1. technology and computing

Organizational
Behavior, 8e
Schermerhorn, Hunt, and
Osborn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc.
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Organizational Behavior: Chapter 12
2
Chapter 12
Strategic Competency and
Organizational Design
 Study questions.
– What is a co-evolution view of strategy, and
what is its linkage to organizational design?
– What is organizational design, and how do the
designs of small and large firms differ?
– Do the operations and information technology
of the firm influence its organizational design?
Organizational Behavior: Chapter 12
3
Chapter 12
Strategic Competency and
Organizational Design
 Study questions — cont.
– What is the relationship between
environmental conditions and organizational
design?
– What is strategy, and how do organizational
learning and information technology influence
strategic competency?
Organizational Behavior: Chapter 12
4
What is a co-evolution view of strategy, and
what is its linkage to organizational design?
 Two aspects of strategy.
– Strategy involves:
• Formulation — the positioning of the firm in its
environment to provide it with the capability to
succeed.
• Implementation — the stream of decisions that
enable the firm to fulfill its capability.
Organizational Behavior: Chapter 12
5
What is a co-evolution view of strategy, and
what is its linkage to organizational design?
 Two aspects of strategy — cont.
– Traditional advice on organization design
relative to strategy.
• Adopt a mechanistic type (or machine
bureaucracy) to achieve efficiency.
• Adopt an organic type (or professional
bureaucracy) to achieve innovation.
Organizational Behavior: Chapter 12
6
What is a co-evolution view of strategy, and
what is its linkage to organizational design?
 Two aspects of strategy — cont.
– Contemporary advice on organization design
relative to strategy.
• The structural configuration should facilitate
carrying out the strategy formulated by senior
management, as well as allow for individuals to
experiment, grow, and develop competencies so
that the firm’s strategy can evolve.
Organizational Behavior: Chapter 12
7
What is a co-evolution view of strategy, and
what is its linkage to organizational design?
 Strategy and co-evolution.
– Co-evolution.
• The firm can adjust to external changes even as it
shapes some of the challenges facing it.
– Aspects of co-evolution.
• Repositioning the firm in its environmental setting
even as the setting changes.
• Shaping the capabilities of the organization’s
members and its administrative and technical
systems.
Organizational Behavior: Chapter 12
8
What is organizational design, and how do
the designs of small and large firms differ?
 Organizational design.
– The process of choosing and implementing a
structural configuration.
– The choice of an appropriate organizational
design depends on the firm’s:
•
•
•
•
Size.
Operations and information technology.
Environment.
Strategy for growth and survival.
Organizational Behavior: Chapter 12
9
What is organizational design, and how do
the designs of small and large firms differ?
 Organizational size.
– Larger organizations cannot be bigger versions
of their smaller counterparts.
• Large firms have a much larger number of direct
personal contacts that must be managed.
• Large firms have many core operations
technologies in a wide variety of specialized units.
• Large firms are bureaucracies.
Organizational Behavior: Chapter 12
10
What is organizational design, and how do
the designs of small and large firms differ?
 The simple design for smaller units and firms.
– A configuration involving one or two ways of
specializing individuals and units.
– Vertical specialization and control emphasize levels of
supervision without elaborate formal mechanisms.
– Appropriate for many smaller firms because of
simplicity, flexibility and responsiveness to a central
manager.
Organizational Behavior: Chapter 12
11
Do the operations and information
technology of the firm influence its
organizational design?
 Organizational design must be adjusted to fit
technological opportunities and requirements.
– Operations technology.
• The combination of resources, knowledge, and techniques
that creates a product or service output.
– Information technology.
• The combination of machines, artifacts, procedures, and
systems used to gather, store, analyze, and disseminate
information for translating it into knowledge.
Organizational Behavior: Chapter 12
12
Do the operations and information
technology of the firm influence its
organizational design?
 Thomson’s view of technology.
– Technologies classified according to the
degree of specification and degree of
interdependence of work units.
– Intensive technology.
• Uncertainty as to how to produce desired
outcomes.
Organizational Behavior: Chapter 12
13
Do the operations and information
technology of the firm influence its
organizational design?
 Thomson’s view of technology — cont.
– Mediating technology.
• Links parties that want to become interdependent.
– Long-linked technology.
• The way to produce desired outcomes is known
and broken down into a number of sequential steps.
Organizational Behavior: Chapter 12
14
Do the operations and information
technology of the firm influence its
organizational design?
 Woodward’s view of technology.
– Small-batch production.
• The organization tailor makes a variety of custom
products to fit customer specifications.
– Mass production.
• The organization produces one or a few products
through an assembly line system.
Organizational Behavior: Chapter 12
15
Do the operations and information
technology of the firm influence its
organizational design?
