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Chapter 8

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Organizational Culture Structure & Design

 

Major Questions You Should Be Able to Answer

8.1 Aligning Strategy, Culture, & Structure

Major Question: Why is it important for managers to align a company’s vision and strategies with its organizational culture and structure?

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

Major Question: How do I find out about an organization’s “social glue,” its normal way of doing business?

8.3 The Process of Culture Change

Major Question: What can be done to an organization’s culture to increase its economic performance?

8.4 Organizational Structure

Major Question: How are for-profit, nonprofit, and mutual-benefit organizations structured?

8.5 The Major Elements of an Organization

Major Question: When I join an organization, what seven elements should I look for?

8.6 Basic Types of Organizational Structures

Major Question: How would one describe the seven organizational structures?

8.7 Contingency Design: Factors in Creating the Best Structure

Major Question: What factors affect the design of an organization’s structure?

 

 

Page 225the manager’s toolbox

How to Stand Out in a New Job: Fitting into an Organization’s Culture in the First 60 Days

“Once you are in the real world—and it doesn’t make any difference if you are 22 or 62, starting your first job or your fifth,” say former business columnists Jack and Suzy Welch, “the way to look great and get ahead is to overdeliver.”1

Overdelivering means doing more than what is asked of you—not just doing the report your boss requests, for example, but doing the extra research to provide him or her with something truly impressive.

Among things you should do in the first 60 days:2

Be Aware of the Power of First Impressions

Within three minutes of meeting someone new, people form an opinion about where the future of the relationship is headed, according to one study.3 “When meeting someone for the first time, concentrate on one thing: your energy level,” advises one CEO, who thinks that seven seconds is all the time people need to start making up their minds about you. Amp it up, he advises. “If you don’t demonstrate energetic attitude on your first day, you’re already screwing up.”4 (However, don’t be too upset if you feel you’ve blown it with someone on the first meeting. What’s key is to make sure you have other chances to meet that person again so that you can show different sides of yourself.5)

Come in 30 Minutes Early & Stay a Little Late to See How People Behave

“Many aspects of a company’s culture can be subtle and easy to overlook,” writes one expert. “Instead, observe everything.” Thus, try coming in early and staying a little late just to observe how people operate—where they take their lunches, for example.

Get to Know Some People & Listen to What They Have to Say

“You’ve got to realize that networking inside a company is just as important as when you were networking on the outside trying to get in,” says a business consultant.6 During the first two weeks, get to know a few people and try to have lunch with them. Find out how the organization works, how people interact with the boss, what the corporate culture encourages and discourages. Walk the halls and get to know receptionists, mail room clerks, and office managers, who can help you learn the ropes. Your role here is to listen, rather than to slather on the charm. Realize that you have a lot to learn.7

Make It Easy for Others to Give You Feedback

Ask your boss, coworkers, and subordinates to give you feedback about how you’re doing. Be prepared to take unpleasant news gracefully.8 At the end of 30 days, have a “How am I doing?” meeting with your boss.

Overdeliver

Because performance reviews for new hires generally take place at 60 to 90 days, you need to have accomplished enough—and preferably something big—to show your boss your potential. In other words, do as the Welches suggest: overdeliver.

For Discussion How does the foregoing advice square with your past experiences in starting a new job? Are there things you wish you could have done differently?

We consider organizational cultures and organizational structures, and how they should be aligned to help coordinate employees in the pursuit of organization’s strategic goals. We then consider the three types of organizations and seven basic characteristics of an organization. We next discuss seven types of organizational structures. Finally, we look at five factors that should be considered when one is designing the structure of an organization.

Aligning Strategy, Culture, & Structure

Why is it important for managers to align a company’s vision and strategies with its organizational culture and structure?

THE BIG PICTURE

The study of organizing, the second of the four functions in the management process, begins with the study of organizational culture and structure, which managers must determine so as to implement a particular strategy. Organizational culture consists of the set of shared, taken-for-granted implicit assumptions that a group holds in the workplace. Organizational structure describes who reports to whom and who does what.

“What’s your favorite movie?” the job interviewer asks you. “Your favorite website?” “What’s the last book you read for fun?” “What makes you uncomfortable?”

These are the four most frequently asked interview questions used by hiring managers, according to a survey involving 285,000 kinds of interview questions.9 For you as a job applicant, these questions might not seem to have much to do with your performance in previous jobs. Rather, they are designed to see whether you will fit in with the company’s culture, or organizational culture, as we’ll explain.10

What Does It Mean to “Fit”? Anticipating a Job Interview

The kind of fit we are concerned with here is what is called person-organization fit, which reflects the extent to which your personality and values match the climate and culture in an organization.

A good fit of this kind is important because it is associated with more positive work attitudes and task performance, lower stress, and fewer expressions of intention to quit (“I’m gonna tell em, ‘Take this job and . . .’”).11 How well an applicant will fit in with the institution’s organizational culture is considered a high priority by many interviewers. Indeed, more than 50% of the evaluators in one study considered “fit” to be the most important criterion of the interview process.12

How can you determine how well you might fit in before you go into a job interview? You should write down your strengths, weaknesses, and values—and then do the same for the organization you’re interviewing with, by researching it online and talking with current employees. You can then prepare questions to ask the interviewer about how well you might fit.

Example: If being recognized for hard work is important to you, ask the interviewer how the company rewards performance. If the answer doesn’t show a strong link between performance and rewards (“Well, we don’t really have a policy on that”), you’ll probably have a low person-organization fit and won’t be happy working there.

How an Organization’s Culture & Structure Are Used to Implement Strategy

How employees fit into an organization’s culture is important to the larger picture of that organization’s strategy. Strategy, as we saw in Chapter 6, consists of the large-scale action plans that reflect the organization’s vision and are used to set the direction for the organization. To implement a particular strategy, managers must determine Page 227the right kind of (1) organizational culture and (2) organizational structure. Let’s consider these terms.

Organizational Culture: The Shared Assumptions That Affect How Work Gets Done We described the concept of culture in Chapter 4on global management as “the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people.” Here we are talking about a specific kind of culture called an organizational culture.

According to scholar Edgar Schein, organizational culture, sometimes called corporate culture, is defined as the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments.13 These are the beliefs and values shared among a group of people in the workplace that are passed on to new employees by way of socialization and mentoring, which significantly affect work outcomes at all levels.14 This is the “social glue” that binds members of the organization together. Just as a human being has a personality—fun-loving, warm, uptight, competitive, or whatever—so an organization has a “personality,” too, and that is its culture.

The culture helps employees understand why the organization does what it does and how it intends to accomplish its long-term goals. 3M sets expectations for innovation, for example, by having an internship and co-op program, which provides 30% of the company’s new college hires.

Culture can vary considerably, with different organizations having differing emphases on risk taking, treatment of employees, teamwork, rules and regulations, conflict and criticism, and rewards. And the elements that drive an organization’s culture also vary. They may represent the values of the founder, the industry and business environment, the national culture, the organization’s vision and strategies, and the behavior of leaders. (See Table 8.1.)

We thoroughly discuss organizational culture in Sections 8.2 and 8.3.

TABLE 8.1 What Drives an Organizational Culture?

Organizational Structure: Who Reports to Whom & Who Does What Organizational structure is a formal system of task and reporting relationships that coordinates and motivates an organization’s members so that they can work together to achieve the organization’s goals. As we describe in Sections 8.4–8.6, organizational structure is concerned with who reports to whom and who specializes in what work.

Whether an organization is for-profit or nonprofit, the challenge for top managers is to align the organization’s vision and strategies with its organizational culture and organizational structure, as shown in the two orange boxes in the drawing below. (See Figure 8.1.)

FIGURE 8.1 Drivers and flow of organizational culture

Figure 8.1 shows that the consistency among these elements in turn impacts (see the three green boxes) group and social processes (discussed in Chapters 13–15), individual work attitudes and behaviors (discussed in Chapters 11–12), and the organization’s overall performance. As you can see from the diagram, consistency across strategy, culture, and structure leads to higher performance.

Page 228

 

 EXAMPLE

How Strategy Affects Culture & Culture Affects Structure: EndoStim, a Medical Device Start-up, Operates Virtually

Nowadays a firm can be completely international. An example is the medical device start-up EndoStim, nominally based in St. Louis but operating everywhere.

The company, reports New York Times columnist Thomas Friedman, came together as a result of some chance encounters:15 Cuban immigrant Raul Perez, a physician, came to St. Louis, where he met Dan Burkhardt, a local investor, with whom he began making medical investments. Perez also suffered from acid reflux (abnormal heartburn caused by stomach acid rising in the esophagus) and went to Arizona for treatment by an Indian-American physician, V. K. Sharma. During the visit, Sharma proposed an idea for a pacemaker-like device to control the muscle that would choke off acid reflux.

The Strategy: Creating a New Medical Device. Perez, Burkhardt, and Sharma all agreed they wanted to build such an electrical-stimulation device. They joined forces with South Africa–born Bevil Hogg, a founder of Trek Bicycle Corporation, who became the CEO of the company they named EndoStim and who helped to raise initial development funds. This strategy then began to dictate who they had to work with, which in turn influenced the company’s culture and structure.

The Culture: An International “Adhocracy.” To advance their strategy of building the device, the four principals recruited two Israelis, a medical engineer and a gastroenterologist. The Israelis collaborated with a Seattle engineering team to develop the design. A company in Uruguay specializing in pacemakers was lined up to build the EndoStim prototype. It was arranged for the clinical trials to be conducted in India and Chile. How much more international can you get?

Thus, the culture of the company could be called an adhocracy, which (as we’ll describe a little later in the chapter) is a risk-taking culture that values flexibility and creativity and that is focused on developing innovative products.

The Structure: A Virtual, Boundaryless Company. As a very lean start-up operating all over the world, with the principals rarely in the same office at the same time, EndoStim is clearly very different from, say, the usual top-down organization operating in one locality. To access the best expertise and high-quality materials and obtain low-cost manufacturing anywhere around the globe, EndoStim thus was forced to take advantage of all the technological tools—teleconferencing, e-mail, the Internet, and faxes—to maintain communications.

