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Organizational Behavior

Eighteenth Edition, Global Edition

Chapter 13

Leadership

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Welcome to this Organizational Behavior course that uses the 18th edition of the textbook, Organizational Behavior by Robbins and Judge. This is considered among the most widely used OB textbooks in the world. Robbins and Judge are recognized as definitive aggregators of OB concepts, applications, and practices. The course and this book will provide you with a resource that will benefit you throughout your degree program and your professional life.

Chapter 12: Leadership

Learning Objectives (1 of 2)

13.1 Summarize the conclusions of trait theories of leadership.

13.2 Identify the central tenets and main limitations of behavioral theories.

13.3 Contrast contingency theories of leadership.

13.4 Describe the contemporary theories of leadership and their relationship to foundational theories.

After studying this chapter, you should be able to:

Summarize the conclusions of trait theories of leadership.

Identify the central tenets and main limitations of behavioral theories.

Contrast contingency theories of leadership.

Describe the contemporary theories of leadership and their relationship to foundational theories.

Learning Objectives (2 of 2)

13.5 Discuss the roles of leaders in creating ethical organizations.

13.6 Describe how leaders can have a positive impact on their organizations through building trust and mentoring.

13.7 Identify the challenges to our understanding of leadership.

Additional objectives for this chapter.

Discuss the roles of leaders in creating ethical organizations.

Describe how leaders can have a positive impact on their organizations through building trust and mentoring.

Identify the challenges to our understanding of leadership.

Summarize the Conclusions of Trait Theories of Leadership (1 of 6)

Leadership is the ability to influence a group toward the achievement of a vision or set of goals.

Not all leaders are managers, nor are all managers leaders.

Nonsanctioned leadership is often as important or more important than formal influence.

Leadership is the ability to influence a group toward the achievement of a vision or set of goals. The source of this influence may be formal, such as that provided by managerial rank in an organization. But not all leaders are managers, nor, for that matter, are all managers leaders. Just because an organization provides its managers with certain formal rights is no assurance they will lead effectively.

Nonsanctioned leadership—the ability to influence that arises outside the formal structure of the organization—is often as important or more important than formal influence. In other words, leaders can emerge from within a group as well as by formal appointment.

Summarize the Conclusions of Trait Theories of Leadership (2 of 6)

Trait theories of leadership focus on personal qualities and characteristics.

The search for personality, social, physical, or intellectual attributes that differentiate leaders from non-leaders goes back to the earliest stages of leadership research.

Trait theories of leadership focus on personal qualities and characteristics. The search for personality, social, physical, or intellectual attributes that differentiate leaders from non-leaders goes back to the earliest stages of leadership research.

Summarize the Conclusions of Trait Theories of Leadership (3 of 6)

A comprehensive review of the leadership literature, when organized around the Big Five, has found extraversion to be the most predictive trait of effective leaders, but it is more strongly related to the way leaders emerge than to their effectiveness.

Unlike agreeableness and emotional stability, conscientiousness and openness to experience also showed strong relationships to leadership, though not quite as strong as extraversion.

A comprehensive review of the leadership literature, when organized around the Big Five, has found extraversion to be the most important trait of effective leaders, but it is more strongly related to the way leaders emerge than to their effectiveness.

Sociable and dominant people are more likely to assert themselves in group situations, but leaders need to make sure they’re not too assertive—one study found leaders who scored very high on assertiveness were less effective than those who were moderately high.

Unlike agreeableness and emotional stability, conscientiousness and openness to experience also showed strong relationships to leadership, though not quite as strong as extraversion.

Summarize the Conclusions of Trait Theories of Leadership (4 of 6)

Good leaders who like being around people:

Are able to assert themselves (extraverted).

Are disciplined and able to keep commitments they make (conscientious).

Have an apparent advantage when it comes to leadership.

The trait approach does have something to offer. Leaders who like being around people and are able to assert themselves (extraverted), who are disciplined and able to keep commitments they make (conscientious), do have an apparent advantage when it comes to leadership, suggesting good leaders do have key traits in common. One reason is that conscientiousness and extraversion are positively related to leaders’ self-efficacy, which explained most of the variance in subordinates’ ratings of leader performance. People are more likely to follow someone who is confident she’s going in the right direction.

Summarize the Conclusions of Trait Theories of Leadership (5 of 6)

Another trait that may indicate effective leadership is emotional intelligence.

A core component of EI is empathy.

People high in EI are more likely to emerge as leaders, even after taking cognitive ability and personality into account.

Another trait that may indicate effective leadership is emotional intelligence (EI), discussed in Chapter 4. A core component of EI is empathy. A leader who effectively displays and manages emotions will find it easier to influence the feelings of followers, by both expressing genuine sympathy and enthusiasm for good performance and by using irritation for those who fail to perform.

Recent research has demonstrated that people high in EI are more likely to emerge as leaders, even after taking cognitive ability and personality into account.

Summarize the Conclusions of Trait Theories of Leadership (6 of 6)

Two conclusions:

Traits can predict leadership.

Traits do a better job predicting the emergence of leaders than they do at distinguishing between effective and ineffective leaders.

Based on the latest findings, we offer two conclusions. We can say that traits can predict leadership. Second, traits do a better job predicting the emergence of leaders and the appearance of leadership than they do at distinguishing between effective and ineffective leaders. The fact that an individual exhibits the traits and that others consider him or her a leader does not necessarily mean that he or she will be an effective one.

Trait theories help us predict leadership, but they don’t fully help us explain leadership.

Central Tenets and Main Limitations of Behavioral Theories (1 of 3)

Behavioral theories of leadership imply we can train people to be leaders.

Ohio State Studies found two behaviors that accounted for most leadership behavior:

Initiating structure

Consideration

While trait research provides a basis for selecting the right people for leadership, behavioral theories of leadership imply that we can train people to be leaders.

The most comprehensive theories resulted from the Ohio State Studies which sought to identify independent dimensions of leader behavior. Beginning with more than a thousand dimensions, the studies narrowed the list to two that substantially accounted for most of the leadership behavior described by employees: initiating structure and consideration.

Initiating structure is the extent to which a leader defines and structures his or her role and those of subordinates to facilitate goal attainment. It includes behavior that attempts to organize work, work relationships, and goals. A leader high in initiating structure is someone who “assigns group members to particular tasks,” “expects workers to maintain definite standards of performance,” and “emphasizes the meeting of deadlines.”

Consideration is the extent to which a leader has job relationships that are characterized by mutual trust, respect for employees’ ideas, and regard for their feelings. A leader high in consideration helps employees with personal problems, is friendly and approachable, treats all employees as equals, and expresses appreciation and support.

Central Tenets and Main Limitations of Behavioral Theories (2 of 3)

The GLOBE study suggests there are international differences in preference for initiating structure and consideration.

Found that leaders high in consideration would succeed best in where cultures did not favor unilateral decision making.

Some research from the GLOBE study suggests that there are international differences in preference for initiating structure and consideration. Research found that leaders high in consideration would succeed best in countries where cultural values did not favor unilateral decision making, such as Brazil. In contrast, the French have a more bureaucratic view of leaders and are less likely to expect them to be humane and considerate. A leader high in initiating structure (relatively task-oriented) will do best there and can make decisions in a relatively autocratic manner. In other cultures, both dimensions may therefore be important.

Central Tenets and Main Limitations of Behavioral Theories (3 of 3)

Summary of Trait Theories and Behavioral Theories

Leaders who have certain traits and who display culturally appropriate consideration and structuring behaviors do appear to be more effective.

Traits and behaviors do not guarantee success.

Context matters too.

In summary, leaders who have certain traits and who display culturally appropriate consideration and structuring behaviors do appear to be more effective. Future research is needed to integrate these approaches. As important as traits and behaviors are in identifying effective or ineffective leaders, they do not guarantee success. The context matters too.

Contrast Contingency Theories of Leadership (1 of 7)

The Fiedler contingency model: effective group performance depends upon the proper match between the leader’s style of interacting with subordinates and the degree to which the situation gives control to the leader.

The least preferred coworker (LPC) questionnaire:

Task- or relationship-oriented.

Assumes leadership style is fixed.

The first comprehensive contingency model for leadership was developed by Fred Fiedler, who proposed that effective group performance depends on the proper match between the leader’s style of interacting with subordinates and the degree to which the situation gives control to the leader.

