Leadership in Organizational Settings Case Study Discussion
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Leadership in Organizational Settings Case Study Discussion
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AUTHENTIC LEADERSHIP
What are the most important lessons about being a leader? For Nvidia CEO Jen-Hsun Huang, the answer is that successful leaders are authentic. “I appreciate people who are authentic,” says Huang. “They are just who they are. They don’t dress like a CEO because they think that’s what CEOs dress like. They don’t talk like CEOs because that’s the way they think CEOs talk”22
Authentic leadership refers to how well leaders are aware of, feel comfortable with, and act consistently with their self-concept.23 In other words, authenticity is knowing yourself and being yourself (Exhibit 12.3). Leaders learn more about their personality, values, thoughts, and habits by reflecting on various situations and personal experiences. They also improve this self-awareness by receiving feedback from trusted people inside and outside the organization. Both self-reflection and receptivity to feedback require high levels of emotional intelligence.
As people learn more about themselves, they gain a greater understanding of their inner purpose, which generates a long-term passion for achieving something worthwhile for the organization or society. Some leadership experts suggest that this inner purpose emerges from a life story, typically a critical event or experience earlier in life that provides guidance for their later career and energy.
Authentic leadership is more than self-awareness; it also involves behaving in ways that are consistent with that self-concept rather than pretending to be someone else. To be themselves, great leaders regulate their decisions
TNT employs more than 150,000 people worldwide, yet the international express and mail delivery services company remains “humanized” through “honesty, authentic leadership, and truly connecting with staff.” Herna Verhagen, global leader of human resources at the Netherlands-based firm, explains that authenticity is intrinsic in effective leaders. “You cannot make someone be authentic,” suggests Verhagen. “What you can do as a company is emphasize that authentic leadership is key and explain what it entails.” Furthermore, Verhagen believes that authentic leadership requires a “secure base,” which includes taking pride in your company, team, boss, and yourself.24
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Debating Point
SHOULD LEADERS REALLY BE AUTHENTIC ALL OF THE TIME?
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According to popular business books and several scholarly articles, authentic leadership is one of the core attributes of effective leaders. Authentic leaders know themselves and act in accordance with that self-concept. They live their personal values and find a leadership style that best matches their personality. Furthermore, authentic leaders have a sense of purpose, often developed through a crisis or similar “crucible” event in their lives.
It makes sense that leaders should be authentic. After all, as singer Lisa Minnelli has often said: “I would rather be a first-rate version of myself than a second-rate version of anybody else.”25 In other words, leaders are better at acting out their natural beliefs and tendencies than by acting like someone else. Furthermore, authenticity results in consistency, which is a foundation of trust. So, by being authentic, leaders are more likely to be trusted by followers.26
But should leaders always be themselves and act consistently with their beliefs and personality? Not necessarily, according to a few experts. The concept of authentic leadership seems to be at odds with well-established research that people are evaluated as more effective leaders when they have a high rather than low self-monitoring personality.27
High “self-monitors” quickly understand their social environment and easily adapt their behavior to that environment. In other words, high self-monitors change their behavior to suit what others expect from them. In contrast, low self-monitors behave consistently with their personality and self-concept. They do not change their beliefs, style, or behaviors across social contexts. On the contrary, they feel much more content with high congruence between who they are and what they do, even when their natural style does not fit the situation.
Employees prefer an adaptive (i.e., high self-monitoring) leader because they have preconceived prototypes of how leaders should act.28 (We discuss this theory—called implicit leadership— later in this chapter.) Authentic leaders are more likely to violate those prototypical expectations and, consequently, be viewed as less leader-like. The message from this is that leadership is a role requiring its incumbents to perform that role rather than to “act naturally” to some degree. Ironically, while applauding the virtues of authentic leadership, leadership guru Warren Bennis acknowledged that “leadership is a performance art.” His point was that leaders are best when they act naturally in that role, but the reality of any performance is that people can never be fully themselves.29
Furthermore, while being yourself is authentic, it may convey the image of being inflexible and insensitive.30 This problem was apparent to a management professor and consultant when recently working with a client. The executive’s staff followed a work process that was comfortable to the executive but not many of her employees. When asked to consider adopting a process that was easier for her staff, the executive replied: “Look. This is just how I work.” The executive was authentic, but the inflexibility undermined employee performance and morale.31
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authentic leadership
The view that effective leaders need to be aware of, feel comfortable with, and act consistentiy with their values, personality, and self-concept.
