MGMT 445 Portland State University Organizational Structure at Portland State University Essay

  

Description

!!Do not write an intro so you can ignore the first prompt because I can use the same intro I did for the previous assignment!!

Please carefully read the instructions and questions in the photo and documents provided. Follow the prompts in the photo labeled “homework instructions”. The assignment is an analysis on Portland State University located in Portland, Oregon regarding Organizational Design and Technology . Use Chapter 9 from the book provided cite where you use it and use it to support your analysis. Use information from the Portland university website, and other relevant online sources dated after 2016 (5 years or newer) if you need to please and thank you. The assignment is 1300 words/3pages single spaced (without the introduction).

I will also upload the feedback and rubric from the previous assignment so you can use it to do a better paper.

Also please demonstrate critical analysis provide examples and link it to real world situations regarding Portland State University! because that is the main reason I got marked down for the previous assignment.

Feel free to reach out if you have any questions.

Organizational Theory,
Design, and Change
seventh edition
global edition
Gareth R. Jones
Texas A&M University
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ISBN: 978-0-13-272994-9 by Gareth R. Jones, published by Pearson Education, Inc., © 2013.
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ISBN 13: 978-0-273-76560-8
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For Nicholas and Julia
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Brief Contents
Preface
Part 1
17
The Organization and Its Environment
Chapter 1
Chapter 2
Chapter 3
Part 2
Organizational Design
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Part 3
Chapter 12
Chapter 13
Chapter 14
114
Basic Challenges of Organizational Design 114
Designing Organizational Structure: Authority
and Control 143
Designing Organizational Structure: Specialization
and Coordination 170
Creating and Managing Organizational Culture 201
Organizational Design and Strategy in a Changing Global
Environment 229
Organizational Design, Competences, and Technology 262
Organizational Change
Chapter 10
Chapter 11
23
Organizations and Organizational Effectiveness 23
Stakeholders, Managers, and Ethics 50
Organizing in a Changing Global Environment 81
295
Types and Forms of Organizational Change 295
Organizational Transformations: Birth, Growth, Decline,
and Death 327
Decision Making, Learning, Knowledge Management,
and Information Technology 356
Innovation, Intrapreneurship, and Creativity 388
Managing Conflict, Power, and Politics 413
Case Studies 439
Company Index 502
Name Index 505
Subject Index 507
5
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Contents
Preface
Part 1
17
The Organization and Its Environment
Chapter 1
23
Organizations and Organizational Effectiveness
What Is an Organization?
23
23
How Does an Organization Create Value?
Why Do Organizations Exist?
25
27
To Increase Specialization and the Division of Labor
To Use Large-Scale Technology 28
To Manage the Organizational Environment 28
To Economize on Transaction Costs 28
To Exert Power and Control 29
Organizational Theory, Design, and Change
27
30
Organizational Structure 30
Organizational Culture 31
Organizational Design and Change 31
The Importance of Organizational Design and Change 33
Dealing with Contingencies 33
Gaining Competitive Advantage 34
Managing Diversity 36
The Consequences of Poor Organizational Design 36
How Do Managers Measure Organizational Effectiveness?
38
The External Resource Approach: Control 39
The Internal Systems Approach: Innovation 39
The Technical Approach: Efficiency 40
Measuring Effectiveness: Organizational Goals 41
The Plan of This Book
42
Organizational Design 44
Organizational Change 44
Summary 45 • Discussion Questions 45
Organizational Theory in Action: Practicing Organizational Theory
Open Systems Dynamics 46
The Ethical Dimension #1 46
Making the Connection #1 46
Analyzing the Organization: Design Module #1 46
Assignment 47
Chapter 2
Stakeholders, Managers, and Ethics
Organizational Stakeholders
46
50
50
Inside Stakeholders 50
Outside Stakeholders 52
Organizational Effectiveness: Satisfying Stakeholders’
Goals and Interests 56
Competing Goals 57
Allocating Rewards 58
7
8
CONTENTS
Top Managers and Organizational Authority 59
The Chief Executive Officer 61
The Top-Management Team 62
Other Managers 63
An Agency Theory Perspective
63
The Moral Hazard Problem 63
Solving the Agency Problem 64
Top Managers and Organizational Ethics
65
Ethics and the Law 66
Ethics and Organizational Stakeholders 67
Sources of Organizational Ethics 69
Why Do Ethical Rules Develop? 71
Why Does Unethical Behavior Occur? 73
Creating an Ethical Organization
74
Designing an Ethical Structure and Control System 75
Creating an Ethical Culture 75
Supporting the Interests of Stakeholder Groups 75
Summary 76 • Discussion Questions 77 • Organizational Theory
in Action: Practicing Organizational Theory 77
Creating a Code of Ethics 77
The Ethical Dimension #2 77
Making the Connection #2 77
Analyzing the Organization: Design Module #2 77
Assignment 77
Chapter 3
Organizing in a Changing Global Environment
81
What Is the Organizational Environment? 81
The Specific Environment 83
The General Environment 85
Sources of Uncertainty in the Organizational Environment
87
Resource Dependence Theory 91
Interorganizational Strategies for Managing Resource Dependencies 92
Strategies for Managing Symbiotic Resource Interdependencies 93
Developing a Good Reputation
Cooptation 94
Strategic Alliances 94
Joint Venture 97
Merger and Takeover 98
93
Strategies for Managing Competitive Resource Interdependencies
Collusion and Cartels 99
Third-Party Linkage Mechanisms
Strategic Alliances 100
Merger and Takeover 100
100
Transaction Cost Theory 101
Sources of Transaction Costs 102
Transaction Costs and Linkage Mechanisms 103
Bureaucratic Costs 104
Using Transaction Cost Theory to Choose an Interorganizational Strategy
Summary 108 • Discussion Questions 109 •
in Action: Practicing Organizational Theory 109
Protecting Your Domain 109
The Ethical Dimension #3 109
Making the Connection #3 110
Analyzing the Organization: Design Module #3 110
Assignment 110
104
Organizational Theory
98
CONTENTS
Part 2
Organizational Design
Chapter 4
114
Basic Challenges of Organizational Design
Differentiation
114
114
Organizational Roles 116
Subunits: Functions and Divisions 117
Differentiation at the B.A.R. and Grille 118
Vertical and Horizontal Differentiation 119
Organizational Design Challenges 119
Balancing Differentiation and Integration
Integration and Integrating Mechanisms
Differentiation versus Integration 124
121
121
Balancing Centralization and Decentralization
Centralization versus Decentralization of Authority
125
125
Balancing Standardization and Mutual Adjustment
Formalization: Written Rules 128
Socialization: Understood Norms 129
Standardization versus Mutual Adjustment
128
130
Mechanistic and Organic Organizational Structures
131
Mechanistic Structures 132
Organic Structures 132
The Contingency Approach to Organizational Design 134
Lawrence and Lorsch on Differentiation, Integration,
and the Environment 134
Burns and Stalker on Organic versus Mechanistic Structures
and the Environment 137
Summary 138 • Discussion Questions 139 •
in Action: Practicing Organizational Theory 139
Growing Pains 139
Making the Connection #4 139
The Ethical Dimension #4 139
Analyzing the Organization: Design Module #4 139
Assignment 140
Chapter 5
Organizational Theory
Designing Organizational Structure: Authority
and Control 143
Authority: How and Why Vertical Differentiation Occurs
143
The Emergence of the Hierarchy 143
Size and Height Limitations 144
Problems with Tall Hierarchies 146
The Parkinson’s Law Problem 149
The Ideal Number of Hierarchical Levels: The Minimum Chain of Command
Span of Control 150
149
Control: Factors Affecting the Shape of the Hierarchy 152
Horizontal Differentiation 152
Centralization 154
Standardization 155
The Principles of Bureaucracy
156
The Advantages of Bureaucracy 159
Management by Objectives 161
The Influence of the Informal Organization 162
IT, Empowerment, and Self-Managed Teams 163
Summary 165 • Discussion Questions 165
in Action: Practicing Organizational Theory 166
How to Design a Hierarchy 166
The Ethical Dimension #5 166
•
Organizational Theory
9
10
CONTENTS
Making the Connection #5 166
Analyzing the Organization: Design Module #5 166
Assignment 166
Chapter 6
Designing Organizational Structure: Specialization
and Coordination 170
Functional Structure
170
Advantages of a Functional Structure 172
Control Problems in a Functional Structure 172
Solving Control Problems in a Functional Structure
173
From Functional Structure to Divisional Structure
Moving to a Divisional Structure
174
176
Divisional Structure I: Three Kinds of Product Structure
176
Product Division Structure 176
Multidivisional Structure 178
Product Team Structure 183
Divisional Structure II: Geographic Structure 185
Divisional Structure III: Market Structure 186
Matrix Structure 188
Advantages of a Matrix Structure 189
Disadvantages of a Matrix Structure 189
The Multidivisional Matrix Structure 190
Hybrid Structure 192
Network Structure and the Boundaryless Organization
193
Advantages of Network Structures 193
Disadvantages of Network Structures 194
The Boundaryless Organization 194
E-Commerce 195
Summary 196 • Discussion Questions 197 •
in Action: Practicing Organizational Theory 197
Which New Organizational Structure? 197
The Ethical Dimension #6 197
Making the Connection #6 197
Analyzing the Organization: Design Module #6 197
Assignment 197
Chapter 7
Organizational Theory
Creating and Managing Organizational Culture 201
What Is Organizational Culture? 201
Differences in Global Values and Norms
204
How Is an Organization’s Culture Transmitted to Its Members? 206
Socialization and Socialization Tactics 206
Stories, Ceremonies, and Organizational Language
209
Where Does Organizational Culture Come From? 211
Characteristics of People within the Organization
Organizational Ethics 213
Property Rights 215
Organizational Structure 218
211
Can Organizational Culture Be Managed? 219
Social Responsibility 221
Approaches to Social Responsibility 221
Why Be Socially Responsible? 222
Summary 224 • Discussion Questions 225
