ORGANIZATIONAL THEORY AND DESIGN

SESSION 1: INTRODUCTION TO ORGANIZATIONAL HEALTH

1 What is organizational health?

With organizations facing unprecedented change, an organization’s health remains among the
most powerful levers leaders have to transform successfully and drive performance in the short
and long therm.

2 The history of organizational health

2.1 What is “organizational performance”?

The organizational performance is what an organization delivers to stakeholders in financial and

operational terms.
 Net operating profit
 Return on capital
 Total returns to shareholders
 Net operating costs
 Stock returns

The best way to run a business is to balance both short-term performance and long-term health.
It is about making profits, growth in market share, innovation, sustainable, healthy, customer
satisfaction, …

2.2 The challenge = Building healthy organizations

Building organizations that are deeply adaptable, innovative at their core, and engaging, exciting
places to work.

Building organizations that perform flawlessly and evolve rapidly, that deliver results today and
change fast enough to be relevant tomorrow.

Healthy companies dramatically outperform their peers.

2.3 Organizational Health: Why bother?

 Across industries
Healthy companies across industries outperform their unhealthy peers in the stock market by
3x.

 Across companies
Companies that focus on health show an 18% increase in EBITDA after one year.

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  Within companies
Health explains up to 50% of performance variation across units.

2.4 Organizational Health: The evidence

- Organizational health survey: 600,000 employees at 500 organizations worldwide

- Literature review: 900 articles from academic journals and books
- 30+ in-depth interviews with CEO’s of leading organizations
- McKinsey Quarterly survey panels of 6,800 senior executives
- Data from more than 100 clients served by McKinsey on specific “performance and
health” engagements

2.5 Organizational Health defined

 More detailed in article “Organizational Health: A fast track to performance improvement”.

Organizational Health is the ability of an organization to align, execute, and renew itself faster
than the competition so that it can sustain exceptional performance over time.

The health of an organization is based on its ability to:

1. Align around a clear vision, strategy and culture
2. Execute against that with excellence
3. Renew the organization’s focus over time by responding to market trends, renew itself
through innovation and creative thinking

2.6 Performance and Health: Paradox

 More detailed in article “The yin and yang of organizational health”.

Paradox: trying to unite two opposites, two things that may look like opposite but that can still
merge.

Health: long term

Performance: short term

The big idea: to be successful, organizations need performance AND health.

Longer-term corporate performance objectives and a rapid performance transformation might

seem at odds. But, when coupled with organizational health, long- and short-term performance
can be interdependent and complementary – just as yin and yang in Chinese philosophy are
inseparable, unable to exist without each other, despite their apparent opposition.

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Healthy organizations are more likely to orient themselves toward the longer term.

For stage 1 of group assignment: video of McKinsey can be helpful

https://www.mckinsey.com/Videos/video?vid=5818616415001&plyrid=HkOJqCPWdb

3 Building blocks of organizational health

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4 Nine keys to becoming a future-ready company

9 organizational imperatives will separate future-ready companies from the pack.

To better organize for a post pandemic future, leaders should embrace 9 imperatives that
collectively explain “who we are” as an organization, “how we operate” and “how we grow”.

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Future-ready organizations accomplish this is three ways:
1. They get clear on their purpose
2. They know how they create value and why they’re unique
3. They create strong and distinct cultures that help attract and retain the best people.

4.1 Who we are: Strengthen identity

Imperative 1: Take a stance on purpose (why)

The purpose is both a differentiating factor and a must-have. A strongly held sense of corporate
purpose is a company’s unique affirmation of its identity, the why of work.

Future-ready companies recognize that purpose helps attract people to join an organization,
remain there, and thrive.

Imperative 2: Sharpen your value agenda (what)

All companies have a strategy for how they create value, but few can show precisely how the
organization will achieve it.

Future-ready companies avoid this dilemma by creating a value agenda; a map that
disaggregates a company’s ambitions and targets into tangible organizational elements such as
business units, regions, product lines, and even key capabilities.
These companies can articulate where value is created in the organization, what sets the
company apart from the pack, and even what might propel its success in the future.

The key is to use the value agenda to focus the organization’s efforts and instill a sense of what
really matters in every employee.

Imperative 3: Use culture as your ‘secret sauce’ (how)

Leaders hoping to create a robust performance culture need to start by cooking up their
organization’s own unique “secret sauce”. The main ingredients are: specific, observable
behaviors that employees at all levels of the company adhere to.

Culture is hard to copy and should ultimately be unique to each organization. When leaders
choose and build the culture they want for their organization, they create a virtuous cycle,
attracting the right talent that will thrive in their culture, unlock their value agenda, and
“turbocharge” performance.

4.2 How we operate: Prioritize speed

Speed is both a preoccupation and a cultural bias. Covid-19 crisis has made speed a priority for
many organizations by has also reinforced how difficult speed is to harness.

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Imperative 4: Radically flatten structure

Companies are betting on organizational complexity to solve market complexity. -> losing bet

Future-ready organizations structure themselves in ways that make them fitter, flatter, faster
and far better at unlocking considerable value. They flatten the organization and adopt the
simplest P&L structure possible, reinforcing business objectives with clear, strong performance
management and other mechanisms.

Imperative 5: Turbocharge decision making

Organizations that consistently decide fast and well are more likely to outperform their peers.

The top team needs to focus its time and energy on the core business decisions, such as
initiatives central to the value agenda.
Other leaders should spend more time deciding on resource and talent allocation for those
initiatives.
Top of mind for everyone should be who is working on what.
Through managing the backlog of resources from the top of the house, organizations will speed
up and increase the quality of decisions.

The Covid-19 crisis has forced companies to “turbocharge” decision making out of necessity.

Imperative 6: Treat talent as scarcer (more rare) than capital

Future-ready companies see that talent ecosystems often allow for the best management and
allocation of top talent.

4.3 How we grow: Build for scale

Imperative 7: Adopt an ecosystem view

Tesla is a great example, it open sourced its patents and encouraged other companies to use its
intellectual property.

The old thinking was about gaining leverage and controlling the supply chain. Increasingly, value
is created through networks where partners share data, code and skills.

Future-ready organizations view partners as extensions of themselves.

Imperative 8: Build data-rich tech platforms

Organizations must create compelling approaches to data governance, redesign processes as

modular applications, tap the benefits of scalable cloud-based technology, and support all this
through variable-cost technology budgets that are reallocated dynamically. By seizing upon
data’s ability to connect and scale, these companies will be able to develop new products,
services and even businesses in fast release-and-upgrade cycles.

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 Imperative 9: Accelerate learning as an organization

Companies need to get learning right to fuel their talent engine and create an empowered
workforce that’s fluent in the art of “fail fast, learn, repeat”.

High-performing companies promote a mindset of continuous learning that encourages and

supports people to adapt and reinvent themselves to meet shifting needs.
Getting to this level requires instilling a growth mindset, curiosity, and an openness to
experimentation and failure.

 More detailed in article “Organizing for the future: Nine keys to becoming a future-ready
company”.

5 Organizational Health: Management practices

Element Practice Description

1. Shared vision Sharing a clear and compelling vision of the future with everyone.
2. Strategic clarity Creating a plan with specific goals, targets and milestones that is
Direction tied to the vision.
3. Employee Involvement Involving co-workers in shaping and translating the vision and
strategy into what it means for them.
Leadership 4. Authoritative Using authority and pressure to get things done.
leadership
5. Consultative leadership Involving and empowering employees through communication
and delegation.
6. Supportive leadership Caring about the welfare of co-workers when making decisions
and creating a positive team environment.
7. Challenging leadership Encouraging employees to take on big challenges and

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 consistently raising the bar.
8. Open and Trusting Ensuring honesty, transparency, and candid dialogue
9. Performance Making results visible to enable best practice sharing and foster a
transparency healthy sense of competition.
Work
10. Operationally Setting and communicating clear work standards to improve
environment
disciplined productivity.
11. Creative and Protecting time to support creativity and encourage initiative-
Entrepreneurial taking.
12. Role Clarity Getting clear on what everyone is responsible for, has authority
over, and who to work with.
13. Performance Setting clear and measurable performance targets
contracts
Accountability
14. Consequence Creating a direct link between performance and consequences
management
15. Personal ownership Feeling personally obligated and invested in achieving
performance objectives
16. People performance Using formal performance feedback and assessments to evaluate,
review develop and deploy people
17. Operational Focusing on clearly defined set of operational metrics to manage
management performance
Coordination and 18. Financial Focusing on clearly defined set of financial metrics to manage
control management performance
19. Professional Using clear standards and policies to set expectations and
standards reinforce compliance.
20. Risk management Identifying and mitigating anticipated risks and responding
rapidly to unexpected problems
21. Talent acquisition Hiring the best outside talent when and where needed
22. Talent development Improving employee skills through defined learning journeys
Capabilities 23. Process-based Regularly documenting and updating procedures and training
capabilities guides.
24. Outsourced expertise Outsourcing activities that external partners can do better
25. Meaningful values Sharing and living a meaningful set of values day-to-day
26. Inspirational leaders Exemplifying what’s valued, providing praise and generating
meaning for employees
27. Career opportunities Providing merit-based promotions and other career
Motivation
opportunities to motivate employees
28. Financial incentives Providing attractive financial incentives to motivate employees
29. Rewards and Acknowledging performance with public recognition and non-
recognition financial rewards/opportunities
30. Top-down innovation Driving innovation through large-scale initiatives sponsored by
senior leaders
31. Bottom-up innovation Encouraging and enabling co-workers to solve problems that
Innovation and
directly impact what they do
learning
32. Knowledge sharing Proactively asking for and sharing knowledge with others
33. Capturing external Identifying and using best practices from outside the company
ideas
External 34. Customer focus Putting customer impact at the forefront of the decision-making
orientation process
35. Competitive insights Systematically reflecting on competitors’ strengths and weakness
during decision making
36. Business partnerships Building and maintaining effective relationships with external
business partners

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 37. Government and Investing resources to build relationships with government,
community relations community, regulatory, and consumer groups.

6 Five frames of performance and health

6.1 Performance

1. Aspire: Strategic objectives.

Create a compelling long-term change vision, roll back the future to a mid-term aspiration, and
guard against biases in the process.

2. Assess: Skillset requirements.

Forecast skill “demand” and understand skill “supply” dynamics, and then identify how any gaps
will be closed.

3. Architect: Bankable plan.

Define the portfolio of initiatives to deliver on your strategic objectives and fulfill you skill
requirements, then programmatically sequence actions and reallocate resources to deliver.

4. Act: Ownership model.

Establish strong governance; decide how to scale up your portfolio of initiatives; monitor
progress and dynamically adjust as plans are implemented.

5. Advance: Learning infrastructure.

Institutionalize processes and expertise to enable knowledge sharing, continuous improvement,
and continuous learning to characterize the day-to-day workings of the organization going
forward.

6.2 Health (focus of this course)

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 1. Aspire: Health goals.
Objectively check your health, choose where to be exceptional, and target any ailing areas in
need of immediate improvement.

2. Assess: Mindset shifts.

Pinpoint the helping and hindering behaviors related to health priority areas, explore the
underlying mindset drivers of these behaviors, and name and reframe the critical few “root-
cause” mindsets.

3. Architect: Influence levers.

Reshape the work environment to influence needed shifts in mindsets and behaviors by
hardwiring health interventions into performance initiatives and interactively cascading the
change story.

4. Act: Energy generation.

Mobilize influence leaders, make the change personal for a critical mass of leaders, and maintain
high impact two-way communications.

5. Advance: Leadership placement.

Prioritize roles by value-creation potential based on the go-forward strategy, match the best
talent to priority roles, and operationalize the talent match process to ensure it’s regularly
revisited.

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 1.

Bridging theory and practice:

Direction :
- Strategic leadership
- Upper echelons
- Middle management
Identity :
- Organizational identiy theory
- Multiple identities
- Organizational recipes
Culture :
- Organizational culture theory
- Competing values

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 2.

Bridging theory and practice:

Organizational cognition :
- Organizational cognition
- Framing & mindsets

Capabilities :
- Resource-based view
- Organizational agility

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 3.

Bridging theory and practice:

Change :
- Organizational change
- Influence model

Learning :
- Organizational learning
- Learning organization
- Organizational failing

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 4.

Bridging theory and practice:

Leadership :
- Leadership theories
- Centered leadership
- Meaning & thriving

7 Three major traps to organizational health

1. Mindfulness trap:
 Tendency to be pulled back into a short-term performance mindset, partly due to mental
effort of longer-term pondering

2. Cognitive traps:
 Preoccupation with the near-term outputs of performance and what is needed to produce
them

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 The mistaken belief that organizational health is soft and intuitive and therefore lacking the
hard-nosed rigor and precision needed to drive performance
 Easy but mistaken assumption that near-term performance and long-term health embody a
set of trade-offs
 Health problems arise in the unknown future rather than taking hold in the present

3. Self-knowledge trap:
 Tendency to say and believe one thing and do another

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 SESSION 2: OVERVIEW OF ORGANIZATION THEORIES

1 What is an organization?

An organization is the rational coordination of the activities of a number of people for the
achievement of some common explicit purpose or goal.

Organizations are (1) social entities that (2) are goal-directed, (3) are designed as deliberately
structured and coordinated activity systems, and (4) are linked to the external environment.

