Organization Theory and Design 4th Edition Canadian Edition Richard L. Daft; Ann Armstrong INSTRUCTO
Organization Theory and Design, 4Ce Enriched Instructor’s Manual
Chapter 1: Organizations and Organization Theory
In this chapter, you will find:
Chapter Overview
Purpose of This Chapter If Nothing Else, My Students Should Learn
Learning Objectives
How Does This Chapter Relate to the Real World?
Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 1 Workbook: Measuring Dimensions of Organizations
• Alternative Classroom Activities
• Case for Analysis: GE
• Integrative Case 4.0: IKEA: Scandinavian Style Assessment Tools
Reflections on Teaching
CHAPTER OVERVIEW
This chapter introduces students to characteristics of organizations and to the perspective that organizations are systems of interrelated units that have to adapt to their environment to survive. Definitions and examples are given to provide students with an understanding of the importance of organizational theory in becoming better managers and leaders in a rapidly changing world. The Hudson’s Bay Company (HBC) case that opens the chapter is an interesting case to refer to during the semester and to update using current business analyses.
Organizational theory is discussed in historical stages and is shown to have practical application for managers. A framework for the content and topic of each chapter is also provided. Instructors can use this as an introductory overview and also as a frame of reference throughout the course.
PURPOSE OF THIS CHAPTER
This chapter provides students with the building blocks for and the language of organization theory and design.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. That organizations are ubiquitous and have a profound impact on individuals, other organizations, and society.
2. The meaning of structural and contextual dimensions and the concept of “contingency.”
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Outline the historical evolution of organizational design [Remember]
2. Discuss current challenges that organizations face. [Understand]
3. Describe the importance of organizations in society. [Remember]
4. Compare and contrast organic and mechanistic organization designs, including the contingency factors typically associated with each. [Understand & Apply]
5. Describe how the structural dimensions of organizations are shaped by contingencies organizations face. [Remember]
6. Explain the current trend toward “bossless” design [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. As already noted, organizations are ubiquitous.
2. Organizations today are facing many challenges; they need to respond by understanding old organizational designs and creating new organizational designs.
3. A well-designed organization can be the source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are structured so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students believe bureaucracies are “bad” and flat organizations are “good.”
2. Students find some of the OTD concepts non-intuitive.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 1 Workbook: Measuring Dimensions of Organizations to show how different organizations are structured and why. Reinforce the idea of contingency. [Stumbling Block 1]
Watch http://www.youtube.com/watch?v=QAJ3YV7k3o8&feature=related for some thoughtful insights from Henry Mintzberg and discuss his main arguments. [Stumbling Block 1]
Ask students to apply the structural and contextual dimensions to their own families and/or a past or present organization they have been an employee of [Stumbling Block 2]
Class Engagement Question
In Mintzberg’s typology, the key part of a simple organization structure is its
a. technostructure
b. operating core
c. middle line
d. strategic apex
Use this question to delve in detail into the key elements of the five structural choices see Exhibit 1.6A and Exhibit 1.6B.
You & Design
The You & Design questionnaire done as a group activity will allow students to discover their own style and discuss ways in which leaders’ styles impact an organization.
Discussion Questions and Suggested Answers
1. What is the definition of organization? Briefly explain each part of the definition.
An organization is a (1) social entity that is a (2) goal-directed, (3) deliberately structured activity system with a (4) link to the external environment. Social entity means that an organization consists of people; the human being is the basic building block of an organization, which makes it different from other types of systems. Goal-directed means that an organization exists for a purpose. It is created to achieve some end. Deliberately structured activity system means that an organization is deliberately subdivided into distinct sets of activities that use the knowledge and technology needed to do the work. The link to the environment includes interactions with customers, suppliers, competitors, the government, and other elements of the external environment.
2. What is the difference between an open system and a closed system? Can you give an example of a closed system? How is the stakeholder approach related to this concept?
The difference is in the relationship with the external environment. An open system has an exchange relationship with the environment and must import resources from the environment to survive. A closed system is completely autonomous and does not need external resources. In a sense, there is no such thing as a closed system, although some managers in organizations that are insufficiently tuned in to their environments act as if they are in a closed system. However, any completely closed-off system would eventually die. Some machine systems, such as a satellite with a nuclear reactor, come close to being closed systems because they last for years without energy from the environment. The stakeholder approach illustrates that an organization is an open system, which needs to recognize and deal with its external stakeholders.
3. Explain how Mintzberg’s five basic parts of the organization illustrated in Exhibit 1.6 work. If an organization had to give up one of these five parts, which one could it survive the longest without? Discuss.
Students should refer to each of the five parts and describe them in detail. Because all subsystems are interdependent, there is not one correct answer to the last question; however, the discussion will ensure that students understand each subsystem’s interactive relationship to all others.
4. A handful of companies on the Fortune 500 list are more than 100 years old, which is rare. What organizational characteristics do you think might explain 100year longevity?
Companies that maintain longevity must be flexible. This includes flexibility with organizational structures and ongoing relationships with employees and the external environment. The ability of organizations to offer competitive pricing and to bring together resources in an innovative manner and over time contributes to their success.
Scientific management has played a role in this, and the Hawthorne studies aided in the understanding that positive treatment of workers contributes to their longevity within the organization, which decreases turnover and maximizes expertise among the labour pool. Also, the ability to embrace technology and knowledge is critical to most organizations’ success and longevity.
5. What is the difference between formalization and specialization? Do you think an organization high on one dimension would also be high on the other? Discuss.
Formalization refers to the amount of written documentation used to direct the organization, including procedures, job descriptions, and policy manuals. Specialization refers to the extent to which tasks are subdivided so that each employee performs only a narrow set of activities.
Generally, these characteristics are associated, so an organization tends to be high or low on both dimensions. As an organization becomes large, for example, tasks become more specialized. Formalization is then required to provide rules and regulations to specify specialization. Some organizations may deviate from this relationship, but generally an organization high on one characteristic will tend to be high on the other.
6. What does contingency mean? What are the implications of contingency theories for managers?
Contingency means that one thing depends on other things, and therefore for an organization to be effective there must be a good fit between its internal structure and its external environment. There are no universal principles that apply to every organization in every situation. There is not one best way. Contingency means “it depends.” Thus, managers should diagnose a particular situation carefully before deciding on the management approach to take.
7. What are the primary differences between an organization designed for efficiency and one designed for flexibility? Discuss the pros and cons of each approach for today’s organizations.
An organization designed for efficient performance is more traditional in its top-down orientation as opposed to one designed for learning, which is geared toward collaboration so that everyone is engaged in identifying and solving problems. As organizations face increasing environmental uncertainty, they need to become more flexible in design and take a learning approach in their systems. Major differences can be seen in the chart that follows.
Efficient Performance
Vertical, functional groupings
Tasks are routine and narrowly defined
Formal control systems to manage complex information
Top management strategy is competitive
Culture may become rigid from having been successful in stable environment
Having layers of managers just eats up costs and slows down response time
Learning Organization
Structure around horizontal workflows or processes
Empowered roles are emphasized
Widespread sharing of information with open channels of communication
Collaborative strategy emerges from employee relationships with customers, suppliers, etc.
Culture adaptive to external environment
Extremely organic “bossless” design; no job titles, people work together on an equal basis
Chapter 1 Workbook: Measuring Dimensions of Organizations
This activity allows students to begin to understand different organizations’ dimensions. Ask students what dimensions they look for in an organization that they would like to work for. Ask them to list the dimensions and also why they prefer some to others. For example, if they have a preference for empowered work roles and decision making, they should also understand that those elements carry with them specific responsibilities and accountability for results. This can add pressure for some people who may not be used to results-based performance management. Also, most students will identify an organization with low formalization and few written rules as a preference. A discussion on this could illustrate that low formalization also means that it is difficult to know how to handle a problem because this organization may also lack written procedures about how to handle it. This can lead to inconsistencies, especially if it is in a customer service context. Next, divide the class into groups and have them share their lists and reasons to see if there are any common themes that emerge from the group. You may want to write them on the board or on a PowerPoint slide and discuss why some themes are repeated. You could also have a discussion about multiple generations in the workplace and how those lists may differ because of different expectations and experience levels of employees.
Caution students not to consider any relationships between dimensions as cause-andeffect or dependent. Relationships between dimensions, at this point, are to be regarded only as a basis for discussion. The textbook will present findings on relationships between dimensions in subsequent chapters.
Alternative Classroom Activities
Another helpful way to summarize the chapter highlights for students is to show them a short video clip on an organization that most of them would know (e.g., Google; several YouTube videos are available) and then use the chart from the workbook to identify where Google may fit on each of these dimensions. A discussion can help students understand many different aspects of Google not just the positive ones.
In contrast, show a video on Seattle’s Fish Market (another YouTube video) or any other organization that you are familiar with and that demonstrates a rather unconventional culture and task structure and ask students to rate this organization on the same dimensions. It makes for a very interesting and memorable discussion.
Case for Analysis: GE
Assignment Questions and Suggested Answers
1. What accounted for GE’s success in the Welch years?
When Jack Welch took the helm as CEO in 1981, one of his first moves was to radically change the corporate structure, reducing the layers of management and expanding the span of control of individual managers. He also implemented a new culture that emphasized open, direct, candid communication. In his two decades as CEO, for which Fortune named him “Manager of the Century,” he made many more strategic changes, took the company global, and launched the organization’s e-business.
2. What factors contributed to GE’s decline?
Welch chose Jeff Immelt to be his successor. Although he pushed for global growth and innovation, GE’s value steadily declined. Many analysts felt that Immelt did not adequately address problems that arose during his tenure. John Flannery then briefly led GE from 2017 to 2019, but he could not reverse GE’s falling stock prices either. By the time Larry Culp assumed the CEO role, GE’s value had fallen to about 10 percent of its former value. Culp immediately began implementing a plan to streamline and trim down the extremely complex conglomerate.
3. Look up GE’s stock price and its trend for the last year. Do you share the analysts’ optimism? Why/not?
Not provided, as this will change from year to year.
Integrative Case 4.0: IKEA: Scandinavian Style
Case Summary
This case describes the evolution of IKEA, from its founding in 1943 to the challenges it faces now that it is a global organization. Ingvar Kamprad, founder of IKEA, grew up on a farm and was entrepreneurial even as a child, by selling matches that he had bought in bulk. In 1943, aged 17, he founded IKEA. His goal was to provide low-cost furniture to the many who could not afford furniture. He used vertical integration to create a strong relationship with suppliers and was able to out-manoeuvre his competition by building even stronger relationships with his suppliers. Today, IKEA works with 1,300 suppliers in 53 countries.
IKEA has built a culture around the values of frugality and rural Sweden IKEA is about “creating a better everyday life for the majority of people.” However, that does not mean sacrificing quality or design. IKEA is essentially about creating a lifestyle.
IKEA pursued global expansion. By 2010, there were 332 IKEA stores in 41 countries. The expansion was not always smooth as IKEA did not anticipate local requirements; for example, North American customers expected beds to be sized to North American measures and many customers around the world found the Swedish product names confusing.
While IKEA is driven by standardization, it has developed innovations such as the flat packaging and reduction of waste in packaging. IKEA supports various children’s charities in addition to working toward reducing its carbon dioxide emissions.
Assignment Questions and Suggested Answers
1. Using the contextual dimensions presented in Chapter 1, describe IKEA.
a) Environment: IKEA’s environment has been changing and continues to do so as IKEA attempts to expand its global reach. It is now competing in an environment that is very different from its rural Swedish roots.
b) Goals and Strategies: IKEA’s goals are to create modestly priced, well-designed furniture so most people can afford it. IKEA wants to sell a lifestyle. It does so by working closely with its supply chain to reduce costs while working with Scandinavian designers to capture a little bit of Sweden.
c) Size: IKEA has a large retail and online presence. However, as it does not manufacture its products, it is seen as a hollow organization.
d) Culture: IKEA has a strong culture, embedded in and supported by the rural values of frugality and family.
e) Technology: IKEA transforms inputs into outputs through its suppliers’ manufacturing processes and then passes on the assembly processes to its customers.
2. Which of IKEA’s stakeholders are the most important and why?
While all the stakeholders are important, the suppliers and the customers are paramount. IKEA also tries to create an employee focus in its culture, in the way it refers to employees as co-workers.
3. What concerns (if any) do you have about IKEA’s global future?
IKEA needs to do more pre-work in its global expansion because it has underestimated the importance of diversity and local norms in its earlier expansions. It will need to manage the tension between mass standardization and responsiveness to local market demands. As it says in the case, IKEA “nearly blew it” in America. It is a lesson that IKEA needs to take to heart to be strategic in any future global expansion.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
• What worked? What didn’t? Why and why not?
• Were students engaged? Were they focused or did they go off on tangents?
• Did my assessments suggest that they understood the key concepts?
• What should I do differently next time?
• How can I gather student feedback?
Chapter 2: The External Environment
In this chapter, you will find:
Chapter Overview
Purpose of This Chapter
If Nothing Else, My Students Should Learn Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks?
What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 2 Workbook: Organizations You Rely On
• Alternative Classroom Activities
• Lecture Enhancement: Walmart’s Challenges
• Case for Analysis: The Paradoxical Twins: Acme and Omega Electronics
• Case for Analysis: Vancity: Doing Good, Doing Well
Assessment Tools
Reflections on Teaching
CHAPTER OVERVIEW
Since most organizations tend to be open systems that interact and react to environmental changes, the theme of this chapter is to describe the relationship between organizations and their environment. Environmental domains are identified for analysis and frameworks that show how environment should influence structure are discussed. Organizational response to the need for information and the need for resources, using techniques of structural design, planning systems, and attempts to change and control elements in the environment are presented.
PURPOSE OF THIS CHAPTER
This chapter explains the characteristics of the environment and how they have an impact on organizational structure. It underlines the importance of the environment as a critical contingency.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Environmental uncertainty is a function of degree of complexity and degree of stability
2. Different degrees of environmental uncertainty require different structural responses and managerial responses.
3. The concepts of differentiation and integration have different definitions and implications.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Describe how the influence of the general environment on an organization is different from that of the task environment. [Understand]
2. Explain the difference between environmental complexity and environmental dynamism. [Understand]
3. Describe how complexity and dynamism together are used to assess the level of uncertainty in an organization’s environment. [Understand]
4. Explain approaches organizations can use to adapt to complexity and dynamism in a changing environment. [Understand]
5. Explain how the environment affects organizational differentiation and integration. [Understand]
6. Describe how the environment affects organic versus mechanistic management processes [Understand]
7. Describe the techniques organizations can use to control financial resources in the external environment [Remember]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Organizations face environmental changes and need to fit the demands of the environment.
2. Organizations try to control their environmental domains, both legally and otherwise.
3. A well-designed organization that fits its environment can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand the context in which organizations compete.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students find some of the chapter’s concepts a bit remote from their lived experience.
2. Students often see environmental uncertainty and instability as synonymous.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 2 Workbook: Organizations You Rely On to highlight the idea of dependence on certain organizations and what the consequences would be if the organizations on which students rely/are dependent no longer existed. Students often focus on their mobile carriers as organizations on which they are highly dependent and for which there are not too many alternatives. [Stumbling Block 1]
Refer to Exhibits 2.2 and 2.7, which make it clear that uncertainty is a function of two distinct elements. In breakout groups, assign one quadrant to each group to identify specific organizations that would likely exist in that quadrant. [Stumbling Block 2]
Class Engagement Question
Environmental uncertainty is a function of
a. degree of complexity
b. degree of resource scarcity
c. degree of stability
d. a and c
Use the question to reinforce the idea of the two components of environmental uncertainty.
You & Design
The You & Design questionnaire done as a group activity will allow students to discover their own mental maps and to see how they differ from those of their teammates.
Discussion Questions and Suggested Answers
1. Define organizational environment. Would the task environment of a new Internet-based company be the same as that of a government social welfare agency? Discuss.
The organizational environment is all elements existing outside the boundary of the organization that have the potential to affect all or part of the organization. The external environment is infinite, so for analysis the environment should be limited to elements that are relevant to the organization. Including only elements that actually interact with the organization would probably be too narrow a focus. The definition above includes elements that have the potential to affect the organization, which is somewhat broader and includes everything that may be important to the organization.
The task environment for a new Internet company would most likely be simple and unstable, while the environment for a government welfare agency would most likely be complex and stable.
2. What are some forces that influence environmental uncertainty? Which typically has the greatest impact on uncertainty environmental complexity or environmental change? Why?
Uncertainty is usually composed of two dimensions complexity and stability. Forces that influence environmental uncertainty include complexity, or the number and dissimilarity of external elements relevant to an organization’s operations, and instability, or the extent to which environmental elements shift abruptly. Environmental instability (change) has the greatest impact on manager uncertainty. You can actually see this on the framework, which shows that unstable environment alone leads to high or high–moderate uncertainty but complexity alone leads to low or low–moderate uncertainty. The reason stability has the greatest effect on uncertainty is because the organization can gradually adapt to and understand a complex environment, but rapid change requires new learning and adaptation.
3. Why does environmental complexity lead to organizational complexity? Explain.
A complex environment means that many elements affect the organization. To deal with these elements, the organization creates positions and departments with the responsibility of exchanging information, resources, and the like with each element. These departments may buffer the technical core of the organization from some environmental complexity and span the boundary to each external element. As the organization deals with more different and complex external sectors, it may need to have internal specialists with the
training or education to deal with those external sectors. Thus, the organization needs a complex structure to cope with a complex environment.
4. Discuss the importance of the international, compared to the domestic, sector for today’s organizations. What are some ways in which the international sector affects organizations in your city or community?
The international sector can directly affect many organizations, and it has become so important that the distinctions between domestic and foreign companies have become increasingly irrelevant as the effects of distance and time diminish. Therefore, the international sector has possibly changed more rapidly than any other sector in recent years. In most communities, students can point to companies with saturated domestic markets that have experienced growth because of the international marketplace.
5. Describe differentiation and integration. In what type of environmental uncertainty will differentiation and integration be greatest? least?
Differentiation is the differences in cognitive orientations, goals, structure, and interpersonal orientation among managers in different departments. Integration is the quality of collaboration that is achieved between those departments.
Differentiation is greatest in highly uncertain environments, and integration will follow if the departments are interdependent. Departments become specialized and highly tailored to the needs of their individual external subenvironments. Extensive integration is required to coordinate the changes taking place in various subenvironments. Differentiation and integration are lowest in the low-uncertainty environment.
6. Under what environmental conditions is organizational planning emphasized? Is planning an appropriate response to a turbulent environment?
Organizational planning is emphasized when the environment changes and presents a threat to the organization. Planning, particularly contingency planning, is emphasized most heavily in an unstable environment. Contingency planning fosters thought; it is having to decide what will be done if A occurs, versus what will be done if B occurs. Planning can help the organization adapt quickly to clusters of changes or countermoves by competitors.
In a truly turbulent environment particularly one in which short-term vision may be all that is possible until some stability is reintroduced long-term planning may not be helpful. If change is so frequent and so many changes occur simultaneously that the organization cannot possibly forecast or cope with them, the organization should concentrate on survival.
7. What is an organic organization? What is a mechanistic organization? How does the environment influence organic and mechanistic structures?
An organic structure is a loose, collegial, free-flowing organization. Tasks are continually redefined. There is little hierarchy of authority and there are few rules. Communication is lateral and the organization is decentralized.
A mechanistic organization is more rigid and bureaucratic. Tasks are specialized, separate, and carefully defined. There are many rules and a strict hierarchy of authority. Communication tends to be vertical, with control centralized to the top of the organization.
Environmental change and stability should influence organizational form. A mechanistic structure is suitable for a stable environment, while an organic form is suitable for an unstable environment. A mechanistic structure quickly becomes outdated in a rapidly changing environment, but it enables an organization to achieve efficiency in a stable environment. An organic form enables the organization to continuously redefine itself to fit into and survive in a changing environment.
8. Why do organizations become involved in interorganizational relationships? Do these relationships affect an organization’s dependency? performance?
Organizations become involved in interorganizational relationships because they have instrumental value for the organization. The organization can get things done by selling, buying, or exchanging resources with other organizations. Another reason is that the government mandates coordination between not-for-profit organizations that provide services to citizens.
An organization may avoid resource scarcity when it has interorganizational relationships. But a large number of these relationships can reduce the dependency on any one organization, so uncertainty can be kept low. Nevertheless, autonomy is decreased. The performance of organizations can be enhanced by interorganizational relationships because they help the organization to get things done more efficiently. A synergistic effect can influence both organizations.
9. Assume you have been asked to calculate the ratio of staff employees to production employees in two organizations one in a simple, stable environment and one in a complex, shifting environment. How would you expect these ratios to differ? Why?
The ratio of staff employees to production employees would be much smaller in the simple, stable environment. Fewer employees would be needed to deal with external elements. The ratio would be very high in a complex, unstable environment because staff employees would be needed to interact with environmental elements and to coordinate diverse activities within the organization.
10. Is changing the organization’s domain a feasible strategy for coping with a threatening environment? Explain.
Yes, an organization can change its domain. It can gradually develop a new market, use different technology to produce different products, enter a different industry, find new suppliers, or turn over its human resources. An organization may try to find a set of domains with less competition, less government regulation, high customer demand, and many suppliers. This is often effective in reducing uncertainty.
Chapter 2 Workbook: Organizations You Rely On
This activity will help to involve students who may know organizations only from the perspective of a customer, entry-level worker, or co-op student. Use the discussion to help students bridge their thinking to the top management level for consideration of strategic matters. During class discussion, you may tie this activity to the chapter to help personalize the meaning of environment. Discuss the types of organizations that tend to be rated high dependency versus low dependency (column 3). Looking at those organizations from their own perspective rather than your perspective, can students see similarities in their environments? For example, when you report low dependency, is it likely that the organization’s environment is unstable or highly competitive? Now get students to look at column 4. When students rate the certainty of an organization as high versus low, do they see any similarities in the organizations’ environments?
Alternative Classroom Activities
Consider the impact the COVID-19 pandemic has had on organizations. You can use the pandemic to illustrate key issues of environmental uncertainty and organizational responses/action.
Lecture Enhancement: Walmart’s Challenge
In Practice: Walmart
Walmart’s Challenge in the General Environment
Have students read the chapter’s In Practice Walmart mini case. A good way to stimulate class discussion about Walmart and how it tries to control its environment is to show the PBS Frontline documentary “Is Wal-Mart Good for America?” Although the documentary is dated (2004), it still has resonance and provides useful information about Walmart’s history, growth, and business strategy.
You can also put Walmart’s growth into context by discussing how it exploited two powerful trends of the 1990s the rise of information technology and the explosion of the global economy. Walmart also changed the balance of power in the retail industry in favour of large retailers rather than suppliers or manufacturers. Outsourcing manufacturing to China is also a trend that Walmart started of its approximately 6,000
global suppliers, experts estimate that as many as 80 percent are based in China. Alternative sources of information: CBC documentary “The Wal-Mart Nation” (2007)
Case for Analysis: The Paradoxical Twins: Acme and Omega Electronics
This is an interesting class activity if time allows. Do not assign this as homework; rather, ask students to read one part at a time in class and then select a group to answer the question(s) based on the part they have just read. It makes for an interesting and engaging class discussion of the appropriateness of mechanistic systems and processes in the right context.
Assignment Questions and Suggested Answers
PART I
1. What are Acme and Omega’s goals?
The goals at Acme show concern for output and internal efficiency. The goals at Omega reflect much greater concern for internal processes and employee satisfaction.
2. What impact do top managers have on the goals?
These goals can be seen to reflect the choices and preferences of top managers. John Tyler at Acme is concerned with efficiency and profit. Jim Rawls, Omega’s president, is concerned with the internal atmosphere and employee satisfaction.
3. Are the goals to be achieved with different strategies?
The goals reflect different effectiveness domains. In the model of effectiveness values Acme values an external focus with control for efficiency, while Omega is concerned with internal effectiveness for human resource development. These organizations are pursuing different goals with different strategies even though they do similar work and produce similar products.
PART II
1. Which organization do you think will produce better results? Why?
Most identify with the atmosphere at Omega and believe it will enable Omega to win the contract. A few typically believe that Acme’s record of efficiency will enable it to produce the best result, even though we may not like the company as much.
PART III
1. Which organization was more effective at developing the prototype and meeting the deadlines? Was its level of effectiveness due to the goals chosen by top management?
This section reveals Acme’s difficulty in meeting deadlines while developing the prototype. The rigid, mechanistic structure that is suitable for internal efficiency led to conflict. The well-oiled relationships inside Omega enabled them to work out problems, and develop a quality prototype with great speed. The ability to develop the prototype can be attributed to the goals chosen by top management. The healthy internal climate at Omega reflects top management preference, as does the rigid structure at Acme.
2. Predict which organization will get the final contract. Why?
Most predict that Omega will get the contract because they seem to “deserve it.” Omega discovered problems in the design, finished the prototype by the deadline, and had a higher quality and acceptance rate on the initial order of 100 prototypes.
PART IV
1. How can Acme’s success be explained? Did Acme’s goals seem more appropriate? Did stakeholder satisfaction play a role?
Acme’s success can be explained by two factors: (1) the president made it a point to stay in close touch with the contracting organization and (2) the manager took a broad view a stakeholder approach and maintained good relationships in the environment. By so doing Acme was given an opportunity to produce the products even though they did poorly in developing the prototype. Acme’s overall goal is oriented toward internal efficiency, so once the job was transformed into long production runs, they had an advantage. Their goal was not “better,” but in this case it allowed them to reduce costs below Omega’s, which was the final criterion of choice. The selection of Acme indicates that effectiveness is a truly complex phenomenon that is not easily measured.
2. Overall, which company was more effective, Acme or Omega? Explain.
Many students will argue that Acme was more effective because it got the contract. If effectiveness were defined so narrowly, then Acme would be the correct answer. Acme would also be considered more effective if students use traditional criteria of profits, efficiency, or outputs as the basis of effectiveness, as they relate to this case. However, in a broader view of effectiveness, the correct answer would be that they are about equally effective because Acme and Omega were attempting to excel in different domains. They were trying to do different things well and were succeeding. Omega was successful in developing a healthy internal climate and employee satisfaction. Acme was successful at being efficient and making profits. There is no single criterion of effectiveness that applies to all organizations, or even to a single organization.
Case for Analysis: Vancity: Doing Good, Doing Well
Teaching Note
8810M69
Note to Instructors: Not for distribution to students. Saul Klein wrote this teaching note as an aid to instructors in the classroom use of the case Vancity: Doing Good, Doing Well, No. 9B10M069. This teaching note should not be used in any way that would prejudice the future use of the case.
The case describes the situation facing Vancity in the wake of the 2008 financial crisis, in an environment where monetary policy was being used to stimulate the economy. The immediate decision facing the chief executive officer (CEO) was whether or not to raise interest rates on loans in order to make up for falling interest income. With close to zero percent interest rates being advocated by the Bank of Canada, the spread between deposit and loan rates had narrowed to unprecedented levels. The situation is complicated for Vancity by its structure as a member-owned cooperative and its strategy of community engagement.
