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Organizational Behavior, 8e Schermerhorn, Hunt, and Osborn Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc.

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Organizational Behavior: Chapter 12

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Chapter 12 Strategic Competency and Organizational Design  Study questions. – What is organizational design, and how do the designs

of small and large firms differ? – Do the operations and information technology of the firm influence its organizational design? – What is the relationship between environmental conditions and organizational design? – What is strategy, and how do organizational learning and information technology influence strategic competency? Organizational Behavior: Chapter 12

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What is organizational design, and how do the designs of small and large firms differ?  Organizational design. – The process of choosing and implementing a structural configuration. – The choice of an appropriate organizational design depends on the firm’s: • • • •

Size. Operations and information technology. Environment. Strategy for growth and survival. Organizational Behavior: Chapter 12

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What is organizational design, and how do the designs of small and large firms differ?  Organizational size. – Larger organizations cannot be bigger versions

of their smaller counterparts. • Large firms have a much larger number of direct

personal contacts that must be managed. • Large firms have many core operations

technologies in a wide variety of specialized units. • Large firms are bureaucracies. Organizational Behavior: Chapter 12

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What is organizational design, and how do the designs of small and large firms differ?  The simple design for smaller units and firms. – A configuration involving one or two ways of

specializing individuals and units. – Vertical specialization and control emphasize levels of

supervision without elaborate formal mechanisms. – Appropriate for many smaller firms because of

simplicity, flexibility and responsiveness to a central manager. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Organizational design must be adjusted to fit

technological opportunities and requirements. – Operations technology. • The combination of resources, knowledge, and techniques

that creates a product or service output.

– Information technology. • The combination of machines, artifacts, procedures, and

systems used to gather, store, analyze, and disseminate information for translating it into knowledge. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Thomson’s view of technology. – Technologies classified according to the

degree of specification and degree of interdependence of work units. – Intensive technology. • Uncertainty as to how to produce desired outcomes. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Thomson’s view of technology — cont. – Mediating technology. • Links parties that want to become interdependent.

– Long-linked technology. • The way to produce desired outcomes is known and broken down into a number of sequential steps. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Woodward’s view of technology. – Small-batch production. • The organization tailor makes a variety of custom

products to fit customer specifications.

– Mass production. • The organization produces one or a few products

through an assembly line system. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Woodward’s view of technology — cont. – Continuous-process technology. • The organization produces a few products using

considerable automation.

– The proper matching of structure and

technology is critical to organizational success. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Where operations technology dominates:

the adhocracy. – When managers and employees do not know

the appropriate way to service a client or produce a particular product, an adhocracy might be an appropriate technological design. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  An adhocracy is characterized by: – Few rules, policies, and procedures. – Substantial decentralization. – Shared decision making among members. – Extreme horizontal specialization. – Few levels of management. – Virtually no formal controls. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  An adhocracy is useful when: – The tasks facing the firm vary considerably

and provide many exceptions. – Problems are difficult to define and solve.

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Do the operations and information technology of the firm influence its organizational design?  Organizational impacts of information

technology (IT).

– IT provides a partial substitute for: • Some operations. • Some process controls. • Some impersonal methods of coordination.

– IT provides a capability for transforming

information to knowledge for learning. – IT provides a strategic capability. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Information technology as a substitute. – Initial implementation of IT often displaced routine, highly specified, and repetitious jobs. • Did not alter fundamental character or design of

the organization.

– A second wave of substitution replaced

process controls and informal coordination mechanisms with IT. • Brought some marginal changes in organizational

design.

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Do the operations and information technology of the firm influence its organizational design?  Information technology as a capability for

learning. – IT provides individuals throughout the

organization the information they need to plan, decide, coordinate, and control. – Real impact of adding IT capability occurred when it became broadly available throughout the organization. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  Information technology as a capability for

learning — cont. – Impact of IT. • Individuals are empowered and their jobs are expanded. • Narrowly defined jobs with process controls are replaced by

broadly-defined jobs with output controls. • Provides new information-based coordination devices. • Can help flatten and streamline the organization structure. • Can be linked to total quality management programs.

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Do the operations and information technology of the firm influence its organizational design?  Information technology as a strategic

capability. – IT has spawned e-businesses, thereby creating

new strategic capability. – IT is transforming aging bricks and mortar

firms, thus altering and enhancing strategic capability. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  IT as a strategic capability for e-business. – Many dot.com firms adopted some variation

of adhocracy. – As the dot.coms grew, the adhocracy design became problematic. • Limits on the size of an effective adhocracy. • Actual delivery of products and services rested

more on responsiveness to clients and maintaining efficiency than on continual innovation. Organizational Behavior: Chapter 12

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Do the operations and information technology of the firm influence its organizational design?  IT as a strategic capability for bricks and

mortar firms. – IT’s most profound effect is in firms that rely

on mediating technology. – More firms are recognizing the strategic value

of IT and are using IT as a basis for global operations. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Understanding the environment is important

because an organization is an open system. – General environment. • The set of cultural, economic, legal-political, and educational

conditions found in the areas in which the organization operates.

