Organization Theory: Strategy Implementation

Process

Steven E. Phelan

Introduction

Who am I?Assistant Professor of Strategic Management at UNLVFormerly at UT DallasI have taught MBA students in 5 countries: Australia, Hong Kong, Singapore, Italy, and US. Taught EMBA students at UT Dallas and UT AustinPractitioner background:

Telecom Australia Ansett Airlines Bridges Management Group (worked on credit cards,

loyalty schemes, distribution strategy, new product development, and acquisitions)

What is this course about?

Organization Theory Lots of academic textbooks Large membership in AOM (2000+) Dry as dust

Strategy Implementation No textbook since 1980s We know a plan is no good unless it is implemented –

kind of important then

The chosen path… Cover the interesting parts from OT and explore

something useful in strategy implementation (Org Design & Change).

Goals

To be able to view organizational life through different lenses

To develop a critical appreciation of organizational discourse

To have an understanding of the major issues in organizational design and change

To have acquired skills in designing and changing organizations

To gain an appreciation of some of the issues in strategy implementation

Assessment

Field Study (20%+5%)In groups of 3-4, apply as many of the eight metaphors you have learned as possible to describe the functioning of an organization with which you are familiar (Paper Due: 7/10, Presentation 8/13)

Case Solution (25%)Write a solution to one of the two cases on organizational design (Due: 7/23)

Book Review (25%)Review a recent book on organizational change in the context of the course material and present your report (Due: 8/13)

Class Participation (25%)

Teaching Philosophy

I am not into one-way transmissions of informationI favor a collaborative learning environment:

We learn from each otherWe learn from the problems and issues we identify and how we solve themI see myself as a coach or mentor guiding the learning experienceThus, the ultimate responsibility for learning is with you

Read the materials Come to class prepared to discuss relevant aspects of your

organizational life (or lives) PLEASE interrupt, discuss, question, argue, debate, clarify

Overview of TodayMetaphor in organizationsOrganizations as machines

Exploring the metaphorStrengths and limitations, implications for strategy

Perrow’s Defense of BureaucracyIt limits particularismIt limits self-interestRules are not so badHierarchy is not so bad

Organizations as organismsOpen systemsContingency theoryOrganizational ecologyStrengths and limitations, implications for strategy

Brains and Cultures

Metaphor in organizations

We learn how to see…Eskimos are able to identify many different types of snow that are indistinguishable to the average personAsians can identify many different varieties of rice

Can you see the old/young woman?

Morgan on Metaphor

What, then, is truth if different people learn to see the same thing in different ways?Is there value in teaching people to see their organizations in different ways?“If you only have a hammer, does every problem become a nail?”“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function” -- F. Scott Fitzgerald“It is easy to teach anybody a new fact…but it needs light from heaven to enable a teacher to break the old framework in which the student has been accustomed to seeing” -- Arthur Koestler

Developing multiple interpretations 1

A week ago, the grave-diggers at Green Mountain cemetery laid down their tools and declared an indefinite strike. Their spokesman, Norman Babitt, said that they were “fed up with the city council’s stonewalling.” Their demands for a pay increase and improved benefits had been rejected. The effects of the strike were immediate. A number of funerals had to be canceled and replaced with cremations. In two instances, bodies were placed in storage pending a resolution of the strike. No immediate return to work is expected. Interpret this event from at least 3 different viewpoints or angles…Share your viewpoints witha class member

Developing multiple interpretations 2

“At Foxboro, a technical advance was desperately needed for survival in the company’s early days. Late one evening, a scientist rushed into the president’s office with a working prototype. Dumbfounded at the elegance of the solution and bemused about how to reward it, the president bent forward in his chair, rummaged through most of the drawers in his desk, found something, leaned over the desk to the scientist, and said, “Here!” In his hand was a banana, the only reward he could immediately put his hands on. From that point on, the small ‘gold banana’ pin has been the highest accolade for scientific achievement at Foxboro.”Can you develop 3 different angles or viewpoints on this story?Share your views with a class member

Viewing your organization as if you were from a foreign land…

On first joining…What struck you as being novel, strange, or different about the way things happened compared to your expectations or what you had become used to elsewhere?

Think of another organization with which you are familiar…What do you consider to be odd, novel, or interesting about the way in which they do things which would be inconceivable in your present organization?

About us…If you wanted to convey the essence of how things are done in your organization, capturing both the good and bad, can you think of a recent event or happening that seems to sum things up? What would it illustrate to an outside who wanted to learn about your organization?

