UNIT 5: ORGANIZATIONAL STRUCTURE, CULTURE AND

CHANGE

OBJECTIVES

1.Understand how efficient management

structures are vital for success

2. Understand cooperate culture

4. Explainhow to manage organizational

change

READING 1: COMPANY STRUCTURE

A. Discussion
- How many different ways of organising or structuring a company can you think of?
Think about departments, products and markets.

- If you work for a company or organisation, how would you describe the company structure?

B. Reading: DOING THE BUSINESS

Rosin Ingle hears how efficient management structures are vital for success
 The need for a solid structure within all business entities is “absolutely
fundamental”, according to Ms Angela Tripoli, a lecturerinBusinessAdministration at
University College Dublin. “Organizational structure concerns who reports to whom in the
company and how different elements are grouped together. A new company cannot go
5 forward without this and established companies must ensure their structure reflects their
target markets, goals and available technology.”

Depending on their size and needs there are several organizational structures
companies can choose from. Increasingly though, in the constantly evolving business
environment, “many firms are opting for a kind of hybrid of all of them.”

10 The most recognisable set up is called the functional structure where a fairly
traditional chain of command (incorporating senior management, middle management
and junior management) is put in place. The main benefit of this system is clear lines of
communication from top to bottom but it is generally accepted that it can also be a
bureaucratic set up which does not favour speedy decision-making.

15 More and more companies are organising themselves along product lines where
companies have separate divisions according to the product that is being worked on. “In this
case the focus is always on the product and how it can be improved.”

The importance for multinational companies of a good geographic structure, said Ms

Tripoli, could be seen when one electrical products manufacturer produced an innovative
20 rice cooker which made perfect rice - according to western standards. When they tried to
sell it on the Asian market the product flopped because there were no country managers
informing them of the changes that would need to be made in order to satisfy this more
demanding market.

The matrix structure first evolved during a project developed by NASA when they
25 needed to pool together different skills from a variety of functional areas. Essentially the
matrix structure organises a business into project teams, led by project leaders, to carry
out certain objectives. Training is vitally important here in order to avoid conflict between
the various members of the teams.

During the 1980s a wave of restructuring went through industry around the globe.
30 This process, known as delayering, saw a change in the traditional hierarchical structures
with layers of middle management being so removed. This development was driven by
 new technology and by the need to reduce costs. The overall result was organisations that
were less bureaucratic.

The delayering process has run its course now. Among the trends that currently
35 influence how a company organises itself is the move towards centralisation and
outsourcing. Restructuring hasevolved along with a more “customercentric” approach
that can be seen to good effect in the banks. They now categorise their customers and their
complex borrowing needs into groups instead of along rigid product lines.

Another development can be seen in larger companies, which are giving their
40 employees more freedom to innovate in order to maintain a competitive edge.

Ms Julia MacLauchlan, Director of Microsoft's European Product Development

Centre in Dublin, said the leading software company had a very flat organizational structure.
“There would not be more than around seven levels between the average software tester
and Bill Gates,” she said.

45 Microsoft is a good example of a company that is structured along product lines.

In Ireland, where 1,000 employees work on localisation of the software for all Microsoft's
markets, the company is split up into seven business units. Each unit controls the localisation
of their specific products while working closely with the designers in Microsoft's Seattle
Headquarters.

50 It works, said MsMaclauchlan, because everyone who works in the unit is “incredibly
empowered”. “Without a huge bureaucratic infrastructure people can react a lot more
quickly to any challenges and work towards the company's objectives.”

From The Irish Times

C. Exercises

I. Read the text about the different ways in which companies are organised and answer
these questions.

1. Four main kinds of organisational structure are described in the article. What are they?

2. Is one kind of organisational structure more common than the others?

3. When did “delayering” take place?

4. What were the reasons for delayering and what were the results?

5. How does Julia MacLauchlan describe Microsoft's organisational structure?

II. Match these definitions with the four organisational structures described in the text.

1. A cross-functional structure where people are organised into project teams.

2. A structure rather like the army, where each person has their place in a fixed hierachy.

3. A structure that enables a company to operate internationally, country by country.

4. A structure organised around different products.

III. These words and expressions are used in the text to describe different aspects of
organisational structure. Which are positive and which are negative?