1.1 Formal vs. Informal organization

Formal organization:

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People usually focus on the formal organization because it is the visible part. We have the
tendency to over emphasize the formal organization and look at the information that is really
provided by the organization itself. If you have to find information for an assignment you will
have to look at:
- the organization charts
- the mission statements
- descriptions about the organization’s activities
- financial records
- spans of control
- policies and procedures
- production efficiency and effectiveness measures

Informal organizations:
But what makes an organization alive, both interesting and extremely complex at the same time,
are all these informal aspects, which are not very tangible. For examples:
- the feeling of employee
- the effective relationships between employees and managers
- leadership processes
- emotional feelings, needs and desire
- personal and group goals and perceptions
- prestige and power structures
- informal leaders
- group norms and sentiments
- grapevines
- personal animosities and friendships
All these things that may sound limited to the psychological sphere extremely impacts the way
the organizations work.

1.2 Definition of organization

The word “organization” derives from an ancient Indo-European root that also spawn[ed] the
words “organ” and “work.” The Roman verb “organizare” meant initially “to furnish with organs
so as to create a complete human being,” but later Romans gave it the broader meaning “to
endow with a coordinated structure.” Organizare migrated from Latin into Old French. In 1488,
the French language included the word “organization,” which an ancient dictionary defined self-
reflectively as “the state of an organized body.”

An organization can only happen when the different parts, organs, work together. An
organization is much more than formal structure, much more than putting people together and
much more than achieving a goal. It is the interconnectedness between all these elements,
between people, structure, goal and the environment that makes the effectiveness of an
organization.

1.3 What is the purpose of an organization?

“Just as people cannot live without eating, so a business cannot live without profits. But most
people don’t live to eat, and neither must businesses live just to make profits”.

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 Profit is not and will never be the ultimate goal of any organization. Organization needs to be
profitable just to achieve their goal. The profit itself is not the goal they are pursuing, but it
doesn’t mean that profit is not important. But is it what you can do with these profits that matter
even more. It is what you can generate with the turnover that you make that matters a lot more
than the number itself.

The ultimate goal is to create value. Value can be excellent services or products that can meet a
specific need. It is about value that you generate for the stakeholders. Before, a value creation
was emphasized as belonging to shareholders. It is extremely important to recognize that you
create value for stakeholders. It is your consumers, employees, suppliers, your network, the
environment, regulators, government,…

It is not about the need to satisfy a specific group of stakeholders, it is about that you have to
look at the context, the whole network of stakeholders and you achieve value creation by gaining
effective organizational performance. You have to generate performance on the short term to
create value on the long term.

1.4 What are organizations?

Rational systems perspective: Organizations are collectivities oriented to the pursuit of

relatively specific goals and exhibiting relatively highly formalized social structures.

Natural systems perspective: Organizations are collectivities whose participants are pursuing
multiple interests, both disparate and common, but who recognize the value of perpetuating the
organization as an important resource.

Open systems perspective: Organizations are congeries of interdependent flows and activities
linking shifting coalitions of participants embedded in wider material-resource and institutional
environments.

1.5 What is Organization Theory?

Theories are linguistic, conceptual devices that try to tell us things about the world: this is to do
with the behavior of people in various social contexts.

Theories define, classify or categorize aspects of the world, i.e. organizations.

Theories propose reasons in the form of cause-and-effect relationships that explain the variation
of a particular phenomenon – the why and the how.

Theories identify the situation(s) or contexts when these causal relationships will or will not
operate, and thereby set the boundaries to where they are applicable.

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Based upon this what, why, how, when and where analysis, theories then can guide our actions
because they enable predictions and hence potentially enable us to anticipate and try to
influence or even control events.

Theories are not divorced from our everyday lives and behaviors. Indeed, we regularly deploy
theory, often in the form of ‘common sense’, in order to make sense of our experiences and to
guide our actions.

Theories matter because they are used to describe, explain and justify the things that we do and
how we do them.

1.6 "There is nothing as practical as a good theory"

 Describes, predicts or explains phenomena

 Simplifies complex phenomena
 Provides a common language or frame of reference
 Knowledge-based guide for action
 Helps organizational analysis and problem identification.
 Enables managers to select ideas from a range of approaches which best suit their
situation.
 Helps to explain the complexities of modern organizations

2 Evolution of organizational thinking

The objective of this part is to provide high level overview of how thinking about organizations
has been evolving. Why is it important to look at the history of organization thinking and
organizational theory? Because things from the past keep coming back. We have the tendency to
think that everything is new. But history has actually the tendency to repeat itself.
Here is the evolution of organizational thinking:

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The major organizational theories have been crafted on economical theories. We see a shift from
rational functioning towards functioning within society. Then there is an emergence of the
psychologists, when the role of people became more essential in theorizing about organizations.
Then there are all different other fields, like philosophy, hermeneutics, cultural studies, language
studies, post-modern theories,… So, there is a shift from economics to sociology, psychology and
then the broaden fields.

More recent typology which uses a different terminology:

Classical theory (Socrates, Smith, Fayol, Taylor, Weber, ...)

 Rationalization, they serve the objective of maximizing production, of specializing workforce,
and of the division of labor. The whole thinking about the hierarchical organization comes from
this classical theory.

Neo-classical theory (Barnard, Simon, Selznick, ...)

Critique of the classical theory as it is a bit ‘simplistic’ classical assumption, and they complicate
a bit the classical theory, and this gives rise to the contingency theory. It is paving the way for
more human- centered organization theory.

Human Resource / OB theory (Mayo, Maslow, McGregor, Follet, Levitt...)

Human needs, symbiosis with people, individual-organization fit, motivation

Structural Organization Theory (Blau, Scott, Lorsch, Mintzberg, ...)

Organizational charts, horizontal & vertical relations, optimal structural design

Organizational Economics Theory (Williamson, Donaldson, March, ...)

It is focused on what are the financial or economic consequences/effcts of specific decisions and
choices that you make within a company. It is a transaction cost theory, principal-agent theory,
theory of property rights.

Power & Politics Organization Theory (Salancik, Pfeffer, French, Kanter, ...)
It is the importance of the role of individuals, coalitions and conflict, influence, power games,
how to use your power effectively in an organization. It also touches upon the human but also
the symbolic part of the organization.

Theories of Organizational Culture & Change (Schein, Cameron, Quinn, Ouchi, Argyris,
Weick, ...)
Shift towards more interpretative or symbolic organization theory. How can we rationally,
quantitively, scientifically describe an organizational culture as it was the case for the classical
theory for example?
Culture is symbolic, it has to be interpreted by different people in different ways. There is not
only one way to define an organizational structure. There are different interpretation depending
on how everyone view things. The culture is a driver of organizational behavior.
It is a social construction of reality, ‘symbolic’ management: meaning & interpretation are
different.
TQM, Learning Organization, Appreciative Inquiry, ...

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Theories of Organizations and Environments (Katz, Hannan, Freeman, Scott, ...)
Open systems perspective, systems theory, population ecologies, Insitutional theory

Theories of Organizations and Society (Acker, Carroll, ...)

Societal consciousness: diversity, social responsibility, social entrepreneurship, blurring of
‘traditional’ sectors

So it is important to remember the classical theory, then the shift to human resource and then
the shift towards a more interpretative, symbolic streams of power change and culture.

2.1 The future of management is “teal”

Other overview of organizational thinking evolved over the past decades, centuries:

“Market-leading companies have missed game- changing transformations in industry after

industry— computers (mainframes to PCs), telephony (landline to mobile), photography (film to
digital), stock markets (floor to online)—not because of ‘bad’ management, but because they
followed the dictates of ‘good’ management.”

A book was written (from Frederic Laloux) on how organizations reinvent themselves over time:
It is about the evolutionary stages of humanity, more oriented towards humanity and almost
nothing to do with economics and engineering. It is about the development of the maturity of
people, and linked to that there is the development of the maturity of organizations (Stages of
increasing maturity, consciousness and complexity). It is about mutual coexistence rather than
linear progression.

Synthesis of the 5 phases in the evolution of organizational thinking:

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It is not very linear in a sense that ok you have an evolution of the colors (from red to amber to
orange,…) but within any organization, at any point in time, you always have a mix of different
colors. For example, today the dominant color is orange, then most likely you will still have some
traits of amber, and maybe a little bit of red and you may already start to emerge some green
and maybe even some teal.

2.1.1 Red (impulsive) worldview

Very dictatorial organizations, armies, street gangs, crimes, tribes. The essence is a division of
labor, you split the whole value chain in very specific tasks, and you assign tasks to specific
people, and you follow the leader. It is a top-down authority.

2.1.2 Amber (conformist) worldview

It is more rationalized organization, less dictatorial, less chaotic, more stable, more organized,
more predictable. Most major organizations that emerged after the second World War for
example, they had very formal structures, stable and reliable processes, well-organized. They
thrive order, control, hierarchy, formal roles. They are more static, stratified pyramidal
organization structures. Examples: government organizations, large bureaucraties.

2.1.3 Orange (achievement) worldview

Typical large bureaucratic organizations that we know. These organizations are seen as
machines, they tend to be very effective, very efficient, but human needs are met to some extend
only. The focus is really on changing the organization, on seeking innovation. It means that you
will be advanced within the company based on your merit, not based on your age or on any
other non-performance related metric. This is one of the key advancements, which is really good.

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But still the human dimension is a bit lacking in this type of organizations, and that is when the
green organizations come in.

The drawbacks are short-term thinking, corporate greed, overconsumption and exploitation of
resources.
Examples: most commercial organizations today

2.1.4 Green (pluralistic) worldview

One of the key elements introduced in this kind of organizations is empowerment.

Empowerment whereby people have the decision to organize their work themselves. These
organizations are as families: cooperation, equality, solidarity and tolerance. The core mission is
the corporate social responsibility.

These organizations emphasize on organizational culture and values, coaching and mentoring,
and teamwork. It is a value-driven culture.

Green organizations can still be considered as rational functioning where the human is reduced
to one of the production forces. This is thus not sustainable in the long term and now it becomes
more theoretical in a sense that we see the emergence of teal organizations but it is quite limited
in a sense that many green organizations try to shift towards teal, but the shift happens very
slowly.

2.1.5 Teal worldview

Teal is not the dominant stage in the evolution, it is becoming more and more important.

Self-management is central. It means that the power, the authority, the control emerges from
within the organization, like a bottom-up. It is not really imposed from the top managers. They
have peer relationships and fluid natural hierarchies. Power and control are embedded
throughout the organizations. They interlock structures and practices.

Wholeness: as human beings, we are whole people, which means that our lives cannot be
separated into work life and personal life. You cannot forget your personal life when you are
working, it is not natural. Be your true self. You can bring your inner wholeness to the work
place.

Evolutionary purpose of teal organizations means that all practices, processing, purposes of
the organization need to comply with an evolutionary purpose of society. Agile practices based
on mindful sensing and responding. Emancipatory objectives above the competition.
It means that we have to strive for more diversity, more sustainability. We have to lead the
evolution of society.

2.2 Evolution of management/ Organizational models

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  Rational Goal Model

Organizational effectiveness = productivity & profit. It is a lot about productivity and profit.
Organizations are effective as long as they are productive and generate profit. It is about
productivity, efficiency, controlling.
Example: Taylorism: Scientific Management.
They want to improve management practice through:
- Work standards
- Target performance rates
- Uniform work methods
- Supervision methods
- Incentive schemes
- Inventory control systems

 Internal Process Model

Organizational effectiveness = stability & continuity. We know how to be effective, we know how
to make profits, now we have to generate this profit in the long term in a stable way, in order to
generate stable return to the shareholders. The mechanism to achieve that stability is
bureaucracy. Bureaucracy was the ideal way of structuring an organization, because it is the
most efficient way to get work done.

There was still one detail that was discounted in that theory, it is that people are not rational. If
you put fully rational human beings to the extent that they exist, or you put machines, machines
are more rational than human beings. If you put machines in the bureaucracy, it is the perfect
way to get things done. But human beings have emotions and feelings, so it means that all the
principles of the bureaucracy don’t work.

Max Weber: The professional bureaucracy

Henri Fayol: Administrative theory

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Principles of bureaucracy (Weber):
- Well-defined hierarchy of authority: it will work if emotions, power place don’t play
wrong in organizations. If you have informal leaders that want to use their power to get
things done, but if those people are not your line managers, they have no authority on
you.
- clear division of work
- system of rules covering rights and duties of each person
- system of procedures for dealing with the work situation
- impersonality of interpersonal relationships
- selection and promotion based on technical competence

 Human Relations Model

Organizational effectiveness = commitment & cohesion. The organizational effectiveness is

achieved through the commitment and cohesion of the workforce.

Hawthorne studies: impact of social norms on productivity

Mary Parker Follet: self-government (or empowerment)  means that you don’t need someone
to tell you what to do and how to decide. It is something that you can do yourself, you have the
power to decide yourself.

- Goal achievement through direct interaction

- Member fulfillment through group development
- Workplace democracy
- Nonhierarchical networks
- Power with people rather than power over people

 Open Systems Model

Organizational effectiveness = adaptability & external support. The organizational effectiveness

is achieved through adaptability and external support, so through innovation and change.

Organizations as seen as open (vs. closed) systems. There was a shift from closed systems to
open systems. Once that shift is made, the degree of stability and control that you want to
achieve, the degree of unpredictability of managing organizations is becoming more important.

