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ORGANIZATION STRUCTURE

This chapter introduces basic concepts of organization structure and shows how to design
structure as it appears on the organization chart.

The following three key components define organization structure:

1. Organization structure designates formal reporting relationships including the

number of levels in the hierarchy and the span of control of managers and
supervisors.
2. Organization structure identifies the grouping together of individuals into
departments and of the departments into the total organization.
3. Organization structure includes the design of systems to ensure effective
communication, coordination, and integration of efforts across departments.

These three elements of structure pertain to both vertical and horizontal aspects of
organizing. For example, the first two elements are the structural framework, which is the
vertical hierarchy. The third element pertains to the pattern of interactions among
organizational employees. An ideal structure encourages employees to provide horizontal
information and coordination where and when it is needed.

Organization structure is reflected in the organization chart. It isn’t possible to see the
internal structure of an organization the way we might see its manufacturing tools, offices,
website or products. Although we might see employees going about their duties,
performing different tasks, and working in different locations, the only way to actually see
the structure underlying all this activity is through the organization chart. The organization
chart is the visual representation of a whole set of underlying activities and processes in an
organization. An organization chart can be very useful in understanding how a company
works. It shows the various parts of an organization, how they are interrelated, and how
each position and department fits into the whole.

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The concept of an organization chart, showing what positions exist, how they are grouped,
and who reports to whom, has been around for centuries. For example, diagrams outlining
church hierarchy can be found in medieval churches in Spain. However, the use of the
organization chart for business stems largely from the Industrial Revolution. As work grew
more complex and was performed by greater numbers of workers, there was a pressing
need to develop ways of managing and controlling organizations.

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ACCOUNTANT ANALYST SUPERINTENDENT SUPERINTENDENT SPECIALIST ADMINISTRATOR

A simple organization chart

The type of organization structure that gradually grew out of these efforts in the late
nineteenth and early twentieth centuries was one in which the CEO was placed at the top,
and there was a clear hierarchy of authority extending to everyone else arranged in layers
down below. The thinking and decision making are done by those at the top, and the
physical work is performed by employees who are organized into distinct, functional
departments. This structure was quite effective and became entrenched in business,
nonprofit, military organizations for most of the twentieth century. However, this type of
vertical structure is not always effective, particularly in rapid changing environments. Over
the years, organizations have developed other structural designs, many of them aimed at
increasing horizontal coordination and communication and encouraging adaptation to
external changes.

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INFORMATION SHARING PERSPECTIVE ON STRUCTURE

The organization should be designed to provide both vertical and horizontal information
flow as necessary to accomplish the organization’s overall goals. If the structure doesn’t fit
the information requirements of the organization, people either will have too little
information or will spend time processing information that is not vital to their tasks, thus
reducing effectiveness. Whereas vertical linkages are designed primarily for control,
horizontal linkages are designed for coordination and collaboration, which usually means
reducing control.

Organizations can choose whether to orient toward a traditional organization designed for
efficiency, which emphasizes vertical communication and control (a mechanistic design) or
toward a contemporary flexible learning organization which emphasizes horizontal
communication and coordination (an organic design).an emphasis on efficiency and control
is associated with specialized tasks, a hierarchy of authority, rules and regulations, formal
reporting systems, few teams or task forces, and centralized decision making, which means
problems and decisions are funneled to top levels of the hierarchy for resolution. Emphasis
on learning and adaptation is associated with shared tasks, a relaxed hierarchy, few rules,
face-to-face communication, many teams and task forces, and informal decentralized
decision making. Decentralized decision making means decision-making authority is
pushed down to lower organization levels.

Organizations may have to experiment to find the correct degree of centralization or

decentralization to meet their needs. A study by William Ouchi found that three large
school districts that shifted to a more flexible, decentralized structure, giving school
principals more autonomy, responsibility and control over resources, performed better and
more efficiently than large districts that were highly centralized. On the other hand, large
decentralized companies sometimes need to build in more centralized communication and
control systems to keep these huge, global corporations functioning efficiently.

DEPARTMENTAL GROUPING OPTIONS

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1. Functional grouping

This places together employees who perform similar functions or work processes or who
bring similar knowledge and skills. For example, all marketing people work together under
the same supervisor, as do all manufacturing employees, all human resources people, and
all engineers.

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2. Divisional grouping

This means people are organized according to what the organization produces. All the
people required to produce toothpaste- including personnel in marketing, manufacturing,
and sales- are grouped together under one executive.

