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Script for Foundations etc.

[slide 1]

Good day, everyone. As you can see on the slide, I’ll tackle two main topics. First is foundations of
organizational structure—this is part one. The other is organizational culture.

[slide 2]

So, for part one, we have the ELEMENTS, CHARACTERISTICS OF STRUCTURES, DOWNSIZING

And MODELS OF ORGANIZATION DESIGN.

Whereas for part two, we have CHARACTERSITICS OF ORGANIZATIONAL CULTURE, CULTURE

TRANSMISSION, SUSTAINING THE CULTURE, FUNCTIONS AND DYSFUNCTIONS, POSITIVE, ETHICAL, AND
INNOVATIVE CULTURES, ORGANIZATIONAL CHANGE AND PARADOX THEORY.

[slide 3]

Let’s now start with part one—foundations of organization structure.

[slide 4]

An organizational structure is a structure that defines how job tasks are formally divided, grouped, and
coordinated. Seven key elements should be considered when designing an

organization’s structure: work specialization, departmentalization, chain of command, span of control,

centralization and decentralization, formalization, and

boundary spanning.

Exhibit 15-1 presents each element as the answer to an

important structural question like “to what degree are activities subdivided into separate jobs” and the
answer would be given by “work specialization”… so we see the questions will ask about grouping jobs
together, to whom groups report to, how many individuals can be managed, who makes the decisions,
what is the extent of enforcing rules, and of course do individuals interact across different areas—and as
you can see there are aspects of the organization that can provide the answers to the questions…

Now, let’s start with what we call

Work specialization, or division of labor, which describes the degree to which

activities in the organization are divided into separate jobs and steps, each

completed by a separate individual. There is even what we call microspecialization in which extremely
small pieces of programming, data processing, or evaluation tasks are delegated to a global network of
individuals by a program manager who then assembles the results

But of course, too much is bad. Too much will cause what we call human diseconomies: boredom,
fatigue, stress, low productivity, inferior quality, increased absenteeism, and high turnover, which more
than offset the economic advantages. We are dealing with human beings after all. As you can see in the
diagram too high work specialization, would result to low productivity.
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So far we discussed one element. Let’s move to the next one, known as departmentalization.

[slide 5]

So, what is departmentalization?

The basis by which jobs are grouped… now there are different kinds

First, functional… that is by the functions performed. A manufacturing manager might organize a plant
into engineering, accounting, manufacturing, HR, and supply chain departments

Second, product or service departmentalization… Procter & Gamble for example

places each major product sector: baby care, feminine care, beauty,

family care, health care, grooming, fabric care, home care, etcetera

under an executive responsible for that sector

Third, geographical… Example, Toyota changed its management structure into geographic regions “so
that they may develop and deliver better products”: northern, western, southern etc.

Fourth is Process departmentalization which involves structuring

employee, product, or customer processes. For example, information security firms may have ONE a
policy management department that works with HR,

legal, and project management functions to set information security policies and then TWO

a network security department that oversees network security, intrusion

prevention, and event management… this kind of allocation depends on employees involved in the
process of product making… Another example, an assessment organization may departmentalize
according to government, industrial, or private consumers

Now, the third element, the chain of command

The chain of command is an unbroken line of authority that extends from the top of

the organization to the lowest echelon and clarifies who reports to whom. But

first, we cannot discuss the chain of command without also discussing authority

and unity of command.

Authority refers to the rights inherent in a managerial position to give orders and expect them to be
obeyed. To facilitate coordination, each managerial position is given a place in the chain of command,
and each

person is given a degree of authority to meet their responsibilities. In chains

of command where most of the authority is vested in one person, so-and-so

becomes more important, as the leader’s “buy-in”

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becomes more important to getting things done.

Unity of command states that a person should have one and

only one superior to whom they are directly responsible. If the unity of command is broken, an
employee might have to cope with conflicting demands

or priorities from several supervisors.

Next, span of control

The span of control describes the number of levels or layers and managers in an organization. All things
being equal, the wider or larger the span, the fewer the levels, and the more employees at each level,
the more efficient the organization.

Narrow or small spans have their advocates. By keeping the span of control to five or six employees, a
manager can maintain close control. But narrow spans can have a major drawback. They are expensive
because they add levels of management. Assume two organizations each have about 4,100 operative-
level employees. One has a uniform span of four and the other a span of eight. As Exhibit 15-3 illustrates,
the wider span of eight will have two fewer levels and approximately eight hundred fewer managers

[slide 6]

Next, centralization and decentralization

Centralization refers to the degree to which decision making is concentrated

at a single point in the organization. In centralized organizations, top managers make all the decisions,
and lower-level managers merely carry out their directives. In organizations at the other extreme,
decentralized decision making

is pushed down to the managers closest to the action or to workgroups

Next, formalization

Formalization refers to the degree to which jobs within the organization are standardized. If a job is
highly formalized, the employee has a minimal amount of discretion over what to do example, there are
explicit job descriptions… and when and how to do it, resulting in consistent and uniform output.

