ORGANIZATION THEORY FINAL

CHAPTER 5 - External Environment

The Environmental Domain

 Organizational environment is defined as all elements that exist outside the boundary of the
organization and have the potential to affect all or part of the organization.

 It can be understood by analyzing its domain within external sector.

• Domain: Territory that can affect or be affected

• Sector: A portion of the domain characterized by a specific

Task environment

 It includes sectors with which the organization interacts directly and that have a direct
impact on the organization’s ability to achieve its goals.

 It typically includes:

• The industry

• Raw materials sector

• Market sector

• Human resources sector

• International sector
General environment

 It includes sectors that might not have a direct impact on the daily operations of a firm but
will indirectly influence it.

 It typically includes:

• Government sector

• Sociocultural sector

• Economic conditions

• Technology sector

• Financial resources

International context

 Distinctions between foreign and domestic operations have become increasingly irrelevant.

 All organizations face domestic and global uncertainty.

 The increasing interconnections represent both opportunities and threats for organizations.

 Organizations are becoming extremely complex and competitive.

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• Uncertainty: Decision-makers not having sufficient information about environmental factors,

and consequently being unable to accurately predict external changes.

• Uncertainty increases the risk of failure and makes estimations difficult.

• Changes in competition, consumer interests, innovative technologies

• Disruptive innovations: Threatens leading firms in the market.

• Examples: Changes in music industry by iPod and later by Spotify, changes in airlines industry

Dimensions of environmental uncertainty

 The dimensions of the environment range:

• Stable or unstable: The pace of change, dynamic vs. static

• Simple or complex: Heterogeneity and number of elements

• Whether available resources are concentrated or dispersed

• Degree of consensus in the environment

• Ergodicit: Nonergodic, i.e. past does not reflect future.

 Two essential ways the environmental changes influence organizations :

• The need for information about the environment

• The need for resources from the environment

Level of uncertainty

 The simple-complex and stable-unstable dimension are combined into a framework for
assessing uncertainty.

- Simple + Stable = Low Uncertainty

- Complex + Stable = Low-Moderate Uncertainty

- Simple + Unstable = High-Moderate Uncertainty

- Complex + Unstable = High Uncertainty

Adapting to Environmental Uncertainty

• Positions and departments to deal with complexity.

• HR department deals with employees, finance department deals with banks.

• Buffering: Departments absorbing shocks through stockpiling or working with extra reserve
agreements or product testing

• Boundary-spanning roles: Contact people who receive and send information (e.g., market
research teams, R&D engineers, business intelligence departments)

• Differentiation and integration among departments: Specialization and collaboration.

Controlling the external environment

 Organizational environment differs regarding uncertainty and resource dependence.

 Organizations can adapt to uncertainty.

 Organization can also control their environment to if there are resource dependencies

 When risk is great, organizations can attempt to change or influence the environment.

Managing resource dependency

• Resource dependence means that organizations depend on the environment but strive to
acquire control over resources to minimize their dependence.

• Organizations are vulnerable if vital resources are controlled by other organizations, so there
is an incentive to be as dominant and independent as possible:

• Minimize vulnerabilities.

• Will team up with others when resources are scarce and be more competitive.

• Maximize own autonomy and independence.

CHAPTER 6 - Interorganizational Relationships

Organizational Ecosystems

 Interorganizational relationships are the relatively enduring resource transactions, flows,

and linkages that occur among two or more organizations.

 Organizational ecosystems are a system formed by the interaction of a community of

organizations and their environment.

- An ecosystem cuts across traditional industry lines.

- In an ecosystem, conflicts and cooperation frequently exist at the same time.

 Is competition dead?

- A new form of competition is intensifying.

- Today’s competition involves clusters of businesses competing with other clusters.

 The changing role of management

- In ecosystems, managers move beyond traditional responsibilities.

- Managers must think about horizontal processes.

- The old role of management relied on operation roles and boundaries.