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PRODUCT DIVISION 1 PRODUCT DIVISION 2 PRODUCT DIVISION 3

3. Multi-focused grouping

This means an organization embraces two or more structural grouping alternatives

simultaneously. These structural forms are often called matrix or hybrid. An organization

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may need to group by function and product division simultaneously or might need to
combine characteristics of several structural options.

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PRODUCT DIVISION 1

PRODUCT DIVISION 2

4. Horizontal grouping

This means employees are organized around core work processes, the end-to-end work,
information, and material flows that provide value directly to customers. All the people
who work on a core process are brought together in a group rather than being separated
into functional departments.

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CORE PROCESS
1
CORE PROCESS
2

5. Virtual network grouping

This is the most recent approach to departmental grouping. With this grouping, the
organization is a loosely connected cluster of separate components. In essence,
departments are separate organizations that are electronically connected for the sharing of
information and completion of tasks. Departments can be spread all over the world rather
than located together in one geographic location.

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FUNCTIONAL, DIVISIONAL AND GEOGRAPHIC DESIGNS

FUNCTIONAL STRUCTURE

In a functional structure, activities are grouped together by common function from the
bottom to the top of the organization. All engineers are located in the engineering
department, and the vice president of engineering is responsible for all engineering
activities. The same goes for marketing, R & D, manufacturing etc. with a functional
structure, all human knowledge and skills with respect to specific activities are
consolidated, providing a valuable depth of knowledge for the organization. The structure
is most effective when in-depth expertise is critical to meeting organizational goals, when

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the organization needs to be controlled and coordinated through the vertical hierarchy,
and when efficiency is important.

Strengths

1. Allows economies of scale within functional departments

2. Enables in-depth knowledge and skill development
3. Enables organization to accomplish functional goals
4. Is best with only one or a few products

Weaknesses

1. Slow response time to environmental changes

2. May cause decisions to pile on top thus hierarchy overload
3. Leads to poor horizontal coordination among departments
4. Results in less innovation
5. Involves restricted view of organizational goals

DIVISIONAL STRUCTURE

Separate divisions can be organized with responsibility for individual products, services,
product groups, major projects or programs, divisions, businesses or profit centres. This
structure is sometimes called a product structure or strategic business unit structure. The
distinctive feature of a divisional structure is that grouping is based on organizational
outputs. The functional structure can be redesigned into separate product groups, and each
group contains functional departments of R&D, manufacturing, accounting, and marketing.
Coordination is maximized across functional departments within each product group.

Strengths

1. Suited to fast change in unstable environment

2. Leads to customer satisfaction because product responsibility and contact points
are clear

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3. Involves high coordination across functions

4. Allows units to adapt to differences in products, regions, and customers
5. Best in large organizations with several products
6. Decentralizes decision making

Weaknesses

1. Eliminates economies of scale in functional departments

2. Leads to poor coordination across product lines
3. Eliminates in-depth competence and technical specialization
4. Makes integration and standardization across product lines difficult

MATRIX STRUCTURE

This structure integrates and blends the horizontal and vertical structures available to
organizations. Managers have equal authority within the organization and employees
report to all managers. The matrix structure is similar to the use of full-time integrators or
product managers except that in the matrix structure, the product managers (horizontal)
are given formal authority equal to that of the functional managers (vertical).

Conditions for matrix structure

1. Pressure exists to share resources across product lines

2. Environmental pressure exists for two or more critical outputs, such as for in-depth
technical knowledge (functional structure) and frequent new products (divisional
structure).
3. The environmental domain of the organization is both complex and uncertain

Strengths

1. Achieves coordination necessary to meet dual demands from customers

2. Flexible sharing of human resources across products

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3. Suited to complex decisions and frequent changes in unstable environment

4. Provides opportunity for both functional and product skill development
5. Best in medium-sized organizations with multiple products

Weaknesses

1. Causes participants to experience dual authority, which can be frustrating and

confusing
2. Means participants need good interpersonal skills and extensive training
3. Is time consuming, involves frequent meetings and conflict resolution sessions
4. Will not work unless participants understand it and adopt collegial rather than
vertical type relationships
5. Requires great effort to maintain power balance

HORIZONTAL STRUCTURE

This organizes employees around core processes. Organizations mainly shift towards a
horizontal structure during the process of re-engineering. This basically means the
redesign of a vertical organization along its horizontal workflows and processes. A process
refers to an organized group of related tasks and activities that work together to transform
inputs into outputs that create value for customers. Numerous organizations have
experimented with horizontal mechanisms such as cross-functional teams to achieve
coordination across departments or task forces to accomplish temporary projects.
Increasingly, organizations are shifting away from hierarchal, function-based structures to
structures based on horizontal processes.

