Organisational Behaviour

1 The Basics of Organisational Behaviour and its Relation to Management Objectives By the end of this module, you will be able to: Distinguish organisational behaviour (OB) and management as different yet related disciplines. Define OB. Explain the elements of the managers job in the twenty-first century. Describe the relationship between organisational productivity and employee needs. Characterise the meaning of values and their relationship to personality. Explain various psychological traits of employees that systematically influence their behaviour on the job and how they can be measured. Explain the meaning of introversion and extroversion. Explain the nature of job satisfaction and recognise its determinants and consequences. Explain the job satisfaction job performance relationship. Assess ways to measure job satisfaction in the work setting. Differentiate organisational commitment and job involvement. Explain the psychological contract and how the new generation of workers is changing it. Describe how economic insecurity erodes workers commitment and involvement. Link personal values to whistle-blowing behaviour at work.

1.1 Why Managers Need to Understand Organisational Behaviour and its Theories 1.2 Values: The Building Blocks of Individual Differences 1.3 The Study of Personality and Employees Personal Traits 1.4 The Crucial Role of Job Satisfaction 1.5 Developments in the Study of Employee Work Attitudes

Summary The field of OB is a social science that advances knowledge about the behaviour of people at work. OB studies organisational productivity and employee needs. All aspects of organisation performance relate to the former; work attitudes such as job satisfaction, organisational commitment and job involvement relate to the latter. The field concentrates on the acquisition of knowledge about organisational productivity and employee needs. Management differs from organisational behaviour in that it deals with accomplishment of organisational goals and involves the technical, conceptual and human components of organisational functioning. The managers job in the twenty-first century will focus on his coaching, integration and conflict-resolution skills. Old job requirements such as giving orders, determining promotions and making autocratic decisions will fade in importance. The rate of change in content of the managers job is being increased by work-force diversity, demands for better products and services, global competition and Theory Y philosophy. Values are enduring beliefs and they can be instrumental or terminal in nature. Instrumental values reflect the means for achieving ones goals in life and terminal values are the life goals themselves. As organisations react to global competition, managers will be challenged by culture-based value differences. Increasingly, organisations are providing culture-based values training to smooth the transitions for their managers who receive global assignments. Locus of control refers to ones beliefs about what cause outcomes in life. Internals believe in the causality of personal behaviour, while externals believe in the causality of environmental forces.
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Internals connect responsibility to outcomes in life while externals believe outcomes are created by forces and events outside themselves. Extroversion and introversion refer to the strength of ones need for external sensory stimulation. Introverts avoid external social noise and extroverts embrace it. These qualities can influence performance if a job is designed to be either high or low in social stimulation. Machiavellism is the urge to influence others to achieve ones personal ends. The high Mach individual manipulates others to achieve personal gains in fluid, unstructured organisational circumstances. The socially acquired needs of achievement, affiliation and power are important factors that shape employee behaviour. Achievement motivation often causes entrepreneurial behaviour. Affiliation needs energise supportive and collaborative behaviour in work groups. Need for power has two forms of expression: personalised and socialised power. The socialised need for power is an important managerial quality that is associated with organisational effectiveness. Job satisfaction is composed of the facets of pay, promotion, co-workers, supervisors and the work itself. The level of experienced job satisfaction is determined by job challenge, job clarity, supervision and incentives, which are all organisational factors. Years in career and personal work expectations are important individual determinants of job satisfaction. Job satisfaction is not directly related to performance. The connection is determined by the availability of both intrinsic and extrinsic rewards, and by employees perception of the fairness of their distribution. Organisational commitment is the employees agreement with organisational goals, his willingness to exert effort on behalf of the organisation and his desire to maintain his membership. It takes longer to form than job satisfaction, but once formed, is more resistant to change. Economic insecurity (job loss through downsizing) threatens employees well-being. Employees who remain on the job after downsizing and corporate restructuring often experience sharp drops in their organisational commitment. Job involvement develops through ones job and affects the employees self-worth and desire to participate in work-related decisions. Employees can have job involvement without being committed to the organisation. Thus, downsizing, job re-engineering and corporate restructurings may have less long lasting or direct, negative effects on employees job involvement.