De Bono’s Approach to Creativity

We need to be able to recognize and escape from the dominant ideas that structure a situation, or one’s interpretation of a situation.The trouble is, these ideas may be so ingrained that they are very hard to see.It is often difficult to identify the truly fundamental assumption and beliefs that are shaping one’s thoughts and actions but we need to do this to avoid being dominated by themIt is much easier to become aware of alternatives when these dominant ideas are made explicit

On metaphors

What are the dominant assumptions and beliefs that shape

How Republicans think of issues in this country?How Democrats think of issues in this countryHow the French think of issues in the US?How Iraqis think of issues in the US?

Is this sort of analysis useful? Is it useful to do this sort of thinking about our organizations and about how stakeholders might perceive our organization?Morgan believes it is very valuable and identifies eight metaphors or ways of thinking about organizations.

Organization as machine

Pre-determined goals and objectivesA rational structure of jobs and activitiesIts blueprint becomes an organizational chartPeople are hired to operate the machine and behave in a predetermined wayWhen an organization is seen as a machine it is expected to operate in a routinized, efficient, reliable, and predictable way

My life as a machine

“Whoever uses a machine does all his work like a machine. He who does his work like a machine grows a heart like a machine” He loses his soul!The industrial age left its mark on the imagination, thoughts, and feelings of humansOrganizational life is often routinized with the precision demanded of clockworkPeople arrive at work at a given time, perform a predetermined set of activities, rest at appointed hours, and then resume their tasks until work is over. Employees are expected to behave as if they were parts of a machinesDo you agree?

Origins

Organon – means a tool or instrument in GreekClearly, ancient cultures had sophisticated organizationsBut, the use of machines required that organizations be adapted to the needs of machines (was this radical?)

Steam power and division of laborEnclosure movement and ‘wage slaves’

Are there many wage slaves today?Real wages have fallen for bottom 20% of income earners over the last 20 yearsPrice to wage ratio is at all time post WW2 high

Frederick the Great’s innovations

Major Innovations:Ranks and uniformsExtension and standardization of regulationsIncreased specialization of tasksStandardized equipment (c.f. Eli Whitney in 1801)Command languageSystematic training and drilling

Less obvious outcomes:Standard training made parts interchangeableFear of officers led to tight discipline under fireDistinction between line and staff officersDecentralization

Max Weber

The bureaucratic form routinizes the process of administration exactly as the machine routinizes production.

Bureaucracies provide:

Precision, speed, clarity, regularity, reliability, and efficiency

Through:

A fixed division of tasks, hierarchical supervision, and detailed rules and regulations

Perrow and Bureaucracy

Key elements of rational-legal bureaucracy:Equal treatment for all employeesReliance on expertise, skills, and experience relevant to the positionNo extra-organizational prerogatives – the position belongs to the organization not the individualSpecific standards of work and outputExtensive record keepingEstablishment and enforcement of rules and regulationsRules and regulations bind managers as well as employees

Purging Particularism

According to Perrow, one of the major benefits of bureaucracy is purging particularism (incl. nepotism and favoritism)

Loyalty to the king was once everything, incompetence counted for little

Tenure was a early invention that provided freedom from unjust authority, separating the office from the person further controlled it.However, nepotism is still a big problem in a lot of countries – e.g. Italy, Mexico, ChinaWhy is it so bad?

Because there is often little relationship between the social criteria for hiring or promoting people and the characteristics that affect performance in the organizationIt may even hurt performance (lower morale, motivation etc.)

Perrow on corruption

Corruption (or enlightened self-interest) is also a likely accompaniment of favoritism

Perrow argues corruption is good for the individual and sometimes even good for the organization

“one of the best ways to seize or retain control [of an organization] is to surround oneself with loyal people”

It doesn’t hurt to have a sympathetic friend in government

Bureaucracy limits corruption: “since official goals are proclaimed, unofficial, unpublicized,

and unlegitimated uses can be held up to scrutiny when they are found, and action can be taken.”

“The hidden uses of organizations, always present, can be exposed and addressed”

Feathering the Nest

Bureaucracy partially solved the problem of separating the interests of the person from the interests of the organizationPeople still tend to act as if they own their positions

They use them to generate income, status, and other things – free phone calls, show tickets, private jets etc.

Bureaucracy reduces (but doesn’t eliminate) this tendencyThe position is seen as independent of the employeeRules govern acceptable behaviorRecords are kept on performance and behavior

Perrow argues: “The growth of bureaucracy was equivalent to putting a label of ‘company property’ on the skills, experience, and creativity of the employee…we no longer question this extraction at all in the case of blue collar workers and most white-collar ones”

Rules are good!

