Eighth International Conference on Knowledge, Culture and .docx

Eighth International Conference
on Knowledge, Culture and
Change in Organizations
5-8 August 2008
Cambridge University ◦ UK
Knowledge,
Culture, Service,
and “The Next”
An excursion forward into
neo-organizational
structure
J. Louis Spencer, Ph.D.
The Case for
Neo-Organizational
Structures—
a review of present realities
and literature
Eighth International Conference on Knowledge, Culture and
5-8 August 2008 ◦ Cambridge University ◦ UK
1. The industrial age is giving
way to the knowledge era

The era of knowledge-production and knowledge management is
emerging with unparalleled significance in organizations.
Facilitating
learning, creative, and adaptive capacity becomes a central
leader task
that reflects the “dynamic relationship between the
bureaucratic,
administrative functions of the organization and the emergent,
informal
dynamics of complex adaptive systems (CAS).”
(Uhl-Bien, Marion, & McKelvey, 2007, p. 298)
2. Traditional hierarchical
models do not express all
there is to structure
A more effective use of understanding hierarchy is to view it as
supporting organizational members instead of merely
commanding
them. Instead of reflecting the hierarchical needs of the leader
to
maintain power and control, long-term viability of organizations
is
related to a collectively led dynamic system “where bottom-up
structuration emerges.” (Osborn & Hunt, 2007, p. 319)

3. Globally diverse
organizations and cultures
require a global mindset in
organizational structures
Antecedents of cultural diversity are a significant consideration
when
talking about global leadership and change (Hofstede, 2001;
House et al, 2004).
Leaders with a global mindset will develop forward-thinking
organizational
structures reflective of the ability “to influence individuals,
groups,
organizations, and systems that are unlike the leader’s.”
(Javidan, 2007, 2008)
4. Complex adaptive
processes are emergent and
interactive
Organizational processes involve complex adaptive relational
responses that
can be depicted as interactions between interdependent people.
(Stacey et al, 2000, Stacey, 2001, 2003)
Leadership in organizations considers valuable the “complex
adaptive
process that emerges in the interactive ‘spaces between’ people
and
ideas.” (Lichtenstein et al, 2006, p. 2)

5. Flatter, more team-based
structures are becoming
normative
Flatter, more team-based structures are replacing traditional
hierarchies in
organizations. (Shalley & Gilson, 2004)
“As traditional management hierarchies give way to the flatter
organisational
structures of the modern lean and agile companies, a new
generation of
leaders and new models of effective leadership have emerged to
manage
these organisations.” (Found & Harvey, 2007, p. 40)
6. The current trend toward
decentralization and neural
networking of organizations is
gaining momentum
Technological advancements allow unparalleled abilities to
create organizations
that appear to have structure and even headship, but in reality
are a neural
network of individuals capable of functioning in a leadership

role at any given
time. (According to Brafman and Beckstrom (2006) ,“the
absence of structure, leadership, and formal organization, once
considered a weakness, has become a major asset” (p.7).
7. The role of the follower in
organizations has increasing
emphasis
The role of followers in organizations is emerging more than
ever as a
singularly-valued topic in organizational leadership and
coincides with the
advancement and use of innovative—and flatter—organizational
hierarchies. (Baker, 2007; Bennis, 2008; Lichtenstein et al,
2006)
The leader and the led are intimate allies whose structures are
“built of
energy and ideas, led by people who find their joy in the task at
hand, while
embracing each other.” (Bennis, 1999, p. 79)
The Case for Neo-Organizational
Structures—summary

Neo-organizational structures support:
1. Technological capabilities for knowledge sharing
2. More accurate representation for the way leaders and
followers actually relate within an organization
3. The value of diverse cultures within the global
community
4. A leadership paradigm that promotes
learning, creativity, and adaptation
5. An enhanced interplay between
individuals, groups, and teams
6. Greater access to power by all members of
an organization
7. The significance of followers
Each of the summary possibilities is worthy of further
discussion, since each point is the topic of continuing research,
assessment and practice in organizations today. However, two
complimentary considerations provide particular interest as
well as impetus for this theoretical excursion into neo-
organizational structure:
First, organizations reflect what could be termed “Negative
Hierarchy” as we consider what is “the next.”

