OD Chapter 1
What is organizations?
are social entities that are goal-directed, are designed as deliberately structured and
coordinated activity systems, and are linked to the external environment, key element of
organization is not a place or policies, organizations are made up of people and their
relationships with one another to perform essential functions that help attain goals.
From Multinationals to Nonprofits organizations
o Some organizations are large, multinational corporations, others are small, family owned
businesses, and still others are nonprofit organizations or governmental agencies, .
o The primary difference is that managers in businesses direct their activities toward
earning money for the company, whereas managers in nonprofits direct their efforts
toward generating some kind of social impact
o Financial resources for nonprofits typically come from government appropriations,
grants, and donations rather than from the sale of products or services to customers
o Managers in nonprofit organizations also deal with many diverse stakeholders and must
market their services to attract not only clients (customers) but also volunteers and donors
o t, since nonprofit organizations do not have a conventional “bottom line,” managers often
struggle with the question of what constitutes organizational effectiveness. It is easy to
measure dollars and cents, but nonprofits have to measure intangible goals such as
“improve public health,” “make a difference in the lives of the disenfranchised,” or
“enhance appreciation of the arts.
Organizations exist to do the following:(organizations are key)
A. Bring together resources to achieve desired goals and outcomes
B. Produce goods and services efficiently
C. Facilitate innovation
D. Use modern manufacturing and information technologies
E. Adapt to and influence a changing environment
F. Create value for owners, customers, and employees
G. Accommodate ongoing challenges of diversity, ethics, and the motivation and
coordination of employees
Through all of these activities, organizations create value for their owners, customers, and
employees, a company can be profitable only when the value it creates is greater than the cost
of resources.
organizations have to cope with and accommodate today’s challenges of workforce diversity
and growing concerns over ethics and social responsibility, as well as find effective ways to
motivate employees to work together to accomplish organizational goals
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Dimensions of organization design:
These dimensions describe organizations in much the same way that personality and physical
traits describe people
Structural dimensions: provide labels to describe the internal characteristics of an
organization. They create a basis for measuring and comparing organizations
1) Formalization: pertains to the amount of written documentation in the organization.
Documentation includes, job descriptions, regulations, and policy manuals. These
written documents describe behavior and activities, Formalization is often measured
by simply counting the number of pages of documentation within the organization
2) Specialization: is the degree to which organizational tasks are subdivided into
separate jobs. If specialization is extensive, each employee performs only a narrow
range of tasks. If specialization is low, employees perform a wide range of tasks in
their jobs. Specialization is sometimes referred to as the division of labor
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). When spans of control are narrow, the hierarchy tends to be
tall. When spans of control are wide, the hierarchy of authority will be shorter.
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, Examples of
organizational decisions that might be centralized or decentralized include purchasing
equipment, choosing suppliers, setting prices, hiring employees
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5) Professionalism: is the level of formal education and training of employees.
Professionalism is considered high when employees require long periods of training
to hold jobs in the organization. Professionalism is generally measured as the average
number of years of education of employees, which could be as high as twenty in a
medical practice and less than ten in a construction company
6) Personnel ratios: refer to the deployment of people to various functions and
departments it includes:
o Administrative ratio
o Clerical ratio
o Professional staff ratio
o The ratio of indirect to direct labor employee
A personnel ratio is measured by dividing the number of employees in a classification
by the total number of organizational employees
Contextual dimensions: characterize the whole organization, including its size, technology,
environment, and goals. They describe the organizational setting that influences and shapes
the structural dimensions
1) Size: can be measured for the organization as a whole or for specific components,
such as a plant or division. Because organizations are social systems, size is typically
measured by the number of employees. Other measures such as total sales or total
assets also reflect magnitude, but they do not indicate the size of the human part of the
system.
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 it provides for customers and includes such things as flexible
manufacturing, advanced information systems, and the Internet
3) Environment: includes all elements outside the boundary of the organization. Key
elements include:
o the industry
o government,
o customers
o suppliers
o financial community
The environmental elements that affect an organization the most are often other
organizations.
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4) Organization’s goals and strategy: define the purpose and competitive techniques
that set it apart from other organizations,
o Goals: are often written down as an enduring statement of company intent.
o Strategy: is the plan of action that describes resource allocation and activities for
dealing with the environment and for reaching the organization’s goals.
Goals and strategies define the scope of operations and the relationship with
employees, customers, and competitors
5) organization’s culture: is the underlying set of key values, beliefs, understandings,
and norms shared by employees. These underlying values and norms may pertain to:
o ethical behavior
o commitment to employees
o efficiency, or customer service
An organization’s culture is UNWRITTEN but can be observed in its stories, slogans,
ceremonies, dress, and office layout.