2 Stress and Well-Being at Work Objectives By the end of this module you will be able to: Describe the causes and consequences of stress on the job. Explain the nature of the general adaptation syndrome. Explain the relationship between job stress and employee performance. Describe the features of the Type A personality that lead to adverse consequences shown in General Adaptation Syndrome. Enumerate the features of a successful company stress-management programme. Conceptualise the relationship between job stress, job insecurity and continuing efforts to control costs through corporate downsizing.

2.1 Introduction to Stress and Well-Being at Work 2.2 Understanding Job Stress and its Components 2.3 A Model of Causes and Consequences of Stress 2.4 Individual Approaches to Managing Stress 2.5 Organisational Programmes of Wellness and Job Stress Management 2.6 Downsizing and Outsourcing: New Forms of Permanent Job Insecurity? 2.7 A Semi-Last Word on Downsizing
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Summary Alarm reaction is the fight or flight response that mobilises the body and mind to defend against physical threat. Behavioural stress symptoms are consistent patterns of employees low performance, inattentiveness and lack of carefulness in work. These patterns in employees may suggest that they are nearing the exhaustion phase in General Adaptation Syndrome. Stressors mount up and their effects are cumulative. At some point an employees resources and capacities to cope with stress begin to deteriorate and diseases of resistance or adaptation ensue. Challenge stress (eustress) results in increased employee effort and performance. Environmental stress factors originate from economic, political or technological uncertainty and induce alarm reaction or press employees with limited stress-coping resources into exhaustion in General Adaptation Syndrome. Intermittent explosive disorder connotes angry outbursts that are inconsistent with the demands of the situation. Exhaustion is the final stage of General Adaptation Syndrome, and is the wear and tear on the body and mind created by chronic stress overload. Type A behaviour is a set of actions and emotions characterise by competitiveness, impatience and sometimes hostility that is rooted in self-doubt. Job burnout is prolonged psychological withdrawal from work by employees who suffer from chronic work overload. Karoshi is a fatalistic Japanese expression that means to die of a heart attack or stroke on the job. Organisational stress factors increase in number and intensity in firms that are contemplating downsizing or outsourcing to revitalise a flagging business model (deterioriating competitive advantage). Physiological stress symptoms are changes in a persons metabolism and bodily processes that can occur as headaches, high blood pressure and heart disease. Psychological stress symptoms are chronic negative emotional reactions to stress such as anxiety, irritability and depression. When these reactions are chronic in the employee, he or she is nearing the exhaustion phase of General Adaptation Syndrome. 3 Contemporary Theories of Motivation Objectives By the end of this module you will be able to: Identify the elements that make up employee motivation. Clearly distinguish motivation from performance. Explain the various levels of human needs. Differentiate hygiene factors from motivators. Describe the differences between content theories of motivation and process theories of motivation. Explain how employees personalities can interact with their perceptions of work outcomes to affect their motivation and performance. Explain the major components of expectancy theory and how they relate to organisational processes. Develop organisational examples of how behaviour modification works. Explain a contingency of reinforcement and how managers can apply it. Differentiate among various schedules of reinforcement. Explain why managers should practise stretching the ratio in providing rewards to employees. Know how to set up a a behaviour modification programme in a company. Identify the pros and cons of using punishment in the workplace.