Next, boundary spanning

Boundary spanning occurs when individuals form relationships with people outside their formally
assigned groups. For example, BMW encourages all employees, including this production worker at its

plant in Jakarta, Indonesia, to build relationships throughout the global company

Let’s talk about our next big topic: organizational frameworks

[slide 7]

Under this topic, we discuss six: simple, bureaucracy, matrix, virtual, team and circular
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So, we were talking about the elements for designing an organization—now we move to the design, the
framework that is made after considering these elements

Let’s start with the first: simple structure

A simple structure is common in many startups

For example, in a modern tech startup, this startup is driven by an entrepreneurial

founder, supported by a core set of loyal employees who work long hours,

who enacts a unifying vision…

there is low degree of departmentalization, wide spans of control, authority centralized in one person
and little formalization

Another example, is exemplified by 15-4—Jack Gold Men’s Store—so we have the owner, cashiers,
salespersons, and extra worker… and that’s it

Let’s move to the next: bureaucracy

A bureaucracy is characterized by highly routine operating tasks achieved through specialization,

formalized rules and regulations, departmentalization, centralized authority, narrow spans of control,
and decision making that follows the chain of command

There are advantages with bureaucracy: the ability to perform standardized activities very efficiently.
Putting like specialties together in units results in economies of scale, minimum duplication of people
and equipment, and a common language that employees all share. Bureaucracies can get by with less
talented managers…

But there are weaknesses: it can create conflicts in which unit perspectives can override the overall goals
of a group. The other major weakness of a bureaucracy is something many have witnessed firsthand:
obsessive concern with following standard procedures and practice

Now, let’s move to the third: matrix structure

matrix structure combines functional and product departmentalization, and these types of structures
can be found in many groups

The most obvious structural characteristic of the matrix is that it breaks the unity of command discussed
earlier. Exhibit 15-5 shows the matrix for a college of business administration. The academic
departments of accounting, decision and information systems, marketing, and so forth, are functional
units. Overlaid on them are the specific programs

[slide 8]

Now, to the fourth one: the virtual structure

virtual structure is typically a small, core organization that outsources its major business functions. The
virtual structure is highly centralized, with little or no departmentalization. These types of structures
open up boundaries between organization
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Exhibit 15-6 shows a virtual structure in which management outsources all the primary functions of the
business. The core of the organization is a small group of executives whose job is to oversee directly any
activities done in-house and to coordinate relationships with organizations that manufacture, distribute,
and perform other crucial functions. The dotted lines represent the relationships typically maintained
under contracts

Now, the fifth one, the team structure

team structure seeks to eliminate the chain of command and replace departments with empowered
teams. This structure removes most vertical and horizontal boundaries in addition to breaking down
most external barriers between the company and its customers and suppliers

[slide 9]

finally, the sixth: the circular structure

to understand this structure, look at Exhibit 15-7. For the circular structure, the center is the CEO,
followed by the executives on the top management team (TMT), and radiating outward in rings grouped
by function are the directors and then the specialists and workers.

The circular structure has intuitive appeal for creative entrepreneurs, and some small innovative firms
have claimed it. As in many of the current hybrid approaches, however, employees are apt to be unclear
about whom they report to and who is running the show, especially without clear linkages between
people in each “band.”

Now—we have another big topic related to how some groups one to create a more focused organization.

The goal of some organizational structures we have described is to improve agility by creating a lean,
focused, and flexible organization. To achieve this, they do “downsizing”; downsizing is a systematic
effort to make an organization leaner by closing locations, reducing staff, or selling off business units that
do not add value… however, there may be disadvantages. For example, Reducing the size of the
workforce perhaps has positive outcomes in the long run, although most of the evidence suggests that
downsizing has a negative impact on stock returns the year of downsizing. Concurrent to closing
locations, as shown in the diagram… offices also would necessarily shrink because of certain downsizing
efforts.

