Organizational Theory Design and Change Summary

8/10/2019 Organizational Theory Design and Change Summary

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Summary Organizational Theory design

and Change

Theory is a system of statements targeted at describing, explain and predicting a real world

phenomenon (Bacharach 1989). Theory is about abstraction from the observable.

Why theory matters? Helps us to synthesize and integrate observations made into a consistent

explanatory framework + can serve as a basic for making predictions on the effects of managerial

decision making + helps conclusions to be generalizable across different settings.

Chapter 1 Organization and organizational effectiveness

Organizations are intangible (=ontastbaar)

Essence of organization: grouping people and other resources to produce good and other services

Organization: is a tool people use to coordinate their actions to obtain something they desire or

value. An organization is a response and a means satisfying some human needs.

Entrepreneurship: is used to describe the process by which people recognize opportunities to satisfy

needs and then gather and use resources to meet those needs.

Organizational environment: is the set of forces and conditions that operate beyond an

organizations boundaries but affect its ability to acquire and use resources to create value.

Value creation model: can be used to describe the activities of most kinds of organizations.

Why do organizations exist?

- To increase specialization and the division of labor. Together more can be accomplished than

working separately

- To use large-scale technology to achieve economies of scale and/or economies of scope.

- To management the organizational environment

-

To economize on transaction costs the costs associated with negotiating, monitoring, and

governing exchanges between people.

- To exert power and control. Organizations can exert great pressure on individuals to conform to

task and production requirements in order to increase production efficiency.

Economies of scale: cost savings that result when good and services are produced in large volume onautomated production lines


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Economies of scope: cost savings that result when an organization in able to use underutilized

resources more effectively because they can be shared across different products or tasks.

Organizational theory: is the study of how organization function and how they affect and are

affected by the environmentin which they operate.

Organizational structure : the formal system of task and authority relationships that control howpeople coordinate their actions and use resources to achieve organizational goals.

Organizational culture: the set of shared values and norms that controls organizational members

interactions with each other and with suppliers, customers and other people outside the

organization

Organizational design: the process by which managers select and manage aspects of structure and

cultureso that an organization can control the activities necessary to achieve goals.

Organizational structure and culture are the means the organization uses to achieve its goals.

Organizational design is about how and whyvarious means are chosen.

Organizational change: the process which organizations redesign their structures and cultures to

move from their present state to some desired future state to increase their effectiveness.

Contingency: an event that might occur and must be planned for, like rising gas prices or the

emergence of a new competitor. (global environment and changing technology are raising

contingency)

Contingency theory: No one best way to organize.It depends context. Theoretical question:

- What are core relationships context characteristicsstructure characteristics.

- What are relationships contextstructure

-

What are the mechanisms at work

When environmental uncertainty increases the effectiveness of organic structures increases.

Uncertainty ----- (+mechanism) --Organicness of structures

Uncertainty = Information essential for task executioninformation at hand before task execution

6x environmental context

Rational

man.

perspectiv

es

Contingency Universal mechanism: organization as information processing

systems

Configuration Classes or organization with their own theoriesDaft & Anand Sequence of organizational forms

Resource

Dependence

Structuring of relationships with external parties

Not

so

rational

Populatie exology Evolutionary theory of genesis and disappearance of organization

forms

Institutional theory Organization adapt to norms and expectations in the

environment

Assumptions:

-

Organization is open system


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- In their task execution organizations are confronted with uncertainty

- Organization can be viewed as information processing system

Coordination mechanism (Mintzberg)

Competitive advantage: the ability of one company to outperform another because its managers are

able to create more value from the resources at their disposal

Strategy: the specific pattern of decisions and actions that managers take to use core competence to

achieve a competitive advantage and outperform competitors

Many sources of competitive advantage, such as skills in research and development that result in

novel product features or state-of-the-art technology, evaporate because they are relatively easy for

competitors to imitate. It is much more difficult to imitate good organizational design and carefully

managed change that brings into being a successful organizational structure and culture.

Why did the performance of these blue-chip companies deteriorate to such a degree? A major

reason is that managers lost control of their organizational structures and cultures.

Control (in the context of controlling the organization) means having control of the external

environment and having the ability to attract resources and customers.

Innovation: developing an organizations skills and capabilities so the organization can discover new

products and processes.

Efficiency: developing modern production facilities using new information technologies that can

produce and distribute a companys products in timely and cost-effective manner.

Approaches to measure organizational effectiveness

Approach What evaluates? Goals to set to measure effectivenessExternal

resource

approach

Ability to secure, manage, and

control scarce and valued skills

and resources

- Lower costs of inputs

-

Obtain high-quality inputs of raw materials

and employees

- Increase market share

- Increase stock price

Internal

systems

approach

Ability to be innovative and

function quickly and responsively

- Cut decision-making time

- Increase rate of product innovation

- Reduce time to market

Technical

approach

Ability to convert skills and

resources into goods and services

efficiency

- Increase product quality

- Reduce number of defects / costs

-

Improve customer service

-

Reduce delivery time to customer

Two types of goals used to evaluate organizational effectivenessofficial goals and operative goals

Official goals: guiding principles which are stated in annual report and in other public documents.

These are lay out in the mission (goals that explain why the organization exists and what it should be

doing).

Operative goals: specific long-term and short-term goals that guide managers and employees as they

perform the work of the organization.


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Chapter 2 stakeholders, managers and ethics

Inducements: include rewards such as money, power, and organizational status

Contribution: the skills, knowledge, and expertise that organizations require of their members

during task performance

Inside stakeholders: are people who are closest to an organization and have the strongest or most

direct claim on organization resourcesshareholders, managers and the workforce.

Stakeholder Contribution to the organization Inducement to contribute

Inside

Shareholders Money and capital Dividends and stock appreciation

Managers Skills and expertise Salaries, bonuses, status, and power

Workforce Skills and expertise Wages, bonuses, stable employment,

and promotion

Outside

Customers Revenue from purchase of goods andservices

Quality and price of goods and services

Suppliers High-quality inputs Revenue from purchase of inputs

Government Rules governing good business practice Fair and free competition

Unions Free and fair collective bargaining Equitable share of inducements

Community Social and economic infrastructure Revenues, taxes and employment

General public Customer loyalty and reputation Natural pride

When shareholders delegate to managers the right to coordinate and use organizational skills and

resources, a divorce of ownership and control occurs.

The allocation of rewards, or inducements, is an important component of organizational

effectiveness because the inducements offered to stakeholders now determine their motivation.

Authority:the power to hold people accountable for their actions and to make decisions concerning

the use of organizational resources.

There are two kinds of directors:

- Inside directorsholds offices in a companys formal hierarchy: they are full-time employees of

the corporation.

-

Outside directorsare not employees of the company: many are professional directors who hold

positions on the board of many companies.The goal of outside directors is to bring objectivity

to a companys decision making and to balance the power of inside directors.

Chain of command: the system of hierarchical reporting relationships in an organization

CEO is responsible for setting the organizations goals and designing it. The CEO selects key

executives to occupy the topmost levels of the managerial hierarchy. The CEO determines top

managements rewards and incentives. The CEO controls the allocation of scare resources such as

money and decision-making power among the organizations functional areas or business divisions.

