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Organizational Culture

Contact information:

Dr. Richard W. Scholl
36 Upper College Road
Kingston, RI 02881

p. 401.874.4347
f. 401.874.2954

rscholl@uri.edu

Organizational structure can be viewed from many perspectives, but I find viewing it from a decision making perspective most useful. Structure exists to perform two essential functions within the organization:

Control- Insuring that decision makers at all levels use the managerial or hierarchical constraint as one of the criteria in making their decisions, and

Coordination- Insuring that decision makers at all levels use lateral or peer constraints as criteria in their decision making.

There are various control and coordination mechanisms used to perform these functions. As control and coordination problems arise, organizations generally respond by developing or modifying a control or coordination mechanism. The organization's structure at any point in time is the sum total or the mechanisms it as developed and modified to achieve control and coordination.

  1. Control Example - A program director of a radio station in an attempt to increase rating establishes to fixed program format and requires all DJ's to follow it.  (For additional information on Control see: Commitment & Control Strategies)
  2. Coordination Example - A new product in a bank is slow in developing, so the CEO assigns a product manager, who reports directly to her, and works with all the departments involved in the new product.

There are many different types of structures and for years researchers and practitioners attempted to determine what type of structure was is fact the most effective. This line of inquiry has led ultimately to a contingency view of structure, that is, the most appropriate structure for a given organization is a function of the type of environment that organizational operates within and the technology it utilizes.

Organizational Control

A control system requires two elements:

  1. A base of power
  2. A control mechanism- The following are the four generic types of control mechanisms employed by organizations. All control mechanism fall into one of these four generic types:
Structural Control Mechanisms

Centralization- Managers achieve control over decision making by either making all decision themselves or requiring the decision maker to have all decision approved before implementation.

Formalization- Development of rules, procedures, guidelines, and policies that act to guide the decision making process (mechanism in example above)

Output Control- Establishing goals or objectives that act as a criterion in the decision making process.

Cloning- Establishing a set of shared values and expectations that act to guide the decision making process. With this control mechanism, a strong base of power is not necessary. This is the basis of organizational culture. Many argue that organizational culture and organizational structure are functional alternatives, that is, they both function to achieve control. When culture is strong, strong structures are not necessary.

We discussed some of the situations which lead to the use of formalization, or process control and, by contrast, situations that lend themselves to output control.

  1. Process Control-
    1. Stable environment, where one best way exists and is known.
    2. Situations where we cannot afford an unfavorable outcome.
    3. Decision makers lack expertise or information necessary.
    4. Situations where consistency among decision makers is important
    5. Situations where a defining clear, measurable objective is difficult
  2. Output Control
    1. A clear, measurable objective exists
    2. There are multiple effective means of achieving the objective.
    3. The proper process depends on factors that must be determined at time of the decision.
    4. Decision makers have expertise and access to information necessary.
    5. The decision makers have access to knowledge of results which provide feedback necessary to modify future processes and decisions.

An organization's structure is, in part, a function of the control mechanisms it utilizes. Those organizations making heavy use of centralization and formalization are said to be mechanistic in form. Those using output control and cloning are termed organic.

Coordination

The major question addressed during this class was, "How do organizations composed of differentiated departments achieve a high degree of coordination or integration."

  1. We started by defining the two fundamental ways in which differentiation, or departmentation takes place. Additionally, we discussed the major benefits of each type of structure and which type of customer based performance pressure each responds to best.
    1. Functional- Major activities are broken up and organized my management function (e.g., Marketing, Engineering, Production)
      1. Responds best to PRICE and QUALITY performance pressures
        1. Economies of scale realized by centralizing functional activity
        2. Greater degree of specialization and reinforcement of expertise by grouping people with other functional experts
    2. Divisional, by either Product, Geography, Client/Customer, or Project
      1. Responds best to TIME and SERVICE performance pressures
        1. Greater degree of coordination achieved by grouping all those working on a single product, project, etc., together. Coordination also achieved through single common goal.
        2. Greater service result of pinpointing of responsibility, and expertise related to single customer needs.

Functional and Divisional structures represent two pure structural types found at opposite ends of the structural continuum. A given environment places demands or performance pressure on an organization, which it responds to by altering its structure, thus moving it along this continuum. Performance pressures of Quality and Cost push the structure towards the Functional end of the continuum, while pressures for Time and Service push the structure towards of Divisional end of the continuum.