The first step in the Fiedler contingency model is identifying leadership style. Fiedler believed that a key factor in leadership success is the individual’s basic leadership style. He created the least preferred coworker (LPC) questionnaire for this purpose, to measure whether a person is task- or relationship-oriented.

Contrast Contingency Theories of Leadership (2 of 7)

Defining the Situation

Contingency dimensions:

Leader-member relations

Task structure

Position power

After assessing leadership style, it is necessary to match the leader with the situation. Fiedler has identified three contingency or situational dimensions:

Leader–member relations—the degree of confidence, trust, and respect members have in their leader.

Task structure—the degree to which the job assignments are procedural.

Position power—the degree of influence a leader has over power variables such as hiring, firing, discipline, promotions, and salary increases.

The next step is to evaluate the situation in terms of these three contingency variables. Leader–member relations are either good or poor. Task structure is either high or low. Position power is either strong or weak. Fiedler states the better the leader–member relations, the more highly structured the job, and the stronger the position power, the more control the leader has.

Contrast Contingency Theories of Leadership (3 of 7)

Exhibit 13-1 Findings from the Fiedler Model

As shown in Exhibit 12-1, Fiedler concluded that task-oriented leaders tend to perform better in situations that were very favorable to them as well as in situations that were very unfavorable. Fiedler would predict that when faced with a category I, II, Ill, VII, or VIII situation, task-oriented leaders perform better. Relationship-oriented leaders, however, perform better in moderately favorable situations—categories IV through VI. Fiedler has condensed these eight situations to three.

Contrast Contingency Theories of Leadership (4 of 7)

Situational leadership theory (SLT) is a contingency theory that focuses on the followers.

Successful leadership is achieved by selecting the right leadership style, which is contingent on the level of the followers’ readiness.

Although LPC theory is the most researched contingency theory, three others deserve mention.

First, situational leadership theory (SLT) is a contingency theory that focuses on the followers. It proposes that successful leadership is achieved by selecting the right leadership style, which is contingent on the level of the followers’ readiness. The term readiness refers to the extent to which people have the ability and willingness to accomplish a specific task. A leader should choose one of four behaviors depending on follower readiness. If followers are unable and unwilling to do a task, the leader needs to give clear and specific directions; If they are unable but willing, the leader needs to display high task orientation to compensate for followers’ lack of ability and high relationship orientation to get them to “buy into” the leader’s desires. Conversely, if followers are able but unwilling, the leader needs to use a supportive and participative style. If they are both able and willing, the leader doesn’t need to do much.

SLT has intuitive appeal. Yet, research efforts to test and support the theory have generally been disappointing.

Contrast Contingency Theories of Leadership (5 of 7)

Path-goal theory:

Contingency model of leadership that extracts key elements from the Ohio State leadership research on initiating structure and consideration and the expectancy theory of motivation.

Derived from belief that effective leaders clarify the path to help followers achieve work goals.

One of the most respected approaches to leadership is the path-goal theory, developed by Robert House. It is a contingency model of leadership that extracts key elements from the Ohio State leadership research on initiating structure and consideration and the expectancy theory of motivation.

The term “path-goal” is derived from the belief that effective leaders clarify the path to help their followers achieve their work goals. According to path-goal theory, whether a leader should be directive or supportive or should demonstrate some other behavior depends on complex analysis of the situation. The theory predicts the following: directive leadership yields greater satisfaction when tasks are ambiguous or stressful than when they are highly structured and well laid out, while supportive leadership results in high performance and satisfaction when employees are performing structured tasks. Directive leadership is likely to be perceived as redundant among employees with high ability or considerable experience.

Contrast Contingency Theories of Leadership (6 of 7)

The leader-participation model relates leadership behavior and participation in decision making.

Leader behavior must adjust to reflect the task structure.

The final contingency theory is the leader-participation model which argues that the way the leader makes decisions is as important as what she or he decides. The model, developed by Victor Vroom and Phillip Yetton, relates leadership behavior and participation in decision-making. Like path-goal theory, it says leader behavior must adjust to reflect the task structure.

Contrast Contingency Theories of Leadership (7 of 7)

OB POLL How Are You Developing Your Leadership Skills

Note: Survey of 700 respondents.

Source: Based on J. Brox, “The Results Are In: How Do You Ensure You’re Constantly Developing as a Leader?” May 14, 2013, http://www.refreshleadership.com/index.php/2013/05/results-ensure-youre-constantly-developing-leader/#more-4732.

Consider the OB Poll … and your own quest for leadership skills.

Contemporary Theories of Leadership (1 of 12)

Exhibit 13-2 Leader–Member Exchange Theory from

The leader-member exchange (LMX) theory argues that because of time pressures, leaders establish a special relationship with a small group of their followers (see Exhibit 12-2). These individuals make up the in-group—they are trusted, get a disproportionate amount of the leader’s attention, and are more likely to receive special privileges. The theory proposes that early in the history of the interaction between a leader and a given follower, the leader implicitly categorizes the follower as an “in” or an “out” and that relationship is relatively stable over time. The leader does the choosing on the basis of the follower’s characteristics.

Research to test LMX theory has been generally supportive, with substantive evidence that leaders do differentiate among followers. These disparities are far from random; and followers with in-group status will have higher performance ratings, engage in more helping or “citizenship” behaviors at work, engage in less deviant or “counterproductive” behaviors at work, and report greater satisfaction with their superior.

Contemporary Theories of Leadership (2 of 12)

Exhibit 13-3 Key Characteristics of a Charismatic Leader

1. Vision and articulation. Has a vision—expressed as an idealized goal—that proposes a future better than the status quo; able to clarify the importance of the vision in terms that are understandable to others.

2. Personal risk. Willing to take on high personal risk, incur high costs, and engage in self-sacrifice to achieve the vision.

3. Sensitivity to follower needs. Perceptive of others’ abilities and responsive to their needs and feelings.

4. Unconventional behavior. Engages in behaviors that are perceived as novel and counter to norms.

Source: Based on J. A. Conger and R. N. Kanungo, Charismatic Leadership in Organizations (Thousand Oaks, CA: Sage, 1998), 94.

Charismatic leadership theory was proposed by Robert House, stating that followers make attributes of heroic or extraordinary leadership abilities when they observe certain behaviors, as seen in Exhibit 12-3. General characteristics are: they have vision; they are willing to take personal risk; they are sensitive to followers’ needs; and they exhibit extraordinary behaviors.

Contemporary Theories of Leadership (3 of 12)

Are Charismatic Leaders Born or Made?

Some individuals are born with charismatic traits, others are trained to exhibit charismatic behaviors.

Develop the aura of charisma.

Use your passion to generate enthusiasm.

Speak in an animated voice, reinforce your message with eye contact and facial expressions, and gesture for emphasis.

Bring out the potential in followers by tapping into their emotions and create a bond that inspires them.

Are charismatic leaders born or made? Some individuals are born with traits that make them charismatic. Most experts believe individuals can also be trained to exhibit charismatic behavior.

To further develop an aura of charisma, use your passion as a catalyst for generating enthusiasm. Speak in an animated voice, reinforce your message with eye contact and facial expressions, and gesture for emphasis. Bring out the potential in followers by tapping into their emotions, and create a bond that inspires them. Remember, enthusiasm is contagious!

Contemporary Theories of Leadership (4 of 12)

How Charismatic Leaders Influence Followers

Articulating an appealing vision.

Developing a vision statement.

Establishing a new set of values.

Conveying courage and conviction about the vision.

How does a charismatic leader influence followers? By articulating an appealing vision, developing an accompanying vision statement, conveying a new set of values, and demonstrating courage and conviction about the vision. Followers “catch” the emotions their leader is conveying.

Contemporary Theories of Leadership (5 of 12)

Does Effective Charismatic Leadership Depend on the Situation?

People are especially receptive when they sense a crisis or when they are under stress.

Does effective charismatic leadership depend on the situation? Charisma appears to be most appropriate when the follower’s task has an ideological component or when the environment involves a high degree of stress and uncertainty. People are especially receptive when they sense a crisis or when they are under stress.

This may explain why, when charismatic leaders surface, it’s more likely to be in politics, religion, wartime; or when a business firm is in its infancy or facing a life-threatening crisis.

