Ch18

Organizational Organizational Behavior, 9/EBehavior, 9/E

Schermerhorn, Hunt, and Schermerhorn, Hunt, and OsbornOsborn

Prepared byMichael K. McCuddyValparaiso University

John Wiley & Sons, Inc.

Organizational Behavior: Chapter 18 2

Chapter 18 Study Questions What is organizational design and how is it

linked to strategy? What is information technology and how is it

used? Can the design of the firm co-evolve with the

environment? How does a firm learn and continue to learn over

time?


Study question 1: What is organizational design and how is it linked to strategy?

Organizational design.– The process of choosing and implementing a

structural configuration.– The choice of an appropriate organizational

design depends on the firm’s:• Size.• Operations and information technology.• Environment.• Strategy for growth and survival.



The structural configuration of organizations should:– Enable senior executives to emphasize the skills and

abilities that their firms need to compete, and to remain agile and dynamic in a rapidly changing world.

– Allow individuals to experiment, grow, and develop competencies so that the strategy of the firm can evolve.



Co-evolution.– The firm can adjust to external changes even

as it shapes some of the challenges facing it.– Shaping capabilities via the organization’s

design is a dynamic aspect of co-evolution.– Even with co-evolution, managers must

maintain a recognizable pattern of choices in organizational design.


Study question 1: What is organizational design and how is it linked to strategy?Organizational size.

– As the number of employees increase, the possible interconnections among them increase even more.

– The design of small firms is directly influenced by core operations technology.

– Larger firms have many core operations technologies in a variety of specialized units.



The simple design for smaller units and firms.– A configuration involving one or two ways of

specializing individuals and units.– Vertical specialization and control emphasize levels of

supervision without elaborate formal mechanisms.– Appropriate for many smaller firms because of

simplicity, flexibility, and responsiveness to a central manager.


Study question 1: What is organizational design and how is it linked to strategy? Organizational design must be adjusted to fit

technological opportunities and requirements.– Operations technology.

• The combination of resources, knowledge, and techniques that creates a product or service output.

– Information technology.• The combination of machines, artifacts, procedures, and

systems used to gather, store, analyze, and disseminate information for translating it into knowledge.



Thomson’s view of technology.– Technologies classified according to the

degree of specification and degree of interdependence of work units.

– Intensive technology.• Uncertainty as to how to produce desired

outcomes.



Thomson’s view of technology (cont.).– Mediating technology.

• Links parties that want to become interdependent.

– Long-linked technology.• The way to produce desired outcomes is known

and broken down into a number of sequential steps.


Study question 1: What is organizational design and how is it linked to strategy? Woodward’s view of technology.

– Small-batch production.• The organization tailor makes a variety of custom products

to fit customer specifications.– Mass production.

• The organization produces one or a few products through an assembly line system.

– Continuous-process technology.• The organization produces a few products using

considerable automation.


Study question 1: What is organizational design and how is it linked to strategy?Woodward’s view of technology (cont.).

– The proper matching of structure and technology is critical to organizational success.

• Successful small-batch and continuous-process plants have flexible structures with small work groups at the bottom.

• Successful mass production operations are rigidly structured and have large work groups at the bottom.



Adhocracy.

– An appropriate structural design when

managers and employees do not know the

appropriate way to service a client or produce

a particular product.



An adhocracy is characterized by:– Few rules, policies, and procedures.– Substantial decentralization.– Shared decision making among members.– Extreme horizontal specialization.– Few levels of management.– Virtually no formal controls.



An adhocracy is useful when:

– The tasks facing the firm vary considerably

and provide many exceptions.

– Problems are difficult to define and solve.


Study Question 2:What is information technology and how is it used?

Why IT makes a difference.– IT provides a partial substitute for:

• Some operations.• Some process controls.• Some impersonal methods of coordination.

– IT provides a strategic capability.– IT provides a capability for transforming

information to knowledge for learning.



Information technology as a substitute.– Initial implementation of IT often displaced

routine, highly specified, and repetitious jobs.• Did not alter fundamental character or design of

the organization.– A second wave of substitution replaced

process controls and informal coordination mechanisms with IT.

• Brought some marginal changes in organizational design.



Information technology as a strategic capability.– IT has been used to improve the efficiency, speed of

responsiveness, and effectiveness of operations.– IT provides individuals the information they need to

plan, make choices, coordinate with others, and control their own operations.

– This new strategic IT capability resulted from IT being broadly available to everyone.



IT and learning.– IT systems empower individuals and expand

their jobs.

– IT encourages the development of a “virtual” network.

– IT transforms how people manage.



IT and e-business.– Many dot-com firms adopted some variation

of adhocracy.– As the dot-coms grew, the adhocracy design

became problematic.• Limits on the size of an effective adhocracy.• Actual delivery of products and services rested

more on responsiveness to clients and maintaining efficiency than on continual innovation.


Study Question 3: Can the design of the firm co-evolve with the environment? Understanding the environment is important

because an organization is an open system. General environment.

