Chapter 17 – Organizational Design, Effectiveness, and Innovation
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Internet Exercise
http://www.google.com/intl/en/about/corporate/index.html
A company evaluates its key accomplishments and competitive threats in its annual
report. An annual report usually includes a message from the CEO, statements about
the company’s mission and detailed financial statements. The annual report is a
chance for the organization to evaluate its organizational effectiveness for the year.
Given that Google was Fortune magazine’s winner of the “Best Companies to Work For”
award in 2007 and 2008 and the number 4 company on the list from 2009-2011, Google
must be doing something right.
The purpose of this exercise is for you to see how Google evaluates its own
organizational effectiveness. From the firm’s homepage at
http://www.google.com/intl/en/about/corporate/index.html, click on “Investor Relations.”
Then click on “Corporate Governance” and “Founders’ Letter.” Then click on the link for
the most recent letter, which presently is the one filed 12-31-2010. Click on the PDF
link to the current annual report. Read the “Founders’ Letter” section, and in Part I, read
the content in the “Item 1: Business” and “Item 1A: Risk Factors” sections. You can
also review the firm’s financial statements, which are provided in Part II, Item 8. After
reviewing this information, answer the questions below.
Questions:
1. Based on what you have learned, do you have more positive or more negative
views about Google? Explain.
2. To what extent would you characterize Google as a learning organization? How
does the firm learn from its successes and failures?
3. Is Google more of a mechanistic or an organic organization? What type of
organizational structure is best suited for Google?
4. By applying the dimensions presented in Figure 17–4, evaluate Google’s success
on each of the dimensions. Does Google display any of the warning signs of
organizational decline?
5. What are the disadvantages of using annual reports as a mechanism for
evaluating organizational effectiveness?
6. How can the model presented in Figure 17-6 be used to explain the innovation
process at Google?
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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INSTRUCTIONAL RESOURCES
1. Some great material for classroom discussion or matrix design issues can be
found in “Designing Matrix Organizations that Actually Work: How IBM, Proctor &
Gamble and Others Design for Success” by J. R. Galbraith (Jossey-Bass, 2008).
2. See “Topic 11: Organizational Structure and Technology” in “An Instructor’s
Guide to an Active Classroom” by A. Johnson and A. Kinicki (McGraw-Hill/Irwin,
2006).
3. See “The Carrier Truck: An Exercise Exploring Organizations as Open Systems”
by M. Trefry in Journal of Management Education, 2002, Vol. 26(4), pp. 462-481.
4. See “The Northern Spotted Owl and the Tragedy of the Commons: Stakes and
Stakeholders” by M. Tucker and C. Tromley in Journal of Management
Education, 2002, Vol. 26(1), pp. 99-114.
5. See “The IT Audit Assignment: Viewing Technology in the Organizational and
Strategic Context” by R. Schwering in Journal of Management Education, 2002,
Vol. 26(4), pp. 344-355.
6. See “Increasing Student Interest and Comprehension of Production Planning and
Control and Operations Performance Measurement Concepts Using a Production
Line Game” by J. Cox and E. Walker in Journal of Management Education, 2005,
Vol. 29(3), pp. 489-511.
TOPICAL RESOURCES
1. See “The Impact of Organizational Learning on Relationship Orientation,
Logistics Service Effectiveness and Performance” by P. Panayides in Industrial
Marketing Management, 2007, Vol. 36, pp. 68-80.
2. See “The Use of Modular Organizational Forms: An Industry–Level Analysis” by
M. Schilling and H. Steensma in Academy of Management Journal, 2001, Vol.
44(6), pp. 1149-1168.
3. See “Effect of Department Structure on the Organizational Citizenship Behavior-
Department Effectiveness Relationship” by T. DeGroot and A. Brownlee in
Journal of Business Research, 2006, Vol. 59, pp. 1116-1123.
4. See “Organizations Unfettered: Organizational Form in an Information-Intensive
Economy” by J. Child and R. McGrath in Academy of Management Journal,
2001, Vol. 44(6), pp. 1135-1148.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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VIDEO RESOURCES
1. Contingency organizational design is the theme of the film “Changing
Organizations: Designing for People and Purpose” (Document Associates).
2. Applying contingency organization design is the subject of the film “Organizing
for Successful Project Management” (Britannica).
3. The differences between mechanistic and organic designs are explored in
“Organizational Design” (Insight Media).
4. Amy Edmondson, author of the article “Strategies for Learning from Failure,”
summarizes her research findings in an interview available at the Harvard
Business Review website. As of August 2011, a link to the video was available
at: http://blogs.hbr.org/video/2011/03/learn-from-failure.html.
DISCUSSION QUESTIONS
1. Why is it hard for firms to learn from their failures? What can managers do to
foster a learning organization that learns from both its successes and its failures?
2. How are advances in information technology and the use of social media
impacting organizational design and how organizations are structured?
3. Would you characterize your university as more mechanistic or organic? Discuss
the specific characteristics of mechanistic versus organic organizations that
influenced your response.