in Action: Practicing Organizational Theory 225
Developing a Service Culture 225
The Ethical Dimension #7 225
•
Organizational Theory
CONTENTS
Making the Connection #7 226
Analyzing the Organization: Design Module #7 226
Assignment 226
Chapter 8
Organizational Design and Strategy in a Changing Global
Environment 229
Strategy and the Environment
229
Sources of Core Competences 230
Global Expansion and Core Competences
Four Levels of Strategy 233
Functional-Level Strategy
232
235
Strategies to Lower Costs or Differentiate Products
Functional-Level Strategy and Structure 237
Functional-Level Strategy and Culture 238
235
Business-Level Strategy 239
Strategies to Lower Costs or Differentiate Products
Focus Strategy 241
Business-Level Strategy and Structure 241
Business-Level Strategy and Culture 244
240
Corporate-Level Strategy 246
Vertical Integration 247
Related Diversification 248
Unrelated Diversification 248
Corporate-Level Strategy and Structure 249
Corporate-Level Strategy and Culture 251
Implementing Strategy across Countries
252
Implementing a Multidomestic Strategy 254
Implementing International Strategy 254
Implementing Global Strategy 255
Implementing Transnational Strategy 256
Summary 257 • Discussion Questions 258 •
in Action: Practicing Organizational Theory 258
What Kind of Supermarket? 258
The Ethical Dimension #8 258
Making the Connection #8 258
Analyzing the Organization: Design Module #8 259
Assignment 259
Chapter 9
Organizational Theory
Organizational Design, Competences, and Technology
What Is Technology? 262
Technology and Organizational Effectiveness 264
Technical Complexity: The Theory of Joan Woodward 266
Small-Batch and Unit Technology 266
Large-Batch and Mass Production Technology 269
Continuous-Process Technology 270
Technical Complexity and Organizational Structure 270
The Technological Imperative 272
Routine Tasks and Complex Tasks: The Theory of Charles Perrow
Task Variability and Task Analyzability 273
Four Types of Technology 274
Routine Technology and Organizational Structure 275
Nonroutine Technology and Organizational Structure 277
Task Interdependence: The Theory of James D. Thompson
Mediating Technology and Pooled Interdependence 278
Long-Linked Technology and Sequential Interdependence 280
Intensive Technology and Reciprocal Interdependence 281
277
272
262
11
12
CONTENTS
From Mass Production to Advanced Manufacturing Technology 283
Advanced Manufacturing Technology: Innovations in Materials
Technology 285
Computer-Aided Design 286
Computer-Aided Materials Management 286
Just-in-Time Inventory Systems 287
Flexible Manufacturing Technology and Computer-Integrated Manufacturing
Summary 289 • Discussion Questions 290 •
in Action: Practicing Organizational Theory 290
Choosing a Technology 290
The Ethical Dimension #9 291
Making the Connection #9 291
Analyzing the Organization: Design Module #9 291
Assignment 291
Part 3
288
Organizational Theory
Organizational Change 295
Chapter 10
Types and Forms of Organizational Change
What Is Organizational Change?
Targets of Change
295
295
296
Forces for and Resistance to Organizational Change
297
Forces for Change 297
Resistances to Change 300
Organization-Level Resistance to Change 300
Group-Level Resistance to Change 301
Individual-Level Resistance to Change 302
Lewin’s Force-Field Theory of Change 302
Evolutionary and Revolutionary Change in Organizations
303
Developments in Evolutionary Change: Sociotechnical Systems Theory
Total Quality Management 304
Flexible Workers and Flexible Work Teams 307
Developments in Revolutionary Change: Reengineering 307
E-Engineering 312
Restructuring 312
Innovation 313
Managing Change: Action Research
303
313
Diagnosing the Organization 314
Determining the Desired Future State 314
Implementing Action 315
Evaluating the Action 316
Institutionalizing Action Research 316
Organizational Development
317
OD Techniques to Deal with Resistance to Change
OD Techniques to Promote Change 319
317
Summary 321 • Discussion Questions 322 • Organizational Theory
in Action: Practicing Organizational Theory 322
Managing Change 322
Making the Connection #10 323
The Ethical Dimension #10 323
Analyzing the Organization: Design Module #10 323
Chapter 11
Organizational Transformations: Birth, Growth,
Decline, and Death 327
The Organizational Life Cycle
Organizational Birth 328
327
Developing a Plan for a New Business
329
CONTENTS
A Population Ecology Model of Organizational Birth
Number of Births 332
Survival Strategies 333
The Process of Natural Selection
331
334
The Institutional Theory of Organizational Growth
336
Organizational Isomorphism 337
Disadvantages of Isomorphism 338
Greiner’s Model of Organizational Growth
338
Stage 1: Growth through Creativity 339
Stage 2: Growth through Direction 340
Stage 3: Growth through Delegation 340
Stage 4: Growth through Coordination 341
Stage 5: Growth through Collaboration 342
Organizational Decline and Death 343
Effectiveness and Profitability 343
Organizational Inertia 345
Changes in the Environment 346
Weitzel and Jonsson’s Model of Organizational Decline
347
Summary 350 • Discussion Questions 351 • Organizational Theory
in Action: Practicing Organizational Theory 351
Growing Pains 351
Making the Connection #11 351
The Ethical Dimension #11 351
Analyzing the Organization: Design Module #11 352
Assignment 352
Chapter 12
Decision Making, Learning, Knowledge Management,
and Information Technology 356
Organizational Decision Making 356
Models of Organizational Decision Making
357
The Rational Model 357
The Carnegie Model 359
The Incrementalist Model 361
The Unstructured Model 361
The Garbage-Can Model 362
The Nature of Organizational Learning 364
Types of Organizational Learning 364
Levels of Organizational Learning 365
Knowledge Management and Information Technology
Factors Affecting Organizational Learning 371
Organizational Learning and Cognitive Structures
Types of Cognitive Biases 372
Cognitive Dissonance 372
Illusion of Control 373
Frequency and Representativeness 373
Projection and Ego-Defensiveness 374
Escalation of Commitment 374
Improving Decision Making and Learning
369
372
375
Strategies for Organizational Learning 375
Using Game Theory 376
Nature of the Top-Management Team 378
Devil’s Advocacy and Dialectical Inquiry 379
Collateral Organizational Structure 380
Summary 381 • Discussion Questions 382
in Action: Practicing Organizational Theory 382
•
Organizational Theory
13
14
CONTENTS
Store Learning 382
Making the Connection #12 382
The Ethical Dimension #12 382
Analyzing the Organization: Design Module #12 382
Assignment 383
Chapter 13
Innovation, Intrapreneurship, and Creativity
Innovation and Technological Change
388
388
Two Types of Innovation 388
Protecting Innovation through Property Rights
390
Innovation, Intrapreneurship, and Creativity 392
Entrepreneurship as “Creative Destruction” 393
Innovation and the Product Life Cycle 394
Managing the Innovation Process
396
Project Management 396
Stage-Gate Development Funnel 398
Using Cross-Functional Teams and a Product Team Structure
Team Leadership 401
Skunk Works and New Venture Divisions 402
Joint Ventures 403
Creating a Culture for Innovation 403
399
Innovation and Information Technology 405
Innovation and Information Synergies 406
IT and Organizational Structure and Culture
407
Summary 408 • Discussion Questions 409 • Organizational Theory
in Action: Practicing Organizational Theory 409
Managing Innovation 409
The Ethical Dimension #13 409
Making the Connection #13 410
Analyzing the Organization: Design Module #13 410
Chapter 14
Managing Conflict, Power, and Politics
What Is Organizational Conflict? 413
Pondy’s Model of Organizational Conflict
413
416
Stage 1: Latent Conflict 416
Stage 2: Perceived Conflict 418
Stage 3: Felt Conflict 419
Stage 4: Manifest Conflict 419
Stage 5: Conflict Aftermath 420
Managing Conflict: Conflict Resolution Strategies
Acting at the Level of Structure 421
Acting at the Level of Attitudes and Individuals
421
422
What Is Organizational Power? 423
Sources of Organizational Power 424
Authority 424
Control over Resources 425
Control over Information 426
Nonsubstitutability 426
Centrality 427
Control over Uncertainty 428
Unobtrusive Power: Controlling the Premises of Decision Making
Using Power: Organizational Politics
429
Tactics for Playing Politics 429
The Costs and Benefits of Organizational Politics
431
428
CONTENTS
Summary 434 • Discussion Questions 434 • Organizational Theory
in Action: Practicing Organizational Theory 435
Managing Conflict 435
The Ethical Dimension #14 435
Making the Connection #14 435
Analyzing the Organization: Design Module #14 435
Assignment 435
Case Studies
439
Supplemental Case Map 439
Case 1 United Products, Inc. 441
Jeffrey C. Shuman
Case 2 The Paradoxical Twins: Acme and Omega Electronics
450
John F. Veiga
Case 3 How SAP’s Business Model and Strategies Made It the Global Business
Software Leader 453
Gareth R. Jones
Case 4 The Scaffold Plank Incident
461
Stewart C. Malone and Brad Brown
Case 5 Beer and Wine Industries: Bartles & Jaymes
463
Per V. Jenster
Case 6 Bennett’s Machine Shop, Inc. 469
Arthur Sharplin
Case 7 Southwest Airlines 481
Case 8 The Rise and Fall of Eastman Kodak: How Long Will It Survive
Beyond 2011? 485
Gareth R. Jones
Case 9 Philips NV
496
Charles W. L. Hill
Case 10 “Ramrod” Stockwell
Charles Perrow
Company Index 502
Name Index 505
Subject Index 507
498
15
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Preface
In the seventh edition of Organizational Theory, Design, and Change, I have kept to my
theme of providing students with the most contemporary and up-to-date account of how
the changing environment affects the way managers design and change organizational
structure to increase organizational effectiveness. In revising my book, I have continued
to focus on making the text relevant and interesting to students so it engages and encourages them to make the effort necessary to assimilate the text material—material being
used every day by managers and consultants who are working to improve organizational
performance. I have continued to mirror the changes taking place in the way organizations deal with their environments, such as the increasing use of outsourcing and the use
of information technology, by incorporating recent developments in organizational theory and research into the text. Also, I have worked to provide vivid, current examples of
the way managers of companies large and small have responded to such changes.