This EndoStim structure, then, is that of a virtual, boundaryless organization—virtual, because its members are operating geographically apart, connected by electronic means, and boundaryless, because the members (whether coworkers or suppliers) come together in fluid, flexible ways on an as-needed basis. We describe these structures further in another few pages.

YOUR CALL

Are you comfortable enough to work in a virtual, boundaryless organization? Many people like the social interaction that comes with working in a physical office with other people. Others, however, are turned off by the office game playing and time-wasting activities that seem to be a necessary concomitant. They welcome the opportunity to do task-oriented work in a makeshift home office, occasionally having to cope with loneliness and restlessness. Which would you favor?

Culture of risk. At Pfizer Inc., a Connecticut pharmaceutical company, drug discovery is a high-risk, costly endeavor in which hundreds of scientists screen thousands of chemicals against specific disease targets, but 96% of these compounds are ultimately found to be unworkable. The culture, then, is one of managing failure and disappointment, of helping drug researchers live for small victories.

Page 229 What Kind of Organizational Culture Will You be Operating In?

How do I find out about an organization’s “social glue,” its normal way of doing business?

THE BIG PICTURE

Organizational cultures can be classified into four types: clan, adhocracy, market, and hierarchy. Organizational culture appears as three layers: observable artifacts, espoused values, and basic assumptions. Culture is transmitted to employees in symbols, stories, heroes, and rites and rituals.

Want to get ahead in the workplace but hate the idea of “office politics”?

Probably you can’t achieve the first without mastering the second. Although hard work and talent can take you a long way, “there is a point in everyone’s career where politics becomes more important,” says management professor Kathleen Kelley Reardon. You have to know the political climate of the company you work for, says Reardon, who is author of The Secret Handshake and It’s All Politics.16 “Don’t be the last person to understand how people get promoted, how they get noticed, how certain projects come to attention. Don’t be quick to trust. If you don’t understand the political machinations, you’re going to fail much more often.”17

A great part of learning to negotiate the politics—that is, the different behavioral and psychological characteristics—of a particular office means learning to understand the organization’s culture. The culture consists not only of the slightly quirky personalities you encounter but also all of an organization’s normal way of doing business, as we’ll explain.

Four Types of Organizational Culture: Clan, Adhocracy, Market, & Hierarchy

According to one common methodology known as the competing values framework, organizational cultures can be classified into four types: (1) clan, (2) adhocracy, (3) market, and (4) hierarchy.18 (See Figure 8.2.)

 

FIGURE 8.2 Competing values framework

Adapted from K.S. Cameron, R.E. Quinn, J. Degraff, and A.V. Thakor, Competing Values Leadership (Northampton, MA: Edward Elgar, 2006)., p. 32.

Page 2301. Clan Culture: An Employee-Focused Culture Valuing Flexibility, Not Stability clan culture has an internal focus and values flexibility rather than stability and control. Like a family-type organization, it encourages collaboration among employees, striving to encourage cohesion through consensus and job satisfaction and to increase commitment through employee involvement. Clan organizations devote considerable resources to hiring and developing their employees, and they view customers as partners.

Southwest Airlines is a good example of a company with a clan culture. So is online shoe seller Zappos, which encourages managers to spend 10%–20% of their off-work hours with employees.19

  1. Adhocracy Culture: A Risk-Taking Culture Valuing FlexibilityAn adhocracy culturehas an external focus and values flexibility. As we saw with EndoStim in the Example box, this type of culture attempts to create innovative products by being adaptable, creative, and quick to respond to changes in the marketplace. Employees are encouraged to take risks and experiment with new ways of getting things done. Adhocracy cultures are well suited for start-up companies, those in industries undergoing constant change, and those in mature industries that are in need of innovation to enhance growth.
  2. L. Gore, maker of Gore-Tex outerwear, is an example of a company with an adhocracy culture. So was Google once, but now it has grown and the enterprise is struggling to avoid losing its adhocracy “Googliness.” In earlier times, all Google engineers were urged to spend 20% of their time on personal projects. As the company grew, however, senior managers concluded that letting thousands of employees work on whatever they wanted would lead to disarray, so now newly hired engineers are forced to wait a while before beginning their passion pursuits.20
  3. Market Culture: A Competitive Culture Valuing Profits over Employee Satisfactionmarket culturehas a strong external focus and values stability and control. Because market cultures are focused on the external environment and driven by competition and a strong desire to deliver results, customers, productivity, and profits take precedence over employee development and satisfaction. Employees are expected to work hard, react fast, and deliver quality work on time; those who deliver results are rewarded.

Kia Motors, which fires executives who don’t meet their sales goals, is an example of a company with a very aggressive and competitive market culture.21 Sometimes the culture can be stretched too far: For instance, some Wall Street firms, such as Citgroup Inc., are reported to have such a strong perform-or-die culture—in which executives are pushed to maximize profits and are quickly fired if they fail to deliver—that it is difficult to find talent to promote from within when chief executives leave.22

  1. Hierarchy Culture: A Structured Culture Valuing Stability & Effectivenesshierarchy culture has an internal focus and values stability and control over flexibility. Companies with this kind of culture are apt to have a formalized, structured work environment aimed at achieving effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation and delivery of products.

Lots of big organizations, such as General Motors, UPS, and the U.S. Army, have a hierarchy culture. A drawback of such cultures is that they can lead to information “silos” or “stovepipes,” in which different divisions don’t share information—a key cause of GM’s ignition switch scandal. Time magazine described this as “a kind of death from a thousand cuts in which multiple divisions had information that could have prevented the safety issues, which they didn’t share, and for which no one person ultimately took responsibility.”23

Based on the above descriptions, what type of culture provides the best fit for you? How might you assess the level of fit between your values and those of a potential Page 231employer? If you are interested in answering these questions, take the time to complete Self-Assessment 8.1.

SELF-ASSESSMENT 8.1

Assessing Your Preferred Type of Organizational Culture

This survey is designed to assess your preferred type of organizational culture. Go to connect.mheducation.com and take Self-Assessment 8.1. When you’re done, answer the following questions:

  1. Do you have a preferred culture type, or is there a combination of types best suited for you? Are you surprised by the results?
  2. What are three questions you can ask a recruiter to determine if a company possesses your preferred culture type?
  3. Have you ever worked in a company that did not possess your preferred culture type? In what ways did you feel a lack of person-organization fit? Did lack of fit affect your job satisfaction or desire to continue working at the company? Explain

 EXAMPLE

The Corporate Cultures of Pfizer Pharmaceuticals: The Different “Personalities” within an Organization

“What makes culture so important is that it’s unique; it’s something that no one can copy,” says Ian C. Read, chairman and CEO of Connecticut-based Pfizer Pharmaceuticals. “Culture can become your competitive advantage. Get it wrong and you’ll pay dearly for it . . . for years to come.”24

Read became head of Pfizer in December 2010, after mismanagement (“micro micro” management, indecisiveness) by the previous CEO failed to lift the company’s fortunes.25 Read has instituted a commitment to “our OWNIT! culture. I challenged Pfizer’s leaders to recognize that they can only own the future if they own changeand can make change work for us, not against us.”

Pfizer employees, he asserts, “understand that our ownership culture can differentiate us within our industry. They also understand it requires a willingness to take prudent risks, be accountable for their decisions and results, and understand how their work contributes to the company’s performance.” The success of the culture especially depends on the efforts of first- and second-line managers, who create a climate of trust that is “essential to providing the space employees need to work, take considered risks, and own the results,” he says.

Organizational cultures are nearly as varied as human personalities. What had Pfizer’s culture been like under Read’s predecessors? Actually, there was more than one culture within the company, as follows. Do you recognize the different types?

$2.3 Billion in Fines. In 2009, Pfizer was fined $2.3 billion for improperly marketing drugs to doctors. “The whole culture of Pfizer is driven by sales,” said a former sales representative whose complaint helped the government’s case, “and if you didn’t sell drugs illegally, you were not seen as a team player.”26 Almost every major drug company has in recent years been accused of giving kickbacks to doctors or shortchanging federal programs.

Free Prescription Drugs to Unemployed. But also in that year, as unemployment hovered around 10% in the United States, Pfizer launched a program in which it offered to supply 70 of its name-brand drugs, such as Lipitor and Viagra, free of charge for up to a year to customers who had lost their jobs and lacked prescription coverage. “We did it because it was the right thing to do,” said Pfizer’s then CEO. “But it was motivational for our employees and got a great response from customers. In the long run, it will help our business.”27

Ongoing Experimentation. At Pfizer, drug discovery is a high-risk, costly endeavor in which hundreds of scientists screen thousands of chemicals against specific disease targets, but 96% of these compounds are ultimately found to be unworkable. The culture, then, is one of managing failure and disappointment, of helping drug researchers live for the small victories. Thus, says one account, “when a researcher publishes a paper, or when a lab gets some positive results on a new therapy, it’s trumpeted throughout the organization.”28 Another example of experimentation, aimed at helping remaining employees to be productive after heavy job cuts, is PfizerWorks, in which 4,000 employees pass off tedious and time-consuming parts of their jobs, such as creating PowerPoint slides and riffling through spreadsheets to outsiders in India.29

 

YOUR CALL

What cultural types are illustrated in these three examples? Does it make more sense that a company would have one dominant cultural type or an equal mixture of clan, adhocracy, market, and hierarchy? Explain your rationale.

Page 232The Three Levels of Organizational Culture

Organizational culture appears as three layers: (1) observable artifacts, (2) espoused values, and (3) basic assumptions.30 Each level varies in terms of outward visibility and resistance to change, and each level influences another level.

Level 1: Observable Artifacts—Physical Manifestations of Culture At the most visible level, organizational culture is expressed in observable artifacts—physical manifestations such as manner of dress, awards, myths and stories about the company, rituals and ceremonies, and decorations, as well as visible behavior exhibited by managers and employees.

Example: In a conference room reserved for sensitive discussions, online travel company Kayak has a two-foot-high stuffed elephant named Annabelle—the “elephant in the room”—that is an artifact believed to bring forth more honest and constructive communications among employees.31 (The expression “elephant in the room” is used in business and politics to mean an obvious truth that is either being ignored or going unaddressed.)

Level 2: Espoused Values—Explicitly Stated Values & Norms Espoused values are the explicitly stated values and norms preferred by an organization, as may be put forth by the firm’s founder or top managers.