Why rules?Bureaucracies are usually criticized for being rule-laden and ‘bureaucratic’Perrow argues that rules are needed to deal with complexity and to make the organization more flexibleReducing rules makes an organization more impersonal, more inflexible, and more standardized . The last thing you want in complex situations is to let people do their own thingPerrow makes little distinction between explicit and implicit rules and argues that professionals have ‘built-in’ rulesGood effective rules are rarely noticed, bad rules stand outThe problem is not rules in general but particular ones that need changingRules are often scapegoats for poor business models

Hierarchy is good!

Downside to hierarchy:Lack of motivation - ‘not my problem’Fear of passing bad news or suggesting changesBuck passingDelays and sluggishnessDictatorial/ignorant decisions by superiorsStifling of independence and creativity

Perrow argues that:Lack of coordination between departments, failure to exercise authority or be decisive, and lack of accountability are, in fact, much worse problems.He also kills a couple of other sacred cows

that a high span of control means more autonomy that the formal organization is dominated by the informal organization That there is conflict of professional and bureaucratic values

Strengths of the machine metaphor

For Morgan, mechanistic approaches work well when:There is a straightforward task to performThe environment is stable and predictable (to enable efficient division of labor)When one produces the same product time and againWhen efficiency and precision are at a premiumWhen the human parts are compliant and behave as they have been designed

For Perrow:Bureaucracies limit particularism and self-interest, and promote coordination

Limitations of the machine metaphor

Bureaucracies have difficulty adapting to changeThey are designed to achieve predetermined goals not innovationIt takes time to get an efficient division of labor through detailed job analysis

Mechanistic approaches result in mindless and unquestioning bureaucracy

Problems can be ignoredCommunication can be ineffectiveParalysis and inaction can lead to backlogsSenior managers can become remoteSpecialization creates myopia and NIH syndromeEmployees know what is expected of them but also what is not expected of themInitiative is discouraged

Using the machine metaphor

Discuss how thinking about organizations like machines might help or hinder the strategy implementation process.

How much do practices like business process re-engineering (BPR) rely on a machine metaphor?

Could this be a reason that 70% of BPR projects failed?

Organizations as organisms

This metaphor has its roots in biology and natural selectionPerhaps certain organizations are more “adapted” to specific environmental conditions than othersLed to concepts such as:

Open systemsOrganizational life cyclesFit and the process of adaptation to environmentOrganizational ecology and different species of organizations

Organizational Needs

The Hawthorne studies of the 1920s and 1930s shifted the focus from organization as a technical problem to the human side of organization, especially motivation

Maslow’s hierarchy of needs Physiological, security, social, ego, self-actualizing needs

The idea of integrating the needs of individuals and organizations became a powerful force

Job enrichment, autonomy, responsibility, recognition, democracy, focus on turnover and absenteeism, HRMSocio-technical systems (STS)

“The design of a technical system always has human consequences and vice versa”

Optimization involves reconciling human needs and technical efficiency Isn’t this obvious? Why was it so controversial at the

at the time (1950s)?

Open systems

Variants of the open systems philosophy became popular with managers in the 1960s with Forrester’s system dynamics and in the 1990s with Senge’s “Fifth discipline”Defined as a system with input OR an entity that changes its behavior in response to conditions outside its boundaries. Systems are rarely ever either open or closed but open to some and closed to other influences

Animals are open to food, plants to sunlightComputers and people are open to informationOrganizations and societies are open to structure

Whether or not a system has outputs does not enter the distinction between open and closed systems.

Systems without inputs are not controllable

Open systems ctd.

What is:

A closed system? A subsystem?

Homeostasis and positive/negative feedback

Entropy and negative entropy (negentropy)

Equifinality

Holism

Practical implications

Open systems theory emphasizes the importance of the environment (not seen in machine metaphor)Organizations are seen as sets of interrelated subsystems

Molecules, cells, organs, lifeforms, social systems, world, solar system, galaxy, universe

The approach encourages congruencies or alignments between different sub-systems (‘fit’)This led to the development of contingency theory

Contingency theory

There is no best way of organizing. The appropriate form depends on the kind of task or environment – many species of organizations

Management’s job is achieving alignment or fit

Fit applies not only to the org-env but also between sub-systems in an organization

First distinction

Mechanistic vs organic (Burns and Stalker)Changing technology or market conditions pose new problems and challenges that require open and flexible styles of organization and management

Lawrence and Lorsch showed that styles of organization might need to vary between organizational subunits

e.g. R&D departments need to be organized differently from production departments)How is this different from an ideal bureaucracy?