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3.1 Introduction 3.2 Content Theories of Motivation 3.3 Process Theories of Motivation 3.4 Cultural Differences in Motivation

Summary Motives initiate, sustain and channel behaviour. Maslows hierarchy consists of two general levels: physiological needs and psychological needs. These levels are also referred to as lower and higher-order needs. Individuals can progress up the hierarchy as their careers advance or as they grow older or both. Employees naturally become increasingly concerned with higher-order needs as their careers lengthen. Herzbergs two-factor theory states that one set of factors cause motivation and satisfaction (content factors) and another set are responsible for dissatisfaction and low motivation (hygiene factors). Expectancy theory is a useful managerial tool for understanding employee behaviour. It specifies the relationships between effort, performance and rewards. The theory articulates the significance of expectancy, instrumentality and valence. These concepts can be applied to work to help employees understand the crucial relationship between performance and rewards. The components of expectancy theory are sensitive to individual differences and organisational factors. BMod is a process theory of motivation and learning which specifies the crucial role of the environment in shaping behaviour. It states that behaviour is a function of its consequences. Positive and negative reinforcement increase the strength of a behaviour. Punishment and extinction reduce behaviour strength. A contingency of reinforcement can be adapted to continuous or partial reinforcement schedules. Partial reinforcement schedules have powerful effects on behaviour. Behavioural shaping induces closer and closer approximations to a desired behaviour. Behaviours which deviate from the improvements are not reinforced. Stretching the ratio or interval of reinforcement strengthens behaviour and makes it permanent. Critics of behaviour modification suggest that the application of its principles to work dehumanises employees. BMod programmes which are based on employee participation improve employee work attitudes and performance. Punishment has unintended consequences because managers use it impulsively or indiscriminately. It can be effective if it is: quick, intense, fair, focused, private, informative and not followed by rewards. 4 Organisational Control and Reward Systems Objectives By the end of this module you will be able to: Explain why organisations must evaluate employee performance. Describe what threatens the reliability of performance appraisal systems. Describe appraisal methods and discuss their characteristics. Explain why goals have motivating properties. Understand management by objective (MBO) systems. Distinguish among intrinsic, extrinsic, financial and non-financial rewards. Describe the significance of distributive and procedural justice in performance appraisal and reward systems. Explain the ways in which companies reward performance. Describe the value of group-based reward systems. Explain why group-based incentive plans cannot be installed in a firm that is in the middle of
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downsizing or outsourcing process. Describe how empowerment and the employment relationship can be strengthened by using groupbased incentives. Describe the pros and cons of individual stock option plans.

4.1 Why Organisations Need to Assess Employees Performance 4.2 Goal-Setting and Management by Objectives (MBO) 4.3 Rewards and Reward Systems 4.4 Components of Executive Compensation 4.5 A Comparison of Company Pay Practices 4.6 Group-Based Reward Systems

Summary PA systems monitor progress towards meeting organisational goals, communicate performance expectations to employees, and create informed data for making human resource decisions. Validity and reliability are the two most important properties of a PA system. Performance appraisal content and empirical validity increase the correspondence of actual and measured performance. Reliability is generally a function of the number of dimensions in a PA system, uniform administration procedures and the level of understanding and training of managers who use the system. Reliability can be enhanced by using multiple raters to judge the performance of employees. Threats to PA system reliability include personal bias, halo effect, recency error, similar-to-me error, forcing the rating, central tendency, leniency error and strictness. Graphic scales is the most popular assessment tool and it overcomes some of the limitations of the absolute standard method. BARS are designed with the help of employees, and can generate useful behavioural data which employees perceive as relevant to successful job performance. BARS are more expensive to design, but they can be extremely useful for jobs with specific behavioural requirements. As job clusters multiply, additional BARS may have to be built. Goal-setting theory supports MBO. MBO works best when it is participative, when ample formal and informal feedback is provided to employees, and when provisions for goal revision are built in to the system. When creating goals for employees, the SMART principle should prevail. MBO systems fail without sustained top management support. They must also be anchored to routine managerial activities, personal development, training, and departmental needs. Rewards are classified as extrinsic or intrinsic. Intrinsic rewards occur as the work unfolds, and employees experience them as challenge, personal growth, work meaningfulness and work significance. Extrinsic rewards are environmentally based and they can be further classified as direct, indirect or non-financial compensation. Extrinsic rewards can be distributed to employees based on their: 1) performance (merit-based), 2) effort, 3) seniority, or 4) difficulty of replacement. Firms sometimes slip into a policy of equal pay for equal work and their boards sometimes allow executives to game the stock options system to reap huge pay packages. Pay systems should be built on the basis of a job analysis which ranks jobs based on the extent of their value adding factors. New pay practices include cafeteria-style fringe benefits, lump-sum pay, skill-based compensation, accumulating time off, the all-salaried team and open-salary information. Group-based reward systems can improve productivity when labour and management view themselves in a performance partnership. Examples of cost savings performance partnerships are the Scanlon Plan, the Rucker Plan and Lincoln Electrics profit-sharing plan. Delayered firms cannot expect to sustain improvements in service quality nor keep highly trained