4. Discuss actions steps managers can take to foster organizational innovation.
SUPPLEMENTAL EXERCISE 1: COMPANY OF IDEAS1
APPLICATION
In the short case presented below, former CEO Jack Welch described his vision of an
organization. Welch operated from an open-system perspective. Discussion questions
follow the case.
1 Excerpted from Jack Welch, “Create a Company of Ideas,” Fortune, December 30, 1991, pp. 25–26.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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* * *
Picture a building. Companies all added floors as they got bigger. Size adds floors.
Complexity adds walls. We all built departments—transportation departments, research
departments. That’s complexity. That’s walls. The job all of us have in business is to
flatten the building and break down the walls. If we do that, we will be getting more
people coming up with more ideas for action items that a business needs to work with.
Not every idea is a capital idea. A breakthrough in biotech—that’s the wrong view of an
idea. An idea is an error-free billing system. An idea is taking a process that requires
six days and getting it done in one. Everyone can contribute—every single person. The
people who process the work in general have better ideas than those in the office, far
better ideas. The key is to give them respect, dignity. When you spend three days in a
room with people mapping a process, the ideas just about bubble up inside. Just give
them respect – everybody in the organization – and the improvement is enormous.
What we do is give people the right of voice and demand responsibility. Those two
things do wonders for you. They get rid of gripe sessions. Somebody says, “We didn’t
do it this way; I told my boss we should have done it this way.” Wait a minute. You
participated in the process. You played in the whole game. It was your responsibility to
either win the argument or, if you lost it, go with it, not to complain – because we gave
you voice.
Neatness and orderliness are not what we are after. We are after getting information to
people who can act on it. Think about the regional manager in sales. Why do we have
offices for regional managers? What do they do in those offices? We have all built
these things to be neat, because those managers have to give reports back to
somebody else. If instead they were out taking the pulse of that market every single
minute – feeling it, touching it, grabbing it, and getting the information to somebody who
could do something about it rather than read it – then you would have what you want.
You would have the ability to deliver and go head to head with competition and win.
All we have to do is open up, give people a chance, get them in the process, and I am
convinced we can make quantum leaps. But we can’t rest. Because while many
American companies are improving dramatically against themselves, globally we still
have a hell of a long way to go to win this game.
DISCUSSION QUESTIONS
1. Did Jack Welch operate from a new-style or an old-style organizational
perspective? Did Welch create a mechanistic or an organic organizational
structure at GE? Be prepared to support your responses.
2. Do you think Jack Welch’s approach to organizations will help companies
compete more effectively in global markets? Why or why not?
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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SUPPLEMENTAL EXERCISE 2: DO YOU BELONG TO A LEARNING
ORGANIZATION?2
APPLICATION
The quiz presented below may be used to determine whether a student’s employer
(past or present) qualifies as a learning organization. Ask students to select an
organization to rate. Possible alternatives include the entire company, department, or
work group. The only stipulation is that the organization have an identifiable leader.
The handout presented on the following page includes 20 statements. Quiz-takers are
asked to rate the organization according to how true each statement is relative to the
current state of the organization, from 1 (Not True) to 5 (Very True). Sum each score to
obtain an organizational learning score. A variation would be to include additional
ratings of the desirability of each of the 20 statements and then compare the current
state of affairs with the desired state of affairs.
* * *
DO YOU BELONG TO A LEARNING ORGANIZATION?
DIRECTIONS: Using the scale provided below, rate the current state of affairs in your
selected organization. Next, sum across all items to obtain an overall organizational
learning score.
NOT TRUE
VERY TRUE
1
2
3
4
5
1. Our leader has a clear vision. _____
2. Our leader’s vision is clearly communicated and understood by all. _____
3. Our leader is admired by the troops. _____
4. Our leaders walk their talk. _____
5. We have a clear plan to transform our vision into reality. _____
6. We effectively measure our processes, progress, and results. _____
7. Results of our metrics are shared rapidly and widely. _____
2 Adapted from C. Wick and L. Leon, “From Ideas to Action: Creating a Learning Organization,” Human Resource
Management, Summer 1995, Vol. 34 No. 2, pp. 299-311.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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8. External and internal customer requirements are clearly understood. _____
9. Our customers are involved in the design and development of our products or
services. _____
10. We routinely learn from the best practices of other companies whose capabilities are
better than ours in critical areas. _____
11. We avoid the problem of “not invented here” by using the good ideas of others.
_____
12. Other company’s learnings are quickly transmitted and acted on. _____
13. We rapidly identify a best practice in one part of our organization and share it so it
can be used by another part of our organization. _____
14. Our people readily share their good ideas with others to help our organization be
more successful. _____
15. The training we do is actively supported by the work environment. _____
16. We often accept challenges even when not sure how to meet them. _____
17. We are inventive in how we meet our challenges. _____
18. We hold people accountable, but do not punish “mistakes.” _____
19. We are a “make it happen” organization. We have a bias toward action and take
pride in our accomplishments. _____
20. We find work fun. _____
SUPPLEMENTAL EXERCISE 3: ROBERTA AND THE LAST STRAW3
APPLICATION
This continuing case started in Chapter 1 with “Introduction to Roberta.” In order to
make this case as effective as possible, it is a good idea to have students at least read
the introductory case. It provides the background information needed to understand the
situation fully. Although the cases are written in chronological order following the
chapters, only the Chapter 1 case is needed in order to understand subsequent
installments.
