Organization/culture

PART I: THE ORGANIZATION
ORGANIZATIONAL CHANGE,
DESIGN, AND CULTURE
Drew Carton, Ph.D.
Management 101: Week 3, Fall 2014
KNOWLEDGE FOR ACTION
PLEASE SEE THE FINAL

SEATING CHART IN THE
BACKTHERE ARE
SOME SMALL CHANGES
PLEASE GRAB A VOTING

DEVICE
Do you feel you have to?
A. Yes
50%
50%
No
Ye
s
B. No
A. Yes
50%
50%
No
Ye
s
B. No
A. Yes
50%
50%
No
Ye
s
B. No
ExperienceChange
Threat of
new entrants
Bargaining power of
suppliers
Bargaining power of
buyers
Threat of
Substitute products and
services
Adapted from Exhibit 2.2 Porters Five Forces Model of Industry Competition
Rivalry
Rivalry diminishes profits as resources are devoted toward price
competition, increased customer service, warranties, etc.
Variation in Performance Across Industries:

Average Economic Profits of U.S. Industries, 19781996
Reproduced from Ghemawat (1999), Strategy and the Business Landscape
ROE-Ke Spread
Toiletries/Cosmetics
Pharmaceuticals
Soft Drink
20%
15%
Tobacco
Food Processing
Household Products
Electrical Equipment
Financial Services
Specialty Chemicals
Newspaper Integrated Petroleum Electric Utility - East
Bank
Retail Store
Telecom
10%
5%
0%
(5%)
(10%)
(15%)
100
200
300
Tire & Rubber

Electric Utility - Central
Medical Services
Machinery
Auto & Truck
Computer & Peripheral
Paper & Forest
Air Transport
Average Invested Equity ($B)
Steel
400
500
600
700
800
900 1,000 1,100 1,200 1,300
11
Variation in performance across industries: average

economic profits of U.S. industries, 1984 - 2002
Reproduced from Ghemawat (2004), Strategy and the Business Landscape
Avg. Spread
(1984-2002)
Toiletry & Cosmetic
40%
Tobacco
30%
Soft Drinks
Pharmaceutical
Med Supplies
20%
Computer Software
Publishing
Financial Services
Petro-Integergrated
Bank
10%
Aerospace/
Defense
Retail Store
Computers & Peripherals

Auto Parts
Building Materials
Insurance Property & Casualty
Auto & Truck
Railroad
For El/Ent.
For Telecom
0%
Tele Service
Semiconduct
Air Transport
Textile
Steel
(10%)
Power
Paper & For. Entertain
(20%)
0
200
400
600
800
1,000
Avg. Equity ($B) (1984 2002)
1,200
1,400
1,600
1,800
2,000
Variation in performance across industries: average

economic profits of U.S. industries, 1989 - 2006
13
Contingency Factors (not Forces)

They shape the five forces at a given time. Examples:
Government
Entering a new market
Often we look at demand, surface-level factors, or contingency
factors without enough regard for strategic forces
Restaurants
App development
Movie Theatre Mini-Case
Threat of
new entrants
Bargaining power of
suppliers
Bargaining power of
buyers
Threat of
Substitute products and
services
Adapted from Exhibit 2.2 Porters Five Forces Model of Industry Competition
ORGANIZATIONAL
CHANGE
Strategy formulation often involves some element of change
Social
Change
Resisters
Champions
Bystanders
Time
20
21
22
24
TAKE IT FORM
DWIGHT: THIS
IS HOW YOU
FORM AN
ALLIANCE!!!
Ouster at Citigroup
26
Kotters 8 Step Model of Organizational

Change
1.
Establish a sense of urgency based on market and competitive realities and

current or potential crises
2.
Form a powerful guiding coalition to lead the change
3.
Create a vision and strategy to direct the change
4.
Communicate the vision with words and examples
5.
Empower others to act on the vision by removing obstacles, modifying

structures and systems, and promoting risk-taking
6.
Create short-term wins and recognize those responsible
7.
Consolidate improvements by aligning systems, structures, and policies
8.
Institutionalize new approaches by connecting new behaviors to corporate

success
Kotters 8 Step Model of Organizational

Change
1.
Establish a sense of urgency based on market and competitive realities and

current or potential crises
2.
Form a powerful guiding coalition to lead the change
3.
Create a vision and strategy to direct the change
4.
Communicate the vision with words and examples
5.
Empower others to act on the vision by removing obstacles, modifying

structures and systems, and promoting risk-taking
6.
Create short-term wins and recognize those responsible
7.
Consolidate improvements by aligning systems, structures, and policies
8.
Institutionalize new approaches by connecting new behaviors to corporate

success
FORMULATE
IMPLEMENT
ORGANIZATIONAL
DESIGN AND CULTURE
Control and Coordination

Organizational design: how the organization structures roles,
tasks, jobs and projects into units as well as formal reporting and
information channels
Organizational culture: set of shared schema that determine
acceptable and unacceptable behavior
Organizational Design
Centralization
Structure
Divisional structure
Each unit is run as if it is its own company. Each unit serves one
product or market segment
Functional structure
Each unit is responsible for a particular specialization (e.g.,
engineering, marketing, finance)
GlobalTech
Hybrid (e.g., Matrix structure)
What is culture?
Study on Monkeys and Culture by

G.R. Stephenson, 1967
What is culture?
Culture: set of shared schema that determine acceptable

and unacceptable behavior
= The way things are done around here
Culture
Visibility and
Awareness
High
Artifacts
and
Practices
Values
Low
Source: Schein, 2003
The Role of Values in a Strong