The CEOs actions and reputations have a major impact on inside and outside stakeholders views ofthe organization and affect the organizations ability to attract resources from its environment.


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After the chair and CEO, the chief operating officer (COO) is in line. The COO reports directly to the

CEO, and together they share the principal responsibility for managing the business. At the next level

of top management are the executive vice presidentsthey overseeing and managing a companys

most significant line and staff responsibilities.

Line role:managers who have direct responsibility for the production of goods and services.

Staff role: managers who are in charge of a specific organizational function such as sale or R&D

Top-management team: a group of managers who report the CEO and COO and help the CEO set the

companys strategy and its long-term goals and objectives.

Corporate managers: the members of the top-management team whose responsibility is to set

strategy for the corporation as a whole.

Divisional managers: managers who set policy only for the division they head

Functional managers: managers who are responsible for developing the functional skills and

capabilities that collectively provide the core competences that give the organization its competitive

advantage.

Agency theory: offers a useful way of understanding the complex authority relationship between top

management and the board of directors. An agency relation arises whenever one person (the

principal) delegates decision-making authority or control over resources to another (the agent).

Agency problema problem in determining managerial accountability that arises when delegating

authority to managers.

Moral hazard problem: when (1) a principal finds it very difficult to evaluate how well the agent has

performed because the agent possesses an information advantage, and (2) the agent has an

incentive to pursue goals and objectives that are different from the principals.

Self-dealing: managers who take advantage of their position in an organization to act in ways to

further their own self-interest.

To overcome the agency problem governance mechanisms: the forms of control that align the

interest of principal and agent so both parties have the incentive to work together to maximize

organization effectiveness. Incentives can be stock-based compensation schemes or promotion

tournaments and career paths.

Stock-based compensation schemes: monetary rewards in the form of stocks or stock options that

are linked to the companys performance.

Ethics: moral principles or beliefs about what is right or wrong. Ethical beliefs alter and change as

time passes, and as they do so, laws change to reflect the changing ethical beliefs of a society.

Ethical groundsof a decision:

- Within the accepted values of the organization environment?

-

Am I willing to see the decision known by all stakeholders which might be affected by it?-

What would people close to me think of it?


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Whether a decision is ethicalor not? three models

1. The utilitarian: an ethical decision is one that produces the greatest good for the greatest

number of people

2. Moral rights. An ethical decision is a decision that best maintains and protects the

fundamental rights and privileges of the people affect by it. For example ethical decisionsprotect peoples right to freedom, life and safety etc.

3. Justices model: an ethical decision is a decision that distributes benefits and harmsamong

stakeholders in a fair, equitable or impartial way.

Ethical rules develop over time through negotiation, compromise and bargaining among

stakeholders. Ethical rules also can evolve from outright conflict and competition between different

stakeholder groups where the ability of one group to impose their solution on another groups

decides which ethical rules will be followed.

Sources of organizational ethics:

- Societal ethics are codified in a societys legal system, in its custom and practices, and in the

unwritten norms and values.

- Professional ethicsare the moral rules and values that a group of people uses to control the way

they perform a task or use resources.

- Individual ethics are the personal and moral standards used by individuals to structure their

interactions with other people.

Why do ethical rules develop?One of the most important reasons why ethical rules governing action

develop is to slow down or temper the pursuit of self-interest.

Why does unethical behavior occurs?Personal ethics, which are different for anyone because they

are taught in the environment where you live. Self-interest or outside pressure, many studies have

shown that the likelihood of a persons engaging in unethical or criminal behavior is much greater

when outside pressure exists for that person to do so.

Creating an ethical organization:

(1) to use the willingness of a person to have his or her action or decision shared with other people.

(2) putting in place an incentive for ethical behavior and punish those who behave unethically.

(3) a manager can make decisions to allocate organizational resources and pursue policies based on

the organizations ethical position. The following steps needs to be taken:

1.

Designing and ethical structure and control system

2. Creating an ethical culture the values, rules and norms that define an organizations

ethical position are part of culture. The creation of an ethical corporate culture requires

commitment at all levels of an organizations, from top down.

3. Supporting the interests of stakeholder groups


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Chapter 3 Organizing in a changing global environment

Environment: is the set of pressures and forces surrounding an organization that have the potential

to affect the way it operates and its access to scare resources.

Organizational domain: the particular range of goods and servicesthat the organization produces.

An organization establishes its domain by deciding how to manage the forces in its environment tomaximize its ability to secure important resources. An organization attempts to structure its

transactions with the environment to protect and enlarge its domain so that it can increase its ability

to create value for customers, shareholders employees and other stakeholders.

Specific environment: the forces from outside stakeholder groups that directly affectan organization

ability to secure resources, i.e. customers, distributors, unions, competitors, suppliers and the

government.

General environment: the forces that shape the specific environment and affect the ability of all

organizations in a particular environment to obtain resources (DESTEP)

Environmental complexity: the strength, number, and interconnectedness of the specific and generalforces that an organization has to manage. Complexity can increase greatly when specific and

general forces in the environment become interconnectedthat is, when forces begin to interact so

their effects on the organization become unpredictable. Three factors causing uncertainty:

1. Complexity

2. DynamismThe degree to which forces in the specific and general environments change

quickly over time and thus contribute to the uncertainty an organization faces.

3. RichnessThe amount of resources available to support and organizations domain. In rich

environment the uncertainty is low.

Resource dependency theory: a theory that argues the goal of an organization is to minimize its

dependence on other organizations for the supply of scare resources in its environment and to find

ways of influencing them to make resources available. Which implies that an organization has to

manage two aspects:

1. It has to exert influence over other organization so it can obtain resources

2. It must respond to the needs and demand of the other organizations in its environment

To reduce uncertainty, an organization needs to devise interorganizational strategiesto manage the

resources interdependencies in its specific and general environment.

In the specific environment, two basic types of interdependenciescause uncertainty:

1.

Symbiotic: interdependencies that exist between an organization and its suppliers and

distributors

2. Competitive: interdependencies that exist among organizations that compete for scare

inputs and outputs.

The more formal a linkage, the greater are both the direct coordination and the likelihood that

coordination is based on an explicit written agreement or involves some common ownership

between organizations.

The more informal a linkage, the more indirect or loose is the method of coordination and the more

likely is the coordination to be based on an implicit or unspoken agreement.

Strategies for managing symbiotic resource interdependencies

Merger and

takeover

Reputation Cooptation Strategic

alliance

Informal Formal


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Reputation: a state in which an organization is held in high regard an trusted by other parties

because of its fair and honest business practices.

Cooptation:a strategy that manages symbiotic interdependencies by neutralizing problematic forces

in the specific environment. A common way to coopt problematic forces such as customers, suppliers

or other stakeholders it to bring them within the organization and in effect make them inside

stakeholders.Interlocking directorate: a linage that results when a director from one company sits

on the board of another company

Strategic Alliance: an agreement that commits two or more companies to share their resources to

develop a new joint business opportunity. Types of alliance:

- Long term contracts

- Networks:a cluster of different organizations whose actions are coordinated by contracts and

agreements rather than through a formal hierarchy of authority

- Minority ownership: when organizations buy a minority ownership stake in each other this

makes organizations extremely interdependent, and that interdependence forges strong

cooperative bonds.- Joint ventures: a strategic alliance among two or more organization that agree to jointly establish

and share the ownership of a newbusiness.