Contemporary Theories of Leadership (6 of 12)

The Dark Side of Charismatic Leadership

Many leaders don’t necessarily act in the best interest of their companies.

Many have allowed their personal goals to override the goals of the organization.

Individuals who are narcissistic are also higher in some behaviors associated with charismatic leadership.

Some charismatic leaders don’t necessarily act in the best interest of their companies, allowing their personal goals to override the goals of the organization. The results at companies such as Enron, Tyco, WorldCom, and HealthSouth are examples of leaders who recklessly used organizational resources for their personal benefit and executives who violated laws and ethical boundaries to inflate stock prices, allowing leaders to cash in millions of dollars in stock options.

It’s little wonder research has shown that individuals who are narcissistic are also higher in some behaviors associated with charismatic leadership. It’s not that charismatic leadership isn’t effective; overall, it is. But a charismatic leader isn’t always the answer. Success depends, to some extent, on the situation and on the leader’s vision.

Contemporary Theories of Leadership (7 of 12)

Exhibit 13-4 Characteristics of Transactional and Transformational Leaders

Transactional Leader

Contingent Reward: Contracts exchange of rewards for effort, promises rewards for good performance, recognizes accomplishments.

Management by Exception (active): Watches and searches for deviations from rules and standards, takes corrective action.

Management by Exception (passive): Intervenes only if standards are not met.

Laissez-Faire: Abdicates responsibilities, avoids making decisions.

Transformational Leader

Idealized Influence: Provides vision and sense of mission, instills pride, gains respect and trust.

Inspirational Motivation: Communicates high expectations, uses symbols to focus efforts, expresses important purposes in simple ways.

Intellectual Stimulation: Promotes intelligence, rationality, and careful problem solving.

Individualized Consideration: Gives personal attention, treats each employee individually, coaches, advises.

Sources: Based on B. M. Bass, Leadership and Performance Beyond Expectations (New York, NY: Free Press, 1990); and T. A. Judge and R. F. Piccolo, “Transformational and Transactional Leadership: A Meta-Analytic Test of Their Relative Validity,” Journal of Applied Psychology 89, no. 5 (2004): 755–68.

A stream of research has focused on differentiating between transactional leaders and transformational leaders.

Transactional leaders guide or motivate their followers in the direction of established goals by clarifying role and task requirements.

Transformational leaders inspire followers to transcend their own self-interests for the good of the organization. They change followers’ awareness of issues by helping them to look at old problems in new ways; and they are able to excite, arouse, and inspire followers to put out extra effort to achieve group goals.

Exhibit 12-4 shows that transformational leadership builds on transactional leadership and produces levels of follower effort and performance beyond what transactional leadership alone can do. Transactional and transformational leadership complement each other; they aren’t opposing approaches to getting things done. The best leaders are transactional and transformational.

Contemporary Theories of Leadership (8 of 12)

Exhibit 13-5 Full Range of Leadership Model

Exhibit 12-5 shows the full range of the leadership model.

Laissez-faire is the most passive and least effective type, while management by exception is slightly better. Contingent reward leadership can be effective, but will not get employees to go above and beyond the call of duty.

The remaining four correspond to transformational leadership: individualized consideration, intellectual stimulation, inspirational motivation, and idealized influence. Leaders are generally more effective when they regularly use the four I’s. Only with these styles are leaders able to motivate followers to perform above expectations and transcend their self-interests for the sake of the organization.

Contemporary Theories of Leadership (9 of 12)

How Transformational Leadership Works

Creativity – theirs and others.

Decentralization of responsibility.

Propensity to take risks.

Compensation is geared toward long-term results.

Greater agreement among top managers about the organization’s goals.

Overall, most research suggests that the reason transformational leadership works is that it inspires and motivates followers. For example, research in Germany and Switzerland found that transformational leadership improves employee job satisfaction, self-efficacy, and commitment to the leader by fulfilling follower autonomy, competence, and relatedness needs (see self-determination theory, Chapter 7)

One study found that transformational leadership leads to increased job performance and OCB by empowering employees (see Chapter 3), especially in more “organic” organizations (i.e., organizations that are adaptive and that have fluid roles, shared values, and reciprocal communication). Other research in China found that transformational leadership positively influenced workers’ helping behaviors through improving employee trust in their leaders along with prosocial motivation. Finally, multiple studies in Israel and the United Kingdom suggest that transformational leadership can improve workplace safety by increasing intrinsic motivation and prevention focus (see Chapter 7).

Companies with transformational leaders also show greater agreement among top managers about the organization’s goals, which yields superior organizational performance.

The Israeli military has seen similar results, showing that transformational leaders improve performance by building consensus among group members. Transformational leaders are able to increase follower self-efficacy, giving the group a “can do” spirit.

Contemporary Theories of Leadership (10 of 12)

Evaluation of Transformational Leadership

Transformational leadership has been supported at diverse job levels and occupations, but it isn’t effective in all situations.

It has a greater impact on the bottom line in smaller, privately-held firms than in more complex organizations.

Transformational leadership has been supported at diverse job levels and occupations (school principals, teachers, marine commanders, ministers, presidents of MBA associations, military cadets, union shop stewards, sales reps), but it isn’t equally effective in all situations.

Transformational leadership has a greater impact on the bottom line in smaller, privately held firms than in more complex organizations. Transformational leadership may also be more effective when leaders can directly interact with the workforce to make decisions (when they have high task autonomy) than when they report to an external board of directors or deal with a complex bureaucratic structure.

Contemporary Theories of Leadership (11 of 12)

Transformational versus Transactional Leadership

Transformational leadership is more strongly correlated with a variety of workplace outcomes.

When comparing transformational leadership with transactional leadership, research indicates transformational leadership is more strongly correlated than transactional leadership a variety of workplace outcomes.

However, transformational leadership theory is not perfect. The full range of leadership model shows a clear division between transactional and transformational leadership that may not fully exist in effective leadership.

And contrary to the full range of leadership model, the four I’s of transformational leadership are not always superior in effectiveness to transactional leadership; contingent reward leadership, in which leaders dole out rewards as certain goals are reached by employees, sometimes works as well as transformational leadership.

More research is needed, but the general supportable conclusion is that transformational leadership is desirable and effective, given the right application.

Contemporary Theories of Leadership (12 of 12)

Transformational versus Charismatic Leadership

Charismatic leadership places more emphasis on the way leaders communicate – are they passionate and dynamic?

Transformational leadership focuses more on what they are communicating – is it a compelling vision?

Both focus on the leader’s ability to inspire followers.

Charismatic leadership places somewhat more emphasis on the way leaders communicate (are they passionate and dynamic?), while transformational leadership focuses more on what they are communicating (is it a compelling vision?).

Still, the theories are more alike than different. At their heart, both focus on the leader’s ability to inspire followers, and sometimes they do so in the same way. Because of this, some researchers believe the concepts are somewhat interchangeable.

Role of Leaders in Creating Ethical Organizations (1 of 4)

Authentic Leadership

Authentic leaders:

Know who they are.

Know what they believe in and value.

Act on those values and beliefs openly and candidly.

The result: people come to have faith in them.

What is authentic leadership? Authentic leaders know who they are. They know what they believe in and value. And they act on those values and beliefs openly and candidly. The result: people come to have faith in them.

Recent research indicates that authentic leadership, especially when shared among top management team members, created a positive energizing effect that heightened firm performance.

Not only is authenticity important for leaders, it is important for followers, too. In a study of Belgian service companies, the joint authenticity of both leaders and followers led to the satisfaction of basic needs (see self-determination theory, Chapter 7), which in turn led to improvements in performance.86 Much like the group- and individual-focused transformational leadership findings from the previous section, both group- and individual perceptions of authenticity on follower outcomes.

Role of Leaders in Creating Ethical Organizations (2 of 4)

Ethical Leadership

Ethics touches on leadership at a number of junctures.

Efforts have been made to combine ethical and charismatic leadership into an idea of socialized charismatic leadership – leadership that conveys other-centered values by leaders who model ethical conduct.

Ethics touches on leadership at a number of junctures. Leaders who treat their followers with fairness, especially by providing honest, frequent, and accurate information, are seen as more effective.

Leaders must be willing to express their ethical beliefs and persuade others to follow their standards. To convey their beliefs, leaders should learn to express their moral convictions in statements that reflect values shared with their organization’s members. Leaders need to set high ethical standards, demonstrate them through their own behavior, and encourage and reward integrity in others while avoiding abuses of power.