Case Objectives
The case was written for use as an introduction to business in an MBA program. As such, it introduces issues of financial viability, the external context, business strategy, and marketing decisions. Students need to evaluate the company and its context in order to resolve the conundrum facing the CEO. The case is exciting to students because of Vancity’s strategy of community involvement and the link between doing good things for the community and doing well as an organization. The case also introduces students to the notion of different forms and how a cooperative operates.
Assignment Questions
The following questions may be assigned in advance to facilitate student preparation:
1. How have policy makers responded to the global financial crisis, and what effect is this having on Vancity?
2. How is Vancity different from a commercial bank?
3. What is Vancity’s business strategy?
4. Should Vancity reprice its loans?
Teaching Plan
The teaching plan essentially follows the assignment questions. I recommend beginning the class with a poll of whether or not Vancity should reprice its loans and a quick identification of the consequences of doing so and those of not doing so.
The first part of the analysis focuses on the global financial crisis. While not intended to raise discussion of the causes of the problem, the consequences should be identified as undermining confidence in traditional financial institutions (due in part to their past lending practices, particularly in the United States) and the monetary policy responses. The impacts of a zero percent interest rate policy should be clarified in the discussion. The impact of low interest rates on the spread between borrowing and lending rates should also be brought out, and the identified income losses for Vancity should be highlighted.
The second part of the discussion focuses on Vancity as a cooperative. Students should understand the nature of a co-op, in which customers are also owners. The responsibility of management both to serve customers well and to safeguard the financial well-being of the owners raises an opportunity to discuss different forms of stakeholder capitalism and the interdependencies between stakeholder interests.
The third part of the discussion revolves around Vancity’s strategy. The cooperative has chosen to focus on community engagement. Students should be probed to identify the logic behind this strategy and its attractiveness to its self-selected owners. The link between doing good and doing well should also be elaborated upon.
Finally, the discussion should return to the trigger question in the case. Those students advocating for a rate increase should be pushed to justify their decision in light of Vancity’s ownership structure as well as its strategy. They should also be pushed to identify how Vancity should have responded if its members did not agree to the new terms and refused to sign new agreements. Those students arguing against the rate increase should be pushed to identify other ways through which Vancity could deal with the income loss.
Following the discussion, you should go over the sequel to the case and ask students to speculate on why Vancity felt the need to reverse its original decision and what implications they take away from this reversal.
Analysis
1. How have policy makers responded to the global financial crisis, and what effect is this having on Vancity?
The financial crisis of 2008 has been attributed to poor bank lending practices and weak regulatory oversight, particularly in the United States. Believing that housing prices could only go up, many lenders abandoned normally prudent mortgage practices and provided funds to consumers who had no ability to repay their loans should interest rates rise or housing prices fall. The problems were compounded by repackaging these loans and reselling them in secondary markets. When housing prices declined in 2008, many financial institutions found that they were holding assets of indeterminate value and of great risk. The inter-bank lending market dried up as banks could not evaluate the risk of lending to each other, and many financial institutions failed. The result was a shortage of credit in the economy and subsequent worldwide recession.
Policy makers responded to the crisis with both fiscal stimulus and monetary policy easing. Even though Canadian banks were not directly impacted to any significant extent by the initially poor lending practices of their counterparts elsewhere, Canada was not immune to the effects of the global recession. The Bank of Canada dropped interest rates aggressively.
Financial institutions make money through the spread between what they pay depositors and what they charge borrowers. The rate at which they lend to borrowers is dependent on the Bank of Canada rate and competition among financial institutions. As the Bank of Canada rate approached zero, bank lending rates (such as their prime rate) declined as well. Given that interest rates paid to depositors cannot fall below zero (without fees being imposed), the spread also narrowed.
For Vancity, the effect on income from this reduced spread was estimated at $24 million, based on outstanding loans; however, the loan exposure could increase if customers drew down on their lines of credit, and potentially could cost Vancity $45 million. With net earnings in 2008 of $47 million, this was a very serious problem for Vancity.
Unlike commercial banks, which responded to the crunch by raising the interest rates that they charged and simply notifying customers to this effect, Vancity could not raise rates without customers agreeing to the new terms.
2. How is Vancity different from a commercial bank?
As a cooperative, Vancity is owned by its customers, called members. Cooperatives do not have outside shareholders, and they exist to serve the interests of their members.
Vancity was at the time the largest cooperative in BC. The board of directors is elected by members at large each member had an equal vote. Vancity had to balance the value that it delivered to its members as customers and to safeguard its assets as owners.
Vancity was well regarded by its members for its services, as well as for its community values. While the reputation of commercial banks was quickly declining in 2008, Vancity was seen as being different from other financial institutions and not responsible for the crisis. Vancity’s members also expected to be treated differently.
3. What is Vancity’s business strategy?
As a financial institution, Vancity provides the same range of services as commercial banks. It differs, however, in that its cooperative structure put principles of economic democracy at the forefront. Many of its customers (members) are attracted to the organization by its commitment to social justice and fairness. At the time, Vancity distributed approximately 30 percent of its earnings to the community and to its members.
Vancity was also expanding on its community roots and developing a strategy based on social finance. Implementation of the strategy would require continuing investments that Vancity would need to generate out of its earnings. The strategy also reflected the organization’s values and coincided with a particular way of interacting with customers, which loosely translated into “doing well by doing good.”
4. Should Vancity reprice its loans?
Arguments in favour of repricing the loans essentially follow a business logic that would be similar for other financial institutions. The spread has declined to unsustainable levels and must be widened for long-term viability. It is also necessary to protect the savings of the members and to fund other investments. If the loans are not repriced, costs must be cut elsewhere, and this could have negative implications for customer service and community involvement.
Arguments against repricing involve understanding member expectations and perceptions of fairness; these are felt much more acutely at Vancity due to its cooperative structure and its attraction of members based on promises of fairness and equity. Communication with members about repricing would have to be handled very carefully, with much greater sensitivity than commercial banks have demonstrated. The question of noncompliance is also much harder for Vancity to address. Calling members’ loans if they did not agree to the new conditions would be seen as a massive violation of trust within the organization.
Sequel
The sequel to this case is an important part of the discussion, and time should be allowed to evaluate why Vancity acted the way it did. In April 2009, Vancity’s board approved
the recommendation from management to raise credit line interest rates by 100 basis points (1 percent) across the board. A communications plan was adopted whereby all credit line holders would be contacted over the following three months. The communication plan highlighted the reasons behind the change and the need for Vancity to align interest rates with the rest of the market, as well as its responsibility as a financial steward for its members’ assets. Members would be engaged through principles of equity, openness, honesty, transparency, and clarity. The high-priority members, those with balances of more than $100,000, would be called by branch staff, while all members would receive mailings.
Members were requested to sign a simple, one-page amendment to their existing credit line agreements. Should they refuse to do so, no further advances on the existing credit lines would be provided, and the cases would then be turned over to the Vancity collections teams to work with their members. If all else failed, demands for repayment would be used.
In August 2009, following a major outcry from its members, Vancity reversed the earlier decision and issued an update (see Exhibit TN-1).
Vancity’s net earnings for 2009 increased to $50.3 million (from $46.8 million in 2008), accompanied by a reduction in operating expenses of $17 million. Membership increased to 474,377 from 401,121 the previous year. The estimated cost of not repricing the credit line portfolio was $7.6 million in 2009, with ongoing anticipated revenue losses of $16 million going forward.
Closing Comments
Students may be probed as to why Vancity reversed its original decision and to speculate on the underlying pressures on the organization. Concluding comments on the case should focus on the importance of understanding the interests of different stakeholders and the way in which they are expressed based on an organization’s own strategy.
Exhibit TN-1
CREDIT LINE UPDATE
Dear Vancity Members:
As a member-owned financial co-operative, we are accountable to our members for our decisions, decisions that must consider both the current and long-term interests of the credit union, so that we can fulfill our purpose of helping people and communities thrive and prosper.
One of the benefits of being a member is that you have a voice.
Recently, we asked members who hold Creditline products with us to give us permission by signing an amendment to their Creditline loan agreement to raise the rate on their prime-related loan.
Some context: We decided to reprice our Creditlines because of the rapid decline in the prime lending rate, which meant these products were priced at a level that was unsustainable for us. While other banks and credit unions are able to reprice lines of credit simply by notifying their customers and members, we cannot. Our Creditline contracts prior to March 2009 do not give us the ability to raise rates automatically, and so we went to our members with our challenge.
Our request touched off a passionate debate among you and we’ve been listening to the feedback that you’ve shared with us directly and indirectly. Many of you feel strongly about your views on the subject and about your relationship with us. To sum up what you told us, it is ‘we understand your business challenge ... but ... a deal is a deal’.
Based on your feedback, as well as input from our management and staff and in consultation with our Board of Directors, we’ve decided to stop our initiative to reprice our Creditlines.
For members who’ve signed the amendment, this means we’ll return you to your original rate and reimburse any additional interest you’ve paid. We’ll also do away with the amendment you signed and grandfather your agreement. If you’ve switched to a different product, we’ll contact you to offer you the choice of keeping the new product or reinstating your Creditline at the original rate. All members who received an amendment from us will soon receive a letter explaining this in much more detail.
I would like to acknowledge and thank our dedicated staff who took on the job that we asked of them; we rely on the trusted relationships they have built with you over time. I know they look forward to continuing to serve you and our communities.
On behalf of all of us at Vancity, thank you for making our credit union one where the ability to debate and to be heard makes us a stronger organization.
Sincerely.
Tamara Vrooman President + CEO
Source: Company documents.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
• What worked? What didn’t? Why and why not?
• Were students engaged? Were they focused or did they go off on tangents?
• Did my assessments suggest that they understood the key concepts?
Chapter 3: Strategy, Organizational Design, and Effectiveness
In this chapter, you will find: Chapter Overview Purpose of This Chapter If Nothing Else, My Students Should Learn Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care? What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 3 Workbook: Identifying Company Goals and Strategies
• Alternative Classroom Activities
• Lecture Enhancement: Stakeholder or Constituency Approach
• Case for Analysis: Jones Soda
• Chapter 3 Workshop: Identify Your Goal Preferences
• Extra Case: Foldable Shoe Maker Beats the Odds Assessment Tools Reflections on Teaching Student Handout
CHAPTER OVERVIEW
Organizations exist to attain goals, and top managers give direction to organizations. This chapter explores strategic direction in organizations in terms of the types of goals and strategies that top management develops, as well as three frameworks for determining strategic action. Several approaches are then explored for measuring organizational effectiveness.
PURPOSE OF THIS CHAPTER
This chapter provides students with an overview of various approaches to strategy and then underscores the importance of strategy as contingency for structure.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. There are several frameworks for selecting strategies and design. Students must have a detailed understanding of them.
2. Effectiveness can be measured through several lenses, as illustrated by both the integrated effectiveness model and the balanced scorecard.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Describe the role of strategy when designing an organization. [Remember]
2. Describe the key similarities and differences between Porter’s strategy model, Miles and Snow’s strategy typology, and Kim and Mauborgne’s blue ocean strategy. [Remember]
3. Identify key distinctions among the resource-based, internal process, and goal approaches to measuring effectiveness. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Organizations use different strategies to pursue their mission; they need to design their structures such that they support the strategy.
2. Often what gets measured gets done in organizations.
3. A well-designed organization can be a source of significant strategic and competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand how strategy drives structure so they can appreciate the consequences of a misfit between the two.
2. Students interested in a consulting career, in particular, will need an understanding of strategy.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students may not see that there are design consequences of pursuing one strategy over another.
2. Students may minimize the complexity of measuring effectiveness and may see effectiveness and efficiency as the same construct.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class read the Tim Hortons case at the beginning of the chapter. Facilitate breakout sessions to apply Exhibits 3.10 and 3.11 to Tim Hortons. End the activity with each breakout group presenting their results. [Stumbling Block 1]
In class, facilitate a discussion of the Chapter 3 Workshop: Identify Your Goal Preferences [Stumbling Block 2]
Assign students, in teams, to apply the balanced scorecard to organizations in different industries and sectors. Be sure to include a nonprofit organization, as the findings will yield some nice comparative discussion. [Stumbling Block 2]
Class Engagement Question
An integrated effectiveness model suggests that
a. managers may emphasize different performance indicators.
b. managers will have a preference for one indicator.
c. managers will try to balance competing values.
d. a and b
e. a and c
Use this question to discuss, in some detail, the model in Exhibit 3.10 developed by Quinn and Rohrbaugh, as well as Exhibit 3.11.
You & Design
Use the You & Design questionnaire to have students reflect on two key skills for being an effective strategist formulation and implementation.
Discussion Questions and Suggested Answers
1. Discuss the role of top management in setting organizational direction.
The primary responsibility of top management is to determine an organization’s goals, strategy, and design. Top management must assess the opportunities and threats in the environment and the internal strengths and weaknesses of the organization. Based on this assessment, the duty of top management is then to formulate the overall mission and goals of the organization. The design of the organization should be based on the mission and goals. The perspective of top management is needed in this process, especially since managers can interpret the environment differently and develop different goals. This interpretation can have a dramatic impact on an organization’s success.
2. How might a company’s goals for employee development be related to its goals for innovation and change? to goals for productivity? Can you discuss ways these types of goals might conflict in an organization?
Employee development may be seen as a prerequisite for innovation or productivity. Goals for innovation and change may spark different approaches by different employees, leading to conflict. Similarly, implementation for productivity may be approached so differently by different employees that it leads to conflict. Such conflict can be healthy for the determination of the best path if it takes the form of constructive disagreement
3. What is a goal for the class for which you are reading this text? Who established this goal? Discuss how the goal affects your direction and motivation.
Students may volunteer that a personal goal is to pass the class with a grade of C or better in order to fulfill degree requirements. Challenge students to evaluate how such a goal could be reformulated in order to offer motivation that can elevate effort to measurable but realistic objectives. Ask students to state what goals the instructor likely has for the class and how those goals affect their own direction and motivation.
There is no “right” answer to this question, but make sure students get the message that goals can, in part, determine behaviour.
4. What is the difference between a goal and a strategy as defined in the text? Identify both a goal and a strategy for a campus or community organization with which you are involved.
Operative goals identify the ends sought by the organization concerning overall performance, resources, market, employee development, innovation and change, and production activities. The official goal is sometimes referred to as the mission or formally stated definition of the business outcome that the organization is trying to achieve its reason for existence. In contrast, a strategy is the organization’s plan for achieving its goals. The goal of Beta Gamma Sigma might be to increase the number of paying
members by 15 percent in two semesters, while a strategy for achieving that goal might be aggressive communication to business students about Beta Gamma Sigma’s purpose.
5. Discuss the similarities and differences in the strategies described in Porter’s competitive strategies and Miles and Snow’s typology.
Both Porter’s differentiation strategy and Miles and Snow’s prospector strategy call for learning orientations with a flexible, decentralized structure. Both have strong capability in research and value employee creativity, risk-taking, and innovation. Additional similarities are that Porter’s low-cost leadership strategy and Miles and Snow’s defender strategy have an efficiency orientation with centralized authority and tight cost control. Differences are that Miles and Snow’s analyzer strategy moves in a new direction from Porter’s strategies by balancing the other two main approaches (prospector and defender) into one strategy, while Porter has no “combination strategy” that balances the differentiation and low-cost leadership approaches. Furthermore, Miles and Snow have one category, the reactor, which has no clear approach whatsoever; this is not an option in Porter’s approaches.
6. Do you believe mission statements and official goal statements provide an organization with genuine legitimacy in the external environment? Discuss.
One important function of a mission statement is to state the reason for the organization’s existence. It provides outsiders with a sense of the organization’s purpose. Official goals identify the purpose and legitimize the organization for employees, clients, government, and other important external groups. Official goals typically are abstract and therefore run the risk of being perceived by some outsiders as “apple pie” statements that sound good but do little to shape the actual organization. Official goals harmonize with the mission and provide a rationale or reason for the organization to exist. Many students comment that such statements offer genuine legitimacy only to the extent that they actually go beyond “public relations” to guide decision making. Therefore, the genuine legitimacy provided may come more from the overall implementation of the mission along with the organization’s goals and strategies than from the piece of paper on which the mission is written for outsiders to read.
7. Suppose you have been asked to evaluate the effectiveness of the police department in a medium-sized community. Where would you begin, and how would you proceed? What effectiveness approach would you prefer?
This question does not have a single correct answer. It is designed to force students to think about the different approaches to effectiveness, to encourage them to apply more than one measure, and to try to apply them. Students will realize how difficult it is to use the goal approach or system resource approach alone. One solution to this question is to follow a procedure to identify indicator goals, system resources, and internal process indicators. The measures can then be formulated into a combined approach to effectiveness. Students may also argue for the constituency approach since the police department is a social organization. The satisfaction of employees, city government,
community members, minorities, and other groups may be a good indicator of police department effectiveness; each of the stakeholders identified should be asked for indicators important to them, and then they should be asked to assess the department on each relevant indicator.
8. What are the advantages and disadvantages of the resource-based approach versus the goal approach for measuring organizational effectiveness?
The advantage of the resource-based approach is that it can be used to evaluate effectiveness of organizations that pursue different kinds of goals as long as they are using similar resources. Organizations can be compared on their ability to acquire scarce and valued resources needed to provide products and services that will eventually enable them to realize their goals. The resource-based approach considers an organization in relationship to the external environment. The advantage of the goal approach is that it examines what the organization is trying to do, which in some respects is the preferred criterion of effectiveness. The goal approach becomes problematic when effectiveness has to be measured for multiple goals, or when comparing organizations that pursue different goals, or when the only indicators are subjective. In these cases, an accurate assessment may be difficult. Sometimes a combination of the system resource and goal approaches is best. Both inputs and outputs can be evaluated. The two approaches can lead to a reasonably accurate measure of effectiveness.
9. What are the similarities and differences between assessing effectiveness on the basis of competing values versus the stakeholder approach described in Chapter 1? Explain.
The similarity is that both approaches incorporate inputs, internal processes, and outputs into determining goals and effectiveness. These approaches acknowledge that organizations do many things and serve various needs both internal and external. The differences reflect the focus on effectiveness. The constituency approach is concerned with all groups that have a stake in the organization. The constituency approach takes society’s perspective and does not give any special recognition to owners or managers in trying to establish effectiveness. The competing values approach takes the view of managers and owners, but realizes that choices must be made in terms of acknowledging what is important for the organization (i.e., internal or external issues, stability or flexibility in structure). When one set of values is chosen, this orientation becomes the criterion of effectiveness for the organization.
10. A noted organization theorist once said, “Organizational effectiveness can be whatever top management defines it to be.” Discuss.
This question can facilitate discussion of where goals come from and top management’s role in the process. Generally speaking, students will agree with this statement. Managers define the goals of the organization and they define the extent to which the organization is performing well. These factors are not fixed or given by the environment. One of the important roles of management is to define goals and effectiveness; these factors are then
taken by other people at lower levels within the organization. Some students may disagree. Students may argue that society’s view is paramount, and the organization should do what is best for the larger culture. This point of view reflects a constituency criterion and can also be accepted as legitimate. Many managers working within organizations, however, would not accept this approach to effectiveness as superior to their own definition. Some students who disagree with the given statement may feel that managers often have too narrow a view of effectiveness and that, much as students who have not yet read this chapter, some managers may think of effectiveness as little more than goal attainment.
Chapter 3 Workbook: Identifying Company Goals and Strategies
The workbook activity presents an opportunity to contrast different firms’ goals and strategies. There is benefit in having several students research the same companies because there will be variation in the goals they select as being most important, and they may come to different conclusions on the strategies used. Furthermore, you will be better able to build on class consensus in subsequent class discussions.
Companies selected for the Internet search might include
• three firms in the transportation industry, such as Cummins, Harley-Davidson, and Toyota
• three retailers, such as Hudson’s Bay, Walmart, and Simons
• three organizations mentioned in the chapter, such as Endeavour Volunteer Consulting for Non-Profits, NASA, and the TTC
• the firms cited in this chapter’s In Practice examples (WestJet, Loblaw) and the A Look Inside example of Tim Hortons
Alternative Classroom Activities
Examine the Harvard Business Review article “Measures That Drive Performance” by Robert S. Kaplan and David P. Norton. Assign students to a breakout group wherein each group will examine one of the assigned balanced scorecard perspectives and propose two hypothetical goals and measures for Tim Hortons. Each breakout group will then present their results to the rest of the class.
Lecture Enhancement: Stakeholder, or Constituency, Approach
The stakeholder, or constituency, approach to determining goals and effectiveness is based on the organization identifying the stakeholders of the organization and their respective measures for determining the organization’s effectiveness (see Chapter 1). Each group has different criteria, or goals, that it feels the organization should be addressing. Once the various criteria or goals are defined, the organization must determine how to balance conflicting demands and prioritize which goals to address. One method is to determine the power of each constituent group and the relative importance of the effectiveness criteria of that group. Remember that the stakeholder groups may
have power over the organization by virtue of their ability to provide or deny critical resources.
The relative importance of the effectiveness criteria is the degree to which the constituent group feels the goals are important to it. By mapping both the power for the stakeholder group and importance of effectiveness criteria, the organization can analyze its stakeholder environment. Have students determine an organization about which they can collect information from at least a small sampling of several groups of stakeholders.
1. List all major stakeholders of the organization.
2. Determine the amount of power each has with respect to the organization, preferably by interviewing the top management team.
3. Find out from key stakeholders what effectiveness criteria are more important, then determine for a particular effectiveness criterion (e.g., market share, customer service) its importance to each stakeholder group.
4. Place each stakeholder group in the appropriate place on the model.
Analysis of stakeholder power and importance
1. High Power
Low Importance
3. Low Power
Low Importance
Case for Analysis: Jones Soda
2. High Power
High Importance
4. Low Power
High Importance
Ask students for their immediate reaction to the case. Then ask students to work in small groups or in their project teams to address the following three questions.
Assignment Questions and Suggested Answers
1. What strategy is Jones Soda using?
As the case says, it is a story of determination and fighting through challenges that other organizations would not have tackled. It also involves a strategy of being close to the customer and managing the Jones brand passionately and vigilantly. It seems to follow a prospector approach where creativity is more important than efficiency This is supported in the case statement “Our value is not so much as a soda company. Our value is as a company that can create ideas like myjones, myjonesmusic, and create the stuff that’s truly in tune with our consumers in a positive way.”
2. Is the strategy sustainable? Why or why not?
The case states, “Execution is where we need to improve. That’s where we can get better.” The analyzer strategy attempts to balance efficient productions for current product lines with a creative department for new product lines. An analyzer strategy may
help to produce more positive earnings outcomes for Jones Soda by focusing more on efficiencies.
3. Are there ethical concerns here that need to be addressed?
All organizations today need to be concerned with ethical practices. As discussed later in the course, ethics is the code of moral principles and values that governs the behaviour of a person or group with respect to what is right or wrong. Statements in the case such as “I watched Richard Branson try to do it by playing by the rules. He couldn’t do it. It’s so easy to scale this up by not playing by the rules. It’s so hard to scale by playing by rules,” may cause one to suspect there could be ethical concerns that need to be addressed.
Chapter 3 Workshop: Identify Your Goal Preferences
The workshop activity presents an opportunity to identify goal preferences. Students are to assume that they could design the perfect organization that reflected their values. What goals receive priority in that organization? Students will rank order the list of goals from 1 to 10 to reflect the goals they consider most important to least important in their perfect organizations. Students can look at the integrated effectiveness model in Exhibits 3.10 and 3.11. They can allocate each goal to the quadrant they think it fits. They can decide which quadrant reflects their highest goal values and which ranks the lowest. Students can compare their rankings to those of other students and look for similarities and differences. Students can also be invited to identify what organizational goals are important to them that are not on the list. How would they rank these additional goals?
Goals
• Employee Development
• Organization Stability
• Market Share Leader
• Creativity-Innovation
• Social Contribution
• High Morale/Satisfaction
• High Productivity
• Rapid Growth/Adaptability
• Profit Maximization
• Within the Law/Ethical
Extra Case: Foldable Shoe Maker Beats the Odds
The case is included as a student handout.
Assignment Questions and Suggested Answers
1. What strategy is Ms. Coleman pursuing?
In terms of Porter’s competitive strategies, Ms. Coleman appears to be pursuing a focused low-cost strategy. She is focusing on women who wear high heels and are looking for a comfortable alternative. In addition, she is pursuing a low-cost advantage, because she was looking to manufacture offshore (e.g., China), thereby lowering her production costs to keep her product competitive. One would assume that barriers to entry in this domain are pretty low (not really specialized technology, etc.), so eventually consumers would look for the “cheapest at best quality” option. In terms of Miles and Snow’s typology, Ms. Coleman is following a prospector strategy, because she is innovating, taking risks, and seeking out new opportunities to grow her business. Also, the fact that she is building and cultivating relationships with her suppliers and manufacturers in China shows she understands the importance of these relationships to her business.
2. What sort of organizational design will support her strategy? How?
In terms of organizational design, Ms. Coleman has to consider that, since low cost and efficiency are paramount, she needs an organizational design that supports that strategy. By outsourcing her manufacturing, she can keep costs low and overhead to a minimum. Her best option would be to keep the design and development and the marketing in-house and to outsource the rest of the functions, including finding a distribution network.
There are two elements to her organization the design/innovation side and the production side. For the former, she needs to have an entrepreneurial, learning orientation absorbing as much information as possible, learning from others (e.g., Arlene Dickinson), being adaptable, and operating as an open system. As an open system, she should be open to feedback from the users (what works well, what might be problematic with the product, reading style and fashion trade magazines for styles). She must be aware of opportunities and threats because barriers to entry in this market are low. She must also operate as an open system because she needs to communicate closely with her partners on the manufacturing side of her organization. On the production side, the organization that she partners with needs to operate with efficiencies to keep the costs down. Her production partner needs to have tight cost controls, lots of standardization, and cost controls in place.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
STUDENT HANDOUT
Foldable Shoe Maker Beats the Odds
Source: Becky Reuber, “Foldable Shoe Maker Beats the Odds,” special to The Globe and Mail, December 9, 2010. Accessed online at https://www.theglobeandmail.com/reporton-business/small-business/sb-growth/foldable-shoe-maker-beats-theodds/article591717/. Reproduced by permission of the author.
The Challenge: Design and manufacture a new product when you’re not a designer or engineer.
Hailey Coleman is the founder of Damn Heels, a business which sells portable and fashionable footwear. She came up with the idea in the summer of 2007, when she was still an undergraduate student. Like many people with great product ideas, she didn’t have any design or engineering experience. How could she create a product that people would actually buy?
The Background
Ms. Coleman got the idea for Damn Heels when she was walking home from a party in London, England, and her high heels were killing her. “Wouldn’t it be great,” she thought, “if no woman had to go barefoot with her heels in hand ever again?” The solution was a pair of soft, comfortable ballerina-style flats packaged in a small expandable bag that fits into a clutch or purse. Before going out on the town, you slip the bag into your purse, and when your feet get sore, you can wear the flats and put your high heels into the expandable bag.