- This is a broad leadership challenge.

 Interorganizational framework

- Useful for managers in developing horizontal management across organizations.

Resource Dependence

 The degree of resource dependence is based on two factors: (1) the importance of the
resource to the firm, and (2) the amount of power over resources allocation and use.

 Resource Strategies

- Adapt to or alter the interdependent relationships

- Use interlocking directorship

- Joint trade associations

- Political actions

 Power Strategies

- Large and relatively independent companies has

more options, while small suppliers with few options.

Collaborative Networks

 The collaborative-network perspective is an emerging alternative to resource-dependence

theory.

 Why collaboration?

- Collaboration allow risks to be shared

- Cooperation is a prerequisite for greater innovation

- Partnership are a major avenue for entering global markets

- Interorganizational linkages provide a kind of safety net that encourages long-term

investment and risk.

 From adversaries to partners

- Partnership is based on interdependence and trust.

- Dependence on another company is seen to reduce

rather than increase risks.

Population Ecology

 A population is a set of organizations engaged in similar activities with similar patterns of

resource utilization and outcomes.

 The population ecology perspective focus on organizational diversity and adaptation within a
population of organizations.

- The changing environment determines which organizations survive or fail.

- Technology continues to change the environment.

 Organization Form and Niche

- Form is an organization’s specific technology, structure, products, goals and personnel

- Each organization attempts to find a niche

 Process of Ecological Change

- New organizations are always appearing in the population.

- Variation - Selection - Retention

 Strategies for Survival

- Competitive struggle for resources – struggle for existence

- Generalist and specialist strategies distinguish organizational forms in the struggle for
survival.
Institutionalism

 The institutional perspective describes how organizations survival and succeed through
congruence between an organization and the expectations from its environment.

 Institutional Environment

• Norms and values of stakeholders

• Adopt structures and processes to please outsiders.

 Legitimacy - an organization’s actions are desirable, proper, and appropriate.

 Institutional theory is concerned with the set of intangible norms and values that shape
behaviour, as opposed.

to the tangible elements of technology and structure.

Institutional View and Organizational Design

 Organizations have two essential dimensions: technical and institutional.

 The technical dimension is the day-to-day work, technology and operating requirements.

- Governed by norms and rationality of efficiency.

 The Institutional structure is that part of the organization most visible to the outside public.

- Governed by expectations of the public.

Institutional Theory

• Why do all organizations in a field look like same?

• Organizations copy each other rather than thinking what to do best for them.

• Institutions, i.e., regulative, normative, and cognitive structures, shape organizations.

• Examples of institutions: Laws, regulations, customs, professional norms, culture, traditions

• As every organization follows same institutions, they become similar.

• How organizations conform to institutions?

• They are coerced to do so.

• They simply imitate what others are doing as to cope with uncertainty.

• They are trained to follow institutions.

Institutional Theory

• Organizations are motivated to meet institutional expectations because they do not want to
lose their ‘legitimacy’.

• Increased legitimacy means increased resources and survival capabilities.

• Some legitimate practices are followed just out of habit without thinking.

• The trap of doing what everyone else is doing.

• There are different ways of doing business, but they are often disregarded because they do
not enjoy social acceptance (legitimacy)

• Commonplace (institutionalized) practices are hard to challenge.

• Organizations also change institutions and what it means to be legitimate: Institutional

entrepreneurship.

• They may say ‘This is not how we want to do our business’.

• Organizations take risks and try new methods that are not legitimized.
Summary and Interpretation

 There has been an evolution in interorganizational relationships.

 Organizations operate within an ecosystem.

 Four perspectives have been developed to explain relationships among organizations.

 The resource-dependence view argues that organizations try to avoid excessive dependence
on other firms.

 The collaborative-network view suggests that collaboration is an emerging alternative to

resource dependence.

 The population-ecology view argues that new organizations fill niches left open by
established companies.