Leaders rated as highly ethical tend to be very positively evaluated by their subordinates, who are also more satisfied and committed to their jobs as well as experience less strain and turnover intentions.

Efforts have been made by scholars to combine ethical and charismatic leadership into an idea of socialized charismatic leadership – leadership that conveys other-centered (not self-centered) values by leaders who model ethical conduct.

Role of Leaders in Creating Ethical Organizations (3 of 4)

Abusive Supervision

Refers to the perception that a supervisor is hostile in their verbal and nonverbal behavior.

Negatively affects health, leads to increased depression, emotional exhaustion, and job tension perceptions.

Leads to decreases in organizational commitment, job satisfaction, and perceived organizational support along with increased work-family conflict.

Can adversely affect employee performance and other employee behaviors.

It can happen to anyone—we’re all capable of being abusive as managers.103 Frighteningly, some research suggests that when it does occur it can be costly: current estimates suggest that it costs organizations in the United States about 23.8 billion dollars per year.

The United States also has relatively low reported levels of abusive supervision in recent research—the highest ratings of abusive supervision are actually in the eastern hemisphere, including China, the Philippines, and Taiwan; with lower ratings in the United States, Canada, and India.

Although not a form of leadership in all cases, abusive supervision refers to the perception that a supervisor is hostile in their verbal and nonverbal behavior.

Research suggests that there are a variety of dire consequences for abusive supervision. First and foremost, abusive supervision negatively affects health: it leads to increased depression, emotional exhaustion, and job tension perceptions. Second, it also leads to decreases in organizational commitment, job satisfaction, and perceived organizational support along with increased work-family conflict. Finally, it can adversely affect employee performance and other employee behaviors: victims of abusive supervision are more prone to engage in CWBs and other deviant behaviors (especially retaliatory ones directed toward their supervisors) and less prone to engage in OCBs.

Role of Leaders in Creating Ethical Organizations (4 of 4)

Servant Leadership

Servant leaders go beyond their self-interest and instead focus on opportunities to help followers grow and develop.

Characteristic behaviors include listening, empathizing, persuading, accepting stewardship, and actively developing followers’ potential.

Scholars have recently considered ethical leadership from a new angle by examining servant leadership. Because servant leadership focuses on serving the needs of others, research has focused on its outcomes for the well-being of followers.

Characteristic behaviors include listening, empathizing, persuading, accepting stewardship, and actively developing followers’ potential.

What are the effects of servant leadership? One study of 71 general managers of restaurants in the United States and over 1,000 of their employees found that servant leaders tend to create a culture of service (see Chapter 16), which in turn, improves the restaurant performance and enhances employee attitudes and performance by increasing their identification with the restaurant. Second, there is a relationship between servant leadership and follower OCB that appears to be stronger when followers are encouraged to focus on being dutiful and responsible. Third, servant leadership increases team potency (a belief that one’s team has above-average skills and abilities), which in turn leads to higher levels of group performance. Finally, a study with a nationally representative sample found higher levels of citizenship associated with a focus on growth and advancement, which in turn was associated with higher levels of creative performance.

Servant leadership may be more prevalent and more effective in certain cultures. When asked to draw images of leaders, U.S. subjects tend to draw them in front of the group, giving orders to followers. Singaporeans tend to draw leaders at the back of the group, acting more to gather a group’s opinions together and then unify them from the rear. This suggests the East Asian prototype is more like a servant leader, which might mean servant leadership is more effective in these cultures.

Positive Leadership (1 of 4)

Trust and Leadership

Trust: a psychological state that exists when you agree to make yourself vulnerable to another because you have positive expectations about how things are going to turn out.

A primary attribute associated with leadership.

When trust is broken, it can have serious adverse effects on a group’s performance.

Trust is a psychological state that exists when you agree to make yourself vulnerable to another because you have positive expectations about how things are going to turn out. Trust is a primary attribute associated with leadership. When trust is broken, it can have serious adverse effects on a group’s performance. People are unlikely to look up to or follow someone they perceive as dishonest or likely to take advantage of them. Thus, as you might expect, transformational leaders do generate higher levels of trust from their followers, which in turn is related to higher levels of team confidence and, ultimately, higher levels of team performance.

Positive Leadership (2 of 4)

Exhibit 13-6 The Nature of Trust

Trust isn’t just about the leader; the characteristics of the followers will also influence the development of trust. What key characteristics lead us to believe a leader is trustworthy? Exhibit 12-6 shows three characteristics: integrity, benevolence, and ability.

Integrity refers to honesty and truthfulness. It seems the most critical of the three in assessing another’s trustworthiness. Benevolence means the trusted person has your interests at heart, even if yours aren’t necessarily in line with theirs. Ability encompasses an individual’s technical and interpersonal knowledge and skills.

The Outcomes of Trust:

Trust encourages taking risks.

Whenever employees decide to deviate from the usual way of doing things, or to take their supervisors’ word on a new direction, they are taking a risk.

Trust facilitates information sharing.

One big reason employees fail to express concerns at work is that they don’t feel psychologically safe revealing their views.

Trusting groups are more effective.

When a leader sets a trusting tone in a group, members are more willing to help each other and exert extra effort, which further increases trust.

Trust enhances productivity.

The bottom-line interest of companies also appears positively influenced by trust. Employees who trust their supervisors tend to receive higher performance ratings.

Positive Leadership (3 of 4)

Trust propensity

Trust and Culture

The Role of Time

Regaining Trust

Trust propensity refers to how likely a particular employee is to trust a leader. Some people are simply more likely to believe others can be trusted. Trust may be built on very different perceptions from culture to culture.

Time is the final ingredient in the recipe for trust. Trust doesn’t happen immediately: we come to trust people based on observing their behavior over a period of time. Trust can also be won in the ability domain simply by demonstrating competence.

Leaders who break the psychological contract with workers, demonstrating they aren’t trustworthy, will find that employees are less satisfied and less committed, have higher intentions to turnover, engage in less citizenship behavior, and have lower task performance.

Positive Leadership (4 of 4)

Exhibit 13-7 Career and Psychological Functions of the Mentoring Relationship

Career Functions	Psychosocial Functions
Lobbying to get the protégé challenging and visible assignments	Counseling the protégé to bolster his or her self-confidence
Coaching the protégé to help develop his or her skills and achieve work objectives	Sharing personal experiences with the protégé
Providing exposure to influential individuals within the organization	Providing friendship and acceptance
Protecting the protégé from possible risks to his or her reputation	Acting as a role model
Sponsoring the protégé by nominating him or her for potential advances or promotions	Blank
Acting as a sounding board for ideas the protégé might be hesitant to share with a direct supervisor	Blank

A mentor is a senior employee who sponsors and supports a less-experienced employee (a protégé). Successful mentors are good teachers. They present ideas clearly, listen well, and empathize with protégés’ problems. As shown in Exhibit 12-7, mentoring relationships serve both career functions and psychosocial functions.

Traditional informal mentoring relationships develop when leaders identify a less experienced, lower-level employee who appears to have potential for future development. The protégé will often be tested with a particularly challenging assignment. If he or she performs acceptably, the mentor will develop the relationship, informally showing the protégé how the organization really works outside its formal structures and procedures.

Why would a leader want to be a mentor? Many feel they have something to share with the younger generation and want to provide a legacy. Mentoring also provides unfiltered access to the attitudes of lower-ranking employees, and protégés can be an excellent source of early warning signals that identify potential organizational problems.

You might assume mentoring is valuable for objective outcomes like compensation and job performance, but research suggests the gains are primarily psychological. So, while mentoring can have an impact on career success, research shows that it’s not as important as ability and personality.

Challenges to our Understanding of Leadership (1 of 4)

Much of an organization’s success or failure is due to factors outside the influence of leadership.

In many cases, success or failure is just a matter of being in the right or wrong place at a given time.

The attribution theory of leadership says leadership is merely an attribution people make about other individuals.

Much of an organization’s success or failure is due to factors outside the influence of leadership. In many cases, success or failure is just a matter of being in the right or wrong place at a given time.

