Chapter 1: Organizations and Organization Theory

Organization:
● social entity - consists of people
● that is goal directed
● Designed as and deliberately structured and coordinated activity systems
● and linked to the environment (external)

Organizational theory: loose collection of many different theories about organizations

● Macro examination of organization because it analyzes the whole organization as a unit
○ Concerned with people aggregated into departments and organizations
○ Sociology of organizations
○ Patterns of organizations
○ Way of thinking about organizations or ideas about what organizations are and how
they work
● Theories help us to identify, understand, describe, diagnose, manage, design organizations so
that they can better achieve their goals
● Not just facts, but way of thinking about seeing and analyze organizations more accurately
○ The way to see and think about it is based on patterns and regularities in organizational
design and behavior
○ Scholars search for these regularities, define and measure them, then make them
available to the rest of us

Organizational behaviour: the micro approach to organizations because it focuses on the individuals
within organizations as the unit of analysis
● Looks at motivation, leadership style, personality

Meso theory: concerns the integration of both micro and macro levels of analysis (individuals and the
org)

Evolution of Organization Theory and Design

Historical/Classical Perspective
● Modern era of management theory began with classical management perspective in late 19th
and early 20th century
○ Industrial revolution created problems that earlier organizations had not encountered
■ More works on a larger scale, people become interested in how to design and
manage work to increase productivity and help organizations attain maximum
efficiency
● Classic perspective has emphasis on efficiency and organization
● Efficiency is everything
○ Frederick Taylor
○ Scientific management: suggests that decisions about organizations and job design
should be based on
 ■ precise, standard procedures for doing each job
■ Select workers with appropriate abilities
■ Train workers in the standard procedures
■ Carefully plan work
■ Provide wage incentives to increase output
○ Created org assumptions that the role of management is to maintain stability and
efficiency, with top managers doing the thinking and workers doing what they are told
● Getting Organized
○ Took a broader look at the organization
○ Administrative principles: looked at the design and functioning of the organization as a
whole
■ Fayol proposed 14 principles of management, formed the foundation for
modern management practice
■ Contributed to the development of bureaucratic organizations
● Organizations that emphasized designing and managing organizations
on an impersonal, rational basis through certain elements (clearly
defined authority, formal records, uniform application of standard
rules)
● Worked well for Industrial age, BUT FAILS TO CONSIDER THE SOCIAL
CONTEXT AND HUMAN NEEDS

**Scientific management and administrative principles approaches were powerful and gave
organizations fundamental new ideas for establishing high productivity and increase prosperity**

● What about people?

○ Restricted focus because of scientific management
○ Hawthorne studies: major breakthrough in industrial psychology and human relations
of a Chicago electric company
■ Concluded that positive treatment of employees improved their motivation and
productivity
■ Led to revolution in worker treatment
○ Increase competition, especially on global playing field started changing the scales in
1970s and 1980s
■ 1980s produced new organizational cultures that valued lean staff, flexibility,
rapid response to the customer, motivated employees, quality products
● Can Bureaucracies be flexible?
○ Flexible approaches to organizational design become more prevalent, especially with
advances in the internet and big data, globalization, rising education of employees and
growing work life balance
● It All Depends: Key Contingencies
○ problems occur when all organizations are treated as similar
 ■ Not every org is the same, the design and procedures for one may not be the
best for the other
○ Contingency: means that one thing depends on other things
■ For organizations to be effective, there must be a goodness of fit between their
design and various contingency factors
● No one best way, it DEPENDS on organization situations
■ Factors: organization size, technology, environment, goals and strategy, org
culture

Current Challenges
● Quite different from the past, world is rapidly changing more than ever before
● Globalization
○ Markets, technologies and organizations are increasingly interconnected
○ Companies can now more than ever try to partner with foreign organizations to gain a
global advantage (but so can your competitors)
○ Growing interdependence of companies means that the environment is becoming more
complex and competitive
■ Organizations have to learn to cross lines to time, culture, geography in order to
survive
■ Find right structures and processes that help them reap advantages of global
interdependence and minimize disadvantages
● Intense Competition
○ Growing Global interdependence creates new advantages
■ Customers want low prices for quality goods, organizations that cna meet the
demand will win
● Outsourcing often happening a lot more
○ But, companies in all industries are feeling pressure to drive down costs, keep prices
low, meet shifting demands while fighting off all competitors
● Sustainability and Ethics
○ Managers face pressure to dial down their single minded pursuit of financial gain and
pay closer attention to the organizations impact on employees, customers, communities
and environment
■ More companies embracing sustainability philosophy
● Economic development that generates wealth and meets the needs of
the current generation while saving the environment so future
generations can meet their goals swe ll
○ Key goal for organizational growth and development
○ Managers also feeling pressure from government and public to hold organizations and
employees to high ethical and professional standards
 ■ Under more scrutiny from public
● Speed of Responsiveness
○ Hard to respond quickly and decisively to environmental changes, organizational crises,
shifting customer expectations
■ Globalization and advancing technology have accelerated the pace at which
organizations in all industries must roll out new products and services to stay
competitive
○ Today customers also want products and services tailored to their exact needs
■ Companies that relied on mass production and distribution techniques must be
prepared with new computer aided systems to customize products how the
customer wants, and give it to them exactly when they need it
○ Organizational leaders more concerned with the amount of new information, managers
must increase the power of employees and their knowledge to keep the company
competitive
● The Digital Workplace
○ Organizations have been engulfed by information technology that affects how they are
designed and managed
○ Many employees prefer to work on computers and may work in virtual teams
○ Trend toward disintermediation (elimination of middle intermediaries) is affecting
every industry
○ Advances mean that organizational leaders not only need to be technologically savvy
but also are responsible for building web of relationships
● Diversity
○ As organizations increasingly operate on a global playing field, the workforce and
customer base dramatically changing
○ Demographics in Canada shifting
■ Today worker older
■ More asians
○ Growing diversity brings a variety of challenges
■ Maintaining a strong organizational culture that supports diversity, balancing
work and family concerns, coping with conflict because of varying cultures
■ Try to seize everything different diversities have to offer
● Digital Organizations and Big Data Analytics
○ Big Data Analytics: technologies, skills and processes for searching and examining
massive sets of data to uncover hidden patterns and correlations

What is an Organization?
Organization:
● social entity
● that is goal directed
● Designed as and deliberately structured and coordinated activity systems
● and linked to the environment
**exists when people interact with one another to perform essential functions that help attain goals*
● Managers structure and coordinate organizational resources to achieve the organization’s
purpose
○ Strive for greater horizontal coordination ogf work activities, using teams of employees
from different areas to work on projects
● Organization cannot exist without interacting with customers, suppliers, competitors and other
external factors

Types of Organizations
● Size: can be large multinational corporations or small, family owned shops (anywhere in
between)
● Can provide different foods and services
● Can be for profit or nonprofit
○ Profit: managers direct their activities toward earning money for the company
■ Managers try to improve the organization product or service to increase sales
revenues
○ Nonprofits: direct their efforts toward some sort of social impact
■ Financial resources come from government grants, individual and corporation
donations and other activities
■ Focus on keeping organizational costs as low as possible and use high efficiency
of resources
■ Struggle to define organizational effectiveness because they do not have
conventional bottom line, but instead a groad goal
■ Have to deal with a ton of stakeholders and must market their services to
attract not only clients (Cusatomers) but volunteers and donors
■ TRIPLE BOTTOM LINE - Social exnteprises
● Economic, social and environmental
● Social enterprises: a form of community economic development in
which an organization exchanges services and goods in the market as a
means to realizing its social objectives or mission
○ Get support from government, individuals, corporations and
foundations
○ Work toward self-sufficiency while focusing on their social
enterprises

Importance of Organizations - SHAPE OUR LIVES

 ● Also produce goods and services that customers want at competitive prices
● Companies look for innovative ways to produce and distribute desirable goods and services
more efficiently
○ E-business
○ COmputer based manufacturing technologies
● Organizations create a drive for innovation rather than reliance on standard principles and
practices
● Through all of their activities, organizations create value for their owners, customers and
employees
○ Managers analyze which parts of the operation create value and which do not
○ Company can only be profitable when the value it creates is greater than the cost of
resources
● Organizations have to cope with and accommodate today’s challenges of workforce diversity
and growing concerns over social and ethical responsibility, plus find ways to motivate
employees

Perspectives on Organizations
Open Systems
 ● Closed System: one that would not depend on its environment, environment assumed to be
stable and focus on internal efficiency
○ Autonomous, enclosed and sealed off from outside world
○ Focus of early organizational management concepts
■ Scientific management, industrial engineering took environment for granted
and assumed the organization could not be made more effective through
internal design
○ Environment would be stable and would not intervene to cause problems
○ Primary management issue would be to run things efficiently
● Open System: must interact with the environment to survive and adapt to it
○ Both consumes resources and exports resources to the environment
○ Cannot seal itself off, must continually adapt to the environment
○ Primary concern is interactions with organization and environment
○ Can be complex, lots of issues to deal with
■ Internal efficiency
■ Organization has to find and obtain needed resources, interpret and act on
environmental changes, dispose of outputs, control internal activities
○ Rapid changes over past few decades have forced managers to reorient toward open
system mindset and recognize business as part of interconnected system
● To understand the whole organization, must view as a system
○ System: a set of interacting elements that acquires inputs from the envt, transforms
them and discharges outputs to the external environment
■ Need for inputs and outputs reflects dependency on the environment, everyone
needs to work with one another

Open System Example:

● System comprises of several subsystems

○ Subsystems: perform the specific functions required for organizational survival
■ Boundary spanning, production, maintenance, adaptation, management
 ● Production: produces the product and service outputs of the
organization
● Boundary: responsible for exchanges with the external environment
○ Purchasing supplies, marketing products
● Maintenance: maintains the smooth operation and upkeep of the
organization’s physical and human elements
● Adaptive: responsible for organizational change and adaptation
● Management: distinct subsystem responsible for coordination and
directing the other subsystems of organization

Contrast of Organic and Mechanistic Designs

● Organizations can be categorized along a continuum ranging from a mechanistic design to an
organic design
○ Terms created by Burns and Stalker to describe two extremesd of organization design
● Mechanistic design: organization is characterized by machinelike standard rules, procedures
and a clear hierarchy of authority
○ Organizations highly formalized and centralized, most decisions made at the top
○ Main concern is efficiency
● Organic design: organization much looser, free-flowing and adaptive
○ Rules and regulations not written down
○ Hierarchy of authority is looser, not clear cut
○ Decentralized decision making
○ Main concern with learning and adaptation
○ Managers communicate a clear sense of direction and purpose and then empower
employees at all levels
■ Knowledge and information widely shared
5 main differences between organic and mechanistic design
1. Centralized vs Decentralized Structure
a. Pertain to the hierarchical level at which decisions are made
b. Mechanistic design: structure is centralized
i. Centralization: means that decision authority is located near the top of the
organizational hierarchy
1. Knowledge and control of activities are centralized at top, employees
expected to do what they are told
c. Organic design: decentralized
i. Decentralization: decision making authority is pushed down to lower
organization levels
1. People encouraged to take care of problems by working with one
another and customers, use their discretion
2. Specialized Tasks vs Empowered ROles
a. Task: narrowly defined piece of work assigned to a person
i. With mechanistic design, tasks broken down into specialized, separate parts
with each employee performing activities according to specific job description
b. Role: part of dynamic social system
i. Has discretion and responsibility, allowing the person to use their jdugment to
achieve an outcome or goal
ii. Organic design
 3. Formal vs Informal System
a. Mechanistic: numerous rules regulations and standard procedures
i. Formal system in place to manage information, guide communication and
detect deviations from established standards and goals
b. Organic: few rules or formal control systems, informal
4. Vertical vs Horizontal Communication
a. Mechanistic: vertical
i. Up and down the hierarchy
b. Organic: horizontal
i. Greater emphasis on information flowing in all directions within and across
departments and hierarchies
ii. Enables employees to have complete information about the company so they
can act quickly
1. Have more open lines of communication with customers, suppliers and
competitors
5. Hierarchy of Authority vs Collaborative Teamwork
a. Mechanistic: close adherence to vertical hierarchy and chain of command
i. Work activities typically designed for bottom to help the top, little collaboration
ii. Organization controlled thorough vertical hierarchy
b. Organic: emphasized collaborative teamwork rather than hierarchy
i. People work across department and org boundaries to solve problems
ii. Encourages intrapreneurship: so that people across the organizations are
coming up with and promoting new ideas that respond to needs of customers

Organizational Configuration - Mintzberg

● Framework proposed by Mintzberg suggests that every organization has 5 parts
○ Technical Core
■ Includes people who do the basic work of the organization
● People who do work that relates to the main product of the
organization
■ Performs the production subsystem function, actually produces the product or
service
● Primary transformation from inputs to outputs takes place
■ Ex: teachers and classes in university, production department in manufacturing
firm
○ Top management (strategic Apex)
■ Distinct subsystem responsible for directing and coordinating other parts of the
organization
■ Provides direction, strategy, goals and policies for entire organization
○ Middle management
■ Responsible for implementation and coordination at department level
 ■ Middle managers: responsible for mediating between top management and
technical core
○ Technical support
■ Helps organization adapt to the environment
■ Scan the environment for problems, opportunities and technological
developments
■ Responsible for creating innovations in the technical core, helping the
organization change and adapt
○ Administrative support
■ Responsible for the smooth operation and upkeep of the organization (physical
and human elements)
■ HR activities: recruiting and hiring, establishing compensation and benefits,
employee training

**May vary in size and importance depending on the organizations’ environment, technology and other
factors **
● Five parts are interrelated and often serve more than one subsystem function

HUGE CHART ON PAGE 23, NOT SURE IF NEED TO MEMORIZED BY MAY BE IMPORTANT TO KNOW

Dimensions of Organizational Design - help us evaluate an organization

● Dimensions describe specific organizational design traits
● Dimensions fall into two types: structural and contextual
● Structural dimensions: provide labels to describe the internal characteristics of an organization
○ Create a basis for measuring and comparing organizations
● Contextual Dimensions: characterize the whole organization and elements of the environment
○ Size, technology, culture, environment, goals and strategy
○ Describe the organizational setting the influences and shapes the structural dimensions
 ○ Set of overlapping elements that underlie an organizations’ structure and work
processes

Structural Dimensions
Describe the internal characteristics of an organization
● Formalization: the amount of written documentation in the organization
○ Documentation: procedures, job descriptions, regulations and policy manuals
■ Describe behaviour and activities
○ Measured by simply counting the number of pages of documentation within an
organization
■ Universities have high formalization vs a farm
● Specialization/Division of Labour: the degree to which organizational tasks are subdivided into
separate jobs
○ If high, each employee performs only a range of narrow tasks
○ If low, employees perform wide range of tasks
● Hierarchy of authority: who reports to whom and the span of control for each manager
○ When spans of control are narrow, hierarchy tall
○ When spans of control are wide, hierarchy shorter
● Centralization: the hierarchical level that has authority to make a decision
 ○ When decision making kept at top level = centralized
○ When decision making delegated to lower org levels = decentralized
● Professionalism: the level of formal education and training of employees
○ High when employees require long periods of training to hold jobs in the organization
○ Measured as the avg number of years of education of employees
● Personnel ratios: the deployment of people top various functions and departments
○ Administrative ratio, clerical ratio, ratio of indirect to direct labour
○ Personnel ratio measured by dividing the NUMBER OF EMPLOYEES IN A CLASSIFICATION
BY TOTAL NUMBER OF ORG EMPLOYEES

Contextual Dimensions
Characterize the whole organization and elements of the environment
● Organization’s goals and strategies
○ Define the purpose and competitive techniques that set it apart from other
organizations
○ Goals are often written down as an enduring statement of company intent
○ Strategy is a plan of action that describes resource allocation and activities for dealing
with the environment and reaching organization’s goals
● Environment
○ Includes all elements outside the boundary of the organization
■ Industry, government, customers, suppliers, and financial community
● Size
○ The organizations magnitude as reflected in the number of people in the organization
■ Can be as a whole or specific components (Divisions, plants)
● Culture
○ Underlying set of key values, beliefs, understandings and norms shared by the
employees
■ Ethical behaviour, commitment to employees, customer service
■ Provide the glue to hold organization member together
● Technology
○ The tools, techniques and actions used to transform inputs into outputs
■ Concerns how the organization actually produces products and services it
provides for customers and includes things lille
● Flexible manufacturing, advanced information systems, internet

**Contextual and Structural Dimensions are interdependent**

● Dimensions provide a basis for the measurement and analysis of characteristics that cannot be
seen by casual observer, reveal information about organization

Performance and Effectiveness Outcomes

 ● Managers need to adjust structural and contextual dimensions and organizational subsystems to
most effectively and efficiently transform inputs into outputs and provide value
● Efficiency: the amount of resources used to achieve the organization’s goals
○ Based on the quantity of raw materials, money and employees necessary to produce a
given level of output
○ Doing things right
● Effectiveness: broader, the degree to which an organization achieves its goals
○ Doing the right thing
○ To be effective, organizations need clear, focused goals and approrporate strategies for
achieving them
○ Not achieved easily because different people want different things from organization
■ Managers carefully balance the needs and interests of various stakeholders in
setting goals and striving for effectiveness
○ Stakeholder approach: integrates diverse organizational objectives by looking at various
organizational stakeholders and what they want from an organization
■ Stakeholder: any group within or outside the organization that has a stake in
the organization’s performance
● Interests sometimes conflict
● Unreasonable to assume every need can be met
● However, if organization fails to meet the needs of several key
stakeholder groups, probably not being effective at all
**Both improved by technology**
Major Stakeholder and Expectations
Contemporary Organizational Design
● Perspectives of the past do not provide a road map for steering today’s organizations
○ New challenges mean new responses for a dramatically changing world
● Today's organizations and managers may be seen as shifting from a mindset based on
mechanical systems to one based on natural and biological systems
○ Changing beliefs and perception affect how we think about organizations and patterns
of behavior about organizations
● Over 20th century, organizations have become large and complex
○ Environment is not stable at all
● Science of chaos theory suggests that relationships in complex, adaptive systems - including
organizations - are nonlinear and made up of numerous interconnections and divergent choices
that create unintended effects and render the universe unpredictable
○ Recognizes that this randomness and disorder can also create patterns
○ Theory says that organizations should be viewed as more natural systems then
predictable machines
● MAny organizations shifting from strict vertical hierarchies to flexible, decentralized structures
that emphasize horizontal collaboration, widespread information sharing and adaptability
● Businesses and other nonprofit organizations need greater flexibility and adaptability
● Managers redesigning companies toward learning organizations
○ Promotes communication and collaboration so everyone is engaged in identifying and
solving problems
○ Enables organizations to continuously experiment, improve and increase its capability
○ Based on equality, open information, no hierarchy, culture of participation

Efficient Performance vs the Learning Organization - the Shifting Change

● From Vertical to Horizontal Structure
○ Promotes efficient production and in depth skill development, more coordination
○ Vertical hierarchy becomes overloaded in changing environment, little collaboration
● From Routine Tasks to Empowered Roles
○ Employees encouraged to take care of problems by working with one another and with
customers, gives employees both the responsibility and authority to deal with
workplace issues
● From Formal Control Systems to Shared Information
○ Allows company to act quicker, have more flowing information
○ Have open lines of communication with customers, suppliers, competitors
● From Competitive to Collaborative Strategy
○ Organizations become collaborators as well as competitors, experimenting to find the
best way to learn and adapt
● From Rigid to Adaptive Culture
○ Culture should encourage adaptation to external environment
■ Culture in learning org values openness, equality, continuous improvement and
change
 ■ Treat everyone with care and respect to create a climate in which people feel
safe to experiment, take risks and make mistakes
● Emerging Bosless Design Trend
○ Greater flexibility, people work on a more equal basis
○ Knowledge based work where ideas and expertise are the primary sources of value
creation, but need to recognize managers do not have every answer

Levels of Analysis
● Four levels of analysis characterize organizations
○ Human being
○ Group or department
■ Collection of individuals who work together to perform group tasks
○ Organization itself
■ Collection of groups or departments that combine into the total organization
○ Environment or Inteorganizational Set/Community
■ Group of organizations with which a single organization interacts

Chapter 2: The External Environment

THE ENVIRONMENTAL DOMAIN
Organizational environment: all elements that exist outside the boundary of the organization that have
the potential to affect all or part of the organization
● Organization is sensitive to the environment and must respond to it in order to survive
○ Green environment: includes those sectors that may not directly affect the daily
operations of a firm but will indirectly influence it
● Environment of an organization can be understood by analyzing its domain within external
sectors
○ Organization domain: chosen field of action
■ The territory an organization stakes out for itself for its products, services and
markets served
■ Defines the organizations niche and defines those external sectors with which
the organization will interact with to accomplish its goals
■ All elements outside the boundary outside of the organization have the ability
to affect the organization
● Environment comprises several sectors (subdivisions of the external environment that contain
similar elements)
○ 10 sectors can be analyzed for each organization: industry, raw materials, human
resources, financial resources, market, technology, economic conditions, government,
sociocultural and international
● Sectors and a hypothetical organizational domain are further subdivided into
○ Task environment
○ General Environment

