Discusses the foundations of Organization System - namely Organizational Structure, Organizational Culture, & Organizational Climate. Detail discussion on types organizational structures, building and sustaining organizational culture, distinction between culture and climate

1. The
Organization
System
Srinivasa Rao V, AUSIB

2. Individuals & Groups
in Organization

3. Agenda
➔ Organizational Structure
An organizational structure defines how
job tasks are formally divided, grouped,
and coordinated..
➔ Organizational Culture
Organizational culture refers to a system
of shared actions, values, and beliefs that
develops within an organization and
guides the behavior of its members.
➔ Organizational Climate
Organizational climate refers to the
shared perceptions organizational
members have about their organization
and work environment.

4. Point Counterpoint
And regulation entails
organizational effectiveness, a
chain of command, and a structure
for logistical support.
~ Sun Tzu
Basic philosophy, spirit and drive of an
organization have far more to do with
its relative achievements than do
technological or economic resources,
organizational structure, innovation and
timing.
~ Marvin Bower

5. Point Counterpoint
In business, organization is an
absolute necessity, not an
alternative.
~ Larry Burkett
... people are capable of more than their
organizational positions ever give them
the tools or the time or the opportunity
to demonstrate.
~ Rosabeth Moss Kanter

6. Organizational Structure
Mintzberg defined
organizational structure as “the
sum total of the ways in which
it divides its labour into distinct
tasks and then achieves
coordination among them”.
According to him,
organizational structure is the
framework of the relations on
jobs, systems, operating
process, people and groups
making efforts to achieve the
goals.
Jennifer and Gareth have defined
organization structure as the
formal system of task and reporting
relationships that controls,
coordinates and motivates employees
so that they cooperate and work
together to achieve an organisation’s
goals.

7. Organizational Structure
Hold and Antony: Structure is
not a coordination mechanism
and it affects all organizational
process. Organizational
structure refers to the models
of internal relations of
organization, power and
relations and reporting, formal
communication channels,
responsibility and decision
making delegation is clarified.
Stephen Robbins: An organizational
structure defines how job tasks are
formally divided, grouped, and
coordinated. Managers need to address
six key elements when they design their
organization’s structure: work
specialization, departmentalization, chain
of command, span of control,
centralization and decentralization, and
formalization.

8. Organizational Structure
Key Design Questions and Answers for Designing the Proper Organizational Structure

9. Early in the twentieth century, Henry
Ford demonstrated that work can
be performed more efficiently if
employees are allowed to
specialize. Every Ford worker was
assigned a specific, repetitive
task such as putting on the right-
front wheel or installing the right-
front door. By dividing jobs into
small standardized tasks that could
be performed over and over,
Work Specialization
Ford was able to produce a car every 10 sec,
using employees who had relatively limited
skills.

10. Today, we use the term work
specialization , or division of labor,
to describe the degree to which
activities in the organization are
subdivided into separate jobs. The
essence of work specialization is to
divide a job into a number of steps,
each completed by a separate
individual. In essence, individuals
specialize in doing part of an activity
rather than the entirety.
Work Specialization

11. Work Specialization [division of
labour] divides the jobs into smaller
activities. These activities are then
grouped together for effective
coordination. Organizing work by
grouping similar tasks along with
the people, and resources is
formally known as horizontal
specialization, The resultant work
units are called departments.
Departmentation

12. This process in which division of
labor followed by grouping of
similar activities that establishes
specific work units within an
organization is also called
departmentation. Some of the
principal bases for grouping
employees & resources into
departments are common tasks,
products, geography, and process.
Departmentation

13. Tasks
Organizational units can be
created around common
tasks. This usually means
grouping together employees
who do the same job – thus, a
firm might create a machine
shop, a maintenance
department, a secretarial pool,
and a sales office.
Bases for Departmentation
Processes
A process is a sequence of interlinked
activities. An organization may be
viewed as a set of processes: the
product development process, the
manufacturing process, the sales and
distribution process, and so on. A
process may correspond closely with
an individual product, or a process
may be dominated by a single task.
Functional organizations tend to
combine task-based and process-
based grouping.

