ob2-iimk-1
TRANSCRIPT
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Organization Structure
Dr. S. Jeyavelu
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Defining Organizational Structure
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Defining Organizational Structure
Formal reporting relationships
Number of levels in the hierarchy
Span of control of managers
Departmentalizationgrouping of individuals
Grouping of departments into the total organization
Design of systems to ensure effective communication,coordination, control and integration of effort acrossdepartments
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A Typical Organization Chart
CEO
Production Finance Marketing
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Choosing a Structure
Required Work Activities
Departmentalization
Reporting Relationships Departments must fit into overall hierarchy
Departmental groupings
Needed to allow efficient and effectiveoutcomes
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Functional Structure
CEO
Production Finance Marketing
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Functional Structure
MD
PlantManager
Production
Purchase
Quality
R&D
Finance HR Marketing
North
Sales
Service
Dealer Dev
Accounts
South East West
Logistics IT, NPD
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GM (Operations)
4 locations
VP (Operations)
Director (Operations)
GM (Finance)
4 locations
VP (Finance)
Director (Finance)
GM ( Marketing)
4 locations
VP (Marketing)
Director (Marketing)
Deputy MD
Anand Mahindra
Managing DirectorR K Pitamber
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Functional Structure
Strengths Best in stable environment Allows economies of scale
within functional departments Enables in-depth knowledge
and skill development
Specialist freed fromadmin/coordinating work Simple decision/
communication networkbest for single/few productorganization
Weaknesses
Slow response time toenvironmental changes
Bottlenecks caused bysequential tasks
May cause decisions to pile ontop, hierarchy overload
Leads to poor horizontalcoordination amongdepartments
Results in less innovation
If multi product priorityconflict Involves restricted view of the
whole
Source: Adapted from Robert Duncan, What Is the Right Organization Structure? Decision Tree Analysis Provides the
Answer,Organizational Dynamics (Winter 1979): 429.
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Divisional Structure
Divisionsubunit consisting of collection offunctions or departments sharing
responsibility for producing particular product
of service
Large complex company model
Strengths and weaknesses?
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CEO
Prod Div 1 Prod Div 2 Prod Div 3
Divisional Structure (Product)
CEO
India Europe USA/Canada
Divisional Structure (Geographical)
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Divisional Structure
Strengths
Suited to fast change inunstable environment
Leads to client satisfactionbecause product responsibility
and contact points are clear Involves high coordination
across functions
Allows units to adapt todifferences in products,
regions, clients Best in large organizationswith several products
Decentralize decision making
Weaknesses
Eliminates economies of scaleto functional departments
Leads to poor coordinationacross product lines
Eliminates in-depthcompetence and technicalspecialization
Makes integration andstandardization across product
line difficult
Source: Adapted from Robert Duncan, What Is the Right Organization Structure? Decision Tree Analysis Provides the
Answer,Organizational Dynamics (Winter 1979): 429.
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F a r m E q u i p m e n t D i v i s i o nT r a c t o r s
G MC e n t r a l S u p p l i e s
M a t l . H a n d l i n g + Q A+ P l a n n i n g +
P r o c u r e m e n t ++ A c c t s + E x c i s e
S u p p . M o d u l e M g r
M a n u f a c t u r i n g +I n s p e c t i o n +E n g i n e e r i n g
M f g M o d u l e M g r
M a i n t e n a n c e +P & I R +
H R D + T r a i n i n g +A d m i n i s t r a t i o n
S e r v ic e s M g r
P U 1 M g r P U 2 M g r . . . P U 6
G MO p e a r t i o n s
H e a d o f M a n u f a c t u r i n g
A u t o m o t i v e D i v i s i o nJ e e p s
C o r p o r a t e f u n c t i o n s( P u r c h a s e , M a r k e t i n g , O p e r a t i o n s )
D e p u t y M DA n a n d M a h i n d r a
M a n a g i n g D i r e c t o r
R K P i t a m b e r
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Matrix Structure
Multi-focused approach
Economies of scale importantsharing internalresources
Used when co-operation needed between functionsand products
Relies on key roles
Top leader
Matrix bosses Two-boss employee
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Production Marketing Operations
CEO
Product 1
Product 2
Product 3
Matrix Structure
Matrix Structure
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Matrix Structure
Strengths Achieves coordination
necessary to meet dualdemands from customers
Flexible sharing of humanresources across products
Suited to complex decisionsand frequent changes inunstable environment
Provides opportunity for bothfunctional and product skilldevelopment
Best in medium-sizedorganizations with multipleproducts
Weaknesses Causes participants to
experience dual authority,which can be frustrating andconfusing
Means participants need goodinterpersonal skills andextensive training
Is time consuming; involvesfrequent meetings and conflictresolution sessions
Will not work unless
participants understand it andadopt collegial rather thanvertical-type relationships
Requires great effort tomaintain power balance
Source: Adapted from Robert Duncan, What Is the Right Organization Structure? Decision Tree Analysis Provides the
Answer,Organizational Dynamics (Winter 1979): 429.
