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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall11-1
Organizational Theory, Design, and Change
Sixth Edition
Gareth R. Jones
Chapter 1
Organizations and Organizational Effectivenessse
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1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 22
What is an Organization?■Organization: a tool used by people to
coordinate their actions to obtain something they desire or value■Organizations provide goods and services■Organizations employ people■Organizations bring together people and
resources to produce products and services■Basically, organizations exist to create
value
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How Does an Organization Create Value?
■Value creation takes place at three stages: input, conversion, and output■Each stage is affected by the
environment in which the organization operates■Environment – the set of forces and
conditions that operate beyond an organization’s boundaries but affect its ability to acquire and use resources to create value
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Figure 1.1: How an Organization Creates Valuese
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Why Do Organizations Exist? People working together to produce goods and services create more value than people workingalone
5 major reasons why organizations exist:■ To increase specialization and the division of labor
■ Division of labor allows specialization■ Specialization allows individuals to become experts at their
job■ To use large-scale technology
■ Economies of scale: cost savings that result when goods and services are produced in large volume
■ Economies of scope: cost savings that result when an organization is able to use underutilized resources more effectively because they can be shared across several different products or tasks
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Why Do Organizations Exist? (cont.)
■To manage the external environment■ External environment consists of the political, social,
economic, and technological factors that affect organizations
■ Organizations regularly exchange products and services for needed resources
■ Organizations need to manage their external environment■To exert power and control
■ Organizations structure their members to efficiently produce products and services
■To economize on transaction costs■ Transaction costs: the costs associated with negotiating,
monitoring, and governing exchanges between people who must cooperate
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Figure 1.3: Why Organizations Existse
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Organizational Theory, Design, and Change: Some Definitions
■Organizational theory: the study of how organizations function and how they affect and are affected by the environment in which they operate
■Organizational structure: the formal system of task and authority relationships that control how people to coordinate their actions and use resources to achieve organizational goals
■Organizational culture: is the set of key values, beliefs, and attitudes shared by organizational members and helps shape the behavior within the organization
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Some Definitions (cont.)■Organizational design: the process by which
managers select and manage aspects of structure and culture so that an organization can control the activities necessary to achieve its goals
■Organizational change: the process by which organizations move from their present state to some desired future state to increase their effectiveness
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1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 101010
Figure 1.4: The Relationship Among Organizational Theory, Structure, Culture, Design,
and Changese
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Importance of Organizational Design and Change
Effective design is required for highorganizational performance
4 Major Reasons why Organizational Design and Change are Important
■Dealing with contingencies■ Contingencies are events that might occur and must be
planned for – most come from environment■ Organizations must be designed to be able to effectively
respond to environmental changes■Managing diversity
■ Differences in the race, gender, and national origin of organizational members have important implications for organizational culture and effectiveness
■ Learning how to effectively utilize a diverse workforce can result in better decision making and more effective workforcese
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Importance of Organizational Design and Change (cont.)
■Gaining competitive advantage■ The ability to outperform other companies because of the
capacity to create more value from resources■ Core competences: skills and abilities in value creation
embedded in the organization’s people or structures■ Strategy: pattern of decisions and actions involving core
competences that produces a competitive advantage to outperform competitors
■Promoting efficiency, speed, and innovation■ The better organizations function, the more value they
create■ The correct organizational design can lead to faster
innovation and quickly get new products to market
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Consequences of Poor Organizational Design
■ Decline of the organization■ Lower performance■ Talented employees leave to take
positions in other organizations■ Resources become harder to acquire■ Resulting crisis may result in
organizational failure
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Why is Organizational Effectiveness Important?■What is the point is you are not going
to perform well?■Maximizing value creation =
organizational effectiveness■There are multiple ways to create value
and perform well■3 primary ways discussed in chapter:
■ Control: external resource approach■ Innovation: internal system approach■ Efficiency: technical approachse
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Table 1.1: Approaches to Measuring Effectivenessse
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Measuring Effectiveness: Organizational GoalsManagers also measure effectiveness by
creating and measuring performance goals■Official goals: guiding principles that the
organization formally states in its annual report and in other public documents■Mission: a mission statement explains why
the organization exists and what it should be doing■Operative goals: specific long- and short-
term goals that guide managers and employees as they perform the work of the organizationse
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Summary
■Organizations are a tool people use to achieve their goals■Organizational theory is the study of
how organizations function and how they affect and are affected by their environment■Organizational effectiveness must be
monitored by managers
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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 18
TERIMA KASIH
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