Contingency theory (Laurence & Lorsch): Appropriateness of managerial actions varies with:
- Size
- Technology
- Environment
- Individuals

2.3 Any similarities with the 4 Industrial Revolutions (IR)?

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Those fit with the typologies seen previously.

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3 Major organization theories: prehistoric, modern, symbolic, and postmodern
perspectives

Overview of Organization theories:

3.1 Prehistoric perspective (pre-modern)

 Systems of decision and action driven by rationality, efficiency and effectiveness

 Directed towards clearly stated objectives
 Knowledge on organizations is developed & accumulated through valid conceptualization
and reliable measurement
 Organization theory aims at:
- Discovering universal principles and laws that govern organizations
- Defining theories that explain performance
- Developing methods to test theories
- Emphasize structure, rules, standardization, and routine.

3.1.1 Adam Smith – Division of Labor

 First ‘theory of organization’

 Division of labor creates economic efficiency
 Effect on economic outcomes
 Managerial techniques of ‘time and motion studies’
 Differentiation of work tasks
 Specialization of workforce

3.1.2 Karl Marx – Theory of Capital

 Human survival needs (food, shelter, ...) creates economic order

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 This order is driven by economic efficiencies of collective labor supported by social
structures
 Economic efficiency leads to surplus for investment
 However: how to divide the surplus or ‘profits’?
 Social conflict between interests of capital and labor
 Induces commodification of labor and thus exploitation of labor by capitalists
 Rise of resistance to managerial control
Example: Caterpillar, Ford, General Motors

3.1.3 Durkheim – Formal vs. Informal Organization

 Shift from agricultural to industrial societies

 Social structure = Formal organization
o Division of labor
o Hierarchy
o Interdependence of work roles and tasks
 Informal organization emphasizes worker’s social needs
 Induced tension in organization theory between hard and soft economic aspects of
organizing.

3.1.4 Max Weber – Bureaucracy

 Charisma & tradition => rational-legal authority

 Bureaucratic rationalization as tool for efficiency in society: rules > individual judgement
 Two types of rationality:
o Formal rationality: rationality of means adopted
o Substantive rationality: rationality of goals
 Problem with bureaucracies: Formal without substantive rationality => ‘iron cage’

3.1.5 Frederick Taylor – Scientific Management

 Scientific research methods > Scientific management > Improve management practice
o Work standards
o Target performance rates
o Uniform work methods
o Supervision methods
o Incentive schemes

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 o Inventory control systems
 ‘Taylorism’: quantifying workers’ inputs and outputs for the purpose of evaluation and
control

3.1.6 Mary Parker Follet – Self-government

 Goal achievement through direct interaction

 Member fulfillment through group development
 Workplace democracy
 Nonhierarchical networks
 Power with people rather than power over people

3.1.7 Henri Fayol – Administrative theory

 Rational administration of organizations

 Based on a series of ‘rational principles’
o Span of control
o Routinization
o Standardized operating procedures
o Delegation by managers
o Departmentalization
o Unity of command
 ‘Esprit de corps’ as basis for ‘organizational culture’

3.2 Modern perspective

3.2.1 Systems theories

Mutual interdependencies of subsystems

Closed vs. Open systems

3.2.1.1 Different view on organizations

 Organizations as rational systems

o Organizations are instruments to attain specific goals

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 o Goal specificity, formalization
o Taylor’s scientific management, Fayol Administrative theory, Weber’s theory of
bureaucracy
 Organizations as natural systems
o Emphasis on the collective nature of organizations: questions of survival and
equilibrium, informal structure
o Human Relations school (Mayo), Bernard’s cooperative system, Selznick’s
institutional theory
 Organizations as open systems
o Emphasis on system dynamics, complexity => organization are social entities
that are complex and loosely couples systems

3.2.1.2 Organizations as Open Social Systems

Characteristics of open systems:

 Throughput of energy (input-processing-output-feedback)
 Dynamic boundaries
 Homeostasis: self-regulation ability and tendency to remain stable
 Negative entropy: ability to create order by inputting complexity
 Law of limited variety: “A system will exhibit no more variety than the variety to which it
has been exposed in its environment”
 Equifinality: there are many different ways to achieve the same end

3.2.2 Contingency theories

 Driven by normative interests

 What is the best way to organize for formal performance?
 Aligning multiple subsystems to maximize performance in a particular situation
 What works best is contingent upon: Environment, goals, technology, people involved,...
 Highly popular due to ‘recipes for success’

Contingency theories simply stated: “If… Then”.

3.2.3 Environment-Organization: different views

What is the direction of the causality:

 environment selects companies that can survive?
 organizations can adapt to environmental changes?
 organization create/enact environments?

Conflicting views?
 population ecology
 resource dependence theory
 institutional theory
 enactment

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3.2.3.1 Resource Dependency theory

 RDT = how the external resources of organizations affect the behavior of the
organization
 Resources to survive are controlled by environment
o capital (investors), raw material (suppliers), human resources (employees),
outputs (customers),
o managing these dependencies: understanding the network and engaging into
formal relationship
 “Organization A's power over organization B is equal to organization B's dependence on
organization A's resources”
 Constitution of interorganizational linkages – active role of management in
organizational survival
 Balancing vulnerability, autonomy & interdependence

3.2.3.2 Collaborative Network perspective

 Emerging alternative to resource dependence theory

 Companies join together and create networks to become more competitive and to share
scarce resources

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3.2.3.3 Population Ecology

 ‘Survival of the fittest’: adaptation within populations of organizations

 Change in organizational structures comes from the selection of new organization(al
form)s, replacing old ones
o organizations will disappear when structural features are not adapted to the
environmental changes
o variation => selection => retention: organizational forms that survive are best
fitted with the environment
 Individual organizational adaptation is very limited compared to changes demanded by
the environment => inertia
o asset specificity, investments and information filters
o internal politics and history (communication, standard operating procedures,
routines, ...)

Cause of rising corporate mortality: 3 broad trends:

- Businesses face ever more diverse environments, which are often harsher, less
predictable, and more malleable than classic environments.
- Technological innovation has increased the pace and impact of change. The diffusion rate
of products from invention to saturation has risen dramatically: firms move through
business life cycles twice as quickly, on average, as they did 30 years ago.
- Businesses are more interconnected than ever before. Multinational companies move
goods, services, and capital around the world. Their activities link markets globally,

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 driving increased correlation across stock markets. These connections can create
tremendous vitality in the economy, but they increase the risk of shocks capable of
cascading throughout the system.

3.2.3.4 Institutionalism

 How do organizations survive through ensuring congruence between an organization

and expectations from the environment, i.e. norms & values of stakeholders
 Organizations are shaped to fit with the demands of the wider institutional environment
stemming from cultural norms, professional bodies, funding agencies (...) =>
LEGITIMACY
 Adaptation not because of requirements within the ‘task environment’ but because of
social, cultural & symbolic systems!

Pillars of institutional theory:

 “Institutions comprise regulative, normative, and cultural- cognitive elements that,

together with associated activities and resources, provide stability and meaning to social
life” (W.R. Scott)
 Institutional theory rests on three pillars:
o Regulative: rules, laws, sanctions
o Normative: certification, accreditation, values, expectations, standards
o Cultural-cognitive: isomorphism, common beliefs, shared logic of action, shared
understanding, taken-for- grantedness

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3.3 Symbolic perspective: guiding assumptions

 External reality is subjective: constructed through interpretation  Organizations are

socially constructed realities
 Truth (knowledge) is relative to the knower
 Organizations carry meaning, discovered through interpretation
 Organization theory aims at:
o Describing how life unfolds within an organizational context
o Producing understanding of how ‘organization’ happens
o Focusing on culture, assumptions, values and practices

3.3.1 Social construction theory

3.3.2 Enactment theory

 Objective environment does not exist

o conditions in the environment cannot be separated from perceptions of those
conditions
o environments are socially constructed
 Positive view on management
o cognitive approach to action: people’s perception of the environment must be
related to action
o organizations adapt to an enacted environment
 Organizations exist only in the minds of its members as cognitive maps of social
constructions
 Construed reality is enacted through sensemaking processes

3.4 Postmodern perspective

 Organizations are sites for enacting power relations

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  Organizations give rise to oppression and irrationality
 Organizations can be ‘rewritten’ to emancipate ourselves
 Organization theory aims at:
o Deconstructing organizational texts to reveal managerial ideologies
o Destabilizing modernist modes of organizing and theorizing
o Favoring marginalized and oppressed viewpoints
o Encourages reflexive and inclusive forms of theorizing and organizing

4 The future of organizations?

4.1 How will the organization of the future look like?

Never forget your classics. For example, during the covod-19 crisis, organizations that comply to
the best practices of how to organize, that really are passionate about what they are doing, and if
you’re passionate about what you are doing then you go the extra mile, you try to be creative,
innovative, you try to care for people, you try to strive for healthy financial organizations. As
long as this is the center piece of how organizations will look like, then it is fine. You must not
forget those basics.

What are the central pieces of good organizing?

It is not always the new things, some of the old things like a good collaborative, creative
organizational culture that fit the strategy of the company is and will remain extremely
important. The alignment between culture strategy and structure will also be equally important.
Essentials will remain important in the future, but you have also new things that emerge. The
link between stability and flexibility.

What will it take to win in the 2020s?

The world is changing and so is the nature of business competition. Here are 5 imperatives for
the decade ahead:

1. Master the New Logic of Competition

In a dynamic and complex environment, planning and predicting won’t necessarily lead to
business success, it is more about understanding process dynamics. If you understand how

35
systems work, then you don’t have to plan and predict because you know the systems will
sometimes move to different directions.

You also have to think in terms of ecosystems or networks. You don’t do the learning and
developing by yourself. There is more need for collaboration.

Successful companies will compete on their ability to learn faster than their rivals, adapt to
constant change, imagine entirely new possibilities, and collaborate in business ecosystems.

Ex: R&D processes of covid-19 vaccines

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 2. Design the company of the future

As the familiar paths to business success disappear, survival depends on the ability to learn and
adapt. Learning and adaptation are becoming more and more important. Indeed, the future of
business hinges on learning. Learning is something you do every single day, not only with
textbooks but also with life experiences. You learn from other people, peers, managers,
colleagues, customers, everybody. You need a cultivation of a learning mindset rather than the
capability to memorize things. This will increase mobility of jobs, it will make people more
flexible and will generate lots of opportunities.

One of the challenges in those opportunities is to find the right balance between artificial and
human intelligence. Technology will help companies gain insight from data, but companies still
need people. It takes a new kind of enterprise to figure out the most potent combination of
artificial and human intelligence.

3. Apply the science of organizational change

Companies must change even when things are going well. Change is continuous, it is happening
all the time. The capacity for continual change is a critical imperative for business success in the
2020s.
Business leaders can turn change into an opportunity. There’s no recipe to follow for
transformation, but data and analytics make it possible to decode what works and what doesn’t.

4. Embrace the business imperative of diversity

Research shows a link between a company’s diversity and its capacity for innovation and
resilience. It is mostly about diversity of mindsets and perspectives.

For business success, it’s not enough to increase the diversity of the workforce. Leaders also
need to create an environment where new perspectives are welcomed and encouraged.

Ex: if you have one man and one woman with the exact same background, there is not much
diversity. It is much more effective in terms of diversity to put different mindsets together. Then
you can approach a specific issue from different perspectives. Then you create new ideas that
are relevant for the organization.

5. Optimize for both social and business value

Combine social and economic value. If you only create economic value, you basically don’t create
value. You need systems that are able to produce both short-term and long-term value, both
performance and health.

As the public’s trust in business wavers, political and economic uncertainty around the globe
increases, and climate change creating social as well as economic value intensifies, companies
must be part of the solution by.

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Companies will thrive in the 2020s—and beyond—only if they have sustainable relationships
with the social, political, and environmental systems they participate in.

4.2 Nine organizational imperatives will separate future-ready companies from the
pack

WHO ARE WE?

Do we have a compelling, standout identity that attracts and inspires people—employees,
investors, clients, and partners? Leading organizations convey the reason for their existence by
embracing three imperatives:
1. Define a resonant purpose that embodies the organization’s unique role in the world and
aligns the entire enterprise with shared meaning.
2. Sharpen your value agenda, the list of priorities that can double or triple the value you
create.
3. Create a special culture defined by a unique set of practices, rituals, symbols, and
experiences.

HOW DO WE OPERATE?
Do we have a nimble, frictionless operating model that fosters simplicity and speed? Leading
organizations build this operating model by adopting the next three imperatives:
1. Radically flatten your structure to allow the organization to operate as a network of
empowered, dynamic teams.
2. Turbocharge decision-making to improve both the quality and velocity of decisions.
3. Treat talent as the scarcer capital by creating a special employee experience, expanding
people’s capacity, and allowing people to “be human.”

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HOW DO WE GROW?
Are we building for scale to get smarter and more innovative, to iterate more rapidly, and to be
able to tap into resources and networks beyond the bounds of the organization? Leading
operations pursue scale by addressing the last three imperatives:
1. Take an ecosystem view, in which communities create value together and partners share
data, code, and skills.
2. Build a data-rich technology platform to generate insight into what works, embed
automation on a grand scale, and allow your people to focus on what only they as
humans can do.
3. Accelerate learning as an organization to enable employees to access, create, and share
innovation, capabilities, and know-how in real time and on demand.

4.3 Organizing for the Future

Other way to advance different key characteristics for organizing for the future.

