interpersonal skills and
• Flexible sharing of human resources across products extensive training: in matrix structures people tend to
• Suited to complex decisions and frequent changes in create their own informal organization to provide
unstable environment themselves with some sense of structure and stability
• Provides opportunity for both functional and product skill • Time consuming: frequent meetings and conflict
development resolution sessions
• Best in medium-sized organizations with multiple • Collegial rather than vertical-type relationships: will not
products work unless participants understand and adopt it
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Matrix Structure
• A matrix structure combines the
strengths of functional and
divisional structures : targeting
product or geographical segments
for better delivery and
responsiveness to local constraints
with economies of scale and
expertise for main functions
• Matrix function is a complex

network of superior-subordinate
reporting relationships : each
employee has two (or more) bosses
• The product team is the building

block and principal integration and
coordination mechanism
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Structure Overview
Introduction
Types Typology
Conclusion
15
Framework 2: Mintzberg’s Typology
Overview
Simple Machine Divisionalized

Structure Bureaucracy Form
Professional
Adhocracy
Bureaucracy
Associated Reading: Mintzberg (1981). Organizational Design Fashion or Fit, Harvard Business Review
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Four elements of differentiation (but many others, cf. article)
Simple Machine Divisionalized Professional Adhocracy

Structure Bureaucracy Form Bureaucracy
1. Key part of
organization
2. Key means
of coordination
3. Dominant
pull
4. Contingency
factors
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1. Key part of organization

1. Key part of Strategic apex Technostructure Middle line Operating core Support Staff
organization
Explanation = Strategic level (CEO = Administrative staff, = Senior staff, who = All employees, = Specialists who
and top management) who defines acts as a liaison whose work is directly provide a range of
operational standards, between operating related to the services essential to
methods, norms that core and strategic production of goods the running of the
apply to operating apex (translation of and services (the organization, but
core (planning, decisions into actions, mission of the totally distinct from its
financial & accounting, information feedback organization) core mission (PR &
security) and reporting, solving communication, Legal
problems that do not services, Strategic
require the marketing, R&D,
intervention of Logistic) 18
strategic apex)
2. Key means of coordination

organization
2. Key means of Direct supervision Standardization of Standardization of Standardization of Mutual adjustment
coordination work outputs skills
Explanation = orders from strategic = formalization of = formalization of = formalization of = interaction and
level rules, processes and plans and schedules, qualifications, informal
procedures (e.g.: common standards of knowledge, communication
employee handbook) results and/or competencies through between highly trained
objectives recruiting and/or experts
training
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3. Dominant pull
Simple Structure Machine Divisionalized Professional Adhocracy
Bureaucracy Form Bureaucracy
organization
3. Dominant pull Pull for centralization Pull for formalization Pull for Pull for Pull for collaboration
balkanization professionalization
Explanation = The strategic apex, = The technostructure, = The middle line, = The operating core, = The support staff, who
in charge of the who defines and wanting to increase whose strength is its is in close contact with
organization, favors controls procedures, its autonomy, favors competence, favors the environment, favors
direct supervision, thus favors standardization standardization of standardization of mutual adjustment, thus
centralization of work, thus outputs, thus qualifications, thus collaboration: selective
formalization: strong balkanization: professionalization: decentralization
formalization of separated divisions, training and according to the nature
behaviors, horizontal & each one having its socialization, horizontal and scope of decision,
vertical specialization, own structural specialization, high degree of
centralization, strict configuration decentralization, horizontal
control, important designed to respond minimum hierarchy and specialization, training,
formal power of to the market in technostructure flexibility according to
20
hierarchical line which it operates projects, instability of
and strategic apex BUs and hierarchy
4. Contingency factors
organization
3. Dominant pull Pull for centralization Pull for formalization Pull for balkanization Pull for Pull for collaboration
professionalization
4. Contingency Age & Size: Typically Age & Size: Typically Age & Size: Typically Age & Size: Varies Age & Size: Typically
factors young and small old and large old and very large Technical system: young
Technical system: Technical system: Technical system: Not regulating or Technical system: very
Simple, not regulating Regulating but not Divisible, otherwise complex complex
Environment: Simple automated, not very like machine Environment: Environment: Complex
and dynamic, complex (mass or bureaucracy Complex and stable and dynamic
sometimes hostile routine technology) Environment:
Environment: Simple Relatively simple and
and stable stable
Examples starts-up, architect mass production; often often mature and big hospitals, universities, small consulting firms,
office; bigger mature organizations; organizations big consulting firms, virtual firms, temporary
companies in a crisis big companies; single operating in different newspapers, projects, research labs,
situation; army service administration; markets; more than investment banks media companies, new
manufacturing with 60% of Fortune 500 technology and high
21
long product life tech companies
Main advantages & problems, psychiatric risk
Simple Structure Machine Divisionalized Form Professional Adhocracy
Bureaucracy Bureaucracy
Main advantages Speed in decision making Rationality, coherence, Distribution of risks and Expertise, autonomy Innovation, capable of
and action security, planning is resources, efficiency and self-responsibility facing a turbulent
possible for professionals environment
Main problems Excessive centralization Coercive coordination; Risk of excessive Weak coordination Efficacy is met at the cost
by a charismatic strong weak human performance objective; between professionals; of inefficiency
leader; Risk of neglecting management; innovation impeded by conflict with support (communication and
strategic issues if leader neglection of employees diversification staff; rejection of coordination cost,
is overloaded by well being in operational innovations which importance of liaison
operational issues core; weak could jeopardize devices); flexibility and
coordination; slow professionals’ ambiguity can be
response to external qualification; destabilizing for
changes; vertical inadequacy to solve individuals, thus a pull
communication only unknown problems toward bureaucratization of
(top-down) the organization
Psychiatric risk Hysteria: Centralization Obsession: Efficiency Depression: Concentration Paranoïa: Competency Schizophrenia: Innovation
The leader can’t do it all Technostructure Division leaders’ horizon Professionals are Do we have to keep on
members are obsessed is limited to their market, convinced that people innovating or do we have
by the respect of segment and own outputs question their skills to exploit existing
standards and rules innovations?
22
Structure Overview
Introduction
Types Typology
Conclusion
23
Conclusion
Symptoms of structural deficiency
Top executives periodically evaluate organization structure to determine whether it is appropriate to changing needs. As a general rule, when
organization structure is out of alignment with organization needs, one or more of the following symptoms of structural deficiency appear:
• Decision making is delayed or lacking in quality. Decision makers may be overloaded because the hierarchy funnels too many
problems and decisions to them. Delegation to lower levels may be insufficient. Another cause of poor quality decisions is that information
may not reach the correct people.
• The organization does not respond innovatively to a changing environment. One reason for lack of innovation is that departments
are not coordinated horizontally. The identification of customer needs by the marketing department and the identification of technological
developments in the research department must be coordinated.
• Employee performance declines and goals are not being met. Employee performance may decline because the structure doesn’t
provide clear goals, responsibilities, and mechanisms for coordination. The structure should reflect the complexity of the market
environment yet be straightforward enough for employees to effectively work within.
• Too much conflict is evident. Organization structure should allow conflicting departmental goals to combine into a single set of goals for
the entire organization. When departments act at cross-purposes or are under pressure to achieve departmental goals at the expense of
organizational goals, the structure is often at fault. Horizontal linkage mechanisms are not adequate.