and behavior in several ways. First, they develop their own style and, where appropriate, place themselves into positions where that style is most effective. Although effective leaders adapt their behavior to the situation to some extent, they invariably understand and rely on decision methods and interpersonal styles that feel most comfortable to them.
Second, effective leaders continually think about and consistently apply their stable hierarchy of personal values to those decisions and behaviors. Leaders face many pressures and temptations, such as achieving short-term stock price targets at the cost of long-term profitability. Experts note that authentic leaders demonstrate self-discipline by remaining anchored to their values. Third, leaders maintain consistency around their self-concept by having a strong, positive core self-evaluation. They have high self-esteem and self-efficacy, as well as an internal locus of control (Chapter 2).
COMPETENCY PERSPECTIVE LIMITATIONS AND PRACTICAL IMPLICATIONS
Although the competency perspective is gaining popularity (again), it has a few limitations.32 First, it assumes that all effective leaders have the same personal characteristics that are equally important in all situations. This is probably a false assumption; leadership is far too complex to have a universal list of traits that apply to every condition. Some
with counterproductive norms, whereas leaders who prefer a supportive style should be sent to departments in which employees face work pressures and other stressors.
LEADERSHIP SUBSTITUTES
So far, we have looked at theories that recommend using different leadership styles in various situations. But one theory, called leadership substitutes, identifies conditions that either limit the leader’s ability to influence subordinates or make a particular leadership style unnecessary. Prior literature identifies several conditions that possibly substitute for task-oriented or people-oriented leadership. Task-oriented leadership might be less important when performance-based reward systems keep employees directed toward organizational goals. Similarly, increasing employee skill and experience might reduce the need for task-oriented leadership. This proposition is consistent with path-goal leadership theory, which states that directive leadership is unnecessary—and may be detrimental—when employees are skilled or experienced.59
Some research suggests that effective leaders help team members learn to lead themselves through leadership substitutes; in other words, coworkers substitute for leadership in high-involvement team structures.60 Coworkers instruct new employees, thereby providing directive leadership. They also provide social support, which reduces stress among fellow employees. Teams with norms that support organizational goals may substitute for achievement-oriented leadership, because employees encourage (or pressure) coworkers to stretch their performance levels.61 Self-leadership—the process of influencing oneself to establish the self-direction and self-motivation needed to perform a task (see Chapter 6)—might be a substitute for task-oriented and achievement-oriented leadership.62
The leadership substitutes model has intuitive appeal, but the evidence so far is mixed. Some studies show that a few substitutes do replace the need for task- or people-oriented leadership, but others do not. The difficulties of statistically testing for leadership substitutes may account for some problems, but a few writers contend that the limited support is evidence that leadership plays a critical role regardless of the situation.63 At this point, we can conclude that leadership substitutes might reduce the need for leaders, but they do not completely replace leaders in these situations.
