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Page 1: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.
Page 2: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

Managing Organizational Structure and Culture

McGraw-Hill/IrwinContemporary Management, 5/e

Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

chapter ten

Page 3: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Learning Objectives

• Identify the factors that influence managers’ choice of an organizational structure.

• Explain how managers group tasks into jobs that are motivating and satisfying for employees.

• Describe the types of organizational structures managers can design, and explain why they choose one structure over another.

Page 4: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Learning Objectives

• Explain why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms

• List the four sources of organizational culture and differentiate between a strong, adaptive culture and a weak, inert culture

Page 5: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Organizational Structure

• Organizational Architecture– The organizational structure, control

systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.

Page 6: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Designing Organizational Structure

• Organizing– The process by which managers establish

working relationships among employees to achieve goals.

• Organizational Structure– Formal system of task and reporting

relationships showing how workers use resources.

Page 7: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Designing Organizational Structure

• Organizational design– The process by which managers create a

specific type of organizational structure and culture so that a company can operate in the most efficient and effective way

Page 8: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Factors Affecting Organizational Structure

Figure 10.1

Page 9: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

The Organizational Environment– The quicker the environment changes, the

more problems face managers.– Structure must be more flexible (i.e.,

decentralized authority) when environmental change is rapid.

Page 10: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

Strategy– Different strategies require the use of

different structures.• A differentiation strategy needs a flexible

structure, low cost may need a more formal structure.

• Increased vertical integration or diversification also requires a more flexible structure.

Page 11: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

Technology– The combination of skills, knowledge, tools,

equipment, computers and machines used in the organization.

– More complex technology makes it harder for managers to regulate the organization.

Page 12: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

Technology – Technology can be measured by:

• Task variety: the number of new problems a manager encounters.

• Task analyzability: the availability of programmed solutions to a manager to solve problems.

Page 13: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

Human Resources– Highly skilled workers whose jobs require

working in teams usually need a more flexible structure.

– Higher skilled workers (e.g., CPA’s and doctors) often have internalized professional norms and values.

Page 14: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

• Human Resources– Managers must take into account all four

factors (environment, strategy, technology and human resources) when designing the structure of the organization.

Page 15: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Organizational Environment

The way an organization’s structure works depends on the choices managers make about:

1. How to group tasks into individual jobs

2. How to group jobs into functions and divisions

3. How to allocate authority and coordinate functions and divisions

Page 16: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Job Design

• Job Design– The process by which managers decide

how to divide tasks into specific jobs.– The appropriate division of labor results in

an effective and efficient workforce.

Page 17: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Question?

What is the process of reducing the tasks each worker performs?

A. Job simplification

B. Job enlargement

C. Job enrichment

D. Job enhancement

Page 18: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Job Design

• Job Simplification– The process of reducing the tasks each

worker performs.• Too much simplification and boredom

results.

Page 19: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Job Design

• Job Enlargement– Increasing the number of different tasks in a

given job by changing the division of labor

• Job Enrichment– Increasing the degree of responsibility a

worker has over a job

Page 20: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Job Enrichment

1. Empowering workers to experiment to find new or better ways of doing the job

2. Encouraging workers to develop new skills

3. Allowing workers to decide how to do the work

4. Allowing workers to monitor and measure their own performance

Page 21: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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The Job Characteristics Model

Figure 10.2

Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).

Page 22: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Job Characteristics Model

Job Characteristic

Skill variety Employee uses a wide range of skills.

Task identity Worker is involved in all tasks of the job from beginning to end of the production process

Task significance Worker feels the task is meaningful to organization.

Autonomy Employee has freedom to schedule tasks and carry them out.

Feedback Worker gets direct information about how well the job is done.

Page 23: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Grouping Jobs into Functions

• Function– Group of people, working together, who

possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs

Page 24: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Grouping Jobs into Functions

• Functional Structure– An organizational structure composed of all

the departments that an organization requires to produce its goods or services.

Page 25: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Functional Structure

• Advantages– Encourages learning from others doing

similar jobs.– Easy for managers to monitor and evaluate

workers.– Allows managers to create the set of

functions they need in order to scan and monitor the competitive environment

Page 26: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Functional Structure

• Disadvantages– Difficult for departments to communicate

with others.– Preoccupation with own department and

losing sight of organizational goals.

Page 27: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

10-27Figure10.3

The Functional

Structure of Pier 1

Imports

Page 28: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Divisional Structures

• Divisional Structure– Managers create a series of business units

to produce a specific kind of product for a specific kind of customer

Page 29: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

10-29Figure 10.4

Product, Market, and Geographic Structures

Page 30: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Types of Divisional Structures

• Product Structure– Managers place each distinct product line or

business in its own self-contained division– Divisional managers have the responsibility

for devising an appropriate business-level strategy to allow the division to compete effectively in its industry

Page 31: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Product Structure

• Allows functional managers to specialize in one product area

• Division managers become experts in their area

• Removes need for direct supervision of division by corporate managers

• Divisional management improves the use of resources

Page 32: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Types of Divisional Structures

• Geographic Structure– Divisions are broken down by geographic

location

• Global geographic structure– Managers locate different divisions in each of

the world regions where the organization operates.

