Organizations and Organization Theory

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Nov 15, 2013 (3 years and 9 months ago)

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Organizations and
Organization Theory

What is your opinion?

1.
An organization can be understood primarily
by understanding the people who make it up.


2.
The primary role of managers in business
organizations is to achieve maximum
efficiency.


3.
A CEO’s top priority is to make sure the
organization is designed correctly.

1


2


3


4


5

Strongly Agree




Strongly Disagree


Founded in 1906


Its people
-
oriented culture and innovativeness was the
envy of the corporate world for much of the 20th century.


Bureaucracy took hold, its patents began expiring, and the
Japanese took over. Market share went from 95% to 13%
in a decade (Early 90’s to Early 00’s).


Management cut costs and expanded into insurance and
financial services, but ended up losing billions in insurance
claims.


A succession of CEO’s fought with an organization
paralyzed by politics and management struggles between
new and old management.


A classic case of a 100 year
-
old company
becoming set in its ways and too
bureaucratic.


Was not responsive to rapidly changing
technology.


The “
How we’ve always done it
” mentality
overwhelmed a series of new CEO’s.

Why We Study Org. Theory & Design


Engineers and architects study how to
design structures.


Organizations are structures.


We study them to…


better
understand

organizational situations.


be able to
analyze and diagnose
problems.


be able to
take appropriate corrective action
.

Current Challenges for
Organizations


Global Competition


Ethics and Social Responsibility


Digital Work Environment


Need for Rapid
Responsiveness


Diversity

Diversity Statistics

as of June 2012



White males are no longer the majority of jobholders.


Men (53%)


Women (47%)


36 % of
the above are
non
-
white workers


64 % are white (non
-
Hispanic)


16 % are Hispanic


12 % are African American



5 % are Asian



3 % do not identify in any of these
categories
.

Management Philosophy


“Top
-
Down strategies don’t win ball
-
games….
thousands of strategic choices have to be made
every day by people closest to the action, rather
than assuming that the people at the top have
all the answers.”



Managers’ responsibility is to design a
learning experience
, not to provide rules,
solutions, and authority.”

Royal Dutch Shell CEO

What is an Organization?


Organizations are
social entities

that are
goal directed
, are designed as
deliberately
structured

and
coordinated

activity
systems
, and are
linked to the external
environment.

Kenneth
Boulding’s

Scale

of System Complexity




Social Systems
(all of the following)


Biological Systems
(self maintaining)


Control Systems
(self regulating)


EG: heating and cooling systems


Framework Systems
(
EG
: a bridge)

S
ocial
E
ntities

Complex

Simple


Without goals, there is no need for an
organization.


Goals are
why organizations exist
.


Goals
provide a purpose
for the
organization.


Goals
provide direction
for activities


Goals create a
need for organizational
planning
.

Goal Directed

Different types of organizations

require different structures



Small

Medium
Large


Manufacturing <
--
> Service


Organic <
--
> Mechanistic


Profit and Not
-
for
-
Profit


Categorized by Industry

Deliberately Structured

Organizations are “Open Systems.”


They are dependent on, and interact with,
elements external to the organization.

Linked to External Environment


$20 to the person who can give an
example of a closed system.


An Open System and Its Five Subsystems

Transformation






Environment

Raw Materials

People

Information

Financing



Input

Subsystems

2.
Boundary


Spanning

1.
Production

3. Maintenance

4.
Adaptation


5.
Management

2.
Boundary


Spanning

Products


and

Services

Output

Production
:
Creating and/or adding value to products and services.

Boundary Spanning
:

Handling exchanges with the external environment


(Sales,
Public Relations, Advertising, Hiring, Purchasing, Fund raising, etc.)

:

Scanning the external environment (Forecasting, Market
Research, etc.)

THE SYSTEMS APPROACH


An organization is a system of subsystems.


Any change in any subsystem affects all
other subsystems.


Chaos Theory


Says the environment is too complex, too
random, and too uncertain to be predictable.