14. Products
Where a company offers multiple
products, these can provide a
basis for structure. In a
department store, departments
are defined by products: kitchen
goods, toiletries, ready-to-
eat/cook foods, and so on. ITC
comprises of three main product
groups: tobacco, FMCG, & agri-
products.
Bases for Departmentation
Geography
Where a company serves multiple
local markets, organizational
units can be defined around these
localities. Banks offering retail
banking services have branches
across the geographical locations,
regional offices, & zonal offices.
Same is the case with some of the
retail chains.

15. Chain of Command
Two related concepts are
authority and unity of
command. Authority refers to
the legitimate power of a
managerial position to give
orders and expect them to be
obeyed. The principle of unity
of command helps preserve
the concept of an unbroken
line of authority. It says a
person should have one and
only one superior to whom he
or she is directly responsible.
The chain of command is an
unbroken line of authority
that extends from the top of
the organization to the
lowest echelon and clarifies
who reports to whom and
shows how executives,
managers, and supervisors
are hierarchically
connected.

16. Span of Control
The number of individuals
reporting to a supervisor is
called the Span Of Control.
Span of control is important
because it largely
determines the number
of levels and managers an
organization has. All things
being equal, the wider or
larger the span, the more
efficient the organization.

17. Centralization & Decentralization
Decentralization is the
degree to which the
authority to make
decisions is delegated
to managers at lower
levels who are the
closest to the action.
Centralization is the degree
to which the authority to
make decisions is restricted
to managers at higher levels
of an organization’s
hierarchy.

18. Formalization & Standardization
In a highly formal
organization, the
employee on the job has
a minimal amount of
discretion over what to do
and when and how to do
it. On the other hand,
where formalization is
low, job behaviors are
relatively unprogrammed,
and employees have a
great deal of freedom to
exercise discretion in their
work.
Formalization refers to the
written documentation of rules,
policies, and procedures to
guide behavior and decision
making. Beyond substituting for
direct management
supervision, formalization
is often used to simplify jobs.
Written instructions allow
individuals with less training to
perform comparatively
sophisticated tasks.

19. Formalization & Standardization
Standardization
eliminates the
possibility of
employees engaging
in alternative
behaviors, by
removing the need
for employees to
consider alternatives.
Standardization is the
degree to which the range
of allowable actions in a job
or series of jobs is limited so
that actions are
performed in a uniform
manner. It involves the
creation of guidelines so
that similar work activities
are repeatedly performed
in a similar fashion.

20. On the basis of the
alternative approaches to
grouping tasks and
activities
[Departmentation], we can
identify three basic
organizational forms: the
functional structure, the
multidivisional structure,
and the matrix structure.
Alternative Structural Forms

21. Thus, in any industrial
organization, specialized
functions like manufacturing,
marketing, finance and
human resource management
constitute as separate units of
the organization. All activities
connected with each such
function are placed in the
same unit. As the volume of
activity increases, sub-units
are created at lower levels in
each unit and the number of
persons under each manager
at various levels get added.
Functional Organization
When units and
sub-units of
activities are
created in
organization on
the basis of
functions, it is
known as
functional
structure.
This results in the
interrelated positions
taking the shape of a
pyramid.

22. Grouping together functionally similar tasks is
conducive to exploiting scale economies, promoting
learning and capability building, and deploying
standardized control systems. Since cross-functional
integration occurs at the top of the organization,
functional structures are conducive to a high degree
of centralized control by the CEO and top
management team.
Once a functionally organized company expands its
product range, coordination within each product
area becomes difficult.
Functional Organization

23. Functional Organization
[ A PARTIAL ORGANIZATION CHART FOR A STATE UNIVERSITY ]

24. Divisional Organization
In divisional organizations individuals and resources
are grouped by products, services, territories, or
customers. The product-based, multidivisional
organizational structure first emerged during the
20th century in response to the coordination
problems caused by diversification.
The key advantage of divisionalized structures —
whether product based or geographically based — is
the potential for decentralized decision making. In
divisionally structured organizations business level
strategies and operating decisions are made at the
divisional level, while the corporate headquarters
concentrates on corporate planning, budgeting,
and providing common services.

