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15-1 Identify seven elements of an organization’s structure.

15-2 Identify the characteristics of the functional structure, the bureau- cracy, and the matrix structure.

15-3 Identify the characteristics of the virtual structure, the team structure, and the circular structure.

15-4 Describe the effects of downsizing on organizational structures and employees.

15-5 Contrast the reasons for using mechanistic versus organic structural models.

15-6 Analyze the behavioral implications of different organizational designs.

15 Foundations of Organization Structure

LEARNING OBJECTIVES After studying this chapter, you should be able to:

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Foundations of Organization Structure CHAPTER 15 507

FLAT TENED TOO THINLY?

GitHub, a software development organization valued at $2 billion and founded by CEO Chris Wanstrath (shown here) and Tom Preston- Werner in 2007, has revolutionized the way software is developed and made. GitHub has grown from a small, San Francisco start-up with only a few employees to a much larger company, with over 600 employees (nearly doubled in size between 2016 and 2017). Furthermore, GitHub had over 22 million users and over 59 million projects hosted as of 2017. Starting out as a smaller organization, the flat, simple structure GitHub was based on was innovative and helpful in the earlier years. GitHub started with no middle managers, and not many of their employees even had job titles—instead, the employees organically organized and worked on projects as teams (with all sharing responsibility for the management role). One benefit GitHub realized from this structure was that people were not arbitrarily divided or limited by divisions—product, specialty, or otherwise. The open-source structure of the company mirrored the open- source nature of their product.

As organizations grow, however, the appropriateness of different forms of organizational structure may change. This became clear to GitHub in 2014, when developer Julie Ann Horvath announced that she had been the vic- tim of harassment. Horvath was sexually harassed by a GitHub engineer,

Employability Skills Matrix (ESM)

Myth or Science?

Career OBjectives

An Ethical Choice

Point/ Counterpoint

Experiential Exercise

Ethical Dilemma

Case Incident 1

Case Incident 2

Critical Thinking ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Communication ✓ Collaboration ✓ ✓ ✓ ✓ ✓ Knowledge

Application and Analysis

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Social Responsibility ✓ ✓ ✓ ✓

MyLab Management Chapter Warm Up If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the chapter warm up.

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who then rejected her work on several products for turning him down. In an organization without a flat or simple structure, there perhaps would have been more channels for accountability and authority to handle this griev- ance earlier and more efficiently instead of letting it play out for two years.

The limitations of these flat organizations are highlighted by Jo Freeman in her essay “The Tyranny of Structurelessness,” in which she writes that “there is no such thing as a structureless group . . . any group of people of whatever nature that comes together for any length of time for any purpose will inevitably structure itself in some fashion.” The issue that arises is that, without formal control mechanisms, authority and influence are invis- ible because they do not operate through explicit channels. For example, Horvath recounted a conversation with Preston-Werner’s wife in which she was informally threatened and coerced to not write a negative review about the company, telling Horvath that she had “spies” in the organization and apparently had access to the employees’ private chatroom logs. Another issue is a lack of role clarity—Julio Avalos, one of the first 100 hires in 2012 and now the chief business officer (CBO), notes, “Without even a minimal layer of management, it was difficult to have some of those conver- sations and to get people feeling like they understood what was expected of them, and that they were getting the support that they needed to do the best work.”

Wanstrath and GitHub leaders learned their lesson: “I encourage every start-up to think about how you’re building. . . . So many companies think they can put that off ’til later—and then everything explodes. That’s the big- gest lesson for us.” To date, Wanstrath and the board of directors of GitHub have transformed the company’s culture from a flat, flexible, meritocratic organization to one with middle management who must be present at the office and not working remotely.

Sources: Based on J. Bort and M. Weinberger, “GitHub Is Undergoing a Full-Blown Over- haul as Execs and Employees Depart,” Business Insider, February 6, 2016, http://www .businessinsider.com/github-the-full-inside-story-2016-2; K. Finley, “GitHub Swaps CEOs, Proves It Doesn’t Need No Stinking Bosses,” Wired, January 22, 2014, https://www.wired .com/2014/01/github-ceo/; K. Finley, “Why Workers Can Suffer in Bossless Companies Like GitHub,” Wired, March 20, 2014, https://www.wired.com/2014/03/tyranny-flatness/; J. Freeman, The Tyranny of Structurelessness, May 1970, http://www.jofreeman.com/joreen/ tyranny.htm; GitHub, About Page, accessed April 16, 2017, https://github.com/about; M. Mittelman, “Why GitHub Finally Abandoned Its Bossless Workplace,” Bloomberg, Sep- tember 6, 2016, https://www.bloomberg.com/news/articles/2016-09-06/why-github-finally- abandoned-its-bossless-workplace; D. Roberts, “GitHub CEO: What I Learned from Our Harassment Scandal,” Forbes, September 29, 2015, http://fortune.com/2015/09/29/ github-ceo-40-under-40/; and A. Wilhelm and A. Tsotsis, “Julie Ann Horvath Describes Sexism and Intimidation behind Her GitHub Exit,” Tech Crunch, March 15, 2014, https:// techcrunch.com/2014/03/15/julie-ann-horvath-describes-sexism-and-intimidation-behind- her-github-exit/.

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Even for a start-up with only a few employees, choosing an organizational structure requires far more than simply deciding who is the boss and how many employees are needed. The organization’s structure determines what relationships form, the formality of those relationships, and many work out- comes. The structure may also change as organizations grow and shrink, as management trends dictate, and as research uncovers better ways of maximiz- ing productivity.

Structural decisions are arguably the most fundamental ones that a leader must make toward sustaining organizational growth.1 In this chapter, we’ll explore how structure affects employee behavior and the organization as a whole.

What Is Organizational Structure? An organizational structure defines how job tasks are formally divided, grouped, and coordinated.2 Managers should address seven key elements when they design their organization’s structure: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, for- malization, and boundary spanning.3 Exhibit 15-1 presents each element as the answer to an important structural question, and the following sections describe each one.

Work Specialization Early in the twentieth century, Henry Ford became rich by building automo- biles using an assembly line. Every worker was assigned a specific, repetitive task such as putting on the right front wheel or installing the right front door. By dividing jobs into small standardized tasks that could be performed over and over, Ford was able to produce a car every 10 seconds, using employees with relatively limited skills.4

15-1 Identify seven elements of an organization’s structure.

organizational structure The way in which job tasks are formally divided, grouped, and coordinated.

Key Design Questions and Answers for Designing the Proper Organizational Structure

Exhibit 15-1

The Key Question The Answer Is Provided by

1. To what degree are activities subdivided into separate jobs?

Work specialization

2. On what basis will jobs be grouped together?

Departmentalization

3. To whom do individuals and groups report?

Chain of command

4. How many individuals can a manager efficiently and effectively direct?

Span of control

5. Where does decision-making authority lie?

Centralization and decentralization

6. To what degree will there be rules and regulations to direct employees and managers?

Formalization

7. Do individuals from different areas need to regularly interact?

Boundary spanning

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Work specialization, or division of labor, describes the degree to which activi- ties in the organization are divided into separate jobs.5 The essence of work specialization is to divide a job into several steps, each completed by a separate individual. Individuals specialize in doing part of an activity rather than the entirety. Specialization is a means of making the most efficient use of employ- ees’ skills and even successfully improving them through repetition. Less time is spent changing tasks, putting away tools and equipment from a prior step, and getting ready for another.

By the 1960s, it increasingly seemed that the good news of specialization could be carried too far. Human diseconomies began to surface in the form of boredom, fatigue, stress, low productivity, inferior quality, increased absentee- ism, and high turnover, which more than offset the economic advantages (see Exhibit 15-2).6 Managers could increase productivity now by enlarging, rather than narrowing, the scope of job activities. Giving employees a variety of activi- ties to do, allowing them to do a whole and complete job, and putting them into teams with interchangeable skills often achieved significantly higher out- put, with increased employee satisfaction.7

Ford demonstrated that work can be performed more efficiently if work is spe- cialized, and the practice still has applications in many industries. For example, could you build a car by yourself? Not likely! Equally important, it’s easier and less costly to find and train workers to do specific tasks, especially in highly sophis- ticated and complex operations. Work specialization increases efficiency and pro- ductivity by encouraging the creation of customized inventions and machinery.

Most managers today recognize the economies that specialization provides in certain jobs and the problems when it’s carried too far. High work specializa- tion helps fast-food restaurants make and sell hamburgers and fries efficiently, and aids medical specialists in most health maintenance organizations. Wher- ever job roles can be broken down into specific tasks or projects, specialization is possible. Specialization may still confer advantages outside manufacturing, particularly where job sharing and part-time work are prevalent.8 Amazon’s Mechanical Turk program, TopCoder, and others like it have facilitated a new trend in microspecialization, e-lancing, or crowd sourcing in which extremely small pieces of programming, data processing, or evaluation tasks are delegated to a global network of individuals by a program manager who then assembles the results.9 This opens the way for employers to use online platforms to assign multiple workers to tasks in a broader functional role like marketing.10 Auto- mation and the use of computers and information systems within organizations are creating a new form of work specialization in which computers take on spe- cialized work.11

work specialization The degree to which tasks in an organization are subdivided into separate jobs.

Economies and Diseconomies of Work SpecializationExhibit 15-2

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Impact from

human diseconomies

(Low) (High)Work specialization

Pr od

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(High)

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Thus, whereas specialization of yesteryear focused on breaking manufactur- ing tasks into specific duties within the same plant, today’s specialization judi- ciously breaks complex tasks into specific elements by technology, expertise, and region. The core principle, however, is the same.

Departmentalization Once jobs have been divided through work specialization, they must be grouped so common tasks can be coordinated. The basis by which jobs are grouped is called departmentalization.12

One of the most popular ways to group activities is by the functions per- formed. A manufacturing manager might organize a plant into engineering, accounting, manufacturing, human resources (HR), and supply chain depart- ments. A hospital might have departments for research, surgery, intensive care, accounting, and so forth. A professional football franchise might have depart- ments for player personnel, ticket sales, and travel and accommodations. The major advantage of this type of functional departmentalization is efficiencies gained from putting specialists that focus on similar areas together.

We can also departmentalize jobs by the type of product or service the organi- zation produces. Procter & Gamble places each major product—such as Tide, Pampers, Charmin, and Pringles—under an executive who has complete global responsibility for it. The major advantage here is increased accountability for performance because all activities related to a specific product or service are under the direction of a single manager.13

When a firm is departmentalized based on geography, or territory, each function (for example, sales) may have western, southern, midwestern, and eastern regions. This form is valuable when an organization’s customers are scattered over a large geographic area and have similar needs within their locations. For this reason, Toyota changed its management structure into geo- graphic regions “so that they may develop and deliver ever better products,” said CEO Akio Toyoda.14

Process departmentalization works for processing customers as well as prod- ucts. If you’ve ever been to a state motor vehicle office to get a driver’s license, you probably went through several departments before receiving your license. In one typical state, applicants go through three steps, each handled by a sep- arate department: (1) validation by the motor vehicles division, (2) process- ing by the licensing department, and (3) payment collection by the treasury department. A final category of departmentalization uses the particular type of customer the organization seeks to reach.

Organizations do not always stay with the basis of departmentalization they first adopt. Microsoft, for instance, used customer departmentalization for years, organizing around its customer bases: consumers, large corporations, software developers, and small businesses. However, in a June 2013 letter from CEO Steve Ballmer to all employees, he announced a restructuring to func- tional departmentalization, citing a need to foster continuing innovation. The new departments grouped jobs by traditional functions, including engineer- ing, marketing, business development, strategy and research, finance, HR, and legal.15

Ballmer expected the change in Microsoft’s organizational structure to “reshape how we interact with our customers, developers, and key innovation partners, delivering a more coherent message and family of product offer- ings.”16 As we see throughout this text, whenever changes are deliberately made in organizations to align practices with organizational goals, particularly the goals of strong leaders, a good execution of the changes creates a much higher probability for improvement. In Microsoft’s case, the results are not

departmentalization The basis by which jobs in an organization are grouped together.

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yet determined—Ballmer, who is a strong leader, announced his retirement 2 months later (he officially left Microsoft in 2014), and further changes ensued. Microsoft continued to struggle with the reorganization, announcing addi- tional changes in its leadership personnel and team structure less than a year later. These changes included, for example, product specialization and func- tional specialization; for instance, the PowerPoint, Excel, and Access teams have been reorganized into content creation and data visualization teams.17

Chain of Command While the chain of command was once a basic cornerstone in the design of organizations, it has far less importance today. But managers should still con- sider its implications, particularly in industries that deal with potential life-or- death situations when people need to rely quickly and suddenly on decision makers. The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

We can’t discuss the chain of command without also discussing authority and unity of command. Authority refers to the rights inherent in a managerial posi- tion to give orders and expect them to be obeyed. To facilitate coordination, each managerial position is given a place in the chain of command, and each manager is given a degree of authority to meet his or her responsibilities. The principle of unity of command helps preserve the concept of an unbroken line of authority. It says that a person should have one and only one superior to whom he or she is directly responsible. If the unity of command is broken, an employee might have to cope with conflicting demands or priorities from several superiors, as is often the case in an organization chart’s dotted-line reporting relationships depicting an employee’s accountability to multiple managers.18

Times change, however, and so do the basic tenets of organizational design. A low-level employee today can access information in seconds that was available only to top managers a generation ago, and many employees are empowered

chain of command The unbroken line of authority that extends from the top of the or- ganization to the lowest echelon and clarifies who reports to whom.

authority The rights inherent in a manage- rial position to give orders and to expect the orders to be obeyed.

unity of command The idea that a subordi- nate should have only one superior to whom he or she is directly responsible.

A global firm that operates on a local scale in more than 200 countries, The Coca-Cola Company is organized into five geographic segments: North America, Latin America, Europe, the Middle East and Africa, and Asia Pacific. The structure enables it to tai- lor its strategy to markets in different stages of economic development and with differing consumer tastes and buying behavior. Source: Kim Kyung-Hoon/Reuters

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to make decisions previously reserved for management.19 Add the popularity of self-managed and cross-functional teams (see Chapter 10) as well as structural designs that include multiple bosses, and you can see why authority and unity of command may appear to hold less relevance. Yet many organizations still find that they are the most productive when they enforce a chain of command. Indeed, one survey of more than 1,000 managers found that 59 percent agreed with the statement, “There is an imaginary line in my company’s organizational chart. Strategy is created by people above this line, while strategy is executed by people below the line.” However, this same survey found that lower-level employees’ buy-in (agreement and active support) to the organization’s overall, big-picture strategy was inhibited by their reliance on the hierarchy for deci- sion making.20

Span of Control How many employees can a manager direct efficiently and effectively? The span of control describes the number of levels and managers in an orga- nization.21 All things being equal, the wider or larger the span, the fewer the levels, and the more employees at each level, the more efficient the organization.22

Assume two organizations each have about 4,100 operative-level employ- ees. One has a uniform span of 4 and the other a span of 8. As Exhibit 15-3 illustrates, the wider span of 8 will have two fewer levels and approximately 800 fewer managers. If the average manager makes $60,000 a year, the wider span will save $48 million a year in management salaries! Obviously, wider spans are more efficient in terms of cost. However, when supervisors no longer have time to provide subordinates with the necessary leadership and support, effectiveness declines and employee performance suffers.23

Narrow or small spans have their advocates. By keeping the span of con- trol to five or six employees, a manager can maintain close control.24 But nar- row spans have three major drawbacks.25 First, they’re expensive because they add levels of management. Second, they make vertical communication in the organization more complex. The added levels of hierarchy slow down decision making and can isolate upper management. Third, narrow spans encourage overly tight supervision and discourage employee autonomy.

span of control The number of subordinates that a manager can direct efficiently and effectively.

Contrasting Spans of ControlExhibit 15-3

Assuming span of 4

Span of 4: Operatives Managers (Levels 1–6)

= 4,096 = 1,365

Span of 8: Operatives Managers (Levels 1–4)

O rg

an iz

at io

na l L

ev el

= 4,096 = 585

Members at each level Assuming span of 8

(Highest)

2 3 4 5 6 7

1 8

64 512

4,096

4 16 64 256

1,024

4,096

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The trend in recent years has been toward wider spans of control.26 They’re consistent with firms’ efforts to reduce costs, cut overhead, speed decision mak- ing, increase flexibility, get closer to customers, and empower employees. To ensure that performance doesn’t suffer because of these wider spans, however, organizations might invest heavily in employee training because managers rec- ognize they can handle a wider span best when employees know their jobs well or can turn to coworkers with questions.

Centralization and Decentralization Centralization refers to the degree to which decision making is concentrated at a single point in the organization.27 In centralized organizations, top man- agers make all the decisions, and lower-level managers merely carry out their directives. In organizations at the other extreme, decentralized decision making is pushed down to the managers closest to the action or to workgroups.28 The concept of centralization includes only formal authority—that is, the rights inherent to a position.

An organization characterized by centralization is different structurally from one that’s decentralized. A decentralized organization can act more quickly to solve problems, more people provide input into decisions, and employees are less likely to feel alienated from those who make decisions that affect their work lives.29 The effects of centralization and decentralization can be predicted: Cen- tralized organizations are better for avoiding commission errors (bad choices), while decentralized organizations are better for avoiding omission errors (lost opportunities).30

Management efforts to make organizations more flexible and responsive have produced a trend toward decentralized decision making by lower-level managers, who are closer to the action and typically have more detailed knowl- edge about problems than top managers. When Procter & Gamble empowered small groups of employees to make decisions about new-product development independent of the usual hierarchy, it was able to rapidly increase the propor- tion of new products ready for market.31 Concerning creativity, research inves- tigating a large number of Finnish organizations demonstrated that companies with decentralized research and development (R&D) offices in multiple loca- tions were better at producing innovation than companies that centralized all R&D in a single office.32 Sometimes, however, decentralization can be a double- edged sword—one study of nearly 3,000 U.S. Air Force officers suggests that there can sometimes be negative effects of decentralization in organizations with multiteam systems, including excessive risk seeking and coordination failures.33

Decentralization is often necessary for companies with offshore sites because localized decision making is needed to respond to each region’s profit oppor- tunities, client base, and specific laws, while centralized oversight is needed to hold regional managers accountable. Failure to successfully balance these pri- orities can harm not only the organization but also its relationships with for- eign governments.34

Formalization Formalization refers to the degree to which jobs within the organization are standardized.35 If a job is highly formalized, the employee has a minimal amount of discretion over what to do and when and how to do it, resulting in consistent and uniform output. There are explicit job descriptions, lots of organizational rules, and clearly defined procedures covering work processes. Formalization eliminates the possibility of employees engaging in alternative behaviors, and it removes the need for them to consider alternatives. Conversely, where formal- ization is low, job behaviors are relatively unprogrammed and employees have a great deal of freedom to exercise discretion in their work.

centralization The degree to which decision making is concentrated at a single point in an organization.

formalization The degree to which jobs within an organization are standardized.

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The degree of formalization can vary widely between and within organi- zations. Research from 94 high-technology Chinese firms indicated that for- malization is a detriment to team flexibility in decentralized organization structures, suggesting that formalization does not work as well where duties are inherently interactive or where there is a need to be flexible and innova- tive.36 For example, publishing representatives who call on college professors to inform them of their company’s new publications have a great deal of free- dom in their jobs. They have a general standardized sales pitch, which they tailor as needed, and rules and procedures governing their behavior may be little more than suggestions on what to emphasize about forthcoming titles and the requirement to submit a weekly sales report. At the other extreme, clerical and editorial employees in the same publishing houses may need to be at their desks by 8:00 a.m. and follow a set of precise procedures dictated by management.

Boundary Spanning We’ve described ways that organizations create well-defined task structures and chains of authority. These systems facilitate control and coordination for spe- cific tasks, but if there is too much division within an organization, attempts to coordinate across groups can be disastrous. One way to overcome this sense of compartmentalization and retain the benefits of structure is to encourage or create boundary-spanning roles.

Within a single organization, boundary spanning occurs when individuals form relationships with people outside their formally assigned groups.37 An HR executive who frequently engages with the IT group is engaged in boundary spanning, as is a member of an R&D team who implements ideas from a pro- duction team. These activities help prevent formal structures from becoming too rigid and, not surprisingly, enhance organization and team creativity, deci- sion making, knowledge sharing, and performance.38

Boundary-spanning activities occur not only within but also between orga- nizations. Positive results are especially strong in organizations that encourage extensive internal communication; in other words, external boundary span- ning is most effective when it is followed up with internal boundary spanning.39

boundary spanning Individuals forming relationships outside their formally assigned groups.

With more than 7,000 neighborhood and airport locations throughout North America and Europe, Enterprise Rent-A-Car empowers employees at the local level to make decisions that affect their work. Decentralization gives Enterprise a competitive advan- tage by enabling employees to provide personalized service that results in high customer satisfaction. Source: RosaIrene Betancourt 3/Alamy Stock Photo

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In addition, research on 225 manufacturer–distributor dyads in China sug- gests that ties between salespersons and buyers across organizations are linked with greater relationship quality between two organizations than are ties between executives across organizations, but when there are strong relation- ships between executives and employees, there may be cooperation and better conflict resolution.40

Organizations can use formal mechanisms to facilitate boundary-spanning activities. One method is to assign formal liaison roles or develop commit- tees of individuals from different areas of the organization.41 Development activities can also facilitate boundary spanning. Employees with experience in multiple functions, such as accounting and marketing, are more likely to engage in boundary spanning.42 Many organizations may try to set the stage for these sorts of positive relationships by creating job rotation programs so new hires get a better sense of different areas of the organization. Another method to encourage boundary spanning is to bring attention to overall organizational goals, such as efficiency and innovation, and shared identity concepts.43

You probably have personal experience with at least some of the results of decisions that leaders have made in your school or workplace that were related to the elements of organizational structure. The organizational framework, which can be depicted by drawing an organizational chart, can help you clarify these leaders’ decisions. We’ll discuss them next.

Common Organizational Frameworks and Structures Organizational designs are known by many names and are constantly evolving in response to changes in the way work is done. We will start with three of the more common organizational frameworks: the simple structure, the bureaucracy, and the matrix structure.

15-2 Identify the characteristics of the functional structure, the bureaucracy, and the matrix structure.

BMW encourages all employees, including this production worker at its plant in Jakarta, Indonesia, to build relationships throughout the global company. Boundary spanning at BMW links R&D, design, production, and marketing individuals to speed prob- lem solving and innovation and to adapt to market fluctuations. Source: Dadang Tri/Bloomberg/Getty Images

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The Simple Structure What do a small retail store, an electronics firm run by a hard-driving entre- preneur, and an airline’s war room during a pilot’s strike have in common? They probably all use the simple structure.44 The simple structure has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. It is a flat organization; it usually has only two or three vertical levels, a loose body of employees, and one individual with decision-making authority. Most companies start as a simple structure, and many innovative technology-based firms with short life spans, like cell phone app development firms, remain compact by design.45

Exhibit 15-4 is an organization chart for a retail men’s store owned and man- aged by Jack Gold. Jack employs five full-time salespeople, a cashier, and extra workers for weekends and holidays, but he “runs the show.” Although this type of organization is typical for a small business, in times of crisis large companies often simplify their structures (though not to this degree) as a means of focus- ing their resources.

The strength of the simple structure lies, of course, in its simplicity. It’s fast, flexible, and inexpensive to operate, and accountability is clear. One major weakness is that it becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create informa- tion overload at the top. Decision making typically becomes slower as the single executive tries to continue doing it all. This proves the undoing of many small businesses. If the structure isn’t changed and made more elaborate, the firm often loses momentum and can eventually fail.46 The simple structure’s other weakness is that it’s risky—everything depends on one person. An illness for the owner-manager can literally halt the organization’s information and deci- sion-making capabilities.47

The Bureaucracy Standardization! That’s the key concept that underlies all bureaucracies. Con- sider the bank where you keep your checking account; the store where you buy clothes; or the government entities that collect your taxes, enforce health regulations, or provide local fire protection. They all rely on standardized work processes for coordination and control.

The bureaucracy is characterized by highly routine operating tasks achieved through specialization, strictly formalized rules and regulations, tasks grouped into units, centralized authority, narrow spans of control, and decision making that follows the chain of command.48 Bureaucracy incorporates all the stron- gest degrees of departmentalization described earlier.

Bureaucracy is a dirty word in many people’s minds. However, this type of organization does have advantages, primarily the ability to perform standard- ized activities very efficiently. Putting like specialties together in units results

simple structure An organizational structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

bureaucracy An organizational structure with highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command.

