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Encourage students to choose the specific structure that best fits their chosen
3. How can a poor choice of organizational structure negatively impact an organization?
Section 8.6 Key Concepts:
Organizational Design
▪ Organizational design is concerned with designing the optimal structures of
accountability and responsibility that an organization uses to execute its strategies.
▪ Organizational designs can be categorized as traditional, horizontal, and designs that
open boundaries between organizations.
Traditional Designs: Simple, Functional, Division, and Matrix
▪ The Simple Structure: For the Small Firm
▪ The Functional Structure: Grouping by Similar Work Specialties
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o This is seen in all kinds of organizations, for-profit and nonprofit.
▪ The Divisional Structure: Grouping by Similarity of Purpose
o In a divisional structure, people with diverse occupational specialties are put
together in formal groups by similar products or services, customers or clients, or
geographic regions.
▪ The Matrix Structure: A Grid of Functional and Divisional for Two Chains of Command
Interactive Classroom Material:
CLICK AND DRAG: Organizational Design—Traditional Structures
Summary of Activity:
The Horizontal Design: Eliminating Functional Barriers to Solve Problems
▪ In a horizontal design, also called a team-based design, cross-functional teams may be
used to solve particular problems by bringing together managers from different functional
divisions.
Interactive Classroom Material:
EXAMPLE: Use of a Horizontal Design: Whole Foods Market
One of Whole Foods’ core operating principles is that all work is teamwork. Thus, each store is
organized into roughly eight self-managed teams, each with a designated team leader. The
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McGraw-Hill Education.
pay schedules are open to all. Whole Foods employees are given both the freedom to do the right
thing for customers and the incentive to do the right thing for profits. The financial results of this
business model are that Whole Foods is the most profitable food retailer in the United States.
Click for follow-up activity.
Connect® Exercise:
VIDEO CASE: Freshii Restaurants
Summary of Activity:
Follow-Up Activity:
Instructor should open the floor for students to discuss the connection between Freshii’s structure
and its culture:
1. What type of organizational structure does Freshii use?
Designs That Open Boundaries Among Organizations: Hollow, Modular, and Virtual
Structures
▪ The Hollow Structure: Operating with a Central Core and Outsourcing Functions to
Outside Vendors
o In the hollow structure, often called the network structure, the organization has a
central core of key functions and outsources other functions to vendors who can
do them cheaper or faster.
▪ The Modular Structure: Outsourcing Pieces of a Product to Outside Firm
Kinicki/Williams, Management, 9e: Chapter 8 Organizational Culture, Structure, and Design: Building
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o This differs from the hollow structure in that it is oriented around outsourcing
certain pieces of a product rather than certain processes.
▪ The Virtual Structure: An Internet-connected Partner for a Temporary Project
Group Exercise #1: Designing an Organization
8.7 Contingency Design: Factors in Creating the
Best Structure
POWERPOINT SLIDES:
#33 Factors in Creating the Best Structure
#34 Mechanistic Versus Organic Organizations
#35 Differentiation Versus Integration
#36 Link Between Strategy, Culture, and Structure
Section 8.7 discusses the three factors that should be considered when determining the best
organizational structure. This includes whether an organization’s environment is mechanistic or
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McGraw-Hill Education.
structure. What has changed is the departmentalization of the company, with product lines being
grouped together in ways that more clearly emphasize the company’s cloud offerings, and group
hardware and devices together more cleanly. This shift reflects Nadella’s desire to shift
Microsoft’s strategy more toward its cloud-based businesses. However, the structural change
mainly affects the engineering function, and doesn’t change Microsoft’s financial reporting.
Furthermore, it appears that there is no fundamental change to Microsoft’s existing matrix
structure.
Topics and Tips for Discussion:
1. For either your current company or a previous one, evaluate the extent to which you
believe there is an effective linking among the firm’s strategy, culture, and structure.
Describe any changes you would recommend.
2. Describe the advantages of mechanistic organizations versus organic ones. Is one
approach better than the other? Defend your point of view.
3. Describe potential indicators that point to a mismatch between a firm’s strategy and its
organizational structure. As a future manager, how will you know when you need to take
corrective action to address a mismatch?
A common indicator of a mismatch between strategy and structure is lack of progress on
important strategic initiatives. If an initiative is not making progress, it is possible that
the current organizational structure is preventing the people who need to be working
Section 8.7 Key Concepts:
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Contingency Design
● The process of fitting the organization to its environment is called contingency design.
Mechanistic Versus Organic Organizations
● In a mechanistic organization, authority is centralized, tasks and rules are clearly
specified, and employees are closely supervised.