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personnel unless they adopt group-based incentives. As a basis for excellent service delivery, groupbased incentives have better line of sight than company-wide ISO plans. New guidelines for altering pay systems stress: 1) matching the pay system to the organisations strategic goals so that competitive advantage is created or extended; 2) adjusting the pay plan to reflect the extent of diversity in the work force and 3) ensuring that the pay system fits with other firm characteristics that are strongly related to the companys sources of competitive advantage. The best way to motivate self-directed teams in a delayered firm is by making group-based rewards contingent on the groups performance. To a considerable extent, such plans reinforce the pay-at-risk trend because the bonuses are not available unless productivity and service are improved by employees in a cost effective way. New guidelines for altering pay systems stress: 1) matching the pay system to the firms strategic goals so that competitive advantage is created or extended; 2) adjusting the pay plan to reflect the extent of diversity in the work force and 3) ensuring that the pay system fits with other firm characteristics that are strongly related to the companys sources of competitive advantage. 5 Job Design and Employee Reactions to Work Objectives By the end of this module you will be able to: Show how employee motivation and performance are related to job design. Describe the difference between jobs which fulfil higher-order needs and those which do not. Explain job design at the individual employee level. Explain why managers must understand and apply job design principles. Explain how job design and participation reduce employee job stress. Discuss interaction between job design and employee personality. Explain how employee participation supports competitive advantage. Describe new developments in team-based employee participation.

5.1 Understanding Job Design 5.2 Making Use of Job Design for Individual Employees 5.3 The Team Approach to Job Design

Summary SM breaks jobs down into their elements; eliminates the unnecessary ones and recombines the remainder to create the most efficient job design. It produces jobs that are more specialised and simplified. It is often associated with employee alienation, turnover, absenteeism and lowered production quality. Herzbergs two-factor theory proposes that the absence of hygiene leads to job dissatisfaction while the presence of motivators leads to job satisfaction, motivation and performance, if hygienes are present. It was the first significant departure from scientific management as a method for job design. Job range refers to the number of tasks performed by an employee, while job depth is the amount of discretion the employee has to select various job procedures to accomplish work. Sometimes these two aspects of job design are called horizontal and vertical job loading respectively. Employee growth need strength is composed of achievement, interest in work, desire for independence and personal control over work. It is a moderating factor which must be considered prior to attempting changes in job design. Job rotation increases levels of employee skills by moving them from one job to a related one for a given period of time. Job enlargement adds related tasks to the employees core work activity. Crosstraining produces employees with inter-changeable skill sets.
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 SDTs integrate the technical and social aspects of group work. Countless companies use SDTs to advance competitive advantage. Employee engagement is the sharing of decision-making power by the organisation with its employees. It is popular with Theory Y managers and their firms. Participation is composed of three elements: 1) psychological and physical job involvement, 2) motivation to contribute and 3) acceptance of responsibility. System 4 organisations use participation and engagement to raise individual and work team effectiveness. Their managers have to value participation and trust employees to achieve results without direct, day-to-day supervision. 6 Understanding Work Group Dynamics and Group-Based Problem-Solving Objectives By the end of this module you will be able to: Differentiate clearly the types of work groups existing in organisations. Describe the factors that attract individuals to organisations and groups. Describe the work consequences of group cohesiveness. Untangle the relationship among work group cohesiveness, work group performance, and the intervening impact of goals and group norms. Recognise the symptoms of groupthink and take corrective actions to minimise its negative effects on group decision-making. Explain each stage of group development, and the managerial problems unique to each one. Explain how to use psychometric testing to hasten group performance. Recognise the problems that curtail group creativity. Follow guidelines to make group decision-making more effective. Recognise social loafing (freeboarding) and correct it. Adopt a useful managerial strategy for handling intergroup relationships. Diagnose inter-group conflict and manage it.