Transformational Perspective of Leadership
Transformational leadership is by far the most popular perspective of leadership today. Unlike the contingency and behavioral perspectives, which examine how leaders improve employee performance and well-being, the transformational leadership perspective views effective leaders as agents of change in the work unit or organization. They create, communicate, and model a shared vision for the team or organization, and they inspire followers to strive to achieve that vision.64
Transformational Versus Transactional Leadership
Leadership experts often contrast transformational leadership with transactional leadership.65
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Transactional leaders influence others mainly by using rewards and penalties, as well as by negotiating services from employees. James McGregor Burns, who coined the term four decades ago, describes transactional leadership with reference to political leaders who engage in vote buying or make transactional promises (e.g., “I’ll have a new hospital built if you vote for me”).66 Managers in organizations are rarely elected, yet transactional leadership has become the focus of study in organizational behavior. The problem is compounded by a confusing and sometimes conflicting array of definitions and measures for transactional
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leadership. For example, Burns acknowledges that transactional leaders can appeal to follower wants and convictions about morality and justice, which is similar to transformational leadership.67
For these reasons, we will avoid the “transactional leadership” concept. Instead, our main focus will be only on transformational leadership. Furthermore, we believe a more appropriate comparison to transformational leadership is managerial leadership or managing. Transformational leaders are change agents who energize and direct employees to a new vision and corresponding behaviors. Managerial leaders instead help employees become more proficient and satisfied in the current situation.68 The contingency and behavioral leadership theories described earlier refer to managerial leadership, because they focus on leader behaviors that improve employee performance and well-being rather than on behaviors that move the organization and work unit to a new direction. As leadership expert Warren Bennis noted several years ago, “Managers are people who do things right, and leaders are people who do the right thing.”69
Organizations require both managerial and transformational leadership.70 Managing improves organizational efficiency, whereas transformational leadership steers companies onto a better course of action. Transformational leadership is particularly important in organizations that require significant alignment with the external environment. Unfortunately, too many leaders get trapped in the daily activities that represent managerial leadership.71 They lose touch with the transformational aspect of effective leadership. Without transformational leaders, organizations stagnate and eventually become seriously misaligned with their environments.
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TRANSFORMATIONAL VERSUS CHARISMATIC LEADERSHIP
Another topic that has generated some confusion and controversy is the distinction between transformational and charismatic leadership. Many researchers either use the words interchangeably, as if they have the same meaning, or view charismatic leadership as an essential ingredient of transformational leadership. Others take this notion further by suggesting that charismatic leadership is the highest degree of transformational leadership.72
However, the emerging view, which this book adopts, comes from a third group of experts who contend that charisma is distinct from transformational leadership. These scholars point out that charisma is a personal trait or relational quality that provides referent power over followers, whereas transformational leadership is a set of behaviors that engage followers toward a better future.73 This view is most consistent with the original and ongoing scholarly definition of charisma as an inherent characteristic of one’s character, not something that can be easily learned or mimicked.74 Transformational leadership motivates followers through behaviors that persuade and earn trust, whereas charismatic leadership motivates followers directly through existing referent power. For instance, communicating an inspiration vision is a transformational leadership behavior that motivates followers to strive for that vision. This motivational effect exists separate from the leader’s degree of charisma. If the leader is highly charismatic, however, his or her charisma will amplify follower motivation.
leadership substitutes
A theory identifying contingencies that either limit a leader’s ability to influence subordinates or make a particular leadership style unnecessary.
transformational leadership
A leadership perspective that explains how leaders change teams or organizations by creating, communicating, and modeling a vision for the organization or work unit and inspiring employees to strive for that vision.
transactional leadership
The view that leaders influence employees mainly by using rewards and penalties, as well as through negotiation.
managerial leadership
A leadership perspective stating that effective leaders help employees improve their performance and well-being in the current situation.
Being charismatic is not inherently good or bad, but several writers have warned that it can have negative consequences in leadership.75 One concern is that leaders who possess the gift of charisma may become intoxicated by this power, which leads to a greater focus on self-interest than on the common good. “Charisma becomes the undoing of leaders,” warns Peter Drucker. “It makes them inflexible, convinced of their own infallibility, unable to change.”76 The late management guru witnessed the destructive effects of charismatic political leaders in Europe a century ago and foresaw that this personal or relational characteristic would create similar problems for organizations.
Another concern with charismatic leadership is that it tends to produce dependent followers. Transformational leadership has the opposite effect—it builds follower empowerment, which tends to reduce dependence on the leader. One study also found that charismatic leadership has a negative effect on follower self-efficacy, which would further increase dependence on the leader.
The main point here is that transformational leaders are not necessarily charismatic, and charismatic leaders are not necessarily transformational. Procter & Gamble CEO Alan G. Lafley is not known for being charismatic, but he has transformed the household goods company like no leader in recent memory. Similarly, IBM CEO Sam Palmisano has guided IBM’s success without much inherent charisma. “I don’t have much curb appeal,” Palmisano admits. “I just try to lead them and get them to come together around a common point of view.”77 In other words, Palmisano and Lafley lead by applying transformational leadership behaviors.