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Horizontal / Flat Structure
Flatter / short structure
Communication, teamwork vital for
coordination of processes
Decisions made at team level
Culture implications
Increasing Importance Strengths and weaknesses?
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A Horizontal Structure
Team
3
Team
2
Team
1
Top
ManagementTeam
Team
3
Team
2
Team
1
Customer
Customer
Process
Owner
Process
Owner
Testing
Product
PlanningResearch
Market
Analysis
New Product Development Process
Distrib.MaterialFlow
PurchasingAnalysis
Procurement and Logistics Process
Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, The Horizontal Corporation, Business Week,
December 20, 1993, 76-81; and Thomas A. Stewart, The Search for the Organization of Tomorrow, Fortune, May 19, 1992, 92-98.
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A Horizontal Project Structure
Process Team
3
Process Team
2
Process Team
1
Top
ManagementTeam
Process Team
3
Process Team
2
Process Team
1
Customer
Customer
Project
Owner
Project
Owner
Testing
Product
PlanningResearch
Market
Analysis
Distrib.MaterialFlow
PurchasingAnalysis
Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, The Horizontal Corporation, Business Week,
December 20, 1993, 76-81; and Thomas A. Stewart, The Search for the Organization of Tomorrow, Fortune, May 19, 1992, 92-98.
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Network Structure and the
Boundaryless Organization
A cluster of different organizations whose actions arecoordinated by contracts and agreements ratherthan through a formal hierarchy of authority
Very complex as companies form agreements withmany suppliers, manufacturers, and distributors
Such agreements are necessary as the organizationoutsources many of the value creation activitiesinvolved in production and marketing goods andservices
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Advantages of Network Structures
To the degree that a network partner can perform aspecific functional activity reliably, and at a lowercost, production costs are reduced.
Avoids the high bureaucratic costs of operating acomplex organizational structure
Allows an organization to act in an organic way
Access to low-cost foreign sources of inputs and
functional expertise
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Disadvantages of Network Structures
A considerable level of mutual adjustment is
needed to allow the groups to interact so that
they can learn from one another.
Difficult to obtain the ongoing learning that
builds competences as companies have no
incentive to do so
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The Boundaryless Organization
Composed of people who are linked bycomputers, faxes, CAD systems and videoconferencing
The use of outsourcing and the developmentof network organization are increasing rapidlyas organizations recognize the manyopportunities they offer to reduce costs andincrease flexibility.