Task Environment
● Includes sectors with which the organization interacts directly and that have a direct impact on
the organization’s ability to reach its goals
○ Typically includes
■ Industry
■ Raw materials
■ Market sectors
■ HR
■ international sectors

General Environment
● Includes sectors that might not have a direct impact on the daily operations of a firm but will
indirectly influence it (eventually)
○ Includes
■ Government - consumer protection legislation
■ Sociocultural - shifting demographics
■ Technology
■ Financial resources
 ■ Economic conditions - affect a way company does business
International Context
● International sector can directly affect many organizations
○ International events affect domestic sectors
● Has become extremely important in the last couple of decades
○ Still though some companies fail to consider it
○ Distinction between foreign and domestic operations have become increasingly
irrelevant
● Increasing global interconnections have both positive and negative implications on organizations
○ Growing importance of international sector means that the environment for all
organizations is becoming extremely complex and competitive
■ Every company has a ton of uncertainty in international market

PEST AND SWOT ANALYSIS

Key Notes about SWOT AND PEST
Environmental Uncertainty
● Applies primarily to those sectors that an organization deals with on a regular day to day basis
(task environment)
● To assess uncertainty, each sector of the organization’s task environment can be analyzed along
dimensions like stability or degree of complexity
○ The total amount of uncertainty felt by an organization is the uncertainty accumulated
across environmental sectors
● Organization must cope with uncertainty to be effective
○ Uncertainty increases the risk of failure for organizational responses and makes it
difficult to compute costs and probabilities of decision alternatives
● Determining an organization’s environmental uncertainty means focusing on sectors of the task
environment - the elements that organization deals with regularly
○ Patterns and events occurring in the environment can be described along several
dimensions
■ Whether environment is stable or unstable
■ Homogeneous or heterogeneous
■ Simple of complex
■ Munificence: amount of resources available to support the organization’s
growth
● Whether resources are concentrated or dispersed
■ Degree of consensus in the organization
 ● Two essential ways that environment influences organizations
○ The need for information about the environment
■ Environmental conditions of complexity and change create greater need to
gather information and to respond based on information
○ The need for resources from the environment
■ Organization concerned with scarce material and financial resources, and need
to ensure availability of resources

Simple Complex Dimension

● Concerns environmental complexity (heterogeneity, number and dissimilarity of external
elements relevant to an organization’s operations)
○ The more external factors that regularly influence the organization and the greater
number of organizations in an organization's domain, the greater the complexity
● Complex environment = one which the organization interacts with and is influenced by
numerous diverse and different external elements
○ Ex: Universities, Boeing

Stable-Unstable Dimension
● Refers to whether elements in the environment are dynamic
○ Environmental domain is stable if it remains the same over a period of months or years,
or experiences readily predict change
■ Public utility
○ Unstable conditions, environmental elements shift abruptly and unexpectedly
■ Toy companies
● Instability may occur when competitors react with aggressive moves and countermoves
regarding advertising and new products

Framework
● Simple complex and stable-unstable dimensions combined into a framework for assessing
environmental uncertainty
Key Notes about Framework:
Adapting to Environmental Uncertainty
● Organizations need the right fit between internal structure and external environment
○ Need to look at structure - functional, horizontal, divisional and look aty the
environment framework and compare which works well with each
● Environmental uncertainty represents an important contingency for organizational structure
and internal behaviours
○ Organizations facing greater uncertainty generally have more horizontal structure that
encourages cross functional communication and collaboration to help organization
adapt
○ Organization in certain environment will be managed and controlled different with
respect to positions and departments, integration, planning, responsiveness
● Positions and Departments
○ As uncertainty in external environment increases, so does the number of positions and
departments within the organization = increase in internal complexity
■ Part of being in an open system
○ Each sector in the external environment requires an employee or department to deal
with it
○ Project Manager/Full Time Integrator
○ Task Forces
● Buffering and Boundary Spanning
○ Buffering roles: purpose is to absorb uncertainty from the environment
■ Technical core performs primary production activity of an organization, buffer
departments surround them and exchange materials, resources and money
between the environment and the organization
● Help them perform efficiently → HR, purchasing department
■ New approach by some organizations is trying to drop the buffers because they
believe being well connected to customers and suppliers is more important than
internal efficiency
○ Boundary spanning roles: link and coordinate an organization with key elements in the
external environment
■ Primarily concerned with the exchange of information to..
● Detect and bring into the organization information about changes in the
environment
● Send information into the environment that presents the organization
in a favourable light
■ More uncertainty in the environment, the greater the importance of boundary
spanners
■ New approach to boundary spanning is business intelligence (the high tech
analysis of large amounts of internal and external data to spot patterns and
relationships that might be important)
● Related to another important area of boundary spanning, competitive
intelligence
○ Competitive intelligence: gives top executives systematic way
to collect and analyze public information about rivals and use it
to make better decision
■ Dif up information on competitor new products,
manufacturing costs, training methods
■ Boundary task of sending information into the environment to represent the
organization is used to influence other peoples perception of the organization
● Differentiation and Integration
○ Organizational Differentiation: the differences in cognitive and emotional orientations
among managers in different functional departments, and the difference in formal
structure among these departments
■ When external environment is complex and rapidly changing, organizational
departments become highly specialized to handle the uncertainty in external
environment
● Success in each sector requires special expertise and behaviour
■ One outcome of high differentiation is that coordination among departments
becomes difficult
● More time and resources must be devoted to achieving coordination
when attitudes, goals and work orientation differ so widely
 ○ Integration: the quality of collaboration among departments
■ Formal integrators are required to coordinator departments
■ When environment highly uncertain, frequent changes require more
information processing to achieve horizontal coordination, so integrators
become a necessary addition to the organizational strcuture
■ Integrators = liaison personnel, project managers, coordinators
■ For organizations with very simple, stable environments

● Research by Lawrence and Lorsch concluded that organizations perform better when
the levels of differentiation and integration match the level of uncertainty in the
environment
○ Organizations that performed well in uncertain environments had levels of both
differentiation and integration (and vice)
● Organic Versus Mechanistic Management Processes
○ Another response to environmental uncertainty is the amount of formal structure and
control imposed on employees
■ Mechanistic organizational system: When the external environment was stable,
the internal organization was characterized by rules, procedures and clear
hierarchy (formalized organization)
● More centralized
● Used when environement was stable (simple and complex included)
■ Organic management structure: in rapidly changing environments, the internal
organizations were much looser, free flowing, adaptive
● Rules not written down, people find their way through the system to
figure out what to do, no clear hierarchy
 ● Decentralized decision making
● More fluid and able to continually adapt
● Used when environment is more unstable

● Planning, Forecasting and Responsiveness

○ Whole point of increasing internal integration and shifting to more organic processes is
to enhance the organization’s ability to quickly respond to sudden changes in an
uncertain environment
■ In uncertain environment, planning and environmental forecasting actually
become more important as way for organization to facilitate a coordinated and
speedy response
■ Planning can soften impact of external shifts
● Planners can environmental elements and analyse potential moves b y
other organizations
● Can be extensive, form what if scenarios
○ Scenario building to show pictures of what the future may look
like
● Cannot be a substitute for effective boundary spanning and adequate
internal integration and coordination
○ Organizations most successful in uncertain environment are
those that keep everyone in touch with environment and can
spot opportunities, threats and responses

Framework for Organizational Responses to Uncertainty

● The change and complexity dimensions combined, giving us four levels of uncertainty
Resource Dependence - NUmber one theoryt to explain mergers and
● Resource Dependence: Means that organizations depend on the environment but strive to
acquire control over resources to minimize their dependence
○ Organizations vulnerable if vital resources are controlled by other organizations
■ Try to be as independent as possible, do not want to be at the hand of others
● Gives power to other organizations, can influence managerial decision
making
■ organizations have limited resources, want to have as little reliance as possible
on other organizations
● Sometimes, costs and risks too high so companies team up to share resources and be more
competitive
○ Interorganizational relationships represent a trade off between resources and autonomy
 ■ To keep autonomy, organizations that have abundant resources will tend not to
establish new linkages
■ Organizations that need resources will form linkages

Controlling Environmental Resources

● Organizations maintain balance between linkages with other organizations an down
independence through attempts to modify, manipulate or control other organizations
● Two strategies to manage resources in external environment
○ Establish favourable linkages with key elements in the environment
○ Shape the environmental domain
● WHen organizations sense that valued resources are scarce, they will use strategies rather than
go alone

Establishing Interorganizational Linkages

● Ownership
○ Companies use ownership to establish linkages when they buy part of/controlling
interest in another company (gives them access to resources they didn't have)
○ Get more ownership through merger and acquisitions
■ Acquisition: involves the purchase of one organization by another so that the
buyer assumes control
■ Merger: unification of two or more organizations into a single unit
● Formal Strategic Alliances
○ When there is a high level of complementarity between the business lines, geographical
positions or skills of two companies, the firms go into strategic alliance rather than
ownership
○ Formed through contracts and joint ventures
■ Reduce uncertainty through a legal and binding relationship with another firm
○ Contracts
■ Come in the form of
● license agreements that involve the purchase of the right to use an
assets for a specific time
● Supplier arrangements: contract for the sale of one firm’s output to
another
■ Provide long term security by tying customers and suppliers to specific amounts
and prices
○ Joint Ventures
■ Result in the creation of a new organization that is formally independent of the
parents, althoughbthe parents will have some control
■ Organizations share the risk and cost associated with projects, innovations
● Cooptation, Interlocking DIrectorates
○ Cooptation: occurs when leaders from important sectors in the environment are made
part of an organization
 ■ Influential people are introduced to the needs of the company
○ Interlocking directorate: formal linkage that occurs when a member of the board of
directors of one company sits on the board of another company
■ A communication link between companies, can influence policies and decisions
■ Direct interlock: when one individual is the link between two companies
■ Indirect interlock: occurs when a director of company A and director of
company B are both directors of company C
● Have access to one another but do not have direct influence over their
respective companies
● Executive recruitment from other organizations
● Advertising and Public Relations
○ Influence the taste of consumers

Controlling Environmental Domain

● Change of Domain
○ Ten sectors above are not fixed, can change domains
■ Organizations decide what business it is in, the suppliers, etc
○ Organization may try to find a domain where there is little competition, government
regulation, abundant suppliers, afficient customers
○ Done through Acquisition and divestment
● Political Activity, Regulation
○ Includes techniques to influence government legislation and regulation
○ Political strategy can be used to erect regulatory barriers against new competitors or to
squash unfavourable legislation
■ Corporations also try to influence appointment to agencies of people who are
aligned with their needs
● Trade Associations
○ Much of the work to influence the external environment is accomplished jointly with
other organizations that have similar objectives
 ● Illegitimate activities
○ Unlawful or unethical activities
○ Usually a dire last case scenario

Organization-Environment Integrative Framework

● Two major themes about organization environment relationships
○ The amount of complexity and change in an organization's domain influences the needs
for information and the uncertainty felt within an organization
■ Greater information uncertainty resolved through greater structural flexibility
and assignment of additional departments and boundary roes
■ When uncertainty low, management structures can be more mechanistics,
number of departments and boundary roles can be fewer
○ PErtains to the scarcity of material and financial resources
■ The more dependant an organization is on other organizations for those
resources, more important it is to establish favourable linkages with those other
organizations
 ■ If you are autonomy = low dependence on others

Chapter 3: Strategy, Organizational Design and Effectiveness

Role of Strategic Direction in Organizational Design
● Organization created to achieve some purpose, often decided and carried out by the executives
○ Purpose and direction shapes how the organization is designed and managed
○ Primary responsibility of top management is to determine an organization's goals,
strategy, design and adapt the organization to the changing environment
● Top management role in organization direction, design and effectiveness..
 ● Direction setting process typically begins with assessment of opportunities and threats in
external environment
○ Degree of change, uncertainty and resource availability
● Managers also assess internal strengths and weaknesses to define the company’s distinctive
competence compared with other firms in the industry
○ Look at each department
● Define overall mission and goals based on the correct fit between external opportunities and
internal strengths
○ Specific operational goals or strategies can be formulated to define how the
organization is to accomplish its overall mission
● Organizational design: the administrative and execution of the strategic plan
○ Implemented through decisions about structural form
■ Choices about control systems, if they are a learning organization, types of HR
policies and culture
■ Determines organizational success
● Choices top managers make about goals, strategies and organizational design have a large
impact on organizational effectiveness
○ Goals are not fixed, must be able to adapt

Organizational Purpose
● Organizations created and continued in order to accomplish something (goal oriented)
● 3 types of goals
○ Official
○ Operative
 ○ Informal - Culture
● Possible business goals
○ Provide good or service
○ Earn money for owners or shareholders
○ Contribute to social goods
● Mission - Official Goals
○ Mission: the overall goal for an organization, the reason for existence
○ Describes the organization’s vision, its shared values and beliefs, reason for being
○ Sometimes called the official goals
■ Official goals: the formally stated definition of business scope and outcomes the
organization is trying to achieve
■ Typically define business operations and may focus on values, markets or
customers that distinguish the organization
○ Often written in policy manual or annual report
○ DIFFERENT FROM VISION
■ Vision captures the core ideology and the envisioned future for an organization
■ Core ideology describes the values of the organization
■ Envisioned future = what the organization wants to become
○ Mission Statements
■ Serve as a communication tool
■ Communicates to current and prospective employees, customers, investors,
suppliers and competitors what organization stands for and what is trying to
achieve
● Communciates legitimacy to stakeholders who identify with stated
purpose
■ Not very specific, relatively short
● Concise to show purpose, little interpretation
■ Needs to fit with the organization’s strategic plan and operations
■ Good mission statement
● No financial goals
● Identify org values or beliefs
● Define org purpose
● Highlight distinct advantage
● Focused on stakeholders and means to satisfy them
● Brief
● Operative Goals
○ Operative Goals: designate the ends sought through the actual operating procedures of
the organization and explain what the organization is actually trying to do
■ Describe specific measurable outcomes, focus on short run
■ Primary tasks they must perform
● Overall performance, boundary spanning, maintenance
● Provide direction for day to day decisions
 ■ Actual specific measurable outcomes
■ Quantify the official goals
○ Overall performance
■ Profitability reflects the overall performance of for profit organizations
● May be in terms of net income, EPS, ROI
● Other goals are growth or output volume
○ Growth comes from increase in sales or profits over time
■ Different ‘performance indicators’ for nonprofits
○ Resources
■ Goals pertain to the acquisition of needed material and financial resources from
the environment
● Obtaining financing for constructing new plants, finding less expensive
raw materials, etc
○ Market
■ Relate to market share or market standing desired by the organization
■ Responsibility of marketing, sales and advertising departments
○ Employee development
■ The training, promotion and safety and growth of employees
■ Strong ED goals are one of the characteristics common to organizations
○ Innovation and Change
■ Innovation Goals pertain to internal flexibility and readiness to adapt to
unexpected changes in the environment
● Often defined in terms of the development of specific new services,
products or production processes
○ Productivity
■ Concern the amount of output achieved from available resources
● Describe the amount of resource inputs required to reach desired
outputs
● Stated in terms of cost for unit of production, units produced per
employees, resource cost by employee
○ Successful ORGANIZATIONS BALANCE A SET OF OPERATIVE GOALS
■ More companies using triple bottom line system, looking at profits but also
environmental and social performance

Importance of Goals
● Officials goals and mission statements describe a value system for the organization
○ Legitimize the organization
● Operative goals represent the primary tasks of the organization
○ More explicit and well defined
○ Provide employees with sense of direction (know what they are working for, helps
motivate them toward accomplishment)
Framework for Selecting Strategy and Design
Strategy: a plan for interacting with the competitive environment to achieve organizational goals
● Managers have to select specific strategy and design options to help organization achieve
purpose and goals within its competitive strategies
● Essence of forming strategies is choosing whether the organization will perform different
activities than competitors or do relatively same thing
● Goals: define where the organization wants to go
○ Strategies are how they get there
● 3 main strategic models we look at
○ Porter Competitive Strategies
○ Miles and Snow strategy typology
○ Kim and Mauborgne’s blue ocean strategy

Porter’s Competitive Strategies

● Porter introduced three competitive strategies

○ Low cost leadership
○ Differentiation
○ Focus
● To use model..
○ Managers evaluate two factors (competitive advantage and competitive scope)
■ Competitive advantage - managers determine whether to compete through
lower cost or ability to offer unique products and services at premium prices
■ Managers then determine whether organization competes on broad or narrow
scope
 ● Broad scope - many customer segments
● Narrow scope - compete in selected customer segment/group of
segments
● Criticized for being too generic and of menial use to managers, does not account for
organizations that are successful even though they are not pursuing one particular strategy
● Focus Strategy
○ The organization concentrates on a specific market/buyer group
○ Further divided into
■ Focused low cost leadership
■ Focused differentiation
○ COmpany will try to achieve either low cost advantage or differentiation advantage
within narrow defined market
● Differentiation
○ Organizations attempt to distinguish their products or services from others in the
industry
■ Uses advertising, distinct product features, exceptional service
○ Can reduce rivalry with competitors and fight off threat of substitutes because they gain
customer loyalty
○ Companies need strong marketing abilities and creative employees who are given the
time and resources to seek innovations
● Low Cost Leadership
○ Tries to increase market share by emphasizing low cost compared to competitors
○ Organization aggressively seeks efficient facilities, pursues cost reductions, use tight
controls to produce products/services more efficiently than competitors
○ Concerned with stability rather than taking risks, keep market share
○ Means they can undercut competitor prices and still offer comparable quality and earn
reasonable profit

Miles and Snow’s Strategy Typology

● Based on the idea that managers seek to formulate strategies that will be congruent with the
external environment
● 4 main strategies
○ Prospector, Defender, Analyzer and Reactor
● Has been widely used and researchers tested its validity in a variety of organizations
○ Have found some support for the effectiveness of this typology for organization
managers in real world situations
● Prospector
○ Strategy is innovate, take risks, seek out new opportunities and grow
○ Suited to a dynamic, growing environment, where creativity is more important than
efficiency
○ Ex: Nike
● Defender
 ○ Opposite of the prospector
○ Rather than taking risks and seeking out new opportunities, strategy concerned with
stability
○ Seeks to hold on to current customers but it neither innovates or seeks to grow
○ Concerned with internal efficiency and control to produce reliable, high quality products
for steady customers
○ Can be successful when the organization exists in a declining industry or stable
environment
○ Ex: HBC
● Analyzer
○ Tries to maintain stable business while innovating on the periphery
○ Midway between prospector and defender
○ Tries to balance efficient production for current product lines with the creative
development of new product lines
● Reactor
○ Not really a strategy, they respond to environmental threats and opportunities in an ad
hoc fashion
○ Top management has not defined a long range plan or given organization explicit
mission or goal, so the organization takes whatever actions to seek immediate needs
○ Can be successful but also fail

Kim and Mauborgne’s Blue Ocean Strategy

 ● Differs from the first two as it does not focus on how to outpace rivals, beat the competition
● Looks at and recommends that organizations look to create a new market where there is less
competition
● 3 main components
○ Start with the right perspective
■ Shift in perspective means recognizing that managers can industry conditions
and create or expand new markets
● Ex: Square
○ Apply the right set of tools
■ Provide a set of marketing creating tools like the three tiers of noncustomers
which helps managers identify various levels of people who do not currently
patronize the industry in which the company operates
○ USe a Humanistic process to create an involved workforce
■ Recognize and harness the humanity within people
● Engagement - engage them in process
● Explanation - give explanations and a clear account
● Reassurance

How Strategies Affect Organizational Design

● Choice of strategy affects internal organization characteristics
○ Need to support the firm’s competitive approach

Organizational Design Outcomes of Strategy

Other Factors Affecting Organizational Design

● Strategy
 ● Environment
● Technology
● Size/Life Cycle
● Culture

**Managers need to design organizations that fit the contingency factors**

Chapter 4: Fundamentals of Organizational Structure

● Organizations use various structural alternatives to help them achieve their purpose and goals
○ Every firm needs structural transformation in order to deal with new challenges, or
reflect new strategies, adapt to environment
● Organizational Structure: the division of labour as well as the patterns of coordination,
communication, workflow and formal power that direct organizational activities
○ Components of structure
■ Formal reporting relationships
● Level of hierarchy, span of control
○ Grouping of individuals and departments
■ Departments within the organization
○ Systems design
■ Communication, coordination and integration
● First two elements above are structural framework (vertical hierarchy)
● Third element is about the pattern of interactions among organizational employees
● Ideal structure encourages employees to provide horizontal information and coordination when
needed
● Departmentalization: organizational chart
○ Specify how employees and their activities are grouped together
○ Fundamental strategy for coordinating organizational activities
■ Establishes the chain of command
■ Encourages specific people and work units to coordinate through informal
communications
● Formal organizational structure reflected in the organizational chart
○ Organizational chart: visual representation of a whole set of underlying activities and
processes in an organization at a particular point in time
○ Can be useful in understanding how an organization works
○ Shows the various parts of the organization, how they are interrelated and how each
position fits into the whole
● Over the years, organizations developed other structural designs aimed at increasing horizontal
coordination and communication, encouraging adaptation to external changes