– The set of cultural, economic, legal-political, and educational conditions found in the areas in which the organization operates.

Specific environment.– The owners, suppliers, distributors, government

agencies, and competitors with which an organization must interact to grow and survive.


Study Question 3: Can the design of the firm co-evolve with the environment?Environmental complexity.

– The magnitude of problems and opportunities in the organization’s environment, as reflected in:

• Degree of richness.• Degree of interdependence.• Degree of uncertainty.

– More complex environments provide more problems and opportunities.


Study Question 3: Can the design of the firm co-evolve with the environment?

Environmental richness.– The environment is richer when:

• The economy is growing.• Individuals are improving their education.• Those on whom the organization relies are

prospering.– A rich environment has more opportunities

and dynamism.– The opposite of richness is decline.



Environmental interdependence.– Linkage between environmental independence

and organization design may be subtle and indirect.

• Organization may co-opt powerful outsiders.• Organization may absorb or buffer demands of

powerful external elements.



Environmental uncertainty.– Uncertainty and volatility can be particularly

damaging to large bureaucracies.– A more organic form is the appropriate

organizational design response to uncertainty and volatility.

– Adhocracy may be needed extreme uncertainty and volatility.



In a complex global economy, firms must learn to co-evolve by altering their environment.

Two important ways of co-evolution:– Management of networks.

– Development of alliances.


Study Question 3: Can the design of the firm co-evolve with the environment?Networks and alliances around the world.

– Informal combines or cartels exist in Europe but are illegal in the United States except in rare cases.

– Networks are called keiretsu in Japan.• Bank-centered keiretsu.• Vertical keiretsu.

– In the United States, outsourcing is developing as a specialized form of network organization.


Study Question 3: Can the design of the firm co-evolve with the environment? Interfirm alliances.

– Announced cooperative agreements or joint ventures between two independent firms.

– Alliances are quite common in high technology industries.

– Since firms cooperate rather than compete; consequently, both the alliance managers and sponsoring executives must be patient, flexible, and creative in pursuing goals.



Virtual organization.– An ever-shifting constellation of firms, with a

lead corporation, that pool skills, resources, and experiences to thrive jointly.

– A design option when internal and external contingencies are changing quickly.


Study Question 3: Can the design of the firm co-evolve with the environment? Key to making a virtual organization work.

– The production system needs to be in a partner network bound together by mutual trust and survival.

– The partner network needs to develop and maintain an advanced IT, trust and cross-owning of problems and solutions, and a common shared culture.

– The lead firm must take responsibility for the whole network and coordinate member firm actions.

– The lead corporation and the partners need to rethink how they are internally organized and managed.


Study Question 3: Can the design of the firm co-evolve with the environment?Boundaryless organization.

– A design option that eliminates vertical, horizontal, external, and geographic barriers that block desired action.

– Actions to create a boundaryless organization.• Executives should systematically examine the

organization and its processes. • Organization members should initiate a process of

improving their cooperation.


Study Question 4: How does a firm learn and continue to learn over time?

Organizational learning.– Process of knowledge acquisition, information

distribution, information interpretation, and information retention in adapting successfully to changing circumstances.

– Adjustment of organization’s and individual’s actions based on experience.

– The key to successful co-evolution.



Mimicry.– Occurs when managers copy what they believe

are the successful practices of others– Is important to new firms.

• Provides workable, if not ideal, solutions to many problems.

• Reduces the number of decisions that need to be analyzed separately.

• Establishes legitimacy or acceptance and narrows the choices requiring detailed explanation.



Experience.– A primary way to acquire knowledge.– Besides learning by doing, managers can also

systematically embark on structured programs to capture the lessons to be learned.

– The major problem with emphasizing learning by doing is the inability to precisely forecast changes.





Scanning.– Involves looking outside the firm and bringing

back useful solutions.

Grafting.– The process of acquiring individuals, units, or

firms to bring in useful knowledge.


Study Question 4: How does a firm learn and continue to learn over time?Common problems in information

interpretation.– Self-serving interpretations.

• People seeing what they want to see, rather than seeing what is.

– Managerial scripts.• A series of well-known routines for problem

identification and alternative generation and analysis that are commonly used by a firm’s managers.



Organizational myths.– Commonly held cause-effect relationships or

assertions that cannot be empirically supported.

– Common myths. Single organizational truth. Presumption of competence. Denial of tradeoffs.


Study Question 4: How does a firm learn and continue to learn over time? Information retention mechanisms.

– Individuals.– Organizational culture.– Transformation mechanisms.– Formal organizational structures.– Ecology.– External archives.– Internal information technologies.



Deficit cycles.– A pattern of deteriorating performance that is

followed by even further deterioration.– Factors associated with deficit cycles.

• Organizational inertia.• Hubris.• Detachment.



Benefit cycles.– A pattern of successful adjustment followed

by further improvements.

– Firms can successfully co-evolve by initiating a benefit cycle.

– The firm develops adequate mechanisms for learning.


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Ch18