ELEMENTS OF TRANSFORMATIONAL LEADERSHIP
There are several descriptions of transformational leadership, but most include the following four elements: Create a strategic vision, communicate the vision, model the vision, and build commitment toward the vision (see Exhibit 12.6).
Develop a Strategic Vision A core element of transformational leadership is strategic vision—a realistic and attractive future that bonds employees together and focuses their energy toward a superordinate organizational goal.78 Indeed, experts describe vision as the commodity or substance of transformational leadership. Strategic vision represents a “higher purpose” or superordinate goal that energizes and unifies employees and adds meaning to each person’s self-concept.79 It is typically described in a way that departs
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from the current situation and is both appealing and achievable. A strategic vision might originate with the leader, but it is just as likely to emerge from employees, clients, suppliers, or other stakeholders. When embraced by employees, a strategic vision plays an important role in organizational effectiveness.80 It offers the same motivational benefits as goal setting (see Chapter 5), but it also serves as a source of a common bond that builds employee commitment to this collective purpose.
Edward Stack had plenty of doubters when he recommended rapid expansion of his father’s two-store sporting goods business in upstate New York. His vision was to become the nation’s leading retail sports store. “You’ll have a lot of people who won’t really share your vision and will tell you all of the reasons why it won’t work,” Stack advises. But he points out that a vision is critical to the company’s success. “If you don’t have a solid vision, you probably aren’t going to be able to grow profitably.” Today, Stack’s company employs nearly 26,000 people in more than 500 Dick’s Sporting Goods and Golf Galaxy stores through the United States.8′
Communicate the Vision If vision is the substance of transformational leadership, communicating that vision is the process. CEOs say that the most important leadership quality is being able to build and share their vision for the organization. “Part of a leader’s role is to set the vision for the company and to communicate that vision to staff to get their buy-in,” explains Dave Anderson, president of WorkSafeBC (the Workers’ Compensation Board of British Columbia, Canada).82
Transformational leaders communicate meaning and elevate the importance of the visionary goal to employees. They frame messages around a grand purpose with emotional appeal that captivates employees and other corporate stakeholders. Framing generates positive emotions and motivation and establishes a common mental model so that the group or organization will act collectively toward the desirable goal.83 Transformational leaders bring their visions to life through symbols, metaphors, stories, and other vehicles that transcend plain language. Metaphors borrow images of other experiences, thereby creating richer meaning of the vision that has not yet been experienced.
Model the Vision Transformational leaders not only talk about a vision; they enact it. They “walk the talk” by stepping outside the executive suite and doing things that symbolize the vision.84 “We hold our leaders to an even higher standard than our employees,” says Nathan Bigler, human resource director at Eastern Idaho Regional Medical Center. “Leaders have to consistently walk the talk.”85
Leaders walk the talk through significant events such as visiting customers, moving their offices closer to (or further from) employees, and holding ceremonies to destroy outdated policy manuals. However, they also alter mundane activities—meeting agendas, dress codes, executive schedules—so that the activities are more consistent with the vision and its underlying values. Modeling the vision is important because it legitimizes and demonstrates what the vision looks like in practice. Modeling is also important because it builds employee trust in the leader. The greater the consistency between the leader’s words and actions, the more employees will believe in and be willing to follow the leader. In fact, one survey reported that leading by example is the most important characteristic of a leader.86 “As an executive, you’re always being watched by employees, and everything you say gets magnified—so you teach a lot by how you conduct yourself,” advises Carl Bass, CEO of the California software company Autodesk.87
Build Commitment Toward the Vision Transforming a vision into reality requires employee commitment, and transformational leaders build this commitment in several ways. Their words, symbols, and stories build a contagious enthusiasm that energizes people to adopt the vision as their own. Leaders demonstrate a “can-do” attitude by enacting their vision and staying on course. Their persistence and consistency reflect an image of honesty, trust, and integrity. Finally, leaders build commitment by involving employees in the process of shaping the organization’s vision.