New to This Edition
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Over 65% of the in-chapter boxes and 90% of the closing cases are new and the rest
have been updated.
New material on the changing nature of problems involved in managing functional,
product, and divisional structures and ways IT can be used to improve their
performance.
New material on the strategy–structure relationship, and new coverage about the
reasons companies need to continuously examine and change their global strategies
and structures.
New material on online software development and craftswork technology and its
importance in the growing services area.
Expanded discussion of how to manage technology to create successful virtual organizational structures, such as those used by Accenture and PeopleSoft.
A major focus is the recent ongoing changes in the mobile computing, smartphone,
and software applications and the consequent effects on the changes in the competitive environment and the way companies have been changing their structures and
control systems to manage these issues.
Increased coverage of ethical issues involved in the stakeholder approach to organizations and their implications for organizational effectiveness, such as new “green”
environmental coverage, and new coverage of disasters such as the BP oil spill,
ethics in health care, and fraud in disguising the quality and price of goods and
services.
Explanations of the most recent developments in organizational structure, such as
the product team structure, outsourcing, and network organizations because of
advancements in IT.
The number and complexity of the strategic and organizational challenges confronting
managers because of the changing global environment has continued to increase in the
2000s. In most companies, managers at all levels are playing catch-up as they work toward
meeting these challenges by implementing new forms of organizational structure and by
changing their existing structures, using the techniques and practices described in this
book. Today, relatively small differences in performance between companies—the speed
at which they can bring new products to market, for example, or in the way they choose to
motivate their employees to find ways to increase effectiveness—can give one organization a significant competitive advantage over another. Managers and companies that use
17
18
PREFACE
established organizational theory and design principles to change the way they operate
can increase their effectiveness over time.
This is clearly evident by the way companies are continuously changing and reorganizing how they operate—at the functional, divisional, organizational, and global levels—
to better compete and manage the ever-changing environment in the 2010s. Of course,
the recession that began in the later 2000s, as well as continuously changing technological
and economic conditions, offer new opportunities for agile companies that can adapt to
meet these challenges while threatening the survival of those that cannot. Nowhere is this
clearer than in the developing markets for mobile computing devices such as smartphones and tablet computers, where the performance of some companies like Apple and
Samsung have soared, while those of others such as Motorola, Blackberry, and Dell have
plunged.
Across all functions and levels, managers and employees must continuously search
out ways to change organizational design to “work smarter” and increase performance.
The challenges facing managers continue to mount as changing global forces such as increasing global outsourcing, rising commodity prices, and the emergence of new low-cost
overseas competitors impact organizations large and small. Moreover, the revolution in
information technology (IT) has transformed the way managers make decisions across all
levels of an organization’s hierarchy and across all of its functions and global divisions—
and the rate of change in IT is accelerating.
The accelerated change in IT is changing the way organizations operate from top to
bottom, a theme that has been extended and updated in the seventh edition. In today’s
world of video downloading, streaming media, text messaging, and tweeting without the
use of any one type of mobile computing device, there is a need to understand how this
affects organizational structure. The new edition offers up-to-date coverage of these
issues throughout, peppered with examples that highlight the significant ways that advances in IT affect organizational decision making, change, and structure. For example,
one issue covered in more depth is the pros and cons of global outsourcing and the new
organizational problems that emerge when thousands of functional jobs in IT, customer
service, and manufacturing are now being performed in countries overseas.
Encouraged by the increasing number of instructors and students who are using
Organizational Theory with each new edition, and based on the reactions and suggestions of both users and reviewers, I have revised and updated the text in the following
ways. First, just as pertinent new research concepts have been added to each chapter,
outdated ideas and concepts have been omitted. As usual, my goal is to streamline the
text content so students can avoid having to assimilate excessive material. Second, I am
happy that the current content and arrangement of the chapters continues to be favorably received by its users. The organization of the book offers instructors many more
hands-on ways in which they can help students to appreciate the power that people have
over organizations to increase their effectiveness. As one student from New York City
informed me in an email, “The book has given me a new vocabulary to understand the
organization I work for and provided the conceptual tools needed to analyze and
change it.”
By bringing a discussion of organizational change and renewal to the center stage of
organizational theory and design, this book stands alone. The organizational theory concepts the text describes are the same ones that firms of management consultants, chief
operating officers, and the increasing number of managers responsible for organizational
design and change use as they perform their roles and jobs.
Seventh Edition Content
The organization of the chapters in this edition is unchanged. Many textbooks lack a
tight, integrated flow of topics from chapter to chapter. In this book, students will see beginning in Chapter 1 how the book’s topics are related to one another. Integration has
been achieved by organizing the material so that each chapter builds on the material of
the previous chapters in a logical fashion. I also accomplish integration by focusing on
one company, Amazon.com, and in several of the book’s chapters I use boxed examples
PREFACE
of this company, all of which have been updated, to illustrate organizational design and
change issues.
Chapter 2, “Stakeholders, Managers, and Ethics,” has proved to be popular, highlighting as it does the ethical issues that confront managers who seek to serve the interests of
multiple stakeholders. I have expanded coverage of ethical issues in this edition in many
chapters, offering more discussion and examples of all kinds of organizations—for-profit
and nonprofit—that have benefited by the increased use of control systems to monitor
their managers and their decision making. “The Ethical Dimension” exercise added to the
“Organizational Theory in Action” section at the end of each chapter has also proved to
be popular. Today, as corporate scandals proliferate, particularly insider trading and organizations created to defraud customers in the 2010s, it is important to ask students to think
about and debate the ethical issues involved in organizational design and change.
A Focus on Managers
The managerial implications of organizational design and change are clearly articulated
for the needs of students. Each chapter has one or more managerial summaries, in which
the practical implications of organizational theories and concepts are clearly outlined. In
addition, each chapter has several “Organizational Insight” boxes in which the experiences of a real company are tied to the chapter content to highlight the implications of
the material. Each chapter also features two closing cases that allow a hands-on analysis
by students.
Learning Features and Support Material
Each chapter ends with a section entitled “Organizational Theory in Action,” which includes the following hands-on learning exercises/assignments:
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“Practicing Organizational Theory,” which is an experiential exercise designed to
give students hands-on experience doing organizational theory. Each exercise takes
about 20 minutes of class time. The exercises have been class tested and work very
well. Further details on how to use them can be found in the instructor’s manual.
An “Ethical Dimension” feature, where students individually or in groups can
debate the ethical dilemmas that confront managers during the process of organizational design and change.
A “Making the Connection” feature, where students collect examples of companies
to illustrate organizational design and change issues.
An ongoing “Analyzing the Organization” feature, where students select an organization to study and then complete chapter assignments that lead to an organizational theory analysis and a written case study of their organization. This case study
is then presented to the class at the end of the semester. Complete details concerning the use of this and the other learning features are in the instructor’s manual.
A closing “Case for Analysis” with questions, which provides an opportunity for a
short class discussion of a chapter-related theme.
In addition to these hands-on learning exercises, I have refined or added to the other
learning features developed for previous editions of the book:
䊉
䊉
䊉
Cases. At the end of the book are numerous cases to be used in conjunction with the
book’s chapters to enrich students’ understanding of organizational theory concepts.
Most cases are classical, in the sense that the issues they raise are always pertinent
and provide a good learning experience for students. To preserve the teaching value
of these cases, they should not be used for student write-ups; their value lies in the
in-class discussion they generate. I have written detailed instructor notes for these
cases to show how I use them in my course in organizational theory. These notes are
found in the Instructor’s Manual.
“Organizational Insight” boxes relate directly to core chapter concepts.
Chapter objectives and key terms are clearly defined and listed to aid learning.
19
20
PREFACE
䊉
䊉
“Managerial Implications” sections provide students with lessons from organizational theory.
Detailed end-of-chapter summaries facilitate learning.
Instructor Supplements
Instructors can access downloadable supplemental resources by signing in to the
Instructor Resource Center at www.pearsonglobaleditions.com/jones.
It gets better. Once you register, you will not have additional forms to fill out or multiple user names and passwords to remember to access new titles and/or editions. As a
registered faculty member, you can log in directly to download resource files and receive
immediate access.
Need help? Our dedicated Technical Support team is ready to assist instructors
with questions about the media supplements that accompany this text. Visit
http://247pearsoned.custhelp.com/ for answers to frequently asked questions and tollfree user support phone numbers. The following supplements are available to adopting
instructors.
PowerPoints: This presentation includes basic outlines and key points from each
chapter. It includes figures from the text but no forms of rich media, which makes the
file size manageable and easier to share online or via email. This set was also designed
for the professor who prefers to customize PowerPoints and who wants to be spared
from having to strip out animation, embedded files, and other media-rich features.
