Chapter 8- Formal Structure

Organizations have a formal structure which is the way that the organization is organized by
those with responsibility for managing the organization. They create the formal structures that
enable the organization to meet its stated objectives.
A formal organizational structure refers to a type of structured and planned organizational
structure that may be adopted by an organization. This type of organizational structure is the
direct opposite of an informal formal structure, which does not adhere to any type of formal
structure. As the name suggests, a formal organizational structure is concerned with the order of
operations in the organization. It seeks to define the roles of the individuals in the workplace and
expects them to adhere to the designated roles.
One of the attributes of a formal organizational structure is the fact that it divides the roles of the
individuals in the organization in a hierarchical manner, from the top to the bottom. The position
at the top is reserved for the most important individual in the organization. This level of
importance cascades downward, defining the succeeding individuals as well as what constitute
the conditions of their various offices. For instance, a company with many subsidiaries may have
one Chief Executive Officer (CEO), who is the most important executive in the organization.
The various branches may have managers who are in charge of their branches but still must
answer to the CEO. Each branch will have a formal organizational structure in which the branch
managers will be the top executives, followed by various department heads, followed by
supervisors, etc.
The purpose of creating a formal organizational structure in a company is to prevent the chaos
that would ensue if individuals did not know what was expected of them in various situations.
Another reason for the establishment of a formal organizational structure is so that companies
can be more orderly, organized and effective. A formal organizational structure can be applied to
most types of business models, however; it is mostly used by large organizations with many
employees and divisions.

Even though a formal organizational structure can make a company be more effective, it also has
its drawbacks. The various levels of departments and leadership create a bottleneck that may
make every important decision-making processes tedious. For instance, if the workers in a
manufacturing plant have any type of grievances, they will have to go through their immediate
supervisor, who may have a general supervisor. The general supervisor will forward the
complaint to the plant manager, who may forward it to the human resources department. Then
the human resources department will review the complaint and decide whether to forward it to
the branch manager, who would then forward it to the regional manager. This tedious process
would continue until the complaint reaches the head office, going through the same process
again until it reaches the CEO.
Relationship between Organizational Structure and Strategy
Organizational Structure and strategy are related because organizational strategy helps a
company define and build its organizational structure. A company's organizational structure is
based on the result of the analysis of organizational strategy. The company will use these results
to determine its areas of concentration and how to position itself in order to succeed.
One of the first steps a company takes in its initial stages is assessing its operational environment
in order to determine the conditions in which it must operate. This involves checking out the
competition, consumer trends, culture and other factors. The company will find out the strengths
and weaknesses of its competition, the buying habits of the consumers, and its economic
capabilities. If the competition sells their own product for $10 US Dollars (USD), the company
would have to work out if the best strategy is to sell its own product above or beyond that price.
Selling its own product at a discount is a strategy that might appeal to a certain demographic. On
the contrary, selling the same product above the price of the competition is also a strategy that
might confer exclusivity and appeal to a certain demographic.
A company will also find out what kind market exists in its environment by researching the
people in that environment. If the majority of the people are highly educated with greater
spending power, making a product exclusive might appeal to them. If the majority of customers
belong to the lower income bracket, selling a product at a discount will work better. Other
organizational strategy might include outsourcing some of the jobs to minimize costs. It may also
include locating the manufacturing plant in countries with cheap labor to enable the company to
offer its products at a competitive price.
The relationship between organizational structure and strategy becomes clearer when the
companys strategy is in place. With a clear focus of what it wants to achieve, the organization
will proceed to align its structure in such a manner to best achieve this. It will allocate
responsibilities for optimal results, create branches, and decide whether individual efforts or
group participation is the best method for it to achieve its goals. The organizational structure and
strategy will also help the company decide if the tone of the company should be strictly formal,
semi-formal or informal. All of these decisions can be made after determining the organizational
strategy of the company.
What Are the Functions of Organizational Structure?
Businesses function most efficiently when all employees understand their jobs and the proper
procedures. Setting up an organizational structure helps employees understand what their roles
are within the company and who to address when decisions must be made. A strong
organizational structure keeps your business running smoothly with a clear plan for overcoming
obstacles.
Hierarchy
The basic function of an organizational structure is to provide a clear chain of command and
define which employees report to which managers. Many companies use multiple levels of
management, where an associate reports to a manager who then reports to a director. The
directors often report directly to the owners. The structure also shows who conducts performance
evaluations for which employee: managers for associates and directors for managers, for
example.
Teams
Creating an organizational structure usually helps define teams who work closely together. These
teams can be organized by department type, such as accounting or marketing, or by geographic
region, such as all sales and administrative staff serving the Southeast. A team can also include
all staff working on a specific project or product. The structure sets the teams, which typically
report to the same manager or director. This helps ensure that all the staff members on the team
are working toward the same goal, have well-defined job duties and can get to know each other
to help balance each others' strengths and weaknesses.
Decision Making
Employees understand to take important decisions to their managers, who might escalate them
up the ladder if necessary. A structure helps define exactly who is the correct decision maker for
each employee, although some businesses allow employees more decision-making abilities than
others. In retail businesses, employees might make customer service decisions within certain
parameters, such as refunds up to $100. In a marketing department, the staff can order collateral
pieces up to the project's budget without management approval, for example. However, the
organizational structure helps clearly define which decisions need management approval and
who to go to for those decisions. Also, it shows who that manager reports to when decision
appeals are necessary.

