Hoorcollege 5 Flashcards
Organization structure
An organization structure is how you can define an organization. It is what an organization looks like in terms of departments, group size, functions, coordination, hierarchy, and rules.
The structure of an organization can be defined simply as the sum of the ways in which its
labor is divided into distinct tasks and then its coordination is achieved among these tasks.
Value chain
The basic structure of an organization can be explained with a value chain. This is a tool to
determine if your organization is suitable for the proposed strategy.
The value chain describes the basic process of the organization from inbound logistics to
service. These are the basic functionalities to make sure you can do the primary process of
the organization:
- Inbound logistics
Everything you need to get the raw materials in the organization. - Operations
This is where the actual work happens, where the raw materials are assembled into something concrete. - Outbound logistics
Transport, storage, etc. - Marketing & sales
This is where the products are sold and delivered. - Service
This is the aftersales service such as customer
feedback.
Value chain & innovation
To make sure the basic functionalisties happen in an organization, you need to have:
- Firm infrastructure
This is everything that makes sure you can do everything (e.g., the buildings, the management structure, finance). - Human resources
The people who work in the organization. - Technology
This is necessary to make sure that people can communicate with each other. - Procurement (raw materials)
This is all the raw material in stock to make sure an organization can produce
products.
This is called a value chain because it is a chain in the organization that creates value. The products you make are more than the sum of the raw materials and everything you add in
between. Value is added to the raw materials in order to make profit as an organization.
It is a very easy and basic way to define the organization structure. It is very useful, because:
- You can analyze how strong/weak each component of your organization is. You can
also analyze what the opportunities/threats in each component are. Both processes are part of a SWOT-analysis.
- You can check for each of the resources to check whether they are rare, valuable, durable, and inimitable.
- However, the value chain has little attention for human capital, especially tacit resources (‘invisible’ resources such as experience and knowledge).
Dimensions of organization structure
There are 3 main dimensions that you can use to classify the structure of an organization:
- Departmentalization
- Centralization vs. de-centralized decision making
- Formalization & Standardization
Departmentalization
This means how you divide up your organization. This can be done in two ways:
- Functional
An organization is split up in a way that different departments do different things. It is structured according to function. For
example, there are departments for marketing, production, etc. - Divisional
An organization is split up in different divisions based on, for example, geography or different products an organization makes.
Oftentimes an organization is split up both functional and
divisional. It is possible for organizations to be structured with matrix lines. This is a way of structuring the organization in both a functional and a divisional way.
For example, an employee works on different products and within these products, the employee is the social media expert.
Centralization vs. de-centralized decision making
Centralized decision-making (top) means that the decision making happens at the top (central) of the company. De-centralized decision-making (bottom-up)
means that people at the bottom of the organization
also have something to say. This also relates to span of control in the organization. Some organizations have a
high span of control (tall structure). Other organizations have a lower span of control (flat structure). What works best depends on the organization and its strategies.
Formalization & Standardization
Formalization means that there are explicit procedures, rules, and policies to structure an
individual’s work behavior. Standardization means that there is a uniformity of activities. This division relates to control (it is determined what every employee should do) vs.
coordination (flexibility in how to do your work).
There are two extremes of organization structure:
- Machine bureaucracy (mechanistic structure)
This organization type is all about control. The organization is centralized, formal, and hierarchical.
- Professionalism (organic structure) This organization type is all about coordination. The organization is flexible,
decentralized, flat, and informal.
Innovation in larger organizations
Larger organizations are often less flexible, which may hamper innovation. Solutions for this are:
- R&D department set apart from organization in more organistic structure.
- Isolating several R&D teams to negate groupthink.
- ‘Dynamic tension’.
Organization culture
A culture is what an organization is besides its structure and formal definition (e.g., strategy).
It consists of the shared mental model that members of the organization have in terms of values, beliefs, norms, practices, and artefacts.
Organizational culture tends to be in line with the ‘national’ culture but may also consist of sub-cultures and countercultures.
Why is an organization’s culture important?
- Culture works as a control strategy for organization. There are three different control
strategies (how to make people do their work) - Culture is also important when the environment is uncertain, and work is equivocal, clan-based organization is more important.
- It is also important when work is boring (e.g., McDonald’s). In that case paying people for the job is not just enough so companies focus more on culture.