Example: The founders of technology company Hewlett-Packard stressed the “HP Way,” a collegial, egalitarian culture that gave as much authority and job security to employees as possible. Although managers may hope the values they espouse will directly influence employee behavior, employees don’t always “walk the talk,” frequently being more influenced by enacted values, which represent the values and norms actually exhibited in the organization.32

Thus, for example, an international corporation hung signs throughout the hallways of its headquarters proclaiming that “trust” was one of its driving principles (espoused value), yet had a policy of searching employees’ belongings each time they entered or exited the building (enacted value).33

HP founders. David Packard (left) and William Hewlett created a close-knit organizational culture that gave a lot of responsibility to employees and fostered innovation within the company. What kind of culture is that?

Level 3: Basic Assumptions—Core Values of the Organization Basic assumptions, which are not observable, represent the core values of an organization’s culture—those that are taken for granted and, as a result, are difficult to change.

Example: At insurance giant AIG, people worked so hard that the joke around the offices was “Thank heavens it’s Friday, because that means there are only two more working days until Monday.”34

Another example: Many founders of start-ups hate rules and red tape. College Hunks Hauling Junk, for instance, was co-founded by Nick Friedman with no formal policies about dress code, vacation, sick days, and other things because he envisioned “a real-life Never Never Land where work is always fun, and the culture is always stress-free.”35 However, when the enterprise grew from a single cargo van to over 50 franchises, the freewheeling spirit made employees lose focus, and client-service ratings, employee morale, and profitability all declined. The firm had to come up with rules and procedures while at the same time trying to “maintain a healthy balance of fun company culture with an accountable organization and team,” Friedman said.

How Employees Learn Culture: Symbols, Stories, Heroes, & Rites & Rituals

Culture is transmitted to employees in several ways, most often through such devices as (1) symbols, (2) stories, (3) heroes, and (4) rites and rituals.36

Page 2331. Symbols A symbol is an object, act, quality, or event that conveys meaning to others. In an organization, symbols convey its most important values.

Example: One of the most iconic products of IKEA, maker of inexpensive home furnishings, whose vision is “to create a better life for the many,” is the LACK table, a 22-inch by 22-inch side table that sells for only $9.99.37

  1. Storiesstoryis a narrative based on true events, which is repeated—and sometimes embellished upon—to emphasize a particular value. Stories are oral histories that are told and retold by members about incidents in the organization’s history.

Example: Marc Benioff is founder of cloud computing business Salesforce.com, a San Francisco company known for its great sense of social responsibility and generosity (and rated No. 7 on Fortune’s 2014 ”Best Companies to Work For” list).38 Its spirit of philanthropy is embodied in a story called the 1-1-1 rule. “When we started the company,” Benioff says, “we took 1% of our equity [stock value] and 1% of our profit and 1% of all our employees’ time, and we put it into a . . . public charity. At the time, it was very easy because we had no profit, we had no time, we had no equity. But then, it turned out that our company is worth, you know, tens of billions of dollars.”39Salesforce.com also runs 10,000 nonprofits for free, doesn’t charge universities for its services, and, says Benioff, delivers “hundreds of thousands of hours of community service.” In its latest philanthropic move, Salesforce .com’s foundation plans to spend $6 million over three years nationally on job training for underemployed adults.40

  1. Heroesherois a person whose accomplishments embody the values of the organization. IKEA employees are expected to work hard, inspired by an anecdote from their Swedish founder, Invar Kamprad, in his 1976 “A Furniture Dealer’s Testament.” In that essay he recounts how he was berated by his father for failing repeatedly to get out of bed to milk the cows on his family’s farm. Then one day he got an alarm clock. “‘Now by jiminy, I’m going to start a new life,’ he determined, setting the alarm for twenty to six and removing the ‘off button.’”41
  2. Rites & RitualsRites and ritualsare the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization’s life. Military units and sports teams have long known the value of ceremonies handing out decorations and awards, but many companies have rites and rituals as well.

Example: Employees of New Belgium Brewery in Fort Collins, Colorado, which makes Fat Tire Ale, are given a cruiser bicycle during their first year. After five years, they get a free brewery-hopping trip to Belgium. Ten years of employment is acknowledged with a tree planted in their name in the campus orchard. (The company boasts a 97% employment retention rate.42)

The Importance of Culture

Culture can powerfully shape an organization’s long-term success by enhancing its competitive advantage. For example, a recent study involving 1,100 companies summarized the relationship between three organizational cultures—clan, adhocracy, and market—and eight different measures of organizational effectiveness, such as job satisfaction, organizational commitment, and quality of products and services.43 (Hierarchy was not included owing to a lack of research in this area.) The results are shown on the next page. (See Figure 8.3.)

Page 234FIGURE 8.3 What organizational benefits are associated with what organizational cultures?

*Only two bars are shown here because organizational commitment was associated with only clan and market structures, and not adhocracy.

Source: Data from C. A. Hartnell, A. Y. Ou, and A. J. Kinicki, “Organizational Culture and Organizational Effectiveness: A Meta-Analytic Investigation of the Competing Values Framework’s Theoretical Suppositions,” Journal of Applied Psychology, July 2011, pp. 677–694.

Results reveal that the eight types of organizational outcomes had significant and positive relationships with clan, adhocracy, and market cultures. The majority of these relationships were of moderate strength, indicating that they are important to today’s managers.

Five conclusions emerge from this research:

An organization’s culture matters. The type of organizational culture can be a source of competitive advantage.

Employees are happier with clan cultures. Employees are more satisfied with and committed to organizations with clan cultures, which value flexibility over stability and control and which are more concerned with satisfying the needs of employees than those of shareholders or customers.

Elements of these cultures can be used to boost innovation and quality. Managers can build into their organizations characteristics of some or all of these three cultures—clan, adhocracy, and market—to increase innovation and improve the quality of their products.

Changing the organizational culture won’t necessarily boost financial performance (but it might). There are no guarantees that making changes in a firm’s organizational culture will lead to a jump in revenues and profits, although any changes that improve its competitive advantage may produce financial benefits.

Market cultures tend to produce better results. As the chart shows, market cultures tend to lead to better outcomes in employee attitudes, performance, and organizational effectiveness, thereby leading to competitive advantage. Managers are encouraged, therefore, to consider how they might make their cultures more market oriented.

Sometimes culture can be strong enough to take the place of bureaucracy; that is, the expectations of the culture replace formal rules and regulations. In these cases, the sense of orderliness and predictability that employees look to for guidance are provided by the culture rather than by a rule book.

Page 235 The Process of Culture Change

What can be done to an organization’s culture to increase its economic performance?

THE BIG PICTURE

There are 12 ways a culture becomes established in an organization.

A particular culture can become embedded in an organization in many ways, 12 of which are described here. (See Table 8.2.)

Changing organizational culture is essentially a teaching process—that is, a process in which members instruct each other about the organization’s preferred values, beliefs, expectations, and behaviors. The process is accomplished by using one or more of the following 12 mechanisms:44

TABLE 8.2 A Dozen Ways to Change Organizational Culture

  1. Formal Statements

The first way to embed preferred culture is through the use of formal statements of organizational philosophy, mission, vision, values, as well as materials used for recruiting, selecting, and socializing employees.

Example: At fashion website Polyvore, CEO Jess Lee wrote down three statements she thought represented the company’s distinct culture: (1) “delight the user,” (2) “do a few things well,” and (3) “make an impact.”45 Walmart founder Sam Walton stated that three basic values represented the core of the retailer’s culture: (1) respect for the individual, (2) service to customers, and (3) striving for excellence.46

  1. Slogans & Sayings

The desirable corporate culture can be expressed in language, slogans, sayings, and acronyms.

Example: David Cote, chairman and CEO of global technology company Honeywell, has adopted the principle “Your job as a leader is to be right at the end of the meeting, not at the beginning of the meeting.” That is, a leader’s job is to flush out all the facts and opinions so at the end he or she can make a good decision.47

  1. Rites & Rituals

As we mentioned earlier, rites and rituals represent the planned and unplanned activities and ceremonies that are used to celebrate important events or achievements.

Example: After a day’s meetings with clients, employees at Boston advertising agency Arnold Worldwide like to meet at a beer-vending machine in the office (nicknamed “Arnie”), where they sip bottles of home-brewed beer, chitchat, and exchange ideas.48 (Of course, employers need to be cautious about encouraging drinking alcohol at work, for both health and liability reasons.)

  1. Stories, Legends, & Myths

A story is a narrative about an actual event that happened within the organization and that helps to symbolize its vision and values to employees.

Example: Until a decade ago, major drug companies treated countries in the developing world as not worth the trouble of marketing to. But Andrew Witty, who in 2008 at age 43 became the youngest CEO of GlaxoSmithKline, the world’s Page 236second-largest pharmaceutical company, is making a name for himself by doing more for the poor people of the world than any other big drug company leader. While working in poor countries Witty found “just unbelievable energy to self-improve, to lift themselves up.” He has promised to keep prices of drugs sold in poor countries to no more than 25% of what is charged in rich ones and to donate one-fifth of all profits made in such countries toward building their health systems. Now Glaxo is ranked No. 1 on the Access to Medicine index, which rates pharmaceutical companies on their stances toward the poor.49

  1. Leader Reactions to Crises

How top managers respond to critical incidents and organizational crises sends a clear cultural message.

Example: Cory Booker (now a U.S. senator from New Jersey) was the mayor of financially struggling Newark in 2010 when a serious snowstorm hit the city. “Throughout the storm,” reports The Wall Street Journal, “those in distress hit up Mr. Booker on Twitter, one of the mayor’s preferred methods of keeping in touch with residents. After they cried out for plows, ambulances, and diapers, he responded, electronically and sometimes by driving to the location, shovel in hand. . . . He ordered his driver to pull over several times to help shovel out or push cars.”50 His on-the-ground efforts were an answer to critics who accused him of being out of touch.

  1. Role Modeling, Training, & Coaching

Many companies provide structured training to provide an in-depth introduction to their organizational values.