Keiretsu: a group of organizations, each of which owns shares in the other organizations in the

group, that work together to further the groups interests. A division is made between capital

keiretsu and financial keiretsu.

Merger and takeover: most formal strategy for managing symbiotic resource interdependencies it to

merge with or take over a supplier or distributor because now resource exchanges occur within one

organization rather than between organizations.

Strategies for managing competitive resource interdependencies

Collusion: a secret agreement among competitors to share information for a deceitful or illegal

purpose

Cartel: an association of firms that explicitly agreeto coordinate their activities

Third-party linkage mechanisms: a regulatory body that allows organizations to share information

and regulate the way they compete, i.e. a trade association, an organizations that represents

companies in the same industry and enables competitors to meet, share information and informally

allow them to monitor one anothers activities. The third-party linkage mechanisms provide rules and

standards that regulate and stabilize industry competition and so reduce the complexity of the

environment and thus increases its richness.

Strategic alliance: competitors can cooperate and form a joint venture to develop common

technology that will save them a lot of money.

Merger andCollusion and

cartels

Third-party

linkage

Strategic

Informal Formal


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Merger and takeover: mergers and takeovers can improve a companys competitive position by

allowing the company to strengthen and enlarge its domain and increase its ability to produce a

wider range of products to better serve more customers.

Transaction cost theory: the cost of negotiating, monitoring and governing exchanges between

people. transaction costs also arise when organizations exchange resources or information.

According to the transaction cost theory, the goal of the organization is to minimize the costs of

exchanging resources in the environment and the costs of managing exchanges inside the

organization. Sources of transaction cost are:

- Environmental uncertainty vs bounded rationally

-

Opportunism vs small numbers

-

Risk vs specific assets

Specific assets: investments- in skills, machinery, knowledge and information that create value in

one particular exchange relationship but have no value in any other exchange relations.

Transaction costs and linkage mechanisms: organizations base their choice of interorganizationallinkage mechanisms on the level of transaction costs involved in an exchange relationship.

Transaction costs are lowwhen these conditions exists:

- Organizations are exchanging nonspecific goods and services

- Uncertainty is low

-

There are many possible exchange partners

In these environmental conditions, it is easy for organizations to negotiate and monitor

internorganizational behavior. Thus, in a low-transaction-cost environment, organizations can use

relatively informal linkage mechanisms, such as reputation and unwritten, word-of-mouth contracts.

Why not use the formal linkage mechanisms all the time? internal transaction costs are calledbureaucratic costs to distinguish them from the transaction costs of exchanges between

organizations in the environment.

Managers should choose the link mechanism that gives the most transaction cost savings at the

lowest bureaucratic cost.

The relatively informal linkage mechanisms avoid the need for an organization to incur bureaucratic

costs. Three linkage mechanisms that help organization to avoid bureaucratic costs while still

minimizing transaction costs are:

- Keiretsu mechanism for achieving the benefits of a formal linkage mechanism without

incurring its costs.- Franchising is a business authorized to sell a companys product in a certain area. The

franchiser sells the right to use its resources to a person or group in return for a flat fee or a

share of the profits.

- Outsourcing the process of moving a value creation activity that was performed inside an

organization to outside where it is done by another company

A transaction cost approach sheds light on why and how organization choose different linkage

mechanisms to manage their interdependencies


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Chapter 4 Basic Challenges of Organizational Design

Differentiation: the process by which an organization allocates people and resources to

organizational tasks and establishes the task and authority relationships that allow the organization

to achieve its goals.

Division of labor: the process of establishing and controlling the degree of specialization in the

organization.

In a simple organization, differentiation is low because the division of labor is low. In complex

organization, both the division of labor and differentiation are high.

Organizational role: the set of task-related behaviors required of a person by his or her position in an

organization.

Function: a subunit composed of a group of people, working together, who possess similar skills or

use the same kind of knowledge, tools or techniques to perform their jobs.

Division:a subunit that consists of a collection of functions or departments that share responsibility

for producing a particular good or service.

As organizations grow in size, they differentiate into five different kinds of functions;

- Support functions: facilitate an organizations control of its relations with its environment and its

stakeholders. It includes purchasing, sales and marketing, public relations and legal affairs.

- Production functions: functions that manage and improve the efficiency of an organizations

conversion processes so more value is created.

- Maintenance functions: functions that enable an organization to keep its departments in

operations.

- Adaptive functions: functions that allow an organization to adjust to changes in the

environment. For example research and development, market research and long-range planning.

-

Managerial functions: functions that facilitate the control of coordination of activities within andamong departments. For example acquisition of, investment in, and control of resources.

Vertical differentiation: the way an organization designs its hierarchy of authority and creates

reporting relationships to link organizational roles and subunits. Vertical differentiation establishes

the distribution of authority between levels to give the organization more control over its activities

and increase its ability to create value.

Horizontal differentiation: the way an organization groups organizational tasks into roles and roles

into subunits (functions and divisions)become more specialized and productive and increases its

ability to create value.


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Lawrence and Lorisch: interdepartmental differences

-

Departmental structures, procedures

- Members emotional-, value- and cognitive orientations.

Organizational design challenges

Subunit orientation: a tendency to view ones role in the organization strictly from the perspective of

the time frame, goals, and interpersonal orientations of ones subunit.

Integration: the process of coordinating various tasks, functions, and divisions so that they work

together and not at cross purposes. Seven integrating mechanisms or techniques are given that

managers can use as their organizations level of differentiation increases:

- Hierarchy of authoritysimplest integrating technique. It differentiates people by the amount

of authority they possess. Because the hierarchy dictates who report to whom, it coordinates

various organization roles.

- Direct contactmanagers meet face to face to coordinate

-

Liaison role a specific manager is given responsibility for coordinating with managers from

other subunits on behalf of his or her subunit.

- Task forcemanagers meet in temporary committees to coordinate cross-functional activities

- Teammanagers meet regularly in permanent committees to coordinate activities

- Integrating rolea new role is established to coordinate the activities of two or more functions

or divisions

- Integrating departmenta new department is created to coordinate the activities of functions

or divisions

Managers facing the challenge of deciding how and how much to differentiate and integratemust

do two things:

(1) carefully guide the process of differentiation so an organization builds the core competences that

give it a competitive advantage: and

(2) carefully integrate the organization by choosing appropriate coordinating mechanisms that allow

subunits to cooperate and work together to strengthen its core competences.

Mutual adjustment: the compromise that emerges when decision making and coordination are

evolutionary processes and people use their judgment rather than standardized rules to address a

problem. Mutual adjustment typically implies decentralization of authoritybecause employees must

have the authority to commit the organization to certain actions when they make decisions.

Formalization: the use of written rules and procedures to standardize operations

Socialization:the process by which organizational members learn the norms of an organization and

internalize these unwritten rules of conduct.

Mechanistic and organic organizational structures two useful concepts for understanding how

managers manipulate all these challenges collectively to influence the way an organizational

structure works are the concepts of mechanistic structure and organic structure.


