You are on page 1of 16


– Going from private to public ownership

– Atmosphere of creativity and challenge
– Google’s ability to innovate
– Serving end users is at the heart of what they do and remains the number one priority
– Strive to provide users with great commercial information
– Concentrating on the long term
– “If opportunities arise that might cause us to sacrifice short term results but are in the best
long term interest of our shareholders, we will take those opportunities”
– Despite the quickly changing business & technology landscape, they try to look at 3-5 year
scenarios in order to decide what to do now
– As investors  consider the risks around long term focus
– Catering to risk taking investors
– “our business environment changes rapidly and needs long term investment. We will not
hesitate to place major bets on promising new opportunities”
– “we will not shy away from high-risk, high-reward projects because of short term earnings pressure”
– Encourage employees to spend 20% of their time working on what they think will benefit Google
– This empowers them to be more creative & innovative
– Expect to devote the vast majority of resources to improvements to main businesses (search &
– Run the company collaboratively (2 presidents & CEO)
– Meet daily to update each other on the business and to focus on collaborative thinking on the
most important and immediate issues
– Decisions made by one of the presidents, others are briefed later
– Have trust & respect for each other and generally think alike
– Can often predict differences of opinions among the 3 of them
– For important decisions, discuss the issue with a larger team appropriate to the task
– Differences are resolved through discussion and analysis and by reaching consensus
– Focus on employees & end users
– Fortunate to have talented management that has grown the company to where it is today
– Corporate structure
– Designed for stability over long time horizons
– By investing in Google, you are placing an unusual long term bet on the team and their
innovative approach
– Set up a corporate structure that will make it harder for outside parties to take over or
influence Google
– It will also make it easier for the management team to follow the long term, innovative
– Dual class voting structure
– Class A common stock – one vote per share
– Class B common stock – held by many current shareholders has 10 votes per share
– Believe that a dual class voting structure will enable Google to retain many of the
positive aspects of being private
– The stability afforded by the dual class structure will enable them to retain the
unique culture and continue to attract and retain talented people
– Auction-based IPO
– Designed IPO to be inclusive for both small and large investors
– Googlers  the employees
– Googlers are everything
– Google is around the ability to attract and leverage the talent of exceptional technologists and
business people
– Provide many unusual benefits for employees
– Workplace with important projects, where employees can contribute and grow
– Focused on providing an environment where talented, hard working people are rewarded
for their contributions and for making the world a better place
– Don’t be evil
– A company that does good thinks for the world even if they forgo some short term gains
– Believe it is important for everyone to have access to the best information and research
– Making the world a better place
– Always mindful of responsibilities to shareholders, employees, customers and business partners
– Continue to strive to attract creative, committed employees, and welcome support from new

SCHACHTER 2013 (Consultant Donald Cooper)

– Runs a corporate workshop  he displays the company's mission statement, vision statement,
statement of values and statement of purpose – but he hides the label for each chunk of text. Then he
asks the employees to identify which statement is which. Rarely do they get it right
– Tries to fix lack of clarity
– Businesses have no clarity about what they want to do and how to get there and how to behave
along the way
– Worked to develop simple, practical, logical approaches that can help companies gain clarity
– Mr. Cooper created Cooper Canada Ltd.  manufactured sporting goods & leather products
– He later moved into boutique fashion retailing
– Starts by building a clear, understandable vision that can inspire others
– Vision needs to be clear & measurable statement of what the organization commits to become
within the next 3-5 years
– Make specific commitments, so it’s not just vague hopes or wishy-washy aims and objectives
– Vision statement should offer specific commitments on issues such as sales growth and profitability,
The customer value you will always deliver, key issues that make you vulnerable, business culture,
operational effectiveness, and how you’ll make a difference in your community and the world
– Mission statement
– Clear, 1 page statement of what you commit to do, this year, in every part of the organization,
to move toward the 3-5 year vision
– Create a fresh mission statement 2 months before the end of each fiscal year so you know what
you intend to accomplish in the coming year
– Statement of purpose and statement of values
– Should be practical and at most one page
– Details why you are in business and what you stand for
– Commitment to profitability template
– Requires calculate of what profit is needed to give the owner and investors sufficient funds and
to have money to reinvest and to serve as a cushion in bad times