25. Divisional Organization
The large, divisionalized corporation is typically
organized into three levels: the corporate center,
the divisions, and individual business units, each
representing a distinct business for which financial
accounts can be drawn up and strategies formulated.
A divisional pattern is often used to meet diverse
external threats and opportunities. The major
advantages of the divisional pattern are its flexibility
in meeting external demands, spotting external
changes, integrating specialized individuals deep
within the organization, and focusing on the
delivery of specific products to specific customers.

26. Divisional Organization
[SOURCE: BASED ON INFORMATION IN GENERAL ELECTRIC ANNUAL REPORT, 2001]

27. Divisional Organization
Divisional Organizational Structure

28. Matrix Organization
Matrix organizational structure is a combination of
functional and divisional structures wherein an
individual is assigned to more than one type of
work unit. Matrix organization combines the
advantages of both the functional, and the
divisional structures - the technical specialization
and the responsiveness, respectively. The
schematic on the next slide shows the basic matrix
arrangement for an aerospace program. Note the
functional departments on one side and the project
groups on the other. Workers and supervisors
in the middle of the matrix have two bosses — one
functional and one project.

29. Matrix Organization
Matrix structure is ideally suited to advertising
agencies, aerospace firms, research and
development laboratories, construction companies,
hospitals, government agencies, universities,
management consulting firms, and entertainment
companies.
As organizations grow larger and more complex
with respect to the number of products, functions,
and locations - matrix structure affords control and
coordination across all three dimensions.

30. Matrix Organization
Matrix Organizational Structure

31. Matrix Organization
Matrix Organizational Structure

32. Modern Organization Structures
In 1993, two of America’s most prominent scholars
of organization announced: “. . . the new
organizational revolution is sweeping one industry
after another . . . quantum changes in
manufacturing and computer-mediated
communication technologies have given managers
radical new options for designing organizations.”
The new organizations featured “. . . flatter
hierarchies, decentralized decision making, greater
tolerance for ambiguity, permeable internal and
external boundaries, empowerment of employees,
capacity for renewal, self-organizing units, self-
integrating coordination mechanisms.”

33. Modern Organization Structures
Accordingly, contemporary organizations have been
experimenting and implementing new structural options
with fewer layers of hierarchy, more autonomy, and
more emphasis on opening the boundaries of the
organization.
 Virtual Organization, aka Modular, or Network
Organization
 Horizontal Organization
 Adhocracy
 Hybrid Structures
 Circular Structure
 Boundar-less Organization
 Learning Organization
 Hub and Spoke Structure

34. Organizational Culture

35. “Organizational culture is
the pattern of values,
norms, beliefs, attitudes
and assumptions that may
not have been articulated
but shape the ways in
which people in
organizations behave and
things get done.”
Organizational Culture

36. The culture of an organization
refers to the unique
configuration of norms, values,
beliefs and ways of behaving
that characterize the manner in
which groups and individuals
combine to get things done.
~ Eldridge and Crombie
Organizational Culture
Culture is the
commonly held beliefs,
attitudes and values
that exist in an
organization. Put more
simply, culture is ‘the
way we do things
around here’.
~ Furnham and Gunter

37. Organizational Culture
Dimensions of
Organizational Culture:
1. Innovation and risk taking
2. Attention to detail
3. Outcome orientation
4. People orientation
5. Team orientation
6. Aggressiveness
7. Stability
1. Observed behavioral
regularities
2. Norms
3. Dominant values
4. Management Philosophy
5. Rules
6. Organizational Climate
Characteristics of
Organizational Culture:

38. Do Organizations have Uniform Cultures?
Organizational culture represents a common perception the
organization’s members hold. Therefore individuals with different
backgrounds or at different levels in the organization to describe its
culture in similar terms. Yet, most large organizations have a Dominant
Culture and numerous Subcultures.
A dominant culture
expresses the core values a
majority of members share
and that give the
organization its distinct
personality.
A subculture is a set of values shared
by a minority, usually a small minority,
of the organization’s members.
Subcultures tend to develop in large
organizations to reflect common
problems or experiences members face
in the same department or location.