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Mechanistic structures result when an

organization makes these choices

Organic structures result when an organization

makes these choices

Individual specialization : employees work

separately and specialize in one clearly defined

task

Joint specialization : employees work together

and coordinate their actions to find the best way

of performing a task

Simple integration mechanisms: hierarchy ofauthority is clearly defined and is the major

integrating mechanism

Complex integrating mechanisms: task forcesand teams are the major integrating

mechanisms

Centralization: authority to control tasks is kept

at the top of the organization. Most

communication is vertical

Decentralization: authority is control tasks is

delegated to people at all levels in the

organization. Most communication is lateral.

Standardization: extensive use is made of rules

and SOPs to coordinate tasks, and work process

is predictable.

Mutual adjustment: extensive use is made of

face-to-face contact to coordinate tasks, and

work process is relatively unpredictable

Mechanistic structures: structures that are designed to induce people to behave in predictable,accountable ways.

Organic structures: structures that promote flexibility, so people initiate change and can adapt

quickly to changing conditions. People assume the authority to make decisions as organizational

needs dictate.

Contingency approach: a management approach in which the design of an organizations structure is

tailored to the sources of uncertaintyfacing an organization. One of the most important of these is

the nature of the environment. In order the manage its environment effectively, an organization

should design its structure for fit with the environment in which the organization operates. an

organization must design its internal structure to control the external environment.

Lawrence and Lorsch found that when the environment is perceived as unstable and uncertain,

organizations are more effective if they are less formalized, more decentralized and more reliant on

mutual adjustment. When the environment is perceived as relatively stable and certain,

organizations are more effective if they have a more centralized, formalized and standardized

structure. The message of their study wasorganizations must adapt their structures to match the

environment in which they operate if they are to be effective

Burns and Stalkerfound that companies with an organic structurewere more effective in unstable,

changing environments that were companies with a mechanistic structure. And visa versa

What is the reason for those results? When the environment is rapidly changing and on-the-spot

decision have to be made, lower-level employees need to have the authority to make importantdecisionsin other words, they need to be empowered.

Managers confront five design challenges as they coordinate organizational activities. The choices

they make are interrelated and collectively determine how effectively an organization operates:

1.

Choose the right extent of vertical and horizontal differentiation

2.

Strike an appropriate balance between differentiation and integration and use appropriate

integrating mechanisms.

3. Strike an appropriate balance between the centralization and decentralization of decision-

making authority

4.

Strike an appropriate balance between standardization and mutual adjustment by using theright amounts of formalization and socialization.


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How to measure the effectiveness of an organization?effectiveness may be conceived is presented

by Quinn en Rohrbaughs Competing Values model of the interpretations which experts of

management and organization give to the effectiveness concept. The reason for their study was the

observation that although effectiveness is a central concept in organization research and theory little

agreement exists on the meaning of the concept. It turned out that the various understandings could

be arranged along two dimensions. The first one focusindicates if emphasis is put on either theinternal or the external functioning of the organization. The second dimension structurerefers

to the question if flexibility or rather control is deemed important. These two dimensions

orthogonally combined produce four different dominant effectiveness approaches.

Sum up competing values model:

- conceptualeffectiveness multifaceted

- Practical : almost always for each organization a mix of various effectiveness considerations

-

Practical: effectiveness values as strategic choices management

Management is apparently primarily externally focused on growth by flexibility. However, at the

same time management realizes that effectiveness on other criteria need to be maintained at a

minimum level at least.

Organization models:

- Functional structure

- Divisional structure

- Matrix structure

-

Horizontal organization

Open forms:

- Hollow organization (AppleFoxconn)

- Modular organization

- Virtual organization

Chapter 5 Designing Organizational Structure: Authority and ControlAn organization does two things to improve its ability to control:

1.

It increases the number of managers it uses to monitor, evaluate and reward employees

2. It increases the number of levels in its managerial hierarchy so that hierarchy of authority

becomes taller over time

Tall organization: an organization in which the hierarchy has many levels relative to the size of the

organization. Problems which arising are: Communication problems, motivation problems.

Bureaucratic costs.


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problem is that organizational member come to rely too much on rules and SOPs to make decisions,

and this overreliance makes them unresponsive to the needs of customers and other stakeholders.

Role conflict: the state of opposition that occurs when two or more people have different views of

what another person should do and, as a result, make conflicting demands on the person.

Role ambiguity: occurs when a persons tasks or authority are not clearly defined ant he person

becomes afraid to act on or take responsibility for anything.

Management by objectives (MBO): a system of evaluating subordinates on their ability to achieve

specific organizational goals and to meet operating budgets.

Altering the formal structure often disrupts the informal norms that make the organization work.

The increasing use of IT has led to a decentralization of authority in organizations and an increasing

use of teams.

Empowerment: the process of giving employees throughout an organization the authority to make

important decisions and to be responsible for their outcomes.

Self-managed teams: work groups consisting of people who are jointly responsible for ensuring that

the team accomplishes its goals and who are empowered to lead themselves.

Cross-functional teams: formal work groups of employees from across an organizations different

function that are empowered to direct and coordinate the value-creation activities necessary to

complete different programs or projects.

Contingent workers: workers who are employed for temporary periods by an organization and whoreceive no indirect benefits such as health insurance or pensions.

As an organization grows, the increase in the size of the managerial component is less than

proportional to the increase in the size of the organization.

According to the principle of minimum chain of command, an organization should choose the

minimum number of hierarchical levels consistent with the contingencies it faces.

Managers need to recognize how the informal organization affect the way the formal hierarchy of

authority works and make sure the two fit enhance organizational performance.

Chapter 6 Designing Organizational Structure: Specialization and

coordination

functional structure: a design that groups people together on the basis of their common expertise

and experience or because they use the same resources.

The problem facing a successful organization is how to keep control of increasingly complex activities

as it grows and differentiates.

communication problemsAs more organizational function develop, each with its own hierarchy,they become increasingly distance from one another.


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measurements problems, location problems, customer problems, strategic problems

how to avoid these problems? combine two functions into one in the long run. Such changes to the

functional structure increase control by increasing integration between functions.

from functional structure to divisional structure

the structure needed is will simultaneously (1)increases managers' control of its different individual subunits so that subunits can better meet

product and customer needs, and (2) allow managers to control and integrate the operation of the

whole company. managers regain control of their organizations when they decide to adopt a more

complex structure, which is the result of three design choices:

1. an increase in vertical differentiation. This involves increasing the number of levels in the

hierarchy, deciding how much decision-making authority to centralize at the top of the

organization and deciding how much to rules, SOPs and norms to standardize the behavior of

low-levels employees.

2.

an increase in horizontal differentiation. overlaying a functional grouping of activities withsome other kind of subunit grouping.

3. an increase in integration. increase integration between subunits.

Divisional structure: a structure in which function are grouped together according to the specific

demand of products, markets or customers. three kinds of product structure:

product division structure: an organization whose products are broadly similar and aimed at

the same market will choose to centralize support services. a divisional structure in which a

centralized set of support functions services the needs of a number of different product

lines.

multidivisional structure: an organization whose products are very different and that

operates in several different markets or industries. a structure in which support function are

placed in self-contained divisions. self-contained means that each division has its own set of

support functions and controls its own value-creation activities. the divisions are overseen by

corporate headquarters staff. Only when an organization has a multidivisional structure does

the management hierarchy expand to include the three main levels of management:

corporate managers, who oversee the operations of all divisions; divisional managers, who

run the individual divisions and functional mangers who are responsible for developing the

organization's core competences

Advantages Disadvantages

increased organizational effectiveness

increased control

profitable growth

internal labor market

managing the corporate-divisional

relationship

coordination problems between divisions

transfer pricing (the price at which one

division sells a product or information about

innovations to another division)

bureaucratic costs

communication problems

product team structure: an organization whose products are very complex technologically or

whose characteristics change rapidly to suit changing customer needs. a divisional structure


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in which specialists from the support functions are combined into product development

teams that specialize in the needs of particular kind of product.

geographic divisional structure: a divisional structure in which divisions are organized according to

the requirements of the different locations in which an organization operates.