Characteristics

1. Structure is created around cross-functional core processes rather than tasks,

functions, or geography.
2. Self-directed teams, not individuals are the basis of organizational design and
performance
3. Process owners have responsibility for each core process in its entirety

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4. People on the team are given the skills, tools, motivation, and authority to make
decisions central to the team’s performance
5. Teams have the freedom to think creatively and respond flexibly to new challenges
that arise
6. Customers drive horizontal cooperation
7. The culture is one of openness, trust, and collaboration, focused on continuous
improvement

Strengths

1. Promotes flexibility and rapid response to changes in customer needs

2. Directs the attention of everyone toward the production and delivery of value to the
customer
3. Each employee has a broader view of organizational goals
4. Promotes a focus on teamwork and collaboration
5. Improves quality of life for employees by offering them the opportunity to share
responsibility, make decisions, and be accountable for outcomes

Weaknesses

1. Determining core processes is difficult and time consuming

2. Requires changes in culture, job design, management philosophy, and information
and reward systems
3. Traditional managers may balk when they have to give up power and authority
4. Requires significant training of employees to work effectively in a horizontal team
environment
5. Can limit in-depth skill development

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DIMENSIONS OF ORGANIZATION DESIGN

Organizations shape our lives, and well-informed managers can shape organizations. The
first step for understanding organizations is to look at the features that describe specific
organizational design traits. These features describe organizations in much the same way
that personality and physical traits describe people. There are two types of interacting
features of organizations namely structural dimensions and contingency factors. Structural
dimensions provide labels to describe the internal characteristics of an organization. They
create a basis for measuring and comparing organizations. Contingency factors encompass
larger elements that influence structural dimensions, including the organization’s size,
technology, environment, culture, and goals. Contingency factors describe the
organizational setting that influences and shapes the structural dimensions. Contingency
factors can be confusing because they represent both the organization and the
environment. To understand and evaluate organizations, one must examine both structural
dimensions and contingency factors. These features of organization design interact with
one another and can be adjusted to accomplish the purposes of organization’s existence.

Contingency Factors

Goals and
strategy

Environment Size

Structural dimensions

-formalization
Technology
Culture -specialization

-hierarchy of authority

-centralization

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STRUCTURAL DIMENSIONS

1. Formalization

This pertains to the amount of written documentation in the organization. Documentation

includes procedures, job descriptions, regulations, and policy manuals. These written
documents describe behavior and activities. Formalization is often measured by simply
counting the number of pages of documentation within the organization. Large universities
tend to be high on formalization because they have several volumes of written rules for
such things as registration, dropping and adding classes, student associations, dormitory
governance, financial assistance etc. A small family-owned business in contrast, may have
almost no written rules and would be considered informal.

2. Specialization

This is the degree to which organizational tasks are subdivided into separate jobs. If
specialization is extensive, each employee performs only a narrow range of tasks. If
specialization is low, employees perform a wide range of tasks in their jobs. Specialization
is sometimes referred to as the division of labor.

3. Hierarchy of authority

This describes who reports to whom and the span of control for each manager. The
hierarchy is depicted by vertical lines in the organization chart. The hierarchy is related to
span of control (the number of employees reporting to a supervisor). When span of control
is narrow, the hierarchy tends to be tall. When span of control is wide, the hierarchy of
authority will be shorter.

4. Centralization

This refers to the hierarchical level that has authority to make decisions. When decision
making is kept at the top level, the organization is centralized. When decisions are
delegated to lower organization levels, it is decentralized.

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CONTINGENCY FACTORS

1. Size

Size can be measured for the organization as a whole or for specific components such as
plant or division. Because organizations are social systems, size is typically measured by
the number of employees. Other measures such as total sales or total assets also reflect
magnitude, but they do not indicate the size of the human part of the system.

2. Organizational technology

This refers to the tools, techniques, and actions used to transform inputs into outputs. It
concerns how the organization actually produces the products and services it provides for
customers and includes such things as flexible manufacturing, advanced information
systems, and the internet. They differ across various industries.