Before launching, however, she had to figure out how she was going to design and manufacture the shoes, as well as the bag; two skills with which she had no experience.
The Solution
Using the Internet, Ms. Coleman found a designer on Craigslist. The designer didn’t have any shoe experience, but did have experience with soft pattern-based designs. Ms. Coleman also found manufacturers in China on the website Alibaba. She contacted many of them and then created a short list, depending on which ones responded promptly and sent pictures and samples of their work.
All was going to plan until she realized she would have to send a prototype to potential suppliers, and couldn’t find the right material. “I knew I was in trouble,” laughs Ms. Coleman, “when a shoe repair man told me not to bother looking for that material because he had been looking for three years to fix a pair of shoes!”
So instead she bought shoes made out of the material she wanted to use, cut them up and pasted them together using the pattern that she had developed with her designer.
Once Ms. Coleman had passable samples, she sent them to several Chinese manufacturers, who then created real shoe samples and sent them back to her. There were a number of iterations. “In the process of tweaking the samples, I got a good feel for which manufacturer would be best to work with,” she explains. “I knew that it would be easier if the same supplier could make the bag and the shoes. And in deciding who to go with, I weighed heavily our ability to communicate with each other.”
Although Ms. Coleman had to pay for the samples, they weren’t terribly expensive. What was important was ensuring the product was right before she placed an order, because there was a large minimum unit requirement. The cost of making a mistake made the entire design process was quite stressful. “I hardly slept the entire time,” says Ms. Coleman. “But once I placed the order, I felt calm because it was all outside of my control at that point.”
The Result
Ms. Coleman launched her first product in December 2009, selling online and in hair salons and restaurants where family and friends worked. Her shoes priced at $20 were must-have Christmas gifts. She won a business plan competition that month and another the following March, netting $32,000 and lots of attention from the media, investors, and entrepreneurs. In September, she appeared on Dragons’ Den and accepted a $50,000 deal from Arlene Dickinson. She is now weighing all distribution offers that have been coming in. She also fit in a visit to China. “I knew that building relationships is important in China,” she says, “but I didn’t realize how important until I received cases of green tea from my supplier. I needed to see the factory and meet the people and talk about how we can build an even stronger relationship.”
Not bad for a relationship that was started online with a rudimentary cut-and-paste sample.
Assignment Questions
1. What strategy is Ms. Coleman pursuing?
2. What sort of organizational design will support her strategy? How?
Chapter 4: Fundamentals of Organizational Structure
In this chapter, you will find: Chapter Overview Purpose of This Chapter If Nothing Else, My Students Should Learn Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 4 Workbook: You and Organizational Structure
• Alternative Classroom Activities
• Lecture Enhancement: Holacracy
• Case for Analysis: Digital Extremes Ltd.
• Case for Analysis: Aquarius Advertising Agency Assessment Tools
Reflections on Teaching
CHAPTER OVERVIEW
This chapter introduces basic concepts of organizational structure. Structure is defined, and students focus on how structure can help organizations achieve their goals. An information-processing perspective on structure explains how organizational linkages can provide needed information capacity. Strategies for grouping organizational activities into functional, divisional, matrix, horizontal, holacracy team, or hybrid structures are shown. Symptoms of misalignment are discussed. New directions for structural design are introduced with boundaryless organizations and humanocracy.
PURPOSE OF THIS CHAPTER
This chapter provides students with the many possible ways of structuring organizations and the reasons for selecting one design over another.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Structure needs to fit the information requirements of the organization.
2. Organizational design choices have a profound impact on organizational effectiveness.
LEARNING OBJECTIVES
After completing this chapter, students should be able to:
1. Define the three key components of organizational structure. [Remember]
2. Discuss the differences you see between the vertical and horizontal informationsharing aspects of structure. [Understand]
3. Describe how relational coordination differs from other horizontal coordination mechanisms. [Understand]
4. Identify the strengths and weaknesses of seven common departmental grouping options, including functional, divisional, geographical, matrix, horizontal, virtual, and holacracy. [Remember]
5. Describe the symptoms of structural deficiency within an organization. [Apply]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. “Well-fitting” structural choices are key if organizations are to be effective.
2. Managers need to understand how structure can help or hinder strategic execution.
3. A well-designed organization can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are structured so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students often find the idea of structure rather abstract.
2. Students often see the matrix design as the “ideal” solution.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 4 Workbook: You and Organizational Structure to show how different organizations are structured. [Stumbling Block 1]
Read the chapter’s In Practice Englander Steel case to discuss the necessary conditions for and challenges of a matrix structure for this organization. Examine Exhibit 4.13 as a means to understand how an organization creates a matrix structure. [Stumbling Block 2]
Class Engagement Question
What are the disadvantages of the virtual network structure?
a. more time needed to manage conflicts
b. weak employee loyalty
c. risk of partners failing
d. all of the above
Use this question to delve in detail into a discussion of the advantages and disadvantages of outsourcing in a global context.
You & Design
The You & Design questionnaire can be used to discuss when and why to use teams as a structure.
Discussion Questions and Suggested Answers
1. What is the definition of organizational structure? Does organizational structure appear on the organization chart? Explain.
Four components of organizational structure are the allocation of tasks and responsibilities to individuals and departments; the formal reporting relationships among employees; the grouping together of individuals into departments and into the total organization; and the systems to ensure effective coordination and integration of effort among participants.
Yes, many elements of structure appear on the organization chart. The organization chart indicates reporting relationships, the grouping together of individuals, and, to some extent, the allocation of tasks and responsibilities. Auxiliary documentation is normally needed to specify tasks and responsibilities in more detail. Moreover, the systems to ensure coordination typically are not on the organization chart. Coordination is a dynamic process, while the organization chart is static. Planning, vertical information systems, teams, task forces, etc. are used to achieve integration and typically are not shown on the organization chart, although horizontal dotted lines and vertical reporting relationships do suggest the desired flow of information.
2. How do rules and plans help an organization achieve vertical integration?
Rules and plans provide information to employees about how to act in a certain situation. Rules are usually built on previous experience and describe the correct response to a recurring situation. Upper management decides how the organization should respond and what rules convey that information to the employees. Plans provide a similar function. Managers work together to decide goals, strategies, and schedules for a few weeks or months into the future. These plans provide information about work requirements. Rules and plans both serve to coordinate the activities of lower-level employees with the decisions and direction decided on by middle and upper management.
3. When is a functional structure preferable to a divisional structure?
It is preferred when environmental uncertainty is low to moderate and when the dominant competitive issue is technical specialization and efficiency. The functional structure groups employees together by common activity, so efficiency and economies of scale are realized. But coordination with other functions is more difficult, so adaptation to the external environment is less effective than it is in the product structure. The functional structure should also be considered when the organization is small- to medium-sized, when there are only a few products, and when managers wish to provide employees with opportunities for in-depth skill development within functions.
4. Why do large corporations tend to use hybrid structures?
As young corporations with a functional structure grow larger, they often develop multiple product lines. The dominant competitive issue requires success and coordination within each product line, so the corporation reorganizes into self-contained units to obtain the advantages of close coordination across functions for each product. However, for some functions, corporations find that economies of scale are lost when the function is divided among product lines. It may be better, for example, for a centralized legal department to do the patent and lawsuit work for an entire corporation than to have a separate legal department assigned to each product line. Through trial and error, corporations identify those functions that pertain to all product lines and centralize them at headquarters. Thus they obtain the advantages of both functional and product structures. Executives attain close collaboration among functions assigned to each product line, as well as economies of scale for functions that apply uniformly to all product lines.
5. What are the primary differences between a traditional organization designed for efficiency and a more contemporary organization designed for learning?
Comparative Emphasis of Efficiency vs. Learning Organizations
TRADITIONAL Vertical linkages Emphasis on efficiency and control
CONTEMPORARY Horizontal linkages Emphasis on learning
Specialized tasks, hierarchy of authority, rules and regulations, formal reporting systems, few teams or task forces, centralized decision making
Shared tasks, relaxed hierarchy and few rules, face-toface communication, many teams and task forces, informal/decentralized decision making
6. What is the difference between a task force and a team? Between a liaison role and an integrating role? Which of the four provides the greatest amount of horizontal coordination?
A task force is a temporary committee composed of people from several departments formed to resolve a problem or to complete a project. Task forces are created for a single purpose and are disbanded when the task force has completed its activity. A team is a permanent committee. A team is used when continuous problems arise between departments and must be coordinated, or when a project is so large that it lasts a period of years. The team resolves problems by mutual adjustment between the departments involved.
A liaison role exists in one department and is responsible for coordinating with another department. An example would be a manufacturing engineer who is assigned to the engineering department but is responsible for coordinating changes with manufacturing. An integrating role is not located in either of the coordinated departments and reports to a
neutral manager. The integrating role is used when the coordination of tasks is large and complex and involves more than two departments. Integrators often have the title of product manager or brand manager when they are personally responsible for achieving coordination for the product line.
The greatest amount of coordination is provided by the integrating role because it is a full-time task. Next is the team, which meets regularly. A task force provides substantial coordination, but only during the period it is in existence. A liaison role provides coordination between two departments on a specific issue relevant to them.
7. What conditions usually have to be present before an organization should adopt a matrix structure?
Most organizations are not appropriate for the matrix structure, which establishes a complex relationship between employees because of its purposeful violation of unity of command. A functional, product, or hybrid structure is normally best. The special circumstances that make the matrix the correct structure are a dominant competitive issue that has two or more critical elements, such as both product and functional specializations; the organization task is both complex and uncertain, so that high levels of internal coordination are required; economy of scale means the organization may not have enough people or facilities to set up separate product lines, so they need to allocate people across a variety of projects or products.
Universities and colleges offer programs that cut across all departments of the business curricula, including the MBA program, graduate degree programs, and undergraduate programs. To achieve coordination across programs, the university or college could appoint to each particular program a program director with the responsibility to supervise faculty within each academic department. The faculty, then, have dual responsibilities: to their department and to the program director. The matrix structure would be appropriate for a school of business if the university or college wished to achieve coordination across each program it offered. If the university or college were more interested in functional expertise (e.g., the finance degree), the matrix would not be appropriate because a simpler functional structure would do the job more easily.
8. The manager of a consumer products firm said, “We use the brand manager position to train future executives.” Do you think the brand manager position is a good training ground? Discuss.
This question is designed to facilitate student discussion about integrator roles. Many organizations do use integrator rules such as brand managers to train executives. The reason is that brand managers have responsibility without authority. They are responsible for coordinating all relevant tasks that comprise the business whole for a given product or brand, and they have to do it through good interpersonal relationships and persuasion. Brand managers have to make things happen. They need the same skills required by general managers at upper levels, who don’t always rely on the formal hierarchy to get
things done. People who can succeed in a brand manager’s position often have the characteristics required to succeed in general management.
9. Why do companies using a horizontal structure have cultures that emphasize openness, employee empowerment, and responsibility? What do you think a manager’s job would be like in a horizontally organized company?
In the horizontal structure, shared tasks and decentralized decision making can occur because power is not concentrated at the top. With a culture that supports employee empowerment, decentralization can be carried out by informed employees in a meaningful manner. The manager’s job does not rely on an authoritarian-like use of power; rather, it emphasizes communication skills to build an effective team at all levels of organizational activity.
10. How is structure related to the organization’s need for efficiency versus its need for learning and innovation? How can managers tell if structure is out of alignment with the organization’s needs?
When need for efficiency is high, the structure should reveal the need for few teams and more specialized tasks with narrow ranges of responsibility. When need for learning and innovation are high, the structure may be flatter and should reflect the use of more teams and individuals with wider cross-training and ranges of responsibility, particularly at the lower levels of the organization.
11. Describe the virtual network structure. Why do you think this is becoming a good structural alternative for some of today’s organizations?
In the virtual network structure, the firm subcontracts many or most of its major processes to separate companies and coordinates their activities from a small headquarters organization. This is a good alternative today because it allows companies to be truly global, drawing on resources worldwide while at the same time allowing the company to develop products and services and get them rapidly to market without huge investments. It also allows the company to be more flexible in a rapidly changing environment while reducing costs.
12. Some suggest that the holacracy is more hype than a new organizational structure. Discuss.
Holacracy is a fundamental mind-shift in the way an organization and its management are viewed. The idea of a bossless work environment shatters traditional hierarchical models. However, the holacracy team structure has been adopted in about 300 organizations, offering the strengths as shown in Exhibit 4.19. With that, though, it is important to also consider its weaknesses.
Chapter 4 Workbook:
You and Organizational Structure
Students may get more from the assignment if you use an example when you assign the exercise. Show an actual chart, and discuss how the structure reflects strengths and weaknesses.
Identify the range of organization charts developed for the range of organizations given in the exercise. Is there a pattern between the type of organization and the proposed organization chart, or between the mission and the proposed organization chart? Next, find the range of organization charts developed for each specific type of organization. If different options were proposed for that organization, would one option likely be more successful than another? In what ways?
Alternative Classroom Activities
Read the chapter’s In Practice Ford Motor Company case to examine and discuss how the use of teams supports horizontal coordination.
Lecture Enhancement: Holacracy
Have students read the chapter’s In Practice Zappos case. Additionally, peruse the company website to gain a deeper understanding of how holacracy impacts an organization, its strategy, and its effectiveness. Have students discuss in groups whether they would choose to work in an organization with a holacracy team structure. Why or why not?
Case for Analysis: Digital Extremes Ltd.
Assignment Questions and Suggested Answers
1. What are the issues that are concerning Michael Schmalz?
There are many issues in this organization. Some of the most notable issues are the following: 1) Michael Schmalz has realized that without attacking the console market, Digital Extremes will likely not grow and may not survive; 2) the company does not have any formal project management staff or systems in place; 3) although the organization has three distinct teams, there is no formal team leader or reporting structure; 4) the question of whether the organization should expand, and if so, how.
2. What would you do to resolve these issues?
The answers may vary here. The key is to ensure the answers are supportable. The first will be to move forward to expanding the business and hiring a project manager.
3. How important is console gaming to the future of Digital Extremes?
Based on quantitative and qualitative factors such as profitability, it is important to produce the larger-budget console games.
4. What risks exist in pursuing expansion into the console industry, and what can be done to mitigate these risks?
The risks of expansion include finding the right people for an expanded creative team. Additionally, there may be a requirement to reduce pay levels, and the company may experience higher turnover. Additionally, as much as James does not want a formal project management structure, the sheer size of the business expansion will demand it.
Case for Analysis: Aquarius Advertising Agency
Assignment Questions and Suggested Answers
1. Analyze Aquarius in terms of the five contextual variables. How would you describe the environment, goals, culture, size, and technology for Aquarius?
Aquarius is a mid-sized firm operating in a relatively unstable environment, particularly because in this industry it is common to lose or gain clients quickly because of changing consumer behaviour or product innovation, often with little or no advance warning. The technology is predominantly non-routine because of the emphasis on creativity and art. The structure is functional, with account executives serving as full-time integrators to provide horizontal linkages and communication. The goals of the firm are to be creative and innovative and to satisfy customers’ needs.
2. Design a new organization structure that takes into consideration the contextual variables in the case and the information flows.
You may give students a hint of the general approaches that could be taken. One approach would be to treat account managers as project managers; another general approach would be to design a product structure with departments reporting to each account executive. Ask students to draw their specific alternatives on the board. A hybrid form of structure would be one specific possibility, with account executives reporting to client group vice-presidents (comparable to the “product” form), and most functional departments, such as research, media, merchandising, copy, and art, reporting to each of the account executives. The functional heads, who would still report directly to the president, would probably be legal counsel, finance, and personnel. The structure matches the uncertainty of the environment and would enable the organization to allow for unit- or customer-driven adaptation to changes. There is high coordination across functions relative to any given customer’s account, and this is necessary for the projects being designed. The emphasis is on client satisfaction, with vertical and horizontal information flows made possible by grouping together the individuals who communicate with one another.
3. Would a matrix structure be feasible for Aquarius? Why or why not?
To determine whether a matrix structure is feasible now, or will be feasible in the future, students should examine the requirements for a matrix.
Is there a dual-domain competitive issue? Perhaps, in this case. Service and creativity require technical competence within each function and yet, at the same time, effective coordination across functions. In-depth knowledge and specialization are also critical.
Is the environment uncertain? Overall, there is potential for rapid environmental change. The environment of an advertising agency is not as uncertain and does not have as great a potential for instability as the environment of computer chip manufacturers, for example, but nevertheless the environment is relatively uncertain. Customers change agencies frequently, and employees drift from agency to agency. New developments and techniques occur in the industry’s technology.
Is there a need to share resources across project or product lines? Yes, one of the problems associated with moving to a matrix structure, with account executives serving as the focus of line authority, is the tremendous duplication of functional resources. Unless an agency is extremely large, it cannot afford to have separate teams of art, copy, merchandising, media, and research specialists for every account executive. This is an example of the need for shared resources that typifies a matrix structure.
Thus a matrix structure might be feasible for Aquarius Advertising. But in this situation, matrix is not the best form to recommend for immediate implementation. The matrix will be effective only when the experienced managers are willing to be complete team players and not overstep their authority functional or product in the complex violation of unity of command that occurs by design. The individuals involved in Aquarius now appear to lack the organizational savvy necessary for the matrix form to operate smoothly. Currently the account executive who is designated to be the liaison between clients and specialists is often bypassed. If that were to occur in the matrix, Aquarius would have a complex management system in place that still would not provide the coordination between functions that the company needs. With training, the managers and account executives could “grow into” a matrix form. However, for now, the best recommendation from a consulting point of view would be to strengthen the integrative capability of the account executives while the company is in its functional structure.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
Organization Theory and Design, 4Ce Enriched Instructor’s Manual
Chapter 5: Designing Organizations for Social and Environmental Purpose
In this chapter, you will find: Chapter Overview Purpose of This Chapter If Nothing Else, My Students Should Learn … Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 5 Workshop: Where to Begin A Framework for Developing Your CSR Strategy
• Alternative Classroom Activities
• Lecture Enhancement: Designs for Achieving Dual Commercial and Social Welfare Goals
• Case for Analysis: Lucky Iron Fish Enterprise Assessment Tools Reflections on Teaching What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores how managers design an organization to embrace corporate social responsibility, especially hybrid organizations that have the dual purpose of serving society while also generating wealth for owners and shareholders. Hybrid organizations are defined, and various approaches to designing organizations to achieve dual commercial and societal benefit goals are examined. The problem of mission drift is discussed as well as the two opposing logics that may conflict in a hybrid organization. The chapter then looks at social enterprises and B Corps. Contemporary trends such as the green movement, the triple bottom line, conscious capitalism, the stakeholder approach, and the bottom of the pyramid are covered. The chapter then looks at organizational design in terms of sustainability and the relationship between corporate social responsibility and financial performance.
PURPOSE OF THIS CHAPTER
This chapter provides students insight toward designing organizations to incorporate strong sustainability and social justice goals that persist in the face of financial pressures to maximize profits.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Increasingly organizations are realizing that they will lose their legitimacy if they do not address sustainability in their structures and their decision making.
2. Initiatives such as CSR activities and conscious capitalism are gaining traction with increasing evidence that organizations that consider environmental and/or social objectives are preferred by customers.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Describe, with a particular focus on B Corps, how a hybrid organization differs from a typical nonprofit or profit-seeking organization, including the two major “logics” that are embraced in hybrid organizations. [Analyze]
2. Describe how organizations implement corporate social responsibility using the green movement, triple-bottom-line, conscious capitalism, stakeholder-mapping, and bottom-of-the-pyramid approaches. [Analyze]
3. Identify important stakeholders for an organization and discuss how managers balance the interests of various stakeholders. [Understand]
4. Understand how B Corps evolved, how they are designed, and why. [Apply]
5. Compare the various sustainability approaches organizations can adopt. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. More and more organizations of all types and sizes are paying greater attention to corporate social responsibility.
2. Unlike traditional for-profit businesses designed to generate wealth or nonprofit businesses designed to serve a social mission, a hybrid organization is designed to pursue both profit and social mission simultaneously.
3. A well-designed organization can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are responding to sustainability and social goals so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students often find the idea of sustainability and social goals rather abstract.
2. Students often see the “hybrid organization” as unattainable.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, read the Patagonia case at the beginning of the chapter. Engage the class in a discussion of whether Patagonia exemplifies a hybrid organization. Discuss the challenges of mission drift and hybrid conflict. [Stumbling Block 1]
In class, read the In Practice COVID-19 Retooling case for a class discussion on the pandemic and CSR of organizations. [Stumbling Block 2]
Class Engagement Question
Which of the following characteristics is not reflected in the triple bottom line network structure?
a. people
b. planet
c. politics
d. profit
Use this question to delve in detail into a discussion of the triple bottom line approach.
You & Design
The You & Design questionnaire can be used to examine the role of personal sustainability behaviour and its relevance toward possessing a social welfare or commercial logic.
Discussion Questions and Suggested Answers
1. What is a hybrid organization? How does it differ from a typical nonprofit or profit-seeking organization?
Traditional profit-seeking organizations are focused on generating wealth for owners, investors, or shareholders by selling products or services. Typical nonprofit organizations are focused on serving some kind of social mission, and generally seek donations through fundraising to finance their operations. A hybrid organization is a combination of the two, in that it uses revenues from sales to finance its social purpose.
2. Compare and contrast the two major “logics” that organization members might hold in a hybrid organization.
Employees working in a hybrid organization sometimes experience conflict because they must hold two “logics,” the commercial profit logic and the social welfare logic. With the commercial profit logic, products and services are sold for economic gain. Legitimacy is achieved by technical and managerial expertise, and in an environment in which hierarchical control is valued, shareholders control goals and operations. By contrast, the social welfare logic means that products and services are a means to serving societal needs. Democratic governance is valued, and there is a high participation among local stakeholders. Legitimacy is achieved by contributing to the social mission.
3. How might “mission drift” hurt the performance of a social enterprise?
In hybrid organizations, employees are required to hold both the commercial profit logic and the social welfare logic simultaneously. However, because employees depend on success in the commercial pursuit of the organizations for their incomes and job security, many employees “drift” toward placing more importance on the commercial side of the business. If this occurs, it is possible for the organization to lose focus on its social mission and fail to make strategic decisions that support its social goals.
4. Do you personally embrace a commercial logic or a social welfare logic? Why do you think you hold to that perspective?
Answers vary, but students’ answers should provide a logical reason and an understanding of the basic concepts. Students will probably mention family role models, religious beliefs, or societal influences that have shaped their perspectives.
5. Why would a social enterprise be better able to maintain a strong social welfare purpose by choosing other like-minded organizations with which to collaborate?
When members of a social enterprise spend a lot of time interacting with members of more traditional, profit-oriented enterprises, they may find themselves starting to focus on the commercial aspects of their own organization and losing sight of their social mission. However, if they interact with members of other like-minded organizations, especially when collaborating on projects focused on their social mission, they are more likely to retain the proper balance between commercial and social goals.
6. What do you think would happen if a hybrid organization focused on profit goals to the exclusion of social goals? If vice versa? Explain.
When members of a hybrid organization begin to focus on either the commercial goals or the social mission to the exclusion of the other, they will most likely make decisions that support their focus and fail to consider whether those decisions might be detrimental to the other purposes of the organization. It is almost guaranteed that the organization will face internal conflict in this situation.
7. Is it reasonable to expect that managers can measure their social and environmental performance with the same accuracy as they measure financial outcomes when using a triple-bottom-line approach?
To some extent, yes. If an organization sets social and environmental objectives that are too broad for example, by simply stating it wants to “help people” or to “save the planet” it would not be able to measure its impact with much accuracy. However, when organizations set measurable KPIs, or goals, they can clearly articulate how they want to impact the world and determine whether they are successful in achieving their mission. For example, they can set goals to donate a certain amount of financial resources to a particular group of people each year, or they can specify a particular change to be implemented in a set timeframe.
8. A survey found that 69 percent of MBA students view maximizing shareholder value as the primary responsibility of a company. How would that philosophy fit into a hybrid organization?
Employees who work in hybrid organizations must be able to hold the commercial profit logic and the social welfare logic simultaneously, otherwise they will experience conflict on the job. Some of these students may be able to adapt, but if not they will probably not enjoy working in a hybrid organization and would make poor decisions that do not support the organization’s social mission.
9. There is research evidence to suggest that employees are happier working for a company that provides them with opportunities to contribute to environmental sustainability. Why do you think this would be the case?
Research shows that many people, and particularly younger generations, are well aware of the need for all people to make good choices, treat people fairly, and be good stewards of the planet. They want to achieve these goals not only in their personal lives through their own behaviour, but also at work, which can be achieved by working for organizations that engage in CSR. Employees who hold that socially responsible attitude and work for an organization that shares the same values often feel that their work is directly contributing to a positive impact in the world. It gives these employees an added sense of purpose and fulfillment through their employment.
10. Explain the concept of conscious capitalism. Do you think managers and companies that espouse this kind of shared value approach are more likely to behave in socially responsible ways?
Conscious capitalism refers to organizational policies and practices that both enhance the economic success of a company and advance the economic and social conditions in the communities in which the organization serves. So yes, the organization’s commitment to CSR can and should carry over and be reflected in managers’ behaviour and decision making.
Chapter 5 Workshop: Where to Begin A Framework for Developing Your CSR Strategy
Read Roger Martin’s 2002 Harvard Business Review article “The Virtue Matrix,” or alternatively the Conference Board of Canada article “Creating a Virtue Matrix Strategy” at https://rogerlmartin.com/docs/default-source/Articles/socialinnovation/creating_virtue_matrix (accessed July 7, 2021). Choose an organization that is familiar to the class, or have students select their own organization. Students will then answer the questions for each of the quadrants in the virtue matrix. Have students brainstorm ideas for improving the social responsibility of the chosen organization(s).
Alternative Classroom Activities
Use Exhibit 5.1 as a means to engage the class in small groups to research and discuss one of the organization designs (as assigned). Each small group will then present their findings to the class.
Lecture Enhancement: Designs for Achieving Dual Commercial and Social Welfare Goals
Research shows that various structures and techniques can be used for organizing people who hold opposing mindsets and values about an organization’s purpose. Closely examine these structures: 1) separating people into distinct departments; 2) selecting employees carefully; 3) setting clear goals; 4) collaborating with like-minded organizations; 5) keeping the social mission alive; 6) choosing the correct legal framework. Incorporate the related In Practice cases to reinforce the relevance and practicality of these approaches.
Case for Analysis: Lucky Iron Fish Enterprise
Assignment Questions and Suggested Answers
1. What are LIFE’s main organizational design features?
LIFE is structured as a social enterprise that is small in size there is a CEO, seven executives, and an international advisory board. The Board comprises both the inventor of the concept of the fish, as well as influential individuals in healthcare, consulting, and management. LIFE also has the Impact Fund, a division of the company that uses proceeds from sales in a partnership model.