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External Environment
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Figure 3-1: The Organizational
Environment
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Figure 3-2: Three Factors Causing
Uncertainty
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30
Relationship Between Environmental
Characteristics and Organizational Actions
Environmental
domain
(ten sectors)
High
complexity
Establishment of favorable linkages:
ownership, strategic alliances, cooptations,
interlocking directorates, executive recruitment,
advertising, and public relations
Organic structure and systems with low
formalization, decentralization,
and low standardization to enable
a high-speed response
Many departments and boundary roles
Greater differentiation and more
integrators for internal coordinationHigh
uncertainty
High rate
of change
Scarcity of
valued
resources
Resource
dependence Control of the environmental domain:
change of domain, political activity,
regulation, trade associations, and
illegitimate activities
Environment Organization
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Simple + Stable =
Low Uncertainty
1. Small number of external elements
and elements are similar
2. Elements remain the same of change
slowly
Examples: soft drink bottlers, beerdistributors, container
manufacturers, food processors
Simple + Stable =
High-Moderate Uncertainty
1. Small number of external elementsand elements are similar
2. Elements change frequently and
unpredictably
Examples: E-commerce, fashion clothing,
music industry, toy manufacturers
Complex + Stable =
High Uncertainty
1. Large number of external elementsand elements are dissimilar
2. Elements change frequently and
unpredictably
Examples: Computer firms, aerospace
firms, telecommunications, airlines
Complex + Stable =
Low-Moderate Uncertainty
1. Large number of external elements
and elements are dissimilar
2. Elements remain the same or change
slowly
Examples: Universities, appliancemanufacturers, chemical cos,
insurance cos
Framework for Assessing Environmental
Uncertainty
ENVIRONMENTAL
CHANGE
STABLE
ENVIRONMENTAL COMPLEXITY
UNSTABLE
SIMPLE COMPLEX
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Figure 4-8: Fit Between the Organization and Its
Environment
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Lawrence & Lorsch: Differentiation, Integration,
and the Environment
Investigated how companies in different
industries differentiate and integrate their
structures to fit the environment
Three industries that experienced different
levels of uncertainty:
The plastics industry
The food-processing industry The container or can-manufacturing industry
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Findings: Lawrence and Lorsch
When environment is perceived as moreunstable and uncertain:
Effective organizations are less formalized, more
decentralized and rely more on mutualadjustment
When environment is perceived as stable andcertain:
Effective organizations have a more centralized,standardized, and formalized structure
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Figure 4.9: Functional Differentiation and
Environmental Demands
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Burns and Stalker
Also found that organizations need different
kinds of structure to control their activities
based on the environment
Organic structures are more effective when the
environment is unstable and changing
Mechanistic structures are more effective in stable
environments
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Table 4-2: The Effect of Uncertainty,
Differentiation and Integration
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Copyright 2007 Prentice Hall 38
Figure 4-10: Relationship Between
Environmental Uncertainty and Structure
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Environmental Uncertainty, Structure
& Effectiveness
Environmental
UncertaintyDifferentiation Integration
Uncertainty
Reduction
Mechanisms
Low Low Low Low
ModerateModerate Moderate Moderate
High High High High
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Technology and Structure
S. Jeyavelu
h l l d
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Copyright 2007 Prentice Hall 41
Figure 9-2: Technical Complexity and
Three Types of Technology
i h i l l i d
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Copyright 2007 Prentice Hall 42
Figure 9-3: Technical Complexity and
Organizational Structure
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Copyright 2007 Prentice Hall 43
Figure 9-4: Charles Perrow
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Copyright 2007 Prentice Hall 44
Table 9-1: Routine and Nonroutine Tasks
and Organizational Design
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Copyright 2007 Prentice Hall 45
Figure 9-5: Task Interdependence and
Three Types of Technology
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Copyright 2007 Prentice Hall 46
Figure 9-6: Work Flows
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Copyright 2007 Prentice Hall 47
NEW CHOICES
Mass
Production
Small batchFlexible
ManufacturingMass
Customization
Continuous
Process
Relationship of Flexible Manufacturing Technology
to Traditional Technologies
BATCH SIZESmall Unlimited
Customized
Standardized
P
RODUCTFLEXIBILITY
Source: Based on Jack Meredith, The Strategic Advantages of New
Manufacturing Technologies For Small Firms. Strategic Management
Journal 8 (1987): 249-58; Paul Adler, Managing Flexible Automation,
California Management Review(Spring 1988): 34-56; and
Otis Port, Custom-made Direct from the Plant.Business Week/21stCentury Capitalism,18 November 1994, 158-59.
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Copyright 2007 Prentice Hall 48
Comparison of Organizational Characteristics Associated with
Mass Production and
Flexible Manufacturing Systems
Characteristic Mass Production FMS
Structure:
Span of Control Wide Narrow
Hierarchical levels Many Few
Tasks Routine, repetitive Adaptive, craft-like
Specialization High Low
Decision making Centralized DecentralizedOverall Bureaucratic,
mechanisticSelf-regulating,organic
Source: Based on Patricia L. Nemetz and Louis W. Fry, Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.Academy of Management Review13
(1988); 627-38; Paul S. Adler, Managing Flexible Automation,
California Management Review (Spring 1988); 34-56; Jeremy Main,Manufacturing the Right Way,Fortune, 21 May 1990, 54-64.
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Copyright 2007 Prentice Hall 49
Comparison of Organizational Characteristics Associated with
Mass Production and
Flexible Manufacturing Systems (cont.)