Chapter 3 Fundamentals of Organization Structure, South-Western, Cengage Learning 24
Topic 4: Culture
2020/2021
INTRODUCTION
Power &
Legitimacy
Culture Overview
Introduction
Framework 1:
Framework 2:
Elements of
The cultural web
organizational
(Johnson et al.,
culture
2005)
(Schein, 2004)
Conclusion
3
Culture Overview
Introduction
Framework 1:
Framework 2:
Elements of
The cultural web
organizational
(Johnson et al.,
culture
2005)
(Schein, 2004)
Conclusion
4
Introduction
I can analyze in a structured way (by mobilizing a framework) the

culture of a given company.
This allows me to identify the advantages and disadvantages of a
given culture.
And finally formulate adequate recommendations for improvement.
5
Introduction
Definition of organizational culture
• The topic of organizational culture came into its own during the 1980s when managers and researchers
began to look for keys to firms’ survival in a competitive and turbulent environment.
• Some definitions:
• “A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation
and internal integration, that has worked well enough to be considered valid, and therefore, to be taught to new
members as the correct way to perceive, think and feel in relation to those problems.” (Schein 1981)
• A historically transmitted pattern of meanings personified by symbols, a system of inherited conceptions
expressing in symbolic forms by which men communicate and develop their knowledge about attitudes towards life
[Geertz 1973]
• A system of informal rules which states how to behave most of the time [Deal & Kennedy 1982]
• Culture creates meaning for those who adhere to it. It is a management tool; a way to reinforce
organizational values, to control behaviors, and maintain cohesion within the organization despite
possible ambient turbulence.
6
Culture Overview
Introduction
Framework 1:
Framework 2:
Elements of
The cultural web
organizational
(Johnson et al.,
culture
2005)
(Schein, 2004)
Conclusion
7
Framework 1: Elements of Organizational Culture (Schein, 2004)
Overview
Artifacts
• Stories/legends
• Rituals/ceremonies Visible
• Organizational language (but not always decipherable)
• Physical structures/décor
Shared values
• Conscious beliefs (declared values)
• Evaluate what is good or bad, right or
wrong
• Enacted values
Invisible
(below the surface)
Associated Reading:
Schein (2004). Shared assumptions
Organizational Culture and
• Unconscious, taken-for-granted
Leadership, p. 25-37
perceptions or beliefs
• Mental models of ideals
8
Artifacts
Name: can represent an ambition (Apple, France Telecom, Kodak, Sony, Tamashi, Björg, etc.)
Logo: same role (Golden Arches of McDonald's), but it can also symbolize the history and/or specificities of the company (RATP, Yamaha, BMW propeller,
etc.).
Physical structures/décor
• Building structure -- may shape and reflect culture
• Office design conveys cultural meaning: Furniture, office size, wall hangings
• Dress code
Stories/legends
• Social prescriptions of desired (undesired) behavior
• Provides a realistic human side to expectations
• Most effective stories and legends: describe real people, assumed to be true, known throughout the organization, are prescriptive
Rituals/ceremonies
• Rituals: programmed routines (Passage rites, Development and upgrading rites, Integration rites, etc.)
• Ceremonies: planned activities for an audience (eg., award ceremonies)
Organizational language
• Words used to address people, describe customers, etc.
• Leaders use phrases and special vocabulary as cultural symbols, eg. Referring to “clients” rather than “customers”
• Language also found in subcultures, eg. Whirlpool’s “PowerPoint culture”
9
Shared values
Stable, evaluative beliefs that guide our preferences
• Enable employees to evaluate what is good or bad, right or wrong
• Conscious beliefs about use of time and how much people work in a given organization; about the way things ought to be
Examples of dominant values