Information Processing Perspective on Structure

 ● Organization should be designed to provide both vertical and horizontal information flow as
necessary to accomplish the organization’s overall goals
○ If structure does not fit the information requirements of the organization, people will
either have too little information or waste time looking at information that isnt really
vital
● Organizations can choose whether to orient toward a
○ more traditional organization designed for efficiency - emphasizing vertical
communication, control
■ Associated with specialized tasks, strict hierarchy of authority, centralized
decision making, few teams
○ more contemporary learning organization - emphasizing horizontal communication and
coordination
■ Shared tasks, horizontal hierarchy, few rules, decentralized decision making

Vertical Information Linkages

● Vertical linkages: used to coordinate activities between the top and bottom of an organization
○ Designed primarily for control of the organization
○ Facilitates communication among employees and departments to achieve organization's
overall task
○ Linkage: the extent of communication and coordination among organizational elements
○ Hierarchical Referral
■ Chain of command, if a problem arises that employees don't know how to solve
it can be referred up to the next level of hierarchy
● When problem solved, answer passed down to lower levels
○ Rules and Plans
 ■ Rule can be established so employees know how to respond without
communicating directly with their manager
■ Rules provide standard information source enabling employees to be
coordinated without actually communicating about every task
■ Plan provides info to employees, like the budget
○ Vertical Information Systems
■ VIS: another strategy for increasing vertical information capacity
● Reports and memos
● Includes periodic reports, written information and computer based
communications distributed to managers
● Make communication up and down the hierarchy more efficient
● WITHIN THE DEPARTMENT
○ Decision making will be fast, very efficient
■ But quality will not be as great
● Horizontal Linkage: the amount of communication and coordination horizontally across
corporations
○ Leads to higher quality decision making and more innovation, creativity
○ Overcomes barriers between departments and provides opportunities for coordination
among employees to achieve unity of effort and organizational objectives
○ Often not drawn on chart, but part of the organizational structure
○ Devices used to improve horizontal coordination and information flow
■ Information Systems
● Enable managers or frontline workers throughout the organization to
routinely exchange information about problems, opportunities,
activities, decisions on a computer
● ACROSS DEPARTMENTS
■ Direct Contact
● Direct contact between managers or employees affected by a problem
● One way to promote is to create a special liaison role
○ Liaison person: located in one department but has the
responsibility for communicating and achieving coordination
with another department
■ Usually on link 2 departments
● Another way to promote is to locate people close together so they have
contact on regular basis
■ Task Forces
● Temporary committee composed of representatives from each
organizational unit affected by a problem
● Effective horizontal linkage device for temporary issues
○ Solve problems by direct horizontal coordination and reduce the
information load on the vertical hierarchy
○ Usually disbanded after tasks are accomplished
■ Full TIme Integrator
● Create a full time position or department solely for the purpose of
coordination
○ Usually title of product or project manager
● Does not report to one of the functional departments being
coordinated, located outside the departments and has responsibility to
coordinate several departments
● Can also be responsible for an innovation or change project
○ coordinating the design, financing and marketing of a new
product
● Need excellent people skills, has to use expertise and persuasion to
achieve coordination
○ Spans the boundary between departments and must be able to
get people together, maintain their trust, confront problems,
resolve conflicts and disputes in the interest of the organization
■ Teams
● Permanent task forces and are used in conjunction with full time
integrator
● Strongest horizontal linkage mechanism
○ Used when activities among departments require strong
coordination over long period of time
● Virtual Teams: one that is made up of organizationally or geographically
dispersed members who are linked primarily through advanced
information and communication technology (internet)
 ● Horizontal devices represent alternatives that managers can select to increase horizontal
collaboration and coordination
○ Higher level decisions provide more horizontal information capacity, but the cost to the
organization in terms of time and money is more
○ Low horizontal coordination - departments out of synch
● Highest level of horizontal coordination is relational coordination
○ Relational coordination: frequent, timely, problem solving communication carried out
through relationships of shares goals, knowledge and mutual respect
■ Part of the very fabric and culture of organization, not justa device
■ In organization with high level of relational coordination, people share
information freelt across department boundaries, people interact on continuous
basis to share knowledge and solve problems
■ Coordination carried out through a web of ongoing positive relationships rather
than formal coordination roles or mechanisms
■ To build, need active managers to invest in the people, build trust and credibility

Organizational Design Alternatives

● Overall design of organizatiomnal structure has three elements
○ Required work activities
■ Departments created to perform tasks considered strategically important to the
company
■ As organizations grow larger and more complex, more and more functions need
to be performed
 ■ Organizations define new departments or divisions as a way to accomplish tasks
deemed valuable by the organization
○ Reporting Relationships
■ The chain of command, are represented by vertical lines on an organization
chart
■ Chain of command should be an unbroken line of authority that links all persons
in an organization and shows who reports to whom
○ Departmental grouping options
■ Affects employees because they share a common supervisor and common
resources, are jointly responsible for performance and tend to identify and
collaborate with one another
■ Functional grouping: places together employees who perform similar functions
or work processes or who bring similar knowledge and skills to bear
■ Divisional grouping: means people are organized according to what the
organization produces
■ Multifocused grouping: means an organization embraces two structural
grouping alternatives simultaneously
● Often called the matrix design
● An organization may need to group by function and product division
simultaneously or by product division, geography
■ Horizontal grouping: means employees are organized around core work
processes, the end to end work, information and material flows that provide
value directly to customers
● All people who work on a core process are brought together in a group
rather than being separated into functional departments
■ Virtual network grouping: the organization is loosely connected cluster of
separate components
● Departments are separate organizatios that are electronically connected
for the sharing of information and completion of tasks
● Departments can be spread all over the world rather than one location

Functional, Divisional, and Geographical Designs

Functional Structure
● Activities are grouped together by common function from the bottom to the top of the
organization
● places together employees who perform similar functions or work processes or who bring
similar knowledge and skills to bear
● All human knowledge and skills for specific activities are consolidated, providing a valuable
depth of knowledge for the organization
● Structure is most effective when in depth expertise is critical to meeting the organizational
goals, when the organization needs to be controlled and coordinated through the vertical
hierarchy and when efficiency is important
 ● Good if there is little need for horizontal coordination
● Strength is that it promotes economy of scale within functions
○ Economy of scale occurs when all the employees are located in the same place and can
share facilities
● Promotes in depth skill development of employees
○ Allows organization to accomplish functional goals
● Main weakness is a slow response to environmental changes that require coordination across
departments
○ Decisions may pile up, so vertical hierarchy may be overloaded
○ Poor horizontal coordination
○ Innovation is slow because of poor coordination and each employee has a restricted
view of overall goals

Functional Structure with Horizontal Linkages

● Very few successful companies can maintain a strictly functional structure
● Organizations compensate for the vertical functional hierarchy by installing horizontal linkages
○ Use information systems, direct contact between departments, full integrators, task
forces, teams

Divisional Structure
● Generic term for what is sometimes called a product structure or strategic business units
● Divisions can be organized according to individual products, services, product groups, major
projects or programs, divisions, businesses
● Divisional grouping: means people are organized according to what the organization produces
● Distinctive feature is that grouping is based on organizational outputs
● Difference between divisional and functional is
○ the functional structure can be redesigned into separate product groups, and each
group contains the functional departments of R&d, manufacturing, accounting,
marketing
■ Coordination across functional departments within each product group is
maximized
■ Centralized because it forces decisions all the way to the top before problem
affecting several functions
 ○ Divisional structure promotes flexibility and change because each unit is smaller and can
adapt to the needs of its environment
■ Excellent for achieving coordination across functional departments
■ Decentralizes decision making, because lines of authority converge at a lower
level in the hierarchy
■ Works well when organizations can no longer be adequately controlled throiug
the traditional vertical hierarchy and when goals are oriented toward
adaptation and change and when they have multiple products and services
■ Reduced, hybrid divisional structure has several strengths is suited to fast
change in unstable environment and provides high product visibility
■ Disadvantage is that the organization loses economies of scale

Geographical Structure
● Grouping the organization’s users or customers via geography, each region of the country may
have distinct tastes and needs
● Each geographic unit includes all functions required to produce and to market products or
services in that region
● For multinational corporations, self contained units are created for different countries and parts
of the world
● Strengths and Weaknesses - similar to divisional
○ Organization can adapt to specific needs of its own region
○ EMployees identify with regional goals rather than national goals
● Horizontal coordination within a region is emphasized rather than linkages across regions or to
the national office

Matrix Structure
● Sometimes an organization's structure needs to be multi focused in that both product and
function or product and geography are emphasized at the same time
● Matrix can be used when both technical expertise and product innovation and change are
important for meeting organizational goals
● The answer when organizations find that the functional, divisional, and geographical structures
combined with horizontal linkage mechanisms will not work
● Strong form of horizontal linkage
● Unique characteristic of the matrix organization is that both the product division and functional
structures (horizontal and vertical) are implemented simultaneously
● Similar to the use of full time integrators and product managers except that in the product
managers (horizontal) are given formal authority equal to that of the functional managers
(vertical)
Conditions of the Matrix
● Condition 1: pressure exists to share scarce resources across product lines
○ Organization typically medium sized and has modern number of product lines
○ Feels pressure for the share and flexible use of people and equipment across those
products
● Condition 2: environmental pressure exists for two or more critical outputs like in depth
technical knowledge (functional structure) and frequent new products (divisional structure)
○ Dual pressure means a balance of power between the functional and product sides of
the organization
○ Dual authority structure is needed to maintain that balance
● Condition 3: environmental domain of the organization is both complex and unstable
○ Frequent external changes and high interdependence between departments require a
large amount of coordination and information processing in both horizontal and vertical
directions

**Under these conditions, the vertical and horizontal lines of authority must be given equal recognition
● Dual authority structure is created so the balance of power between them is equal
 ● Matrix formalizes horizontal teams along with the traditional vertical hierarchy and tries to give
equal balance to both
○ Many organizations found a balanced matrix difficult to implement and maintain
because one side of authority often dominates
● Functional matrix: the functional bosses have primary authority and the project or product
managers simply coordinate product activities
● Product matrix: the project or product managers have primary authority and functional
managers simply assign technical personnel to projects and provide advisory expertise as
needed

Strengths and Weaknesses of the Matrix

● Matrix structure when environmental change is high and when goals reflect a dual requirement
(both product and functional goals)
● Dual authority structure facilitates communication and coordination to cope with rapid
environmental change and enables an equal balance between product and functional bosses
● Tends to work best in organizations with moderate size and a few product lines
● Strength of the matrix is that it enables an organization to meet dual demands from customers
in the environment
○ Resources (people, equipment) can be flexibly allocated across different products, and
the organization can adapt to changing external environment
○ Provides opportunity for employees to acquire either functional or general management
skills, depending on their interests
● Disadvantage of the matrix is that employees experience dual authority, reporting to two bosses
and sometimes juggling conflicting demand
○ Employees in matrix need excellent interpersonal and conflict resolution skills, may
need special training

Horizontal Structure
Horizontal structure: organizes employees around core processes
● Shift toward horizontal structure during reengineering procedure
● Reengineering: the redesign of a vertical organization along its horizontal workflows and
processes
○ Changes the way managers think about how work is done
 ■ Rather than focusing on narrow jobs into functional departments, managers
emphasize core processes that cut horizontally across the organization and
involve teams of employees worrying toegtehr to service customers
○ Process: an organized group of related tasks and activities that work together to
transform inputs into outputs that create value for customers
● When company is reengineered to a horizontal structure, all the people throughout the
organization who work on a particular process have easy access to one another so they can
communicate and coordinate their efforts
● Virtually eliminates both the vertical hierarchy and old department boundaries
○ Improved by technological processes, internet based integration and coordination
● Customers expect faster and better service, and employees want opportunities to use their
minds, learn new skills and assume greater responsibility
○ Organizations experimented with horizontal mechanisms like cross functional teams to
achieve coordination across departments or task forces to accomplish projects

Characteristics of Company Reengineered into Horizontal Structure

● Structure is c reated across c ross functional core processes rather than tasks, functions or
geography
○ Boundaries between departments eliminated
● Self directed teams, not individuals are the basis of organizational design and performance
● Process owners have responsibility for each core process in its entirety
● People on the team are given the skills, tools, motivation and authority to make decisions
central to the team’s performance
○ Team members cross trained to perform one anothers jobs and the combined skills are
sufficient to complete a major organizational task
● Teams have the freedom to think creatively and respond flexibly to new challenges that arise
● Customers drive the horizontal corporation
○ Effectiveness is measured by end of process performance objectives (based on the goal
of bringing value to the customer), customer satisfaction, employee satisfaction and
financial contributions
● Culture is one of openness, trust, collaboration that focuses on continuous improvement
Strengths and Weaknesses of Horizontal Structure

Virtual Network Structure

● Extends the concept of horizontal coordination and collaboration beyond the boundaries of the
traditional organization
● Outsourcing: means to contract out to certain corporate functions (manufacturing, IT, credit
processing)
○ Advantages are operational and strategic nature
■ Operational advantages usually provide for short term trouble avoidance, while
strategic advantages offer long term contribution in terms of maximizing
opportunities
● Virtual Network Structure: sometimes called a modular structure, the firm subcontracts many
or most of its major processes to separate companies and coordinates their activities from a
small headquarters organization

How the Structure Works

● May be viewed as a central hub surrounded by a network of outside specialists
○ Services like accounting, design, manufacturing are outsourced to separate companies
that are connected electronically to a central office
○ Organizational partners use internet to exchange data and information rapidly and
smoothly
○ Incorporates a free market style to replace the traditional vertical hierarchy
● Hub maintains control over processes in which it has world class or difficult to imitate
capabilities and then transfers over activities to other organizations
○ Partner organizations organize and accomplish their work using their own ideas, assets
and tools
● Idea is that the firm can concentrate on what they do best and contract everything else to
companies with distinctive competence in those areas (do more with less)
Strengths and Weaknesses

Holacracy Team Structure

● Most recent approach to organizational design involving a shift toward self management
● The holacracy team structure is an extreme organic design composed of fluid teams and no
managers
○ Few informal leaders may emerge within circles based on who has expertise with the
matter at hand
● Each individual performs a variety of roles and probably has a role on three to four teams
● Trend toward self management reflects a fundamental mind shift in the way human
organizations and management are viewed
○ Complete self management goes beyond employee empowerment,t flatter
organizations, distributed decision making
○ All organization members are personally responsible for planning their own work,
coordinating their actions with others, developing own personal relationships, getting
needed resources and taking corrective action
● Key ideas for basis of philosophy
○ People are generally happier when they have control over their own life and work
○ Does not make sense to give decision making authority to the person furthest away
from the actual work
○ Traditional hierarchical model is recipe for slow death
○ Undeniable link between freedom and economic prosperity
● In the design, circles (teams) are the basic building block of the structure
○ Each circle shares a common purpose and has decision making authority over to do its
work and achieve its purpose
 ■ Sub circles may be created for tasks that do not require input from all team
members
○ Within each circle, individual role jointly negotiated with other members regarding the
tasks needed to accomplish the circles purpose
■ People DO NOT have job descriptions
● Structure is used primarily in small to medium sized organizations that face a need for
continuously learning and innovation to meet rapidly changing custom needs

Characteristics of Holacracy Team Structure

● Teams (circles) rather than idnividuals, tasks, departments or other units are the fundamental
building blocks of an organization
● Individual roles collectively defined and assigned within the various teams as needed to
accomplish the work
● Teams evolve, form and disband as conditions change
○ As there are new opportunities, problems, goals organizational members there are new
teams or circles created
● Teams design and govern themselves
● LEadership is distributed and contextual
○ No one is an assigned manager

Strengths and Weaknesses of the Holacracy Team Structure

Hybrid Structures
● Combines thew characteristics of various approaches tailored to specific strategic needs
○ Combine the characteristics of functional, divisional, geographical, horizontal or network
structures to take advantage of their strengths and avoid some of their weaknesses
● Tend to be used in rapidly changing environments because they offer greater flexibility
● One main kind is one that combines functional and divisional structures
○ Functions that are important to each product or market are decentralized to the self
contained units
○ However, some functions that are relatively stable and require economies of scale and
in depth specialization are also centralized at headquarters

Example: Ford
Applications of Structural Design
● Each type of structure is applied in different situations and meets different needs
○ Design follows purpose
● Structural Alignment
○ Most important decision managers make about structural design is to find the right
balance between vertical control and horizontal coordination (depends on needs of
organizations)
■ Vertical goals associated with goals of efficiency and stability
■ Horizontal coordination - learning, innovation and flexibility
○ Functional structure
■ Appropriate when the organization needs to be coordinated through the
vertical hierarchy and when efficiency is important for meeting organizational
goals
■ Uses task specialization and strict chain of command to gain efficient use of
scarce resources
○ Horizontal structure
■ Appropriate when the organization has a high need for coordination among
functions to achieve innovation and promote learning
■ Enables organizations to differentiate themselves and respond quickly to
changes, but at the expense of efficient resource use
○ Virtual Structure
■ Offers even greater flexibility and potential for rapid response by allowing the
organization to add or subtract pieces as needed to adapt and meet changing
needs of environment and marketplace
○ Web of Inclusion
■ More circular than hierarchical and builds from the centre out, while creating
new connections
■ Allows organizations to draw on the widest possible best talent (huge
advantage)
■ Allow resources to flow when needed
Symptoms of Structural Deficiency
● When organizational structure is out of alignment with organizational needs, one or more of the
symptoms appear
● Decision making is delayed or lacking in quality
○ Decision makers may be overloaded because the hierarchy funnels too many problems
and decisions to them
■ Information linkages in either the vertical or horizontal direction may be
inadequate to ensure decision quality
● THe organization does not respond innovatively to a changing environment
○ Lack of innovation is because departments are not coordinate horizontally
○ Organizational structure also has to specify departmental responsibilities that include
environmental scanning and innovation
● Employee performance declines and goals are not being met because structure does not
provide clear goals, responsibilities and mechanisms for coordination
● Too much conflict is evident

New Directions
● Images of Organizations
○ Gareth Morgan provides 8 images or metaphors through which we can understand
organizations
■ Argues that managers need to look at organizations through different images so
they can get a rich and accurate understanding of their organizations to make
more informed deicisons
○ Machines, organisms, brains, cultures, political systems, psychic prisons, flux and
transformation and instruments of domination
 ● Boundaryless Organizations
○ Term coined by Jack Welch
○ Welch believed that boundaries in organizations prevent organizations from achieving
high levels of success as organizations become consumed by turf wars
○ 4 types of boundaries
■ Vertical.hierarchical
■ Horizontal/Interunit
■ Geographiuc
■ External/Interorganizational
○ Boundaryless organizations learn to permeate their boundaries so they can be more
flexible and responsive to their stakeholders

● Humanocracy
○ Hamel and Zanini in 2020 present 7 principles to create structures that are human
centric
○ Power of ownership, power of the market, power of meritocracy, power of community,
power of openness, power of experimentation and power of paradox

Chapter 5: Designing Organizations for Social and Environmental Purpose

● Social enterprises typically founded with the purpose of addressing a societal problem while at
the same time succeeding as a business in order to finance the social mission
● Hybrid organization: pursue both profit and social missions within a single organization
○ Tries to be financially self sufficient while at the same time spending its profits to create
a positive impact on a social or environmental problem (hard to balance, much easier
just to focus on one)
■ Doing both presents a challenge because one goal may take priority over
another
○ Embedded or Intertwined view
○ Face the risk of mission drift
■ Giving less importance to their social mission and more importance to
generating revenue and profit
● Care more about value to paying customers rather than non paying
social beneficiaries
● Disparate view
■ Consequence for social enterprises is severe because it threatens their reason
for existence
■ When hybrid loses sight of social mission, it will fail to achieve the goal of
delivering social value that address a problem
■ Need to give equal balance to social and commercial activities
● Organizational approaches for Societal Benefit