Example: Triage Consulting Group, a health care financial consulting firm in California, places a high value on superior performance at achieving measurable goals. New employees are immediately prepared for this culture with a 4-day orientation in Triage’s culture and methods, followed by 15 training modules scheduled in 6-week intervals. After less than a year, the best performers are ready to begin managing their own projects, furthering their career development. Performance evaluations take place four times a year, further reinforcing the drive for results.51

  1. Physical Design

There is constant experimenting going on as to the best office layout that will encourage employee productivity and send a strong message about the culture.

Example: After power producer Dynegy emerged from bankruptcy, the new CEO abandoned his private office and moved into a 64-square-foot cubicle—identical to the ones used by the 235 other employees—signaling his aim “to transform a business previously focused on day-to-day survival into an agile operator poised for growth,” according to one report.52

Another example: Pharmaceutical company GlaxoSmithKline has embraced an open-space philosophy that abandons individual desks in favor of “hoteling,” where everyone is assigned to “neighborhoods,” or areas of workers engaged in related tasks (you store your personal belongings in a small locker), on the theory that chance encounters among employees will spark conversations and collaboration.53

  1. Rewards, Titles, Promotions, & Bonuses

Rewards and status symbols are one of the strongest ways to embed organizational culture.

Example: At Triage Consulting Group, employees at the same level of their career earn the same pay, but employees are eligible for merit bonuses, again reinforcing the culture of achievement. The awarding of merit bonuses is partly based on Page 237coworkers’ votes for who contributed most to the company’s success, and the employees who received the most votes are recognized each year at the company’s “State of Triage” meeting.54

  1. Organizational Goals & Performance Criteria

Many organizations establish organizational goals and criteria for recruiting, selecting, developing, promoting, dismissing, and retiring people, all of which reinforce the desired organizational culture.

Example: Las Vegas–based Zappos, the online shoe retailer (No. 38 on Fortune’s 2014 “Best Places to Work For” list), spends a great deal of time analyzing applicants to see if they will fit into its clan-based culture. “We spend seven to 10 hours [with potential recruits] over four occasions at happy hours, team building events, or other things outside the office,” says the company’s human resources director. “We can see them, and they can us.”55 The result of this careful selection process was a low turnover rate of only 20% in 2009, a remarkable statistic for call centers. Employees want to stay not only because Zappos pays full employee benefits but also because of the “wow factor”—part of which is encouraging them to have fun at work.

The wow culture. The “wow” factor that encourages Zappos’s clan-based culture is partly created by encouraging employees to have fun at work, as in playing Nerf basketball. Is this a place you could stick with?

  1. Measurable & Controllable Activities

An organization’s leaders can pay attention to, measure, and control a number of activities, processes, or outcomes that can foster a certain culture.

Example: Adam Nash, the CEO of Wealthfront, an online financial management firm, believes that how you keep score on employee progress is important. “If you don’t give people metrics [methods of measurement],” he says, “smart people will make up their own,” and “you’ll get incessant fighting and arguments.”56

  1. Organizational Structure

The hierarchical structure found in most traditional organizations is more likely to reinforce a culture oriented toward control and authority compared with the flatter organization that eliminates management layers in favor of giving employees more power.

Example: The hierarchical structure of a railroad provides a much different culture from that of the “spaghetti organization” formerly employed by Danish hearing-aid maker Oticon, in which employees worked at mobile desks on wheels and were always subject to reorganization.

  1. Organizational Systems & Procedures

Companies are increasingly using electronic networks to increase collaboration among employees, to increase innovation, quality, and efficiency.

Example: Molson Coors CEO Peter Swinburn, in knitting together employees of several former companies, made sure they had better tools to interact with each other. One technology he introduced was Yammer, a website for short messages similar to Twitter, on which some 2,000 employees now provide updates and collaborate on projects.57

Page 238 Organizational Structure

How are for-profit, nonprofit, and mutual-benefit organizations structured?

THE BIG PICTURE

The organizational structure of the three types of organizations—for-profit, nonprofit, and mutual-benefit—may be expressed vertically or horizontally on an organization chart.

Once an organization’s vision and strategy have been determined, as we stated at the beginning of this chapter, the challenge for top managers is, first, to create a culture that will motivate its members to work together and, second, a structure that will coordinate their actions to achieve the organization’s strategic goals. Here let us begin to consider the second part—an organization’s structure.

In Chapter 1, we defined an organization as a group of people who work together to achieve some specific purpose. According to Chester I. Barnard’s classic definition, an organization is a system of consciously coordinated activities or forces of two or more people.58 By this wording, a crew of two coordinating their activities to operate a commercial tuna fishing boat is just as much an organization as the entire StarKist Tuna Co.

The Organization: Three Types

As we stated in Chapter 1, there are three types of organizations classified according to the three different purposes for which they are formed:59

For-profit organizations. These are formed to make money, or profits, by offering products or services.

Nonprofit organizations. These are formed to offer services to some clients, not to make a profit (examples: hospitals, colleges).

Mutual-benefit organizations. These are voluntary collectives whose purpose is to advance members’ interests (examples: unions, trade associations).

Who sells the electricity? About 80% of U.S. drivers drive 40 miles or less a day—and 38 miles is what the hybrid Chevrolet Volt will drive on a single electric charge. (A small combustion engine cuts in to charge the battery, so the car is always running on the electric motor.) The Volt is made by General Motors, a for-profit organization. What kind of organizations might sell the electricity and the charging stations—for-profit, nonprofit, or mutual-benefit?

Page 239Clearly, you might have an occupation (such as auditor or police officer) that is equally employable in any one of these three sectors. As a manager, however, you would be principally required to focus on different goals—making profits, delivering public services, or satisfying member needs—depending on the type of organization.

The Organization Chart

Whatever the size or type of organization, it can be represented in an organization chart. An organization chart is a box-and-lines illustration showing the formal lines of authority and the organization’s official positions or work specializations. This is the family-tree-like pattern of boxes and lines posted on workplace walls and given to new hires, such as the following for a hospital. (See Figure 8.4.)

FIGURE 8.4 Organization chart

Example for a hospital.

Two kinds of information that organization charts reveal about organizational structure are (1) the vertical hierarchy of authority—who reports to whom, and (2) the horizontal specialization—who specializes in what work.

The Vertical Hierarchy of Authority: Who Reports to Whom A glance up and down an organization chart shows the vertical hierarchy, the chain of command. A formal vertical hierarchy also shows the official communication network—who talks to whom. In a simple two-person organization, the owner might communicate with just a secretary or an assistant. In a complex organization, the president talks principally to the vice presidents, who in turn talk to the assistant vice presidents, and so on.

Page 240The Horizontal Specialization: Who Specializes in What Work A glance to the left and right on the line of an organization chart shows the horizontal specialization, the different jobs or work specialization. The husband-and-wife partners in a two-person desktop-publishing firm might agree that one is the “outside person,” handling sales, client relations, and finances, and the other is the “inside person,” handling production and research. A large firm might have vice presidents for each task—marketing, finance, and so on.

 PRACTICAL ACTION

Transition Problems on Your Way Up: How to Avoid the Pitfalls

Although corporations and managements may make noises about training and support, newly promoted managers may not see any of this and may simply be expected to know what to do. And, as managers move up the ladder, they may encounter other problems that they have not anticipated. How can you avoid some pitfalls as you make your ascent? Some suggestions:60

Have Realistic Expectations & Think about the Kind of Manager You Want to Be New managers often focus on the rights and privileges of their new jobs and underestimate the duties and obligations. Make a list of all your previous bosses and their good and bad attributes. This may produce a list of dos and don’ts that can serve you well.

Don’t Forget to Manage Upward & Sideways as Well as Downward You not only need to manage your subordinates but also the perceptions of your peers and your own managers above you. In addition, you need to have good relationships with managers in other departments—and be perceptive about their needs and priorities—since they have resources you need to get your job done. Don’t make the mistake of thinking your own department is the center of the universe.

Get Guidance from Other Managers You may not get advice on how to manage from your own manager, who may have promoted you to help reduce his or her workload, not add to it by expecting some coaching. If this is the case, don’t be shy about consulting other managers as well as people in professional organizations.

Resist Isolation If you’re promoted beyond supervisor of a small team and you have to manage hundreds rather than dozens, or thousands rather than hundreds, you may find the biggest surprise is isolation. The way to stay in touch is to talk daily with your senior managers, perhaps have “town meetings” with staffers several times a year, and employ “management by wandering around”—bringing teams together to talk.

YOUR CALL

How would you try to manage the perceptions not only of subordinates but of your peers?

Managing. Being a manager requires a lot of interaction with others—as in “town meetings” with staffers. Do you think you’ll need to resist a tendency toward isolation?

Page 241 The Major Elements of an Organization

When I join an organization, what seven elements should I look for?

THE BIG PICTURE

Seven basic elements or features of an organization are described in this section.

Whether for-profit, nonprofit, or mutual-benefit, organizations have a number of elements in common. We discuss four proposed by an organizational psychologist, and then describe three others that most authorities agree on.

Common Elements of Organizations: Four Proposed by Edgar Schein

Organizational psychologist Edgar Schein proposed the four common elements of (1) common purpose, (2) coordinated effort, (3) division of labor, and (4) hierarchy of authority.61 Let’s consider these.

  1. Common Purpose: The Means for Unifying MembersAn organization without purpose soon begins to drift and become disorganized. The common purposeunifies employees or members and gives everyone an understanding of the organization’s reason for being.
  2. Coordinated Effort: Working Together for Common PurposeThe common purpose is realized through coordinated effort,the coordination of individual efforts into a group or organizationwide effort. Although it’s true that individuals can make a difference, they cannot do everything by themselves.
  3. Division of Labor: Work Specialization for Greater EfficiencyDivision of labor,also known as work specialization, is the arrangement of having discrete parts of a task done by different people. Even a two-person crew operating a fishing boat probably has some work specialization—one steers the boat, the other works the nets. With division of labor, an organization can parcel out the entire complex work effort to be performed by specialists, resulting in greater efficiency.
  4. Hierarchy of Authority: The Chain of CommandThe hierarchy of authority,or chain of command, is a control mechanism for making sure the right people do the right things at the right time. If coordinated effort is to be achieved, some people—namely, managers—need to have more authority, or the right to direct the work of others. Even in member-owned organizations, some people have more authority than others, although their peers may have granted it to them.