1. clear lines of communication (line 13) positive

2. bureaucratic set up (line 14)

3. speedy decision-making (line14)

4. traditional hierarchical structure (line 30)

5. customer centric approach (line 37)

6. freedom to innovate (line 40)

7. flat organisational structure (line 42)

IV. Match these nouns as they occur together in the text.

1. product a. teams
2. target b. objectives
3. borrowing c. lines
4. project d. units
5. delayering e. company
6. country f. process
7. business g. markets
8. software h. needs
9. company i. managers
Use an appropriate phrase from Exercise A to complete each sentence.

1. Banks need to be fully aware of their customers’ borrowing needs.

2. Silicon Valley is full of .......................... .
3.Many companies are now organized along . ……………….., in which each division is
responsible for a group of products.
4. A matrix organisation groups people into ……………………… .
5.Some companies are divided into different …………………., often also called profit centres.
6.A multinational company will often have a number of ………………………., in charge of
activities in different parts of the world.

V. Match these terms with their definitions.

1. business entities a. focusing on the customer rather than the product

2. set up b. new, original
3. innovative c. companies

4. flopped d. something that makes you better than other companies

5. outsourcing e. did not succeed, failed

f. structure
6. customercentric
g. getting external companies to do work for your company
7. competitive edge

VI. Complete these sentences with an appropriate preposition.

1. Organisational structure concerns who reports ... to… whom.

2. Depending ………………… its size, there are several organisational structures a company can
 choose from.
3. Many companies are organizing themselves .……………….. product lines.
4. In the 1980s a wave of restructuring went ………………… industry.
5. Delayering was driven ………………… the need to reduce costs.
6. Microsoft in Ireland is split ………………… seven business units.

READING 2: CORPORATE CULTURE

A. Discussion

- Every organisation has its own distinctive culture, and this can vary enormously from
company to company. To an outsider, corporate culture differences are usually reflected
in external symbols or characteristics, such as advertising and design. Other
characteristics of corporate culture are only observable by when you get inside the
company as an employee or a supplier, such as the kind of dress worn by staff or the use
of first names. Try to think of some other characteristics of corporate culture based on
companies that you know.

Environment working, Activities for employees

- Think of some large supermarket groups you know. What kind of image do they project
to their customers, e.g. friendly, giving best value?

B. Reading

TRANSPOSING A CULTURE by Peggy Hollinger

Not to be taken for granted

 Asda and Wal-Mart should be the perfect merger, given that the former has deliberately set
out to copy the US retailing giant's style. But Asda is keenly aware of the pitfalls.

You could not hope to find a neater fit; said the commentators when Wal-Mart, the world's
biggest retailer, agreed a £6.7bn takeover deal with Asda, the UK's number three supermarket
5 group.

It had long been known that the team which was brought in to rescue Asda from collapse in
the mid-1980s had deliberately set out to copy virtually every aspect of the giant US discount
group that could be replicated in the UK.

So Asda stores have 'colleagues', is not employees. They have people in the parking lots to
10 help drivers to park. They have old-age pensioners wearing colourful name badges, standing
at the door to say hello and ask customers if they need help. In the Leeds headquarters no one
has an individual office, not even the chairman. Finally, store staff get actively involved in
promoting individual product lines, and are rewarded when their efforts lead to tangible sales
improvements.

15 Most of these ideas came straight from Bentonville, Arkansas, home to one of the world's most
unusual retailers. For Wal-Mart's corporate culture has become a legend in retailing.

