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Chapter 13

Organizational
Structure
and Culture
Michael A. Hitt
C. Chet Miller
Adrienne Colella
Slides by Ralph R. Braithwaite
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Integrated Portfolio at FedEx


With all the acquisitions by FedEx, there was a need to
change their structure. It adopted a multi-divisional
structure. Corporate provides strategic direction and
consolidated financial reporting. Significant authority has
been delegated to the divisions. Each division manages
its own specialized network of services.
Do you know of other companies that operate in a similar
fashion?
Is this a good model for organizations to follow as they
grow and develop?

Exploring Behavior in Action

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FedEx Organization
FedEx
Freight

FedEx
Express

FedEx
Kinkos
Services

FedEx
Supply
Chain
FedEx
Custom
Critical

FedEx
Corp.

FedEx
Trade
Network

FedEx
Ground
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Organizational Structure and


Culture
Organizational
Structure

The formal system of work roles and


authority relationships that govern
how associates and managers
interact with one another.

Organizational
Culture

Involves the values and norms


shared by managers and associates
that influence behavior. It is a
powerful force in organizations.
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Knowledge Objectives
1. Define key elements of organizational structure,
including both structural and structuring dimensions.

2. Explain how corporate and business strategies relate


to structure.

3. Explain how environment, technology, and size relate


to structure.

4. Define organizational culture, and discuss the


competing-values cultural framework.

5. Discuss socialization.
6. Describe cultural audits and subcultures.
7. Explain the importance of a fit between individual
values and organizational culture.
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Fundamental Elements of
Organizational Structure
Structural
Characteristics

Hierarchy

Structuring
Characteristics

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Structural Characteristics
Departmentation

Height

Span of Control
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Span of Control

Organizational Level

Highest

Average span of Four

Average span of Ten

4
17
63

10
100
1000

250
Associates
1000
Associates

Lowest
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Adapted from Exhibit 13-1: Average Span of Control: Effects on Height of the Hierarchy

Functional Organization
CEO

VP
Research and
Development

VP
Operations

VP
Finance

Adapted from Exhibit 13-2: Simplified Functional


Organization

VP
Human
Resources
VP
Marketing

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Divisional Organization
CEO

V.P.
Product/Service
Area 1

Head of
R&D

Head of
Operations

Head of
Finance

Head of
Human
Resources

Head of
Marketing

V.P.
Product/Service
Area 1

Head of
R&D

Head of
Operations

Head of
Finance

Head of
Human
Resources

Head of
Marketing

Adapted from Exhibit 13-3: Simplified Divisional Organization

V.P.
Product/Service
Area 1

Head of
R&D

Head of
Operations

Head of
Finance

Head of
Human
Resources

Head of
Marketing

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Centralization

Standardization

Structuring Characteristics
Formalization

Specialization

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The Modern Organization


Flexible empowering type of structure
Organic

Mechanistic

Learning

Non-Learning

Boundaryless

Traditional

Fewer management levels, broader spans of control, less


centralization, standardization, formalization and
specialization.

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Freedom
Substantial freedom may exist, but
1. Freedom is not unlimited
2. Alternative mechanisms are used to ensure that
individuals are working for the good of the
organization
3. Values are shared
4. Reward systems are used to promote appropriate
behavior

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Factors Affecting Structure


Corporate
Strategy

Growth

Diversification

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Diversification Strategy and


Structure
Diversification

Structure

Single product

Functional

Dominant product (few products)

Functional

Dominant product (several products)

Divisional

Related product

Divisional

Unrelated product

Divisional

Unrelated product

Holding Company

Adapted from Exhibit 13-4: Matches between Diversification Strategy and Structure

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Business Strategy
How a firm competes for success against other
organizations in a particular market.

Low cost/low price


Product/service differentiation
Supporting structure including strategic
business units SBUs

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IDEO and Differentiation Strategy


IDEO demonstrates a differentiation strategy, highlights
that occasionally organizations supplement their human
capital, and they value teams with diverse members.
Is this an effective approach to business?
How can this approach help other businesses and
organizations?
What are your thoughts about IDEOs approaches:

Form a diverse team


Team members brainstorm
Team members engage in rapid prototyping
Team members implement the fruits of their
labors

Experiencing
Strategic OB

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Environment and Basic


Structure
Environmental uncertainty the degree to which
an environment is complex and changing;
uncertain environments are difficult to monitor
and understand.
Paul R. Lawrence

Effective organizations experiencing high


environmental uncertainty tend to be more
organic.

