Transcript Chapter 1: Introducing Organization Theory: What is it and

Systems/Organic Theories & Contingency
Theory
by
Erlan Bakiev, Ph. D.
Zirve University
Spring 2012
Systems Theory
• Synergy
• Interdependence
• Interconnections
• within the organization
• between the organization and the environment
• Organization as ORGANISM
• “A set of elements standing in inter-relations”
General Theoretical Distinctions
• Classical and humanistic theories prescribe
organizational behavior, organizational
structure or managerial practice (prediction
and control). MACHINE
• Systems theory provides an analytical
framework for viewing an organization in
general (description and explanation).
ORGANISM
Systems Framework
• Ludwig von Bertalanffy (1968)
• Offered a more comprehensive view of organizations
• NOT a theory of management - new way of
conceptualizing and studying organizations
• Four Strengths (“promises”) M. Scott Poole
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Designed to deal with complexity
Attempts to do so with precision
Takes a holistic view
It is a theory of emergents - actions and outcomes at the collective
level emerge from the actions and interactions of the individuals
that make up the collective
The Systems Approach
• What is a System?
• A collection of parts that operate
interdependently to achieve a common purpose.
• Systems Approach
• Posits that the performance of the whole is
greater that the sum of the performance of its
parts.
• Analytic versus synthetic thinking: outside-in
thinking versus inside-out thinking.
• Seeks to identify all parts of an organized activity
and how they interact.
General Systems Theory
• General Systems Theory
• An area of study based on the assumptions that
everything is part of a larger, interdependent
arrangement.
• Levels of systems
• Each system is a subsystem of the system above
it.
• Identification of systems at various levels helps
translate abstract systems theory into more
concrete terms.
General Systems Theory Cont.
• Closed Versus Open Systems
• Closed system
• A self-sufficient entity.
• Open system
• Something that depends on its surrounding
environment for survival.
• Systems are classified open (closed) by how
much (how little) they interact with their
environments.
Systems Considerations
• An open system interacts with the
environment. A closed system is selfcontained.
•
Closed systems often undergo entropy and lose
the ability to control itself, and fails.
• Synergy: performance gains of the whole
surpass the components.
•
Synergy is only possible in a coordinated
system.
The Organization as an Open System
Input Stage
Conversion
Stage
Output
Stage
Raw
Materials
Machines
Goods
Services
Human skills
Sales of outputs
Firm can then buy inputs
General Systems Theory Cont.
• New Directions in Systems Thinking:
Organizational learning and knowledge
management
• Organizations are living and thinking open systems
that learn from experience and engage in complex
mental processes.
• Chaos theory
• Every complex system has a life of its own, with its own
rule book.
• Complex adaptive systems
• Complex systems are self-organizing.
Misunderstandings
• Doesn’t focus on specific task functions
• Doesn’t directly explore the impact of
interpersonal relationships and loyalty on
productivity
• Doesn’t provide for detailed focus
• Changes in environment directly affect the
structure and function of the organization.
Strengths
• Recognizes . . .
• interdependence of personnel
• impact of environment on organizational structure and
function
• affect of outside stakeholders on the organization
• Focuses on environment and how changes can
impact the organization
• Seeks to explain “synergy” & “interdependence”
• Broadens the theoretical lens for viewing
organizational behavior.
Principles of General Systems Theory
• Laws that govern biological open systems can be applied to systems of
any form.
• Open-Systems Theory Principles
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Parts that make up the system are interrelated.
Health of overall system is contingent on subsystem functioning.
Open systems import and export material from and to the environment.
Permeable boundaries (materials can pass through)
Relative openness (system can regulate permeability)
Second Principle of Thermodynamics (ENTROPY)
• Entropy must increase to a maximum
• Negentropy increases growth and a state of survival
• Synergy (extra energy causes nonsummativity--whole is greater than sum
of parts)
• Equifinality vs. “one best way.”