The company's employees chant the Wal-Mart cheer before store meetings. They benefit from
a share ownership scheme which is one of the most widespread in the industry. Top executives
share rooms when on business trips, and pay for their coffee and tea from vending machines
20 like the lowliest sales assistant.

Given, the similarities, there are few who really believe putting Asda into the Wal-Mart
network will result in anything but success. But, says Asda's Chief Executive, Allan Leighton,
this is no reason to be complacent. Fairing to bring together corporate cultures, even those as
similar as Asda's and Wal-Mart's, could lead to the downfall of the most logical mergers.
25 'When acquiring or merging with a business, getting the cultures to fit is fundamentally
important,' he says. Half-way houses, where compromises are made, never work, he believes,
and nor does imposing one culture on another. 'A company calling their colleagues colleagues
and treating them like staff is not the answer,' he says.

The key to getting the deal to work culturally rests on a few fundamental issues, he believes.
30 The first and most important is terminology, he says. 'Businesses have their own language.
 You have to get everyone aligned so that when someone uses a word it means the same thing
to everyone.'

Middle management comes next. 'Initially, everything is done at the top of the organisation,”
he says. “But most of the work is done in the middle.' If middle management is not
35 incentivised, a deal can go horribly wrong. 'It all boils down to people in the end. And what
motivates people? Unless you can demonstrate very quickly that their influence in the
organisation is at least the same if not better than before, then people will get concerned about
it,' he says.

Third comes getting to know each other. Asda and Wal-Mart have spent the last few weeks
40 swapping store managers and IT systems staff. 'We will go out there, look and bring back,'
Leighton says. 'That way we will have ownership of the changes as opposed to having them
pushed on us.'

It will always be hard to determine whether a merger or takeover has failed because the cultures
simply did not fit. But success is more likely to elude those who do not really believe in the
45 cultures they are trying to create. 'This all comes from the heart,' says Leighton. 'You do not
get it from textbook management or instruction. You have to create an environment where
people feel comfortable in expressing themselves in a different way.'
C. Exercises

I. Read the text on the opposite page about the merger of two companies and their
corporate cultures and answer these questions.

1 Which company is bigger - Asda or Wal-Mart?

2 What are employees at Asda called?

3 Which two countries are Asda and Wal-Mart from?

4 Which of these statements best summarises the corporate cultures of Asda and Wal-
Mart?

a) We must keep costs as low as possible.

b) We value the contribution of every employee to the success of the company.

c) Everyone in the company is considered equal.

5 What extra financial benefit do Wal-Mart employees have?

6 Allan Leighton mentions three things needed to get the deal 'to work culturally'. What
are they?

II. Mark these statements T (true) or F (false) according to the information in the text.
Find the part of the text that gives the correct information

1 Asda and Wal-Mart have very similar corporate cultures.

2 Asda is the biggest supermarket group in the UK.

3 Wal-Mart is the biggest retailing group in the US.

4 Asda had financial problems in the 1980s.

5 Many of Asda's employees are over 65.

6 Allan Leighton is sure the merger of Asda with Wal-Mart will succeed

7 Wal-Mart plans to impose its corporate culture on Asda.

 8 Creating a corporate culture cannot be planned in theory only.

II. Understanding meanings

1 Choose the best explanation of the phrase 'there are few who really believe putting
Asda into the Wal-Mart network will result in anything but success' (line 22)

a) most people think the combination of Asda and Wal-Mart will succeed

b) not many people think the merger will succeed

2 What does Allan Leighton mean when he says 'it all boils down to people in the
end' (line 35)

a) the number of people in the new organisation will need to be reduced

b) people are the most important element in a merger or takeover

Vocabulary tasks

A Synonyms

1 The word 'employees' is used several times in the text. What other word is used
that has a similar meaning? (para 4)

2 The phrase 'to push something on someone' is used in line 97. What similar phrase
is used earlier in the text? (para 6)

B Word search

Find a word or phrase in the text that has a similar meaning.