The attribution theory of leadership says leadership is merely an attribution people make about other individuals. Thus, we attribute to leaders intelligence, outgoing personality, strong verbal skills, aggressiveness, understanding, and industriousness. At the organizational level, we tend to see leaders, rightly or wrongly, as responsible for extremely negative or extremely positive performance.

Challenges to our Understanding of Leadership (2 of 4)

Exhibit 13-8 Substitutes for and Neutralizers of Leadership

Defining Characteristics	Relationship-Oriented Leadership	Task-Oriented Leadership
Individual	Blank	Blank
Experience/training	No effect on	Substitutes for
Professionalism	Substitutes for	Substitutes for
Indifference to rewards	Neutralizes	Neutralizes
Job	Blank	Blank
Highly structured task	No effect on	Substitutes for
Provides its own feedback	No effect on	Substitutes for
Intrinsically satisfying	Substitutes for	Neutralizes
Organization	Blank	Blank
Explicit formalized goals	No effect on	Substitutes for
Rigid rules and procedures	No effect on	Substitutes for
Cohesive work groups	Substitutes for	Substitutes for

Source: Based on K. B. Lowe and W. L. Gardner, “Ten Years of the Leadership Quarterly: Contributions and Challenges for the Future,” Leadership Quarterly 11, no. 4 (2000): 459–514.

Data from numerous studies collectively demonstrate that, in many situations, whatever actions leaders exhibit are irrelevant.

As shown here in Exhibit 12-8, experience and training are among the substitutes that can replace the need for a leader’s support or ability to create structure. Organizational characteristics such as explicit formalized goals, rigid rules and procedures, and cohesive work groups can also replace formal leadership, while indifference to organizational rewards can neutralize its effects. Neutralizers make it impossible for leader behavior to make any difference to follower outcomes. Sometimes the difference between substitutes and neutralizers is fuzzy.

Challenges to our Understanding of Leadership (3 of 4)

Selecting Leaders

Identifying effective leaders:

Review specific requirements for the position.

Consider personality tests to identify leadership traits.

Situation-specific experience is relevant.

Plan for a change in leadership.

The process that organizations go through to fill management positions is essentially an exercise in trying to identify individuals who will be effective leaders. You might begin by reviewing the specific requirements for the position such as knowledge, skills, and abilities that are needed to do the job effectively. Personality tests can identify traits associated with leadership—extraversion, conscientiousness, and openness to experience. Also, candidates with high emotional intelligence should have an advantage, especially in situations requiring transformational leadership. Experience is a poor predictor of leader effectiveness, but situation-specific experience is relevant.

In addition, it’s important to plan for a change in leadership.

Challenges to our Understanding of Leadership (4 of 4)

Training Leaders

Leadership training is likely to be more successful with high self-monitors.

Teach implementation skills.

Teach trust building, mentoring, and situational-analysis.

Behavioral training through modeling exercises can increase an individual’s charismatic leadership qualities.

Review leadership after key organizational events.

Train in transformational leadership skills.

Billions are spent on leadership training and development every year. Here are some things management can do to get the maximum effect from their leadership-training budgets:

Leadership training is likely to be more successful with individuals who are high self-monitors than with low self-monitors. Second, organizations can teach implementation skills. We also can teach skills such as trust building, mentoring, and situational-analysis skills. There is evidence suggesting that behavioral training through modeling exercises can increase an individual’s ability to exhibit charismatic leadership qualities. Recent research also indicates that leaders should engage in regularly reviewing their leadership after key organizational events as part of their development. Finally, leaders can be trained in transformational leadership skills that have bottom-line results.

Implications for Managers (1 of 2)

For maximum leadership effectiveness, ensure that your preferences on the initiating structure and consideration dimensions are a match for your work dynamics and culture.

Hire candidates who exhibit transformational leadership qualities and who have demonstrated success in working through others to meet a long-term vision. Personality tests can reveal candidates higher in extraversion, conscientiousness, and openness, which may indicate leadership readiness.

In summary, leadership plays a central part in understanding group behavior, because it’s the leader who usually directs us toward our goals. Knowing what makes a good leader should thus be valuable in improving group performance. The early search for a set of universal leadership traits failed. However, recent efforts using the Big Five personality framework show strong and consistent relationships between leadership and extraversion, conscientiousness, and openness to experience. The behavioral approach’s major contribution was narrowing leadership into task-oriented (initiating structure) and people-oriented (consideration) styles. By considering the situation in which the leader operates, contingency theories promised to improve on the behavioral approach, but only LPC theory has fared well in leadership research. Research on charismatic and transformational leadership has made major contributions to our understanding of leadership effectiveness.

Specific implications for managers are below:

For maximum leadership effectiveness, ensure that your preferences on the initiating structure and consideration dimensions are a match for your work dynamics and culture.

Implications for Managers (2 of 2)

Hire candidates whom you believe are ethical and trustworthy for management roles and train current managers in your organization’s ethical standards to increase leadership effectiveness and reduce abusive supervision.

Seek to develop trusting relationships with followers, because, as organizations have become less stable and predictable, strong bonds of trust are replacing bureaucratic rules in defining expectations and relationships.

Consider investing in leadership training such as formal courses, workshops, and mentoring.

Consider investing in leadership training such as formal courses, workshops, rotating job responsibilities, coaching, and mentoring.

Learning Objectives (1 of 2)

13.1 Summarize the conclusions of trait theories of leadership.

13.2 Identify the central tenets and main limitations of behavioral theories.

13.3 Contrast contingency theories of leadership.

13.4 Describe the contemporary theories of leadership and their relationship to foundational theories.

After studying this chapter, you should be able to:

Summarize the conclusions of trait theories of leadership.

Identify the central tenets and main limitations of behavioral theories.

Contrast contingency theories of leadership.

Describe the contemporary theories of leadership and their relationship to foundational theories.

Learning Objectives (2 of 2)

13.5 Discuss the roles of leaders in creating ethical organizations.

13.6 Describe how leaders can have a positive impact on their organizations through building trust and mentoring.

13.7 Identify the challenges to our understanding of leadership.

Additional objectives for this chapter.

Discuss the roles of leaders in creating ethical organizations.

Describe how leaders can have a positive impact on their organizations through building trust and mentoring.

Identify the challenges to our understanding of leadership.

Questions?

Organizational Behavior

Eighteenth Edition, Global Edition

Chapter 14

Foundations of Organization Structure

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Chapter 15: Foundations of Organization Structure

Learning Objectives

14.1 Identify seven elements of an organization’s structure.

14.2 Identify the characteristics of the functional structure, the bureaucracy, and the matrix structure.

14.3 Identify the characteristics of the virtual structure, the team structure, and the circular structure.

14.4 Describe the effects of downsizing on organizational structures and employees.

14.5 Contrast the reasons for using mechanistic versus organic structural models.

14.6 Analyze the behavioral implications of different organizational designs.

After studying this chapter, you should be able to:

Identify seven elements of an organization’s structure.

Identify the characteristics of the functional structure, the bureaucracy, and the matrix structure.

Identify the characteristics of the virtual structure, the team structure, and the circular structure.

Describe the effects of downsizing on organizational structures and employees.

Contrast the reasons for using mechanistic versus organic structural models.

Analyze the behavioral implications of different organizational designs.

Identify Seven Elements of an Organization’s Structure (1 of 10)

Exhibit 14-1 Key Design Questions and Answers for Designing the Proper Organizational Structure

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

An organizational structure defines how job tasks are formally divided, grouped, and coordinated. There are six key elements, shown here in Exhibit 15-1. They are work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.

Identify Seven Elements of an Organization’s Structure (2 of 10)

Work specialization: the division of labor into separate activities.

Repetition of work.

Training for specialization.

Increasing efficiency through invention.

Henry Ford

Let’s focus on the first of the elements, work specialization. Work specialization, or division of labor, describes the degree to which activities in the organization are subdivided into separate jobs. In essence, an entire job is broken into a number of steps, each completed by a separate individual.

By the late 1940s, most manufacturing jobs in industrialized countries were being done this way. Management saw this as a means to make the most efficient use of its employees’ skills. Managers also looked for other efficiencies that could be achieved through work specialization. For example, employee skills at performing a task successfully increase through repetition. Training for specialization is more efficient from the organization’s perspective. It increases efficiency and productivity, encouraging the creation of special inventions and machinery. For much of the first half of this century, managers viewed work specialization as an unending source of increased productivity.