Next big topic: models of organizational design

Whatever structure is designed for the organization, we can refer to two extreme models that can serve
as paradigms

Exhibit 15-8 differentiates between two extreme models of organizational design. One model is the
mechanistic model, which is generally synonymous with the bureaucracy in that it has highly
standardized processes for work, high formalization, and more managerial hierarchy. The other extreme
is the organic model, which is flat, has fewer formal procedures for making decisions, has multiple
decision makers, and favors flexible practices

With these two models in mind, why are some organizations more mechanistic whereas others are more
organic? This is a very good question. The strategies being applied in a certain organization will affect
whether a more mechanistic or an organic model is achieved.
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[slide 10]

This brings us to our next big topic: organizational strategies.

First, let’s start with innovation strategy. An innovation strategy strives to achieve meaningful and unique
innovations. Innovative firms use competitive pay and benefits to attract top candidates and motivate
employees to take risks. Some degree of the mechanistic structure can benefit innovation.

Next, we have cost-minimization strategy. An organization pursuing a cost-minimization strategy tightly

controls costs, refrains from incurring unnecessary expenses, and cuts prices. For example, India’s Jet
Airways did away with the first-class section in its planes, enabling it to increase revenue by adding an
additional fifty-four seats per plane in 2019

Last is imitation strategy … here, we try to minimize risk and maximize opportunity for profit, moving
new products or entering new markets only after innovators have proven their viability

One modern example is how Instagram released its own version of “Stories,” a feature nearly identical to
the one Snapchat introduced: Since its release, Instagram added 250 million users.

Now what are structural matches? Well, this concept refers to the idea that a certain structural option
would best match a certain strategy.

So, we see innovation matching organic, cost minimization matching mechanistic, and imitation
matching both.

Now, let’s get to our last big topic for part one: other factors and the outcomes in relation to
organizational structure

An important factor—we have what we call: organizational size, for instance, Organizations that employ
two thousand or more people tend to have more specialization, more departmentalization, more vertical
levels, and more rules and regulations than do small organization

Another is technology. Technology describes the way an organization transfers inputs into outputs. Every
organization has at least one technology for converting financial, human, and physical resources into
products or services

[slide 11]

Next is environment. An organization’s environment includes outside institutions or forces that can affect
its structure—and it has three dimensions: capacity, the degree that the environment can support
growth, volatility, the degree of instability in the environment, and complexity, degree of heterogeneity
and concentration among environmental elements. As shown in the diagram, there is a three-
dimensional model for environment: The more scarce, dynamic, and complex the environment, the
more organic a structure should be. The more abundant, stable, and simple the environment, the more
the mechanistic structure will be preferred.

Another is the institutions. These are cultural factors that act as guidelines for appropriate behavior.

Now, an organization’s structure can have significant effects on its members. What might those effects
be? Well, we cannot generalize these effects. Not everyone prefers the freedom and flexibility of organic
structures. Several factors stand out in different structures as well. In highly formalized, heavily
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structured mechanistic organizations, the level of fairness in formal policies and procedures is a very
important predictor of satisfaction. In more personal, individually adaptive organic organizations,
employees value interpersonal justice more. Some people are most productive and satisfied when work
tasks are standardized and ambiguity is minimized—that is, in mechanistic structures—now somehow
we can see that Exhibit 15-11 summarizes all this. In any case, any discussion of the effect of
organizational design on employee behavior should address individual differences as well as culture.

[slide 12]

Now that’s all for part one. Let’s move on to part two: organizational culture and change

[slide 13]

So, what is Organizational culture? Organizational culture refers to a system of shared meaning held by
members that distinguishes the organization from other organizations. This system of shared meaning
includes values, beliefs, and assumptions that characterize the organization. These values, beliefs, and
assumptions, when put into practice, filter what employees pay attention to, are physically manifested as
material symbols for example, uniforms, statues, etc. and stories, and form the foundation for shared
meaning among members of an organization.

Now, there are many ways to conceptualize the “culture”. However, among these a very common
scheme is using the criterion of values. And so, this framework has been made:

1… “The Clan.” A culture based on human affiliation. Employees value attachment, collaboration, trust,
and support. 2. “The Adhocracy.” A culture based on change. Employees value growth, variety, attention
to detail, stimulation, and autonomy. 3. “The Market.” A culture based on achievement. Employees value
communication, competence, and competition. 4. “The Hierarchy.” A culture based on stability.
Employees value communication, formalization, and routine.

According to a study, there are certain effects perceivable within the cultures. Look at Exhibit 16-2… A
plus corresponds with a positive effect on the outcome, a minus corresponds with a negative effect on
the outcome, zero corresponds with no effect on the outcome, and an asterisk suggests the culture is
strongly related to the outcome. Well, this is according to an analysis by Hartnell, Kinicki, Choi and
Karam.

