8.1 What Kind of Organizational Culture Will You Be Operating In?

• Organizational culture is a system of shared beliefs and values that develops within an organization and guides the behavior of its members. Culture exists on two levels—invisible and visible. (1) The invisible level is the core culture, which consists of values, beliefs, and assumptions —beliefs and values so widely shared that they are rarely discussed. (2) The visible level is the observable culture, which is expressed in symbols, stories, heroes, and rites and rituals. A symbol is an object, act, quality, or event that conveys meaning to others. A story is a narrative based on true events, which is repeated—and sometimes embellished on—to emphasize a particular value. A hero is a person whose accomplishments embody the values of the organization. Rites and rituals are the activities and ceremonies, planned and unplanned, that celebrate important occasions and accomplishments in the organization's life.
• Culture, which can powerfully shape an organization's success over the long term, has four functions. (1) It gives members an organizational identity. (2) It facilitates collective commitment. (3) It promotes social-system stability. (4) It shapes behavior by helping employees make sense of their surroundings.

8.2 What Is an Organization?

• An organization is a system of consciously coordinated activities or forces of two or more people. There are three types of organizations classified according to the three different purposes for which they are formed: for-profit, nonprofit, and mutual-benefit. It has been proposed that business organizations not be judged on profits alone—that there is blended value, in which all investments are understood to operate simultaneously in both economic and social realms.
• Whatever the size of organization, it can be represented in an organization chart, a boxes-and-lines illustration showing the formal lines of authority and the organization's official positions or division of labor. Two kinds of information that organizations reveal about organizational structure are (1) the vertical hierarchy of authority—who reports to whom, and (2) the horizontal specialization—who specializes in what work.

8.3 The Major Elements of an Organization

• Organizations have seven elements: (1) common purpose, which unifies employees or members and gives everyone an understanding of the organization's reason for being; (2) coordinated effort, the coordination of individual efforts into a group or organization-wide effort; (3) division of labor, having discrete parts of a task done by different people; (4) hierarchy of authority, a control mechanism for making sure the right people do the right things at the right time; (5) span of control, which refers to the number of people reporting directly to a given manager; (6) authority and accountability, responsibility, and delegation. Authority refers to the rights inherent in a managerial position to make decisions, give orders, and utilize resources. Accountability means that managers must report and justify work results to the managers above them. Responsibility is the obligation you have to perform the tasks assigned to you. Delegation is the process of assigning managerial authority and responsibility to managers and employees lower in the hierarchy. Regarding authority and responsibility, the organization chart distinguishes between two positions, line and staff. Line managers have authority to make decisions and usually have people reporting to them. Staff personnel have advisory functions; they provide advice, recommendations, and research to line managers. (7) Centralization versus decentralization of authority. With centralized authority, important decisions are made by higher-level managers. With decentralized authority, important decisions are made by middle-level and supervisory-level managers.

8.4 Basic Types of Organizational Structure

• Organizations may be arranged into eight types of structures. (1) In a simple structure, authority is centralized in a single person; this structure has a flat hierarchy, few rules, and low work specialization. (2) In a functional structure, people with similar occupational specialties are put together in formal groups. (3) In a divisional structure, people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions. (4) In a conglomerate structure, divisions are grouped around similar businesses or industries. (5) In a hybrid structure, an organization uses functional and divisional structures in different parts of the same organization. (6) In a matrix structure, an organization combines functional and divisional chains of commands in grids so that there are two command structures—vertical and horizontal. (7) In a team-based structure, teams or workgroups are used to improve horizontal relations and solve problems throughout the organization. (8) In a network structure, the organization has a central core that is linked to outside independent firms by computer connections, which are used to operate as if all were a single organization.

8.5 Contingency Design: Factors in Creating the Best Structure

• The process of fitting the organization to its environment is called contingency design. Managers taking a contingency approach must consider five factors in designing the best kind of structure for their organization at that particular time.
• (1) An organization may be either mechanistic or organic. In a mechanistic organization, authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. In an organic organization, authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks.
• (2) An organization may also be characterized by differentiation or integration. Differentiation is the tendency of the parts of an organization to disperse and fragment. Integration is the tendency of the parts of an organization to draw together to achieve a common purpose.
• (3) Organizational size is usually measured by the number of full-time employees. Larger organizations tend to have more rules, regulations, job specialization, and decentralization. Smaller organizations tend to be more informal, have fewer rules, and have less work specialization.
• (4) Technology consists of all the tools and ideas for transforming materials, data or labor (inputs) into goods or services (outputs). Firms may be classified according to three forms of technology in increasing levels of complexity. In small-batch technology, often the least complex technology, goods are custom-made to customer specifications in small quantities. Large-batch technology is mass-production, assembly-line technology. Continuous-process technology is highly routinized technology in which machines do all the work.
• (5) The four-stage organizational life cycle has a natural sequence of stages: birth, youth, midlife, and maturity. The birth stage is the nonbureaucratic stage, the stage in which the organization is created. The youth stage is the prebureaucratic stage, a stage of growth and expansion. In the midlife stage, the organization becomes bureaucratic, a period of growth evolving into stability. In the maturity stage, the organization becomes very bureaucratic, large, and mechanistic. The danger at this point is lack of flexibility and innovation.

8.6 Toward Building a Learning Organization

• Learning organizations are able to modify their behavior to reflect new knowledge. There are three reasons why organizations resist learning. (1) People believe that competition is always better than collaboration. (2) Fragmentation leads to specialized fiefdoms that resist learning. (3) Unless encouraged, people won't take risks, the basis for learning.
• A way to encourage learning is a new paradigm—namely, for all employees to view themselves as collaborators, not competitors.