– Generally, occurs when managers are pursuing a multi-domestic strategy

Page 33: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Types of Divisional Structures

• Global Product Structure– Each product division takes responsibility

for deciding where to manufacture its products and how to market them in foreign countries worldwide

Page 34: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Global Geographic and Global Product Structures

Figure 10.5

Page 35: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Types of Divisional Structures

• Market Structure– Groups divisions according to the particular

kinds of customers they serve– Allows managers to be responsive to the

needs of their customers and act flexibly in making decisions in response to customers’ changing needs

Page 36: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Matrix Design Structure

• Matrix Structure– An organizational structure that

simultaneously groups people and resources by function and product.

• Results in a complex network of superior-subordinate reporting relationships.

• The structure is very flexible and can respond rapidly to the need for change.

• Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

Page 37: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Matrix Structure

Figure 10.6

Page 38: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Discussion Question?

Which is the most effective and efficient organizational structure?

A. Matrix structure

B. Divisional structure

C. Market structure

D. Geographic structure

Page 39: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Product Team Design Structure

• Product Team Structure– Does away with dual reporting relationships

and two-boss managers– Functional employees are permanently

assigned to a cross-functional team that is empowered to bring a new or redesigned product to work

Page 40: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Product Team Design Structure

• Product Team Structure– Cross-functional team is composed of a

group of managers from different departments working together to perform organizational tasks.

Page 41: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Product Team Structure

Figure 10.6

Page 42: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Hybrid Structures

• Hybrid Structure– The structure of a large organization that

has many divisions and simultaneously uses many different organizational structures

Page 43: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Federated’s Hybrid Structure

Figure 10.7

Page 44: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Question?

What is the power vested in a manager to make decisions?

A. Power

B. Influence

C. Authority

D. Control

Page 45: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Coordinating Functions:Allocating Authority

• Authority– The power vested in a manager to make

decisions and use resources to achieve organizational goals by virtue of his position in an organization

Page 46: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Coordinating Functions:Allocating Authority

• Hierarchy of Authority– An organization’s chain of command,

specifying the relative authority of each manager.• Span of Control: the number of

subordinates who report directly to a manager

Page 47: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Allocating Authority

• Line Manager– Someone in the direct line or chain of

command who has formal authority over people and resources

• Staff Manager– Managers who are functional-area

specialists that give advice to line managers.

Page 48: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

10-48Figure 10.8

The Hierarchy of Authority and Span of Control at McDonald’s Corporation

Page 49: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Tall and Flat Organizations

• Tall structures have many levels of authority and narrow spans of control.– As hierarchy levels increase,

communication gets difficult creating delays in the time being taken to implement decisions.

– Communications can also become distorted as it is repeated through the firm.

– Can become expensive

Page 50: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Tall Organizations

Figure 10.9

Page 51: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Tall and Flat Organizations

• Flat structures have fewer levels and wide spans of control.– Structure results in quick communications

but can lead to overworked managers.

Page 52: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Flat Organizations

Figure 10.9

Page 53: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Minimum Chain of Command

• Minimum Chain of Command– Top managers should always construct a

hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources

Page 54: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Centralization and Decentralization of Authority

• Decentralizing authority – giving lower-level managers and non-

managerial employees the right to make important decisions about how to use organizational resources

Page 55: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Decentralizing Authority

• Disadvantages– Teams may begin to pursue their own goals

at the expense of organizational goals– Can result in a lack of communication

among divisions

Page 56: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Integrating Mechanisms

Figure 10.10

Page 57: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Organizational Culture

• Organizational culture – shared set of beliefs, expectations, values,

and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals

Page 58: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Sources of an Organization’s Culture

Figure 10.11

Page 59: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Characteristics of Organizational Members

• Ultimate source of organizational culture is the people that make up the organization

• Members become similar over time which may hinder their ability to adapt and respond to changes in the environment

Page 60: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Organizational Ethics

• Organizational Ethics – moral values, beliefs, and rules that

establish the appropriate way for an organization and its members to deal with each other and people outside the organization

Page 61: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Employment Relationship

• Human resource policies:– Can influence how hard employees will

work to achieve the organization’s goals, – How attached they will be to it – Whether or not they will buy into its values

and norms

Page 62: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Organizational Structure

• In a centralized organization:– people have little autonomy – norms that focus on being cautious, obeying

authority, and respecting traditions emerge– predictability and stability are desired goals

Page 63: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Organizational Structure

• In a flat, decentralized structure: – people have more freedom to choose and

control their own activities– norms that focus on being creative and

courageous and taking risks appear – gives rise to a culture in which innovation

and flexibility are desired goals.

Page 64: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Strong, Adaptive Cultures Versus Weak, Inert Cultures

• Adaptive cultures – values and norms help an organization to

build momentum and to grow and change as needed to achieve its goals and be effective

Page 65: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Strong, Adaptive Cultures Versus Weak, Inert Cultures

• Inert cultures – Those that lead to values and norms that

fail to motivate or inspire employees– Lead to stagnation and often failure over

time

Page 66: Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights.

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Movie Example: Apollo 13

What organizational structure does NASA use to handle a moon launch?


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