Also Contextual dimensions can be confusing because they represent both the organization
and the environment. Contextual dimensions can be envisioned as a set of overlapping
elements that underlie an organization’s structure and work processes
Performance and effectiveness outcome:
Efficiency: refers to the amount of resources used to achieve the organization’s goals. It is
based on the quantity of raw materials, money, and employees necessary to produce a given
level of output.
Effectiveness: is a broader term, meaning the degree to which an organization achieves its
goals.
Many organizations are using new technology to improve efficiency and effectiveness. For
example, the health care industry is striving to increase efficiency by using information
technology to reduce paperwork and streamline procedures
Achieving effectiveness is not always a simple matter because different people want different
things from the organization. For customers, the primary concern is high-quality products and
services at a reasonable price, Managers carefully balance the needs and interests of various
stakeholders in setting goals and striving for effectiveness. This is referred to as the
stakeholder approach
Stakeholder approach: which integrates diverse organizational activities by looking at
various organizational stakeholders and what they want from the organization
A stakeholder: is any group within or outside of the organization that has a stake in the
organization’s performance. The satisfaction level of each group can be assessed as an
indication of the organization’s performance and effectiveness
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the evaluation of organization theory and design (read the description on page 22 on the
book):
HISTORICAL PERSPECTIVES:
1) Efficiency Is Everything. Pioneered by Frederick Winslow Taylor, scientific
management, emphasizes scientifically determined jobs and management practices as
the way to improve efficiency and labor productivity. Taylor proposed that workers
“could be retooled like machines, their physical and mental gears recalibrated for
better productivity. He insisted that management itself would have to change and
emphasized that decisions based on rules of thumb and tradition should be replaced
with precise procedures developed after careful study of individual situations. To use
this approach, managers develop precise, standard procedures for doing each job,
select workers with appropriate abilities, train workers in the standard procedures,
carefully plan work, and provide wage incentives to increase output.
2) How to Get Organized. Another subfield of the classical perspective took a broader
look at the organization. Whereas scientific management focused primarily on the
technical core,
administrative principles looked at the design and functioning of the organization as
a whole. For example, Henri Fayol proposed fourteen principles of management, such
as “each subordinate receives orders from only one superior” (unity of command) and
“similar activities in an organization should be grouped together under one manager”
(unity of direction). These principles formed the foundation for modern management
practice and organization design. The scientific management and administrative
principles approaches were powerful and gave organizations fundamental new ideas
for establishing high productivity and increasing prosperity. Administrative principles
in particular 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 standard rules
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3) Early work on industrial psychology and human relations received little attention
because of the prominence of scientific management. However, a major breakthrough
occurred with a series of experiments at a Chicago electric company, which came to
be known as the Hawthorne Studies. Interpretations of these studies at the time
concluded that positive treatment of employees improved their motivation and
productivity. The publication of these findings led to a revolution in worker treatment
and laid the groundwork for subsequent work examining treatment of workers,
leadership, motivation, and human resource management. These human relations and
behavioral approaches added new and important contributions to the study of
management and organizations
4) Can Bureaucracies Be Flexible? (return to page 25)
Contingency: 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.46 What works in one setting may not work in another setting.
There is no “one best way, ” Contingency theory means it depends for example: (read
the example on page 26 on the book)
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ORGANIZATIONAL CONFIGURATION
Another important insight from organization design researchers is how organizations are
configured—that is, what makes up an organization’s parts and how do the various parts
fit together?
Mintzberg’s ORGANIZATIONAL Types
One framework proposed by Henry Mintzberg suggests that every organization has five
basic parts: In real-life organizations, the five parts are interrelated and often serve more
than one function.
1) Technical Core: includes people who do the basic work of the organization. This part
actually produces the product and service outputs of the organization. This is where
the primary transformation from inputs to outputs takes place. The technical core is
the production department in a manufacturing firm
2) The technical support: function helps the organization adapt to the environment.
Technical support employees such as engineers, researchers, and information
technology professionals scan the environment for problems, opportunities, and
technological developments. Technical support is responsible for creating innovations
in the technical core, helping the organization change and adapt.
3) Administrative Support: The administrative support function is responsible for the
smooth operation and upkeep of the organization, including its physical and human
elements. This includes human resource activities such as recruiting and hiring,
establishing compensation and benefits, and employee training and development, as
well as maintenance activities such as cleaning of buildings and service and repair of
machines.