Instructor’s Manual: Includes Teaching Objectives, Chapter Summaries, Outlines,
Discussion Questions and Answers, Organizational Theory in Action, Cases for
Analysis, Analyzing the Organization and Teaching Suggestions, and Ethical
Dimensions.
Test Bank: Contains a detailed and comprehensive set of at least 60 multiplechoice questions and 15 true/false questions together with three short-answer and
essay questions for each chapter.
Acknowledgments
Finding a way to coordinate and integrate the rich and diverse organizational theory literature is challenging. Nor is it easy to present the material in a way that students can
readily understand. Across the last editions of Organizational Theory, I have been fortunate to have the assistance of several people who contributed greatly to the book’s final
form. My developmental editor, Jane Tufts, helped me decide how to present the material
in the chapters on structure and culture, which was my most difficult task. Her efforts can
be seen in the integrated flow of material both within and between the book’s chapters.
Brian Mickelson, my Pearson editor, provided me with timely feedback and information
from professors and reviewers, which has allowed me to shape the book to meet the
needs of its intended market. Ilene Kahn ably coordinated the book’s progress through
production. Their efforts can be seen in the comprehensiveness of the package of materials that constitutes Organizational Theory. I am also grateful to the following reviewers
and colleagues who provided me with detailed feedback on the chapters in this and previous editions of the book:
PREFACE
Reviewers
Sonny Ariss, Janet Barnard, Nate Bennett, Ken Bettenhausen, Alan Bluedorn, Karen Dill
Bowerman, Tony Buono, John Butler, Marian Clark, Paul Collins, Ed Conlon, Tina Dacin,
Parthiban David, Gordon Dehler, Richard Deluca, Leonidas Doty, Allen Engle, Steven
Farner, Pat Feltes, Robert Figler, Steven Floyd, Linda Fried, Lawrence Gales, Deborah
Gibbons, Richard Goodman, Charles Hill, Renata Jaworski, Bruce H. Johnson, Sara
Keck, Leslie A. Korb, Robert M. Krug, Nancy Kucinski, Arie Lewin, Ronald Locke, David
Loree, Karl Magnusen, Judi McLean-Parus, Frances Milliken, Dennis Mott, Pracheta
Mukherjee, Ann Marie Nagye, Janet Near, Jeffrey R. Nystrom, Kaviraj Parboteeah, Dane
Partridge, Dave Partridge, Richard Paulson, Janita Rawls, Greg Saltzman, Mary Jane
Saxton, John Schaubroeck, John A. Seeger, James Segouis, Jim Sena, Dayle Smith,
George Strauss, Dan Svyantek, Paul W. Swierez, Filiz Tabak, Louise Tourigny, and
Carolyn Youssef.
Gareth R. Jones
College Station, Texas
Pearson wish to thank and acknowledge the following people for their work on the
Global Edition:
Contributors
David Ahlstrom,The Chinese University of Hong Kong
Roger Fulwood, Manchester Metropolitan University
Rohaya Mohd Nor, University Malaysia Sarawak
Ingi Rúnar Eðvarðsson, The University of Akureyri
Reviewers
David Coghlan, University of Dublin
Evangellos Dedoussis, American University in Dubai
Huang Guohua Emily, Hong Kong Baptist University
21
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Part 1
The Organization
and Its Environment
C H A P T E R
Organizations and
Organizational Effectiveness
Learning Objectives
Organizations exist in uncertain, changing environments and continually confront new challenges
and problems. Managers must find solutions to these challenges and problems if organizations are
to survive, prosper, and perform effectively.
After studying this chapter you should be able to:
1. Explain why organizations exist and the purposes they serve.
2. Describe the relationship between organizational theory and organizational design and
change and differentiate between organizational structure and culture.
3. Understand how managers can utilize the principles of organizational theory to design
and change their organizations to increase organizational effectiveness.
4. Identify the three principal ways in which managers assess and measure organizational
effectiveness.
5. Appreciate the way in which several contingency factors influence the design of
organizations.
What Is an Organization?
Few things in today’s world are as important or as taken for granted as organizations.
Although we routinely enjoy the goods and services that organizations provide, we rarely
bother to wonder about how these goods and services are produced. We see online videos
of manufacturing production lines churning out automobiles, PCs, or smartphones, and
we watch on a local TV channel how our schools or hospitals are striving to use advances
in new kinds of computer hardware and software, such as online learning programs, to
help students improve their performance. Yet we rarely question how or why these organizations go about their business. Most often, we think about organizations only when
they fail us in some way—for example, when we are forced to wait two hours in the emergency room to see a doctor, when our new smartphone crashes, or when we are at the end
of a long line in a bank on a Friday afternoon. When such events happen, we wonder why
the bank did not anticipate the rush of people and put on more tellers, why the hospital
made us spend 30 minutes filling out paperwork in order to obtain service and then kept
us waiting for an hour and a half, or why wireless phone companies don’t insist on higherquality hardware and bug-free software from their smartphone suppliers.
People have a casual attitude toward organizations because organizations are
intangible. Even though most people in the world today are born, work, and die in organizations, nobody has ever seen or touched an organization. We see the products or
services that an organization provides, and sometimes we see the people the organization
employs, for example, as we go into a FedEx Kinko’s store or doctor’s office. But the
1
24
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Organization
A tool people use to
coordinate their actions to
obtain something they desire
or value.
Entrepreneurship
The process by which people
recognize opportunities to
satisfy needs and then gather
and use resources to meet
those needs.
reason an organization, such as FedEx Kinko’s, is motivated to provide goods and services, and the way it controls and influences its members so that it can provide them, are
not apparent to most people outside the organization. Nevertheless, grouping people and
other resources to produce goods and services is the essence of organizing and of what an
organization does.1
An organization is a tool people use to coordinate their actions to obtain something
they desire or value—that is, to achieve their goals. People who value security create an
organization called a police force, an army, or a bank. People who value entertainment
create organizations such as the Walt Disney Company, CBS, or a local club. People who
desire spiritual or emotional support create churches, social service organizations, or
charities. An organization is a response to and a means of satisfying some human need.
New organizations are spawned when new technologies become available and new needs
are discovered—such as social networking sites like Facebook—and organizations die or
are transformed when the needs they satisfied are no longer important—such as video
rental stores like Blockbuster. The need to invent improved drugs, for example, led to the
creation of Amgen, Genentech, and other biotech companies. The need to handle increasing amounts of information and emerging new computer technologies led to the rise of
IBM, Apple, Microsoft, Google, and other high-tech companies and the decline and failure of companies whose technology had become outdated, such as the typewriter
company Smith Corona. Retail stores such as Walmart, Target, the Gap, and Sears are
continually being transformed—not always successfully—as they seek to respond to the
changing tastes and needs of consumers.
Who creates the organizations that arise to satisfy people’s needs? Sometimes an individual or a few people believe they possess the necessary skills and knowledge and set up
an organization to produce goods and services. In this way organizations like sandwich
shops, Google, and software design studios are created. Sometimes several people form a
group to respond to a perceived need by creating an organization. People with a lot of
money may invest jointly to build a vacation resort. A group of people with similar beliefs
may form a new church, or a nation’s citizens may move to establish a new political party. In
general, entrepreneurship is the term used to describe the process by which people recognize opportunities to satisfy needs and then gather and use resources to meet those needs.2
Today, many organizations being founded, and particularly those experiencing the
fastest growth, are producing goods and services related in some way to new information
ifong/Shutterstock.com
Most of us don’t think about the
organizations that produce the
products we use until we have a
problem with those products.
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
25
technology (IT). The increasing use of mobile computing devices such as laptops, smartphones, and tablet computers linked to the World Wide Web (WWW) through wireless
broadband connections are revolutionizing the way all organizations operate. This book
examines this crucial issue by focusing on one company, Amazon.com, that has achieved
explosive growth because of its development of IT products and services such as its
Kindle book reader. In nine chapters of this book the story of this company is used to illustrate the many ways in which the IT revolution is improving the way organizations operate and create value today. We begin this analysis here by examining why and how
Amazon.com was founded, which is discussed in the Focus on New Information
Technology box.3
How Does an Organization Create Value?
The way in which an organization creates value is depicted in Figure 1.1. Value creation
takes place at three stages: input, conversion, and output. Each stage is affected by the environment in which the organization operates. The organizational environment is the set
of forces and conditions that operate beyond an organization’s boundaries but affect its
ability to acquire and use resources to create value.
Inputs include resources such as raw materials, machinery, information and knowledge, human resources, and money and capital. The way an organization chooses and obtains from its environment the inputs it needs to produce goods and services determines
how much value the organization creates at the input stage. For example, Jeff Bezos
chose to design software to make Amazon.com’s website as simple and user friendly as
he possibly could, and he only recruited people who could provide high-quality,
Figure 1.1
How an Organization Creates Value
Organization’s Inputs
Organization obtains inputs
from its environment
Organization’s Conversion Process
Organization transforms inputs
and adds value to them
Raw materials
Machinery
Money and capital
Computers
Human resources
Human skills and abilities
Information and knowledge
Customers of service organizations
Organization’s Environment
Sales of outputs allow organization
to obtain new supplies of inputs
Organization’s Outputs
Organization releases outputs to
its environment
Customers
Finished goods
Shareholders
Services
Suppliers
Dividends
Distributors
Salaries
Government
Value for stakeholders
Competitors
Organizational environment
The set of forces and
conditions that operate
beyond an organization’s
boundaries but affect its ability
to acquire and use resources to
create value.
