In an organic organization tasks and rules are clearly specified

Major Questions You Should Be Able to Answer

8.1

Aligning Strategy, Culture, & Structure

Major Question: Why is it important for managers to align a company’s vision and strategies with its organizational culture and structure?

8.2

What Kind of Organizational Culture Will You Be Operating In?

Major Question: How do I find out about an organization’s “social glue,” its normal way of doing business?

8.3

The Process of Culture Change

Major Question: What can be done to an organization’s culture to increase its economic performance?

8.4

Organizational Structure

Major Question: How are for-profit, nonprofit, and mutual-benefit organizations structured?

8.5

The Major Elements of an Organization

Major Question: When I join an organization, what seven elements should I look for?

8.6

Basic Types of Organizational Structures

Major Question: How would one describe the seven organizational structures?

8.7

Contingency Design: Factors in Creating the Best Structure

Major Question: What factors affect the design of an organization’s structure?

Page 225the manager’s toolbox

How to Stand Out 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.

Among things you should do in the first 60 days: 2

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. 3 “When meeting someone for the first time, concentrate on one thing: your energy level,” advises one CEO, who thinks that seven seconds is all the time people need to start making up their minds about you. Amp it up, he advises. “If you don’t demonstrate energetic attitude on your first day, you’re already screwing up.” 4 (However, don’t be too upset if you feel you’ve blown it with someone on the first meeting. What’s key is to make sure you have other chances to meet that person again so that you can show different sides of yourself. 5 )

Come in 30 Minutes Early & Stay a Little Late to See How People Behave

“Many aspects of a company’s culture can be subtle and easy to overlook,” writes one expert. “Instead, observe everything.” Thus, try coming in early and staying a little late just to observe how people operate—where they take their lunches, for example.

Get to Know Some People & Listen to What They Have to Say

“You’ve got to realize that networking inside a company is just as important as when you were networking on the outside trying to get in,” says a business consultant. 6 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, rather than to slather on the charm. Realize that you have a lot to learn. 7

Make It Easy for Others to Give You Feedback

Ask your boss, coworkers, and subordinates to give you feedback about how you’re doing. Be prepared to take unpleasant news gracefully. 8 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 foregoing advice square with your past experiences in starting a new job? Are there things you wish you could have done differently?

We consider organizational cultures and organizational structures, and how they should be aligned to help coordinate employees in the pursuit of organization’s strategic goals. We then consider the three types of organizations and seven basic characteristics of an organization. We next discuss seven types of organizational structures. Finally, we look at five factors that should be considered when one is designing the structure of an organization.

Page 226

Aligning Strategy, Culture, & Structure

Why is it important for managers to align a company’s vision and strategies with its organizational 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.

“What’s your favorite movie?” the job interviewer asks you. “Your favorite website?” “What’s the last book you read for fun?” “What makes you uncomfortable?”

These are the four most frequently asked interview questions used by hiring managers, according to a survey involving 285,000 kinds of interview questions. 9 For you as a job applicant, these questions might not seem to have much to do with your performance in previous jobs. Rather, they are designed to see whether you will fit in with the company’s culture, or organizational culture, as we’ll explain. 10

What Does It Mean to “Fit”? Anticipating a Job Interview

The kind of fit we are concerned with here is what is called person-organization fit, which reflects the extent to which your personality and values match the climate and culture in an organization.

A good fit of this kind is important because it is associated with more positive work attitudes and task performance, lower stress, and fewer expressions of intention to quit (“I’m gonna tell em, ‘Take this job and . . .’”). 11 How well an applicant will fit in with the institution’s organizational culture is considered a high priority by many interviewers. Indeed, more than 50% of the evaluators in one study considered “fit” to be the most important criterion of the interview process. 12

How can you determine how well you might fit in before you go into a job interview? You should write down your strengths, weaknesses, and values—and then do the same for the organization you’re interviewing with, by researching it online and talking with current employees. You can then prepare questions to ask the interviewer about how well you might fit.

