Chapter 08 - Organizational Culture, Structure, and Design PDF

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Organizational Culture, Structure, and Design: Building Blocks of the Organization...

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PART 4

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ORGANIZING

Organizational Culture, Structure, and Design Building Blocks of the Organization ©Olivier Renck/Aurora/Getty Images

After reading this chapter, you should be able to: LO 8-1

Describe how managers align vision and strategies with the organization’s culture and structure.

LO 8-2

Explain how to characterize an organization’s culture.

LO 8-3

Describe the process of culture change in an organization.

LO 8-4

Compare the structures of for-profit, nonprofit, and mutual-benefit organizations.

LO 8-5

Identify the major elements of an organization.

LO 8-6

Describe the eight organizational structures.

LO 8-7

Identify the factors that affect the design of an organization’s structure.

LO 8-8

Describe how to use the career readiness competencies of understanding the business and personal adaptability to assess an organization’s internal context.

FORECAST

What’s Ahead in This Chapter

We discuss organizational cultures and structures, and how they should be aligned to coordinate employees in the pursuit of the organization’s strategic goals. We then consider the three types of organizations and their seven basic elements. We next review seven types of organizational structures and consider five factors that should be considered when designing the structure of an organization. We conclude with a Career Corner that focuses on how to use the career readiness competencies of understanding the business and personal adaptability to improve your ability to assess an organization’s internal context.

How to Get Noticed in a New Job: Fitting into an Organization’s Culture in the First 60 Days “Once you are in the real world—and it doesn’t make any difference if you are 22 or 62, starting your first job or your fifth,” say former business columnists Jack and Suzy Welch, “the way to look great and get ahead is to overdeliver.”1 Overdelivering means doing more than what is asked of you—not just doing the report your boss requests, for example, but doing the extra research to provide him or her with something truly impressive. “You must continue to ‘sell yourself’ after you are hired,” says one human resources director. “Keep your boss informed of things you are working on, including projects others ask you to assist with.”2 Among things you should do in the first 60 days are the following.3

Be Aware of the Power of First Impressions Within three minutes of meeting someone new, people form an opinion about where the future of the relationship is headed, according to one study.4 Journalist and author Malcolm Gladwell concluded that “Snap judgments are, first of all, enormously quick: they rely on the thinnest slices of experience . . . they are also unconscious.”5 Counter the possibility of someone else’s bias in such a quick judgment by using your career readiness skills of social and emotional intelligence to put your best foot forward.

See How People Behave by Arriving Early and Staying Late “Many aspects of a company’s culture can be subtle and easy to overlook,” writes one expert. “Instead, observe everything.” Try coming in 30 minutes early and staying a little late just to observe how people operate—where they take their meals, for example. If a meal was part of your interview, you’ve probably picked up some clues about whether they regularly eat out or are mostly brown-bagging it at their desks.6

Network with People and Find Out How the Organization Works Keep your networking skills at the ready; they represent a career readiness competency. During the first two weeks, get to know a few people and try to have lunch with them. Find out how the organization works, how people interact with the boss, what the corporate culture encourages and discourages. Walk the halls and get to know receptionists, mail room clerks, and office managers, who can help you learn the ropes. Your role here is to listen. Realize that you have a lot to learn when you’re new.7

Ask for Advice Be aware that those who seek advice are perceived as being more competent than those who do not.8 Your proactive learning orientation will help you here; don’t be afraid to ask co-workers for feedback as you start learning the job. At the end of 30 days, have a “How am I doing?” meeting with your boss.

Overdeliver Because performance reviews for new hires generally take place at 60 to 90 days, you need to have accomplished enough—and preferably something big—to show your boss your potential. In other words, do as the Welches suggest: overdeliver.

For Discussion How does the preceding advice square with your past experiences in starting a new job? Are there things you wish you could have done differently?

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Organizing

8.1 Aligning Strategy, Culture, and Structure THE BIG PICTURE The study of organizing, the second of the four functions in the management process, begins with the study of organizational culture and structure, which managers must determine so as to implement a particular strategy. Organizational culture consists of the set of shared, taken-for-granted implicit assumptions that a group holds in the workplace. Organizational structure describes who reports to whom and who does what.

LO 8-1 Describe how managers align vision and strategies with the organization’s culture and structure.

How important is culture, the “social glue” that binds together organizations? “Culture and people are everything,” says Brett Wilson, CEO of TubeMogul, a video advertising software company. “Nothing else matters, and our ability to stay ahead is a function of having the best people and moving faster than our competitors. . . . Creating an exceptional culture is the only way to build a sustainable competitive advantage.”9

How an Organization’s Culture and Structure Are Used to Implement Strategy

Organizational culture binds people to common norms and expectations just like glue binds pieces of materials into one. ©McGraw-Hill Education/Michael Scott, photographer

“A leader’s job is to help inspire every employee to help execute strategy,” says one report. “This requires consistently and constantly demonstrating, celebrating, and modeling the cultural traits that reinforce strategy.”10 Or, for better performance, perhaps the leader’s style should even be different from the organization’s culture (as we’ll discuss later).11 Strategy, as we saw in Chapter 6, consists of the large-scale action plans that reflect the organization’s vision and are used to set the direction for the organization. To implement a particular strategy, managers must determine the right kind of organizational culture and organizational structure, which mutually influence each other. (See Figure 8.1.) The “I Wish . . .” feature illustrates what happened to John French when his employer failed to integrate strategy and culture.