A Simple Structure (Jack Gold’s Men’s Store)Exhibit 15-4

Jack Gold, owner-manager

Bob Munson, salesperson

Edna Joiner, salesperson

Johnny Moore, salesperson

Helen Wright, cashier

Jerry Plotkin, salesperson

Norma Sloman, salesperson

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in economies of scale, minimum duplication of people and equipment, and a common language employees all share. Bureaucracies can get by with less talented—and hence less costly—middle- and lower-level managers because rules and regulations substitute for managerial discretion. There is little need for innovative and experienced decision makers below the level of senior exec- utives, and innovative employees often do not mesh well with bureaucracy.49

Listen to this conversation among four executives in one company: “You know, nothing happens in this place until we produce something,” said the pro- duction executive. “Wrong,” commented the R&D manager, “Nothing happens until we design something!” “What are you talking about?” asked the market- ing executive, “Nothing happens until we sell something!” The exasperated accounting manager responded, “It doesn’t matter what you produce, design, or sell. No one knows what happens until we tally up the results!” This conversa- tion highlights how bureaucratic specialization can create conflicts in which the unit perspectives override the overall goals of the organization.

The other major weakness of a bureaucracy is something we’ve all witnessed: obsessive concern with following the rules. When cases don’t fit the rules pre- cisely, there is no room for modification. The bureaucracy is efficient only if employees confront familiar problems with programmed decision rules.50 There are two types of bureaucracies we should explore: functional and divi- sional structures.

The Functional Structure The functional structure groups employees by their similar specialties, roles, or tasks.51 An organization organized into production, marketing, HR, and accounting departments is an example. Many large organi- zations utilize this structure, although this is evolving to allow for quick changes in response to business opportunities. One advantage of the functional struc- ture is that specialists may be able to become experts more easily than if they worked in diversified units. Employees can also be motivated by a clear career path to the top of the organization chart specific to their specialties.

The functional structure works well if the organization is focused on one product or service. Unfortunately, it creates rigid, formal communications because the hierarchy dictates the communication protocol. Coordination

functional structure An organizational structure that groups employees by their similar specialties, roles, or tasks.

Hospitals benefit from standardized work processes and procedures common to a bureaucratic structure because they help employees perform their jobs efficiently. At Christchurch Women’s Hospital in New Zealand, registered nurse Megan Coleman (right) and midwife Sally Strathdee follow formal rules and regulations in caring for mothers and newborns. Source: Greg Wood/AFP/Getty Images

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among many units is a problem, and infighting in units and between units can lead to reduced motivation.

The Divisional Structure The divisional structure groups employees into units by product, service, customer, or geographical market area.52 It is highly depart- mentalized. Sometimes this structure is known by the type of division structure it uses: product/service organizational structure (for example, units for cat food, dog food, and bird food that report to an animal food producer), customer orga- nizational structure (for example, units for outpatient care, inpatient care, and pharmacy that report to hospital administration), or geographic organizational structure (for example, units for Europe, Asia, and South America that report to corporate headquarters).

The divisional structure has the opposite benefits and disadvantages of the functional structure. It facilitates coordination in units to achieve their goals while addressing the specific concerns of each unit. It provides clear respon- sibility for all activities related to a product but with duplication of functions and costs. Sometimes this is helpful, say, when the organization has a unit in Spain and another in China, which are very different markets, and a market- ing strategy is needed for a new product. Marketing experts in both places can incorporate the appropriate cultural perspectives into their region’s market- ing campaign. However, the organization’s marketing function employees in two places may represent an increased cost because they are doing basically the same task in two different countries. It appears as if organizations can shift from a divisional to a functional structure, and vice versa; however, those who shift from a functional to a divisional structure tend to perform the best.53

The Matrix Structure The matrix structure combines the functional and product structures, and we find it in advertising agencies, aerospace firms, R&D laboratories, construction companies, hospitals, government agencies, universities, management con- sulting firms, and entertainment companies.54 Companies that use matrixlike structures include ABB, Boeing, BMW, IBM, and P&G.

The most obvious structural characteristic of the matrix is that it breaks the unity-of-command concept. Employees in the matrix have two bosses: their func- tional department managers and their product managers. Exhibit 15-5 shows the matrix for a college of business administration. The academic departments of accounting, decision and information systems, marketing, and so forth, are

divisional structure An organizational structure that groups employees into units by product, service, customer, or geographical market area.

matrix structure An organizational structure that creates dual lines of authority and combines functional and product departmentalization.

Accounting

Finance

Management

Decision and Information Systems

Marketing

Programs

Undergraduate Master’s Ph.D. Research Community ServiceExecutiveDevelopmentAcademicDepartments

Matrix Structure for a College of Business AdministrationExhibit 15-5

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520 PART 3 The Group

functional units. Overlaid on them are specific programs (that is, products). Thus, members in a matrix structure have a dual chain of command: to their functional department and to their product groups. A professor of accounting teaching an undergraduate course may report to the director of undergraduate programs as well as to the chairperson of the accounting department.

The strength of the matrix is its ability to facilitate coordination when the organization has many complex and interdependent activities.55 Direct and fre- quent contacts between different specialties in the matrix can let information permeate the organization and reach the people who need it more quickly. The matrix reduces so-called bureaupathologies—its dual lines of authority limit people’s tendency to protect their territories at the expense of the orga- nization’s goals.56 A matrix also achieves economies of scale and facilitates the allocation of specialists by both providing the best resources and ensuring that they are efficiently used.57

The major disadvantages of the matrix lie in the confusion it creates, its tendency to foster power struggles, and the stress it places on individuals.58 For individuals who desire security and absence from ambiguity, this work climate can be stressful. Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity. Without the unity-of-command concept, ambiguity about who reports to whom is significantly increased and often leads to conflict and power struggles between functional and product managers.

Alternate Design Options In the ever-increasing trend toward flatter structures, many organizations have been developing new options with fewer layers of hierarchy and more emphasis on opening the boundaries of the organization.59 In this section, we describe three such designs: the virtual structure, the team structure, and the circular structure.

The Virtual Structure Why own when you can rent? That question captures the essence of the virtual structure (also sometimes called the network, or modular, structure), typically a small, core organization that outsources its major business functions.60 The virtual structure is highly centralized, with little or no departmentalization.

The prototype of the virtual structure is today’s filmmaking organization. In Hollywood’s golden era, movies were made by huge, vertically integrated corporations. Studios such as Metro-Goldwyn-Mayer (MGM), Warner Bros., and 20th Century Fox owned large movie lots and employed thousands of full-time specialists—set designers, camera people, film editors, directors, and actors. Today, most movies are made by a collection of individuals and small companies who come together and make films project by project. This struc- tural form allows each project to be staffed with the talent best suited to its demands rather than just with the people employed by the studio. It minimizes bureaucratic overhead because there is no lasting organization to maintain. It lessens long-term risks and their costs because there is no long term—a team is assembled for a finite period and then disbanded.

Exhibit 15-6 shows a virtual structure in which management outsources all the primary functions of the business. The core of the organization is a small group of executives whose job is to oversee directly any activities done in-house and to coordinate relationships with organizations that manufacture, dis- tribute, and perform other crucial functions. The dotted lines represent the

15-3 Identify the characteris-tics of the virtual struc- ture, the team structure, and the circular structure.

virtual structure A small, core organization that outsources major business functions.

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Foundations of Organization Structure CHAPTER 15 521

relationships typically maintained under contracts. Managers in virtual struc- tures spend most of their time coordinating and controlling external relations.

Network organizations often take many forms.61 Some of the more tradi- tional forms include the franchise form, in which there are managers, systems, and other experts in the central node (i.e., executive group), and customer sales and services are carried out by franchise units. This popular form of net- work organization is very common in service business models, such as 7-Eleven, McDonald’s, Jimmy John’s, and Dunkin’ Donuts. In this form, however, franchi- sees do not tend to collaborate or coordinate with one another and may actu- ally be in direct competition for resources from the executive group. Another example is the starburst form, in which a parent firm splits off one of its func- tions into a spinoff firm.62 For example, in 2012, Netflix split off its DVD function into a separate entity, now DVD.com.63

The major advantage of the virtual structure is its flexibility, which allows individuals with an innovative idea and little money to successfully compete against larger, more established organizations. The structure also saves a great deal of money by eliminating permanent offices and hierarchical roles for out- sourced functions.64 The drawbacks have become increasingly clear as popu- larity has grown.65 Virtual organizations are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear, set- ting the stage for increased political behavior.

The Team Structure The team structure seeks to eliminate the chain of command and replace departments with empowered teams.66 This structure removes vertical and hor- izontal boundaries in addition to breaking down external barriers between the company and its customers and suppliers.

By removing vertical boundaries, management flattens the hierarchy and minimizes status and rank. Cross-hierarchical teams (which include top execu- tives, middle managers, supervisors, and operative employees), participative decision-making practices, and the use of 360-degree performance appraisals (in which peers and others evaluate performance) can be used. For example, at the Danish firm Oticon A/S, the world’s largest hearing aid manufacturer, all traces of hierarchy have disappeared.67 Everyone works at uniform mobile

team structure An organizational structure that replaces departments with empowered teams, and that eliminates horizontal bound- aries and external barriers between customers and suppliers.

A Virtual StructureExhibit 15-6

Advertising agency

Factories in

South Korea

Executive group

Commissioned sales

representatives

Independent research and development consulting

firm

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workstations, and project teams, not functions or departments, coordinate work.

As previously discussed, functional departments create horizontal boundar- ies between functions, product lines, and units. The way to reduce them is to replace functional departments with cross-functional teams and organize activi- ties around processes. Xerox, for instance, develops new products through multidisciplinary teams that work on a single process instead of on narrow functional tasks.68

When fully operational, the team structure may break down geographic bar- riers. Today, most large U.S. companies see themselves as team-oriented global corporations; many, like Coca-Cola and McDonald’s, do as much business overseas as in the United States, and some struggle to incorporate geographic regions into their structure. In other cases, the team approach is need-based. Such is the case with Chinese companies, which made 93 acquisitions in the oil and gas industry in five years—incorporating each acquisition as a new team unit—to meet forecasted demand that their resources in China could not meet.69 The team structure provides a solution because it considers geography as more of a tactical, logistical issue than a structural one. In short, the goal may be to break down cultural barriers and open opportunities.

Career OBjectives What structure should I choose?

I’m running a small but growing busi- ness and need help figuring out how to keep positions flexible as we expand. What advice can you give me about designing job structures that will help combine my success today with growth for tomorrow?

— Anika Dear Anika: A surprising number of small busi- nesses fail right at the point where they begin to grow, and for many rea- sons, including financing deficits and competitors that copy their clever ideas. However, a frequent problem is that the structure that the company began with is simply not right for a larger firm.

There are ways to meet the chal- lenge. Start by looking at individual jobs and their responsibilities. Make a list for each job. When job roles and responsibilities aren’t defined, you can pick up a great deal of flexibility, assigning employees to tasks exactly when needed. Unfortunately, this flex- ibility also means it’s hard to determine which skills are available or to identify

gaps between planned strategy and available human resources.

Second, you may want to define roles based on broad sets of compe- tencies that span multiple levels of organizational functioning. In this stra- tegic competency model, job roles and incentives are defined based on a clear structure. Here are the steps:

• Look at the top level and think about the future. In the competency model, you should use the mission state- ment and overall organizational strategies to evaluate your organiza- tion’s future needs.

• Once you’ve identified the organiza- tion’s future needs, figure out a smart way to assign responsibilities to indi- viduals. You’ll obviously need some specialization, but at the same time, consider general skills that will be useful for both growth and long-term sustainability.

• As your business grows, identify appli- cants with the potential to meet future needs, and develop employee incen- tives to encourage broad skills profiles.

You’ll want to structure your plan so employees increase in competency as they move up the organization chart.

The most important thing to remember is that you aren’t creating a job structure just for today—make sure it’s ready to grow and change with your business. Grow well!

Sources: Based on G. W. Stevens, “A Critical Review of the Science and Practice of Com- petency Modeling,” Human Resource Devel- opment Review 12 (March 2013): 86–107; P. Capelli and J. R. Keller, “Talent Management: Conceptual Approaches and Practical Chal- lenges,” Annual Review of Organizational Psy- chology and Organizational Behavior 1 (March 2014): 305–31; and C. Fernández-Aráoz, “21st Century Talent Spotting,” Harvard Business Review, June 2014, https://hbr .org/2014/06/21st-century-talent-spotting.

The opinions provided here are of the manag- ers and authors only and do not necessar- ily reflect those of their organizations. The authors or managers are not responsible for any errors or omissions, or for the results obtained from the use of this information. In no event will the authors or managers, or their related partnerships or corporations thereof, be liable to you or anyone else for any decision made or action taken in reliance on the opinions provided here.

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Some organizations create teams incorporating their employees and their customers or suppliers. For example, to ensure that important product parts are made reliably and to exacting specifications by its suppliers, Honeywell International partners some of its engineers with managers at those suppliers.

The Circular Structure Picture the concentric rings of an archery target. In the center are the execu- tives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers. This is the circular structure.70 Does it seem like organizational anarchy? There is still a hierarchy, but top man- agement is at the very heart of the organization, with its vision spreading outward.

The circular structure has intuitive appeal for creative entrepreneurs, and some small innovative firms have claimed it. As in many of the current hybrid approaches, however, employees are apt to be unclear about whom they report to and who is running the show. We are still likely to see the popularity of the circular structure spread. The concept may have intuitive appeal for spreading a vision of corporate social responsibility (CSR), for instance.

circular structure An organizational structure in which executives are at the center, spreading their vision outward in rings grouped by function (managers, then specialists, then workers).

An Ethical Choice Flexible Structures, Deskless Workplaces

Once upon a time, students fresh from business schools couldn’t wait for that first cubicle to call home, midlevel managers aspired to an office of their own, and executives coveted the corner office. These days, the walls are coming down. As organi- zational structures change, so do their physical environments. Many organi- zations have been trying to make the physical environment reflect the organi- zational structures they adopt.

At online retailer Zappos, not even the CEO wants an office, and all 1,500 employees are welcome throughout the open spaces. Firms like Google have workplace designs of public rooms with lounge areas and large, multiper- son tables. According to Edward Danyo, manager of workplace strategy at phar- maceuticals firm GlaxoSmithKline, shared environments create efficient work gains, including what he esti- mates is a 45 percent increase in the speed of decision making. But there are ethical concerns about the disman- tling of the physical and mental organi- zational structure:

• Where will confidential discussions take place? In some contemporary workplace designs, ad hoc confer- ence rooms address the need for separate gatherings. This may not be optimal if the walls are made of glass, if employees will feel stig- matized when called into a meeting room, or if they become reluctant to approach human resources staff with issues because of privacy concerns.

• How can differences in personality traits be overcome? Employees high in extraversion will be more comfort- able building collaborative relation- ships without assigned workspaces, while introverted individuals may be uncomfortable without an estab- lished office structure where they can get to know others over time.

• How can personal privacy be main- tained? Zappos gives employees personal lockers, asks employees to angle laptop screens away from neighbors, and tries to make open spaces more private by encouraging ear buds to create a sound barrier between working employees.

• How can you assure your clients about confidentiality? Even walled, soundproof rooms for virtual or live meetings may not provide the de- sired level of security for clients who need to know their business will stay on a need-to-know basis.

• How will expectations and account- abilities be enforced? In an envi- ronment without offices and some- times without job titles, there is an even greater need for clearly assigned goals, roles, and expecta- tions. Otherwise, open collaborative structures may foster diffusion of responsibility and confusion.

Sources: Based on S. Henn, “‘Serendipitous Inter- action’ Key to Tech Firm’s Workplace Design,” NPR, March 13, 2013, www.npr.org/blogs/ alltechconsidered/2013/03/13/174195695/ serendipitous-interaction-key-to-tech-firms- workplace-design; H. El Nasser, “What Office? Laptops Are Workspace,” USA Today, June 6, 2012, 1B–2B; R. W. Huppke, “Thinking Out- side the Cubicle,” Chicago Tribune, October 29, 2012, 2-1, 2-3; “Inside the New Deskless Office,” Forbes, July 16, 2012, 34; and E. Maltby, “My Space Is Our Space,” The Wall Street Journal, May 21, 2012, R9.

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The Leaner Organization: Downsizing The goal of some organizational structures we’ve described is to improve agility by creating a lean, focused, and flexible organization. Downsizing is a systematic effort to make an organization leaner by closing locations, reducing staff, or selling off business units that don’t add value.71 Downsizing doesn’t necessarily mean physically shrinking the size of your office, although that’s been happen- ing, too (see OB Poll).

The radical shrinking of Motorola Mobility in 2012 and 2013 is a case of downsizing to survive after its 2011 $12.5 billion acquisition by Google. In response to declining demand for its smartphones, Motorola cut its workforce by 20 percent in August 2012. When the company posted a $350 million fourth- quarter loss in 2012, with a 40 percent revenue decline, it cut the workforce again, by 10 percent. Google called this rightsizing.72 Motorola Mobility was then sold to China’s Lenovo in 2014 for $2.91 billion.

Other firms downsize to direct all their efforts toward their core compe- tencies. American Express claims to have been doing this in a series of layoffs over more than a decade: 7,700 jobs in 2001, 6,500 jobs in 2002, 7,000 jobs (10 percent of its workforce) in 2008, and 4,000 jobs in 2009. The 2013 cut of 5,400 jobs (8.5 percent of the remaining workforce) represented “its big- gest retrenchment in a decade,” with an additional sizable layoff of around 4,000 jobs in 2015. Each layoff has been accompanied by a restructuring, to reflect changing customer preferences, away from personal customer service

15-4 Describe the effects of downsizing on organi- zational structures and employees.

MyLab Management Personal Inventory Assessments Go to www.pearson.com/mylab/management to complete the Personal Inventory Assessment related to this chapter.

The Incredible Shrinking Office

Source: Based on February 28, 2012, press release “Office Space per Worker Will Drop to 100 Square Feet or Below,” http://www.corenetglobal.org/files/ home/info_center/global_press_releases/pdf/pr120227_officespace.pdf.

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ce s

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(s q

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300

250

200

150

100

2000 2010

225

165

2012 (2017)

150

260

225

165

OB POLL

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Foundations of Organization Structure CHAPTER 15 525

and toward online customer service. According to CEO Ken Chennault, “Our business and industry continue to become transformed by technology. Because of these changes, we have the need and the opportunity to evolve our organiza- tion and cost structure.”73

Some companies focus on lean management techniques to reduce bureau- cracy and speed decision making.74 Starbucks adopted lean initiatives in 2009, which encompassed all levels of management and focused on faster barista techniques and manufacturing processes.75 Customers generally applauded the shortened wait times and improved product consistency.

Despite the advantages of being a lean organization, the impact of down- sizing on organizational performance is not without controversy. Reducing the size of the workforce perhaps has positive outcomes in the long run, although the majority of the evidence suggests that downsizing has a negative impact on stock returns the year of downsizing (although this may be contin- gent on the organization’s goals for downsizing along with other contextual factors).76 An example of these contingencies can be found in the case of Russia’s Gorky Automobile Factory (GAZ), which realized a profit for the first time in many years after President Bo Andersson fired 50,000 workers, half the workforce.77 Eventually, however, the rampant downsizing policy caught up with Andersson when he was CEO of Russia’s largest car maker, AvtoVAZ. From 2014 to 2016, downsizing at its plant in Togliatti led to tens of thou- sands of workers losing their jobs. At the time, Sergei Chemezov, an ally of President Vladmir Putin, told Andersson that he was “playing with fire.”78 Eventually, Andersson was removed as CEO for his tactics in 2016—what tended to be standard practice in the West (downsizing) was frowned upon in Russia, where the auto industry is revered with nationalistic pride and jobs tend to be preserved rather than cut.79

Part of the problem is the effect of downsizing on employee attitudes.80 Employees who remain often feel worried about future layoffs, may be less com- mitted to the organization, and may experience a greater amount of stress and strain.81 Downsizing can also lead to psychological withdrawal and more volun- tary turnover, so vital human capital is lost.82 The result is a company that is more anemic than lean. Paradoxically, some research suggests that the victims may even fare better than the survivors, experiencing higher control perceptions and less stress.83

Companies can reduce the negative impact of downsizing by preparing in advance, thus alleviating some employee stress and strengthening support for the new direction. Here are some effective strategies for downsizing:

• Invest. Companies that downsize to focus on core competencies are more effective when they invest in high-involvement work practices afterward.

• Communicate. When employers make efforts to discuss downsizing with employees early, employees are less worried about the outcomes and feel the company is taking their perspective into account.

• Participate. Employees worry less if they can participate in the process in some way. Voluntary early-retirement programs or severance packages can help achieve leanness without layoffs.

• Assist. Severance, extended health care benefits, and job search assistance demonstrate that a company cares about its employees and honors their contributions.

In short, companies that make themselves lean can be more agile, efficient, and productive—but only if they make cuts carefully and help employees through the process.

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commitment, and clear channels of authority all may make it easier for rapid changes to occur smoothly.

An organization pursuing a cost-minimization strategy controls costs tightly, refrains from incurring unnecessary expenses, and cuts prices in selling a basic product.90 This describes the strategy pursued by Walmart and the makers of generic or store-label grocery products. Cost-minimizing organizations usually pursue fewer policies meant to develop commitment among their workforce.

Organizations following an imitation strategy try to minimize risk and maxi- mize opportunity for profit, moving new products or entering new markets only after innovators have proven their viability.91 Mass-market fashion manufacturers that copy designer styles follow this strategy, as do firms such as Hewlett- Packard and Caterpillar. They follow smaller and more innovative competitors with supe- rior products but only after competitors have demonstrated that a market exists. Italy’s Moleskine SpA, a small maker of fashionable notebooks, is another exam- ple of imitation strategy but in a distinct way: Looking to open more retail shops around the world, it imitates the expansion strategies of larger, successful fash- ion companies Salvatore Ferragamo SpA and Brunello Cucinelli.92

Exhibit 15-8 describes the structural option that best matches each strategy. Innovators need the flexibility of the organic structure (although, as we noted, they may use some elements of the mechanistic structure as well), whereas cost minimizers seek the efficiency and stability of the mechanistic structure.

innovation strategy A strategy that empha- sizes the introduction of major new products and services.

cost-minimization strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.

imitation strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven.

Why Do Structures Differ? We’ve described many organization design options. Exhibit 15-7 recaps our dis- cussions by presenting two extreme models of organizational design.84 One model is the mechanistic model. It’s generally synonymous with the bureaucracy in that it has highly standardized processes for work, high formalization, and more managerial hierarchy. The other extreme is the organic model. It’s flat, has fewer formal procedures for making decisions, has multiple decision mak- ers, and favors flexible practices.85

With these two models in mind, let’s ask a few questions. Why are some organizations structured along more mechanistic lines whereas others follow organic characteristics? What forces influence the choice of design? In this sec- tion, we present major causes or determinants of an organization’s structure.86

Organizational Strategies Because structure is a means to achieve objectives, and objectives derive from the organization’s overall strategy, it’s only logical that structure should fol- low strategy. If management significantly changes the organization’s strategy or its values, the structure must change to accommodate. For example, recent research indicates that aspects of organizational culture may influence the success of corporate social responsibility (CSR) initiatives.87 If the culture is supported by the structure, the initiatives are more likely to have clear paths toward application. Most current strategy frameworks focus on three strategy dimensions—innovation, cost minimization, and imitation—and the structural design that works best with each.88

To what degree does an organization introduce major new products or ser- vices? An innovation strategy strives to achieve meaningful and unique inno- vations.89 Obviously, not all firms pursue innovation. Apple and 3M do, but conservative retailer Marks & Spencer doesn’t. Innovative firms use competi- tive pay and benefits to attract top candidates and motivate employees to take risks. Some degree of the mechanistic structure can actually benefit innovation. Well-developed communication channels, policies for enhancing long-term

15-5 Contrast the reasons for using mechanistic versus organic structural models.

mechanistic model A structure character- ized by extensive departmentalization, high formalization, a limited information network, and centralization.

organic model A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a compre- hensive information network, and relies on participative decision making.

Mechanistic versus Organic ModelsExhibit 15-7

The Organic ModelThe Mechanistic Model

High specialization Rigid departmentalization Clear chain of command Narrow spans of control Centralization High formalization

Cross-functional teams Cross-hierarchical teams Free flow of information Wide spans of control Decentralization Low formalization

• • • • • •

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commitment, and clear channels of authority all may make it easier for rapid changes to occur smoothly.

innovation strategy A strategy that empha- sizes the introduction of major new products and services.

cost-minimization strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.

imitation strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven.