Second, a negative hierarchical structure facilitates follower
empowerment and greater productivity
Several theoretical streams reflect a kind of
thinking about leadership that facilitates
organizational effectiveness by seeing this
“negative hierarchy” as an advantage. Among
those theories that reflect innovative intentionality
toward followers is servant leadership (SL). SL
stands out as an example of how leaders lead
given the realities of a present future where
organizational change and adaptation are the
norm and followers are vital organizational agents.
(Greenleaf, 1977, 2004; Lichtenstein et al, 2006; Osborn &
Hunt, 2007)

Agapao P1
Humility P2
Altruism P3
Vision S7, B6, RS1, P4
Trust S8, B7, RS4, P5
Hope P6
Service (Servanthood) S10, B10, RS5, PW2, P8, LW9
Empowerment RS9, PW6, P7, LW4
Voluntary Subordination/Relating SJ6, LW8
Authentic Self RS2, SJ5
Covenantal Relationship SJ1
Responsible Morality SJ4
Transcendental Spirituality SJ3
Transforming Influence S5, B3, RS6, SJ2
Leading B8, RS7, PW1
Visioning PW3
Team-building PW5
Empowering others PW6
Shared decision-making PW7
Integrity RS3, PW8
Emotional Healing S3, B2, LW1
Creating Value for the Community LW2
Conceptual Skills S6, B4, LW3
Helping Employees/subordinates Grow/ Succeed S9, B5,
RS8, PW4, LW5
Putting Employees/subordinates First LW6
Behaving Ethically LW7
Altruistic Calling BW11
Wisdom
Persuasive Mapping S5, B3
Organizational Stewardship S8
B: Bennett
BW: Barbuto & Wheeler

LW: Liden et al
P: Patterson
PW: Page & Wong
RS: Russell & Stone
S: Spears
SJ: Sendjaya
As promised, this is
only an excursion.
And now it is time to
come toward
home . . .
Requirements for the Use of
Neo-Organizational Structures
1. Structures should be made to serve the organization and
its members, not the other way around (yes, neo-
organizational structures can be based on traditional

hierarchical models)
2. More effective communication within the organization
facilitates greater learning, innovation, and adaptability.
3. You must have the right people to make it work
• Greater collaborative will and skill.
• Integration of leadership roles that embrace adaptability,
enabling, and learning
• Leaders who are intentionally follower-friendly, follower-
empowering, and follower-serving.
4. Look to where other areas of leadership
theory—even drawing from either diverse
or traditional models—are justifiably
applicable.
Considerations when Transitioning
to Neo-Organizational Structures
(Winston, 2007)
! The organization has to know who it is and whether or why it
wants to remain who it is.
! The organization has to confirm that it lives what it says it is
(alignment of espoused versus practiced values).
! The organization then has to seek people who have the same

values (values alignment).
! The organization has to indoctrinate members into the
methods by which they live out the values.
! The organization then has to help members see
how the individual's vision fits in the overall
organizational vision (should not be difficult if the
values alignment is there).
! Then, the chosen model of leadership sets the
stage for the how, what, when, where.
Some concluding
words about
neo-organizational
structures
• Effective/productive organizations will
press into “the next” by utilizing ever-
increasing technological capability and
connectivity to knowledge and people
along with an embracing, non-
judgmental world mindset toward
extremely diversified cultures.