• “customers are number one”
• high quality products
• travel style
• importance of family
Different types of values:

• Core values are the deeply ingrained principles that guide all of a company’s actions; they serve as its cultural cornerstones
• Espoused (the values we say we use and often think we use) vs. enacted values (values we actually rely on to guide our decisions and
actions)
• Aspirational values are those a company need to succeed in the future but currently lacks
Decisions and behaviors linked to values when:

• We are mindful of our values
• We have logical reasons to apply values in that situation
• The situation does not interfere
10
Shared assumptions
Unconscious, taken-for-granted beliefs, mental models of ideals. Shared assumptions provide answers to some
fundamental questions members of the organization may have:
The image of the organization:

• Is the organization solid and eternal, or unsafe and vulnerable?
• Is it unique, prestigious, rewarding?
• Is it caring and protective, or a brutal and unfair place, or a cold yet fair system?
The image of the profession and qualifications required:

• What is expected of me?
• What does it take to be successful, what is the profile of a winner, should one be a shark or a team player?
• What does it means to be a good engineer, auditor, foreman, etc..?
The image of the power structure:

• Who are the important people or groups?
• What kind of gap is there between the official hierarchy and real power?
• Who are the powerful stakeholders(customers, shareholders, regulation authorities, etc..)?
11
Culture Overview
Introduction
Framework 1:
Framework 2:
Elements of
The cultural web
organizational
(Johnson et al.,
culture
2005)
(Schein, 2004)
Conclusion
12
Framework 2:
The cultural web
(Johnson et al., 2005)
The cultural web is a

representation of the
taken-for-granted
assumptions, or paradigm,
of an organisation and the
physical manifestations of
organisational culture
Associated Reading: Johnson, G.,

Scholes, K., & Whittington, R. (2005).
Exploring Corporate Strategy, p. 201-207
13
Culture Overview
Introduction
Framework 1:
Framework 2:
Elements of
The cultural web
organizational
(Johnson et al.,
culture
2005)
(Schein, 2004)
Conclusion
14
Conclusion
Four levers for evolving a culture
Articulate the aspiration.
• Begin with an analysis of the current culture, using a framework that can be openly discussed throughout the organization.
• Leaders must understand what outcomes the culture produces and how it does or doesn’t align with current and anticipated market and
business conditions.
Select and develop leaders who align with the target culture.
• Leaders serve as important catalysts for change by encouraging it at all levels and creating a safe climate
• Candidates for recruitment should be evaluated on their alignment with the target culture.
• Incumbent leaders who are unsupportive of desired change can be engaged and re-energized through training and education about the
important relationship between culture and strategic direction.
• However, culture change can and does lead to turnover.
Use organizational conversations about culture to underscore the importance of change.

• Culture frameworks can be used to discuss current and desired culture styles and also differences in how senior leaders operate.
• Various kinds of organizational conversations, such as listening tours or structured group discussion, can support change.
Reinforce the desired change through organizational design.