3. The environment

This includes all elements outside the boundary of the organization. Key elements include
the industry, government, customers, suppliers, and the financial community. The
environmental elements that affect an organization the most are often other organizations.

4. The organization’s goals and strategy

These define the purpose and competitive techniques that set it apart from other
organizations. Goals are often written down as an enduring statement of the company
intent. A strategy is the plan of action that describes resource allocation and activities for
dealing with the environment and for reaching the organization’s goals. Goals and
strategies define the scope of operations and the relationship with employees, customers
and competitors.

5. Organizational culture

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This is the underlying set of key values, beliefs, understandings, and norms shared by
employees. These underlying values and norms may pertain to ethical behavior,
commitment to employees, efficiency, or customer service, and they provide the glue to
hold organization members together. An organization’s culture is unwritten but can be
observed in its stories, slogans, ceremonies, dress, and office layout.

PERFORMANCE AND EFFECTIVENESS OUTCOMES

The whole point of understanding structural dimensions and contingency factors is to

design the organization in such a way as to achieve high performance and effectiveness.
Managers adjust various aspects of the organization to most efficiently and effectively
transform inputs into outputs and provide value. Efficiency refers to the amount of
resources used to achieve the organization’s goals. It is based on the quantity of raw
materials, money, and employees necessary to produce a given level of output.
Effectiveness is a broader term meaning the degree to which an organization achieves its
goals.

To be effective, organizations need clear focused goals and appropriate strategies for
achieving them. The concept of effectiveness, including goals and strategies and various
approaches to measuring effectiveness is complex. Many organizations apply new
technology to improve efficiency and effectiveness.

Achieving effectiveness is not always a simple matter because different people want
different things from the organization. For customers, the primary concern is high quality
products and services at a reasonable price whereas employees are mostly concerned with
adequate pay, good working conditions, and job satisfaction. Managers carefully balance
the needs and interests of various stakeholders in setting goals and striving for
effectiveness. This is referred to as stakeholder approach, which integrates diverse
organizational activities by looking at various organizational stakeholders and what they
want from the organization. A stakeholder is any group within or outside of the
organization that has a stake in the organization’s performance. The satisfaction level of

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each group can be assessed as an indication of the organization’s performance and

effectiveness.

OWNERS & EMPLOYEES CUSTOMERS

STOCKHOLDERS Satisfaction High quality products
Pay Service
Financial return Value
supervision

SUPPLIERS
Satisfactory transactions
CREDITORS
Revenue from purchases ORGANIZATION
COMMUNITY Creditworthiness
Good corporate citizen Fiscal responsibility
Contribution to
community affairs
MANAGEMENT
UNION Efficiency
Worker pay Effectiveness
Benefits

GOVERNMENT
Obedience to laws and
regulations
Fair competition
Stakeholder groups and what they expect

EVOLUTION OF ORGANIZATION THEORY AND DESIGN

Organization theory is not a collection of facts; it is a way of thinking about organizations

and how people and resources are organized to collectively accomplish a specific purpose.
Organization theory is a way to see and analyze organizations more accurately and deeply
than one otherwise could. organizations have evolved over time and so have the designs.
Organizations were more mechanistic in the beginning with little delegation of decision
making and they adopted taller hierarchical structures and designs. Over time and with the

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changes in the organizational environment, organizations have shifted to the adoption of

structures and designs that are more collaborative and there is more delegation of
authority.

Scientific management focused primarily on the technical core- on work performed on the
shop floor- administrative principles looked at the design and functioning of the
organization as a whole. For example, Henri Fayol proposed 14 principles of management,
such as ‘each subordinate receives orders from only one superior’ (unity of command) and
‘similar activities in an organization should be grouped together under one manager’ (unity
of direction). These principles formed the foundation for modern management practice and
organization design.

The scientific management and administrative principles approaches were powerful and
gave organizations fundamental new ideas for establishing high productivity and
increasing prosperity. Administrative principles in particular contributed to the
development of bureaucratic organizations, which emphasized designing and managing
organizations on an impersonal, rational basis through such elements as clearly defined
authority and responsibility, formal recordkeeping, and uniform application of standard
rules. Although the term bureaucracy has taken on negative connotations in today’s
organizations, bureaucratic characteristics worked extremely well for the needs of the
Industrial Age. One problem with the classical perspective, however, is that it failed to
consider the social context and human needs.