26
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Focus on New Information Technology
Amazon.com, Part 1
I
n 1994, Jeffrey Bezos, a computer science and electrical engineering
graduate from Princeton University, was growing weary of working
for a Wall Street investment bank. With his computer science background prompting him, he saw an entrepreneurial opportunity in the
fact that use of the Internet was growing at over 2,300% a year as
more and more people were becoming aware of its information
advantages.
Searching for an opportunity to take advantage of his skills in
the new electronic virtual marketplace, he concluded that the bookselling market would be a good place to invest his personal
resources. Deciding to make a break, he packed up his belongings
and drove to the West Coast, deciding en route that Seattle,
Washington, a new mecca for high-tech software developers and
the hometown of Starbucks coffee shops, would be an ideal place
to begin his venture.
What was his vision for his new venture? To build an online bookstore that would be customer friendly, easy to navigate, and would
offer the broadest possible selection of books. Bezos’s mission? “To
use the Internet to offer products that would educate, inform and
inspire.”4 Bezos realized that compared to a real bricks-and-mortar
bookstore, an online bookstore would be able to offer a much larger
and more diverse selection of books. Moreover, online customers
would be able to search easily for any book in print on a computerized
online catalog, browse different subject areas, read reviews of books,
and even ask other shoppers for online recommendations—something
most people would hesitate to do in a regular bookstore.
With a handful of employees and operating from his garage in
Seattle, Bezos launched his venture online in July 1995 with $7 million
in borrowed capital. Word of his venture spread like wildfire across the
Internet and book sales quickly picked up as satisfied customers spread
the good word. Within weeks Bezos was forced to relocate to new
larger premises and to hire new employees as book sales soared.
Bezos’s new venture seemed to be poised for success.
customer-friendly service that would most appeal to his Internet customers. If he had
made poor choices and customers had not liked Amazon.com’s website or customer service, his company would not have been successful.
The way the organization uses human resources and technology to transform inputs
into outputs determines how much value is created at the conversion stage. The amount
of value the organization creates is a function of the quality of its skills, including its ability to learn from and respond to the environment. For example, Jeff Bezos had to decide
how best to sell and market his products to attract customers. His answer was to offer
wide choice and low prices and to ship books quickly to customers. His skill at these
activities created the value that customers saw in his concept.
The result of the conversion process is an output of finished goods and services that
the organization releases to its environment, where they are purchased and used by
customers to satisfy their needs—such as delivered books. The organization uses the
money earned from the sale of its output to obtain new supplies of inputs, and the cycle
begins again. An organization that continues to satisfy people’s needs will be able to
obtain increasing amounts of resources over time and will be able to create more and
more value as it adds to its stock of skills and capabilities.5 Amazon.com has grown
from strength to strength because satisfied customers return to its online storefront and
continue to provide the revenues it needs to continually improve its skills and expand
its operations.
A value-creation model can be used to describe the activities of most kinds of
organizations. Manufacturing companies, such as GE, GM, and IBM, take from the environment component parts, skilled or semiskilled labor, and technical knowledge and at
the conversion stage create value by using their manufacturing skills to organize and
assemble those inputs into outputs, such as cars and computers. Service organizations,
such as McDonald’s, Amazon.com, the Salvation Army, and your family doctor, interact
directly with customers or clients, who are the “inputs” to their operations. Hungry
people who go to McDonald’s for a meal, needy families who go to the Salvation Army
for assistance, and sick people who go to a doctor for a cure are all “inputs.” In the
conversion stage, service organizations create value by applying their skills to yield an
output: satisfied hunger, a cared-for family, a cured patient. Figure 1.2 is a simplified
model of how McDonald’s creates value.
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
Figure 1.2
How McDonald’s Creates Value
McDonald’s inputs:
Obtained from its environment
McDonald’s conversion process:
Tranforms inputs and adds value to them
Raw materials (ground beef, sandwich
buns, potatoes, milk-shake mix, etc.)
Machinery (grills, toasters, frying
machines, milk-shake machines)
Human resources (cooks, clean-up crew,
order takers, managers)
Computers (computerized cash registers,
ordering systems, inventory tracking)
Information and knowledge (training,
knowledge of fast-food industry)
Human skills and abilities (personnel
trained in sandwich preparation,
ordering, potato frying, overseeing
the whole operation)
Money and capital
(shareholders’ investments)
Customers
McDonald’s environment:
Sale of outputs to customers
McDonald’s outputs:
Released to its environment
Satisfied customers
Fast and cheap food
Potential customers
Satisfied customers
Suppliers of meat, potatoes, milk-shake mix
Satisfied shareholders
Population from which to choose employees
Government health regulations
Competitors (KFC, Burger King,
Taco Bell)
Why Do Organizations Exist?
The production of goods and services most often takes place in an organizational setting
because people working together to produce goods and services usually can create more
value than people working separately. Figure 1.3 summarizes five reasons for the existence of organizations.
To Increase Specialization and the Division of Labor
People who work in organizations may become more productive and efficient at what
they do than people who work alone. For many kinds of productive work the use of an
organization allows the development of specialization and a division of labor. The collective nature of organizations allows individuals to focus on a narrow area of expertise,
which allows them to become more skilled or specialized at what they do. For example,
engineers working in the engineering design department of a large car manufacturer
like GM or Toyota might specialize in improving the design of fuel injection systems or
other engine components. An engineer working for a small car manufacturer might be
responsible for designing the whole engine. Because the engineer in the small company
must perform many more tasks than the engineer in the large company, the degree of
specialization in the small company is lower; there is less chance of discovering what
makes for a great carburetor and thus creating more value for someone who desires
high speed.
27
28
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Figure 1.3
Why Organizations Exist
Increase specialization and
the division of labor
Use large-scale technology
The use of an
organization allows
people jointly to:
Manage the external
environment
Which increases
the value that an
organization
can create
Economize on
transaction costs
Exert power and control
To Use Large-Scale Technology
Economies of scale
Cost savings that result when
goods and services are
produced in large volume on
automated production lines.
Economies of scope
Cost savings that result when
an organization is able to use
underutilized resources more
effectively because they can be
shared across different
products or tasks.
Organizations are able to take advantage of the economies of scale and scope that result
from the use of modern automated and computerized technology. Economies of scale are
cost savings that result when goods and services are produced in large volume on automated production lines.
Economies of scope are cost savings that result when an organization is able to use
underutilized resources more effectively because they can be shared across several different products or tasks. Economies of scope (as well as of scale) can be achieved, for example,
when it is possible to design an automated production line to produce several different
types of products simultaneously. Toyota and Honda were the first carmakers to design
assembly lines capable of producing three models of a car instead of just one. GM and Ford
have followed suit and have achieved impressive gains in efficiency. Multimodel assembly
lines give car companies lower manufacturing costs and greater flexibility to change quickly
from making one model to another to meet varying customer needs.
To Manage the Organizational Environment
Pressures from the organizational environment in which they operate also make organizations the favored mode for transforming inputs into outputs. An organization’s environment is the source of valuable input resources and is the marketplace into which it
releases outputs. It is also the source of economic, social, and political pressures that affect an organization’s ability to obtain these resources. Managing complex environments
is a task beyond the abilities of most individuals, but an organization has the resources to
develop specialists to anticipate or attempt to influence the many pressures from the
environment. This specialization allows the organization to create more value for the
organization, its members, and its customers. Large companies like IBM, AT&T, and Ford
have whole departments of corporate executives who are responsible for monitoring,
responding to, and attempting to manage the external environment, but those activities
are just as important for small organizations. Although local stores and restaurants do not
have whole departments to scan the environment, their owners and managers need to
spot emerging trends and changes so that they can respond to changing customer needs,
just as Jeff Bezos did; otherwise they will not survive.
To Economize on Transaction Costs
When people cooperate to produce goods and services, certain problems arise. As they
learn what to do and how to work with others to perform a task effectively, people jointly
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
have to decide who will do which tasks (the division of labor), who will get paid what
amounts, and how to decide if each coworker is doing his or her share of the work. The
costs associated with negotiating, monitoring, and governing exchanges between people
to solve these kinds of transaction difficulties are called transaction costs. Organizations’
ability to control the exchanges between people reduces the transaction costs associated
with these exchanges. Suppose Intel bought the services of its scientists daily and thousands of scientists had to spend time every day discussing what to do and who should
work with whom. Such a work system would be very costly and would waste valuable
time and money. The structure and coordination imposed by the Intel organization, however, lets managers hire scientists on a long-term basis, assign them to specific tasks and
work teams, and gives Intel the right to monitor their performance. The resulting stability
reduces transaction costs and increases productivity.
29
Transaction costs
The costs associated with
negotiating, monitoring, and
governing exchanges between
people.
To Exert Power and Control
Organizations can exert great pressure on individuals to conform to task and production
requirements in order to increase production efficiency.6 To get a job done efficiently,
people must come to work in a predictable fashion, behave in the interests of the organization, and accept the authority of the organization and its managers. All these requirements make production less costly and more efficient but put a burden on individuals
who must conform to organizational requirements. When individuals work for themselves, they need to address only their own needs. When they work for an organization,
however, they must pay attention to the organization’s needs as well as their own.
Organizations can discipline or fire workers who fail to conform and can reward good
performance with promotion and increased rewards. Because employment, promotion,
and increased rewards are important and often scarce, organizations can use them to
exert power over individuals.