I Wish… …my company had integrated its corporate strategy and organizational culture.

John French. Courtesy John French

John French worked as a senior financial analyst for a medical group as part of a national health care system. While in this position, he witnessed severe resistance to change as the company attempted to reshape its culture. It was necessary to change the culture of this health care company because the current culture was not valuing its employees. The company’s

competitor was located in the same area, and was constantly taking advantage of the undervalued employees at John’s company. “Instead of promoting from within and cultivating talent, the way you get promoted here is by going to the competition and getting a raise,” said John. John’s company continued to lose some of its best employees because of their approach toward promotions. Consequently, people with little industry experience found themselves in management positions they were not qualified for. In addition to failing to value its current employees, the company was struggling financially due to its culture. “We’re a nonprofit, and we had a very non-profit culture. Because of that, the company thought that it didn’t need to focus on money. People would always say, ‘It’s for the patient,’ but if you’re bleeding money, you won’t survive for the patient,” said John.

Organizational Culture, Structure, and Design

Because of the lack of financial focus, the company continued to promote medical practitioners instead of businesspeople. This deepened the financial issues because the people who were managing the departments did not have business experience and were not concerned about the financial wellbeing of the company. When John found himself in a management role after his manager left the company to work for the competition, he decided to bring in an analytics team to evaluate the company’s finances. This did not go over well with the rest of the team. “We were able to link payments together and define how successful we were. And what we found was that we were actually overpaying our doctors.

CHAPTER 8

We were paying our doctors more than they were bringing in,” said John. Of course, the doctors did not take well to this information, and they did not understand it from a financial perspective. The medical group continued to lose money and talent by refusing to change its ways. John began to reevaluate his role within the company. He quickly realized that the culture was leading to the destruction of the company, and he no longer wanted to be a part of it. After an unsuccessful meeting with Human Resources about an increase in pay, John left the company, where things have remained stagnant to this day. Courtesy of John French

FIGURE 8.1 Drivers and flow of organizational culture Drivers of culture

Organizational al culture

Organizational al structure & internal processes

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Group & social processes

Work attitudes & behaviors

Realizing the Organizational Vision and Strategy: Get the Right Culture and the Right Structure Let’s consider these two concepts—organizational culture and organizational structure.

Organizational Culture: The Shared Assumptions That Affect How Work Gets Done We described the concept of culture in Chapter 4 on global management as “the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people.” Here we are talking about a specific kind of culture called an organizational culture. According to scholar Edgar Schein, organizational culture, sometimes called corporate culture, is defined as the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments.12 These are the beliefs and values shared among a group of people in the

workplace that are passed on to new employees by way of socialization and mentoring, which significantly affect work outcomes at all levels.13 As we said earlier, culture is the “social glue” that binds members of the organization together. Just as a human being has a personality—fun-loving, warm, uptight, competitive, or whatever—so an organization has a “personality,” too, and that is its culture. The culture helps employees understand why the organization does what it does and how it intends to accomplish its long-term goals. The cultural tone is often set in the hiring process. “The ultimate filter we use is that we only hire nice people,” says Peter Miller, CEO of Optinose, a pharmaceutical company.14 MuleSoft, a software company, looks for people with “high integrity, being a great team player, and they want to win as a company first, team second, individually third,” says CEO Greg Schott.15 TubeMogul CEO Brett Wilson, mentioned earlier, also prefers nice people. “I . . . really value people who are kind to one another,” he says. “That makes the workplace better, and they end up having a deeper sense of empathy with our clients.” In addition, “we want a culture where people aren’t afraid to make mistakes. . . . Our ability to win is a function of how innovative we are. So making mistakes is encouraged.” Finally, he says, “it’s a culture where we value the people who do what they say—they have a high ‘do-to-say’ ratio.”16

Overall performance

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Freewheeling culture. Mic, a New York City news website created by and for Millennials, which has 106 mostly Millennial employees, is described as having a “playful vibe.” 17 Here CEO Chris Altchek (right) talks with an employee. At Mic, oversharing, acting entitled, and second-guessing the boss are the norm. Dogs wander between desks, some employees use a megaphone for impromptu announcements, others ride hoverboards into the kitchen for free snacks. Could the Mic culture work in, say, the labs of Pfizer Inc., the global pharmaceutical company, where drug discovery is a high-risk, costly endeavor? ©Jennifer S. Altman/The New York/Redux Pictures