Imitating the successful growth strat- egy of several large fashion firms, Italian retailer Moleskine plans to increase sales of its popular line of notebooks and travel accessories by opening about 20 new stores each year throughout the world. The expan- sion plan focuses on store openings in metropolitan and business hubs such as New York City, London, and Beijing. Source: Alessandro Garofalo/Reuters/Alamy Stock Photo

The Strategy–Structure RelationshipExhibit 15-8

Strategy Structural Option

Innovation Organic: A loose structure; low specialization, low formalization, decentralized

Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization

Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

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528 PART 3 The Group

Imitators combine the two structures. They use a mechanistic structure to main- tain tight controls and low costs in their current activities but create organic subunits in which to pursue new undertakings.

Organization Size An organization’s size significantly affects its structure.93 Organizations that employ 2,000 or more people tend to have more specialization, more depart- mentalization, more vertical levels, and more rules and regulations than do small organizations. However, size becomes less important as an organization expands. Why? At around 2,000 employees, an organization is already mecha- nistic; 500 more employees won’t have much impact. But adding 500 employ- ees to an organization of only 300 is likely to significantly shift it toward a more mechanistic structure.

Technology Technology describes the way an organization transfers inputs into outputs. Every organization has at least one technology for converting financial, human, and physical resources into products or services. For example, the Chinese consumer electronics company Haier (the owners of GE Appliances) uses an assembly-line process for mass-produced products, which is comple- mented by more flexible and innovative structures to respond to custom- ers and design new products.94 Regardless, organizational structures adapt to their technology—and vice versa. Organizational structure and culture can become inscribed in the data structure, software, and hardware that an organization uses.95

Environment An organization’s environment includes outside institutions or forces that can affect its structure, such as suppliers, customers, competitors, and public pres- sure groups.96 Dynamic environments create significantly more uncertainty for managers than do static ones. To minimize uncertainty in key market are- nas, managers may broaden their structure to sense and respond to threats. Most companies, for example Pepsi and Southwest Airlines, have added social media departments to counter negative information posted on blogs.

Any organization’s environment has three dimensions: capacity, volatility, and complexity.97 Capacity refers to the degree to which the environment can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity.

Volatility describes the degree of instability in the environment. A dynamic environment with a high degree of unpredictable change makes it difficult for management to make accurate predictions. Because information technology changes at such a rapid pace, more organizations’ environments are becoming volatile.

Complexity is the degree of heterogeneity and concentration among envi- ronmental elements. Simple environments—like the tobacco industry where the methods of production, competitive and regulatory pressures, and the like, haven’t changed in quite some time—are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion—like the broad- band industry—are complex and diverse, with numerous competitors.

Exhibit 15-9 summarizes our definition of the environment along its three dimensions. The arrows indicate movement toward higher uncertainty. Thus, organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty because they have high

technology The way in which an organiza- tion transfers its inputs into outputs.

environment Forces outside an organiza- tion that potentially affect the organization’s structure.

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unpredictability, little room for error, and a diverse set of elements in the envi- ronment to monitor constantly.

Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrange- ments. The more scarce, dynamic, and complex the environment, the more organic a structure should be. The more abundant, stable, and simple the envi- ronment, the more the mechanistic structure will be preferred.

Institutions Another factor that shapes organizational structure is institutions. These are cultural factors that act as guidelines for appropriate behavior.98 Institutional theory describes some of the forces that lead many organizations to have similar structures and, unlike the theories we’ve described so far, focuses on pressures that aren’t necessarily adaptive. In fact, many institutional theorists try to high- light the ways in which corporate behaviors sometimes seem to be performance- oriented but are guided by unquestioned social norms and conformity.

The most obvious institutional factors come from regulatory pressures; certain industries under government contracts, for instance, must have clear reporting relationships and strict information controls. Sometimes simple inertia determines an organizational form—companies can be structured in a particular way just because that’s the way things have always been done. Organi- zations in countries with high power distance might have a structural form with strict authority relationships because it’s seen as more legitimate in that cul- ture. Some have attributed problems in adaptability in Japanese organizations to the institutional pressure to maintain authority relationships.

Sometimes organizations start to have a particular structure because of fads or trends. Organizations can try to copy other successful companies just to look good to investors and not because they need that structure to perform better. Many companies have recently tried to copy the organic form of a company like Google only to find that such structures are a very poor fit with their oper- ating environment. Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful.

institutions Cultural factors, especially those factors that might not lead to adaptive consequences, that lead many organizations to have similar structures.

Three-Dimensional Model of the EnvironmentExhibit 15-9

Abundant

Stable

Dynamic

ComplexSimple

Scarce

MyLab Management Try It If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the Mini Sim.

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Organizational Designs and Employee Behavior We opened this chapter by implying that an organization’s structure can have significant effects on its members. What might those effects be?

A review of the evidence leads to a pretty clear conclusion: You can’t generalize! Not everyone prefers the freedom and flexibility of organic structures. Several factors stand out in different structures as well. In highly formalized, heavily structured mechanistic organizations, the level of fair- ness in formal policies and procedures (organizational justice) is a very important predictor of satisfaction. In more personal, individually adaptive organic organizations, employees value interpersonal justice more.99 Some people are most productive and satisfied when work tasks are standardized and ambiguity is minimized—that is, in mechanistic structures. So any dis- cussion of the effect of organizational design on employee behavior should address individual differences. To do so, let’s consider employee prefer- ences for work specialization, span of control, and centralization.100

The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of job satisfaction. However, work spe- cialization is not an unending source of higher productivity. Problems start to surface, and productivity begins to suffer, when the human diseconomies of

15-6 Analyze the behavioral implications of different organizational designs.

Myth or Science? Employees Can Work Just as Well from Home

T his statement is true—but not unequivocally. Employees who work from home even part of the time report they are happier, and as we saw in Chapter 3, happier employ- ees are likely to be more productive than dissatisfied counterparts. From an organization’s perspective, companies are realizing gains of 5 to 7 extra work hours a week for each employee work- ing from home. There are also cost sav- ings, from reduced overhead for office space and utilities to elimination of unproductive social time. Employers of a home-based workforce can establish work teams and organizational report- ing relationships with little attention to office politics, making it possible to assign roles and responsibilities more objectively. These may be some of the reasons organizations have increasingly endorsed the concept of telecommut- ing, to the point where 3.1 million U.S. payrolled employees work from home.

Although we can all think of jobs that may never be conducive to working from home (such as many in the service industry), not all posi- tions that could be based from home should be. Research indicates that the success of a work-from-home position depends on the job’s struc- ture even more than on its tasks. The amount of interdependence needed between employees within a team or in a reporting relationship sometimes requires epistemic interdependence, which is each employee’s ability to predict what other employees will do. Organization consultants pay atten- tion to how employee roles relate in the architecture of the organization chart, realizing that intentional rela- tionship building is key. Thus, while an employee may complete the tasks of a job well by working alone from home, the benefits of teamwork can be lost. We don’t yet fully understand

the impact of working at a physi- cal distance without sharing time or space with others, but it is perhaps the reason that Yahoo!, Best Buy, and other corporations have brought their employees back into the office.

The success of a work-from-home program depends on the individual, job, and culture of the organization. Work from home can be satisfying for employees and efficient for organiza- tions, but we are learning it has limits.

Sources: Based on M. Mercer, “Shirk Work? Working at Home Can Mean Longer Hours,” TriCities.com, March 4, 2013, www.tricities.com/ news/opinion_columns/article_d04355b8-83cb- 11e2-bc31-0019bb30f31a.html; P. Puranam, M. Raveendran, and T. Knudsen, “Organization Design: The Epistemic Interdependence Per- spective,” Academy of Management Review 37, no. 3 (2012): 419–40; N. Shah, “More Americans Working Remotely,” The Wall Street Journal, March 6, 2013, A3; and R. E. Silver- man and Q. Fottrell, “The Home Office in the Spotlight,” The Wall Street Journal, February 27, 2013, B6.

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doing repetitive and narrow tasks overtake the economies of specialization. As the workforce has become more highly educated and desirous of jobs that are intrinsically rewarding, we seem to reach the point at which productivity begins to decline as a function of specialization more quickly than in the past. While decreased productivity often prompts companies to add oversight and inspection roles, the better answer may be to reorganize work functions and accountability.101

A segment of the workforce still prefers the routine and repetitiveness of highly specialized jobs. Some individuals want work that makes minimal intel- lectual demands and provides the security of routine; for them, high work specialization is a source of job satisfaction. The question is whether they represent 2 percent of the workforce or 52 percent. Given that some self- selection operates in the choice of careers, we might conclude that negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity.

It is probably safe to say that no evidence supports a relationship between span of control and employee satisfaction or performance. Although it is intuitively attractive that large spans might lead to higher employee perfor- mance because they provide more distant supervision and more opportu- nity for personal initiative, there is a lack of research to support this notion. Some people like to be left alone; others prefer the security of a boss who is available at all times. Consistent with several of the contingency theories of leadership discussed in Chapter 12, we would expect factors such as employ- ees’ experiences and abilities, and the degree of structure in their tasks, to explain when wide or narrow spans of control are likely to contribute to per- formance and job satisfaction. However, some evidence indicates that large spans of control are related to more unsafe behaviors and accidents in the workplace.102

We also find evidence linking centralization and job satisfaction.103 This is partly because, in general, less centralized organizations have a greater amount of autonomy. But, again, while one employee may value freedom, another may find autonomous environments frustratingly ambiguous.

We can draw one obvious insight: People don’t select employers randomly. They are attracted to, are selected by, and stay with organizations that suit their personal characteristics.104 Job candidates who prefer predictability are likely to seek out and take employment in mechanistic structures, and those who want autonomy are more likely to end up in organic structures. Thus, the effect of structure on employee behavior is undoubtedly reduced when the selection process facilitates proper matching of individual characteristics with organiza- tional characteristics. Companies should strive to establish, promote, and main- tain the unique identity of their structures, because skilled employees may quit because of dramatic changes.105

Research suggests that national culture influences the preference for struc- ture.106 Organizations that operate with people from high power-distance cul- tures, such as Greece, France, and most of Latin America, often find their employees are much more accepting of mechanistic structures than are employ- ees from low power-distance countries. So consider cultural differences along with individual differences when predicting how structure will affect employee performance and satisfaction.

The changing landscape of organizational structure designs has implica- tions for the individual progressing on a career path. Research with managers in Japan, the United Kingdom, and the United States indicated that employ- ees who weathered downsizing and resulting hybrid organizational structures considered their future career prospects diminished. While this may or may

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not have been correct, their thinking shows that organizational structure does affect the employee and thus must be designed carefully.107

MyLab Management Watch It If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the video exercise.

Summary The theme of this chapter is that an organization’s internal structure contrib- utes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work have a bearing on employee attitudes and behavior. What’s the basis for this argu- ment? To the degree that an organization’s structure reduces ambiguity for employees and answers questions such as “What am I supposed to do?,” “How am I supposed to do it?,” “To whom do I report?,” and “To whom do I go if I have a problem?,” it shapes their attitudes and facilitates and motivates them to higher levels of performance. Exhibit 15-10 summarizes what we’ve discussed.

Implications for Managers ● Specialization can make operations more efficient, but remember that

excessive specialization can create dissatisfaction and reduced motivation. ● Avoid designing rigid hierarchies that overly limit employees’ empower-

ment and autonomy. ● Balance the advantages of remote work against the potential pitfalls before

adding flexible workplace options into the organization’s structure. ● Downsize your organization to realize major cost savings, and focus the

company around core competencies—but only if necessary, because downsizing can have a significant negative impact on employee affect.

● Consider the scarcity, dynamism, and complexity of the environment, and balance organic and mechanistic elements when designing an orga- nizational structure.

Organizational Structure: Its Determinants and OutcomesExhibit 15-10

determines Performance and

satisfaction

Moderated by individual

differences and cultural norms

associated with

Causes • Strategy • Size • Technology • Environment • Institutions

Structural designs • Mechanistic • Organic

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Sources: Based on D. Burkus, “Why Your Open Office Workspace Doesn’t Work,” Forbes, June 21, 2016, https://www.forbes .com/sites/davidburkus/2016/06/21/why-your-open-office-workspace-doesnt-work/#336a42f6435f; G. W. Evans and D. Johnson, “Stress and Open-Office Noise,” Journal of Applied Psychology 85, no. 5 (2000): 779–83; L. Kaufman, “Google Got It Wrong. The Open-Office Trend Is Destroying the Workplace,” The Washington Post, December 30, 2014, https://www .washingtonpost.com/posteverything/wp/2014/12/30/google-got-it-wrong-the-open-office-trend-is-destroying-the- workplace/?utm_term=.d716ef9fe41a; S. Khetarpal, “The Popular ‘Open Office’ Design Has Many Disadvantages, but Some Employers Are Going Beyond It to Create an Empowering Environment at the Workplace,” Business Today, March 12, 2017, 100–6; M. Konnikova, “The Open-Office Trap,” The New Yorker, January 7, 2014, http://www.newyorker.com/ business/currency/the-open-office-trap; P. Rosenberg and K. Campbell, “An Open Office Experiment That Actually Worked,” Harvard Business Review (October 3, 2014); R. Saunderson, “Learning in an Open Office Environment,” Training, January 1, 2016, 134–5; D. Ward, “Beyond the Open Office,” HR Magazine, April 1, 2015, 30–5; and M. D. Zalesny and R. V. Farace, “Traditional versus Open Offices: A Comparison of Sociotechnical, Social Relations, and Symbolic Meaning Perspectives,” Academy of Management Journal 30, no. 2 (1987): 240–59.

Open-Air Offices Inspire Creativity and Enhance Productivity POINT

E ric Prum, cofounder of W&P Design in Brooklyn, New York, and the rest of his 12 coworkers share a single room on the fourth floor of an open-air, converted warehouse. Although it can occasionally be noisy, the layout has led to some very pro- ductive brainstorming sessions. In fact, their latest project, ¡Buenos Nachos!, was a direct result of the open-air office plan. The cofound- ers were discussing the idea for a hipster nacho cookbook in the office while the coworkers eavesdropped. What turned into a spon- taneous idea quickly became a productive brainstorming session. From this open-air plan emerged a cookbook with over 75 recipes from famous chefs and celebrities, including Bill Hader, Andrew Zimmern, and Rachael Ray.

Aside from cost minimization, the logic of the open-air office is that it is meant to tear down the physical barriers between people in the workplace. The functional communication among employees is maximized when these barriers are removed. Starting with the orga- nization’s functional goals in mind, an open-air workplace can be tailored so that it accomplishes these goals by setting aside certain areas or spaces so that they are well suited to accomplish specific functions (e.g., a meeting area, a reading area, etc.). For example, the New York branding firm Collins altered aspects of the environ- ment to work around any limitations of an open-air office, includ- ing arranging the tables so that no person faces another employee. Overall, Collins found, in their own internal research, that the open- air office improves a sense of shared vision and mission, commu- nity, and creativity perceptions. Additional research also suggests that these open-air plans can reduce the amount of time spent in meetings.

COUNTERPOINT

“Our new, modern Tribeca office was beautifully airy, and yet remarkably oppressive. Nothing was private. On the first day, I took my seat at the table assigned to our creative department, next to a nice woman who I suspect was an air horn in a former life. All day, there was constant shuffling, yelling, and laughing, along with loud music piped through a PA system.” The picture Lindsey Kaufman, a Brooklyn advertising professional, described highlights the strain and dissatisfaction employees in open-air office environ- ments can experience, even when there are cubicles granting at least some privacy. The creator of the cubicle, Robert Probst, envisioned something very different in 1964: a freespace where employees could customize their workplace to accommodate their level of privacy, space needs, and flexibility, and to give them a sense of autonomy in an open office. This “action office” became mass-produced and limited in size, quality, and customizability, leading to what we would now call the modern-day cubicle.

Studies on the open-air office and the confinement cubicles of modern offices paint a dismal picture of their effectiveness. One study reviewing hundreds of office environments found that, despite their cohesion benefits, open-air offices reduced workers’ attention spans, productivity, creative thinking, and satisfaction. One of the biggest fac- tors responsible is the level of noise, which leads to decreased moti- vation and potential posture issues. The satisfaction levels related to noise, sound privacy, ease of interaction, among others, across 42,764 observations from over 300 office buildings were analyzed by researchers using the Post-Occupancy Evaluation (POE) database from the University of California at Berkeley. They found a clear dis- parity between satisfaction in open offices versus private offices, and drastically more satisfaction with the latter. And they found that ease of interaction (a goal of open-office plans) was no greater in open offices than in private offices.

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CHAPTER REVIEW

MyLab Management Discussion Questions Go to www.pearson.com/mylab/management to complete the problems marked with this icon .

QUESTIONS FOR REVIEW

15-1 What seven key elements define an organization’s structure?

15-2 What are the characteristics of the functional, bureaucracy, and matrix structures?

15-3 What are the characteristics of the virtual structure, the team structure, and the circular structure?

15-4 How might downsizing affect organizational structures and employees?

15-5 How are mechanistic and organic structural models similar and different?

15-6 What are the behavioral implications of different organizational designs?

APPLICATION AND EMPLOYABILITY Knowing the ins and outs of the structure of your orga- nization can help you improve your employability in the future by improving how you make strategic and ethical decisions along with how you collaborate and commu- nicate with others in the workplace. Different forms of organizational structure have different consequences for employee, manager, and customer behaviors; recognizing these effects can help you behave more adaptively. Per- haps some day you will be starting your own organization from the ground up, or you may collaborate to restructure or redesign the work in an organization. Understanding these different forms of structure will help you improve your skills for use in those situations. In this chapter, you improved your critical thinking as well as your knowledge

application and analysis skills by determining whether employees can work just as well from home, considering what type of structure to choose for a small and growing business, considering the ethics of flexibility and struc- tural changes in the workplace, and debating the effective- ness of open-air offices.

In the next section, you will develop these skills, along with your social responsibility knowledge, by participating in the Experiential Exercise: The Sandwich Shop, exam- ining the ethicality behind employment fluidity in the current job market, considering creative deviance and its anti-hierarchical benefits to organizations, and question- ing the effectiveness of the bureaucratic structure for a major airline carrier.

EXPERIENTIAL EXERCISE The Sandwich Shop Form groups of at least four individuals. Use the following information as background for the exercise.

The managers of a new chain of sandwich shops need to determine what types of sandwiches consum- ers want and find recipes and ingredients. Ingredient sources, prices, and other logistical requirements (like refrigeration) need to be determined, purchasing deci- sions are ongoing, and supplier relationships need to be managed. Financing must also be arranged at this early phase. With this groundwork, the company will move to the next stage of marketing, including pricing and the

development of advertising materials. Finally, selecting and training workers will occur. Each group creates the following.

A Simple Structure Determine what a simple structure would look like for this organization. Recall that a simple structure is one in which there is little hierarchy, wide spans of control, and centralized decision making. To whom would the various tasks described in the background above be as- signed? What sort of delegation might take place? Who

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would coordinate the multiple operations? About how many people would be acting in an administrative role, and what sort of spans of control would they have? What challenges will the organization face as it grows?

A Bureaucracy Determine what a bureaucratic structure would look like for this organization. Bureaucracies are marked by more hierarchy, small spans of control, and specialized decision making. Establish task assignments, delegation, coordina- tion, and the number of individuals required. Also con- sider possibilities for future growth with a bureaucratic system.

A Virtual Structure Determine what a virtual structure would look like for this organization if many of the aspects of the business are outsourced. Consider which tasks can be performed ad- equately by individuals who do not work within the restau- rant chain and which tasks should be kept in house.

Debriefing After all groups have developed different structural options, convene for class discussion for groups to describe how they created responsibilities for different individuals. Then the class should talk about which system of organiza- tion seems most beneficial for this business.

ETHICAL DILEMMA Postmillennium Tensions in the Flexible Organization The message from the business press has been consis- tent: Don’t count on long-term employment. For years, job seekers have been told they should expect to be responsible for their own careers and prepare for the possibility that they will be changing jobs frequently. A simple look at employment trends also confirms that highly routine and well-defined jobs have been decreas- ing in number.

The shift has often been described in positive terms. Managers work to create organizations that have laud- able characteristics like adaptability, flexibility, and cre- ativity. Author Micha Kaufman notes that doing well in contemporary business environments means “hav- ing the flexibility to let go of the ideas of the past, the courage to constantly reevaluate plans for the future, and the presence of mind to adapt to life, as it is, in the moment.” There is a lot of appeal in creating your own future at work.

At the same time, many workers land in precarious positions. Researchers find that individuals who feel inse- cure or uncertain about future employment experience higher levels of psychological strain and worry. Insecure workers also get sick more frequently. Contrary to the pos- itive image of the freelance worker with boundless energy and creativity, evidence shows that for many individuals, a

lack of job security can result in exhaustion and an appre- hensive approach to work problems.

Corporate leaders ask themselves what their role in creating job security should be. Some note that com- panies built around stability and security are less likely to compete successfully and may go out of business. Many organizations try to maintain flexibility and a cer- tain level of security. For example, Scripps Health has maintained a pool of internal transfer opportunities and training assignments for individuals whose job func- tions are no longer needed. As a result, even within the highly volatile health care industry, it has been able to avoid layoffs. However, systems that provide job secu- rity do not come cheaply nor are they feasible for all companies.

Questions 15-7. Do you think that stability is good or bad for

employees? Explain your answer. 15-8. Do employers have an ethical responsibility to

provide security for employees or just a warning about a lack of security?

15-9. If long-term employment security isn’t feasible, what alternatives might employers provide to help employees make smoother transitions?

Sources: Based on M. Kaufman, “The Wisdom of Job Insecurity,” Forbes, October 3, 2014, http:// www.forbes.com/sites/michakaufman/2014/10/03/the-wisdom-of-job-insecurity-dont-be-lulled-by- falling-unemployment/; C. Van Gorder, “A No-Layoffs Policy Can Work, Even in an Unpredictable Economy,” Harvard Business Review, January 26, 2015, https://hbr.org/2015/01/a-no-layoffs-policy- can-work-even-in-an-unpredictable-economy; J. Zumbrun, “Is Your Job ‘Routine’? If So, It’s Probably Disappearing,” Wall Street Journal, April 8, 2015, http://blogs.wsj.com/economics/2015/04/08/ is-your-job-routine-if-so-its-probably-disappearing/; and U. Kinnunen, A. Mäkikangas, S. Mauno, N. De Cuyper, and H. De Witte, “Development of Perceived Job Insecurity across Two Years: Associa- tions with Antecedents and Employee Outcomes,” Journal of Occupational Health Psychology 19 (2014): 243–58.

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CASE INCIDENT 1 Creative Deviance: Bucking the Hierarchy? One of the major functions of an organizational hierarchy is to increase standardization and control for top manag- ers. Using the chain of command, managers can direct the activities of subordinates toward a common purpose. If the right person with a creative vision oversees a hier- archy, the results can be phenomenal. For example, until Steve Jobs’s passing in October 2011, Apple had used a strong top-down creative process in which most major decisions and innovations flowed directly through Jobs and were subsequently delegated to teams as specific assignments to complete.

Then there is creative deviance, in which individuals create extremely successful products despite being told by senior management to stop working on them. The electrostatic displays used in more than half of Hewlett- Packard’s instruments, the tape slitter that was one of the most important process innovations in 3M’s history, and Nichia’s development of multibillion-dollar LED bright lighting technology were all officially rejected by the management hierarchy. In these cases, an approach like Apple’s would have shut down some of the most successful products the companies ever produced. Doing business as usual can become such an imperative in a hierarchical organization that novel ideas are seen as threats rather than opportunities for development.

It’s not immediately apparent why top-down decision making works so well for one highly creative company like Apple, while hierarchy nearly ruined innovations at sev- eral other organizations. It may be that Apple’s structure is quite simple, with relatively few layers and a great deal of responsibility placed on everyone for his or her own outcomes. Or it may be that Apple simply had a unique leader who was able to rise above the conventional stric- tures of a CEO to create a culture of constant innovation.

Questions 15-10. Do you think it’s possible for an organization to

create an anti-hierarchy to encourage employees to engage in more acts of creative deviance? What steps might a company take to encourage creative deviance?

15-11. Why do you think a company like Apple is able to be creative with a strong hierarchical struc- ture, whereas other companies find hierarchy limiting?

15-12. Do you think Apple’s success was entirely depen- dent on Steve Jobs’s role as head of the hierarchy? What are the potential liabilities of a company’s being so strongly connected to the decision making of a single individual?

Sources: Based on C. Mainemelis, “Stealing Fire: Creative Deviance in the Evolution of New Ideas,” Academy of Management Review 35, no. 4 (2010): 558–78; and A. Lashinsky, “Inside Apple,” Fortune, May 23, 2011, 125–34.