● Why do social vs economic missions produce internal conflict…

○ Logic: a person’s basic assumptions, values and beliefs that they think guide an
organization’s behaviour
 ■ Give meaning to people's daily lives
■ People usually believe their logic is correct and should take precedence over
other logics
■ Peoples logic reflects beliefs and values that they want to see in their work
practices and organizational purposes
● Differences in logics can and do polarize people
● In case of hybrid organizations, two main logics
○ Commercial Profit logic
■ Focuses on selling products and services for economic gain or profit
■ Social mission is a means, not a goal
■ Hierarchical control valued
■ Major decisions around goals and operations made to serve shareholders
■ Legitimacy of company achieved by technical and managerial expertise to beat
their competition
■ Ex:
■ Tim’s donating money if you donate is an example, disparate view because they
only give once they have it
○ Social Welfare Logic
■ Selling products and services are a mechanism for responding to societal needs
in the organization’s goal
■ Economic resources is a means, not a goal
■ Democratic governance valued
■ High participation and representation of local stakeholders
■ Legitimacy achieved through contribution and commitment to social mission
■ Ex: hearing aids, medical devices
○ HAVE TO BALANCE AND COMPROMISE IN HYBRID ORGANIZATIONS

Designs for Achieving Dual Commercial and Social Welfare Goals

● Various structures and techniques can be used for organizing people who old opposing mindsets
and values about an organization’s purpose
● Use Separate Departments
○ Integrated structure: Managers can choose to put everyone in a single department
within which all employees actively work toward both social welfare and profit goals
■ If the work is a series of tasks producing a single outcome, then integrating
employees into single unit can be effective while also achieving greater
efficiency
○ Separate departments: organize hybrid employees into a structure with two separate
departments depending on the nature of the workflow and clients
■ When the work can be divided readily into separate parts, each of which
requires a different value logic, then separate departments are more effective
● Hire Employees with Balanced Mindset
● Set Clear Goals and Measure Effectiveness
 ○ Setting clearly defined goals and measures of effectiveness is an important
organizational tool
■ Goals communicate what matters and measurement indicates what is working
and what is not
■ Poor goal setting and unsuitable performance measures can throw the
organization out of whack
○ Relatively easy to measure financial side of the organization
■ Sales, revenue growth, ROA, are readily accessible and widely used metrics
○ Measuring social impact more challenging
■ Precise goals more difficult to define and quantitative data harder to obtain
■ Need more work and research to set goals and measure their accomplishment
● Collaborate with Like Minded Organizations
○ Organizations tend to develop institutional similarity with their significant partners in
the same organizational population or value chain
○ Manty of the companies pursuing dual missions are still on the periphery to gain market
share
■ Face subtle pressure to mimic the systems and values of the companies with
which they do significant business
■ Hybrid organizational leaders need a clear focus on whom they work with
● Suppliers, customers, employees
● Keep social mission alive in minds of employees
○ If the leaders keep the social mission alive in every employee’s mind, they can minimize
the potential conflicts between employees with different logics
■ Many employees looking for jobs where they feel work is meaningful and goes
beyond just making money
● Choose the Correct Legal Framework
○ Benefit corporation: purpose is to create public benefit in terms of a positive material
impact on society and the environment
■ Not certified B corps
● Certified B Corps: companies that have been certified by the non profit
B Lab to have met rigorous standards of social and environmental
performance, accountability and transparency
● To become B corps, assessed on 5 main criteria
○ Community
○ Governance
○ Workers
○ Customers
○ The environment
● Must be evaluated periodically to maintain their certification
● Corporate Social Responsibility
 ○ Corporate Social Responsibility: management’s efforts to make choices and take action
so that the organization contributes to the welfare and interest of all organizational
stakeholders
■ Customers, shareholders, employees, community and broader society
○ Companies now can be assessed and measured on their performance along ESG
dimensions (environmental, social and governance)
■ ESG scores can range from 0 to 100 based on items…
● Environment
○ Water use, fuel management
● Social capital
○ Customer privacy, community development
● Human capital
○ Diversity and inclusion, compensation and benefits
● Business innovation
○ Product societal value, quality and safety
● Leadership and governance
○ Business ethics, executive compensation
○ One issue not discussed in light of corporate progress on ESG factors is the potential
trade off that exists between firms financial performance and performance on ESG type
dimensions
■ Improving one may be at the cost of worsening another
■ Tradeoff similar to need in hybrid enterprises to balance social and financial
goals
○ Increasing evidence that doing good is good for bottom line
■ Organizations that follow effective sustainability practices not only gain social
legitimacy, but also operational cost savings from increased efficiencies in
power and waste management

Approaches and models that businesses adopt to organize their socially responsible activities…
● The Green Movement
○ Sustainability: the ability to generate wealth without compromising social stewardship
or responsibility for the environment
■ Meeting the current and future needs of stakeholders while preserving the
environment and society so that future generations can meet their needs as
well
■ Managers weave environmental and social concerns into every strategic
decision so that financial goals are achieved in a way that is socially and
environmentally responsible
● The Triple Bottom Line
○ Measuring an organization’s social performance, environmental performance and
financial performance
○ 3Ps; People, Planet, Profit
 ■ People
● looks at how socially responsible the organization is in terms of fair
labour practices, diversity, supplier relationships, treatment of
employees, contributions to community
○ Measures social performance
■ Planet
● Measures the organizations commitment to environmental
sustainabiliyt
■ Profit
● Financial bottom line
○ Using triple bottom line approach to measuring performance ensures that managers
take social and environmental factors into account rather than just blindly pursuing
profit no matter the cost to society
● Conscious Capitalism
○ Shared value approach, refers to organizational policies and practices that both
enhance the economic success of a company and advanced the economic and social
conditions of the communities in which the company operates
○ 4 tenets of conscious capitalism
■ Have a higher purpose
● It is purpose that enables managers to transcend a narrow minded focus
on profit, infuse the org with energy and relevance, and create
engagement among employees and other stakeholders
■ Recognize each stakeholder group as important and interdependent
● Trade offs not necessary, conscious businesses strive to satisfy needs of
all stakeholders
■ Conscious businesses need conscious leaders
● Leaders embrace decentralization, empowerment, innovation and
collaboration
● Leaders motivated by service to the higher purpose and goal of aligning
all stakeholder interests
■ Embrace conscious business values
● Culture embodies trust, accountability, fairness, integrity, loyalty,
personal growth, egalitarianism
● Serving Organizational Stakeholders
○ Managers balance needs and interests of various of various stakeholders in setting goals
and striving for effectiveness
○ Stakeholder approach: integrates diverse organizational activities by looking at
significant organizational stakeholders and what they want from an organization
■ Stakeholder: any group within or outside of the organization that has a stake in
its performance
● Satisfaction level of each group can be assessed as an indication of
overall org performance
 ■ Investors, employees, customers and suppliers are considered primary
stakeholders
● Organization cannot survive without them
● Interests of investors, suppliers and shareholders served by managerial
efficiency (use of resources to achieve profits)
● Employees expect work satisfaction, pay and good supervision
● Customers concerned with decisions about the quality, safety and
availability of goods and services
○ Managers making 4 mistakes when addressing shareholder concerns
■ Not knowing how business models create trade offs
■ Starting with the business case
■ Treating CSR as an add on
■ GIving up when solution is not found
■ To course correct, organizations need to examine what stakeholders have been
excluded, start with environmental and social issues first then make the
business case, use CSR for organizational transformation and innovate even in
face of complex trade offs
○ Other important stakeholders are the government and community
■ Government: organizations must operate within limits of safety laws,
environmental protection regulation, etc
■ Community: local governments, natural environment, quality of life for
residents
■ Special stakeholders
● Trade unions and associations
● Professional associations
● Human rights organizations
○ Stakeholder interests sometimes conflict, and organizations often find it difficult to
simultaneously satisfy all demands of all groups
■ In all organizations, managers have to evaluate stakeholder concerns and
establish goals that can achieve at least minimal satisfaction for major
stakeholder groups
○ Stakeholder mapping: provides a systematic way to identify the expectations, needs,
importance and relative power of various stakeholders
■ Helps managers identify and prioritize the key stakeholders related to specific
issue or project
● Serving the Bottom/Base of the Pyramid
○ Bottom of the pyramid (BOP): proposes that large multinational corporations can
alleviate poverty and other social ills, as well as make profits by selling to the world’s
poorest people
■ Bottom of the pyramid = more than 4B people who make up the lowest level of
the world’s economic pyramid as defined by per capita income
○ Incomes of the World Economic pyramid
 ■

○ Traditionally, worlds poorest people have not been served by large businesses because
products and services too expensive or inaccessible
■ Poor end up paying more than wealthier counterparts for basic needs
○ Believers in BOP thinking believe multinational firms c an contribute to positive lasting
change when the profit motive goes hand in hand with desire to make contribution to
humankind

The Consequences of Doing Good

● Generally a positive relationship between socially responsible behaviour and firm’s financial
performance

Designing Structure for Executing Sustainability Program

● Successfully implementing a sustainability or CSR program depends on 3 things
○ Engaging employees
○ Engaging outside stakeholders
○ Engaging system of accountability that includes metrics and rewards
■ Example in textbook, 199
● A separate department or include everyone?...
○ Research evidence clear that engaging all employees in sustainability effort is superior
strategy over assigning responsibility to separate department
○ To achieve successful sustainability initiative, the organization’s leaders must inspire
employees and provide multiple avenues to help them incorporate sustainable thinking
into their everyday work lives
■ Making sustainability part of every employees jobs can have real payoff,
because employees personally absorb sustainability thinking
■ Create conditions for employees to own sustainability
● Psychological ownership: the feelings of possession and connection
that people develop toward an appealing object or idea
○ Feelings of ownership lead to greater job satisfaction, increased
engagement and higher productivity and profits
● Involve External Stakeholders
 ○ Sustainable businesses redefining the corporate ecosystem to create value for all
stakeholders
■ No single company can solve big social and environmental problems by going at
it alone
■ Industry collaborations required to solve complex supply chain issues
(deforestation, climate change, depletion of resources)
● Company serves itself and others well by collaborating with
governments, social enterprises, NGOS
○ Value of sustainability comes from continually talking with key stakeholders
■ Through repeated and regular dialogue, company with sustainability agenda
better able to anticipate and react to social, economic, environmental changes
■ Poor relationships with stakeholders can lead to increase conflict and reduce
stakeholder cooperation
○ Listening is key mechanism for stakeholder engagement
■ Key is to establish a conversation that considers performance in a holistic
manner, deals with trade offs, specifies the benefits generated
○ Also need to obtain feedback on how well the company is meeting stakeholder
expectations and what it cna do to improve the relationship
● Set Goals, Measure and Reward
○ Implementation of a sustainability program can appeal ton the heads and heats of
managers and employees
■ Head reflects rational decisions like setting specific goals or targets, defining
metrics to measure success, and proving rewards and incentives to people who
achieve the goals
● 3 basic steps of planning and control cycle in organizations
○ Sustainability planning more effective when part of the annual strategic planning
process within an organization rather than done separately
■ Increases its importance in minds of managers and increases the likelihood of
success
○ To manage implementation, leaders need to establish key performance indicators
metrics tied to important tangible goals, with clear assignment of responsibilities
○ UN sustainable development goals in text

Article Notes - Business-Society-Nature Interface: Implications for Management

Disparative View
● Business takes priority, only care about survival
● Society and Nature considered if aligned with Business’s interests
● ENvironment scan: perceive narrow range of issues
● Externalizing perspective, drawn primarily from traditional management studies and a
neoclassical economic orientation in which society and nature are regarded as separable form
and peripheral to business system
Intertwined View
● Business, Society and Nature are equally important and interconnected
● See multiple connected and conflicting issues between business, society and nature
● Environment scan: attend to broad variety of issues

Embedded View
● Nature takes priority, then society, business last
● Business is nested within society, which is nested within nature
● Environment scan: attend to broad variety of issues

Table Comparing all the Viewpoints - Really easy to summarize

Chapter 6: Interorganizational Relationships
Organizational Ecosystems
● Interorganizational relationships: the relatively enduring resource transactions, flows, and
linkages that occur among two or more organizations
○ Used to be view as a necessary evil that kills productivity
● Current view is one that argues that organizations are evolving into business ecosystems
○ Organizational ecosystem: system formed by the interaction of a community of
organizations and their environment
■ Cuts across traditional industry lines, company can create its own ecosystem
■ Conflict and cooperation exist at same time

Is Competition Dead?
● Traditional competition, which assumes a distintcy company competing for survival and
supremacy with other stand alone businesses no longer exists
○ Because organizations support and depend on others for success and survival
● New form of competition, where stakes are higher and market share can change at any point
● Organizations now need to co-evolve with others in the ecosystem so everyone gets stronger
○ WIth co-evolution, whole system becomes stronger
● Companies co-evolve through
○ Discussion with each other
○ Shared visions
○ Alliances
○ Managing complex relationships
● Coopetition: the simultaneous engagement in both cooperative and competitive behaviours
between two or more actors
○ Not easy to manage as managers are concerned about their organizations losing
autonomy as they cooperate
○ Social enterprises engaged in coopetitive behaviour simultaneously, not sequentially
■ Social enterprises engaged in 3 levels of action (coopetitive behaviours)
● Operational
○ Resource and knowledge exchange/sharing
● Stakeholder
○ Agreement on quality standards
● Environmental
○ Establishing joint venture

Changing Role of Management

● Within business ecosystems, managers learn to move beyond traditional responsibilities of
corporate strategy and designing hierarchical structures
○ Managers think about horizontal processes rather than vertical structures
○ Horizontal relationships now include linkages with suppliers and customers
 ● Managers need to see and appreciate the rich environment of opportunities that come from
cooperative relationships with others in ecosystem

Interorganizational Framework
● Relationships among organizations can be characterized by whether the organizations are
dissimilar or similar and whether relationships are competitive or cooperative
○ By understanding these perspectives, managers can assess their environment and adopt
strategies to meet their needs

● Resource Dependence
○ Describes ways organizations deal with each other to reduce dependence on the
environment
● Collaborative Networks
○ Organizations allow themselves to become dependent on other organizations to
increase value and productivity for both
● Population ecology
○ Examines how new organizations fill niches left open by established organizations, and
how a rich variety of new organizational forms benefits society
● Institutionalism
○ Explains why and how organizations legitimate themselves in the larger environment
and design structures by borrowing ideas from each other

Resource Dependence
● Represents the traditional view of relationships among organizations
 ○ Argues that organizations try to minimize their dependence on other organizations for
the supply of important resources and try to influence the environment to make
resources available
● Theory argues that organizations do not want to become vulnerable to other organizations
because of negative effects of performance
● Amount of resource dependence depends on two factors
○ Importance of the resource to the organization
○ How much discretion or monopoly power those who control a resource have over its
allocation and use
● Those organizations aware of resource dependence tend to develop strategies to reduce their
dependence on the environment and learn how to use power differences
● Resource Strategies
○ Adapt or Alter the Interdependent relationships
■ Purchasing ownership in suppliers, developing long term contracts or joint
ventures
○ Use interlocking directorships
■ Boards of directors include members of the boards of supplier companies
○ Political actions
■ Lobbying for new regulation
● Power Strategies
○ In theory, large independent companies have power over small suppliers
■ When one company has power over another, it can tell suppliers to absorb
more costs, ship more efficiently and provide more services (supplier cannot
really say no)

Collaborative Networks
Collaborative network: emerging alternative to resource dependence theory
● Companies join together to become more competitive and share scarce resources
● Why collaboration?
○ Cooperation is prerequisite for greater innovation, problem solving and performance
○ Partnerships make it easier to enter global markets
○ Share risks
○ Can reduce costs
○ Provides a safety net that encourages long term investment and risk taking
● Bitter rivals are not being replaced with partnerships
○ More companies changing from adversarial mindset to partnership
■ Change in mindset
○ Relationship based on interdependence and trust
■ Performance measures for partnerships are loosely defined, and problems
resolved through discussions and dialogue
○ Managing these relationships with other firms become a large role of strategic
managers
**GREATER VALUE CAN BE ACHIEVED BY TWO PARTIES RATHER THAN GOING AT IT ALONE**

Population Ecology
Population Ecology perspective: differs from other perspectives because it focuses on organizational
diversity and adaptation within a population of organizations
● Population: set of organizations engaged in similar activities with similar patterns of resource
utilization and outcomes
○ Organizations within a population compete for similar resources or customers
● Individual organizational adaptation is severely limited compared to the changes demanded by
the environment
○ Innovation and change in the population of organizations takes place through new
forms and kinds of organizations
○ Organizational forms considered relatively stable
○ New organizations meet the new needs of society more than established ones who are
slow to change
■ New organizational forms are emerging that fit the current environment
● Fill a new niche and over time take business away from established
companies
● Org becomes very big, so hard to adapt to environment
● Why do established/old organizations have such a hard time adapting to a rapidly changing
environment?
○ Hannan and Freeman said there are limitations on the ability of organizations to change
■ Heavy investment in plants, equipment and personnel
■ Limited information
■ Established and fixed viewpoints of decision makers
● When looking at an organizational population as a whole, the changing environment determines
which organizations survive or fail
○ Assumption is that individual organizations suffer from structural inertia and find it
difficult to change
○ When rapid change occurs, old organizations likely to decline or fail

Organizational Form and Niche

Organizational Form: an organization’s specific technology, structure, products, goals and personnel
which can be selected or rejected by the environment
● Each new organization tries to find a niche sufficient to support it
● Niche: a domain of unique environmental resources and needs
○ Usually small in early stages of organization but increases over time if successful

Process of Ecological Change

**ASSUMES THAT NEW ORGANIZATIONS ARE ALWAYS APPEARING IN THE POPULATION, CONSTANTLY
UNDERGOING CHANGE**

1. Variation
● Means the appearance of new, diverse forms in the population of organizations
○ New forms may be conceived to cope with perceived need in the external
environment
○ Entrepreneurs, government, venture capital by large organizations

2. Selection
● Whether the new organizational form is suited to the environment and can survive
○ Only a few variations are ‘selected in’ by the environment and survive over the
long term
● SOme provide extreme benefits and are able to find a niche, acquire resources from
environment necessary to survive
○ Others fail due to insufficient demand or have insufficient resources

3. Retention
● The preservation and institutionalization of selected organizational forms
○ Certain tech, products, services are highly valued by the environment
○ Become a part of the environment
■ Ex: Mcdonald’s

Strategies of Survival
Struggle for existence (competition): organizations and populations of organizations are engaged in a
competitive struggle over resources
 ● Each organizational form is fighting to survive
● Struggle more intense among new organizations
○ Both birth and survival frequencies of new organizations related to factors in the larger
environment
■ Size of area, industry growth rate, railroads
● Generalist and Specialist strategies distinguish organizational forms in the struggle for survival
● Generalists: organizations with a wide niche or domain (offer broad range of products or
services that serve a broad market)
○ Breadth of the domain somewhat protects it from environmental changes
■ Although demand may fall for some products or services, it usually increases for
others
○ Can reallocate resources internally to adapt to a changing environment
● Specialists: organizations that provide a narrower range of goods or services, serve a narrower
market
○ Generally more competitive than generalists
○ Often smaller companies
■ Means they can often move faster and be more flexible to adapting to changes

Institutionalism
Institutional perspective: describes how organizations survive and succeed through congruence
between an organization and the expectations from its environment
● Institutional environment: composed or norms and values from stakeholders
○ Reflects what greater society views as correct ways of organizing and behaving
● Key characteristic of institution is they are relatively stable organizations, legitmiate
○ Institutions become similar with one another

● Institutional view believes that organizations adopt structures and processes to please outsiders,
and these activities come to take on rule like status in organizations
○ Concerned with the set of intangible norms and values that shape behaviour

Legitimacy: the general perspective that an organization’s actions are desirable, proper and appropriate
within the environment’s system or norms, values and beliefs
● Organizations must fit within cognitive and emotional expectations of their ‘audience’
● Corporations are paying attention to their social responsibility rankings
○ Actively shaper and manager their reputations in order to increase their competitive
advantage
■ Having a good reputation was significantly related to HIGHER levels of
performance measures (ROA, net profit)

The Institutional View and Organizational Design

● Institutional view sees organizations as having two essential dimensions (technical and
institutional)
 ● Technical dimension
○ Day to day work, technology and operating requirements
○ Government by norms of rationality and efficiency
● Institutional dimension
○ Part of the organization most visible to the outside public
○ Governed by expectations from the external environment

● Formal structures of some organizations reflect the expectations and values of the environment
rather than the demand of work activities
○ Organization may incorporate positions or activities perceived as important by the larger
society to increase reputation even if it decreases efficiency
○ Ensures survival in the larger environment

Institutional Similarity
Institutional similarity/isomorphism: emergence of a common structure and approach among
organizations in the same field
● Isomorphism: process that causes one unit in a population to resemble other units that face the
same set of environmental conditions