Another common framework is the Organizational Culture Profile (OCP). The OCP says organizational
culture can be described by eight dimensions: (1) innovation, (2) attention to detail, (3) decisiveness, (4)
team-orientation, (5) outcomeorientation, (6) aggressiveness, (7) supportiveness, and (8) rewards-
emphasis.

Let’s move to our next big topic: how employees learn culture.

[slide 14]

There are four to discuss: stories, rituals, symbols, and language.

First—stories… for example, When Henry Ford II was chair of Ford Motor Company, you would have been
hard-pressed to find a manager who had not heard how he reminded his executives, when they got too
arrogant, “It’s my name that’s on the building.” The message was clear: Henry Ford II ran the company.
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Stories such as these circulate through many organizations, anchoring the present in the past and
legitimizing current practices.

Second—rituals… Rituals are repetitive sequences of activities that express and reinforce the key values
of the organization—what goals are most important and/or which people are important versus which are
expendable. Some companies have nontraditional rituals to help support the values of their cultures.
Kimpton Hotels & Restaurants maintains its customer-oriented culture with traditions like a
Housekeeping Olympics that includes blindfolded bedmaking and vacuum races.

Third—material symbols… these are Physical objects, or artifacts, that symbolize values, beliefs, or
assumptions inherent in the organization’s culture. Symbols include the size of offices; the elegance of
furnishings, perks, and attire; and even the organization’s corporate social media page.

Fourth… language… Many organizations and subunits within them use language to help members
identify with the culture, attest to their acceptance of it, and help preserve it.

All of these four are the ways through which culture is communicated and passed on, and these ways
can be used to describe the kind of culture a company has... for example… Baidu, a Chinese Web services
firm, describes its culture as “simple”—meaning direct, open, and uncomplicated—and “reliable”—
meaning trusting the competence of colleagues. Baidu’s casual workplaces reflect this trust with lounges,
gyms, studios, and dome-shaped nap rooms.

Next topic—how does culture begin? And how is it maintained?

[slide 15]

An organization’s customs, traditions, and general way of doing things are largely due to what it has done
before and how successful it was in doing it. This leads us to the ultimate source of an organization’s
culture: the founders.

Once a culture is in place, it can be kept alive by giving employees a set of similar experiences. Now,
Three forces play a particularly important part in sustaining a culture: selection or hiring practices,
actions of top management, and socialization methods.

Selection The explicit goal of the selection process is to identify and hire. What is considered here is how
well candidates fit into the organization, identifies people whose values are consistent with at least a
good portion of the organization’s.

The actions of top management have a major impact on the organization’s culture. Through words and
behavior, senior executives establish norms that filter through the organization.

And socialization A process which enables new employees to acquire the social knowledge and
necessary skills in order to adapt to the organization’s culture

[slide 16]

Now, socialization can help alleviate the problem many employees report when their new jobs are
different from what they expected and can make or break how employees see their jobs moving forward
(as you can see in the poll)… and of course, this process has an impact on the new employee’s
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productivity, commitment to the organization, and decision to stay with the organization. This process
has three stages.

prearrival stage The period of learning in the socialization process that occurs before a new employee
joins the organization

encounter stage The stage in the socialization process in which a new employee sees what the
organization is really like and confronts the possibility that expectations and reality may diverge

metamorphosis stage The stage in the socialization process in which a new employee changes and
adjusts to the job, work group, and organization

And of course, these stages can lead to the outcomes of productivity, and/or commitment or turnover.

Successful metamorphosis should have a positive impact on new employees’ productivity and their
commitment to the organization and reduce their propensity to leave the organization, known as
turnover.

Next topic—what do cultures do?

[slide 17]

First is that organizational cultures create organizational climates. What is organizational climate? It is
The shared perceptions that organizational members have about their organization and work
environment; particularly, the policies, practices, and procedures that are in place.

However,… Although we often expect culture to manifest in a predictable way, there may be a difference
between espoused and enacted cultural values, beliefs, and assumptions. What is professed and what is
done. Therefore, culture is revealed through organizational climates, which manifest culture’s
underlying values and beliefs. The climates then affect employee performance and satisfaction, along
with other outcomes relevant to organization. Look at 16-6 for a concept map—from the factors up to
performance and satisfaction.