Advancement Potential
Employees often are motivated by the opportunity to advance within the company for more
responsibility and higher pay. An organizational structure provides that advancement opportunity
with higher-level positions and a clear understanding of what those positions are responsible for.
A successful structure assigns job duties to positions instead of people. As the people advance or
change positions, the new person filling the vacancy takes on the same duties as the previous
employee. This allows people who advance to know what duties will be expected in their new
positions and to train the people who take over their old positions.

Organizational structure refers to the way an organization establishes authority, responsibility
and communication within the organization. It defines reporting relationships, lines of authority,
job positions and responsibilities, and reflects an organizations environment and culture.
Bureaucratic, or tall, and flat organizational structures are two of the most common types of
organizational structures.
Differences in Organizational Characteristics
Routine, specialization and formal rules and procedures characterize bureaucratic structures.
Bureaucratic organizations focus on efficiency and on policy and stringent regulations to
improve effectiveness and deliver results. Bureaucratic organizations assign individuals
specialized duties and routinely monitor their performance. Communication within a
bureaucratic structure is formal and commonly relies on written messages, reports and memos.
Flatter organizations, on the other hand, hold that flexibility and autonomy are more effective in
realizing organizational goals. Flat organizations are more unstructured and encourage
employees to be creative and find out-of-the-box solutions for problems. Communication in flat
organizations is informal and much of it entails face-to-face meetings.
Organizational Layers
Bureaucratic structures typically have multiple hierarchical layers with power flowing from the
upper layers to the lowest. The number of layers varies between different organizations. It is
common for larger companies to have more than five layers, while smaller businesses may have
two or three layers only. Flat organizations have fewer layers than bureaucratic structures and the
distance is relatively short between the topmost layer, which comprises the company CEO or
president, and the lowest layer.
Centralized vs. Decentralized
Bureaucratic organizations are centralized structures while flat organizations are decentralized
structures. Centralized structures imply that authority and decision-making concentrates within a
select few individuals -- typically the company CEO and his core team. The remaining members
of the organization take orders directly from the top and have limited say in decision-making. A
decentralized structure implies that management authorizes individuals at lower organizational
levels to make decisions.


Considerations
Larger companies typically use the bureaucratic organizational structure for the multitude of
strengths it offers. The structure focuses on standardization, administrative efficiency, control
and coordination, and a clear management structure. The weaknesses of bureaucratic structures
are slower decision-making, high levels of supervisor and managerial overheads, lack of
employee freedom and lower employee morale. Flatter structures are common to smaller
organizations. Communication is clear and quick, job satisfaction and employee morale is
higher, and decision-making is easier. Management structure is unclear in a flat structure, an
employee may report to multiple supervisors, and the structure is unfeasible for large
organizations.
Chapter 9- Informal Systems
Informal systems also serve the function of meeting individual needs but these may only
coincidentally correspond with the needs of a formal organization in which the participants may
share membership. Participants are selected for their personal qualities and capacity to give
loyalty rather than for their formal, paper,-based qualifications. The relationships express
obligation, and the participants utilize their resources, including economic resources, social
contacts, and power in meeting these obligations to each other. These informal systems are
rooted in the power of PERSONALITY.
- Friendship
- Patronage
- Guanxi
Patronage
Patronage is the power to confer favors, give support and protection, or to appoint to office or
position. Providers of patronage (patrons) and receivers (clients) form a network through which
access to various resources is obtained. It originates from unequal distribution of power and,
since ancient times, is closely linked with corruption.

Guanxi
Guanxi describes the basic dynamic in personalized networks of influence, and is a central idea
in Chinese society. In Western media, the pinyin romanization of this Chinese word is becoming
more widely used instead of the two common translations"connections" and "relationships"
as neither of those terms sufficiently reflects the wide cultural implications that guanxi describes.

Guanxi is a general Chinese term used to describe relationships that may result in the exchanges
of favors or "connections" that are beneficial for the parties involved. Sounds like a simple way
to create business right? The truth is this type of relationship can become somewhat time
consuming and complex.
A Chinese term meaning "networks" or "connections," understood to be a network of
relationships designed to provide support and cooperation among the parties involved in doing
business. According to the Los Angeles Chinese Learning Center, by obtaining the right guanxi,
organizations minimize the "risks, frustrations, and disappointments when doing business in
China."
The elements of exchanges based on "guanxi" carry a long tradition in doing business in China
and Chinese communities. Good "guanxi" can be the key needed to opening doors otherwise
closed.
In simple terms "guanxi" appears to carry an element of trust. It's true that a lot of business in
China revolves around circles of personal and mutual trust. So for any outsider to do business in
China they must take the time to form relationships or "guanxi." This has been a big obstacle for
many western businesses trying to enter the Chinese market. Business connections made through
"guanxi" must be maintained to ensure proper positioning for future business.