Henry Ford became rich and famous by building automobiles on an assembly line, demonstrating that work can be performed more efficiently by using a work specialization strategy. Every Ford worker was assigned a specific, repetitive task. By breaking jobs up into small standardized tasks, Ford was able to produce cars at the rate of one every ten seconds, while using employees who had relatively limited skills.

Identify Seven Elements of an Organization’s Structure (3 of 10)

Exhibit 14-2 Economies and Diseconomies of Work Specialization

The fourth element in an organization’s structure is span of control. How many employees a manager can efficiently and effectively direct is an important question. All things being equal, the wider or larger the span, the more efficient the organization.

Exhibit 15-3 illustrates that reducing the number of managers leads to significant savings. Wider spans are more efficient in terms of cost. However, at some point, wider spans reduce effectiveness. Narrow or small spans have their advocates. By keeping the span of control to five or six employees, a manager can maintain close control. Narrow spans have three major drawbacks. First, as already described, they are expensive because they add levels of management. Second, they make vertical communication in the organization more complex. Third, narrow spans of control encourage overly tight supervision and discourage employee autonomy.

The trend in recent years has been toward wider spans of control. They are consistent with recent efforts by companies to reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, and empower employees. To ensure that performance does not suffer because of these wider spans, organizations have been investing heavily in employee training.

Identify Seven Elements of an Organization’s Structure (4 of 10)

Grouping jobs together so common tasks can be coordinated is called departmentalization.

By functions performed.

By type of product or service the organization produces.

By geography or territory.

By process differences.

By type of customer.

The second element in an organization’s structure is departmentalization, or grouping jobs together so common tasks can be coordinated. One of the most popular ways to group activities is by functions performed. For example, a manufacturing manager might organize his or her plant by separating engineering, accounting, manufacturing, personnel, and purchasing specialists into common departments. The advantage to this type of grouping is obtaining efficiencies from putting like specialists together.

Tasks can also be departmentalized by the type of product or service the organization produces. The major advantage to this type of grouping is increased accountability for product performance under a single manager. Another way to departmentalize is on the basis of geography or territory. The sales function, for instance, may have western, southern, mid-western, and eastern regions.

Process departmentalization can be used for processing customers as well as products. For example, at the state motor vehicles office you might find: validation by motor vehicles division, processing by the licensing department, and payment collection by the treasury department.

A final category of departmentalization is by type of customer. Microsoft, for instance, recently reorganized around four customer markets: consumers, large corporations, software developers, and small businesses. The assumption is that customers in each department have a common set of problems and needs that can best be met by having specialists for each.

Identify Seven Elements of an Organization’s Structure (5 of 10)

Chain of command: an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

Once a basic cornerstone in organization design.

Two complementary concepts:

Unity of command

Authority

The third element in the organization’s structure is the chain of command. 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. It was once a basic cornerstone in the design of organizations, but it is far less important today. Two complementary concepts are authority and unity of command. Authority is the rights inherent to management to give orders and expect the orders to be obeyed. The principle of unity of command helps preserve the concept of an unbroken line of authority. It states that a person should have only one superior to whom he/she is directly responsible.

Identify Seven Elements of an Organization’s Structure (6 of 10)

The chain of command is less relevant today because of technology and the trend of empowering people.

Operating employees make decisions once reserved for management.

Increased popularity of self-managed and cross-functional teams.

Many organizations still find that enforcing the chain of command is productive.

Times change, and so do the basic tenets of organizational design. The concepts of chain of command have less relevance today because of technology and the trend of empowering employees. A low-level employee today can access information in seconds that a generation ago was available only to top managers. Operating employees are empowered to make decisions previously reserved for management.

Add the popularity of self-managed and cross-functional teams, and the creation of new structural designs that include multiple bosses, and you can see why authority and unity of command hold less relevance. Still, many organizations find they can be most productive by enforcing the chain of command. Indeed, one survey of more than 1,000 managers found that 59% of them 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 buy-in to the organization’s strategy by lower-level employees was inhibited by too much reliance on hierarchy for decision making.

Identify Seven Elements of an Organization’s Structure (7 of 10)

Exhibit 14-3 Contrasting Spans of Control

Now that you’re familiar with the elements in an organization’s structure, let talk about the more common organizational designs: the simple structure, the bureaucracy, and the matrix.

Exhibit 15-4 shows an example of the simple structure, an organization design that is characterized most by what it is not rather than what it is: it is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is a “flat” organization; it usually has only two or three vertical levels. One individual has the decision-making authority.

Identify Seven Elements of an Organization’s Structure (8 of 10)

Centralization and Decentralization

Centralization refers to the degree to which decision making is concentrated at a single point in the organization.

Advantages of a decentralized organization:

Can act more quickly to solve problems.

More people provide input into decisions.

Employees are less likely to feel alienated from those who make decisions that affect their work lives.

The next element is centralization and decentralization. Centralization refers to the degree to which decision making is concentrated at a single point in the organization. In centralized organizations, top managers 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.

The concept of centralization includes only formal authority—that is, the rights inherent in a position. An organization characterized by centralization is inherently 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.

Management efforts to make organizations more flexible and responsive have produced a recent trend toward decentralized decision making by lower-level managers, who are closer to the action and typically have more detailed knowledge about problems than top managers. When Procter & Gamble empowered small groups of employees to make many decisions about new-product development independent of the usual hierarchy, it was able to rapidly increase the proportion of new products ready for market.

Research investigating a large number of Finnish organizations demonstrates that companies with decentralized research and development offices in multiple locations were better at producing innovation than companies that centralized all research and development in a single office.

Identify Seven Elements of an Organization’s Structure (9 of 10)

Formalization: the degree to which jobs within the organization are standardized.

A highly formalized job means a minimum amount of discretion.

Low formalization – job behaviors are relatively non-programmed, and employees have a great deal of freedom to exercise discretion in their work.

The final element in the model is formalization, or the degree to which jobs within the organization are standardized. A highly formalized job gives the job incumbent a minimum amount of discretion over what is to be done, when it is to be done, and how he or she should do it. Employees can be expected to always handle the same input in exactly the same way. The greater the standardization, the less input the employee has into how the job is done. Low formalization, where job behaviors are relatively non-programmed, allows employees to have a great deal of freedom to exercise discretion in their work. The degree of formalization can vary widely between organizations and within organizations.

Identify Seven Elements of an Organization’s Structure (10 of 10)

Boundary spanning occurs when individuals form relationships with people outside their formally assigned groups.

Positive results are especially strong in organizations that encourage extensive internal communication; in other words, external boundary spanning is most effective when it is followed up with internal boundary spanning.

We’ve described ways that organizations create well-defined task structures and chains of authority.

These systems facilitate control and coordination for specific tasks, but if there is too much division within an organization, attempts to coordinate across groups can be disastrous.

One way to overcome compartmentalization and retain the positive elements 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. Boundary-spanning activities occur not only within but also between organizations.

Organizations can use formal mechanisms to facilitate boundary-spanning activities. One method is to assign formal liaison roles or develop committees of individuals from different areas of the organization. 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. Many organizations 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. A final method to encourage boundary spanning is to bring attention to overall organizational goals and shared identity concepts.

Common Organizational Frameworks and Structures (1 of 7)

Exhibit 14-4 A Simple Structure (Jack Gold’s Men’s Store)

Now that you’re familiar with the elements in an organization’s structure, let talk about the more common organizational designs: the simple structure, the bureaucracy, and the matrix.

Common Organizational Frameworks and Structures (2 of 7)

Simple structure: the manager and the owner are one and the same.

Strengths:

Simple, fast, and flexible.

Inexpensive to maintain.

Accountability is clear.

Weaknesses:

Difficult to maintain in anything other than small organizations.

Risky—everything depends on one person.

The simple structure is most widely practiced in small businesses in which the manager and the owner are one and the same.

The strength of the simple structure lies in its simplicity. It is fast, flexible, inexpensive to maintain, and accountability is clear. One major weakness is that it is difficult to maintain in anything other than small organizations. It becomes increasingly inadequate as an organization grows because its low formalization and high centralization tend to create information overload at the top. As size increases, it is very difficult for the owner-manager to make all the choices. The simple structure’s other weakness is that it is risky—everything depends on one person. Illness can literately destroy the information and decision-making center of the company.