Taken together, these five factors help explain why often more value can be created
when people work together, coordinating their actions in an organized setting, than when
they work alone. Over time, the stability created by an organization provides a setting in
which the organization and its members can increase their skills and capabilities, and the
ability of the organization to create value increases by leaps and bounds. By 2011, for example, Google grew to become the most valuable Internet software company in the world
because Larry Page and Sergey Brin, its founders, created an organizational setting in
which people are given freedom to develop their skills and capabilities to create innovative
new products. In contrast, in the last decade other software companies like WordPerfect,
Lotus, Novell, and even Microsoft have experienced major problems because they have not
been able to create the Internet software customers want. Why does Google’s organization
allow it to create more and more value while these other organizations have actually reduced the value they can create? Before we can answer this question, we need to take a
close look at organizational theory, design, and change.
Annette Shaff/Shutterstock.com
Giving the company’s workers
the freedom to innovate has
helped Google stay ahead of its
competition.
30
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Organizational Theory, Design, and Change
Organizational theory is the study of how organizations function and how they affect
and are affected by the environment in which they operate. In this book, we examine the
principles that underlie the design, operation, change, and redesign of organizations to
maintain and increase their effectiveness. Understanding how organizations operate,
however, is only the first step in learning how to control and change organizations so
that they can create wealth and resources effectively. Thus the second aim of this book is
to equip you with the conceptual tools to influence organizational situations in which
you find yourself. The lessons of organizational design and change are as important at
the level of first-line supervisor as they are at the level of chief executive officer, in small
or large organizations, and in settings as diverse as the not-for-profit organization or the
assembly line of a manufacturing company.
People and managers knowledgeable about organizational design and change are
able to analyze the structure and culture of the organization for which they work (or
which they wish to help, such as a charity or church), diagnose problems, and make adjustments that help the organization achieve its goals. Figure 1.4 outlines the relationship
among organizational theory, structure, culture, design, and change.
Organizational theory
The study of how
organizations function and
how they affect and are
affected by the environment
in which they operate.
Organizational structure
The formal system of task and
authority relationships that
control how people coordinate
their actions and use resources
to achieve organizational
goals.
Organizational Structure
Once a group of people has established an organization to accomplish collective goals,
organizational structure evolves to increase the effectiveness of the organization’s control of the activities necessary to achieve its goals. Organizational structure is the formal
system of task and authority relationships that control how people coordinate their
actions and use resources to achieve organizational goals.7 The principal purpose of organizational structure is one of control: to control the way people coordinate their actions
Figure 1.4 The Relationship among Organizational Theory and
Organizational Structure, Culture, and Design, and Change
Organizational Theory
The study of how organizations function and how they affect and
are affected by the environment in which they operate.
Organizational Structure
The formal system of task and
authority relationships that
controls how people are to
cooperate and use resources to
achieve the organization’s goals.
Controls coordination and
motivation; shapes behavior of
people and the organization.
Is a response to contingencies
involving environment, technology,
and human resources.
Evolves as organization grows and
differentiates.
Can be managed and changed
through the process of
organizational design.
Organizational Design
and Change
The process by which managers
select and manage various
dimensions and components of
organizational structure and
culture so that an organization
can control the activities
necessary to achieve its goals.
Balances the need of the
organization to manage external
and internal pressures so that it
can survive in the long run.
Allows the organization to
continually redesign and
transform its structure and
culture to respond to a
changing global environment.
Organizational Culture
The set of shared values and norms
that controls organizational
members’ interactions with
each other and with people
outside the organization.
Controls coordination and
motivation; shapes behavior of
people and the organization.
Is shaped by people, ethics, and
organizational structure.
Evolves as organization grows and
differentiates.
Can be managed and changed
through the process of
organizational design.
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
31
to achieve organizational goals and to control the means used to motivate people to
achieve these goals. At Google, for example, the control problems facing Larry Page and
Sergey Brin were how to coordinate their IT engineers’ activities to make the best use of
their talents, and how to reward them when they developed innovative products. Their solution was to place scientists in small self-contained teams and to reward them with stock
in Google based on individual and team performance.
For any organization, an appropriate structure is one that facilitates effective responses to problems of coordination and motivation—problems that can arise for any
number of environmental, technological, or human reasons.8 As organizations grow and
differentiate, the structure likewise evolves. Organizational structure can be managed
through the process of organizational design and change.
Organizational Culture
At the same time that organizational structure is evolving, so is organizational culture.
Organizational culture is the set of shared values and norms that controls organizational
members’ interactions with each other and with suppliers, customers, and other people
outside the organization. An organization’s culture is shaped by the people inside the
organization, by the ethics of the organization, by the employment rights given to employees, and by the type of structure used by the organization. Like organizational structure,
organizational culture shapes and controls behavior within the organization. It influences
how people respond to a situation and how they interpret the environment surrounding
the organization. At Google, Page and Brin attempted to create values that encouraged
entrepreneurship and risk taking to build an organizational culture in which innovation
was a valued activity. The small-team structure was helpful because scientists were continually meeting face to face to coordinate their activities and to learn from one another,
which encouraged them to experiment and to find new ways of solving problems.
The cultures of organizations that provide essentially the same goods and services
can be very different. For example, Coca-Cola and PepsiCo are the two largest and most
successful companies in the soft drinks industry.9 Because they sell similar products and
face similar environments, we might expect their cultures to be similar. But they are not.
Coca-Cola takes pride in its long-term commitment to employees; its loyal managers,
many of whom spend their entire careers with the organization; and its cautious and cooperative approach to planning. By contrast, PepsiCo has a highly political and competitive culture in which conflicts over decision making cause frequent disputes, and often
turnover, among top managers. Like organizational structure, organizational culture
evolves and can be managed through organizational design and change.
Organizational culture
The set of shared values and
norms that controls
organizational members’
interactions with each other
and with suppliers, customers,
and other people outside the
organization.
Organizational Design and Change
Organizational design is the process by which managers select and manage aspects of
structure and culture so an organization can control the activities necessary to achieve its
goals. Organizational structure and culture are the means the organization uses to
achieve its goals; organizational design is about how and why various means are chosen.
An organization’s behavior is the result of its design and the principles behind its operation. It is a task that requires managers to strike a balance between external pressures
from the organization’s environment and internal pressures from, for example, its choice
of technology. Looking outward, the design can cause organizational members to view
and respond to the environment in different ways. Looking inward, an organization’s design puts pressure on work groups and individuals to behave in certain ways.
Achieving the proper balance helps ensure that the organization will survive in the long
run. The theories, concepts, and techniques covered in this book are intended to provide you
with working models you can use to analyze organizational situations and to propose and
implement suitable solutions to change an organization and increase its effectiveness.
High-tech organizations like Google, Apple, and Intel need to be flexible and capable of quick responses to the competitive moves of their rivals—Facebook, Samsung, and
ARM—as they innovate new technology and introduce new products. At the same time,
such organizations must have stable task relationships that allow their members to work
Organizational design
The process by which
managers select and manage
aspects of structure and
culture so that an organization
can control the activities
necessary to achieve its goals.
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PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Organizational change
The process by which
organizations redesign their
structures and cultures to
move from their present state
to some desired future state to
increase their effectiveness.
together to create value, solve problems, and accomplish organizational objectives. In
contrast, organizations like Nucor and Alcoa, which produce sheet steel and aluminium,
respectively, face relatively stable environments in which customer needs are more predictable and technology changes more slowly. Consequently, their organizational design
choices are likely to reflect the need for a structure and culture that reduces production
costs rather than a structure and culture that promotes flexibility. In Chapters 4, 5, 6, and
7, we discuss the organizational structures and cultures that managers can design to help
ensure their organizations’ survival.
Organizational change is the process by which organizations move from their present
state to some desired future state to increase their effectiveness. The goal of organizational change is to find new or improved ways of using resources and capabilities to increase an organization’s ability to create value, and hence its performance.10 Once again,
organizational structure and culture are a principal means or fulcrum that managers use
to change the organization so it can achieve its future desired state.
Organizational design and change are thus highly interrelated. Indeed, organizational
change can be understood as the process of organizational redesign and transformation. As
we discuss in later chapters, as organizations grow, their structure and culture is constantly
evolving, changing, and becoming more complex. A large organization faces a different set
of design and redesign problems than a small organization because its structure and culture
are different from a small organization’s. Managers need to recognize that their initial design choices will have important ramifications in the future as their organizations grow; indeed, it has been argued that initial choices are an important determinant of differences in
long-run performance. For an example, consider how the way Steve Jobs designed the
structure and culture of Apple changed over the years as he learned the principles behind
organizational design, as illustrated in Organizational Insight 1.1.
Organizational Insight 1.1
How Steve Jobs Learned
How to Organize and Control Apple
I
n 1976 Steven P. Jobs sold his Volkswagen van, and his partner
Steven Wozniak sold his two programmable calculators, and they used
the proceeds of $1,350 to build a circuit board in Jobs’s garage. So
popular was the circuit board, which developed into the Apple II personal computer (PC), that in 1977 Jobs and Wozniak founded Apple
Computer to make and sell it. By 1985 Apple’s sales had exploded to
almost $2 billion, but in the same year Jobs was forced out of the company he founded. Jobs’s approach to organizing was a big part of the
reason he lost control of Apple.
Jobs saw his main task as designing the organizational structure
in ways that would lead to the rapid development of new and
improved PCs, but his personal style was often arbitrary and overbearing. For example, Jobs often played favorites among the many
different project teams he created that caused many conflicts and led
to fierce competition, many misunderstandings, and growing distrust
among members of the different teams. Jobs’s abrasive management
style also brought him into conflict with John Sculley, Apple’s CEO.
Employees became unsure whether Jobs (the chairman) or Sculley
was in control of the company. Both managers were so busy fighting
for control of Apple that the task of ensuring its resources were
being used efficiently was neglected. Apple’s costs soared, and its
performance and profits fell.