3 core mechanisms that change an organization for greater legitimacy in the institutional environment:
● Mimetic forces: result from responses to uncertainty
○ Pressure to copy or model other organizations
■ When companies se an innovation they consider useful, the innovative practice
or process is copied
■ Benchmarking
○ Mimetic process works when…
■ organizations face continuous high uncertainty
■ They are aware of innovations occurring in the environment
■ Innovations are culturally supported
● Coercive forces: stem from political influence (governments)
○ The external pressures exerted on an organization to adopt structures, techniques or
behaviours similar to other organizations
■ May not make the organization more effective, but it will look more effective
and be accepted as legitimate in the environment
○ Organizational changes that result from coercive forces occur when
■ Organization dependent on another
■ When political factors are involved - rules, laws, sanctions
■ Wen other contractual or legal basis defines the relationship
○ Under constraints, organizations will adopt changes and relate to one another in a way
that increases homogeneity and limits diversity
● Normative forces: result from common training and professionalism, traditions
 ○ Pressures to change to achieve standards of professionalism and to adopt techniques
that are considered by the professional community to be up to date and effective
○ Companies accept normative pressures to become like one another through a sense of
obligation or duty to high standards of performance based on professional norms
shared by managers and specialists in organizations (education and certifications)

Chapter 7: Designing Organizations for the International environment

Motivations for Global Expansion
● Economic, technological and competitive forces have pushed many companies from domestic to
global focus
○ In some industries, being successful means succeeding on a global basis
○ Importance of global environment reflected in the shifting global economy
● Three primary factors motivating international expansion
○ Economies of scale, economies of scope and low cost production factors
● Economies of Scale
○ Cost advantages that companies gain due to their scaler of operation
○ Going global expand’s organization scale of operations
○ Through large volume production, industrial giants able to achieve lowest possible cost
per unit of production
○ For many companies, domestic markets no longer provide the high level of sales needed
to maintain enough volume to achieve scale economies
● Economies of Scope
○ Scope: the number and variety of products and services a company offers as well as the
number and variety of regions, countries and markets it serves
○ Can increase a company’s market power compared to competitors because the
company develops broad knowledge of the cultural, social, economic and other factors
that affect its customers in varied locations and can provide specialized products and
services to meet those needs
■ Companies that have a presence in multiple countries gain marketing power and
synergy compared to same firm with presence in fewer countries
● Low Cost Production Factors
○ One of the most powerful motivations for North American companies to invest abroad is
the opportunity to obtain raw materials and other resources at lowest possible cost
○ Organizations have looked overseas to secure raw materials that were scarce or
unavailable in their home country
○ Also turn abroad for low cost labour
○ Other reasons
■ Lower costs of capital
■ Sources of cheap energy
■ Reduced government restrictions
■ Other factors that lowe companies production costs
○ Companies can locate facilities wherever it makes the most economic sense
Stages of International Development

1. Domestic Stage
● Company is domestically oriented, but managers are aware of of the global environment and
may want to consider initial foreign investment to expand production volume and realize
economies of scale
● Market potential limited and is primarily in the home country
● Structure of company is domestic, typically functional or divisional and initial foreign sales are
handled through export department
● Freight forwarding, customs problems and foreign exchange are handled by outsiders

2. International stage
● Company takes exports seriously and thinks multi domestically
○ Multidomestic: means competitive issues in each country are independent of other
countries, the company deals with each country individual
● Concern is international competitive positioning compared with other firms in the industry
● At this point, international division set up

3. Multinational Stage
● Company has extensive experience in a number of international markets, has established
operations in several foreign countries

4. Global Stage
● Company transcends any single country
● Not just a collection of domestic industries, but subsidiaries are interlinked to the point where
competitive position in one country significantly influences activities in other countries
● GLobal companies: have been called stateless corporations, no longer think of themselves as
having a single home country

The Need for Cultural Intelligence

Cultural intelligence: the ability to use reasoning and observation skills to interpret unfamiliar gestures
and situations and devise appropriate behavioral responses
 ● Enables person to ferret out clues to a culture’s shared understandings and respond to new
situations in culturally appropriate ways
● Developing high cultural intelligence means being open and respective to new ideas and
approaches
○ Living or working in different country best way to do so, develop more global
perspective

Global Expansion through international strategic alliances

● Typical alliances include licensing, joint ventures and consortia
● Joint Venture: separate entity created with two or more active firms as sponsors
○ Popular approach to sharing development and production costs and penetrating new
markets
○ May either be with customers or competitors
○ Companies use to take advantage of a partner’s knowledge of local markets, achieve
production cost savings through economies of scale, share technological strengths or
distribute new products/services through another country’s distribution channels
○ Fights off political uncertainty
○ Downsides
■ Collaboration eventually goes down, each has their own agenda and goals
■ Lose autonomy
● Consortia: groups of independent companies (suppliers, customers, competitors) that join
together to share skills, resources, costs and access to one another’s markets
○ Global virtual organizations: a continually evolving set of company relationships that
exist temporarily to exploit unique opportunities or attain specific strategic advantages
● Acquisitions

Designing Structure to Fit Global Strategy

● An organization’s structure must fit its situation by providing sufficient information processing
for coordination and control while focusing employees on specific functions, products or
geographic regions

Challenges of Global Design - 3 main challenges

● Increased complexity and differentiation
○ Organizations have to accept an extremely high
level of environmental complexity in the
international domain and address the
differences in countries
■ Each country has its own history, laws,
and regulatory system, tastes
○ Managers have to create a structure to operate
in numerous countries that differ in economic
development, cultural norms and values, infrastructure
 ○ As environments become more complex and uncertain, organizations grow more highly
differentiated, with many specialized positions and departments to cope with specific
sectors in the environment
■ Top management migjt need to set up specialized departments to deal with
diverse government, legal and accounting regulations in different countries
○ Companies operating internationally need more boundary spanning departments to
sense and respond to external environment
■ Many organizations have set up global product development systems to achieve
greater access to international expertise and design products that are better
suited to global markets
● Increased need for coordination
○ As organizations become more differentiated, with multiple products, divisions,
departments and positions across diff countries, managers need to coordinate
■ More time and resources dedciated to different goals
○ Coordination: the quality of collaboration across organizational units
● Transfer of Knowledge and Reverse Innovation
○ Organizations need to learn from their international experiences by sharing knowledge
and innovations across the enterprise
■ Diversity of international environment offers great opportunities for learning,
development of diverse capabilities and innovations in products or services
○ Experts believe one way to cope with challenge is to have a greater percentage of
radical innovations from companies in emerging markets like China or India
○ Reverse Innovation (trickle up): companies crete innovative, low cost products or
services for emerging markets then quickly and inexpensively adapt and repackage them
for sale in developed countries
■ Has organizations paying more attention to the need for mechanisms that
encourage sharing across the international organization

○ Many organizations tap only a fraction of the potential that is available from the cross
border transfer of knowledge and innovation
■ People in different locations have trouble building trusting relationships
■ Language, barriers or cultural differences with geographic distances can prevent
managers from spotting the knowledge and opportunities that exist
 ■ Managers don’t always appreciate the value of organizational integration, want
to protect their division rather than help everyone else
■ Much of organizational knowledge can’t be written down
■ Divisions sometimes view knowledge and power as advantage to keep them
around

Model for Global Vs Local Opportunities

● Managers look for global strategy that will provide synergy among worldwide operations for the
purpose of achieving common organizational goals
○ Dilemma they choose is whether to emphasize global standardization versus national
responsiveness
● Globalization strategy: means that product design, manufacturing and marketing strategy are
standardized throughout the world
○ Good for things like Coke, but not good services because different customs and habits
often require a different approach to proving service
○ COmpanies in recent years been shifting away from strict globalization strategy
■ Economic and social changes have made consumers to be less interested in
global brands and more in favour of products with a local feel
○ Can help a manufacturing organization reap economy of scale efficiencies by
standardizing product design and manufacturing
■ Using common suppliers, introducing products faster, coordinating prices
● Multidomestic strategy: means that competition in each country is handled independently of
competition in other countries
○ Encourages product design, assembly and marketing tailored to the specific needs of
each country
 ● Companies can be characterized by whether their product and service lines have potential for
globalization, which means advantages through worldwide standardization
○ Companies that sell diverse products and services appropriate for a multidomestic
strategy, which means local country advantages through differentiation and
customization to meet local needs
● WHen forces for global standardization and national responsiveness in countries are low, using
an international division with the domestic structure is appropriate way for international
business
○ For some industries though, technological, social for economic forces may create
situation where selling standardized products worldwide provides basis for competitive
advantage
■ Use global product structure
■ Provides product managers with authority to handle their product lines on a
global basis and enables company to take advantage of unified global
marketplace
● In some cases, companies can gain competitive advantages through national responsiveness
(responding to unique needs in various c countries)
○ Global geographic approach is best

International Division
● As companies begin to explore international markets, they typically start with an export
department that grows into international division
○ Has a status equal to the other major departments in the company
● International division is organized according to geographic interests, not functional/product
lines
● Has its own hierarchy to handle business (licensing, joint ventures), selling the products and
services created by domestic division, opening their own plants
● Firms typically start with international department and then depending on strategy, later use
product or geographic division structures

Global Product Structure

● Product divisions take responsibility for global operations in their specific product area
● Managers use because it provides straightforward way to effectively manager a variety of
businesses and products around the world
● Managers in each product division can focus on organizing international operations as they see
fit and directing employee energy toward own divisions unique set of problems and
opportunities
○ Gives top managers at headquarters a broad perspective on competition, can more
rapidly respond to changing environment
● Each division manager responsible for planning, organization and controlling all functions for the
production and distribution of its products for any market in the world
● Structure works best when…
 ○ the company has opportunities for worldwide production and sale of standard products
for all markets
○ Provides economics of scale and standardization of production, marketing, advertising
● Problems
○ Often product divisions do not work well together (compete instead of cooperate)
○ Some countries may be ignored by product managers
Global Geographic Structure
● Divides the world into geographic regions, with each geographic division reporting to the CEO
○ Each division has full control of functional activities within its geographic area
● Companies that use this structure have typically been those with mature product lines and
stable technologies
○ Can find low cost manufcturing in countries, and meet different needs across countries
for marketing and sales
● TO meet new service demands (less emphasis on just manufacturing), many manufacturers are
emphasizing the ability to customize their products in order to meet speciifc needs, which
requires greater emphasis on local and regional responsiveness
○ All organizations compelled by current environmental and competitive challenges to
develop closer relationships with customers, which may lead companies to shift from
product based to geographic based structures
● Problems faced by management using structure come from
○ autonomy of each regional division
■ Difficult to do planning on global scale because each divisona cts only to meet
the needs of the region
○ New domestic technologies and products can be difficult to transfer to international
markets because each division thinks it will develop what it needs
○ Difficult to rapidly introduce products developed offshore into domestic markets

Global Matrix Structure

● Similar to domestic matrix, except that for multinational corporations the geographic distances
for communication are greater and coordination even more complex
● Matrix works best when pressure for decision making balances the interests of both product
standardization and geographic localization, and when coordination to share resources is
important
Building Global Capabilities
Global Coordination Mechanisms
● Global Teams
○ Cross border work groups made up of multiskilled, multinational members whose
activities span multiple countries
○ Teams usually two types
■ INtercultural Teams: members come from different countries and meet face to
face
■ Virtual Global teams: members remain in separate locations around the world
and conduct work electronically
○ Most advanced and competitive use of global teams involves simultaneous
contributions in 3 areas
■ Help address the differentiation challenge - enabling them to be more locally
responsive by providing knowledge to meet the needs of different regional
markets, consumer preferences and political/legal systems
■ Teams provide integration benefits - helping organizations achieve global
efficiencies by developing regional or worldwide cost advantages, standardizing
designs and operations
■ Continuous organizational learning, knowledge transfer
● Stronger Headquarters Planning
○ Headquarters take an active role in planning, scheduling and control to keep the widely
distributed pieces of the global organization working together and moving in same
direction
○ Plans, schedules and formal rules/procedures can help ensure greater communication
across divisions and with headquarters
■ Foster cooperation and synergy among different departments/units to achieve
goals
○ Managers can provide strategic direction, resolve conflicts, delegate decision making
 ● Specific Coordination Roles
○ Creating specific organizational roles or positions for coordination is a way to integrate
all the pieces of the enterprise to achieve strong competitive position
○ Country managers coordination across functions
■ Country manager for international firm has to coordinate all the various
functional activities to meet the problems, opportunities, needs and trends in
the local market
● Enables organization to achieve multinational flexibility and rapid
response
■ Help with the transfer of ideas, trends, products and technologies that arise in
one country and might have significant impact on broader scale
○ Some organizations create formal network coordinator positions to coordinate
information and activities related to key customer accounts
○ Top managers in successful global firms encourage and support informal networks and
relationships to keep information flowing in all directions
■ By supporting informal networks, gives people across boundaries opportunities
to get together and develop relationships to remain close, more coordination
○ FIrms that stimulate and support interunit coordination and collaboration typically
better off
■ Benefits from interunit collaboration:

Cultural Differences in Coordination and Control

● Organizational Norms and values are influenced by the values in the larger national culture
○ These, in turn, influence the organization's structural approach and the ways managers
coordinate and control an international firm

National Value Systems

● Hofstede identified 5 dimensions of national value systems that vary widely across countries
○ 5 main dimensions
■ Power distance
 ● High power distance means that people accept inequality in power
among institutions, organizations and people
○ Organizations tend to be more hierarchical and centralized,
greater control and coordination from top levels of organization
● Low pd means that people expect equality in power
○ Decentralized decision making
■ Individualism/Collectivism
■ Masculinity
■ Long term orientation
■ Uncertainty avoidance
● High means that members of a society feel uncomfortable with
uncertainty and ambiguity, and thus support beliefs that promise
certainty and conformity
○ Preference for coordination through rules and procedures in
organizations
● Low means that people have a high tolerance for the unstructured,
unclear and unpredictable
○ Fewer rules and formal systems, relying on more informal
networks and personal communication for coordination
○ 6 dimensions added by Minkov
■ Indulgence vs Restraint
● Indulgence - a society that allows relatively free gratification of basic
and natural human drives (enjoying life, having fun)
● Restraint - a society that suppresses gratification of needs and
regulations through strict social norms
● Project GLOBE (global Leadership and Organizational Behaviour Effecriveness)
○ 9 dimensions that explain cultural differences, including HOFSTEDES
○ Give more in depth picture
 ● Deal focus vs relationship focused
○ Deal focus - NA, Australia
■ Task oriented
■ Approach business in an objective and impersonal way
○ Relationship focused - Middle east, asia
■ People oriented
■ Believe in building close personal relationships as the appropriate way to
conduct business
● Informal vs Formal
○ Informal Cultures
■ Place a low value on status and power differences
● US and Australia
○ Formal cultures
■ Typically hierarchical and status conscious
● Rigid Time vs Fluid time
○ One part of world flexible about time and scheduling
○ Other group more rigid and dedicated to clock time
● Expressive vs reserved
○ Creates major communication gap
○ Expressive - use more hand gestures, facial expressions

Three National Approaches to Coordination and Control - Japan, Europe, North America

Transnational Model of Organization - ON SLIDES

● Represents the most advanced kind of international organization
○ Reflects the ultimate in organizational complexity (many units) and organizational
coordination (mechanisms for integrating the varied parts)
● Useful for large, multinational companies with subsidiaries in many countries that try to exploit
both global and local advantages
● Looks to achieve global efficiency, national responsiveness and global learning simultaneously
○ Really hard to get a sense of participation and involvement by subsidiaries, get more
coordination, share information and knowledge
○ Some subsidiaries become so big that they don’t fir the narrow strategic role defined by
headquarters
■ Individual units do need some autonomy for themselves and the ability to have
impact on other parts of the organization
● Addresses challenges by creating an integrated network of individual operations that are linked
together to achieve multidimensional goals of the overall organization
○ Management philosophy based on interdependence rather than either full dividonal
independence or total dependence of those units on headquarters for decision making
● More than just an organizational chart
 ○ Managerial state of mind, set of values, shared desired to make worldwide learning
system work
● Characteristics
○ Assets and resources are dispersed worldwide into highly specialized operations that are
linked together through interdependent relationships
■ Resources and capabilities widely distributed to help organization meet
changing needs, challenges
○ Each group has to cooperate with one another to achieve its own goals
○ Encourages sharing information and resources, cross unit problem solving
■ Materials, people, products, ideas, resources and information continually
flowing
○ Managers actively shape, manage and reinforce informal information networks that
cross functions, products, divisions and countries
○ Structures flexible and always changing
■ Flexible centralization is key
○ Unification and coordination achieved through organizational culture, shared vision and
values, management style

**Essentially a horizontal structure on a global scale**

PRINCIPLE OF FIT AND EFFECTIVENESS - ON SLIDES AND DO EVERYTHING BEYOND IT

Chapter 8: Organization Size, Life Cycle and Decline

● As organizations get larger and more complex, they need more complex systems and
procedures for guiding and controlling the organization
○ But, also causes problems of inefficiency, rigidity and slow response time
○ Organizations looking for more ways to be more flexible and responsive to rapidly
changing environment while continuing to grow

Organization Size: Is bigger better?

Pressure for Growth
● A decade ago, analysis and management scholars were heralding a shift away from the bigness
toward small, nimble companies that could quickly respond in a fast changing environment
● Today, business world has entered an era of the mega corporation
○ Due to the amount of mergers
○ Huge conglomerates own scores of companies
○ Companies in all industries strive for growth to acquire the size and resources needed to
compete on a global scale, invest in new technology, control distribution channels and
guarantee access to markets
● Other pressures for organizations to grow
○ Executives below firms must grow to stay economically healthy and believe that to stop
growing is to stagnate
 ■ TO be stable means that customers may not have demands fully met or
competitors will take your position
● Greater size for some companies gives them power in marketplace and increases revenues
○ Can be vibrant, exciting places to work which enables them to attract top talent and
keep quality employees

Dilemmas of Large Size

● Large organizations
○ Huge resources and economies of scale needed for organizations to compete globally
○ Able to get back business more quickly after disaster, more sense of security for
employees
○ Standardized, often mechanistically run
○ Complex
○ Employee longevity, raises, promotions
■ People can work there for many years, stable
● Small organizations
○ Responsive and flexible
○ Have just regional reach
○ Flat structure, organic, free flowing management style that encourages
entrepreneurship and innovation
○ Simple
○ Niche finding
● Big organization/Small organization hybrid
○ Advantages of small organizations sometimes enable them to grow large
○ However, small companies can become visitims of their own success as they grow large,
shifting to a mechanistic structure emphasizing vertical hierarchies and spawning
corporate fucks instead of entrepreneurs
■ Big companies may become committed to their existing products and
knowledge, limiting innovation
○ Solution of both problems done by Jack Welch that combines a large corporations
resources and reach with a small company’s simplicity and flexibility
■ Development of new organizational forms with emphasis on decentralizing
authority and cutting out layers of hierarchy, combined with increasing use of
information technology is making it easier to make organizations big and small,
getting advantages of each

Organizational a
Life Cycle: suggests that organizations are born, grow older and eventually die
● Stages are sequential with natural progression

Stages of Life Cycle Development - 4 main stages

● Entrepreneurial stage
 ○ Start up of an organization
○ Emphasis is on creating a product or service and surviving in the marketplace
○ Founders are entrepreneurs, devote energies to the technical activities of production
and marketing
○ Organization is informal and nimble
● Crisis: Need for Leadership
○ As organization starts to gerow, larger number of employees causes problems
○ The creative and technically oriented owners have hard time with managing people, just
want to focus on the product
○ TO solve, entrepreneurs must adjust the structure of the organization to accommodate
continued growth or bring others to do so
● Collectivity Stage
○ Organization grows and develops more elaborate design
○ Strong leadership obtained (hopefully)( and organization begins to develop clear goals
and direction
■ Has new departments, hierarchy of authority, division of labour
○ Employees identify with mission of the organization and spend a lot of time trying to
make it succeed
■ Members feel part of a collective, communication dn control are mostly
informal but some formal systems
● Crisis: Need for delegation with control
○ If new management has been successful, lower level employees find themselves
restricted by strong top down leadership
■ Organization needs to find mechanisms to control and coordinate departments
without direct supervision from the top, give them more autonomy
● Formalization Stage
○ Organization more bureaucratic
○ Involves the installation and use of rules, procedures and control systems
■ Communication more formal and less frequent
○ Management becomes concerned with strategy and planning, leaves operations to
middle management
○ Incentive systems based on profits implemented to motivate managers
○ When effective, new coordination and control systems enable the organization to
continue growing by establishing linkage mechanisms between top management and
field units
● Crisis: Need to deal with too much red tape
○ Proliferation of systems and programs may strangle mid level exces
■ Organization seems bureaucraticized
■ Middle management may resent intrusion of staff, innovation restricted
○ Organization seems too large and complex to be managed through formal programs
● Elaboration stage
○ Organization becomes more flexible in its design, more teamwork and collaboration
 ○ Mamagers develop skills for confronting problems and working together
○ Social control and self discipline reduce needs for additional formal controls
■ Bureacracy at the max
○ To achieve collaboration, teams are often formed across functions or divisions of the
company
● Crisis: need for revitalization
○ After organization reaches maturity, may enter periods of temporary decline
■ Organization shifts out of alignment with the environment, may be slow moving
and must go through stage of streamlining and innovation
○ Need for renewal happens every 10 to 20 years

