Module 3: Organizational Structure and Culture

3.1 Organizational Structure:

Definition: Organizational structure refers to the arrangement of positions in an organization
and the authority and responsibility relationships among them. This means that every
organization is made up of persons holding particular positions or playing certain roles. The
organization’s structure is then determined by the interrelationships among the
responsibilities of these various positions or roles. An organizational structure defines how
job tasks are formally divided, grouped, and coordinated.
When designing their organization's structure, managers need to address six key elements:
work specialization, departmentalization, chain of command, span of control, centralization
and decentralization, and formalization.
1. Work specialization/division of labour - 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 several steps, each completed by a separate individual. In
essence, individuals specialise in doing part of an activity rather than the entirety.
2. Departmentalization - Once jobs have been divided through work specialization, they
must be grouped to coordinate common tasks. The basis by which jobs are grouped is
called departmentalisation. One of the most popular ways to group activities is by
functions performed. A manufacturing manager might organize a plant into
engineering, accounting, manufacturing, personnel, and supply specialists
departments. Some of the more widely used departmentalization bases are-
Functional, Geographic & Product.
3. The chain of command is an unbroken line of authority that extends from the top of
the organization to the lowest position and clarifies who reports to whom. Authority
refers to the rights inherent in a managerial position to give orders and expect them to
be obeyed. To facilitate coordination, each managerial position is given a place in the
chain of command, and each manager is given a degree of authority in order to meet
his or her responsibilities. The principle of unity of command helps preserve the
concept of an unbroken line of authority. The chain of command is the number of
authority levels in a particular organization. The chain of command follows the lines
of authority and status vertically through the organization.
4. 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. A flat structure is an organisational structure with
only a few layers of management. In a flat structure, managers have a wide span of
control with more subordinates, and there is usually a short chain of command. Tall
structure is equipped with a narrow span of control, which is the number of
employees that report to a manager.

5. Centralization refers to the degree to which decision-making is concentrated at a

single point in the organization. In centralized organizations, top managers make all
the decisions, and lower-level managers merely carry out their directives. In
organizations at the other extreme, decentralized decision-making is pushed down to
the managers closest to the action.
6. Formalization refers to the degree to which jobs within the organization are
standardized. If a job is highly formalized, the incumbent has a minimal amount of
discretion over what to do and when and how to do it. Employees can be expected
always to handle the same input in exactly the same way, resulting in a consistent and
uniform output. There are explicit job descriptions, lots of organizational rules, and
clearly defined procedures covering work processes in organizations in which there is
high formalization. Where formalization is low, job behaviours are relatively
unprogrammed, and employees have a great deal of freedom to exercise discretion in
their work. Standardization not only eliminates the possibility of employees engaging
in alternative behaviours, but it even removes the need for employees to consider
alternatives.
Common organizational designs
Difference between: Organizational design, Organizational structure & Organizational chart
Organizational structure is the static representation of organization. Whatever type of
structure a business is using, you should be able to draw it out in the form of a diagram.
The organogram is a corporate structure chart that provides an easy way to visualize the
relationship between one job function and another, the ranks of team members, managers and
leaders, and the various chains of command. Organizational design, on the other hand, is
a dynamic representation of organization. The term refers to the procedures for structuring
and restructuring an organization, its processes and workflows to make sure the business is
continually operating at its best. Organizational design is the management’s decisions and
actions that result in a specific organization structure. Organization design involves the
creation of roles, processes and structures to ensure that the organization’s goals can be
realized. Common organizational designs: the simple structure, the bureaucracy, and the
matrix structure.

1. The Simple Structure - The simple structure is not elaborate. It has a low degree of
departmentalization, wide spans of control, authority centralized in a single person, and little
formalization. It is a “flat” organization; it usually has only two or three vertical levels, a
loose body of employees, and one individual in whom the decision-making authority is
centralized. The simple structure is most widely adopted in small businesses in which the
manager and owner are the same. Large companies, in times of crisis, often simplify their
structures as a means of focusing their resources. The strength of the simple structure lies in
its simplicity. It is fast, flexible, and inexpensive to operate, and accountability is clear. One
major weakness is that it becomes increasingly inadequate as an organization grows, because
its low formalization and high centralization tend to create information overload at the top.
As size increases, decision making typically becomes slower and can eventually come to a
standstill as the single executive tries to continue making all the decisions. This proves the
undoing of many small businesses. If the structure is not changed and made more elaborate,
the firm often loses momentum and can eventually fail.
2. The Bureaucracy- The bureaucracy is characterized by routine operating tasks achieved
through specialization, much formalized rules and regulations, tasks grouped into functional
departments, centralized authority, narrow spans of control, and decision-making that follows
the chain of command. Its primary strength is its ability to perform standardized activities in a
highly efficient manner. Putting like specialties together in functional departments results in
economies of scale, minimum duplication of people and equipment, and employees who can
speak “the same language” among their peers. Standardized operations and high
formalization allow decision making to be centralized. There is little need for innovative and
experienced decision makers below the level of senior executives. The other major weakness
of a bureaucracy is when cases do not precisely fit the rules; there is no room for
modification. The bureaucracy is efficient only as long as employees confront familiar
problems with programmed decision rules.