Next topic—culture as asset and liability

[slide 18]

Culture can be an asset in terms of the following aspects: ethical, sustainable, and innovative.

ethical culture is The shared concept of right and wrong behavior in the workplace that reflects the true
values of the organization and shapes the ethical decision making of its members

on the other hand, sustainability refers to Maintaining practices over a long period of time because the
tools or structures that support them are not damaged by the processes

the third one—innovative… innovative cultures are open, unconventional, collaborative, visionary, and
accelerating… for example, Samsung Electronics of South Korea is past the usual innovation life cycle
stage yet continues to foster a climate of creativity and idea generation. Samsung emulates a startup
culture through its Creative Labs, where employees like engineer Ki Yuhoon, shown here, take up to a
year off from their regular jobs to work on innovative projects.
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However, culture can also be a liability. Stagnation and entrenchment happen when shared values do not
agree with those that further the organization’s effectiveness. Uniformity and rigidity can apply when
newcomers who wish to fit in are usually compelled to accept the organization’s core culture.

And of course, dysfunctional management values in a corporation can produce downward forces that are
equally powerful yet toxic… and also, cultural compatibility can be absent—thus resulting in culture
clash.

Our next topics are—positive and ethical cultures.

[slide 19]

Positive cultures build employee strengths, reward more than punish, encourage vitality and growth…
however there are extremes possible… for instance, toxic positivity— an approach that imposes
unrealistic and psychologically damaging effects on employees who are pressured to be perfect

Ethical cultures are made by following these principles: Be a visible role model. Communicate ethical
expectations. Provide ethical training. Visibly reward ethical acts and punish unethical ones. Provide
protective mechanisms. This means that you have to seek formal mechanisms so everyone can discuss
ethical dilemmas and report unethical behavior without fear of reprimand. These might include
identifying ethical counselors as liaisons.

Next topic: innovative culture… now, what are the sources of innovation?

[slide 20]

Well, the following statements point to these sources. . Organic structures positively influence
innovation. Contingent rewards positively influence innovation. Innovation is nurtured when there are
slack resources. AND LASTLY Inter-unit communication is high in innovative organizations. This means
that These organizations are heavy users of committees, task forces, cross-functional teams and the like.

And of course with innovation, comes change—change that can be accomplished by the employees… but
still, sometimes this change is not entirely due to the efforts of the people within the company and is
catalyzed by forces beyond the companies’ control, for better or worse… as we see in exhibit 16-7…
many factors can play a part: diversity, mobile computing, global competitors, new markets to name a
few.

Next topics—planned change, resistance to change and overcoming this resistance

[slide 21]

Now, certain situations involve proactive, intentional, and goal-oriented efforts to realize change, which
all describe planned change. Thus, change activities must be done… Who in organizations is responsible
for managing change activities? These are the change agents. However, change can be resisted. 16-8
enumerates the different sources of resistance like habit, security, the economy, fear of the unknown,
structural inertia, limited focus, group inertia and threats to expertise and power relationships. The last
one I just mentioned is very much alive if there is too much politics in a certain organization—and sadly,
this can happen more often than we expect.
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Now, how do we overcome the resistance? There are many ways: communication, participation, building
support & commitment, positive relationships, implementing changes fairly, manipulation & cooptation,
selection of adaptive people, and coercion. I’ll elaborate more on cooptation and coercion… Cooptation
is a combination of manipulation and participation like for instance, when Samsung lets customers look
for authorized retailers but then they still decide on the terms for repair—so people who want to stick to
having independent repair will have to adjust to the change Samsung dictates. And of course, coercion—
which must be mentioned is hardly effective and can backfire a lot. So, for instance, you can block an
employee’s promotion so that changes you want will happen—that’s coercion—and that can backfire.

Before we end—let’s have one topic: the paradox theory.

[slide 22]

paradox theory states that the key paradox in management is that there is no final optimal status for an
organization. In a paradox situation, we are required to balance tensions across various courses of
action, which are caused by resource scarcity. There is a constant process of finding a balancing point, a
dynamic equilibrium, among shifting priorities over time. The first lesson of paradox theory is that as the
environment and members of the organization change, different elements take on importance. For
example, sometimes a company needs to acknowledge past success and learn how it worked, while at
other times looking backward will only hinder progress. There is some evidence that managers who
think holistically and recognize the importance of balancing paradoxical factors are more effective,
especially in generating adaptive and creative behaviors in those they are managing. But… leaders who
adopt paradoxical approaches may fall into the trap of escalation of commitment—continuing on a
failing course, even when there are many negative outcomes already.

NOW—we have covered really a lot on foundations of organization structure… that’s part one… and part
two: organization culture and change… and I will simply leave you with these quotes

[slide 23]

from our reference, and since they speak for themselves—I will not explain further…

First: structure affects how people communicate with one another and how members of the
organization execute the organization’s strategy and mission

Second: cultural transformation and change management will almost always amount to unfinished
business… and so, we have here the

[slide 24]

reference… I’d like to thank everyone for listening… Goodbye, and God bless.