1 agreement when a company buys another (para 1)

2 when a company fails (para 2)

3 something that is copied exactly (para 2)

 4 something that can be seen and proved (para 3)

5 company that is famous in its industry (para 4)

6 being unreasonably confident (para 6)

7 agreement where both sides give up some of what they want (para 6)

8 in the same position or share the same ideas (para 7)

9 exchanging people or things (para 9)

C Definitions

Match these terms with their definitions.

1 virtually (line 7) a) cause something to fail

2 parking lots (line 9) b) people of retirement age who no longer

work

3 old-age pensioners (line 10) c) almost all

4 chant (line 17) d) Sing

5 widespread (line 18) e) Escape

6 lead to the downfall (line 24) f) a place where cars are put

7 incentivised (line 35) g) motivated through money or other

means

8 elude (line 44) h) available to lots of people

D Collocations

Match these nouns as they occur together in the text

1 IT a) ownership

2 Product b) trip
 3 Name c) systems

4 Store d) line

5 Sales e) management

6 Share f) badges

7 Middle g) assistant

8 Business h) manager

E Complete the sentence

Use an appropriate phrase from Exercise D to complete each sentence.

1 ……………..schemes for employees help to develop loyalty and commitment.

2 Most large supermarkets sell hundreds of ……………

3 With the increased emphasis on the customer in retailing, the role of the ………….
is important.

4 The increased use of audio and video conferencing should reduce the number of
………. executives need to make.

5 Large organisations need sophisticated ………… to operate efficiently.

6 If people didn't wear ………… at big conferences, you wouldn't know who
anyone was.

7 Most executives never progress beyond ……………….

8 The role of a ………………..is to motivate and control the sales staff in the shop.
READING 3: MANAGING ORGANIZATIONAL CHANGE

A. Discussion

1. Why are people sometimes resistant to change?

2. What kind of changes have you experienced in the place where you work or study?

B. Reading: Managing Organizational Change

Organizational change occurs when a company makes a transition from its current state to some
desired future state. Managing organizational change is the process of planning and
implementing change in organizations in such a way as to minimize employee resistance and
cost to the organization while simultaneously maximizing the effectiveness of the change
effort.

Today's business environment requires companies to undergo changes almost constantly if they
are to remain competitive. Factors such as globalization of markets and rapidly evolving
technology force businesses to respond in order to survive. Such changes may be relatively
minor—as in the case of installing a new software program—or quite major—as in the case of
refocusing an overall marketing strategy, fighting off a hostile takeover, or transforming a
company in the face of persistent foreign competition.

Organizational change initiatives often arise out of problems faced by a company. In some
cases, however, companies change under the impetus of enlightened leaders who first
recognize and then exploit new potentials dormant in the organization or its circumstances.
Some observers, more soberly, label this a "performance gap" which able management is
inspired to close.

But organizational change is also resisted and—in the opinion of its promoters—fails. The
failure may be due to the manner in which change has been visualized, announced, and
implemented or because internal resistance to it builds. Employees, in other words, sabotage
those changes they view as antithetical to their own interests.
AREAS OF ORGANIZATIONAL CHANGE

Studies of organizational change identify areas of change in order to analyze them. Daniel
Wischnevsky and Fariborz Daman, for example, writing in Journal of Managerial Issues,
single out strategy, structure, and organizational power. Others add technology or the corporate
population ("people"). All of these areas, of course, are related; companies often must institute
changes in all areas when they attempt to make changes in one. The first area, strategic change,
can take place on a large scale—for example, when a company shifts its resources to enter a
new line of business—or on a small scale—for example, when a company makes productivity
improvements in order to reduce costs. There are three basic stages for a company making a
strategic change: 1) realizing that the current strategy is no longer suitable for the company's
situation; 2) establishing a vision for the company's future direction; and 3) implementing the
change and setting up new systems to support it.