 Woodward’s view of technology — cont.
– Continuous-process technology.
• The organization produces a few products using
considerable automation.
– The proper matching of structure and
technology is critical to organizational
success.
Organizational Behavior: Chapter 12
16
Do the operations and information
technology of the firm influence its
organizational design?
 Where operations technology dominates:
the adhocracy.
– When managers and employees do not know
the appropriate way to service a client or
produce a particular product, an adhocracy
might be an appropriate technological design.
Organizational Behavior: Chapter 12
17
Do the operations and information
technology of the firm influence its
organizational design?
 An adhocracy is characterized by:
– Few rules, policies, and procedures.
– Substantial decentralization.
– Shared decision making among members.
– Extreme horizontal specialization.
– Few levels of management.
– Virtually no formal controls.
Organizational Behavior: Chapter 12
18
Do the operations and information
technology of the firm influence its
organizational design?
 An adhocracy is useful when:
– The tasks facing the firm vary considerably
and provide many exceptions.
– Problems are difficult to define and solve.
Organizational Behavior: Chapter 12
19
Do the operations and information
technology of the firm influence its
organizational design?
 Organizational impacts of information
technology (IT).
– IT provides a partial substitute for:
• Some operations.
• Some process controls.
• Some impersonal methods of coordination.
– IT provides a capability for transforming
information to knowledge for learning.
– IT provides a strategic capability.
Organizational Behavior: Chapter 12
20
Do the operations and information
technology of the firm influence its
organizational design?
 Information technology as a substitute.
– Initial implementation of IT often displaced
routine, highly specified, and repetitious jobs.
• Did not alter fundamental character or design of
the organization.
– A second wave of substitution replaced
process controls and informal coordination
mechanisms with IT.
• Brought some marginal changes in organizational
design.
Organizational Behavior: Chapter 12
21
Do the operations and information
technology of the firm influence its
organizational design?
 Information technology as a capability for
learning.
– IT provides individuals throughout the
organization the information they need to plan,
decide, coordinate, and control.
– Real impact of adding IT capability occurred
when it became broadly available throughout
the organization.
Organizational Behavior: Chapter 12
22
Do the operations and information
technology of the firm influence its
organizational design?
 Information technology as a capability for
learning — cont.
– Impact of IT.
• Individuals are empowered and their jobs are expanded.
• Narrowly defined jobs with process controls are replaced by
broadly-defined jobs with output controls.
• Provides new information-based coordination devices.
• Can help flatten and streamline the organization structure.
• Can be linked to total quality management programs.
Organizational Behavior: Chapter 12
23
Do the operations and information
technology of the firm influence its
organizational design?
 Information technology as a strategic
capability.
– IT has spawned e-businesses, thereby creating
new strategic capability.
– IT is transforming aging bricks and mortar
firms, thus altering and enhancing strategic
capability.
Organizational Behavior: Chapter 12
24
Do the operations and information
technology of the firm influence its
organizational design?
 IT as a strategic capability for e-business.
– Many dot.com firms adopted some variation
of adhocracy.
– As the dot.coms grew, the adhocracy design
became problematic.
• Limits on the size of an effective adhocracy.
• Actual delivery of products and services rested
more on responsiveness to clients and maintaining
efficiency than on continual innovation.
Organizational Behavior: Chapter 12
25
Do the operations and information
technology of the firm influence its
organizational design?
 IT as a strategic capability for bricks and
mortar firms.
– IT’s most profound effect is in firms that rely
on mediating technology.
– More firms are recognizing the strategic value
of IT and are using IT as a basis for global
operations.
Organizational Behavior: Chapter 12
26
What is the relationship between
environmental conditions and
organizational design?
 Understanding the environment is important
because an organization is an open system.
– General environment.
• The set of cultural, economic, legal-political, and educational
conditions found in the areas in which the organization
operates.
– Specific environment.
• The owners, suppliers, distributors, government agencies, and
competitors with which an organization must interact to grow
and survive.
Organizational Behavior: Chapter 12
27
What is the relationship between
environmental conditions and
organizational design?
 Environmental complexity.
– The magnitude of problems and opportunities
in the organization’s environment, as reflected
in:
• The degree of richness.
• The degree of interdependence.
• The degree of uncertainty.
– More complex environments provide more
problems and opportunities.
Organizational Behavior: Chapter 12
28
What is the relationship between
environmental conditions and
organizational design?
 Degree of environmental richness.
– The environment is richer when:
• The economy is growing.
• Individuals are improving their education.
• Those on whom the organization relies are
prospering.
– The opposite of richness is decline.
Organizational Behavior: Chapter 12
29
What is the relationship between
environmental conditions and
organizational design?