– Hiroshi Okuda – chairman of Toyota
– Painted as both the architect of global expansion that proved ruinous and an enemy of the
Toyoda family
– Blaming Okuda for what has gone wrong at Toyota does not get to the root cause of the
company’s problems
– An anachronistic management structure that has proved inefficient and counterproductive
– Organized the same way it was half-a-century ago when it first began selling cars in the US
– None of its operations are functionally integrated – all report back to Japan
– Vertical structures and no coordination
– Engineering, manufacturing, purchasing, and sales report back to headquarters in Japan
– Does not have the necessary information or authority to order a recall
– Not a long of cross divisional communication
– Management structure has been an issue with its American executives for at least 2 decades
– Action has been delated because of a power struggle that pits the US sales arm against other
divisions of the company
– Argued for better communication between North America and the company’s technical side
– Need faster information flow, and more technical support when hot issues arrive

SCHACHTER 2014 (Boston Consulting Group – Yves Morieux & Peter Tollman)
– Hard scientific, analytical approach – traces back to mechanical engineer Fredrick Taylor’s efforts
to improve industrial efficiency
– Soft approach – the human relations thinking
– Companies try to combine both
– Morieux & Tollman argue it’s not working
– The hard approach is becoming counterproductive as new structures, processes, and systems
are slapped in place to supposedly improve performance
– The soft approach tries to control the individual, even if that is disguised, using emotional
rather than financial incentives like celebration and encouraging management systems to
address the problems created by the hard approach
– The hard and soft creates vicious circles, in which managers are trapped and people are
– They believe management needs to focus on autonomy & co-operation
– Autonomy frees people to use their full intelligence and energy at work
– But companies need to encourage people to use that autonomy to enhance the
effectiveness of others
– Autonomy and co-operation are threatened by the hard approach
– Control lies elsewhere, with the executives setting the rules, directions and targets that
must be met
– Balance scorecards gets in the way of enhancing co-operation
– 6 simple rules
– Understand what people do
– Understand what your employees do
– Support integrators
– Spread power more broadly
– Companies must be careful not to empower some people while disempowering others
– Increase reciprocity
– Make people more dependent on others so there is more reason to co-operate
– Extend the shadow of the future
– Create feedback loops that force people to see the consequences of their actions
– Reward those who co-operate
– Provide incentive so people use their autonomy to work with others


– 3 management layers separating the chief executive from the hourly workers
– Maintaining a thin structure is getting harder
– Chairman and CEO Dan DiMicco decided he couldn’t have plant managers reporting directly to him
– The company created a new layer of 5 executive vice presidents
– Total of 4 layers now
– He is mindful of not getting too removed
– Vs. 10 layers at Toyota
– A CEO with too few management layers below is likely to be overwhelmed with people relaying
information and seeking guidance
– Lean is more about eliminating waste and running efficiently
– Layers get in the way of everything
– They slow decisions down, because decisions have to go up


– Reorganization of structure
– Dividing into 3 major units, each led by a senior executive holding the title of president
– The moves are aimed at speeding decision-making in an organization that is now 30 years old and has
60,000 employees
– The reorganization is intended to push decision-making further down into the organization
– The 3 units
– The platform products and services unit
– The Business Division
– Entertainment and devices
– Used to have 7 divisions  don’t need 7 divisions anymore
– A lot of the visions are redundant & only made sense during that time


– Had one boss, but when he was picked to help lead a new product and set of services, his bosses
multiplied and divided
– “what I actually did in my job and what I was being told to do had no relation to one another”
– It was difficult to know who was holding the purse strings, who to support, and who to ignore
– He ultimately quit because of burnout
– Outbreak of bosses can be blamed on many things
– Empire builders – whoever has the biggest team wins
– Glory seekers – anything touched can be taken credit for
– Ubiquitous leaders-in-training
– The real culprit – the organizational design or how the company was structured
– The matrix management in which product managers assemble teams across divisions run by
functional managers
– One employee is responsible to more than one person
– Bottom is closer to the top, which doesn’t always suit the bottom very well
– Managerial one-for-all
– Self-appointed leaders run amok


– Debate between two sides: those who hate & love the matric structure
– Matrix structure shows slow decision making and obfuscates accountability
– Matrix structure is in inescapable prerequisite for lateral coordination in large complex
– A manager in a matrix organization has 2 or more upward reporting lines to bosses who each
represent different business dimensions
– Corporate silos
– An example of hard-wiring, because the 2 bosses of a manager in a matrixed position have the
joint responsibility to set his objectives, supervise his work, do his appraisal, and ensure his
– Soft-wiring relies on more informal, organic, temporary dimensional task force
– Those who are opposed to a matrix consider that soft-wiring can do the job all by itself
– A matrix complicates things
– Adopt when purposeful
– Should not be the default design option
– When there is a major need for middle managers of different units/teams to coordinate on
important business matters on a daily basis
– Required coordination cannot be achieved adequately through soft-wiring only
– Keep intrinsic conflict out
– Make sure there are intrinsic reasons for them to collaborate rather than to compete
– Limit breadth and depth
– Don’t pretend
– Position the two reporting lines of a matrixed managers as fully balanced
– Escalate by exception only