3. The Matrix Structure - The matrix structure in advertising agencies, aerospace firms,
research and development laboratories, construction companies, hospitals, government
agencies, universities, management consulting firms, and entertainment companies. It
combines two forms of departmentalization: functional and product. Companies that use
matrix-like structures include BMW, IBM, and Procter & Gamble. The strength of functional
departmentalization is putting like specialists together, which minimizes the number
necessary while allowing the pooling and sharing of specialized resources across products. Its
major disadvantage is the difficulty of coordinating the tasks of diverse functional specialists
on time and within budget. Product departmentalization has exactly the opposite benefits and
disadvantages. It facilitates coordination among specialties to achieve on time completion and
meet budget targets. It provides clear responsibility for all activities related to a product but
with duplication of activities and costs. The matrix attempts to gain each other's strengths
while avoiding their weaknesses. The most obvious structural characteristic of the matrix is
that it breaks the unity-of-command concept. Employees in the matrix have two bosses: their
functional department managers and their product managers. Thus, members in a matrix
structure have a dual chain of command: to their functional department and to their product
groups. Instead of having one manager, employees report to multiple managers
simultaneously: their usual functional manager, such as the Head of Marketing, and the
manager of the project they are working on. As your project, team changes assignments, so
does the person managing the project (and to whom project team members report). The main
objective of this type of hierarchical organizational structure type is that it helps team
members work on multiple tasks, like a graphic designer creating images for websites.
However, they do this across various departments (at the same time). For example, a graphic
designer could create social media images for the marketing department while laying out a
customer product guide for the product team.
The strength of the matrix is its ability to facilitate coordination when the organization has
several complex and interdependent activities. Direct and frequent contacts between different
specialities in the matrix can let information permeate the organization and more quickly
reach the people who need it. A matrix also achieves economies of scale and facilitates the
allocation of specialists by providing both the best resources and an effective way of ensuring
their efficient deployment. The reason a company chooses a matrix model is that it enhances
the workflow, autonomy for employees, and team building. This tends to work better in
larger companies where there are several teams and divisions and it should be well planned
and outlined. The major disadvantages of the matrix lie in the confusion it creates, its
tendency to foster power struggles, and the stress it places on individuals. Reporting to more
than one boss introduces role conflict, and unclear expectations introduce role ambiguity.

4. The Virtual Organization – A virtual organization is a small, core organization that

outsources major business functions. Think of it as “renting” departments rather than owning
them. The virtual organization (also sometimes called the network, or modular, organization).
In structural terms, the virtual organization is highly centralized, with little or no
departmentalization. The prototype of the virtual structure is today’s movie-making
organization. This structural form allows each project to be staffed with the talent best suited
to its demands, rather than just the people employed by the studio. It minimizes bureaucratic
overhead because there is no lasting organization to maintain. In addition, it lessens long-
term risks and their costs because there is no long-term team that is assembled for a finite
period and then disbanded. This is possible because it outsources almost everything:
manufacturing, procurement, shipping, and quality control. The core of the organization is a
small group of executives whose job is to oversee directly any activities done in-house and to
coordinate relationships with the other organizations that manufacture, distribute, and
perform other crucial functions for the virtual organization. The dotted lines represent the
relationships typically maintained under contracts. In essence, managers in virtual structures
spend most of their time coordinating and controlling external relations, typically by way of
computer network links. The major advantage of the virtual organization is its flexibility,
which allows individuals with an innovative idea and little money to successfully compete
against larger, more established organizations. Virtual organizations also save a great deal of
money by eliminating permanent offices and hierarchical roles. Virtual organizations’
drawbacks have become increasingly clear, as their popularity has grown. They are in a state
of perpetual flux and reorganization, which means roles, goals, and responsibilities are
unclear, setting the stage for political behaviour. Cultural alignment and shared goals can be
lost because of the low degree of interaction among members. Team members who are
geographically dispersed and communicate infrequently find it difficult to share information
and knowledge, which can limit innovation and slow response time. Ironically, some virtual
organizations are less adaptable and innovative than those with well-established
communication and collaboration networks. A leadership presence that reinforces the
organization’s purpose and facilitates communication is thus especially valuable.
Example: upGrad operates with a remote-first mindset. Given that it is an online learning
platform, the company has adopted a fully virtual workspace model for most of its
employees. Remote work is central to the company's operations, and employees can work
from any location of their choice. upGrad's virtual workspace is enhanced by various learning
management systems (LMS), collaborative platforms, and communication tools that ensure
effective communication and smooth workflow across departments.

5. The Boundaryless – Jack Welch, CEO of General Electric, pioneered the boundary less
organization in the 1990s. Boundaries whether between hierarchical levels, functions,
geographies, or external boundaries stifle this innovation. The boundary-less organization
seeks to eliminate the chain of command, have limitless spans of control, and replace
departments with empowered teams. By removing vertical boundaries, management flattens
the hierarchy; and minimizes status and rank. Everyone works at uniform mobile
workstations, and project teams, not functions or departments coordinate work. Functional
departments create horizontal boundaries that stifle interaction among functions, product
lines, and units. The way to reduce them is to replace functional departments with cross-
functional teams and organize activities around processes. Another way to lower horizontal
barriers is to rotate people through different functional areas using lateral transfers. This
approach turns specialists into generalists. When fully operational, the boundary-less
organization also breaks down geographic barriers. The boundary-less organization provides
one solution because it considers geography more of a tactical, logistical issue than a
structural one. In short, the goal is to break down cultural barriers.
6. The Team Structure: In an organizational structure based on teams, the structure breaks
down department barriers and decentralizes decision-making to the level of the team. Team
structures usually require employees to be generalists as well as specialists. A team structure
can define a whole company. Indeed, each of the teams is dependent on and answers to the
other members of their own team and the other teams. More often than not, when larger
organizations decide to use teams, they do so as a part of a bureaucratic structure rather than a
straight team structure. Moving from a bureaucratic to a team structure requires a great deal
of change, so larger organizations will assemble teams and add a quasi-team structure into
their bureaucratic org chart.