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Evaluating the Transformational Leadership Perspective
Transformational leaders do make a difference.88 Subordinates are more satisfied and have higher affective organizational commitment under transformational leaders. They also perform their jobs better, engage in more organizational citizenship behaviors, and make better or more creative decisions. One study of bank branches reported that organizational commitment and financial performance seem to increase in branches whose manager had completed a transformational leadership training program.89
Transformational leadership is currently the most popular leadership perspective, but it faces a number of challenges. One problem is that some writers engage in circular logic 90 They define and measure transformational leadership by how well the leader inspires and engages employees rather than by whether the leader engages in behaviors we call transformational (e.g., communicating a vision). This approach makes it impossible to evaluate transformational leadership, because by definition and measurement, all transformational leaders are effective!
Another concern is that transformational leadership is usually described as a universal rather than contingency-oriented model. Only very recently have writers begun to explore the idea that transformational leadership is more valuable in some situations than others.91 For instance, transformational leadership is probably more appropriate when organizations need to adapt than when environmental conditions are stable. Preliminary evidence suggests that the transformational leadership perspective is relevant across cultures. However, there may be specific elements of transformational leadership, such as the way visions are formed and communicated, that are more appropriate in North America than other cultures.
Implicit Leadership Perspective
The competency, behavior, contingency, and transformational leadership perspectives make the basic assumption that leaders “make a difference.” Certainly, there is evidence that senior executives influence organizational performance. However, leadership also involves followers’ perceptions about the characteristics and influence of people they call leaders. This perceptual perspective of leadership, called implicit leadership theory, has two components: leader prototypes and the romance or attribution of leadership.92
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PROTOTYPES OF EFFECTIVE LEADERS
One aspect of implicit leadership theory states that everyone has leadership prototypes— preconceived beliefs about the features and behaviors of effective leaders.93 These prototypes, which develop through socialization within the family and society, shape the follower’s expectations and acceptance of others as leaders, and this in turn affects their willingness to remain as a follower. For example, one study reported that inherited personality characteristics significantly influence the perception that someone is a leader in a lead-erless situation.94
Leadership prototypes not only support a person’s role as leader; they also form or influence our perception of the leader’s effectiveness. In other words, people are more likely to believe a leader is effective when he or she looks like and acts consistently with their prototype of a leader.95 This prototype comparison process occurs because people have an inherent need to quickly evaluate individuals as leaders, yet leadership effectiveness is often ambiguous and might not be apparent for a long time.
THE ROMANCE OF LEADERSHIP
Along with relying on implicit prototypes of effective leaders, followers tend to distort their perception of the influence that leaders have on the environment. This “romance of
As the CEO of a successful company (Semco SA) and the author of best-selling business books, Ricardo Semler is a giant among corporate leaders in South America. Yet he warns that “romance of leadership” problems can occur when employees are blinded by charismatic leadership. “People will naturally create and nurture a charismatic figure. The charismatic figure, on the other hand, feeds this,” Semler explains. “The people at Semco don’t look and act like me. They are not yes-men by any means— [Yet] they credit me with successes that are not my own, and they don’t debit me my mistakes.”36
leadership” effect exists because in most cultures people want to believe that leaders make a difference. There are two basic reasons people inflate their perceptions of the leaders influence over the environment.97
First, leadership is a useful way for us to simplify life events. It is easier to explain organizational successes and failures in terms of the leader’s ability than by analyzing a complex array of other forces. Second, there is a strong tendency in the United States and other Western cultures to believe that life events are generated more from people than from uncontrollable natural forces.98 This illusion of control is satisfied by believing that events result from the rational actions of leaders. In other words, employees feel better believing that leaders make a difference, so they actively look for evidence that this is so.