In addition, authority is most effective when arranged in a hierarchy. Without tiers or ranks of authority, a lone manager would have to confer with everyone in his or her domain, making it difficult to get things done. Even in newer organizations that flatten the hierarchy, there still exists more than one level of management.62 flat organization is defined as one with an organizational structure with few or no levels of middle management between top managers and those reporting to them.

Finally, a principle stressed by early management scholars was that of unity of command, in which an employee should report to no more than one manager in order to avoid conflicting priorities and demands. Today, however, with advances in computer Page 242technology and networks, there are circumstances in which it makes sense for a person to communicate with more than one manager (as is true, for instance, with the organizational structure known as the matrix structure, as we’ll describe).

Common Elements of Organizations: Three More That Most Authorities Agree On

To Schein’s four common elements we may add three others that most authorities agree on: (5) span of control, (6) authority, responsibility, and delegation, and (7) centralization versus decentralization of authority.

  1. Span of Control: Narrow (or Tall) versus Wide (or Flat)The span of control,or span of management, refers to the number of people reporting directly to a given manager.63 There are two kinds of spans of control, narrow (or tall) and wide (or flat).

Narrow Span of Control This means a manager has a limited number of people reporting—three vice presidents reporting to a president, for example, instead of nine vice presidents. An organization is said to be tall when there are many levels with narrow spans of control.

Wide Span of Control This means a manager has several people reporting—a first-line supervisor may have 40 or more subordinates, if little hands-on supervision is required, as is the case in some assembly-line workplaces. An organization is said to be flat when there are only a few levels with wide spans of control.

Historically, spans of about 7 to 10 subordinates were considered best, but there is no consensus as to what is ideal. In general, when managers must be closely involved with their subordinates, as when the management duties are complex, they are advised to have a narrow span of control. This is why presidents tend to have only a handful of vice presidents reporting to them. By contrast, first-line supervisors directing subordinates with similar work tasks may have a wide span of control.

Today’s emphasis on lean management staffs and more efficiency means that spans of control need to be as wide as possible while still providing adequate supervision. Wider spans also fit in with the trend toward allowing workers greater autonomy in decision making. Research suggests that, when aided by technology to communicate and monitor, a manager can oversee 30 employees or more.64

  1. Authority, Responsibility, & Delegation: Line versus Staff PositionsMale sea lions have to battle other males to attain authority over the herd. In human organizations, however, authority is related to the management authority in the organization; it has nothing to do with the manager’s fighting ability or personal characteristics. With authority goes accountability, responsibility,and the ability to delegate one’s authority.

Accountability Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. (Authority is distinguished from power, which, as we discuss in Chapter 14, is the extent to which a person is able to influence others so they respond to orders.) In the military, of course, orders are given with the expectation that they will be obeyed, disobedience making one liable to a dishonorable discharge or imprisonment. In civilian organizations, disobeying orders may lead to less dire consequences (demotion or firing), but subordinates are still expected to accept that a higher-level manager has a legitimate right to issue orders.

Page 243Authority means accountability—managers must report and justify work results to the managers above them. Being accountable means you have the responsibility for performing assigned tasks.

Responsibility With more authority comes more responsibility. Responsibility is the obligation you have to perform the tasks assigned to you. A car assembly-line worker has little authority but also little responsibility: just install those windshields over and over. A manager, however, has greater responsibilities.

It is a sign of faulty job design when managers are given too much authority and not enough responsibility, in which case they may become abusive to subordinates and capricious in exerting authority.65 Conversely, managers may not be given enough authority, so the job becomes difficult.

Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy. To be more efficient, most managers are expected to delegate as much of their work as possible. However, a business entrepreneur may fall into the common trap of perfection, believing, as one writer puts it, that “you are the only person who can handle a given situation, work with a special client, design a program.”66 But a surprising number of managers fail to realize that delegation is an important part of their job.

 PRACTICAL ACTION

When Should You Delegate & When Not? How Managers Get More Done

All managers must learn how to delegate—to assign management authority and responsibilities to people lower in the company hierarchy. But failure to delegate can happen even with high-powered executives, including those you might least suspect—such as the president of Harvard University. Dr. Neil L. Rudenstine, who became president of Harvard in 1991, initially became so exhausted from overwork that he had to stay home for two weeks to recover. The incident sent a message that his future survival would depend on his ability to set priorities and delegate responsibility.67

“To do more in a day, you must do less—not do everything faster,” says Oakland, California, productivity expert Odette Pollar.68 If as a manager you find yourself often behind, always taking work home, doing your subordinates’ work for them, and constantly having employees seeking your approval before they can act, you’re clearly not delegating well. How do you decide when to delegate and when not to? Here are some guidelines:69

Delegate Routine & Technical Matters Always try to delegate routine tasks and routine paperwork. When there are technical matters, let the experts handle them.

Delegate Tasks That Help Your Subordinates Grow Let your employees solve their own problems whenever possible. Let them try new things so they will grow in their jobs.

Don’t Delegate Confidential & Personnel Matters Any tasks that are confidential or that involve the evaluation, discipline, or counseling of subordinates should never be handed off to someone else.

Don’t Delegate Emergencies By definition, an emergency is a crisis for which there is little time for solution, and you should handle this yourself.

Don’t Delegate Special Tasks That Your Boss Asked You to Do—Unless You Have His or Her Permission If your supervisor entrusts you with a special assignment, such as attending a particular meeting, don’t delegate it unless you have permission to do so.

Match the Tasks Delegated to Your Subordinates’ Skills & Abilities While recognizing that delegation involves some risk, make your assignments appropriate to the training, talent, skills, and motivation of your employees.

YOUR CALL

Managers fail to delegate for many reasons.70 An excessive need for perfection. A belief that only they should handle “special,” “difficult,” or “unusual” problems or clients. A wish to keep the parts of a job that are fun. A fear that others will think them lazy. A reluctance to let employees lower down in the hierarchy take risks. A worry that subordinates won’t deliver. A concern that the subordinates will do a better job and show them up. Are any of these reasons why you might not be very good at delegating? What are some others?

Page 244Regarding authority and responsibility, the organization chart distinguishes between two positions, line and staff. (See Figure 8.5.)

FIGURE 8.5 Line and staff

Line responsibilities are indicated by solid lines, staff responsibilities by dotted lines.

Line Position Line managers have authority to make decisions and usually have people reporting to them. Examples: the president, the vice presidents, the director of personnel, and the head of accounting. Line positions are indicated on the organization chart by a solid line (usually a vertical line).

Staff Position Staff personnel have authority functions; they provide advice, recommendations, and research to line managers (examples: specialists such as legal counsels and special advisers for mergers and acquisitions or strategic planning). Staff positions are indicated on the organization chart by a dotted line (usually a horizontal line).

  1. Centralization versus Decentralization of AuthorityWho makes the important decisions in an organization? That is what the question of centralization versus decentralization of authority is concerned with.

Centralized Authority With centralized authority, important decisions are made by higher-level managers. Very small companies tend to be the most centralized, although nearly all organizations have at least some authority concentrated at the top of the hierarchy. Kmart and McDonald’s are examples of companies using this kind of authority.

An advantage in using centralized authority is that there is less duplication of work, because fewer employees perform the same task; rather, the task is often performed by a department of specialists. Another advantage of centralization is that procedures are uniform and thus easier to control; all purchasing, for example, may have to be put out to competitive bids.

Decentralized Authority With decentralized authority, important decisions are made by middle-level and supervisory-level managers. Here, obviously, power has been delegated throughout the organization. Among the companies using decentralized authority are General Motors and Harley-Davidson.

An advantage in having decentralized authority is that managers are encouraged to solve their own problems rather than to buck the decision to a higher level. In addition, decisions are made more quickly, which increases the organization’s flexibility and efficiency.

Page 245 Basic Types of Organizational Structures

How would one describe the seven organizational structures?

THE BIG PICTURE

Seven types of organizational structures are simple, functional, divisional, matrix, team-based, network, and modular.

Culture and structure, we’ve said, are quite often intertwined. When Google co-founder (with Sergey Brin) and CEO Larry Page was asked in 2011 about the biggest threat to his company, Page answered in a single word: “Google.”

Now 17 years old, Google started out as a freewheeling company in which, as we mentioned, engineers were given time to experiment on their own projects, producing the famed Google’s culture of innovation. The problem, however, was that the company grew so quickly (it’s now 40,000 people) that decision making had become molasses-like. For instance, the two co-founders, who had been trained as engineers, had hired a professional manager, Eric Schmidt, to be CEO, but the three of them “had to agree before anything could be done,” says one report. “The unwieldy management and glacial pace of decision making were particularly noticeable in [Silicon Valley], where start-ups overtake behemoths in months.”71 Since then, Schmidt was promoted to chairman and Page took over as CEO, streamlining the company’s structure and decision-making processes.

Small firm. What type of organizational structure is best suited to a local floral shop? Should the number of employees influence the decision?

Organizational design is concerned with designing the optimal structures of accountability and responsibility that an organization uses to execute its strategies.We may categorize organizational designs as three types: (1) traditional designs, (2) horizontal designs, and (3) designs that open boundaries between organizations.72

  1. Traditional Designs: Simple, Functional, Divisional, & Matrix Structures

Traditional organizational designs tend to favor structures that rely on a vertical management hierarchy, with clear departmental boundaries and reporting arrangements, as follows.

The Simple Structure: For the Small Firm The first organizational form is the simple structure. This is the form often found in a firm’s very early, entrepreneurial stages, when the organization is apt to reflect the desires and personality of the owner or founder. An organization with a simple structure has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization. (See Figure 8.6, right.)

Hundreds of thousands of organizations are arranged according to a simple structure—for instance, small mom-and-pop firms running landscaping, construction, insurance sales, and similar businesses. Examples: Both Hewlett-Packard and Apple Computer began as two-man garage start-ups that later became large.

FIGURE 8.6 Simple structure: an example

There is only one hierarchical level of management beneath the owner.

The Functional Structure: Grouping by Similar Work Specialties The second organizational form is the functional structure. In a functional structure,people with similar occupational specialties are put together in formal groups. This is a quite commonplace structure, seen in all kinds of organizations, for-profit and nonprofit. (See Figure 8.7.)