6.1 Describing Work Groups and their Characteristics 6.2 Work Group Composition, Cohesiveness and Norms 6.3 Significant Aspects of Work Group Structure 6.4 From Statics to Dynamics: Work Group Development and Decision-Making 6.5 Practical Guidelines for Managing Groups 6.6 Decision-Making in Teams: Deciding on the Extent of Participation 6.7 Work Groups in Competition and Conflict

Summary A group is two or more employees who interact, perceive common interests or goals and are brought together to accomplish a task. Firms have formal task or command groups and informal friendship groups. Informal groups emerge because formal groups cannot satisfy all their members needs. People join groups and organisations because of interpersonal attraction created by proximity, physical attractiveness, attitude similarity, demographic similarity, group activities and group goals. Work group composition refers to the degree of similarity or difference between members personal qualities. If members share numerous characteristics their group is homogeneous and if they have little in common their group is heterogeneous. Cohesiveness means that members value the benefits of membership highly. Cohesiveness augments performance if the work groups norms agree with the norms of the organisation. Managers can
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influence cohesiveness by controlling the groups composition, size, and goal clarity. In addition, managers can create a disturbance or common enemy to influence the cohesiveness in their groups. Work group norms streamline the process for controlling member behaviour. Without norms, a group would have to deal with each example of behaviour as a discrete event. If conformity and cohesiveness are extremely high, a work group may exhibit groupthink. This is the suspension of critical thinking in the group. Groupthink symptoms are detectable and correctable. Groupthink need not always result in bad decisions. Often a work group will exhibit groupthink but possess enough information to reach a correct decision. Work group size has predictable effects on member participation, satisfaction with membership, process losses and average performance per member. Work group development proceeds through: 1) forming, 2) storming, 3) norming and 4) performing. Each stage has identifiable issues which must be resolved before the group can progress to the next stage. Belbins roles analysis of teams can be used to hasten teams progress to stage 4 performance and productivity. Work groups cannot stay in stage 4 indefinitely. Turnover of membership and changes in the groups task eventually dislodge the group from this stage. Groups make risky decisions based on how members value risk and the organisations expectations that given groups should be risk tolerant or risk averse. Work group creativity can be low if the manager does not know how to separate idea generation from idea evaluation in group decision-making. Brainstorming in work groups defers judgement about the quality of suggestions and focuses exclusively on generating as many suggestions as possible in a set time period. The nominal group technique (NGT) formalises face-to-face interactions in work groups to minimise the effects of status and to manage member participation in decision-making. Managers must prevent NGT from becoming ritualistic. The Delphi technique can be used for large-scale policy decisions where anonymity of group members is a prerequisite for effective decision-making. While it is costly and time-consuming, the Delphi technique does produce decisions which are superior to those produced by conventional faceto-face decision-making groups. The effective group leader must judge when task activities or maintenance activities are of greater concern to the group. Process losses can be minimised by: 1) careful definition of the groups task, 2) separation of idea generation from idea evaluation, 3) avoidance of groupthink, 4) making group rewards contingent on group performance and 5) making group rewards contingent on group contributions to work unit successes. Managing intergroup behaviour and performance requires the manager to assess groups need for interdependence, information flow and integration. Depending on needs in these three areas, managers can choose among the following to improve intergroup behaviour and performance: 1) rules and procedures, 2) member exchange, 3) linking roles, 4) task-forces and 5) decoupling. Social loafing is the decline in average member performance in groups of increasing size. Social loafing can be reduced if a manager focuses on maintaining high job involvement, preserving group performance norms and reinforcing the importance of the groups performance goals. The extent of group participation in decision-making can be determined by analysis of these conditions: 1) the time pressure to make the decision; 2) the importance of decision quality; 3) the importance of subordinates commitment to the decision; and 4) the extent to which information is available to make the decision. The actual amount of group participation in decision-making varies from none (boss-centred decision-making) to considerable (full group-centred decision-making). Group conflict can be suppressed (X view) or viewed as a feature of organisational life (Y view).