Activity: Design an organizational chart for the following sectors - marketing,

education, and non-profit considering the key departments, roles, and reporting
structures.
What factors would influence your decisions in structuring the hierarchy?
3.2 Organizational Culture
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Culture Eats Strategy for Breakfast: The sentence was attributed to the management guru
Peter Drucker in 2006, and made famous by Mark Fields, who later became chief executive
of Ford Motor Company describes how any well-designed strategic plan will fall flat if the
culture has not engaged and united the team.
Definition: Organizational culture refers to a system of shared assumptions, values, and
beliefs that show employees what is appropriate and inappropriate behaviour. Organizational
culture is a general pattern of beliefs, expectations, and values, some conscious and some
unconscious, that are expected to guide the behaviour of all members of an organization.
Organizational culture is what the employees perceive and how this perception creates a
pattern of beliefs, values, and expectations.
Organizational culture serves the following functions:
1. It provides shared patterns of cognitive interpretations or perceptions, thus, communicating
to the organizational members how they are expected to think and behave.
2. It provides shared patterns of feelings, i.e., an emotional sense of involvement and
commitment to organizational values and moral codes of things worth working for, or
believing in, so that the organizational members know what they are expected to value and
how they are expected to feel. It enhances commitment to the organization’s mission.
Development of strong identification with management goals.
3. It defines and maintains boundaries, allowing identification of members and non-members.
4. It is an implicit organizational control system, prescribing and prohibiting certain
behaviours.
5. Having a strong emphasis on the selection, training, and development of personnel.