Common Organizational Frameworks and Structures (3 of 7)

A bureaucracy is characterized by standardization.

Highly routine operating tasks.

Very formalized rules and regulations.

Tasks grouped into functional departments.

Centralized authority.

Narrow spans of control.

Decision making that follows the chain of command.

In contrast, standardization is the key concept for all bureaucracies. The bureaucracy is characterized by six traits: highly routine operating tasks achieved through specialization; very formalized rules and regulations; tasks grouped into functional departments; a strong centralized authority; there are narrow spans of control; and decision making follows the chain of command.

Common Organizational Frameworks and Structures (4 of 7)

Strengths of bureaucracy:

Ability to perform standardized activities in a highly efficient manner.

Weaknesses of bureaucracy:

Subunit conflicts.

Unit goals dominate.

Obsessive behavior.

Covering weak management.

The bureaucracy’s primary strength is in its ability to perform standardized activities in a highly efficient manner. Putting like specialties together in functional departments results in economies of scale, minimum duplication of personnel and equipment, etc. Bureaucracies get by nicely with less talented and less costly middle- and lower-level managers.

Some of bureaucracy’s weaknesses are that specialization creates subunit conflicts, and functional unit goals can override the organization’s goals. Also, an obsessive concern with following the rules can develop, and the bureaucracy is efficient only as long as employees confront familiar problems with programmed decision rules.

Common Organizational Frameworks and Structures (5 of 7)

Two aspects of bureaucracies:

Functional structure: groups employees by their similar specialties, roles, or tasks.

Divisional structure: groups employees into units by product, service, customer, or geographical market area.

There are two aspects of bureaucracies we should explore: functional and divisional structures.

The functional structure groups employees by their similar specialties, roles, or tasks. An organization organized into production, marketing, HR and accounting departments is an example. Many large organizations utilize this structure, although this is evolving to allow for quick changes in response to business opportunities. Still, there are advantages, including that the functional structure allows specialists 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 divisional structure groups employees into units by product, service, customer, or geographical market area. It is highly departmentalized. Sometimes this structure is known by the type of division structure it uses: product/service organizational structure (like units for cat food, dog food, and bird food that report to an animal food producer), customer organizational structure (like units for outpatient care, inpatient care, and pharmacy that report to hospital administration), or geographic organizational structure (like units for Europe, Asia, and South America that report to corporate headquarters).

Common Organizational Frameworks and Structures (6 of 7)

The matrix structure combines two forms of departmentalization—functional and product:

The strength of functional is putting specialists together.

Product departmentalization facilitates coordination.

It provides clear responsibility for all activities related to a product, but with duplication of activities and costs.

The third organization design is the matrix structure. This structure is common in advertising agencies, aerospace firms, research and development laboratories, construction companies, hospitals, government agencies, universities, management consulting firms, and entertainment companies. It combines two forms of departmentalization—functional and product.

The strength of functional departmentalization is putting like specialists together and the pooling and sharing of specialized resources across products. Its major disadvantage is the difficulty of coordinating tasks. Product departmentalization facilitates coordination. It provides clear responsibility for all activities related to a product, but with duplication of activities and costs.

Common Organizational Frameworks and Structures (7 of 7)

Exhibit 14-5 Matrix Structure for a College of Business Administration

The most obvious structural characteristic of the matrix is that it breaks the unity of command concept. Exhibit 15-5 shows the matrix form as used in a college of business administration. Its strength is its ability to facilitate coordination when the organization has a multiplicity of complex and interdependent activities. The dual lines of authority reduce tendencies of departmental members to protect their worlds. It facilitates the efficient allocation of specialists.

The major disadvantages of the matrix lie in the confusion it creates, its propensity to foster power struggles, and the stress it places on individuals. Violation of the unity of command concept increases ambiguity that often leads to conflict. Confusion and ambiguity also create the seeds of power struggles. Reporting to more than one boss introduces role conflict, and unclear expectations introduce role ambiguity.

Alternate Design Options (1 of 4)

The Virtual Organization

The essence of the virtual organization is that it is typically a small, core organization that outsources major business functions.

Also referred to as a modular or network organization.

It is highly centralized, with little or no departmentalization.

The essence of the virtual organization is that it is typically a small, core organization that outsources major business functions. The virtual organization is also referred to as a modular or network organization. It’s highly centralized, with little or no departmentalization.

Alternate Design Options (2 of 4)

Exhibit 14-6 A Virtual Structure

Exhibit 15-6 shows a virtual organization in which management outsources all of the primary functions of the business. The dotted lines in this exhibit represent those relationships typically maintained under contracts. Managers in virtual structures spend most of their time coordinating and controlling external relations, typically by way of computer-network links.

Network organizations often take many forms. Some of the more “traditional” forms include the franchise form in which there are managers, systems, and other experts in the central node (i.e., executive group) whereas customer sales and services are carried out by franchise units. This popular form of network organization is very common in service business models, such as 7-Eleven, McDonald’s, Jimmy John’s, and Dunkin’ Donuts. However, in this form, franchisees do not tend to collaborate or coordinate with one another, and may actually 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 functions into a “spinoff” firm. For example, in 2012 Netflix split off its DVD function into its own separate entity, now DVD.com.

The major advantage to the virtual organization is its flexibility. The primary drawback is that it reduces management’s control over key parts of its business. Virtual organizations’ drawbacks have become increasingly clear as their popularity has grown. They are in a state of perpetual flux and reorganization, which means roles, goals, and responsibilities are unclear, setting the stage for political behavior. Cultural alignment and shared goals can be lost because of the low degree of interaction among members. Team members who are geographically dispersed and communicate infrequently find it difficult to share information and knowledge, which can limit innovation and slow response time.

Ironically, some virtual organizations are less adaptable and innovative than those with well-established communication and collaboration networks. A leadership presence that reinforces the organization’s purpose and facilitates communication is thus especially valuable.

Alternate Design Options (3 of 4)

The team structure: eliminates the chain of command and replaces departments with empowered teams.

Removes vertical and horizontal boundaries.

Breaks down external barriers.

Flattens the hierarchy and minimizes status and rank.

When fully operational, the team structure may break down geographic barriers.

The team structure seeks to eliminate the chain of command and replace departments with empowered teams. This structure removes vertical and horizontal 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 executives, 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. When fully operational, the team structure may break down geographic barriers.

Today, most large U.S. companies see themselves as team-oriented global corporations; many, such as 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.

Alternate Design Options (4 of 4)

In the circular structure: in the center are the executives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers.

Has intuitive appeal for creative entrepreneur.

However, employees may 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.

Picture the concentric rings of an archery target. In the center are the executives, and radiating outward in rings grouped by function are the managers, then the specialists, then the workers. This is the circular structure.

The circular structure has intuitive appeal for creative entrepreneurs, and some small innovative firms have claimed it. However, as in many of the current hybrid approaches, 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) initiatives, for instance.

Effects of Downsizing on Organizations and Employees (1 of 2)

The Leaner Organization: Downsizing

The goal of the new organizational forms 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 selling off business units, closing locations, or reducing staff.

The leaner organization leads to organizational downsizing. The goal of the new organizational forms 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 selling off business units, closing locations, or reducing staff. It has been very controversial because of its potential negative impacts on employees.

The radical shrinking of Motorola Mobility in recent years was a case of downsizing due to loss of market share and changes in consumer demand. Some companies downsize to focus on their core competencies. Some companies focus on lean management techniques to reduce bureaucracy and speed up decision making.

Effects of Downsizing on Organizations and Employees (2 of 2)

Strategies for downsizing include:

Investment

Communication

Participation

Assistance

Make cuts carefully and help employees through the process.

There are several strategies for downsizing:

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

Communication. 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.

Participation. Employees worry less if they can participate in the process in some way. In some companies, voluntary early retirement programs or severance packages can help achieve leanness without layoffs.

Assistance. Providing severance, extended health-care benefits, and job search assistance demonstrates a company does really care about its employees and honors their contributions.

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.

Mechanistic vs. Organic Structural Models (1 of 8)

Exhibit 14-7 Mechanistic versus Organic Models

We’ve described organizational designs ranging from the highly structured bureaucracy to the amorphous boundaryless organization. There are also two extreme models of organizational design, as seen here in Exhibit 15-7.