Organizational Life Cycle - Summary and Photo

VERY IMPORTANT CHART, PAGE 303

Organizational Bureaucracy and Control
● As organizations progress through the life cyce, they take on bureaucratic characteristics as they
grow larger and more complex
● Study of bureaucracy in organizations odne by Max Weber
○ Perceived it as a threat to personal liberties but also recognized that it is the most
efficient possible system of organizing

Weber Dimensions of Bureaucracy

What is Bureaucracy?
 ● Bureaucracy: Rules and standard procedures enable organizational activities to be performed in
a predictable, routine manner
○ Specialized duties means that each employee had a clear task to perform
○ Hierarchy of authority provides sensible mechanism for supervision and control
○ Technical competence: basis by which people were hired rather than friendship, family
ties and favoritism
○ Separation of position from holder means that individuals did not own or have an
inherent right to the job, promoting efficiency
○ Written records: provided an organizational memory and continuity over time
● Provides advantages over organizations forms based on favoritism, social status, family
connections or graft

Size and Structural Control

● Formalization and Centralization
○ Formalization: rules, procedures and written documentation (policy manuals and job
descriptions) which prescribe the rights and duties of employees
■ Large organizations rely own rules and procedures to achieve standardization
and control across their large numbers of employees and departments, and top
managers can use personal observation to control small organization
○ Centralization: the level of hierarchy with authority to make decisions
■ In centralized organizations, decisions tend to be made at the top
■ In decentralized organizations, decisions made at lower level
■ In perfect bureaucratic organization, all decisions made at very top
● But due to the size, NOT ACTUALLY THE CASE
● As the organization gets larger and has more departments, decisions
can become overloaded and overwhelming, so there is greater
permission of decentralization
■ In small start up organizations, the founder can effectively be involved in every
decision, large and small
● Personnel Ratios
○ Personnel Ratios: the proportions of administrative, clerical and professional support
staff
■ Most frequent ratio is the administrative ratio
○ Two patterns
■ Ratio of top administration to total employees is actual smaller in large
organizations, saying that organizations experience administrative economies as
they grow larger
● As organizations increase in size, administrative ratio declines
■ Clerical and professional support staff ratios tend to increase in proportion to
organization size
● Clerical ratio increases because of the greater communication and
reporting requirements needed as organization grow larger
 ● Professional staff ratio increases because of the greater need for
specialized skills in larger, complex organizations
○ Net effect for direct workers is that they decline as a percentage of total employees
○ Whereas top administrators do not make up a disproportionate number of employees in
larger organizations, the idea that proportionally greater overhead is required in large
organizations is true

Bureaucracy in a Changing World

● By establishing a hierarchy of rules and procedures, it provided an effective way to bring order
to large groups of people and prevent abuses of power
○ Interpersonal relationships based on roles rather than favoritism was good for the
business and more efficient
○ Provided rational ways to organize and manage tasks to complex to be understood by a
couple of individuals, improving effectiveness and efficiency of large organizations
● But, with the changing world, there is a need to reduce formalization and bureaucracy
○ Narrowly defined job descriptions tend to limit creativity, flexibility and rapid response
needed in today’s knowledge based organizations

Organizing temporary systems for flexibility and innovation

● Organizations dealing with the problems of bureau=cracy in changing environment through
innovative structural solutions
● Incident command system: commonly used by organizations like fire or police that have to
respond rapidly to emergency or crisis situations
○ Developed to maintain the efficiency and control benefits of bureaucracy yet prevent
the problem of slow response to crisis
○ Being adapted to other organizations to help them respond quickly to new
opportunities, unforeseen competitive threats, organizational crisis
○ Basic idea is that the organization can balance between a highly formalized, hierarchical
structure that is effective during times of stability and a more flexible, loosely structured
one needed to respond well to unexpected and demanding environmental conditions
■ Hierarchical side helps maintain control and ensure adherence to the rules
■ Loose side of loose command lines and enables people to work across
departments help anticipate, avoid and solve unanticipated problems
○ Mechanisms to ensure smooth functioning of system
■ Incident commander- ultimately responsible for all activities that occur and
everyone knows clearly who is in charge of what aspect of the situation
● Helps maintain order in chaotic environment
● Key is that decision making authority is dispersed to individuals who
best understand the particular situation
■ System based on trust that lower level workers have a clear understanding of
the mission and make decisions within guidelines to reach organizational goals
○ How to start
 ■ Requires lots of times and resources

Other approaches to reducing bureaucracy

● Cutting layers of the hierarchy
● Give lowr level workers freedom to make decisions
○ Give frontline workers more authority and responsibility to define and direct their own
jobs
● Professionalism: the length of formal training and experience of employees
○ More employees need more degrees
○ Not needed because profession training regularized a high standard of behaviour for
employees that acts as a substitute for bureaucracy
● Professional partnership: form of organization made completely up of professionals
○ Branches have substantial autonomy and decentralized authority to make necessary
decisions

Organizational Control Strategies

● Every organization needs systems for guiding and controlling the organization
● Managers at top and middle levels of organization can choose between 3 control strategies
○ Come from framework proposed by william Outchi
■ Suggested that three control strategies that organizations could adopt
○ Bureaucratic, Market, Clan

Bureaucratic Control
● Use of rules, policies, hierarchy of authority, written documentation, standardization and other
bureaucratic mechanisms to standardize behaviour and assess performance
● Primary purpose is to standardized and control employee behaviour
● Managers must have authority to maintain control over the organization
○ Need to have rational authority other other types of control (favoritism, payoffs) as the
basis for organizational decisions and activities
● Weber 3 types of authority that could explain the creation and control of large organization
○ Rational-legal authority
■ Based on employees belief in the legality of rules and the right of those elevated
to positions of authority to issue commands
■ Basis for both creation and control of most government organizations
■ Most widely used form to govern internal work activities and decision making
○ Traditional authority
 ■ Belief in traditions and in the legitimacy of the status of people exercising
authority through these traditions
■ Basis for religious institutions
○ Charismatic authority
■ Based on the devotion to the exemplary character or the heroism of the
individual
■ Organization reflects personality and value of the leader

Market Control
● Occurs when price competition is used to evaluate the output and productivity of an
organization
○ Originated in economics
● Use of market control requires that outputs be sufficiently explicitly for a price to be assigned
and for competition to exist
○ Without competition, the price does not accurately reflect internal efficiency
● Some firms require that individual departments interact with one another at market prices
○ Buying and selling products or services among themselves at prices equivalent to those
quoted outside the firm
● To make system work, internal units also have the option to buy and sell with outside companies
● Can be used only when the output of an organization, division or department can be assigned a
dollar price and when there is competition
○ Organizations finding they can apply it to internal departments (accounting, legal)

Clan Control
● The use of social characteristics (org culture, shared values, commitment, beliefs) to control
behaviour
● Organizations required shared values and trust among employees
● Important when ambiguity and uncertainty are high
○ High uncertainty means the organization cannot put a price on is services and things
change so quickly that rules and regulations are not able to specify every correct
behaviour
● People may be hired because they are committed to the organization’s purpose
○ New employees may be subjected to long period of socialization to gain acceptance by
colleagues
● Most often used in small, informal organizations or in organizations with a strong culture,
because of personal involvement in and commitment to the organization’s purpose
● Self-control: stems from the values, goals and standards of individuals (speerate from clan
control, while clan control is focusing on being socialized into a group)
○ Organization attempts to induce a change such that individual employees own internal
values and work preferences are in line with organization’s values and foals
○ Employees generally set their own goals and montiroty their own performance
 ○ Nee leaders who can clarify boundaries within which each employee exercise their own
knowledge and discretion

Organizational Decline and Downsizing

Organizational Decline: a condition in which a substantial, absolute decrease in the organization’s
resources base occurs over a period
● Often associated with environmental decline
○ Organizational domain expereinces either a reduction in size (shrinkage in customer
demand) or a reduction in shape (shift in customer demand)
● 3 main contributing factors
○ Organizational atrophy
■ Occurs when organizations grow older and become inefficiency and overly
bureacraticized
■ Organization’s ability to adapt to its environment declines
■ Follows a long period of success, org takes it for granted and fails to adapt
■ Warning signs: excess administrative and support staff, lack of communication
and coordination, outdata organizational strucutre
○ Vulnerability
■ Organizations strategic inability to prospoer in its envionment
■ Often happens to small organizations that are not yet fully established
● Vulnerable to shifts in consumer tastes or in the economic health of the
larger community
■ Organizations typically need to redefine their environmental domain to enter
new industries or markets
○ Environmental decline or competiton
■ Environmental decline: reduced energy and resources avaliable to support an
organization
■ When environment has less capacity to support an organization, organization
either has to scale down operations or shift to another domain
● New competition increases the problem

Model of Decline Stages

1. Blinded stage
● Internal and external change that threatens long term survival and may require the organization
to tighten up
○ Organization may have excess personnel, lack of harmony with customers
● Leaders often miss signals and the solution is to develop effective scanning and control systems
that indicate when something is wrong

2. Inaction stage
● Denial occurs despite signs of declining performance
○ Leaders may try to say all is well
● Solution is for leaders to acknowledge decline and take prompt action to realign organization
with the environment
○ New problem solving approaches, increased decision making participation

3. Faulty Action stage

● Organization facing serious problems, indicators of poor performance cannot be ignored
● Failure to act may mean organizational failure
● Leaders forced to make major chances
○ Retrenchment, downsizing
● Leaders should reduce employee uncertainty by clarifying values and providing information

4. Crisis stage
● Organization experiences chaos, efforts to go back, sharp changes and anger
● Only solution is major reorganization
 ○ dramatic change
■ Replacing top administrators
■ Change in structure, culture, strategy
■ Huge downsizing

5. Dissolution stage
● Decline is irreversible
● Organization suffering loss of personnel, markets, reputation, capital
● Close down the organization and reduce separation trauma of employees

Downsizing Implementation
● When organization downsized, individuals are laid off permanently or are not replaced when
they retired
● Techniques to smooth it out for those who leave and those who remain
○ Communicate more, not less - give advanced notice and reasoning
○ Provide assistance to displaced workers
○ Help the survivors cope

Chapter 9: Organizational Culture and Ethics

Organizational Culture
● Strong culture can have an profound impact on an organization, both positive and negative
● One of the most important jobs organizational leaders do is instill and support the kind of values
needed for company to succeed
● Social capital: the quality of interactions among people and whether they share a common
perspective
○ Organizations with high degree of social capital: relationships based on trust, mutual
understanding and shared norms/values that allow people to cooperate and coordinate
activities to achieve organizational goals
○ Similar to goodwill
 ■ When relationships both within the organization and with customers, suppliers
and partners based on honesty and trust, their is goodwill and mutual benefits
○ High amounts enables frictionless social interactions and exchanges that jelp facilitate
smooth organization functioning

What is Culture?
Culture: set of values, norms, guiding beliefs and understandings that is shared by members of an
organization and is taught to new members
● Represents the unwritten, feeling part of organization
● Organizational culture exists on two levels - ICEBERG MODEL
○ Surface - visible artifacts and observable behaviours
■ The way people act and dress, symbols, stories and ceremonies organizations
members share
○ Visible elements - deeper values in the minds of organization members
■ The underlying values, assumptions, beliefs, attitudes, feelings
■ The true culture
● Attributes of culture display themselves in many ways, but usually shape into a patterned set of
activities through social interactions
○ Patterns can be used to interpret culture
● Hidden costs of bad culture
○ Communication
■ Leads to a gray area, delays and deficiency
■ A good culture is supposed to help to us to resolve the communication costs
○ Innovation
○ Creativity

Emergence and Purpose of Culture

● Culture provide members with a sense of organizational identity and generates them a
commitment to beliefs and values that larger than themselves
● Organizational culture usually begins with a founder or early leader who articulates and
implements particular ideas and values as a vision, philosophy or business strategy
○ When these ideas and values lead to success, they become institutionalized
● Two critical functions of culture in organizations
○ Internal Integration: members develop a collective identity and know how to work
together effectively
■ integrates members so that they know how to relate to one another
■ Guides the day to day working relationships and determines how people
communicate within the organization, what behaviour is acceptable and how
power/status allocated
■ Shapes organizational identity
○ External adaptation: how organization meets goals and deals with outsiders
■ helps the organization adapt to external environment
 ■ Helps guide daily activities or workers to meet certain goals, respond rapidly to
customer needs or competitors moves
● Guides employee decision making in the absence of written rules or policies

Interpreting Culture
● To identify and interpret culture requires that people make inferences based on observable
artifacts
● Rites and Ceremonies
○ The elaborate, planned activities usually making up a special event and are often
conducted for the benefit of an audience
■ Can provide dramatic exasmples of what company values, reinforcing them and
creating bond with people
○ 4 types of rites

● Passage: facilitate the transition of employees into new social roles

● Enhancement: create stronger social identities and increase the status of
employees
● Renewal: reflect training and development activities that improve organizaiton
functioning
● Integration: create common bonds and good feelings among employees and
increase commitment to the organization

● Stories
○ Narratives based on true events that are frequently shared among organizational
employees, told to new employees to inform them about an organization
○ Many about company heroes to serve as models or ideals for cultural values
○ Some are legends because events are historical and may have been embellished over
time
○ Myths: consistent with the values and beliefs of the orghanization, but not supported by
facts
○ Keep primary values of organization alive
● Symbols
○ Something that represents another thing (deeper values of the organization)
○ Focus attention on a specific item
○ Can be both prostitute or negative
■ Ex: premium parking spot
● Language
 ○ Many organizations use a specific saying, slogan, metaphor or other form of language to
convey special meaning to employees
■ Slogan can be readily picked up and repeated by both employees and customers

Culture and Organizational Design - STRATEGIC FOCUS AND NEEDS OF ENVIRONMENT

● Org culture should reinforce the strategy and structural design that the organization needs to be
effective within its environment
● Culture can be assessed on many dimensions, bu we focus on two main ones
○ Extent to which the competitive environment requires flexibility or stability
○ Extent to which the organization’s strategic focus and strength are internal or external
● 4 categories of cultures associated wiht the differences
○ Relate to the fit among cultural values, strategy, structure, and the environment

● Adaptability Culture
○ Characterized by strategic focus on the external environment through flexibility and
change to meet customer needs
○ Encourages entrepreneurial values, norms, and beliefs that support the capacity of the
organizations to detect, interpret and translate signals from the environment into new
behaviour responses
○ Does not just react quickly to environmental changes, but actively creates change
○ Rewards and values risk taking, innovation, creativity
● Mission Culture
○ Characterized by an emphasis on a clear vision of the organization and on the
achievement of goals (sales growth, profitability, market share)
○ Concerned with serving specific customers in the external environment but without the
need for rapid change
 ○ Managers shape behaviour by envisioning and communicating desired future state
○ Because envt stable, can translate vision into measurable goals that help evaluate
employee performance
○ Reflect high level of competitiveness and profit making orientation
● Clan culture
○ Has a primary focus on the involvement and participation of the organization’s members
and on rapidly changing expectations from the external environment
○ Focused on needs of employees as route to high performance
■ Involvement and participation creates sense of ownership and greater
commitment to organization
○ Important value is taking care of employees, making sure they have what they need to
be satisfied and productive
● Bureaucratic Culture
○ Has an internal focus and a consistency orientation for stable environment
○ Supports a methodical approach to operating - tradition, following established policies
and practices to achieve goals
○ Personal involvement lower, but high level of consistency, conformity and collaboration
among members
○ Succeeds by being highly integrated and efficient

Culture of Discipline
● Collins identifies number of characteristics that define great companies, one is discipline
● How is discipline built
 ○ Level 5 leadership: leaders characterized by an almost complete lack of personal ego,
coupled with strong will and ambition for success of the organization
○ Having the right values: individual freedom and responsibility with a framework of
organizational purpose and goals
○ The right people in the right jobs: look for self disciplined people who embody the
values that fit the culture
○ Knowing where to go
■ What they can be the best at in the world
■ What they are deeply passionate about
■ What makes economic sense for the organization

Culture Strength and Organizational Subcultures

Culture strength: the degree of agreement among members of an organization about the importance of
specific values
● If there is a consensus about the importance of those values, culture is cohesive and strong
● Associated with the frequent use of ceremonies, symbols, stories, heroes and slogans
○ Increase employee commitment to the values and strategy of a company
● Managers who want to create and maintain strong organizational cultures often emphasize
selection and socialization of employees

Subcultures: develop to reflect the common problems, goals and experiences that members of a team,
department or other unit share
● May be so different in an organization that employees may be feeling something completely
different
● Typically include the basic values of the dominant organizational culture and additional values
unique to members of the subculture
○ But, these subculture differences can lead to conflicts between departments, especially
in organizations that do not have strong organizational cultures
● When they become too strong and outweigh the corporate cultural values, leads to conflict and
hurts organizational performance

Organizational Culture, Learning, Performance

● Culture can play an important role in creating an organizational climate that enables learning
and innovative response to challenges, competitive threats or new opportunities
● Strong culture that encourages adaptation and change enhances organizational performance by
energizing and motivating employees, unifying them around common mission and shaping and
guiding employee behavior so that everyone's actions are aligned with strategic priorities
● Strong cultures that do not encourage adaptation can hurt the organization
○ Danger for many successful organizations is that the culture becomes set and they fail to
adapt as environment changes
■ Many become victim of their success fro their values and ideas that got them
there
 ● Strong adaptive cultures have certain values
○ Whole is more important than the parts and boundaries between parts are minimized
■ Reduces boundaries within the organization and other companies
■ Leads to free flow of people, ideas and information allows coordinated action
and continuous learning
○ Equality and trust are primary values
■ Culture creates a sense of community and caring for one another
■ Creates climateof safety and trust that allows experimentation, frequent
mistakes and learning
○ Culture encourages risk taking, change and improvement
■ Challenge the status quo
● In adaptive cultures, managers are concerned with customers and employees as well as internal
processes and procedures that bring about useful change
○ Behaviour flexible, managers initiate change when needed
● In maladaptive cultures, managers are more concerned about themselves, discourage risk taking
and change

Adaptive vs Maladaptive Organizational Cultures

Ethical Values and Social Responsibility - NOT ON MIDTERM

Sources of Individual Ethical Principles
Ethics: the code of moral principles and values that governs the behaviors of a person or group with
respect to what is right and wrong
● CONTEXT SPECIFIC AND ALWAYS EVOLVING AND CHANGING
● Managers values can be shaped by their background and experiences
● Ethics are personal and unique to each individual
● Set standards as to what is good or bad in conduct and decision making
● Laws, as well as unwritten societal norms and values, shape the local environment within each
individual acts
○ Community, family and place of work
● Each person ethical stance is a blending of their historical, cultural, societal and family
backgrounds and influences
○ Important to look at individual ethics because ethics always involved an individual action
● IN an organization, an individual's ethical stance may be affected by peers, subordinates and
supervisors as well as the culture
 ○ Culture has influence on individual choices and can support and encourage ethical
actions or promote unethical behaviour

Managerial Ethics and Social

Responsibility
Rule of law: arises from a set of
codified principles and
regulations that describe how
people are required to act, that
are generally accepted in society and that are enforceable in the courts
● Ethical standards for the most part apply to behavior not covered by law
● Unethical conduct more prevalent than ever as more and more stories are coming out about
how bad it was

Managerial Ethics: principles that guide the decisions and behaviours of managers with regard to
whether they are right or wrong
● Managers make choices everyday about ethics
● Ethical dilemma: arises in a situation concerning right and wrong in which values are in conflict
○ Hard to identify right and wrong
○ Not easy to resolve, but top executives can aid the process by establishing
organizational values that provide people with guidelines for making the best decision
from moral standpoint

Social responsibility: extension of the idea of managerial ethics and refers to management's obligation
to make choices and take action so that the organization contributes to the welfare and interest of all
organizational stakeholders

Does it pay to be good?

