Organizational Design & Leadership Flashcards
Functions of Organizational Structures (I)
Functions of Organizational Structures
Organizations exist to enable a group of people to effectively coordinate their activities and transaction efforts and to achieve organizational objectives.
Organizational structures serve the following three functions:
- Enableorganizationalmembersundertakeseveralactivities
according to a division of labor that defines
- Specialization ▶️ of tasks and functions
- Standardization ▶️ of tasks and functions
- Departmentalization ▶️ of tasks and functions
- Enable organizational members to coordinate their activities through integrating mechanisms, e.g.:
* Hierarchical supervision
* Formal rules
* Procedures - Define boundaries of the organization and its interactions with the environment.
▶️ Focal question: What drives organizational designs?
We will focus on factors that shape organizational designs:
- Environment
Society
policy
Customer
Competition
- Technology
- Motivation
Environment
Environment Dynamics Drive Organizational Design
Environmental factors influence organizational design (and vice versa):
- New modes of working (temporary employment, labor leasing, etc.) * Technological changes
- Changing / advanced education of employees
- Changing traditions and value-systems
- Competition
▶️ How can organizations cope with environmental changes?
Theoretical Background: System Theory Dynamics (I)
- Organizations exist in the form of systems because this enables the reduction of complexity between organizations and environment.
- The boundary between systems and environment is called difference.
- The environment of systems varies (depending on their boundaries).
- Because each system is part of an environment consisting of other dynamic systems (competition, policy, etc.), that collection of systems (= environment) is never static!
- Accordingly, changes in the environment always affect the focal systems (= the organization).
▶️ Therefore, as a collection of dynamic systems, environment is considered as a source of uncertainty for organizations.
Environment
Classification of Environment
- According to System Theory, everything that‘s not part of a focal system by definition is considered to be part of the environment.
- Environment can be described along two classifications:
- Formal Environment
- Content Environment
- Formal Classification of Environment (I)
Principle: Describe the environment along formal dimensions:
Dimension 1: Complexity
* Captures the degree of complexity of the environment
* Includes the number and variety of elements relevant to the environment
Dimension 2: Dynamics
* Captures changes of the environment over time (evolution)
* Dimensions of environmental dynamics:
Stability of Elements, intensity and predictability of changes
Dimension 3: Illiberality
* Captures pressure for organizations to cope with environmental
changes
* Includes intensity of competition, scarce resources, and regulations.
- Content Classification of Environment
Principle: Organizations should only focus on particularly relevant environmental forces
How can organizations identify relevant environmental forces that affect organizations directly?
Checklists of particularly relevant environmental forces include:
- Technological * Ecological
- Regulatory * Macroeconomic
- Socio-cultural
Goal: Reduction of complexity
Formal vs. Content Classification of the Environment (I)
- What can organizations learn from these perspectives?
- Research reveals two conflicting perspectives describing the
relationship between the environment and organizational designs:
Congruence Perspective ↔️ Interactional Perspective
- Congruence Perspective:
Organizational environment is dominating organizational structures. Organizations have to adapt to changes induced by the environment. - Interactional Perspective:
Organizational environment and organizational structures are interacting with each other.
Environment
Mechanic vs. Organic Organizational Structures
Model of Differentiation and Integration
Mechanic vs. Organic Organizational Structures (I)
Mechanic structures
- Strict hierarchy
- Vertical Interaction
- Downward trend of
communication - Final Authority is centralized
- Strong formalization
- Loyalty and obedience
Organic structures
- Functional authority
- Lateral interaction
- Net structure of
communication - Many decision-making centers
- Redefining tasks continuously
- Task dedication
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Model of Differentiation and Integration
- Many approaches build upon „Mechanic vs. Organic Organizational Structures“ model from Bruns and Stalker (1961).
*Lawrence and Lorsch (1967) develop the well-known „Model of Differentiation and Integration“
Model of Differentiation and Integration (II)
- Organizations are regarded as „open systems“.
- With increasing size, organizations differentiate itself into separate
sub-systems (differentiation). - The system integrates all these sub-systems and ensures that all sub-
departments work together seamlessly (integration). - The system has to absorb organizational changes induced by the environment.
Model of Differentiation and Integration (III)
Organizations have to cope with different environmental forces…
…and organizational sub-systems have to deal with corresponding environmental elements.
