VIII.

Organizational Structure,
Culture and Development
An ORGANIZATION is a group of
people working together to achieve
common goals.

Organizational goals are objectives that management

seeks to achieve in pursuing the purpose of the firm.
Goals motivate people to work together.
Organizational Structure & Organizational Chart

Organizational Structure: The formal configuration

between individuals and groups with respect to the
allocation of tasks, responsibilities, and authorities
within organizations.
Organizational Chart: A diagram representing the
connections between the various departments
within an organization: a graphic representation of
organizational design.
Organizational Structure & Organizational Chart
Purposes of Organizing
• Divides work to be done into specific jobs and
departments
• Assigns tasks and responsibilities associated with
individual jobs
• Coordinates diverse organizational tasks
• Clusters jobs into units
• Establishes relationships among individuals, groups,
and departments
• Establishes formal lines of authority
• Allocates and deploys organizational resources
Elements in Organizational Design

Six key elements:

• Work specialization
• Departmentalization
• Authority & responsibility
• Span of control
• Centralization vs . decentralization
• Formalization
Work Specialization
 The degree to which tasks in the organization
are divided into separate jobs with each step
completed by a different person
 Overspecialization can result in human
diseconomies from boredom, fatigue, stress, poor
quality, increased absenteeism and higher
turnover
Departmentalization
 Functional
 Grouping jobs by functions
performed
 Product
 Grouping jobs by product
line
 Geographical
 Grouping jobs on the basis
of territory or geography
 Process
 Grouping jobs on the basis of
product or customer flow
 Customer
 Grouping jobs by type of
customer and needs
Departmentalization
Authority & Responsibility
 Authority
 The rights inherent in a managerial position to tell people what to do
and to expect them to do it
 Responsibility
 The obligation or expectation to perform.
 Responsibility brings with it accountability (the need to report and
justify work to manager’s superiors)
 Unity of Command
 The concept that a person should have one boss and should report
only to that person
 Delegation
 The assignment of authority to another person to carry out specific
duties
Chain of Command

 The continuous line of authority that extends

from upper levels of an organization to the
lowest levels of the organization and clarifies
who reports to whom
Line and Staff Authority
 Line managers are responsible for the essential
activities of the organization, including production
and sales.
 Line managers have the authority to issue orders to
those in the chain of command
 The president, the production manager, and the sales
manager are examples of line managers
 Staff managers have advisory authority, and cannot
issue orders to those in the chain of command
(except those in their own department)
Span of Control
 The number of employees who can be effectively
and efficiently supervised by a manager
 Width of span is affected by:
 Skills and abilities of the manager and the employees
 Characteristics of the work being done
 Similarity of tasks
 Complexity of tasks
 Physical proximity of subordinates
 Standardization of tasks
 Sophistication of the organization’s information system
 Strength of the organization’s culture
 Preferred style of the manager
Centralization vs Decentralization
 Centralization
 The degree to which decision making is concentrated
at a single point in the organization
 Organizations in which top managers make all the decisions
and lower-level employees simply carry out those orders
 Decentralization
 The degree to which lower-level employees provide
input or actually make decisions
 Employee Empowerment
 Increasing the decision-making discretion of employees
Formalization

 The degree to which jobs within the

organization are standardized and the extent
to which employee behaviour is guided by
rules and procedures
 Highly formalized jobs offer little discretion over
what is to be done
 Low formalization means fewer constraints on
how employees do their work
Traditional and
Non-traditional
Organizational
Structure
Traditional Organizational Structure
1. Simple Structure

 A simple structure is defined as a design with low

departmentalization, wide spans of control, centralized
authority, and little formalization. This type of design is very
common in small start up businesses. For example in a business
with few employees the owner tends to be the manager and
controls all of the functions of the business.
2. Functional Structure

 A functional structure is defined as a design that groups similar

or related occupational specialties together. It is the functional
approach to departmentalization applied to the entire
organization.
3. Divisional Structure

 A divisional structure is made up of separate, semi-autonomous

units or divisions. Within one corporation there may be many
different divisions and each division has its own goals to
accomplish.
Non-traditional Organizational Structure
1. Team Structure

 A team structure is a design in which an organization is made

up of teams, and each team works towards a common goal.
Since the organization is made up of groups to perform the
functions of the company, teams must perform well because
they are held accountable for their performance
2. Matrix Structure

 A matrix structure is one that assigns specialists from different

functional departments to work on one or more projects. In an
organization there may be different projects going on at once.
Each specific project is assigned a project manager and he has
the duty of allocating all the resources needed to accomplish the
project.
3. Project Structure

 A project structure is an organizational structure in which

employees continuously work on projects. This is like the
matrix structure; however when the project ends the employees
don’t go back their departments. They continuously work on
projects in a team like structure.
4. Autonomous Internal Units

 Some large organizations have adopted this type of structure.

That is, the organization is comprised of many independent
decentralized business units, each with its own products,
clients, competitors, and profit goals. There is no centralized
control or resource allocation.
5. Boudaryless Organization

 is an unstructured design. This structure is much more flexible

because there is no boundaries to deal with such as chain of
command, departmentalization, and organizational hierarchy.
Instead of having departments, companies have used the team
approach. In order to eliminate boundaries managers may use
virtual, modular, or network organizational structures. In a
virtual organization work is outsourced when necessary.
6. Learning Organization

 A learning organization is defined as an organization that has

developed the capacity to continuously learn, adapt, and
change. In order to have a learning organization a company
must have very knowledgeable employees who are able to
share their knowledge with others and be able to apply it in a
work environment.
Organizational Culture
is a system of shared assumptions, values, and beliefs,
which governs how people behave in organizations. These
shared values have a strong influence on the people in the
organization and dictate how they dress, act, and perform
their jobs. Every organization develops and maintains a
unique culture, which provides guidelines and boundaries
for the behavior of the members of the organization.
Dimensions of Culture

 *Innovative Cultures
 - According to the OCP framework,companies that have innovative cultures are
flexible and adaptable, and experiment with new ideas.

