Structuring a New Business Venture: Powerpoint (no more than 15 slides)

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plays as a determinant of outcomes such as stress, coop- erative or deviant behavior, and performance.

Personality traits that are related to flexibility, stress hardiness, and personal initiative are also the subject of research. Examples of these personality traits include a tendency toward individualism or collectivism, self- monitoring, openness to experience, and a proactive per- sonality. Forms of behavior that are constructive and change-oriented in nature are also studied. These forms of behavior are proactive in nature and act to improve situations for the individual, group, or organization. Examples of these behaviors include issue selling, taking initiative, constructive change-oriented communication, innovation, and proactive socialization.

Organizational behavior is a central concern of human resource managers. Research at all levels of organ- izational behavior continues to be an active field in both academia and management. A wide variety of issues and concerns are the focus of on-going studies and manage- ment techniques.

S E E A L S O Human Resource Management; Motivation and Motivation Theory; Organic Organizations; Organizational Culture; Organizational Development

B I B L I O G R A P H Y Bowditch, James L., and Anthony F. Buono. A Primer on

Organizational Behavior. 7th ed. New York: Wiley, 2007. DeCenzo, David A., and Stephen P. Robbins. Fundamentals of

Human Resource Management. 9th ed. New York: Wiley, 2006.

Hersey, Paul H., Kenneth H. Blanchard, and Dewey E. Johnson. Management of Organizational Behavior. 9th ed. Upper Saddle River, NJ: Prentice Hall, 2007.

Hitt, Michael A., C. Chet Miller, and Adrienne Colella. Organizational Behavior: A Strategic Approach. New York: Wiley, 2005.

Hofstede, Geert, and Gert Jan Hofstede. Cultures and Organizations: Software of the Mind. 2nd ed. New York: McGraw-Hill, 2004.

Schein, Edgar H. Organizational Culture and Leadership. San Francisco, CA: Jossey-Bass, 2004.

Schermerhorn, John, James G. Hunt, and Richard N. Osborn. Organizational Behavior. 10th ed. New York: Wiley, 2008.

Staw, Barry, ed. Research in Organizational Behavior, vol. 28. London: JAI Press, 2008.

ORGANIZATIONAL CHART An organizational chart is a pictorial representation of a company’s structure and reporting relationships. This chart can provide a great deal of information and may help organizational members understand the overall struc- ture of the organization and its strategy. This entry

describes how organizational charts are constructed, including the software and other applications that can be used to create them; what information the organiza- tional chart provides; the benefits of making the chart available publicly; and the circumstances under which a chart is likely to change.

CONSTRUCTING AN ORGANIZATIONAL CHART

All organizational charts have similar elements that allow them to be easily interpreted and understood by people inside and outside of the organization. Charts consist of shapes and lines that represent work units and their hierarchy. See Figure 1 for an example of an organiza- tional chart.

The basic building block of an organizational chart is the rectangle, which can represent a person or a work unit (e.g., a department). For example, as shown in Figure 1, the CEO position has a separate rectangle that denotes one person, but the entire Public and Community Rela- tions Department is also represented by one rectangle. If the outline of the rectangle is dashed, this means that a position is open and must be filled, as with one of the manager positions. If a rectangle is divided, and two or more names are in it, this may indicate job sharing or that multiple people are responsible for the outcomes associ- ated with this position. In the figure, W. Allen and P. Lloyd are comanagers in one area of the Production and Services Marketing Department, where they have a job-sharing arrangement and each works part-time hours.

The boxes may contain as much or as little informa- tion as the organization prefers. They may include a job title, an employee’s name, an employee’s department, or even information such as job tenure, education, or salary. Alternatively, a chart may be created without rectangles, with names or titles standing alone. The three employees in the Public and Community Relations Department are listed with their names not in rectangles. This often is done to save space on the chart.

Rectangles on an organizational chart are linked with solid or dashed lines. A solid line indicates a formal, direct relationship, and a dashed line indicates that one employee or department advises another or has some other sort of indirect relationship. Note that all but one of the reporting relationships in Figure 1 is formal. L. Jiminez has a dashed line to the Product and Services Marketing Department, which means that she sometimes will work for that depart- ment or will report to that department’s manager. When lines represent a tree structure—when two or more rec- tangles are linked to another with multiple lines—this indicates that several individuals or departments report to one supervisor. For instance, the tree structure represents the relationship between the CEO and the three top

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managers who report to the CEO. Finally, a rectangle that is attached horizontally outside of the vertical hier- archy typically indicates an assistant or staff person. In the example, this is represented by the executive secretary to the CEO.