• When a company’s structures, systems, and processes are aligned and support the aspirational culture and strategy, instigating new
culture styles and behaviors will become far easier.
• The degree of centralization and the number of hierarchical levels in the organizational structure can be adjusted to reinforce behaviors
inherent to the aspirational culture.
Associated Reading: Groysberg, B., Lee, J., Price, J. & Cheng, J. Y.-J., (2018). The Leader’s Guide to Corporate 15
Culture, How to manage the eight critical elements of organizational life, Harvard Business Review
Topic 5: Incentives
2020/2021
INTRODUCTION
Power &
Legitimacy
Incentives Overview
Introduction
Psychological Ouchi’s control
contract theory
Conclusion
3
Incentives Overview
Introduction
contract theory
Conclusion
4
Introduction
Three different approaches for activating control in organizations:
• By motivation (psychologists): Intrinsic motivation (identity, culture, image, pride, empowerment, etc.)
• By incentives (economists): Management by objectives and financial incentives (compensation

packages, promotion, any recognition)
• By power (sociology): control, rules and procedures, mission statements, job definition
The purpose is always to control (in a dynamic way) the organization, but incentives cannot be
understood only on the individual level : organizational models and contingencies are very
structuring.
5
Introduction
I can analyze in a structured way the psychological contract within

a given company.
This allows me to identify which type of Ouchi’s control theory mainly
applies to a given organization.
Finally, I am aware of the company as a whole (culture, structure,...)
to know if other levers can be mobilized to reduce incentive
imbalances within the organization
6
Incentives Overview
Introduction
contract theory
Conclusion
7
Framework 1: Psychological contract
• Large research field, its beginnings date back to the 1950s. For example March and Simon’s contribution-inducements model (1958).
• Motivation is an equilibrium (a psychological contract) between contribution & retribution : each party’s involvement is based on
this notion of social exchange in which each party demands certain things and contributes accordingly to the exchange
• Individuals will stay in companies as long as the retributions they receive exceed the contributions they make
• Retributions: salary, status, self-actualization, etc.
• Contributions: work time, effort, subordination, etc.
• If the organizational system does not allow for a psychological (i.e. perceived) balance between contribution and retribution,
organizational members try to re-establish this balance themselves by:
• Reducing their contribution: being late, absenteeism, unjustified absences, etc.
• Raising the retribution they get: stealing, charging unjustified expenses, etc.
• What counts is not the objective, measurable and monetary, value of the contributions and retributions, but the subjective, symbolic,
perception of the organizational members:
• Weekend or evening work is considered as meriting “high retribution costs”
• Using company property for personal purposes is estimated as having a “retribution value” higher than its actual economic value
Associated Reading: Conway and Briner (2005): Understanding Psychological Contracts at Work: A Critical
8
Evaluation of Theory and Research, p. 8-13, Oxford University Press
Incentives Overview
Introduction
contract theory
Conclusion
9
Framework 2: Ouchi’s control theory (1979)
Overview
Incentives cannot be understood only on the individual level. Organizational models and contingencies are very
structuring. According to Ouchi (1979) there are three different control strategies that organizations could adopt :
bureaucratic, market, and clan. Each form of control is based on different types of requirements. All three types may
appear simultaneously in an organization.
Source: Draft (2009), p. 353
Associated Reading: Draft (2009). Organization Theory and Design; Chapter 9: Organization Size, Life Cycle,
and Decline; Bureaucracy versus other forms of control, p. 552-556, South-Western, Cengage Learning 10
Three different control strategies
• Bureaucratic control is the use of rules, policies, hierarchy of authority, written documentation, standardization, and
other bureaucratic mechanisms to standardize behavior and assess performance. The primary purpose of bureaucratic
rules and procedures is to standardize and control employee behavior. As organizations progress through the life cycle
and grow larger, they become more formalized and standardized. To make bureaucratic control work, managers must
have the authority to maintain control over the organization.
• Market control occurs when price competition is used to evaluate the output and productivity of an organization or its
major departments and divisions. The use of market control requires that outputs be sufficiently explicit for a price to be
assigned and that competition exist. Each division contains resource inputs needed to produce a product. Each division
can be evaluated on the basis of profit or loss compared with other divisions.
• Clan control is the use of social characteristics, such as shared values, commitment, traditions, and beliefs, to control
behavior. Organizations that use clan control have strong cultures that emphasize shared values and trust among
employees. Clan control is important when ambiguity and uncertainty are high. High uncertainty means the
organization cannot put a price on its services, and things change so fast that rules and regulations are not able to
specify every correct behavior.
11
Summary
Control Based on Achieved To control By installing
mechanisms through
Objectives, Competition
Market Price Competition indicators, Results A
budgets / \
B><C
Direct Separation
Bureaucracy Rules Hierarchy supervision, Behaviors A
control
/ \
B][C
Training, Cooperation
Clan Engagement Traditions socialization Attitudes A
ideology / \
B<>C
12
Incentives Overview
Introduction
contract theory
Conclusion
13
Conclusion
• It is important to not only focus on monetary incentives. No study could clearly establish the direct link between an
incentive and the achievement of a task. Sometimes even the opposite can be found, especially for highly complex
tasks.
• We often find a negative correlation between salary and performance. If we cut a salary by half the performance will
certainly decrease, however if we double a salary we will not see a significantly better performance. A US study has
shown that companies that pay bonuses to their top managers do not have the better results.
• Incentives only lead to temporary improvements, with a permanent cost that can become rather high very quickly.
• The notion of punishment is linked to incentives in the sense that not receiving an available bonus can be perceived
as a punishment. The more you focus on those who receive bonuses, the more you punish those who do not. It may
therefore sometimes be preferable to only punish a small number of real under-performers and avoid rewarding highly
just a selected few.
• To make sure they keep their bonuses employees may play down any difficulties or refrain from asking for help
even if it is needed. Being used to incentives reduces notion of risk, introduces individual stress about individual
compensation, diminishes creativity and may push to non-compliance.
• Overcoming these problems by striving for a purpose-driven organisation
14
Topic 6: Power & Legitimacy
2020/2021
INTRODUCTION
Power &
Legitimacy
Power & Legitimacy Overview
Introduction
Vertical Sources Horizontal Sources
of Power of Power
Conclusion
3
Introduction
of Power of Power
Conclusion
4
Introduction
Definitions
Power: is the ability of one person (or group) to influence and change the attitudes or behavior of others, which
they wouldn’t have without our intervention
• Influence: corresponds to the informal aspect of power. We use the term of influence to emphasize the
psychological, and mostly unconscious, aspect of the relationship (pressure, seduction, politics, etc..): the process
of affecting the thoughts, behavior and feelings of another
• Authority: authority is the formal aspect of power. It finds its source in rules, laws and regulations governing the
institution. Its legitimacy confers the right to obtain, without the use of physical restraint, a certain behavior on the
part of those who are submitted to it. It therefore requires the consent of the other. Linked to a role or function,
authority is hence temporary.
It is important to understand the subtle difference among those terms: for instance a manager can have authority
but no power: you can have the right to tell someone what to do, but nor the ability, nor the skills to influence him
effectively.
5
Introduction
I can distinguish the four major sources of vertical power.