2. Is LIFE innovative? Why/why not?
Ways in which LIFE is innovative:
LIFE puts a modern spin on traditional beliefs (the fish shape in Cambodia symbolizing luck, the tulsi leaf shape in India which is based on traditional medicine)
The Impact Fund is not just a monetary charity; it also provides individuals with training opportunities to deal with iron deficiency in their community, including training in impact measurement
Ways in which LIFE is not innovative:
LIFE uses BOGO the buy one, give one model for sales (which is a fairly wellknown practice)
3. What actions might LIFE take to scale?
Answers vary. The case discusses the need for an injection of capital to take the company global. Students may suggest ways to overcome the stumbling block of local regulations that may hold up international scaling.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few websites that provide further information for some of the organizations discussed in Chapter 5.
Canada Goose
https://www.canadagoose.com/en/beyond/humanature (accessed July 7, 2021).
https://investor.canadagoose.com/English/news-results-and-presentations/pressrelease/press-release-details/2020/Canada-Goose-Response-Program-Update-COVID19/default.aspx (accessed July 7, 2021).
United Nations
https://sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for %20Sustainable%20Development%20web.pdf (accessed July 7, 2021).
Chapter 6: Interorganizational Relationships
In this chapter, you will find:
Chapter Overview
Purpose of This Chapter If Nothing Else, My Students Should Learn
Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 6 Workbook: Management Fads
• Alternative Classroom Activities
• Lecture Enhancement: Applying the Process of Ecological Change
• Case for Analysis: Apple
• Case for Analysis: Hugh Russel, Inc.
• Chapter 6 Workshop: The Shamatosi
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores the increasingly dense web of relationships among organizations. Companies that are dependent on others for resources, supplies, materials, and information need to manage those relationships with increasing levels of trust, communication, and collaboration. This is changing the nature of management. Managers must now deal effectively with a whole gamut of interorganizational relationships, whereas in the past they merely focused on the internal affairs of their own organization, bought materials from the lowest bidder, and responded somewhat loosely to outside forces in the environment. Research on interorganizational relationships sheds light on such perspectives as resource dependence, collaborative networks, population ecology, and institutionalism.
PURPOSE OF THIS CHAPTER
This chapter is designed to inform students about the importance of understanding the many forms of linkages between organizations and the reasons for them.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Students need to know and understand the interorganizational framework summarized in Exhibit 6.2 and how interorganizational relationships have an impact on managerial action.
2. Students need to understand the idea of and reasons for organizational collaboration.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Describe an organizational ecosystem and the changing role of management in interorganizational relationships. [Remember]
2. Identify types of resource dependence relationships and their power implications. [Apply]
3. Explain the role of collaborative networks and the interorganizational shift from adversaries to partners. [Evaluate]
4. Describe key concepts of the population ecology perspective, including organizational form and niche and the process of ecological change [Understand]
5. Compare three mechanisms that lead to institutional similarity identified by the institutional view of organizations. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. As organizations become more interlinked, it is important to understand the underlying contextual dynamics.
2. Organizations today are facing many challenges and need to respond by understanding old organizational designs and creating new organizational designs.
3. A well-designed organization can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are structured so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students find some of the material quite abstract.
2. Students seem to view the idea that organizations want to be seen as legitimate as a politicized concept.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
Assign the Toyota Motor Corporation case as a pre-read and then identify and discuss the impact of interorganizational relationships of Toyota in class. [Stumbling Block 1]
Facilitate the classic role play of the Chapter 6 Workshop: The Shamatosi. This workshop brings out many of the concepts in the chapter. Follow the instructions as a means to facilitate this workshop. [Stumbling Block 2]
Class Engagement Question
The interorganizational framework is based on
a. boundary fluidity
b. similarity or dissimilarity of organizations
c. cooperative or competitive organizational relationships
d. b and c
Use this question to discuss Exhibit 6.2 in detail.
You & Design
The You & Design questionnaire is a useful way to alert students to the importance of building relationships through networking.
Discussion Questions and Suggested Answers
1. The concept of business ecosystems implies that organizations are more interdependent than ever before. From personal experience, do you agree? Explain.
Students may have business experience that helps them answer this question. If they do not, ask what experiences they may have had as a consumer that give them understanding. Perhaps they have shopped at Walmart or Costco, organizations that are more than simply retailers they have developed relationships with hundreds of organizations, cutting across traditional business boundaries.
2. How do you feel about the prospect of becoming a manager and having to manage a set of relationships with other companies rather than just managing your own company? Discuss.
In discussing this question, students should realize that their careers in management can and likely will be more than traditional supervision and more than getting goals accomplished through other people. Discuss what kinds of activities entry-level managers should do early in their careers in order to be promotable and to demonstrate their ability to handle this new dimension of management. What leadership opportunities now exist in extracurricular organizations for students to begin developing skills in interorganizational communication?
3. Assume you are the manager of a small firm that is dependent on a large computer manufacturing customer that uses the resource dependence perspective. Put yourself in the position of the small firm, and describe what actions you would take to survive and succeed. From the perspective of the large firm, what actions would you take?
Because the large manufacturing customer uses the traditional view of relationships between organizations, we know that they try to minimize their dependence on us and may at any time assert their control over us to minimize dependence on us. Therefore, the small firm, as a protective device, will develop a wide-enough customer base so as not to be subject to their whim. But also, as a proactive strategy, we will attempt to improve communication with the large organization so that we can meet their needs better and perhaps develop a relationship in which trust and interdependence replaces a buy from the lowest bidder attitude.
4. Many managers today were trained under assumptions of adversarial relationships with other companies. Do you think operating as adversaries is easier or more difficult than operating as partners with other companies? Discuss.
What comes most easily is what comes most naturally and may well be a byproduct of our experience and training. This does not mean that we cannot make a conscious decision and change our patterns, but when a situation is fraught with conflict or is under heavy time restraints, we may lapse back into what comes more naturally. What training have students received so far about individualism versus cooperative relationships (class projects, grades in courses, athletics, etc.)? What training have students received so far about adversarial versus cooperative relationships between organizations (athletics, student organizations, internships or work experience, etc.)?
5. Discuss how the adversarial versus partnership orientations work among students in class. Is there a sense of competition for grades? Is it possible to develop true partnerships in which your work depends on others?
Students may feel that since grades are given in the classroom, but not in the business world, analogies between the two settings are nullified. In response, be sure to help students realize that there are many kinds of organizational rewards that act like grades: who gets the promotion, special recognition, best conference, etc. In either setting, as long as the rewards/grades are given out based on individual criteria there will remain an element of adversarial orientation, but for select activities for which rewards/grades can be given for team effort true partnerships can develop.
6. The population ecology perspective argues that it is healthy for society to have new organizations emerging and old organizations dying as the environment changes. Do you agree? Why would European countries pass laws to sustain traditional organizations and inhibit the emergence of new ones?
If you have European students in the class, make sure that they have an opportunity to speak from their perspective on the importance of maintaining traditional organizations. Most North American students can accept the population ecology perspective’s precept that it is appropriate to allow old organizations to die naturally when they have been bypassed because of outdated management and products and services and to allow vibrant, new organizations to take their place.
7. Explain how the process of variation, selection, and retention might explain innovations that take place within an organization.
Organization populations are continually changing; therefore, within the populations, a single entity is continually changing. When new organizational forms appear (variation), they bring innovative ideas to other firms in the industry that are often imitated. When some variations suit the external environment and find a niche (selection), other organizations are prone to imitate, thus bringing change within an organization. If dominant organizational forms do not adapt to external change they will gradually be
replaced, so they typically try to respond to selection and retention of firms in their industry.
8. Do you believe that legitimacy really motivates a large, powerful organization such as Walmart? Is acceptance by other people a motivation for individuals as well? Explain.
When an organization’s actions are seen as desirable, proper, and appropriate within the environment’s system of norms, it is motivating to the organization to maintain that legitimacy because environmental support brings cooperation, partners, and customers. On the negative side, when legitimacy is not in place, organizations are motivated to find environmental acceptance. Acceptance by other people is a motivation on the individual level. We see this motivation even in grade school, when children do things and wear clothing that they think will bring peer acceptance.
9. How does the desire for legitimacy result in organizations becoming more similar over time?
Interorganizational relationships are characterized by forces that cause organizations in the same population to become similar over time. As organizations strive for legitimacy, institutional forces emerge; the organizations adapt structures and behaviours intended for environmental acceptance. They may copy other organizations, and this has the effect of making them more similar over time. To some extent, there may be outside forces that push organizations toward similarity like, for example, laws that mandate certain responses such as pollution control or maternity and parental leave.
10. How do mimetic forces differ from normative forces? Give an example of each.
Mimetic forces refer to the emergence of common structures and approaches among organizations in the same field due to one organization copying or modelling another. In contrast, normative forces bring about the same result for a different reason: one organization adopts techniques that are considered to be up-to-date by the professional community in general. The motivation for adopting common structures differs in the two cases. In the first case, there is a conscious effort to mimic what another is doing successfully, and in the second case, common professional networks lead to a common understanding of what is right.
An example of mimetic forces is when managers benchmark and purposefully copy the best practices that they find in another company. An example of normative forces is occurring in the field of human resources management: although there is no legal requirement (coercive) for outplacement services when downsizing, consulting companies and professional norms have created a standard of professional practice so that companies offer this service for terminated employees.
Chapter 6 Workbook: Management Fads
Point out to students that trends or fads are not necessarily bad and that some are of lasting duration because of the contribution they make to how we think about organizational activity. If your students are unable to generate ideas on specific trends and fads, you may suggest some of the following:
Current trends
Diversity
Spirituality in the workplace
Chaos theory
Benchmarking
Intrapreneurship
Customer relationship management (CRM)
Alternative Classroom Activities
Themes popularized several years ago
Theory Z
Management by objectives (MBO)
Time and motion studies
Bureaucracy
Fayol’s administrative principles
Teams
Have the class read the In Practice Walmart case. Discuss the idea that the “discipline” that Walmart imposes on its suppliers forces many suppliers to drastically change their production processes to meet Walmart’s specifications or delivery schedules. In other cases, it forces suppliers to outsource manufacturing overseas to secure cheaper labour and increase productivity. Show some clips from Wal-Mart: The High Cost of Low Price, which highlights the legitimacy problems that Walmart faces. The film has aired on television, and the DVD is widely available (view the trailer at https://www.youtube.com/watch?v=4FV4kocCPgM and/or video https://www.youtube.com/watch?v=RXmnBbUjsPs).
Note: Although this video is now 20 years old it provides valuable insight to the planet’s largest retail organization (as of April 2021), and how it came to be.
Lecture Enhancement: Applying the Process of Ecological Change
Have the class read the Leading by Design case on Shazam. Discuss the relevance of the elements in the population ecology model in Exhibit 6.4 as they apply to Shazam and other players in the industry.
Case for Analysis: Apple
Assignment Questions and Suggested Answers
1. Why would Steve Jobs want to partner with Bill Gates?
Jobs both needed and recognized the power of ecosystems. Jobs was able to expand Apple’s reach and also ensure that Microsoft would continue to develop and to support its Office software for the Macintosh platform.
2. What is Apple’s strategy? Is it effective?
Apple focuses on making the best products and attracting the best partner organizations that will follow its rules of engagement. Apple differentiates itself by its innovation and its “coolness” factor. While it has not been as effective in the desktop computer market, it has been very effective in the digital music player sector by transforming the way many people buy and listen to music.
3. According to Christensen, in his book The Innovator’s Dilemma, the world thanks innovators for new products but won’t buy them. Does his statement hold for Apple in general and for its iPhone, in particular?
Apple’s many innovations have been incorporated by its competitors and Apple has often struggled to survive in the computer industry. However, with the development of the iPod and then its iPhone, Apple seems to have introduced a significant variation that has been retained and diffused. Therefore, Christensen’s statement applies in general but not to the development of the iPhone.
Case for Analysis: Hugh Russel, Inc.
Assignment Questions and Suggested Answers
1. Briefly describe whether events in this case support or refute each of the resource dependence, collaborative network, population ecology, and institutional perspectives. Why or why not?
The resource dependence view is refuted because in that view, organizations minimize their dependence on other organizations for important resources. In this case, success was achieved through interdependence with other organizations, such as the bank, the government, and union organizations. For the same reason that the resource-dependence view is refuted, the collaborative network view is supported. In collaborative networks, managers partner with other organizations and assume a cooperative and trusting stance. The population ecology perspective may not be addressed in this case because facts are not given in sufficient depth on the population of organizations changing or not changing. The institutional perspective describes how organizations survive through congruence between an organization and expectations from its environment. Support for the
institutional perspective is not likely to have been borne out in this case. Had there been pressure for a common structure and approach among organizations in Hugh Russel’s field in the early 1980s, it would not likely have been pressure for a boundaryless organization with extensive interorganizational networks; this phenomenon tends to be more recent. For example, James Moore wrote The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems in 1996.
2. Do you think the changed relationships with other organizations could have occurred without internal company changes? Explain.
It is unlikely that meaningful relationships with all the various organizations could have occurred if they were all performed by the top executive group. Without internal company changes, they would have had to be handled only by the top executives, because these would have been the only people sufficiently informed to handle such networking. Internal changes brought internal teamwork to such an extent that all employees could speak in an informed and consistent manner for the organization.
3. Hugh Russel seemed to increase its legitimacy and power by developing relationships with other companies. Does this make sense to you as general strategy for powerless organizations?
We know that legitimacy is a general perspective that an organization’s actions are appropriate within the environment’s system of norms, values, and beliefs. When the general perspective was that Hugh Russel did not have legitimacy, it made good sense for the company to enlist the assistance of other companies to change that view. As those companies assisted in the turnaround, they were sufficiently involved to buy in to the appropriateness of the changes taking place and therefore to change the perspective on the legitimacy of Hugh Russel.
Chapter 6 Workshop: The Shamatosi
This workshop activity gives students an example of the importance of collaboration as a win–win strategy. They discover for themselves that they can really win by cooperating and that their team results will be better. (It is rather enjoyable when at least one team does not play with trust and sharing of information, because then from the learning perspective, benefits of cooperation become obvious.) Assign this activity before referring students to the material in the text; most instructors prefer to give out individual roles of Dr. Hobbs or Dr. Dominguez to each student (photocopied from the following pages), instructing them to keep their papers to themselves, and not pointing out until debriefing that both roles are printed in the textbook for their understanding of the total exercise. (If students have already “played” this exercise in other courses, ask them to be observers and then give them a significant role in the debrief.)
ROLE OF “DR. HOBBS” from Pharmacology Inc.
As Dr. Bernice Hobbs, you are a biological researcher for Pharmacology Inc., a major pharmaceutical company, and you have monitored with mounting concern the reports from Brazil’s Amazon rainforest. Everything from world weather patterns to providing an estimated one in four ingredients in medicine is tied to securing the world’s rainforests. But over the past decade, scientists and pharmaceutical companies, along with environmental groups and others, have observed with alarm the destruction of the rainforests, and with it the destruction of entire species of plant, animal, and insect life.
As you monitor the situation, you are particularly concerned about conditions with regard to a particular plant found in limited quantities near the Rio Negro. Rainforest trees have shallow roots because the major nutrients for growth are located near the surface level. Biologists discovered a rare tiny plant growth called Shamatosi embedded among the trees near the Rio Negro. For a number of years, researchers have explored potential medical uses for these tiny plants.
You have been working with the leaves of the tiny Shamatosi plant and have discovered the plant’s potential as a cancer suppressing drug after breast cancer surgery. For a number of years the leading drug in this category has been Tamoxifen, a synthetic drug described as “remarkable” and credited with saving more lives than any other oncological drug by the lead investigator for a major breast cancer research group. However, research has also shown that Tamoxifen raises the risk of cancer in the lining of the uterus and can lead to blood clots in the lungs. There is also a growing level of concern as Tamoxifen resistance has developed. The medicine you developed may avoid these problems and bring a new treatment into the list of options for doctors and their patients. But more research is needed. You need to have access to as many leaves as possible from the Shamatosi plant.
DBR, the Brazilian timber company, has possession of several thousand Shamatosi plants from this year’s season that have been replanted in portable crates. Your company, Pharmacology Inc., has authorized $1.5 million for your team to bid to obtain the plants. You cannot go over this budget. Your team will meet with a team from Radiology Inc., which also wants to purchase the Shamatosi plants from DBR, about a possible agreement for purchasing and using the plants for research.
ROLE OF “DR. DOMINGUEZ” from Radiology Inc.
You are Dr. Alberto Dominguez, a biochemist for Radiology Inc., with expertise in treating radiation exposure. You monitor with mounting concern the reports from Brazil’s Amazon rainforest. Everything from world weather patterns to the providing of an estimated one in four ingredients in medicine is tied to securing the world’s rainforests. But over the past decade, scientists and pharmaceutical companies, along with environmental groups and others, have observed with alarm the destruction of the rainforests, and with it the destruction of entire species of plant, animal, and insect life.
You are particularly concerned about conditions concerning a particular plant found in limited quantities near the Rio Negro. Rainforest trees have shallow roots because the major nutrients for growth are located near the surface level. Biologists discovered a rare tiny plant growth called Shamatosi embedded among the trees near the Rio Negro. For a number of years, researchers have explored potential medical uses for these tiny plants.
You have been working with the roots of the Shamatosi plant in response to incidents involving radiation exposure. The worldwide expansion of nuclear facilities, the lessons from the 1986 Chernobyl disaster, and the resulting cases of thyroid cancer among thousands of children and adolescents, led you and your colleagues to intensive research to provide the swiftest response with the most powerful medicine. For years, Potassium iodide (KI) was issued in kits provided by organizations such as the Centers for Disease Control. However, KI was found deficient in protecting many body parts, such as the liver and intestines. You discovered the tiny Shamatosi plant and research indicated the potential for medicines from the root of this plant to provide additional protection, even for incidents of large scale or prolonged exposure. The March 2011 Tohoku earthquake and tsunami, and the resultant radiation exposure caused by the meltdown at the Fukushima Daiichi nuclear power plant, intensified concerns among scientists to find and develop a new medicine. You need as many plants as possible.
DBR, the Brazilian timber company, has possession of several thousand Shamatosi plants from this year’s season that have been replanted in portable crates. Your company, Radiology Inc., has authorized your team to bid $1.5 million to obtain the plants. You cannot go over this budget. Your team will meet with a team from Pharmacology Inc., which also wants to purchase the Shamatosi plants from DBR, about a possible agreement for purchasing and using the plants for research.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few resource articles that provide further information for material discussed in Chapter 6
Toyota Liker, J.K., and Choi, T.Y. (2004, December). “Building Deep Supplier Relationships,” HBR.
Pfizer and Other Pharmaceutical Companies
Vlaar, P.W.L. (2006) “Making Sense of Formalization in Interorganizational Relationships: Beyond Coordination and Control,” PhD thesis, Erasmus University Rotterdam
The Dark Side of Interorganizational Relationships
Oliveira, Nuno, and Lumineau, Fabrice. (2019, January). “The Dark Side of Interorganizational Relationships: An Integrative Review and Research Agenda,” Journal of Management, Vol. 45, No. 1.
Chapter 7: Designing Organizations for the International Environment
In this chapter, you will find:
Chapter Overview
Purpose of This Chapter If Nothing Else, My Students Should Learn… Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Alternative Classroom Activities
• Lecture Enhancement: Chapter 7 Workshop: Working Abroad
• Case for Analysis: Ivanhoe Mines
• Case for Analysis: Rhinebeck Industrial Assessment Tools Reflections on Teaching What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores the ways in which the international environment impacts how managers design organizations. Reasons for expanding internationally are provided, along with the stages of international development and the use of strategic alliances. The chapter examines global strategic approaches and the application of various structural designs for global advantage, as well as specific challenges global organizations face and how they cope with them. Cultural differences in coordination and control and, finally, the transnational model are explained.
PURPOSE OF THIS CHAPTER
This chapter underscores the challenges of international expansion.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Competing in the international domain is complex, and organizations need to be designed to fit the particular domains. The design options are summarized in Exhibit 7.5.
2. Students must understand the stages of international evolution, summarized in Exhibit 7.1.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Compare and contrast the three primary motivations for entering the global arena. [Understand]
2. Explain the three major challenges global design faces. [Understand]
3. Describe the main elements of globalization and multidomestic strategies. [Understand]
4. Describe how different structural design options for international operations relate to differences in global strategy [Analyze]
5. Identify mechanisms for global coordination, knowledge transfer, and resolving the tension between global uniformity and local responsiveness [Apply]
6. Describe the transnational model of organizing. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Globalization is an ongoing process, fraught with difficulty and controversy.
2. Many organizations continue to engage in global expansion.
3. A well-designed organization can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students are often interested in international career opportunities and can use some of the ideas to be better informed about the challenges of international work. 2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students seem to believe that globalization is inherently good. 2. Students may believe that they can easily address intercultural differences.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
Watch this clip from The Economist, “Will COVID Kill Globalisation?” (https://www.youtube.com/watch?v=KJhlo6DtJIk), and discuss the impact of COVID-19 as a disruption to globalization. [Stumbling Block 1]
In class, use Chapter 7 Workbook: What Is Your Cultural Intelligence? to underscore cultural differences and then discuss the behavioural implications of the cultural differences. [Stumbling Block 2]
Class Engagement Question
If the forces for global integration are high and the forces for national responsiveness are low, what structure best fits?
a. international division
b. global geographic structure
c. global product structure
d. global matrix
Use this question to delve in detail into the key elements of the four structural choices see Exhibit 7.5
You & Design
The You & Design questionnaire gives students the opportunity to reflect on whether they are suited for international work. It works well as a team activity.
Discussion Questions and Suggested Answers
1. Under what conditions should a company consider adopting a global geographic structure as opposed to a global product structure?
A global product structure should be considered when the company handles products that can be assigned to divisions that are technologically similar and can be standardized for worldwide production and marketing. This will provide economies of scale in both production and marketing of the product. If the products must be tailored to each country or market, this structure would be less appropriate.
2. Name some companies that you think could succeed today with a globalization strategy and explain why you selected those companies. How does the globalization strategy differ from a multidomestic strategy?
The companies that students come up will vary. Multidomestic strategy means that exports are taken seriously and that the company deals with the competitive issues of each country separately. Globalization means that the company transcends any single country and does not identify with a single home country. Products and practices that work in any one country are used in other appropriate countries.
3. Why would a company want to join a strategic alliance rather than go it alone in international operations? What do you see as the potential advantages and disadvantages of international alliances?
Strategic alliances should be sought by companies wanting to get involved in international operations but with limited resources with which to accomplish their objective. They can take advantage of the country-knowledge and resources of other companies through the alliance and perhaps become more successful in their international involvement. Companies that want to limit their risk should also seek strategic alliances in order to share the risk.
Companies that are strong enough to enter the market internationally and can take the risk may wish to avoid international strategic alliances. Not only does such an alliance share the risk, but often the profits as well. It also tends to limit the independence and freedom of the firm. Whether a company decides to try it alone or to seek an alliance is, of course, an individual choice. However, it is increasingly difficult to be successful in international markets as a lone agent.
4. Why is knowledge sharing so important to a global organization?
Knowledge transfer helps to facilitate coordination and standardization on a worldwide basis. It also gives the global organization its advantage by taking what works in one location and applying it to another location. This is exactly what is meant by being a global organization.
5. What are some of the primary reasons a company decides to expand internationally? Identify a company in the news that has recently built a new overseas facility. Which of the three motivations for global expansion described in the chapter do you think best explains the company’s decision? Discuss.
By going global, companies can realize economies of scale and exploit economies of scope the number and variety of products and services it offers. Another reason for moving to the global market is to take advantage of low-cost production factors, especially lower-cost labour. The companies that students come up will vary, as will their analysis of the motivations behind that expansion.
6. When would an organization consider using a matrix structure? How does the global matrix differ from the domestic matrix structure described in Chapter 4?
The global matrix structure is most effective when forces for both global integration and for national responsiveness are high. It presents complexity in the structure and therefore should not be considered when either or both of those forces are low, because it would impose unnecessary complexity on organizational activity. However, when the needs are present, this design can help the organization effectively match its structure to its strategy.
The international matrix has much in common with the inner workings of the domestic matrix, except for the fact that distances are greater worldwide and coordination is more complex. This means that decisions may take longer to make unless new communications technology is used to help overcome distance. Furthermore, it means that factors of local conditions, legalities, and cultures must also be considered when running the organization. Structurally, whereas the domestic matrix highlights managers for both functional areas and product or project areas, the international matrix typically highlights managers for both regional areas and product or project areas.
7. Name some of the elements that contribute to greater complexity for international organizations. How do organizations address this complexity? Do you think these elements apply to an online company such as eBay that wants to grow internationally? Discuss.
The factors that contribute to greater complexity for international organizations include offering modified or different products, the need for integration, the problem of transferring knowledge across a global firm, and cultural differences. Organizations address this complexity by adapting the organizational structure to produce offerings complying with local tastes, culture, and laws. They often must develop new positions, as Colgate-Palmolive did.
Online companies such as eBay must also adapt to more complexity. Cultural and legal differences will still play a major role and may require some organizational changes.
8. Traditional values in Mexico support high power distance and a low tolerance for uncertainty. What would you predict about a company that opens a division in Mexico and tries to implement global teams characterized by shared power and authority and a lack of formal guidelines, rules, and structure?
Mexican workers would probably not respond well to this type of approach. They would view management as weak and would want more direction to be provided them. Another response might be that the teams set up this way would need a strong personality to assume the stronger leadership role that their culture prefers.
9. Compare Hofstede’s six dimensions with the GLOBE’s nine dimensions. Which approach to national values do you find more useful? Why?
The GLOBE’s nine dimensions provide more detail and depth than Hofstede’s original five, although these are included in the GLOBE’s nine. For example, the GLOBE research distinguishes between institutional collectivism and in-group collectivism to differentiate between society’s encouragement and rewarding of collective actions and the extent to which individuals express pride and cohesiveness in their interpersonal relationships without societal pressure. In addition, the humane orientation reflects current thinking toward more ethical and responsible behaviour and environmental impacts. The performance orientation also reflects current thinking on the importance of innovation in the current business environment.
10. Do you believe it is possible for a global company to simultaneously achieve the goals of global efficiency and integration, national responsiveness and flexibility, and the worldwide transfer of knowledge and innovation? Discuss.
While this is certainly possible, it takes a lot of work. The company may have to give up some efficiency and have a little less integration to achieve the responsiveness and flexibility it desires. The company may learn that what makes it efficient in one country does not fit the culture of another country or is not allowed by local laws.
11. Compare the description of the transnational model in this chapter to the elements of the learning organization described in Chapter 1. Do you think the transnational model seems workable for a huge global firm? Discuss.
An organizational culture that is strong and fosters shared values characterizes both the learning organization and the transnational model; it is described in the text as the learning organization extended to the international arena.