– Worked there for almost 12 years
– Environment at Goldman Sachs is not toxic and destructive
– The interest of the clients continue to be sidelined in the way the firm operates and thinks about
making money
– The culture used to be a vital part of their success
– It revolved around teamwork, integrity, a spirit of humility, and always doing right by the
– It wasn’t just about making money
– Today – there is virtually no trace of the culture that made him love working for the firm for
many years
– “I knew it was time to leave when I realized I could no longer look students in the eye and tell them
what a great place this was to work”
– The firm changed the way it thought about leadership
– Leadership used to be about ideas, setting an example and doing the right thing
– Today, if you make enough money for the firm you will be promoted into a position of influence
– Not one single minute is spent asking questions about how we can help clients
– It is purely about how we can make the most possible money off of them
– Seen 5 different managing directors refer to their own clients as “muppets”
– If clients don’t trust you, they will eventually stop doing business with you – it doesn’t matter how
smart you are
– Most common question “how much money did we make off the client”
– In the past:
– Taught to be concerned with learning the ropes, understanding finance, getting to know the
clients and what motivated them, learning how they defined success and what they could do to
help them get there
– Goldman Sachs today has become too much about shortcuts and not enough about achievement
– Make the client the focal point of your business again
– Without clients you will not make money, you will not exist
– Get the culture right again so people want to work here for the right reasons
– People who care only about making money will not sustain this firm or the trust of its clients


– Built the first accredited MBA in which the principles of sustainable management were baked into every
– Deliver expertise in social & environmental sustainability that is critical to manage successful
organizations today
– The world in which business (and all other institutions) operates faces such existential threats
as global warming, loss of major ecosystems, extreme inequality, political instability, and
resource constraints. Unless countered, these could drive total system collapse
– Unilver is prospering because they have made a commitment to doing business for more than profit
– Uber CEO lost his job because he disrespected his employees
– Volkswgen anticipates to lose $18B from its decision to cheat emissions standards
– In the future, only companies that make sustainability a goal will achieve competitive advantage
– That means rethinking business models as well as products, technologies, and processes
– Companies managing their carbon emissions and planning for climate change enjoy 18% higher
returns on their investment than companies that aren’t, and 67% higher than companies hiding
– Few graduates of ordinary business schools are given the tools necessary to manage companies,
governments or organizations sustainable
– Offer foundational course to answer this challenge
– Students gain the sustainability knowledge to manage a modern organization, and a deep
understanding of the social and environmental opportunities and challenges facing leadership
– For those who think that business exists to make a profit, I suggest they think again. Business makes
a profit to exist. Surely it must exist for some higher, nobler purpose than that.”


– Culture isn’t just about unity, it’s also about division
– culture is something people use, often strategically, to achieve goals.
– It can also provide a basis upon which people contest and counter certain ideas and values
while accepting other values associated with a particular cultural context.
– In organizations, people interpret and contest values all the time
– Ex. The meaning of responsibility
– People have different meanings
– People may contest “common” values while maintaining their commitment to the success of the
– Values espoused specifically to bring people together may not successfully function that way
– Rather than making everyone feel included, praising diversity can make some people feel
singled out or threatened
– The attempt to unify and organization by creating a “culture” is ultimately an exercise of power
– People will react to that expression of power in different way depend on the extent to which the
values associated with the organizational culture resonate with their personal beliefs
– A culture is not a set of shared values
– it’s a web of power relationships in which people are embedded and that they use to meet both
personal and collective goals but that can also restrict their ability to achieve goals.
– Call pull people together but can also push them apart because they are product of differential
access to resources
– Differences in power influence how we respond to and think about values espoused as being
shared by members of a group
– Reliance on culture as a way to create unity can mislead those in positions of power into thinking that
the core values expressed by the organization are actually uncritically accepted by employees
– It also obscures the fact that people may align themselves with core values not because they
agree, but because they see other values, such as job security, as more important to achieving
their personal goals