Characteristics of Organizations as Systems
• Input-Throughput-Output
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Inputs
• Maintenance Inputs (energic imports that sustain system)
• Production Inputs (energic imports which are processed to yield a productive outcome)
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Throughput (System parts transform the material or energy)
Output (System returns product to the environment)
TRANSFORMATION MODEL (input is transformed by system)
• Feedback and Dynamic Homeostasis
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Positive Feedback - move from status quo
Negative Feedback - return to status quo
Dynamic Homeostasis - balance of energy exchange
• Equivocality and Requisite Variety (Karl Weick)
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Equivocality (uncertainty and ambiguity)
Requisite Variety (complex inputs must be addressed with complex processes)
Characteristics of Organizations as Systems
• Role of Communication
• Communication mechanisms must be in place for the organizational
system to exchange relevant information with its environment
•
• Boundary Spanners perform this function!
• Media Outlets are communication link between system & environment
Communication provides for the flow of information among the subsystems
• Systems, Subsystems, and Supersystems
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Systems are a set of interrelated parts that turn inputs into outputs through
processing
Subsystems do the processing
Supersystems are other systems in environment of which the survival of the focal
system is dependent
Five Main Types of Subsystems
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Production (technical) Subsystems - concerned with throughputs-assembly line
Supportive Subsystems - ensure production inputs are available-import raw material
Maintenance Subsystems - social relations in the system-HR, training
Adaptive Subsystems - monitor the environment and generate responses (PR)
Managerial Subsystems - coordinate, adjust, control, and direct subsystems
Characteristics of Organizations as Systems
• Boundaries
• The part of the system that separates it from its environment
• Four Types of Boundaries (Becker, 1997)
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Physical Boundary - prevents access (security system)
Linguistic Boundary - specialized language (jargon)
Systemic Boundary - rules that regulate interaction (titles)
Psychological Boundary - restricts communication (stereotypes, prejudices)
• The ‘Closed’ System
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Healthy organization is OPEN
Do not recognize they are embedded in a relevant environment
Overly focused on internal functions and behaviors
Do not recognize or implement equifinality
Inability to use feedback appropriately
CO-DEPENDENT
Summary
• Systems Theory is NOT a prescriptive management theory
• Attempts to widen lens through which we examine and
understand organizational behavior
• The Learning Organization
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•
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Synergy
Nonsummativity
Interdependence
Equifinality
Requisite Variety
Emphasizes COMMUNICATION in the Learning Process
• Organizations cannot separate from their environment
• Organizational teams or subsystems cannot operate in
isolation
Background Info. for
Contingency Theory
• During the 1960s, the importance of
studying the impact of the external
environment on an organization became
clear after the development of:
• The open-systems theory; and
• The contingency theory
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The Contingency Approach
• Contingency Approach
• A research effort to determine which
managerial practices and techniques are
appropriate in specific situations.
• Different situations require different managerial
responses.
• Can deal with intercultural feelings in which custom
and habits cannot be taken for granted.
The Contingency Approach Cont.
• Contingency Characteristics
• An open-system perspective
• How subsystems combine to interact with outside
systems.
• A practical research orientation
• Translating research findings into tools and
situational refinements for more effective
management.
• A multivariate approach
• Many variables collectively account for variations in
performance.
The Contingency Approach Cont.
• Lessons from the Contingency Approach
• Approach emphasizes situational
appropriateness rather than rigid adherence to
universal principles.
• Approach creates the impression that an
organization is captive to its environment.
• Approach has been criticized for creating the
impression that an organization is a captive of
its environment.
What is Contingency Theory?
• Developed in the 1960s by Tom Burns and G.