Characteristic Mass Production FMS
Human Resources:
Interactions Standalone Teamwork
Training Narrow, one time Broad, frequent
Expertise Manual, technical Cognitive, social
Solve problems
Source: Based on Patricia L. Nemetz and Louis W. Fry, Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.Academy of Management Review13
(1988); 627-38; Paul S. Adler, Managing Flexible Automation,
California Management Review (Spring 1988); 34-56; Jeremy Main,Manufacturing the Right Way,Fortune, 21 May 1990, 54-64.
C i f O i ti l Ch t i ti A i t d ith
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Copyright 2007 Prentice Hall 50
Comparison of Organizational Characteristics Associated with
Mass Production and
Flexible Manufacturing Systems (cont.)
Characteristic Mass Production FMS
Interorganizational:
Customer Demand Stable Changing
Suppliers Many,
arms length
Few, closerelations
Source: Based on Patricia L. Nemetz and Louis W. Fry, Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.Academy of Management Review13
(1988); 627-38; Paul S. Adler, Managing Flexible Automation,
California Management Review (Spring 1988); 34-56; Jeremy Main,Manufacturing the Right Way,Fortune, 21 May 1990, 54-64.
Differences Between Manufacturing and
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Copyright 2007 Prentice Hall 51
Differences Between Manufacturing and
Service Technologies
Manufacturing Technology1. Tangible product
2. Products can be inventoried for later
consumption
3. Capital asset intensive
4. Little direct customer interaction
5. Human element may be less
important
6. Quality is directly measured
7. Longer response time is acceptable
8. Site of facility is moderately
important
Service Technology1. Intangible product
2. Production and consumption takeplace simultaneously
3. Labor and knowledge intensive
4. Customer interaction generally high
5. Human element very important
6. Quality is perceived and difficult to
measure
7. Rapid response time is usually
necessary
8. Site of facility is extremely important
Service:Airlines, Hotels,Consultants,
Healthcare, Law firms
Product and Service:Fast-food outlets, Cosmetics,
Real estate, Stockbrokers,
Retail stores
Product:Soft drink companies,
Steel companies,
Auto manufacturers,
Food processing plantsSources:Based on F. F. Reichheld and W. E. Sasser, Jr.,Zero Defections: Quality Comes to Services,Harvard Business
Review 68 (September-October 1990): 105-11; and David E.
Bowen, Caren Siehl, and Benjamin Schneider, A Frameworkfor Analyzing Customer Service Orientations in Manufacturing,
Academy of Management Review 14 (1989): 75-95.
C fi ti d St t l Ch t i ti f S i
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Copyright 2007 Prentice Hall 52
Configuration and Structural Characteristics of Service
Organizations vs. Product Organizations
Service Product
Structure:
Separate boundary roles Few Many
Geographical dispersion Much Little
Decision making Decentralized Centralized
Formalization Lower Higher
Human Resources:
Employee skill level Higher Lower
Skill emphasis Interpersonal Technical
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Organizational Culture
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Do Organizations Have Uniform
Cultures?
Core
Values
SubculturesDominantCulture
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Strong & Weak Cultures
An organizations culture can be strong or
weak.
The strength with which it binds
organizational members can influence many
other organizational factors.
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Elements of Organizational Culture
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Unconscious, taken-for-grantedperceptions or beliefs
Mental models of ideals
Shared assumptions
Conscious beliefs
Evaluate what is good or bad, right orwrong
Shared values
Artifacts
Stories/legends
Rituals/ceremonies
Organizational language
Physical structures/dcor
Visible
Invisible
(below the surface)
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Artifacts: Stories and Legends
Social prescriptions of desired (undesired)behavior
Provides a realistic human side to
expectations Most effective stories and legends:
Describe real people
Assumed to be true
Known throughout the organization Are prescriptive
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Artifacts: Rituals and Ceremonies
Rituals
programmed routines
(eg., how visitors are greeted)
Ceremonies
planned activities for an audience
(eg., award ceremonies)
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Artifacts: Organizational Language
Words used to address people, describe
customers, etc.