4) Management: is a distinct function, responsible for directing and coordinating other
parts of the organization. Top management provides direction, planning, strategy,
goals, and policies for the entire organization or major divisions. Middle management
is responsible for implementation and coordination at the departmental level. In
traditional organizations, middle managers are responsible for mediating between top
management and the technical core, such as implementing rules and passing
information up and down the hierarchy
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Mintzberg’s Five ORGANIZATION Types
1. entrepreneurial structure: typically a new, small start-up company. It consists mainly
of a top manager and workers in the technical core. The organization is managed and
coordinated by direct supervision from the top rather than by middle managers or support
departments. Top management is the key part of the structure. Few support staff are
needed. The primary goal of the organization is to survive and become established in its
industry. There is little formalization or specialization. This form is suited to a dynamic
environment because the simplicity and flexibility enable it to maneuver quickly and
compete successfully with larger, less adaptable organizations.
2. machine bureaucracy: is very large, typically mature, and the technical core is often
oriented to mass production It has fully elaborated technical and administrative
departments, The narrow middle management area reflects the tall hierarchy for control.
This form reflects extensive formalization and specialization, with a primary goal of
efficiency. This form is suited to a simple, stable environment. It would not do well in a
dynamic environment because the bureaucracy is not adaptable.
3. professional bureaucracy: is the size and power of the technical core, which is made up
of highly skilled professionals, such as in hospitals, universities, The technical support
staff is small or nonexistent, large administrative support staff is needed to support the
professionals and handle the organization’s routine administrative activities, The primary
goals are quality and effectiveness, and although there is some specialization and
formalization, professionals in the technical core have autonomy. Professional
organizations typically provide services rather than tangible goods, and they exist in
complex environments
4. diversified form: are mature firms that are extremely large and are subdivided into
product or market groups, shown in Exhibit 1.7(d). There is a relatively small top
management and a small technical support group for the top level. There is a larger
administrative support staff to handle paperwork to and from the divisions.
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5. Adhocracy: develops in a complex, rapidly changing environment. The design goal is
frequent innovation and meeting continually changing needs, as in the aerospace and
defense industries shows the various parts (middle management, technical, and
administrative support) merged together into an amorphous mass in the middle. The main
structure consists of many overlapping teams rather than a vertical hierarchy.
Adhocracies are usually young or middle-aged and can grow quite large. The
organization has professional employees, and the technical and administrative support
staff are part of the mix of ongoing innovation teams and projects rather than being
placed in separate departments. ( return to page 30 on the book)
CONTEMPORARY DESIGN IDEAS:
TRUE OR FALSE : organizations are still imprinted with the hierarchical, bureaucratic,
formalized approach that arose in the nineteenth century (answer is true) ,
by today’s dynamic environment require greater flexibility and adaptability for most
organizations
organizations and managers may be seen as shifting from a mindset based on rigid
mechanical systems to one based on flexible natural systems.
For most of the twentieth century, Newtonian science, which suggests that the world
functions as a well-ordered machine, continued to guide managers’ thinking about
organizations. The environment was perceived as orderly and predictable and the role of
managers was to maintain stability. This mindset worked quite well for the Industrial
Age
The environment for today’s companies, however, is anything but stable, managers can
no longer maintain an illusion of order and predictability
Chaos theory: suggests that relationships in complex, adaptive system including
organizations are nonlinear and made up of numerous interconnections and divergent
choices that create unintended effects and render the whole unpredictable, The ideas of
chaos theory suggest that organizations should be viewed more as natural systems than as
well-oiled, predictable machines
EFFICIENT PERFORMANCE VERSUS THE LEARNING ORGANIZATION
Many managers are redesigning their companies toward something called the
Learning organization: The learning organization promotes communication and
collaboration so that everyone is engaged in identifying and solving problems, enabling
the organization to continuously experiment, improve, and increase its capability .
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compares organizations designed for efficient performance with those designed for
continuous learning by looking at five elements of organization design:
o Structure
o Tasks/roles
o System Formality
o Culture
o Strategy
all of these elements are interconnected and influence one another.
From Vertical to Horizontal Structure (DETAILS IN PAGE 31)
From Routine Tasks to Empowered Roles (DETAILS IN PAGE 31)
From Formal Control Systems to Shared Information (DETAILS IN PAGE 33)
From Competitive to Collaborative Strategy (DETAILS IN PAGE 33)
From Rigid to Adaptive Culture (DETAILS IN PAGE 33 & 34)
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