One way that followers support their perceptions that leaders make a difference is through fundamental attribution error (see Chapter 3). Research has found that (at least in Western cultures) leaders are given credit or blame for the company’s success or failure because employees do not readily see the external forces that also influence these events. Leaders reinforce this belief by taking credit for organizational successes.99
The implicit leadership perspective provides valuable advice to improve leadership acceptance. It highlights that leadership depends on the perception of followers as much as the actual behaviors and formal roles of people calling themselves leaders. Potential leaders must be sensitive to this fact, understand what followers expect, and act accordingly. Individuals who do not make an effort to fit leadership prototypes will have more difficulty bringing about necessary organizational change.
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Cross-Cultural and Gender Issues in Leadership
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implicit leadership theory
A theory stating that people evaluate a leader’s effectiveness in terms of how well that person fits preconceived beliefs about the features and behaviors of effective leaders (leadership prototypes) and that people tend to inflate the influence of leaders on organizational events.
Along with the five perspectives of leadership presented throughout this chapter, cultural values and practices affect what leaders do. Culture shapes the leader’s values and norms, which influence his or her decisions and actions. Cultural values also shape the expectations that followers have of their leaders. An executive who acts inconsistently with cultural expectations is more likely to be perceived as an ineffective leader. Furthermore, leaders who deviate from those values may experience various forms of influence to get them to conform to the leadership norms and expectations of the society. In other words, implicit leadership theory, described in the previous section of this chapter, explains differences in leadership practices across cultures.
Over the past decade, 150 researchers from dozens of countries have worked together on Project GLOBE (Global Leadership and Organizational Behavior Effectiveness) to identify the effects of cultural values on leadership.100 The project organized countries into 10 regional clusters, of which the United States, Canada, Great Britain, and similar countries are grouped into the “Anglo” cluster. The results of this massive investigation suggest that some features of leadership are universal and some differ across cultures. Specifically, the GLOBE project reports that “charismatic visionary” is
Merritts Bakery has come a long way since its humble beginnings as a small cake shop in Tulsa, Oklahoma. Along the way, owners Larry and Bobbie Merritt discovered that successful business growth depends to some extent on creating an organizational structure that supports the business strategy and process. Organizational structure refers to the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities. It formally dictates what activities receive the most attention, as well as financial, power, and information resources. For example, Merritt s Bakery grew into a functional structure and developed various coordinating mechanisms to ensure that everyone works in concert toward the organizations objectives.
Although the topic of organizational structure typically conjures up images of an organizational chart, this diagram is only part of the puzzle. Organizational structure includes these reporting relationships, but it also relates to job design, information flow, work standards and rules, team dynamics, and power relationships. As such, the organizations structure is an important instrument in an executives toolkit for organizational change, because it establishes new communication patterns and aligns employee behavior with the corporate vision.2
For example, Merritts Bakery reorganized reporting relationships and communication patterns when it moved bakery staff to a central production facility. With this organizational structure change, the company was able to specialize production jobs—for example, employees are now trained through different levels of decorating expertise. It was also able to increase efficiency through more standardized work and to improve supervisory control because bakery employees have common skill sets.
This chapter begins by introducing the two fundamental processes in organizational structure: division of labor and coordination. This is followed by a detailed investigation of the four main elements of organizational structure: span of control, centralization, formalization, and departmentalization. The latter part of this chapter examines the contingencies of organizational design, including external environment, organizational size, technology, and strategy.
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Division of Labor and Coordination
All organizational structures include two fundamental requirements: the division of labor into distinct tasks and the coordination of that labor so that employees are able to accomplish common goals.3 Organizations are groups of people who work interdependently toward some purpose. To efficiently accomplish their goals, these groups typically divide the work into manageable chunks, particularly when there are many different tasks to perform. They also introduce various coordinating mechanisms to ensure that everyone is working effectively toward the same objectives.
DIVISION OF LABOR
Division of labor refers to the subdivision of work into separate jobs assigned to different people. Subdivided work leads to job specialization, because each job now includes a narrow subset of the tasks necessary to complete the product or service. Merritts Bakery organizes employees into a dozen or so specific jobs to effectively serve customers, bake cakes and pastries, and manage the restaurants. As companies get larger, horizontal division of labor is usually accompanied by a vertical division of labor: Some people are assigned the task of supervising employees, others are responsible for managing those supervisors, and so on.