I can distinguish the five major sources of horizontal power.
I can analyse where the power lies within an organisation and give
adequate recommendations to reduce dependencies.
Finally, I am aware of the company as a whole (culture, structure,
incentives...) to know if other levers can be mobilized to reduce
power imbalances within the organization.
6
Introduction
of Power of Power
Conclusion
7
Framework 1: Vertical Sources of Power
Four major sources of vertical power (1/2)
All employees along the vertical hierarchy have access to some sources of power. Although a large amount of power is typically
allocated to top managers by the organization structure, people throughout the organization often obtain (or don’t obtain) power
disproportionate to their formal positions.
“Sources of Vertical Power” How to influence “Sources of Vertical Power”
Formal Certain rights, responsibilities, and prerogatives accrue to Power can be increased when a position encourages
position top positions. People throughout the organization accept contact with high-level people. The total amount of power in
the legitimate right of top managers to set goals, make an organization can be increased by designing tasks and
decisions, and direct activities. interactions along the hierarchy so everyone can exert more
influence. If the distribution of power is skewed too heavily
toward the top, research suggests that the organization will
be less effective.
Resources Each year, new resources are allocated in the form of Top management can exchange resources in the form of
budgets. These resources are allocated downward from salaries and bonuses, personnel, promotions, and physical
top managers. Resources can be used as rewards and facilities for compliance with the outcomes they desire.
punishments, which are additional sources of power.
Resource allocation also creates a dependency
relationship.
Associated Reading: Draft (2009). Organization Theory and Design;

Chapter 13 Conflict, Power, and Politics; Vertical Sources of Power p. 499-503, South-
Western, Cengage Learning 8
Framework 1: Vertical Sources of Power
Four major sources of vertical power (2/2)
“Sources of Vertical Power” How to influence “Sources of Vertical Power”
Control of Control of decision premises: top managers place Control of decision premises: How much decision freedom is
decision constraints on decisions made at lower levels by given to lower managemnt ?
premises and specifying a decision frame of reference and guidelines.
information
Control of information: managers recognize that Control of information: Is information openly and broadly
information is a primary business resource and that by shared within the organisation ? If yes this increases the
controlling what information is collected, how it is power of people throughout the organization.
interpreted, and how it is shared, they can influence how
decisions are made.
Network Network centrality means being centrally located in the People can increase their network centrality by becoming
Centrality organization and having access to information and people knowledgeable and expert about certain activities or by
that are critical to the company’s success. Managers as taking on difficult tasks and acquiring specialized knowledge
well as lower-level employees are more effective and that makes them indispensable to managers above them.
more influential when they put themselves at the center of
a communication network, building connections with
people throughout the company.
9
Introduction
of Power of Power
Conclusion
10
Framework 2: Horizontal Sources of Power
Overview
Horizontal power pertains to relationships across