 The institutional perspective notes that interorganizational relationships are shaped by

legitimacy as well as products/services.
CHAPTER 12 - Culture, ethics, and sustainability

Levels of corporate culture

Observable aspects

• Rites and ceremonies - the elaborate, planned activities, special events.

• transition of employees into new social roles

• common bonds & good feelings among employees & increase commitment to the
organization.

• E.g. Celebrations, graduation ceremonies, special lunches or dinners, plaques

• Stories and myths - narratives based on true/untrue events that are frequently shared & told
to new employees.

• E.g. Nordstrom, Ritz Carlton, IBM stories

• Symbols - represents the deeper values of an organization.

• physical artifacts

• E.g. No private offices/no doors (collaboration, creativity, equality)

• private parking lots, unaccessible offices at the top, offices at the corners with nice
furnitures etc. (power distance)
Organizational culture at two levels

• Observable symbols

• Dress

• Language (“hocam”, “üstad”, “Googleplex”), slogan, motto

• Buildings, architecture

• Power structures

• Symbols, stories, ceremonies

• Underlying values

• Openness & Innovation Risk taking or avoidance

• Teamwork Bureaucracy, formality

• Rigidity Performance-orientation

• Collaboration Customer satisfaction

• Competition Power distance

• Traditionalism

Why culture matters?

• Provides sense of organizational identity

• Guides DM in the absence of written rules or policies

• Integrates members so they know how to relate to one another

• Guides daily behavior, what is acceptable or not

• How power & status are allocated

• How people communicate

• Helps organization adapt to external environment

• Guide behavior to meet certain goals

• How to respond to customer needs & moves of a competitor

Organization Design and Culture

 Managers want a corporate culture that reinforces the strategy and structural design the
organization needs to be effective within environment.

 Culture can be assessed along many dimensions. Two specific dimensions are:

(1) the extent to which the competitive environment requires flexibility or stability.

(2) the extent to which the organization’s strategic focus and strength are internal or
external.

Adaptability Culture

• Strategic focus on the external environment through flexibility & change to meet customer
needs.

• The company actively creates change.

• Innovation and risk-taking are rewarded.

• Internet-based, electronics, cosmetics companies...

• E.g. Google

• informal work culture (like a university where genious graduate students

have fun & work hard)

• Brainstorming sessions

• %20 of their time is spent on creativity

• New ideas/projects

• Google Maps, Google News, Google Ads, YouTube

The Mission Culture

• The Mission Culture

• focus on a clear vision of org. purpose & the achievement of goals such as sales or
market share.

• The environment is stable: managers can translate the vision into measurable goals
& evaluate employee performance for meeting them.

• E.g. Bilkent University

• Commitment to excellence in teaching & research

• Bonuses & promotions are based on performance

• Very tough & rigorous promotion system based on “footprint”

Clan Culture and Bureaucratic Culture

• The Clan Culture

• focus on the involvement & participation of the members.

• taking care of employees & making sure they are satisfied.

• Good wages, employee development & trainings, empowerment, Sense of

responsibility & ownership, commitment to the org

• E.g. Fashion & retail industries, Turkish family firms

• The Bureaucratic Culture

• internal focus & a consistency orientation

• high level of consistency, conformity & collaboration

• High level of integration & efficiency

• low personal involvement

• E.g. Public organizations in Turkey

Ethics

• Ethics: Moral principles about right and wrong.

• Ethics promotes cooperation while not neglecting self-interests.

• Helping or not hurting someone is the essence of morality.

• sweatshop working conditions (including child labor)

• human rights: discrimination

• deceptiveness (false advertisement)

• harming environment (pollution)

• Corruption: Pursuit of illegitimate personal gain through abuse of power

• bribery, fraud, financial crime, abuse, falsification, favouritism, nepotism,

manipulation, etc

Why being ethical matters?

• It is demanded by customers, governments, suppliers, media.