Why do companies divide the work required to operate a bakery into several jobs? As we described earlier in this book, job specialization increases work efficiency.4 Job incumbents can master their tasks quickly because work cycles are shorter. Less time is wasted changing from one task to another. Training costs are reduced because employees require fewer physical and mental skills to accomplish the assigned work. Finally, job
EXHIBIT 13.1 Coordinating Mechanisms in Organizations Informal communication Sharing information on mutual tasks; forming common • Direct communication mental models to synchronize work activities • Liaison roles • Integrator roles • Temporary teams Formal hierarchy Assigning legitimate power to individuals, who then use • Direct supervision this power to direct work processes and allocate • Formal communication channels resources Standardization Creating routine patterns of behavior or output • Standardized skills • Standardized processes • Standardized output FORM OF COORDINATION DESCRIPTION SUBTYPES/STRATEGIES Sources: Based on information in J. Galbraith, Designing Complex Organizations (Reading, MA: Addison-Wesley, 1973), pp. 8-19; H. Mintzberg , The Struc turing of Organizations (Englewood Cliffs, NJ: Prentice Hall, 1979), Ch. 1; D.A. Nadler and M.L. Tushman , Competing by Design: The Power of Organizational Architecture (New York: Oxford University Press, 1997), Ch. 6.specialization makes it easier to match people with specific aptitudes or skills to the jobs for which they are best suited. Although one person working alone might be able to prepare, serve, and market food products at each Merritts Bakery outlet, doing so would take much longer than having some people prepare the food, others serve it to customers, and still others take care of marketing, purchasing, accounting, and other functions. Some employees are talented at serving customers, whereas others are better at decorating wedding cakes.
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COORDINATING WORK ACTIVITIES
When people divide work among themselves, they require coordinating mechanisms to ensure that everyone works in concert. Coordination is so closely connected to division of labor that the optimal level of specialization is limited by the feasibility of coordinating the work. In other words, an organizations ability to divide work among people depends on how well those people can coordinate with one another. Otherwise, individual effort is wasted due to misalignment, duplication, and mistiming of tasks. Coordination also tends to become more expensive and difficult as the division of labor increases. Therefore, companies specialize jobs only to the point where it is not too costly or challenging to coordinate the people in those jobs.5
Every organization—from the two-person corner convenience store to the largest corporate entity—uses one or more of the following coordinating mechanisms:6 informal communication, formal hierarchy, and standardization (see Exhibit 13.1). These forms of coordination align the work of staff within the same department as well as across work units. These coordinating mechanisms are also critical when several organizations work together, such as in joint ventures and humanitarian aid programs.7
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organizational structure
The division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities.
Coordination Through Informal Communication All organizations rely on informal communication as a coordinating mechanism. This process includes sharing information on mutual tasks as well as forming common mental models so that employees synchronize work activities using the same mental road map.8 Informal communication is vital in nonroutine and ambiguous situations because employees need to exchange a large volume of information through face-to-face communication and other media-rich channels.
Coordination through informal communication is easiest in small firms, though information technologies have further leveraged this coordinating mechanism in large
37% 44% of 434 human resource managers saici younger employees complain that older managers miciomanage them.organizations.9 Companies employing thousands of people also support informal communication by keeping each production site small. Magna International, the global auto parts manufacturer, keeps its plants to a maximum size of around 200 employees. Magna’s leaders believe that employees have difficulty remembering one another’s names in plants that are any larger, a situation that makes informal communication more difficult as a coordinating mechanism.10
Larger organizations also encourage coordination through informal communication by assigning liaison roles to employees, who are expected to communicate and share information with coworkers in other work units. Where coordination is required among several work units, companies create integrator roles. These people are responsible for coordinating a work process by encouraging employees in each work unit to share information and informally coordinate work activities. Integrators do not have authority over the people involved in that process, so they must rely on persuasion and commitment. Brand managers at Procter & Gamble have integrator roles because they coordinate work among marketing, production, and design groups.”