Computer software is the most common and user- friendly method for creating organizational charts. Organ- izational charts can be created using drawing tools in a word processing program, but diagramming programs offer more options and ease of use. For example, Micro- soft’s Visio 2007 presentation software allows for the creation of organizational charts, can be shared with col- leagues in various formats, and is compatible with all other Microsoft applications. For creating larger, more complex charts, there are many different programs avail- able for purchase. Some examples are OrgPlus7, Concept- Draw 7.6, SmartDraw 2008.3, and Abra OrgChart. These software programs allow quick, easy chart creation with point-and-click menus, automatic resizing and align- ment. Diagramming software programs also allow charts to be easily downloaded into word processing documents, presentations, or Web sites for optimal visibility. Other features include the ability to insert photographs and

information from other human resources programs directly into charts.

Other diagramming software for creating organiza- tion charts can be used live on the Internet to allow user interface from business to business. The Google Apps Suite offers Google Docs, a program that allows for the creation and integration of organizational charts directly into documents that are accessible to multiple online users. Users are able to make changes to charts and docu- ments based on a level of access determined by the account’s administrator.

INFORMATION IN THE ORGANIZATIONAL CHART

Organizational charts provide a great deal of information about the organization as a whole and the interaction of its parts. From a chart, one can see the organization’s structure, its hierarchy, the degree to which it is central- ized or decentralized, and its chain of command.

Organizational Structure. First, organizational charts detail an organization’s structure. It may be functional, in which work units are divided based on what they do and named after those functions (e.g., research and

Figure 1 Sample Organizational Chart

CEO John Smith

Vice President of Sales Tom Lee

K. Poole L. Jiminez T. Washington

W. Allen

P. Lloyd

Manager

Manager

Manager

Manager

Manager

Manager

Manager

Manager

Vice President of Production Pam Connors

Exec. Secretary

Vice President of Marketing Juan Gomez

Public & Community Relations

Department

Product & Services

Marketing Department

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development, marketing, sales, etc.). The structure may be divisional, based on product, customers served, or geographic location. Finally, an organizational chart may represent a matrix structure, in which work units are organized by function and division.

Organizational Hierarchy and Centralization. In addi- tion to outlining the type of organizational structure, the organizational chart also indicates the number of manage- ment levels, whether the organizational structure is tall or flat, and the span of control at each level. Tall organiza- tions have many levels of middle management and small spans of control. Each manager supervises and directs few employees, and the chain of command has many manag- ers. Conversely, a flat organization has fewer management levels and larger spans of control. Because managers supervise more employees, employees tend to have more autonomy and discretion in their jobs.

Organizational hierarchy and the number of manage- ment levels often indicate the degree of centralization within an organization. Centralized organizations are those in which most of the decision making occurs by a few people at the top of the hierarchy. This typically creates a top-down management structure, in which top- level managers strongly control the direction of the work- place through their decisions and supervision. Conversely, an organization with a decentralized structure allows greater decision-making and authority at lower organiza- tional levels. Highly decentralized companies may have units that operate nearly independently of one another. The degree of hierarchy on an organization’s chart will help to determine the degree of centralization or decen- tralization within its structure. Typically, the taller the organization, the more centralized it is. Flatter organiza- tions generally require more decentralization because managers each have broader spans of control and cannot direct and closely supervise so many people. Additionally, as previously described, the organization’s structure may indicate the degree of centralization. Functional structures tend to be more centralized than divisional structures.

Chain of Command. The vertical and horizontal lines connecting the rectangles on an organizational chart indi- cate reporting relationships and chain of command. That is, they indicate which employees are directly responsible for the supervision of others and who has ultimate accountability for a group of employees.

AVAILABILITY OF THE ORGANIZATIONAL CHART

Many companies make their organizational chart available to their employees and to the public either online or in corporate literature. The members of the public who may

have an interest in a company’s organizational chart include company shareholders, investors, distributors and suppliers, customers, potential job applicants, and even community members. The chain of command of a publicly traded company can often be found in a company’s profile on Yahoo! Finance or Google Finance and are updated regu- larly. By providing this information, these external stake- holders and other interested parties may gain a better understanding of the organization. The chart may give them a sense of the organization’s operations, workforce, or even its strategy.

Employees typically have access to the organizational chart through the employee handbook or a company Web site, generally in the ‘‘About Us’’ or ‘‘Investor Relations’’ sections. Providing the organizational chart to employees allows them to see the structure of the organization and to better understand how their positions fit into the big- ger picture. Additionally, observing the chain of com- mand helps an employee to understand to whom they are accountable, making diagnosing organizational prob- lems easier.

CHANGES TO THE ORGANIZATIONAL CHART

The organizational chart must reflect any alterations to the organizational structure. The structure may change due to a company’s growth, decline, or restructuring.