Early work on industrial psychology and human relations received little attention because
of the prominence of scientific management. However, a major breakthrough occurred
with a series of experiments at a Chicago electric company, which came to be known as the
Hawthorne Studies. Interpretation of these studies at the time concluded that positive
treatment of employees improved their motivation and productivity. The publication of
these findings led to a revolution in worker treatment and laid the groundwork for
subsequent work examining treatment of workers, leadership, motivation, and human
resource management. These human relations and behavioral approaches added new and
important contributions to the study of management and organizations.

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However, the hierarchical system and bureaucratic approaches that developed during the
Industrial Revolution remained the primary approach to organization design and
functioning well into the 1980s. in general, this approach worked well for most
organizations until the past few decades. During the 1980s, though, it began to cause
problems. Increased competition, especially on a global scale, changed the playing field.
North American companies had to find a better way.

The 1980s produced new corporate cultures that valued lean staff, flexibility, and learning,
rapid response to the customer, engaged employees, and quality products. Organizations
began experimenting with teams, flattened hierarchies, and participative management
approaches. The new design led to improved quality, decreased costs, and enhanced
innovation, helping the plant be more competitive in a changed environment. Rather than
relying on strict rules and hierarchy, managers began looking at the entire organizational
system, including the external environment.

Since the 1980s, organizations have undergone even more profound and far-reaching
changes. Flexible approaches to organization design have become prevalent. Recent
influences on the shifting of organization design include the internet and other advances in
communications and information technology; globalization and the increasing
interconnection of organizations; the rising educational level of employees and their
growing quality-of-life expectations; and the growth of knowledge and information-based
work as primary organizational activities.

Organizational Configuration

An important insight from organization design researchers is how organizations are

configured- that is, what parts make up an organization and how do the various parts fit
together. An organization’s design or configuration will reflect contingency factors along
recognizable patterns. One framework proposed by Henry Mintzberg suggests that every
organization has five patterns. These parts include, technical core, top management, middle
management, technical support and administrative support.

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1. Technical core

The technical core includes people who do the basic work of the organization. This part
actually produces the product and service outputs of the organization. This is where the
primary transformation from inputs to outputs takes place. The technical core is the
production department in a manufacturing firm, the teachers and classes in a university
and the medical activities in a hospital.

2. Technical support

The technical support function helps the organization adapt to the environment. Technical
support employees such as engineers, researchers, and information technology
professionals scan the environment for problem, opportunities, and technological
developments. Technical support is responsible for creating innovations in the technical
core, helping the organization change and adapt.

3. Administrative support

The administrative support function is responsible for the smooth operation and upkeep of
the organization, including its physical and human elements. This includes human resource
activities such as recruiting and hiring, establishing compensation and benefits, and
employee training and development, as well maintenance activities such as cleaning of
buildings and service and repair of machines.

4. Management

Management is a distinct function, responsible for directing and coordinating other parts of
the organization. Top management provides direction, planning, strategy, goals, and
policies for the entire organization or major divisions. Middle management is responsible
for implementation and coordination at the departmental level. In traditional
organizations, middle managers are responsible for mediating between top management
and the technical core, such as implementing rules and passing information up and down
the hierarchy.

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MANAGING CONFLICT IN ORGANIZATIONS

INTERDEPARTMENTAL CONFLICT IN ORGANIZATIONS

Conflict among departments and groups in organizations, called intergroup conflict,

requires three ingredients; group identification, observable group differences, and
frustration. First, employees have to perceive themselves as part of an identifiable group or
department. Second, there has to be an observable group difference of some form. Groups
may be located on different floors of the building, members may have different social or
educational backgrounds, or members may work in different departments. The ability to
identify oneself as a part of one group and to observe differences in comparison with other
groups is necessary for conflict. The third ingredient is frustration. Frustration means that
one group achieves its goals, the other will not; it will be blocked.

Intergroup conflict will appear when one group tries to advance its position in relation to
other groups. Intergroup conflict can be defined as the behavior that occurs among
organizational groups when participants identify with one group and perceive that other
groups may block their group’s goal achievement or expectations. Conflict means that
groups clash directly, that they are in fundamental opposition. Conflict is similar to
competition but more severe. Competition is rivalry among groups in the pursuit of a
common prize, whereas conflict presumes direct interference with goal achievement.

Intergroup conflict within organizations can occur horizontally across departments or

vertically between different levels of the organization. The production department of a
manufacturing company may have a dispute with quality and control because new quality
procedures reduce production efficiency. R&D managers often conflict with finance
managers because of the finance managers’ pressure to control costs and reduce the
amount of funding for new R&D projects. Team mates may argue about the best way to
accomplish tasks and achieve goals.