The transnational model has multiple centres, subsidiary managers who initiate strategy for the whole company, and coordination and control, which is achieved through corporate culture and shared values. This type of structure may be the only workable structure in huge global firms with subsidiaries in many countries that try to exploit both global and local advantages. When it is necessary to deal with multiple interrelated competitive issues, the complexities of even the global matrix structure are inadequate to
carry beyond balancing simultaneous product and geographic needs. Simply due to the size of the organization, more restrictive types of structures would tend to slow down a huge global firm and make it less competitive.
12. What does it mean to say that the transnational model is based on a philosophy of interdependence?
The characteristics of the transnational model facilitate strong coordination and knowledge sharing. It makes the units of the company more dependent on each other, thus complying with the philosophy of interdependence.
Chapter 7 Workbook: What Is Your Cultural Intelligence?
This activity allows students to gain insight into their own level of cultural intelligence. Cultural intelligence is a manager’s capability to function well in situations characterized by cultural diversity. Cognitive CQ pertains to the head, emotional CQ pertains to the heart, and behavioural CQ pertains to the body. How might you develop greater empathy for people who are different from you? Hone your observational skills, take courses, look for international travel opportunities, and learn to pick up on clues about how people from a different country respond.
Alternative Classroom Activities
Students have difficulty in imagining a truly transnational organization, and so it makes for an interesting group discussion to find and discuss a company that truly functions as a transnational company. Reckitt is such a company. Assign the research ahead of time and then have students discuss some of the organizational design and management implications of such a structure. In particular, students can discuss the diversity in the executive team and management. See http://www.reckitt.com/home
Lecture Enhancement: Chapter 7 Workshop: Working Abroad
Engage the class in this workshop by using the Hofstede Cultural Insights website https://www.hofstede-insights.com/product/compare-countries/ to examine and analyze their chosen country. Ensure each team is analyzing a different country.
Case for Analysis: Ivanhoe Mines
Assignment Questions and Suggested Answers
1. What problems did Ivanhoe Mines encounter when it invested in Myanmar?
It encountered many problems, such as international sanctions, disputes over taxation and permits, problematic partners, loss of legitimacy, and political and bureaucratic delays.
2. Do you think that Ivanhoe Mines’ approach to risk is appropriate? Why or why not?
While the CEO has a strong appetite for risk, it seems that his position and that of Ivanhoe Mines is foolhardy. In the case of the investment in Myanmar, the company has nothing to fall back on should the situation there become more difficult still. Failure in Myanmar may erode confidence in Ivanhoe Mines as an organization and as an investment.
Case for Analysis: Rhinebeck Industrial
Assignment Questions and Suggested Answers
1. What do you see as the pros and cons of a new headquarters’ international department to coordinate across geographic regions?
The benefits to a new international department at headquarters include greater coordination of activities and greater sharing of information and innovations. These could result in substantial cost reductions and increased sales. However, the three regional vice presidents and managers at all of the subsidiaries are accustomed to thinking only in terms of what is best for their regions and/or subsidiaries. They will most likely resist this new way of thinking, at least initially, and may not be willing to implement some changes that benefit the entire organization if they feel the changes hurt their subsidiaries.
2. Do you support the proposal to reorganize into a worldwide product structure? What implementation challenges do you foresee? Explain.
The pros and cons of a worldwide product structure are fairly similar to those of the international department. The restructuring should result in greater coordination of activities and greater sharing of information and innovations, which should yield significant cost reductions and increased sales. Here again, the three regional vice presidents and managers at all of the subsidiaries will most likely resist the change initially. However, in time, they may come to see themselves as part of a collaborative global effort, as opposed to individuals within a conglomerate.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here is a website that provides further information for Ivanhoe Mines discussed in Chapter 7.
Ivanhoe Mines
Humphreys, T. (2014). “On an African Dog and Pony Show with Mining Mogul Robert Friedland,” at http://ceo.ca/2014/02/17/on-an-african-dog-and-pony-show-withbillionaire-mining-mogul-robert-friedland/ (accessed August 29, 2014).
Chapter 8: Organization Size, Life Cycle, and Decline
In this chapter, you will find: Chapter Overview Purpose of This Chapter If Nothing Else, My Students Should Learn … Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care? What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
Reflections on Teaching What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores the question of large versus small organizations and how size relates to structure and control. It introduces the notion of bureaucracy in relation to organization size, growth, decline, and performance. Models of life-cycle development stages and the mechanisms for organizational control are introduced. Strengths and weaknesses of bureaucracy are analyzed. Finally, the chapter discusses organizational decline and some of the methods for dealing with downsizing.
PURPOSE OF THIS CHAPTER
This chapter develops the idea of the importance of organizational size and age in shaping organizational processes.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Students must understand the multistage organizational life-cycle model in detail.
2. Students need to understand that “bigger is not necessarily better.”
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Explain the advantages and disadvantages of large organization size. [Understand]
2. Describe how an organization progresses through four stages of the organizational life cycle. [Apply]
3. Define the characteristics of bureaucracy. [Remember]
4. Compare large organizations and small organizations along the dimensions of formalization, centralization, and personnel ratios. [Analyze]
5. Identify approaches to reducing bureaucracy in large organizations. [Apply]
6. Contrast market and clan control with bureaucratic control. [Analyze]
7. Describe the model of decline stages. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Organizations face crises at different stages in the organizational life cycle and need to be managed differently at different stages.
2. As the chapter illustrates, organization do die, often leaving significant socioeconomic impacts on employees; on the community; and, more broadly, on countries.
3. The big-organization/small-organization hybrid is a useful model for organizations.
WHY SHOULD STUDENTS CARE?
1. Students need to be aware of an organization’s stage in the life cycle so that they can understand what crises the organization may face as it grows.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students believe bureaucracies are “bad,” and they therefore see bureaucratic control as undesirable.
2. Organizational death seems a rather remote or improbable idea!
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 8 Workbook: Control Mechanisms to highlight the nature of and differences between organizational control mechanisms. [Stumbling Block 1]
Watch the documentary Startup.com to highlight an organization’s rise and fall during the dot-com era. The video may be seen as controversial; therefore, it is recommended to first view the trailer at https://www.youtube.com/watch?v=Pjk-WmtNs3g. The complete video can be viewed at https://www.youtube.com/watch?v=ibuiUXOTE4M [Stumbling Block 2]
Class Engagement Question
How is the idea of clan control related to organizational culture?
a. It is not.
b. Clan control involves the use of shared values, commitment, traditions, etc. to control behaviour.
c. Clan control uses price–cost comparisons.
Use this question to introduce the idea of organizational culture that students will be examining in Chapter 9.
You & Design
The You & Design questionnaire allows students to learn about their preference for organizational size. More entrepreneurial students may become encouraged to look for smaller organizations to work at.
Discussion Questions and Suggested Answers
1. Discuss the key differences between large and small organizations. Which kinds of organizations would be better off acting as large organizations, and which are best trying to act as big-company/small-company hybrids?
A large organization is able to achieve economies of scale and to reach out to the global market. A small organization is more responsive to customers and more flexible. Its reach is usually only regional. The structure of the large organization is often mechanistic with emphasis on the vertical hierarchy (keep in mind, though, that successful large organizations are decentralized), while the small organization is more likely to have a flat structure and be more organic. The large organization is more complex and likely to breed organization men, while the small organization can be kept simple in a relatively simple environment and fosters entrepreneurs.
Organizations that are in relatively stable markets (federal government), companies needing huge resources to produce a product or service (Boeing), or those that must perform complex tasks (NASA) can function best as large companies. Those companies that wish to serve a niche in the marketplace can remain small. A company that is in a complex and dynamic environment but needs flexibility and responsiveness to be competitive, or that demands innovation to be successful, will need to become a bigcompany/small-company hybrid. This would even be true of companies competing in world niche markets.
2. Why do large organizations tend to be more formalized?
Large organizations experience greater variation among employees; hence, the need for standardization and control is present. Large organizations rely on rules, procedures, and other paperwork to achieve standardization and control across a large number of employees and departments. Personal supervision is not a feasible form of control by upper management in a large organization. Formalization is an impersonal means of control that substitutes for surveillance as organizations increase in size.
3. If you were managing a department of university or college professors, how might you structure the department differently than if you were managing a department of bookkeepers? Why?
The professors would be considered high on professionalism; they have spent years in advanced education and have been socialized toward norms and values of work performance. Therefore, the department of professors should have less bureaucratization, especially of rules and procedures. Rules have been internalized so that minimal external rules are needed.
Professionalism does what formalism is designed to do organize and regularize the behaviour of members of the organization. If too much bureaucracy is imposed on
professionals, a conflict will emerge, resulting in dissatisfaction and resignation on the part of the professionals.
4. Apply the concept of life cycle to an organization with which you are familiar, such as a university or college, or a local business. What stage is the organization in now? How did the organization handle or pass through its life-cycle crises?
This question is designed to have students trace the development of an organization through the four stages of the life cycle. Students will match the characteristics described in Exhibits 8.2 and 8.3 with the actual characteristics of the organization chosen for description. Although the model and reality of any one given organization may not correspond exactly, use the questioning process to help students identify the factor satisfied during each stage and then the crisis experienced before the organization was pushed to the next stage.
5. Describe the three bases of authority identified by Weber. Is it possible for each of these types of authority to function at the same time within an organization?
Rational-legal authority is based on employees’ beliefs in the legitimacy of rules and the hierarchy of authority and the right of those elevated to authority to issue commands. Traditional authority is based on people’s belief in the sanctity of tradition and in the status of people exercising authority through those traditions. Charismatic authority is based upon devotion to the exemplary character or heroism of an individual person.
Yes, each of these types of authority may function at the same time within an organization. Rational-legal authority is a common base in today’s organization. Traditional authority may appear in norms and values within an organization. Things may be done a certain way because of norms and tradition. Certain individuals may have special status due to these traditions or norms, and the rest of the employees defer to that tradition. Charismatic authority appears when a very strong or attractive person is able to influence the direction and outcomes of the organization because other people defer to them.
6. In writing about types of control, William Ouchi said, “The Market is like the trout and the Clan like the salmon, each a beautiful highly specialized species which requires uncommon conditions for its survival. In comparison, the bureaucratic method of control is the Catfish clumsy, ugly, but able to live in the widest range of environments and ultimately, the dominant species.” Discuss what Ouchi meant by that analogy.
Ouchi’s point is that the market and clan mechanisms of control are highly specialized and suited to specific circumstances. The market works only when price competition is present and output can be accurately priced (highly specialized species). Clan control works only when employees have shared values, traditions, and trust (requires uncommon conditions for its survival). Bureaucratic control, on the other hand, will fit almost any situation.
Rules and regulations, hierarchy, and other bureaucratic aspects of control can be used in almost any organization (widest range of environments). Thus, bureaucracy occurs in almost all organizations and is the most widely used form of control (dominant species).
7. Government organizations often seem more bureaucratic than for-profit organizations. Could this partly be the result of the type of control used in government organizations? Explain.
Yes, government organizations have to rely on bureaucratic forms of control; hence, they have more paperwork, procedures, and red tape. Government organizations usually cannot use market control because they typically provide services that are unique and difficult to price. Moreover, government organizations are not in competition, so there is not a market to ensure that a price reflects fair value. There is an element of clan control in some agencies to the extent that employees share common values. However, heavy clan control is not realized for lack of a thick, constant culture. Since many government organizations also are large and perform routine tasks, they are unable to make extensive use of clan control. Government organizations thus seem much more bureaucratized than similar organizations in the private sector. By default, bureaucratic control dominates.
8. The incident command system has been used primarily by organizations that regularly deal with crisis situations. Discuss whether this approach seems workable for a large media company that wants to reduce bureaucracy. How about for a manufacturer of cell phones?
Yes, this approach can help any organization respond to new opportunities and unforeseen competitive threats, as well as organizational crises. A media company wanting to reduce bureaucracy could loosen its lines of command while maintaining its mission. The idea is to maintain order in a dynamic environment. With technological changes for both a media company and cell phone company happening so rapidly, this approach could be very helpful.
9. Refer to the HBC case at the beginning of Chapter 1 and discuss how HBC illustrates the various stages of the organizational life cycle. In what stage of the life cycle does HBC seem to be today?
HBC has been through most of the stages of decline. It has gone through the first four stages but has not entered the dissolution stage. It has been able to survive, up to this point
10. Do you think a “no growth” philosophy of management should be taught in business schools? Why?
A case can be made to teach a “no growth” philosophy in management education. It has become evident in the economy the last few years that always expecting growth is not always realistic. Managers need to know how to manage in such a no-growth situation.
The 2008–09 financial meltdown is a good illustration of the need to manage in a different context.
Chapter 8 Workbook: Control Mechanisms
This workbook activity encourages students to evaluate control they have experienced in their work and school settings. You will have an opportunity to reinforce the importance of achieving balance in organizational control systems. Some students may have a tendency to label all control as “bad,” so be certain that a balanced picture emerges in the final analysis and that students understand the importance of appropriate controls from an organizational perspective.
Alternative Classroom Activities
Have the class read the Chapter 8 In Practice United Parcel Service case. Examine the dimensions of bureaucracy in Exhibit 8.5 and discuss how the largest packagedistribution company in the world has become so successful.
Bartunek and Betters-Reed (1987) (“The Stages of Organizational Creation,” American Journal of Community Psychology, 15, 287–303) developed a model describing the process of organizational creation from the original idea to its implementation, based on case studies of several organizations, each of which had the goal of meeting some social need in an innovative way. Although perhaps seen as a dated model, it still holds relevance for the life-cycle of organizations today. The model involves three stages: (1) first idea, (2) commitment and early planning, (3) and implementation. The authors contend that the ways in which the idea is developed and ultimately implemented affect the future of the organization by providing the foundation for how the organization will pass through life-cycle stages. For example, organizations that allowed all new members the freedom to develop and adapt the plan were more likely to be an innovative organization. Those that did not resolve problems and conflicts during the pre-birth stages continued to have such problems in their later organizational life.
The first idea stage involves the perception of a problem and the suggestion of a way in which the problem might be addressed through an organization. Experiences and feelings vary from discomfort about the problem to excitement about the first ideas and their superiority to other ideas. Critical issues include the creativity and thoroughness involved in the development of the idea and whether the originator of the idea cares about the problem itself.
The second stage, commitment and early planning, begins with the commitment of the idea originator to create a new organization and continues through initial planning. Important relationships are established at this stage with others who now join in planning for the organization, and with others in the environment, such as sponsors, resource suppliers, and regulatory agencies. Common experiences and feelings may
involve ambiguity and conflict among planners; negotiation over the development of the idea, which may be transformed by the addition of other planners; and problems with the environmental sectors. The critical issues are similar to those of the first stage, but they take on new dimensions. Issues now include the relationships among the planners and between planners and environmental groups.
At the implementation stage, planners begin to feel that an organization really exists, because formalization begins to take place. Crucial tasks include choosing the leader and hiring new organizational members. There is excitement that the organization is finally getting underway. However, there are also discoveries that resources are not adequate for the plans. There may be difficulties between planners and new members. Critical issues include the ways in which resources are used, particularly if the level of resources does not match the intended plan; the way in which new members are treated as integral to the organization; and the relationship between the first leader and members.
Case for Analysis: Daily Grind Coffee Inc.
Assignment Questions and Suggested Answers
1. How well do you think that The Daily Grind defines its distinctive niche?
The owners have differentiated themselves by offering “home-made” dishes with distinctive and interesting menu items that appeal to customers who want healthy, tasty alternatives to the fast-food franchises. In addition, by offering simple catering options and a meeting place for local groups they have made it a congregating place for regular patrons and built customer loyalty. The location, good quality, flexible menu options, and customer appreciation have made The Daily Grind a distinctive coffee shop. It has articulated its value proposition very effectively.
2. What are future challenges the organization should anticipate?
One of the future challenges it will face is the pressure to grow as it becomes more successful. This may mean diluting some of its distinctive value proposition as it grows. The distinctive “home-made” appeal works due to its size and single location, but this could be sacrificed with growth as well as the loss of control. In addition, copycat coffee shops may try to replicate its success. Finally, the clan control that differentiates it may start to dilute with time as the organization becomes less of a novelty.
Case for Analysis: I Love Rewards Inc.
Assignment Questions and Suggested Answers
1. What risks does I Love Rewards Inc. face as it expands?
The company may experience the crisis of the need for “delegation with control” as it moves into the formalization stage. It can be difficult for founders/entrepreneurs to make the transition of giving up some degree of control to others. In this case, Suleman is so closely tied to the culture and identity of his company that the loss of control may be difficult for him. In addition, the management team to whom he delegates some of this control will have to share his vision of the company and not dilute its value proposition and core values.
2. Razor Suleman comments that his company could be a billion-dollar company in five to ten years. What are some challenges he may face then?
He will need to manage the transitions between the stages of the organizational life cycle. As well, he will need to develop a control system that will continue to integrate his employees. Because I Love Rewards Inc. has been recognized for its employment practices and culture, it needs to be particularly attentive to the type of control systems it will need as it grows. Clan control is difficult to sustain without the strong vision and continuing presence of the founder. Also, as the company gets larger, some of the integrating and coordinating mechanisms will have to be more formalized, and this could impact the flexibility and fluidity of the organization. If Suleman raises some venture capital to grow his company, as he did in 2010, he will have to answer to the lenders as well. He will also have to be alert to the signs of organizational decline.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few websites that provide further lecture ideas for Chapter 8.
Family Businesses
Fernandez-Araoz, C., Iqbal, S., Ritter, J., and Sadowski, R. (2019, June 18). “6 Traits of Strong Family Businesses,” Harvard Business Review at https://hbr.org/2019/06/6-traitsof-strong-family-businesses (accessed July 5, 2021).
MacDonald, C. (2013, June 23) “Why Do Family Firms Thrive?” Canadian Business at http://www.canadianbusiness.com/blogs-and-comment/why-do-family-firms-thrive/ (accessed August 4, 2014)
Large versus Small Organizations
Adler, L. (2014). “Point/Counterpoint: Why You Should Start Your Career with a Big Company,” at https://www.linkedin.com/today/post/article/20140106014615-15454point-counterpoint-why-you-should-start-your-career-with-a-big-company (accessed August 4, 2014)
Henderson, J.M. “Are You Better Off Working for a Small Company Or a Big One?” at https://www.forbes.com/sites/jmaureenhenderson/2016/11/07/are-you-better-offworking-for-a-small-company-or-a-big-one/?sh=6ba630ce6959 (accessed July 5, 2021)
Chapter 9: Organizational Culture and Ethics
In this chapter, you will find:
Chapter Overview
Purpose of This Chapter
If Nothing Else, My Students Should Learn …
Learning Objectives
How Does This Chapter Relate to the Real World?
Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks?
What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Alternative Classroom Activities
• Lecture Enhancement: In Practice Case: Google
• Case for Analysis: Queen’s Returns Radler Gift
• Case for Analysis: NASCAR
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
Chapter 9 explores the cultural and ethical values of organizations. First it describes the nature of organizational culture its origins, and purpose, and how to identify and interpret culture through ceremonies, stories, and symbols. Then it explores how culture reinforces strategy and structural design. It also discusses ethical values and how managers implement the structures and systems and shape culture that will influence employee behaviour. Finally, it provides an overview of the international environment’s effect on cultural and ethical issues.
PURPOSE OF THIS CHAPTER
This chapter highlights the strength of culture and values in shaping organizational behaviours. Whether culture eats strategy for breakfast, a statement attributed to management consultant Peter Drucker, this chapter provides the theoretical basis to understand culture.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Organizational culture is powerful, hard to see, but not monolithic.
2. Organization culture serves two critically important functions to integrate members so that they know how to relate to one another and to help the organization adapt to the external environment.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Define organizational culture and identify symbols, rituals, stories, or other observable elements that signal cultural values in a company you are familiar with. [Apply]
2. Describe the four types of organizational culture. [Remember]
3. Explain the relationship among culture, corporate values, and performance. [Understand]
4. Explain how managers create a high-performance culture. [Evaluate]
5. Understand how ethical systems work in organizations. [Understand]
6. Explore your ethical views. [Analyze]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Organizations have different cultures and subcultures, which need to be understood and managed.
2. Organizations often emphasize the importance of individuals fitting into the culture and sharing the same values.
WHY SHOULD STUDENTS CARE?
1. Students need to understand culture so that they do not inadvertently make careerlimiting errors.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students underestimate the importance and strength of organizational culture. 2. Students minimize the fact that it is organizational leaders who shape culture and ethical values to achieve organization performance outcomes.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
Watch http://www.youtube.com/watch?v=ECz945gq33s to see what happens when David Letterman visits the GE building to deliver a fruit basket. Get students to infer some cultural differences between GE and NBC. [Stumbling Block 1]
Watch and discuss some clips from Dead Poets Society. For example, see https://www.youtube.com/watch?v=Wey8nauEyA4 and https://www.youtube.com/watch?v=TqY_1BH7TNQ [Stumbling Block 2]
Class Engagement Question
Which of the following attributes are not elements of an adaptability culture?
a. innovation
b. internal focus
c. creativity
d. risk taking
Use this question to discuss the four categories of organizational cultures that have been identified.
You & Design
The You & Design questionnaire on organizational culture preference makes a good starting point to discuss the importance of “fitting in.”
Discussion Questions and Suggested Answers
1. Describe observable symbols, ceremonies, dress, or other aspects of culture and the underlying values they represent for an organization where you have worked or studied.
The answer to this question will vary according to experience. This question is designed to get students to think about these observable aspects of culture. Since all students have been associated with a university or college, a discussion of the culture of that university or college could be used for this question if students do not on their own come up with meaningful discussion about places they have worked. The graduation ceremony, with robes worn by faculty and graduates, helps maintain the culture. Many universities or colleges have a mace, and certainly all give diplomas as symbols. Other elements of culture among students include the prevailing dress, trends such as book bags rather than briefcases, and expected study habits or behaviour of students.
2. What might be some of the advantages of having several subcultures within an organization? the disadvantages?
Distinctive subcultures often develop within a company when there is physical separation of the main operations or a unique problem or goal of a particular unit within the organization. Subcultures can be advantageous to the corporation so that multiple goals can be met effectively. The text points out that this is similar to the concept of differentiation, in which employees in different functional areas develop different values with respect to time horizon, interpersonal relationships, and formality in order to perform the job of each particular department more effectively. The potential disadvantage is that the subcultures might become so disparate that they do not blend together into a corporate whole.
3. Explain the concept of social capital. Name an organization currently in the business news that seems to have a high degree of social capital and one that seems to have a low degree.
Social capital consists of the embedded trust, mutual understandings, and shared norms and values that enable members of an organization to cooperate and coordinate their activities to achieve organizational goals. This can be either high or low. When it is high, the company usually experiences goodwill, as with eBay as well as Deloitte & Touche, LLP in Calgary. Enron, Walmart, and other companies caught up in scandals or poor management practices have certainly developed low social capital.
4. Do you think a bureaucratic culture would be less employee oriented than a clan culture? Discuss.
Yes, bureaucratic culture has an internal focus and a consistency orientation for a stable environment. In contrast, clan culture has a primary focus on the involvement and participation of organization members and on rapidly changing expectations from the
external environment. The bureaucratic culture would be less employee-centred since its main thrust is being consistent. Exceptions to norms for personal reasons are less likely to be tolerated. The clan culture focuses on the participation of its members, and therefore is more likely to be employee-oriented.
5. Why is values-based leadership so important to the influence of culture? Does a symbolic act communicate more about company values than an explicit statement? Discuss.
Values-based leadership defines and uses signals and symbols to influence corporate values. Its use articulates a vision for organizational values. Engaging in daily activities reinforces these values. Symbols represent deeper values of the organization, whereas language is the use of a saying, slogan, or metaphor to convey special meaning and influence culture. We all hear language that doesn’t mean anything, so we look for actions to express intent. “Walk the talk” is truly crucial in trying to influence culture.
6. Are you aware of a situation in which either you or someone you know was confronted by an ethical dilemma, such as being encouraged to inflate an expense account? Do you think the person’s decision was affected by individual moral development or by the accepted values within the company? Explain.
This answer will depend on personal experience. The following experience happened to a person now well known as a writer in organization theory. While a health- and beautyaids buyer for a large grocery wholesaler, the person was frequently provided with samples of products. Sometimes gifts were given by sales representatives. When he asked for clarification of company policy regarding gifts, he was told by a vice president, “If it is larger than a television set, you cannot keep it. If it is smaller, it is okay.” Once, he was offered lodging aboard the Hyatt Queen Mary Hotel during a vacation. This seemed larger than a television set. When he asked the same vice president about it, he was told, “Well, we shouldn’t do this type of thing, but we all do. Go ahead and accept it and have a good time. But don’t tell anyone and don’t let it influence your buying decisions.” He knew that it would be hard not to let it influence his decisions, but he wanted to maintain a good relationship with this vendor. The decision to go on the vacation anyway was an indication of his moral development. Faced with the same decision today, he would not accept the lodging since his moral development has progressed since that time. Accepted values of the company entered into the picture, but basically reinforced what the individual really wanted to do anyway and was willing to risk with his manager’s encouragement
7. Why is equality an important value to support learning and innovation? Discuss.
The learning organization creates a web of caring relationships in which people take risks and develop to their full potential. Preferential parking spaces and executive dining rooms that create values of inequality are discarded. Within a climate of trust, employees sense the learning environment and are freer for experimentation, knowing that a mistake made from appropriate risk will not cost their status in the organization.
8. What importance would you attribute to leadership statements and actions for influencing ethical values and decision making in an organization?
Cultural leadership styles will definitely influence culture and ethics. Some leadership styles fit better with some cultures than do others. Leaders who create culture fit well in a mission culture. Leaders who embody culture fit well in a consistency culture. Leaders who integrate culture fit well in an involvement culture. Leaders who change culture fit well in an adaptability culture. The importance of symbolic management can also influence the ethics of the organization. Symbolic management defines and uses signals and symbols to influence corporate values. The vision of the organization states or implies its values and ethical focus. The daily activities of leaders act to reinforce these values.
9. How do external stakeholders influence ethical decision making in an organization? Discuss how globalization has contributed to more complex ethical issues related to external stakeholders.
Government agencies, customers, special interest groups, and global market forces influence ethical decision making in an organization because of their profound influence on standards of what is acceptable. Global companies face difficult ethical issues. Securing lower-cost labour overseas may anger employees and the local community while it serves the interests of shareholders. However, many companies now face opposition from activists about their sourcing policies and have had to act in ways that are more socially responsible (e.g., Nike).
10. Codes of ethics have been criticized for transferring responsibility for ethical behaviour from the organization to the individual employee. Do you agree? Do you think a code of ethics is valuable for an organization?
One can understand the rationale for this criticism of a code of ethics. Indeed, when dealing with employees of low moral development they may easily simply follow the code of ethics and rationalize their escape from any responsibility for their actions. A code of ethics still has a role for an organization. It tells the employees what the minimum ethical standards are and what is expected. It could also help the organization defend itself from attacks if ethical standards are not followed.