Types:
 Bureaucratic Culture: An organization that practices formality, rules, standard
operating procedures, and hierarchical coordination has a bureaucratic culture. The
goals of a bureaucracy are predictability, efficiency, and stability. Its members highly
value standardized goods and customer service. Behavioral norms support formality
over informality. Leaders view their roles as good coordinators, organizers, and
enforcers of written rules and standards. Tasks, responsibilities, and authority for all
employees are clearly defined. The organization's many regulations and processes are
spelled out in thick manuals, and employees believe that they must “go by the book”
and follow legalistic procedures. Examples: Government agencies such as the IRS
(Internal Revenue Service), educational institutions & entities like the United Nations
(UN), and World Health Organization (WHO).
The key parts of a hierarchy culture are structure, stability, and control.
1. Structure: Hierarchy cultures have clear, well-defined forms. Each person knows
his or her role, duties, and where they stand in the firm.
2. Stability: These cultures value stability and predictability. There needs to be more
risk-taking and more focus on keeping the status quo.
3. Control: There are clear lines of authority in a hierarchy culture. Findings are
often made at the top and trickle down.
Characteristics:
1. Rules and Policies: Clear policies govern actions.
2. Efficiency: Focus on even, reliable output.
3. Stability: Stresses a predictable environment.
4. Control: There are clear lines of decision-making power.
Example: Government institutions often exhibit a hierarchical culture, with strict
policies and protocols, clear lines of authority, and a focus on stability and order.
 Clan Culture: Tradition, loyalty, personal commitment, extensive socialization,
teamwork, self-management, and social influence are attributes of a clan culture. Its
members recognize an obligation beyond the simple exchange of labour for a salary.
They understand that contributions to the organization (e.g., hours worked per week)
may exceed any contractual agreements. The individual’s long-term commitment to
the organization (loyalty) is exchanged for the organization’s long-term commitment
to the individual (security). Because individuals believe that the organization will treat
them fairly in terms of salary increases, promotions, and other forms of recognition,
they hold themselves accountable to the organization for their actions. Organizations
such as Zappos, Mayo Clinic, and Southwest Airlines have developed strong clan
cultures. A clan culture achieves unity by means of a long and thorough socialization
process. Socialization is a process with three stages: pre-arrival, encounter, and
metamorphosis (a complete change of form). It has an impact on the new employee’s
work productivity, commitment to the organization’s objectives, and eventual
decision to stay with the organization. The pre-arrival stage recognizes that each
individual arrives with a set of values, attitudes, and expectations about both the work
and the organization. No matter how well managers think they can socialize
newcomers, however, the most important predictor of future behaviour is past
behaviour. One way to capitalize on pre-hire characteristics in socialization is to use
the selection process to inform prospective employees about the organization as a
whole. On entry into the organization, the new member enters the encounter stage and
confronts the possibility that expectations about the job, co-workers, the boss, and the
organization in general may differ from reality. Finally, to work out any problems
discovered during the encounter stage, the new member changes or goes through the
metamorphosis stage. In organisational psychology, the honeymoon-hangover effect
describes the relationship between voluntary employee job change and job
satisfaction. The first stage of the honeymoon hangover effect is referred to as
“deterioration”, in which employees experience job dissatisfaction and leave their old
job. Immediately after changing jobs, there is a sudden increase in job satisfaction at
the new job (honeymoon effect). This increase in job satisfaction is followed by a
slower decline in job satisfaction back to a baseline level (hangover effect). One study
has documented patterns of “honeymoons” and “hangovers” for new workers,
showing that the period of initial adjustment is often marked by decreases in job
satisfaction as their idealized hopes come into contact with the reality of
organizational life. Other research suggests that role conflict and role overload for
newcomers rise over time, and that workers with the largest increases in these role
problems experience the largest decreases in commitment and satisfaction. It may be
that the initial adjustment period for newcomers presents increasing demands and
difficulties, at least in the short term.
Long-time clan members serve as mentors and role models for newer members. The
clan is aware of its unique history and often documents its origins and celebrates its
traditions in various rites. Members have a shared image of the organization’s style
and manner of conduct. Public statements and events reinforce its values. In a clan
culture, members share feelings of pride in membership. They have a strong sense of
identification and recognize their common fate in the organization. Shared goals,
perceptions, and behavioural tendencies foster communication, coordination, and
integration. A clan culture generates feelings of personal ownership of a business, a
product, or an idea. In addition, peer pressure to adhere to important norms is strong.
The richness of the culture creates an environment in which few areas are left very
free from normative pressures. Depending on the types of its norms, the culture may
or may not generate risk-taking behaviour or innovation. Success is assumed to
depend substantially on sensitivity to customers and concern for people. Teamwork,
participation, and consensus decision making are believed to lead to this success.
In a clan culture, the core parts stem from shared values, trust, and joint goals.
1. Shared Values: Everyone in the firm shares equal values and beliefs. This shared
mind-set eases teamwork and cooperation.
2. Trust: Clan culture fosters a climate of trust. Workers feel safe to express ideas,
take risks, and make errors without fear of penalty.
3. Common Goals: Clan cultures work towards shared goals. The focus isn't on
personal triumph but on what the team can achieve jointly.
Characteristics:
The traits of clan culture can be better known from the points below.
1. Collaborative: Everyone unites and works jointly.
2. Empowerment: Workers are encouraged to be freed.
3. Open Communication: Ideas and thoughts are shared freely.
4. Flexibility: There is room for error and creativity.
 Example: At Google, workers often work in teams and are inspired to brainstorm and
problem-solve. This fosters a sense of harmony and shared purpose.
 Entrepreneurial Culture: High levels of risk-taking and creativity characterize an
entrepreneurial culture. There is a commitment to experimentation, innovation, and
being on the leading edge. This culture doesn’t just quickly react to changes in the
environment it creates change. Many of today’s hi-tech companies, such as Apple,
Google, and Nintendo, have developed entrepreneurial cultures. Effectiveness means
providing new and unique products and rapid growth. Individual initiative, flexibility,
and freedom foster growth and are encouraged and well rewarded. Entrepreneurial
cultures are often found in small to mid-sized companies that are still run by a
founder. Innovation and entrepreneurship are values held by the founder.
The key parts revolve around creativity, flexibility, and risk-taking.
1. Creativity: In this culture, creative thinking is not only encouraged but expected.
Workers are given the freedom to think outside the box and come up with
innovative solutions.
2. Flexibility: Adhocracy cultures are naturally flexible, adapting quickly to changes
and disruptions in the environment.
3. Risk-Taking: This culture is all about taking figured risks. Mistakes are not feared
but are seen as options for learning and progress.
Characteristics:
1. Experimentation: Testing new ideas is enabled.
2. Risk-Taking: There is high patience for daring offers.
3. Agility: Quick to respond and adapt to changes in the marketplace.
4. Entrepreneurial: Fosters innovation and enables workers to think outside the box.
Example: Tesla's innovative approach to electric cars and energy solutions is a
testament to the entrepreneurial/adhocracy culture that values creativity and risk-
taking.
 Market Culture: The achievement of measurable and demanding goals, especially
those that are financial and market based (e.g., sales growth, profitability, and market
share), characterise a market culture. PepsiCo, Bank of America, and Goldman Sachs,
among others, have many of the characteristics found in market cultures. Hard-driving
competitiveness and a profit orientation prevail throughout a market culture
organization. In a market culture, the relationship between individual and organization
is contractual. That is, the obligations of each party are agreed on in advance. In this
sense, the control orientation is formal and quite stable. The individual is responsible
for some level of performance, and the organization promises a specified level of
rewards in return. Increased levels of performance are exchanged for increased
rewards, as outlined in an agreed-on schedule. Neither party recognizes the right of
the other to demand more than was originally specified. The organization does not
promise (or imply) security, and the individual does not promise (or imply) loyalty.
The contract, renewed annually if each party adequately performs its obligations, is
utilitarian because each party uses the other to further its own goals. Rather than
promoting a feeling of membership in a social system, the market culture values
independence and individuality and encourages members to pursue their own
financial goals. In market cultures, superiors’ interactions with subordinates largely
 consist of negotiating performance–reward agreements and/or evaluating requests for
resource allocations. Leaders are not formally judged on their effectiveness as role
models or mentors. The absence of a long-term commitment by both parties results in
a weak socialization process. Social relations among co-workers are not emphasized,
and few economic incentives are tied directly to cooperating with peers. Leaders are
expected to cooperate with managers in other departments only to the extent
necessary to achieve their performance goals. As a result, they may not develop an
extensive network of colleagues within the organization. The market culture often is
tied to monthly, quarterly, and annual performance goals based on profits.
The market culture stresses competition, results, and client focus.
1. Competition: A market culture thrives on the contest. It's all about beating rivals
and dominating the market.
2. Results: Market cultures are highly results-oriented. Performance metrics and goal
triumph are prioritized.
3. Customer Focus: The needs and preferences of customers are paramount in a
market culture. Every decision, from product growth to service delivery, revolves
around the client.
Characteristics
The elements of market culture can be better understood with the help of the points
noted below.
1. Competition: The focus is on winning and gaining market share.
2. Results-oriented: Success is gauged by the triumph of goals.
3. Customer Focus: All actions are driven by client needs and preferences.
4. Stability and Control: There are well-defined processes and forms.
Example: Amazon’s customer obsession is well known, and it has always prioritized
customer satisfaction above all else, a core feature of its market culture.