CASE INCIDENT 2 Turbulence on United Airlines The beginning of 2017 was not good for United Airlines. Several incidents involving United Airlines personnel enforcing a variety of rules, regulations, and protocols in employees’ interactions with customers caused interna- tional outcry. The first incident involved two teenagers who were wearing leggings for their flight from Minne- apolis to Denver. They were stopped by the gate agent and not allowed to board for violating the United Airlines travel perk program. These travel perk passes hinge on a requirement for users of the passes to dress themselves so that the airline is presented in a favorable light. United defended its decision via Twitter: “Leggings are not inap- propriate attire except in the case of someone traveling as a pass rider.” Comedian Seth Rogan tweeted, “We here at @United are just trying to police the attire of the daugh- ters of our employees! That’s all! Cool, right?”

A second, more severe incident occurred when David Dao, a doctor who needed to see his patients the follow- ing morning, was aboard a Louisville-bound flight from Chicago in April. Four United employees needed to get

to Louisville at the last minute, and it was announced that four people needed to give up their seats or else the flight would be cancelled. Attendants called the police after no one complied. The police approached Dao and forcibly removed him from the plane. Dao suffered a broken nose and concussion after his head smashed into an armrest. United policy allowed for the involuntary removal of pas- sengers from flights, although this time United was not as defensive. Dao later filed a lawsuit against United for its actions.

A third incident, in Houston, involved a soon-to-be- married couple, Michael and Amber, headed to Costa Rica for their wedding. When they entered the plane, they noticed a man sleeping in the row where their seats were assigned. Instead of disturbing him, they found some seats three rows up and sat there instead. They were soon asked by an attendant to return to their seats and they complied. A U.S. marshall approached them soon after and ejected them from the plane. According to United statements, the couple “repeatedly” tried to sit in upgraded seats and

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would not follow the instructions of the attendants and crew members, and, as such, they were within their power to eject the passengers.

These incidents suggest that, starting with the struc- ture as created by the CEO, United employees do not have much latitude or flexibility when dealing with day- to-day policy breaches. Taking cost-minimization and efficiency-boosting strategies to the extreme may also have had an effect given that the focus drifted from the customer and toward rule following. Many attribute this inflexibility to the strict, rule-following bureaucracy created by United managers. In this bureaucracy, their 85,000 employees may be reluctant to deviate from the rules—intracompany historical precedent suggests that many employees face termination if they break the rules.

Questions 15-13. How do you think United Airlines should have

handled the recent string of incidents? Do you think that United Airlines was within its power to have removed these people from the flights? Why or why not?

15-14. What are the pros and cons of having a bureau- cratic organizational structure for an airline? Do you think the pros and cons are justified for United Airlines and that they should keep the structure they have? Why or why not?

15-15. What do you think United Airlines should do in the future? Do you have any suggestions for enhancements or improvements to the United Air- lines organizational structure? Would you consider restructuring? Why or why not?

Sources: Based on S. Carey, “Behind United Airlines’ Fateful Decision to Call Police; Airline’s Rules- Based Culture in Spotlight after Man Was Dragged off Flight by Law Enforcement,” The Wall Street Journal, April 17, 2017; J. Disis and J. Ostrower, “United Airlines in Twitter Trouble over Leggings Rule,” CNN Money, March 27, 2017, money.cnn.com/2017/03/26/news/united-airlines-twitter- dress-code/; A. Hartung, “Why United Airlines Abuses Customers: The Risks of Operational Excellence,” Forbes, April 10, 2017, https://www.forbes.com/sites/adamhartung/2017/04/10/ why-united-airlines-abuses-customers-the-risks-of-operational-excellence/#78a1af3fbb10; M. Hiltzik, “At United Airlines and Wells Fargo, Toxic Corporate Culture Starts with the CEO,” Los Angeles Times, April 17, 2017, http://www.latimes.com/business/hiltzik/la-fi-hiltzik-toxic-united-wells- 20170411-story.html; and E. C. McLaughlin, “Man Dragged off United Flight Has Concussion, Will File Suit, Lawyer Says.” CNN, April 14, 2017, http://www.cnn.com/2017/04/13/travel/united- passenger-pulled-off-flight-lawsuit-family-attorney-speak/.

MyLab Management Writing Assignments If your instructor has assigned this activity, go to www.pearson.com/mylab/management for auto-graded writing assignments as well as the following assisted-graded writing assignments:

15-16. After reading Case Incident 2, do you think it is possible for organizations to merge more than one type of organizational structure and retain elements of each type? Is it possible for United Airlines to have both a bureaucratic and a more flexible structure at the same time? How so?

15-17. Based on what you’ve discovered about your personality traits on the Big Five Model through your organiza- tional behavior studies in Chapter 5, in which organizational structures might you work best?

15-18. MyLab Management only—additional assisted-graded writing assignment.

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ENDNOTES 1 F. A. Csaszar, “An Efficient Frontier in Organization Design: Organizational Struc- ture as a Determinant of Exploration and Exploitation,” Organization Science 24, no. 4 (2013): 1083–101; G. P. Huber, “Organiza- tions: Theory, Design, Future,” in S. Zedeck (ed.), APA Handbook of Industrial and Organi- zational Psychology: Vol. 1, Pt. II: Perspectives on Designing Organizations and Human Resource Systems (Washington, DC: APA, 2011): 117–60; and B. McEvily, G. Soda, and M. Tortoriello, “More Formally: Rediscover- ing the Missing Link between Formal Orga- nization and Informal Social Structure,” The Academy of Management Annals 8, no. 1 (2014): 299–345. 2 Huber, “Organizations.” 3 See, for instance, R. L. Daft, Organization Theory and Design, 12th ed. (Boston, MA: Cengage, 2015). 4 T. Hindle, Guide to Management Ideas and Gurus (London, UK: Profile Books/The Economist Newspaper, 2008). 5 See, for instance, E. Penrose, The Theory of the Growth of the Firm, 4th ed. (Oxford, UK: Oxford, 2009); and D. G. Ross, “An Agency Theory of the Division of Managerial Labor,” Organization Science 25, no. 2 (2013): 494–508. 6 For a review, see J. A. Häusser, S. Schulz- Hardt, T. Schultze, A. Tomaschek, and A. Mojzisch, “Experimental Evidence for the Effects of Task Repetitiveness on Mental Strain and Objective Work Performance,” Journal of Organizational Behavior 35, no. 5 (2014): 705–21. 7 J. R. Hackman and G. R. Oldham, “Motiva- tion through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance 16 (1976): 250–79. 8 J. G. Miller, “The Real Women’s Issue: Time,” The Wall Street Journal, March 9–10, 2013, C3. 9 P. Hitlin, “Research in the Crowdsourc- ing Age, a Case Study,” Pew Research Center: Internet, Science & Technology, July 11, 2016, http://www.pewinternet.org/2016/07/11/ research-in-the-crowdsourcing-age-a-case- study/; and T. W. Malone, R. J. Laubacher, and T. Johns, “The Age of Hyperspecializa- tion,” Harvard Business Review ( July–August 2011): 56–65. 10 J. Schramm, “A Cloud of Workers,” HR Magazine (March 2013): 80. 11 F. Levy and R. J. Murnane, The New Division of Labor: How Computers Are Creating the Next Job Market (New York, NY: Sage, 2004). 12 See, for instance, J. L. Price, “The Impact of Departmentalization on Interoccupational Cooperation,” Human Organization 27, no. 4 (1968): 362–8. 13 N. Kumar, “Kill a Brand, Keep a Customer,” Harvard Business Review, December 2003,

https://hbr.org/2003/12/kill-a-brand-keep- a-customer. 14 C. Woodyard, “Toyota Brass Shakeup Aims to Give Regions More Control,” USA Today, March 6, 2013, www.usatoday.com/story/money/ cars/2013/03/06/toyota-shakeup/1966489/. 15 S. Ballmer, “One Microsoft: Company Realigns to Enable Innovation at Greater Speed, Efficiency,” Microsoft, July 11, 2013, http:// blogs.microsoft.com/firehose/2013/07/11/ one-microsoft-company-realigns-to-enable- innovation-at-greater-speed-efficiency/. 16 Ibid. 17 M. Weinberger, “Why This Microsoft Exec Totally Shook up the Team That Makes One of Its Most Important Products,” Business Insider, June 14, 2016, http://www.businessinsider.com/ microsoft-office-team-reorganization-2016-6; and A. Wilhelm, “Microsoft Shakes Up Its Leadership and Internal Structure as Its Fiscal Year Comes to a Close,” TechCrunch, June 17, 2015, http://techcrunch.com/2015/06/17/ microsoft-shakes-up-its-leadership-and-internal- structure-as-its-fiscal-year-comes-to-a-close/ #.mcn4eo:OnA3. 18 See, for instance, S. Finkelstein and R. A. D’Aveni, “CEO Duality as a Double-Edged Sword: How Boards of Directors Balance Entrenchment Avoidance and Unity of Command,” Academy of Management Journal 37, no. 5 (1994): 1079–1108; and J. Pfef- fer, “Management as Symbolic Action: The Creation and Maintenance of Organiza- tional Paradigms,” in L. L. Cummings and B. M. Staw (eds.), Research in Organizational Behavior, Vol. 3 (Greenwich, CT: JAI, 1981): 1–52. 19 P. Hinds and S. Kiesler, “Communication across Boundaries: Work, Structure, and Use of Communication Technologies in a Large Organization,” Organization Science 6, no. 4 (1995): 373–93. 20 See, for instance, “How Hierarchy Can Hurt Strategy Execution,” Harvard Business Review (July–August 2010): 74–75. 21 For a review, see D. D. Van Fleet and A. G. Bedeian, “A History of the Span of Manage- ment,” Academy of Management Review 2, no. 3 (1977): 356–72. 22 E. Appelbaum and R. Batt, The New American Workplace (Ithaca, NY: ILR, 1994); and C. Heckscher and A. Dornellor (eds.), The Post-Bureaucratic Organization (Thousand Oaks, CA: Sage, 1994). 23 B. Brady, “It’s Time to Stop Trying to Do It All,” Fortune, May 26, 2016, http://fortune .com/2016/05/26/fortune-500-principal- financial-time-management/. 24 See, for instance, J. H. Gittell, “Supervisory Span, Relational Coordination, and Flight Departure Performance: A Reassessment of Postbureaucracy Theory,” Organization Science 12, no. 4: (2001): 468–83.

25 Society for Human Resource Manage- ment (SHRM), “Span of Control: What Factors Should Determine How Many Direct Reports a Manager Has?,” SHRM: HR Q&S, April 25, 2013, https://www.shrm.org/ resourcesandtools/tools-and-samples/ hr-qa/pages/whatfactorsshoulddetermine howmanydirectreportsamanagerhas.aspx. 26 J. Morgan, The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization (Hoboken, NJ: Wiley, 2014); and J. Morgan, “The 5 Types of Organizational Structures: Part 3, Flat Organizations,” Forbes, July 13, 2015, https://www.forbes.com/sites/ jacobmorgan/2015/07/13/the-5-types- of-organizational-structures-part-3-flat- organizations/#5b9001926caa. 27 Huber, “Organizations.” 28 Ibid. 29 Huber, “Organizations”; and Society for Human Resource Management (SHRM), “Understanding Organizational Structures,” SHRM: Toolkits, November 30, 2015, https:// www.shrm.org/resourcesandtools/tools- and-samples/toolkits/pages/understanding organizationalstructures.aspx. 30 F. A. Csaszar, “Organizational Structure as a Determinant of Performance: Evidence from Mutual Funds,” Strategic Management Journal 33, no. 6 (2012): 611–32. 31 B. Brown and S. D. Anthony, “How P&G Tripled Its Innovation Success Rate,” Harvard Business Review (June 2011): 64–72. 32 A. Leiponen and C. E. Helfat, “Location, Decentralization, and Knowledge Sources for Innovation,” Organization Science 22, no. 3 (2011): 641–58. 33 K. Lanaj, J. R. Hollenbeck, D. R. Ilgen, C. M. Barnes, and S. J. Harmon, “The Double- Edged Sword of Decentralized Planning in Multiteam Systems,” Academy of Management Journal 56, no. 3 (2013): 735–57. 34 K. Parks, “HSBC Unit Charged in Argentine Tax Case,” The Wall Street Journal, March 19, 2013, C2. 35 Huber, “Organizations”; and McEvily, Soda, and Tortoriello, “More Formally.” 36 P. Hempel, Z.-X. Zhang, and Y. Han, “Team Empowerment and the Organizational Context: Decentralization and the Contrasting Effects of Formalization,” Journal of Management 38, no. 2 (2012): 475–501. 37 M. L. Tushman and T. J. Scanlan, “Characteristics and External Orientations of Boundary Spanning Individuals,” Academy of Management Journal 24 (1981): 83–98. 38 J. E. Perry-Smith and C. E. Shalley, “A Social Composition View of Team Cre- ativity: The Role of Member Nationality- Heterogeneous Ties outside of the Team,” Organization Science 25 (2014): 1434–52; J. Han, J. Han, and D. J. Brass, “Human

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Capital Diversity in the Creation of Social Capital for Team Creativity,” Journal of Organizational Behavior 35 (2014): 54–71; M. Tortoriello, R. Reagans, and B. McEvily, “Bridging the Knowledge Gap: The Influ- ence of Strong Ties, Network Cohesion, and Network Range on the Transfer of Knowl- edge between Organizational Units,” Orga- nization Science 23, no. 4 (2012): 1024–39; and X. Zou and P. Ingram, “Bonds and Boundaries: Network Structure, Organiza- tional Boundaries, and Job Performance,” Organizational Behavior and Human Decision Processes 120, no. 1 (2013): 98–109. 39 N. J. Foss, K. Laursen, and T. Pedersen, “Linking Customer Interaction and Innova- tion: The Mediating Role of New Organi- zational Practices,” Organization Science 22 (2011): 980–99; N. J. Foss, J. Lyngsie, and S. A. Zahra, “The Role of External Knowledge Sources and Organizational Design in the Process of Opportunity Exploitation,” Strategic Management Journal 34 (2013): 1453–71; and A. Salter, P. Crisuolo, and A. L. J. Ter Wal, “Coping with Open Innovation: Responding to the Challenges of External Engagement in R&D,” California Management Review 56 (Win- ter 2014): 77–94. 40 Y. Huang, Y. Luo, Y. Liu, and Q. Yang, “An Investigation of Interpersonal Ties in Inter- organizational Exchanges in Emerging Mar- kets,” Journal of Management 42, no. 6 (2016): 1557–87. 41 H. Aldrich and D. Herker, “Boundary Span- ning Roles and Organization Structure,” Academy of Management Review 2, no. 2 (1977): 217–30. 42 T. A de Vries, F. Walter, G. S. Van der Vegt, and P. J. M. D. Essens, “Antecedents of Individuals’ Interteam Coordination: Broad Functional Experiences as a Mixed Blessing,” Academy of Management Journal 57 (2014): 1334–59. 43 R. Cross, C. Ernst, D. Assimakopoulos, and D. Ranta, “Investing in Boundary-Spanning Collaboration to Drive Efficiency and Inno- vation,” Organizational Dynamics 44, no. 3 (2015): 204–16. 44 Huber, “Organizations”; and H. Mintzberg, Structure in Fives: Designing Effective Organizations (Englewood Cliffs, NJ: Prentice Hall, 1983). 45 A. Murray, “Built Not to Last,” The Wall Street Journal, March 18, 2013, A11. 46 B. Sugarman, “Stages in the Lives of Orga- nizations,” Administration and Policy in Mental Health 1, no. 2 (1989): 59–66. 47 See, for instance, M. Myatt, “Businesses Don’t Fail—Leaders Do,” Forbes, January 12, 2012, https://www.forbes.com/sites/mikemyatt/ 2012/01/12/businesses-dont-fail-leaders- do/#7ad1d7596c97. 48 Huber, “Organizations”; and Mintzberg, Structure in Fives. 49 J.-F. Harvey, P. Cohendet, L. Simon, and L.-E. Dubois, “Another Cog in the Machine:

Designing Communities of Practice in Profes- sional Bureaucracies,” European Management Journal 31, no. 1 (2013): 27–40. 50 D. Graeber, The Utopia of Rules: On Technol- ogy, Stupidity, and the Secret Joys of Bureaucracy (New York, NY: Melville House, 2015). 51 J. H. Gittell and A. Douglass, “Relational Bureaucracy: Structuring Reciprocal Relationships into Roles,” Academy of Management Review 37, no. 4 (2012): 709–33. 52 For a quick overview, see J. Davoren, “Functional Structure Organization Strength and Weakness,” Small Business Chronicle, http://smallbusiness.chron.com/ functional-structure-organization-strength- weakness-60111.html, accessed June 25, 2015; and Huber, “Organization.” 53 H. Moon, J. R. Hollenbeck, S. E. Humphrey, D. R. Ilgen, B. West, A. P. J. Ellis, and C. O. L. H. Porter, “Asymmetric Adaptability: Dynamic Team Structures as One-Way Streets,” Acad- emy of Management Journal 47, no. 5 (2004): 681–95. 54 J. R. Galbraith, Designing Matrix Organiza- tions That Actually Work: How IBM, Procter & Gamble, and Others Design for Success (San Francisco: Jossey Bass, 2009); Huber, “Organi- zation”; and E. Krell, “Managing the Matrix,” HRMagazine (April 2011): 69–71. 55 R. C. Ford, “Cross-Functional Structures: A Review and Integration of Matrix Organiza- tion and Project Management,” Journal of Management 18, no. 2 (1992): 267–94. 56 See, for instance, M. Bidwell, “Politics and Firm Boundaries: How Organizational Struc- ture, Group Interests, and Resources Affect Outsourcing,” Organization Science (November– December 2012): 1622–42. 57 Ford, “Cross-Functional Structures.” 58 See, for instance, T. Sy and L. S. D’Annunzio, “Challenges and Strategies of Matrix Organizations: Top-Level and Mid-Level Managers’ Perspectives,” Human Resource Planning 28, no. 1 (2005): 39–48; and T. Sy and S. Côté, “Emotional Intelligence: A Key Ability to Succeed in the Matrix Organiza- tion,” Journal of Management Development 23, no. 5 (2004): 437–55. 59 N. Anand and R. L. Daft, “What Is the Right Organization Design?,” Organizational Dynamics 36, no. 4 (2007): 329–44. 60 Huber, “Organizations.” 61 Ibid. 62 Huber, “Organizations”; and J. B. Quinn and P. Anderson, “Leveraging Intellect,” Acad- emy of Management Executive 10 (1996): 7–27. 63 E. Steel, “Netflix Refines Its DVD Business, Even as Streaming Unit Booms,” The New York Times, July 26, 2015, https://www.nytimes.com/ 2015/07/27/business/while-its-streaming- service-booms-netflix-streamlines-old-business .html?_r=0. 64 J. Schramm, “At Work in a Virtual World,” HR Magazine (June 2010): 152.

65 See, for instance, C. B. Gibson and J. L. Gibbs, “Unpacking the Concept of Virtuality: The Effects of Geographic Dis- persion, Electronic Dependence, Dynamic Structure, and National Diversity on Team Innovation,” Administrative Science Quarterly 51, no. 3 (2006): 451–95; H. M. Latapie and V. N. Tran, “Subculture Formation, Evolu- tion, and Conflict between Regional Teams in Virtual Organizations,” The Business Review (Summer 2007): 189–93; and S. Davenport and U. Daellenbach, “‘Belonging’ to a Virtual Research Center: Exploring the Influence of Social Capital Formation Processes on Mem- ber Identification in a Virtual Organization,” British Journal of Management 22, no. 1 (2011): 54–76. 66 See, for instance, M. A. West and L. Markiewicz, Building Team-Based Working: A Practical Guide to Organizational Transforma- tion (Malden, MA: Blackwell, 2004). 67 D. Herath, “Mess Is Good for Business: Some Companies Would Do Better if They Embraced Disorganization,” Newsweek, February 28, 2017, http://www .newsweek.com/organization-skills-business- efficiency-561985; S. Stevenson, “Who’s the Boss? No one.” Slate, June 2, 2014, http:// www.slate.com/articles/business/psychology_ of_management/2014/06/the_bossless_ office_how_well_do_workplaces_ without_managers_function.html; and Schum- peter, “The Holes in Holacracy,” The Economist, July 5, 2014, http://www.economist.com/ news/business/21606267-latest-big-idea- management-deserves-some-scepticism-holes- holacracy. 68 A. Grasso, Y. Hoppenot, and C. Privault, “Experience Design: The Path from Research to Business,” Xerox Research Centre Europe (Press Release), 2013, http://www.xrce.xerox .com/About-XRCE/History/20-Years-of- Innovation-in-Europe/Articles/Experience- Design-the-path-from-research-to-business. 69 J. Scheck, L. Moloney, and A. Flynn, “Eni, CNPC Link Up in Mozambique,” The Wall Street Journal, March 15, 2013, B3. 70 A. G. L. Romme, “Domination, Self-Deter- mination and Circular Organizing,” Organiza- tion Studies 20, no. 5 (1999): 801–31. 71 D. K. Datta, J. P. Guthrie, D. Basuil, and A. Pandey, “Causes and Effects of Employee Downsizing: A Review and Synthesis,” Journal of Management 36, no. 1 (2010): 281–348. 72 S. Ghosh, “Google’s Motorola Mobility Layoffs: Sweeping Changes Axe 4,000 Jobs,” Reuters, August 13, 2012, http:// www. huffingtonpost.com/2012/08/13/ google-motorola-mobility-layoffs-cuts- employees_n_1771692.html. 73 L. Gensler, “American Express to Slash 4,000 Jobs on Heels of Strong Quarter,” Forbes, January 21, 2015, http://www.forbes .com/sites/laurengensler/2015/01/21/

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american-express-earnings-rise-11-on- increased-cardholder-spending/. 74 B. Fotsch and J. Case, “Transforming Your Service Business with Lean Management,” Forbes, March 7, 2017, https://www.forbes. com/sites/fotschcase/2017/03/07/ transforming-your-service-business-with-lean- management/#66b5134254e8; and L. McCann, J. S. Hassard, E. Granter, and P. J. Hyde, “Casting the Lean Spell: The Promotion, Dilution and Erosion of Lean Management in the NHS,” Human Relations 68, no. 10 (2015): 1557–77. 75 J. Jargon, “Latest Starbucks Buzzword: ‘Lean’ Japanese Techniques,” The Wall Street Journal, August 4, 2009, https://www.wsj.com/ articles/SB124933474023402611. 76 Datta, Guthrie, Basuil, and Pandey, “Causes and Effects of Employee Downsizing.” 77 L. I. Alpert, “Can Imported CEO Fix Russian Cars?,” The Wall Street Journal, March 20, 2013, http://www.wsj.com/articles/ SB1000142412788732363960457837012139 4214736. 78 R. Handfield, “Bo Andersson’s Supply Strat- egy Collides with Vladmir Putin’s Russia: The Performance Triangle Collapses,” Supply Chain View From the Field, NC State Poole College of Management, Supply Chain Resource Coop- erative, April 11, 2016, https://scm.ncsu.edu/ blog/2016/04/11/bo-anderssons-supply- strategy-collides-with-vladimir-putins-russia- the-performance-triangle-collapses/. 79 G. Stolyarov and C. Lowe, “In Russia’s Detroit, Layoffs Are Blamed on Foreign Interlopers,” Reuters: Business News, April 27, 2016, http://www.reuters.com/article/ us-russia-avtovaz-idUSKCN0XO0EE. 80 D. Van Dierendonck and G. Jacobs, “Survivors and Victims: A Meta-Analytical Review of Fairness and Organizational Commitment after Downsizing,” British Journal of Management 23 (2012): 96–109. 81 J. R. B. Halbesleben, A. R. Wheeler, and S. C. Paustian-Underdahl, “The Impact of Furloughs on Emotional Exhaustion, Self- Rated Performance, and Recovery Experi- ences,” Journal of Applied Psychology 98, no. 3 (2013): 492–503; R. Kalimo, T. W. Taris, and W. B. Schaufeli, “The Effects of Past and Anticipated Future Downsizing on Survivor Well-Being: An Equity Perspective,” Journal of Occupational Health Psychology 8, no. 2 (2003): 91–109; and Van Dierendonck and Jacobs, “Survivors and Victims.” 82 G. M. Spreitzer and A. K. Mishra, “To Stay or Go: Voluntary Survivor Turnover Follow- ing an Organizational Downsizing,” Journal of Organizational Behavior 23, no. 6 (2002): 707–29; C. O. Trevor and A. J. Nyberg, “Keep- ing Your Headcount When All About You Are Losing Theirs: Downsizing, Voluntary Turn- over Rates, and the Moderating Role of HR Practices,” Academy of Management Journal 51, no. 2 (2008): 259–76.

