March 29, 2017

Organizational Design and Culture - Review Notes

There are two parts in this chapter by Luthans

One is Organization Theory and Design. Two is  Organizational Culture

Organization Theory


Chester Barnard defined a formal organization as a system of consciously coordinated activities of two or more persons. Barnard gave the opinion that authority really should come from the bottom up, rather than top-down bureaucratic approach.  It was Barnard's contention that the existence of a cooperative system is contingent on the human participant's ability to communicate,  come out with a common purpose, and their willingness to serve and strive toward a common purpose. The human beings play the most important role in the creation and perpetuation of formal organizations.

Apart from the role of the people in forming organizations and in working toward common goals as members of the organization, there is a division of labor in the organizations and therefore an organization is viewed as a system made of interacting parts. Open systems concept of organizations bring into picture the effect of environment on organizations. Organizations need information processing ability to take proper decisions that have less uncertainty.  Contingency approach to organization argues that organizations have to change in response to internal changes as well as external environment changes to adjust and survive.

In contrast to contingency approach, ecological approach to organization survival contends that there are drastic changes in external environment and only those organization fit to survive in the changed state of nature survive and other organizations die.


Every organization has a culture.  What is culture? It is behavior exhibited by members of an organization. The culture is shaped by values (ideas,which are presently actively promoted in the organization) and beliefs (presently not actively promoted - but are in the memory of the members of the organization). Defined this way, an organization may not have a uniform culture. There can be subcultures. An organization's culture is strong when more people display similar behavior.

Luthans gives the following six as important characteristics agreed by many scholars

1. Observed behavioral regularities.
2. Norms
3. Dominant values
4. Philosophy
5. Rules
6. Organizational climate

Organizational culture is the outcome of a system of shared meaning held by members that distinguishes the organization from other organizations. The system of shared meaning is a set of characteristics. According to the existing research, there are seven primary characteristics that, in aggregate capture the essence of an organization's culture.

1. Innovation and risk taking: The degree to which employees are encouraged to be innovative and take risks.
2. Attention to detail: The degree to which employees are expected to exhibit precision, analysis, and attention to detail.
3. Outcome orientation: The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve those outcomes.
4. People orientation: The degree to which management decisions take into consideration the effect of outcomes on people within the organization.
5. Team orientation: The degree to which work activities are organized around teams rather than individuals.
6. Aggressiveness:The degree to which people are aggressive and competitive rather than easygoing.
7. Stability: The degree to which organizational activities emphasize maintaining status quo in contrast to growth.
(Reference for the 7 item model: C.A. O'Reilly III, J. Chatman, and D.F. Caldwell, "People and Organizational Culture: A Profile Comparison Approach to Assessing Person-Organization Fit," Academy of Management Journal, September 1991, pp. 487-516.

J.A. Chatman and K.A. Jehn, "Assessing the Relationship between Industry Characteristics and Organizational Culture: How Different Can You Be?" Academy of Management Journal, June 1994, pp. 522-553)

Organizational culture is conceptualized to have three components. One is the behavior. This the same behavior that we are studying in this subject of organizational behavior. While this behavior is the result of cognitive aspects (Perception and attribution, personality and attitudes,  Motivational needs and activities, positive psychology related aspects), dynamic aspects (communication, decision making processes, conflict management,  use of power and political activities, and group behavior) and management practices (job design, goal setting, supervision and control). The culture perspective advocates that values and belief lead to behavior in a more stable way.

Values are explicitly stated by organizations. But, members of an organization assess the organization's value by the behavior exhibited by leaders of the organization. Organization members have an understanding of the organization's values and this can be captured by talking to members. Then the organization members have an aspirational values which they feel their organization must espouse.  Beliefs are formed in people due to long period of living, education and experience. They also have an effect on behavior. Managers of an organization try to communicate new value system that is required to attain the goals of the organization and then try to demonstrate appropriate behavior so that many in the organization accept the values as relevant and also being practiced by the top leaders. As more members of the organization accept the relevance as well as adherence to new values by the top leaders, the values become shared values and influence the organization's behavior. Then the climate in the organization changes. Organizational climate is the perception of outsiders regarding their encounters with the organization and its members. Change in values, change in behavior and its results are likely to change beliefs over a period of time.

Updated  1 April 2017.  15 May 2016,  9 July 2014, 5 June 2014, 4 December 2011

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