The ability to speed up, to make fast decisions, to change fast, to shift your way of strategizing
from a more planned way toward a more emergent way.

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40
 SESSION 3: ASPIRE: ORGANIZATIONAL DIRECTION

We will tackle the first stage of Aspire, focusing on the health dimension. We will focus on
building block of direction.

1 Organizational purpose

1.1 Aspire: Setting strategic objectives

What is the importance of setting strategic objectives? Answers from class:

- It is important to an organization because it provides a sense of direction and outlines
measurable goals. Strategic planning is a tool that is useful for guiding day-to-day
decisions and also for evaluating progress and changing approaches when moving
forward.
- It is important so the employees have a direction and know why they are doing what
they are doing and feel motivated.
- To achieve long term goals and objectives
- It allows to define how to use the different resources.
- Without direction, there is no incentive to keep renewing your business & there is no
vision of where you want to be in a few years.

1.2 Apple case

 What is the original mission statement of Apple?

“To make a contribution to the world by making tools for the mind that advance humankind”
(Steve Jobs, 1980).

 The current mission statement of Apple:

“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and
professional software. Apple leads the digital music revolution with its iPods and iTunes online
store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and
is defining the future of mobile media and computing devices with iPad.“

 The current vision statement of Apple:

“We believe that we are on the face of the earth to make great products and that’s not
changing. We are constantly focusing on innovating. We believe in the simple not the complex.
We believe that we need to own and control the primary technologies behind the products that
we make, and participate only in markets where we can make a significant contribution. We
believe in saying no to thousands of projects, so that we can really focus on the few that are
truly important and meaningful to us. We believe in deep collaboration and cross-pollination
of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t
settle for anything less than excellence in every group in the company, and we have the self-
honesty to admit when we’re wrong and the courage to change. And I think regardless of who is
in what job those values are so embedded in this company that Apple will do extremely well.”
(Tim Cook)

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1.3 What is the purpose of an organization?

The purpose is no longer optional. Access to markets, talent, and capital now requires business
leaders to be clear about why their organization exists, what it stands for, and how it contributes
to the society.

Employees feel that purpose is important, but many say their companies don’t

1.4 Purpose – Mission – Vision – Goals

Purpose: why do we exist

Mission: in what business are we.
Vision: the desired future state of the organization, how we see the future, where we would like
to be in 5 year from now for ex.
Goals: something to be achieved, more general than objective (ex: cost reduction, invest more in
R&D,…)
Objective: operation goal (ex: achieve an investment in R&D in the next 2 years of 15 000€)

The purpose is at the core of the company. It leads to strategic choices and build on cultural
strengths to drive impact.

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1.4.1 Mission and vision statements

A Mission Statement defines an organization's business, its objectives and its approach to reach
those objectives.

A Vision Statement describes the desired future position of an organization.

Elements of Mission and Vision Statements are often combined to provide a statement of the
company’s purposes, goals and values.

M/V statements should have 3 main themes:

 the fundamental goals that the organization seeks
 the scope of the organization's activities
 and the particular capabilities it has to deliver all of these

1.4.2 The properties of purpose

 Presence. Is the organization’s purpose clear, compelling, and noticeable to customers

and employees? Do they understand it enough to describe it, beyond what the company
makes or sells?
 Strength. Is the organization’s purpose inspiring? Does it reflect a real need in society?
Could it be as relevant tomorrow as it is today? Does it suggest that the organization is
resilient in the face of an unknown future?
 Alignment. Does the purpose reflect the company’s roots, history, and DNA? Do leaders
believe in it? Does it motivate them to take certain actions? Do leaders feel that being
part of the company is being part of a movement?
 Integration. Are the company’s decisions in harmony with its purpose? Does the
company live its purpose with passion? Would leaders turn down a profitable
opportunity if it wasn’t tied to the purpose?
 Advocacy. Does purpose elicit greater loyalty from employees and customers? Are
people more engaged with the company because of it? Would employees and customers
recommend the company to others because of its purpose?

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1.4.3 Why many purposes are not authentic

They rely on platitudes and generalities. Many institutional investors’ purpose statements
use the same language, and few are distinctive or memorable. For example, many firms say that
their mission is to be industry leader and excel in customer service. That may be true, but it’s
true for all firms in the industry, so the statement is neither unique nor differentiated.

They focus on the “what” rather than the “why.” Simply explaining what an organization does
lacks meaning. It is not as emotionally compelling to employees as explaining why the
organization does what it does, which helps people link their individual contributions to the
ultimate impact of the organization and shows that they are part of something larger.

They’re superficial. An authentic purpose isn’t something you can develop in a day; rather, it
has to be discovered, through a process of self-reflection that requires firms to consider why
they exist. It’s hard work, and it takes time, but it results in more than a tagline; it yields
principles and beliefs that create emotional engagement and guide behavior.

1.4.4 Some critical questions to address

Articulation. Does your organization have a clear and compelling purpose, distilled to a single,
emotive, memorable, inspirational, and timeless purpose statement that captures not the “what”
but the “why”?
Inspiration. Do your employees understand this purpose, and does it galvanize them to perform
better? If you were to ask 100 employees why their organization exists, would you get a
consistent answer?
Integration. Are your firm’s leaders integrating the purpose in their key decision-making
processes? Does it affect the day-to-day behaviors of both leaders and employees?
Recognition. Is your purpose influencing the way your firm is perceived by stakeholders, both
internally and externally?

1.4.5 How to create a compelling vision/purpose?

44
1.4.6 Linking purpose to performance

45
1.4.7 Linking purpose to health

1.4.8 Mission statement example

Our mission is to help our clients make distinctive, lasting, and substantial improvements in
their performance and to build a great firm that attracts, develops, excites, and retains
exceptional people.

Google: To organize the world’s information and make it universally accessible and useful
Tesla: To accelerate the advent of sustainable transport by bringing compelling mass market
electric cars to market as soon as possible
BMW: The world's leading provider of premium products and premium services for individual
mobility
Ryanair: To offer low fares that generate increased passenger traffic while maintaining a
continuous focus on cost containment and efficiency operation.

1.5 Massive Transformative Purpose (ExO)

Massive: Audaciously big and aspirational

46
Transformative: Can cause significant transformation to an industry, community or to the
planet.
Purpose: There is a clear “why” behind the work being done. Something that unites and inspires
action.

An MTP is… An MTP is NOT…

 Emotional: it reaches hearts and minds;
generates passion.
 Credible: Stakeholders need to be
confident in their daily work.
 Simple: Clear and easy to understand.
 Replaces mission statement: Enhances
brand as they are linked MTP.
 Guide People: From the inside and
outside.
 Guide Scale: Organize the world’s
information.
 Transformative: with purpose.
 Just about the organization: it’s not a
vision statement about the organization.
MTPs are more extremally focused.
 Only about the “how to”: it’s not a mission
statement which reflects the how-to.
 A marketing slogan for customers: these
are deeply transparent and less welcome
all the time.
 A sentence for customer (“you”) or a
sentence for us (“we”): it’s not about
business.
 The Value Proposition: it’s not about the
literal promise to customers.

Examples:

1.6 Strategic intent

Strategic intent is defined as a compelling statement about where an organization is going that
succinctly conveys a sense of what the organization wants to achieve long-term.

47
According to Hamel and Prahalad, strategic intent captures the essence of winning, it is stable
over time, and it sets a target that deserves personal effort and commitment. Strategic intent
goes beyond simply copying what competitors are doing.

Strategic intent represents a symbol of the organization’s will about the future, which energizes
all organizational levels for a collective purpose (Hamel & Prahalad, 1989).

Strategic intent directs the accumulation of necessary competencies, giving the

intraorganizational evolution processes a common target, ‘‘something to ‘aim’ for’’ (Lovas &
Ghoshal, 2000, p. 885)

2 The tension: Upper echelons vs. middle echelons

2.1 Upper Echelons theory

2.1.1 The role of CEO and TMT

 Great leader view of strategic leadership

"Strategic leadership theory holds that companies are reflections of their top managers, and, in
particular, of the chief executive officers, and that ".. .the specific knowledge, experience, values,
and preferences of top managers are reflected not only in their decisions, but in their
assessments of decision situations"." (Ireland & Hitt, 1999:45)

 Great groups view of strategic leadership

"In an organizational community, strategic leadership is distributed among diverse individuals
who share the responsibility to create a viable future for their firm. (...) Perhaps the most
important "great group" in an organization is the top management team (TMT) formed by the
CEO." (Ireland & Hitt, 1999:46)

2.1.2 Main ideas

If we want to understand why organizations do the things they do, or why they perform the way
they do, we need to understand the people at the top. Top managers act on the basis of their

48
personal biases, experiences, and values. There is a link between of personal characteristics with
the performance of the company.

The characteristics of the entire top management team (TMT) will be far more predictive of
organizational outcomes than will those of the individual top executive (CEO) alone.

Executives' biases in their choices become manifest through information filtering processes

2.1.3 The theory

All these characteristics will have impact on the construed reality.

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Strategic situation: the myriad events, trends, and conditions that exist inside and outside the
organization; this ‘situation’ consists of far more phenomena than the executive can
comprehend.

Executive’s orientation: interwoven set of psychological characteristics (values, personality,

cognitive models, ...) and observable experiences (age, tenure, education, functional
background,...).

Three-step information filtering process: resulting in highly personalized construed reality:

 the executive’s orientation affects his or her field of vision: those phenomena to
which attention is directed
 the manager’s perceptions are further limited because he or she will selectively
perceive only some of the phenomena that lie within the field of vision. An executive sees
or notices only a subset of what is on the radar screen.
 the executive then interprets, or attaches meaning, to the stimuli that have been
noticed.

2.1.4 Some propositions

Age: Firms with young managers will be more inclined to pursue risky strategies than will firms
with older managers

Functional track: There will be a positive association between the degree of output-function
experience of top managers and the extent to which the firm emphasizes outputs in its strategy

 Experience: Years of inside service by top managers will be negatively related to strategic
choices involving product innovation and unrelated diversification.
Formal education: The amount, but not the type, of formal education of a management team will
be positively associated with innovation.

Socioeconomic background: Firms whose top managers come disproportionately from lower
socioeconomic groups will tend to pursue strategies of acquisition and unrelated diversification

Composition: Homogeneous top management teams will make strategic decisions more quickly
than heterogeneous teams.

Heterogeneity: In turbulent, especially discontinuous, environments, team heterogeneity will be

positively associated with profitability

2.1.5 An assessment

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2.1.6 Managerial discretion

Reconcile two antagonistic, polar views:

 managers don’t matter very much to organizational outcomes (cfr. population ecology)
 managers influence greatly what happens to their organizations (cfr. strategic
management)
TMT matter depending on how much executive discretion - or latitude of action - they possess.
Discretion exists when there is an absence of constraint and when means-ends ambiguity is high,
i.e. when there are multiple plausible alternatives.

As a consequence: If a great deal of discretion is present, then managerial characteristics will

become reflected in strategy and performance. If, however, discretion is lacking, executive
characteristics do not matter much.

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Task environment

 Product differentiability (+)

 Market growth (+)
 Demand instability (+)
 Low capital intensity (+)
 Competitive industry structures (-)
 Legal constraints (-)
 Powerful outside forces (-)
 ‘High discretion’ industries: IT-related industries, consulting, ...
 ‘Low discretion’ industries: utilities, railroads, education, ...

Internal Organization

 Inertial forces: size, age, strong culture, capital intensity (-)

 Resource availability (+)
 Internal power relations:
o Dispersed (+) vs concentrated (-) ownership
o CEO (-) vs CEO and Chairman of the Board (+)
 Attitude towards uncertainty and complexity (+/-)

Managerial Characteristics

 Level of aspirations (+)

 Commitment to status quo (-)
 Tolerance for ambiguity (+)
 Cognitive complexity (+)

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  Internal locus of control (+)
 Power base and political acumen (+)
 Effective managers / executives can create their own discretion!

2.1.7 The role of Upper Echelons in OH

“Only the senior leader(s) can ensure that the right people spend the right amount of time on
driving the right changes” (Keller & Price, 2011:204).

Making the transformation meaningful:

 Personalize the transformation story (cfr. Influence model)
 Openly engaging others through 2-way face-to-face communication
 Reinforce the story by spotlighting successes & failures

Role modeling desired mindsets and behavior

 Undergoing personal transformation
 Generate impact through symbolic actions

Building a strong and committed top team

 Understanding and acting quickly
 Invest time in building team dynamics

Relentlessly pursuing impact

 Personal involvement to achieve maximum impact
 Taking up responsibilities and being accountable

2.2 Middle Management and its role in strategy

Middle managers are managers who report to top managers.

Strategic leadership theories:

middle management is traditionally perceived as operational in nature:
 defining tactics and developing budgets for achieving a strategy
 monitoring the performance of individuals and subunits
 taking corrective action when behavior falls outside expectations

Dynamic capability theories:

 Emphasis on capability development through collectively accumulated skills and
knowledge
 Capabilities develop as organizations learn to reconfigure their resource base, through
the brains of middle managers.

2.2.1 The strategic role of managers

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Metaphor for the strategic role of middle managers: hot dog. The middle manager is the sausage
in the hot dog, because it represents an essential link in the organization. The sausage covers
both the upper and lower bun, which means that the upper bread is CEO and lower bread is the
team leaders.

