Sample Questions

Saturday, August 28, 2021 10:44 AM

1. FUNCTIONAL STRUCTURE CHARACTERISTICS VS DIVISIONAL STRUCTURE CHARACTERISTICS •

A Functional Structure has two layers. The first layer is where work is grouped by technical similarities. Activities that share the same
knowledge, infrastructures, technologies, tools, are grouped together and they belong to one function. The second is the Horizontal
specialization where functions represent the activities carried out by the company in its sector(s).

Advantages of Functional Structures−

Provides people with the opportunity to learn from one another and become more specialized and productive

People who are grouped together by common skills can supervise one another and control each other’s behavior

People develop norms and values (“functional culture”) that allow them to become more effective at what they do

Problems in a functional Structures

Communication Problems: as more organizational functions develop, each with their own hierarchy, they become increasingly distant from
one another

Measurement Problems: information needed to measure the profitability of any functional group is difficult to obtain

Location Problems: centralized control hinders ability to satisfy the special needs in different geographic regions

Customer Problems: servicing the needs of new kinds of customers and tailoring products to suit them is relatively difficult

Strategic Problems: top managers spend too much time finding ways to improve coordination

Divisional Structure−

Organizations most commonly adopt the divisional structure to solve control problems that arise with too many products, regions, or
customers. Divisional structure is dependent on control problem to be solved It helps create smaller, more manageable subunits. Divisional
structures are−

1.Excellent in customer care and strategic differentiation.

2.Weak in economies of scale and functional specialization.
3.Divisional structures are excellent in growth and expansion strategy implementation
It is divided into a product structure, which is essentially, a divisional structure in which products (goods or services) are grouped into
separate divisions according to their similarities or differences Organizations need to decide how to coordinate its product activities with
support functions.

A. PRODUCT STRUCTURE WITH CENTRALIZED SUPPORT FUNCTIONS

B. MULTIDIVISIONAL STRUCTURE WITH AUTONOMOUS SUPPORT FUNCTIONS
C. MULTIDIVISIONAL STRUCTURE WITH INDEPENDENT OD SOLUTIONS WITHIN EACH DIVISION

When the control problems that companies experience are a function of geography, a geographic divisional structure is appropriate. It allows
the organization to adjust its structure to align its core competences with the needs of customers in different geographic regions. It allows
some functions to be centralized and others decentralized.

A market divisional structure aligns functional skills and activities with the needs of different customer groups.
Customer groups can be identified as:

Type of customer and their needs (e.g. business vs consumer)

Type of industry in which customer operates (e.g. transportation, financial, telecom, etc)

Each customer group has a different marketing focus, and the job of each group is to develop products to suit the needs of its specific
customers. Each customer group makes use of centralized support function.

Disadvantages of Divisional Structure−

1.Complex and expensive to manage,

2.Transfer prices can be source of conflicts,
3.Can be bureaucratic and less agile

DETERMINANTS OF OVERCONFIDENCE AND WAYS TO CONTRAST IT

Overconfidence, is associated, with lowering of attention and end up in a spiraling trap. People who fall into grave difficulties are usually
experts in their fields. They end up in overconfidence traps and this lets you take wrong decisions and higher risk. You are under
representative or availability heuristics. To explain this, we can use the example of a crash landing of airplane on water. The bubble of
overconfidence is created so that people behave in a disciplined manner and are compliant with the rules. Overconfidence is a two sided
coin − nudge people to create a common behavior or create risky behavior.

Regarding its roots, it seems that individual factors like cognition, self efficacy and motivation combined with organizational and
environmental factors are the main causes of overconfidence among entrepreneurs. Overconfidence impacts entrepreneurial decisions
profusely and has dual effects on entrepreneurial enterprises. On one hand, overconfidence leads to entrepreneurial unprepared entry
decisions into market and subsequent failure, on the other hand, in uncertain environments and under time pressure overconfidence could
be entrepreneurs’ last resort to make decisions. Under special entrepreneurial situations like decision uncertainty and decision complexity,
heuristics and biases, especially overconfidence are common in entrepreneurial decisions.
Overconfidence is just around the corner: it’s a risk and it’s a reassuring opportunity
Optimism bias is one version of the overconfidence.