Technological changes are often introduced as components of larger strategic changes,

although they sometimes take place on their own. An important aspect of changing technology
is determining who in the organization will be threatened by the change. To be successful, a
technology change must be incorporated into the company's overall systems, and a
management structure must be created to support it. Structural changes can also occur due to
strategic changes—as in the case where a company decides to acquire another business and
must integrate it—as well as due to operational changes or changes in managerial style. For
example, a company that wished to implement more participative decision making might need
to change its hierarchical structure.

People changes can become necessary due to other changes, or sometimes companies simply
seek to change workers' attitudes and behaviors in order to increase their effectiveness or to
stimulate individual or team creativeness. Almost always people changes are the most difficult
and important part of the overall change process. The science of organization development was
created to deal with changing people on the job through techniques such as education and
training, team building, and career planning.

RESISTANCE TO CHANGE

A manager trying to implement a change, no matter how small, should expect to encounter
some resistance from within the organization. Resistance to change is normal; people cling to
habits and to the status quo. To be sure, managerial actions can minimize or arouse resistance.
People must be motivated to shake off old habits. This must take place in stages rather than
abruptly so that "managed change" takes on the character of "natural change." In addition to
normal inertia, organization change introduces anxieties about the future. If the future after the
change comes to be perceived positively, resistance will be less.

Education and communication are therefore key ingredients in minimizing negative reactions.
Employees can be informed about both the nature of the change and the logic behind it before
it takes place through reports, memos, group presentations, or individual discussions. Another
important component of overcoming resistance is inviting employee participation and
involvement in both the design and implementation phases of the change effort. Organized
forms of facilitation and support can be deployed. Managers can ensure that employees will
have the resources to bring the change about; managers can make themselves available to
provide explanations and to minimize stress arising in many scores of situations.

Some companies manage to overcome resistance to change through negotiation and rewards.
They offer employees concrete incentives to ensure their cooperation. Other companies resort
to manipulation, or using subtle tactics such as giving a resistance leader a prominent position
in the change effort. A final option is coercion, which involves punishing people who resist or
using force to ensure their cooperation. Although this method can be useful when speed is of
the essence, it can have lingering negative effects on the company. Of course, no method is
appropriate to every situation, and a number of different methods may be combined as needed.

TECHNIQUES FOR MANAGING CHANGE EFFECTIVELY

Managing change effectively requires moving the organization from its current state to a future
desired state at minimal cost to the organization. Key steps in that process are:

1. Understanding the current state of the organization. This involves identifying problems
the company faces, assigning a level of importance to each one, and assessing the kinds
of changes needed to solve the problems.
2. Competently envisioning and laying out the desired future state of the organization.
This involves picturing the ideal situation for the company after the change is
implemented, conveying this vision clearly to everyone involved in the change effort,
and designing a means of transition to the new state. An important part of the transition
 should be maintaining some sort of stability; some things—such as the company's
overall mission or key personnel—should remain constant in the midst of turmoil to
help reduce people's anxiety.
3. Implementing the change in an orderly manner. This involves managing the transition
effectively. It might be helpful to draw up a plan, allocate resources, and appoint a key
person to take charge of the change process. The company's leaders should try to
generate enthusiasm for the change by sharing their goals and vision and acting as role
models. In some cases, it may be useful to try for small victories first in order to pave
the way for later successes.

Change is natural, of course. Proactive management of change to optimize future adaptability

is invariably a more creative way of dealing with the dynamisms of industrial transformation
than letting them happen willy-nilly. That process will succeed better with the help of the the
company's human resources than without.

C. Exercises
I. A management consultant is making a presentation about BPR. Choose the best word
to fill each gap from the alternatives given below.

First of all, what is BPR? Business process (1)…….. is a way of restructuring a company's
business processes. This means completely (2) ……........ the processes, rather than trying to
improve things incrementally. It is essential that this redesign is (3) …….……- going back to
the (4) board to ask basic questions about what each process is intended to achieve - and it
should also be (5)……….... , completely ignoring how things were done before. In addition, it
is important that the redesign is (6)…………… - any changes made should be very large and
very sudden.