11. In the recent global economic meltdown, many senior executives made money while many lost their jobs and their houses. What ethical issues does this situation raise? How do you think this affects the social capital of these organizations?
It is hard to justify these actions from an ethical viewpoint. The social capital within the company will have sunk lower based on this situation, which will most likely affect its goodwill with external audiences as well.
Alternative Classroom Activities
Show the video trailer of The New Corporation in class and divide up the chapters for different groups to discuss from an ethical context. The discussion of shareholder wealth versus corporate social responsibility makes a good debate and generates a lot of interest and opinion.
Alternatively, examine the article, “‘The New Corporation: The Unfortunately Necessary Sequel’ Review: A More Profound Documentary Than the First One” to spark conversation on the controversial role of corporations, at https://variety.com/2020/film/reviews/the-new-corporation-the-unfortunately-necessarysequel-review-the-corporation-1234819215/ (accessed July 6, 2021)
Facilitate a discussion and/or debate of Peter Drucker’s (often referred to as the father of modern management in the business world) view that “Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you’ve got.” (Peter Drucker, BrainyQuote.com, Xplore Inc , 2014, at http://www.brainyquote.com/quotes/quotes/p/peterdruck130601.html (accessed July 6, 2021)
Lecture Enhancement: In Practice Case: Google
After reading the case, engage students in a discussion as to why Google (Alphabet, Google’s parent company) continues in the top rankings of best workplaces.
Have students peruse LinkedIn’s Top Companies 2021 in Canada, https://www.linkedin.com/pulse/top-companies-2021-25-best-workplaces-grow-yourcareer-canada-/ (accessed July 6, 2021).
Poll students to determine which organization(s) they would choose to work for and why.
Case for Analysis: Queen’s Returns Radler Gift
This case provokes animated discussion. It works well if students discuss the case in teams (or small groups) for 15–20 minutes and you then debrief the class as a whole.
Assignment Questions and Suggested Answers
1. What are the most important ethical issues in the case?
Queen’s was trying to be consistent with its principles when it returned the gift. If the university teaches students to be ethical, then accepting a gift from someone who has pleaded guilty to fraud is not acceptable. Having someone like that on a benefactor’s wall sullies the reputation of the institution and what it teaches.
2. Should Queen’s have returned the gift? Why?
Although answers will vary here, students should focus on ethical considerations and consistency. In that context, the gift should have been returned.
3. Does returning the gift establish some sort of precedent?
Although the university administration says that these types of decisions will be made on a case-by-case basis, it does create a precedent to do the same thing in similar circumstances in the future. Students will have a range of responses that should be captured on a whiteboard or other display medium. At the end of the discussion, you should ask for a quick show of hands, first by those who support Queen’s decision; then by those who oppose it; and, lastly, by those whose views were changed as a result of the analysis.
Case for Analysis: NASCAR
Assignment Questions and Suggested Answers
1. How would you describe the culture of NASCAR racing teams? How are these cultural values manifested?
Suggested Answer: Race-car drivers and teams belong to a culture of “outlaws” who take the law into their own hands. NASCAR fans expect their drivers to be smart, crafty, and calculating and, if need be, playing just this side of the rule book in the garage and on the track. Loyal fans “know” their drivers and can easily picture themselves drinking a beer or spending an afternoon tinkering under the hood with a favourite driver.
Drivers remain faithful to traditional stock car racing and to the traditional tracks, devoted to the notion of “let the boys drive,” including rule-breaking to gain an advantage. The outlaw image is cherished by NASCAR’s fan base, as one sports columnist warned: “If the outlaw blood ever is completely drained, then NASCAR will be as colorless as the white flag that signals one lap to go. And its popularity could be just as fleeting.”
2. Describe the culture war at NASCAR. What is your evidence?
Suggested Answer: In contrast to the no-holds-barred, outlaw culture enjoyed by drivers, teams, and fans, NASCAR’s corporate office, the media, and sponsors embrace a bureaucratic culture full of rules, fines, and penalties. NASCAR’s focus ranges from assigning and revoking car numbers at will and the strict enforcement of a nocommunications ban between crews/drivers and their rivals, to points penalties for drivers who refuse to talk to the media. Even the area of driver safety is a cultural tug-of-war, and drivers claim that NASCAR is more concerned with the crackdown on rules violations than on safety. Teams point out the frequency with which serious issues such as safety regulations seem to follow high-profile wrecks and deaths.
3. How might the NASCAR organization, teams, and sponsors work through differences to create a unified culture? What do you think a unified culture would mean for all parties?
Suggested Answer: Students can have a lively discussion about how to create a unified culture in an ethical manner. They should recognize that a unified culture will need to identify some common ground and a shared vision of a sport that is exciting and fun for the drivers/teams as well as the fans. All parties need to understand the purpose of rules and policies creating a level playing field while protecting driver safety.
Chapter 9 Workshop: What Is Your Level of Ethical Maturity?
Engage the class in this workshop. As students respond to each question, encourage students to reflect on what influences their ethical behaviour and decisions. As a class, discuss the implication of ethical maturity for their potential role as an organization manager.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few articles that can be used for a deeper discussion of organizational values.
Ben & Jerry’s http://www.benjerry.com/values (accessed July 6, 2021).
“We’ve Started a Food Fight!” https://www.benjerry.com/whats-new/2014/weve-starteda-food-fight (accessed July 6, 2021)
Lululemon
D’Innocenzio, A. (2018, February 6). “Lululemon’s CEO Resigns over Issue of Conduct,” The Denver Post, https://www.denverpost.com/2018/02/06/lululemon-ceoresigns-over-issue-of-conduct/ (accessed July 6, 2021).
Tahir, T. (2018, February 15). “Employees Lift the Lid on ‘Toxic Culture’ at Leggings Retailer Lululemon Where ‘You Had to Be a Man to Succeed Unless You Were the Boss’s Girlfriend’,” Daily Mail.com, https://www.dailymail.co.uk/news/article5395241/Employees-lift-lid-toxic-culture-Lululemon.html (accessed July 6, 2021).
Additional
Chris MacDonald, The Business Ethics Blog, at http://businessethicsblog.com World Business Council for Sustainable Development, at http://www.wbcsd.org/home.aspx.
Organization Theory and Design, 4Ce Enriched Instructor’s Manual
Chapter 10: Manufacturing and Service Technologies and Digitization
In this chapter, you will find: Chapter Overview Purpose of This Chapter
If Nothing Else, My Students Should Learn … Learning Objectives
How Does This Chapter Relate to the Real World? Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks?
What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 10 Workbook: Bistro Technology
• Alternative Classroom Activities
• Lecture Enhancement: Lean Manufacturing at FastCap
• Case for Analysis: Digitization in the Manufacturing Sector: Skills in Transition
• Chapter 10 Workshop: Manufacturing and Big Data Organize the Project
• Integrative Case 6.0: Costco: Join the Club
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores the nature of organizational technology and the impact that technology has on organizational design. This chapter explores both manufacturing and service technologies. Technology is an organization’s production process and includes work procedures as well as machinery. This chapter will discuss both core and noncore work processes and their relationship to designing organizational structure. External strategic needs and internal operational work processes impact design. The chapter focuses on three design issues:
1. How manufacturing and service technologies for the organization as a whole influence organizational structure
2. How the differences in departmental technologies influence the design and management of organizational subunits
3. How the flow of materials and information that is, the interdependence among departments affects structure
PURPOSE OF THIS CHAPTER
This chapter provides students with a detailed understanding of the differences and similarities between service and manufacturing organizations.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Students need to understand the profound impact that technologies have on organization design.
2. Students must understand Perrow’s framework described in Exhibit 10.8
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Define an organization’s core technology and its influence on organization design. [Remember]
2. Explain Woodward’s model of technical complexity, structure, and performance. [Understand]
3 Apply the distinctive qualities of organization design that enable organizations to operate exceptionally complex technologies with few breakdowns and extremely rare catastrophes. [Apply]
4. Compare service technology and manufacturing technology in terms of their impact on organization design. [Evaluate]
5. Define departmental technology and its relationship to department design. [Remember]
6. Identify three types of interdependence and their respective structural priority. [Remember]
7. Explain the impact of digital technology on organizations as it evolved from mainframe computers to the Internet of things (IoT) and beyond. [Understand]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Increasingly organizations are becoming manufacturing and service hybrids.
2. Technology and structure can be co-aligned with organizational strategy to meet changing needs and provide new competitive advantages.
3. Organization design must allow for the appropriate amount of communication and coordination to handle interdependence across departments.
4. Digitization is changing the nature of work and organizational design.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are structured so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Some of the concepts are not too familiar to students.
2. Students find some of the chapter’s concepts nonintuitive.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 10 Workbook: Bistro Technology to illustrate the idea of technology. [Stumbling Block 1]
Show the clip posted at http://www.bbc.com/news/magazine-28581597, on scissor making, to discuss the resurgence of craft work. [Stumbling Block 2]
Class Engagement Question
Which one of the following characteristics does not typically represent a service organization?
a. interpersonal skills
b. intangible outputs
c. high formalization
d. decision making is often decentralized
Use this question to explain the differences between service and product organizations.
You & Design
The You & Design questionnaire done as a group activity will allow students to see differences and similarities in their mental maps service versus manufacturing.
Discussion Questions and Suggested Answers
1. Where would your university or college department be located on Perrow’s technology framework? Look for the underlying variety and analyzability characteristics when making your assessment. Would a department devoted exclusively to teaching be put in a different quadrant from a department devoted exclusively to research?
The purpose of this question is to generate discussion about how to apply Perrow’s framework to a real organization. Students often are not aware of the full range of work activities that takes place in an academic department, so it is a nice opportunity to discuss the technology of teaching and research. Students generally agree that university departments go into the research quadrant. Most teaching and research are unanalyzable because they require experience, judgment, and skill to know how to perform. One cannot do them just by studying a procedure manual. Moreover, there are frequent problems and exceptions that have to be handled. A department devoted to teaching would generally be lower in variety than a department devoted to research. A department devoted to teaching would be in the craft category because after two or three years of teaching, few new problems arise. In schools where teaching is an assembly line, the department might be in the routine quadrant. A department devoted exclusively to research would go into the nonroutine category because research always contains unexpected problems that are not analyzable and require experience and intuition to solve.
2. Explain Thompson’s levels of interdependence. Identify an example of each level of interdependence in the university or college setting. What kinds of coordination mechanisms should an administration develop to handle each level of interdependence?
Pooled interdependence is the lowest form of interdependence. All departments contribute to the overall organization mission, but they do not directly exchange resources with each other. Sequential interdependence means that the outputs of one department are inputs to another department. Reciprocal interdependence means that the outputs of department A go to department B and from department B back to department A. Resources are exchanged in both directions.
An example of pooled interdependence would be the marketing and philosophy departments. Both contribute to the university, but generally they do not exchange resources with one another. An example of sequential interdependence would be the course sequence in accounting. Students from the first course become inputs to the second course, and so on. An example of reciprocal interdependence would be an
interdisciplinary research project or capstone course jointly taught by accounting and management. Discoveries in accounting would become inputs into the thinking of management, and management’s work would become inputs to accounting.
As interdependence increases, greater time and energy are needed for coordination. Simple rules and standardization can provide for any coordination needed between pooled departments. Planning is needed to make sure that outputs of one department are suitable as inputs to the next department in sequential interdependence. Mutual adjustment, which involves face-to-face discussion, becomes necessary to solve joint problems in the case of reciprocal interdependence.
3. Describe Woodward’s classification of organizational technologies. Explain why each of the three technology groups is related differently to organizational structure and management processes.
Woodward assigned 100 firms to 10 categories. These 10 categories were then summarized into three major groups. The first group is small batch, which are job shops. They manufacture and assemble individual orders to meet the specific needs of customers. Examples include made-to-order manufactured products such as for unique applications in the construction industry.
The second type is called large batch or mass production. This is the assembly line process, which uses long production runs of standardized parts. The manufacturers of automobiles, trailer homes, and textbooks all are examples of mass production.
The third group is continuous process. This is automatic technology that runs continuously. Examples include chemical plants or nuclear power plants.
The differences in management processes and structure are related to increasing technical complexity. As stated by Woodward, different technologies impose different demands on individuals and organizations and the organization must adapt to those demands. In order to produce the products desired in the unit production operation, highly skilled employees are hired. The operations are nonstandardized, requiring both verbal and frequent communication. The same is true of the continuous-process operation, though the emphasis is on supporting the complex machinery and units responsible for maintaining the machinery. Mass-production operations are standardized, use lower-skilled employees, and can be coordinated with rules and procedures. The structure and management processes support the type of technology used in the organization.
4. What relationships did Woodward discover between supervisor span of control and technological complexity?
Woodward proposed that technological complexity increased from small batch to mass production to continuous-process technology. However, small batch had a span of control of 23, while mass production increased to 43, and continuous process decreased to only 15. This is a curvilinear relationship because span of control does not increase steadily
with technological complexity. Rather, it increases, then decreases. Other factors are probably associated with this relationship. Continuous-process and unit production have more higher-skilled employees, but more complex problems, so supervisors cannot handle as many people simultaneously.
5. How do flexible manufacturing and lean manufacturing differ from other manufacturing technologies? Why are these new approaches needed in today’s environment?
FMS (flexible manufacturing system) involves a computer taking over the manufacturing process. On Woodward’s technical complexity scale, FMS would be considered even more complex than continuous-process technology because machines run the manufacturing process and batch size can be adjusted for customization or mass production. FMS allows for the production of a single unit or of 1,000 or more identical units to be produced in the manufacturing flow. The computers are programmed to construct each part according to bar code data. The equipment does not have to be stopped and retooled as in small-batch manufacturing. In effect, a single manufacturing plant can operate as both small batch and mass production at the same time. Several custom orders can be combined into a large-volume production run. The tremendous advantage of computer-integrated manufacturing is the immediate responsiveness to customers that have a unique order and the ability to produce these custom orders in large batches for efficiency.
6. What is a service technology? Are different types of service technologies likely to be associated with different structures? Explain.
Service technologies differ from manufacturing technologies because there is no tangible product. Service technologies are typically defined as having two elements:
i. Simultaneous production and consumption, which means that the employee and customer interact to provide the service, thereby involving the customer in the production process.
ii Intangible product, which refers to an abstract service that cannot be stored in inventory in the same way a product can. This may consist of information or knowledge and/or the actual service itself.
The structure of service firms usually differs from product firms because the service organization has to be located close to the customer and employees have to have high interpersonal skills. The differences between service technologies are not addressed in the text, but are described in the auxiliary lecture for this chapter. Service technologies that have a high degree of labour intensity and which require customization of services are considered nonroutine and would have a structure characterized by decentralization and informality. Service technologies that have low customization and a low degree of labour intensity (high level of physical facilities) would tend to be structured in a way to increase centralization and formalization. Perrow’s technology framework can also be used to understand service technology. Service technologies that are routine would tend
to be structured in a more mechanistic structure, while services considered nonroutine would tend to be structured in a more organic fashion.
7. Mass customization of products has become a common approach in manufacturing organizations. Discuss ways in which mass customization can be applied to service firms as well.
The text gives several examples of mass customization in service firms. For example, Ritz-Carlton hotels are linked to a database filled with the preferences of half a million guests, allowing any desk clerk to find out what your favourite wine is, whether you’re allergic to feather pillows, and how many extra towels you want in your room. At Wells Fargo, customers can apply over the Internet and get a three-second decision on a loan structured specifically for them.
8. In what primary ways does the design of service firms typically differ from that of product firms? Why?
In a service firm, separate boundary roles are few as opposed to many, geographical dispersion is much as opposed to little, decision making is decentralized as opposed to centralized, formalization is lower, employee skill level is higher, and skill emphasis is interpersonal as opposed to technical. The designs differ primarily because the service firm needs technical core employees to be close to the customer.
9. A top executive claimed that top-level management is a craft technology because the work contains intangibles, such as handling people, interpreting the environment, and coping with unusual situations that have to be learned through experience. If this is true, is it appropriate to teach management in a business school? Does teaching management from a textbook assume that the manager’s job is analyzable, and hence that formal training rather than experience is most important?
This question is designed to foster discussion of management work and to examine the role of education in management training. Generally, students agree that management work tends to be craft. Many problems do require experience. Management work is not yet a profession that would go in the engineering category. Formal training and rulebooks will not make people good managers.
The reason management is taught in business schools is twofold. First, some aspects of management are analyzable. Frameworks and concepts can be used to help the manager understand certain aspects of the organization. But other parts are unanalyzable, and a good way to become better at these is through experience based on a sound ability to think and analyze. Effective management thus requires the combination of formal training and experience. Second, universities concentrate on analyzable activities because that is what they do best. Schools cannot provide a substitute for experience, but through research, they can learn which parts are analyzable and transmit to students them through
course work. Furthermore, by offering a well-rounded liberal background, education fosters the critical thinking ability that enhances an unanalyzable management job.
10. In which quadrant of Perrow’s framework would a mass-production technology be placed? Where would small-batch and continuous-process technologies be placed? Why? Would Perrow’s framework lead to the same recommendation about organic versus mechanistic structures that Woodward made? Why?
This question is designed to help students integrate Perrow’s framework with Woodward’s framework. Generally, mass-production technology would go in the routine quadrant of Perrow’s framework. The work is highly analyzable and there is little variety. People do the same thing over and over. Small batch, on the other hand, would tend to be craft. The work requires experience and is less analyzable because each activity is custom-tailored to the customer. Continuous process would tend to go in the engineering quadrant. The work is well understood because the machinery can be designed to handle it, but there are many exceptions that may arise.
Generally, Perrow’s framework would lead to similar recommendations about organic versus mechanistic structures to Woodward’s. Mass production goes in the routine quadrant, and both are suited to mechanistic structures. Craft and engineering quadrants tend to be more organic, which is consistent with Woodward’s observation about smallbatch and continuous-process firms.
11. To what extent does the development of new technologies simplify and routinize the job of employees? Discuss.
The development of new organizational technologies has the potential to both enrich and simplify employee jobs. New flexible manufacturing systems are being adopted by organizations and impacting organizational design. For the most part, the impact is positive, with shifts toward more organic structures both on the shop floor and in the management hierarchy. These technologies replace routine jobs, encourage teamwork, and allow the organization to become more flexible and responsive. The new technologies are enriching jobs to the point where organizations are happier places to work.
12. Describe the sociotechnical systems model. Why might some managers oppose a sociotechnical systems approach?
This model recognizes the interaction of technical and human needs in effective job design, combining the needs of people with the organization’s need for technical efficiency. The goal is to design the organization so that social and technical systems fit the needs of one another. There might be some opposition to the approach because the need for its expansion captures the real nature of today’s organization as a chaotic environment with a shift to nonroutine jobs.
13. How has the Internet of things (IoT) caused an explosion in the data available for analysis in organizations?
The Internet of things (IoT) refers to tens of billions of data units. The advent of digital media has enabled the emergence of big data analytics, digital organization, and the platform-based organization.
14. How do the underlying assumptions differ for a traditional “pipe” organization and a new platform-based digital organization?
Every consumer product that people have used in the past essentially came through a pipe organization wherein all manufacturing runs on a pipe model. The “pipe” organization works in a linear order, acquiring resources at one end of the pipe, making stuff within the pipe, and pushing the result out the other end for sale to customers.
However, platform-based organizations do not make stuff and push it out to customers. Rather, they connect and enable users to both create and consume something of value In a platform-based organization, producers and consumers are connected via digital technology (computers, smartphones). For example, YouTube is a digital connector that links thousands of independent producers with thousands of consumers.
Chapter 10 Workbook: Bistro Technology
Alternatively to the instructions given in the text, you may wish to suggest that students examine the Internet home page of national chains and interview the owner of a local family restaurant for perspectives on organizational goals. How customized versus standardized is the product? Is the batch size one meal created for the individual or is it a mass-produced food product that consumers can identify throughout the nation? Place the various restaurants’ technologies closer to service or product, depending on the extent to which they choose to mass-produce their product, and note how internal organizational variables change accordingly
Alternative Classroom Activities: Manitobah Mukluks
Have the class read A Look Inside Manitobah Mukluks at the beginning of the chapter. Then, using Exhibit 10.2, identify the core technology at Manitobah Mukluks Identify what the likely noncore technologies are at Manitobah Mukluks. Extend the application of core and noncore technologies to post-secondary institutions. Conclude with students examining past or present workplaces to identify their organization’s core and noncore technologies.
Lecture Enhancement: Lean Manufacturing at FastCap
FastCap, located in Ferndale, Washington, has embraced lean manufacturing View the video clip for a lean factory tour: https://www.youtube.com/watch?v=jYby_HczyDA (accessed July 6, 2021)
Case for Analysis: Digitalization in the Manufacturing Sector: Skills in Transition
In this case, students discover how the introduction of smart manufacturing technologies is affecting all aspects of a manufacturing plant.
Assignment Questions and Suggested Answers
1. What is meant in the case by jobs being “de-skilled”? Do you think the knowledge and skill sets based on older technologies are worth saving for a company? Explain.
Sandberg is an excellent representation of the “old guard,” hands-on manufacturing world. He describes the way people like him knew how to work with their machines, had in-depth knowledge used to adjust them, and relied on intuition and instinct in determining when a product was well made. The introduction of CAD/CAM and CNC machining has eliminated much of the need for these skills. Some students may say that machines should be allowed to do it all, with the added bonus of making the jobs less stressful, while other students will argue in favour of knowing more about how to use the machines and recognizing quality work.
2. Do you think computer technicians should be hired directly from school or hired from among existing operators and retrained into the new job? Why?
This is a dilemma faced by many organizations hire someone with specialized skills and train them in technology, or hire someone with technology skills and train them in the area of specialized knowledge. There is no right answer, but students should be able to support their answers.
3. How might a company best work through the transition from an old to a new manufacturing technology with its employees? Discuss.
Many long-time employees fear this type of change. They are concerned they will become obsolete, or they lack confidence in their ability to learn new skills associated with using the new technology. Above all, employees need to be informed and reassured. Training programs need to be provided, but employees also need outlets in which to express their feelings and concerns. The more employees can be involved in the transition, the more likely they will be to embrace it.
Chapter 10 Workshop: Manufacturing and Big Data Organize the Project
This activity allows students to examine and assess the steps involved in launching a successful manufacturing big data project. You may want to inform students that “Deploy and Pray” is an assumption that is to be avoided rather than a step to follow.
7 Steps for a Successful Manufacturing Big Data Project
Big data projects are like any other process or technology implementation at a manufacturer: they must follow standards for good project management that are applicable to any project: executive- or director-level sponsorship; clearly defined goals and scope; and well-documented project plans with specific milestones along a timeline.
1. Assign an ops manager as project leader: As discussed above, the best project leader for manufacturing-driven big data projects is someone in manufacturing engineering or operations management with authority over the operations being analyzed. Their expertise in the operational and quality challenges, their pragmatic view of the goals of continuous improvement, and their focus on solving a specific manufacturing challenge facing the company is invaluable in driving the project to success.
2. Target a specific challenge to address: Where to start is often the most difficult challenge a company faces when considering a big data rollout. In successful projects, a clear trend emerges: focus on a well-known quality issue, throughput issue, or process issue (e.g., machine downtime) in a particular place among your operations. Solving a specific problem offers multiple advantages: clearly defined data sources, easily measured success, and easily calculable ROI. A common scenario is to focus on a machine or line that is experiencing high scrap rates or low output, and use big data to find the root cause. Once the problem is corrected and the process is improved, it is easier to find support from other groups within manufacturing for a wider rollout.
3. Define the required analytics: In some ways, manufacturers looking at big data are lucky. The advanced statistical modelling that manufacturers have used for many years puts them far ahead of other industries. Using big data to analyze overall equipment effectiveness (OEE), or to calculate statistical process controls (SPC) for quality defects, for example, is an application of new technology to bolster time-proven techniques for analysis and problem solving; rather than just providing after-the-fact calculations like legacy solutions, a big data implementation enables real-time analysis and comparisons among OEE numbers machine by machine, shift by shift, or factory by factory. Additionally, big data systems such as Sight Machine enable companies to combine data from parts, processes, and even plants for analysis and problem solving at a level never before seen.
4. Determine the required data sources: Companies require a change in outlook when considering a big data project. In the past, teams have been limited as to what data they can look at based on cost of acquisition, storage, and computing power, as well as the complexity of tying all of this data together. With big data (and inexpensive cloud storage systems), the attitude should be, What data can we add to the mix? Data directly from sensors and PLCs, product data such as serial codes pulled from legacy MES/FIS and ERP solutions, images from cameras, worker IDs and shift codes from scheduling systems, supplier data all of it should be considered if it in some way contributes to the process being analyzed. In most cases, manufacturing owns or controls the data sources, though in many cases IT or other organizations will need to be consulted. Be wary of any solution that requires a rip-and-replace approach, or requires major upgrades for existing systems. The
best products and services today can take both structured and unstructured data from myriad sources and in myriad formats.
5. Identify internal data/process experts: A common surprise in these projects, especially when working with external consultants, is that your company knows a lot more about its data than you think it does. In fact, identifying the internal experts on data and process is one of the key factors in determining the success of your project. As many agree: it’s easier to take your process experts and teach them about big data than it is to teach big data experts about your business. So be sure to have the right product or process people involved from the very beginning the people who OWN the problem and understand how analytics can contribute to solving the problem.
6. Trust the data: After a project gets up and running, it’s not unusual for teams to be surprised by the results. In fact, we’ve heard questions about whether management should trust the analysis, because it’s saying something different than they’ve been hearing for the last several months. Mistrusting the data is a mistake, and unfortunately a common one: Fortune Knowledge Group found that 62% of business leaders said they tend to trust their gut, and 61% said real-world insight tops hard analytics when making decisions. For a big data project to pay dividends, the team must be ready to trust the data, even when it disagrees with their previous assumptions.
7. Be ready to take action: In the end, data analytics can take you to the cause of a problem, but it cannot solve the problem on its own. Project teams must be ready to take action based on the output from the system, and to correct the root cause of a problem once it has been identified. The analytics system can then be used to confirm the problem has been resolved.
Avoid this approach at all costs:
“Deploy and Pray.” There is a naive belief that “Big data is magic!” This leads to the deployment of generic big data tools and a business intelligence software package for reporting, with hoped-for results that will appear as if by magic. Those hoped-for results end up as generic as the tools deployed. No insights into manufacturing parts, processes, or plants are available from generic data models and data tools. Manufacturers must choose technologies that are built on manufacturing-specific data models—data tagged and sorted with part numbers, batches, cycles, downtimes or other important manufacturing data as the organizing principle behind the data structures.
Additional Considerations
As much as the focus is on data, people get in the way the beliefs, prejudices and entrenched beliefs they bring to a project are often a bigger hurdle than getting budget or personnel assigned to a project. And as much as we might want to be ruled by data, people ultimately rule the big data process. This typically includes making the initial decisions as to which data to collect and keep, which questions to ask of it, and which actions to take in the end.