● In an organic organization, authority is decentralized, there are fewer rules and
procedures, and networks of employees are encouraged to cooperate and respond quickly
to unexpected tasks.
o Organic organizations are often called “adhocracies” because they operate on an
ad hoc basis, improvising as they go along.
Interactive Classroom Material:
CLICK AND DRAG: Mechanistic vs. Organic Structures
Summary of Activity:
SELF-ASSESSMENT 8.3
Assessing Your Organizational Structure Preference
This 10-question Self-Assessment addresses students’ organizational structure preference
(mechanistic or organic) at their current or former place of employment. If a student is not
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Differentiation vs. Integration
● The differentiation-integration dimension reflects forces that impel the parts of an
organization to move apart or to come together as a result of the stability of the
environment.
● Differentiation is the tendency of the parts of an organization to disperse and fragment.
● Integration is the tendency of the parts of an organization to draw together to achieve a
common purpose.
The Link between Strategy, Culture and Structure
● A company’s organizational culture and organizational structure should be aligned with
its vision and strategies.
● If managers change an organization’s strategy, they need to change the organization’s
structure to support that strategy.
Group Exercise: #2: Establishing Organizational Culture and Structure
There is a group exercise available at the end of this manual that allows students to learn more
about organizational culture and structure.
Exercise Objectives:
8.8 Career Corner: Managing Your Career Readiness
POWERPOINT SLIDES:
#37 Managing Your Career Readiness
#38 Model of Career Readiness
Kinicki/Williams, Management, 9e: Chapter 8 Organizational Culture, Structure, and Design: Building
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Section 8.8 turns the focus to the student, discussing ways in which the student can use the career
readiness competencies of understanding the business and personal adaptability to assess an
organization’s internal context. It encourages students to ask questions related to the various
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McGraw-Hill Education.
Encourage students to talk through both questions, even if they feel that their situation
was largely a success or a failure. Encourage students to consider the extent to which
they used the tactics discussed in the subsection “Becoming More Adaptable,” including
focusing on being optimistic, displaying a proactive learning orientation, being
resourceful, taking ownership and accepting responsibility, and expanding their
perspective by asking different questions.
Section 8.8 Key Concepts:
Understanding the Business and Where You “Fit” In
Step 1: Assess Where and How You Fit in the Context
• What is the mission or purpose of my work unit?
• How does this work unit support corporate strategy, and what is at stake if we fail to
achieve our goals?
Step 2: How Can You Effectively Adapt?
• Based on your assessment of the organization’s structure, how can I adapt to this context?
• Based on your assessment of the rules governing behavior, how can I adapt to this
Becoming More Adaptable
• Personal adaptability—ability and willingness to adapt to changing situations.
o Increasing level of personal adaptability:
▪ Focus on Being Optimistic
Interactive Classroom Material:
CLICK AND DRAG: Understanding the Business
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Summary of Activity:
In this career readiness competency-based Click and Drag Exercise, students will assess
organizational fit based on their understanding of a business.
Interactive Classroom Material:
CLICK AND DRAG: Becoming More Adaptable
Summary of Activity:
Career Corner Group Exercise: Building the Competency of Self-Awareness
Exercise Objectives:
CAREER
READINESS
CAREER
READINESS
CAREER
READINESS
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MANAGEMENT IN ACTION: WELLS FARGO’S SALES CULTURE
FAILS THE COMPANY
WELL FARGO’S SALES CULTURE FAILS THE COMPANY
Problem-Solving Perspective
1. What is the underlying problem in this case from the regulators’ perspective?
2. What role do you believe Wells Fargo’s executive leadership played in the RSP and
auto insurance scandals?
3. What do you think regulators should do to encourage permanent change in Wells
Fargo’s culture and prevent similar problems in the broader banking industry?
Responses will vary but should include content from the 8.3 (Culture Change).
Specifically, regulators should encourage utilization of the 12 mechanisms for culture
Application of Chapter Content
1. Using the competing values framework as a point of reference, how would you
describe the organizational culture under CEO Kovacevich and under CEO Sloan?
Provide examples to support your conclusions.
Wells Fargo, under CEO Kovacevich, had a market type of organizational culture. A
market culture has a strong external focus and values stability and control. Because
Kinicki/Williams, Management, 9e: Chapter 8 Organizational Culture, Structure, and Design: Building
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Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
of products’ and that pressure and fraud occurred even at the bank’s headquarters. This
strong sales culture transformed Wells Fargo’s bottom line, as evidenced by a 67 percent
increase in the bank’s stock from 2006–2015.”
2. How do you think new branch employees learned the culture at Wells Fargo?
3. Describe how Wells Fargo can use the 12 mechanisms for culture change to
drastically improve its culture.