• Good reputation

• Helps to comply with laws and regulations.

• Often ethical choices are also the best choices.

Normative ethical theories

 Consequentialism (Utilitarianism): What is good or bad depends on the costs and benefits of
consequences: Act according to greatest happiness for society.
 Deontology (Kantian ethics): Universal principles and duties regardless of consequences: Act
according to the categorical imperatives (Follow your reason and the moral law within
yourself)
 Virtue ethics (Aristotelian ethics): The excellence of personal character is what matters, not
consequences nor principles: Act according to virtue.
 Stakeholder theory: Balancing stakeholders’ interests.

Stakeholders In Ethical Decisions

Psychological Theories on Moral Judgements

• Moral machinery (Moral Tribes, by Joshua Greene): Inborn capacities for empathy,
vengefulness, honour, guilt, embarrassment, tribalism, righteous indignation (anger) but also
selfishness and greed

• Moral intuitionism: We intuitively know what is ethical or not.

• Instincts: Our genetic program to act in a specific way in specific circumstances.

• Emotional responses: We evaluate our emotions to decide (Frans de Waal)

• Morality is evolved to find solutions to problems of cooperation.

How To Create an Ethical Culture

• Provide Value-Based Leadership: Demonstrate commitment to the rules

• Leaders are role models for ethical behavior

• Provide Formal Structure and Systems

• Ethics Committee

• Chief Ethics Officer (E.g. Siemens)

• Ethics Hotline (confidential)

• Provide Disclosure Mechanisms: Encourage employees to voice concerns (e.g.,

whistleblowing)

• Provide Training Programs

• Develop a Meaningful Code of Ethics

• Should be distributed to every employee

• Should be supported by top management

• Should be enforced with rewards for compliance and penalties for

noncompliance

• Reduce incentives for unethical behavior

Corporate Social Responsibility

• CSR is a form of business regulation that guides companies to operate in a socially

responsible way. Core subjects listed in CSR include:

• Fair labor practices: Eliminate discrimination and forced labor

• The environment: Minimize environmental impacts of business.

• Fair operating practices: Adhere to anti-corruption measures

• Consumer issues: Responsible marketing

• Community involvement and development: Charity organizations

Sustainability

• Economic sustainability refers to indefinite economic production to support long-term

business prosperity, without negatively impacting the social and environmental aspects of a
business.

• Corporate sustainability: The degree to which an enterprise is able to be maintained or

continued while avoiding the long-term depletion of natural resources.

• Corporate sustainability is often broken into three pillars:

• economic, or profits

• social, or people

• environmental, or planet

ESG

ESG is a quantifiable assessment of sustainability.

1. Environmental. These criteria may include corporate climate policies, energy use, waste
treatment and treatment of animals.

2. Social. These criteria cover the company's relationship with stakeholders, such as employees
or community members. Meeting social criteria may involve making donations, encouraging
employees to volunteer, or practicing supply chain sustainability and ethics.

3. Governance. These criteria hold companies to ethical accounting and reporting standards.

Deception in Sustainability

• Greenwashing: Greenwashing is when an organization spends more time and money on

marketing itself as environmentally friendly than on minimizing its environmental impact.

• Whitewashing: Whitewash is an attempt to hide the unpleasant facts or truth about

someone or something.
How to Resolve Sustainability Issues?

• Technocentric view: “Humans are the only locus of intrinsic value. They have a right to
master natural creation for human benefit.…Nature is tough and resilient in the face of
disturbance, and damage is generally reversible.”

• Ecocentric view: According to ecocentrism, the premise that humans occupy a privileged
place in nature is rejected….

• …animal-rights activists, spiritual ecofeminists, restoration ecologists, organic

farmers, bioregionalists, steady-state economists, followers of the Gaia hypothesis
(Lovelock, 1988), and more radical environmental activists.”