– Specific environment. • The owners, suppliers, distributors, government agencies,

and competitors with which an organization must interact to grow and survive. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Environmental complexity. – The magnitude of problems and opportunities in the organization’s environment, as reflected in: • The degree of richness. • The degree of interdependence. • The degree of uncertainty.

– More complex environments provide more

problems and opportunities.

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What is the relationship between environmental conditions and organizational design?  Degree of environmental richness. – The environment is richer when: • The economy is growing. • Individuals are improving their education. • Those on whom the organization relies are

prospering.

– The opposite of richness is decline. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Degree of environmental interdependence. – Linkage between environmental independence

and organization design may be subtle and indirect. • Organization may co-opt powerful outsiders • Organization may absorb or buffer demands of

powerful external elements. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Degree of environmental uncertainty. – Uncertainty and volatility can be particularly

damaging to large bureaucracies. – A more organic form is the appropriate

organizational design response to uncertainty and volatility. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Using alliances where environmental

factors dominate. – In high-tech areas and businesses dominated

by IT, interfirm alliances are used. – Interfirm alliances are announced cooperative

agreements or joint ventures between two independent firms. Organizational Behavior: Chapter 12

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What is the relationship between environmental conditions and organizational design?  Interfirm alliances. – Known as informal combines or cartels in

Europe. – Known as keiretsu in Japan. – The network organization is beginning to

evolve in the United States. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Strategic competency can be acquired

through organizational learning. – Organizational learning is the process of

knowledge acquisition, information distribution, information interpretation, and information retention in adapting successfully to changing circumstances. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Knowledge acquisition. – Mimicry. • Is important to new firms. • Provides workable, if not ideal, solutions to many

problems. • Reduces the number of decisions that need to be analyzed separately. • Establishes legitimacy or acceptance and narrows the choices requiring detailed explanation. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Knowledge acquisition — cont. – Experience. • All organizations and managers learn through experience. • Learning by doing. • Learning through structured programs.

– Vicarious learning. • Capturing the lessons of others’ experiences. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Knowledge acquisition — cont. – Individual social learning. • Social learning is achieved through the reciprocal interactions among people, behavior, and the environment. • The individual learns behaviors by observing and imitating others. • Symbolic processes, self-control, and self-efficacy are important in social learning. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Knowledge acquisition — cont. – Scanning. • Involves looking outside the firm and bringing back useful solutions.

– Grafting. • The process of acquiring individuals, units, or firms to bring in useful knowledge.

– Contracting out (or outsourcing). • Asking outsiders to perform a particular function. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Information distribution. – Once information is obtained, managers must establish mechanisms for distributing relevant information. – Key challenges of information distribution in large organizations. • Quickly locating who has needed information. • Quickly locating who needs specific types of

information.

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Information interpretation. – Interpreted information reflects a collective

understanding within the firm. – Interpretation problems. • Self-serving interpretations — managers and employees

seeing what they want to see, rather than seeing what is. • Managerial scripts — a series of well-known routines for

problem identification and alternative generation and analysis that are commonly used by a firm’s managers. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Information interpretation — cont. • Organizational myths — commonly held cause-

effect relationships or assertions that cannot be empirically supported.  There is a single organizational truth.  The presumption of competence.  The denial of tradeoffs.

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Information retention. – Important retention mechanisms. • • • • • • •

Individuals. Organizational culture. Transformation procedures. Formal organizational structures. Physical structures (or ecology). External archives. Internal information technologies. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Deficit cycles of strategic organizational

learning. – A deficit cycle is a pattern of deteriorating

performance that is followed by even further deterioration. – The same problems keep reoccurring, and the firm fails to develop adequate mechanisms for learning. Organizational Behavior: Chapter 12

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Deficit cycles of strategic organizational

learning — cont. – Factors associated with deficit cycles. • Organizational inertia. • Hubris. • Detachment.

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What is strategy, and how do organizational learning and information technology influence strategic competency?  Benefit cycles of strategic organizational

learning.

– A benefit cycle is a pattern of successful

adjustment followed by further improvements. – The same problems do not keep reoccurring as the firm develops adequate mechanisms for learning. – Firms that successfully co-evolve can ride the benefit cycle. Organizational Behavior: Chapter 12

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