S
o
m
e
c
o
n
c
lu
d
in
g
w
o
rd
s:
• Effective leaders will reemphasize the
truth that people were not made for
organizations, but that organizations

were made to facilitate service for the
fulfilling of the destiny of the people.
S
o
m
e
c
o
n
c
lu
d
in
g
w
o
rd
s:
• Servant leaders—those who empower

through intentional and creative sacrifice
for the people who comprise the
organization—will navigate “the next”
with by inspiring a sprawling team of
emergent leader-followers whose sense
of commitment and dedication to the
vision of the organization is experienced
as a by-product of living meaningfully.
S
o
m
e
c
o
n
c
lu
d
in
g
w
o
rd
s:

This excursion forward with life and
work, as unpredictable as “the next”
can be, will find servant leaders
filled with an emergent living reality
that is not only being experienced
personally, but is also being
productively replicated through
fellow servant-leaders.
5-8 August 2008
Effective and
Productive
Organizations
Beware:
The cases of
In-N-Out and
Benny Goodman
Effective and
Productive
Organizations
Beware:
The cases of

In-N-Out and
Benny Goodman
Existing profitable organizations beware
about changing organizational
philosophies and paradigms if what you
presently do—albeit appearing as old
theory and highly hierarchical—still
produces the best at what it does. By
changing your structure merely for the
sake of wanting to become current could
destroy your ability to be effective at
what you do. Embracing SL
characteristics as a leader may enhance
the sense of empowerment and support
of followers in an organization, but it may
not mean that changing the
organizational structure to a negative
hierarchy is appropriate.
-istics as a leader may enhance the sense of empowerment and
support of followers in an organization, but it may not mean
that
changing the organizational structure to a negative hierarchy is
appropriate.
Once you are what you are, you can enhance skills
and even do some makeovers, but changing your DNA

can be hazardous. In the case of In-N-Out Burger, they
are world-renown for their product. They also have a
centralized hierarchy. This, admittedly, sounds
controlling—and it is—but the product is consistently
the best in town and the service is always excellent.
What In-N-Out did to maintain a controlling hierarchy,
yet remain extremely desirable to food service
employees is by extending bonuses, providing the best
pay in the industry (numerous In-N-Out managers
make 6 figures), and providing upward mobility
opportunities. Given these factors, do not expect them
to find a need to change. Whether franchise or
company owned, excellence can be achieved with the
right combination of organizational theory coupled with
getting the right people on the bus (Collins, 2001). C
a
se
: I
n
-N
-O
u
t
B
u
rg
e
r:

An example where a change in “operational DNA”
contributed to decline instead of advancement involves
famous popular clarinetist Benny Goodman. A
contemporary of Goodman’s was the famous British
classical clarinetist Reginald Kell, whose outstanding
tone and use of vibrato were world renown during a
great part of the mid-twentieth century. Goodman
came to Reginald Kell after Goodman was already
famous and asked for help with his tone quality. Kell
introduced Goodman to the double-lipped method of
playing the clarinet, thus—according to Kell (personal
communication, Fall 1969)—contributed to the
ruination of Goodman’s career because of the new
sweetness of tone. The old adage sometimes applies:
“If it ain’t broke, don’t fix it.”
C
a
se
: B
e
n
n
y
G

o
o
d
m
a
n
Identifying what could be termed as
“improved or theoretically innovative”
organizational structures does not mean
that all is for all, but rather allows greater
enablement to make informed decisions
about what is most appropriate for the
organizations we lead (and serve).
5-8 August 2008
Knowledge,
Culture, Service,
and “The Next”
An excursion forward into
neo-organizational

structure
J. Louis Spencer, Ph.D.
Problem 1
On October 15, our company has executed a purchase order for
new equipment to be purchased from a supplier in Denmark for
a purchase price of DKK 1.2 million. The equipment is
deliverable on March 31. In order to hedge the commitment to
pay DKK1.2 million, we enter into a forward exchange contract
on October 15 to receive DKK1.8 million on March 31 at an
exchange rate of $0.17: DKK1. Assume the following exchange
gates:
Date
Spot Rates
Forward Rates
October 15
$0.15:DKK1
$0.17:DKK1
December 31
$0.16:DKK1
$0.18:DKK1
March 31
$0.20:DKK1
n/a
Required: Prepare the journal entries to record the following:
· Execution of the purchase order and forward contract
· Adjusting entries at December 31
· Receipt of equipment and payment to equipment supplier on
March 31.
Problem 2
Blanton Corporation is comprised of five operating segments.