• Sustaincentric view: “The earth is humanity's home, to be kept clean, healthy, and properly
managed for the sake of human survival and welfare. ”

• “Proponents of sustaincentrism are not antitechnology, but they also do not accept it
uncritically. Technologies should be developed and employed in appropriate, just,
and humane ways.
CHAPTER 12 - Innovation and Change

Strategic Role of Change

• Innovation is successful implementation of a creative idea.

• Companies continuously invest in innovation because of:

• Technological changes

• Increased domestic and international competition.

• Changes in the markets

• Innovation is required not only for prospering but also for survival.
Elements for Successful Change

 Ideas

- Ideas can come from within or from outside the organization

- Internal creativity is a key element of organizational change.

 Need - Ideas are generally not seriously considered unless there is a perceived need for
change.

 Adoption occurs when decision makers choose to go ahead with a proposed idea.

 Implementation occurs when organization members actually use a new idea, technique or
behavior.

 Resource

- Change requires time, resources and energy.

Explore and Exploit Dilemma

• Exploit existing capabilities for cash flow vs. explore new possibilities for long-term
prosperity.

Exploitation: Utilising what is already known, high probability of success

• It aims at efficiency, refinement and focus

• Builds on incremental improvements

Exploration: Discovering what is not known, low probability of success

• Investigating new businesses and opportunities, transforming current capabilities

• Experimentation, flexibility, and divergent thinking, tolerance for failure

Organizational Ambidexterity

Accommodation of contradictory logics of exploration and exploitation.

• Creative Departments (structural ambidexterity): Separating creative units

• Too demanding on top executives

• Venture teams: Free creative people from rest of the company, e.g., Shell’s Game Changer
unit

• Corporate entrepreneurship programs: Using idea champions

• Switching structures (sequential ambidexterity): switching from mechanic to organic

approach when needed, e.g., Nissan

• Not always feasible and can destroy current capabilities

New product success

 New product success rate

- Approximately, 80% of new products fail upon introduction and another 10% disappear
within 5 years.

 Reasons for new product success

- Innovating companies understand customers

- Innovating companies successfully use technology

- Top management supports innovation

Product Innovation Management

• Specialization: R&D, marketing, and production

• Boundary Spanning: Collaborations with outsiders.

• Horizontal Coordination: Technical, marketing and production people share ideas and
information.

• Fast-cycle teams: Accelerated product development project for time-based competition

Administrative Change Management

• Organizations that successfully adopt many administrative changes have/are:

- A mechanistic organization structure

- Larger administrative ration

- Larger in size

- More bureaucratic

- More formalized

- More centralized

• By contrast, technological changes are often organically driven.

Cultural Change

Forces for Culture Change

- Reengineering and Horizontal Organization

- Diversity

- The Learning Organization

 Techniques of OD (Organization Development)

- Large Group Intervention: Large-scale off-site meetings

- Team Building: enhance communication and collaboration

- Interdepartmental Activities: Representatives from different departments are brought

together

Leadership for Change

 Implementing complex changes requires strong and persistent leadership.

 Transformational leadership is particularly suited

- enhance organizational innovation both directly and indirectly.

 Three stage of the change commitment process

- Preparation

- Acceptance

- Commitment

 Leaders must develop the skills and methods needed

to help their organization remain competitive

Barriers to Change

 Many barriers to change exist at the individual and organizational levels.

- Excessive focus on costs

- Failure to perceive benefits

- Lack of coordination and cooperation

- Uncertainty avoidance

- Fear of loss
Techniques to overcome barriers

 Establish a sense of urgency for change.

 Establish a coalition to guide the change.

 Create a vision and strategy for change.

 Find an idea that fits the need.

 Develop plans to overcome resistance.

- Alignment with needs and goals of users

- Communication and training

- An environment that affords psychological safety

- Participation and involvement

- Forcing and coercion

 Create change teams.

 Foster idea champions.