A market structure aligns functional skills and competences with the product needs of different

customer groups. Marketing, not manufacturing, determines how managers decide how to group

organizational activities into divisions.

Matrix structure: a structure in which people and resources are grouped in two ways simultaneously:

by function and by project or product. the organizations itself is very flat and decentralized authority.

Advantages of Matrix Disadvantages of Matrix

the use of cross-functional teams is designed to

reduce functional barriers and overcome the

problem of subunit orientation it opens up communication between functional

specialists and provides an opportunity for

team members from different functions to

learn from one another and develop their skills

it enables an organization to effectively use the

skills of it specialized employees who move

from product to product as needed

the dual functional and product focus

promotes concern for both cost and quality

a matrix lacks the advantages of

bureaucratic structure

the lack of clearly defined hierarchy ofauthority can lead to conflict between

functional product teams

matrix structures have to be carefully

managed to retain their flexibility

because they do not automatically

produce the high level of coordination

multidivisional matrix structure: a structure that provides for more integration between corporate

and divisional managers and between divisional managers.

hybrid structure: the structure of a large organization that has many divisions and simultaneously

uses many different types of organizational structures.

recall also how outsourcing is moving a value-creation activity that was done inside an organization

to the outside, where it is performed by another company.

Advantages of network structures: the degree that an organization can find a network partner that

can perform a specific functional activity reliability, and at a lower cost, production costs are

reduced. A network structure allows an organization to act in an organic way.

disadvantages of network structures: the coordination problems arising from having different

companies perform different parts of the work process would be enormous.

the boundary less organization is composed of people who are linked by computers, faxes, CAD

systems, they may rarely or ever see one another face to face. People come and go as their services

are needed, much as in a matrix structure, but they are not formal members of an organization. they

are independent function experts who form an alliance with an organization


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e-commerce: trade that takes place between organizations, and between organizations and

customer using IT and the Internet.

Chapter 7 Creating and Managing Organizational Culture

Organizational culture: the set of shared values and norms that control organizational members

interaction with each other and with people outside the organization. to increase organizational

effectiveness. Because it control the way members make decisions.

Values:general criteria, standards or guiding principles that people use to determine which types of

behaviors, evens, situations, and outcomes are desirable or undesirable

Terminal value: a desired end state or outcome that people seek to achieve. For example excellence

Instrumental value: a desired mode of behavior. Include, working hard, respecting traditions.

An organizations culture consists of the end states that the organization seeks to achieve (its

terminal values) and the modes of behavior the organization encourages (its instrumental values).

Ideally, instrumental values help the organization achieve tis terminal goals.

Norms: standards or styles of behavior that are considered acceptable or typical for a group of

people.

Culture can inspire and facilitate the intense kind of personal and team interaction that are necessary

to develop organizational competences and obtain a competitive advantage:

1. Cultural values are important facilitators of mutual adjustment in an organization. When

shared cultural values provide a common reference point, employees do not need to spend

much time establishing rapport and overcoming differences in their perceptions of events.

2. Organizational culture is a form of informal organization that facilitates the working of the

organizational structure.

Core competence when: (VRIN)

- Valuable: greater value, in terms of relative costs and benefits, than similar resources in

competing firms.

- Rare: scare relative to demand

-

Inimitable: it is difficult to imitate

- No substitutable: no functional substitutes (other resources) exist

Socialization: the process by which members learn and internalize the values and norms of an

organizations culture.

Role orientation: the characteristic way in which newcomers respond to a situation.

An institutionalized roleorientation results when individuals are taught to respond to a new context

in the same way that existing organizational members respond to it. An individualized role

orientation results when individuals are allowed and encourages to be creative and to experiment

with changing norms and values so an organization can better achieve its values.


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Type of rite Example of rite Purpose of rite

Rite of passage Introduction and basic training Learn and internalize norms and values

Rite of integration Office Christmas party Build common norms and values

Rite of enhancement Presentation of annual award Motivate commitment to norms and values

The concept of organizational language encompasses not only spoken language, but how people

dress, the office they occupy, the company cars they drive, and how they formally dress one another.

Organizational culture effects organizational effectivenessbecause it can (a) provide an organization

with a competitive advantage, (b) improve the way an organizational structures works, and (c)

increase the motivation of employees to pursue organizational interests.

Positive function of culture Negative function of culture

- Behavioral control

- System stability in time

-

Members identity

- Frustrates changes

- Strengthens sub-unit orientation: integration problems

-

Conflicts with diversity goals-

Frustrates mergers

Culture is transmitted to an organizations members by means of (a) socialization and training

programs, (b) stories, ceremonies and language used by members of the organization.

Organizations culture develops from the interaction of four factors:

-

The personal and professional characteristics of peoplewithin the organization.

- Organizational ethics are the moral values, beliefs and rules that establish the appropriate

way for organizational member to deal with one another and with the organizations

stakeholders. (professional ethics + individual ethics)

- Property rights: the rights that an organization gives to its members to receive and use

organizational resources. The distribution of property rights has a direct effect on the

instrumental values that shape employees behavior and motivate organizational members.

- The structure of the organization: organizational structure effects the cultural values that guide

organizational members as they perform their activities. In turn, culture improves the way

structure coordinates and motivates organization resources to help and organization achieve its

goals.

Social responsibility: refers to a managers duty or obligation to make decisions that nurture,

protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole.

The strength of an organizations commitment to social responsibility ranges from low to high. At the

low end of the range is an obstructionist approachchoose not to behave in a socially responsible

way. A defensive approachindicates at least a commitment to ethical behavior stay with the law

and abide strictly within legal requirements but they make no attempt to exercise social

responsibility beyond what the law dictates.

Accommodative approach is an acknowledgement of the need to support social responsibility.

Accommodative managers agree that organizational member ought to behave legally and ethically,


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and they try to balance the interests of different stakeholder against one another so the claims of

stockholders are seen in relation to the claims of other stakeholders.

Proactive approachmanagers who actively embrace the need to behave in socially responsible

ways, go out of their way to learn about the needs of different stakeholder groups, and are willing to

use organizational resources to promote the interests not only of stockholders but of the otherstakeholders.

Advantages of social responsibility

1. Workers and society benefits directly because organization bear some of the costs of helping

workers

2. If all organization in a society were socially responsible, the quality of life as a whole would

be higher.

Whistle-blowing: informing (by and employee) an outside person or agency, such as a government

agency or a newspaper or television reporter, about an organizations illegal or immoral behavior.

Chapter 8 Organizational Design and Strategy in a changing global

environmentAn organization develops a strategy to increase the value it can create for its stakeholders.