There are 4 strategic roles of the middle management:

- Championing strategic alternatives
- Synthesizing information
- Facilitating adaptability
- Implementing deliberate strategy

 Championing strategic alternatives

(upward – divergent)
-The persistent and persuasive communication of strategic options to upper management.

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-Middle managers become "champions" of strategic alternatives: middle managers select certain
projects, nurture them with 'seed money,' and when they prove successful, advocate them as
new business opportunities. (Bower, 1970)
-Middle-level managers frequently become “organizational champions” for initiatives developed
at the operating level, centering on influencing corporate management to adjust their current
concept of strategy (Burgelman, 1983)

 Synthesizing information
(upward – integrative)

-Middle managers supply information to top management concerning internal and external
events.
-As organizational linking pins, middle managers are positioned uniquely 'to combine strategic ...
with hands-on ... information'. They infuse information with meaning through evaluation,
advice, and subjective interpretation. For example: by applying the category 'threat' and
'opportunity', middle managers affect how issues are interpreted.
-The function is integrative in that it combines ambiguous and diverse data and interprets it
within a given strategic context
-Ability to influence TMT perceptual processes.

 Facilitating adaptability
(downward – divergent)

-Middle managers nourish adaptability apart from the plans embedded in deliberate strategy,
sometimes in spite of them
-Middle managers facilitate learning by encouraging organization members to sense changing
conditions, experiment with new approaches, and adapt appropriately.
-Relax regulations to get new projects started
-‘Buy time’ for experimental programs
-Locate and provide resources for trial projects
-Provide a safe haven for experimental programs
-Encourage informal discussion and information sharing

 Implementing deliberate strategy

(downward – integrative)

-Implementing deliberate strategy = managerial interventions that align organizational action

with strategic intent.
-Monitor activities to support top management objectives
-Translate goals into action plans and individual objectives
-Sell top management initiatives to subordinates

2.3 Completing the picture

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3 Setting strategic goals

3.1 Focus on the medium-term future

 Ambitious, bold long-term vision statements are not always the right approach
 What matters more is a clear definition of a medium-term future:
o Provides a sense where an organization wants to be 2 or 3 years from now: much
nearer than a long-term vision
o Provides immediacy and tangibility to inspire stakeholders
o Sets a rapid pace for change
o Creates an action-oriented attitude through the organization
 Examples: Tata, General Electric, IBM

3.2 Balance facts and intuition

How can organizations minimize their chances of going in the wrong direction and maximize the
likelihood of going in the right one?
 Balancing intuition with fact and not allow either to dominate

Building a robust fact base:

 Asking questions: environment & capabilities
 Testing scenario's to probe for unintended consequences

Relying on intuition:
 Knowing or sensing without the use of rational processes
 Combination of experience & self-awareness

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When to leverage intuition?

 When decisions need to be consistent with the organization's culture and values
 When time is of the essence

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  When explicit cues are lacking because policies, rules, guidelines, or expert guidance are
absent
 When uncertainty prevails because of new product planning or strategy formulation
 When quantitative analyses require checks & balances

3.3 Set tough but achievable goals

In our experience, targets are too often incremental, cautious, or tailored to existing capabilities.
They fail to create momentum or pressure for an organization to push the limits of what is
possible, and they seldom lead to break-throughs. Naturally, if people see goals as beyond reach,
they will become disillusioned and give up. But most organizations, whether strugglers or top
performers, have more headroom than they think before goals truly do become unattainable.

3.3.1 Case: Tata Motors

What does the Tata Motors case tell you about:

1. Upper echelons?
-TMT not prepared for perceiving the cues leading to the 2001 crisis.
-Characteristics of chairman Ratan Tata in radiating patience and confidence.

2. Middle management?
-Selling ideas internally (rather than drilling down)
-Pivotal role of breakfast meetings involving various functions

3. Managerial discretion?
-Environmental changes inducing the 2001 crisis
-Role of the favorable environment in the success of the organization

4. Strategic objectives?
-Reorganization was shaped in 3 distinct 2-year phases (medium-term)
-Objectives focusing on performance (cost reduction) and health (product quality, new products,
internationalization…)
-Setting tough goals (10% cost reduction)

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4 Organizational Direction and Health

How does the organization direction (and the components we have seen) have an impact on the
Organizational Health and its 3 main components?  typical exam question

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 SESSION 4: ASPIRE: ORGANIZATIONAL IDENTITY (RÉÉCOUTER)

1 Organizational Recipes

1.1 Health aspirations

Successful companies match their organizations to their aspirations; misalignment can often
undermine both performance and health.

How to set the 'right' health aspirations?

 Threshold across all 9 elements of health (in the building block)
 Above bottom quartile or 'Able' for all 37 practices
 Distinctive or 'Elite' for minimum 6 practices (top quartile): which are the 6 practices
that you need to excel at?

Not possible to be healthy if they don’t perform well on these 9 building blocks.

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 - Which practices are most likely to enable my organization to reach its performance
aspirations?
- Where do our organization's existing strengths lie?
- Which practices will complement one another?

Complementarity example (textbook): If a company wants to increase motivation, it has various

management practices at its disposal. If it decides to offer incentives to its staff, it has a 48
percent probability of increasing its motivation to the top-quartile level (perhaps surprisingly,
the lowest probability for any motivation practice). However, if the company offers incentives
and modifies its work environment to create performance transparency, the probability goes up
to 95 percent. Adopting two complementary management practices instead of relying on just
one greatly increases the chance of success—almost doubling it, in this case.

1.2 Organizational health archetypes

- Threshold across all 9 elements of organizational health

- Above bottom quartile or 'Able' for all 37 practices
- Distinctive or 'Elite' for minimum 6 practices
- Align with performance aspirations, existing strengths, and seek complementarity

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How do we find the 6 practices that we should excel at to achieve excellent organizational
health?  4 'archetypes' of health organizations

1.2.1 Archetype 1: Leadership factory

 Primary focus is to secure the future

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  Leaders are the catalysts for performance
 Empowering individuals to channel their efforts in the right direction
 Focusing on building a pipeline of new leaders within the organization
 Key elements include performance contracts & reviews, operational management &
discipline to foster accountability and transparency
 Example: PepsiCo

1.2.2 Archetype 2: Market shaper

 Shaping market trends

 Building a portfolio of strong and innovative brands
 Beat the competition, being innovative different and distinctive
 Objective: staying ahead of competition
 Strong external orientation
 Excelling at delighting customers, while making profit
 Developing network of partnerships
 Examples: Apple, P&G

1.2.3 Archetype 3: Execution edge

 Being excellent at implementing your strategy

 Discipline, sound execution, and continuous improvement are foundational for
performance
 Knowledge sharing in order to getting things done
 Bottom-up desire for standardization
 Best practice focused
 Example: Walmart

1.2.4 Archetype 4: Talent and Knowledge core

 Pool of talent & knowledge is most important asset

 Success depends on developing talent effectively
 Important processes include talent acquisition, role clarity, performance rewards,
personal ownership, performance review, ...
 Examples: McKinsey, Goldman Sachs

1.2.5 Selecting the “right” recipe

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How to select the right archetype, the right recipe? Based on your direction and aspirations.

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1.2.6 Archetypes in consumer-goods companies

Leader driven. Several consumer-goods companies used to follow this recipe. However, in
many companies, the emergence of global brands has resulted in a lessening of local leaders’
degrees of freedom. While local leaders are still accountable for results, they now rarely make
big choices that will have an impact on a brand’s overall strategy. At such companies, few local
leaders have the opportunity to develop the skills that global leadership roles require.
Market focused. Most consumer-goods companies follow this recipe. They have a customer-
centric approach to management. Many of the most successful consumer product innovations of
the 20th century—disposable diapers being one example—are a direct result of this strong
customer focus.

Execution edge. Some consumer-goods companies, particularly those that operate in many
small local markets, have used certain ingredients from this recipe—for example, they have
developed centers of expertise in marketing and innovation that liaise closely with staff in local
markets to facilitate the sharing of knowledge and best practices. Such an arrangement allows
these companies to learn from local improvements and spread them quickly across the global
network to deliver a real execution edge over competitors.

Talent and knowledge core. Although they certainly use some of the management practices
strongly associated with a talent and knowledge core, this recipe in its pure form is rare among
consumer-goods companies.

How would following organizational processes be different per archetype:

- Setting strategic objectives
- Middle management roles & responsibilities
- Employee motivation & assessment
- Performance measurement: in execution edge company

2 Organizational Identity Theory

2.1 Organizational Identity

Why does identity matter for an organization?

- Identifies the organization
- Points the direction
- Creates alignment
- Informs strategy
- Determines structure
- Radiates underlying culture
- Guides decision making
- Shapes talent development
- Align values of employees

What does it tell us about an organization?

- See things differently
- Follow a vision, not a path

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 - Focus on a whole new take
- Change things together
- Moving the world forward
- Being different
- There is always another, better, bigger way
- You are the difference between the world as it is and the better place it will become
- Different is the one thing that will always be the same

2.1.1 Identity: individual vs. organizational identity

Individual identity

- An answer to the “Who Am I?” question

- Various meanings attached to a person by self and others that are based on people’s
social roles and membership in various groups (social identities) and personal
characteristics and traits (personal identities)
- Social identity is an individual’s self-concept stemming from membership in a social
group
- Membership in various groups leads to a variety of social identities linked to various
memberships

Organizational identity

- Organizational identity addresses the question "Who are we as an organization?"

- Organizational Identity = those features of an organization that in the eyes of its
members (1) are central to the organization's character of self-image, (2) make the
organization distinctive from other similar organizations, and (3) are viewed as having
continuity over time.
- Organizations can have multiple identities
- Holographic organizations: individuals across subunits share a common identity
- Ideographic organizations: individuals display subunit- specific identities

2.1.2 Pillars of organizational identity construct

Central
- Manifested as key values, labels, products, services, practices
- Deemed to be essential aspects of organizational self-definition of'who we are'

Distinctive
- Difference or separation from other organizations
- "Optimal distinctiveness" and "Uniqueness paradox"
- What really matters is that organization members themselves believe that they have
distinctive identities, regardless of whether such beliefs are “objectively” verifiable.

Continuity
- Enduring nature of identity over time
- Labels are stable, but their meanings are malleable

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2.2 Ontological and Epistemological OI debates

Ontological debate:
What is the essential nature of the OI phenomenon
- Entitative (content-based)
- Processual (process-based)

Epistemological debate:
How can we know the phenomenon of OI
- Social actor perspective
- Social construction perspective
- Institutional perspective

2.2.1 Ontological debate

OI as entity:
- OI is a substance (a thing) and can be described by articulating key attributes of that
entity
- OI is treated as relatively static, stable
- OI is enduring and changes very slowly over time
- Identity claims are stable commitments that exhibit continuity over time

OI as process
- OI is a fluent, dynamic process
- "What really exists is not things made but things in the making"
- OI is constituted by dynamic relations with other constructs (culture, image, innovation,
change,...)
- OI is continuously reconstructed in time as ongoing relations between past, present, and
future.

Enduring perspective on OI: supporting evidence

 OI is characterized as something durable, permanent, unchanging and stable over long
periods of time
 OI is characterized by 4 common lifecycle events: birth, growth, maturity, retrenchment.

 Micro-level sources of resistance to identity change

o Need for stability
o Need to maintain a positive social identity
 Macro-level barriers to identity change
o What is central is deliberately preserved
o Organizational - ‘structural’ - inertia
o OI as perceptual filter that influences how organizational members process and
interpret issues
 Enablers of identity persistence

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 o Cognitive (defense) mechanisms (identity threats & management)

Dynamic perspective on OI
 OI is fluid, in flux, and unstable (stable labels with malleable meanings)
 OI is a continuity and fosters 'adaptive instability'
 OI as emerging from the shared interpretive schemes that members collectively
construct

Sources of instability:
 Fluidity of organizational image
 “Identity gaps” (‘who we are’ vs. ‘who we want to be’)
 Perceptions among organizational members (UE vs MM)
 Legitimacy imperatives (alignment with institutional context)
 Attempts at improving (financial) performance (strategic shifts)

2.2.2 Epistemological debate

OI: The social actor perspective

 OI is the property of an organization as a 'social actor' to whom society has granted legal
rights and powers similar to those enjoyed by individuals
 OI = claims made by organizational representatives about "who we are as an
organization“
 Emphasis on overt organizational claims, rather than organizational actor meaning
constructions
 Formal commitments, actions, official claims indicate the organization's self-proclaimed
position in social space
 Overt claims that convey consistent expectations to stakeholders , and that signal how
other organizations should relate to the organization => ‘sensegiving’
 Criticism: projected rather than lived identity claims

OI: The social construction perspective

 OI is an organization's members' collective understanding of the features presumed to
be central and continuous, and that distinguish the organization from other
organizations (i.e. ‘self- referential’ and ‘self-reflective’)
 OI is subject to periodic revision as members interact with others, and renegotiate their
collective interpretation of organizational experience.
 OI is the shared understanding of organizational members about what it means to be
"who we are as an organization“ => organizational actors are meaning creators
 It therefore does not necessarily accept claims as presenting a ‘fact-based’ depiction of
OI. Rather, OI focuses on the underlying meanings that members associate with these
claims.

OI: The Institutional perspective

 How do institutional forces affect organizations and their identities?
 OI is still internally determined, but also highly influenced by strong external forces.