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7 The Influence Processes in Organisations: Power, Politics, Leadership and Entrepreneurship Objectives By the end of this module you will be able to: Distinguish among power, authority and influence. Differentiate forms of interpersonal power used by managers. Explain how employees can gain power. Explain why political behaviour takes place in firms and why managers play politics. Describe effective methods for upward management. Differentiate leadership behaviour from managerial behaviour. Describe current theories of leadership and how they differ. Recognise the importance of effective leader reward and punishment behaviours. Explain how characteristics of subordinates, tasks and the organisation can function as neutralisers and substitutes for leadership. Characterise the entrepreneurial profile. Contrast entrepreneurial behaviour and administrative behaviour. Diagnose your own ability to be an entrepreneur. This module addresses three issues important to managers and students of OB. First, we will define the important concept of power in organisations. We will examine the bases for interpersonal power and how individuals and organisational subunits obtain power. Next, well explore organisational politics and we will see how individuals and subunits manipulate the firms political system. Our next topic is leadership. We will define it, differentiate it from management and trace its development as a core concept in the fields of OB and management. The module concludes with a variation on the leadership theme: entrepreneurship and its role in sustaining competitive advantage.

7.1 An Example of Power 7.2 Uses and Abuses of Power: Playing Politics 7.3 Leadership: A Conundrum of Theory 7.4 The New Age of Entrepreneurs

