Organizations andOrganization Theory

Some Definitions Organization:A consciously coordinated social entity, with a relatively

identifiable boundary, that functions on a relatively continuous basis to achieve a common goals or a set of goals

Structure: defines complexity, formalization and centralization of the organization

Design is concerned with constructing and changing an organization’s structure to achieve the organizations goals

Organization theory: is a discipline that studies the structure and design of organizations. It refers to both descriptive (how organizations are actually structured) and prescriptive (how to improve upon it for better effectiveness) aspects

Perspectives on Organization Open system Life cycle Organizational configuration

Transformation

Process

An Open System and Its Subsystems

Environment

Raw MaterialsPeopleInformation resourcesFinancial resources

Input

SubsystemsBoundarySpanning

Production,Maintenance,Adaptation, Management

BoundarySpanning

Products andServices

Output

Characteristics of an Open system Environment awareness Feedback Cyclical nature Negative entropy Steady State Movement toward growth & expansion Balance of Maintenance & Adaptive activities Equifinality

Importance of Systems Perspective A frame work for conceptualizing organizations Enables us to see organization in totality with

interdependent parts Prevents employees from seeing their jobs as

isolated elements of the organization Helps to gain insight as to why organizations resist

change

Life cycle Perspective Entrepreneurial Stage: formative stage, creativity

high, maintaining a steady supply of resources a challenge

Collectivity Stage: maintains the innovation, communication informal, high commitment

Formalization & Control Stage: rules established, stable structure, emphasis on efficiency

Elaboration of Structure Stage: more complex structure, diversified markets, decentralization

Decline Stage: high employee turnover, increased conflict, centralization

Organization Configuration:Five Basic Parts of an Organization

TopManagement

TechnicalSupport

Technical Core

AdministrativeSupport

MiddleManagement

Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.

Organization Theory in Action Current Challenges

Global Competition Ethics and and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity

Importance of Organizations

Bring together resources to achieve desired goals and outcomes

Produce goods and services efficiently Facilitate innovation Use modern manufacturing and information

technologies

Importance of Organizations Importance of Organizations (cont’d)

Adapt to and influence a changing environment Create value for owners, customers and

employees Accommodate ongoing challenges of diversity,

ethics, and the motivation and coordination of employees

Dimensions of Organization Design Structural Contextual

Goals and Strategy

Environment Size

Culture TechnologyStructure

1. Formalization2. Specialization3. Hierarchy of Authority4. Centralization5. Professionalism6. Personnel Ratios

Early Contributions Bible: delegation, only unusual cases to be

sorted by higher authority Simple hierarchy: Pope-Cardinal-Archbishop-

Bishop-Parish Division of labour: Adam Smith (1776)

Contributions made in this Century: Type 1 Theorists

Organizations are closed systems There for goal achievement F. Taylor and Scientific Management

1. Scientific determination of a workers job

2. Managers plan & supervise and workers execute

3. Differential motivation Looked at lowest level of work in the organization

Type 1 Theorists Fayol: Principles of Organization Max Weber & Bureaucracy

1. Division of labor

2. Authority

3. Hierarchy

4. Formal selection procedure

5. Rules & regulation (formalization)

6. Impersonal relationship

Type 1 Theorists Ralph Davis and Rational Planning1. Primary objective of a business firm is economic

service2. Economic service is generated by the product or

service the organization produces3. The job of management is to group the activities in

such a way so as to generate a structure4. Therefore the structure of the organization is

contingent upon the organization’s objectives

Type 2 Theorists Also called the human relations school Believed in the social nature of organizations Organizations are made of both tasks and people Elton mayo and Hawthorne Studies (1924-27) Chester Barnard and Cooperative System1. Organization are a combination of work and people

challenged that authority flew from top to bottom2. Believed that authority should be defined in terms of the

response of the subordinate

Type 2 Theorists McGregor and Theory X & Y Warren Bennis (flexible adhocracy) and downfall

of Bureaucracy1. Bureaucracy (centralized decision making,

impersonal submission to authority, div. of labor) now replaced by decentralized democratic structures organized around flexible groups

2. Position power was being replaced by expertise power

Type 3 Theorists Contingency Approach (1960s) Conflict between mechanistic (type I) and humanistic

approach (type II) led to the synthesis called the contingency approach

Simon: focus on the environmental conditions under which organizations function

Katz & Kahn: also focused on environment - structure relationship

Importance to technology: works of Perrow, Woodward showed the importance of technology in determining structure

Type 4 Theorists March, Simon :challenged the rational model

of decision making and argued that decision makers selected the satisfactory alternative only

Pfeffer: focused on power coalitions (organizational designs that favour the self interest of those in power) and inherent conflict over goals.

Two Organization Design Approaches

VerticalStructure

RoutineTasks

RigidCulture

CompetitiveStrategy

FormalSystems

HorizontalStructure

AdaptiveCulture

EmpoweredRoles

CollaborativeStrategy

SharedInformation

Organizational Changein the Service of

Performance

Mechanical System Design

Natural System Design

Stable EnvironmentEfficient Performance

Turbulent EnvironmentLearning Organization

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)