Integrative Case 6.0: Costco: Join the Club
Case Summary
This case describes the founding and growth of Costco. Costco was started in 1983 in Seattle to compete in the no-frills segment. Costco has low prices and thin margins but, in 2010, was the largest membership warehouse retailer, with 572 stores, 142,000 employees, 55 million members, and sales of $76 billion.
Costco differentiates itself from other no-frills retailers because it pays its employees well. Employees also have a good benefits plan and can receive up to 150 shares of company stock for the implementation of time-saving ideas. Costco believes that it achieves a competitive advantage by having low employee turnover and satisfied employees. The CEO and founder, James Sinegal, makes $550,000, a fraction of what other CEOs make. There are no luxury offices, and the CEO dresses casually and wears a nametag. Sinegal spends about 200 days a year on the shop floor.
Sinegal believes that the organization must be “flat, fast and flexible.” As a result, local warehouse managers act essentially as CEOs. Costco tries to fit the community as well when it opens a new store. Costco has used local stores as labs to try out new service ideas and product launches. It has invested heavily in its own label, Kirkland, which now has about 400 products.
However, Costco has faced complaints as it has expanded, for example, about a lack of notification about management job openings. It has been able to address such issues quite easily, but the challenges resulting from international expansion create more complex issues. In Mexico, for example, Costco was accused of cultural insensitivity, but it worked with representatives of the Mexican Institute of Fine Arts & Literature to address them. Costco is known for its moral leadership now, but questions remain whether the future CEO will continue in the Sinegal way.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few websites that provide further information for some of the ideas discussed in Chapter 10.
Dell Computer
A Dell factory tour can be viewed at: www.dailymotion.com/video/xlzzqb_dell-factorytour-video_tech or https://vimeo.com/37953117 (accessed July 6, 2021)
“Lean Manufacturing Explained,” from https://www.reliableplant.com/Read/30267/leanmanufacturing-techniques (accessed July 6, 2021).
Sociotechnical Systems
Whitworth, Brian, with Ahmad, Adnan. (2013). “Socio-Technical System Design.” In Soegaard, Mads, with Dam, Rikke Friis (eds.). The Encyclopedia of Human–Computer Interaction, 2nd ed. Aarhus, Denmark: The Interaction Design Foundation. Available online at https://www.interaction-design.org/encyclopedia/sociotechnical_system_design.html (accessed July 6, 2021).
What Are Common Student Misconceptions and Stumbling Blocks?
What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 11 Workbook: Innovation Climate
• Alternative Classroom Activities
• Lecture Enhancement: IDEO
• Case for Analysis: Osoyoos Band
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter explores how organizations change and how managers direct the innovation and change process. The chapter first considers the forces driving a need for change. It then discusses the difference between incremental and radical change It also discusses the four types of change technology, product, structure, people occurring in organizations and how to manage change successfully. Note that innovation and change are not synonymous. Innovation can create change and can result from change; however, change may not necessarily create or result in innovation. The organizational structure and management strategies for facilitating each type of change are then discussed. Management techniques for influencing both the creation and the implementation of change are covered. The final section of the chapter looks at barriers to change and implementation techniques that managers can use to overcome resistance.
PURPOSE OF THIS CHAPTER
This chapter provides students with an understanding of the increasing importance of planned change and innovation in today’s organizations.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Organizations face and must address change on an ongoing basis.
2. Successful innovation and change require the application of practical and creative models.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Describe the types of strategic innovation. [Understand]
2. Explain the necessary elements for successful organizational change. [Understand]
3. Compare and contrast techniques for encouraging technology innovation with those that encourage product and service innovation. [Analysis]
4. Explain how innovation speed provides a competitive advantage. [Apply]
5. Describe the dual-core approach to organizational change. [Remember]
6. Explain how a large group intervention can be used to bring about culture change in an organization. [Apply]
7. List techniques for overcoming resistance to change. [Remember]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Organizations face increasing pressures from the environment to change.
2. Organizations today need managers who are familiar with the theory and practice of change management.
3. Innovation can be a source of significant competitive advantage.
WHY SHOULD STUDENTS CARE?
1. Students need to understand innovation and change so that they can appreciate and respond effectively to the degree of change in their organizations.
2. Managing change is a vital skill for managers and students.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students underestimate the complexities of managing planned change.
2. Students tend not to understand the importance and impact of “vision” in innovation and change.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use Chapter 11 Exhibit 11.11: ExperienceChange Model to illustrate an organization’s change processes in some detail. Pick an organization, such as Tim Hortons, that students experience regularly. [Stumbling Block 1]
Watch in its entirety Martin Luther King’s “I Have a Dream” speech, at http://www.youtube.com/watch?v=smEqnnklfYs. Ask what elements of the speech make it effective and how they can be applied in organizational change. [Stumbling Block 2]
Class Engagement Question
To effect cultural change, organizations can use
a. large group interventions
b. team building
c. interdepartmental activities
d. all of the above
Use this question to discuss in some detail the role of organizational development (OD) techniques as possible change management tools.
You & Design
The You & Design questionnaire done as a group activity will allow students to discover their own style and attitude to innovation and discuss the implications of any differences.
Discussion Questions and Suggested Answers
1. How is the management of radical change likely to differ from the management of incremental change?
Incremental change represents a series of continuous progressions that maintain the organization’s general equilibrium, often affecting only one organizational part. Management brings it about through the established structure and may include new technologies and product improvements.
Radical change breaks the frame of reference for the organization and often creates a new equilibrium because the entire organization is transformed. It involves creation of a new structure and management processes and an emphasis on system change. The technology is likely to be breakthrough and new products will be created for new markets.
2. How are organic characteristics related to changes in technology? to administrative changes?
Organic structure and management processes are generally believed to facilitate changes in technology. People who work with the technology have freedom to experiment and to propose new ideas. An organic structure tends to restrict administrative changes, however. Administrative changes are top-down, and when lower-level employees have freedom and autonomy, they are generally more resistant to administrative innovations. Moreover, an organization with an organic structure normally needs fewer administrative changes.
3. Describe the dual-core approach. How does administrative change normally differ from technology change? Discuss.
The dual-core model argues that innovation takes place separately in the administrative and technical cores of the organization. Administrative change normally follows the topdown process and is facilitated by a mechanistic organization structure. Technology change is typically just the opposite, following a bottom-up process in an organic structure. An organization can adopt the structure needed depending upon the type of change that is most important to its performance.
4. How might organizations manage the dilemma of needing both stability and change?
All organizations face this dilemma. Change is needed to adapt to the environment. Stability is needed to allow efficient production processes. The dilemma was emphasized in the ambidextrous model of change. Organic, freewheeling conditions are needed for initiation of new ideas, whereas more rigid, mechanistic characteristics are suitable for implementation and operation of the new techniques. Techniques that organizations use to maintain both stability and change are switching structures, creating separate innovation departments, establishing venture teams, and encouraging idea champions. In
each of these techniques, some or all of the organization is assigned to the organic, creative process. Then the organization either reverts back to a more mechanistic process or stable production, or other parts of the organization take responsibility for using and institutionalizing the innovations. These techniques represent ways to encourage the initiation of change while also maintaining a stable and efficient operation.
5. Why do organizations experience resistance to change? What steps can managers take to overcome this resistance?
Students will normally develop ideas such as the following: change is threatening to people, change leaves employees uncertain about the impact on their job, employees do not have adequate information about the change, the change may appear unproductive to users, and the change simply may upset the established order. Students may also reflect on the barriers to change given in the text both organizational and personal barriers that are, to some extent, normal and natural human processes.
Important steps to overcome resistance include:
Align the change to meet the needs and goals of users.
Encourage users to participate in the development of the change
Encourage open communication throughout the period of development and implementation.
6. “Bureaucracies are not innovative.” Discuss.
This statement reflects the widespread belief that bureaucracies, with their rules and procedures, are resistant to change. Student discussion should acknowledge that this is probably true for certain types of change, especially technical changes that require organic conditions. It may also be true for a new product change, to some extent. But it is not true for administrative change. Bureaucracies give power to people at the top who can impose administrative changes in a top-down fashion. The bureaucracy is an appropriate organization structure when the organization needs to innovate in goals, procedures, policies, strategy, and other administrative changes. In any well-managed organization today bureaucracy or not top management can listen to the ideas of employees. So even with top-down administrative change, there is no requirement for a despot who unilaterally issues nonsensical changes in goals, policies, and practices!
7. A noted organization theorist said, “Pressure for change originates in the environment; pressure for stability originates within the organization.” Do you agree? Discuss.
This question is designed to facilitate discussion about change. Although there is no one correct answer, this statement would generally be considered true in most organizations especially those that do not yet excel in horizontal linkages.
Developments in the external environment precipitate the need for an organization to respond with its own innovations in technology, new products, administration, or people.
The environment also provides the basis of comparison for organizational performance. Resistance to change, on the other hand, usually lies with employees, structure, habits, and the established order within the organization. Managers must work with the internal need for stability in nudging the organization toward change.
8. Of the seven elements required for successful change, which element do you think managers are most likely to overlook? Discuss.
For any change to be successful, organization participants must perceive a need, then have an idea, a proposal, implementation of the idea, and the resources to bring about the change from beginning to end.
The element most managers overlook is implementation. They concentrate on the initial stages of change, which are identifying the problem and developing an idea to solve the problem. But the latter stage of the process is often the most difficult. Too little time and effort are allocated to implementation, and hence, the change may never be realized. Failure to implement is probably the largest reason changes fail.
9. How do the underlying values of organization development compare to the values underlying other types of change? Why do the values underlying OD make it particularly useful in shifting to a learning organization?
Values underlying organizational development (OD) are for a participative system of change that brings interdepartmental representatives to surface conflict, diagnose its causes, and plan improvement. Other strategies for change vary greatly, although there is little place for forcing and coercion except as a last resort. The learning organization involves similar values for knowledge sharing and continuous learning. Both approaches call for an adaptive learning culture. In fact, OD is known as a method for bringing about that level of culture change by applying behavioural sciences in a process of planned organization-wide change, with the goal of increasing organizational effectiveness.
10. The manager of R&D for a drug company said that only 5 percent of the company’s new products ever achieve market success. He also said the industry average is 10 percent and wondered how his organization might increase its success rate. If you were acting as a consultant, what advice would you give him concerning organizational structure?
The most relevant advice concerning organization structure reflects the horizontal linkage model. Design the organization so that marketing and research departments are highly specialized. Encourage them to develop broad and effective contacts within their own external sub-environments. Marketing should know about customers, and research should know about new technologies. Internally, teams and task forces should be created that bring marketing and research personnel together to make joint decisions.
The structure should enable extensive discussion and conflict as needed to collaborate on decisions that meet the needs of both departments. When the new product reflects only
the interests of the research people, often it will fail to meet customer needs. When it is designed strictly on the basis of customer needs, it may be technically deficient or inefficient to produce. Organization structure must be designed to facilitate horizontal linkages across the organization and with the environment.
11. Review the seven stages for implementing change illustrated in Exhibit 11.11. What sort of resistance might you expect at stages 2, 4 and 6? Explain.
At Stage 2, Enlist, employees may resist by formally or informally withholding support. Stage 2 is a crucial early stage and resistors may see resistance as a tool to prevent the planned change from proceeding further. At Stage 4, Motivate, employees may resist by feigning support. This sort of resistance is difficult to address, as it is indirect and subtle. At Stage 6, Act, employees may resist by slowing down the implementation process. They may do so as a technique to fight the momentum of the planned change. (It is important to note the resistance behaviours may come from fear of the change rather than a desire to thwart it per se.)
Chapter 11 Workbook: Innovation Climate
Record the ratings given by the student whose organization scored the highest, and by the student who interviewed another person with the highest organizational score. Focus the discussion on organizational characteristics that foster an innovative environment in the organization. Ask them what chapter concepts are illustrated in the examples.
Alternative Classroom Activities
1. Ask students to sign their names. Then ask them to do the same task with their nondominant hand. Debrief by discussing process and output differences between the two tasks. This simple, classic activity is a great way to start a class on change. (Check, between the two rounds, by a show of hands who is right-handed.)
2. Use Change Game 3 at http://www.isixsigma.com/training/training-materialsaids/change-game-engaging-exercises-teach-change/ (accessed July 6, 2021). Change Game 3 is a more involved change task that helps participants to appreciate the challenges of change and change management.
Lecture Enhancement: IDEO
Use the skunkworks model at IDEO as part of a discussion on different design options to build innovation into an organization’s structure. The IDEO example provides much material for an in-class group discussion. Show the following three videos to highlight both the model and an innovation challenge in practice. These three clips show an IDEO team redesigning a grocery cart.
1. How does the Osoyoos band integrate its traditions with its businesses?
It highlights its culture in its tourist venues. For example, it has built a cultural centre as the cornerstone of its extensive tourist development that includes a resort and spa, a golf course, and a wine cellar.
2. How has the Osoyoos band changed the paradigm of development?
The band has reframed the practice of development by establishing practices that are not in opposition to the sustainability of its land and its heritage. Chief Louie believes in balancing the need for development, jobs, and revenue with a commitment to preserve the land.
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few websites that provide further information on some of the ideas discussed in Chapter 11.
Kotter’s Change Model https://www.kotterinc.com/8-steps-process-for-leading-change/ (accessed July 6, 2021).
Innovation MaRS, http://www.marsdd.com (accessed July 6, 2021).
Government of Canada, https://www.ic.gc.ca/eic/site/080.nsf/eng/home (accessed July 6, 2021).
Canada Foundation for Innovation, https://www.innovation.ca/ (accessed July 6, 2021).
Chapter 12: Conflict, Power, and Politics
In this chapter, you will find: Chapter Overview
Purpose of This Chapter If Nothing Else, My Students Should Learn Learning Objectives
How Does This Chapter Relate to the Real World?
Why Should Students Care?
What Are Common Student Misconceptions and Stumbling Blocks? What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 12 Workbook: How Do You Handle Conflict?
• Alternative Classroom Activities
• Lecture Enhancement: Conflict versus Competition
• Case for Analysis: The Irving Dynasty to End?
• Case for Analysis: The Burlington Plant
• Integrative Case 5.0: “Ramrod” Stockwell
• Integrative Case 7.0: The War of the Woods: A Forestry Giant Seeks Peace
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
This chapter examines the nature of conflict and the use of power and political tactics to reduce conflict. The chapter first explores intergroup conflict, characteristics of organizations that contribute to conflict, and the use of a political versus rational model of organization to manage conflict interests. Subsequently, it examines individual and organizational power, the vertical and horizontal sources of power, and how power is used to attain organizational goals. Politics, the application of power and authority to achieve desired outcomes, is also covered, as are tactics managers can use to enhance collaboration and prevent political behaviour from becoming self-serving or negative.
PURPOSE OF THIS CHAPTER
This chapter highlights the many sources of and reasons for conflict and politics in organizations. It further explains that organizations have many non-rational processes.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Organizations are inherently political.
2. Students need to understand the sources of power, both individual and organizational.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Identify organizational characteristics that can cause intergroup conflict. [Remember]
2. Compare and contrast the rational and the political models of organization [Understand]
3. Describe the vertical sources of power in organizations. [Remember]
4. Explain the concept of strategic contingencies as it relates to horizontal power in organizations. [Understand]
5. Define politics and explain why political activity is necessary. [Understand]
6. Identify tactics for increasing and for using power. [Apply]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. As already noted, organizations are inherently political and therefore full of conflict.
2. Power and its judicious use is necessary for goal achievement.
WHY SHOULD STUDENTS CARE?
1. Students need to understand why and how organizations are political so that they can navigate their workplaces.
2. Students can become better informed about what types of organizations they may like to work at.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students seem to believe that organizations are rational and conflict-free. 2. Students may feel that the idea of organizational politics is either irrelevant or unseemly.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
Discuss, in some detail, the In Practice feature on Apotex and Dr. Nancy Olivieri. See https://www.healthnewsreview.org/2012/05/medical-research-ethics-whistleblowernancy-olivieri-honored-again/ for a short discussion about the role of whistleblowers, which discusses the Olivieri case.
[Stumbling Block 1]
Watch https://www.youtube.com/watch?v= Z9yOEH6oQ for an example of how to use office politics positively. [Stumbling Block 2]
Class Engagement Question
Political activity is useful for
a. resolving differences
b. reducing uncertainty
c. resource allocation
d. all three of the above
Use this question to discuss the link between power and politics.
You & Design
Use the You & Design questionnaire to get students thinking about how their political skills need to be developed and why such skills are important for their own organizational success.
Discussion Questions and Suggested Answers
1. Give an example from your personal experience of how differences in tasks, personal background, and training lead to conflict among groups. How might task interdependence have influenced that conflict?
Departments attract people with specific values, norms, time horizon, education, and attitudes. These characteristics are compatible with departmental membership, but may be opposite to the characteristics in other departments. Thus a highly educated operational researcher who attempts to implement his ideas to less-educated people on the shop floor will run into trouble. This specialist may use academic jargon and expect his superior education to be the basis for implementation. The person on the shop floor may not understand the technical details and is more concerned with day-to-day work than sophisticated theory.
People from each group will tend to turn off one another and will not reach a satisfactory outcome. Task interdependence leads to conflict because groups have to interact more frequently as interdependence increases. They depend upon another department to achieve their own department’s outcomes. Attempting to influence the other department will lead to conflict. When interdependence is low, little interaction and manipulation is required; hence conflict will be less.
2. A noted expert on organizations said that some conflict is beneficial to organizations. Discuss.
Many researchers have found that conflict focused on substantive rather than personal issues can be beneficial because it helps clarify objectives, expectations, and behaviours and helps in making better decisions to reach goals. To the extent that substantive conflict involves discussion of different points of view, managers will avoid the problem of groupthink, which suppresses needed diversity. Rather than making poor decisions for lack of hearing divergent views, and rather than mindlessly agreeing only for the sake of group harmony, substantive discussion of issues can lead to better decision making.
3. In a rapidly changing organization, are decisions more likely to be made using the rational or political model of organization? Discuss.
We found in this chapter that the political model is associated with conflict over goals, shifting coalitions and interest groups, ambiguous information, and uncertainty. The learning organization is characterized by decentralized operations in a shifting environment. Realizing that the conflict felt in a learning organization need not be negative, and that the ambiguity is brought on by the environment rather than by internal confusion or mismanagement, the learning organization takes on positive characteristics of the political model. The rational model, in contrast, tends to be more centralized and more orderly in dealing with logical questions such as how to select the outcomemaximizing choice or how to optimize efficiency.
4. Which do you believe would have a greater long-term impact on changing employee attitudes toward increased collaboration intergroup consultation or confrontation and negotiation? Discuss.
When intergroup consultation is used, it typically stems from suspicious and uncooperative relations between groups. A third-party consultant is brought in to mediate, bringing the disputing parties together, sometimes for a multiple-day workshop, in order to reduce conflict. This technique clearly builds on the principles of confrontation and negotiation by forcing the parties through organizational development processes to achieve long-term agreement on how each will change. As preliminary strategies, confrontation is effective when managers are engaging in a win–win approach at the outset and are able to define the conflict as a mutual problem; it is very effective as a means for keeping groups on track, but it does not bring long-term change for employees unwilling to collaborate with a win–win attitude.
5. What is the difference between power and authority? Is it possible for a person to have formal authority but no real power? Discuss.
Power is an intangible force that is not necessarily reflected on the organizational chart. It is the ability of a person or group to influence other people in order to attain desired outcomes. Power can be exercised in either vertical or horizontal directions. Authority, on the other hand, is prescribed by formal hierarchy and reporting relationships. It is vested in organizational positions and flows down the vertical hierarchy. A person can have a job title that is, authority with a legitimate right to exercise command and yet be non-influential. Similarly, it is possible for a person to be influential with others in attaining desired outcomes, yet not have the formal authority of position.
6. Discuss ways in which a department in a hospital could help the CEO respond to changes in provincial health-care policies.
Issues of critical uncertainty can be dealt with by absorption and by taking action to reduce uncertainty. Horizontal power relationships in organizations change as strategic contingencies change. Departments that help organizations cope with new strategic issues will have greater power.
7. In Exhibit 12.7, R&D has greater power in company B than in the other firms. Discuss possible strategic contingencies that give R&D greater power in this firm.
Based upon the discussion of strategic contingencies, R&D is in some way more important to the central purpose of company B. The firm may be highly innovative so that research work is central to new products and organizational success. If the manufacturing and marketing processes are very complex, other departments may depend upon R&D for knowledge and information about those processes. R&D probably cannot be substituted easily, so the department has extensive influence. The primary uncertainty facing the firm (dominant competitive issue) may be the ability to develop new products;
hence R&D copes with that crucial uncertainty, thereby increasing its relative power in the organization.
8. What are some sources of power for university or college students? What are some sources of power for university professors and administrators? How might students increase their power?
Note: This question makes for a lively discussion in class. It is also a useful discussion as students come to better understand the realities of academic institutions.
Students evaluate instructors’ performance in class and in labs. They can participate in governance structures. Professors and administrators have, at a minimum, position and expertise power. As well, administrators control financial resources and may have network centrality. Students can increase their power informally by “voting with their feet.” [Students will have many varied responses.]
9. A bookkeeper tried for several years to expose fraud in the organization’s accounting department, but couldn’t get anyone to pay attention to his claims. How would you evaluate this employee’s power? What might he have done to increase his power and call notice to the ethical and legal problems at the organization?
The employee has little power. Although the power comes from larger organizational forms and processes, the political use of power involves individual-level activities. The employee could have tried to build coalitions and expand networks within the bookkeeping group, to enhance legitimacy and expertise by involving an internal or outside consultant, or to make a direct appeal to a manager and that manager’s manager.
10. The engineering school at a major university brings in three times more government research dollars than does the rest of the university combined. Engineering appears wealthy and has many professors on full-time research status. Yet when internal research funds are allocated, engineering gets a larger share of the money, even though it already has substantial external research funds. Why would this happen?
This is an example of a strategic contingency. The engineering school provides financial resources to the organization, which in turn gives it greater power within the organization. It uses this power to acquire a larger share of internal resources. The internal resources are, in one sense, a reward for bringing in external resources. In order for other departments to get a larger share of the internal research dollars, they would have to increase their power by bringing in a larger amount of external research grants. They probably will not be successful in getting additional dollars just by claiming they have a greater need for the dollars, since they are not particularly influential compared to engineering.
Chapter
12 Workbook:
How Do You Handle
Conflict?
Conflict management style whether we use solution-oriented, non-confrontational, or control strategies affects the ease with which we operate in various types of conflict situations. This self-assessment instrument will give students personal insight from which you can explore the impact of personal style on horizontal, vertical, and interdepartmental conflict. You may need to remind students that structural issues can impact organizational conflict as much or more than personal issues, because persons without significant management experience may overemphasize behavioural effects while they underemphasize design effects.
Alternative Classroom Activities
I have used the Power Simulation created by Bolman and Deal. It can be found at http://www.leebolman.com/power_simulation.htm. It is a very engaging experiential activity, but it is very important to think through the risks. It requires preparation and a detailed debriefing so that everyone leaves without strong feelings of anger, resentment, hurt, and/or elation.
Lecture Enhancement: Conflict versus Competition
It is useful to point out the differences and similarities between conflict and competition as perceived by those who believe that a controlled amount of competition can be healthy in stimulating the organization. Understanding can be increased by the use of an example that contrasts the conflict of street fighting versus the competition of boxing.
Conflict Street Fighting
• Incompatibility of goals: One fighter wants to kill, the other wants to run away.
• Opposing behaviours: They hit each other.
• Few or no rules on limits of escalation: One pulls a knife on the other.
• One or both may be forced into the contest: The bully picks on the 90-pound weakling.
• Dysfunctional outcomes for one and others not involved: One gets hospitalized and the bar is in shambles.
Competition Boxing
• Compatibility of goals: Both want to be the champion.
• Some opposing behaviours and some cooperative behaviours: They hit each other, but break up when instructed by referee.
• Basic ground rules, including escalation: No hitting below the belt and stop at the bell.
• Both enter the contest voluntarily: They sign contracts and want the bout.
• Mostly functional outcomes for both and other parties: Both get paid and the crowd gets entertained.
Similarities
• Both conflict and competition result in “we versus they” feelings and distortions of perceptions.
• Both can have functional and dysfunctional outcomes.
Case for Analysis: The Irving Dynasty to End?
Assignment Questions and Suggested Answers
1. Why would a family business like Irving Oil generate such antipathy?
People are opposed to a company that is so powerful and seems to be able to conduct business unfettered on its own terms.
2. What changes are necessary if the organization is to continue?
The Irving family will first have to decide succession issues among themselves. Then the family will have to learn to manage Irving Oil, not as personal fiefdoms, but as a large company. Students can be asked to place Irving Oil on the organizational life cycle spectrum and then examine the design implications of their assessments.
Case for Analysis: The Burlington Plant
Assignment Questions and Suggested Answers
1. What assumptions (rational or political) was Burton using in his initiative to improve the plant? Explain.
Burton assumed that everyone at Burlington was stuck in the past and old ways of thinking of manufacturing. He assumed that because Burlington performed things the ways they “were always done” that they were inherently wrong.
2. What was the underlying cause of the conflict in the case?
Burton made several assumptions from a place of academia to try to apply to Burlington. He made several directives that upset people’s perception of power and place in the plant. Ultimately, Burton wanted to use the revolution (and presumed success) of the Burlington Plant to springboard his own career into higher level management. His motives were self-serving.
3. How do you think the workers viewed Burton’s initiative? What might Burton have done differently to gain the cooperation of the workers? Explain.
Burton may have solicited feedback in a more collaborative way and taken more time to discuss the problems with the in-the-ground employees for their feedback. He took a very top-down approach that came across as heavy handed, and as such he immediately earned the plant’s ire and distrust.
Integrative Case 5.0: “Ramrod” Stockwell
Overview
The case centres around the vice president of production, Ramsey Stockwell. He was regarded as a very competent production man, and his loyalty to the company was unquestioned. He managed to keep outdated facilities operating and was able to push through the construction of quite modern facilities in the finishing phases of the production process. But he was in trouble with his own staff and with other divisions of the company, principally sales. Stockwell failed to delegate authority to his subordinates. People asked for permission for this and that, but those who took some action on their own could be bawled out unmercifully. Stockwell was isolated socially from the right group of top personnel and didn’t handle people very well. He balked at the idea of learning management skills through leadership training. By contrast, Rob Bronson, the sales manager, was widely regarded as an extremely bright, capable, likable, and up-andcoming manager. The relationship between the production department and the sales department was strained.