39. According to Edgar Schein, there are three levels of
culture: artifacts, espoused beliefs and values, and
underlying assumptions.
Nature of Organizational Culture
Observable
Culture
Shared Values
Common
Assumptions
Artifacts represent the observable culture
and include rituals, language, myths,
dress, and the organization of space.
Schein’s next level of culture is espoused
values, or the values that are reported by
management as core to the organization.
The third level consists of the underlying assumptions of organizational
life. These indicate why organizational members go about their day-to-
day work lives as they do, and they are frequently deeply ingrained.

40. An organization’s current customs,
traditions, and general way of
doing things are largely due to
what it has done before and how
successful it was in doing it.
Therefore, the fundamental source
of an organization’s culture are its
founders.
Creating & Maintaining Organizational Culture
Free of previous customs or
ideologies, founders have a vision
of what the organization should be,
and the firm’s small size makes it
easy to impose that vision on all
members.
A strong leader who joins an
organization as CEO can also usher
in a new culture.

41. How does Organizational Culture Develop?
Creating & Maintaining Organizational Culture
IV. External environment might
stimulate the need for an internal
ecosystem, and in turn establishing
a culture within the organization.
V. As the organization grows in size,
and the members work for a long
time and grow with it, a unique
close-knit internal environment is
created culminating in
organizational culture.
I. Leaders’ behaviour in various
situations in the past is studied and
understood to develop a culture.
II. Live lessons learnt from critical
incidents help build a culture to
equip with better preparedness.
III. The need of maintaining an
effective working relationships
among the members of the
organization also results in creation
of shared values and expectations.

42. Once an organizational
culture starts and
begins to develop,
there are a number of
practices that help
solidify the
acceptance of core
values and ensure that
the culture maintains
itself.
Creating & Maintaining Organizational Culture
The selection process,
performance evaluation
criteria, training and
development activities,
and promotion
procedures ensure
those hired fit in with
the culture, reward
those who support it,
and penalize - or even
expel - those who
challenge it.
Three forces play a
particularly important
part in sustaining a
culture:
1. Selection practices,
2. the actions of top
management, and
3. socialization
methods.

43. Creating & Maintaining Organizational Culture
Socialization. The
process by which the new
employees are facilitated
to adapt to the prevailing
culture is known as
Socialization. The
socialization process
consists of three stages:
Selection. The explicit
goal of the selection
process is to identify and
hire individuals with the
knowledge, skills, and
abilities to perform
successfully. The selection
criteria should also
include a match between
the candidate’s value
system and that of the
organization. Additionally,
the selection process
provide to the applicants,
information about the
organizational culture.
Top Management. The
actions of top management
have a major impact on the
organization’s culture.
Through words and
behavior, senior executives
establish norms that filter
through the organization
about, for instance,
whether risk taking is
desirable, how much
freedom managers give
employees, what is
appropriate dress, and
what actions earn pay
raises, promotions, and
other rewards.
(a) pre-arrival,
(b) encounter, and
(c) metamorphosis.

44. Creating & Maintaining Organizational Culture

45. Creating & Maintaining Organizational Culture
Metamorphosis.
Finally, to work out any
problems discovered
during the encounter
stage, the new member
changes or goes through
the metamorphosis stage .
Most research suggests
there are two major
“bundles” of socialization
practices — formal vs
informal, individual vs
collective, sequential vs
random, and fixed vs
flexible.
Pre-arrival. The pre-
arrival stage recognizes
that each individual
arrives with a set of
values, attitudes, and
expectations about both
the work and the
organization. What people
know before they join the
organization, and how
proactive their personality
is, are critical predictors
of how well they adjust to
a new culture.
Encounter. The new
member enters the
organization and confronts
the possibility that
expectations — about the
job, co-workers, the boss,
and the organization in
general — may differ from
reality. If expectations
were fairly accurate, the
encounter stage merely
cements earlier
perceptions. However, this
is often not the case, and
newcomers have to “learn
the ropes” with the help of
friends and co- workers.