Sources of core competence:

1. Specialized resources. This can be either functional resources or organizational resources.

Functional resources the skills possessed by an organizations functional personnel.Organizational resourcesthe attributes that give an organization a competitive advantage

such as the skills of the top-management team or possession of valuable and scare

resources.

2. Coordination abilities an organizations ability to coordinate its functional and

organizational resources to create maximal value.

Four ways in which global expansionallows an organization to create value for its stakeholders:

- Transferring core competences abroad

-

Establishing a global network

sets of task and reporting relationships among managers,functions, and divisions that link an organizations value-creation activities around the world.

- Gaining access to global resources and skills

-

Using global learningto enhance core competences

An organization must formulate strategy at four levels:

- Functional-level strategy: a plan of action to strengthen an organizations functional and

organizational resources, as well as its coordination abilities, in order to create core

competences.


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- Business-level strategy: a plan to combine functional core competences in order to position the

organization so that it has a competitive advantage in its domain. Business-level strategy is the

responsibility of the top-management team.

- Corporate-level strategy: a plan to use and develop core competences so that the organization

can not only protect and enlarge its existing domain but can also expand into new domains.

-

Global expansion strategy: a plan that involves choosing the best strategy to expand into

overseas markets to obtain scare resources and develop core competences.

According to contingency theory, an organizations design should permit each function to develop a

structure that suits its human and technical resources.

To create value at the function level, the organizational strategy must allow and encourage each

function to develop a core competencein lowering costs or differentiating its production from those

of competitors. The sources of core competences lie in the resources an organization embeds in each

function, and in the abilities of functional experts to take advantage of and coordinate those

resources. To gain a competitive advantage, an organization needs to design its functional structureand culture to provide a setting in which core competences develop. The more a functions core

competence is based on coordination abilities embedded in the way people in the organization

interact, the more difficult it is for competing organization to duplicate the core competences and

the greater is the organizations competitive advantage.

The challenge of business-level strategy is for an organization to take the core competences created

by its functions and combine them to take advantage of opportunities in the environment to create

value. The organization needs a business-level strategy that does both of the following: (1) selects

the domain the organization will compete in an (2) positions the organization so it can use its

resources and abilities to manage its specific and general environments in order to protect and

enlarge that domain.

Low-cost business-level strategy: a plan whereby an organization produces low-priced goods and

services for all customer groups.

Differentiation business-level strategy: a plan whereby an organization produces high-priced

products, quality products aimed at particular market segments.

Focus strategy: specializing in one segment of a market and focusing all of the organizations

resources on that segment.

From a strategy perspective, three factors affect an organizations choice of a structure to create a

competitive advantage:

1. As an organization produces a wide range of products, it will need greater control over the

development, marketing and production of these products

2.

As an organization seeks to find new customers group for its products, it will need a structure

that allows it to serve the need of its customers

3. As the pace of new product development in an industry increases, an organization will need

a structure that increases coordination among its functions.

Product structure: handle a wide range of products


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Market structure or geographic structure: handling different groups of customers in which

functional activities are grouped to best meet the needs of different types of customers.

Product team structure or matrix structure: when rapid product development and speedy response

to competitors are the keys to competitive advantage.

Vertical integration: a strategy in which an organization takes over and owns its suppliers (backward

vertical integration) or its distributors (forward vertical integration). The more an organization

pursues vertical integration the larger it becomes, and the bureaucratic costs associated with

managing the strategy rise sharply.

Related diversification: the entry into new domain that is related in some way to an organizations

domain.

Unrelated diversification: the entry into a new domain that is not related in any way to an

organizations core domain.

Conglomerate structure: a structure in which each business is placed in a self-contained division and

there is no contact between divisions.

Companies can use four principal strategies as they begin to market their products and establish

production facilities abroad:

1. Multi-domestic strategy: orientated towards local responsiveness of a company

decentralized control to subsidiaries and divisions in each country in which its operates to

produce and customize products to local markets. When using this structure, a company

duplicates all value-creation activities and establishes an overseas division in every countryor world area in which it operates.

2. International strategy: based on R&D and marketing being centralized at home and all the

other value-creation functions being decentralized to national units.

3. Global strategy: oriented towards cost reduction, with all the principal value-creation

functions centralized at the lowest cost global locations. It locates its manufacturing and

other value chain activities at the global location that will allow it to increase efficiency and

quality.

4. Transnational strategy: achieve both local responsiveness and cost reduction. Some

functions are centralized and others are decentralized at the global location best suited. It

overcomes to responsiveness to customers because the focus is still on centralized control.

Chapter 9 Organizational design, competences, and technologyTechnology: the combination of skills, knowledge, abilities, techniques, materials, machines,

computers, tools and other equipment that people use to convert or change raw materials into

valuable goods and services. Inside the organization it exists in three levels:

- Individual leveltechnology is the personal skills

- Functional or department level the procedures and techniques that groups work out to

perform their work create competences that constitute technology.- Organizational levelthe way organizations converts inputs into outputs


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An organization taking the external resources approach uses technology to increase its ability to

manage and control external stakeholders.

An organization taking the internal system approachuses technology to increase the success of its

attempts to innovate: to develop new products, services and processes; and to reduce the time

needed to bring new products to market.

An organization taking the technical approach uses technology to improve efficiency and reduce

costs while simultaneously enhancing the quality of reliability of its products.

Programmed technology: a technology in which the procedures for converting input into outputs can

be specified in advance so that tasks can be standardized and the work process can be made

predictable.

Technical complexity: a measure of the extent to which a production process can be programmed so

that it can be controlled and made predictable.

According to one researcher, Joan Woodward, the technical complexity of a production process is the

important dimension that differentiates technologies. High technical complexity exists when

conversion processes can be programmed in advance and fully automated. Low technical complexity

exists when conversion processes depend primarily on people and their skills and knowledge and not

on machines. Joan Woodward identified ten level of technical complexity, which are associated with

three types of production technology:

1. Small-batch and unit technology: production of simple units to consumers orders, fabrication of

large equipment in stages, production in small batches

2.

Large-batch and mass production technology: mass production3.

Continuous-process technology: process production of chemical batches, continuous flow

production of liquids, gases and solid shapes.

One of Woodwards goals in classifying technologies according to their technical complexity was to

discover whether an organizations technology affected the design of its structure. each

technology is associated with a different structure because each technology presents different

control and coordination problems. Small batch three levels of their hierarchy. Mass production

technologyfour levels, continuous-process technologysix levels.

Technological imperative: the argument that technology determines structure.

According to Charles Perrow, two dimensions underlie the differences between routine and non-

routine or complex tasks and technologies: task variabilityand task analyzability.

Task variability: the number of exceptions new or unexpected situations that a person

encounters while performing a task

Task analyzability: the degree to which search activity is needed to solve a problem. The greater the

number of exceptions that workers encounter in the work process, and the greater the amount of

search behavior required to find a solution to each exception, the more complex and less routine are

tasks. Four types of technology:


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1. Routine manufacturinglow task variability and high task analyzability (mass production)

2. Craftwork task variability is low and task analyzability is also low (a high level of search

activity is needed to find a solution to problems).

3. Engineering production task variability is high and task analyzability is high. Finding a

solution is relatively easy.

4.

Non-routine researchhigh task variability and low task analyzability. Tasks are complex

because not only is the number of unexpected situations is large, but search activity is high.