83 K. Devine, T. Reay, L. Stainton, and R. Collins-Nakai, “Downsizing Outcomes: Better a Victim Than a Survivor?,” Human Resources Management 42, no. 2 (2003): 109–24. 84 T. Burns and G. M. Stalker, The Manage- ment of Innovation (London, UK: Tavistock, 1961). 85 K. Walker, N. Ni, and B. Dyck, “Recipes for Successful Sustainability: Empirical Organi- zational Configurations for Strong Corpo- rate Environmental Performance,” Business Strategy and the Environment 24, no. 1 (2015): 40–57. 86 See, for instance, A. Drach-Zahavy and A. Freund, “Team Effectiveness under Stress: A Structural Contingency Approach,” Journal of Organizational Behavior 28, no. 4 (2007): 423–50. 87 K. Walker, N. Ni, and B. Dyck, “Recipes for Successful Sustainability: Empirical Organi- zational Configurations for Strong Corpo- rate Environmental Performance,” Business Strategy and the Environment 24, no. 1 (2015): 40–57. 88 See, for instance, S. M. Toh, F. P. Morge- son, and M. A. Campion, “Human Resource Configurations: Investigating Fit with the Organizational Context,” Journal of Applied Psychology 93, no. 4 (2008): 864–82. 89 G. P. Pisano, “You Need an Innovation Strategy,” Harvard Business Review, June 2015, https://hbr.org/2015/06/you-need- an-innovation-strategy. 90 See, for instance, R. Robinson, “Costs and Cost-Minimisation Analysis,” British Medical Journal 307 (1993): 726–8. 91 See, for instance, J. C. Naranjo-Valencia, D. Jiménez-Jiménez, and R. Sanz-Valle, “Inno- vation or Imitation? The Role of Organiza- tional Culture,” Management Decision 49, no. 1 (2011): 55–72. 92 M. Mesco, “Moleskine Tests Appetite for IPOs,” The Wall Street Journal, March 19, 2013, B8. 93 M. Josefy, S. Kuban, R. D. Ireland, and M. A. Hitt, “All Things Great and Small: Organizational Size, Boundaries of the Firm, and a Changing Environment,” The Academy of Management Annals 9, no. 1 (2015): 715–802. 94 J. Backaler, “Haier: A Chinese Company That Innovates,” Forbes, June 17, 2010, http:// www.forbes.com/sites/china/2010/06/17/ haier-a-chinese-company-that-innovates/. 95 A. Mutch, “Technology, Organization, and Structure—a Morphogenetic Approach,” Organization Science 21, no. 2 (2010): 507–20. 96 Huber, “Organizations.” 97 See, for instance, J. A. Cogin and I. O. Williamson, “Standardize or Custom- ize: The Interactive Effects of HRM and Environment Uncertainty on MNC Subsid- iary Performance,” Human Resource Manage- ment 53, no. 5 (2014): 701–21; and G. Kim and M.-G. Huh, “Exploration and Organi- zational Longevity: The Moderating Role of

Strategy and Environment,” Asia Pacific Journal of Management 32, no. 2 (2015): 389–414. 98 R. Greenwood, C. R. Hinings, and D. Whetten, “Rethinking Institutions and Organizations,” Journal of Management Stud- ies, 51 (2014): 1206–20; D. Chandler and H. Hwang, “Learning from Learning Theory: A Model of Organizational Adoption Strate- gies at the Microfoundations of Institutional Theory,” Journal of Management 41 (2015): 1446–76. 99 C. S. Spell and T. J. Arnold, “A Multi- Level Analysis of Organizational Justice and Climate, Structure, and Employee Mental Health,” Journal of Management 33, no. 5 (2007): 724–51; and M. L. Ambrose and M. Schminke, “Organization Structure as a Mod- erator of the Relationship between Procedural Justice, Interactional Justice, Perceived Orga- nizational Support, and Supervisory Trust,” Journal of Applied Psychology 88, no. 2 (2003): 295–305. 100 See, for instance, Spell and Arnold, “A Multi-Level Analysis of Organizational Justice Climate, Structure, and Employee Mental Health”; J. D. Shaw and N. Gupta, “Job Complexity, Performance, and Well- Being: When Does Supplies-Values Fit Mat- ter?,” Personnel Psychology 57, no. 4 (2004): 847–79; and C. Anderson and C. E. Brown, “The Functions and Dysfunctions of Hierar- chy,” Research in Organizational Behavior 30 (2010): 55–89. 101 See, for instance, T. Martin, “Pharmacies Feel More Heat,” The Wall Street Journal, March 16–17, 2013, A3. 102 R. Hechanova-Alampay and T. A. Beehr, “Empowerment, Span of Control, and Safety Performance in Work Teams after Workforce Reduction,” Journal of Occupational Health Psy- chology 6, no. 4 (2001): 275–82. 103 S. Bhargava and A. Kelkar, “Prediction of Job Involvement, Job Satisfaction, and Empowerment from Organizational Structure and Corporate Culture,” Psychological Studies 45, nos. 1–2 (2000): 43–50; A. P. Kakabadse and R. Worrall, “Job Satisfaction and Orga- nizational Structure: A Comparative Study of Nine Social Service Departments,” The British Journal of Social Work 8, no. 1 (1978): 51–70; E. G. Lambert, E. A. Paoline III, and N. L. Hogan, “The Impact of Centralization and Formalization on Correctional Staff Job Satis- faction and Organizational Commitment: An Exploratory Study,” Criminal Justice Studies 19, no. 1 (23–44); and G. S. Rai, “Job Satisfaction among Long-Term Care Staff: Bureaucracy Isn’t Always Bad,” Administration in Social Work 37, no. 1 (2013): 90–9. 104 See, for instance, R. E. Ployhart, J. A. Weekley, and K. Baughman, “The Structure and Function of Human Capital Emergence: A Multilevel Examination of the Attraction- Selection-Attrition Model,” Academy of

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Management Journal 49, no. 4 (2006): 661–77; and B. Schneider, “The People Make the Place,” Personnel Psychology 40, no. 3 (1987): 437–53. 105 J. B. Stewart, “A Place to Play for Google Staff,” The New York Times, March 16, 2013, B1.

106 See, for instance, B. K. Park, J. A. Choi, M. Koo, S. Sul, and I. Choi, “Culture, Self, and Preference Structure: Transitivity and Context Independence Are Violated More by Inter- dependent People,” Social Cognition 31, no. 1 (2013): 106–18.

107 J. Hassard, J. Morris, and L. McCann, “‘My Brilliant Career?’ New Organizational Forms and Changing Managerial Careers in Japan, the UK, and USA,” Journal of Management Studies 49, no. 3 (2012): 571–99.

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542

Organizational Culture16

16-1 Describe the common characteris- tics of organizational culture.

16-2 Compare the functional and dysfunc- tional effects of organizational cul- ture on people and the organization.

16-3 Identify the factors that create and sustain an organization’s culture.

16-4 Show how culture is transmitted to employees.

16-5 Describe the similarities and differ- ences in creating an ethical culture, a positive culture, and a spiritual culture.

16-6 Show how national culture can affect the way organizational culture is transported to another country.

LEARNING OBJECTIVES After studying this chapter, you should be able to:

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dl ey

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THE CHEVRON WAY

When you think of a company’s culture, what comes to mind? Do you think of office pets? Quirky, modern furniture? Foosball tables? Or other strange perks, such as a personal, meal planning concierge? It seems as if the term organizational culture has shifted, for many, toward an obsession with uniqueness, trendiness, and innovation and away from a more general understanding of the system of shared meaning that it should represent. For instance, consider Chevron. Chevron employees, such as the ones shown here in the Chevron House building in Singapore, have rated the company favorably and laud The Chevron Way: its mission devoted to safety, health, and support for one another, a philosophy which can be traced back to the early roots of the company. For an industry [oil and gas] that normally gets a bad rap, Glassdoor Career Trends Analyst Scott Dobroski notes, “Unlike other companies in that industry, they really appreciate ‘The Chev- ron Way.’ . . . That’s built into their culture, and it’s specific for that industry.”

Chevron has managed to craft a positive organizational culture and offers numerous perks related to its mission, such as onsite fitness centers and free health club memberships. It also has a variety of programs to further its health mission, including massages and personal training. The mission is etched into the infrastructure, and rules and policies mandating regular breaks are enforced. As Jamie Hooker, a former employee, writes, “I love

Employability Skills Matrix (ESM)

Myth or Science?

Career OBjectives

An Ethical Choice

Point/ Counterpoint

Experiential Exercise

Ethical Dilemma

Case Incident 1

Case Incident 2

Critical Thinking ✓ ✓ ✓ ✓ ✓ ✓

Communication ✓ ✓ ✓ ✓ ✓ ✓ Collaboration ✓ ✓ ✓ ✓ Knowledge

Application and Analysis

✓ ✓ ✓ ✓ ✓ ✓

Social Responsibility ✓ ✓ ✓

MyLab Management Chapter Warm Up If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the chapter warm up.

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working for Chevron . . . my favorite part, the fact that they demand we take breaks every 45 minutes. They even installed a program on our computers that locks it so that we have to take a 5-minute break.” Chevron has many family support policies as well, further emphasizing its value of mutual sup- port. It has nursing rooms for new mothers, college counseling for employ- ees’ families and children, and an adoption reimbursement program. As Sujan Patel, cofounder of ContentMarketer.io notes, “Your company culture doesn’t have to be ping-pong tables and free beer. Simply providing employ- ees with a sense of safety and well-being and creating a policy where every- one looks out for each other can easily suffice.”

Overall, the leaders who developed the Chevron Way clearly articulated a simple mission: “to be the global energy company most admired for its peo- ple, partnership and performance.” Along with this mission statement, they have articulated many values, including (1) diversity and inclusion, (2) high performance, (3) integrity and trust, (4) partnership, and (5) protecting peo- ple and the environment. Leadership continues to propagate the Chevron values and articulate the mission of the organization, posting speeches and press releases on its website. For example, Vice President Ian McDonald in 2012, at the Kurdistan-Iraq Oil & Gas Conference, clarified the Three Pillars of Partnership (persistence, collaboration, and integrity), values that Chevron drew upon in facilitating a partnership with the people and government of Kazakhstan. CEO John Watson also stresses the key role of leadership in setting the ethical tone for the rest of the employees and in developing lead- ers so that they serve as excellent role models of the Chevron Way.

Sources: Based on Chevron, The Chevron Way: Getting Results the Right Way (San Ramon, CA: Self, 2016); J. Demers, “Why a ‘Living and Breathing’ Company Culture Isn’t Always a Good Thing,” Entrepreneur, April 3, 2017, https://www.entrepreneur.com/article/292095; K. T. Derr, “Managing Knowledge the Chevron Way” [Speech] (San Francisco, CA: Knowl- edge Management World Summit, 1999); K. Dill, “The Top Companies for Culture and Val- ues,” Forbes, August 22, 2014, https://www.forbes.com/sites/kathryndill/2014/08/22/ the-top-companies-for-culture-and-values/#2a74e4d03b7c; I. MacDonald, “Three Pillars of Partnership” [Speech] (Erbil, Kurdistan Region of Iraq: Kurdistan-Iraq Oil & Gas Confer- ence, 2012); B. O’Keefe, “How Chevron Creates Leaders,” Fortune Video, March 25, 2015, http://fortune.com/video/2015/03/25/how-chevron-creates-leaders/; S. Patel, “10 Examples of Companies with Fantastic Cultures,” Entrepreneur, August 6, 2015, https:// www.entrepreneur.com/article/249174; and R. Wile, “Chevron Is the Best Employer in a Red Hot Industry,” Business Insider, February 5, 2013, http://www.businessinsider.com/ chevron-best-oil-company-to-work-for-2013-2.

Organizations have values, beliefs, assumptions, and norms that govern how members behave. We call these expectations the organizational culture. Every organization has a culture that, depending on its strength, can have a considerable influence on the attitudes and behaviors of organization mem- bers, even if that effect is hard to measure precisely. In this chapter, we’ll discuss what organizational culture is, how it affects employee attitudes and behavior, where it comes from, and whether it can be changed.

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What Is Organizational Culture? An executive once was asked what he thought organizational culture meant. He gave essentially the same answer U.S. Supreme Court Justice Potter Stewart gave in defining pornography: “I can’t define it, but I know it when I see it.” In this section, we propose one definition and review several related ideas.

A Definition of Organizational Culture Organizational culture refers to a system of shared meaning held by members that distinguishes the organization from other organizations.1 This system of shared meaning includes values, beliefs, and assumptions that characterize the organization. Six primary characteristics seem to capture the essence of an organization’s culture:2

1. Adaptability. The degree to which employees are encouraged to be innova- tive and flexible as well as to take risks and experiment.

2. Detail orientation. The degree to which employees are expected to exhibit precision, analysis, and attention to detail.

3. Results/outcome orientation. The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve them.

4. People/customer orientation. The degree to which management decisions consider the effect of outcomes on people within and outside the organization.

5. Collaboration/team orientation. The degree to which work activities are organized around teams rather than individuals.

6. Integrity. The degree to which people exhibit integrity and high ethical standards in their work.

Each of these characteristics exists on a continuum from low to high. Apprais- ing an organization on the strength of each provides a basis for the shared understanding that members have about the organization, how things are done in it, and the way they are supposed to behave. Exhibit 16-1 contrasts two com- panies that are very different along these six dimensions.

Another common culture framework groups organizations into one of four types, each with its own assumptions, beliefs, values, artifacts, and even criteria for effectiveness:3

1. “The Clan.” A culture based on human affiliation. Employees value attach- ment, collaboration, trust, and support.

2. “The Adhocracy.” A culture based on change. Employees value growth, variety, attention to detail, stimulation, and autonomy.

3. “The Market.” A culture based on achievement. Employees value commu- nication, competence, and competition.

4. “The Hierarchy.” A culture based on stability. Employees value communica- tion, formalization, and routine.

The differences between these cultures are reflected in their internal ver- sus external focus and their flexibility and stability.4 For instance, clans are internally focused and flexible, adhocracies are externally focused and flexible,

16-1 Describe the common characteristics of organi- zational culture.

organizational culture A system of shared meaning held by an organization’s members that distinguishes the organization from others.

MyLab Management Watch It If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the video exercise.

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markets are externally focused and stable, and hierarchies are internally focused and stable. A review of the prior studies conducted on clans, adhocracies, and markets (not enough research had been conducted on hierarchies to be con- clusive) found that employees tend to be more satisfied with and committed to clan cultures. Markets and clans tend to be the most innovative, although all three tend to produce high-quality products and services.5

Culture Is a Descriptive Term If you’ve ever been in an organization (certainly you’ve been in many!), you probably noticed a pervasive culture among the members. Organizational culture describes how employees perceive the characteristics of an organization, not whether they like those characteristics. In other words, it’s a descriptive term. Research on organizational culture has sought to measure how employees see their organization: Does it encourage teamwork? Does it reward innovation? Does it stifle initiative? In contrast, job satisfaction seeks to measure how employees feel about the organization’s expectations, reward practices, and the like. Although the two terms have overlapping characteristics, keep in mind that organizational culture is descriptive in that it describes an organization, much like how personality traits describe employees. On the other hand, job satisfaction is evaluative because it can be positive or negative (as is the case with job dissatisfaction).

Contrasting Organizational CulturesExhibit 16-1

Organization A

This organization is a manufacturing firm. Managers are expected to fully document all deci- sions, and “good managers” are those who can provide detailed data to support their rec- ommendations. Creative decisions that incur significant change or risk are not encouraged. Because managers of failed projects are openly criticized and penalized, managers try not to implement ideas that deviate much from the status quo. One lower-level manager quoted an often-used phrase in the company: “If it ain’t broke, don’t fix it.”

There are extensive rules and regulations in this firm that employees are required to fol- low. Managers supervise employees closely to ensure there are no deviations. Management is concerned with high productivity, regardless of the impact on employee morale or turnover.

Work activities are designed around individuals. There are distinct departments and lines of authority, and employees are expected to minimize formal contact with other employees outside their functional area or line of command. Performance evaluations and rewards emphasize individual effort, although seniority tends to be the primary factor in the deter- mination of pay raises and promotions.

Organization B

This organization is also a manufacturing firm. Here, however, management encourages and rewards risk taking and change. Decisions based on intuition are valued as much as those that are well rationalized. Management prides itself on its history of experimenting with new technologies and its success in regularly introducing innovative products. Managers or employees who have a good idea are encouraged to “run with it.” And failures are treated as “learning experiences.” The company prides itself on being market driven and rapidly responsive to the changing needs of its customers.

There are few rules and regulations for employees to follow, and supervision is loose because management believes that its employees are hardworking and trustworthy. Management is concerned with high productivity but believes that this comes through treating its people right. The company is proud of its reputation as being a good place to work.

Job activities are designed around work teams, and team members are encouraged to interact with people across functions and authority levels. Employees talk positively about the competition between teams. Individuals and teams have goals, and bonuses are based on achievement of these outcomes. Employees are given considerable autonomy in choosing the means by which the goals are attained.

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Do Organizations Have Uniform Cultures? Organizational culture represents a perception that the organization’s mem- bers share. Statements about organizational culture are valid only if individuals with different backgrounds or at different levels in the organization describe the culture in similar terms.6 For example, the purchasing department can have a subculture that includes the core values of the dominant culture, such as aggressiveness, plus additional values unique to members of that department, such as risk taking.

The dominant culture expresses the core values that a majority of members share and that give the organization its distinct personality.7 Subcultures tend to develop in large organizations in response to common problems or expe- riences that a group of members face in the same department or location.8 Most large organizations have a dominant culture and numerous subcultures.9 Sometimes the subcultures can be so strong, however, that they subtly reject the “official” culture and do not conform.10

If organizations were composed only of subcultures, the dominant organi- zational culture would be significantly less powerful. It is the “shared meaning” aspect of culture that makes it a potent device for guiding and shaping behav- ior. That’s what allows us to say, for example, that the Zappos culture values customer care and dedication over speed and efficiency, which explains the behavior of Zappos executives and employees.11

dominant culture A culture that expresses the core values that are shared by a majority of the organization’s members.

subcultures Minicultures within an organization, typically defined by department designations and geographical separation.

core values The primary or dominant values that are accepted throughout the organization.

Myth or Science? An Organization’s Culture Is Forever

T his statement is not true. Although organizational culture is difficult to change and a notable change can take a long time, it can be done. Some- times it is essential for survival. For years, Wisconsin’s Wellspring system provided nursing homes in which inpa- tients had little input about their care, and the organizational culture allowed lax standards to prevail. Then the network of 11 nursing homes launched a culture change initiative. Management focused on caregiver collaboration, education, accountability, and empowerment. The results were excellent. Wellspring real- ized fewer state standards infractions and higher employee retention rates at the facilities, and the results for the patients were even greater: fewer bed- ridden residents, less use of restraints and psychoactive medication, less incon- tinence, and fewer tube feedings than in other nursing homes.

The Wellspring program illustrates the significant effect that positive

organizational culture change can achieve. CEO Bob Flexon of Dynegy Inc., a Houston-based electric utility giant that emerged from bankruptcy, saved his company by changing the organiza- tional culture. First, he ditched the cushy CEO office suite, $15,000 marble desk, and Oriental rugs for a small cubicle on a warehouse-style floor shared with all 235 headquarters employees. Next, he visited company facilities, trained “culture champions,” reinstated annual performance reviews, and increased employee collaboration. He created a plaque as a reminder to “Be Here Now” instead of multitasking and banned smartphones from meetings. Flexon said, “The idea was to instill a winning spirit,” and he counts on his visibility as CEO to broadcast the culture change down to the lowest levels of the wide- spread organization.

Positive results at Dynegy have included a reduction in turnover from 8 percent in 2011 to 5.8 percent in the

turnaround of 2012. Flexon said, “Peo- ple are cautiously beginning to believe that we can win again.” The company continues to report massive earnings losses, but Flexon is optimistic about Dynegy’s rebound. He says, “Our ongo- ing focus on culture is what will make the difference.” Through substantial growth following its bankruptcy, Dynegy makes around $5.5 billion annually as of 2017.

Sources: Based on J. Bellot, “Nursing Home Culture Change: What Does It Mean to Nurses?,” Research in Gerontological Nurs- ing (October 2012): 264–73; T. Linquist, “Interview with Bob Flexon, CEO of Dynegy in Houston,” Leadership Lyceum: A CEO’s Vir- tual Mentor [podcast], https://www.linkedin .com/pulse/part-1-2-interview-bob-flexon- ceo-dynegy-houston-thomas-linquist; J. S. Lublin, “This CEO Used to Have an Office,” The Wall Street Journal, March 13, 2013, B1, B8; and J. Molineux, “Enabling Orga- nizational Cultural Change Using Systemic Strategic Human Resource Management— A Longitudinal Case Study,” International Journal of Human Resource Management (April 1, 2013): 1588–612.

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Strong versus Weak Cultures It’s possible to differentiate between strong and weak cultures.12 If most employees have the same opinions about the organization’s mission and values, the culture is strong; if opinions vary widely, the culture is weak.

In a strong culture, the organization’s core values are both intensely held and widely shared.13 The more members who accept the core values and the greater their commitment, the stronger the culture and the greater its influence on member behavior. Nordstrom employees know exactly what is expected of them, for example, and these expectations go a long way toward shaping their behavior.

A strong culture should more directly affect organizational outcomes because it demonstrates high agreement about what the organization rep- resents. Such unanimity of purpose builds cohesiveness, loyalty, meaning, and organizational commitment. For example, with high cultural consensus and intensity surrounding the adaptability dimension of culture, organiza- tions in one study experienced gains in net income, revenue, and operat- ing cash flow.14 A study of nearly 90,000 employees from 137 organizations found that culture strength or consistency was related to numerous finan- cial outcomes when there was a strong sense of mission and high employee involvement.15

What Do Cultures Do? Let’s discuss the role that culture performs and whether it can ever be a liability for an organization.

The Functions of Culture Culture defines “the rules of the game.” First, it has a boundary-defining role: It creates distinctions between organizations. Second, it conveys a sense of identity for organization members. Third, culture facilitates commitment to something larger than individual self-interest. Fourth, it enhances the stabil- ity of the social system. Culture is the social glue that helps hold the organiza- tion together by providing standards for what employees should say and do. Finally, it is a sense-making and control mechanism that guides and shapes employees’ attitudes and behavior. This last function is of particular interest to us.16

A strong culture supported by formal rules and regulations (i.e., an organizational infrastructure) ensures that employees will act in a rela- tively uniform and predictable way. Today’s trend toward decentralized organizations (see Chapter 15) makes culture more important than ever, but ironically it also makes establishing a strong culture more difficult. When formal authority and control systems are reduced through decen- tralization, culture’s shared meaning can point everyone in the same direc- tion. However, employees organized in teams may show greater allegiance to their team and its values than to the organization. Strong leadership that fosters a strong culture by communicating frequently about com- mon goals and priorities may be especially important for organizations. Research on hundreds of CEOs and top management team (TMT) mem- bers suggests that more positive organizational outcomes are achieved when the culture and leadership styles are complementary in content and

strong culture A culture in which the core values are intensely held and widely shared.

16-2 Compare the functional and dysfunctional effects of organizational cul- ture on people and the organization.

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not redundant.17 When leadership behaviors and an organization’s cultural values are redundant, the leaders have less of an effect on organizational outcomes. However, when leaders provide something that is lacking in the organization’s culture, they can substitute or fill in for the element that is missing. For example, a transformational leader in a bureaucratic, hierar- chical culture would be more effective than a transactional leader in the same type of culture.

Individual–organization “fit”—that is, whether the applicant’s or employ- ee’s attitudes and behavior are compatible with the culture—strongly influ- ences who gets a job offer, a favorable performance review, or a promotion.18 It’s no coincidence that Disney theme park employees appear almost univer- sally attractive, clean, and wholesome and smile brightly. The company selects employees who will maintain that image.

Culture Creates Climate If you’ve worked with someone whose positive attitude inspired you to do your best, or if you have worked with a lackluster team that drained your motivation, you’ve experienced the effects of climate. Organizational climate refers to the shared perceptions that organizational members have about their organization and work environment.19 These perceptions are directed at the policies, practices, and procedures experienced by the employees. When everyone has the same general feelings about what’s important or how well things are working, the effect of these attitudes will be more than the sum of the individual parts. One meta-analysis found that, across dozens of different samples, psychological climate was strongly related to individuals’ level of job satisfaction, involvement, commitment, and motivation.20 A posi- tive workplace climate has been linked to higher customer satisfaction and organizational financial performance as well.21

Recent theory also suggests that there is a difference between espoused (i.e., adopted on-the-surface) and enacted (i.e., actually put into practice) cultural

Employees of French videogame publisher Ubisoft Entertainment are shown working on “Just Dance 3” at the firm’s creative studio near Paris. Ubisoft’s 26 creative studios around the world share a climate of creative collaboration that reflects the diversity of team members. Source: Charles Platiau/Reuters

organizational climate The shared percep- tions that organizational members have about their organization and work environment.