– For most of Walmart’s 41 years – corporate America refused to acknowledge the retailer as one of its
– Was seen as a discount store
– Now – Walmart is fortune’s most admired company  marking the first time the world’s biggest
corporation is also most respected
– Walmart’s sales on one day last fall $1.42 billion were larger than the GDPs of 36 countries.
– It is the biggest employer in 21 states, with more people in uniform than the U.S. Army.
– It plans to grow this year by the equivalent of take your pick one Dow Chemical, one PepsiCo,
one Microsoft, or one Lockheed Martin.
– If the estimated $2 billion it loses through theft each year were incorporated as a business, it
would rank No. 694 on the FORTUNE 1,000.
– CEO Lee Scott  runs what is arguably the world’s most powerful company
– Walmart is not just Disney’s biggest customer
– Also P&G, Kraft, Revlon, Gillette, Campbell’s Soup
– The nation’s biggest seller of DBDs, groceries, toys, guns, diamonds, CDs, apparel, dog food,
jewelry, sporting goods, video games, socks, bedding, toothpaste
– Biggest film developer, optician, private truck-fleet operator, energy consumer, real estate
– Newell Rubbermaid’s office
– Everything in there is like Walmart
– “you need to be your customer”
– Number 15  the percentage of its merchandise that passes through Walmart cash
– How Walmart thinks
– Buy stuff at the lowest cost possible, pass the gains on to the consumer through super low
prices, watch stuff fly off the shelves at insane velocity
– Suppliers are expected to offer their best price
– As a supplier raising prices, good luck
– It’s not negotiated anymore
– By wrestling “pricing power” from the manufacturer and handing it to the consumer, Walmart has
begun to generate and economy-wide Walmart Effect
– Economists now credit the company’s everyday low prices with contributing to everyday low
– As Walmart grows, it will transform its competitors, suppliers, and the industries it dominates
– Apparel – George line
– The battle of the brands is increasingly played out on Walmart turf
– Partnering mode  both sides swap info to streamline the flow of goods from raw materials to
checkout counter
– Shoppers get direct control of the nation’s manufacturing facilities
– Walmart as the world’s most finely articulated tool for turning customer wants into reality
– No advertising, no “funny money”
– Over the years, Walmart has thundered its way up the retail food chains
– Ex. Mom-and-pop stores, Kmart, Toys R US
– Threatening to kill the category, no category seems safe
– Walmart is now the world’s biggest grocer  driving down prices in the markets it enters
– Cheaper financial services (ex. Money wiring), vacations, internet access, flower delivery, online
DVD rentals
– Stresses that many of these experiments are just experiments
– The company has long excelled at using itself as a testing lab, tweaking and refining a concept
until it’s everywhere
– Walmart’s turnover is so rapid that 70% of its merchandise is rung up at the register before the
company has paid for it
– Leaves competitors with 2 options
– Option 1: play Walmart’s game – very risky, experts only
– Option 2: don’t play Walmart’s game


– The airline industry is littered with great startup airlines that never made it to the big time, all founded
by ambitious and imaginative people
– Jetblue has been a dramatic example of what can happen when the right entrepreneur with the right
ideas comes along at the right moment
– It enjoys among the industry's best operating margins, the highest percentage of seats filled,
and one of the top rates for on-time arrivals.
– Much that's distinctive about this airline--from the enthusiasm of its employees to its relentless
customer focus to its hip, slightly countercultural image--is precisely the sort of thing you can pull off
when you' re small, and that becomes far tougher the bigger you get
– Can JetBlue maintain those qualities as it morphs from nimble startup into the bureaucracy
that's required to manage a vastly more complex operation?
– Challenge JetBlue now faces: is small scalable?
– The difference here is that the boss knows many of these employees by name. He asks about their
job, their kids, a spouse undergoing chemo.
– JetBlue still feels truly intimate
– Neeleman’s startup has gotten big enough to draw serious competitive fire
– In the last year, two major airlines started their own versions of JetBlue
– JetBlue enjoys the lowest costs in the industry, just over six cents per passenger seat mile. But any
startup with new planes would have lower costs
– The jets don’t need maintenance yet
– None of the staff have worked at the airline more than a few years – pay scale is fairly low, it
will rise
– Large airlines fork over more money to run their business – another price of being big
– Neeleman knows how to attract and adapt mature talent to an immature company
– JetBlue is on the verge of becoming big
– Ex. Failure of People Express Airline – revolutionized air travel, offering dirt-cheap fares,
preaching customer service
– On the verge of being big, they stretched too far
– Couldn’t sustain growth
– JetBlue wants to differentiate itself through reliability
– Two of the most important performance numbers are the completion rate (the proportion of
flights that aren’t cancelled) and on-time arrivals
– During any disruption it allows planners to select various goals before rerouting planes
– As it manages growth, the airline must also standardize many other things it does to avoid starting
from scratch every time
– JetBlue has developed a checklist of what has to happen whenever it enters a new market
– Everyone involved has access to the list on the corporate intranet. Each department sees what
has been done, what remains to be done, deadlines, problems.
– The plane is for his personal group – he asks customers what they like and don’t like, what the airline
should do differently
– JetBlue is not unionized
– If management and crew members trust one another and if people feel they’re compensated
fairly, he believes that there’s no need for a 3rd party
– Pilots participate in the business
– One pilot creates elaborate airport diagrams to help orient colleagues
– Another pitches in doing financial analysis for the company
– Building a system that consistently delivers a better experience to passengers
– Preserving the culture increasingly requires conscious effort, starting with orientation
– On the first day, explains the JetBlue brand, how the company makes money, how each
employee contributes to the bottom line
– Principles of Leadership (POL)
– Reinforce and transmit the key elements of JetBlue’s culture by teaching attendees the
practice five primary principles: treat you people right, communicate with your team,
inspire greatness in others, encourage initiative and innovation, do the right thing
– Designed to create leaders that understand what he would do if he were there
– Neeleman is still a man on a mission – to continually improve the product, the JetBlue experience
– Neeleman talks a lot about team work, how every employee is vital to the success of the airline –
helps employees
– Stay small as you grow
Chapter 1 - Organizations and Organizational Theory