Each new situation creates a need to expend resources to deal with it.

Argue that an organization should move from a mechanistic to an organic structure as tasks become

more complex and less routine. Because employee tasks can be standardized with routine

technology, the organizational hierarchy is relatively tall and decisions making is centralized.

A craftswork-like organization structure has replaced the mechanistic structure to achieve the

advantages of flexibility at lower costs.

Woodward focused on how an organizations technology affects its choice of structure. Perrows

model of technology focused on the way in which the complexity of tasks affects organizational

structure. Another view of technology, developed by James D. Thompson focuses on the way in

which task interdependence, the method used to relate or sequence different tasks to one another,

affects an organizations technology and structure. When task interdependence is low, people and

departments are individually specialized that is, they work separately and interdependently to

achieve organizational goals. Thompson identified three types of technology:

- Mediating: a technology characterized by a work process in which input, conversion, and output

activities can be performed independently of one another. (piece work or franchise)- Long linked: a technology characterized by a work process in which input, conversion, and

output activities must be performed in series. (assembly-line or continuous-process plant)

- Intensive: a technology characterized by a work process in which input, conversion and output

activities are inseparable. (general hospital or research and development laboratory). Expensive.

Can reduce costs to specialism (producing only a narrow range of outputs)

Slack resources: extra or surplus resources that enhance an organizations ability to deal with

unexpected situations.

To reduce costs, a mass production company must maximize the gains from economies of scale and

from the division of labor associated with large-scale production. Use Dedicated machinesand fixed

workers.

Materials technology: technology that comprises machinery, other equipment, and computers.

Advanced manufacturing technology (AMT): technology that consists of innovations in material

technology and in knowledge technology that change the work process of traditional mass

production organizations. With AMT, the organization actively seeks ways to increase its ability to

integrate or coordinate the flow of resources among input, conversion, and output activities. AMT

allows an organization to reduce uncertainty not by using inventory stockpiles but by developing the

capacity to adjust and control its procedures quickly to eliminate the need for inventory at both the

input stage and the output stages. Examples are:


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- Computer-Aided Design (CAD):an advanced manufacturing technique that greatly simplifies the

design process

- Computer-aided materials management (CAMM):an advanced manufacturing technique that is

used to manage the flow of raw materials and component part into the conversion process, to

develop master production schedules for manufacturing and to control inventory. It uses the pull

approach.

- Just-in-time inventory (JIT)

In sum, JIT, CAMM and CAM increase technical complexity and task interdependence and thus

increase the degree to which a traditional mass production systems operates like a continuous-

process technology: they also increase efficiency and reduce production costs.

Flexible manufacturing technology: technology that allows the production of many kinds of

components at little or no extra cost on the same machine.

Computer-integrated manufacturing (CIM): an advanced manufacturing technique that controls thechangeover from one operation to another by means of the commands given to the machines

through computer software.

Chapter 10 Types and Forms of Organizational Change

Organizational change: the process by which organizations move from their present state to some

desired future state to increase their effectiveness.

Planned organizational change is normally targeted at improving effectiveness at one or more of four

different levels:

- Human resourcesfind the most effective way of motivating and organizing human resources

to acquire and use the skills of the employees. For example training, changing norms and values.

- Functional resources an organization can improve the value that its functions create by

changing its structure, culture and technology.

- Technological capabilities often a redesign of organizational activities to create value for

stakeholders.

- Organizational capabilities often involves changing the relationship between people and

functions to increase their ability to create value.

Forces for change

- Competitive forces: striving for competitive advantage

- Economic, political and global forces: compel them to change and how and where they produce

goods and services.

- Demographic and social forces: changes in the demographic characteristics of the workforce

have led managers to change their styles of managing all employees.

- Ethical forces

Organizational inertia: the tendency of an organization to resist change and maintain the status quo.


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Resistance or impediments to change that cause inertia are found at the organization, group and

individual levels. Mechanistic structures are more resistant to change.

Lewins force-field theory of change: a theory of organizational change that argues that two sets of

opposing forces within an organization determine how change will take place. To change increase

the force and decrease the resistance. The process of changing is the following:

- Unfreezing the organization from its present state

- Making the change

- Refreezing the organization in the new, desired state

Action research: a strategy for generating and acquiring knowledge that managers can use to define

an organizations desired future state and to plan a change program that allows the organization to

reach that state. Steps are:

1.

Diagnosing the organization

2.

Determining the desired future state

3. Implementing action

4.

Evaluation the action

5.

Institutionalizing action research

Evolutionary change: change that is gradual incremental, and specifically focused. Not drastic or

sudden altering of the basic nature of an organizations strategy and structure. Theories:

- Sociotechnical systems theory: a theory that proposes the importance of changing role and task

or technical relationships to increase organizational effectiveness. managers need to fit or

jointly optimize the workings of an organizations technical and social systems or in terms ofthe present discussion, culture to promote effectiveness. A poor fit between an organizations

technology and social system leads to failure, but a close fit leads to success.

- Total quality management: a technique developed by W. Edwards Deming to continuously

improve the effectiveness of flexible work teams. Quality circles: groups of workers who met

regularly to discuss the way work is performed to find new ways to increase performance.

- Flexible workers and flexible work teams: a group of workers who assume responsibility for

performing all the operations necessary for completing a specified stage in the manufacturing

process.

Revolutionary change: change that is sudden, drastic, and organizational-wide. Methods are:

- Reengineering: the process by which managers redesign how tasks are bundled into roles and

functions to improve operational effectiveness. The focus is on the business process instead of

the organizational functions.

- E-Engineering: companies attempts to use all kinds of information systems to improve their

performance.

- Restructuring: a process by which managers change task and authority relationships and

redesign organizational structure and culture to improve organizational effectiveness. Another

type is downsizing: the process by which managers streamline the organizational hierarchy and

lay off managers and workers to reduce bureaucratic costs.


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- Innovation: the process by which organizations use their skills and resources to develop new

goods and services or to develop new production and operating systems so they can better

respond to the needs of their customers.

Organizational development (OD): a series of techniques and methods that managers can use in

their action research program to increase the adaptability of their organization. OD techniques todeal with resistance to change:

- Education and communication

- Participation and empowerment

- Facilitationproviding a training to help learn how to perform new tasks

- Bargaining and negotiationhelp to manage conflicts

- Coercion (dreigen/onderdrukken)threaten with consequences if people resists change.

Sensitivity training: an OD technique that consists of intense counseling in which group members,

aided by a facilitator, learn how others perceive them and may learn how to deal more sensitivelywith others.

Process consultation: an OD technique in which a facilitator works closely with a manager on the job

to help the manager to improve his or her interactions with other group members

Intergroup training: an OD technique that uses team building to improve the work interactions of

different functions or divisions.

Organizational mirroring: an OD technique in which a facilitator helps two interdependent group

explore their perceptions and relations in order to improve their work interactions.

Incrementalist decision making: The science of muddling through

-

Decision making = correcting mistakes

- Living according to your SOPs

- Inertia, complacency

-

Low level of organizational learningWeathering the storm Strategy

-

Closed mind sets/ cognitive structures

Conclusion: Contingency model of decision making

High Goal consensus Low goal consensusHigh knowledge of

causal relations

Rational

Homo economics

Calculation

Management science, operation

research

Carnegie

Negotiating, coalitions

Political satisficing

Low knowledge of

causal relations

Judgement, Trial & error, unstructured

[Mintzberg e.a.]