Most western educated businessmen think that this kind of relationship is only based on direct
cash exchanges. Although this is correct on some levels it isn't the norm today. Often "guanxi"
transactions are "hidden" and not made obvious to the casual observer. Although the direct
giving of "gifts" is a common form of building "guanxi" it isn't the only way. Inviting or hosting
dinners for prospective clients or business partners can create an environment for "guanxi." Also
the exchange of favors or "inside information" may amount to good "guanxi." However, not all
"guanxi" is good "guanxi." Relationships built on "guanxi" can quickly fade or disappear if part
of the "relationship chain" is put into question for any reason. There is a fine line between
"guanxi" and bribery. The path to good "guanxi" isn't an easy path to follow. Tipping to one side
can put relationships made in this way a case for legal action. As China is creating its own terms
for capitalism and legal business transactions the distinction many not become any clearer. So
creating "guanxi" is like walking into a thick mist where you constantly have to feel your way
through.




Chapter 11- globalization and localization
Globalization is the process of designing and developing applications that function for multiple
cultures. Localization is the process of customizing your application for a given culture and
locale. The topics in this section describe how to create ASP.NET Web applications that can be
adapted to different languages and cultures.
The world is becoming smaller and smaller. Due to the innovative technologies, geographic
locations are no longer barriers for global economy. Countries are becoming closer than ever
with numerous tangible and intangible ties and connections. Culture stands out as a key issue we
are facing today. Whenever we schedule a trip or expand our business in another country, the
very first class to learn is always the culture. Globalization and localization is a task we need to
handle carefully.
In a general sense, localization is the process of customizing a product or strategy so that it meets
the needs of customers in specific foreign countries. Differences in culture, language or legal
regulations often require companies to make changes to their products in order to better reach
potential customers abroad and to avoid cultural blunders.
In the ever changing business world where doing business on an international level versus the
domestic level, business is becoming more complicated. Determining whether to use expatriates
or home nationals, bridging the cultural divide, hiring intelligent, flexible managers, and
determining the best competitive advantage for the organization are all strategic issues that need
to be addressed in the strategic planning stage.
Creating an effective global work force means knowing when to use "expats," when to hire
"locals" and how to be a "glopat" is a task for leaders or managers who want to succeed in a
foreign country or exotic culture.
The scarcity of qualified managers has become a major constraint on the speed with which
multinational companies can expand their international sales. The growth of the knowledge-
based society, along with the pressures of opening up emerging markets, has led cutting-edge
global companies to recognize now more than ever that human resources and intellectual capital
are as significant as financial assets in building sustainable competitive advantage. To follow
their lead, chief executives in other multinational companies will have to bridge the yawning
chasm between their companies' human resources rhetoric and reality.
These international managers must then be meshed into a cohesive network in which they
quickly identify and leverage good ideas worldwide.
Such an integrated network depends on executive continuity. This in turn requires career
management to insure that internal qualified executives are readily available when vacancies
occur around the world and that good managers do not jump ship because they have not been
recognized.
The trade-off between standardization and adaptation has been an ongoing debate in
international corporations. Globalization (standardization) is having a uniform product and
marketing strategy throughout the world. The benefits are economies of scale and brand
consistency. However, a policy of localization or adaptation maybe more effective in reaching
potential markets.
Before entering a new market, companies have to answer questions such as: Which is the human
resource strategy in the new market? How can a company choose the appropriate decision
maker? How can companies choose a balancing point between globalization and localization? Is
it possible to pursue a mix and match strategy? What kind of training will be provided for local
managers? Will offer opportunities for local leaders to step up?
Today's global leaders build partnerships. As the organization standardizes and integrates its
operations worldwide, leaders are required to align themselves with supply chains which may
appear seamless in a strategic plan but which, in reality, involve real people with diverse cultural
backgrounds and communication styles. The new organizational prototype demands new
individual skills to meet this complexity; it presents planning and communication challenges
requiring new tools in response.
A foundational element for any global leader is the need to look at the big picture while at the
same time consulting with key stakeholders at every level. In some ways, the work of equipping
global leaders is that of creating more "un-CEOs." New leaders are those who are adept at
building partnerships, both one-to-one and one-to-many, as a matter of habit. They emphasize
horizontal leadership such as peer coaching, for example, to help project stakeholders help each
other.
Building partnerships is one of the most important competencies for global leaders of the future.
Leaders have to successfully build trusting and long-term strategic relationships, internally and
externally, and leverage those relationships, in order to get the job done.
Finally, remember to be curious about other cultures and enjoy the challenges of communicating
in a competitive, fast-paced global business environment.