Classical Approach to Management

– Scientific Management → Frederick Taylor - decisions on organizations should be precise, scientific
study, thus managers develop precise standard procedures for each job.
– Administrative principles → broader look at design and functioning of organization as a whole
– Henri Fayol - 14 principles of management
– Bureaucratic Organizations - designing and managing on an impersonal, rational basis
– Hawthorne Studies → led to revolution in worker treatment

Current Challenges
– Globalization: rapid advances in technology and communications. Today's organizations needs to feel
“at home” anywhere in the world. Organizations have to learn to cross lines of time, culture, and
geography to survive.
– Ethics & Social Responsibility: Public opinion on corporates is turning negative due to numerous
scandals and wrongdoings. Shareholders and public now hold organizations and their employees to
high ethical and professional standards.
– Speed of Responsiveness: Organizations need to respond quickly and decisively to environmental
changes, organizational crises or shifting consumer expectations. Mindset of organizational leaders is
to expect the unexpected, and be ready for rapid change and potential crises -nimble organizational
– The Digital Workplace: organizational leaders not only need to be technologically savvy but also are
responsible for managing a web of relationships that reaches far beyond the boundaries of the physical
organization, building flexible e-links between a company and its employees, suppliers, contract
partners, and customers.
– Diversity: organizations operate on a global playing field, workforce is changing dramatically.
Managing diversity is a rewarding challenge for global organizations.

What is an organization?
– Social entity - made up of people, their activities and interactions
– Goal directed - purpose to exist, achieve its collective goals
– Structured activity system - division and coordination of activities into roles and departments
– Linked to the external environment - different stakeholder groups, beyond formal boundaries

Importance of Organizations
– Create value for owners, customers, and employees
– Accommodate challenges of diversity, ethics and coordination
– Adapt to and influence a rapidly changing environment
– Use modern manufacturing and information technologies
– Facilitate innovation
– Produce goods and services efficiently
– Bring together resources to achieve desired goals

Perspectives on Organizations
– System → set of interacting elements that require inputs from the environment, transforms them and
discharges outputs to external environment.
– Subsystems → perform specific functions required for organizational survival [boundary spanning,
– Open System
– A system that must interact with the environment openly to survive
– Consumes resources and exports resources to the environment
– Find and obtain resources, interpret and act on environmental changes, dispose of outputs, and
control and coordinate internal activities in the face of environmental disturbances.

Dimensions of Organizational Design

– Structural dimensions → describe internal characteristics of an organization
– Formalization - amount of written documentation
– Specialization - degree to which tasks are subdivided into separate jobs
– Hierarchy of authority - reporting structure and span of control for each manager
– Centralization - hierarchical level that has authority to make a decision
– Professionalism - level of formal education and training of employees
– Personnel ratios - deployment of people to various functions and departments
– Contextual Dimensional → Characterize the whole organization: size, technology, culture,
environment, goals/strategy
– Goals & Strategies - purpose & competitive techniques which set it apart from other
– Environment - all elements outside boundary of the organization
– Size - organizations magnitude as reflected in the number of people in the organization
– Culture - underlying set of key values, beliefs, understandings and norms shaped by
– Technology - tools, techniques, and actions used to transform inputs into outputs