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Environment
- Organization
- Market Segment (Customers, Competitors) ( Marketing)
- Science Segment (Production)
- Techno- Economical Segment R&D
Model of Differentiation and Integration (IV)
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Environment and Organizational Design (I)
The characteristics of the environmental segments determine organizational structures of the corresponding (sub-) systems:
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Environmental setting:
- Safe and stable
- Complex and dynamic
▶️
Organizational structures of (sub-) systems
- Mechanic
- Formalized
- Centralized
- Flexible
- Organic
- Easy-to-adapt
Environment
Imperative Thesis of Organizational Design
Imperative thesis: The success of organizational design depends on the congruence between the organizational design and its (given) environment.
Issues:
* Environment is not necessarily always imperative.
* Organizations have different options to react to environmental conditions and changes.
* Environment may be influenced by organizational activities (e.g. marketing, lobbying) (Interdependency).
▶️This critic leads to the interactional perspective describing the relationship between organizations and their environment.
a. Functional Organization
- Based on the integration of similar functions into departments. * The departments are responsible for all activities of the
corresponding function. - Each department has its own
- Internal structure * Management
- Objectives
- Plans
- Budget
Manager
- R&D
- Marketing
- Production
- Finance
a. Functional Organizations: Advantages
Environment
a. Functional Organization: Advantages and Disadvantages
a. Functional Organization: Advantages
High levels of interaction within the functions:
* Individual knowledge
* Common functional-specific knowledge
This leads to:
* higher productivity
* feasibility of complex tasks
Peer-supervision and peer-support is feasible for small business units and
employees at the same level
Function-specific norms and values influence commitment and therefore motivation and performance.
a. Functional Organizations: Disadvantages
Functional orientation is suboptimal for (very) big companies
Many reasons may overstress functions:
* Heterogeneous customer needs
* Diversity of the product portfolio
* Geographical diversification
Performance assessment of separate functions is hardly assessable
Managers are highly involved in daily coordination procedures between functions
Therefore, managers may neglect long-term planning (strategy)
Communication and coordination problems between functions Source: Jones/Bouncken (2008)
Environment
Divisional Organizations: Overview
Divisional Organizations: Evaluating Divisional Organizations (I)
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Management
⬇️
Product A
R&D
Marketing
Production
Finance
Divisional Organizations: Evaluating Divisional Organizations (I)
Advantages:
* Divisions are closer to the market
* Single divisions can better respond to uncertainty
* Fast reaction to environmental changes
* Accountability is clearly defined
Disadvantages:
* Economies of scale and scope can be lost
* Divisions may end up competing against each other
* Divisions may develop similar products for similar types of customers
* Divisional organization may lead to duplication of internal services
(such as accountin
Customer-Oriented Organization
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Technology
Organizational Structure and Production System (I)
- Woodward (1950) investigates the organizational structure of 100
industrial companies in England. - His results reveal a large variety of organizational structures of
exceptionally successful companies (same holds true for less
successful companies).
➡️ Which factors could explain the broad scope?
- Woodward includes the technological structure of the production
system into his investigation: - Single-item and small-batch serial production
- Large-scale and mass production
- Process production
➡️ Production systems determine organizational designs
Organizational Structure and Production System (III)
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Organizational Structure and Production System (IV)
- Organizations with either simple or very complex production systems
employed organic organizational structures. - Organizations with medium complex production systems employed
mechanical organizational structures.
➡️ Production system determines the relationship between
technological settings and organizational / managerial structures.
Technology
Technology and Knowledge (I)
This early perspective (Woodward 1950) considers the complexity of the production systems as technology.
Today, this understanding of technology may be obsolete:
* Technology is more than just the production system
* Technology is often considered an intangible asset
Technology
Technology and People
Linking Technology and the Market: Transformative Business Models
- Keeping the understanding of technology from Perrow (1967, 1973) in
mind:
In the transformation process, not organizations but individual people
transform input to output. - Individual people act as intervening factor between technology and
organizational design. - Question: How do they intervene?
Example:
Suppose a hospital purchases a new CAT-scanner. For the proper
operation of the new technological device, specialized personnel is
necessary. Because the established staff is not trained in using the CATscanner, the organization may implement job rotation to train their
employees on the job.
Linking Technology and the Market: Transformative Business Models
- Industry‘s transformation is usually associated with the adoption of a
new technology - But although new technologies are often major factors, they have
never transformed an industry on their own
➡️ No new technology can transform an industry unless a business
model can link it to an emerging market need!