Transforming a profit-maximizing system into a purpose-driven

Humans are built for purposefulness.

1. Create a Microcosm of the World You Want

2. Build a “How Could We Test That?” Culture

3. Do the Right Things for the Right Stakeholders

4. Prioritize Collaboration over Competition

What contributes to GETIR’s success

• Digital disruption: Application and operating system backed up by sophisticated AI and data
science tools

• Unique positioning: Grocery delivery to 10 minutes at most.

• Strategic vision of founders: Getir was founded by Mr. Nazim Salur and several of his
business partners

• Leadership: High entrepreneurial spirit, unorthodox management style that facilitates

extreme agility and speed in execution.

• Exceptional talent base: Direct access to the abundant pool of young talent in Turkey.

• Human-centric management: Values each employee at every level and cares about their
motivations and aspirations with fair compensation and professional development
opportunities.

• Business Eco System / Partner Network: ‘Partner first’ philosophy facilitates partner-driven
aspect of Getir’s strategy. Extraordinary compassion and goodwill are shown towards
suppliers and other partners, win-win approach

• Stakeholder (not shareholder!)-centric company culture: The value offered to and received
by its employees (including operational and field teams), traditional retailers, suppliers,
consumers, and its shareholders.

• Operational excellence: Achieved by efficient and data-driven supply chain

management,superior fulfillment, sourcing, delivery, operations, human resources and
training, and financial systems.

• Learning from earlier business ventures: The earlier experience of the lead founder, Mr.
Nazım Salur, with Bitaksi ( www.bitaksi.com) has been very relevant. Bitaksi is a digital taxi
hailing business in Istanbul with the taxi arriving within 3 minutes of the request.

• Creative execution: Agility in decision making, encouraging creativity in all aspects of the
business, openness to new ideas to improve the business and/or the operation, and an
innovative orientation have all been an integral part of GETİR.
CHAPTER 13 - Decision-making processes

Definitions
• Decision-making is about making choices. To make a choice, organizations:

• First, identify the problem of choosing

• Second, solve the problem of choosing

 Programmed (Routine) Decisions

- Repetitive and well defined

- Clear procedures exist for the problem

 Nonprogrammed (Complicated) Decisions

- Novel and poorly defined

- Uncertainty is great and decision are complex

- Involve strategic planning

- Wicked Problem
What is a rational decision?
Bounded rationality

• Individuals are usually intendedly rational. However, their rationality is bounded by:

• Cognitive limitations: Attention, memory, computation, comprehension,

communication, emotions

• Incomplete information: Unknown consequences, unknown preferences, unknown

options, ill-defined problems

• Time and cost pressures

• People often use stereotypes (infer unobservable from observable), simplify the problem and
use heuristics (short-cut solution rules)

• People seek satisfactory solutions (rather than the best one)

• Rationality as a procedure of thinking vs. rationality as a desirable outcome

Intuition vs. Analytical Thinking

 Intuition operates by unconscious recognition (seeing)

 Intuition creates personal judgements.

 Intuition integrates all available information quickly.

 Preferences are often formed intuitively.

 Analytic thinking is deliberate, relies on formal logic (incl. probability)

 Analytic thinking systematically focuses on details and challenges cognitive capacity, whereas
intuition builds holistic associations (synthesizes) based on inborn abilities and earlier
experiences.

 Intuition often creates strong feelings (e.g., excitement)

 Intuition uses heuristics (short-cut solution rules) but it is possible to use heuristics
deliberately.
Smart uses of heuristics

• Heuristics can be use for fast and frugal decision-making under uncertainty

• Frugal: Using a few cues and ignoring rest

• Fast: Many computations are unfeasible, costly or slow.

• Examples of heuristics:

• Recognition heuristic

• Imitate the successful

• Imitate the majority

• Tit for tat (e.g. reciprocal altruism)

• Recognition heuristic

• Heuristics can be learned individually, socially or evolutionarily.