First, the mechanistic model is synonymous with bureaucracy and has extensive departmentalization, high formalization, a limited information network (mostly downward), and little participation in decision making. The organic model uses cross-hierarchical and cross-functional teams, low formalization, a comprehensive information network, and high participation in decision making.

Why are some organizations structured along mechanistic lines while others are organic? In this section, we present the major causes or determinants of an organization’s structure.

Mechanistic vs. Organic Structural Models (2 of 8)

An organization’s structure is a means to help management achieve its objectives.

Most current strategy frameworks focus on three dimensions:

Innovation strategy

Cost Minimization strategy

Imitation strategy

An organization’s structure is a means to help management achieve its objectives. Objectives derive from the organization’s overall strategy. Structure should follow strategy. Most current strategy frameworks focus on three strategy dimensions—innovation, cost minimization, and imitation—and the structural design that works best with each.

An innovation strategy means a strategy for meaningful and unique innovations. This strategy may appropriately characterize 3M Company. A cost-minimization strategy tightly controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product. This describes Walmart’s strategy. An imitation strategy tries to copy successful ideas of innovators and capitalize on the best of both in order to minimize risk and maximize opportunity for profit. It moves into new products or new markets only after viability has been proven by innovators, for example, when manufactures mass-market fashion goods that are rip-offs of designer styles.

Mechanistic vs. Organic Structural Models (3 of 8)

Exhibit 14-8 The Strategy–Structure Relationship

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

Exhibit 15-8 describes the structural option that best matches each strategy. Innovators need the flexibility of the organic structure, whereas cost minimizers seek the efficiency and stability of the mechanistic structure. Imitators combine the two structures. They use a mechanistic structure to maintain tight controls and low costs in their current activities but create organic subunits in which to pursue new undertakings.

Mechanistic vs. Organic Structural Models (4 of 8)

Organizational Size

Large organizations—employing 2,000 or more people—tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations.

The impact of size becomes less important as an organization expands.

An organization’s size significantly affects its structure. Large organizations—employing 2,000 or more people—tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations. The impact of size becomes less important as an organization expands. Once an organization has around 2,000 employees, it’s already mechanistic. An additional 500 employees will not have much impact. However, adding 500 employees to a 300-employee firm is likely to result in a mechanistic structure.

Mechanistic vs. Organic Structural Models (5 of 8)

Technology: the way an organization transfers its inputs into outputs.

Numerous studies have examined the technology-structure relationship.

Organizational structures adapt to their technology.

Technology refers to how an organization transfers its inputs into outputs. Every organization has at least one technology for converting financial, human, and physical resources into products or services. Chinese electronics maker, Haier, uses an assembly-line process to make its products. Colleges may use a number of instruction technologies—the ever-popular formal lecture method, the case analysis method, the experiential exercise method, the programmed learning method, etc.—to educate its students.

Mechanistic vs. Organic Structural Models (6 of 8)

An organization’s environment includes outside institutions or forces that can affect its performance.

Dynamic environments create significantly more uncertainty for managers than do static ones.

To minimize uncertainty:

Broaden structure to sense and respond to threats.

Form strategic alliances.

An organization’s environment includes outside institutions or forces that can affect its performance, such as suppliers, customers, competitors, government regulatory agencies, and public pressure groups.

Dynamic environments create significantly more uncertainty for managers than do static ones. To minimize uncertainty, managers may broaden their structure to sense and respond to threats. For example, most companies, including Pepsi and Southwest Airlines, have added social networking departments to counter negative information posted on blogs. Or companies may form strategic alliances, such as when Microsoft and Yahoo! joined forces to better compete with Google.

Mechanistic vs. Organic Structural Models (7 of 8)

Exhibit 14-9 Three-Dimensional Model of the Environment

Any organization’s environment has three dimensions: capacity, volatility, and complexity. Capacity is the degree to which it can support growth. Rich and growing environments generate excess resources, which can buffer times of relative scarcity. Volatility refers to the degree of instability in an environment, characterized by a high degree of unpredictable change. The environment is dynamic, making it difficult for management to predict accurately the probabilities associated with various decision alternatives. At the other extreme is a stable environment. Complexity is the degree of heterogeneity and concentration among environmental elements. Simple environments are homogeneous and concentrated. In contrast, environments characterized by heterogeneity and dispersion are called complex.

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 unpredictability, little room for error, and a diverse set of elements in the environment to monitor constantly. Given this three-dimensional definition of environment, we can offer some general conclusions about environmental uncertainty and structural arrangements. The more scarce, dynamic, and complex the environment, the more organic a structure should be. The more abundant, stable, and simple the environment, the more the mechanistic structure will be preferred.

Mechanistic vs. Organic Structural Models (8 of 8)

Another factor that shapes organizational structure is institutions.

Regulatory pressures.

Simple inertia.

Culture.

Fads or trends.

Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful.

Another factor that shapes organizational structure is institutions. These are cultural factors that act as guidelines for appropriate behavior. 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.

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. Organizations in countries with high power distance might have a structural form with strict authority relationships because it’s seen as more legitimate in that culture. 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.

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 operating environment. Institutional pressures are often difficult to see specifically because we take them for granted, but that doesn’t mean they aren’t powerful.

Analyze the Behavioral Implications of Different Organizational Designs (1 of 2)

An organization’s structure can have significant effects on its members.

It’s impossible to generalize!

Not everyone prefers the freedom and flexibility of organic structures.

Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized.

This chapter opened by implying that an organization’s structure can have significant effects on its members. 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. Different factors stand out in different structures as well. In highly formalized, heavily structured, mechanistic organizations, the level of fairness in formal policies and procedures is a very important predictor of satisfaction. In more personal, individually adaptive, organic organizations, employees value interpersonal justice more. Some people are most productive and satisfied when work tasks are standardized and ambiguity minimized—that is, in mechanistic structures. So, any discussion of the effect of organizational design on employee behavior has to address individual differences.

Analyze the Behavioral Implications of Different Organizational Designs (2 of 2)

Organizational Designs and Employee Behavior

Work specialization contributes to higher employee productivity.

No evidence supports a relationship between span of control and employee satisfaction or performance.

Fairly strong evidence links centralization and job satisfaction, meaning that less centralization is associated with higher satisfaction.

National culture influences the preference for structure.

The evidence generally indicates that work specialization contributes to higher employee productivity—but at the price of reduced job satisfaction. However, work specialization is not an unending source of higher productivity.

While research fails to support a relationship between span of control and employee satisfaction or performance, we find fairly strong evidence linking centralization and job satisfaction. In general, less centralized organizations have a greater amount of autonomy, which appears positively related to job satisfaction.

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

Implications for Managers (1 of 3)

Exhibit 14-10 Organizational Structure: Its Determinants and Outcomes from

The theme of this chapter is that an organization’s internal structure contributes to explaining and predicting behavior. That is, in addition to individual and group factors, the structural relationships in which people work has a bearing on employee attitudes and behavior. What’s the basis for this argument? To the degree that an organization’s structure reduces ambiguity for employees and clarifies concerns, 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 (2 of 3)

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’ empowerment and autonomy.

Balance the advantages of remote work against the potential pitfalls before adding flexible workplace options into the organization’s structure.

Managers should:

Recognize that 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’ empowerment and autonomy.

Balance the advantages of remote work against the potential pitfalls before adding flexible workplace options into the organization’s structure.

Implications for Managers (3 of 3)

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 organizational structure.

In addition, managers should:

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 the organic and mechanistic elements when designing an organizational structure.

Learning Objectives

14.1 Identify seven elements of an organization’s structure.

14.2 Identify the characteristics of the functional structure, the bureaucracy, and the matrix structure.

14.3 Identify the characteristics of the virtual structure, the team structure, and the circular structure.

14.4 Describe the effects of downsizing on organizational structures and employees.

14.5 Contrast the reasons for using mechanistic versus organic structural models.

14.6 Analyze the behavioral implications of different organizational designs.

After studying this chapter, you should be able to:

Identify seven elements of an organization’s structure.

Identify the characteristics of the functional structure, the bureaucracy, and the matrix structure.

Identify the characteristics of the virtual structure, the team structure, and the circular structure.

Describe the effects of downsizing on organizational structures and employees.

Contrast the reasons for using mechanistic versus organic structural models.

Analyze the behavioral implications of different organizational designs.

Questions?