Organizational Chart

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Implementing Organizational Change: Theory into Practice Bert Spector

Chapter 6

Reinforcing New

Behaviors

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Learning Objectives

Identify the major structural choices faced by organizational leaders and the behavioral implications of those choices.

Consider the requirement of aligning financial measures with the strategic goals of the firm.

Analyze the role of information technology in impacting employee behaviors.

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In all organizations, the activities of employees need to be focused on two separate issues:

The functional or technical activities required to achieve the desired outcomes of the organization.

2. Responsiveness to the external marketplace

(customers, suppliers, competitors, regulators, etc.)

Organization structure is a mechanism for helping to

achieve the desired focus.

Organizational Focus

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Building a Vocabulary

Organizational structure: the manner in which employees are subdivided into units and divisions as a way of focusing effort on the required tasks of the company

“Organization structure is more than just boxes and lines; it is a way to focus the activities of employees.”

“As organizations move beyond the small, start-up stage, they are likely to adopt a simple functional structure: people with similar skills performing related activities are placed in functional departments.”

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Functional Organizational Structure

“Use functional structures to shape the development of technical skills and expert knowledge on the part of employees.”

But:

“Organizations seeking to create seamless coordination across functions may find that the silos erected through functional structures get in the way.”

CEO/

President

CFO

Business

Development

Sales

Engineering

Surfing

Production

Brand

Marketing

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Divisional Organizational Structure

“Divisional structures enhance coordinated focus on the marketplace but make integration across highly autonomous divisional units difficult to achieve.”

Divisional structure: an organizational design choice that groups people together in units based on common products, services, or customer

CEO/

President

CFO

Enterprise

Products

Commerce

Products

Publishing

Financial

Services

Retail

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Matrix Organizational Structure

“Organizations move to a matrix structure help support dual focus—on technical expertise and marketplace responsiveness”

Matrix structure:

an organizational design choice that groups people by both function and product or product and geographical region

Marketing

R & D

Production

Procurement

Finance

CEO

Product

Line A

Product

Line B

Product

Line C

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Horizontally Linked Structure

“Organizations can use cross-functional teams to achieve linkages across the various and interdependent activities of their value chain.”

Horizontally linked structure:

an organizational design choice that groups people along the value chain activities and processes that produce, market, deliver, and service the firm’s offerings

Value-Chain Teams

CEO

Warehousing

Designing

Cutting

& Sewing

Packaging

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The Role of Structural Intervention in Implementing Change

“Think of structural change in terms of Lewin’s refreezing, not in terms of unfreezing.”

Compensation is one of the strongest, perhaps most immediate tools that impact patterns of employee behavior.

“When structural change occurs early in a change process, employees can be confused by its purpose, unsure of what new

competencies are being required, and unwilling—or unable—to make appropriate alterations in behavioral patterns.”

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Building a Vocabulary

Pay for performance: pay that is tied to the performance in the form of either a merit raise to base pay or an incentive bonus that does not increase base pay

“Individual incentives will be most effective in shaping behavior when the individual controls the outcomes being measured and rewarded, when the outcomes are tied to improved performance, when the evaluation of an employee’s contribution are perceived as being valid, and when the difference between rewards for high and low performance is significant.”

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Pay-for-Performance Plans

Plan	How It Works
Piece rate	Employee earns all or part of a wage based on number of units produced.
Commission	Sales person earns all or part of a wage based on number of units sold.
Merit pay	Employee earns raise to base wage based on performance evaluation.
Bonus	Employee earns extra payment based on performance evaluation.

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Factors That May Undermine Pay-for-Performance Plans

Performance appraisals are subjective.

Individual rather than group goals are emphasized.

Encourage short-term orientation at the expense of long-term goals.

Merit pay raises become an expected annuity.

Lengthy time lag between performance and reward.

Many jobs cannot be isolated and precisely measured.

Pay differentials among performance levels are small.

Payout factors determined by organizational performance not by individual performance.

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Team-Based Bonus Plans

Team-based bonuses:

Enhances team performance

Hurts collaboration among and between teams

“Organizations call upon team-based performance bonuses

to enhance the effectiveness of teams, but the bonus may undermine collaboration between teams.”

“Bonuses based on the overall performance of the organization make a symbolic statement recognizing the shared purpose and responsibility of all employees and organizational units.”

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Building a Vocabulary

Extrinsic rewards: rewards (pay, promotion, praise, and so forth) provided by the organization to employees

Intrinsic rewards: (feelings of pride, satisfaction, and self-esteem) that accrue to the individual based on the performance of a task

Pay equity: a perception by employees that their pay is fair and equitable in relationship to others: peers inside the organization and out as well as subordinates and superiors in the hierarchy

“By relying heavily on extrinsic rewards to shape employee behavior, organizations risk driving out the intrinsic rewards that might be associated with the work; as a result curiosity, creativity, and problem‐solving behaviors may be lessened.”

“

“Introducing new incentives early in a change implementation process risks negative consequences.”

“Organizations will not be able to call on intrinsic motivation unless employees feel that they are being paid equitably.”

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Building a Vocabulary

Technology: the processes, mechanics, and interactions of human behavior required to convert raw material into finished offerings

“When introducing new technology, organizational leaders face a choice: to use that technology to automate existing processes or to use new technology to support transformed behaviors.”

“New technologies can be introduced as a way to support desired behavioral changes.”

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