Ch01 Organizations and Organization Theory
Chapter 1: Organizations and Organization Theory Current Challenges of Organizations • Globalization o Markets, technologies, and organizations are becoming increasingly interconnected • Ethics and social responsibility o The list of execs and major corporations involved in financial and ethical scandals continues to grow • Speed of responsiveness o Globalization and advancing technology has accelerated the pace at which organizations in all industries must roll out new products and services to stay competitive • The digital workplace In today’s workplace, many employees perform much of their work on computers and may work in virtual teams, connected electronically to colleagues around the world • Diversity o By 2050, it is estimated that 85% of entrants into the workforce will be women and people of colour What Is an Organization? Organizations: social entities that are goal-directed, are designed as deliberately structured and coordinated activity system, and are linked to the external environment Types of Organizations • Multinational corporations • Small, family-owned shops • For-profit versus non-profit organizations
Organizations exist to do the following: 1.Bring together resources to achieve desired goals and outcomes 2.Produce goods and services efficiently 3.
Facilitate innovation 4. Use modern manufacturing and information technologies 5. Adapt to influence a changing environment 6. Create value for owners, customers, and employees 7. Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees Perspectives on Organizations Closed System • A system that is autonomous, enclosed, and not dependent on its environment • Don’t truly exist today Early management concepts such as scientific management, leadership style, and industrial engineering were closed-system approaches Open System • A system that must interact with the environment to survive • It both consumes resources and exports resources to the environment, and must continually adapt to the environment An Open System and its Subsystems [pic] Organization Configuration • Technical core o Includes people who do the basic work of the organization o The primary transformation of inputs to outputs occurs here o Includes production department, teachers and classes, medical activities in hospitals, etc. Technical Support o Helps the organization adapt to the environment o Technical support employees such as engineers and researchers scan the environment for problems, opportunities, and technological developments o Responsible for creating innovations in the technical core • Administrative Support o Responsible for the smooth operation and upkeep of the organization, including its physical and human elements o Includes HR activities like recruiting and hiring, making compensation/benefit plans, employee training, etc. • Management A distinct subsystem responsible for directing and coordinating other parts of the organization o Top management provides direction, strategy, goals, and policies for the entire organization or major divisions o Middle management is responsible for implementation and coordination at the departmental level [pic] Dimensions of Organization Design Structural Dimensions 1. Formalization ? Pertains to the amount of written documentation in the organization, including procedures, job descriptions, regulations, and policy manuals, describing behaviour and activities ?
A large state university would be high on formulization and a small, family-owned business would be low on formulization 2. Specialization ? The degree to which organizational tasks are subdivided into separate jobs 3. Hierarchy of authority ? Describes who reports to whom and the span of control for each manager ? The hierarchy is related to span of control (the number of employees reporting to a supervisor), and when the span is narrow, the hierarchy is tall, and vice versa 4. Centralization ? Refers to the hierarchical level that has authority to make a decision ?
When decision making is kept at the top level, the organization is centralized ? When decisions are delegated to lower organizational levels, it is decentralized 5. Professionalism ? The level of formal education and training of employees ? It’s considered high when employees require long periods of training ? Professionalism is measured as the average number of years of education of employees 6. Personnel ratios ? Refer to the development of people to various functions and departments ?
Includes the administrative ratio, the clerical ratio, the professional staff ratio, and the ratio of indirect to direct labour employees ? A personnel ratio is measured by dividing the number of employees in a classification by the total number of organizational employees [pic] Contextual Dimensions 1. Size ? The organization’s magnitute as reflected in the number of people in the organization ? Because organization’s are social systems, it’s typically measured by # of employees 2. Organizational technology ? Refers to the tools, techniques, and actions used to transform inputs into outputs ?
It concerns how the organization actually produces the products and services and includes things such as flexible manufacturing, advanced info systems, and the Internet 3. Environment ? Includes all elements outside the boundary of the organization ? Key elements include the industry, government, customers, suppliers, and the financial community 4. Goals and Strategies ? Define the purpose and competitive techniques that set it apart from other organizations ? Goals are written down as an enduring statement of company intent ?
A strategy is the plan of action that describes resource allocation and activities for dealing with the environment and for reaching the organization’s goals 5. Culture ? The underlying set of key values, beliefs, understandings, and norms shared by employees ? These values may pertain to ethical behaviour, commitment to employees, efficiency, or customer service Performance and Effectiveness Outcomes • Managers adjust structural and contextual dimensions and organizational subsystems to most efficiently and effectively transform inputs into outputs nd provide value • Efficiency refers to the amount of resources used to achieve the organization’s goals, and it is based on the quantity of inputs necessary to produce a given level of output • Effectiveness is the degree to which an organization achieves its goals • Stakeholder is any group within or outside an organization that has a stake in the organization’s performance • Stakeholder approach assesses the satisfaction of stakeholders as an indicator of the organization’s performance (also called constituency approach) • Major stakeholders and what they expect: Owners/stockholders: financial return o Employees: satisfaction, pay, supervision o Customers: high-quality goods/services, service, value o Creditors: creditworthiness, fiscal responsibility o Management: efficiency, effectiveness o Government: obedience to laws and regulations, fair competition o Union: worker pay, benefits Community: good corporate citizen, contribution to community affairs o Suppliers: satisfactory transactions, revenue from purchases The Evolution of Organization Theory and Design Historical Perspectives • Efficiency is everything o Frederick Winslow Taylor developed scientific management, which claims decisions about organization and job design should be based on precise, scientific procedures • How to get organized Administrative principles focuses on the total organization (looks at the organization as a whole) o For example, Henri Fayol proposed 14 principles of management, such as “each subordinate receives orders from only one superior” and “similar activities in an organization should be grouped together under one manager” o These gave organizations fundamental new ideas for estabilishing high productivity and increasing prosperity o Administrative principles contributed to the development of bureaucratic organizations, which emphasized designing and managing organizations on an impersonal, rational basis through such elements as clearly defined authority and responsibility, formal recordkeeping, and uniform application of stand rules • People o Hawthorn Studies are a series of experiments on worker productivity that began in 1924 o It attributed employees’ increased output to managers’ better treatment of them during the study • Environment Many problems occur when all organizations are treated similar, which is the case with scientific management o Structures and systems that work in the retail division will not be appropriate for the manufacturing division o Consistency means that one thing depends on other things, and for organizations to be effective, there must be a “goodness of fit” between their structure and the conditions in their external environment o Some organizations experience a certain environment, use a routine technology, and desire efficiency, and in this case, bureaucratic controls would be appropriate o But today, almost all organizations operate in a highly uncertain environment Contemporary Organizational Design Today’s organizations and managers are shifting from a mindset based on mechanical systems to one based on natural and biological systems • Chaos theory suggests that relationships in complex, adaptive systems – including organizations – are made up of numerous interconnections that create unintended effects and render the environment unpredictable • Many organizations are shifting from strict vertical hierarchies to flexible, decentralized structures that emphasize horizontal collaboration, widespread info sharing, and adaptability • Learning organization is an organization in which everyone is engaged in identifying and solving problems, enabling the organization to continuously experiment, improve, and increase its capability Efficient Performance versus the Learning Organization • From vertical to horizontal structure • From routine tasks to empowered tasks • From formal control systems to shared information • From competitive to collaborative strategy • From rigid to adaptive culture ———————– Transformation Process Environment Raw Materials People Information resources Financial resources Input Subsystems Boundary Spanning Production, Maintenance, Adaptation, Management Boundary Spanning Products and Services Output Top Management