Page 246FIGURE 8.7 Functional structure: two examples

This shows the functional structure for a business and for a hospital

Examples: A manufacturing firm will often group people with similar work skills in a Marketing Department, others in a Production Department, others in Finance, and so on. A nonprofit educational institution might group employees according to work specialty under Faculty, Admissions, Maintenance, and so forth.

The Divisional Structure: Grouping by Similarity of Purpose The third organizational form is the divisional structure. In a divisional structure, people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions. (See Figure 8.8, next page.)

Product Divisions: Grouping by Similar Products or Services Product divisions group activities around similar products or services. Examples: The media giant Time Warner has different divisions for magazines, movies, recordings, cable television, and so on. The Warner Bros. part of the empire alone has divisions spanning movies and television, a broadcast network, retail stores, theaters, amusement parks, and music.

Customer Divisions: Grouping by Common Customers or Clients Customer divisions tend to group activities around common customers or clients.Examples: Ford Motor Co. has separate divisions for passenger-car dealers, for large trucking customers, and for farm products customers. A savings and loan might be structured with divisions for making consumer loans, mortgage loans, business loans, and agricultural loans.

Geographic Divisions: Grouping by Regional Location Geographic divisions group activities around defined regional locations. Example: This arrangement is frequently used by government agencies. The Federal Reserve Bank, for instance, has 12 separate districts around the United States. The Internal Revenue Service also has several districts.

The Matrix Structure: A Grid of Functional & Divisional for Two Chains of Command The fourth organizational form is the matrix structure. In a matrix structure, an organization combines functional and divisional chains of command in a grid so that there are two command structures—vertical and horizontal. The functional structure usually doesn’t change—it is the organization’s normal departments or divisions, such as Finance, Marketing, Production, and Research & Development. The divisional structure may vary—as by product, brand, customer, or geographic region. (See Figure 8.9, next page.)

Page 247FIGURE 8.8 Divisional structure: three examples

This shows product, customer, and geographic divisions.

A hypothetical example, using Ford Motor Co.: The functional structure might be the departments of Engineering, Finance, Production, and Marketing, each headed by a vice president. Thus, the reporting arrangement is vertical. The divisional structure might be by product (the new models of Taurus, Mustang, Explorer, and Expedition, for example), each headed by a project manager. This reporting arrangement is horizontal. Thus, a marketing person, say, would report to both the Vice President of Marketing and to the Project Manager for the Ford Mustang. Indeed, Ford Motor Co. used the matrix approach to create the Taurus and a newer version of the Mustang.

  1. The Horizontal Design: Eliminating Functional Barriers to Solve Problems

The second organizational design is the horizontal design. In a horizontal design, also called a team-based design, teams or workgroups, either temporary or permanent, are used to improve collaboration and work on shared tasks by breaking down internal boundaries. For instance, when managers from different functional divisions are brought together in teams—known as cross-functional teams—to solve particular problems, the barriers between the divisions break down. The focus on narrow divisional interests yields to a common interest in solving the problems that brought them together. Yet team members still have their full-time functional work responsibilities and often still formally report to their own managers above them in the functional-division hierarchy. (See Figure 8.10, opposite page.)

Page 248FIGURE 8.9 Matrix structure

An example of an arrangement that Ford might use.

 EXAMPLE

Use of a Horizontal Design: Whole Foods Market

Upscale natural and organic-food grocery Whole Foods Market started out in 1980 as one store in Austin, Texas, and today has revenues of $12.9 billion and 375 stores in North America and the United Kingdom.73 It was rated No. 20 in 2014 on Fortune magazine’s annual “World’s Most Admired Companies” list.74 It has also been chosen as one of Fortune’s “100 Best Companies to Work For” every year for 17 years (No. 44 in 2014).75 But, as one writer observed, if its values are “soft-hearted,” emphasizing Whole Food, Whole People, Whole Planet, “its competitive logic is hard-headed.”76 That’s because its management strategy is based not on hierarchy but on autonomous profit centers of self-managed teams.

“Radical Decentralizing”: Empowering Small Teams. One of Whole Foods’s core operating principles is that all work is teamwork. Thus, each store is organized into roughly eight self-managed teams, each with a designated team leader. The leaders in each store also operate as a team, as do the store leaders in each region. Additionally, the directors of the company’s 11 regions operate as a team.

At most retail companies, employees are hired by supervisors (not fellow employees), decisions about what products to order are made by someone high up at central headquarters, and the amounts of people’s paychecks are kept secret. Whole Foods, however, believes in “radical decentralizing,” in the words of influential management professor Gary Hamel.77

At the individual-store level, compensation is tied to team rather than individual performance, and performance measurements and individual pay schedules are open to all. Each team has the mission of improving the food for which it is responsible; is given wide flexibility in how it manages its responsibilities, hires and fires its members, and stocks its shelves; and is given a lot of power in how it responds to the changing tastes of local consumers.

A Steady Diet of Growth. Whole Foods employees are given both the freedom to do the right thing for customers and the incentive to do the right thing for profits. The financial results of this business model are that Whole Foods is the most profitable food retailer in the United Sates, when measured by profit per square foot. Although its stock price was down somewhat in 2014, it still was up 12-fold since its 2008 recession-era low.78

YOUR CALL

In designing new products, such as cell phones, the horizontal design team approach, known as concurrent engineering or integrated product development, has been found to speed up design because all the specialists meet at once, instead of separately doing their own thing, then handing off the result to the next group of specialists. Why do you think a horizontal design would be better in a retail business such as groceries?

Page 249FIGURE 8.10 Horizontal design

This shows a mix of functional (vertical) and project-team (horizontal) arrangements.

Page 2503. Designs That Open Boundaries between Organizations: Hollow, Modular, & Virtual Structures

The opposite of a bureaucracy, with its numerous barriers and divisions, a boundaryless organization is a fluid, highly adaptive organization whose members, linked by information technology, come together to collaborate on common tasks. The collaborators may include not only coworkers but also suppliers, customers, and even competitors. This means that the form of the business is ever-changing, and business relationships are informal.79

Three types of structures in this class of organizational design are hollow, modular, and virtual structures.

The Hollow Structure: Operating with a Central Core & Outsourcing Functions to Outside Vendors In the hollow structure, often called the network structure, the organization has a central core of key functions and outsources other functions to vendors who can do them cheaper or faster. (See Figure 8.11.) A company with a hollow structure might retain such important core processes as design or marketing and outsource most other processes, such as human resources, warehousing, or distribution, thereby seeming to “hollow out” the organization.80

FIGURE 8.11 Hollow structure

This is an example of a personal computer company that outsources noncore processes to vendors.

A firm with a hollow structure might operate with extensive, even worldwide operations, yet its basic core could remain small, thus keeping payrolls and overhead down. The glue that holds everything together is information technology, along with strategic alliances and contractual arrangements with supplier companies. An example of a hollow structure is EndoStim, the medical device start-up we described earlier.

The Modular Structure: Outsourcing Pieces of a Product to Outside Firms The modular structure differs from the hollow structure in that it is oriented around outsourcing certain pieces of a product rather than outsourcing certain processes (such as human resources or warehousing) of an organization. In a modular structure, a firm assembles product chunks, or modules, provided by outside contractors. One article compares this form of organization to “a collection of Lego bricks that can snap together.”

Page 251

Modular structure. The center section of Bombardier’s eight-passenger Continental business jet is built in Ireland and is shipped to Wichita, Kansas, where it is assembled with 12 other major components in just four days.

For example, Bombardier (pronounced “bom-bar-deeay”), of Wichita, Kansas, makes an eight-passenger business jet, the Continental, that is designed in a dozen large modules that are built in various places around the world. The cockpit and forward fuselage are built by Bombardier Montreal. The center section is built in Belfast, the wing by Mitsubishi in Japan, the stabilizers and rear fuselage by Aerospace Industrial Development in Taiwan, the landing gear by Messier-Dowty in Canada, and the tailcone by Hawker de Havilland in Australia. The engines are provided by General Electric and the avionics gear by Rockwell Collins, both companies in the United States. The 12 modules are shipped to Wichita, where the parts are snapped together in just four days.81

The Virtual Structure: An Internet-Connected Partner for a Temporary Project “Strip away the highfalutin’ talk,” says one industry observer, “and at bottom the Internet is a tool that dramatically lowers the cost of communication. That means it can radically alter any industry or activity that depends heavily on the flow of information.”82 One consequence of this is the virtual organization, an organization whose members are geographically apart, usually working with e-mail, collaborative computing, and other computer connections, while often appearing to customers and others to be a single, unified organization with a real physical location.83

The virtual organization allows the form of boundaryless structure known as the virtual structure, a company outside a company that is created “specifically to respond to an exceptional market opportunity that is often temporary,” according to one definition.84 The structure, in which members meet and communicate with each other by e-mail and videoconferencing instead of face to face, is valuable for organizations that want to grow through partnerships with other companies.85 For instance, Finnish phone-maker Nokia, which had trouble gaining market share in the United States, changed its strategy to develop phones in partnership with U.S. carriers, as by assigning product developers to AT&T and Verizon.

Page 252 Contingency Design: Factors in Creating the Best Structure

What factors affect the design of an organization’s structure?

THE BIG PICTURE

Three factors that should be considered when determining the best organizational culture involve whether an organization’s environment is mechanistic or organic, whether its environment stresses differentiation or integration, and how its strategy can affect its structure.

What is the optimal size for an organization? How big is too big?

Medical records company gloStream, which sells software to doctors’ offices, was founded in 2005 as a virtual organization, and for four years the approach worked well, with costs kept low and salespeople having no choice but to be out in the field. But in 2009, CEO Mike Sappington decided it was time to “take the company physical.” “We’ve gotten too big to be a virtual company,” he told Inc. magazine. By the following year, gloStream planned to have 100 employees in the United States and another 100 in India. “Setting up a conference call or arranging everyone’s schedules for a meeting,” he said, “started to take an enormous amount of time.”86

Three Factors to Be Considered in Designing an Organization’s Structure

When managers are considering what organizational arrangements to choose from, such factors as stage of development are among the factors, or contingencies, they must consider. Recall from Chapter 2 that the contingency approach to management emphasizes that a manager’s approach should vary according to—that is, be contingent on—the individual and environmental situation. Thus, the manager following the contingency approach simply asks, “What method is the best to use under these particular circumstances?” The process of fitting the organization to its environment is called contingency design.