 Aggresive Cultures
 - Companies with aggressive cultures value competitiveness and outperforming
competitors: By emphasizing this, they may fall short in the area of corporate
social responsibility.

 *Outcome-Oriented Cultures
 -The OCP framework describes outcome-oriented cultures as those that
emphasize achievement, results, and action as important values
 *Stable Cultures
 Stable cultures are predictable, rule-oriented, and bureaucratic. These
organizations aim to coordinate and align individual effort for greatest levels of
efficiency. When the environment is stable and certain, these cultures may help
the organization be effective by providing stable and constant levels of output.

 *People-Oriented Cultures
 People-oriented cultures value fairness, supportiveness, and respect for
individual rights. These organizations truly live the mantra that “people are
their greatest asset.” In addition to having fair procedures and management
styles, these companies create an atmosphere where work is fun and employees
do not feel required to choose between work and other aspects of their lives.

 *Team-Oriented Cultures
 Companies with team-oriented cultures are collaborative and emphasize
cooperation among employees.
 *Detail-Oriented Cultures
 Organizations with detail-oriented cultures are characterized in the OCP
framework as emphasizing precision and paying attention to details. Such a
culture gives a competitive advantage to companies in the hospitality industry
by helping them differentiate themselves from others

 *Service Culture
 Service culture is not one of the dimensions of OCP, but given the importance
of the retail industry in the overall economy, having a service culture can make
or break an organization.

 *Safety Culture
 In organizations where safety-sensitive jobs are performed, creating and
maintaining a safety culture provides a competitive advantage, because the
organization can reduce accidents, maintain high levels of morale and employee
retention, and increase profitability by cutting workers’ compensation insurance
costs. Characteristics that Define an Organization's Culture
 *Language and Customs
 A company's culture is often defined by its language and customs. Your
company most likely has many sayings, expressions and acronyms that only
your people understand

 *Mission and Values

 Almost every company has a mission statement that guides its actions. This
mission statement must permeate your entire organization and be the basis of
all that you do.

 Climate and Habits

 Your workplace climate is an important characteristic of your corporate
culture. The climate for your company is usually established at the top before
filtering to the staff. Habits also define your corporate culture. What you do,
say and live on a daily basis is observed and copied by your people. If you
arrive early and stay late, your people will be more inclined to do the same.
 Symbols
 Symbols are a powerful statement of your company's culture.
Your symbols can be as simple as a trademark, or as
complicated as a pattern of behavior, but can grow into a part of
your culture over time. Symbols speak of your culture without
ever speaking a word.

 Organization Development
 - is an effort (1) planned, (2) organization-wide, and (3)
managed from the top, to (4) increase organization
effectiveness and health through (5) planned interventions in
the organizations "processes,” using behavioral-science
knowledge.
Organizational Development (OD)
 is a field of research, theory, and practice dedicated to
expanding the knowledge and effectiveness of people to
accomplish more successful organizational change and
performance.

 OD is a process of continuous diagnosis, action planning,

implementation and evaluation, with the goal of
transferring knowledge and skills to organizations to
improve their capacity for solving problems and managing
future change.
 Among the models of OD developed by the behavioural
scientists, the following three models are very popularly
discussed in organizational behavior.

 They are:

 1. Kurt Lewin’s Unfreezing, Changing and Refreezing Model,

 2. Greiner’s Equential Models, and

 3. Leavitt’s System Model

Lewin’s Model:

 Lewin’s model is based on premises that before actually

introducing a change organisation needs to be prepared for
change, motivated to change and established and integrated the
change into behaviours of organisation Accordingly, Lewin has
nomenclature these steps as unfreezing, changing and refreezing.
A brief description of these follows.

 Unfreezing:
 No change occurs in a vacuum of no prior perspective. To the extent the new
perspective differs from the old one, the old one then implies doubting of its own
existence. This necessitates unlearning of old things in order to learn new things.
The same is called unfreezing. Unfreezing involves encouraging individuals to
discard old behaviours by shaking up the equilibrium that maintains status quo.
 Changing:
 Having unlearned his past experience, the individual is ready for new
behaviour and a change in perspective. Efforts are made to substitute
new attitudes, values and behaviours for old ones. This implies
transition from old behaviour to experimentation with new behaviour.

 Refreezing:
 In this final step, new attitudes, values, and behaviours are established
as the new status quo. For this, the new ways of operating are
cemented in and reinforced. This implies stabilizing and integrating
the change by reinforcing the new behaviours and intigrating them
into formal and interpersonal relationships and in one’s personality.
Larry Griener’s Model:

 According to Griener, change occurs in terms of certain

sequential stages. The external stimulus pressurises the
management of organisation to initiate change process.
The management in response to stimulus is motivated to
take actions to introduce change in organization.
Leavitt’s Model:

 OD Sequential Stages

 Leavitt’s OD Model is founded on the interactive nature of the

various sub­systems in a change process. In an organisational
system, there are four interacting sub-systems- tasks, structure,
people and technology. Due to their interacting nature, change in
any one of the sub-systems tends to have consequences for the other
sub-systems also.

 Change in any one of the sub-systems can be worked out depending

upon the situation. How the various sub-systems, according to
Leavitt, interact with each other in a change processes depicted in
the following figure 12.2.Leavitt's Interactive Model of OD