Performance and Effectiveness Outcomes

– Efficiency - amount of resources used to achieve organization's goals
– Based on quantity of raw materials, money, and employees necessary to produce given output
– Effectiveness - broader degree to which an organization achieves its goals → “doing the right thing”
– Stakeholder approach - integrates diverse organizational activities with stakeholders and what they
– Stakeholder - any group in or out of organization which has a stake in organization performance
– Contingency - dependency of one thing with another

Contemporary Organizational Design

– Chaos theory - organizations are nonlinear, made up of interconnections and divergent choices
– Learning organization - promotes communication and collaboration, so everyone is engaged to
solving problems

Chapter 2: Strategy, Organizational Design, and Effectiveness

Organizational Purpose → [Official goals vs. Operative goals]

– Mission = official goals → formally stated definition of scope and outcomes of organization
– Mission statement: tell external environment why “we” exist
– Vision → core ideology and envisioned future
– Shared value
– Operative goals → what an organization & its divisions set out to do in attaining official goals →
measuring outcomes
– Overall performance: profitability, growth, outcome volume
– Resources: needed material and financial resources
– Market: marketing, sales, and advertising departments
– Employee development: training, promotion, safety, and employee growth
– Innovation and change: flexibility and ability to adapt
– Productivity: amount of output from available resources

Framework for Selecting Strategy & Design

– Strategy → plan to interact with competitive environment to achieve organizational goals
– Porter's competitive strategies
– Low-cost leadership: increase market share emphasizing low cost
– Differentiation: distinguish products/services from others in industry
– Focus: concentrates on specific regional market or buyer group
– Focused low-cost
– Focused differentiation
– Miles and Snow's Strategy Typology
– Prospector: innovative, takes risks, seeks opportunities
– Defender: stability, retrenchment
– Analyzer: innovative but maintain stability
– Reactor: react to threats & opportunities
Assessing Organizational Effectiveness
– Organizational goals → represent organization's existence

Contingency Approaches → four approaches to measuring organizational effectiveness

– Resource-based approach (Whats coming into the system?)
– Obtaining and managing inputs
– Internal Process approach (How are things working inside?)
– Efficiency and productivity: use of resources
– Goal approach (what are outputs? Quality? Quantity?)
– Achievement of operative output goals
– Integrated effectiveness model → Competing-values model
– First dimension concern – organizational focus = internal vs. external
– Second dimension concern – organizational structure = stability vs. flexibility
– Open-system emphasis – external & flexible
– Growth and resource acquisition + flexibility, readiness, external evaluation
– Rational-goal emphasis – external & stability
– Productivity, efficiency, profit + planning and goal setting
– Internal-process emphasis – internal & stability
– Stability, equilibrium + information management, communication
– Human relations emphasis – internal & flexible
– Human resource development + cohesive, morale, training

– Balanced Scorecard → comprehensive management control system {Kaplan & Norton}

– Financial performance
– Customer service indicators
– Business process indicators
– Potential for learning and growth

Chapter 3: Fundamentals of Organizational Structure

Organizational structure
– Designates formal reporting relationships
– Identifies group the grouping together of individuals into departments
– Includes the design of systems to ensure communication, coordination & integration

Information processing → Centralized vs. decentralized

– Horizontal organization designed for learning
– Vertical organization designed for efficiency
– Vertical Linkages → coordinate activities from top & bottom of organization
– Hierarchical referral = chain of command
– Rules and plans → standardization of information
– Vertical information systems → periodic reports, written information
– Horizontal information linkages → amount of communication across departments
– Information systems - computerized information systems
– Direct contact - liaison role {link two departments}
– Task forces – temporary & direct horizontal coordination
– Full-time integrator - stronger full time horizontal linkage device
– Teams - permanent task forces + in conjunction with full-time integrator

Organizational Design Alternatives→ Departmental Grouping{common boss/resources}

– Functional grouping: group employees who perform similar functions
– Divisional grouping: organized according to what organization produces
– Multi Focused grouping: two structural groupings = matrix
– Horizontal grouping: organized around core work processes
– Virtual network grouping: loosely connected cluster virtually
Functional, Divisional, and Geographical Design
– Functional structure: grouped together by common function from bottom to top
– Divisional structure → individual products, services, groups programs, divisions
– Matrix structure → multi focused + strong horizontal linkages
– Conditions:
– pressure exists to share scarce resources across product lines (med size)
– Environmental pressure exists for 2+ critical outputs, balance of power needed
– Environmental domain of organization is complex and unstable
– Pros: coordination for dual demands, flexible HR sharing, midsize multi product organization,
– opportunity for functional and product skill development
– Cons: dual authority, need good interpersonal skills, great effort to maintain power balance
– Horizontal Structure → organizing employees around core processes
– Re-engineering → redesign of vertical organization along horizontal workflows and processes
– Virtual Network Structure → extends beyond horizontal coordination and collaboration
– Outsourcing
– Virtual network structure → subcontracts its main activities out
– Hybrid Structure → combines characteristics of functional, divisional, geographical, horizontal, or
network structures