Apple’s directors became convinced Jobs’s style was the heart of
the problem and asked him to resign. After he left Apple, Jobs
started new ventures. First he founded PC maker NEXT to develop a
powerful new PC that would outperform Apple’s PCs. Then he
founded Pixar, a computer animation company, which become a
huge success after it made blockbuster movies such as Toy Story and
Finding Nemo, both distributed by Walt Disney, and Pixar was eventually sold to Disney.
In both these companies Jobs organizing approach changed. He built
strong management teams to lead the project teams developing the new
PCs and movies and kept his distance. Jobs saw his main task as organizing the companies’ future product development strategies and he left the
actual tasks of organizing and controlling to the managers who reported
to him. He gave them the autonomy to put his vision into practice and in
both companies he worked to create a culture based on values and
norms of collaboration and creative thinking to promote innovation.
Meanwhile Apple was struggling to compete against Dell’s low-cost
PCs loaded with Microsoft’s Windows software; its performance was
plummeting and its future looked in doubt. To help the company he
founded survive, in 1996 Jobs convinced Apple to buy NEXT for $400
million and use its powerful operating system in a new line of new
Apple Mac PCs. Jobs worked inside Apple to lead its turnaround and he
was so successful that in 1997 he was asked to become its new CEO.
His first step was to create a clear vision and goals to energize and
motivate Apple employees. Jobs decided that Apple had to introduce
state-of-the art, stylish PCs and related digital equipment. He created a
team structure that allowed programmers and engineers to pool their
iStockphoto.com/Justin Sullivan
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
skills to develop new PCs. He delegated considerable authority to the
teams, but he also established strict timetables and challenging
33
“stretch” goals, such as bringing new products to market as quickly as
possible, for these groups. One result of these efforts was Apple’s sleek
new line of iMac PCs, which were quickly followed by a wide range of
futuristic PC-related products.11
In 2003 Jobs announced that Apple was starting a new service
called iTunes, an online music store from which people could download songs for 99 cents. At the same time Apple introduced its iPod
music player, which can store thousands of downloaded songs, and it
quickly became a runaway success. Apple continually introduced new
generations of the iPod, each more compact, powerful, and versatile
than previous models. By 2006 Apple had gained control of 70% of
the digital music player market and 80% of the online music download business, and its stock price soared to a new record level.
The next milestone in Jobs’s managerial history came in 2007 when
he announced that Apple would introduce the iPhone to compete directly with the popular Blackberry. Once again he organized Apple’s engineers into teams, not only to develop the new phone but to create an
online iPhone applications platform where users would be able to download iPhone applications—such as to interact with their friends—to make
their phones more useful. By 2010 over two million iPhone applications
had been developed, over two billion applications had been downloaded
by iPhone users, and Apple was the leader in the smartphone market.
In 2010 Jobs announced that Apple planned to introduce its new
iPad tablet computer, which he claimed would be the best way to experience the Web, email, and photos and would also have a wireless reading function to compete directly against Amazon.com’s successful
Kindle wireless reader.12 As before, Jobs organized a new engineering
unit to pioneer the development of applications for its new iPad, and
after the iPad was released in spring 2010 analysts and customers
swarmed to buy it, its stock rose to a high of $219. By 2011, Apple’s
stock had soared to over $350 as its product teams continuously
brought out new and improved versions of its iPod, iPhone, and iPad
and many analysts thought the company’s stock would become the
most valuable in the world.
As the example of the way Steve Jobs had changed his approach to organizing people
and resources suggests, people who start new organizations may initially lack the kinds of
skills or knowledge to manage an organization’s structure and culture effectively but
many of them can develop these skills over time. An understanding of the principles behind organizational design and change helps to speed this learning process and deepens
appreciation for the many subtle technical and social processes that determine how
organizations operate.
The Importance of Organizational Design and Change
Because of increased global competitive pressures and the increasing use of advanced IT, organizational design has become one of management’s top priorities. Today, as never before,
managers are searching for new and better ways to coordinate and motivate their employees
to increase the value their organizations can create. There are several specific reasons why
designing an organization’s structure and culture, and changing them to increase its effectiveness, are such important tasks. Organizational design and change have important implications for a company’s ability to deal with contingencies, achieve a competitive advantage,
manage diversity effectively, and increase its efficiency and ability to innovate.
Dealing with Contingencies
A contingency is an event that might occur and must be planned for, such as a changing
environment pressure like rising gas prices or the emergence of a new competitor like
Contingency
An event that might occur
and must be planned for.
34
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
Amazon.com that decides to use new technology in an innovative way. The design of an
organization determines how effectively an organization is able to respond to various
pressures in its environment and so obtain scarce resources. For example, an organization’s ability to attract skilled employees, loyal customers, or government contracts is a
function of the degree to which the way it is designed gives it control over those three
environmental factors.
An organization can design its structure in many ways to increase control over its environment. An organization might change employee task relationships so that employees
are more aware of the environment, or it might change the way the organization relates to
other organizations by establishing new contracts or joint ventures. For example, when
Microsoft wanted to attract new customers for its Windows software in the United States
and globally, it recruited large numbers of customer service representatives and created a
new department to allow them to better meet customers’ needs. The strategy was very successful, and the Windows platform is still used on over 90% of all desktop PCs globally.
As pressures from competitors, consumers, and the government increase, the environment facing all organizations is becoming increasingly complex and difficult to respond to,
and more effective types of structure and culture are continually being developed and tried.
We discuss how the changing nature of the environment affects organizations in Chapter 3
and how organizations can influence and control their environments in Chapter 8.
One part of the organizational environment that is becoming more important and
more complex is the global environment. In the 2000s U.S. companies like Apple, IBM,
and Walmart are constantly under pressure to expand their global presence and produce
and sell more of their products in markets overseas to reduce costs, increase efficiency, and
survive. Organizational design is important in a global context because to become a global
competitor, a company often needs to create a new structure and culture. Chapter 8 also
looks at the structures and cultures that a company can adopt as it engages in different
kinds of global activities.
Changing technology is another contingency to which organizations must respond.
Today, the Internet and other advanced IT have become one of the principal methods that
organizations use to manage relationships with their employees, customers, and suppliers.
The growing use of IT is fundamentally changing the design of organizational structure and
has led to a huge round of organizational change as organizations have redesigned their
structures to make most effective use of IT. We examine the effects of IT on organizational
design and change in almost all the chapters of this book but particularly in Chapter 12.
In particular, a theme throughout the book is to examine how IT is changing the
nature of the boundary of the organization, and the specific ways organizations coordinate
people and tasks. The growth of outsourcing and the global network organizations whose
members are linked primarily through electronic means has changed the way organizations operate in many ways. The pros and cons of this change in organizing—as organizations seek to increase their effectiveness and gain a competitive advantage—are discussed
in depth in later chapters.
Competitive advantage
The ability of one company to
outperform another because
its managers are able to create
more value from the resources
at their disposal.
Core competences
Managers’ skills and abilities in
value-creating activities.
Strategy
The specific pattern of
decisions and actions that
managers take to use core
competences to achieve a
competitive advantage and
outperform competitors.
Gaining Competitive Advantage
Increasingly, organizations are discovering that organizational design, change, and redesign are a source of sustained competitive advantage. Competitive advantage is the
ability of one company to outperform another because its managers are able to create
more value from the resources at their disposal. Competitive advantage springs from core
competences, managers’ skills and abilities in value-creation activities such as manufacturing, R&D, managing new technology, or organizational design and change. Core competences allow a company to develop a strategy to outperform competitors and produce
better products, or produce the same products but at a lower cost. Strategy is the specific
pattern of decisions and actions that managers take to use core competences to achieve a
competitive advantage and outperform competitors. Consider the way in which
Groupon, profiled in Organizational Insight 1.2, has been rushing to develop its strategy
to capture customers and keep its competitive advantage.
The way managers design and change organizational structure is an important
determinant of how much value the organization creates because this affects how it
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
35
Organizational Insight 1.2
I
n 2010, Google offered to buy Groupon, the online “daily deal”
newcomer, for $6 billion as it became obvious that Internet users liked
the idea of online, continually changing coupons that offered them
good deals by location. Groupon grew out of a website called The
Point. Founded by Andrew Mason in 2007, it was designed to allow a
sufficient number of people to get together online and participate as
members in a joint endeavor, so that a “tipping point” was reached
that allowed them to act as a group to take advantage of an opportunity that could not be obtained by any one individual. As Mason said in
a letter to prospective investors in 2011, “I started The Point to empower the little guy and solve the world’s unsolvable problems.”13
Mason transformed The Point into Groupon, and began hiring employees who shared his collective vision, and by 2009 it launched its
online coupon service. As Mason wrote, “As an antidote to a common
ailment for us city-dwellers: there’s so much cool stuff to do, but the
choice can be overwhelming. With so many options, sometimes the
easiest thing is to go to a familiar restaurant, or just stay at home and
watch a movie. As a result, we miss out on trying all the cool things
our cities have to offer.”14 Mason’s idea was that by focusing on one
specific good or service each day in a specific geographic location,
Groupon could leverage its members’ collective buying power to obtain
deals from companies supplying goods and services that were hard to
resist. Moreover, to protect its users, Groupon promises that because
nothing is more important than treating customers well, if customers
feel Groupon has let them down, all they have to do is call Groupon to
get a refund.
Spearheaded by Mason’s vision, Groupon has built a company that
saw its revenues increase by 15 times between 2010 and 2011 and
has successfully managed its explosive growth. Mason took advantage
of the concept of online coupons to its full effect. In fact, while global
sales were nonexistent in March 2010, they were 53% of its revenues
by March 2011. Indeed, to grow his company so fast, Mason has
taken major risks as he has invested all the money raised from private
investors, and from its growing revenues, into aggressive expansion to
stay ahead of competitors—including Google and LivingSocial, which
also rushed to expand their own online coupon services.