Managers taking a contingency approach must consider the following factors in designing the best kind of structure for their particular organization at that particular time:

  1. Environmentmechanistic versus organic
  2. Environmentdifferentiation versus integration
  3. Link between strategy, culture, and structure

Could anyone do this? Hotel housekeepers, following the model of a mechanistic organization, are supposed to be able to make beds in no more than 3 minutes and ready an entire room within 24 minutes. The tasks are physically demanding, and the staff must be taught how to bend properly to make the work easier on the body. If you had this job, what would you do to vary the routine to avoid monotony—or would that sacrifice speed?

  1. The Environment: Mechanistic versus Organic Organizations—the Burns & Stalker Model

Making beds—how hard could it be?

Actually, a hotel housecleaner may be expected to whip not just beds but entire rooms, 16–30 of them, into spick-and-span shape during an eight-hour shift. Here every job is broken down into the smallest of steps, with vacuuming, dusting, mopping, making beds, and so on, expected to take about 20–24 minutes per room, according to time-motion studies. Making a neatly tucked bed should take no more than 3 minutes.87

Page 253Much of this kind of mundane hotel work exemplifies what British behavioral scientists Tom Burns and G. M. Stalker call a mechanistic organization, as opposed to an organic organization.88 (See Table 8.3.)

TABLE 8.3 Mechanistic versus Organic Organizations

Mechanistic Organizations: When Rigidity & Uniformity Work Best In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. Mechanistic organizations, then, are bureaucratic, with rigid rules and top-down communication. This kind of structure is effective in certain aspects of hotel work because the market demands uniform product quality and cleanliness.

In general, mechanistic design works best when an organization is operating in a stable environment. Yet new companies that have gone through a rough-and-tumble start-up period may decide to change their structures so that they are more mechanistic, with clear lines of authority.

Organic Organizations: When Looseness & Flexibility Work Best In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks. Tom Peters and Robert Waterman called this kind of organization a “loose” structure.89

Organic organizations are sometimes termed “adhocracies” because they operate on an ad hoc basis, improvising as they go along. As you might expect, information-technology companies favor the organic arrangement because they constantly have to adjust to technological change. NewYork–based Dark Arts Consulting, a technology consulting firm, has used the practice of co-working—sharing office space with other businesses—to expand into territories in New Jersey and Pennsylvania, enabling it to hire salespeople and engineers without having the added expense of an underutilized office.90 Companies that need to respond to fast-changing consumer tastes also favor organic arrangements.

No doubt you would be more comfortable in some organizational structures than others. If you value autonomy and the chance to make decisions, you probably prefer a hollow or virtual structure as opposed to one that is more structured. What type of structure do you think would bring out the best in you? Find out by taking Self-Assessment 8.2.

Page 254SELF-ASSESSMENT 8.2

Assessing Your Organizational Structure Preference

This survey is designed to assess your preferred type of organizational structure. Go to connect.mheducation.com and take Self-Assessment 8.2. When you’re done, answer the following questions:

  1. Do you prefer a more mechanistic or organic structure? What do you think is the cause for this preference?
  2. If you were interviewing for a job, what questions might you ask to determine if the company is more mechanistic or organic?
  3. The Environment: Differentiation versus Integration—the Lawrence & Lorsch Model

Burns and Stalker’s ideas were extended in the United States by Harvard University researchers Paul R. Lawrence and Jay W. Lorsch.91 Instead of a mechanistic-organic dimension, however, they proposed a differentiation-integration dimension—forces that impelled the parts of an organization to move apart or to come together. The stability of the environment confronting the parts of the organization, according to Lawrence and Lorsch, determines the degree of differentiation or integration that is appropriate.

Differentiation: When Forces Push the Organization Apart Differentiation is the tendency of the parts of an organization to disperse and fragment.The more subunits into which an organization breaks down, the more highly differentiated it is.

This impulse toward dispersal arises because of technical specialization and division of labor. As a result, specialists behave in specific, delimited ways, without coordinating with other parts of the organization. For example, a company producing dental floss, deodorants, and other personal-care products might have different product divisions, each with its own production facility and sales staff—a quite differentiated organization.

Integration: When Forces Pull the Organization Together Integration is the tendency of the parts of an organization to draw together to achieve a common purpose. In a highly integrated organization, the specialists work together to achieve a common goal. The means for achieving this are a formal chain of command, standardization of rules and procedures, and use of cross-functional teams and computer networks so that there is frequent communication and coordination of the parts.

  1. Linking Strategy, Culture, & Structure

We began this chapter by discussing why it makes sense that a company’s organizational culture and organizational structure should be aligned with its vision and strategies. Thus, if the managers of an organization change its strategy, as gloStream did when it decided to add lots more people and put them under one roof instead of in a virtual network, they need to change the organization’s culture and structure to support that strategy. Indeed, companies often begin by offering a single product or product line that requires only a simple structure, but as they grow and their strategies become more ambitious and elaborate, so the culture and structure need to change to support those strategies.92

All the organizational cultures and structures described in this chapter are used today because all of them have advantages that make them appropriate for some cases and disadvantages that make them not useful for others. For example, the clear roles and strict hierarchy of an extremely mechanistic organization are clearly suitable in a system valuing careful routines and checks and balances, such as a nuclear power plant. A fast-moving start-up drawing on sources of expertise throughout the world may benefit from a more flexible culture and organic structure that lowers boundaries between functions and organizations.

Page 255Key Terms Used in This Chapter

accountability

adhocracy culture

authority

boundaryless organization

centralized authority

clan culture

common purpose

contingency design

coordinated effort

corporate culture

customer divisions

decentralized authority

delegation

differentiation

division of labor

divisional structure

enacted values

espoused values

flat organization

functional structure

geographic divisions

hero

hierarchy culture

hierarchy of authority

hollow structure

horizontal design

integration

line managers

market culture

matrix structure

mechanistic organization

modular structure

network structure

organic organization

organization

organization chart

organizational culture

organizational design

organizational structure

person-organization fit

product divisions

responsibility

rites and rituals

simple structure

span of control (management)

staff personnel

story

symbol

team-based design

unity of command

virtual organization

virtual structure

Key Points

 8.1  Aligning Strategy, Culture, & Structure

  • Person-organization fit reflects the extent to which your personality and values match the climate and culture in an organization. A good fit is associated with more positive work attitudes and task performance, lower stress, and fewer intentions to quit.
  • The challenge for top managers is to align the organization’s vision and strategies with its organizational culture and organizational structure.
  • Organizational culture is defined as the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments. The culture helps employees understand why the organization does what it does and how it intends to accomplish its long-term goals.
  • Organizational structure is a formal system of task and reporting relationships that coordinates and motivates an organization’s members so that they can work together to achieve the organization’s goals.

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

  • According to one common methodology known as the competing values framework,organizational cultures can be classified into four types: clan, which has an internal focus and values flexibility; (2) adhocracy, which has an external focus and values flexibility; (3) market, which has a strong external focus and values stability and control; and (4) hierarchy, which has an internal focus and values stability and control.
  • Organizational culture appears as three layers. Level 1 is observable artifacts, the physical manifestations of culture. Level 2 is espoused values, explicitly stated values and norms preferred by an organization, although employees are frequently influenced by enacted values, which represent the values and norms actually exhibited in the organization. Level 3 consists of basic assumptions, the core values of the organization. Culture is transmitted to employees in symbols, stories, heroes, and rites and rituals. A symbol is an object, act, quality, or event that conveys meaning to others. A story is a narrative based on true events, which is repeated—and sometimes embellished on—to emphasize a particular value. A hero is a person whose accomplishments embody the values of the organization. Rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization’s life.

Page 256 8.3  The Process of Culture Change

  • Among the 12 mechanisms managers use to embed a culture in an organization are: (1) formal statements; (2) slogans and sayings; (3) rites and rituals; (4) stories, legends, and myths; (5) leader reactions to crises; (6) role modeling, training, and coaching; (7) physical design; (8) rewards, titles, promotions, and bonuses; (9) organizational goals and performance criteria; (10) measurable and controllable activities; (11) organizational structure; and (12) organizational systems and procedures.

 8.4  Organizational Structure

  • An organization is a system of consciously coordinated activities or forces of two or more people.
  • There are three types of organizations classified according to the three different purposes for which they are formed: for-profit, nonprofit, and mutual-benefit.
  • Whatever the size of organization, it can be represented in an organization chart, a boxes-and-lines illustration showing the formal lines of authority and the organization’s official positions or division of labor.
  • Two kinds of information that organizations reveal about organizational structure are (1) the vertical hierarchy of authority—who reports to whom, and (2) the horizontal specialization—who specializes in what work.

 8.5  The Major Elements of an Organization

  • Organizations have seven elements. Four proposed by Edgar Schein are (1) common purpose, which unifies employees or members and gives everyone an understanding of the organization’s reason for being; (2) coordinated effort, the coordination of individual efforts into a group or organization-wide effort; (3) division of labor, having discrete parts of a task done by different people; and (4) hierarchy of authority, a control mechanism for making sure the right people do the right things at the right time.
  • Other common elements are (5) span of control, which refers to the number of people reporting directly to a given manager; and (6) authority and accountability, responsibility, and delegation.
  • Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. Accountability means that managers must report and justify work results to the managers above them. Responsibility is the obligation you have to perform the tasks assigned to you. Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy.
  • Regarding authority and responsibility, the organization chart distinguishes between two positions, line and staff. Line managers have authority to make decisions and usually have people reporting to them. Staff personnel have advisory functions; they provide advice, recommendations, and research to line managers.
  • The final common element of organizations is (7) centralization versus decentralization of authority. With centralized authority, important decisions are made by higher-level managers. With decentralized authority, important decisions are made by middle-level and supervisory-level managers.

 8.6  Basic Types of Organizational Structures

  • Organizations may be arranged into seven types of structures. (1) In a simple structure, authority is centralized in a single person; this structure has a flat hierarchy, few rules, and low work specialization. (2) In a functional structure, people with similar occupational specialties are put together in formal groups. (3) In a divisional structure, people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions. (4) In a matrix structure, an organization combines functional and divisional chains of command in grids so that there are two command structures—vertical and horizontal.
  • (5) In a horizontal design or team-based design, teams or workgroups are used to improve horizontal relations and solve problems throughout the organization. (6) In a network structure, the organization has a central core that is linked to outside independent firms by computer connections, which are used to operate as if all were a single organization. (7) In a modular structure, a firm assembles product chunks, or modules, provided by outside contractors.