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values, beliefs, and assumptions and that this difference has implications for how climate emerges.22 In making sense of their environments, employees draw a distinction between what they “hear” or “see” being supported by organiza- tional leaders in meetings, memos, rulebooks, and so on, and what they “actu- ally” see being enacted. Climate, then, is a function of what employees perceive is being rewarded. Research in Australia suggests that when there is alignment between espoused and enacted organizational values, employees have higher organizational commitment.23

Dozens of dimensions of climate have been studied, including innovation, creativity, communication, warmth and support, involvement, safety, justice, diversity, and customer service.24 For example, someone who encounters a safety climate will have higher levels of job satisfaction and organizational com- mitment, have better health, and be more prone to engage in safety behaviors.25 Climate influences the habits that people adopt. If there is a climate of safety, everyone wears safety gear and follows safety procedures even if individually they wouldn’t normally think very often about being safe. Indeed, many studies have shown that a safety climate decreases the number of documented injuries on the job.26 Climates can also interact with one another to produce various outcomes. For example, a climate of worker empowerment can lead to higher levels of per- formance in organizations that also have a climate of personal accountability.27

The Ethical Dimension of Culture Organizational cultures are not neutral in their ethical orientation, even when they are not openly pursuing ethical goals. Ethical culture develops over time as the shared concept of right and wrong behavior in the workplace. The ethical culture reflects the true values of the organization and shapes the ethical deci- sion making of its members.28 Research indicates that ethical cultures espouse clear ethical standards, with ethical behavior modeled by leadership and with employees who are capable of and committed to behaving ethically. Employees and managers are open to discuss ethical issues and are reinforced for their ethical behavior.29

Researchers have developed ethical climate theory (ECT) and the ethical climate index (ECI) to categorize and measure the shared perceptions of the ethical work context and environment as reflected in an organization’s policies, prac- tices, and procedures.30 Of the nine identified ECT climate categories, five are most prevalent in organizations: instrumental, caring, independence, law and code, and rules. Each explains the general mindset, expectations, and values of the managers and employees in relationship to their organizations. For instance, in an instrumental ethical climate, managers may frame their decision making around the assumption that employees (and companies) are motivated by self- interest (egoistic). Conversely, in a caring climate, managers may operate under the expectation that their decisions will have a positive effect on the greatest number of stakeholders (employees, customers, suppliers) possible.

Ethical climates of independence rely on everyone’s personal moral ideas to dictate his or her workplace behavior. Law and code climates require manag- ers and employees to use an external, standardized moral compass such as a professional code of conduct for norms, while rules climates tend to operate by internal standardized expectations from, perhaps, an organizational policy manual. Organizations often progress through various categories as they move through their business life cycle.

An organization’s ethical climate is a powerful influence on the way its indi- vidual members feel they should behave, so much so that researchers have been able to predict organizational outcomes from the climate categories.31 Instru- mental climates are negatively associated with employee job satisfaction and

ethical culture The shared concept of right and wrong behavior in the workplace that reflects the true values of the organization and shapes the ethical decision making of its members.

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organizational commitment, even though those climates appeal to self-interest (of the employee and the company). They are positively associated with turn- over intentions, workplace bullying, and deviant behavior. Caring and rules cli- mates may bring greater job satisfaction. Caring, independence, rules, and law and code climates also reduce employee turnover intentions, workplace bully- ing, and dysfunctional behavior. Recent research also suggests that ethical cli- mates have a strong influence on sales growth over time when there is also a customer service climate to support it.32

Studies of ethical climates and workplace outcomes suggest that some ECT climate categories are likely to be found in certain organizations.33 Indus- tries with exacting standards, such as engineering, accounting, and law, tend to have a rules or law and code climate. Industries that thrive on competitive- ness, such as financial trading, often have an instrumental climate. Industries with missions of benevolence are likely to have a caring climate, even if they are for-profit, as in an environmental protection firm. We cannot conclude, however, that instrumental climates are bad or that caring climates are good. Instrumental climates may foster the individual-level successes their companies need to thrive, for example, and they may help underperformers to recognize that their self-interest is better served elsewhere. Managers in caring climates may be thwarted in making the best decisions when only choices that serve the greatest number of employees are acceptable.34 The ECI, first introduced in 2010, is one way researchers are seeking to understand the context of ethical drivers in organizations. By measuring the collective levels of moral sensitivity, judgment, motivation, and character of our organizations, we may be able to determine the strength of the influence that our ethical climates have on us.35

Although ECT was first introduced more than 25 years ago, researchers have been recently studying ethics in organizations more closely to determine not only how ethical climates behave but also how they might be fostered or even changed.36 Eventually, we may be able to provide leaders with clear blue- prints for designing effective ethical climates.

Culture and Sustainability Sustainability refers to maintaining practices over very long periods of time37 because the tools or structures that support the practices are not damaged by the processes. One survey found that a substantial majority of executives saw sustain- ability as an important part of future success.38 Concepts of sustainable manage- ment have their origins in the environmental movement, so processes that are in harmony with the natural environment are encouraged. Social sustainability prac- tices address the ways that social systems are affected by an organization’s actions over time and how changing social systems may affect the organization.

For example, farmers in Australia have been working collectively to increase water use efficiency, minimize soil erosion, and implement tilling and harvest- ing methods that ensure long-term viability for their farm businesses.39 In a very different context, 3M has an innovative pollution-prevention program rooted in cultural principles of conserving resources, creating products that have minimal effects on the environment, and collaborating with regulatory agencies to improve environmental effects.40

Sustainable management doesn’t need to be purely altruistic. Systematic reviews of the research literature show a generally positive relationship between sustainability and financial performance.41 However, there is often a strong moral and ethical component that shapes organizational culture and which must be a genuine value for the relationship to exist.

To create a truly sustainable business, an organization must develop a long- term culture and put its values into practice.42 In other words, there needs to

sustainability Maintaining organizational practices over a long period of time because the tools or structures that support them are not damaged by the processes.

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be a sustainable system for creating sustainability! In one workplace study, a company seeking to reduce energy consumption found that soliciting group feedback reduced energy use significantly more than simply issuing reading materials about the importance of conservation.43 In other words, talking about energy conservation and building the value into the organizational cul- ture resulted in positive employee behavioral changes. Like other cultural prac- tices we’ve discussed, sustainability needs time and nurturing to grow.

Culture and Innovation The most innovative companies are often characterized by their open, uncon- ventional, collaborative, vision-driven, accelerating cultures.44 Start-up firms often have innovative cultures because they are usually small, agile, and focused on solving problems to survive and grow. Consider digital music leader Echo Nest, recently bought by Spotify. As a start-up, the organization was unconven- tional, flexible, and open; it hosted music app “hack” days for users and fos- tered a music culture.45 All these are hallmarks of Spotify’s culture, too, making the fit rather seamless.46 Because of the similar organizational cultures, Echo Nest and Spotify may be able to continue their start-up level of innovation.

At the other end of the start-up spectrum, consider 30-year-old Intuit, one of the World’s 100 Most Innovative Companies according to Forbes. Intuit employ- ees attend workshops to teach them how to think creatively and unconventionally. Sessions have led to managers talking through puppets and holding bake sales to sell prototype apps with their cupcakes. The culture stresses open accountability. “I saw one senior guy whose idea they’d been working on for nine months get dis- proved in a day because someone had a better way. He got up in front of everyone and said, ‘This is my bad. I should have checked my hypothesis earlier,’” said Eric Ries, author of The Lean Startup. As a consultant for entrepreneurs, Ries considers the older software company equally innovative to start-ups because of its culture.47

Alexion Pharmaceuticals is also one of Forbes’ Most Innovative and, like Intuit, it has been in operation long past the usual innovation life-cycle stage. Unlike Intuit, though, this maker of life-saving medicines is not known for

Visitors to “The Crystal” in London, which is the largest exhibition about the future of the world’s cities and one of the most sustainable buildings in the world. The Crystal was created by Siemens, an international conglomer- ate who prides itself on being the most energy-efficient firm in its indus- try and who took the top spot in the 2017 Global 100 list of most sustain- able organizations in the world. Source: Julio Etchart/Alamy Stock Photo

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unconventional management practices. The key to its continuing innovation is a culture of caring, which drives it to develop medicines that save victims of rare diseases, even when the patients affected are few, the cost of development is prohibitively high, and the probability of success is low.48

Israeli research suggests that CEOs who value self-direction can lead to the formation of a creative culture, which in turn, is related to employee innovative behavior and employees recognizing creative solutions more readily.49

Culture as an Asset As we have discussed, organizational culture can provide a positive ethical envi- ronment and foster innovation. Culture can also contribute significantly to an organization’s bottom line in many ways.

One strong example is found in the case of ChildNet.50 ChildNet is a nonprofit child welfare agency in Florida whose organizational culture was described as “grim” from 2000 (when one of its foster children disappeared) through 2007 (when the CEO was fired amid FBI allegations of fraud and forg- ery). “We didn’t know if we would have jobs or who would take over,” employee Maggie Tilelli said. However, after intense turnaround efforts aimed at chang- ing the organizational culture, ChildNet became Florida’s top-ranked agency within four years and Workforce Management’s Optima award winner for General Excellence in 2012. President and CEO Emilio Benitez, who took charge in 2008, effected the transformation by changing the executive staff, employing innovative technology to support caseworkers in the field and new managers at headquarters, acknowledging the stress employees and managers felt by estab- lishing an employee recognition program, and creating cross-departmental roundtables (work groups) for creative problem solving. The roundtables have been able to find solutions to difficult client cases, resulting in better place- ment of foster children into permanent homes. “From a business perspective, [the new problem-solving approach] was a tremendous cost savings,” Benitez said. “But at the end of the day, it’s about the families we serve.”

Founded in 1969, Samsung Elec- tronics of South Korea is past the usual innovation life cycle stage yet continues to foster a climate of cre- ativity and idea generation. Samsung emulates a start-up culture through its Creative Labs, where employees like engineer Ki Yuhoon, shown here, take up to a year off from their regular jobs to work on innovative projects. Source: Lee Jin-man/AP Images

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While ChildNet demonstrates how an organizational culture can have a pos- itive effect on outcomes, Dish Network illustrates the elusiveness of matching a culture to an industry or organization.51 By every measure, Dish Network is a business success story—it is the second-largest U.S. satellite TV provider, and it has made founder Charlie Ergen one of the richest men in the world. Yet Dish was ranked as one of the worst U.S. companies to work for nearly every year since 2012 by 24/7 Wall Street, and employees say the fault is the micromanag- ing culture Ergen created and enforces. Employees describe arduous manda- tory overtime, fingerprint scanners to record work hours to the minute, public berating (most notably from Ergen), management condescension and distrust, quarterly “bloodbath” layoffs, and no working from home. One employee advised another online, “You’re part of a poisonous environment . . . go find a job where you can use your talents for good rather than evil.”

At ChildNet, positive changes to the organization’s performance have been clearly attributed to the transformation of its organizational culture. Dish, on the other hand, may have succeeded despite its culture. We can only wonder how much more successful it could be if it reformed its toxic culture. There are many more cases of business success stories due to excellent organizational cultures than there are of success stories despite bad cultures, and almost no success stories because of bad ones. Research suggests that part of the reason why culture affects an organiza- tion’s performance is through customer satisfaction: One study of nearly 100 auto- mobile dealerships over a 6-year time frame found that a positive culture leads to improved sales performance because it increases customer satisfaction.52

Culture as a Liability Culture can enhance organizational commitment and increase the consistency of employee behavior, which clearly benefits an organization. Culture is valu- able to employees too because it spells out how things are done and what’s important. But we shouldn’t ignore the potentially dysfunctional aspects of culture, especially a strong one, on an organization’s effectiveness. Hewlett- Packard, once known as a premier computer manufacturer, rapidly lost market share and profits as dysfunction in its TMT trickled down, leaving employees disengaged, uncreative, unappreciated, or in a polarized environment.53 Let’s unpack some of the major factors that signal a negative organizational culture, beginning with institutionalization.

Institutionalization When an organization undergoes institutionalization— that is, it becomes valued for itself and not for the goods or services it produces— it takes on a life of its own, apart from its founders or members.54 Institution- alized organizations often don’t go out of business even if the original goals are no longer relevant. Acceptable modes of behavior may become largely self- evident to members; although this isn’t entirely negative, it does mean behaviors and habits go unquestioned, which can stifle innovation and make maintaining the organization’s culture an end in itself.

Barriers to Change Culture is a liability when shared values don’t agree with those that further the organization’s effectiveness. This is most likely when an organization’s environment is undergoing rapid change, and its entrenched culture may no longer be appropriate.55 Consistency of behavior, an asset in a stable environment, may then burden the organization and make it difficult to respond to changes.

Barriers to Diversity Hiring new employees who differ from the majority in race, age, gender, disability, or other characteristics creates a paradox:56 Management wants to demonstrate support for the differences that these employees bring to the workplace, but newcomers who wish to fit in must accept

institutionalization A condition that occurs when an organization takes on a life of its own, apart from any of its members.

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the organization’s core culture. Second, because diverse behaviors and unique strengths are likely to diminish as people assimilate, strong cultures can become liabilities when they effectively eliminate the advantages of diversity. Third, a strong culture that condones prejudice, supports bias, becomes insensitive, or overemphasizes differences can undermine formal corporate diversity policies or the positive effects of demographic diversity.57 It seems that these barriers to diversity can start at the community level: One study of nearly 150 retail bank locations in the United States found that the demographic composition of the community serves as an important signal in setting the diversity norms that are adopted and made part of an organization’s culture and climate.58

Toxicity and Dysfunctions In general, we’ve discussed cultures that cohere around a positive set of values and attitudes. This consensus can create powerful forward momentum. However, coherence around negativity and dysfunctional manage- ment systems in a corporation can produce downward forces that are equally powerful yet toxic. For example, research on 862 bank employees in about 150 branches of a large bank in the United States suggests that branch managers model conflict management styles, which then shape conflict cultures within each branch.59 Collaborative cultures (i.e., encouraging proactive, constructive, and col- laborative conflict resolution) tended to increase the cohesion and satisfaction of the branch and decrease levels of burnout. Dominating cultures (i.e., encourag- ing active confrontation and aggressive competition among employees when there is conflict) tend to reduce branch cohesion and customer service performance. Avoidance cultures (i.e., those that passively avoid conflict) tend to be less creative.

Barriers to Acquisitions and Mergers Historically, when management looked at acquisition or merger decisions, the key decision factors were potential finan- cial advantage and product synergy. In recent years, cultural compatibility has become the primary concern.60 All things being equal, whether the acquisition works seems to have much to do with how well the two organizations’ cultures match up. When they don’t mesh well, the organizational cultures of both become a liability to the whole new organization. A study conducted by Bain and Company found that 70 percent of mergers failed to increase shareholder values, and Hay Group found that more than 90 percent of mergers in Europe failed to reach financial goals.61 Considering this dismal rate of success, Law- rence Chia from Deloitte Consulting observed, “One of the biggest failings is people. The people at Company A have a different way of doing things from Company B . . . you can’t find commonality in goals.”

Culture clash was commonly argued to be one of the causes of AOL Time Warner’s problems. The $183 billion merger between America Online (AOL) and Time Warner in 2001 was the largest in U.S. corporate history. It was also a disaster. Only 2 years later, the new company saw its stock fall an astounding 90 percent, and it reported what was then the largest financial loss in U.S. history— it has since been acquired by Verizon and is being merged, yet again, with Yahoo under the umbrella company “Oath.”62

Recent research on acquisitions in the Taiwanese electronics industry sug- gests that the success of mergers and acquisitions hinge on how the acquisition was acquired, the organizational structure (e.g., centralization and divisional integration), and the organizational culture.63

Creating and Sustaining Culture An organization’s culture doesn’t pop out of thin air and, once established, it rarely fades away. What influences the creation of a culture? What reinforces and sustains it once in place?

16-3 Identify the factors that create and sustain an organization’s culture.

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How a Culture Begins An organization’s customs, traditions, and general way of doing things are largely due to what it has done before and how successful it was in doing it. This leads us to the ultimate source of an organization’s culture: the found- ers.64 Founders have a vision of what the organization should be, and the firm’s initial small size makes it easy to impose that vision on all members.

Culture creation occurs in three ways.65 First, founders hire and keep only employees who think and feel the same way they do. Second, they indoctrinate and socialize employees to their way of thinking and feeling. And finally, the founders’ own behavior encourages employees to identify with them and inter- nalize their beliefs, values, and assumptions. When the organization succeeds, the founders’ personalities become embedded in the culture. For example, the fierce, competitive style and disciplined, authoritarian nature of Hyundai, the giant Korean conglomerate, exhibits the same characteristics often used to describe founder Chung Ju-Yung.66 Other founders with sustaining impact on their organization’s culture include Bill Gates at Microsoft, Ingvar Kamprad at IKEA, Herb Kelleher at Southwest Airlines, Fred Smith at FedEx, and Richard Branson at the Virgin Group.

Keeping a Culture Alive Once a culture is in place, practices within the organization maintain it by giving employees a set of similar experiences.67 The selection process, perfor- mance evaluation criteria, training and development activities, and promotion procedures (all discussed in Chapter 17) ensure those hired fit in with the culture, reward those employees who support it, and penalize (or even expel) those who challenge it.68 Three forces play a particularly important part in sus- taining a culture: selection or hiring practices, actions of top management, and socialization or onboarding methods (e.g., teaching and including new employees). Let’s look at each.

Selection The explicit goal of the selection process is to identify and hire indi- viduals with the knowledge, skills, and abilities to perform successfully. The final decision, because it is significantly influenced by the decision maker’s judgment of how well candidates will fit into the organization, identifies people whose values are consistent with at least a good portion of the organization’s.69 The selection process also provides information to applicants. Those who per- ceive a conflict between their values and those of the organization can remove themselves from the applicant pool.70 Selection thus becomes a two-way street, allowing employer and applicant to avoid a mismatch and to sustain an orga- nization’s culture by removing those who might attack or undermine its core values, for better or worse.

W. L. Gore & Associates, the maker of Gore-Tex fabric used in outerwear, prides itself on its democratic culture and teamwork. There are no job titles at Gore, nor are there bosses or chains of command. All work is done in teams. In Gore’s selection process, teams put job applicants through extensive interviews to ensure that they can deal with the level of uncertainty, flexibility, and team- work that’s normal in Gore plants. Not surprisingly, W. L. Gore appears regu- larly on Fortune’s list of 100 Best Companies to Work For (number 52 in 2017) partially because of its selection process emphasis on culture fit.71

Top Management The actions of top management have a major impact on the organization’s culture.72 Through words and behavior, senior executives estab- lish norms that filter through the organization about, for instance, whether risk taking is desirable; how much freedom managers give employees; appropriate dress; and what actions earn pay raises, promotions, and other rewards.

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The culture of supermarket chain Wegmans—which believes driven, happy, and loyal employees are more eager to help one another and provide exem- plary customer service—is a direct result of the beliefs of the Wegman fam- ily. Their focus on fine foods separates Wegmans from other grocers—a focus maintained by the company’s employees, many of whom are hired based on their interest in food. Top management at the company believes in taking care of employees to enhance satisfaction and loyalty. For example, Wegmans has paid more than $105 million in educational scholarships for more than 33,000 employees since 1984. Top management also supports above average pay for employees, which results in annual turnover for full-time employees at a mere 5 percent (the industry average is 27 percent). Wegmans regularly appears on Fortune’s 100 Best Companies to Work For list (number 2 in 2017), in large measure because top management sustains the positive organizational culture begun by its founding members.73

Socialization No matter how good a job the organization does in recruiting and selection, new employees need help adapting to the prevailing culture. This help comes in the form of socialization practices.74 Socialization can help alleviate the problem many employees report when their new jobs are differ- ent from what they expected (see OB Poll). For example, the consulting firm Booz Allen Hamilton begins its process of bringing new employees onboard even before their first day of work. New recruits go to an internal Web portal to learn about the company and understand the culture. After they start work, a social networking application links them with more established members of the firm and helps ensure that the culture is reinforced over time.75 Clear Channel Communications, Facebook, Google, and other companies are adopt- ing fresh onboarding (new hire acclimation) procedures, including assigning “peer coaches,” holding socializing events, personalizing orientation programs, and giving out immediate work assignments. “When we can stress the personal identity of people, and let them bring more of themselves at work, they are

Job Is Not as Good as Advertised

Source: Based on S. Bates, “Majority of New Hires Say Job Is Not What They Expected,” Society for Human Resource Management, May 28, 2012, http://www.shrm.org/hrdisciplines/employeerelations/articles/pages/newhiresfeelmisled.aspx.

OB POLL

45%

40%

35%

30%

25%

20%

15%

Of the 61% of 2,054 new hires who say the job is different than expected, why?

Employee morale

40%

Work hours

Supervisor’s personality

36%

Career advancement opportunities

Salary

22%

37%

27%

socialization A process that adapts employ- ees to the organization’s culture.

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more satisfied with their job and have better results,” researcher Francesca Gino of Harvard said.76

We can think of socialization as a process with three stages: prearrival, encounter, and metamorphosis.77 This process, shown in Exhibit 16-2, has an impact on the new employee’s work productivity, commitment to the organiza- tion’s objectives, and decision to stay with the organization.

The prearrival stage recognizes that each individual arrives with a set of values, attitudes, and expectations about both the work and the organization. One major purpose of a business school, for example, is to socialize students to the attitudes and behaviors that companies desire in future employees. Newcomers to high-pro- file organizations with strong market positions have their own assumptions about what it’s like to work there.78 Most new recruits will expect Nike to be dynamic and exciting, and a stock brokerage firm to be high in pressure and rewards. How accu- rately people judge an organization’s culture before they join the organization, how proactive their personalities are, and their anticipated “psychological con- tract” with the organization become critical predictors of how well they adjust.79

The selection process can help inform prospective employees about the orga- nization as a whole. Upon entry into the organization, the new member enters the encounter stage and confronts the possibility that expectations—about the job, coworkers, boss, and organization in general—may differ from reality. If expectations were accurate, this stage merely cements earlier perceptions. How- ever, this is not often the case. At the extreme, a new member may become dis- illusioned enough to resign. Proper recruitment, selection, and socialization (e.g., giving a realistic preview of the job) should significantly reduce this out- come, along with encouraging friendship ties in the organization—newcomers are more committed when friendly coworkers help them “learn the ropes.”80

Finally, to work out any problems discovered during the encounter stage, the new member changes or goes through the metamorphosis stage.81 The options presented in Exhibit 16-3 are alternatives designed to bring about metamorpho- sis. Most research suggests two major “bundles” of socialization practices.82 The more management relies on formal, collective, fixed, and serial socialization programs while emphasizing divestiture, the more likely newcomers’ differences will be stripped away and replaced by standardized predictable behaviors. These institutional practices are common in police departments, fire departments, and other organizations that value rule following and order. Programs that are infor- mal, individual, variable, and random while emphasizing investiture are more likely to give newcomers an innovative sense of their roles and methods of work- ing. Creative fields such as research and development, advertising, and filmmak- ing rely on these individual practices. Most research suggests that high levels of institutional practices encourage person–organization fit and high levels of commitment, whereas individual practices produce more role innovation.83

prearrival stage The period of learning in the socialization process that occurs before a new employee joins the organization.

encounter stage The stage in the socializa- tion process in which a new employee sees what the organization is really like and con- fronts the possibility that expectations and reality may diverge.

metamorphosis stage The stage in the socialization process in which a new employee changes and adjusts to the job, work group, and organization.

A Socialization ModelExhibit 16-2

Prearrival Encounter Metamorphosis Commitment

Socialization process Outcomes

Turnover

Productivity

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The three-part entry socialization process is complete when new members have internalized and accepted the norms of the organization and their work groups, are confident in their competence, and feel trusted and valued by their peers. They understand the system—not only their own tasks but the rules, pro- cedures, and informally accepted practices as well. Finally, they know what is expected of them and what criteria will be used to measure and evaluate their work. As Exhibit 16-2 showed earlier, successful metamorphosis should have a positive impact on new employees’ productivity and their commitment to the organization, and reduce their propensity to leave the organization (turnover).