3 Co-written by E. Leonard, Jr., Indiana-Purdue University at Fort Wayne, and Maria Muto, Arizona State University.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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In this case, Roberta is caught in the middle during a badly handled downsizing.
Problems in top management’s approach, coupled with insensitivity from her direct
manager, have created a worst-case scenario for Roberta. Her employees are upset
and hostile, and she herself is feeling both demotivated and angry.
You may find that it is useful to tie this case in with the lecture outline provided in the
following supplemental lecturettes dealing with downsizing. It is clear that many of the
important features in a successful downsizing are not present in this Roberta case.
In the current case, Roberta needs to enact some damage control through her personal
efforts, including supporting the survivors and herself. Roberta needs to develop some
tactics to support herself through this time. It is clear that there is no support from
Hiberley. She needs to focus on reducing stress, as well as finding other people and
developing her own support group.
HRI could use more participative approaches to its problems. Also, it seems that Mr.
Martin has abdicated some or all of his responsibility for HRI to the consultants. Martin
and the other top managers need to look beyond the bottom-line to the impact their
decisions are having on the employees and the long-term good of the organization.
* * *
ROBERTA AND THE LAST STRAW
The mood of the Customer Service Department at HRI, Inc. was not positive. All over
the company, departments were laying off people. Bob Hiberley, the new Vice
President of Operations, seemed to be living up to his headquarter’s reputation as a
hatchet man.
Roberta was concerned, but did all she could to encourage a team atmosphere and
keep the spirits of the staff up. The department adopted a destitute family for
Thanksgiving, providing food, blankets, and clothing for them. This seemed to provide a
lift, making people realize that as tough as the situation was, they were better off than
many people.
Despite the problems, the customer service team was more productive than ever. Many
of the ideas they had discovered from other companies and tried were working well, and
as the staff became more comfortable with the changes, they became more efficient.
The staff had even re-designed the work area to increase interaction among
themselves.
Unfortunately, other departments at HRI were not doing as well. With sales down, it
appeared that Christmas bonuses would be eliminated for the first time in 8 years, and
cost-saving consultants were auditing every department, looking at every aspect of the
business.
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Roberta knew that it would be hard to evaluate the importance of what she and her staff
are doing, because their work was qualitative rather than quantitative. She had been
tracking customer retention rates both before and after the department changes, but
with less than a year since she took over, there was not enough information to prove
that her department had a strong positive impact on retention. She had plenty of
customer testimonials, but HRI’s new pattern of behavior had strictly a numbers focus.
It had been a tough fall, and Roberta was feeling tired and frustrated. Her father was
receiving a special teaching award at the year-end banquet at the university where he
teaches. When he invited her to attend, she decided she both needed and deserved a
break. Roberta planned the trip from Wednesday night through Sunday morning. The
banquet was Thursday night, and then her family planned two days of skiing before she
had to fly back.
When Roberta left the office Wednesday night, her senior customer service rep, Kent,
said to her, “Things are quiet this week. We’ve got everything under control. You go
have a good time and don’t even think about us until Monday morning.”
Early Thursday morning, the consultants met with top management and recommended
immediate deep cost-cutting measures if HRI wanted to avoid Chapter 11. Their
suggestions included an immediate 20 percent cut in the work force across the board in
every department. Selections would be made through a complicated formula involving
seniority, performance evaluations, and protected status. All employees who had been
with the company less than six months would be eliminated, with only a few exceptions
considered on a case-by-case basis.
Based on this formula, the final selections for the layoffs were made by Thursday
afternoon. Friday morning, in a top management meeting, the lists were distributed.
The layoffs were to be completed by the end of the day.
Mr. Hiberley decided that the best way to handle the cut was to call his managers in for
a meeting, explain the situation, give them their lists, and let them complete the
process. Two of his managers were out of the office. His secretary was able to reach
one at home, and he said he would be right in. The other, Roberta, was on a ski trip
and unavailable until Monday morning. Bob Hiberley knew that the layoffs couldn’t wait.
He asked one of his assistants to handle Roberta’s department. Three people were
eliminated from customer service, Mary Jo, Amanda, and Eugene.
Upon returning to town late Sunday evening, Roberta’s telephone answering machine
was filled with messages from concerned employees, the “survivors.” They sounded
angry and betrayed. They wanted to meet with her early Monday morning. Among all
the messages, Roberta managed to piece the story together. She felt angry and
betrayed herself. “I can’t even take two days off,” she thought to herself as she got
ready for bed. “How could all this have happened so suddenly?”