The “Butterfly Effect.”

Systems

Organizational Boundaries


Do organizations have boundaries?


Most organizations have highly
elusive and fluid boundaries.



Organizational boundaries are best
viewed in terms of the
organization’s influence.


Henry
Mintzberg’s

Five Basic Parts
of an Organization

Top Management

(Direction, Goals
,
Strategy)

Technical

Support

(Adaptation)

Technical
Core (Production/Transformation)

The people who do the basic work of the organization


Administrative

Support

Staff

Middle

Management


(Implement & Control)

Mintzberg

classified organizations into five different types, each
type emphasizing a different basic part.

Environment

Size

Culture


Technology

Structure

1.
Formalization

2.
Specialization

3.
Hierarchy of Authority

4.
Centralization

5.
Professionalism

6.
Personnel Ratios



Structural
Dimensions

describe

internal characteristics
.



Contextual Dimensions

describe the
broader organization
.

Goals &

Strategy



Formalization

(amount of documentation, rules, procedures,
policies, etc.)


Specialization

(How finely divided is the labor?)


Hierarchy of authority

(levels & spans of management)


A “tall” organization has many levels.


Centralization

(extent to which D
-
M authority is delegated)


Professionalism

(avg. levels of education of employees)


Personnel Ratios

(Ratios of people in any given
subsystem to the overall number of employees)



The student / teacher ratio at TCNJ is one example.



The ratio of faculty to staff



The ratio of freshman to total student body.







SIZE
: (number of people, annual sales, etc.)




TECHNOLOGY
: (How the transformation process is done)


Small
-
batch and unit production (Job Shops)


Large
-
batch and Mass production (Mostly assembly lines)


Continuous process (Oil, paper, chemicals, power generation)



ENVIRONMENT
: (External contexts such as industry, markets,
suppliers, labor, economic conditions, etc.)




GOALS

& STRATEGY
:
(Defines what, where, how and when)



CULTURE
: (The shared values, beliefs, and norms of the
organizational members.)

Three Major Paradigm Shifts


Pre
-
Industrial Revolution


Small, family
-
oriented, Informal, no growth incentives


The Industrial Revolution


Stable environment, formalized, centralized structures.


Bigger was better. Bureaucratic, mechanistic


Currently changing

to a new paradigm


Unstable, unpredictable environments.


Flexible, organic, information
-
based structures


Decentralized, less formalized, global

Changing Organizational Design Paradigms

Vertical

Structure

Routine

Tasks

Rigid

Culture

Competitive

Strategy

Formal

Systems


Horizontal

Structure



Adaptive

Culture



Empowered

Roles



Collaborative

Strategy



Shared

Information




Organizational

Changes to enhance

performance

and survival

Mechanistic

Organic

Stable Environment

Efficient Performance

Turbulent Environment

Learning Organization

Mechanistic &

Bureaucratic

Organic, Flexible

and Responsive

Contemporary Designs




To a great extent, managers and organizations
are still imprinted with the hierarchical,
bureaucratic approach that arose more than a
century ago. Yet the challenges presented by
today’s environment
call for dramatically different
responses from people and organizations.”



(
global competitiveness
,
diversity
,
ethical concerns
,
rapid advances in
technology
,
rise of e
-
business
, a
shift to knowledge and information as
the organization’s most important form of capital
, and
growing worker
expectations
for meaningful work and opportunities for personal and
professional growth
)

“The perspectives of the past do
not

provide a
road map for navigating the world of business
today.”

THE
LEARNING

ORGANIZATION


Participative at all levels to include:


Cooperative problem solving


Information and idea sharing with
minimal hierarchy
(flatter organizations)



They are called learning organizations because
employees learn from sharing ideas and
information, working together to solve problems,
and making the organization more flexible and
adaptable in a rapidly changing environment.