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Vertical conflict may occur when employees clash with bosses about new work methods,
reward systems, or job assignments. Another typical area of conflict is between groups
such as unions and management or franchise owners and headquarters. For example,
franchise owners like McDonald’s, Taco Bell, Burger King and KFC have clashed with
headquarters because of the increase of company-owned stores in neighborhoods that
compete directly with franchisees.

Conflict can also occur between different divisions or business units within an
organization, such as between the auditing and consulting units of big firms like
PricewaterhouseCoopers. In global organizations, conflicts between regional managers and
business division manager, among different divisions, or between divisions and
headquarters are common because of the complexities of internal business. Similar
problems occur between distinct organizations. With so many companies involved in inter-
organizational collaboration, conflicts and shifting power relationships are inevitable.

SOURCES OF CONFLICT

1. Goal incompatibility

The goals of each department reflect the specific objectives members are trying to achieve.
The achievement of one department’s goals often interferes with another department’s
goals, leading to conflict. University police, for example, have a goal of providing a safe and
secure campus. They can achieve this by locking all buildings on evenings and weekends
and not distributing keys. Without easy access to buildings, however, progress toward the
science department’s research goals will proceed slowly. On the other hand, if scientists
come and go at all hours and security is ignored, police goals for security will not be met.
Goal incompatibility throws the departments into conflict with each other.

2. Differentiation

These are the differences in cognitive and emotional orientations among managers in
different functional departments. Functional specialization requires people with specific
education, skills, attitudes, and time horizons. For example, people may join a sales

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department because they have ability and aptitude consistent with sales work. After
becoming members of the sales department, they are influenced by departmental norms
and values. Departments or divisions within an organization often differ in values,
attitudes, and standards of behavior and these subcultural differences lead to conflicts.

3. Task interdependence

This refers to dependence of one unit on another for materials, resources or information.
Pooled interdependence means there is little interaction; sequential interdependence
means the output of one department goes to the next department; and reciprocal
interdependence means that departments mutually exchange materials and information.

Generally, as interdependence increases, the potential for conflict increases. In the case of
pooled interdependence, units have little need to interact. Conflict is at a minimum.
Sequential and reciprocal interdependence require employees to spend time coordinating
and sharing information. Employees must communicate frequently and differences in goals
or attitudes will surface. Greater interdependence means departments often exert pressure
for a fast response because departmental work has to wait on other departments.

4. Limited resources

Another major source of conflict involves competition between groups for what members
perceive as limited resources. Organizations have limited money, physical facilities, staff
resources, and human resources to share among departments. In their desire to achieve
goals, groups want to increase their resources. This throws them into conflict. Managers
may develop strategies, such as inflating budget requirements or working behind the
scenes, to obtain a desired level of resources.

Problems from too much conflict

1. Communication breaks down

2. Performance and productivity decrease
3. Resources and effort are wasted

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4. Morale declines, ill will and bad feelings increase

5. Breakdowns in planning and coordination occur
6. Problems are not solved and processes are not improved.
7. Company loses its focus on customers and profits
8. Disputes and the use of negative politics increase
9. Job-related stress and workplace tension increase
10. Employees see and follow a poor example set by managers

TACTICS FOR ENHANCING COLLABORATION

Good managers strive to minimize conflict and prevent it from hurting organizational
performance and goal attainment. Effective conflict management can have a direct, positive
effect on team and organization performance. Thus managers consciously apply a variety of
techniques to overcome conflict by stimulating cooperation and collaboration among
departments to support the attainment of organizational goals. Tactics for enhancing
collaboration include the following:

1. Create integration devices.

This can be teams, task forces and project managers who span the boundaries between
departments. Teams and task forces reduce conflict and enhance cooperation because they
integrate people from different departments. Integration devices can also be used to
enhance cooperation between labor and management.

2. Use confrontation and negotiation

Confrontation occurs when parties in conflict directly engage one another and try to work
out their differences. Negotiation is the bargaining process that often occurs during
confrontation and that enables the parties to systematically reach a solution. If members
are able to resolve the conflict on the basis of face-to-face discussions, they will find new
respect for each other, and future collaboration becomes easier. Confrontation and
negotiation are successful when managers engage in a win-win strategy. Win-win means
both sides adopt a positive attitude and strive to resolve the conflict in a way that will

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benefit each other. If the negotiations deteriorate into a strictly win-lose strategy, the
confrontation will be ineffective. One type of negotiation used to resolve a disagreement
between workers and management is referred to as collective bargaining. The bargaining
process is usually accomplished through a union and results in an agreement that specifies
each party’s responsibilities for the next two to three years.