Researchers examine how employee attitudes change during socialization by measuring at several points over the first few months. Several studies have now documented patterns of “honeymoons” and “hangovers” for new work- ers, showing that the period of initial adjustment is often marked by decreases in job satisfaction as idealized hopes come into contact with the reality of organizational life.84 Newcomers may find that the level of social support they receive from supervisors and coworkers is gradually withdrawn over the first few weeks on the job, as everyone returns to “business as usual.”85 Role conflict and role overload may rise for newcomers over time, and workers with the largest increases in these role problems experience the largest decreases in commit- ment and satisfaction.86 The initial adjustment period for newcomers may pres- ent increasing demands and difficulties, at least in the short term.

Summary: How Organizational Cultures Form Exhibit 16-4 summarizes how an organization’s culture is established and sustained. The original culture derives from the founder’s philosophy and strongly influences hiring criteria as the firm grows. The success of socializa- tion depends on the deliberateness of matching new employees’ values to those of the organization in the selection process and on top management’s

Entry Socialization OptionsExhibit 16-3

Formal vs. Informal The more a new employee is segregated from the ongoing work setting and differentiated in some way to make explicit his or her newcomer’s role, the more socialization is formal. Specific orientation and training programs are examples. Informal socialization puts the new employee directly into the job, with little or no special attention.

Individual vs. Collective New members can be socialized individually. This describes how it’s done in many professional offices. They can also be grouped together and processed through an identical set of experiences, as in military boot camp.

Fixed vs. Variable This refers to the time schedule in which newcomers make the transition from outsider to insider. A fixed schedule establishes standardized stages of transition. This characterizes rotational training programs. It also includes probationary periods, such as the 8- to 10-year “associate” status used by accounting and law firms before deciding on whether or not a candidate is made a partner. Variable schedules give no advance notice of their transition timetable. Variable schedules describe the typical promotion system, in which one is not advanced to the next stage until one is “ready.”

Serial vs. Random Serial socialization is characterized by the use of role models who train and encourage the newcomer. Apprenticeship and mentoring programs are examples. In random socialization, role models are deliberately withheld. New employees are left on their own to figure things out.

Investiture vs. Divestiture Investiture socialization assumes that the newcomer’s qualities and qualifications are the necessary ingredients for job success, so these qualities and qualifications are confirmed and supported. Divestiture socialization tries to strip away certain characteristics of the recruit. Fraternity and sorority “pledges” go through divestiture socialization to shape them into the proper role.

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does this to support a culture of creativity. He says, “You mess with somebody’s internal clock, and some interesting ideas come out.”93

Symbols The layout of corporate headquarters, the types of automobiles top executives are given, and the presence or absence of corporate aircraft are a few examples of material symbols, sometimes also known as artifacts.94 Others include the size of offices, the elegance of furnishings, perks, and attire.95 These convey to employees who is important; the degree of egalitarianism top management desires; and the kinds of behavior that are appropriate, such as risk taking, and conservative, authoritarian, participative, individualistic, or social behavior. Material symbols also offer a sense of connection and stir emotions in employ- ees who make sense of the symbols.96

One example of the intentional use of material symbols is Texas electric company Dynegy. Dynegy’s headquarters doesn’t look like a typical opera- tion. There are few individual offices, even for senior executives. The space is essentially made up of cubicles, common areas, and meeting rooms. This informality conveys to employees that Dynegy values openness, equality, cre- ativity, and flexibility. While some organizations provide their top executives with chauffeur-driven limousines and a corporate jet, other CEOs drive the company car themselves and travel in airlines’ economy section. At some firms, like Chicago shirtmaker Threadless, an “anything goes” atmosphere helps emphasize a creative culture. At Threadless, meetings are held in an Air- stream camper parked inside the company’s converted FedEx warehouse, while employees in shorts and flip-flops work in bullpens featuring disco balls and garish decorations chosen by each team.97

Some cultures are known for the perks in their environments, such as Google’s bocce courts, Factset Research’s onsite pie/cheese/cupcake trucks, software designer Autodesk’s bring-your-dog-to-work days, SAS’s free health care clinic, Microsoft’s organic spa, and adventure-gear specialist REI’s free equipment rentals. Other companies communicate the values of their cultures through the gift of time to think creatively, either with leaders or

rituals Repetitive sequences of activities that express and reinforce the key values of the organization, which goals are most impor- tant, which people are important, and which are expendable.

material symbols What conveys to employees who is important, the degree of egalitarianism top management desires, and the kinds of behavior that are appropriate.

commitment to socialization programs. Top managers’ actions set the general climate, including what is acceptable behavior and what is not, and employees sustain and perpetuate the culture.

How Employees Learn Culture Culture is transmitted to employees in several forms, the most potent being stories, rituals, material symbols, and language.

Stories When Henry Ford II was chair of Ford Motor Company, you would have been hard-pressed to find a manager who hadn’t heard how he reminded his execu- tives, when they got too arrogant, “It’s my name that’s on the building.” The message was clear: Henry Ford II ran the company.

Today, a number of senior Nike executives spend much of their time serving as corporate storytellers.87 When they tell how cofounder (and Oregon track coach) Bill Bowerman went to his workshop and poured rubber into a waffle iron to create a better running shoe, they’re talking about Nike’s spirit of inno- vation. When new hires hear tales of Oregon running star Steve Prefontaine’s battles to make running a professional sport and attain better performance equipment, they learn of Nike’s commitment to helping athletes.

Stories such as these circulate through many organizations, anchoring the present in the past and legitimizing current practices.88 They typically include narratives about the organization’s founders, rule breaking, rags-to-riches suc- cesses, workforce reductions, relocations of employees, reactions to past mis- takes, and organizational coping.89 Employees also create their own narratives about how they came either to fit or not to fit with the organization during the process of socialization, including first days on the job, early interactions with others, and first impressions of organizational life.90

Rituals Rituals are repetitive sequences of activities that express and reinforce the key values of the organization—what goals are most important, and/or which peo- ple are important versus which are expendable.91 Some companies have non- traditional rituals to help support the values of their cultures. Kimpton Hotels & Restaurants, one of Fortune’s 100 Best Companies to Work For, maintains its customer-oriented culture with traditions like a Housekeeping Olympics that includes blindfolded bedmaking and vacuum races.92 At marketing firm United Entertainment Group, employees work unusual hours a few times a year, arriv- ing in the late afternoon and working until early morning. CEO Jarrod Moses

16-4 Show how culture is transmitted to employees.

How Organizational Cultures FormExhibit 16-4

Philosophy of organization’s

founders

Selection criteria

Organizational culture

Socialization

Top management

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does this to support a culture of creativity. He says, “You mess with somebody’s internal clock, and some interesting ideas come out.”93

rituals Repetitive sequences of activities that express and reinforce the key values of the organization, which goals are most impor- tant, which people are important, and which are expendable.

material symbols What conveys to employees who is important, the degree of egalitarianism top management desires, and the kinds of behavior that are appropriate.

Baidu, a Chinese Web services firm, describes its culture as “ simple”—meaning direct, open, and uncomplicated—and “reliable”— meaning trusting the competence of colleagues. Baidu’s casual workplaces reflect this trust with lounges, gyms, yoga studios, and dome-shaped nap rooms employees may use at any time. Source: Lou Linwei/Alamy Stock Photo

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offsite. For instance, Biotech leader Genentech and many other top com- panies provide paid sabbaticals. Genentech offers every employee 7 weeks’ paid leave for every 5 years of service to support a culture of equitability and innovative thinking.98

Language Many organizations and subunits within them use language to help members identify with the culture, attest to their acceptance of it, and help preserve it.99 Unique terms describe equipment, officers, key individuals, suppliers, customers, or products that relate to the business. New employees may be overwhelmed at first by acronyms and jargon that, once assimilated, act as a common denominator to unite members of a given culture or subculture.

An Ethical Choice A Culture of Compassion

In the world of banking, success and ethical culture don’t necessar-ily go hand in hand. Leaders who desire ethical cultures in their organiza- tions must choose to build ethics into the company’s definition of success in ways that translate into ethical actions for managers and employees. Contrast two financial success stories, Goldman Sachs and JP Morgan Chase & Com- pany. Both megabanks are among the Fortune 100 (the largest U.S. compa- nies ranked by revenue). They are also two of Fortune’s World’s Most Admired Companies, a list that ranks the largest companies in revenue by nine criteria including social responsibility. Yet their organizational cultures appear to be vastly different. Goldman Sachs seems to struggle to achieve an ethical culture for its employees and clients, while JP Morgan Chase seems to emanate a culture of compassion. Consider some headlines:

• Mefit “Mike” Mecevic was a loyal janitor for Goldman Sachs when

Superstorm Sandy hit New York in 2012. Mecevic and his cowork- ers rode out the storm in the com- pany’s Manhattan skyscraper and worked nonstop for days to keep floodwaters back. Then a Gold- man Sachs manager threw him out without explanation. Mecevic said to him, “‘I live in Staten Island, there’s a state of emergency, there are no cars, no trains, no lights. The water is up to our necks.’ I was begging for my life. But he said, ‘Leave the building.’” Mecevic left but was later fired anyway. “I worked day and night,” Mecevic said. “They destroyed my life for nothing. Nothing.”

• Jamie Dimon, CEO of JP Morgan Chase & Company, proclaims, “Peo- ple are our most important asset. The long-term growth and success of JP Morgan Chase depends on our ability to attract and retain our employees. Maintaining a diverse and inclusive workplace where

everyone can thrive is not only the smart thing to do—it’s the right thing to do.” The culture of JP Mor- gan Chase is driven by performance and merit, partnership and inclu- sion, and directness. It has pro- grams that support the success of women and minorities.

Organizational culture is where leaders’ ethical choices demonstrate their expectations for others’ deci- sions throughout the company. These examples suggest that the two cul- tures may make very different ethical choices.

Sources: Based on JP Morgan Chase & Co., “Peo- ple and Culture,” https://www.jpmorganchase .com/corporate/About-JPMC/ab-people- culture .htm, accessed April 18, 2017; B. Ross, A. Ng, and C. Siemaszko, “Ex-Goldman Sachs Jani- tor Sues for Being Forced into Post-Hurricane Sandy Destruction,” New York Daily News, June 7, 2013, www.nydailynews.com/new-york/ janitor-sues-tossed-aftermath-hurricane-sandy- article-1.1366334; and M. Schifrin and H. Touryalai, “The Bank That Works,” Forbes, Feb- ruary 13, 2012, 66–74.

MyLab Management Try It If your professor has assigned this activity, go to www.pearson.com/ mylab/management to complete the Mini Sim.

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Influencing an Organizational Culture As we discussed, the culture of an organization is set by its founders and is often difficult to change afterward. It’s true that the ideal scenario is a strong founder or founders who carefully plan the organization’s culture beforehand. That’s seldom the case, though; organizational culture usually grows organically over time. When we think of the development of culture as ongoing and conducted through each employee, we can see ways to increase the ethical, positive, and/ or spiritual aspects of the environment, which we discuss next.

Developing an Ethical Culture Despite differences across industries and cultures, ethical organizational cul- tures share some common values and processes.100 Therefore, managers can create a more ethical culture by adhering to the following principles:101

• Be a visible role model. Employees will look to the actions of top management as a benchmark for appropriate behavior, but everyone can be a role model to positively influence the ethical atmosphere. Send a positive message.

• Communicate ethical expectations. Whenever you serve in a leadership capacity, minimize ethical ambiguities by sharing a code of ethics that states the organization’s primary values and the judgment rules employ- ees must follow.

• Provide ethical training. Set up seminars, workshops, and training pro- grams to reinforce the organization’s standards of conduct, clarify what practices are permissible, and address potential ethical dilemmas.

• Visibly reward ethical acts and punish unethical ones. Evaluate subordinates on how their decisions compare with the organization’s code of ethics. Review the means as well as the ends. Visibly reward those who act ethi- cally and conspicuously punish those who don’t.

• Provide protective mechanisms. Seek formal mechanisms so everyone can discuss ethical dilemmas and report unethical behavior without fear of reprimand. These might include identifying ethical counselors, ombudspeople, or ethical officers for liaison roles.

A widespread positive ethical climate must start at the top of the organiza- tion.102 When top management emphasizes strong ethical values, supervisors are more likely to practice ethical leadership. Positive attitudes transfer down to line employees, who show lower levels of deviant behavior and higher levels of cooperation and assistance. Several other studies have come to the same gen- eral conclusion: The values of top management are a good predictor of ethical behavior among employees. For example, one study involving auditors found perceived pressure from organizational leaders to behave unethically was asso- ciated with increased intentions to engage in unethical practices.103 Clearly the wrong type of organizational culture can negatively influence employee ethi- cal behavior. Conversely, ethical leadership has been shown to improve group ethical voice, or the extent to which employees feel comfortable speaking up about issues that seem unethical to them, through improvements in ethical culture.104 Finally, employees whose ethical values are similar to those of their department are more likely to be promoted, so we can think of ethical culture as flowing from the bottom up as well.105

Developing a Positive Culture At first, creating a positive culture may sound hopelessly naïve or like a Dil- bert-style conspiracy. The one thing that makes us believe this trend is here to stay, however, are signs that management practice and Organizational Behavior

16-5 Describe the similarities and differences in creat- ing an ethical culture, a positive culture, and a spiritual culture.

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(OB) research are converging. A positive organizational culture emphasizes building on employee strengths, rewards more than it punishes, and encour- ages individual vitality and growth.106 Let’s consider each of these areas.

Building on Employee Strengths Although a positive organizational culture does not ignore problems, it does emphasize showing workers how they can capitalize on their strengths. As management guru Peter Drucker said, “Most Americans do not know what their strengths are. When you ask them, they look at you with a blank stare, or they respond in terms of subject knowledge, which is the wrong answer.”107 Wouldn’t it be better to be in an organizational culture that helped you discover your strengths and how to make the most of them?

As CEO of Auglaize Provico, an agribusiness based in Ohio, Larry Ham- mond used this approach during the firm’s worst financial struggles. When the organization had to lay off one-quarter of its workforce, he took advantage of what was right, rather than dwelling on what went wrong. “If you really want to [excel], you have to know yourself—you have to know what you’re good at, and you have to know what you’re not so good at,” he said. With the help of Gallup consultant Barry Conchie, Hammond focused on discovering and using employee strengths to help the company turn itself around. “You ask Larry [Hammond] what the difference is, and he’ll say that it’s individuals using their natural talents,” says Conchie.108

Rewarding More Than Punishing Although most organizations are sufficiently focused on extrinsic rewards such as pay and promotions, they often forget about the power of smaller (and cheaper) rewards such as praise. Part of creat- ing a positive organizational culture is “catching employees doing something right.” Many managers withhold praise because they’re afraid employees will coast or because they think praise is not valued. Employees generally don’t ask for praise, and managers usually don’t realize the costs of failing to give it.

Consider El’zbieta Górska-Kolodziejczyk, a plant manager for International Paper’s facility in Kwidzyn, Poland. Employees worked in a bleak windowless basement. Staffing became roughly one-third its prior level, while production tripled. These challenges had defeated the previous three managers. When she

positive organizational culture A culture that emphasizes building on employee strengths, rewards more than punishes, and emphasizes individual vitality and growth.

Google, a technology firm, fosters a positive climate. The firm rewards employees with many perks, including free food, recreation rooms (shown here), free rides to work, tech support, massages, and child care, among oth- ers. Google also heavily emphasizes learning and building strengths and has a variety of employee develop- ment programs. Source: Dpa picture alliance/Alamy Stock Photo

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took over, recognition and praise for staff were at the top of her list. She ini- tially found it difficult to give praise to those who weren’t used to it, especially men. “They were like cement at the beginning,” she said. “Like cement.” Over time, however, she found they valued and even reciprocated praise. One day a department supervisor pulled her over to tell her she was doing a good job. “This I do remember, yes,” she said.109

Encouraging Vitality and Growth No organization will get the best from employ- ees who see themselves as mere cogs in the machine. A positive culture rec- ognizes the difference between a job and a career. It supports not only what the employee contributes to organizational effectiveness but how the organi- zation can make the employee more effective—personally and professionally. Top companies recognize the value of helping people grow. Safelite AutoGlass, Workforce Management’s 2012 Optima award winner for Competitive Advantage, attributes its success in part to its PeopleFirst Plan talent development initiative. “The only way we can stand out is if we have the best people,” says Senior Vice President Steve Miggo.110

It may take more creativity to encourage employee growth in some indus- tries. From the Masterfoods headquarters in Brussels, Philippe Lescornez led a team of sales promoters, including Didier Brynaert, who worked in Lux- embourg, nearly 150 miles away. Lescornez decided Brynaert’s role could be improved if he were an expert on the unique features of the Luxembourg market. So Lescornez asked Brynaert for information he could share with the home office. “I started to communicate much more what he did internally to other people [within the company], because there’s quite some distance between the Brussels office and the section he’s working in. So I started to communicate, communicate, communicate. The more I communicated, the more he started to provide material,” he said. As a result, “Now he’s recog- nized as the specialist for Luxembourg—the guy who is able to build a strong relationship with the Luxembourg clients,” says Lescornez. What’s good for Brynaert was, of course, also good for Lescornez, who got credit for helping Brynaert grow and develop.111

Limits of Positive Culture Is a positive culture a cure-all? Though many com- panies have embraced aspects of a positive organizational culture, it is a new enough idea for us to be uncertain about how and when it works best.

Not all national cultures value being positive as much as the U.S. culture does and, even within U.S. culture, there surely are limits to how far orga- nizations should go. The limits may need to be dictated by the industry and society. For example, Admiral, a British insurance company, has established a Ministry of Fun in its call centers to organize poem writing, foosball, conk- ers (a British game involving chestnuts), and fancy-dress days, which may clash with an industry value of more serious cultures. When does the pursuit of a positive culture start to seem coercive? As one critic notes, “Promoting a social orthodoxy of positiveness focuses on a particular constellation of desirable states and traits but, in so doing, can stigmatize those who fail to fit the template.”112 There may be benefits to establishing a positive culture, but an organization also needs to be objective and not pursue it past the point of effectiveness.

A Spiritual Culture What do Southwest Airlines, Hewlett-Packard, Ford, The Men’s Wearhouse, Tyson Foods, Wetherill Associates, and Tom’s of Maine have in common? They’re among a growing number of organizations that have embraced work- place spirituality.

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What Is Spirituality? Workplace spirituality is not about organized religious practices. It’s not about God or theology. Workplace spirituality recognizes that people have an inner life that nourishes and is nourished by meaningful work in the context of community.113 Organizations that support a spiritual culture recognize that people seek to find meaning and purpose in their work and desire to connect with other human beings as part of a community. Many of the topics we have discussed—ranging from job design to corporate social respon- sibility (CSR)—are well matched to the concept of organizational spirituality. When a company emphasizes its commitment to paying Third World suppli- ers a fair (above-market) price for their products to facilitate community development—as did Starbucks—or encourages employees to share prayers or inspirational messages through e-mail—as did Interstate Batteries—it may encourage a more spiritual culture.114

Why Spirituality Now? As noted in our discussion of emotions in Chapter 4, the myth of rationality assumed that the well-run organization eliminated peo- ple’s feelings. Concern about an employee’s inner life had no role in the per- fectly rational model. But just as we realize that the study of emotions improves our understanding of OB, an awareness of spirituality can help us better under- stand employee behavior.

Of course, employees have always had an inner life. So why has the search for meaning and purposefulness in work surfaced now? We summarize the rea- sons in Exhibit 16-5.

Characteristics of a Spiritual Organization The concept of workplace spiritual- ity draws on our previous discussions of values, ethics, motivation, and lead- ership. Although research remains preliminary, several cultural characteristics tend to be evident in spiritual organizations:115

• Benevolence. Spiritual organizations value kindness toward others and the happiness of employees and other organizational stakeholders.

• Strong sense of purpose. Spiritual organizations build their cultures around a meaningful purpose. Although profits may be important, they’re not the primary value.

• Trust and respect. Spiritual organizations are characterized by mutual trust, honesty, and openness. Employees are treated with esteem and value, consistent with the dignity of each individual.

• Open-mindedness. Spiritual organizations value flexible thinking and cre- ativity among employees.

workplace spirituality The recognition that people have an inner life that nourishes and is nourished by meaningful work that takes place in the context of community.

Reasons for the Growing Interest in SpiritualityExhibit 16-5

Spirituality can counterbalance the pressures and stress of a turbulent pace of life. Contemporary lifestyles—single-parent families, geographic mobility, the temporary nature of jobs, new technologies that create distance between people—underscore the lack of community many people feel and increase the need for involvement and connection.

•

Formalized religion hasn’t worked for many people, and they continue to look for anchors to replace lack of faith and to fill a growing feeling of emptiness.

• Job demands have made the workplace dominant in many people’s lives, yet they continue to question the meaning of work.

• People want to integrate personal life values with their professional lives.

• An increasing number of people are finding that the pursuit of more material acquisitions leaves them unfulfilled.

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Achieving Spirituality in the Organization Many organizations have grown inter- ested in spirituality but have had trouble putting principles into practice. Several types of practices can facilitate a spiritual workplace,116 including those that sup- port work-life balance. Leaders can demonstrate values, attitudes, and behaviors that trigger intrinsic motivation and a sense of fulfilling a calling through work. Encouraging employees to consider how their work provides a sense of purpose can help achieve a spiritual workplace; often this is done through group counsel- ing and organizational development, the latter of which we take up in Chapter 18.

A growing number of companies, including Taco Bell and Sturdisteel, offer employees the counseling services of corporate chaplains. Many chaplains are employed by agencies, such as Marketplace Chaplains USA, while some corporations, such as R.J. Reynolds Tobacco and Tyson Foods, employ chap- lains directly. The workplace presence of corporate chaplains, who are often ordained Christian ministers, is obviously controversial, although their role is not to increase spirituality but to help human resources departments serve the employees who already have Christian beliefs.117 Similar roles for leaders of other faiths certainly must be encouraged.

Career OBjectives How do I learn to lead?

I’ll be starting a new job in a few weeks. It’s my first time working as a leader for a team, and I know I have a lot to learn. Is there any way I can be sure I’ll achieve success as a leader?

—Gordon

Dear Gordon: Learning about a new job is always complicated. Learning how to be a leader is doubly complicated. It’s expected that you have the capacity to provide direction and purpose for employees and that you will respect the existing culture of the group as well as the capacities of individual members. Here are a few key insights toward making your transition into leadership successful:

• Ask questions. New leaders are often anxious about asking ques- tions of employees who report directly to them for fear of being seen as incompetent or weak. How- ever, inquiring about how things have been done in the past and asking about individual goals sig- nals that you are concerned about the team members. Familiarizing

yourself with the group’s culture and practices can also help you develop techniques to harness the team’s strengths and overcome challenges.

• Build relationships with other leaders. Remember—you were put into this role for a reason, and the company wants to see you succeed, so make the most of the resources of others. Take detailed notes regarding spe- cific activities and strategies that were successful, and schedule a check-in to discuss how these strat- egies have worked over time. If you can show you are truly engaged in the learning process, you’ll find oth- ers are more willing to provide you with assistance and advice.

• Start small. Much has been written about the importance of gaining small wins early to build your repu- tation. The old saying “You never get a second chance to make a first impression” definitely holds true in the workplace. Try to develop new initiatives with clear outcomes that will allow you to demonstrate your leadership traits.

The best leadership transitions include learning what the situation calls for and setting your team up for success from the start. Be proactive!

Sources: Based on T. B. Harris, N. Li, W. R. Boswell, X. Zhang, and Z. Xie, “Getting What’s New from Newcomers: Empowering Leadership, Creativity, and Adjustment in the Socialization Context,” Personnel Psy- chology 67 (2014): 567–604; Y. H. Ji, N. A. Cohen, A. Daly, K. Finnigan, and K. Klein, “The Dynamics of Voice Behavior and Lead- ers’ Network Ties in Times of Leadership Successions,” Academy of Management Pro- ceedings (2014): 16324; and B. Eckfeldt, “5 Things New CEOS Should Focus On,” Business Insider, June 1, 2015, http://www .businessinsider.com/5-things-new-ceos- should-focus-on-2015-6.

The opinions provided here are of the man- agers and authors only and do not neces- sarily reflect those of their organizations. The authors or managers are not respon- sible for any errors or omissions, or for the results obtained from the use of this information. In no event will the authors or managers, or their related partnerships or corporations thereof, be liable to you or anyone else for any decision made or action taken in reliance on the opinions provided here.

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Criticisms of Spirituality Critics of the spirituality movement in organiza- tions118 have focused on three issues. First is the question of scientific founda- tion. What really is workplace spirituality? Is spirituality just a new management buzzword? Second, are spiritual organizations legitimate? Specifically, do orga- nizations have the right to claim spiritual values? Third is the question of eco- nomics: Are spirituality and profits compatible?