One outcome of this restructuring can be (7) …………….. Staff may be concerned that the
removal of management (8) .................will lead to job (9) ........................

1 A redesigning B engineering C review

2 A re-establishing B redistributing C redesigning
3 A fundamental B superficial C deep
4 A designing B drawing C managing
5 A realistic B rooted C radical
6 A dramatic B dynamic C differentiated
 7 A differentiation B delayering C delevelling
8 A benefits B layers C departments
9 A loss B losing C losses

II. Match the terms (1-8) with the collect definitions (a-h).

Issue Example

1 Organizationaldevelopment a An approach to change that is based on looking at

development the people and their relationship to the
whole the approach is planned, strategic and
long-term.

2 Change agents b A concept of organizational change that is based on

flexibility and continuous change.

3 Bench-marking c A combination of force that do not want change

4 Communication d Study of the impact of change.

5 Resistance to change e Radical redesign of all aspects of an organization ’s

activities

6 Re-engineering f Explaining why change is necessary and how it

should happen.

7 Data analysis g A process of identifying a model of ‘best practice’

and comparing performance against this model.

8 Organizational renewal h People responsible for making change happen in

renewal organizations .

III. Change is often met with resistance. Change agents therefore have to negotiate with
those who would prefer to resist the changes. Complete the headings for the five stages of
negotiation with words from the box.
 agreement concessions or compromise information
persuasion planning preparation relationship building

Stage I
Planning and ____________________________
Before face-to-face meetings, the foundations have to be ready. Collect information. Decide
on a strategy. Set objectives.
Stage II
____________________________ between negotiating parties
This stage is about developing trust between the parties.
Stage III
____________________________ exchange
Learn about the needs and demands of the other side.
Stage IV
____________________________ attempts
Attempts to modify the position of the other side. Negotiation is about increasing the influence
of your side.
Stage V
____________________________ and ____________________________
In this stage both sides make changes in their original position. If this happens, both sides leave
the negotiation with some satisfaction.

TERMS

• Bureaucracy • Informal organization structure

• Centralization • Matrix organization
• Decentralization • Organization structure

• Delegation • Organizational culture/ corporate

• Departmentalization culture

• Empowerment • Product service departmentalization

• Flat organization structure • Project organization

• Six Sigma
• Functional departmentalization
• Span of control
 • Geographic departmentalization • Unity of command
• Home shoring
• Horizontal structure

TOPICS FOR WRITING

1. “All groups and organizations should function as teams in which everyone makes
decisions and shares responsibilities and duties. Giving one person central authority and
responsibility for a project or task is not an effective way to get work done.” To what extent
do you agree or disagree with the opinion expressed above? Support your views with reasons
and/or specific examples drawn from your own work or school experiences, your
observations, or your reading.

2. Organizations should be structured in a clear hierarchy in which the people at each level,
from top to bottom, are held accountable for completing a particular component of the work.
Any other organizational structure goes against human nature and will ultimately prove
fruitless.” Discuss the extent to which you agree or disagree with the opinion expressed
above. Support your point of view with reasons and/or examples from your own experience,
observations, or reading.

3. ‘Telecommuting' refers to workers doing their jobs from home for part of each week and
communicating with their office using computer technology. Telecommuting is growing in
many countries and is expected to be common for most office workers in the coming
decades. How do you think society will be affected by the growth of telecommuting?

4. “Corporations and other businesses should try to eliminate the many ranks and salary
grades that classify employees according to their experience and expertise. A ‘flat’
organizational structure is more likely to encourage collegiality and cooperation among
employees.” Discuss the extent to which you agree or disagree with the opinion stated above.
Support your views with reasons and/or examples from your own experience, observations,
or reading