Another way that larger organizations encourage coordination through informal communication is by organizing employees from several departments into temporary teams. Concurrent engineering applies this coordinating strategy for the development of products or services. Concurrent engineering typically consists of a cross-functional project team of people from various functional departments, such as design engineering, manufacturing, marketing, and purchasing. By being assigned to a team, rather than working within their usual specialized departments, these employees have more authority and opportunity to coordinate using informal communication. When the design engineer begins to form the product specifications, representatives from manufacturing, engineering, marketing, purchasing, and other departments can offer feedback as well as begin their contribution to the process. By coordinating through information-rich informal communication, concurrent engineering teams tend to produce higher-quality products with dramatically less development time compared with situations in which employees work in their own departments and coordinate through other means.12
Coordination Through Formal Hierarchy Informal communication is the most flexible form of coordination, but it can become chaotic as the number of employees increases.
Coordination Through
Mismanagement14
25%
yees saici they
9%
of 11.045 American employees polled identified micromanagement as the most significant barrier to their productivity.
of 524 American employees polled said tliey occasionally or frequently feel micromanaged by their boss.Consequently, as organizations grow, they rely increasingly on a second coordinating mechanism: formal hierarchy.13 Hierarchy assigns legitimate power to individuals, who then use this power to direct work processes and allocate resources. In other words, work is coordinated through direct supervision— the chain of command. For instance, each Merritt’s Bakery oudet has a manager and likely an assistant manager who is responsible for ensuring that employees perform their respective tasks as well as coordinate effectively with other staff on each work shift.
35%
of 434 human resource managers said older managers complarn that younger employees lack respect for tire organizational hierarchy.
A century ago, management scholars applauded the formal hierarchy as the best coordinating mechanism for large organizations. They argued that organizations are most effective when managers exercise their authority and employees receive orders from only one supervisor. The chain of command—in which information flows across work units only through supervisors and managers—was viewed as the backbone of organizational strength.
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Chapter Thirteen Designing Organizational Structures
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Part Four Organizational Processes
Although still important, formal hierarchy is much less popular today. One concern is that it is not as agile for coordination in complex and novel situations. Communicating through the chain of command is rarely as fast or accurate as direct communication between employees. For instance, product development—typically a complex and novel activity-tends to occur more quickly and produce higher-quality results when people coordinate mainly through informal communication rather than formal hierarchy. Another concern with formal hierarchy is that managers are able to closely supervise only a limited number of employees. As the business grows, the number of supervisors and layers of management must increase, resulting in a costly bureaucracy. Finally, todays workforce demands more autonomy over work and more involvement in company decisions. Formal hierarchy coordination processes tend to conflict with employee autonomy and involvement.
Coordination Through Standardization Standardization, the third means of coordination, involves creating routine patterns of behavior or output. This coordinating mechanism takes three distinct forms:
- Standardized processes. Quality and consistency of a product or service can often be improved by standardizing work activities through job descriptions and procedures.15 Merritts Bakery uses flowcharts that standardize work processes for many of its work activities. This coordinating mechanism is feasible when the work is routine (such as mass production) or simple (such as making cupcakes), but it is less effective in nonroutine and complex work such as product design.
- Standardized outputs. This form of standardization involves ensuring that individuals and work units have clearly defined goals and output measures (e.g., customer satisfaction, production efficiency). For instance, to coordinate the work of salespeople, companies assign sales targets rather than specific behaviors.
- Standardized skills. When work activities are too complex to standardize through processes or goals, companies often coordinate work effort by extensively training employees or hiring people who have learned precise role behaviors from educational programs. Merritts Bakery relies on this coordinating mechanism to some extent. It trains production staff so cakes and pastries are produced to a high quality. It also trains store staff so customer interactions are consistent and professional. Training is particularly critical as a coordinating mechanism in hospital operating rooms. Surgeons, nurses, and other operating room professionals coordinate their work more through training than through goals or company rules.
Division of labor and coordination of work represent the two fundamental ingredients of all organizations. But how work is divided, which coordinating mechanisms are emphasized, who makes decisions, and other issues are related to the four elements of organizational structure.
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