Technology
Linking Technology and the Market: Six Keys to Success
Linking Technology and the Market: Six Keys to Success (I)
- Research selects 40 new business models that seem to have a
potential to transform industries - Looking for recurring features in the models: 6 emerge
- No company displays all of them but a higher number of these
features usually correlate with a higher chance of success at
transformation. - Trends and needs were identified by an analysis of regularly published
industry reports from think tanks and consulting companies such as
the McKinsey Global Institute, PwC, and the Economist Intelligence
Unit.
Linking Technology and the Market: Six Keys to Success (II)
- Personalization: They are better tailored than the dominant models to customers’ individual and immediate needs.
- Closed Loop: Replace a linear consumption process with a closed loop, in which used products are recycled.
- Asset Sharing: Some innovations succeed because they enable the sharing of costly assets. For example, Airbnb allows home owners to share them wit
Linking Technology and the Market: Six Keys to Success (III)
- Usage-based Pricing: Some models charge customers when they use the product or service, rather than requiring them to buy something outright
- Collaborative Ecosystem: Technology improves collaboration with supply chain partners and helps allocate business risks more appropriately
- Agility: Move away from traditional hierarchical models of decision making in order to make decisions that better reflect market needs and allow real-time
adaptation to changes in those needs.
Linking Technology and the Market: Six Keys to Success (IV)
Linking Technology and the Market: Six Keys to Success (V)
Linking Technology and the Market: Six Keys to Success (VI)
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Linking Technology and the Market: Six Keys to Success (VI)
UBER can claim five of the six key features:
- Personalization: Rating of drivers via mobile device.
- Asset Sharing: Drivers use their own cars.
- Usage-based Pricing: Mobile device directs drivers to locations where the
probability of finding a fare is high. - Collaborative Ecosystem: Drivers assume the risk of winning rides, while the
platform helps minimizing that risk through
application of big data. - Agility: Internal decision-making system responds to
market changes in real time.
Technology
Technology
Technology and Management Methods: Agile Working
Technology and Management Methods: Agile Working (I)
- Agile Innovation methods have revolutionized information technology
- They are a radical alternative to command-and-control-style
management - Agile methods such as scrum, kanban, and lean development are
spreading beyond IT to other functions
Technology and Management Methods: Agile Working (II)
Compared with traditional management approaches, agile working offers a number of major benefits, all of which have been studied and documented:
- increases team productivity and employee satisfaction
- minimizes the waste inherent in redundant meetings, repetitive planning, excessive documentation
- brings the most valuable products and features to market faster and more predictably, and reduces risk
Technology and Management Methods: Agile Working (II)
- By engaging team members from multiple disciplines as collaborative peers, it broadens organizational experience and builds mutual trust and respect
- By reducing the time squandered on micromanaging, it allows to devote themselves more fully to higher-value work and improves motivation
Technology
Technology and Management Methods: Agile Manifest
- People over processes and tools
- Working prototypes over excessive documentation
- Respond to change rather than follow a plan
- Customer collaboration over rigid contracts
Technology
Technology and Management Methods: Agile Conditions (I)
Technology and Management Methods: Agile Scrum Framework
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Conditions:
- Market environment
Favorable:
- Customer preferences and solution
options change frequently
Unfavorable:
- Market conditions are stable and
predictable
Conditions:
- Customer involvement
Favorable:
* Close collaboration and rapid
feedback are feasible
* Customers know better what they
want as the process progresses
Unfavorable
- Requirements are clear from the
outset and will remain stable
- Customers are unavailable for
constant collaboration
Conditions
- Modularity of
work
Favorable
* Incremental developments have
value, and customers can use them
* Work can be broken into parts and
conducted in rapid, iterative cycles
* Late changes are manageable
Unfavorable
* Customers cannot start testing
parts of the product until
everything is complete
* Late changes are expensive or
impossible
Conditions
- Innovative type
Favorable
* Problems are complex, solutions are
unknown, and the scope isn‘t
clearly defined
* Product specifications may change
* Creative breakthroughs and time to
market are importan
Unfavorable
* Similar work has been done before,
and innovators believe the solutions
are obvious
* Detailed specifications and work
plans can be forecast with
confidence and should be adhered
to
* Problems can be solved sequentially
in functional silos
Conditions:
- Impact of interim
markets
Favorable
* They provide valuable learning
Unfavorable
* They may be catastrophic
Motivation
Defining Motivation
Motivation: The processes that account for an individual’s intensity, direction, and persistence of effort toward attaining a goal.