Three different control
strategies
- Market-based: work based on supply & demand of work. You make people do their work because you pay them for their work.
- Bureaucracy: control based on structure.
- Clan: control based on shared values & beliefs. That is what we call culture and that is why culture is important for an organization.
Culture consists of 2 thigns
Culture consists of:
- Beliefs & values (learned unconsciously)
- Practices, norms, and artifacts (how we do things)
Organizational culture needs to fit with…
- Internal structure
- External environment
The organizational culture is a strong determinant of 2 things
The organizational culture is a strong determinant of:
- Employee behavior and satisfaction
- Performance & innovation
What if we wanted to change our organizational culture?
We should :
1. Know different types of organizational culture
2. And the advantages and disadvantages
3. Identify our own organizational culture
Competing values framework (Quinn 2013)
There are two dimensions with competing values. The dimensions are:
- Flexibility vs. control
- Internal focus vs. external focus
Models of Management
This is a way of looking at what an organization focusses on in terms of management. There are two dimensions with competing values. The dimensions are:
- Flexibility vs. control
- Internal focus vs. external focus
This leads to four possible focusses of an organization:
- Rational goal model
- Internal process model
- Human relations model
- Open system model
Rational goal model
Focus on market/competition/efficiency
- Focused on efficiency in terms of external requirements.
- Directive, goal-oriented, rule-driven.
- Aggressive competitive strategy.
- Core assumption: competitiveness and productivity lead to profitability.
- A results-oriented workplace with an emphasis on winning.
- Success is defined in terms of market share and penetration.
- Examples: Unilever, online marketing agencies.
Internal process model
Focus on hierarchy/control/processes
- Focused on internal efficiency and stability.
- Obtained through control, routine, procedures, conservative management → machine bureaucracy.
- Core assumption: clear lines of decision-making authority, standardized rules and procedures, and control and accountability mechanisms are the keys to success.
- Rule manuals dictate work (little autonomy).
- Promotion requires knowledge of rules and policies and happens in determined series of steps.
- Examples: McDonalds, IT companies.
Human relations model
Focus on collaboration/relationships/HRM
- Informal, interpersonal relations (‘extended family’).
- Focus on employee well-being, commitment, participation, support.
- Core assumptions: the environment can best be managed through teamwork and employee development, customers are partners, and the major task of management
is to empower employees and facilitate their participation, commitment, and loyalty. - Success is defined in terms of internal climate and concern for people, with a premium on teamwork, participation, and consensus.
- Examples: IKEA, insurance agencies, governmental agencies (in general: organizations that are less sensitive to economic cycles).
Open system model
Focus on innovation/flexibility/environment
- Focused on external environment.
- Entrepreneurial, responsive to customers, organic, flexible.
- Core assumption: adaption and innovativeness lead to new resources and profitability.
- Decentralized power and authority.
- Professional/organistic structure with a focus on individual and teamwork.
- Emphasis on individuality and risk taking.
- Examples: Google, startups, strategy consultants.
Culture affects attitude towards innovation
The organizational culture affects the attitude towards innovation in two ways:
- How people see information in a certain culture:
o Belongs to individuals, or to the organization.
o A means of control, a source of creativity.
o To be hoarded or shared. - How people see innovation:
o Resistant to or welcoming change.
o Part of their core job or part of other’s job.
o Useful or useless.
The different organization cultures may stimulate innovations in different ways
- Open system
o For more radical/architectural innovations.
o For technologies at the start of the S cycle/adoption curve. - Rational goal
o For more revolutionary innovations.
o For technologies a bit later in the adoption curve. - Internal process
o For incremental innovations. - Human relations
o Possible also for more radical types of innovation.
o Process innovation rather than service/product innovation.
How culture affects technology
Culture and technology affect each other. Culture affects the technologies and the systems that work best in the organization. Technologies and systems in an organization may affect culture.
Culture affects the technologies / systems that work best in the organization, for example…
-Internal process -> large integrated systems, ERP, data warehouses
-Rational goal -> CRM systems
-Human relations -> Groupware, social media
-Open systems -> (external) social media, extranet, decision support software
Technologies / systems in an organization may affect culture, for example…
-Social media may make communication more informal (we know email has)
-ERP can lead to standardization, formalization, central power
-Internet, SCM can lead to more external orientation