Components:
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Edgar Schein defined culture as a pattern of basic assumptions invented, discovered, or
developed by a given group as it learns to cope with the problems of external adaptation and
internal integration that has worked well enough to be considered valid and, therefore, to be
taught to new members as the correct way to perceive, think, and feel in relation to those
problems. Schein’s definition points out that culture involve assumptions, adaptations,
perceptions, and learning. Organizational culture can be thought of as consisting of three
interrelated levels (Schein, 1992).
Layer I includes artifacts and creations that are visible but often not interpretable. An annual
report, a newsletter, wall dividers between workers, and furnishings are examples of artifacts
and creations. Artifacts are the surface-level actions that can be observed from which some
deeper meaning or interpretation can be drawn about the organization. Trice and Beyer
(1993) identified four major categories of cultural artifacts: symbols (e.g., physical objects or
locations); language (e.g., jargon, slang, gestures, humour, gossip, and rumours); narratives
(e.g., stories, legends, and myths about the organization); and practices (e.g., rituals, taboos,
and ceremonies). Although these artifacts are easy to observe, they are not necessarily easy to
interpret or understand. At layer II are values, or the things that are important to people.
Values are conscious, affective desires or wants. Espoused values are those beliefs or
concepts that are specifically endorsed by management or the organization at large.
Organizations per se do not possess values, but rather key individual leaders within the
organization espouse these values. In layer III are the basic assumptions people make that
guide their behaviour. Included in this layer are assumptions that tell individuals how to
perceive, think about, and feel about work, performance goals, human relationships, and the
performance of colleagues. Basic assumptions are unobservable and are at the core of the
organization. They frequently start out as values but over time become so deeply ingrained
that they are taken for granted. Basic assumptions are rarely confronted or debated and are
extremely difficult to change. At the deepest level, below our awareness lie
basic assumptions.
For example, in an organization one of the basic assumptions employees and managers share
might be that happy employees benefit their organizations. This assumption could translate
into values such as social equality, high quality relationships, and having fun. The artifacts
reflecting such values might be an executive “open door” policy, an office layout that
includes open spaces and gathering areas equipped with pool tables, and frequent company
picnics in the workplace. Understanding the organization’s culture may start from observing
its artifacts: the physical environment, employee interactions, company policies, reward
systems, and other observable characteristics. When you are interviewing for a position,
observing the physical environment, how people dress, where they relax, and how they talk to
others is definitely a good start to understanding the company’s culture. However, simply
looking at these tangible aspects is unlikely to give a full picture of the organization. An
important chunk of what makes up culture exists below one’s degree of awareness. The
values and, at a deeper level, the assumptions that shape the organization’s culture can be
uncovered by observing how employees interact and the choices they make, as well as by
inquiring about their beliefs and perceptions regarding what is right and appropriate
behaviour.
Organizational culture can be described in terms of management style also. Management
style is the approach managers use to deal with people. It is also called ‘leadership style’, as
defined there, it consists of the following extremes: Charismatic/non-charismatic;
Autocratic/democratic; Enabler/controller & Transactional/transformational. Most managers
adopt an approach somewhere between the extremes. Some will vary it according to the
situation or their feelings at the time; others will stick to the same style whatever happens. A
good case can be made for using an appropriate style according to the situation but it is
undesirable to be inconsistent in the style used in similar situations. Every manager has his or
her style but this will be influenced by the organizational culture, which may produce a
prevailing management style that represents the behavioural norm for managers that is
generally expected and adopted. The term ‘management style’ can also refer to the overall
approach an organization adopts to the conduct of employee relations. Purcell and Sisson
(1983) identified five typical styles: authoritarian, paternalistic, consultative, and
constitutional, and opportunist

Brief about organizational climate:

Organizational Culture versus Organizational Climate:
Case: Jan, who was excited to start work at Organization X. She was attracted to the company
because its culture valued employee well-being. After being introduced at her first all staff
meeting, Jan heard several praises of her new team members for going beyond, specifically
for quick responses after hours and during a long weekend. An “extra big” shout-out went to
a team member that took time during her vacation to wrap up a big project. Jan left feeling
uncertain, and rightly so. She is confused about what behaviours are expected from her
because there is a misalignment between the culture of touting work-life balance and the
climate, in which her team members are publicly recognized for working after hours, which
negatively affects her performance and mental health. Knowing the importance of aligning a
company’s culture and climate, if Jan’s manager called for a huddle after the meeting and
said, “I’m proud of you all for the work you do. You work so hard, but at the same time,
working after hours and during vacation are behaviours that do not align with valuing well-
being, and they put you on a trajectory for burnout. How can I help you rebalance?” Then,
when rebalancing is highlighted as a win in the next all-staff meeting, imagine how that
would shape employees’ opinions about “how things are around here.”
Organizational climate 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.’ The term ‘organizational
climate’ is sometimes confused with organizational culture and there has been much debate
on what distinguishes them from one another. In his analysis of this issue, 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 environment that are consciously perceived by organizational
members. Rousseau (1988) stated that climate is a perception and is descriptive. Perceptions
are sensations or realizations experienced by an individual. Descriptions are what a person
reports of these sensations. The debate about the meanings of these terms can become
academic. It is easiest to regard organizational climate as how people perceive (see and feel
about) the culture existing in their organization. As defined by French et al (1985) it is ‘the
relatively persistent set of perceptions held by organization members concerning the
characteristics and quality of organizational culture’. They distinguish between the actual
situations (i.e. culture) and the perception of it (climate).

3.3 Organizational Change:

Change management is the process of designing and implementing change. Organizational
development (OD) is a specialized field that focuses on how to design and manage change.
An OD consultant is someone who has expertise in change management processes. OD
refers to a “complex educational strategy intended to change beliefs, attitudes, values, and
structure of organizations so that they can better adapt to new technologies, markets, and
challenges and the dizzying rate of change itself.” The goal of OD is to improve
organizational effectiveness and help people reach their potentials and realize their goals. OD
typically takes place in a series of phases:

Forces of change
Competitive forces: Managers and employees must continually work to achieve a competitive
advantage over their rivals by performing their tasks in a more effective way. Competition is
a force for change because, unless an organization can match or surpass its competitors in at
least one functional area for example, in marketing or R&D that allows it to increase product
quality, innovation, or responsiveness to customers it will not survive. To excel, an
organization must continually adopt the latest technology as it becomes available. The
adoption of new technology usually changes task and job relationships as employees learn
new skills or techniques to operate the new technology. To excel in the area of innovation
and use its technological advantage to produce superior products, a company must skilfully
organize its activities so employees are motivated and coordinated and willing to share ideas
and cooperate to bring about change. Central to the ability to capture and sustain a
competitive advantage is the ability to excel in the most important area of all: responsiveness
to customers.
Economic, Political, and Global forces: Changing economic and political forces affect
organizations and compel them to alter how and where they produce goods and services. The
huge growth in outsourcing has been an enormously significant economic force over the last
few decades. Also, economic and political unions between countries are becoming an
increasingly important force for change. No organization can afford to ignore the effects of
global economic and political forces on its activities. The rise of low-cost overseas
competitors, the development of a new technology that erodes a company’s competitive
advantage, and the failure to take advantage of low-cost inputs from abroad all spell doom to
organizations in the global marketplace. Another challenge organizations face is the need to
help their expatriate managers who work abroad adjust to the economic, political, and
cultural values of the specific countries in which they are located. Toyota, for example, has
realized the importance of sending its Japanese car designers and engineers to work with their
counterparts in other countries. This helps the company meet the needs of customers in
overseas markets as well as spread its Kaizen or TQM manufacturing methods to its other
global divisions.
Demographic and Social Forces: Managing a diverse workforce is one of the biggest
challenges confronting organizations today. Increasingly, the changing demographic
characteristics of the workforce have motivated managers to find better ways to supervise and
encourage minority and female members. Managers have learned the importance of equity in
the recruitment and promotion process and the need to acknowledge that employees today are
looking for a better balance between work and leisure. For example, as increasing numbers of
women enter the workforce, companies have had to change to accommodate the needs of
dual-career and single-parent families such as providing employees with childcare facilities
and allowing them to adopt flexible work schedules. Many companies have helped their
employees keep up with changing technology by supporting advanced education and training
for them. Increasingly, organizations are coming to realize that the ultimate source of
competitive advantage and organizational effectiveness lies in fully utilizing the skills of their
members, by, for example, empowering their employees to make important decisions.
Ethical forces: While organizations must change in response to demographic and social
forces, they must do so in an ethical way, especially in the face of increasing government,
political, and public scrutiny. Many companies have created the role of ethics officer, a
person to whom employees can report ethical lapses on the part of the organization’s
managers or turn for advice when faced with ethical business dilemmas. Organizations are
also trying to promote ethical behaviour by giving employees direct access to important
decision-makers and by protecting whistle-blowers who expose ethical problems. In the
2000s, most organizations made many changes to their rules and SOPs that encourage and
reward employees at all levels to report unethical (and illegal) behaviours so that an
organization can move quickly to eliminate such behaviour and protect the interests and
reputation of the organization and the people affected by its actions, for example,
stockholders and customers.
Resistance to change
Impediments to Change:

Effective organizations are those that are agile enough to adjust to these forces. However,
many internal, structural forces make organizations resistant to change. Research suggests
that one of the main reasons why organizations find it so difficult to change is organizational
inertia, or the pressures within a company to maintain the status quo and behave as it has
always done in the past.

Organization- level resistance to change: Many forces inside an organization make it difficult
for an organization to change in response to a changing environment. The most powerful
organization-level impediments to change include power and conflict, differences in
functional orientation, a mechanistic structure, and organizational culture.