Three key elements of motivation:
- Intensity describes how hard a person tries
- Direction describes the focusing of effort towards
(organizational) goals - Persistence measures how long a person can maintain effort
Motivation
Recap From 1st Lecture: Neoclassical Human Relations Approach (I)
Recap From 1st Lecture: Neoclassical Human Relations Approach (I)
Employees act as the fundamental resource of organizations:
* Motivation
* Creativity
* Willingness to cooperate
Employees are therefore crucial to the performance of organizations
Recap From 1st Lecture: Neoclassical Human Relations Approach (II)
- If the organizational design is based on the perspective that
employees dutiful execute their tasks, the organizational design may
lead to a waste of capabilities and may be counterproductive. - Organizational design is more than just a control equipment
(to ensure efficient workflow):
➡️ Organizational designs have to foster motivation
and employees’ initiative!
Overview: Motivational Theories (I)
Employee motivation is one of the most important factors influencing
organizational performance.
Within the last decades, many motivational theories arose
Two broad categories of motivation theories can be classified:
- (Early) content theories emphasize what motivates
individuals - (Contemporary) process theories emphasize the actual process
of motivation
Overview: Motivational Theories (II)
Content Theories
1. Hierarchy of Needs
2. Theory of Needs
3. Theory X vs. Y
4. Two-Factor Theory
5. Self-Determination Theory
Process Theories
6. Goal-Setting Theory
7. Self-Efficiency Theory
8. Equity Theory
9. Theory of Organizational Justice
10. Expectancy Theory
- Theory of Needs
- Goal-Setting Theory
- Theory of Needs
According to Mc Clelland (1961), achievement, power, and affiliation
are three important needs that help to explain motivation:
- Need for achievement: The drive to excel, to achieve in relationship
to a set of standards, and to strive to succeed. - Need for power: The need to make others behave in a way in
which they would not have behaved
otherwise. - Need for affiliation: The desire for friendly and close interpersonal
relationships
- Goal-Setting Theory: Introduction
Intentions to work toward goals are a major source of work motivation.
Goals tell an employee what needs to be done and how much effort is
needed.
Research reveals:
* Specific goals increase performance more than unspecific goals
(“Do your best”).
* Easier goals are more likely to be accepted.
* Difficult goals, when accepted, result in a higher performance than easy
goals.
* Feedback leads to a higher performance than non-feedback.
- Goal-Setting Theory: Cascading of Objectives
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Summary: What can we Learn from these Theories? (I)
- Note: Many of the presented theories can be regarded as
complementary. - All theories highlight different aspects of employee’s motivation: Organizational management has to ensure that all aspects of employee’s motivation are considered in the organizational design.
How can organizations consider all aspects that accelerate employees’
motivation?
* Two modelling approaches try to integrate these organizational
theories into one framework:
* Integration Approach by Robbins and Judge
* Job Characteristics Model
a. Integration Approach by Robbins & Judge (2014)
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Job Characteristics Model (I): Five Core Dimensions
- Skill variety is the degree to which a job requires a variety of
different activities. - Task identity is the degree to which a job requires the
completion of a whole and identifiable piece of
work. - Task significance is the degree to which a job affects the lives or
work of other people. - Autonomy is the degree to which a job provides the worker
with freedom in scheduling work and procedures
of task execution. - Feedback is the degree to which carrying out work
activities generates direct and clear information
about the own performance.
➡️ If jobs lack on one (or more) core job dimensions,
employees typically have lower levels of motivation
Job Characteristics Model (III)
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Leadership
Leadership
Leadership
- Organizational Leadership is the ability to influence a group toward
the achievement of a vision or a set of goals. - It is important to mention that neither all leaders are managers,
nor all managers are leaders. - Organizations need strong management and strong leadership for
optimal effectiveness.
Leadership
Managing vs. Leading (I)
- It is important to appreciate the difference between leadership and
management in order to fully understand what leadership is about.
➡️ “Leaders manage and managers lead but the two activities are not synonymous”.
- Managers typically perform functions associated with planning,
investigating, organizing and controlling, while leaders deal with
interpersonal aspects of a manager’s job.
➡️ Leaders inspire others, provide emotional support, and try to get employees to rally around a common goal.