Typologies

This research led to the development of typologies of organizations:

Miles and Snow Prospectors, analyzers, defenders

Mintzberg Machine bureaucracy, divisionalized form, professional

bureaucracy, simple structure, adhocracy

BCG Cash cows, dogs, stars, question marks

Porter Cost leadership, differentiation, focus

Other developments

Organization developmentThe belief that we can diagnose the environment and thus improve internal and external fit

What is the nature of the organization’s environment? What kind of strategy is being employed? What kind of technology is being used? What kinds of people are employed and what is the dominant culture? How is the organization structured, and what are the dominant

management philosophies? This can be done at the top level or at sub-levels

Expert SystemsBurton and Obel even developed an expert system to choose the right structure for an organization

Conflicts are resolved using fuzzy logic Why am I suspicious of both these approaches?

Organizational Ecology

Researchers have tracked the births and deaths of companies over time

Liability of newness, smallness, oldnessFaced with new types of competition or environmental circumstances, whole industries or types of organizations may come and goLegitimacy and inertia prevent one type of organization (or species) from changing into anotherDebate: How ‘inert’ are companies in the face of competitive or environmental threats?

Co-evolution

Evolution is a pattern of a pattern of relations embracing organisms and their environments

Survival of the fitting not just survival of the fittest

Concepts of symbiosis, co-evolution, punctuated equilibrium, co-opetition, business ecosystems

Ford or Yahoo are not single companies – they have a whole web of suppliers and collaborators and alliances

Strengths of the Organismic Metaphor

Organizations must always pay close attention to their external environments

Survival and evolution become central concerns

Achieving congruence with the environment becomes a key managerial task

What are the implications for strategy implementation?

Limitations of the Organismic Metaphor

Organizations are not organismsEnvironments are not concrete

Actual vs perceived vs enactedMetaphor overstates degree of functional unity and cohesion in most organizations and top management’s ability to choose subsystem settingsCan lead to social Darwinism and other ideological traps

i.e. the best performing organizations are the fittest and thus the ‘best’No guarantee the best today will be the best tomorrow

Organizations as brains

The brain has both specialized functions (speech) and distributed functions (memory)Is it possible [and desirable] to design “learning organizations” that have the capacity to be as flexible, resilient, and inventive as the functioning of the brain?Is it possible [and desirable] to distribute capacities for intelligence and control throughout an enterprise so that the system as a whole can self-organize and evolve along with emerging challenges (holographic organizations)?

Applications of this metaphor in strategy

Learning organizations

Knowledge management

E-Commerce, CRM, Data mining, SCM

Virtual Organizations

Self Directed Teams

Why is information so important?

Information is needed to coordinate the firm’s resources

faster innovation of new products,

reduced duplication of efforts,

savings in research and development costs,

learning from expensive mistakes

transmission of best practice

enhanced employee satisfaction.

Knowledge management

Where should this information come from? From top management?

Centralization versus decentralization issue

From information systems? Explicit versus tacit knowledge issue

From people? Coordination versus cooperation issue

How should this knowledge be collected, stored, used? Who should have access? How should people be motivated to share information?

Garvin

In most discussions of organizational learning, 3 critical issues are left out

a plausible definition of learning organizations

clear guidelines for practice

tools for assessing the rate and level of learning

Definition

an organization skilled at creating, acquiring and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights (Garvin, 1994)

Garvin: Distinctive Policies

systematic problem solving

experimentation with new approaches

learning from your own experiences and history

learning from the experiences and best practices of others

transferring knowledge quickly and efficiently throughout the organization

Garvin: Distinctive Practices

insisting on data rather than assumptions (PDCA)

an incentive system that favors risk-taking

demonstration projects that start with a clean slate

widely disseminated case studies and post-project reviews of successes and failures - concept of learning from mistakes

training in best practice

transferring and rotating staff - learning by doing

Why is effective learning so hard?

Argyris and Schon start with 2 theories of action

Theory in use (Model I) what we actually do in practice

Espoused Theory (Model II) what we would like others to think we do

Learning occurs when we explore the fit between model 1 and model 2 and correct errors

But we hate doing this! Why?