Culture
A strong culture is one in which values are simple, widely shared, and
strongly held (OReilly et al., 1991):
Study on hospitals
Johnson-Neyman technique in a multiple regression revealed that
effect of a strong vision on performance only held for hospitals in
which leaders communicated four values or less
Replicated in an experiment with full-time employees
Visibility and
Awareness
High
Verbal (stories,
jargon, jokes)
Physical (dress,
objects, layout)
Artifacts
and
Practices
Norms and
rules of conduct
Values
Low
Source: Schein, 2003
Artifacts and reinforcers of a strong culture
Verbal (stories, jargon)

Behavioral (norms, ceremonies)
Physical (dress code, objects, office layout)
Percentage of Individuals who Stole Money
Graffiti and untidiness leads to more stealing

30%
25%
20%
15%
10%
5%
0%
Tidy with No Graffiti
Untidy with Graffiti

Question:
How would you shape office layout

to promote a more collaborative
culture?
Question:
How would you shape the work

space to promote a more
achievement-oriented culture?
CLAN CULTURES
People behave appropriately when they have trust in and loyalty
to an organization (Ouchi, 1977; Hartnell et al., 2011)
Upsides of a Strong Clan Culture

Ability to attract and retain employees
COOPERATION: Feelings of cohesion (social glue) while making
individuals to feel motivated to achieve a common cause
Compared to organizations that control behavior through objectives and
an achievement orientation (achievement cultures), clan cultures elicit
stronger commitment (estimated population correlation: .50 versus .29)
COST: inexpensive but highly valued rewards (e.g., identity, peer

support)
Source: OReilly
& Chatman,
1996
Oversight and direction are not as necessary
CONTROL: sometimes invisible but still effective way to control

conduct)
Hartnell et al.,
2011
Do you want a strong culture?
A. Yes
50%
50%
No
Ye
s
B. No
Downsides of a Strong Clan Culture

Often fosters obedience
and excessive conformity
Groupthink: they yield less
innovation than
achievement cultures
estimated population
correlation: .41 versus
.59 (Hartnell et al., 2011)
Difficult to change
Downside of Strong Cultures of all

Types: The Effect of Strong Cultures on
Joint Ventures and Mergers
Merging organizations tend to emphasize quantifiable issues
(scale, market share, profitability), often overlooking culture
Ingroup / outgroup biases: differences between cultures can
lead to hostility and relationship conflict
Data from Weber (1996) on the impact of cultural differences
on integration effectiveness
Sources: Carter & Cooper, 1993; Hofstede et. al.,
1990; Johnson, 2004 ; Kanter, 1991;
Weber,1996; Weber & Camerer, 2003;
Letterman Meets General Electric
Do you want a strong culture?
A. Yes
50%
50%
No
Ye
s
B. No
TAKEAWAYS: ORGANIZATIONAL CHANGE, DESIGN,

AND CULTURE
Organizational change follows a systematically predictable series of steps
Coalition building is often critical for advancing change in its early stages
Organizations can be structured in either functional or divisional form. It is
important that the organizations structure not be at odds with other
components of the organization, such as incentives or performance review
(think of Microsoft).
Organizations can control behavior either through authority/hierarchy
(bureaucratic control) or through culture and internalization of the
organizations values/identity
Strong clan cultures drive cooperation (social glue), increase
commitment, and save expenses, however they can trigger groupthink and
be difficult to change.

Organization/culture

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PART I: THE ORGANIZATION

KNOWLEDGE FOR ACTION

PLEASE SEE THE FINAL

PLEASE GRAB A VOTING

KNOWLEDGE FOR ACTION

Do you feel you have to?

KNOWLEDGE FOR ACTION

Do you feel you have to?

KNOWLEDGE FOR ACTION

Do you feel you have to?

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

Variation in Performance Across Industries:

Tire & Rubber

Variation in performance across industries: average

Computers & Peripherals

Avg. Equity ($B) (1984 2002)

KNOWLEDGE FOR ACTION

Variation in performance across industries: average

Contingency Factors (not Forces)

KNOWLEDGE FOR ACTION

Movie Theatre Mini-Case

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

Strategy formulation often involves some element of change

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

Kotters 8 Step Model of Organizational

Establish a sense of urgency based on market and competitive realities and

Form a powerful guiding coalition to lead the change

Create a vision and strategy to direct the change

Communicate the vision with words and examples

Empower others to act on the vision by removing obstacles, modifying

Create short-term wins and recognize those responsible

Consolidate improvements by aligning systems, structures, and policies

Institutionalize new approaches by connecting new behaviors to corporate

KNOWLEDGE FOR ACTION

Kotters 8 Step Model of Organizational

Establish a sense of urgency based on market and competitive realities and

Form a powerful guiding coalition to lead the change

Create a vision and strategy to direct the change

Communicate the vision with words and examples

Empower others to act on the vision by removing obstacles, modifying

Create short-term wins and recognize those responsible

Consolidate improvements by aligning systems, structures, and policies

Institutionalize new approaches by connecting new behaviors to corporate

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

Control and Coordination

KNOWLEDGE FOR ACTION

Hybrid (e.g., Matrix structure)

KNOWLEDGE FOR ACTION

Study on Monkeys and Culture by

KNOWLEDGE FOR ACTION

Culture: set of shared schema that determine acceptable

KNOWLEDGE FOR ACTION

KNOWLEDGE FOR ACTION

Source: Schein, 2003