Power and conflict: Change usually benefits some people, functions, or divisions at the
expense of others. When change causes power struggles and organizational conflict, this
slows down decision-making. Suppose that by changing its current suppliers the materials
management function can achieve its goal of reducing input costs, but manufacturing believes
this change will result in lower quality inputs that will increase production costs. Materials
management pushes for the change, but manufacturing resists it. The conflict between the
two functions slows down the process of change and even may prevent it from occurring at
all. Many large companies have found that their functions and divisions are often resistant to
change. The failure of IBM to control the PC market resulted because IBM’s mainframe
division, the most powerful in the company, resisted efforts to transfer resources to the
growing PC divisions in order to preserve its prestige and power in the company. The failure
of its managers to change in response to changing customer demands cost the company its
leadership position and it lost tens of billions of dollars. Only when a new CEO took over and
ruthlessly laid off thousands of mainframe managers and diverted the company’s resources
into providing computer services and consulting did IBM’s turnaround begin and it rose to
the top again.

Differences in functional orientation: Differences in functional orientations or goals are

another major impediment to change and a source of organizational inertia. Different
functions and divisions often see the source of a problem differently because they have their
own different perspectives. The “tunnel vision” of each function or division increases
organizational inertia because much time and effort needs to be spent to secure agreement
about the source of a problem and how to solve it.

Mechanistic structure: Tall hierarchies, centralized decision making, and the standardization
of behaviour through rules and procedures characterize mechanistic structures. In contrast,
organic structures are flat, decentralized, and rely on mutual adjustment between people to
get the job done. Mechanistic structures are more resistant to change because the employees
who work inside them are supposed to behave in predictable ways and do not develop the
initiative to adjust their behaviour to changing conditions. The extensive use of mutual
adjustment and decentralized authority in an organic structure, on the other hand, fosters the
development of skills that enable employees to be creative and able to respond quickly to find
solutions to new problems. A mechanistic structure is a principal source of inertia in large
bureaucratic organizations.

Organizational culture: The values and norms in an organization’s culture can become
another source of resistance to change. Just as a formal system of role relationships results in
stable or predictable expectations between people, taken for granted values and norms cause
people to behave in predictable ways. If organizational change disrupts these values and
norms and forces people to question what they are doing and how they should do it resistance
is likely to follow. Over time, many organizations develop conservative values that support
the status quo, they make managers reluctant to search for new opportunities to compete or
become more effective. Now, if the environment changes and a company’s products become
obsolete, they have no ways to respond and so failure is likely

Group-Level Resistance to Change: Groups perform much of an organization’s work, and

several group characteristics may result in resistance to change. Here, we consider four
characteristics: group norms, group cohesiveness, groupthink, and escalation of commitment.

Group norms: Many groups develop strong informal norms that specify appropriate and
inappropriate behaviours and govern the interactions between group members. Often, change
alters task and role relationships in a group; and when it does, it disrupts group norms and the
expectations members have of one another. As a result, members of a group may resist
change because a completely new set of norms may have to be developed to meet the needs
of the new situation.

Group cohesiveness: Group cohesiveness, or the attractiveness of a group to its members,

affects group performance. Although some level of cohesiveness promotes group
performance, too much cohesiveness can actually reduce performance if it makes group
members slow to recognize opportunities to change and adapt. A highly cohesive group may
resist attempts by others to change what it does or even who its members are. Group
members may unite to protect their interests at the expense of other groups.

Groupthink and escalation of commitment: Groupthink is a pattern of faulty decision making

that occurs in cohesive groups when members discount negative information in order to make
it easier to agree with or conform to each other’s views. Escalation of commitment worsens
this situation. This occurs when members realize that their course of action is wrong but
continue to pursue it, regardless of the consequences. Groupthink and escalation can make
changing a group’s behaviour very difficult.

Case example: Kodak was once a leader in the photography industry, known for its film-
based business. However, as digital photography emerged, Kodak struggled to shift its focus.
Despite having developed the first digital camera in 1975, the company failed to embrace the
change and continued prioritizing film.

Groupthink in Kodak: Kodak’s leadership team was highly cohesive, and decision-makers
were reluctant to challenge the existing business model. They dismissed negative information
about the declining film industry and convinced themselves that digital photography was just
a niche market rather than the future of photography. Employees who raised concerns were
ignored or pressured to conform to the prevailing view.

Escalation of Commitment: Even when it became evident that digital cameras were gaining
popularity, Kodak continued investing in film technology. Executives feared acknowledging
their mistake because it would mean admitting past failures. Instead of pivoting fully to
digital, they doubled down on their existing strategy, hoping that the film business would
recover. By the time Kodak realized its mistake, companies like Sony and Canon had taken
over the digital camera market. Kodak eventually filed for bankruptcy in 2012.

Individual-Level Resistance to Change Individuals within an organization may be inclined to

resist change because of uncertainty, selective perception, and force of habit.

Uncertainty and insecurity: People tend to resist change because they feel uncertain and
insecure about its outcome. Employees might be given new tasks, role relationships may
change, and some employees might lose their jobs while others might be promoted.
Employees’ resistance to the uncertainty and insecurity surrounding change can cause
organizational inertia. Absenteeism and turnover may increase as change takes place and
employees may become uncooperative, they may attempt to delay or slow down the change
process, or passively resist it.