Responses will vary but should include content from the 8.3 (Culture Change). For
4. Is Wells Fargo’s structure more organic or mechanistic? Explain.
In a mechanistic organization, authority is centralized, tasks and rules are clearly
specified, and employees are closely supervised. In an organic organization, authority is
5. What is the most important lesson from this case? Discuss.
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LEGAL/ETHICAL CHALLENGE
SHOULD SOCIALIZING OUTSIDE WORK HOURS BE MANDATORY?
Solving the Challenge
1. I think it’s a good idea. The benefits exceed the costs and I don’t agree that it fails to
appreciate diversity. The socializing activities can be varied to fit the values and needs of
diverse employees, thereby supporting diversity.
First, it is hard to say that the benefits exceed the costs when the costs often fall on the
2. I don’t like it. What employees do after work hours is their business and companies
should not infringe on them. Socializing outside work hours should be voluntary.
3. I believe that employers have no business interfering with how employees spend time
outside of work. This means that I don’t want either voluntary or mandatory requests
about socializing outside of work hours. If people want to socialize outside work, let
them arrange it on their own.
4. Invent other options.
Kinicki/Williams, Management, 9e: Chapter 8 Organizational Culture, Structure, and Design: Building
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TEXTBOOK EXAMPLES
EXAMPLE: How Strategy Affects Culture and Culture Affects Structure: Cleveland Clinic
Refocuses Its Continuous Improvement Strategy
Cleveland Clinic has balanced its strategy, structure, and culture. Along the way, it has learned
some important lessons. Even organizations that already have cultures that value excellence can
YOUR CALL
The continuous improvement model adopted by Cleveland Clinic integrates the hospital’s vision,
strategic goals, culture, and structure. Do you think this is hard to pull off in today’s
organizations?
It can be difficult. It is challenging to organize, communicate and collaborate across multiple
SUPPLEMENTAL ACTIVITIES
Consider using the following discussion questions:
1. How important to the overall outcome of these initiatives do you think it is to ask for constant
staff input? What positive or negative effects might this have on staff involvement, goal
achievement, and morale?
3. Improved patient care is an obvious outcome of the continuous improvement initiatives at
Cleveland Clinic. What do you think are the most important outcomes for the staff?
4. Would you like to work in an organization that engages in daily, or even weekly, “huddles?”
Why, or why not?
Interactive Classroom Material:
EXAMPLE: Use of a Horizontal Design: Whole Foods Market
One of Whole Foods’ core operating principles is that all work is teamwork. Thus, each store is
organized into roughly eight self-managed teams, each with a designated team leader. The
leaders in each store also operate as a team, as do the store leaders in each region. Additionally,
the directors of the company’s 11 regions operate as a team.
YOUR CALL
Why do you think a horizontal design would be better in a retail business such as groceries?
SUPPLEMENTAL ACTIVITIES
1. One way to build on this Example is to have the students read the Wall Street Journal article
◼ Discuss how Whole Foods’ organizational structure likely allows the firm to stay abreast
of trends in the grocery industry.
ONLINE
ONLINE
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How did the team structure help Whole Foods retain its initial culture of
“interdependence” as the company grew from one store to over 60,000 employees?
Do you think the last step of the hiring process is fair? After all, employees are
interviewed extensively before being placed on a team. If they not voted in after 60 days, they
have to start all over finding a new team or leave. Why or why not is this a good idea? How does
it help or hinder the company culture?
What is meant by the comment in the article: “You can always fool the team leader, but
it’s very hard to fool the team.” How does this relate to hiring and compensation?
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TEXTBOOK PRACTICAL ACTIONS
PRACTICAL ACTION: How to Delegate Effectively
How do you decide when to delegate and when not to? Here are some guidelines: 1) Delegate
routine and technical matters; 2) Delegate tasks that help your subordinates grow; 3) Don’t
delegate confidential and personnel matters; 4) Don’t delegate emergencies; 5) Don’t delegate
special tasks that your boss asked you to do—unless you have his or her permission; and 6)
Match the tasks delegated to your subordinates’ skills and abilities.
YOUR CALL
Are any of these reasons why you might not be very good at delegating? What are some others?
These are common reasons why managers do not delegate.
From the text:
An excessive need for perfection.
Other Reasons:
The manager was never delegated work from his or her boss; thereby, not inheriting that
mindset.
Kinicki/Williams, Management, 9e: Chapter 8 Organizational Culture, Structure, and Design: Building
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SUPPLEMENTAL ACTIVITES
1. One way that you could build on this Practical Action is to have the students read the