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  OI is determined by its claims to membership in a social category or collective identity at
the level of the organizational field (~ industry).
 Emphasizes the 'sameness' or isomorphic aspect of OI, as opposed to the distinctiveness
aspect.
 Brings about the question of ‘optimal distinctiveness’: being similar to, but sufficiently
distinctive from a chosen reference group.
2.3 Tensions among Organizational Identities

2.4 Multiple Organizational Identities

Hybrid identities = 2 organizational identities that are not expected to go together (e.g. economic
vs non-economic)

Multiple organizational identities

 Plurality: number of organizational identities – often reduced to question of resources
(human, financial, physical,...)
 Synergy: oppositional (low synergy) or complementary (high synergy)

Managing multiple identities:

 Aggregation: maintain complementary identities
 Compartmentalization: physical, temporal, or symbolic separation
 Integration: combining OI to create new identity
 Deletion: eliminating an identity entirely

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Compartmentalization (high plurality, low synergy):
 Preserve current identities without seeking synergy among them
 Can often create conflict at organizational level, though each identity is often too
valuable for the long-term success of the organization
 Can be implemented using physical, spatial, or symbolic means

Deletion (low plurality, low synergy):

 Organizations consciously choose to limit the number of identities
 Easier in ideographic than holographic organizations
 Risk of alienation of a core group within the organization
 Enables focus on primary mission

Integration (low plurality, high synergy):

 Fusing multiple identities into a distinct new identity
 Often through merger/acquisition and subsequent creation of new identity
 Reduces alienation risk and need to manage competing demands at cost of reduced
flexibility

Aggregation (high plurality, high synergy):

 Maintaining different identities while forging links between them
 Efforts to identify relationships and exploit synergies between identities
 Challenge of managing multiple and competing identities

3 Case study of organizational identity

McKinsey’s new corporate identity

 What cues do you receive on the organization’s identity?

-To be innovative
-Oriented more towards the future
-They want to work with young talents
-Continuity: linking past and future
-Adapt to a changing world
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-Deliver high impact
-Foster partnership
-To be data-driven
-High contrast  clarity, being clear about their messages, being a leader in the industry

 Can you identify McKinsey’ Health archetype? Based on what characteristics do you
make your assessment?
It is Talent and knowledge core.

 What does identity say about the organization’s direction?

Make sure to have more talents, to have creative people. They are willing to take risks. Direction
is about creativity. The company wants to cultivate and develop exceptional people. They want
to be adaptive to the changing world but without disruptions. To create a sense of stability,
excellence, knowledge, impact.

 What is the (proclaimed) rationale for a new identity?

Internal change in the firm’s radical (recent) evolution. 50% of the firm did not exist 5 years ago.

 Can you identify the organization’s central, distinctive and enduring elements of its
identity?
Central: cutting edge impact, insights, attractive employer
Distinctive: creating lasting impact
Enduring: they try to have a smooth identity transition (“who we are now and continue to
become”)

 What epistemological & ontological stances does McKinsey take on it’s identity?
Processual and social actor

 Is McKinsey & holographic or ideographic organization?

Holographic at surface – ideographic in reality

 How does McKinsey manage – if any – multiple identities?

Integration

Identity reinforces direction

“In McKinsey’s case, it is visible that the transformation is led by an original thought and not a
trend. We can see that they haven’t fallen prey to the usual charm of, “Change should be drastic!
It should be seen!”. They’ve thought about what exactly is the gap — looking modern and
expanding the identity effectively into digital — and what needs to be transformed to bridge it.”

4 Organizational identity

How does organizational identity contribute to organizational health?

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The link towards internal alignment is the strongest.
The quality of execution will be influenced by knowing who you are as a company.
Capacity of renewal: by doing things different

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 SESSION 5: ASPIRE: ORGANIZATIONAL CULTURE

1 Theories of Organizational culture

Describe the organizational culture of your project work organization in a series of keywords:
 Growth-oriented, try to develop an environment for their workers that try to foster the
integration of new trends. Microsoft tries to be innovative.

How do you grasp / sense the organizational culture of your case organization? How do you
know it is innovative?
 By analyzing the different financial reports, check the CEO’s purpose and vision for Microsoft,
analyze external reports, ask employees, ask customers, go on the website.

1.1 Case: cultural change at Bombardier

Flying people, not planes.

How would you describe the organizational culture of Bombardier before the change? And after
the change?
 Before the change, they were driven by engineering. After the change, they focused more
on what customers want. Before the change they were blaming culture, they were more
like “we don’t have any problem, it is not my responsibility”. After, they were more
problem-solvers.

What consists a “world class culture”?

 Try to focus on some key points related to their culture. Establish a ranking to enable to
clearly see at which level of integration they were. They called that an excellent program.
For Bombardier, what the world class culture means is a culture of improvement.
Learning from mistakes and integrating that in their culture.

1.2 What is organizational culture?

It is the way people do things regularly and automatically. It is patterns of behaviors that
become automatic after some time. Those patterns are based on some beliefs that are shared
within the organization. The fact that some people believe that every employee should be
involved. The mindsets of an organization.

1.2.1 Organizational culture: Schein’s model

It is “a pattern of shared basic assumptions that the group learned as it solved its problems of
external adaptation and internal integration, that has worked well enough to be considered valid
and, therefore, to be taught to new members as the correct way to perceive, think, and feel in
relation to those problems” (Schein, 1985)

It is things that people have learned in the past. Assumptions related to the environment of the
organization. The internal functioning and the relationships of the organization with the

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external world. These assumptions have to be considered valid. Something that has been tested
in the past and has been learned by people, that became part of the subconscious processing of
the people. When people join in the organization, these assumptions are thought. Mindset that
people join when they join the company, they learn the organization’s mindsets. It is a
framework that is installed in the minds of people.

More definitions from managers:

1.2.2 Schein’s levels of organizational culture

Artifacts:
It is the most visible level, things we can observe easily but where the meaning is hard to
decipher. Examples: company reports, company website, office lay-out, dress code, jargon, new
hire training, office meetings, offsite events, ...

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Espoused beliefs and values:
It is less visible. Models of the world that we apply, often unconsciously. You need to deep dive
to company reports, know what the company values are. Know what we think is important, what
makes us tick.
Examples: codes of ethics, company values, ...

Underlying assumptions:
It is hard to discover and understand. They are taken-for-granted assumptions about what is
right, how things are supposed to be. They are deep in the organizations.
Examples: the assumption that the business needs to make profit, provide high quality
product/service, service philosophies.

1.2.2.1 Case: Bombardier

Artifacts:
- Customer feedback
- Leadership forum
- Silos: people focused on their own tasks
- Clear listed performance goals
- Conversations (on explaining the importance of the “soft stuff” to the engineers for ex)
- Achieving-excellence system, identifying discrete project
- Identifying a group of champions

Espoused beliefs and values:

- We believe that we fly people but not planes.
- They want to learn from each other, continuous improvement could be a value.
- They believed they were doing good and avoided problems.
- They value teamwork
- Customers’ expectations, teamwork and continuous improvement
- Avoiding putting facts on the table, not facing up to issues, blaming the other department
(-> assumption of stability)
- Vulnerability, willing to learn, working in teams

Underlying assumptions:
- Engineering hard stuff: that was the dominant before the change
- Continuous improvement can be an assumption too
- “We’re flying people, not planes”
- Organization that wants to get better -> an organization is supposed to be world class

1.2.3 How do organizational members ‘learn’ values?

New members need to learn the culture when entering an organization. Values are transmitted
to employees through:

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Stories: provide explanations through some specific stories.
Example: stories of the founder of the company, the early years of the organization. They live
throughout the growth of the organization. Stories of major successes, failures, major events.

Rituals: reinforce key values and norms.

Example: team building to get to know everyone and get to know the core values, onboarding
days/week, training programs for new members, Friday free lunch.

Material symbols: convey importance, degree of egalitarianism desired, and appropriate

behaviors. Mostly related to artifacts. The way that the office is designed, company cars, the way
people are supposed dressed, are all material symbols.

Language: identify and segregate members. Jargon, people use a specific jargon. Finance people
will use a different jargon than manufacturing people.

1.2.4 The many faces of Organizational culture

(not that important)

Values
= what we prefer, hold dear, or desire
Values are the ‘software’ or organizations, ensuring uniformity and predictability of behaviors
Where do values come from?? Founders, executives, TMT,...

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Stories
= narratives that convey ideas and meanings through verbal expression or written language.
Stories provide accounts of how individuals view themselves in relation to others and are
therefore central to how we construct social identities and organizational images.

Frames
Culture is a filter that delimits our attention.
Framing involves processes of inclusion and exclusion; to frame is to select some aspects of
perceived reality and make them more salient: framing defines the situation.

Toolkits
Sets or “repertoires” of stories, frames, categories, rituals, and practices that actors draw upon to
create meaning. Toolkits represents a stock of ideas that we can mix and match to solve
everyday problems.

Categories
Categories are social constructions or classifications that define and structure the conceptual
distinctions between objects, people and practices.

1.3 How executives shape organizational culture

What the role of top managers is shaping the culture of the company.

Primary Embedding Mechanisms:

• What leaders pay attention to, measure, and control on a regular basis
• How leaders react to critical incidents and organizational crises
• How leaders allocate resources
• Deliberate role modeling, mentoring, teaching, and coaching
• How leaders allocate rewards and status
• How leaders recruit, select, promote, and communicate

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Secondary Articulation and Reinforcement Mechanisms:
• Organizational design and structure
• Organizational systems and procedures
• Rites and rituals of the organization
• Design of physical space, facades, and buildings
• Stories about important events and people
• Formal statements of organizational philosophy, creeds, and charters

1.4 Organizational identity vs. Organizational culture

Identity tends to be more textual, explicit, and instrumental. Culture tends to be more
contextual, tacit, and emergent.
Organizational identity expresses underlying cultural understandings. Organizational culture
reflects parts of an organization’s identity.

Culture and identity relate to the internal functioning of the organization. Identity is the starting
point, and after we will be able to build the culture and image. Image is more external vision of
the company. Culture is more related to the internal society.

Organization would start by building its identity, an identity that would fit the organization’s
purpose. In order to be what you want to be, you need to have organizational culture to establish
the identity that you want.

Culture follows identity and identity follows purpose. Identity is more comprehensive that
culture, culture is more a set of norms, beliefs and understandings. Identity is more, it is who we
are, what we stand for, it encompasses more than just norms and beliefs. Image is the external
view by the outsider of the company.

1.5 From culture to organizational effectiveness

What does organizational culture say about organizational performance, effectiveness, or

health?

There are 4 perspectives:

- Strong culture leads to strong performance. They will be more aligned; they know what
they have to believe in. (Strong culture = organization whose members all know what
the culture is).
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 - Strong performance leads to strong culture: strong culture is the consequence of a well-
performing organization.

- Culture contingent upon context to impact performance: the link between culture and
performance depends on the external environment, on the industry.

- Adaptive cultures leads to strong performance: it is not about having a strong or weak
culture, it is about the fact of having adaptive cultures that lead to strong performance.

 How do you see the role of organizational culture in organizational performance / health?

2 Competing Values Framework

2.1 Competing Values Framework

- Ultimate question of organizational effectiveness: How can an organization create value?

That was the initial research background for the competing values framework.
- The objective of framework: which competing values can we identity that will lead to create
value in a sustainable way.
- Importance of recognizing the underlying tensions or paradoxes in organizing and
organizations, the “competing values”
- Understanding the dynamics of competing values enables organizations to create value in a
sustainable way
- Serves as a map, an organizing mechanism, a sensemaking device, a source of new ideas,
and a learning system.
- Helps identify a set of guidelines that can enable executives to diagnose and manage the
interrelationships, congruencies, and contradictions among the different aspects of
organizations.

2.2 Organizational Culture Assessment Instrument

The OCAI consists of 6 questions. Each question has 4 alternatives. Divide 100 points among
these 4 alternatives depending on the extent to which each alternative is your preferred one.

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2.3 Competing Values Framework: Core dimensions

Empirical research revealed 2 core underlying dimensions of organizations:

- Flexibility & adaptability vs. Stability & control
- Internal orientation vs. External orientation

Flexibility and adaptability:

• Orientation towards flexibility, discretion, dynamism.
• Organizational effectiveness is being achieved by: change, agility, being adaptable,
changing systematically to the changing environment, being volatile
• Emphasis on inductive learning, speculative ideas, creative information processing.

Stability and control:

• Orientation towards stability, order, control, thinking in the long term
• Effectiveness = stable, predictable, mechanistic, longevity, steadiness
• Emphasis on deductive learning, rational ideas, methodological information processing

Internal orientation:
• Focus on the internal functioning, internal capability, integration of different functions and
unity of processes
• Value produced through harmonious internal characteristics
• Emphasize familiar information, harmonizing strategies, analyzing consistencies and
congruencies

External orientation:
• Focus on external opportunities, differentiation from and rivalry with outsides. It is a bit
more competitive that an organization with an internal orientation.
• Value produced through challenging and competing with rivals
• Emphasize unfamiliar events, confronting strategies, analyzing uniqueness, aberrations,
and dissimilarities.