Assignment Questions and Suggested Answers
1. What are Stockwell’s vertical sources of power?
Since the company was a vertical hierarchy, Stockwell derived vertical power from his formal position, which had certain rights and responsibilities. People throughout the organization accepted Stockwell’s legitimate right to make decisions and direct activities. This is legitimate power. Control of information is another source of power. Stockwell recognized that information was a valuable resource and that by controlling what information was shared, he could influence how decisions are made. Sales personnel found it quite difficult to get reliable information from production as to delivery dates or even what stage a product was in. Stockwell would not allow production people to give any but the most routine information to sales personnel. Because of the high centralization of authority and information in production, production personnel often did not know themselves. Stockwell even “contracted” the lines of authority by giving orders directly to a manager or a head foreperson rather than by working through the intermediate levels. This violated the chain of command, left managers uninformed, and reduced their authority.
2. What are the horizontal sources of power?
Horizontal power pertains to relationships across departments. All the vice presidents Stockwell in production, Bronson in sales, and Carswell in research are at the same level on the organization chart. However, each department does not have the same amount of power. Charles Perrow’s research (see Exhibit 13.4) shows that in most firms, sales has the greatest power. In a few firms, production is also quite powerful. Power among departments depends on strategic contingencies activities that are essential for attaining organizational goals. Departments involved with strategic contingencies have greater power. Stockwell’s department handled the production of aerospace products that were difficult to make, and failure to meet specifications resulted in substantial losses. About 20 percent of the cash value output was in aerospace metals. By contrast, the sales division performed like a well-oiled machine and had enthusiasm and adaptability. At the semi-annual company meeting, the chairperson of the board complimented sales for its good work, but there was only the stock “well done” for production. The annual reports credited sales for the good years and referred to equipment failures or crowded or poor production facilities in bad years.
3. How could empowerment improve this situation?
In the case situation, the friction between production and sales was spilling over into other areas, and the morale of management was suffering. People under Stockwell resented the way he took over their jobs at times and the lack of information available about other aspects of production. A sales manager made promises to the customer without checking with the vice president of sales, who could have checked with Stockwell. “He was right,” said Vice President Bronson. “I can’t spend all my time calling Ramsey about status reports.”
In forward-thinking organizations, top managers want lower-level employees to have greater power to do their jobs more effectively. They push power down the hierarchy and share it with employees. Empowerment is power sharing, the delegation of authority to subordinates. Empowering employees gives them three elements to act more freely in their jobs: information, knowledge, and power.
4. What do you recommend for this company?
Structural reorganizations strike at the heart of power and authority relationships. This organization should be designed to provide both vertical and horizontal information flows to accomplish the organization’s overall goals. Since the current structure doesn’t fit the information requirements of the organization, people either have too little information or spend time processing information that is not vital to their tasks, thus reducing effectiveness.
However, there is an inherent tension between vertical and horizontal mechanisms in an organization. Whereas vertical linkages are designed primarily for control, horizontal linkages are designed for coordination and collaboration, which usually means reducing control. This firm may have to experiment to find the correct degree of centralization or decentralization. Also, the principle of reciprocity is one of the key factors affecting influence relationships in organizations. Doing additional work that helps out other departments obligates the other departments to respond at a future date. Sales and production might use reciprocity to bridge their differences.
Integrative Case 7.0: The War of the Woods: A Forestry Giant Seeks Peace
Case Summary 1
MacMillan Bloedel (MB) faced an economic crisis in 1997. It had had six consecutive quarters of losses. However, MB faced more problems: environmentalists were opposed to its clear-cutting methods, international demand was down, and Aboriginal communities claimed the lands. MB faced considerable uncertainty. The CEO, Tom Stephens, was brought in after a shareholders’ revolt in 1997. Stephens set up the Forestry Project, whose mandate was “to find a new way to manage forestry.” The project was set up after Stephens himself had spent 90 days doing a strategic review. He required every unit to justify its existence and terminated many of the senior executives He told each senior manager, “Sell it, milk it or grow it: get off your lazy assets.” Executives feared for their jobs.
Stephens received a broad change mandate from the board of directors. He refocused MB’s strategy on its core building materials business, exited various businesses, downsized the workforce, and restructured the senior management team. MB’s bureaucratic culture was changed to one of co-management.
The chief forester, Bill Cafferata, was the head of the Forestry Project. The project team was cross-functional, consisting of senior managers and experts in the fields of logging, silviculture, conservation biology, forest ecology, forest growth, yield projections and the social aspects of the environmental affairs. It had a budget of $1,000,000 and a time frame of 90 days. The team members consulted broadly, both internally and externally. They had heated discussions as they tried to understand everyone’s views. However, the team agreed that it needed to come up with action ideas that (1) increased old forest conservation; (2) created a harvesting compromise that suited environmentalists and the public; and (3) accomplished the first two action ideas in ways that protected employee safety, achieved forest certification, maintain current employment levels, met or exceeded regulatory requirements, and improved profitability. Subcommittees were tasked to address key issues.
1This rich case can be used to support material from Chapters 9, 11, 12, or 13
Subcommittee Recommendations
Subcommittee Recommendation
Harvest Level
Biodiversity & Conservation
Silviculture
Safety
Stakeholder Management
Profit
Continue use of clear-cutting old-growth (except in designated preservation areas)
MB must show commitment to maintaining oldgrowth forests by distinguishing areas
Variable retention by retaining part of the forest after harvesting
Invest in necessary training and planning
Use variable retention
Variable retention is more costly and a high risk strategy
Cafferata was then faced with deciding how to proceed! He could decide alone, try to push the team to his viewpoint, or engage in a lengthy buy-in process.
Suggested Use of Case
I recommend that you use this case, in class, as a role play. Each of the subcommittees could present their arguments and analysis and then try to influence Cafferata. Students should be assigned, in advance, to do some research of their subcommittee’s issues so that they have a detailed understanding of the situation in BC and the importance of MB to its economy.
You can refer to the Chemainus plant described in the text in Chapter 4, as it was one of the redesigned MB sawmills. As well, show https://www.youtube.com/watch?v=pzcbfx4S2Dk to help students understand the safety risks of working at MB (now known as Western Forest Products).
ASSESSMENT TOOLS
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
Here are a few references that provide further information on some of the ideas discussed in Chapter 12.
Two Classic Works on Power
Pfeffer, J. (1993). Managing with Power: Politics and Influence in Organizations, Cambridge, Mass: HBS Press.
Zaleznik, A. (1970, May–June). “Power and Politics in Organizational Life,” HBR, Reprint 70313.
Office Politics
Brightman, B. (2013). “How to Overcome the 6 Most Toxic Employee Behaviours,” Fast Company, https://www.fastcompany.com/3023318/how-to-overcome-the-6-most-toxicemployee-behaviors (accessed July 6, 2021).
Bush, D. (2017). “Toxic Employees 7 Steps to Stop Them in Their Tracks!” LinkedIn, https://www.linkedin.com/pulse/toxic-employees-6-steps-stop-them-tracks-douglas-wbush-m-a- (accessed July 6, 2021).
What Are Common Student Misconceptions and Stumbling Blocks?
What Can I Do in Class?
• Stumbling Block Activities
• Class Engagement Question
• You & Design
• Discussion Questions and Suggested Answers
• Chapter 13 Workbook: Biases
• Alternative Classroom Activities
• Lecture Enhancement: A “Vigilant” Approach to Decision Making
• Case for Analysis: The Big Carrot
• Chapter 13 Workshop: Mist Ridge
Assessment Tools
Reflections on Teaching
What Other Resources Are Available?
CHAPTER OVERVIEW
The first section of Chapter 13 defines decision making. The next section examines how individual managers make decisions. Cognitive biases are one significant factor of which managers should be aware. Several models of organizational decision making are then explored. Each model is used in a different organizational situation. The final section in this chapter combines the models into a single framework that describes when and how they should be used, and discusses special issues such as decision mistakes.
PURPOSE OF THIS CHAPTER
This chapter provides students with an understanding of the various models of decision making so that they can better understand the rational and non-rational processes that they will encounter in organizations.
IF NOTHING ELSE, MY STUDENTS SHOULD LEARN …
1. Decision making in organizations is less rational than they may expect or believe.
2. Students need to understand that there are contingencies that shape decision making.
LEARNING OBJECTIVES
After completing this chapter, students should be able to
1. Explain the differences between programmed and nonprogrammed decisions. [Understand]
2. Compare the rational approach to decision making with the bounded rationality approach to decision making. [Understand]
3. Describe how cognitive biases can cause decision errors. [Analyze]
4. Explain the management science approach to decision making. [Understand]
5. Describe the Carnegie and incremental decision models. [Understand]
6. Identify the components of the garbage can model of decision making. [Apply]
7. Explain how to determine the best decision-making approach by using the contingency decision-making framework. [Understand]
8. Describe how high-velocity environments and decision mistakes influence decision making for today’s managers. [Analyze]
HOW DOES THIS CHAPTER RELATE TO THE REAL WORLD?
1. Making decisions is a key managerial, subunit, and organizational activity with significant consequences.
2. Most organizational decisions are not made in a logical, rational manner. Rather, decisions are characterized by conflict, coalition building, trial and error, speed, and mistakes.
3. Both managers and organizations face many limitations to effective decision making, and the more they understand why, the better they can address the limitations.
WHY SHOULD STUDENTS CARE?
1. Students need to understand the importance and complexities of decision-making processes in organizations.
2. Students need models to help them understand what may seem to be rather nonrational and bewildering decisions.
WHAT ARE COMMON STUDENT MISCONCEPTIONS AND STUMBLING BLOCKS?
1. Students question the idea that organizational decisions are often nonrational. 2. Students may find the garbage can model of decision making difficult to understand.
WHAT CAN I DO IN CLASS?
Stumbling Block Activities
In class, use the rational model, described early in the chapter, and ask students to critique the model. Discuss how the model is an ideal, but is too time consuming to apply in organizations. [Stumbling Block 1]
Highlight the original work by Cohen, March, and Olsen (1972) and examine circumstances where the garbage can model may be applicable. Share any nonconfidential decisions from your department (the model works well in academic settings). [Stumbling Block 2]
Ask students if they have experienced a manager who has implemented a solution for a problem that does not exist or that is not really a problem. [Stumbling Block 2]
Class Engagement Question
In high-velocity environments, successful managers
a. consult broadly
b. make decisions alone
c. look at historical data
d. expect consensus
Use this question to remind students what high-velocity environments entail
You & Design
The You & Design questionnaire done as a group activity will allow students to discover their own decision making styles and to appreciate individual differences.
Discussion Questions and Suggested Answers
1. When you are faced with choosing among several valid options, how do you typically make your decision? How do you think managers typically choose among several options? What are the similarities between your decision process and what you think managers do?
Answers vary. Students should refer to their You & Design data.
2. A professional economist once told her class, “The individual decision maker should process all relevant information and select the economically rational alternative.” Do you agree? Why or why not?
After reading this chapter, students will generally disagree with this statement. Managers usually do not possess all relevant information and do not use rational decision processes. Economists tend to assume that quantitative analysis and economic logic underlie most decisions. This is the case for well-understood decisions for which the organizations have experience. But for non-programmed decisions that frequently occur and characterize most decisions of top management intuition, judgment, and hunch may determine the decision outcome. Managers often have a feel for relevant problems and possible solutions based upon experience within the organization that cannot be captured into a formal model. Thus it is not accurate to assume that individuals behave in an economically rational way when making organizational decisions.
3. Do you think intuition is a valid way to make important business decisions? Why or why not?
Intuition is normally used for non-programmable decisions. Current thinking in organization theory suggests that intuition is a valid decision technique. Efforts to apply a rational, logical analysis to every problem have not been fruitful. Logical analysis is effective for certain problems but does not capture the intangible, fuzzy aspects of decisions. When intuition is criticized, the argument usually assumes that intuition leads to random decision outcomes. This is not the case, because intuition utilizes right-brain processes and subconscious thinking. A manager’s intuitive skills are built up through trial-and-error experience. In many cases a manager’s gut feeling may be better than analytic procedures.
Intuitive processes are used often at the top of the organization because problems and alternatives are less well-defined. Managers also have more experience with the organization and its problems to guide the decision process.
4. The Carnegie model emphasizes the need for political coalition in the decisionmaking process. When and why are coalitions necessary?
Coalitions are necessary because there is natural conflict and disagreement within an organization. As described in Chapter 2, on the environment, departments pursue different goals, have different time horizons and attitudes, and work with different environmental constituencies. An organizational decision, however, may affect several organizational groups. Coalition building provides a mechanism to negotiate and reach agreement among several managers whose ideas and cooperation are needed for implementation.
Coalitions are thus necessary whenever differences of opinion or goals are present. Once managers agree about goals and the priority of problems, the organization can proceed to solve the problem.
5. What are the three major phases in Mintzberg’s incremental decision process model? Why might an organization recycle through one or more phases of the model?
The first phase is problem recognition. In this phase, managers become aware of the problem and engage in diagnosis to gather more information to define the problem. The second phase is called development, in which managers may use search procedures to find a solution from previous organizational experience or to design a custom-made solution. The organization then enters the selection phase, where the solution is chosen. The organization may select the decision through the process of judgment, analysis, or bargaining, which is then followed by formal authorization by upper-level managers.
An organization may recycle through one or more of these phases because the chosen alternative may not work. These failures are called “interrupts.” The organization will cycle back to an earlier stage to reevaluate whether the problem truly exists, whether a different solution should be developed, or whether an alternative solution should have been elected. An organization experiencing uncertainty about how to solve the problem may try several solutions and recycle many times before the problem is finally solved.
6. An organization theorist once told his class, “Organizations never make big decisions. They make small decisions that eventually add up to a big decision.” Explain the logic behind this statement.
Discussion of this question can make students aware that the image of a single person at the top of an organization making big decisions often is not the case. The statement is somewhat exaggerated by the word “never,” but it is true that the general pattern in organizations is to make small, incremental decisions.
The incremental decision process model, for example, and the illustration of the Gillette Company (In Practice) illustrate how a single large decision such as selecting the location for a new plant or designing a new product concept can involve many small decisions. The incremental decision model emphasizes small decisions made incrementally that lead to a big decision and problem solution. Small decisions may also be made simultaneously by several managers.
This would occur when a coalition is built and various managers are pooling their ideas and making decisions about whether to participate. They may also be asked to carry out a small part of the larger decision. Big decisions involve many small decisions and trial and error before the final outcome is reached.
7. How would you make a decision to select a building site for a new wastetreatment plant in South Africa? Where would you start with this complex decision, and what steps would you take? Explain which decision model in the chapter best describes your approach.
Answers vary but should demonstrate a clear understanding of the contingencies in decision making.
8. Why would managers in high-velocity environments worry more about the present than the future? Discuss.
As long as managers in any environment strive to maintain a clear grasp on external opportunities and threats, managers in a high-velocity environment should not worry too much about the future because it changes so rapidly. Research has shown that firms that are more concerned with the future in these environments have only a loose grip on immediate happenings and are unsuccessful. Trying to make specific plans for such a rapidly changing environment would take so much time that management could not concentrate on the current situation. Internal processes, however, must continually be managed for innovation and rapid adaptation to the external environment.
9. Describe the four streams of events in the garbage can model of decision making. Do you think those streams are independent of each other? Why?
The four streams are problems (points of dissatisfaction with current performance), solutions (somebody’s idea), participants (employees), and choice opportunities (when the organization makes a decision). These streams are considered independent because they do not follow one another in logical sequence in an uncertain situation. The appearance of a problem will not always lead to a solution or choice opportunity.
Participants may not be aware of certain solutions. Thus the decision-making process takes on a rather random character. In the course of organizational activities, these four streams will interconnect. A participant may be assigned to a new job where they will become aware of a problem that fits an idea that they have had for some time. If the individual decides to act, they may develop a proposal and force the organization into a
choice opportunity. The organization may adopt the idea, which may solve the problem. But in the highly uncertain environment, the idea may not solve the problem. Over time, a few problems may get solved, although many decisions will not have much impact on organizational performance.
10. Why are decision mistakes, usually accepted in organizations, penalized in university courses and exams that are designed to train managers?
This question is to facilitate discussion about student education prior to becoming managers. Student performance is generally penalized through lowering of grades when mistakes are made on exams, papers, projects, or case analyses because university and college course material generally fits into cell 1 of the contingency-decision framework. Post-secondary courses use a well-defined body of knowledge and attempt to measure students’ mastery of that body of knowledge. Goals are defined and underlying cause–effect relationships are known. The question is more one of whether the student has studied enough to correctly apply a rational process that will lead to the correct outcome. Managers who work within a system and cannot isolate particular decisions to one particular textbook section typically experience uncertainty about goals or how to achieve those goals. They use trial and error and will occasionally make errors. In many ways, the traditional classroom environment is not a good training ground for organizational decision making. Instead, the classroom environment is good for educating students in the use of frameworks and models that can be taught and will add to students’ thinking and information-processing ability. Managers must also acquire experience through trial and error to handle the less well-understood aspects of problem solving and to gain savvy in taking an informed perspective on organizational problems. But students who have become familiar with decision mistakes such as escalating commitment may be less inclined to make those mistakes in the organizational setting. By applying patterns that they have observed in case study analysis as students, managers will not have to “reinvent the wheel” and learn by experience from every situation they encounter in the organizational setting.
Chapter 13 Workbook: Biases
This activity will personalize the textbook information on biases. One method for discussing the activity in class is to ask students to complete the questions on their own After a certain allotted time, students will gather in groups of four or five to reveal their individual responses Students will refer to the textbook section on biases to examine which biases may have impacted their decision making process. The activity will then conclude with the instructor sharing potential responses and associated biases.
Alternative Classroom Activities
Use the Apollo 13 crisis (1970) to illustrate an organization’s decision-making process under high pressure. Refer to the following resources:
NASA on Apollo 13 at https://www.nasa.gov/mission_pages/apollo/missions/apollo13.html
Lessons from Apollo 13 at https://medium.com/the-technology-burrow/lessonsfrom-apollo-13-working-the-problem-1f7ef20ee225
Failure Is Not an Option at https://www.youtube.com/watch?v=TA8SXpyg4O4
Houston, We Have a Problem! at https://www.youtube.com/watch?v=C3J1AO9z0tA
Archival footage showing the live BBC coverage of the Apollo 13 splashdown at http://www.youtube.com/watch?v=DUP5IKyOiio
Lecture Enhancement: A “Vigilant” Approach to Decision Making
When people slip into groupthink, the desire for group harmony outweighs concerns over decision quality. Irving Janis, known for his writings on groupthink, provides a descriptive model of vigilant problem solving for high-quality decision making. The model depicts a challenge (threat or opportunity), which begins the problem-solving process. It then provides the following components:
Step 1 Formulate the problem
What requirements should be met?
What seems to be the best direction of solution?
Step 2 Use information resources
What prior information can be recalled?
What new information should be obtained?
Step 3 Analyze and reformulate
What additions or changes are there in the requirements?
Are there additional alternatives?
What additional information might reduce uncertainties?
Step 4 Evaluate and select the alternative
What are the pros and cons for each alternative?
Are requirements met? If not, consider modification.
How can costs and risks be minimized?
What additional plans are needed for implementation and monitoring?
Decide if any defects in the decision making procedure occurred.
Gross omissions in survey of objectives.
Gross omissions in survey of alternatives.
Poor information search.
Selective bias in processing information at hand.
Failure to examine some major costs and risks of preferred choice.
Failure to work out detailed implementation, monitoring, and contingency plans.
Closure Internal consolidation of the choice
Bolster it by playing up the advantages and playing down the disadvantages.
Solicit supportive information.
Refute unwelcome information about drawbacks.
Social commitment to the choice
Announce it to interested parties.
Promote it.
Source: Janis, Irving L., Crucial Decisions: Leadership in Policymaking and Crisis Management (New York: The Free Press, 1989), 89–99.
Case for Analysis: The Big Carrot
1. What do you think of the decision-making processes at The Big Carrot?
Answers vary, but students should focus on its fundamental democratic nature. If students focus on its inefficiency, they should be challenged to address the issue of its effectiveness.
2. What do you believe are the main advantages and disadvantages of organizational and ownership arrangements of The Big Carrot?
The main advantage of the organizational and ownership arrangements of The Big Carrot is that members who put in the requisite hours of work have a vote and are expected to be involved in decisions through the biweekly meetings. The disadvantage of the organizational arrangement is that decision making can be time consuming and that implementing larger changes can be challenging for management.
3. If you were creating a business, would you consider this structure? Why?
The current structure can be considered appropriate for this type of business. At the same time, the current structure did evolve over time with a number of changes.
Modifications that could be considered for the current structure include (1) flexibility in annually changing the fixed interest rate of 10 percent, as the concept of “reasonable return” changes year to year; (2) additional provisions for investing surplus net income into growing the business (the growth of a business is highly dependent on the availability of additional capital for it to reinvest in new products, services, stores, etc.; the business will be limited to slow or no growth if the majority of earnings are paid out to the members); and (3) a greater range of pay scales to account for a greater diversity of effort, skills, and experience.
Chapter 13 Workshop: Mist Ridge
The Mist Ridge exercise is set in southwestern Alberta. It looks very much like a lot of other survival exercises (Lost on the Moon, Lost at Sea, Subarctic Survival, etc.), but it is not. In fact, the key to this exercise is that it is an everyday, normal kind of decision. You and a few friends are going out for a hike (a long one), and you have to decide what to take with you. In reality, most if not all people would opt for light loads and an enjoyable day. There is really no danger here. Even if it snows, it is August 23, and the snow won’t stay around for long. It’s not going to drop down to −30°C at the end of August. Animals are likely not much of a threat. The biggest one is surprising a mother bear and getting between her and her cubs. Look out! Most hikers advise making a lot of noise while walking so the animals know you are coming and can get out of the way.
The beauty of this exercise is that your students will have done exercises of the survival type and will automatically assume that this one is of the genre. They will quickly fall into “survival mode” and make decisions to carry a tent, sleeping bags, etc. that they would never make in real life. You will find that your student groups fall easily into two types: the groups in survival mode and the realists. I would also expect some argument at the end of the exercise when you give them the expert answers because they just can’t accept that this is not a survival situation. All this gives you a good chance to discuss the assumptions that groups make and the process errors that they get into.
You will find some groups that do better than the individuals in them. This is because in a task where more information helps, adding group members should improve the decision that is made. However, I have found that even in Alberta there are very few students who have hiked in the mountains. Therefore, I have had many groups doing this exercise with little to no expert knowledge in the group. In this case adding group members does not help the group to make better decisions because all you are adding is people, not information. This is another good point that you can make about groups. Sometimes adding more members just doesn’t help.
According to six members of Skyline Hikers of the Canadian Rockies, the correct ranking of the 15 items is as follows:
1. Topographic map and trail guide book. The guide book not only tells you how to get to the trail, but also gives you explicit directions on how to follow it. It also provides you with a detailed description of what to expect on your trail hike. The topographic map is an excellent supplement to the guide book to help you stay on the unmarked trail.
2. Rain gear. This will protect you from rain, snow, and wind, all of which are likely on a trail such as this at this time of year. It may also be used as a wind break on the ridge and as a stretcher in case of an emergency.
3. Canteen with water. This may be carried full or empty and filled at any time with water. Water is required to protect against dehydration, as you will sweat even if the ambient temperature is cool. There is no water on the ridge. Dehydration is dangerous because it increases your chances of sunstroke and hypothermia.
4. Food. It is a long day and a strenuous hike. For psychological reasons and to keep your group together, you will want to be able to stop along the way and enjoy a meal before continuing.
5. First aid kit. In case someone is injured or blisters become a problem, this will be required in order to walk back out.
6. Hat. To protect you from the sun or for heat retention should you remain out overnight.
7. Compass. The trail may live up to its name and become covered in mist, meaning that a compass will be required to help you get back out again.
8. Repair kit. To fix a broken pack, belt, or shoelace, this kit may be useful. It also contains materials that could be used for making splints, etc. in case of an emergency.
9. Insect repellent. Probably only required in the stretch of trail that is down in the valley among the trees.
10. Sunscreen. Not as important because you already have a hat with you to protect you from the sun.
11. Flashlight. May be of some use on the way back should you be out longer than you expect. In the valley the light will fade quickly and you may need a light to stay on the trail.
12. Sunglasses. You already have a hat, so these are mostly a duplication.
13. Matches. You are not supposed to light a fire in a national park. Matches will be of little use to you on the ridge, in any case, as there is no wood. However, in an emergency, matches may be of more use to you than the remaining two items.
14. Sleeping bags. These are bulky and unnecessary because you are dressed warmly and have rain gear that may be used for protection from the elements if the need arises. The plan is to have a day hike, and sleeping bags will slow you down too much.
15. Tent with waterproof fly. This is heavy, and again will only slow you down. Again, you have with you rain gear, which can double as a wind break if you need it overnight. If you must stay out overnight, you will just have to huddle together until first light when you can walk out to your car.
To do the exercise, have students fill in the individual ranking, then form them into groups and have the group make the decision all over again. As groups make their decision, give them a sheet with a list of the correct rankings and have them write those rankings down the middle column of the answer page. Then get them to calculate deviation scores by determining the absolute value of the difference between the rank given an item by the student and by the expert.
These deviation scores are summed to determine the individual’s score. The process is repeated to determine the group score. Each student group determines the summary statistics. Have all the scores posted using a large matrix on the classroom chalkboard or whiteboard. Then have everyone in the class, yourself included, examine the matrix and discuss what the scores mean and what learning can be made.
If you are asked about the experts, direct students to http://www.skylinehikers.ca.
Refer to the accompanying Test Bank for assessment purposes.
REFLECTIONS ON TEACHING
Reflect on your classroom experience by reviewing the following questions:
What worked? What didn’t? Why and why not?
Were students engaged? Were they focused or did they go off on tangents?
Did my assessments suggest that they understood the key concepts?
What should I do differently next time?
How can I gather student feedback?
WHAT OTHER RESOURCES ARE AVAILABLE?
Here are a few websites that provide further information for some of the organizations and ideas discussed in Chapter 13.
BlackBerry
Issie Lapowsky. (2014, April 16). “BlackBerry Just Had Its First Good Idea in Years,” Wired, http://www.wired.com/2014/04/blackberry-invests-nanthealth/ (accessed July 7, 2021).
Silverman, S. (2015, July 27). “Avoiding the Blackberry path: 5 ways to improve your company’s decision making,” Philadelphia Business Journal, https://www.bizjournals.com/philadelphia/blog/guest-comment/2015/07/avoiding-theblackberry-path-5-ways-to-improve.html (accessed July 7, 2021).
Bombardier
The Canadian Press (2020, February 15) “Bombardier in Talks to Sell Train-Making Division to French Multinational Alstom,” https://www.cbc.ca/news/canada/montreal/ bombardier-in-talks-to-sell-train-making-division-to-french-multinational-alstom-1.5465925 (accessed July 7, 2021).
Other Resources
Chris Musser and Dipak Sundaram. (2020, May 13). “Steps to Effective DecisionMaking in Organizations, ” Gallup, https://www.gallup.com/workplace/310439/stepseffective-decision-making-organizations.aspx (accessed July 7, 2021).