The overconfidence effect is a well−established bias in which a person's subjective confidence in his or her judgments is reliably greater than
the objective accuracy of those judgments, especially when confidence is relatively high. Overconfidence is one example of a miscalibration
of subjective probabilities. Throughout the research literature, overconfidence has been defined in three distinct ways: (1) overestimation of
one's actual performance; (2) overplacement of one's performance relative to others; and (3) overprecision in expressing unwarranted
certainty in the accuracy of one's beliefs.

How can we contrast overconfidence?

- Have a positive reaction or outlook

- Recognize problems
- Do not spiral into delusion of everything being perfect
- Leading people and giving advice to them implies using positive strategies
1. Social Incentives 2. Immediate Rewards 3. Progress Monitoring 4. Perceived Control
People are social animals: we want to be compliant to similar others. Improve your performance, people operate on comparison with
others. We want to be compliant to match others.

MATRIX ORGANIZATIONAL STRUCTURES: EXPLAIN HOW THEY SHOULD WORK TO ACTUALLY BALANCE THE FUNCTIONAL AND THE DIVISIONAL
POWER

Matrix structure: an organizational design that groups people and resources in two ways simultaneously, by function and product
A matrix is a rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility
The members of the team are called two−boss employees because they report to two superiors: the product team manager and the
functional manager. The team is the building block and principal coordination and integration mechanism. Matrix structures combine both
the functional structure and the BU perspective responding to fast changing environments without cost and infrastructure of rigid and
complex divisional giant organizations or function focused functional structures.

How do we successfully implement a matrix design?

Matrix structures need a duplication of all management systems

Career, rewards, budgeting, hiring, information systems, communications must be channeled and supervised across the two side of the
matrix organization. If this doesn’t happen the two boss manager will opt to contribute to the side of the matrix where there is more power.

Matrix structures work better under matrix cultures •This often implies hiring people from the bottom and teaching them to work under the
matrix culture from day 1.

Matrix structures need collegial decisional bodies (i.e. directors’ committee) that sort problems out •Management committees should work a
“court of appeal”, to solve problems and push out conflicts.

Matrix structures should delegate power to professionals •Two boss managers should be granted with a higher degree of autonomy to make
decisions.

MOTIVATING EMPLOYEES: EXPLORE THE PROCESS BASED APPROACH

A separate stream of research views motivation as something more than action aimed at satisfying a need. Instead, process−based theories
view motivation as a rational process. Individuals analyze their environment, develop thoughts and feelings, and react in certain ways.
Process theories attempt to explain the thought processes of individuals who demonstrate motivated behavior.
Two main process−based theories are equity theory and expectancy theory.

Equity theory is about perceived fairness. The theory says motivation depends on a comparison to others, called a referent. The employee
compares his input and output to colleagues, someone at another firm, or a cousin in another state. If an employee feels he is putting more
into a job than what he gets out of the job, relative to the referent, he will become demotivated, disgruntled, and even disruptive.
According to equity theory, perceived unfairness can cause distress for both the person who feels slighted and the person who gets more
than she deserves.

Expectancy theory focuses on the cognitive process. It argues that motivation depends on the strength of the expectation that the activity
will result in a consistent and favorable outcome for an individual. Expectancy theory is comprised of three components: expectancy,
instrumentality, and valence. Expectancy is the belief or expectation that the employee can accomplish the goal. Instrumentality asks if
management will honor the bargain. Instrumentality is high if the employee believes success will be rewarded. Valence is the degree to
which an employee values the rewards, such as a promotion or pay raise.

From <https://courses.lumenlearning.com/suny−principlesmanagement/chapter/reading−process−based−theories−of−motivation/>

TASK COMPLEXITY DEFINED ACCORDING TO DIFFERENT OD MODELS

The greater the task uncertainty, the greater the amount of information that must be processed among decision makers during task
execution in order to achieve a given level of performance. The basic effect of uncertainty is to limit the ability of the organization to preplan
or to make decisions about activities in advance of their execution. If the task is well understood prior to performing it, such of activity can be
preplanned. If it is not understood, then during the actual task execution more knowledge is acquired which leads to changes in resource
allocations, schedules, and priorities.
Task complexity recalls the high needs for integration and differentiation by the L&L Model. Task Complexity depends on TD and TC.
Service industries have to manage information needs, as a daily issue: the Galbraith 2 model best fits in these cases. Task complexity and
intra−unit task interdependence are each sources of uncertainty and of information processing requirements.
Low TC − (ACME)− Big volume of production, no delegation of authority or decentralize authority. Reward Structure can be quantitative
High TC − Task clarity, Feedback time is more− you better have a very low degree of formalization− delegation power− narrow structure− don’t
get into minor details ( OMEGA)
EXPLAIN WHAT COMPANIES SHOULD DO IN CASE THE INTEGRATION NEEDS ARE VERY HIGH