Selective perception and retention: Perception and attribution play a major role in
determining work attitudes and behaviours. There is a general tendency for people to
selectively perceive information consistent with their existing views (or schemas) of their
organizations. Then, when change takes place, employees tend to focus only on how it will
personally affect them or their function or division. If they perceive few benefits, they may
reject the change. Not surprisingly, it can be difficult for an organization to develop a
common platform to promote change across an organization and get people to see the need
for it.

Habit: Habit, people’s preference for familiar actions and events, is another impediment to
change. The difficulty of breaking bad habits and adopting new styles of behaviour indicates
how hard it is for people to change their habits. Some researchers have suggested that people
have a built-in tendency to return to their original behaviors a tendency that hinders and
prevents change

Overcoming resistance

Eight tactics can help change agents deal with resistance to change.
1. Education and Communication: Communicating the logic of a change can reduce
employee resistance on two levels. First, it fights the effects of misinformation and poor
communication. If employees receive the full facts and clear up misunderstandings,
resistance should subside. One study of an organization in the Philippines found that formal
change information sessions decreased employees’ anxiety about the change while providing
high-quality information about the change increased their commitment to it. Second,
communication can help “sell” the need for change by packaging it properly. For example, a
study of German companies revealed that changes are most effective when a company
communicates a rationale balancing the interests of various stakeholders (shareholders,
employees, community, and customers) rather than considering the viewpoint of shareholders
only.

2. Participation: It’s difficult to resist a change decision in which we’ve participated.

Assuming participants have the expertise to make a meaningful contribution, their
involvement can reduce resistance, obtain commitment, and increase the quality of the
change decision. However, against these advantages are the negatives: potential for a poor
solution and great consumption of time.

3. Building Support and Commitment: When employees’ fear and anxiety are high,
counselling and therapy, new-skills training, or a short paid leave of absence may facilitate
adjustment. When managers or employees have low emotional commitment to change, they
favor the status quo and resist it. Employees are also more accepting of changes when they
are committed to the organization as a whole. So, firing up employees and emphasizing their
commitment to the organization overall can help them emotionally commit to the change
rather than embrace the status quo

4. Develop Positive Relationships: People are more willing to accept changes if they trust the
managers implementing them. One study surveyed 235 employees from a large housing
corporation in the Netherlands that was experiencing a merger. Those who had a more
positive relationship with their supervisors, and who felt that the work environment supported
development, were much more positive about the change process. Another set of studies
found that individuals who were dispositional resistant to change felt more positive about the
change if they trusted the change agent. This research suggests that if managers are able to
facilitate positive relationships, they may be able to overcome resistance to change even
among those who ordinarily don’t like changes.

5. Implementing Changes Fairly: One-way organizations can minimize negative impact is to

make sure change is implemented fairly. Procedural fairness is especially important when
employees perceive an outcome as negative, so it’s crucial that employees see the reason for
the change and perceive its implementation as consistent and fair.

6. Manipulation and Co-optation: Manipulation refers to covert influence attempts. Twisting

facts to make them more attractive, withholding information, and creating false rumours to
get employees to accept change are all examples of manipulation. If management threatens to
close a manufacturing plant whose employees are resisting an across-the-board pay cut, and if
the threat is actually untrue, management is using manipulation. Co-optation, on the other
hand, combines manipulation and participation. It seeks to “buy off” the leaders of a
resistance group by giving them a key role, seeking their advice not to find a better solution
but to get their endorsement. Both manipulation and co-optation are relatively inexpensive
ways to gain the support of adversaries, but they can backfire if the targets become aware
they are being tricked or used. Once discovered, the change agent’s credibility may drop to
zero.

7. Selecting People Who Accept Change: One study of managers in the United States,
Europe, and Asia found those with a positive self-concept and high risk tolerance coped
better with organizational change. Research suggests that the ability to easily accept and
adapt to change is related to personality some people simply have more positive attitudes
about change than others. Such individuals are open to experience, are willing to take risks,
and are flexible in their behaviour. A study of 258 police officers found those who were
higher in growth-needs, internal locus of control, and internal work motivation had more
positive attitudes about organizational change efforts. Individuals higher in general mental
ability are also better able to learn and adapt to changes in the workplace. In sum, an
impressive body of evidence shows organizations can facilitate change by selecting people
predisposed to accept it. Besides selecting individuals who are willing to accept changes, it is
also possible to select teams that are more adaptable. Studies have shown that teams that are
strongly motivated by learning about and mastering tasks are better able to adapt to changing
environments. This research suggests it may be necessary to consider not just individual
motivation, but also group motivation when trying to implement changes. Fostering a
learning organization can help with this process. A learning organization facilitates
continuous transformation by encouraging the development of a shared vision while
simultaneously supporting systematic questioning of the status quo and standard modes of
operating (mental models). Individuals are encouraged to develop personal mastery in their
areas of expertise. Ongoing dialogue and discussion transform that individual mastery into
team learning.

8. Coercion: Last on the list of tactics is coercion, the application of direct threats or force on
the dissenters. If management really is determined to close a manufacturing plant whose
employees don’t acquiesce to a pay cut, the company is using coercion. Other examples of
coercion tools are forced transfers, loss of promotions, negative performance evaluations, and
a poor letter of recommendation. The advantages and drawbacks of coercion are
approximately the same as for manipulation and co-optation