Growth or Decline. All organizations have a life cycle of growth, maturity, and decline, and in each stage the organizational structure is likely to be different. In the growth stage, the company is expanding rapidly, gaining customers and market share. Growth takes place when a company is just beginning and products and services are gaining a foothold. It may also occur when an organiza- tion develops a new product or expands into new markets, perhaps in other countries. With growth, the organiza- tional chart will change. Levels of management may be added, along with new departments.

In maturity, an organization is no longer growing at a rapid rate and is stable in its production and sales. The organization may introduce minor changes to a product or service, but major changes to its structure are unlikely.

In the decline stage, the organization is losing ground in the marketplace. It may be that its products or services are becoming obsolete or that its competitors are taking over the market. In decline, the organization may shed levels of management or positions in all divisions. Addi- tionally, it may outsource work in some areas and thus remove those departments from its structure. Or, as cer- tain products or services are dropped from the organiza- tion, the work units needed for these products and services also may be eliminated. Thus, in the decline stage

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the organizational chart is likely to be streamlined or shrunken.

Restructuring. Restructuring occurs when an organiza- tion reduces its workforce by eliminating large numbers of management and line employees. Restructuring typi- cally occurs when information technology can be used to achieve the same productivity outcomes with fewer peo- ple. With restructuring, management levels may be elim- inated entirely, or entire departments may be removed. This is particularly true if outsourcing accompanies the restructuring.

S E E A L S O Management Levels; Organizational Structure

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McGraw Hill, 2008. DuBrin, Andrew J. Essentials of Management. 7th ed. Cincinnati,

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2007 12 September 2006. Available from: http://msevents. microsoft.com/cui/WebCastEventDetails.aspx?EventID= 1032305755& EventCategory=4&culture=en-US&Country Code=US.

Rue, Leslie W., and Lloyd L. Byars. Management: Skills and Application. 10th ed. New York: McGraw-Hill/Irwin, 2003.

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ORGANIZATIONAL CULTURE An organizational culture is defined as the shared assump- tions, values, and beliefs that guide the actions of its members. Large organizations usually have a dominant culture (shared by the majority of the organization) and subcultures (represented by groups of individuals with unique values or beliefs that may or may not be consistent with the dominant culture). Subcultures that reject the dominant culture are called countercultures. Organiza- tional culture tends to be shaped by the founders’ values, the industry and business environment, the national cul- ture, and the senior leaders’ vision and behavior.

THE IMPORTANCE OF ORGANIZATIONAL CULTURE

As people work together to accomplish goals, groups develop into organizations. As goals become more specific and longer-term, and work more specialized, organizations become both more formal and institutionalized. Organi- zations tend to take on a life of their own and widely held

beliefs, values, and practices develop, differentiating one organization from another and often affecting the organ- ization’s success or failure. As one commentator has noted, ‘‘Most organizational scholars and observers now recognize that organizational culture has a powerful effect on the performance and long-term effectiveness of organizations.’’

The importance of organizational culture is a rela- tively new phenomenon. While organizational psycholo- gists began developing theories of organizational behavior during the 1950s and 1960s, it wasn’t until the 1980s that the culture of the organization was recognized as a key determinant of behavior and effectiveness. The inter- est in organizational cultures was largely created by Wil- liam Ouchi’s 1981 best-seller, Theory Z: How American Business Can Meet the Japanese Challenge. Ouchi consid- ered organizational culture to be a key factor in creating an effective organization. In 1982 two other best-sellers, Terrance Deal and Allan Kennedy’s Corporate Cultures: The Rites and Rituals of Corporate Life and Thomas Peters and Robert Waterman’s In Search of Excellence, supported the idea that excellent companies tended to have strong cultures.

Throughout the 1980s, management scholars began attempting to describe these belief systems, which they referred to as organizational or corporate cultures. Interest in organizational culture has remained strong in subse- quent decades as managers and executives continue to recognize the impact an organization’s culture can have on such key factors as morale, productivity, and profit.

A STRONG ORGANIZATIONAL CULTURE

Strong organizational cultures are those where the core values of the dominant culture are strongly believed by the great majority of organizational members. A strong culture tends to increase behavior consistency and reduce turnover.

There are many practices within an organization that tend to keep a culture alive and measure the cultural fit between the organization and its employees. Many of the human resource practices such as selection, performance appraisal, training, and career development reinforce the organization’s culture. Organizational beliefs also tend to influence the work norms, communication practices, and philosophical stances of employees. Organizations use a process called socialization to adapt new employees to the organization’s culture. If employees do not adapt well, they feel increasing pressure from supervisors and from coworkers who are better acculturated. They might stay and fight, stay and become isolated, or leave the organ- ization, voluntarily or involuntarily, and look for a differ- ent organization whose culture they fit better.

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