● Scholars generally found small positive relationship between ethical and socially responsible
behaviour and financial results
● Long term organizational success relies largely on social capital
 ○ Means companies need to build a reputation for honesty, fairness and doing the right
thing
● People prefer to work for companies that demonstrate a high level of ethics and social
responsibility

Sources of Ethical Values in

Organizations
● Ethics is both an organizational
and individual matter
● Standards for ethical conduct
are embodied within each
employee and within the
organization itself
● Formal organizational systems
influence values and behaviours
based on reward systems
● Individual beliefs, moral
development influence personal
ethics

● Personal Ethics
○ Each of us have a set of
personal beliefs and
values
○ Personal values and moral reasoning that translate values into behaviour are important
for looking at ethical decisions
○ Historical, cultural, family, religion, community backgrounds of people shape their
principles and the way they carry out behaviour
■ It is up to the managers to make sure that people conform to the expectations
of good behaviour defined by both colleagues and society
○ Managers have an ethical framework for their decisions
■ Utilitarian theory: argues that ethical decisions should be made be made to
generate the greatest benefits for largest number of people
● Consistent with business decisions because costs and benefits
calculated in dollars
■ Personal liberty: argues that decisions should be made to ensure the greatest
possible freedom of choice and liberty for individuals
● Liberties = freedom to act the way you choose
■ Distributive justice: holds that moral decisions are those that promote equity,
fairness and impartiality with respect to the distribution of rewards and
administration of rules
● Organizational Culture
 ○ Business practices also reflect the values, attitudes and behaviour patterns of an
organization’s culture
○ To promote ethical behavior in workplace, companies should make ethics an integral
part of organizational culture
■ Has a positive impact on individual ethics because it helps to guide employees in
making daily decisions
● Organizational Systems
○ Includes the basic architecture of the organization
■ Whether ethical values are in policies and rules
■ Whether an explicit code of ethics available and issues to members
■ Whether rewards, praise, attention are linked to ethical behavior
■ If ethics is a consideration in selection and training of employees
● External Stakeholders
○ Influenced by group outside the organization that have a stake in the organizations
performance
○ Ethically and socially responsible decision making recognizes that the organization is a
part of a larger community and considers the impact of a decision or action on all
stakeholders
■ Need to operate within government laws
■ environmentalism , sustainable development

How Leaders Shape Culture and Ethics

● The CEO and other top managers must be committed to specific values and demonstrate
constant leadership in tending and renewing the values
○ Values communicated by speeches, company publications, policy statements and
personal actions
● Top leaders responsible for creating and sustaining a culture that emphasizes the importance for
ethical behaviour for all employees everyday
○ When CEO engages in unethical practices or fails to take firm and decision action in
response to actions of others, filters through organization
● Values Based Leadership
○ Relationship between a leader and followers that is based on shared, strongly
internalized values that are advocated and acted upon by the leader
○ Leaders influence cultural and ethical values by clearly articulating a vision for
organizational values that employees can believe in, communicating the vision
throughout the organization and institutionalizing the vision through everyday
behaviour, rituals, ceremonies and symbols, organizational systems and policies
○ Leaders engender a high level of trust and respect from employees not only their stated
values but on their courage, determination and self sacrifice they demonstrate in
upholding them
■ Lead employees to a sense of purpose when carrying out organizational purpose
 ■ Make sacrifices for stake of values, which leads employees to do so
● Formal Structures and Systems
○ Structure - managers can assign responsibility for ethical values to a specific position
■ Ethics committee: cross functional group of executives who oversee company
ethics, provides rulings and disciplines wrongdoers
■ Chief Ethics officer: high level company executive who oversees all aspects of
ethics
● Establishing ethical standards and communicating them, setting up
training programs, supervising problems and advising managers on
ethical aspects of corporate decisions
■ Ethics Hotlines: employees can use to seek guidance and report questionable
behaviour
○ Disclosure mechanisms - policies and procedures used to support and protect
whistleblowers
■ Whistleblowing: employee disclosure of illegal, immoral or illegitmaget
practices on part of the organization
● Must protect them and try to get them to stay within the organization,
not be affected by their peers
● Many suffer personal and financial loss
○ Code of ethics
■ Formal statement of the ompany’s values concerning ethics and social
responsibility
■ Clarifies to the employee what the company stands for the and expectations for
employee conduct
○ Training programs

Social Audit: measures and reports the ethical, social and environmental impact of a company’s
operations
● Supports and reinforces company ethics objectives on global scale

Chapter 11: Innovation and Change

● Today’s organizations must design themselves to innovate and change, not only to prosper but
also to survive in the world of increased competition
○ Powerful sources associated with advancing tech, international economic integration,
maturing of domestic markets and shift to capitalism have brought about a globalized
economy with both new threats and opportunities
■ To recognize and manage threats and take advantages of opportunities, today’s
organizations undergoing major changes
○ Today’s organizations face need for dramatic strategic and cultural change and for rapid
and continuous innovations in tech, services, products and processes
● Innovate or Be Disrupted
○ Powerful environmental forces drive the need
for major organizational change
■ Tech advances, changing markets,
shifting social attitudes, social media,
digital information revolution
○ Organizations can respond to environmental
shifts with 3 main types of change and
innovation
■ Episodic change: occurs occasionally,
with periods of relative stability
● Managers can respond with
technical, product or
structural innovations as
needed
■ Continuous change: happen more often due to rapidly changing environment
● Occurs frequently, with fewer and shorter periods of stability
● Managers embrace change as part of the organizational process, using
R&D to buld new products and services to serve innovations to meet
shifting needs
■ Disruptive innovation: innovations in products or services that typically start
small and end up completing replacing an existing product or service
technology for producers and consumers
● Companies typically win big, create new or dominate market
● 3 stages…
○ Some new or unexpected technology, product or service
emerges on a small scale that poses a potential threat to
established companies
○ Established companies ignore these small potential threats,
wanting to hold on to their current business models
○ Previously unnoticed companies, products and services grow
into a sizable force that is wrecking the established business
model
● Companies in many industries experiencing it because of rapid changes
in technology
● Incremental vs Radical Change
○ Changes used to adapt to the environment can be evaluated according to scope (extent
to which they are incremental or radical for an organization)
○ Incremental change: a series of continual progressions that maintain the organization’s
general equilibrium and often affect only one organizational part
■ Through normal structure and management processes
■ Technology improvements
 ■ Product improvements
■ Less risk, consumers adapt
■ Ex: implementation of sales teams in the marketing department
■ Management
○ Radical change: breaks the frame of reference for the organization, often transforms
the entire organization
■ Creates new structure and management
■ Breakthrough technology
■ New products create new markets
■ More risky, need consumer adoption
■ Ex: shifting the entire organization from a vertical to horizontal structure
■ Growing emphasis on the need for radical change because of today’s
unpredictable environment
■ Management
● Strategic Types of Change
○ 4 main types of change managers can focus on to achieve strategic advantage
■ Changes of…
● Products and services
● Strategy and structure
● Culture
● Technology
■ 4 of them are interdependent - change in one often means a change in another
○ Product and service changes pertain to the product or service outputs of an
organization
■ New products include small adaptations of existing products or entire new
product lines
■ New products and services designed to increase market share or to develop
new markets, customers or clients
■ Usually come from bottom up
■ Incremental Changes but can be radical
○ Strategy and structure changes pertain to the administrative domain in an organization
■ Administrative domain involves the supervision and management of the
organizationi
■ Changes include
● Change in org structure, strategic management, policies, reward
systems, labor relations
■ Usually mandated by top management
■ Radical Changes
● Strategy normally radical
● Structure could be either
■ Facilitated by mechanistic org design (dual core approach)
 ○ Culture change: changes in the values, attitudes, expectations, beliefs, abilities and
behaviour of employees
■ Pertains to changes in how employees think (changes in mindset)
■ Facilitated by organization development interventions
■ Radical change
○ Technology changes: changes in an organization’s production process, including its
knowledge and skill base that enable distinctive competence
■ Changes designed to make production more efficient or to produce greater
volume
● Involve the techniques for making new products or services
○ Work methods, equipment and workflow
■ Incremental Change But Can be radical

Elements for Successful Change

Organizational change: the adoption of a new idea or behaviour by an organization
Organizational innovation: the adoption of an idea or behaviour that is new to the organization’s
industry, market or general environment
● Change that creates a new dimension for performance
● First organization to introduce a new product is considered the innovator, and those that coot
are considered to adopt changes
○ Innovations typically assimilated into an organization through series of steps
■ Org members first become aware of innovation, evaluate its appropriateness
and then evaluate and choose the idea
● 10 faces of innovation

● For a change to be successfully implemented, managers must ensure each element occurs in the
organization
○ If one of the elements is missing, the change process will fail

Required elements for successful change

● Ideas
○ No company can remain competitive without new ideas
■ Change is the outward expression of those ideas (new way od doing things)
 ○ Can come from within or from outside the organization
○ Creativity: the generation of novel ideas that may meet perceived needs or respond to
opportunities
■ Need to spur internal creativity
● Ways to do so…
○ Increase diversity within organization
○ Ensure employees have opportunities to interact with people
different from themselves
○ Give employees time and freedom for experimentation
○ Support risk taking and making mistakes
● Needs
○ Ideas not considered unless there is a perceived need for change
■ Perceived need for change occurs when managers see a gap between actual
performance and desired performance
● Adoption
○ Occurs when decision makers choose to proceed with a proposed idea (key managers
and employees agree to support change)
● Implementation
○ Occurs when organization members in fact use a new idea, technique or behaviour
■ Materials and equipment acquired, workers trained
○ Most difficult step, until people use the idea there will be no change
● Resources
○ Human energy and activity required to bring about change (also need time)

Technology Change
● Any company today that isn’t continually developing, acquiring or adapting new technology will
likely be out of business in a few years
● To attain both aspects of technological change, many organizations use the ambidextrous
approach
○ Instead of strictly organic or strictly mechanistic structures
○ Challenge for managers is to create both organic and mechanistic conditions within the
organization to achieve both innovation and efficiency
● The conundrum slide
○ Want organic structure when you are focusing on promoting new ideas, and efficiency
when focusing on implementing the new ideas (functional or divisional)
● The Ambidextrous Approach/Organization
○ Used to incorporate structures and management processes that are appropriate to
both the creation and implementation of innovation (both organic and efficiency)
■ Look at the organizational design elements that are important for exploring new
ideas versus the design elements that are most suitable for exploiting current
capabilities
● Explosration means encouraging creativity and developing new ideas
● Exploitation means implementing those ideas to produce routine
products
■ Organization can be designed to behave in an organic way for exploring new
ideas and in a mechanistic way to exploit and use those ideas
○ Two parts of the innovation process
■ Idea generation: coming up with new ideas for products and services
■ Idea conversion: efforts to convert those ideas to product development
processes
○ Innovative organizations recognize that many useful ideas come from people who are
doing work daily, so they want to support innovation by implementing systems and
processes that encourage bottom up flow of idea
● Techniques for Encouraging Technology Change
○ Switching Structures
■ Means an organization creates an organic structure when such a structure is
needed for the initiation of new ideas
● Establish organic conditions for developing new ideas in the mindset of
more mechanistic conditions for implementing and using those ideas
○ Separate Creative Departments
■ Creative departments: initiate change, are organically structured to facilitate
the generation of new ideas and techniques
● Research and development, design, engineering
■ Idea incubator: provides a safe harbour where ideas from employees
throughout the organization can be developed without interference from
company politics
● Gives people throughout org a place to go rather than having to shop a
new idea all over the company hoping someone will pay attention
○ Venture Teams
■ Technique used to give free rein to creativity within organizations
● Like a small company within a large company
■ Often given a separate location and facilities so that are not constrained by org
procedures and bureaucracy
■ Skunkworks: separate, small, informal, highly autonomous and often secretive
group that focuses on breakthrough ideas for the business
■ New-Venture fund: variation of the venture team concept, provides financial
resources for employees to develop new ideas, products or businesses
○ Corporate Intrapreneurshiop
■ Attempts to develop an internal entrepreneurial spirit and strcutrure that will
provide a higher than average numer of innovations
● May involve the use of creative departments and new venture tams, but
also attempts to release creative energy of ALL employees in an
organization
■ ions: provide the time and energy to make things happen
● Important outcome of corporate intrapreneurship
● Fight to overcome resistance to change and to convince others of the
merit of an idea
● Not necessarily just in org, can come from regular customers
● Two types
○ Technical/product champion: person who generates or adopts
and develops an idea for a technological innovation and is
devoted to it, even to the extent of risking position or prestige
○ Management champion: acts as a supporter and sponsor to
shield and promote an idea within an organization
 ■ Sees the potential application, and has the authority to
give the idea a fair change and allocate resources to it

New Products and Services

● Special case of innovation because they are used by customers outside the organization
○ Since new products are designed for sale in the environment, uncertainty about the
suitability and success of an innovation is very high
● New Product Success Rate
○ 80% of new products fail upon introduction and another 10% disappear within 5 years
○ To be successful, new product had to pass 3 stages of development
■ Technical completion
■ Commercialization
■ Market success
● Reasons for New Product Success
○ Successful innovating companies had a much better understanding of customer needs
and paid much more attention to marketing
○ Successful innovating companies made more effective use of outside technology and
advice, even though they did more work in house
○ Top management support in the successful innovating companies was from people who
were more senior and had greater authority
○ Distinct patterns of..
■ Tailoring innovation to customer needs
■ Making effective use of technology
■ Having influential top managers support the project
■ Horizontal coordination
● Horizontal Coordination Model
○ Model of 3 components of organizational designed needed to achieve new production
innovation
■ Departmental specialization
■ Boundary spanning
■ Horizontal linkages
○ Specialization
 ■ Key departments in new product development are R+D, marketing and
production
● Specialization means each of the personnel in these three departments
are highly competent at their own tasks
● Differentiated from each other and have skills, goals and attitudes
appropriate for their specialized functions
○ Boundary Spanning/Full Time Integrator
■ Each department involved with new products has excellent linkage with
relevant sectors in the external environment
○ Horizontal coordination
■ Horizontal coordination increases both the amount and variety of information
for new product development, enabling the design of products that meet
customers needs and circumventing manufacturing and marketing problems
■ Technical, marketing and production people share ideas and information
● Research people inform marketing of new technical developments to
learn whether the developments are applicable to customers
● Marketing people provide customer complaints and information to R&D
for them to consider when designing new products
● People from both RandD and marketing coordinate with production
because new products have to fit within production capabilities
■ Decision to launch a new product is a joint decision among all 3 departments
● Open Innovation and Crowdsourcing
○ Open Innovation: extending the search for and commercialization of new products
beyond the boundaries of the organization and even beyond boundaries of the industry
■ Collaboration with other firms and with customers/outsiders can provide many
benefits
● Faster time to market
● Lower product development costs
● Improved quality
● Better adaptation of products to customer needs
● Strong internal coordination across departments and knowledge sharing
mechanisms
○ Crowdsourcing: approach to open innovation that solicits ideas, services, or information
from online volunteers instead of traditional employees
■ Gives companies a chance to integrate external with internal input into the front
end of new product development
● Achieving Competitive Advantage: Need for Speed
○ Rapid development of new products is becoming major strategic weapon in shifting
international marketplace
■ To remain competitive, companies are learning to develop ideas into new
products or services incredibly quickly
 ● Models and processes designed to get people working together
simultaneously on a project rather than in sequence
○ Time-based competition: means delivering products and services faster than
competitors, giving companies a competitive edge
■ Fast-cycle teams: multifunctional/national team that works under stringent
timelines and is provided with high levels of company resources and
empowerment to accomplish an accelerated product development project
● A way to support highly important projects and deliver products and
services faster than their competition

Strategy and Structure Change

● All organizations need to make changes in their strategies, structures and administrative
procedures from time to time
○ Organizations across world have faced the need to make radical changes in strategy,
structure and management processes to adapt to new competitive demands
● Strong shifts toward horizontal and virtual structures, decentralizing decision making, cutting
layers of management
● Want to make sure everyone is on board
● Dual Core Approach
○ Dual Core approach: compares administrative and technical changes
■ Administrative changes: pertain to the design and structure of the organization
itself
● Restructuring, downsizing, teams, control systems, information systems,
departmental grouping
● Occur less frequently than technical changes
● Occur in response to different environmental sectors and follow
different internal process than technology based changes
● Administrative core: above technical core in hierarchy
○ Responsibilities include the structure, control and coordination
of the organization itself
■ Concerns the environmental sectors of government,
financial resources, economic conditions, human
resources and competitors
■ Technical changes: changes in production techniques and innovation
technology for new products
● Technical core: concerned with the transformation of raw materials into
organizational products and services, involves the environmental
sectors of customers and technology
○ Point of dual core approach is that many organizations must adopt frequent
administrative changes and need to be structured differently from organizations that
rely on frequent technical and product changes for competitive advantage
 ● Organizational Design for Implementing Administrative Change
○ Mechanistic organizational structure is best for frequent administrative changes
■ Changes in goals, strategy, structure, control systems and human resources
○ Organizations that successfully adopt many administrative changes often have larger
administrative ratio, are larger in size and are centralized and formalized compared with
organizations that adopt many technical changes
○ Organizations with more technical changes involve more organic structure

PARAGRAPH on PAGE 438, see from lecture what most important

DUAL CORE APPROACH

Culture Change
● Can’t make any changes in strategy, structure, technologies and products without changing
people as well
● Changing organizational culture fundamentally shifts how work is done in an organization and
can lead to renewed commitment and empowerment of employees and a stronger bond
between the company and its customers
● MOST DIFFICULT CHANGE
● Forces for Culture Change
○ Re-engineering and Horizontal Organizing
■ Re-engineering: redesigning a vertical organization along its horizontal
workflows
● Changes the way managers and employees need to think about how
work is done
● Requires greater focus on employee empowerment, collaboration,
information sharing and meeting customer needs
■ Horizontal organization: managers and frontline workers need to understand
and embrace concepts of teamwork, empowerment and cooperation
● Managers view workers as colleagues, have more mutual trust and risk
taking
○ Diversity
○ The learning organization
■ Involves breaking down boundaries both within and between organizations to
create companies that are focused on knowledge sharing and continuous
learning
■ Structures become horizontal, involve empowered teams working directly with
customers
● Few rules and procedures, knowledge and control of tasks given to
employees
■ Cannot exist without a culture that supports openness, equality, adaptability
and employee participation
● Organization Development Interventions for Culture Change
○ Organization development (OD): focuses on the human and social aspects of the
organization as a way to improve the organization’s ability to adapt and solve problems
■ Emphasizes values of human development, fairness, openness, freedom from
coercion and individual autonomy
■ Not a step by step procedure to solve a specific problem, but a process of
fundamental change in the human and social systems of the organization
■ Uses knowledge and techniques from behavioural sciences to create a learning
environment through
● Increased trust
● Open confrontation of problems
● Employee empowerment
● Knowledge and info sharing
 ● Design of meaningful work
● Cooperation and collaboration between groups
■ TO be successful, senior management must see need for OD and provide visible
support for change
○ Techniques for improving people skills through OD
■ Large group intervention: brings together participants from all parts of the
organization (even key stakeholders outside org) in an off site setting to discuss
problems or opportunities and plan for change
● Might involved 50fto to 500 people and last for several days
● Limits distractions, enabling participants to focus on new ways of doing
things
■ Team Building: promotes the idea that people who work together cna work as a
team
● Can be brought together to discuss conflicts, goals, the decision making
process, communication, creativity and leadership
○ Team can plan to overcome problems and improve results
■ Interdepartmental activities: representatives from different departments
brought together in mutual location to expose problems or conflicts, diagnose
causes and plan improvements in communication and coordination

Strategies for Implementing Change

● Leadership for Change
○ Leaders must develop the personal qualities, skills and methods needed to help their
companies remain competitive
○ Managers ust turn organizations into change leaders by using the present to actually
create the future
■ Breaking industry rules, creating new market space, routinely abandoaning
outdated products, services and processes to free up resources to build for the
future
○ Transformational leadership: leaders enhance organizational innovation both directly
(creating a compelling vision) and indirectly (creating an environment that supports
exploration, experimentation, risk taking, sharing of ideas)
■ Need to have employees devote time and energy to reach new goals, have
methods to help with them coping with chaos and tension associated with
change
○ Leaders build organization wide commitment by taking employees through 3 stages of
the change commitment process
■ Preparation
● Employees hear about the change through memos, meetings, speeches
or personal contact and become aware that the change will directly
affect their work
■ Acceptance
 ● Leaders should help employees development an understanding of the
full impact of the change and the positive outcomes with it
■ Commitment
● Steps of installation and institutionalization
● Installation: trial process for the change, gives leaders an opportunity to
discuss problems and employee concerns
● Institutionalization: employees view the change as not something new
but as normal and integral part of organizational operations
● Barriers to Change
○ It is understandable that people resist change, and many barriers to change exist at
individual and organizational levels
○ Excessive focus on costs
■ Management may possess mindset that costs are all important and may fail to
appreciate the important of a change NOT focused on costs
○ Failure to perceive benefits
■ Education may be needed to help managers and employees perceive more than
positive than negative aspects of the change
○ Lack of coordination and cooperation
○ Uncertainty avoidance
○ Fear of Loss (power, status, position)
● Techniques for Implementation/Leading Change
○ Establish sense of urgency for change
○ Establish coalition to guide the change
○ Create vision and strategy for change
○ FInd an idea that fits the need
○ Develop plans to overcome resistance to change
■ Alignment with needs and goals of users
■ Communication and training
■ Environment that creates psychological safety
■ Participation and involvement
■ Forcing and Coercion
○ Create change teams
○ Foster idea champions