3. Schedule intergroup consultation

When conflict is intense and enduring, and department members are suspicious and
uncooperative, top managers may intervene as third parties to help resolve the conflict or
bring third-party consultants from outside the organization. This process, sometimes called
workplace mediation is a strong intervention to reduce conflict because it involves bringing
the disputing parties together and allowing each side to present its version of the situation.

4. Practice member rotation

Rotation means that members from one department can be asked to work in another
department on a temporary or permanent basis. The advantage is that individuals become
submerged in the values, attitudes, problems, and goals of the other department. In
addition, individuals can explain the problems and goals of their original departments to
their new colleagues. This enables a frank, accurate exchange of views and information.
Rotation works slowly to reduce conflict but is very effective for changing the underlying
attitudes abd perceptions that promote conflict.

5. Create shared mission and superordinate goals

Another strategy is for top management to create a shared mission and establish
superordinate goals that require cooperation among departments. Organizations with
strong, constructive cultures, where employees share a larger vision for their company, are
more likely to have a united, cooperative workforce. Studies have shown that when
employees from different departments see that their goals are linked, they will openly
share resources and information. To be effective, superordinate goals must be substantial,

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and employees must be granted the time and incentives to work cooperatively in pursuit of
the superordinate goals rather than departmental sub-goals.

POWER AND ORGANIZATIONS

Power is an intangible force in organizations. It cannot be seen but its effect can be felt.
Power is often defined as the potential ability of one person (0r department) to influence
other people (or departments) to carry out orders or to do something they would not
otherwise have done. Power is the ability to achieve goals or outcomes that power holders
desire. It is the potential to influence others within the organization with the goal of
attaining desired outcome for power holders. Powerful managers, for instance, are often
able to get bigger budgets for their departments, more favorable production schedules and
more control over the organization’s agenda.

Power exists only in a relationship between two or more people, and it can be exercised in
either vertical or horizontal directions. The source of power often derives from an
exchange relationship in which one position, department, or organization provides scarce
or valued resources to other people, departments, organizations. When one is dependent
on another, a power relationship emerges in which the side with the resources has greater
power. Power holders can achieve compliance with their requests.

INDIVIDUAL VERSUS ORGANIZATIONAL POWER

In popular literature, power is often described as a personal characteristic, and a frequent

topic is how one person can influence or dominate another person. Managers have five
sources of personal power:

1. Legitimate power is the authority granted by the organization to the formal

management position a manager holds
2. Reward power stems from the ability to bestow rewards- a promotion, raise, or pat
on the back- to other people
3. Coercive power is the authority to punish or recommend punishment

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4. Expert power derives from a person’s greater skill or knowledge about the tasks
being performed
5. Referent power is derived from personal characteristics: people admire the manager
and want to be like or identify with the manager out of respect and admiration.

Power in organizations, however, is often the result of structural characteristics.

Organizations are large, complex systems that may contain hundreds, even thousands of
people. These systems have a formal hierarchy in which some tasks are more important
regardless of who performs them. In addition, some positions have access to more
information and greater resources, or their contribution to the organization is more
critical. Thus, the important power processes in organizations reflect larger organizational
relationships, both horizontal and vertical.

POWER VERSUS AUTHORITY

Anyone in an organization can exercise power to achieve desired outcome. The concept of
formal authority is related to power but is narrower in scope. Authority is also a force for
achieving desired outcomes, but only as prescribed by the formal hierarchy and reporting
relationships.

Three properties identify authority:

1. Authority is vested in organizational positions. People have authority because of the

positions they hold, not because of personal characteristics or resources.
2. Authority is accepted by subordinates. Subordinates comply because they believe
position holders have a legitimate right to exercise authority.
3. Authority flows down the vertical hierarchy. Authority exists along formal chain of
command, and positions at the top of the hierarchy are vested with more formal
authority than are positions at the bottom.

Formal authority is exercised downward along the hierarchy. Organizational power, on the
other hand, can be exercised upward, downward, and horizontally in organizations. In
addition, managers can have formal authority but little power.

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