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2.4 Competing Values Framework: 4 culture types

Clan culture:
• Flexibility and internal focus.
• It is also called family culture. Focused on smooth operations and functioning which
translates to cohesion, collaboration, teamwork, employee involvement.
• Contribute to harmony with a flexible way.
• Shared values and goals, cohesion, participativeness, individuality, sense of “we-ness”
• Teamwork, employee involvement, corporate commitment to employees
• Major task of management is to empower employees and facilitate their participation,
commitment, and loyalty

Adhocracy culture:
• Flexibility and external focus.
• Something temporary, being created for a specific purpose, something dynamic, very
adaptive, flexible, with a competitive focus.
• Related to environment, strong R&D, strong creativity, need to come up with solutions in
a very fast way.
• Foster adaptability, flexibility, and creativity where uncertainty, ambiguity, and
information overload are typical.
• Adhocracy > "ad hoc": implying something temporary, specialized, dynamic
• Major task of management is to foster entrepreneurship, creativity, and activity “on the
cutting edge”.

Hierarchy culture:
• Stability and internal orientation
• Rigidity, Stability, predictability, and efficiency: formal rules and policies hold the
organization together
• Maintaining efficient, reliable, fast, smooth-flowing production

Market culture:
• Stability and external orientation
• Major focus is to conduct transactions (exchanges, sales, contracts) with other
constituencies to create competitive advantage
• Core values are competitiveness and productivity. The glue that holds the organization
together is an emphasis on winning.
• The long-term concern is on competitive actions and achieving stretch goals and targets.
Success is defined in terms of market share and penetration.
• Focus on beating the competition, gaining competitive advantage, gaining market share,
in a rather stable way.
• Creating stability, more long term oriented with a strong focus on capturing market
share.

Microsoft is B = adhocracy

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Examples:

Beliefs in a market culture would be likely the opposite of the beliefs of the clan culture.
Market: collaboration is ok but having market share is better.
What is more relevant is the configuration of the 4 types. Which culture type is dominant is
important but the configuration is also important.

2.5 Examples

BCG
Mostly A but also a bit of B.
Human development and learning new things is important but it is also important to have new
ideas. Flexibility is important to them.

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Bombardier
Before the change: D because it was all about structure and control. Or C: because the main value
was that they were on the 3rd place on the market. The emphasis was on the engineering part, on
the internal processes. More on internal and stability side before the change. So, D.
After the change: from internal to external. They were focusing more on the customers and their
feedbacks.

2.6 Dynamic nature of organizational culture

Typical evolution based on lifecycle.

The Lifecycle of Apple:

1. Young dynamic organization: entrepreneurial and innovative
2. Growing success and agility stressing the feeling of 'Apple family'
3. Further growth pushed for control and standardization, leading to crisis. Not a shift
towards market culture but more towards hierarchical culture.
4. Development of mature, efficient, marketing savvy organization. Typical profile of a large
and mature organization that is competing in a healthy way in the industry, with a large
part of market culture and also hierarchical culture.

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2.7 The average profile

Typical profile: market culture is predominant. Secondly is hierarchy. Mature organizations are
usually not very innovative, which is why adhocracy is the least important.

2.8 Organizational subcultures

Sales and marketing: more stable but also focus on external market.

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2.9 A typical entrepreneurial cycle

2.10 Competing value: balancing tensions

Competing values is based on balancing tensions.

If you look at one dimension, for example clan culture.

If it is too low, the company is facing a slow death. If there is no opportunity for learning,
development, collaboration, the organization is dying. It is becoming a boring place to work.
If it is too high, then the company becomes more the style of irresponsible organization where
you do whatever you want. So, both are toxic for the organization.

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If you look at market culture:
If it is not enough market oriented, then it becomes irrelevant. You will lose your market share.
You will die in the end. But if you are too competitive, then you end up where people are being
exploited. You need to find a balance.

3 Linking culture to underlying organization theory

4 Linking culture to organizational direction

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5 Linking culture to organizational identity

6 Linking culture to Organizational Health

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 SESSION 6: ASPIRE: ORGANIZATIONAL COGNITION

Mindsets: a hypothetical experiment

1 Organizational mindsets

1.1 Organizational mindsets

We reproduce the rules without knowing. Mindsets get transmitted but we don’t have specific
reasons.

1.1.1 What are mindsets?

A mindset is “a fixed mental attitude or outlook that predetermines how people interpret
situations and respond to them”. It is “an organization’s inner working”. It is an organization’s
understanding of the world. It interprets huge amounts of information available to us by filtering
out some things and amplifying others, especially those that reinforce our existing beliefs.

Performance = Potential – Interference

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 created by self-imposed constraints that come from fear, self-doubt, lapses in focus, and
limiting assumptions. Your performance is not equal your full potential. Interference is caused
by our mindsets (fears about questions on an exam).

A polish in the government said, “A woman should earn less that men, because they are less
intelligent, inferior”. The mindset of this man is a closed mindset.

Mindsets are very strong and have an impact on the behavior that you demonstrate. Fixed
mindsets have a negative impact.

1.1.2 Examples of mindsets

- Locus of control of sales staff about customer behavior

- Attitude about coaching, performance feedback
- Theory X vs. Theory Y: X says humans by nature are lazy, they don’t like to compete and
if we want to motivate them, we need to give them orders. X is a fixed mindset. Y: assume
that people like to learn, to develop themselves, motivated by nature. We coach them,
give them feedback. Y is a growth mindset.
- Degree of workplace autonomy, trust
- Performance measurement
- Attitude towards change

1.1.3 Importance of understanding mindsets

Management practices are impacted by mindsets of your team and your own mindsets as a
manager.

- Realizing organization change

- Strategy implementation
- Organizational transformations
- Capability development
- Decision making
- Communication
- Learning and knowledge development

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1.1.4 Fixed vs. Growth mindsets

Giving feedbacks: different people react to feedbacks differently. Some people say “no it is your
fault”  fixed mindsets. Some people will see that as a lesson and want to learn from those
feedbacks  Growth mindsets

Fixed mindsets Growth mindsets

• Suggest that your abilities are innate and
unchangeable.
• View failure is permanent.
• View critical feedback as a personal
attack.
• Choose easier task and put in minimum
effort
• More likely to give up when they face
obstacles
• Focus is on measurable accomplishments.
• Less likely to take creative risks.
• Something you can improve through
practice.
• See failure as a chance to learn and pivot.
• View critical feedback as a chance to
improve and develop new systems.
• Embrace challenging tasks and work hard
to improve.
• View obstacles as a chance to experiment
and solve problems.
• Focus is more on a journey of continual
improvement.
• Creative risks are simply a way to
innovate and improve.

Provide examples of situations where you have experienced either growth or fixed mindsets at
work:
• What was the situation? During an exam
• How did the growth or fixed mindset manifest itself? I said that we did not have enough
time, that the questions were too hard. It is a fixed mindset.
• What was the impact / consequence?

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1.2 The discovery process

If you want to change mindsets, you don’t only focus on the level of outcomes, of the level of
behaviors, the level of managerial process, you have to go deep in the mindset level to be able to
change your mindsets. Changing mindsets takes time.

1.2.1 Uncovering organizational mindsets

Examples:

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What could be underlying fixed and growth mindsets and associated behaviors with regard to:
- Receiving feedback
- Failing at a task, exam, project
- Receiving a job application rejection letter
- Having lost a major sales account at work

Objectives
• Determine what behaviors are needed to adopt the desired management practices
• Unveil the root-cause mindsets that explain behaviors
• Bring subconscious mindsets to the forefront of consciousness where they can be analyzed

Tools / approaches
• Interview-based technique: “laddering”
• Focus group collages and card sorting
• Textual pattern analysis

1.2.2 “Laddering”

You go to the deeper level. Why do you do your job? What do you like in doing your job? With
those questions you can find out what mindset your team has.

1.2.3 Focus group collages

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1.2.4 Qualitative data analysis

Read text and do qualitative analysis on that text. You can start to identify patterns of fixed or
growth mindsets. By the words used, you can see what kind of mindsets are.

1.2.5 Outcome

Identify mindsets that should be strengthened and reinforced in order to achieve health
aspirations.

Identify mindsets that might create barriers to organizational health in order to abandon them
and create an explicit shift

Often moving:
• from transactional to relational way of working
• from working in silos to collaboration
• from assigning blame to accountability

Importance of “from/to” and “both/and”.

Combining deficit-based and constructionist approaches.

A growth mindset is not always better than a fixed mindset.

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1.2.6 Reframing Root-Cause Mindsets and Behaviors

1.2.7 Barriers to Digital Transformation

1.3 Case: Changing mindsets at Microsoft

Created a new mindset in the organization, which is becoming more focused on the growth
mindset.

• Why did Microsoft embark on the “growth mindset” journey?

When the new CEO took over, there was a lot of competition between employees, organization
was not very innovating, and it was very much a fixed mindset. Before becoming CEO, he was
employee at Microsoft, he knew what was going well and what was going wrong. This is a big
asset when you embark as a CEO, you have all the experience from within the organization.
There was also a lack of collaboration, the stack ranking system. Ranking employees based on
their performance. The problem with that system is that people start to focus more on
complying with performance criteria and less on doing a good job.

- Organization with high level of internal rivalry inertia

- Culture of internal competition and “not invented here” mindset
- Managerial and performance practices that kill collaboration

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 - Narrow vision of performance (ST) over market opportunities (LT)
- External competition by upcoming big players

• How would you describe the “growth mindset” at Microsoft?

Try to empower people. Microsoft moves to “know-it-all” to “learn-it-all”. “Know it all”, the
knowledge is more static, sounds that you know it already. “Learn it all” is much more dynamic,
knowledge becomes outdated, and you need to reinvent yourself. You have to learn all the time.

From “know-it-all” to “learn-it-all” emphasize dynamic learning, a culture based on the belief
that everyone can grow and develop.
A dynamic learning culture, focused on cooperation, collaboration, listening, learning, and
harnessing individual passions and talents.

• How did Microsoft implement the “growth mindset”?

Changing values. Working with reminders in the organizations, like signs in the elevator,
missions in the reception area.
- CEO letter emphasizing the choice/drive to make a difference
- Annual executive retreat opening up to become more inclusive
- Identifying three pillars of the growth mindset: customer obsession, diversity and
inclusion, and One Microsoft
- Implementing a new performance review system with continual feedback and coaching
- CEO role modeling: publicly acknowledging mistakes

• What is the impact of the “growth mindset” on the organization?

- Employee satisfaction rate went up.

- Customers are more satisfied with the products and services of Microsoft.
- Financial performance (stock price, S&P performance index…)
- Organization that attracts top talent
- First-choice partner for organizations undergoing digital transformation
- High degree of appreciation of the CEO (95% glassdoor rating)

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Mindsets of excellent CEOs:

Typical mindsets and behaviors of CEOs.

What mindsets do you recognize at Microsoft?

2 Managerial and Organizational Cognition

2.1 Overview of the MOC field

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2.1.1 Managerial & Organizational Cognition (MOC)

• Origins in behavioral psychology and cognitive psychology

• Simon(1947). Administrative Behavior: Bounded rationality

o Bounded rationality: “actors are unable to take decisions in a completely rational
manner, due to the fact that they are constrained by fundamental information
processing limitations”. When we think we think rationale, it is a balance between
rationality and intuition.

• Information processing model: “the way in which individuals act is driven ultimately by
the way in which they interpret their worlds (perception), this in turn being shaped in
part by the past experiences and learning”

• Fundamental concerns of MOC: mental representation.

o Individuals are limited in their ability to process the richness of stimuli contained in
the external world
o Consequently, they reduce the burden of information processing by developing a
simplified understanding of reality
o These mental representations act as filters through which incoming information is
processed

2.1.2 MOC: Different approaches

“Managers construct, rearrange, single out, and demolish many ‘objective’ features of their
surroundings. When people act they un-randomize variables, insert vestiges of orderliness, and
literally create their own constraints... There is a reciprocal influence between subjects and
objects, not a one-sided influence such as implied by the idea that a stimulus triggers a response.
This reciprocal influence is captured in the organizing model by the two-way influence between
enactment and ecological change”

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 • Information-processing perspective
o Information processing limitations of organizational actors
o Strategies employed to overcome these limitations
o Organizations = systems of information
• Interpretive perspective
o Understanding of the ways in which realities are socially constructed
o Organizations = systems of meaning

2.1.3 Examples of ‘frames’ in organization

- Organizational founder’s vision, mission, ambition, aspirations

- Organization’s strategy (industry, market, Corp & BU strategy, ...)
- Organization’s Top Management Team and managerial layers
- Organizational Identity (‘who we are’ defines ‘what we do’)
- Organizational Image (‘how others see us’ defines ‘who we are’)
- Organizational Culture (cfr. competing values, psychological safety, ...)
- Organizational structure (specialization, centralization, task descriptions,...)
- Organizational capabilities and capability development processes
- Organizational communication, categories, typologies, vocabularies, ...
- Environment (regulations, industry trends, macro dynamics, ...)
- Performance definition and measurement

All these things have an impact on how managers interpret reality.