• The more unpredictable a situation, the more information needs to be ignored.

Common cognitive biases (errors of intuitive thinking)

• Availability heuristic: Deciding by ease of accessibility in memory

• Representativeness heuristic: Assigning probability (likelihood) of an event by its prototypical

example

• Overconfidence: Overestimation of abilities

• Status-quo bias: Tendency to favor the status-quo

• Self-serving bias: Desire to confirm our opinions

• Emotional attachments
Collective decision-making

1. Consensus

2. Majority

3. Qualified consensus

4. Directive leadership

Decision-making in organizations

 Influenced by

- Internal structure, politics, personality of executives, culture

- Degree of stability or instability of the external environment

 Four types of organizational decision making process

- The management science approach

- The Carnegie model

- The incremental decision process model (I will ignore)

- The garbage can model

Management Science Approach

 Use of statistics and other mathematical tools to identify relevant variables

 Dominated by analytical methods

 Very successful for structured problems and decisions that are informed by probabilistic
information

 Limited applicability when quantitative data are not rich

 Which decision-making problems can be best addressed by management science approach?

The Carnegie Model

 The final choice was based on a coalition among those managers.

 A coalition is an alliance among several managers who agree about organizational goals and
problem priorities.

 Implication of the process of coalition on organizational decision behavior:

- Decision are made to satisfice rather than to optimize problem solutions

- Problematic search: manages are concerned with immediate problems and short-run
solutions.
Garbage Can Model

 It deals with the pattern or flow of multiple decisions within organizations.

 It explains decision making in high uncertainty.

 Organized anarchy – three characteristics:

- Problematic preferences (inconsistent and often learned after action, ambiguous goals)

- Unclear, poorly understood technology (processes, methods and rules of decision-making)

- Turnover (actors change quickly)

 Streams of events instead of defined problems and solutions.

- Problems

- Potential solutions

- Participants

- Choice opportunities

 Four specific consequences:

- Solutions may be proposed even when problems do not exist.

- Choices are made without solving problems

- Problems may persist without being solved

- A few problems are solved

 It is probably inevitable in the exceptionally complex global environment.

 Highly visible in learning organizations

Special circumstances

 In High-Velocity Environments, organizations need to:

- Track information in real time

- Act fast and build multiple alternatives

- Seek advice from everyone and depend on trusted people

- Aim for consentient decision

- Integrate decisions with the overall strategic direction

 Decision mistakes and learning

- Each failure provides new information and insight.

 Escalating commitment

- Managers trying to avoid responsibility by blocking or distorting negative information.

- Consistency and persistence are valued.

Concluding thoughts

 Most decisions are not made in a logical, rational manner.

 Individuals make decisions, but organizational decisions are not made by a single individual.

 Conflict exists when problems are not agreed on.

 Four types of organizational decision making process are the management science approach,
Carnegie model, incremental decision process and garbage can model.

 The garbage can model is the most novel description of decision-making.

 Organizations operate in high-velocity environments.

 Decision mistakes made through trial and error should

be encouraged.
CHAPTER 14 - Conflict, Power and Politics

Intergroup conflict

• Intergroup conflicts are especially common in multinational mergers (e.g., Lenovo purchased
IBM’S PC unit).

Causes:

• Identifying with a group

• Observed group differences and group competition

• Frustration: Perceived differences in achievements

Clashes:

• Clashes with team mates and bosses

• Clashes with outsiders (unions, franchise owners, investors)

• Clashes with branches, headquarters, divisions, regions

Sources of conflict

• Goal incompatibility: Interfering goals (e.g., goals of marketing vs. manufacturing)

• Differentiation: Differences in cognitive and emotional orientations among managers

• Task interdependence: Disagreements in coordination of activities

• Limited resources: Severe competition for power and influence

Conflict is harmful but fair amount of competition is beneficial.