After the task has been divided, into specialist subtasks, the problem is to integrate the subtasks around the completion of the global task.
This is the problem of organization design. There might be a situation that makes the integration needs in an organisation rise. The behaviors
that occur in one subtask cannot be judged as good or bad per se. The behaviors are more effective or ineffective depending upon the
behaviors of the other subtask performers. There is a design problem because the executors of the behaviors cannot communicate with all
the roles with whom they are interdependent. Therefore the design problem is to create mechanisms that permit coordinated action across
large numbers of interdependent roles. Each of these mechanisms, however, has a limited range over which it is effective at handling the
information requirements necessary to coordinate the interdependent roles. As the amount of uncertainty increases, and therefore
information processing increases, the organization must adopt integrating mechanisms which increase its information processing capabilities.

1. Coordination by Rules or Programs

For routine predictable tasks March and Simon have identified the use of rules or programs to coordinate behavior between interdependent
subtasks. To the extent that job related situations can be predicted in advance, and behaviors specified for these situations, programs allow
an interdependent set of activities to be performed without the need for inter unit communication. Each role occupant simply executes the
behavior which is appropriate for the task related situation with which he is faced.

2. Hierarchy

As the organization faces greater uncertainty its participants face situations for which they have no rules. At this point the hierarchy is
employed on an exception basis. The recurring job situations are programmed with rules while infrequent situations are referred to that level
in the hierarchy where a global perspective exists for all affected subunits. However, the hierarchy also has a limited range. As uncertainty
increases the number of exceptions increases until the hierarchy becomes overloaded.

3. Coordination by Targets or Goals

As the uncertainty of the organization's task increases, coordination increasingly takes place by specifying outputs, goals or targets. Instead of
specifying specific behaviors to be enacted, the organization undertakes processes to set goals to be achieved and the employees select the
behaviors which lead to goal accomplishment. Planning reduces the amount of information processing in the hierarchy by increasing the
amount of discretion exercised at lower levels. Like the use of rules, planning achieves integrated action and also eliminates the need for
continuous communication among interdependent subunits as long as task performance stays within the planned task specifications, budget
limits and within targeted completion dates. If it does not, the hierarchy is again employed on an exception basis. The ability of an
organization to coordinate interdependent tasks depends on its ability to compute meaningful sub goals to guide subunit action. When
uncertainty increases because of introducing new products, entering new markets, or employing new technologies these sub goals are
incorrect. The result is more exceptions, more information processing, and an overloaded hierarchy.

DIFFERENTIATION AMONG FUNCTIONAL SUB − ENVIRONMENTS: DISCUSS ITS DETERMINANTS

WHY GROUP PRESSURE HAPPENS IN TEAMS? WAYS TO CONTRAST IT

As pressure on results increases, quality of decision deteriorates.

Different cognitive styles= different conclusions in decision making=more pressure on results = decreased quality of decision
The group usually has different views on matters of high priority and as this number increases the group pressure increases. This leads to
dysfunctional behaviors like−

• Cutting off others • Attacking people rather than issues • Topic jumping • Dominating • Attending to side issues −nitpicking • Side
grouping − side conversations • Avoiding responsibility • Operating on assumptions − “not checking it out ”
Ways to contrast this behavior would be

1. Following the methodical approach to group discussions− Forming, Storming, Norming, Performing
2. Seek to make each person welcome •
3. Ask or comments from those reacting nonverbally •
4. Encourage each to listen to others •
5. Request that all state their feelings •
6. Give positive feedback or support •
7. Involve everyone − ask for everyone’s reactions •
8. Keep relationships honest and supportive •
9. Maintain a sense of freedom and mutual responsibility •
10. Listen to those who speak •
11. Encourage group members to state their opinions •
12. Avoid direct argument with a group member •
13. Use inclusive language (i.e. “we ”) • Exhibit “Sharing Behavior ” (offer rides, bring snacks)

WHY PEOPLE MAKE BAD DECISIONS?