2.2 Information-processing perspective

2.2.1 Bounded rationality

• The limited information-processing capability of human beings makes it impossible to

assimilate and understand all the information necessary to optimize
• Bounded rationality is constructing simplified models that extract the essential features
from problems without capturing all their complexity
• Decision making under bounded rationality is composed of three steps:
o Limited search for criteria and alternatives – familiar criteria and easily found
alternatives
o Limited review of alternatives – focus on alternatives, similar to those already in
effect
o Satisficing – selecting the first alternative that is “good enough”

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Our brain is huge but when we have to apply it, our brain is small. We use only 4-5% of our
brain.
2.2.2 Insights from behavioral strategy

Actions-oriented biases:
- Excessive optimism
- Overconfidence: ex of starting your own business: only 5% succeed to survive, but still
people are developing their own business because they are convinced they will succeed.
- Competitor neglect

Interest biases:
- Misaligned individual incentives
- Inappropriate attachments
- Misaligned perception of corporate goals

Social biases:
- Groupthink (ex: imitate the behavior of others, if you look up and keep looking up, the
others will look up). Groupthink is not productive because you don’t dare to give your
opinion and ask questions.
- Sunflower management

Pattern-recognition biases:
- Confirmation bias: when you have a specific opinion and look for further information,
you will only see the information confirming your opinion.
- Management by example
- False apologies
- Power of storytelling
- Champion bias

Stability bias:
- Anchoring
- Loss aversion
- Sunk-cost fallacy
- Status quo bias

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2.2.3 Debiasing the corporation

What can organization do to be more aware of biases?

- Write stuff down (fighting hindsight bias): When we make a decision and after some
time the situation is not involving, you look back at the point in time you made the
decision. You have to right down.
- Forecasting follies (and confidence limits): be critical when using forecast to make a
decision. Your answer will always be biased.
- Nudging the corporation (choice architecture)
- Diversity (in thinking)
- Making better decisions through technology

Example of nudging: people were getting fat and everyone always took the escalator. Making the
stairs like a piano was more fun.

Other example: changing the size of your plate will make you eat less.

2.3 Case: Combating bias at RWE

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 - Learn from postmorterm analysis and from “mistakes”
- Account for variety of “mistakes”: managerial performance exogenous factors,
unforeseeable factors
- Fighting biases: scan the decision-making process for biases: “debiasing”
- Psychological safety:
o Cultivating a critical mindset
o Feeling comfortable with some conflict
o Obligation to dissent
o Devil’s advocate
- Adopt different decision-making processes based on different types of decisions to be
made.

3 Ted Talk: Are we in control of our own decisions?

Idea to write a cookbook but everyone said “cute but not for us”. He had to write about his
research first and then publish the cookbook. He actually enjoyed writing it and he learned a lot
from people.

Which one seem longer? The left one. But actually, when we draw a line on them, they are the
same size. Our intuition is fooling us.

What color do you see that the top arrow is pointing to? Brown. The bottom arrow? Yellow. But
actually, they are identical.

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Illusion is a metaphor. Vision is one of the best things we do. We have a huge part of our brain
dedicated to vision, we do more vision more hours of the day than anything else. If we have this
predictable repeatable mistake in vision, which we are so good at, what are the chances we don’t
make even more mistakes in something we are not as good at.

People dedicated to give donating organs:

There are 2 types of countries, countries on the right that seem to be giving a lot, and countries
on the left that seem to be giving very little. Why? People tend to think it has something to do
with culture but when we look at it, Sweden and Denmark are culturally very similar but are
opposites on the graph. The Netherlands is on the left, Belgium is on the right. Germany is on the
left; Austria is on the right.
The Netherlands: reached 28% by mailing every household a letter begging people to join the
organ donation program.

Countries on the left have a form at the DMV that says, “check the box below if you want to
participate in the organ donor program”.  people don’t check and don’t join.
Countries on the right have a different form that says, “check the box below is you don’t want to
participate in the organ donor program”.  people don’t check and join.

We think we make decisions. But actually, much of these decisions are not residing within us.
They are residing by the persons who are designing that form. We have the feeling that we are in
control and we are making the decisions, but it’s very hard to accept the idea that we actually
have an illusion of making a decision, rather than an actual decision.

Example:

Here is a patient. He is a 67-year-old farmer. He's been suffering from right hip pain for a while."
And then, they said to the physicians, "You decided a few weeks ago that nothing is working for
this patient. All these medications, nothing seems to be working. So you refer the patient for hip
replacement therapy.

Then they said to half of the physicians, yesterday, you reviewed the patient's case, and you
realized that you forgot to try one medication. You did not try ibuprofen. What do you do? Do
you pull the patient back and try ibuprofen? Or do you let him go and have hip replacement?
That group of physicians decided to pull the patient and try ibuprofen.

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To the other group of physicians, they said, "Yesterday when you reviewed the case, you
discovered there were two medications you didn't try out yet -- ibuprofen and piroxicam." You
have two medications you didn't try out yet. What do you do? You let him go, or you pull him
back? And if you pull him back, do you try ibuprofen or piroxicam? Now, think of it: This decision
makes it as easy to let the patient continue with hip replacement, but pulling him back, all of the
sudden it becomes more complex.

Other example: online subscription for 59 dollars, a print subscription for 125 dollars, or you
could get both for 125. Relative to the option in the middle, which was get only the print for 125,
the print and web for 125 looked like a fantastic deal.
The general idea here, by the way, is that we actually don't know our preferences that well. And
because we don't know our preferences that well, we're susceptible to all of these influences
from the external forces: the defaults, the particular options that are presented to us, and so on.

I think that if we understood our cognitive limitations in the same way we understand our
physical limitations, even though they don't stare us in the face the same way, we could design a
better world, and that, I think, is the hope of this thing.

4 Cognition and Organizational Health

Internal alignment:
- Mindsets and frames shape how organizational members interpret strategies & goals
- Intended missions, visions, goals, strategies, identities, culture create unintended side-
effects
- Important that your minds are in the similar direction, that there is an alignment.

Quality of execution:
- Awareness and understanding of underlying mindsets and sensemaking processes is
KEY to organizational excellence
- The broader an organization’s ‘stock’ of mindsets they can deal with, the more
complexity they can handle

Capacity of renewal:

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 - Fixed frames prevent organizations from renewing
- Adopting different - paradoxical - perspectives generates a healthy basis for long-term
renewal
- Important to deal with complexity. Cultivating a broad portfolio of mindsets is way to
deal with complexity.

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 SESSION 7: ASSESS: ORGANIZATIONAL CAPABILITIES

1 Organizational Capabilities: Theory

1.1 Resource-based view of the Firm

What is strategic management? It is a long-term plan for an organization to help move to a

specific direction the company wants to go. The organization sets specific goals.

Internal analysis: about the company itself. It is about the resources and core capabilities of the
organization.

Resources-based view refers at the internal part. It looks at how it cultivates resources. The
resources-based view answers the question “How can organization realize a sustained
competitive advantage and what resources do we need for that?”.

Tangible resources: what you can touch, building, equipment, plant

Intangible resources: patents, intellectual property or capital, software

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For resources to contribute to the competitive advantage, they need to be heterogenous and
immobile. It means that only you have access to those resources, so that competitors cannot
copy them.

Resources need specific criteria to be able to lead to a competitive advantage.

1.1.1 Factors explaining superior firm performance

Organization will perform in a superior way when they will have gained a sustained competitive
advantage. Does it come from firm effects, industry effects or other effects?
Firm effects/ internal factors are responsive for explaining 55% of the difference in firm
performance.

1.1.2 Resources and Competitive advantage

Firm resources:
• Physical capital resources: technology, assets, equipment, location, access to raw
materials, ...
• Human capital resources: individual managers and their training, expertise, judgment,
intelligence, relationships, ...
• Organizational capital resources: reporting structure, planning, controlling and
coordinating systems, ...

(Sustained) Competitive advantage:

• Implementing a value creating strategy that is not simultaneously being implemented by
any current or potential competitors (and when these firms are unable to duplicate the
benefits of this strategy)

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1.1.3 VRIO and competitive advantage

4 criteria that resources need to comply with:

Copy the innovation process, the learning is really difficult. That means we need access of the
DNA of the organization, the deep roots of organizations.

1.2 Dynamic capabilities view of the Firm

Resources-based view is a bit outdated, so they shift to the dynamic capabilities view.
Resources-based view couldn’t answer some of the key questions.

Unaddressed questions of the resource-based view:

- How can organizations create new resources?
- How can organizations refresh their current stock of resources?
- How to resources evolve over time in order to maintain sustainable competitive
advantage?
- How do organizations refresh their resource mix in rapidly changing environments?

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Dynamic capabilities are the means by which an organization has the ability to renew and
recreate its strategic capabilities to meet the needs of changing environments.

Such capabilities are distinct from ordinary capabilities that may be necessary to operate
efficiently now but that may not be sufficient to sustain superior performance in the future.

‘the firm’s ability to integrate, build, and reconfigure internal and external competences to
address rapidly changing environments’

‘the capacity of an organization to purposefully create, extend or modify its resource base’

‘a firm’s behavioral orientation constantly to integrate, reconfigure, renew and recreate its
resources and capabilities and, most importantly, upgrade and reconstruct its core capabilities
in response to the changing environment to attain and sustain competitive advantage’

1.2.1 Examples of dynamic capabilities

Dynamic capabilities are mostly process, because they are hard to copy.

• R&D processes
• Acquisition processes
• Product innovation
• Absorptive capacity
• Organizational structure reconfiguration
• Resource divestment
• Learning & unlearning
• Strategic agility
• Ambidexterity (balancing exploitation & exploration)
• Ambidextrous leadership – Cognitive & behavioral complexity
• Overall capability to deal with paradox

1.3 Institutional capabilities

1.3.1 Determining institutional capabilities

1. Determining institutional capabilities

What capabilities does an organization need to fulfill its performance aspirations?
What organizational capabilities are genuinely strategic?
Process of determining institutional capabilities = embedded as a permanent feature of an
organization

2. Assessing current state of capabilities

What is the current state of an organization’s strategic or institutional capabilities?
Risk at overestimating an organization’s capabilities!

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1.3.2 Institutional capabilities require 3 systems

Technical system: “what we need”

Having the ‘right’ equipment, tools, infrastructure, processes, procedures, technology, assets, ...

Management system: “how we manage”

Having the ‘right’ structures, incentives, roles, decision rights; performance, talent & knowledge
management processes, etc...

Behavioral system: “how we act”

Having the ‘right’ knowing, understanding, experience, skills, behaviors, mindsets, culture, ...

1.3.3 Elements of “institutional capabilities”

Which need all 3 of them. But the one most difficult to cultivate is the management system. It is
one of the most intangible things to copy.

1.3.4 Institutional capabilities @ Bombardier

During organizational transformation at Bombardier, what institutional capability / capabilities

have been prioritized?
 “deliver continuous improvement for the benefit of the customer” (within existing execution
archetype). The competitive advantage of Bombardier is improvement and the way it
implements it.

What are the elements of the technical, managerial, and behavioral systems that support the
institutional capability?

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2 Organizational Agility

What is the opposite of fragile?

Resilient? Strong? Robust? Flexible?  Fragile >< Agile

Agility is the ability of an organization to renew itself, adapt, change quickly, and succeed in a
rapidly changing, ambiguous, turbulent environment. Agility is not incompatible with stability—
quite the contrary. Agility requires stability for most companies. The key is the balance
between flexibility and stability.

2.1 Organizational Agility at ING

• What is agility?
“Agility is about flexibility and the ability of an organization to rapidly adapt and steer itself in a
new direction. It’s about minimizing handovers and bureaucracy, and empowering people.”

• What is the rationale for implementing organizational agility? Why did ING decide to embark
on agile organization?
- Update organizational model by looking at other industries. They looked at other types
of organizations and thought they were a bit too bureaucratic compared to those
organizations. They wanted to become more flexible.
- Need for improved customer orientation & employee engagement
- Culture of silo-thinking, bureaucracy & risk-aversion
- Mindset of continuous transformation while performing well
- Awareness of changing customer behavior and expectations

• Challenges:
- Deciding how much power to give up
- Convincing stakeholders and anticipate resistance
- Building fluid structures around customers: new roles & governance
- Balancing oversight and autonomy for employees
- Providing development and growth opportunities: if you want your employees to make
more decisions, you need to train them.
- All employees were somehow without a job and had to reapply to another position

• The role of organizational culture:

“Culture is perhaps the most important element of this sort of change effort. It is not something,
though, that can be addressed in a program on its own. We have spent an enormous amount of
energy and leadership time trying to role model the sort of behavior—ownership,
empowerment, customer centricity—that is appropriate in an agile culture. Culture needs to be
reflected and rooted in anything and everything that we undertake as an organization and as
individuals.”

ING video

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Cultural change is one of the success factors to become agile:

2.2 Example of Agile organizations

Agility is a shift in the model of what an organization is, and how it operates

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Agile organizations are simultaneously:
- Stable: resilient, reliable, efficient
- Dynamic: fast, nimble, adaptive

Design structures, governance, and processes with

- a relatively unchanging set of core elements (fixed backbone)
- looser, more dynamic, adaptive elements (dynamic apps)

Balancing tensions in terms of structure, governance & process

- Dynamic cross-cutting teams that form, dissolve, and re-form as resources shift in
response to market demands
- Stable and dynamic elements in making decisions through dynamic committees adopting
balanced governance
- Standardizing signature processes with continuous improvement

Agility transforms every facet of the organization: people, process, strategy, structure, &
technology.

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Design structures, governance, and processes with
- a relatively unchanging set of core elements (fixed backbone)
- looser, more dynamic, adaptive elements (dynamic apps)

Examples of “backbone” elements

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Agile business units are still in minority

2.3 Organizational Agility at Zalando

2.4 Agility and mindset shifts

2.5 Agile transformation

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