departments, divisions, or other units. All vice
presidents are usually at the same level on the
organization chart, but they don’t necessarily have the
same amount of power. Horizontal power is not
defined by the formal hierarchy or the organization
chart (e.g. IT departments have growing power in many
organizations, even though it is not visible in
organization charts). Salancik & Pfeffer (1977), Emerson
(1962) (among others) show that a department rated as
powerful may possess one or more of power sources.
We will distinguish five major sources of horizontal
sources of power.
Associated Reading: Draft (2009). Organization Theory and
Design; Chapter 13 Conflict, Power, and Politics; Horizontal
Sources of Power p. 504-509, South-Western, Cengage
Learning
Source: Sources of horizontal power, Draft 2009, p. 506 11
Framework 2: Horizontal Sources of Power
Five major sources of horizontal sources of power
“Sources of Horizontal Power”
Dependency Interdepartmental dependency is a key element underlying relative power. Power is derived from having something someone
else wants. The power of department A over department B is greater when department B depends on department A. For
example: a department in an otherwise low power position might gain power through dependencies. If a factory cannot produce
without the expertise of maintenance workers to keep the machines working, the maintenance department is in a strong power
position because it has control over a strategic contingency.
Financial Control over resources is an important source of power. Money can be converted into other kinds of resources that are needed
resources by other departments. Money generates dependency; departments that provide financial resources have something other
departments want. Departments that generate income for an organization have greater power.
Centrality Centrality reflects a department’s role in the primary activity of an organization. One measure of centrality is the extent to which
the work of the department affects the final output of the organization. For example, the production department is more central
and usually has more power than staff groups. The corporate finance department of an investment bank generally has more
power than the stock research department.
Non- Power is also determined by nonsubstitutability, which means that a department’s function cannot be performed by other readily
substitutability available resources. Similarly, if an employee cannot be easily replaced, his or her power is greater. If an organization has no
alternative sources of skill and information, a department’s power will be greater.
Coping with Elements in the environment can change swiftly and can be unpredictable and complex. In the face of uncertainty, little informa-
Uncertainty tion is available to managers on appropriate courses of action. Departments that reduce this uncertainty for the organization will
increase their power. For example: When market research personnel accurately predict changes in demand for new products,
they gain power and prestige because they have reduced a critical uncertainty. But forecasting is only one technique. 12
Sometimes uncertainty can be reduced by taking quick and appropriate action after an unpredictable event occurs.
Introduction
of Power of Power
Conclusion
13
Conclusion
Summary: Power in organizations
• Power in organizations is not primarily a phenomenon of the individual. It is related to the resources departments
command, the role departments play in an organization, and the environmental contingencies with which departments
cope.
• Position and responsibility, more than personality and style, may determine a manager’s ability to influence
outcomes in the organization.
• However, power is used through individual political behavior. To fully understand the use of power within
organizations, it is important to look at both structural components and individual behavior. Although power often comes
from larger organizational forms and processes, the political use of power involves individual-level activities and skills.
(for more information see: Draft (2009). Organization Theory and Design; Chapter 13 Conflict, Power, and Politics;
Using power, politics, and collaboration, p. 512-520, South-Western, Cengage Learning)
14
Topic 7: Decision Making
2020/2021
INTRODUCTION
Power &
Legitimacy
Decision Making Overview
Introduction
Framework :
Carnegie Model Focus:
(based on the work of Cyert, Biases & Solutions
March & Simon)
3
Introduction
Framework :
March & Simon)
4
Introduction
The complexity of Decision Making process
The success of any organization depends on its ability to make effective decisions: (1) timely, (2) acceptable to the individuals affected
by it, (3) and meeting the desired objective
Decision making is a critical activity in management: decisions range from simple and routine, where there is established decision rules
and procedures (programmed decisions) to new and complex decisions that require creative solutions (non programmed decisions)
Decision making process in organization is highly complex: it involves individual influences, group bias and collective liabilities, as well
as organizational design and constraints (structure, interests and politics, culture), that can either enhance an effective decision process or
impede it.
Challenges:
• Decision making is stressful: managers must make decisions with significant pressure, risks and uncertainty and most of the time
without all necessary information; and they must trust and rely on others even if they are eventually responsible of the outcome
• Most companies cultivate a failure-fearing culture, where penalties for making wrong decisions are overly severe
• Few companies have established “effective decision making rules and processes”, and most of the time they rely on the leader’s
final decision
Solutions have to be found to overcome these challenges.
5
Introduction
Rational model vs. Bounded rationality model
Rational model:
• Classical approach of decision making: vision of decision as resulting from intended rational choice.
• It stands as an ideal that managers strive for and follows a logical step by step approach, with thorough analysis of alternatives and
consequences and their probability to occur.
• An unrealistic model (utopia), given its assumptions that do not take into account time constraints, limit to human knowledge,
information-procession capabilities.
Bounded rationality model:

• In 1978, Herbert A. Simon received the Nobel Prize in economics for his Bounded Rationality Model.
• Bounded Rationality is the idea that the environment is too complex for one person to understand and know.
• In decision-making, rationality of individuals is limited by various elements: information they can have, cognitive limitations of
their minds and the inevitable selective perception, number of alternatives which is too large to be all considered, impossibility to
figure out all consequences in time and space, the finite amount of time individuals have to make a decision.
• Herbert Simon has shown that to deal with the complexity, the uncertainty and the difficulties of discovering and designing
alternatives, decision making models can replace “optimization criteria” with “satisfactory performance” criteria
• Bounded Rationality is the “real world” model: managers choose the FIRST satisfactory and sufficient solution (not the optimal
one) , that respects organizational status quo, and which can be rapidly taken from incomplete information.
6
Introduction
Organizations are decision making support systems
Organizations help to overcome bounded rationality to get closer to rational decision making.
Structure, procedures, rules, cultures, incentives, etc.. are used to overcome human shortcomings,
reduce complexity and absorb uncertainty.
Division of labor: reduces the individual attention and competency spam to acceptable dimensions
Hierarchy and control: avoids thinking about the soundness of orders and releases responsibility
Rules, standards, procedures: which are ready made solutions
Information channels: those who collect information are not those who use it
7
Introduction
I can analyze the decision making process of organizations.

I can identify if an organisation / individual faces decision making biases.
I can recommend solutions for better decision making in organizations.
Finally, I am aware of the company as a whole (culture, structure, incentives...) to
know if other levers can be mobilized to improve decision making within the
company.
8
Introduction
Framework :
March & Simon)
9
Framework: Carnegie Model (based on the work of Cyert, March & Simon)
Organization-level decisions based on coalitions among managers
The Carnegie model of organizational decision making is based on the work of Richard Cyert, James March, and Herbert Simon, who were
all associated with Carnegie-Mellon University. Their research helped formulate the bounded rationality approach to individual decision
making, as well as provide new insights about organizational decisions.
Research by the Carnegie group indicated that organization-level decisions are based on coalitions among managers:
• Large firms are coalitions of individuals or sub-groups (managers, stockholders, workers, suppliers, etc.) each of one with different
interests. All groups participate in setting goals and making decisions.
• Specific goals (production; inventory; market share; sales and profits) are compromises negotiated by the sub-groups : priorities and
information vary by group, potentially creating conflicts. All goals must be satisfied, following an implicit order of priority among them.
• The problem is divided into sub-problems (secondary goals) that different sub-groups have to solve, depending on their specialty ;
each one uses its standard procedures to solve the problem, in order to satisfy their own hierarchy.
• Once a satisfactory solution vis-à-vis the hierarchy is found, the process stops (satisficing sequential behavior). The overall
solution is the simple juxtaposition of local solutions.

Chapter 12 Decision Making Processes, Carnegie Model p. 464-466, South-Western,
Cengage Learning
10
Choice Processes in the Carnegie Model
Insight: As a manager, use

a coalition-building
approach when
organizational goals and
problem priorities
are in conflict. When
managers disagree about
priorities or
the true nature of the
problem, they should
discuss and seek
agreement about priorities.
Source: Draft 2009, p. 465
11
Organizational Slack
A large organization can afford not to apply optimal decision making, because of its “organizational
slack”
Organizational slack is the excess capacity maintained by organizations, e.g. when resources are ordinarily
not being completely utilized to keep the various sub-groups in the organization (wages higher than required
to retain employees and for the efficient working of the firm, products prices lower than necessary for not
loosing customers, high dividends paid to shareholders, etc.).
Cyert and March claim that organizational slack plays a stabilizing and adaptive role:
• A solution for maintaining the coalition of sub-group that form the organization
• A surplus in case of crisis
• A steering wheel for short-term adaptation
12
Introduction
Framework :
March & Simon)
13
Focus: Biases & Solutions
Common Biases that affect business decisions (1/2)
Psychologists and behavioral economists have identified many cognitive biases that impair our ability to
objectively evaluate information, form sound judgments, and make effective decisions. Here are several biases
that can be particularly problematic in business contexts:
Action-oriented Biases:
• Excessive optimism: We are overly optimistic about the outcome of planned actions. We overestimate the likelihood of
positive events and underestimate that of negative ones.
• Overconfidence: We overestimate our skill level relative to others’ and consequently our ability to affect future
outcomes. We take credit for past positive outcomes without acknowledging the role of chance.
Biases related to perceiving and judging alternatives:

• Confirmation bias: We place extra value on evidence consistent with a favored belief and not enough on evidence that
contradicts it. We fail to search impartially for evidence.
• Anchoring and insufficient adjustment: We root our decisions in an initial value and fail to sufficiently adjust our
thinking away from that value.
• Groupthink: We strive for consensus at the cost of a realistic appraisal of alternative courses of action.
• Egocentrism: We focus too narrowly on our own perspective to the point that we can’t imagine how others will be
affected by a policy or strategy. We assume that everyone has access to the same information we do.
14
Common Biases that affect business decisions (2/2)
Biases related to the framing of alternatives:
• Loss Aversion: We feel losses more acutely than gains of the same amount, which makes us more risk-averse than a
rational calculation would recommend.
• Sunk-cost fallacy: We pay attention to historical costs that are not recoverable when considering future courses of
action.
• Escalation of commitment: We invest additional resources in an apparently losing proposition because of the effort,
money, and time already invested.
• Controllability bias: We believe we can control outcomes more than is actually the case, causing us to misjudge the
riskiness of a course of action.
Stability Biases:
• Status quo bias: We prefer the status quo in the absence of pressure to change it.
• Present bias: We value immediate rewards very highly and undervalue long-term gains.
Associated Reading: Beshears & Gino (2015). Decision Making,

15
Designing Solutions
Executives have a range of options they can use to encourage greater deliberation and analysis in decision making:
• Use joint, rather than separate, evaluations: Evaluating decision alternatives simultaneously, rather than sequentially,
reduces bias
• Create opportunities for reflection: Taking time out of our busy days to just think may sound costly, but it is an effective way to
engage in slow, logical, and deliberate mode of processing information and making decisions.
• Use planning prompts: People often resolve to act in a particular way but forget or fail to follow through. Simple prompts can
help employees stick to the plan.
• Inspire broader thinking: We commonly approach problems by asking ourselves, “What should I do?” Asking “What could I
do?” helps us recognize alternatives to the choice we are facing, thus reducing bias in the evaluation of the problem and in the
final decision.
• Increase accountability: Holding individuals accountable for their judgments and actions increases the likelihood that they will
be vigilant about eliminating bias from their decision making.
• Encourage the consideration of disconfirming evidence: When we think that a particular course of action is correct, our
tendency is to interpret any available information as supporting that thinking (confirmation bias). Furthermore, once we invest
resources in a course of action, we tend to justify those investments by continuing down that path, even when new information
suggests that doing so is unwise (escalation of commitment). Together, these biases lead decision makers to discount
contradictory evidence and to ignore the possibility of superior alternatives. Organizations can solve this problem by actively
encouraging counterfactual thinking.
Associated Reading: Beshears & Gino (2015). Decision Making, 16

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ORGANISATION & MANAGEMENT

Topic 1: Historical perspective

94% of professors believe

about half of them

94% of professors believe

• Seven topics, each with two frameworks/sub-topics

• Final exam (case study analysis): 50%

Work Structure Culture

Focus 1: Focus 2: Focus 3:

Focus 1: Focus 2: Focus 3:

Most courses within a business degree are:

By comparison, the Organization & Management course:

Use the code below:

Importance assigned by organizations

source: Culpin (2020)

source: Taleb (2007)

“Very quickly, when managers reach their thirties,

“Organization & How the organization is

Improve your understanding of organizations:

Improve your managerial skills:

In a given organization of n individuals

Where does the difference come from?

Focus 1: Focus 2: Focus 3:

Associated Reading: Hatch

Focus 1: Focus 2: Focus 3:

Use the code below:

He identifies three types of legitimacy that make people obey to authority:

During his experience as a Shop Manager, Taylor observed a “powerless hierarchy”:

1. Taylor wishes to replace empirical and inefficient management by Scientific Management:

Fayol identifies 6 different management functions within the company:

Saw the need for delivering systematic training to managers

What do you think about these principles?

- Analyse internal interdependencies.

3. Fasty has been accused of ‘Taylorization’ by the labor unions.

Focus 1: Focus 2: Focus 3:

Associated Reading: Kessler 2020 - Why the

Associated Reading: The Economist (2015) -

2016 invented employee tracking wristbands

Amazon warehouse working environment

Associated Reading: Mcclelland (2012) I Was a

Focus 1: Focus 2: Focus 3:

… explain the evolution of the Organisation & Management

Work Structure Culture

I can distinguish prescribed work from real work.

Prescribed work Real work

Associated Reading: Thompson (2007). Organizations in

Work Structure Culture

• Organizational structure: the arrangement of activities (allocation and deployment of organizational

Functional Divisional Matrix

Associated Reading: Draft (2009). Organization Theory and Design,

Source: Draft 2009, p. 107

• Matrix function is a complex

• The product team is the building

Simple Machine Divisionalized

Simple Machine Divisionalized Professional Adhocracy

Simple Machine Divisionalized Professional Adhocracy

Simple Machine Divisionalized Professional Adhocracy

Associated Reading: Draft (2009). Organization Theory and Design,

Work Structure Culture

I can analyze in a structured way (by mobilizing a framework) the

Examples of dominant values

Different types of values:

ORGANISATION & MANAGEMENT 