Applications of Structural Design

– Situation and needs → design follows purpose
– Structural alignment → balance vertical control with horizontal coordination

Chapter 9: Organizational Culture and Ethical Values

Organizational Culture
– Social Capital → quality of interactions among people and their shared perspective (goodwill)
– Culture → set of values, norms, beliefs, and unwritten guidelines
– Integrate members to relate to one another
– Help organization adapt to external environment
– Internal integration: members develop collective identity + how to work together
– External adaption: how organization meets its goal and deals with outsiders
– Organizational culture exists at 2 levels:
– The surface level – visible artifacts and observable behavior
– Deeper values in the mind of organization members (underlying assumptions, beliefs,
attitudes, feelings, thought processes)
– Unobservable organization culture
– Integrations with internal relations
– Adaption with the external environment
– Observable Organizational Culture
– Norms and rules → daily routine activities
– Stories = heroes, legends, myths
– Symbol - physical symbols or illustrations
– Rites and ceremonies → reinforcer of values
– Passage
– Enhancement
– Renewal
– integration
– Language - industry jargon
– Espoused values → explicit expressions of organizational values
Organizational Design and Culture
– Culture must reinforce strategy & structured design = organization effective in environment
– Categories of culture
– Adaptability culture: strategic focus on external environment with flexibility and change
– Mission culture: serve specific clients in external environment, no need for rapid change
– Clan culture: involvement and participation of organizations members in rapidly changing
– Bureaucratic culture: internal focus and consistency orientation for stable environment
– Culture of discipline
– Level 5 leadership = complete lack of personal ego, strong will and ambition for the success
of the organization
– Right values = culture based on values of individual freedom and responsibility
– Right people in right jobs = persons whose values embody the organization's values and fit
the culture
– Knowing where to go = best direction for the company
– Culture strength → degree of agreement among members on specific values
– Subcultures → reflect common goals, experiences etc within a culture/team

Organizational culture, learning and performance

– Strong culture
– Encourages adaptation and change
– Energizing and motivating employees
– Strong adaptive cultures incorporate these values:
– The whole is more important than the parts and boundaries between parts are
– Equality and trust are primary values
– The culture encourages risk taking, change, and improvement
– Adaptive cultures
– Core values:
– Managers are concerned with customers and employees & internal processes and
procedures that bring about useful change
– Common behaviours:
– Behavior is flexible and managers initiate change when needed
– Managers pay attention to stakeholders and initiate change to serve their interest
– Create organizational climate that is supportive of employee participation, development
and creativity
– Maladaptive cultures
– Core values:
– Managers are more concerned about themselves, their immediate work groups, their
own specific projects
– Discourage risk taking and change
– Value short-term gains
– Common behaviours:
– Managers tend to be isolated, political, and bureaucratic
– Tend to resist change and when they must change, they push ideas down the hierarchy
– Restrict employee creativity
– Nonadaptive cultures encourage rigidity and stability

Ethical Values and Social Responsibility

– Ethics → code of moral principles and values to govern behavior
– Rule of law: arises from a set of codified principles and regulations that describe how people are
required to act, that are generally accepted in society, and that are enforceable in the courts
– Managerial ethics: principles that guide the decisions and behaviors of managers with regard to
whether they are right or wrong
– Social responsibility: management’s obligation to make choices and take actions so that the
organization contributes to the welfare and interest of all organizational stakeholders
(employees, customers, shareholders, the community, broader society)
Sources of ethical values in organizations
– Personal ethics: Every individual brings a set of personal beliefs and values into the workplace
– Moral development – people go through stages of moral development that affect their ability
to translate values into behaviour
– Ethical framework that guides decision
– Utilitarian theory: decisions should be made to generate the greatest benefits for the
largest number of people
– Personal liberty framework: decisions should be made to ensure the greatest
possible freedom of choice and liberty for individuals
– Distributive justice framework: moral decisions are those that promote equity,
fairness, and impartiality with respect to the distribution of rewards and the
administration of rules, which are essential for social cooperation
– Organizational culture: business practices also reflect the values, attitudes, and behavior patterns of
an organization’s culture
– Rituals/ceremonies, stories/heroes, language/slogans, symbols
– Founder/history
– External stakeholders: managerial ethics and social responsibility are also influenced by a variety of
external stakeholders
– Government regulations – safety laws, environmental protection laws
– Customers – concerned with the quality, safety, and availability of goods and services
– Special-interest group – those concerned with corporate responsibility of the natural
– Sustainable development – a dual concern for economic growth and environmental
– Organizational systems
– Structure
– Policies, rules
– Code of ethics
– Reward system
– Selection, training