 Degree of environmental interdependence.
– Linkage between environmental independence
and organization design may be subtle and
indirect.
• Organization may co-opt powerful outsiders
• Organization may absorb or buffer demands of
powerful external elements.
Organizational Behavior: Chapter 12
30
What is the relationship between
environmental conditions and
organizational design?
 Degree of environmental uncertainty.
– Uncertainty and volatility can be particularly
damaging to large bureaucracies.
– A more organic form is the appropriate
organizational design response to uncertainty
and volatility.
Organizational Behavior: Chapter 12
31
What is the relationship between
environmental conditions and
organizational design?
 Using alliances where environmental
factors dominate.
– In high-tech areas and businesses dominated
by IT, interfirm alliances are used.
– Interfirm alliances are announced cooperative
agreements or joint ventures between two
independent firms.
Organizational Behavior: Chapter 12
32
What is the relationship between
environmental conditions and
organizational design?
 Interfirm alliances.
– Known as informal combines or cartels in
Europe.
– Known as keiretsu in Japan.
– The network organization is beginning to
evolve in the United States.
Organizational Behavior: Chapter 12
33
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Strategic competency can be acquired
through organizational learning.
– Organizational learning is the process of
knowledge acquisition, information
distribution, information interpretation, and
information retention in adapting successfully
to changing circumstances.
Organizational Behavior: Chapter 12
34
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Knowledge acquisition.
– Mimicry.
• Is important to new firms.
• Provides workable, if not ideal, solutions to many
problems.
• Reduces the number of decisions that need to be
analyzed separately.
• Establishes legitimacy or acceptance and narrows
the choices requiring detailed explanation.
Organizational Behavior: Chapter 12
35
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Knowledge acquisition — cont.
– Experience.
• All organizations and managers learn through
experience.
• Learning by doing.
• Learning through structured programs.
– Vicarious learning.
• Capturing the lessons of others’ experiences.
Organizational Behavior: Chapter 12
36
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Knowledge acquisition — cont.
– Individual social learning.
• Social learning is achieved through the reciprocal
interactions among people, behavior, and the
environment.
• The individual learns behaviors by observing and
imitating others.
• Symbolic processes, self-control, and self-efficacy
are important in social learning.
Organizational Behavior: Chapter 12
37
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Knowledge acquisition — cont.
– Scanning.
• Involves looking outside the firm and bringing
back useful solutions.
– Grafting.
• The process of acquiring individuals, units, or
firms to bring in useful knowledge.
– Contracting out (or outsourcing).
• Asking outsiders to perform a particular function.
Organizational Behavior: Chapter 12
38
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Information distribution.
– Once information is obtained, managers must
establish mechanisms for distributing relevant
information.
– Key challenges of information distribution in
large organizations.
• Quickly locating who has needed information.
• Quickly locating who needs specific types of
information.
Organizational Behavior: Chapter 12
39
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Information interpretation.
– Interpreted information reflects a collective
understanding within the firm.
– Interpretation problems.
• Self-serving interpretations — managers and employees
seeing what they want to see, rather than seeing what is.
• Managerial scripts — a series of well-known routines for
problem identification and alternative generation and analysis
that are commonly used by a firm’s managers.
Organizational Behavior: Chapter 12
40
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Information interpretation — cont.
• Organizational myths — commonly held cause-
effect relationships or assertions that cannot be
empirically supported.
 There is a single organizational truth.
 The presumption of competence.
 The denial of tradeoffs.
Organizational Behavior: Chapter 12
41
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Information retention.
– Important retention mechanisms.
•
•
•
•
•
•
•
Individuals.
Organizational culture.
Transformation procedures.
Formal organizational structures.
Physical structures (or ecology).
External archives.
Internal information technologies.
Organizational Behavior: Chapter 12
42
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Deficit cycles of strategic organizational
learning.
– A deficit cycle is a pattern of deteriorating
performance that is followed by even further
deterioration.
– The same problems keep reoccurring, and the
firm fails to develop adequate mechanisms for
learning.
Organizational Behavior: Chapter 12
43
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Deficit cycles of strategic organizational
learning — cont.
– Factors associated with deficit cycles.
• Organizational inertia.
• Hubris.
• Detachment.
Organizational Behavior: Chapter 12
44
What is strategy, and how do organizational
learning and information technology
influence strategic competency?
 Benefit cycles of strategic organizational
learning.
– A benefit cycle is a pattern of successful
adjustment followed by further improvements.
– The same problems do not keep reoccurring as
the firm develops adequate mechanisms for
learning.
– Firms that successfully co-evolve can ride the
benefit cycle.
Organizational Behavior: Chapter 12
45