Incremental

Garbage can

Knowledge management: a type of IT-enabled organization relationship that has important

implications .. al learning and decision making.


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Codification approach: knowledge is carefully collected, analyzed, and stored in databases where it

can be retrieved easily by users who input organization-specific commands and keywords.

Suitable for standardized product or service

Personalization approach: IT designed to identify who in the organization might possess the

information required for a custom job.More reliance on know-how, insight and judgment to makedecisions.

Organizational learning: The process through which managers seek to improve organization

members desire and ability to understand and manage the organization and itsenvironment so they

make decisions that continuously raise organizational effectiveness.

Exploration: experimenting, developing new things

Exploitation: improving, fine tuning existing processes.

Central idea: organizations can adapt in principle: but some are too late, or not so rational.

Institutional environment:

- Institutional field: Collection of other organizations, regulating bodies, associations, within

recognizable social sphere of activity [health care, insurance .]

- Rationalized myths: norms and beliefs that are rationalized translated into rule-like procedures

to attain certain ends. An organization needs to comply in order to obtain resources/legitimacy.

- Isomorphism: organizations become similar

Chapter 11 Organizational transformationsOrganizational life cycle: The four principal stages of the organizational life cycle are birth, growth,

decline and death.

Entrepreneurs: People who recognize and take advantage of opportunities to use their skills and

competences to create value.


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Organizational birth: the founding of an organization: a dangerous life cycle stage associated with

the greatest change of failure.

Liability of newness: the danger associated with being the first in a new environment

Population ecology theory: a theory that seeks to explain the factors that affect the rate at whichnew organizations are born (and die) in a population of existing organizations. The availability of

resources determines the number of organizations in a population. Two factors account for the rapid

birthrate:

1. As new organization are founded, there is an increase in the knowledge and skills available to

generate similar new organizations

2. A new environment is that when a new kind of organization is founded and survives, it

provides a role model. The success of the new organization makes it easier for entrepreneurs

to found similar new organizations because success confers legitimacy, which will attract

stakeholders.

First-mover advantages: the benefits an organization derives from being an early entrant into a new

environment.

Population of organizations: the organization that are competing for the same set of resources in

the environment. For example: all the fast-food restaurants in Houston, Texas, constitute of

population of restaurants that compete to obtain environmental resources in the form of dollars that

people are willing to spend to obtain food conveniently. Organization can choose to focus on

different environmental niches, particular set of resources.

Population density: the number of organizations that can compete for the same resources in aparticular environment.

Population ecologists have identified two sets of strategies that organizations can use to gain access

to resources and enhance their chances of survival in the environment:

1. R-strategy versus K-strategy. R-strategy: a strategy of entering a new environment early. K-

strategy: a strategy of entering an environment late, after other organizations have tested

the water.

2. Specialist strategy versus generalist strategy.Specialist: organizations that concentrate their

skills to pursue a narrow range of resources in a single niche. Generalist: organization thatspread their skills thinly to compete for a broad range of resources in many niches.

Generalists can often outcompete specialists when there is considerable uncertainty in the

environment and when resources are changing so that niches emerge and disappear

continually.

Strategies for competing in the Resource Environment

Specialist strategy (one niche) Generalist Strategy (several niches)

r-strategy (early entry into

environment)

R-specialist R-Generalist

K-strategy (lately entry intoenvironment)

K-specialist K-generalist


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Natural selection: the process that ensures the survival of the organizations that have the skills and

abilities that best fit with the environment.

Organizational growth: the life cycle state in which organizations develop value creation skills andcompetences that allow them to acquire additional resources. Growth allows an organization to

increase its division of labor and specialization and thus develop a competitive advantage.

Institutional theory: studies how organizations can increase their ability to grow and survive by

becoming legitimate, that is, accepted, reliable, and accountable in the eyes of their stakeholders.

Institutional environment: the set of values and norms in an environment that govern the behavior

of a population of organizations.

Organizational isomorphism: the similarity among organization in a population. the process by

which organizations in a population become more alike or similar. Three processes that explain whyorganizations become more alike have been identified:

- Coercive isomorphism: when an organization adopts certain kind of values and norms because it

is pressured to by other organizations or by society in general. For example using child labor

- Mimetic isomorphism: when organizations intentionally imitate and copy one another to

increase their legitimacy.

- Normative isomorphism: when organizations come to resemble one another over time because

they indirectly adopt the norms and values of other organization in the environment. For

example from moving managers and employees over organizations.

Disadvantages of isomorphism:

-

The way organization have learned to operate may become outdates, inertia sets in, and the

result in low effectiveness

- The pressure to imitate the competitions may reduce the incentive to experiment so that the

level of innovation declines.

Greiners Model of organizational growth: he proposes that an organization passes through five

sequential growth stages during the course of its evaluation, and each stage a specific organizational

design problem causes a crisis that must be solved if a company is not to fall into a chasm and so

becomes unable to advance from one stage to the next.

Stage 1: growth through creativity. This stage involves the birth of the organization. The

entrepreneurs are mainly busy with developing the product. They will forget the need to manage

organizational resources efficiently + so involved in providing customers with high-quality products,

they ignore the costs involved. Crisis of leadership will begin.

Stage 2:Growth through direction: the crisis of leadership ends with the recruitment of a strong top-

management team to lead the organization through the next stage of organization growth: growth

through direction. Crisis of autonomy will arise arises because the organizations creative people

in departments such as R&D, product engineering and marketing become frustrated by their lack ofcontrol over new product development and innovation. The structure designed by top managers and


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imposed on the organization centralized decision making and limited the freedom to experiment,

take risks and be internal entrepreneurs.

Stage 3: growth through delegation: to solve crisis of autonomy, organizations must delegate

authority to lower-level managers in all functions and link their increased control over organizational

activities to a reward structure that recognizes their contributions. It allows the organization to strikea balance between recruiting experienced managers to improve performance and the need to

provide room for entrepreneurship so that the organization can innovate and find new ways to

reduce costs or improve its products. Then crisis of control will arise when top managers compete

with function or corporate level managers for control of organizational resources.

Stage 4: Growth through coordination: to resolve the crisis of control, an organization must find the

right balance between centralized control from the top of the organization and centralized control at

the function or divisional level. Top management takes on the role of coordinating different divisions

and motivating divisional manager to take a company-wide perspective. Crisis of red tape when

organizations fail to manage the organization when it is in growth.

Stage 5:Growth through collaboration. Solve the crisis of the red tape and put the organization up

the growth curve. Use the product team and matrix structuresto improve the ability to respond to

customer needs and introduce new products quickly.

Organizational decline: the life cycle stage that an organization enters when it fails to anticipate,

recognize, avoid, neutralize, or adapt to external or internal pressures that threaten its long-term

survival.

Profitability: a measurement of how well a company is making use of resources relative to its

competitors. This is something different from profit. Because the profit says little about how well its

managers are making use of resources and its ability to generate future profits.

Two factors that often lead to continuing decline and loss in effectiveness are:

- Organizational inertia: forces inside an organi

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Organizational Theory Design and Change Summary