Managing vs Leading (II)
Managers
1. Wait until it happens
1. Are happy with the status quo
1. Are pursuing objectives
1. Are experts of the past
1. Do the things right
1. Follow their job description
1. Respect budgets
1. Avoid mistakes
1. See information as power
1. Are myopic
1. Are difficult to reach
1. Adore status symbols
1. Use reward and punishment
Leaders
1. Are pro-active
1. Challenge the status quo
1. Have a vision
1. Are experts of the future
1. Do the right things
1. Change their job description
1. Create value
1. Seek learning opportunities
1. Share information
1. Take the broad view
1. Are approachable
1. Want the best for all
1. Inspire and motivate
Leadership
Trait Theories
Behavioral Theories
Trait Theories
* Traits are distinctive characteristics that distinguish leaders from
non-leaders.
* Throughout the history, strong leaders have been described by their
traits. Trait theories of leadership focus on personal qualities and
characteristics.
* A research review in the late 1960s identified nearly 80 leadership
traits. A breakthrough came with the Big Five Personality Framework
(most of the dozens of traits fit under one of the Big Five).
Behavioral Theories
* Trait research provides a basis for selecting the right people for leadership. In contrast, behavioral theories of leadership imply one can train people to be leaders.
* The most comprehensive theories resulted from the Ohio State
Studies in the late 1940s, which sought to identify independent
dimensions of leadership behavior.
* The Ohio State Studies identifies behavioral differences between
effective and ineffective leaders.
Behavioral Theories: Four Leadership Styles Derived from the Ohio State Studies
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Leadership
Contingency Theories
- Some leaders may have the right traits or display the right behaviors
and still fail. As important as traits or behaviors are in identifying
effective or ineffective leaders, they do not guarantee success. - Context matters, too, which has given rise to the contingency
theories.
There are 4 relevant contingency theories:
* The Fiedler model
* Situational theory
* Path-goal theory
* Leader-participation model
Leadership
The Fiedler Model (I)
The Fiedler contingency model proposes that effective group performance depends on:
- a proper match between a leader’s style or interacting with subordinates
- the degree to which the situation gives control and influence to the leader
The Fiedler Model (II)
The model states that there is no best style of leadership. Instead, a leader’s effectiveness is based on the situation. This is the result of two factors:
* leadership style
* situational favourableness
Leadership
Situational Leadership Theory
- This theory focuses on the followers. It says successful leadership
depends on selecting the right leadership style contingent on the
followers’ readiness. - The fundamental underpinning of the situational leadership theory is
that there is no single “best” style of leadership, because leadership
depends upon each individual situation. - Effective leadership therefore varies, not only with the person or
group that is being influenced, but it also depends on the task, job or
function that needs to be accomplished.
Leadership
Path Goal Theory
- This theory states that it is the leader’s job to assist followers in
attaining their goals and to provide the necessary direction and/or
support to ensure that their goals are compatible with the overall
objectives of the group or organization. - The theory also states that a leader’s behavior is contingent to the
satisfaction, motivation and performance of her or his subordinates.
In particular, leaders:
* Clarify the path so subordinates know which way to go.
* Remove obstacles that are stopping them going there.
* Increase the rewards along the route.
Leadership
Leader-Participation Model
- This theory provides a set of rules to determine the form and
amount of participative decision making in different situations. - The situational theory argues the best style of leadership is
contingent to the situation. - The Leader-Participation Model is highly flexible with respect to the
choices a leader can make. The range is from highly dictatorial to
democratic.
Leadership
Transactional and Transformational Leadership
Transactional leaders
* Are those, who guide their followers toward established goals by
clarifying role and task requirements.
Transformational leaders
* Inspire followers to transcend their self-interests for the good of the
organization. Transformational leaders can have an extraordinary
effect on their followers.
Transactional and transformational leadership complement each other. Transformational leadership builds on transactional leadership.
➡️ The best leaders are transactional and transformational.
Transactional and Transformational Leadership (II)
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Leadership
Authentic Leadership
- Authentic leaders know who they are, know what they believe in and
value, and act based on those values and beliefs. - Their followers consider them ethical people. Trust is produced by
authentic leadership. - Authentic leaders share information, encourage open
communication, and stick to their ideals.
The result: People develop faith in them. - There has been limited research on authentic leadership up to date.
However, recent research indicates that authentic leadership creates
a positive energizing effect.
Leadership
Ethical Leadership
- Ethical Leadership is leading by knowing and doing what is right. The
problem with ethical leadership is that it is difficult to define “right”. - After all, there is no universal standard for ethical behaviour, and
ethical norms vary by culture, by industry, and even sometimes within
an organization.