The need for coordination increases directly with the amount of reciprocal interdependence among units. Where interdependence is pooled few resources and relatively little effort need be directed toward coordination. Sequential interdependence requires more efforts toward coordination, while reciprocal interdependence requires constant adjustments with concomitant requirements for communication and resolution of conflicts. Thus more resources are necessary to facilitate communication and resolve conflicts in an integrative (win-win) manner.

  1. Reciprocal interdependence between functional units is greatest during the development and product introduction stages of a product's life cycle.
  2. Therefore, organizations with multiple products, with short life cycles have greater requirements for cross functional integration.
Cross Functional Integration Mechanisms

These are arranged in order of increased cost, but increased effectiveness as well. Thus the Hierarchy requires the least amount of additional resources, but becomes the weakest mechanism when increased complexity (amount of reciprocal interdependence) exits.

  1. Hierarchy- Cross functional communication is achieved through a mutual superior. Conflict among functional units is resolved through mutual supervisor.
    1. Creates time delays
    2. Where multiple products exist, the general manager must focus on operational issues of all products
  2. Direct Contact- When the chain of command get overburdened individual begin communicating directly with counterpart in other functional departments. This has a tendency to speed up decision processes.
    1. Communications with and involvement of the appropriate functional units is left of the discretion and initiative of individuals.
    2. When conflict occurs between these individuals, their relative power tends to determine the outcome. An integrative (win-win) decision is not encouraged. Leads to a trade off of performance pressures, rather than development of an innovative way to meet multiple performance pressures.
  3. Liaison Role- A Facilitator, expediter, project manager, etc. is appointed to smooth conflicts and encourage communication among those working on a single project or product. No formal base of power. Must rely on building identification with the project (referent power). Also tends to get work done through reciprocity (exchange of favors).
    1. Lack of formal power often put this type of project manager at a disadvantage. When faced with competing demands from a project manager and functional manager, the employee generally attempt to satisfy the functional manger.
  4. Task Groups- The project manager now is assigned specific individuals from the various functional units to work with on the project. The team meets regularly and motivation is achieved through identification with the team. Increased communication is achieved though regular meetings. The conflict mediation, or facilitation skills of the team leader are an essential part of the success of this mechanism. The leader must focus on both team goals and functional member interests to be effective.
    1. Team members often devote time and energy toward the project when they see that their efforts are making a measurable difference in results of the project. This is especially true when positive projects results are attributed to their competencies (Internal and External Self Concept Motivation). However, this type of motivation is often compromised when the time and effort spent on the project comes at the expense of performance in the eyes of the functional manager.
  5. Integrating Role- The titles may be the same, (project manager, expediter, etc.) however, this individual is given increased power through the allocation of resources. In all other mechanisms, resources are distributed among functional departments. In this case, resources are divided between functional managers and project managers. The project manager gain increased power through his/her ability to allocate resources.
  6. Integrating Department- This is a task group with a budget.
  7. Matrix Structure- Here there is a theoretical balance of power between the functional manager and the project manager. They both have budgets and influence over personnel decisions. It is designed to force a conflict between the functional manger's desire for quality, and the project managers push for time and service. It also takes advantage of economies of scale, necessary to hold down costs, by encouraging the fluid deployment and re-deployment of expertise to projects as needed.
    1. Matrix structures are difficult to manage and require different leadership styles and conflict resolution styles than traditional functional structures. They should only be used when the following three conditions exit.
      1. Multiple performance pressures-
        1. If faced with time, quality, and service, but you can pass on costs; move toward divisional and over-staff.
        2. If quality and cost are important, but time is not; move toward functional
        3. You get the idea.
      2. There are benefits from economies of scale- If your big enough so that you can achieve all the expertise you need in separate divisions, and fully utilize these people; move toward divisional. Also, if you are more toward the conglomerate end of the diversification continuum (rather than the concentric end) you probably will not benefit from economies of scale except for broad based administrative services.
      3. High information processing needs- Reciprocal interdependence, that is, relatively high amount of new product development.

The Other side of the Continuum (Between matrix and divisional). We find a mirror image, however on this side power rests with the divisional manager with functional managers acting as advisors and facilitators.


 
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