BUSI 610 Week 8 Group DB Forum 4: Part 2 Example

Group Discussion Board Forum 4: Part 2, Replies and Group Response

BUSI 610 Organizational Design and Structure, Group Discussion Board Forum 4: Part 2 (2 replies and the group response)

Thread by [Student Name]

The group, its members' threads and the organizations discussed are composites; the research cited is real, and the requirements follow Liberty's public course guide for BUSI 610.

Reply to Tanya

Tanya, your thread argued that the regional electric utility you studied should create a separate unit to develop new businesses such as home battery storage, electric vehicle charging and energy management services, because its existing culture, built around reliability and regulatory compliance, would smother them. I think you are right, and research on ambidextrous organizations supports your argument while adding a condition that matters. Your example of the utility's earlier pilot of smart thermostats, which stalled in approval committees for two years, is exactly the kind of evidence that shows why separation is needed.

March (1991) described a basic tension in organizational learning between exploitation, refining existing competencies for reliable returns, and exploration, experimenting with new possibilities whose returns are uncertain and distant. Because exploitation produces quicker and surer results, organizations tend to drive out exploration over time, becoming very good at what they already do while losing the capacity to adapt. A utility is an extreme case: its core business rewards caution, standard procedures and avoiding failure, which are exactly the habits that hinder new ventures.

Tushman and O'Reilly (1996) argued that firms can escape this trap by becoming ambidextrous, housing exploratory units separately from the core business, with their own structures, processes and cultures, while integrating them at the senior leadership level. The separation protects new ventures from the core's routines; the integration allows them to draw on the core's resources, such as the utility's customer relationships and grid knowledge. Raisch and Birkinshaw (2008), reviewing the research, found that ambidexterity is associated with better performance but that firms achieve it in different ways, through structural separation, through a context that lets individuals balance both activities or through leadership that manages the tension.

The condition your proposal depends on is integration at the top: a separate unit without senior sponsorship tends to be starved or absorbed by the core. I would suggest that the new unit report directly to the chief executive, have its own budget and performance measures suited to experimentation and share specific resources, such as customer data, with the core business under clear agreements. Daft's discussion of the dual-core approach to change is also relevant: the utility's administrative core may need to support the new unit's different hiring and compensation practices. How does the utility's regulator view new businesses like these, and could regulation limit how independent the unit can be? If regulated customers' money cannot fund the new unit, the utility may need a separate holding company structure, which would make integration at the top even more important.

Reply to Gabriel

Gabriel, your thread on the bank whose employees opened accounts customers had not requested was a strong case study of how culture can go wrong. You recommended a new code of ethics, required training and an annual certification. These are reasonable steps, and many organizations take them after a scandal, but research on ethical culture suggests they address only part of the problem. The bank's own experience supports that concern, since it had a code of conduct and annual training before the misconduct occurred.

Kaptein (2008) built and validated a survey measure of ethical culture with eight dimensions, among them clarity of expectations, how well supervisors and senior managers model ethical behavior, the feasibility of meeting expectations without cutting corners, the support employees receive, the transparency of conduct, how openly ethical issues can be discussed and whether unethical behavior is sanctioned. A code of ethics improves clarity, the first dimension, but it does little on its own for the others. In your case, the problem seems to have come mainly from feasibility: sales targets that employees could not reach honestly, combined with pressure from managers who modeled the wrong behavior and a climate in which raising concerns felt risky.

That suggests the bank's remedy should start with the targets themselves, since no code can persuade employees to accept the loss of their jobs for missing quotas that only misconduct can meet. Leaders would need to model the change visibly, for example by rewarding managers whose branches report honest shortfalls, and the bank would need channels for raising concerns that employees trust, with protection from retaliation. Daft's point that leaders shape culture by what they notice, reward and do under pressure fits here: employees will judge the new code by what happens to the next person who misses a target or reports a problem.

I agree that the code and training are worth doing, since clarity matters, but I would put them after the changes to targets and leadership. Sequencing matters because employees who see a new code arrive while the old targets remain will conclude that the code is for public relations, which would make the next attempt at reform harder. The bank could also measure ethical culture directly, using a survey built on Kaptein's dimensions, before and after the changes, so that leaders know whether employees actually perceive a difference rather than assuming the new policies have worked. Did your research show whether the bank changed its incentive system, or only its policies?

Group Response: Leading Change Through Culture, Decisions and Power

Daft (2016) closes his text with chapters on culture, change, decisions and power, and our group's threads examined four organizations facing change: an electric utility trying to build new businesses, a bank recovering from sales misconduct, a hospital system choosing among sites for a new facility and a manufacturing firm where a merger produced conflict between engineering and sales. Daft's final chapters treat culture and ethics, innovation and change, decision making, and conflict, power and politics as separate topics, but our discussion showed how closely they interact. We drew four principles from our work.

First, culture determines which changes are possible. The utility's culture of reliability and caution was valuable for its core business but hostile to new ventures, and the bank's sales culture made misconduct seem normal. Daft describes culture as the shared values, beliefs and assumptions that guide behavior, often below the level of awareness. Because culture is learned through what succeeds, it tends to reinforce existing activities, a pattern March (1991) described as the tendency of exploitation to drive out exploration. Change that conflicts with the culture will be resisted even when leaders endorse it, so leaders must either protect new activities from the existing culture, as an ambidextrous design does, or change the culture itself.