Example: If being recognized for hard work is important to you, ask the interviewer how the company rewards performance. If the answer doesn’t show a strong link between performance and rewards (“Well, we don’t really have a policy on that”), you’ll probably have a low person-organization fit and won’t be happy working there.

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

How employees fit into an organization’s culture is important to the larger picture of that organization’s strategy. 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 Page 227the right kind of (1) organizational culture and (2) organizational structure. Let’s consider these terms.

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. 13 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. 14 This 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. 3M sets expectations for innovation, for example, by having an internship and co-op program, which provides 30% of the company’s new college hires.

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. And 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 .

TABLE 8.1 What Drives an Organizational Culture?

Organizational Structure: Who Reports to Whom & 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 concerned 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 orange boxes in the drawing below. (See Figure 8.1 .)

FIGURE 8.1 Drivers and flow of organizational culture

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 leads to higher performance.

Page 228

EXAMPLE

How Strategy Affects Culture & Culture Affects Structure: EndoStim, a Medical Device Start-up, Operates Virtually

Nowadays a firm can be completely international. An example is the medical device start-up EndoStim, nominally based in St. Louis but operating everywhere.

The company, reports New York Times columnist Thomas Friedman, came together as a result of some chance encounters: 15 Cuban immigrant Raul Perez, a physician, came to St. Louis, where he met Dan Burkhardt, a local investor, with whom he began making medical investments. Perez also suffered from acid reflux (abnormal heartburn caused by stomach acid rising in the esophagus) and went to Arizona for treatment by an Indian-American physician, V. K. Sharma. During the visit, Sharma proposed an idea for a pacemaker-like device to control the muscle that would choke off acid reflux.

The Strategy: Creating a New Medical Device. Perez, Burkhardt, and Sharma all agreed they wanted to build such an electrical-stimulation device. They joined forces with South Africa–born Bevil Hogg, a founder of Trek Bicycle Corporation, who became the CEO of the company they named EndoStim and who helped to raise initial development funds. This strategy then began to dictate who they had to work with, which in turn influenced the company’s culture and structure.

The Culture: An International “Adhocracy.” To advance their strategy of building the device, the four principals recruited two Israelis, a medical engineer and a gastroenterologist. The Israelis collaborated with a Seattle engineering team to develop the design. A company in Uruguay specializing in pacemakers was lined up to build the EndoStim prototype. It was arranged for the clinical trials to be conducted in India and Chile. How much more international can you get?

Thus, the culture of the company could be called an adhocracy, which (as we’ll describe a little later in the chapter) is a risk-taking culture that values flexibility and creativity and that is focused on developing innovative products.

The Structure: A Virtual, Boundaryless Company. As a very lean start-up operating all over the world, with the principals rarely in the same office at the same time, EndoStim is clearly very different from, say, the usual top-down organization operating in one locality. To access the best expertise and high-quality materials and obtain low-cost manufacturing anywhere around the globe, EndoStim thus was forced to take advantage of all the technological tools—teleconferencing, e-mail, the Internet, and faxes—to maintain communications.

This EndoStim structure, then, is that of a virtual, boundaryless organization—virtual, because its members are operating geographically apart, connected by electronic means, and boundaryless, because the members (whether coworkers or suppliers) come together in fluid, flexible ways on an as-needed basis. We describe these structures further in another few pages.

YOUR CALL

Are you comfortable enough to work in a virtual, boundaryless organization? Many people like the social interaction that comes with working in a physical office with other people. Others, however, are turned off by the office game playing and time-wasting activities that seem to be a necessary concomitant. They welcome the opportunity to do task-oriented work in a makeshift home office, occasionally having to cope with loneliness and restlessness. Which would you favor?

Culture of risk. At Pfizer Inc., a Connecticut pharmaceutical company, drug discovery is a high-risk, costly endeavor in which hundreds of scientists screen thousands of chemicals against specific disease targets, but 96% of these compounds are ultimately found to be unworkable. The culture, then, is one of managing failure and disappointment, of helping drug researchers live for small victories.