First, there is comparatively little research on workplace spirituality. Spir- ituality has been defined so broadly in some sources that practices from job rotation to corporate retreats at meditation centers have been identified as spiritual. Questions need to be answered before the concept gains full credibility.

Second, an emphasis on spirituality can clearly make some employees uneasy. Critics have argued that secular institutions, especially business firms, should not impose spiritual values on employees.119 This criticism is undoubt- edly valid when spirituality is defined as bringing religion and God into the workplace. However, it seems less stinging when the goal is limited to helping employees find meaning and purpose in their work lives. If the concerns listed in Exhibit 16-5 truly characterize a large segment of the workforce, then per- haps organizations can help.

Third, whether spirituality and profits are compatible objectives is a relevant concern for managers and investors in business. The evidence, although lim- ited, indicates they are. In one study, organizations that provided their employ- ees with opportunities for spiritual development outperformed those that didn’t.120 Other studies reported that spirituality in organizations was positively related to creativity, employee satisfaction, job involvement, and organizational commitment.121

The Global Context We considered global cultural values (collectivism–individualism, power dis- tance, and so on) in Chapter 5. Here our focus is a bit narrower: How is orga- nizational culture affected by the global context? Organizational culture is so powerful that it often transcends national boundaries. But that doesn’t mean organizations should, or could, ignore local culture.

Organizational cultures often reflect national culture.122 The culture at AirAsia, a Malaysian-based airline, emphasizes openness and friendships. The carrier has lots of parties, participative management, and no private offices, reflecting Malaysia’s relatively collectivistic culture. The culture of many U.S. airlines does not reflect the same degree of informality. If a U.S. airline were to merge with AirAsia, it would need to take these cultural dif- ferences into account. Organizational culture differences are not always due to international culture differences, however. One of the chief chal- lenges of the merger of US Airways and American Airlines was the inte- gration of US Airway’s open-collar culture with American’s button-down culture.123

One of the primary things U.S. managers can do is to be culturally sensitive. The United States is a dominant force in business and in culture—and with that influence comes a reputation. “We are broadly seen throughout the world as arrogant people, totally self-absorbed and loud,” says one U.S. executive. Some ways in which U.S. managers can be culturally sensitive include talking in a low tone of voice, speaking slowly, listening more, and avoiding discussions of religion and politics.

16-6 Show how national cul-ture can affect the way organizational culture is transported to another country.

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The management of ethical behavior is one area where national culture can rub against corporate culture.124 U.S. managers endorse the suprem- acy of anonymous market forces as a moral obligation for business organiza- tions. This worldview sees bribery, nepotism, and favoring personal contacts as highly unethical. They also value profit maximization, so any action that devi- ates from profit maximization may suggest inappropriate or corrupt behavior. In contrast, managers in developing economies are more likely to see ethical decisions as embedded in the social environment. That means doing special favors for family and friends is not only appropriate but possibly even an ethical responsibility. Managers in many nations view capitalism skeptically and believe the interests of workers should be put on a par with the interests of sharehold- ers, which may limit profit maximization.

Creating a multinational organizational culture can initiate strife between employees of traditionally competing countries. When Swedish, Norwegian, Finnish, and Danish banks combined to form Nordea Bank AB, the stereo- types some employees held based on the countries’ historical relationships created tensions. Finland had originally been a colony of Sweden, and Nor- way had been a part of Denmark and then of Sweden. The fact that none of the employees had yet been born when their countries were colonies didn’t matter; complex alliances within Nordea formed along nationalistic lines. To bridge these gaps, Nordea employed storytelling to help employees identify with positive aspects of their shared geographical region. The organization reinforced the shared identity through press releases, corporate correspon- dence, equal country representation in top management, and championing of shared values. Although the organization continues to struggle with a multina- tional culture, the successes it has enjoyed can be attributed to careful atten- tion to national differences.125

As national organizations seek to employ workers in overseas operations, management must decide whether to standardize many facets of organiza- tional culture. For example, should organizations offer wellness plans and work-life balance initiatives from the home country to the satellite offices, or should they tailor the plans for the norms of each society? Either can be prob- lematic. For instance, when U.S. company Rothenberg International intro- duced its alcohol abuse remediation plan to Russian employees as part of its employee assistance program (EAP), it didn’t foresee that Russians resist the concept of “assistance” and prefer “support” instead. Rothenberg could adjust, but sometimes local laws intercede (as a help or a hindrance) when employers roll out homeland plans. Brazil has a government anti-HIV plan that employers can use, for instance, and the United Kingdom’s National Health Service pays for smoking cessation programs, while in Germany pri- vate insurance must pay for wellness plans.126 At this point, there is no clear consensus on the best course of action, but the first step is for companies to be sensitive to differing standards.

Summary Exhibit 16-6 depicts the impact of organizational culture. Employees form an overall subjective perception of the organization based on factors such as the degree of risk tolerance, team emphasis, and support of individuals. This over- all perception represents, in effect, the organization’s culture or personality and affects employee performance and satisfaction, with stronger cultures hav- ing greater impact.

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Implications for Managers ● Realize that an organization’s culture is relatively fixed in the short term.

To effect change, involve top management and strategize a long-term plan.

● Hire individuals whose values align with those of the organization; these employees will tend to remain committed and satisfied. Not surprisingly, “misfits” have considerably higher turnover rates.

● Understand that employees’ performance and socialization depend to a considerable degree on their knowing what to do and what not to do. Train your employees well and keep them informed of changes to their job roles.

● You can shape the culture of your work environment, sometimes as much as it shapes you. All managers can do their part to create an ethical cul- ture and to consider spirituality and its role in creating a positive organi- zational culture.

● Be aware that your company’s organizational culture may not be “trans- ported” easily to other countries. Understand the cultural relevance of your organization’s norms before introducing new plans or initiatives overseas.

How Organizational Cultures Have an Impact on Employee Performance and Satisfaction

Exhibit 16-6

Organizational culture

Performance

Satisfaction

High

Low

Strength

Perceived as orientation

orientation

MyLab Management Personal Inventory Assessments Go to www.pearson.com/mylab/management to complete the Personal Inventory Assessment related to this chapter.

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Organizational Culture Can Be “Measured” POINT

Greg Besner, the CEO of CultureIQ, has spent 15 years as an entrepreneur and leader following hundreds of companies to be able to accurately measure organizational culture. Cultu- reIQ focuses on measuring and managing organizational culture using a software package, and they have found, over time, what they believe are 10 indicators that help a company assess their organizational cultures (especially the mission and values aspect). Besner suggests that companies should assess all of the following:

1. Communication, including employee voice and downward communication from leaders

2. Innovation, including employee creativity and organizational receptiveness to new ideas

3. Agility, including employee perceptions of whether the organi- zation adapts to changes

4. Wellness, including the mental and physical well-being of employees

5. Environment, including the comfort and usability of the office space

6. Collaboration, including how well employees work with one another

7. Support, including the assistance that employees get from their supervisors, coworkers, and organization as a whole

8. Performance orientation, including role clarity, rewards, and employee recognition

9. Responsibility, including employee accountability and autonomy

10. Mission and values, including awareness and implementation

Beyond Besner’s approach, a variety of other researchers and practitioners have claimed to assess organizational culture accurately. Primarily, they have used surveys and interviews to assess organi- zational culture and have amassed evidence that the surveys and interviews measure what they should and measure them consistently. One example of these measures asks employees to respond to ques- tions related to the dimensions of organizational culture discussed at the beginning of the chapter (the same “objective factors” listed in Exhibit 16-6) and to compare how their stance on these values aligns with those of the organization.

COUNTERPOINT

Can something so complex, so deep, and so difficult to define clearly be measured by asking someone about his or her organization’s culture in an interview or a survey? Probably not, according to some researchers. As Professor John Traphagan notes, “The problem with the term ‘culture’ is that it tends to essen- tialize groups: It simplistically represents a group of people as a unified whole that share simple common values, ideas, practices, and beliefs.” Not only does it reduce complex systems to unified wholes, organizational culture is also deterministic, meaning that it is a given, complete entity that changes slowly and tends to have a strong, straightforward effect on behavior. But the reality is that these assumptions are probably not grounded.

The survey measures and interviews that are employed to assess organizational culture often fail to “meet the mark” because either they assess other phenomena that we inappropriately call “cul- ture” (e.g., communication, performance, attitudes, etc.) or they do not fully capture the deep complexities of organizational culture. For example, should organizational culture assessments focus on myths? Stories? Values? Behavior? Artifacts? Beliefs? Underlying assumptions? Although it is easy to see how values, behavior, and beliefs can be assessed with surveys, it is perhaps very difficult to make sense of the organization’s stories, artifacts, and underlying assumptions. Furthermore, how can we distinguish reliably between the effect of subcultures or the national culture and the overall cul- ture as a whole?

A final issue can be found in what we should measure. As can be seen throughout this chapter, many different forms of organiza- tional culture and dimensions have been forwarded by organizational behavior researchers over many decades. Which ones are correct? The answer to this question plays into the question of how we should measure organizational culture. It seems clear that, although orga- nizational cultures appear to be real and to influence people, it is incredibly difficult to “measure” them.

Sources: Based on N. M. Ashkanasy, L. E. Broadfoot, and S. Falkus, “Questionnaire Measures of Organizational Culture,” in N. M. Ashkanasy, C. P. M. Wilderom, and M. F. Peterson (eds.), Handbook of Organizational Culture and Climate (Thousand Oaks, CA: Sage, 2000): 131–46; G. Besner, “The 10 Company Culture Metrics You Should Be Tracking Right Now,” Entrepre- neur, June 3, 2015, https://www.entrepreneur.com/article/246899; C. Ostroff, A. J. Kinicki, and R. S. Muhammad, “Organi- zational Culture and Climate,” in I. B. Weiner (ed.), Handbook of Psychology, 2nd ed. (Hoboken, NJ: Wiley, 2012): 643–76; B. Schneider, M. G. Ehrhart, and W. H. Macey, “Organizational Climate and Culture,” Annual Review of Psychology 64 (2013): 361–88; and J. Traphagan, “Why ‘Company Culture’ Is a Misleading Term,” Harvard Business Review, April 21, 2015, https:// hbr.org/2015/04/why-company-culture-is-a-misleading-term.

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CHAPTER REVIEW

QUESTIONS FOR REVIEW

16-1 What is organizational culture, and what are its common characteristics?

16-2 What are the functional and dysfunctional effects of organizational culture?

16-3 What factors create and sustain an organiza- tion’s culture?

16-4 How is culture transmitted to employees?

16-5 What are the similarities and differences in creating an ethical culture, a positive culture, and a spiritual culture?

16-6 How does national culture affect what happens when an organizational culture is transported to another country?

APPLICATION AND EMPLOYABILITY In this chapter, you were introduced to organizational cul- ture and climate as well as their differentiating character- istics. You should also know now that they matter—a poor organizational culture, in many ways, can be a make-or- break factor for an organization. Organizational cultures are often taken very seriously by organizations. By learn- ing about organizational cultures and how they work, you are improving your employability by enabling you to adapt to distinct types of cultures, to craft positive organizational cultures if you are to be in a leadership position, and to demonstrate your fit with the values of a company at which you are interviewing. You are also aware of the neg- ative aspects of organizational culture, which will help you avoid or circumvent potentially troublesome situations

when you are either on the job or applying to an orga- nization that might have a negative organizational cul- ture. In this chapter, you improved your communication skills by considering the forces of organizational culture change, learning how to be a better leader, differentiating between compassionate cultures in the banking industry, and debating whether it is possible to “measure” organiza- tional culture. In the next section, you will improve your critical thinking and knowledge application and analysis skills by designing an organizational culture of your own, examining how cultures can encourage dishonesty or corruption, discussing how aspects of office and organi- zational design contribute to organizational culture, and questioning the pros and cons of an active culture.

EXPERIENTIAL EXERCISE Culture Architects Form groups of three to four students. Each group will be the founders of a new organization. The members of each group will draw on what they learned in the chapter and other materials to set the foundation for an effective organizational culture for their new company. Each group will need to provide the following information about their new culture and to justify their answers:

Name of the organization Product or service provided Founding members

Mission or vision statement Three primary values guiding the organization Five core beliefs that guide the conduct of business in the

organization Three examples of organizational policies, practices, or proce-

dures that further the organization’s vision or that reinforce the values

One or more artifacts or symbols that represent the organization’s mission or values (can be a logo, description of clothes, use of language or jargon, and so on)

MyLab Management Discussion Questions Go to www.pearson.com/mylab/management to complete the problems marked with this icon .

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Questions 16-7. Was it difficult to come to a consensus on any of

these elements when crafting the culture? What sorts of disagreements arose and how did you solve them?

16-8. Do you think this foundation will definitely lead to the culture you intended? Why or why not? What

sorts of changes, roadblocks, or other events might you see changing the culture or making it drift toward something that was not intended?

16-9. What types of specific socialization practices could you use so that new employees can best adapt to the organizational culture?

ETHICAL DILEMMA Culture of Deceit We have noted throughout the text that honesty is gen- erally the best policy in managing OB. But that doesn’t mean honest dealing is always the rule in business.

Studies have found, in fact, that whole industries may encourage dishonesty. In one experiment, subjects were first asked either to think about their professional iden- tities or to complete a generic survey. They were then asked to report on a series of coin flips; they were told in advance that the more times the coin showed heads, the more money they would make. The bankers who took the generic survey were about as honest in reporting coin flips as people who worked in other fields. The bankers told to think about their professional identities, however, exaggerated how often the coin turned up heads. People in other professions didn’t do so—the tie between profes- sional identity and dishonesty was unique to those who worked in banking. These results are certainly not limited to the banking industry. Many other ways of priming peo- ple to think about financial transactions seem to generate more dishonesty. And studies have also found that many individuals feel pressured to engage in dishonest behav- ior to meet the bottom line. Money provides powerful motives for dishonesty.

Money motivations are strong in professional sports. For example, the number of top leaders in FIFA (Fédéra- tion Internationale de Football Association, the interna- tional governing body of association football [soccer], futsal, and beach soccer) who were indicted in 2015 suggests that behaving dishonestly has been accepted within FIFA and covering up for the dishonesty of oth- ers has been encouraged. Domenico Scala, FIFA’s audit

and compliance committee chair, noted, “To support the change we need a culture that censures inappropri- ate behavior and enforces rules vigorously, fairly, and [is] responsive.” There is consensus that to overcome cor- ruption, those in positions of authority must demonstrate commitment to an ethical culture. As Scala noted, “It is the leaders’ tone that ensures it is embedded at all levels of the organization. This must be honest and communicated with sincerity in both words and actions.” There may well be a tendency to become dishonest when there’s money to be made, so leaders may need to be especially vigilant and communicate clear expectations for ethical behavior.

Fortunately, evidence shows that asking people to focus on relationships and the way they spend their time can make them behave more honestly and helpfully. This suggests that a focus on the social consequences of our actions can indeed help to overcome corruption.

Questions 16-10. What are the negative effects of a culture that

encourages dishonesty and corruption on an orga- nization’s reputation and its employees?

16-11. Why might some organizations push employees to behave in a dishonest or corrupt manner? Are there personal benefits to corruption that organi- zational culture can counteract?

16-12. What actions can you take as a new employee if you are pressured to violate your own ethical standards at work? How might midlevel employees’ responses to this question differ from those of more senior managers?

Sources: Based on F. Gino, “Banking Culture Encourages Dishonesty,” Scientific American, December 30, 2014, http://www.scientificamerican.com/article/banking-culture-encourages-dishonesty/; A. Cohn, E. Fehr, and M. A. Maréchal, “Business Culture and Dishonesty in the Banking Indus- try,” Nature, 2014, doi:10.1038/nature13977; L. Geggel, “FIFA Scandal: The Complicated Science of Corruption,” Scientific American, May 31, 2015, http://www.scientificamerican.com/article/fifa- scandal-the-complicated-science-of-corruption/; and K. Radnedge, “Culture Change Required if FIFA Is to Eliminate Wrongdoing,” World Soccer, May 29, 2015, http://www.worldsoccer.com/ columnists/keir-radnedge/culture-change-required-if-fifa-is-to-eliminate-wrongdoing-362278.

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CASE INCIDENT 1 The Place Makes the People At Gerson Lehrman Group, you won’t find an employee working in a cubicle day after day. You also won’t find an employee working in a free-form open office area con- sistently either. The reason is that Gerson Lehrman is invested in what it calls activity-based working. In this sys- tem, employees have access to cubicle spaces for privacy, conference rooms for group meetings, café seating for working with a laptop, and full open-office environments. Where you work on a particular day is entirely up to you.

It may be hard to remember, but office allocations were a uniform signal of hierarchical status and part of organizational culture until recently. As organizations have become flatter and the need for creativity and flex- ibility has increased, the open-office plan has become a mainstay of the business world. The goal is to encourage free- flowing conversation and discussion, enhance creativ- ity, and minimize hierarchy—in other words, to foster a creative and collaborative culture and remove office space from its status position.

Research on open offices, however, shows there is a downside. Open offices decrease the sense of privacy, reduce the feeling of owning your own space, and create a distracting level of background stimulation. As psychol- ogy writer Maria Konnikova noted, “When we’re exposed to too many inputs at once—a computer screen, music, a colleague’s conversation, the ping of an instant message— our senses become overloaded, and it requires more work to achieve a given result.”

So is the activity-based hybrid described earlier a poten- tial solution? With its constantly shifting workspace and

lack of consistent locations, this may be an even less con- trolled environment than an open office. However, it does signal a culture that values the autonomy of individual workers to choose their own best environment at a partic- ular time. The lack of consistency creates other problems, though. Workers cannot achieve even the modest level of personal control over any specific space that they had with the open design. Design expert Louis Lhoest notes that managers in an activity-based office “have to learn to cope with not having people within their line of sight.” This is a difficult transition for many managers to make, especially if they are used to a command-and-control culture.

Whether a traditional, open, or activity-based design is best overall is hard to say. Perhaps the better question is, “Which type will be appropriate for each organization?”

Questions 16-13. How might different types of office design influ-

ence employee social interaction, collaboration, and creativity? Should these be encouraged even in organizations without an innovative culture?

16-14. Can the effects of a new office design be assessed objectively? How could you measure whether new office designs are improving the organizational culture?

16-15. Do you think certain types of office design can be utilized to create a more ethical or spiritual cul- ture? Why or why not? If you answered yes, how can office design be utilized to create an ethical culture?

Sources: Based on B. Lanks, “Don’t Get Too Cozy,” Bloomberg Businessweek, October 30, 2014, http://www .businessweekme.com/Bloomberg/newsmid/190/newsid/271; M. Konnikova, “The Open-Office Trap,” New Yorker, January 7, 2014, http://www.newyorker.com/business/currency/the-open- office-trap; and N. Ashkanasy, O. B. Ayoko, and K. A. Jehn, “Understanding the Physical Environ- ment of Work and Employee Behavior: An Affective Events Perspective,” Journal of Organizational Behavior 35 (2014): 1169–84.

CASE INCIDENT 2 Active Cultures Employees at many successful companies start the day by checking the economic forecast. Patagonia’s Ventura, California, employees start the day by checking the surf forecast. The outdoor clothing company encourages its workforce to take time from the workday to get outside and get active. For Patagonia, linking employees with the natural environment is a major part of the culture.

New hires are introduced to this mindset very quickly. Soon after starting at Patagonia, marketing executive Joy Howard was immediately encouraged to go fly fish- ing, surfing, and rock climbing all around the world.

She notes that all this vacationing is not just playing around—it’s an important part of her job. “I needed to be familiar with the products we market,” she said. Other practices support this outdoors-oriented, healthy culture. The company has an on-site organic café featur- ing locally grown produce. Employees at all levels are encouraged through an employee discount program to try out activewear in the field. And highly flexible hours ensure that employees feel free to take the occasional afternoon off to catch the waves or get out of town for a weekend hiking trip.

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Sources: Based on J. Murphy, “At Patagonia, Trying New Outdoor Adventures Is a Job Requirement,” Wall Street Journal, March 10, 2015, http://www.wsj.com/articles/at-patagonia-trying-new- outdoor- adventures-is-a-job-requirement-1425918931; B. Schulte, “A Company That Profits as It Pampers Workers,” Washington Post, October 25, 2014, http://www.washingtonpost.com/business/a-com- pany-that-profits-as-it-pampers-workers/2014/10/22/d3321b34-4818-11e4-b72e-d60a9229cc10_story .html; and D. Baer, “Patagonia CEO: ‘There’s No Way I Should Make One Decision Based on Quarterly Results,’” Business Insider, November 19, 2014, http://www.businessinsider.com/ patagonia-ceo-interview-2014-11.

Are there bottom-line benefits to this organizational culture? Some corporate leaders think so. As Neil Blu- menthal, one of the founders of Warby Parker eyewear, observes, “[T]hey’ve shown that you can build a profit- able business while thinking about the environment and thinking about your team and community.” As Patagonia CEO Rose Marcario says, “People recognize Patagonia as a company that’s . . . looking at business through a more holistic lens other than profit.” However, she is quick to add, “Profit is important; if it wasn’t you wouldn’t be talk- ing to me.”

Patagonia’s culture obviously makes for an ideal work- place for some people—but not for others who don’t share its values. People who are just not outdoor types would likely feel excluded. While the unique mission and

values of Patagonia may not be for everyone, for its spe- cific niche in the product and employment market, the culture fits like a glove.

Questions 16-16. What do you think are the key dimensions of cul-

ture that make Patagonia successful? How does the organization help to foster this culture?

16-17. Does Patagonia use strategies to build its culture that you think could work for other companies? Is the company a useful model for others that aren’t so tied to a lifestyle? Why or why not?

16-18. What are the drawbacks of Patagonia’s culture? Might it sometimes be a liability and, if so, in what situations?

ENDNOTES 1 See, for example, B. Schneider, M. G. Ehrhart, and W. H. Macey, “Organizational Climate and Culture,” Annual Review of Psychol- ogy 64 (2013): 361–88. 2 J. A. Chatman, D. F. Caldwell, C. A. O’Reilly, and B. Doerr, “Parsing Organizational Cul- ture: How the Norm for Adaptability Influ- ences the Relationship between Culture Consensus and Financial Performance in High Technology Firms,” Journal of Organiza- tional Behavior 35, no. 6 (2014): 785–808. 3 C. A. Hartnell, A. Y. Ou, and A. Kinicki, “Organizational Culture and Organizational Effectiveness: A Meta-Analytic Investigation of the Competing Values Framework,” Journal of Applied Psychology 96 (2011): 677–94; and R. E. Quinn and J. Rohrbaugh, “A Special Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis,” Management Science 29 (1983): 363–77.

4 Schneider, Ehrhart, and Macey, “Organiza- tional Climate and Culture.” 5 Hartnell, Ou, and Kinicki, “Organizational Culture and Organizational Effectiveness.” 6 See, for example, C. Ostroff, A. J. Kinicki, and R. S. Muhammad, “Organizational Culture and Climate,” in I. B. Weiner (ed.), Handbook of Psychology, 2nd ed. (Hoboken, NJ: Wiley, 2012): 643–76. 7 D. A. Hoffman and L. M. Jones, “Leadership, Collective Personality, and Performance,” Journal of Applied Psychology 90, no. 3 (2005): 509–22. 8 J. Martin, Organizational Culture: Mapping the Terrain (Thousand Oaks, CA: Sage, 2002). 9 P. Lok, R. Westwood, and J. Crawford, “Per- ceptions of Organisational Subculture and Their Significance for Organisational Com- mitment,” Applied Psychology: An International Review 54, no. 4 (2005): 490–514; and B. E.

Ashforth, K. M. Rogers, and K. G. Corley, “Identity in Organizations: Exploring Cross- Level Dynamics,” Organization Science 22 (2011): 1144–56. 10 J. M. Jermier, J. W. Slocum Jr., L. W. Fry, and J. Gaines, “Organizational Subcultures in a Soft Bureaucracy: Resistance behind the Myth and Façade of an Official Culture,” Organiza- tion Science 2, no. 2 (1991): 170–94. 11 T. Hsieh, “Zappos’s CEO on Going to Extremes for Customers,” Harvard Business Review (July/August 2010): 41–45. 12 For discussions of how culture can be evalu- ated as a shared perception, see D. Chan, “Multilevel and Aggregation Issues in Climate and Culture Research,” in B. Schneider and K. M. Barbera (eds.), The Oxford Handbook of Organizational Climate and Culture (New York: Oxford University Press, 2014): 484–95; and J. B. Sorensen, “The Strength of Corporate

16-19. Refer again to Case Incident 1. In what ways can office design shape culture? 16-20. Refer again to Case Incident 2. What might Patagonia do to reinforce its culture even further? 16-21. MyLab Management only—additional assisted-graded writing assignment.

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