Effective organizations experiencing low


environmental uncertainty tend to be less
organic.
Jay W. Lorsch

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Environment and Integration


Increasing Richness of
Information Processing

Lateral
Relations
Information
Technology
Self-Contained
Tasks
Slack
Resources

Increasing Implementation Complexity


Adapted from Exhibit 13-5: Integration in Organizations

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Alternative Lateral Processes


Direct Contact

Liaison Roles

Taskforces

Matrix Designs

Managerial
Linking Roles

Lateral
Processes
Teams

Integrating Roles
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Technology and
Structure
Mass Production
Technology
Small-Batch
Technology

Manufacturing

Process
Production
Technology

Mass
Customization

Joan Woodward

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Technology and Structure


Task Variability

Four categories
of technology

Charles Perrow

Task Analyzability

Routine

Craft

Engineering

Nonroutine

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Organizations and Technology

Task Variability

High

Low

Engineering

Non-Routine

Specialized
Engineering
Consulting Firm

Research and
Development
Firm

Routine

Craft

Mass-Production
Firm

Public School

High Task Analyzability Low


Adapted from Exhibit 13-6: Organizations and Technology

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Google Culture Attracts


High-Quality Associates
Do you think Google would have enjoyed its success had
a different type of structure and culture been introduced?
What types of organizations could benefit with a similar
structure and culture? What types of organizations might
have difficulty?
As Google continues to grow, will the culture survive or
will it possibly be replaced by a more traditional culture?

Experiencing
Strategic OB

Larry Page and Sergy Brin

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Developing Organizational Culture


Shared
Values

Reinforcing
Outcomes

Organizational
Culture

Norms

Individual and
Group Behavior

Adapted from Exhibit 13-7: Process of Developing Organizational Culture

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Stability/Control

Flexibility/
Discretion

Organizational Culture
Clan

Adhocracy

Leadership
Mentors and Coaches

Leadership
Entrepreneurs and
Innovators

Effectiveness
Cohesion and Morale

Effectiveness
Creativity and Innovation

Hierarchy

Market

Leadership
Monitors and Organizers

Leadership
Hard Drivers and
Competitors

Effectiveness
Efficiency and Order

Effectiveness
Goal Achievement and
Winning

Internal Focus/Integration

External Focus/
Differentiation

Adapted from Exhibit 13-8: Competing Values Model of Organizational Culture

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Cultural Socialization
A process through which an organization imparts its
values to newcomers

Content

Context

Social
Dynamics
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Cultural Audit

A tool for assessing and understanding the culture


of an organization. Use these five steps for
conducting the cultural audit:
Analyze
process
and
content

Analyze
responses
to critical
incidents

Analyze
values
and
beliefs of
culture
creators

Explore
anomalies
or
puzzling
features

Examine
linkage
culture
with
goals

Subcultures groups that share values


that differ from the main values of the
organization.
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Managerial
Advice

Finding a Fit at
Home Depot
Do you agree that an individuals management
style and values should agree with the
organizations culture? Why or why not?
Do you think Nardelli is what Home Depot
needed at the time?

Robert Nardelli

Have you worked with a leader whose style


was very different than the culture of the
organization? What was that like?
Can some organizations benefit from a major
change in leadership philosophy?

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Person-Organization Fit
Types of personal goals
that one ought to have

Values
Abstract ideals that
relate to proper life
goals and methods for
reaching those goals.

End-Means Dimension

Types of behaviors that


one ought to use in
reaching those goals
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Types of Personal Values

End
(Goal)
Values

Adapted from Exhibit 13-9: Types of Personal Values

Means
(Behavior)
Values

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The Strategic Lens


1. Consider an organization of which you are a member
or an associate. What is the structure in this
organization? Is it centralized or decentralized? Is it
organic and flexible? How would you change the
structure in this organization to make it more
effective?
2. How would you describe the culture in the organization
discussed in question #1? How does the culture affect
members behavior in the organization?
3. When you become a manager, what type of culture will
you establish in your unit? What values do you want to
emphasize? Why?
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Questions

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