Page 229

What Kind of Organizational Culture Will You be Operating In?

How do I find out about an organization’s “social glue,” its normal way of doing business?

THE BIG PICTURE

Organizational cultures can be classified into four types: clan, adhocracy, market, and hierarchy. Organizational culture appears as three layers: observable artifacts, espoused values, and basic assumptions. Culture is transmitted to employees in symbols, stories, heroes, and rites and rituals.

Want to get ahead in the workplace but hate the idea of “office politics”?

Probably you can’t achieve the first without mastering the second. Although hard work and talent can take you a long way, “there is a point in everyone’s career where politics becomes more important,” says management professor Kathleen Kelley Reardon. You have to know the political climate of the company you work for, says Reardon, who is author of The Secret Handshake and It’s All Politics. 16 “Don’t be the last person to understand how people get promoted, how they get noticed, how certain projects come to attention. Don’t be quick to trust. If you don’t understand the political machinations, you’re going to fail much more often.” 17

A great part of learning to negotiate the politics—that is, the different behavioral and psychological characteristics—of a particular office means learning to understand the organization’s culture. The culture consists not only of the slightly quirky personalities you encounter but also all of an organization’s normal way of doing business, as we’ll explain.

Four Types of Organizational Culture: Clan, Adhocracy, Market, & Hierarchy

According to one common methodology known as the competing values framework, organizational cultures can be classified into four types: (1) clan, (2) adhocracy, (3) market, and (4) hierarchy. 18 (See Figure 8.2 .)

FIGURE 8.2 Competing values framework

Adapted from K.S. Cameron, R.E. Quinn, J. Degraff, and A.V. Thakor, Competing Values Leadership (Northampton, MA: Edward Elgar, 2006)., p. 32.

Page 2301. Clan Culture: An Employee-Focused Culture Valuing Flexibility, Not Stability A clan culture has an internal focus and values flexibility rather than stability and control. Like a family-type organization, it encourages collaboration among employees, striving to encourage cohesion through consensus and job satisfaction and to increase commitment through employee involvement. Clan organizations devote considerable resources to hiring and developing their employees, and they view customers as partners.

Southwest Airlines is a good example of a company with a clan culture. So is online shoe seller Zappos, which encourages managers to spend 10%–20% of their off-work hours with employees. 19

2. Adhocracy Culture: A Risk-Taking Culture Valuing Flexibility An adhocracy culture has an external focus and values flexibility. As we saw with EndoStim in the Example box, this type of culture attempts to create innovative products by being adaptable, creative, and quick to respond to changes in the marketplace. Employees are encouraged to take risks and experiment with new ways of getting things done. Adhocracy cultures are well suited for start-up companies, those in industries undergoing constant change, and those in mature industries that are in need of innovation to enhance growth.

W. L. Gore, maker of Gore-Tex outerwear, is an example of a company with an adhocracy culture. So was Google once, but now it has grown and the enterprise is struggling to avoid losing its adhocracy “Googliness.” In earlier times, all Google engineers were urged to spend 20% of their time on personal projects. As the company grew, however, senior managers concluded that letting thousands of employees work on whatever they wanted would lead to disarray, so now newly hired engineers are forced to wait a while before beginning their passion pursuits. 20

3. Market Culture: A Competitive Culture Valuing Profits over Employee Satisfaction A market culture has a strong external focus and values stability and control. Because market cultures are focused on the external environment and driven by competition and a strong desire to deliver results, customers, productivity, and profits take precedence over employee development and satisfaction. Employees are expected to work hard, react fast, and deliver quality work on time; those who deliver results are rewarded.

Kia Motors, which fires executives who don’t meet their sales goals, is an example of a company with a very aggressive and competitive market culture. 21 Sometimes the culture can be stretched too far: For instance, some Wall Street firms, such as Citgroup Inc., are reported to have such a strong perform-or-die culture—in which executives are pushed to maximize profits and are quickly fired if they fail to deliver—that it is difficult to find talent to promote from within when chief executives leave. 22

4. Hierarchy Culture: A Structured Culture Valuing Stability & Effectiveness A hierarchy culture has an internal focus and values stability and control over flexibility. Companies with this kind of culture are apt to have a formalized, structured work environment aimed at achieving effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation and delivery of products.