Summary Power is the ability to influence someone else. Authority is the right to order or to ask others to do what you want them to do. It is bestowed by the position in the organisational hierarchy. Influence is a dynamic interpersonal process in which one person affects the thoughts, feelings and behaviours of others. Managers who use power ethically must communicate effectively and through their words and actions show respect for their subordinates. There are several sources of interpersonal power. Reward power, coercive power and legitimate power all adhere to the position held by the individual. They are a function of vertical placement in the hierarchy. Referent and expert power are forms of personal power which have little to do with placement in the hierarchy of the organisation. Subunits in the organisation gain power by 1) competing for resources, 2) managing organisational uncertainty, 3) occupying a central position in the flow of work and 4) eliminating substitutes for the subunits activities. Organisational politics focuses on methods and results. Both can be either sanctioned or nonsanctioned. Failure to pursue sanctioned outcomes with approved methods has ruined more than a few executives and their firms. Leadership is the power of one individual to guide the actions of another. Management is understood
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as a set of interlocking roles: 1) interpersonal, 2) informational and 3) decisional. Behavioural style theory emphasises the leaders consideration behaviour which is those actions that sustain the morale and cohesiveness of the work group. The approach also stresses the leaders initiating structure behaviours which focus on achieving goals and clarifying work. Both leader behaviours are related to group performance and member satisfaction. Fiedlers contingency theory tries to integrate the leaders orientation to his least-preferred coworker and the favourableness of his leadership situation. The theory proposes that the situation is composed of: 1) leadermember relations, 2) leaders position power and 3) task structure. The leaders control of situational favourableness can be enhanced by changes in leadermember relations, position power and task structure. The path-goal theory of leadership proposes that the leaders job is the clarification of pathways from workers effort and performance to the rewards that they value. The leader can adopt: 1) directive, 2) supportive, 3) participative or 4) achievement-oriented behaviour to achieve the clarification noted. Characteristics of subordinates, tasks and the organisation can function as neutralisers and substitutes for leadership. Entrepreneurs are special types of leaders who create wealth by assuming risk. Entrepreneurship consists of skills which can be learned. They differ from bureaucrats and administrators in their orientation to strategy, opportunity exploitation, decision-making, resource-allocation and reward practices. Entrepreneurial behaviour can be learned by employees. The organisation must create the roles of: 1) idea champion, 2) sponsor and 3) godfather to ensure a culture that encourages entrepreneurship. Organisations must also protect creative groups from organisational bureaucracy by creating greenhouses. 8 Organisational Design and New Forms of Service-Driven Organisations Objectives By the end of this module you will be able to: Differentiate between organisational structure and organisational design. Link Theory X and Theory Y to mechanistic and organic designs. Explain the role of division of labour, delegation of authority, departmentalisation, and span of control in organisational design. Explain the principles underlying effective delegation of authority. Differentiate between the four basic organisational designs. Explain the reasoning behind decisions to centralise or decentralise organisations and their implications for cost control. Differentiate between coordination and control. Describe the importance of horizontal and vertical coordination. Explain the differences between process-oriented and results-oriented control systems. Explain how to boost customer service as an aspect of competitive advantage by eliminating the manufacturing approach to service. Explain why service quality improvements require the rebuilding of organisational structure and processes from the bottom up to support service delivery employees. Show how the managers job changes when service becomes part of the firms competitive advantage. Explain why service quality training must be viewed as an investment in future earnings streams (and not a current expense). Explain how outsourcing of services can jeopardise competitive advantage and customer loyalty if service becomes unsatisfactory. Explain why improving service quality is far more time consuming than downsizing, but is more likely to sustain competitive advantage.
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8.1 Making Sense of Organisational Anatomy 8.2 Organisational Structure: Understanding the Basics 8.3 Understanding the Responsive Organisation 8.4 Drivers of Growth in Customer Service 8.5 Designing Service for Customer Retention 8.6 Organising Principles of Service Quality 8.7 Creating a Service-Driven Organisation

Summary The four key aspects of organisational design are division of labour, allocation of authority, departmentalisation and span of control. Mechanistic (X) designs vary in terms of division of labour, allocation of authority, departmentalisation, and span of control. The mechanistic firm has high division of labour, low delegation of authority, uniform departments, and narrow spans of control. Organic (Y) designs have less division of labour, greater delegation of authority, and wider spans. Division of labour subdivides work and it creates economies of scale through task specialisation. It sustains the competitive advantage of the low-cost producer in a given industry. Delegation of authority gives control of work activities and goals to employees. When done broadly and consistently across the firm, delegation of authority is employee empowerment. Departmentalisation is the grouping together of like jobs. The four forms of departmentalisation are: 1) functional, 2) territorial, 3) product, and 4) matrix. Large, complex firms blend all four forms of departmentalisation in their designs. The choice of design is heavily influenced by the extent of environmental uncertainty. Centralisation is the retention of authority to make decisions by top management. Highly centralised (X) firms are formalised, standardised and specialised. Formalisation is the extent to which employees work is controlled by written documentation of rules, regulations and work procedures. Standardisation limits behaviour variation in a job. Outsourcing is contracting with outside firms for goods and services that support manufacturing, accounting functions purchasing, sales, customer service, product development and personnel practices. Decentralised firms delegate authority to employees. They exhibit less formalisation and standardisation than centralised firms. Decentralisation has strengths and weaknesses which must be weighed in relation to the firms business model. Coordination is the linking of subunits to achieve a pattern of consistent outcomes. The level of coordination needed is highly sensitive to the amount of information that must be processed to accomplish tasks throughout the firm. Vertical coordination is improved by using groups, a collateral organisation, direct supervision, standardised work processes, standardisation of outputs, use of performance appraisal, and management information systems. Horizontal coordination is improved by using direct manager contact, liaison roles, horizontal task forces, and permanent teams to manage recurring work-flow problems. Interorganisational designs (conglomerates) engage in related and unrelated diversification. Strategic alliances are cooperative arrangements between two firms that are often used to help a company enter global markets. Organisational control refers to the set of mechanisms used to keep action and outcomes within predetermined limits. Process control standardises task performance by either specifying work methods or setting work