46. Organizational Climate
As defined by Ivancevitch et al
(2008), organizational climate
is: ‘A set of properties of the
work environment, perceived
directly or indirectly by the
employees, that is assumed to
be a major force in influencing
employee behaviour.’
According to Forehand and Gilmer,
“Climate encompasses of a set of
characteristics that define an
organization, differentiate it from
other organizations, are
comparatively lasting over time and
influence the behaviour of people
in it.”
“Organizational climate reflects a person’s perception of the company to which
he belongs. It is a set of unique characteristics and features that are perceived
by the employees about their company which serves as a major force in
influencing their behaviour.”

47. Organizational Climate
Hellriegel and Slocum (1974)
defined Organizational Climate
as “a set of attributes which can
be perceived about particular
organization and / or its
subsystems, and that may be
induced from the way that
organization and / or its
subsystems deal with their
members and environment”.
Denison (1996) suggested that
‘culture’ refers to the deep structure
of organizations, which is rooted in
the values, beliefs and assumptions
held by organizational members. In
contrast, ‘climate’ refers to those
aspects of the [internal]
environment that are consciously
perceived by organizational
members.

48. Operationalizing Organizational Climate
Organizational Climate
Understanding the concept of
organizational climate is important as it
captures the human experience in
organizations – how organizations appear
and feel to members.
Also, it has been found that the shared
perceptions can be associated with
significant unit outcomes - specially when
climate is operationalized in terms of
strategic goals of the organization.
Organizational climate can be
described as employees' shared
perceptions or experiences of the
policies, practices, and processes
of their workplace and the
behaviours that get rewarded,
supported, and predictable.
This concept has become a very
useful metaphor for thinking about
and describing the social system
within a company.

49. Good Climate vs Bad Climate
Organizational Climate
‘Bad’ results in dysfunctional
outcomes:
 Turnover
 Stress
 Sickness
 Poor performance
 Error Rate
 Wastage
 Accidents
‘Good’ Climate results in positive
outcomes:
 Job Satisfaction
 Confidence in Management
 Affective Commitment
 Emotional Wellbeing
 Faith in Organization
 Performance

50. Organizational Climate depends on many factors. Richard M Hodgetts
has classified organizational climate into two factors as under:
Overt Factors
1. Hierarchy
2. Goals of the organization
3. Financial resources
4. Skills and abilities of employees
5. Technological state of the organization
6. Performance standards adopted
7. Efficiency measurement
Covert Factors
1. Values
2. Attitude
3. Norms
4. Feelings
5. Interaction
6. Supportiveness
7. Satisfaction
Organizational Climate

51. Organizational Culture and Climate
Organizational Climate
Organizational Culture includes deeply
held values, beliefs and assumptions,
symbols, heroes, and rituals.
Organizational climate, on the other
hand, is often defined as the recurring
patterns of behaviour, attitudes and
feelings that characterize life in an
organization. While an organization
culture tends to be deep and stable.
Organizational climate tends to be more
dynamic.
Organizational climate and
organizational culture are distinct
concepts. Organizational culture is
something that older employees
usually try to pass on to younger
employees and shape behaviours,
structures, and perceptions.

52. Thanks!
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E-mail: shrini.vempali@gmail.com

53. Geert Hofstede, a Dutch
Psychologist, developed a
framework to understand
how value differences
across national cultures
influence human behavior
at work.
Two additional dimensions
of national culture were
added as a result of
continuing research to the
original four in his
framework.
 Power distance is a culture’s acceptance of the
status and power differences among its members.
 Uncertainty avoidance is the cultural tendency
to be uncomfortable with uncertainty and risk in
everyday life.
 Individualism vs collectivism is the tendency of
members of a culture to emphasize individual
self-interests or group relationships.
 Masculinity vs femininity is the degree to which
a society values assertiveness or relationships.
 Long-term/short-term orientation is the degree
to which a culture emphasizes long-term or
short-term thinking.
 Self-indulgence vs restraint is the level of
tolerance shown by a society towards relatively
free gratification of basic and natural human
desires related to enjoying life and having fun.
APPENDIX - I