How leaders shape culture and ethics

– Value-based leadership: a relationship between a leader and follower that is based on shared,
strongly internalized values that are advocated and acted upon by the leader
– Formal structures and systems
– Structure: managers can assign responsibility for ethical values to a specific position
– Ethics committee – cross-functional group of executives who oversee company ethics
– Chief ethics officer – high-level company executive who oversees all aspects of ethics
– Ethics hotline
– Disclosure mechanisms – establish procedures to support and protect whistle-blowers
– Code of ethics – formal statement of the company’s values concerned ethics and social
– Training programs

Chapter 4: Organization Size, Life Cycle & Decline

Organization Size: Is bigger better?

– Pressures for growth
– Institutionalized → business schools
– Size provides = gains from scales & scope (chandler), access to resources, legitimacy
– Large
– Economies of scale
– Global reach
– Vertical hierarchy & mechanistic
– Stable market
– Employee longevity, raises & promotions
– Small
– Responsiveness & flexibility
– Regional reach
– Flat structure & organic
– Simple & niche finding
– Entrepreneurial
– Big-Organization/Small-Organization hybrid
– Combines resources of large organization + flexibility & simplicity of small
– By reorganizing into groups of smaller companies, huge companies capture the mindset and
advantages of smallness
– Emphasis on decentralizing authority and cutting out layers of hierarchy

Organizational Life-cycle → organizations are born, grow older and die
– Entrepreneurial Stage → start-up of organization
– Need for leadership: management issues
– Collectivity Stage → develops elaborate design, departments, hierarchy
– Need for delegation with control (autonomy) = coordination at all levels
– Formalization Stage → installment of rules, procedures and systems
– Need to deal with too much red tap = bureaucratic, lack of innovation
– Elaboration Stage → more flexible design, split into multiple division
– Need for revitalization

Organizational Bureaucracy & Control

– What is bureaucracy? → predictable routine manner
– 6 characteristics that could be found in successful bureaucratic organizations:
– Rules and procedures
– Specialization and divisions of labour
– Hierarchy of authority
– Technically qualified personnel
– Separate position from position holder
– Written communication and records
– Size and structural control
– Formalization: rules, procedures, and written documentation that prescribe rights and duties
of employees
– Centralization: the level of hierarchy with authority to make decisions
– Personnel ratios: for admin, clerical, and professional support staff

Bureaucracy in the changing world

– Organizing temporary systems for flexibility and innovation → incident command system
– Incident control system (ICS) = organizations glide between formalized and stable to flexible and
– Used by emergency crews
– Other approaches to reducing bureaucracy
– Cutting layers of hierarchy
– Increasing professionalism of employees

Organizational Control Strategies → William Ouchi 3 types

– Bureaucratic control - use of rules, policy, hierarchy of authority, standardization
– Weber identified 3 types of authority that could explain the creation and control of a large org.
– Rational-legal authority = employees beliefs in legality of rules
– Traditional authority = belief in traditions and the status of people in authority
– Charismatic authority = devotion to exemplary character and order defining it
– Market control - price competition used to evaluate output and productivity
– Clan control - use of social characteristics = organizational culture, shared values, commitment,
traditions and beliefs.
– Self-control → values, goals and standards of individuals → individual employees internal values
are brought in line with organizations
Organizational Decline → substantial, absolute decrease in an organization's resource base
– 3 factors considered to cause organizational decline
– Organizational atrophy → when organizations grow old and become inefficient, overly
– Vulnerability → organizations strategic inability to prosper in its environment
– Environmental decline/competition → reducing energy and resources available to support
an organization
– Stages of organizational decline
– Blinded stage → internal and external exchange which threatens long-term survival
– Inaction stage → denial occurs even in declining stage
– Faulty action stage → poor performance can’t be ignored = organizational failure
– Crisis stage → social fabric is eroding
– Dissolution stage → decline is irreversible = close down organization