Information about each of these segments is as follows (in
thousands):
Linens
Kitchen
Grocery
Furniture
Stationery
Sales to outsiders
$
47
$
253
$
22
$
61
$
14
Intersegment transfers
2

13
7
15
12
Interest revenue - outsiders
1
-
2
4
-

Interest revenue - intersegment
-
3
-
-
11
Operating expenses - outsiders
58
207
20
51

13
Operating expenses - intersegment
1
10
3
8
11
Interest expense
-
6
-

1
-
Income taxes
(2
)
5
2
3
12
Tangible assets
9
58

9
6
4
Intangible assets
-
-
2
4
-
Intersegment loans
4

3
-
-
-
-
Required:
A) Which operating segments are reportable under the revenue
test?
B) What is the total amount of revenues in applying the revenue
test?
C) Which operating segments are reportable under the profit or
loss test?
D) In applying the profit or loss test, what is the minimum
amount an operating segment must have in order to meet the
profit or loss test for a reportable segment?
E) Which operating segments are reportable under the asset
test?
F) In applying the asset test, what is the minimum amount an
operating segment must have in order to meet the asset test for a
reportable segment?

G) Which operating segments are reportable?
H) According to the test results for reportable segments, is there
a sufficient number of reported segments or should any
additional segments also be disclosed? Explain the reason for
your conclusion.
Problem 3
Assume that our company owns a subsidiary operating in
Switzerland. The subsidiary has adopted the Swiss Franc (CHF)
as its functional currency. Our company operates this subsidiary
like a division or branch office, making all of its operating
decisions, including pricing its products. We conclude,
therefore, that the functional currency of this subsidiary is the
$US and that its financial statements must be remeasured prior
to consolidation. Following are the subsidiary’s financial
statements (in CHF) for the most recent year:
Income statement:
Sales
3,000,000
Cost of goods sold
-2,321,500
Gross profit
678,500
Operating expenses
-252,000
Depreciation
-225,000
Remeasurement gain or loss
Net income
201,500

Statement of retained earnings:
BOY retained earnings
1,506,500
Net income
201,500
Dividends
-75,000
Ending retained earnings
1,633,000
Balance sheet:
Assets
Cash
850,000
Accounts receivable
1,273,300
Inventory
650,000
PPE, net
927,000
Total Assets
3,700,300
Liabilities and Stockholders’ Equity
Current Liabilities
250,000
Long-term Liabilities
1,097,300
Common Stock
220,000

APIC
500,000
Retained Earnings
1,633,000
Total Liabilities & Equity
3,700,300
Our subsidiary also reports the following additional financial
statement information (in CHF):
Beginning inventory
450,000
Purchases
2,521,500
Ending inventory
-650,000
Cost of Goods Sold
2,321,500
Land
52,000
Building
750,000
Accumulated Depreciation—Building
-500,000
Equipment
1,250,000
Accumulated Depreciation—Equipment
-625,000
PPE, net
927,000
Depreciation expense—Building
100,000
Depreciation expense—Equipment

125,000
Depreciation expense
225,000
The relevant exchange rates for the $US value of the Swiss
Franc (CHF) are as follows:
BOY Rate
$0.60
EOY rate
$0.80
Avg. rate
$0.70
Dividend rate
$0.77
Historical rates:
Beginning inventory
$0.60
Land
$0.35
Building
$0.35
Equipment
$0.45
Historical rate (Common Stock and APIC)
$0.20
Required: Remeasure the subsidiary’s income statement,
statement of retained earnings, and balance sheet into $US for
the current year (assume that the BOY Retained Earnings is
$1,100,000).

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