Power and organizations

• Power: Ability to influence other people for desired outcomes

 Individual versus organizational power

- Legitimate Power: Authority granted by the organization

- Reward Power: The ability to bestow rewards

- Coercive Power: The authority to punish

- Expert Power: Derives from a person’s greater skill or knowledge

- Referent Power: Derives from personal characteristics

Power vs. Authority

 Authority is a force for achieving desired outcomes, as prescribed by the formal hierarchy
and reporting relationships.

- It is related to power, but narrower in scope.

 Three properties identify authority:

- Authority is vested in organizational positions.

- Authority is accepted by subordinates.

- Authority flows down the vertical hierarchy.

 Power can be exercised upward, downward and horizontally.

 Authority is exercised downward along the hierarchy.

Vertical sources of power

 Formal position

- Legitimate power is the power from formal position.

- Power is accrued to top positions.

 Resources

- Resources can be used as a tool for adding power.

 Control of decision premises and information

- Constraints placed on decisions

- Control of information can also be a source of power

 Network centrality means being centrally located in the organization and having access

 People – loyal executives/managers

Horizontal sources of power

 Horizontal power pertains to relationships across divisions or departments.

- It is not defined by the formal hierarchy.

 Strategic Contingencies are events and activities both inside and outside an organization that
are essential for attaining organizational goals.

- Groups most responsible for key organization issues.

Horizontal power

 Dependency

- A department that depends little on other departments is in a high power position.

 Financial resources

- Departments that generate income for an organization have greater power.

 Centrality reflects a department’s role in the primary activity of an organization.

 Non-substitutability

 Coping with Uncertainty

- Obtaining prior information

- Prevention

- Absorption.
Political processes

 Politics is the use of power to influence decisions in order to achieve desired outcomes.

- It is intangible and difficult to measure.

 Organizational politics involves activities to acquire, develop, and use power and other
resources to obtain the desired outcomes.

 Politics is used when uncertainty is high and there is disagreement over goals or problem
priorities.

Domains of political activity

• Structural change: Managers may actively bargain and negotiate to maintain the
responsibilities and power bases they have.

• Management succession: Hiring new executives, promotions and transfers

• Resource allocation: Salaries, operating budgets, employees, office facilities, equipment, use
of the company vehicles or even aeroplanes

Tactics for increasing power

 Enter areas of high uncertainty

- Identify key uncertainties can take steps to remove those uncertainties can increase a
department’s power.

 Create dependencies

- Power can also be increased by incurring obligations.

 Provide scarce resources

- Departments that accumulate resources and provide them to an organization will be

powerful.

 Satisfy strategic contingencies

- A contingency could be a critical event, a task for which there are no substitutes.
Tactics for using power

 Build coalitions and expand networks

- Networks can be expanded by (1) reaching out to establish contact with additional
managers and (2) co-opting dissenters.

 Assign loyal people to key positions

- Top leaders frequently use this tactic to achieve desired outcomes.

 Control decision premises

- e.g. choose or limit information provided to other managers.

 Enhance legitimacy and expertise

 Make a direct appeal

- Political activity is effective only when goals and

needs are made explicit.

Tactics for enhancing collaboration

 Create integration devices

- Use team, task forces and project managers who span the boundaries between
departments.

 Use confrontation and negotiation

- More likely to ne successful when managers engage in a win-win strategy.

 Schedule intergroup consultation

- Workplace mediation

 Practice member rotation

- Individuals become submerged in the values,

attitudes and goals of the other department.

 Create shared mission and super-ordinate goals

 Conflict, power, and politics are natural outcomes of organizing.

 Two views for organizations are: rational and political models.

 Vertical sources of power include formal position, resources, control of decision premises
and network centrality.

 Horizontal source of power include dependency, financial resources, centrality,

nonsubstitutability and ability to cope with uncertainty.

 Certain characteristics make some departments more powerful than others.

 Political tactics such as coalition building, expanded networks and control of decision
premises.