**REVIEW TEXTBOOK ON LISTS ABOVE TO SEE ANY ADDED POINTS I AM JUST

LAZY**

Chapter 13: Decision Making Processes in Organizations

Organizational decision making: process of identifying and solving process
● 2 main stages
○ Problem identification stage: information about environmental and organizational
conditions is monitored to determine is performance is satisfactory and to diagnose the
cause of shortcomings
○ Problem solution stage: occurs when alternative courses of action are considered and
one alternative is selected and implemented
● Organizations decisions vary in complexity and can be categorized into two categories
○ Programmed decisions: repetitive and well defined, procedures exist for resolving the
problem
■ Characteristics
● Well structured because criteria of performance normally clear
● good info about current performance is available
● alternatives easily specified
● there is relative certainty that the chosen alternative will be successful
■ Examples
● Decision rules
○ When to reimburse managers for travel expenses
● Adopt rules based on experience with programmed decisions
○ Nonprogrammed decisions: novel, ill structured and poorly defined, no procedure exists
for solving the problem
■ Characteristics
● Used when an organization has not seen a problem before and may not
know how to respond
● Clear cut decision criteria do not exist
● Alternatives are fuzzy
● Uncertainty about whether a proposed solution will solve the problem
● Few alternatives can be developed, so single solution is custom tailored
to the problem
■ Involve strategic planning because uncertainty is significant and decisions are
complex
■ Wicked decisions: particularly complex nonprogrammed decisions
● Simply defining the problem can turn into a major task
● Associated with manager conflicts over objectives and alternatives,
rapidly changing circumstances and unclear linkages among decision
elements
● Managers dealing with them may hit on a solution that merely proves
they failed to correctly define the problem to begin with
● Messes: according to Russell Ackoff, involve highly interconnected problems and constantly
changing, interdependent circumstances
○ A wicked problem
○ Even a good choice can produce a bad outcome
Individual Decision Making
● Can be described in two ways
○ Rational approach: suggests how managers should try to make decisions
○ Bounded rationality perspective: describes how decisions actually have to be made
under severe time and resource constraints
■ An ideal that managers may work toward but never reach
● Rational Approach - systematic analysis
○ Stresses the need for systematic analysis of a problem followed by choice and
implementation in a logical, step by step sequence
○ When managers have deep understanding of the rational decision making process, it
can help them make better decisions even when there is lack of clear information
○ According to approach, decision making broken down into 8 sequential steps
■ Problem identification stage…
● Monitor the decision environment
● Define the decision problem
● Specify decision objectives
● Diagnose the problem
■ Problem solution stage…
● Develop alternative solutions
● Evaluate alternatives
 ● Choose the best alternative
● Implement the chosen alternative
○ Used when organizations are facing little competition and are dealing with well
understoodf issues
● Bounded Rationality perspective
○ Used when decisions are nonprogrammed, ill defined and piling on top of another
■ May have to take shortcuts by relying on intuition and experience
○ Deviations from rational approach explained by the bounded rationality perspective
■ Managerial decision making shows that often managers are unable to follow an
ideal procedure
● Time pressures, large number of internal and external factors make
systematic analysis not possible
○ Managers only have so much time and mental capacity
○ Constraints and Trade offs
■ Not only are lare organizational decisions too complex to fully comprehend, but
several other constraints put on decision maker
● For many decisions the circumstances are ambiguous, requiring social
support, shared perspective on what happens, and acceptance and
agreement
■

■ Managers often also make decisions within the context of trying to please
others above them
■ Personal constraints - decision style, work pressure, desire for prestige or simple
feelings of insecurity may constrain the search for alternatives or the
acceptability of an alternative
○ Role of Intuition
■ Intuitive decision making: experience and judgment rather than sequential logic
or explicitly reasoning are used to make decisions
 ● Intuition not arbitrary or irrational because it is based on years of
practice and hands on experience, often stored in the subconscious
● When managers use intuition to help solve organizational issues, more
rapidly perceive and understand problems, get a gut feeling about
which alternative will solve a problem (Speeds up decision making
process)
● In a situation of great complexity, previous experience and judgment
are needed to incorporate intangible elements at both the problem
identification and solution stage
○ Managers may make a decision based on what they sense to be
right rather than what they can document with hard data

Cognitive Biases
● Severe errors in judgment that all humans are prone to and typically lead to bad choices

● Being influenced by initial impressions

○ Anchoring effect: mind often gives disproportionate weight to the first information it
receives
■ Initial impressions, statistics or estimates act as an anchor to our subsequent
thoughts and judgment
● Seeing what you want to see
○ People often look for information that supports their existing point of view and avoid
information that contradicts it
■ People tend to give too much weight to supporting information and too little to
information that conflicts with established viewpoints
● Being influenced by emotions
○ Organizations managers make better decisions when they take emotions out of the
decision making process
● Being overconfident
○ Can be dangerous when making risky decisions
● Escalating commitment
○ Organizations often continue to invest time and money in a solution despite evidence
that it is not working
● Fearing failure or loss
○ Loss aversion: people hate losing even more than they enjoy winning
■ Because of thai, fear of failure is more powerful than the opportunity for
success when making a decision
○ Prospect theory: suggests that the threat of a loss has a greater impact on a decision
than the possibility of an equivalent gain
■ Most managers have a tendency to analyze problems in terms of what they lose
rather than what they might gain
 ■ When faced with a specific decision, they overweight the value of potential
losses and underweight value of potential gains
■ Can be tied to escalating commitment, because managers don’t want to lose ant
any cost
● Being influenced by the group
○ Groupthink: tendency of people in groups to suppress contrary opinions
■ When people face groupthink, desire for harmony outweighs concerns over
decision quality
■ Group members emphasize maintaining unit rather than realistically channeling
problems and alternatives
■ Reluctant to criticize others and censor personal opinions, go with the group
bias
● Change Blindness
● Inattentional Blindess

How managers can avoid cognitive bias…

● Evidence based management: means a commitment to make more informed and objective
decisions based on the best available fats and evidence
○ Being aware of your biases, seeking and examining evidence with rigor
○ Managers do by being careful and thoughtful rather than carelessly relying on
assumptions, past experiences, rules of thumb or intuition when data can be found
○ Particularly useful for overcoming the bias or loss aversion and problem of escalating
commitment
■ By seeking evidence managers can try to avoid relying on faulty assumptions
■ Decisions makers can also do a post mortem of decisions to evaluate what
worked, what didn't and how to do things better
● Always questioning and encouraging others to question their knowledge
and assumptions
● Dissent and Diversity
○ Primary way to keep people away from cognitive biases is to create an organizational
environment in which people feel free to speak up, disagree with others and challenge
ideas
■ Dissent and diversity help in complex situations because they open decision
process to wide variety od ideas and opinions rather than groupthink
○ Make sure group us diverse in terms of age and gender, race, functional area of
expertise, experience
○ Devil’s advocate: has the role of challenging the assumptions and assertions made by
the group
■ May force the group to rethink its approach to a problem and avoid reaching
premature decisions
○ Ritual dissent: puts parallel teams to work on the same problem in a large group
meeting
 ■ Each team has spokesperson to say finding to another team, and the other team
proceeds to rip into them
■ By the end, all teams have spoken and been criticized to come to conclusion

Organizational Decision Making

● Organizations composed of managers who make decisions using rational and intuitive processes,
but mant organizational decisions involve several managers
○ Problem identification and solution involve many departments, viewpoints, etc
● Processes by which decisions are made in organizations are influenced by a number of factors
but MAINLY
○ Organizations own internal structures
○ Degree of stability or instability of the external environment
● 4 main types of organizational decision making processes
○ Management science approach
○ Carnegie model
○ Incremental decision process model
○ Garbage can model
● Management science approach: analogue to the rational approach by individual managers
○ Use statistics and numbers to make decisions
○ No human element in the decision making
○ Came into being during second world war, really great for military problems
○ Using mathematical models and statistical techniques to problems that were beyond
ability of individual decision makers
○ Excellent device for organizational decision making when problems are analyzable and
when the variables can be identified and measured, and structured in a logical way
■ Can accurately and quickly solve problems tha have too many explicit variables
for human processing
■ Increasingly sophisticated computer tech and software allowing for it to cover
more problems than ever before
○ Examples of problems solved
■ Finding right spot for church camp
■ Test marketing the first of a new family of products
○ Has produced many failures though
■ Sometimes need some human judgment
○ Problems
■ Quantitative data are not rich and do not convey tacit knowledge
● May not have the quantitative data
● Informal cues that indicate the existence of problems have to be sensed
on a more personal basis by managers
● Most sophisticated math models are of no value if the important factors
cannot be quantified and included in the model
○ Role is to supplement manager decision making
 ■ Quantitative results can be given to managers for discussion but need managers
interpretation through opinions, judgments and intuition
● Carnegie Model: helped formulate the bounded rationality approach to individual decision
making
○ Research indicated that organization level decisions involved many managers and that a
final choice was based on a coalition among those managers
■ Coalition: alliance among several managers who agree about organizational
goals and problem priorities
● Have common goal
○ Management coalitions need during decision making for two reasons
■ Organizational goals are often ambiguous, and operative goals of departments
often inconsistent
● Leads to managers to disagree about problem priorities, must bargain
about problems and build a coalition about which problems to solve
■ Individual managers intend to be rational but function with human cognitive
limitations and other constraints
● Do not have the time, resources or mental capacity to process all
information relevant to a decision
● Limitations lead to coalition building behavior
○ Managers talk to each other and exchange viewpoints to reduce
ambiguity
○ Implications of process of coalition formation on organizational decision behaviour
■ Decisions are made to satisfice rather than to optimize problems solutions
● Satisficing: organizations accept a satisfactory rather than a maximum
level of performance, enabling them to achieve several goals
simultaneously
■ MAnagers are concerned with immediate problems and short run solutions
● Problemistic search: managers look around in the immediate
environment for a solution to quickly resolve a problem
○ Managers dont expect a perfect solution when situation is ill
defined and filled with conflict
○ Managers want to adopt the first satisfactory solution that
emerges
○ Discussion and bargaining especially important in problem identification stage
■ Unless coalition members perceive a problem, action will not be taken
 ● Model points out that building agreement through a managerial coalition is major part
of organizational decision making
○ Organizations suffer when managers are unable to build a coalition around goals
and problem priorities
● Discussion and bargaining are time consuming, so search procedures are usually simple
and selected
○ When problems are programmed (clear and have been seen before)
organization will rely on previous procedures and routines
○ Use discussion and bargaining for nonprogrammed decisions
● Model useful at the problem idieficiation stage
○ Coalition of key dept managers also important for smooth implementation of a
decision

● Incremental Decision Process Model: places less emphasis on the political and social factors
described in the Carnegie model, but tells more about the structured sequences of activities
undertaken from the discovery of a problem to its solution
○ Mintzbeerg identified 25 decisions made in organizations and traced the events
associated with these decisions from beginning to end
○ One discovery from research about nonprogrammed and custom designed solutions is
that major organizational choices are usually a series of small choices that combine to
produce the major decisions
■ Organiziations move through several decision points and may hit barriers along
the way
● Decision interrupts: barriers in decision, may mean org has to cycle
back through a previous decision and ty something new
○ Each box below is a possible step in the decision sequence
■ Steps take place in 3 major decision phases
 ● Identification
● Development
● Selection

● Identification Phase
○ Begins with recognition (one or more managers become aware of a problem
and the need to make a decision, stimulated by problem or opportunity)
○ Second step is Diagnosis (more information gathered if needed to define the
problem and situation)
■ May be systematic or informal, depending on severity of the problem
● Development Phase
○ Solution is shaped to solve the problem defined in the identification phase
○ Takes one of two directions
■ Search procedures may be used to seek out alternatives within the
organization's repertoire of solutions
● To conduct search, org participants may look into their own
memories, talk to other managers or examine the formal
procedures of the organization
● Screen routine: used when search is expected to generate more
ready made alternatives than can be practically evaluated
 ○ Screening: superficial routine, more concerned with
eliminating what is infeasible than with defining what is
appropriate
■ Design a custom solution
● Happens when the problem is novel so that previous experience
has no value
● Through trial and error screening process, a custom designed
alternative will emerge
● Selection Phase
○ Occurs when the solution is chosen
■ Evaluation of the single alternative that seems feasible
○ Evaluation and choice accomplished in 3 ways
■ Judgment form
● Final choice falls upon a single decision maker, and the choice
involves judgment based on experience
■ Analysis evaluation
● Alternatives are evaluated on more systematic basis
■ Bargaining
● Selection involves a group of decision makers, each of whom
may have a different stake in the outcome
○ May lead to conflict
○ Leads to discussion and bargaining until coalition
formed
○ When decision formally accepted by the organization, authorization takes place
■ Decision passed up to the hierarchy responsible
● Dynamic Factors
○ Lower part of the chart above, lines running back toward the beginning of the
decision process
○ Organizational decisions don’t follow orderly progression, minor problems arise
that force them to go back to earlier stage
■ Decision interrupts
○ Can be caused by problems of timing, politics, disagreement, inability to identify
proper solution, sudden appearance of new alternative

The Learning Organization

● Some organizations that are being affected by the rapidly changing external business
environment are shifting toward learning organization concept
○ Organizations characterized by lots of uncertainty at both problem identification and
solution stages
● Two approaches to decision making have evolved to help managers cope with the uncertainty
○ Combine the carnegie and incremental process models
○ Garbage can model
● Combining the Incremental Process and Carnegie Models
○ Carnegie description of coalition building is especially relevant for the problem
ideficiation stage
■ When issues are ambiguous, or if manasgers disagree about problem severity
you need to have discussion, negotiation and coalition
○ INcremental process model emphasizes the steps used to reach a solution
■ After managers agree on a problem, step by step process is a way of trying
various solutions to see what will work
● When problem solution unclear, trial and error solution may be
designed

● Garbage Can Model

○ Deals with the pattern or flow of multiple decisions within organizations
○ Helps managers think of the whole organization and the frequent decisions beinfg made
by managers throughout
○ Organized Anarchy
■ Describes an extremely organic organization that has extremely high uncertainty
■ Organized anarchies do not realty on the normal vertical hierarchy of authority
and bureaucratic decision rules
■ Result from 3 characteristics
● Problematic preferences
○ Goals, problems, alternatives and solutions are ill defined
○ Ambiguity characterized each step of a decision process
● UNclear poorly understood technology
○ Cause and effect relationships within the organization are
difficult to identify
● Turnover
○ Participation in any given decision will be fluid and limited
■ Characterized by rapid change and collegial, nonbureaucratic environment
○ Streams of Events
 ■ Unique characteristic of garbage can model is that the decision process is not
seen as a sequence of steps
● An idea may be proposed as a solution when no problem specified
● Problem may exist and never generate a solution
■ Decisions are the outcome of independent streams of events within the
organization
■ 4 streams relevant to organizational decision making
● Problems
○ Points of dissatisfaction with current activities and performance
■ Represent a gap between desired performance and
current activities
○ May lead to a proposed solution or may not
● Potential solutions
○ Solution is an idea somebody proposed for adoption
■ Form a flow of alternative solutions through the
organization
○ Exist independent of problems
■ May be brought into org by new or current personnel
● Participatns
○ Org participants are employees who come and go through
organization
○ Vary widely in their ideas, perceptions of problems,
experiences, values and training
● Choice opportunities
○ Occasions when an organization usually makes a decision
■ Occur when the right mix of participants, solutions and
problems exists
● Match ups of problems and solutions often
result in decisions
■ With 4 streams, pattern of org decision making takes on a random quality
● Problems, solutions, particpants and choices all flow through the
organization
○ When they all connect at one point, decision may be made
about a problem
○ Some problems are solved, some are not (very complex)
○ Consequences
■ Solutions may be proposed even when problems don't exist
■ Choices are made without solving problems
■ Problems may persist without being solved
■ A few problems are solved
Contingency Decision Making Framework
● The use of an approach is contingent on the organization setting
● Two characteristics of organizations that determine the use of decision approaches
○ Problem consensus
○ Technical knowledge about the means to solve those problems
● Problem Consensus
○ The agreement among managers about the nature of a problem or opportunity and
about which goals and outcomes to pursue
■ Can range from complete agreement to complete disagreement
○ When managers agree, little uncertainty
■ Problems and goals of org are clear and so are standards of performance
○ When managers disagree, high uncertainty
■ Organization direction and performance expectations in dispute
 ○ Tends to be low when organizations are differentiated
■ Differentiation between departments in goals and attitudes in order to
specialize in specific environmental sectors can lead to more conflicting opinions
and disagreement
○ Very important in problem identification stage of decision making
■ When problems clear and agreed on, provide clear standards and expectations
for performance
■ When not agreed on, problem identification uncertain and management
attention must be focused on gaining agreement about goals and priorities
● Technical Knowledge about solutions
○ The understand and agreement about how to solve problems and reach organization
goals
■ Can be complete agreement to complete disagreement
○ When means and methods are well understood, appropriate alternatives can be
identified and evaluated
○ When means are poorly understood, potential solutions are ill defined and uncertain
■ Intuition, judgment and trial and error become basis for decisions

Contingency Framework
● Brings together the two dimensions of problem consensus and technical knowledge about
solutions
○ Each cell represents an organizational situation
● TOP LEFT (Certain, Certain)
○ Rational decision procedures used because problems are agreed on and cause-effect
relationships understood, little uncertainty
○ Decisions made in computational manner
○ Alternatives can be identified and best solution adopted through analysis and
calculations
● TOP RIGHT (Certain, Uncertain)
○ High uncertainty about problems and priorities, so bargaining and compromise used to
reach consensus
○ Priorities given to problems decided through discussion, debate and coalition building
○ Managers should use broad participation to achieve consensus in decision process
(collect opinions)
○ Carnegie model applies when there is dissension about org proble,s
■ When there is disagreement or conflict with constiuneices (regulators, suppliers,
unions), bargaining and negotiation required
● Bargaining strategy relevant to the problem identification stage of the
decision process, then can move on and support one decision
● BOTTOM LEFT (Uncertain, Certain)
○ Problems and standards of performance certain, but alternative technical solutions
vague and uncertain
○ Intuition will be decision guideline, rational approaches not effective because
alternatives cannot be identified and calculated (hard facts not available)
○ Incremental decision process model reflects trial and error on part of the org
■ Once problem identified, sequence of small steps enables the org to learn a
solution
■ As new problems arise, org may recycle back to earlier point and start over until
they have enough experience to solve the problem (eventually get the technical
knowledge to solve)
● BOTTOM RIGHT (Uncertain, Uncertain)
○ High uncertainty about both problems and solutions, most difficult for decision making
○ Manager can attempt to build a coalition to establish goals and priorities and use
judgment or intuition to solve problems
○ May also use additional techniques
■ Inspiration: an innovative, creative solution that is not reached by logical means
● Comes like a flash of insight, often based on deep knowledge and
understanding of a problem that the unconscious mind has had time to
mull over
■ Imitation: adopting a decision tried elsewhere in the hope that it will work in
this situation
○ Managers should encourage widespread discussion of problems and idea proposals and
eventually through trial and error will solve problems
Special Decision Circumstances
● Three issues of concern for today’s decision makers are coping with high velocity environments,
learning from decision mistakes and avoiding escalating commitment
● High Velocity environments
○ In some industries rate of competitive and technological change is so extreme that
market data is either unavailable or obsolete
○ Looks at understanding whether organizations abandon rational approaches or have
time for incremental implementation
○ Patterns of successful vs unsuccessful decisions

● To improve the chances of a good decision under high velocity conditions, some
organizations using technique calling point-counterpoint
○ Divides decision makers into two groups and assignments them different,
often competing, responsibilities
■ Groups develop and exchange proposals and debate options until they
arrive at common set of understandings and recommendations
● In the face of uncertainty, the more people who have a say in
the decision making, the better

● Decision Mistakes and Learning

○ Organizational decisions result in many errors, especially in conditions of great
uncertainty
■ If an alternative fails, the org can learn from it and try another alternative that
better fits the situation
● Each failure provides new information and insight to future decisions
 ○ Only by making mistakes can managers and organizations go through the process of
decision learning and acquire sufficient experience and knowledge to perform more
effectively in the future
● Escalating commitment
○ Persist in a course of action when it is failing
○ Two explanations why managers escalate commitment
■ Managers block or distort negative information when they are personally
responsible for a negative decision (don’t know when to pull the plug)
■ Failure to admit they made a mistake