After all, any new startup can easily imitate Groupon’s strategy,
but being the first mover is a major advantage. Hence Mason believes
that pouring money into sales and marketing to make Groupon the
iStockphoto.com/Christian Rummel
Groupon Forges Ahead
global leader is worth it—in the same way that eBay and Amazon.com
spent billions to become the online retail portals of choice and are currently reaping the benefits of their innovative strategies. However,
Groupon still faces the prospect of cutthroat competition from giants
like Google. For example, in 2011 Google announced the launch of an
online coupon service that will offer discounts from restaurants and
other merchants if enough people agree to buy the coupons. The service, called “Google Offers” is similar to the daily deals offered by
Groupon. Google is testing its new online coupon service in Portland,
Oregon, and will then rapidly expand it to large cities such as New
York and San Francisco as a part of a new mobile payment service
Google also unveiled recently that allows users to pay for products directly through their smartphones. So, only the future will tell if
Groupon can maintain its leadership over this niche of the online market or will be crushed by Google, as well as Yahoo, AOL, and Facebook
(which also announced its own coupon service for its 500,000 million
users in 2011).
Despite these concerns and the fact in June 2011 Groupon had
only 50 million users, its initial stock offering valued the company at
$30 billion—a value higher than Google’s when it went public! Only
time will tell if Groupon can develop the organizational structure and
culture it needs to control its explosive growth; so far it is succeeding
as its laid-back founder has recruited people committed to following
Mason’s vision and making Groupon a force in which individuals can
obtain the bargaining power they need to deal with large companies.
implements strategy. Many sources of competitive advantage, such as skills in research
and development that result in novel product features or state-of-the-art technology,
evaporate because they are relatively easy for competitors to imitate. It is much more difficult to imitate good organizational design and carefully managed change that brings
into being a successful organizational structure and culture. Such imitation is difficult because structure and culture are embedded in the way people in an organization interact
and coordinate their actions to get a job done. Moreover, because successful structures
and cultures form early, as at Dell and Apple, and take a long time to establish and develop, companies that possess them can have a long-term competitive advantage.
An organization’s strategy is always changing in response to changes in the environment; organizational design must be a continuously evolving managerial activity for a
36
PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
company to stay ahead of the competition. There is never a single optimal or “perfect”
design to fit an organization’s needs. Managers must constantly evaluate how well their
organization’s structure and culture work, and they should change and redesign them
continually to improve them. In Chapter 8 we consider how organizations create value by
means of their strategy.
Managing Diversity
Differences in the race, gender, and national origin of organizational members have important implications for the values of an organization’s culture and for organizational effectiveness. The quality of organizational decision making, for example, is a function of
the diversity of the viewpoints that get considered and of the kind of analysis that takes
place. Similarly, in many organizations a large part of the workforce are minority employees whose needs and preferences must be taken into consideration. Also, changes in the
characteristics of the workforce, such as an influx of immigrant workers or the aging of
the current workforce, require attention and advance planning. An organization needs to
design a structure and control system to make optimal use of the talents of a diverse
workforce and to develop an organizational culture that encourages employees to work
together. An organization’s structure and culture determine how effectively managers
are able to coordinate and motivate workers. Today, as companies increasingly operate in
countries with widely disparate cultures around the globe, organizational design becomes
even more important to harmonize national with organizational culture. Organizational
Insight 1.3 discusses how the use of diverse—in this case female—manufacturing managers can promote high performance.
Organizations exist to produce goods
and services that people value. The better that organizations function, the more value, in
the form of more or better goods and services, they create. Historically, the capacity of
organizations to create value has increased enormously as organizations have introduced
better ways of producing and distributing goods and services. Earlier we discussed the
importance of the division of labor and the use of modern technology in reducing costs,
speeding work processes, and increasing efficiency. The design and use of new and more
efficient organizational structures is equally important. In today’s global environment, for
example, competition from countries with low labor costs is pressuring companies all
over the world to become more efficient in order to reduce costs or increase quality.
The ability of companies to compete successfully in today’s competitive environment
is increasingly a function of how well they innovate and how quickly they can introduce
new technologies. Organizational design plays an important role in innovation. For example, the way an organization’s structure links people in different specializations, such as
research and marketing, determines how fast the organization can introduce new products. Similarly, an organization’s culture can affect people’s desire to be innovative. A culture based on entrepreneurial norms and values is more likely to encourage innovation
than a culture that is conservative and bureaucratic because entrepreneurial values encourage people to learn how to respond and adapt to a changing situation.
Organizational design involves a constant search for new or better ways of coordinating and motivating employees. Different structures and cultures cause employees to behave in different ways. We consider structures that encourage efficiency and innovation in
Chapters 4, 5, and 6 and cultures that do so in Chapter 7.
PROMOTING EFFICIENCY, SPEED, AND INNOVATION
The Consequences of Poor Organizational Design
Many management teams fail to understand the important effects that organizational design and change can have on their company’s performance and effectiveness. Although
organizational structure and culture control behavior, managers are often unaware of the
many factors that affect this relationship, paying scant attention to the way employees behave and their role in the organization—until something happens.
Ford, Sears, and Kodak have all experienced enormous problems in the last decade
adjusting to the reality of modern global competition and have seen their sales and
CHAPTER 1 • ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS
37
Organizational Insight 1.3
B
uilding cars remains primarily a male occupation; in 2011 roughly
three out of four automotive manufacturing jobs are held by men, and
women still number less than 20% of automotive manufacturing managers. Today, however, more women than men are buying new vehicles, and that shift, together with an increasing concern for diversity,
has prompted major carmakers to promote more women into key
management positions.15 However, few women enroll in automotive
and mechanical engineering programs because assembly plants have a
reputation of being unpleasant, dirty, noisy places to work.
At Ford Motors, however, two of its female plant managers, Gloria
Georger and Jan Allman, provide good examples of women who accepted the challenge of entering the manufacturing world. They embraced the opportunities such a job offers, and developed the skills
that have allowed them to rise to become plant managers responsible
for organizing and controlling billion-dollar manufacturing plants that
employ thousands of employees.
Gloria Georger had no plans to pursue a manufacturing job and
majored in accounting, but one recruiter commented on her outgoing
personality and suggested she consider manufacturing where her interpersonal skills might be valuable—and manufacturing paid better
than accounting. She took a job at U.S. Steel’s plant in Gary, Indiana,
and sure enough, her ability to motivate and work smoothly with employees led her to be promoted to production supervisor. Moreover,
she claims the job helped develop the skills she needed to manage the
unexpected contingencies that always arise on a fast-paced assembly
line. She moved to Ford in 1986 when few women worked in manufacturing, but she quickly demonstrated the willingness to learn the
cultural values and norms of its manufacturing operations and her personality allowed her to embrace and succeed in handling challenges
from her mainly male colleagues and subordinates. She came to be regarded as a competent team leader and she steadily worked her way
up the hierarchy of Ford’s manufacturing function in different Ford
plants until being promoted to her current position as the head manager of Ford’s stamping plant in Chicago Heights, Illinois.16
Jan Allman is in charge of Ford’s Torrence Avenue assembly plant,
where in 2011 two-shifts of 2500 assembly line workers produce the
iStockphoto.com/WendellandCarolyn
How Diverse Manufacturing Managers
Can Help Increase Product Quality
new generation Ford Taurus, Lincoln MKS, and Explorer SUV. The parts
produced by Georger’s plant are assembled into the final vehicle at the
Torrence Avenue plant, so close cooperation between the two plant
managers is essential. Allman joined Ford in 1986 as a line engineer of
an engine plant after receiving an engineering degree; she was one of
two women out of 100 engineers Ford selected as interns to evaluate
their performance before making hiring decisions. Allman rose to become the manufacturing engineering manager in charge of the engine
plant, a position rarely held by a woman. Her hands-on organizing approach under difficult conditions impressed her colleagues, who noted
her attention to detail of every aspect of the assembly process and the
agreeable way in which she treated—and was treated by—employees.
Hence, her promotion to become the manager of one of Ford’s major
assembly plants.
Both Allman and Georger agree that the growing number of
women Ford has recruited into manufacturing over time has helped
change the values and norms of its manufacturing culture.17 Not only
has it reduced the level of conflict between managers and workers, it
has promoted cooperation and helped to promote Ford’s focus on increasing product quality that is one of its major competitive advantages
in the tough game of carmaking today. In 2011, for example, Ford reported its highest profits in 20 years and the company’s new vehicles are
increasingly ranked for their high quality.
profits fall dramatically. In response, they have slashed their workforces, reduced the
number of products they make, and even reduced their investment in R&D. Why did the
performance of these blue-chip companies deteriorate to such a degree? A major reason
is that managers lost control of their organizational structures and cultures. These companies became so big and bureaucratic that their managers and employees were unable to
change and adapt to changing conditions.
The consequence of poor organizational design or lack of attention to organizational
design is the decline of the organization. Talented employees leave to take positions in
strong growing companies. Resources become harder and harder to acquire, and the
whole process of value creation slows down. Neglecting organizational design until crisis
threatens forces managers to make changes in organizational structure and culture that
derail the company’s strategy. In the last decade, one major development at large
companies has been the appointment of chief operating officers (COOs), who are made
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PART 1 • THE ORGANIZATION AND ITS ENVIRONMENT
responsible for overseeing organizational structure and culture. COOs create and oversee teams of experienced senior managers who are responsible for organizational design
and for orchestrating not only small and incremental but also organizatio…
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