Second, culture is changed through systems and examples, not statements. The bank case showed that a code of conduct addresses only one dimension of ethical culture; Kaptein (2008) identified others, including the feasibility of meeting expectations ethically, the example set by managers, openness to discussing problems and consistent sanctions. The utility case showed the same lesson for innovation: a new unit needs its own measures, budget and leadership support to develop a different culture. Tushman and O'Reilly (1996) emphasized that ambidextrous organizations combine structural separation with integration by senior leaders, who must actively hold the two cultures together.

Third, decision making in organizations is rarely as rational as it appears. The hospital system's site selection followed a formal analysis of population, travel times and costs, but our member found that the final choice also reflected board members' preferences, the timing of a donor's gift and a consultant's report that happened to be available. In the garbage can model of Cohen et al. (1972), an organization under ambiguity is a loose collection of issues looking for attention, answers looking for issues, people drifting in and out of meetings and occasions that call for a decision, and outcomes depend heavily on which of these happen to meet. Daft presents this model alongside more rational approaches, and our discussion suggested that leaders should recognize when a decision resembles the garbage can and try to bring problems and solutions together deliberately, for example by setting clear criteria before options are proposed.

Fourth, power and politics determine whether change succeeds. In the manufacturing firm, the merger shifted power toward the acquiring company's sales department, and engineers resisted changes they saw as threats to product quality. Pfeffer (1992) argued that power is a normal and necessary part of organizational life and that managers who ignore it cannot accomplish change, because getting things done in organizations requires building support, managing dependencies and understanding the interests of others. Our member recommended that the firm's leaders create a joint product council with equal representation from engineering and sales, giving both groups a legitimate forum for their concerns, a structural way of channeling conflict that Daft discusses.

These principles connect in a sequence. Culture shapes which changes people will accept; systems and leadership examples shape culture; decisions emerge from processes that are partly political and partly accidental; and power determines whose preferences prevail. Leaders who attend to only one element, issuing a code of ethics without changing incentives, creating an innovation unit without senior sponsorship or making a rational decision without building political support, are likely to be disappointed.

The four organizations also showed how the elements can reinforce one another when they are aligned. Our member who studied the hospital noted that its earlier decision to open an outpatient center had succeeded because the chief executive built support among physicians before the formal analysis began, so that the analysis informed a decision people were already prepared to accept. In the manufacturing firm, by contrast, the merger's integration plan was technically sound but ignored the engineering group's loss of influence, and conflict slowed the plan for more than a year. These contrasting outcomes suggest that attention to power and culture is not a distraction from rational management but a condition for it to work.

Our group also noticed that each organization's challenge involved a tension between stability and change. The utility needs reliability and innovation; the bank needs sales and integrity; the hospital needs analysis and timely decisions; the manufacturer needs both engineering quality and commercial responsiveness. Raisch and Birkinshaw (2008) concluded that organizations can manage such tensions in several ways, through structure, context or leadership, rather than choosing one side. For the bank, the tension between sales and integrity might be managed through balanced performance measures that reward customer retention and complaint resolution as well as new accounts; for the manufacturer, through a council that gives engineering and sales equal standing in product decisions. That conclusion matches our experience: the right answer in each case was not to eliminate the tension but to design structures and processes that hold both values together.

In conclusion, the final chapters of Daft's text show that organizational design does not end with structure. Culture, change processes, decision making and power determine how a structure works in practice. Our group's shared conclusion, reached after considerable discussion, is that effective leaders treat these as parts of one system, aligning culture, incentives, decision processes and power with the changes they want to achieve. As a group, we found this forum the most useful of the course because it showed us why well-designed structures still fail. That conclusion also ties together the course as a whole: from strategy and structure through environment, technology and size to culture and power, organizational design is the work of fitting the many parts of an organization to its purpose.

References

Cohen, M. D., March, J. G., & Olsen, J. P. (1972). A garbage can model of organizational choice. Administrative Science Quarterly, 17(1), 1-25. https://doi.org/10.2307/2392088

Daft, R. L. (2016). Organization theory and design (12th ed.). Cengage Learning.

Kaptein, M. (2008). Developing and testing a measure for the ethical culture of organizations: The corporate ethical virtues model. Journal of Organizational Behavior, 29(7), 923-947. https://doi.org/10.1002/job.520

March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71-87. https://doi.org/10.1287/orsc.2.1.71

Pfeffer, J. (1992). Understanding power in organizations. California Management Review, 34(2), 29-50. https://doi.org/10.2307/41166692

Raisch, S., & Birkinshaw, J. (2008). Organizational ambidexterity: Antecedents, outcomes, and moderators. Journal of Management, 34(3), 375-409. https://doi.org/10.1177/0149206308316058

Tushman, M. L., & O'Reilly, C. A., III. (1996). Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review, 38(4), 8-29. https://doi.org/10.2307/41165852