Lots of big organizations, such as General Motors, UPS, and the U.S. Army, have a hierarchy culture. A drawback of such cultures is that they can lead to information “silos” or “stovepipes,” in which different divisions don’t share information—a key cause of GM’s ignition switch scandal. Time magazine described this as “a kind of death from a thousand cuts in which multiple divisions had information that could have prevented the safety issues, which they didn’t share, and for which no one person ultimately took responsibility.” 23

Based on the above descriptions, what type of culture provides the best fit for you? How might you assess the level of fit between your values and those of a potential Page 231employer? If you are interested in answering these questions, take the time to complete Self-Assessment 8.1 .

SELF-ASSESSMENT 8.1

Assessing Your Preferred Type of Organizational Culture

This survey is designed to assess your preferred type of organizational culture. Go to connect.mheducation.com and take Self-Assessment 8.1 . When you’re done, answer the following questions:

1. Do you have a preferred culture type, or is there a combination of types best suited for you? Are you surprised by the results?

2. What are three questions you can ask a recruiter to determine if a company possesses your preferred culture type?

3. Have you ever worked in a company that did not possess your preferred culture type? In what ways did you feel a lack of person-organization fit? Did lack of fit affect your job satisfaction or desire to continue working at the company? Explain.

EXAMPLE

The Corporate Cultures of Pfizer Pharmaceuticals: The Different “Personalities” within an Organization

“What makes culture so important is that it’s unique; it’s something that no one can copy,” says Ian C. Read, chairman and CEO of Connecticut-based Pfizer Pharmaceuticals. “Culture can become your competitive advantage. Get it wrong and you’ll pay dearly for it . . . for years to come.” 24

Read became head of Pfizer in December 2010, after mismanagement (“micro micro” management, indecisiveness) by the previous CEO failed to lift the company’s fortunes. 25 Read has instituted a commitment to “our OWNIT! culture. I challenged Pfizer’s leaders to recognize that they can only own the future if they own change and can make change work for us, not against us.”

Pfizer employees, he asserts, “understand that our ownership culture can differentiate us within our industry. They also understand it requires a willingness to take prudent risks, be accountable for their decisions and results, and understand how their work contributes to the company’s performance.” The success of the culture especially depends on the efforts of first- and second-line managers, who create a climate of trust that is “essential to providing the space employees need to work, take considered risks, and own the results,” he says.

Organizational cultures are nearly as varied as human personalities. What had Pfizer’s culture been like under Read’s predecessors? Actually, there was more than one culture within the company, as follows. Do you recognize the different types?

$2.3 Billion in Fines. In 2009, Pfizer was fined $2.3 billion for improperly marketing drugs to doctors. “The whole culture of Pfizer is driven by sales,” said a former sales representative whose complaint helped the government’s case, “and if you didn’t sell drugs illegally, you were not seen as a team player.” 26 Almost every major drug company has in recent years been accused of giving kickbacks to doctors or shortchanging federal programs.

Free Prescription Drugs to Unemployed. But also in that year, as unemployment hovered around 10% in the United States, Pfizer launched a program in which it offered to supply 70 of its name-brand drugs, such as Lipitor and Viagra, free of charge for up to a year to customers who had lost their jobs and lacked prescription coverage. “We did it because it was the right thing to do,” said Pfizer’s then CEO. “But it was motivational for our employees and got a great response from customers. In the long run, it will help our business.” 27

Ongoing Experimentation. At Pfizer, drug discovery is a high-risk, costly endeavor in which hundreds of scientists screen thousands of chemicals against specific disease targets, but 96% of these compounds are ultimately found to be unworkable. The culture, then, is one of managing failure and disappointment, of helping drug researchers live for the small victories. Thus, says one account, “when a researcher publishes a paper, or when a lab gets some positive results on a new therapy, it’s trumpeted throughout the organization.” 28 Another example of experimentation, aimed at helping remaining employees to be productive after heavy job cuts, is PfizerWorks, in which 4,000 employees pass off tedious and time-consuming parts of their jobs, such as creating PowerPoint slides and riffling through spreadsheets to outsiders in India. 29

YOUR CALL

What cultural types are illustrated in these three examples? Does it make more sense that a company would have one dominant cultural type or an equal mixture of clan, adhocracy, market, and hierarchy? Explain your rationale.