High
Formalization


>
>>>>>>>>>>>>>>>>
>
Low

Formalization


High
Specialization

>>>>>>>>>>>>>>>>>>

Low Specialization


Tall Hierarchy


>>>>>>>>>>>>>>>>>>


Flat Hierarchy


Product
Technology

>>>>>>>>>>>>>>>>>>


Service Technology


Stable Environment


>>>>>>>>>>>>>>>>>>

Unstable Environment


Strong Culture



>>>>>>>>>>>>>>>>>>


Adaptive Culture


Competitive Strategy

>>>>>>>>>>>>>>>>>>

Collaborative

Strategy


Well
-
Defined
Goals

>>>>>>>>>>>>>>>>>>


Flexible

goals


Large Size



>>>>>>>>>>>>>>>>>>


Contingency approach

Organizational Dimensions

and the changing paradigm

Traditional Structures

Newer Structures

Levels of Organizational Analysis


Organizational Behavior Approach


A micro approach
:

Psychological

-

focusing on individuals
and groups, motivation and leadership.


Organizational Theory Approach


A macro approach
:
Sociological

-

focusing on the
organization’s social system and its external environment.


External Environment


Groups of interacting (inter
-
organizational) organizations


Meso

Theory


Integrates the macro and micro approaches and examines
their interrelationships. A realistic but complex analysis.

Framing Organizations



” refers to the context in which we view a
situation or organization. We can use any or all of the
following frames. How we frame the situation often
determines our actions.


uses one or more of the
structural dimensions to view the situation.

looks at people’s needs
and feelings


views organizations in terms of
power, conflict and politics.

focuses on organizational
culture.

Rational versus Social

Rational Approach


Managers strive for
logic and
order.


Cost
-
benefit
analysis


Tends to operate as
a less open system


Results in a more
mechanistic
structure

Social System Approach


Recognizes that
disorder and
irrational behavior
are
common.



Results in a more
organic structure

Resolving the Dichotomy

(Rational vs. Social)


Apply The Contingency Approach


Either mechanistic or organic structures
may be appropriate.


Stable

environments

need the control that
bureaucratic (mechanistic) structures have.


Unstable environments

require the
flexibility and responsiveness of a more
organic approach.

Why we have organic and
mechanistic controls:


Each may be justifiable in appropriate situations.


The term “rational manager” should not exclude an awareness
of the realities of disorder and chaos.



Rational
” implies the use of sound judgment or good sense.


Thus one who manages organizations as closed systems
and considers the world as stable and predictable is not
being rational.


It says a firm that is managed too rationally (i.e.: as a closed
system) will ultimately fail because it will not be adaptive.


Managers must strive to eliminate or reduce disorder while
being tolerant of the fact that disorder can never be
eliminated for very long, if at all.


Organizational Design gives us
the analytical tools to determine
what structures are appropriate
for given situations.

Answers

1. An organization can be understood primarily by
understanding the people who make it up.


Disagree
: An organization has distinct characteristics that are
independent of the nature of the people who make it up.

2. The primary role of managers in business
organizations is to achieve maximum efficiency.


Disagree
: Efficiency is important, but you can be very efficient at
doing the wrong things. Effectiveness is usually considered more
important, although both are desirable.

3. A CEO’s top priority is to make sure the organization
is designed correctly.


Agree
: Top managers have many responsibilities, but the most
important is making sure the organization is designed correctly.


Organization
-
design organizes and focuses people’s work and
shapes their responses to customers and other stakeholders.


Top managers must consider both
structural

and
contextual

dimensions

as well as making sure the various parts of the
organization work together to achieve important goals.



John Chambers: CEO of Cisco Systems

(June 2010 Interview about his job)


A huge part of a leadership role is to drive the
culture of the company and to reinforce it.”


“The other thing that has changed dramatically is a
shift from command and control to collaboration and
teamwork. It sounds easy to do, but it’s hard,
because you are trained that way…”


“Around 80 to 90% of the (CEO’s) job is how we
work together toward common goal
s
, which requires
a different skill set.”

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