Leaders use phrases and special vocabulary as
cultural symbols
eg. Referring to clients rather than customers
Language also found in subcultures
eg. Whirlpools PowerPoint culture
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Artifacts: Physical Structures/Symbols
Building structure -- may shape and reflect
culture
Office design conveys cultural meaning
Furniture, office size, wall hangings
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Underlying Dimensions of Organizational
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Underlying Dimensions of Organizational
Culture
The nature of human beings
The nature of human relationships
The organizations relationship to environment
The nature of humanwork relationship
The nature of reality & truth
The nature of time
Homogeneity vs. Diversity
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Embedding Mechanisms
Primary What leaders pay attention
to, measure & control
Leaders reaction to criticalincidents & crises
Deliberate role modeling &coaching
Operational criteria forrewards & punishments
Operational criteria forselection, promotion,retirement, etc
Secondary Organization structure
Systems & procedures
Physical space, facades,buildings
Stories, legends, myths &symbols
Formal statement oforganizational philosophy,creed & charter
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A Typology of Organizational Rites and Their Social
Consequences
Type of Rite Example Social Consequences
Passage Induction and basic training; Army Facilitate transition of person into
new social roles and statuses
Enhancement Annual awards night Enhance social identities and
increase status of members
Renewal Organizational development
activities
Refurbish social structures and
improve organization functioning
Integration Office holiday party Encourage and revive common
feelings that bind members
together and commit them to the
organization
Source: Adapted from Harrison M. Trice and Janice M. Beyer,
Studying Organizational Cultures through Rites and Ceremonials,
Academy of Management Review9 (1984), 653-659. Used with permission.
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Competing Values Framework for
Organizational Culture
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Internal External
Control
Flexible
Group / Clan
Culture
Hierarchical /
Bureaucratic
Culture
Rational / Market
Culture
Developmental /
Entrepreneurial
Culture
Four Types of Culture
Value Dimensions
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Value Dimensions
Group /
Clan
Culture
Developmental /
Entrepreneurial
Culture
Hierarchical /
Bureaucratic
Culture
Rational /
Market
Culture
Flexibility /
Control
Flexible Flexible Control Control
Internal /External
Focus
Internal External Internal External
Means Cohesion,
Morale
Adaptability,
readiness
Information
management,
communication
Planning,
goal setting
Ends Development
of human
resources
Growth,
resource
acquisition
Stability, control Production,
efficiency
O i ti l Ch t i ti
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Organizational Characteristics
Group /Clan
Culture
Developmental /Entrepreneurial
Culture
Hierarchical/Bureaucratic
Culture
Rational /Market
Culture
Compliance Affiliation Ideology Rules Contract
Motivation Attachment Growth Security Competence
Leadership Concerned,
supportive
Inventive,
risk taking
Conservative,
cautious
Directive,
goal oriented
Technology Craft Non routine Routine Engineering
Org. Form Clan Adhocracy Hierarchy Market
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Main Features of Organizational Culture
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Main Features of Organizational Culture
Components Soft Culture
Work-centric
Nurturant
Culture
Technocratic
Culture
Values Needs, interests &relationships
Work-oriented
relationships
Quality, costs &
customer satisfaction
Behavior Inefficient andindifferent to work
Productive, paternalistic
& participative
Efficient, demanding &
competitive
Relationships Need-based andsocially determined
Socio-technicallydetermined
Technologicallydetermined
Technology Neglected State of art & suited tothe employer
State of art & R&D
driven
Structure Heavy and usually
bureaucratic
Socio-technically
integrated
Lean, flexible & team
based
Procedure Nonwork oriented Work & people oriented Outcome oriented &dynamic
Goals &
Objectives
Welfare & profit (if
possible)
Interests of all
stakeholders
Market leadership,
expansion & profit
Source: Jai B P Sinha (2000). Patterns of Work Culture. Page 47.
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Dimensions of National Culture
Power DistanceStrong vs. Weak
Uncertainty AvoidanceStrong vs. Weak
Individualism vs, Collectivism
Masculinity vs. Femininity
Temporal FocusLong Term Orientation vs.
Short Term Orientation
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Managing Culture Change
Unfreeze systemhighlight threats & give hope Articulate a new direction, new set of assumptions and role
model Fill key positions with hybrids /mutants /outsiders with
different assumptions
Reward adoption of new direction & punish adherence to olddirection Seduce or coerce members to adopt new behaviors in
coherence with new direction Visible scandals to discredit sacred cows, myths and
dysfunctional traditions to symbolically destroy artifacts
associated with them Create new emotionally charged rituals, new symbols and
artifacts
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Thank You