In the large number of decisions we take throughout the day, some of these choices turn out to be really good (you choose a college major
that then leads to a rewarding career), while others end up being not so great (the turkey sandwich you selected was awful and it upset your
stomach).There are a number of factors that contribute to poor choices and knowing how these processes work and influence your thinking
can perhaps help you to make better decisions in the future. Optimizing criteria for decision making is under attack: its implementation is
challenged everyday by practical obstacles and cost of processing information. A limited rationality model becomes more realistic to explain
how human beings behave.

Factors that affect our decision making are innumerous, however, to put in words, these are some of the ways our brain tricks us into
believing that quick judgements are best− when actually things are not usually right that way.
In order to make decisions quickly and economically, our brains rely on a number of cognitive shortcuts known as heuristics.1
These mental rules−of−thumb allow us to make judgments quite quickly and often times quite accurately, but they can also lead to fuzzy
thinking and poor decisions. We rely on heuristics as they help us simplify a complex problem, reduce our effort and used by our brain to
reduce the mental effort, called cognitive laziness and/or be fast in decision making.

Types of Heuristics
 1. Availability Heuristic − The availability heuristic involves making decisions based upon how easy it is to bring something to mind. When
you are trying to make a decision, you might quickly remember a number of relevant examples. Since these are more readily available
in your memory, you will likely judge these outcomes as being more common or frequently occurring.
2. Representativeness Heuristic− The representativeness heuristic involves making a decision by comparing the present situation to the
most representative mental prototype. When you are trying to decide if someone is trustworthy, you might compare aspects of the
individual to other mental examples you hold.
3. Affect Heuristic− The affect heuristic involves making choices that are influenced by the emotions that an individual is experiencing at
that moment. For example, research has shown that people are more likely to see decisions as having benefits and lower risks when
they are in a positive mood. Negative emotions, on the other hand, lead people to focus on the potential downsides of a decision
rather than the possible benefits.
4. Anchoring− The anchoring bias involves the tendency to be overly influenced by the first bit of information we hear or learn. This can
make it more difficult to consider other factors and lead to poor choices. For example, anchoring bias can influence how much you are
willing to pay for something, causing you to jump at the first offer without shopping around for a better deal.

Heuristics can also contribute to things such as stereotypes and prejudice.5

Because people use mental shortcuts to classify and categorize people, they often overlook more relevant information and create
stereotyped categorizations that are not in tune with reality.

Another key aspect that makes us take bad decisions is − Overconfidence.

The overconfidence effect is a well−established bias in which a person's subjective confidence in his or her judgments is reliably greater
than the objective accuracy of those judgments, especially when confidence is relatively high. Overconfidence is one example of a
miscalibration of subjective probabilities. Throughout the research literature, overconfidence has been defined in three distinct ways:
(1) overestimation of one's actual performance; (2) overplacement of one's performance relative to others; and (3) overprecision in
expressing unwarranted certainty in the accuracy of one's beliefs.

Third, you can be too optimistic in making decisions.

Surprisingly, people tend to have a natural−born optimism that can hamper good decision−making. In one fascinating study, researcher Tali
Sharot asked participants what they thought the chances were of a number of unpleasant events happening—things such as being robbed or
getting a terminal illness.3 After the subjects had given their predictions, the researchers then told them what the actual probabilities were.
Part of this overly optimistic outlook stems from our natural tendency to believe that bad things happen to other people, but not to us. When
we hear about something tragic or unpleasant happening to another person, we often tend to look for things that the person might have
done to cause the problem. This tendency to blame the victims protects us from having to admit that we are just as susceptible to tragedy as
anyone else.
Sharot refers to this as the optimism bias, or our tendency to overestimate the likelihood of experiencing good events while underestimating
the likelihood of experiencing bad events.3 She suggests that this isn't necessarily a matter of believing that things will just magically fall into
place, but instead overconfidence in our own abilities to make good things happen.

Apart from the reasons listed above, we need to understand that our decision making ability is highly influenced by comparisons (Gilbert),
where you are comparing your options to are not representative or equal and fall prey to faulty comparisons.