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standards. Process control often limits flexibility if the firm operates in a risky environment. External process control detects production defects and corrects them. Internal process control relies on selfdirected teams to solve product or production problems with total quality management. Results-oriented control (MBO) achieves uniformity by specifying the results to be obtained by employees and their work units. MBO rests on superiorsubordinate teamwork to: 1) establish goals, 2) review goal progress, and 3) resolve conflicts and take corrective action with respect to set goals. Goals motivate employees by channelling and focusing their behaviour on a useful end result. Some managers undermine goal setting by over-emphasising control (record keeping) at the expense of the goals themselves. Responsive firms focus on customers and their service needs. This is a revenue or top line orientation that builds competitive advantage on the firms ability to meet or exceed the needs of customers. The responsive firm stresses employee training, reward system design and improved organisational practices to strengthen its service mix. Sealing off company systems from external risk is a hallmark of X-based manufacturing assumptions. They are inconsistent with a strong customer service orientation and the firm must abandon them if it hopes to defend its market segments.

9 Managing Transitions: Organisational Culture and Change Objectives By the end of this module you will be able to: Characterise organisational culture and explain its contribution to the firms mission, strategic plan and goals. Explain how the founder (or CEO) preserves a strong culture. Discuss the features of a strong organisational culture. Develop the concept of the organisational life cycle and describe how organisations change throughout the life cycle. Describe the process of planned change and the key problems which can surface in each of its phases. Describe the key elements of a multi-method and multi-level diagnosis. Develop methods to ensure the benefits of change in the firm. Differentiate: 1) interpersonal and group level change, 2) system-wide process change and 3) Grid OD.

9.1 Organisational Culture: Its Meaning and Relationship to Successful Strategy 9.2 Organisational Life-Cycle Theory 9.3 Organisational Change 9.4 Methods of Change in Organisation Development

Summary Organisational culture is the shared beliefs and values which produce stable norms for employee behaviour. Large firms have multiple cultures which should be integrated. Organisation culture reflects the personality of the founder or the CEO and is sustained by the socialisation process. Organisations learn to manage planned change because they face risky external complexity and change (driving forces). When firms detect external risk they typically alter goals and strategies, technology or structure. If firms detect internal risk, they may alter job design, select different people, adopt new training methods or rearrange PA and reward systems. A strong organisational culture drives financial and strategic success as long as it remains adaptable.
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 The life-cycle model of organisations covers inception, growth, maturity and decline. Many useful interventions can delay decline. Planned change unfreezes existing patterns and processes, changes them to better match intended strategy and refreezes the improvements. For change to take hold, employees must be dissatisfied, the firm needs a model for the future and the process must be objective and orderly. Diagnosis is a collaborative process between a change agent and a firm to identify the underlying causes of problems. It is part of the unfreezing process and it should be multi-level in nature. Resistance to change is a widespread belief among employees that the costs of change will exceed its benefits. Resistance springs from employees fears of: 1) knowledge obsolescence, 2) loss of personal power and 3) altered work relationships. The carry-over problem occurs when new methods and behaviours are not reinforced in the on-going work environment. The transfer of new learning can be increased if: 1) the change process corresponds to the work environment, 2) changes are immediately useful and 3) new attitudes and behaviours are measured and supported. Institutionalisation is making a planned change a permanent part of the organisations culture. Diffusion is the horizontal transfer of planned change across units For it to occur top management must promote the benefits of change and cut through obstacles like red tape (bureaucracy) and union resistance. OD is a system-wide application of behavioural science knowledge by change agents to the development of new strategies, structures and processes. It includes methods like team building, survey feedback and pre-packaged programmes like Grid OD.

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