Page 232The Three Levels of Organizational Culture

Organizational culture appears as three layers: (1) observable artifacts, (2) espoused values, and (3) basic assumptions. 30 Each level varies in terms of outward visibility and resistance to change, and each level influences another level.

Level 1: Observable Artifacts—Physical Manifestations of Culture At the most visible level, organizational culture is expressed in observable artifacts—physical manifestations such as manner of dress, awards, myths and stories about the company, rituals and ceremonies, and decorations, as well as visible behavior exhibited by managers and employees.

Example: In a conference room reserved for sensitive discussions, online travel company Kayak has a two-foot-high stuffed elephant named Annabelle—the “elephant in the room”—that is an artifact believed to bring forth more honest and constructive communications among employees. 31 (The expression “elephant in the room” is used in business and politics to mean an obvious truth that is either being ignored or going unaddressed.)

Level 2: Espoused Values—Explicitly Stated Values & Norms Espoused values are the explicitly stated values and norms preferred by an organization, as may be put forth by the firm’s founder or top managers.

Example: The founders of technology company Hewlett-Packard stressed the “HP Way,” a collegial, egalitarian culture that gave as much authority and job security to employees as possible. Although managers may hope the values they espouse will directly influence employee behavior, employees don’t always “walk the talk,” frequently being more influenced by enacted values, which represent the values and norms actually exhibited in the organization. 32

Thus, for example, an international corporation hung signs throughout the hallways of its headquarters proclaiming that “trust” was one of its driving principles (espoused value), yet had a policy of searching employees’ belongings each time they entered or exited the building (enacted value). 33

HP founders. David Packard (left) and William Hewlett created a close-knit organizational culture that gave a lot of responsibility to employees and fostered innovation within the company. What kind of culture is that?

Level 3: Basic Assumptions—Core Values of the Organization Basic assumptions, which are not observable, represent the core values of an organization’s culture—those that are taken for granted and, as a result, are difficult to change.

Example: At insurance giant AIG, people worked so hard that the joke around the offices was “Thank heavens it’s Friday, because that means there are only two more working days until Monday.” 34

Another example: Many founders of start-ups hate rules and red tape. College Hunks Hauling Junk, for instance, was co-founded by Nick Friedman with no formal policies about dress code, vacation, sick days, and other things because he envisioned “a real-life Never Never Land where work is always fun, and the culture is always stress-free.” 35 However, when the enterprise grew from a single cargo van to over 50 franchises, the freewheeling spirit made employees lose focus, and client-service ratings, employee morale, and profitability all declined. The firm had to come up with rules and procedures while at the same time trying to “maintain a healthy balance of fun company culture with an accountable organization and team,” Friedman said.

How Employees Learn Culture: Symbols, Stories, Heroes, & Rites & Rituals

Culture is transmitted to employees in several ways, most often through such devices as (1) symbols, (2) stories, (3) heroes, and (4) rites and rituals. 36

Page 2331. Symbols A symbol is an object, act, quality, or event that conveys meaning to others. In an organization, symbols convey its most important values.

Example: One of the most iconic products of IKEA, maker of inexpensive home furnishings, whose vision is “to create a better life for the many,” is the LACK table, a 22-inch by 22-inch side table that sells for only $9.99. 37

2. Stories A story is a narrative based on true events, which is repeated—and sometimes embellished upon—to emphasize a particular value. Stories are oral histories that are told and retold by members about incidents in the organization’s history.