Because…

Exposing inconsistency is threatening and psychologically painfulPeople want to avoid embarrassment and blameThey want to be seen as ‘winners’ not ‘losers’However, this also prevents them from discovering the causes of their emotionsRedirecting blame causes defensiveness, misunderstanding, and mistrust in organizationsExecutives are so skilled at this behavior that they see no other way of behaving - it is a tacit and automatic way of behaving

Organizational defensive routines

Design and manage situations unilaterally

Advocate our views without encouraging inquiry

Evaluate the thoughts and actions of others in ways that do not encourage testing the validity of the evaluation;

Attribute causes for whatever we are trying to understand--without necessarily validating those attributions;

Unilaterally save face by withholding information or making certain things "undiscussable" in order to minimize upsetting others or making them defensive.

Engage in defensive actions such as blaming, stereotyping, intellectualizing

Keep premises and inferences tacit, lest we lose control.

Remain ‘logical’ by suppressing emotions and conflict

Loops

Single Loop Learning

learning within existing premises of the organization (e.g. how do I make a better widget)

Double Loop Learning

Double loop learning involves surfacing and challenging deeply rooted assumptions and norms of an organization that have previously been inaccessible, either because they were unknown, or known but undiscussable. (e.g. Should we be making widgets at all.)

Triple loop learning

Requires double loop learning in a sensitive way

TLL requires trust, listening skills, sharing of power, tolerance of diverse views, and ability to resist saving face

Exercise: Surfacing undiscussables

With a partner, discuss some of the “undiscussables” in your organization

Strengths of the brain metaphor

Clear guidelines for creating a learning organizationWe learn how information technology can support organizationsWe gain a new theory of management based on self-organization

What about holographs??We recognize the importance of dealing with paradox

Limitations of the brain metaphor

There may be conflict between the requirements of learning and the realities of power and control

Learning for the sake of learning can become just another ideology

Implications for implementation

Investments in IT systems and applications for transfer and analysis of explicit knowledge

We need to create systems for tacit knowledge transfer and organizational learning

We need to decentralize decision making where possible

Organizations as Cultures

Culture: “the way we do things around here”

National cultures

Regional cultures

Organizational cultures

Departmental cultures

How is culture like:

A language, an iceberg, an onion, an umbrella, sticky glue?

What else could be a metaphor for culture?

National cultures

Concept that management style should change to remain effective in different countriesEthnocentric vs polycentric stylesCultural dimensions:

Hofstede: masculinity, power-distance, uncertainty avoidance, individualityTrompenaars: universalism/particularism, neutral/affective, time orientation, achievement/ascription

How can we become more effective managers in global situations?

Exercise: Corporate cultures

Take some time to share the following answers to these questions about your organization:

What kinds of beliefs and values dominate the organization (officially…unofficially)What are the main norms (do’s and don’ts)What are the dominant stories and rituals?What are the favorite topics of informal conversations?Think of three influential people in the organization. How do they symbolize the character of the organization?Are there subcultures? Are they in conflict or harmony?

Debrief

What struck you as abnormal or strange about your partner’s answers? Why?

What management challenges do you think your partner’s organization might present? How hard would it be to change the culture?

What are the implications for strategy implementation?

Some key questions

Where does culture come from? How is it sustained?

How do we create or change a culture?

Where does culture come from?

Leadership (setting mission/vision)Selznick (1957) says purpose-setting is essence of leadership

Shared valuesReligious groups, etc.

Stories, legends, myths, symbolsReward systemsProfessional values

e.g. engineers, doctors, accountantsHistorical accidentsMorgan makes a big deal about enactment – what is it and why is it important?Hegemony

Indoctrination of masses, coalition with powerful

Changing a culturetrigger shifts in the established mindsetbreakdown habitual behavior patterns including routines, structures and rewardsmove outside established information channelsuse data and analysis to shock peopleintroduce new people and outsidersco-opt or break adversarial political alliancesrevamp employee communication mechanismstraining and developmentuse symbolism , ritual, and enactmentreward new behavior, celebrate successprovide leadership

Strengths of the cultural metaphor

Emphasizes the symbolic significance of what we doWe learn that organization and shared meaning are one and the sameWe see how success hinges on the creation of shared meaningLeaders and managers gain a new understanding of their impacts and rolesWe see that organizations and their environments are enacted domainsStrategic management is understood as an enactment processThe metaphor offers a fresh perspective on organizational change

Limitations of the cultural metaphor

The metaphor can be used to support ideological manipulation and controlCulture is holistic and cannot readily be managed by a simple checklistImportant dimensions are invisible and what is easily seen may be relatively unimportantCulture usually has a deep political dimension