Culture can vary considerably, with different organizations having differing emphases on risk taking, treatment of employees, teamwork, rules and regulations, conflict and criticism, and rewards. As such, culture can have both positive and negative effects on employees and overall corporate performance. Zenefits, a San Francisco health-insurance brokerage startup, for example, is being sued for actions associated with a negative culture. Its director of real estate and workplace services sent employees a note asking them to cut out using the headquarters stairwells for smoking, drinking, eating, and sex.18 Some other organizations, believing that the office has become “too nice,” have embraced a culture known as “radical candor” or “front-stabbing,” in which workers are encouraged “to drop the polite workplace veneer and speak frankly to each other no matter what,” according to one report.19 Still other companies go beyond candor to fraudulent behavior, such as the case of Volkswagen. The company admitted in 2015 that it cheated on its emission tests. Mitsubishi also admitted to 25 years of company engineers’ intentionally manipulating fuel-economy tests.20 In addition, the elements that drive an organization’s culture also vary. They may represent the values of the founder, the industry and business environment, the national culture, the organization’s vision and strategies, and the behavior of leaders. (See Table 8.1.) We thoroughly discuss organizational culture in Sections 8.2 and 8.3.

an Organizational Culture?

Organizational Culture, Structure, and Design

CHAPTER 8

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Organizational Structure: Who Reports to Whom and Who Does What

Organizational structure is a formal system of task and reporting relationships that coordinates and motivates an organization’s members so that they can work together to achieve the organization’s goals. As we describe in Sections 8.4–8.6, organizational structure is con-

cerned with who reports to whom and who specializes in what work. Whether an organization is for-profit or nonprofit, the challenge for top managers is to align the organization’s vision and strategies with its organizational culture and organizational structure, as shown in the two gold boxes in Figure 8.1. Figure 8.1 shows that the consistency among these elements in turn impacts (see the three green boxes) group and social processes (discussed in Chapters 13–15), individual work attitudes and behaviors (discussed in Chapters 11–12), and the organization’s overall performance. As you can see from the diagram, consistency across strategy, culture, and structure is expected to foster higher performance. ●

EXAMPLE

How Strategy Affects Culture and Culture Affects Structure: Cleveland Clinic Refocuses Its Continuous Improvement Strategy

The guiding principle at Cleveland Clinic, one of the largest research and teaching hospitals in the United States, is “Patients first.”21 To ensure that patients experience the best care and the best outcomes, the hospital needs practitioners who are at the top of their field but are not content with the status quo. So it recently undertook a new initiative to update its strategy of continuous improvement, in which all members of the organization are encouraged to make incremental improvements in all processes and services on an ongoing basis22 (see Chapter 16). The idea this time was to “change the culture” by giving “everyone the opportunity to look at how they’re doing their day-to-day jobs and where they could make improvements, reduce wastes, cut costs and improve the patient experience,” the chief medical operations office said.23 The Strategy: Continuous Improvement The goal of Cleveland Clinic’s continuous improvement strategy is “to create practices through which every caregiver is capable, empowered, and expected to make improvements every day.” The Clinic is focusing on measuring and improving patient safety, patient quality, patient experience, caregiver experience, and affordability.24 The reason for upgrading the continuous improvement program was not that practitioners didn’t already value excellence; Cleveland’s organizational culture is known for that. But as Dr. Lisa Yerian, medical director of continuous improvement, said, “People who are committed to excellence can create a lot of workarounds. They will go the extra mile but don’t always think about how to go three miles fewer to deliver the same or better quality care.”25 The Structure: A Matrix Cleveland Clinic itself is organized around individual organs and diseases rather than around clinical departments like most hospitals. Its continuous improvement department, launched in 2006 when the hospital first adopted continuous improvement, has since grown in size and

in scope and now includes 32 members, some from industries outside the medical profession. Skilled in applying world-class quality improvement strategies, they are located in many different departments and institutes within the hospital, so they are able to work with teams that similarly cross functional lines in the organization.26 The Culture: A Commitment to Excellence The continuous improvement team has been able to strengthen the hospital’s “patients first” culture in many tangible ways. It has reduced cancer patients’ wait times for chemotherapy treatments, achieved faster set-up in the hospital’s operating rooms, and dramatically reduced wait times in the emergency department so more patients are seen. In-patients and out-patients, as well as their caregivers and families, all have benefitted. In addition, the Decision Support Services (DSS) team, part of the finance division and an early participant in the newest continuous improvement effort, made permanent upgrades in its reporting process and changed its own culture. A brief project-status meeting every morning now gives every team member an opportunity to ask questions, air problems, and suggest solutions. As a result of these in-person check-ins, the volume of e-mail has dropped dramatically, team members feel more accountable to each other, and department costs have dropped more than 10 percent. Today, the DSS team members are helping to share what they learned about continuous improvement with teams in other areas of the organization.27

YOUR CALL The continuous improvement model adopted by Cleveland Clinic integrates the hospital’s vision, strategic goals, culture, and structure. Do you think this is hard to pull off in today’s organizations? Why do you think Cleveland Clinic was successful?28

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8.2 What Kind of Organizational Culture Will You Be Operating In? THE BIG PICTURE Organizational culture appears as three layers: obs...