 8.7  Contingency Design: Factors in Creating the Best Structure

  • The process of fitting the organization to its environment is called contingency design. Managers taking a contingency approach must consider at least three factors in designing the best kind of structure for their organization at that particular time.
  • The first is that an organization may be either mechanistic or organic. In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees Page 257are closely supervised. In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks.
  • The second is that an organization may also be characterized by differentiation or integration. Differentiation is the tendency of the parts of an organization to disperse and fragment. Integration is the tendency of the parts of an organization to draw together to achieve a common purpose.
  • The third is the link between strategy, culture, and structure. If the managers of an organization change its strategy, they need to change the organization’s culture and structure to support that strategy. Indeed, companies often begin by offering a single product or product line that requires only a simple structure, but as they grow and their strategies become more ambitious and elaborate, so the culture and structure need to change to support those strategies.

Understanding the Chapter: What Do I Know?

  1. To implement an organization’s strategy, what are the two kinds of important areas that managers must determine?
  2. How would you describe the four kinds of organizational cultures, according to the competing values framework?
  3. Describe and explain the three levels of organizational culture.
  4. What are four ways in which culture is transmitted to employees?
  5. Name 12 mechanisms by which an organization’s members teach each other preferred values, beliefs, expectations, and behaviors.
  6. What are seven common elements of organizations?
  7. Describe the four types of traditional organizational designs.
  8. Explain what is meant by horizontal organizational designs.
  9. What are three designs that open boundaries between organizations?
  10. What are three factors to consider in designing an organization’s structure?

Management in Action

IDEO’s Culture Reinforces Helping Behavior

IDEO is a company that has won many awards for its “human-centered, design-based approach to helping organizations” improve and grow. They have helped hundreds of companies in many industries to innovate and improve customer satisfaction and profitability. Tim Brown, president and CEO, describes design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”93 IDEO’s success is built on a culture that values, reinforces, and supports helping behavior.

Helping behavior must be actively nurtured because it is discretionary. At IDEO helping others and collaborating for the good of a client is the norm. This case is based on results from a study of IDEO’s culture and design process. The investigators identified four keys to achieving helping behavior and collaboration.

Leadership Conviction

Not every large company’s leader would, if asked about organizational priorities, bring up the topic of encouraging collaborative help in the ranks. But IDEO’s leadership is explicitly focused on it. For Tim Brown, the CEO, that’s not only because the problems IDEO is asked to solve require extreme creativity; it’s also because they have become more complicated. Brown says, “I believe that the more complex the problem, the more help you need. And that’s the kind of stuff we’re getting asked to tackle, so we need to figure out how to have a culture where help is much, much more embedded.” Essentially, this is a conviction that many minds make bright work.

Leaders at IDEO prove their conviction by giving and seeking help themselves. For example, we observed Page 258a particularly successful event (in terms of new ideas generated) when a C-suite-level [senior executives] helper joined a team for an hour-long brainstorming session. The team’s project hadn’t even formally kicked off yet, so it was not a situation in which help was desperately needed. Nor was this leader the only one qualified to provide it. His arrival in the room signaled strongly that helping is an expected behavior in the culture and that everyone is part of the helping network.

The Two Sides of the Helping Coin

Because most cultures have norms of reciprocity, getting help from others can put you in their debt. Even if you are unfazed by the prospect of a future request, you might worry about seeming weak or incompetent if you ask for assistance, especially from someone of higher status. IDEO makes a conscious effort to sweep that hesitation away. From the beginning of every project, designers are encouraged to assume that they’ll need help. A project team with a demanding client learns that it would be irresponsible not to ask a colleague who had a lot of experience with that client to review its work. The team members might ask for that colleague’s input throughout the project, in sessions lasting anywhere from 15 minutes to half a day. At IDEO there is no shame in asking for help, and this psychological safety shows up on many levels: For example, people cheerfully accept frequent all-office e-mail blasts along the lines of “Does anyone have experience with Spanish-language radio?” or “Who’s tried the new quick-loss diet?”

Processes & Roles

How pervasive is helping at IDEO? Our network mapping revealed an extraordinary fact: In the office we studied, nearly every person was named as a helper by at least one other person. Even more amazing, an overwhelming majority of employees (about 89%) showed up on at least one other employee’s list of top five helpers. Clearly, effective helping isn’t a rare skill. Most people at IDEO learn to do it as they become steeped in the culture of the organization, participate in its regular activities, and develop networks within the firm. It would be hard, we think, to achieve this simply by communicating the desired culture. And indeed, IDEO goes much further, building the value of help into formal processes and explicit roles.

Help is embedded in the entire design process, from IDEO’s famous brainstorming sessions, through formal design reviews, to the many forms of support and encouragement for project teams seeking feedback on ideas. In this way IDEO builds essential habits of mind. In fact, Brown told us, when help is not seen as an integral part of the process, “teams will rush through their project and get quite close to the end before they realize ‘Wow, we completely missed something—which we wouldn’t have missed if we had stopped and asked for help.’”

Most IDEO project teams have one or more senior designers assigned as helpers. These people have expertise in a given domain, deep experience with the team’s client, or simply a reputation for being particularly good helpers. They are generally available to the team and check in with it periodically throughout the project.

Slack in the Organization

Remember that helping is a discretionary behavior. That’s true even for a formally assigned helper at IDEO: The role is only a small part of anyone’s overall job. A potential helper may or may not be able (or willing) to respond to any given request. Because IDEO wants helping to occur, it must avoid overloading people with tasks of their own. Notice the implication: Time that might be spent on billable client work is made available to facilitate ad hoc assistance. This strongly reinforces messages exhorting people to help their colleagues.

The Surprising Omissions

These keys to collaborative help at IDEO may seem uncontroversial. But note what isn’t part of the equation: some of corporate leadership’s favorite talent-management levers. The firm seems not to rely on fancy collaborative software tools or other technologies (although e-mail and videoconferencing are used frequently). Most pointedly, financial incentives don’t play a prominent role in promoting the culture of help.

To be sure, executives have help in mind when evaluating job candidates. Brown wrote about this recently: “During job interviews, I listen for a couple things. When people repeatedly say ‘I,’ not ‘we,’ when recounting their accomplishments, I get suspicious. But if they’re generous with giving credit and talk about how someone else was instrumental in their progress, I know that they give help as well as receive it.” Helpfulness is considered in promotions as well. It is a value that everyone in a senior position at IDEO is expected to model. But on a daily basis, the incentive to help comes from the simple gratitude it produces and the recognition of its worth.

This apparent joy in collaborative helping speaks to a larger reality of IDEO’s culture: It is not about cutthroat competition. Many organizations discourage helping, at least implicitly, because it is seen as incompatible with individual responsibility for productivity. Some have cultures that actually promote competition among peers, so aiding a colleague seems self-defeating. IDEO’s message is that the thing to beat is the best work you could have done without help—and that when the firm produces the best work possible for clients, all its employees do better.

Page 259FOR DISCUSSION

  1. Using the competing values framework as a point of reference, how would you describe the current organizational culture at IDEO? Provide examples to support your conclusions.
  2. What type of culture is desired by Tim Brown to meet his goals? Does the company have this type of culture? Discuss.
  3. Which of the 12 ways to embed organizational culture has IDEO used to create its current culture? Provide examples to support your conclusions.
  4. Does Tim Brown want to create more of a mechanistic or organic organization? Explain the rationale for his preference.
  5. What is the most important lesson from this case? Discuss.

Source: Excerpted from T. Amabile, C. M. Fisher, and J. Pillemer, “IDEO’s Culture of Helping,” Harvard Business Review, January– February 2014, pp. 55–61.

Legal/Ethical Challenge

Is Apple’s Culture Going Too Far?

Stealing, better known as shortage (or shrinkage) in the retail industry, is a big problem for this economic sector. While people steal from their employers for many reasons, this challenge involves a practice that Apple has used to reduce theft.

Two former Apple retail store employees sued the company claiming that “they were owed up to $1,500 in annual overtime, waiting each workday to have a manager check their personal bags for pilfered store merchandise.” Would you like to spend extra, nonpaid time at work having your bags checked? This is the crux of the suit. The former employees claim that the practice “was mandatory and performed after they had clocked out for meal breaks and at the end of their work day.” The searches are conducted every time a sales rep leaves the store, including meal breaks. Seven additional people have agreed to join this lawsuit against Apple.

Apple denies all claims and allegations. The company argues that it did not willfully fail to pay any wages. Apple claims the searches are optional and they would not take place if employees would not bring bags to work or use iPhones or other Apple products. In other words, if an employee would not bring anything to work, then there is nothing to search. The company recently petitioned the court to toss the case, and a federal judge, William Alsup, rejected the request.

The judge concluded that avoiding searches is not so straightforward because employees “may need to bring a bag to work for reasons they cannot control, such as the need for medication, feminine hygiene products, or disability accommodations.”

SOLVING THE CHALLENGE

What would you do if you were an executive at Apple?

  1. Continue to fight the lawsuit because it is a class action suit that could cost a lot of money.
  2. Fight this lawsuit, but change the policy in the future. I want the company to be more clannish and adhocracy, and this policy is contrary to these cultural types.
  3. Settle the lawsuit. Yes, it will cost money, but the company is sitting on a stockpile of cash. This action will also show goodwill while reinforcing aspects of Apple’s clan culture.
  4. Invent other options.

Source: This case was based on material in G. Allen, “Apple’s Attorneys Respond to Lawsuit over Bag Check Overtime,” Forbes, August 17, 2013, www.forbes.com/sites/garydallen/2013/08/17/apples-attorneys-respond-to-lawsuit-over-bag-check-overtime; and J. J. Roberts, “Apple Store Workers’ Lawsuit over Bag and Gadget Searches Can Go to Trial, Judge Rules,” Buy iMac, June 2, 2014, www.buyimac.com/apple-store-workers%e2%80%99-lawsuit-over-bag-and-gadget-searches-can-go-to-

 

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