M. Stalker in Britain and Paul Lawrence and
Jay Lorsch in the United States
• It is the idea that the organizational structures
and control systems that managers choose
depend on (i.e. are contingent on)
characteristics of the external environment in
which the organization operates
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Two Contingency Theories
• Burns and Stalker (1968) Management of Innovation
• Organizational systems should vary based on the level of stability
in the environment
• Two different types of management systems
• Mechanistic systems - appropriate for stable environment
• Organic systems - required in changing environments (unstable
conditions)
• Management is the Dependent Variable
• Variations in environmental factors lead to management
• Lawrence and Lorsch (1969)
• Key Issue is environmental uncertainty and information flow
• Focus on exploring and improving the organization’s relationship
with the environment
• Environment is characterized along a certainty-uncertainty
continuum
Characteristics of
Contingency Theory
• The characteristics of the external environment affect
an organization’s ability to obtain resources
• To maximize the likelihood of gaining access to
scarce resources, managers must allow an
organization’s departments to organize and control
their activities in ways most likely to allow them to
obtain those resources
• Examples of characteristics of the external
environment include (but are not limited to):
• changes in the environment;
• the entry of new competitors;
• unstable economic conditions.
Characteristics of
Contingency Theory Cont.
• Burns & Stalker (drawing on Weber’s and
Fayol’s principles of organization and
management) proposed 2 basic ways in
which managers can organize and control an
organization’s activities in response to its
external environment:
• A mechanistic structure for organizations in stable
environments (typically resting on Theory X
assumptions); or
• An organic structure for organizations in changing
environments (typically resting on Theory Y
assumptions)
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Mechanistic vs. Organic
Structures
Mechanistic Structures exhibit:
 Managerial authority resting at the
top & controlling the behavior of
subordinates
 Close supervision of subordinates
with tasks & roles clearly defined
 An emphasis on strict discipline &
order
 An example is McDonald ’ s –
supervisors make all important
decisions; employees are closely
supervised & follow well-defined
rules & standard operating
procedures
Organic Structures exhibit:
 Middle & 1st line managers are
encouraged to take responsibility &
act quickly to acquire scarce
resources
 Tasks & roles are left ambiguous to
encourage employees to cooperate
& respond quickly to the unexpected
 Cross-departmental
teams
(authority rests with the individuals,
departments and teams best poised
to control the specific problem
facing the organization)
 More expensive to operate as it
requires more managerial time,
money & effort to be spent on
coordination
 Only used when needed; i.e. when
the external environment is unstable
& rapidly changing
 An example is Nokia – teams make
important decisions; teams are
given autonomy &26are allowed to be
creative
Slide 1.27
A graphic explanation of
Contingency Theory of Organizational Design
• There’s no one best
way to organize
• Organizational
structure depends on
the environment in
which an organization
operates
Characteristics of the
external environment
Determine the design
of an organization’s
structure and control
systems
Organizations in stable
environments choose a
MECHANISTIC structure (i.e.,
centralized authority, vertical
communication flows, control
through strict rules and
procedures)
Organizations in changing
environments choose and
ORGANIC structure (i.e.,
decentralized authority,
horizontal communication
flows, intra-departmental
cooperation)
John McAuley, Joanne Duberley and Phil Johnson, Organization Theory: Challenges and Perspectives, 1st Edition, © Pearson Education Limited 2007
Pragmatic Application of Systems Theory
• The Learning Organization
• Peter Senge’s The Fifth Discipline: The Art and Practice of the
Learning Organization (1990)
• An organization that is continually expanding its capacity to create
its future
• Organizational Learning Occurs under Two Conditions
• 1) When design of organizational action matches the intended
outcome
• 2) When initial mismatch between intentions and outcomes is
corrected, resulting in a match
• Key attribute of learning organization is increased adaptability
• Adaptability is increased by advancing from adaptive to generative
learning
The Learning Organization
• Adaptive (single-loop) Learning
• Involves coping with a situation
• Limited by the scope of current organizational assumptions
• Occurs when a mismatch between action and outcome is corrected
without changing the underlying values of the system that enabled
the mismatch.
• Generative (double-loop) Learning
• Moves from COPING to CREATING an improved organizational
reality
• Necessary for eventual survival of the organization
• Both are Central Features of the Model of the
Communicative Organization (Chapter 6)
• Synergy and Nonsummativity are Important
The Learning Organization
• Through communication, teams are able to learn more than
individuals operating alone.
• Critics argue that teams inhibit learning
• Thoughts?
• Leadership is a key element in creating and sustaining a
learning organization.
• Leaders are responsible for promoting an atmosphere
conducive to learning
• CREATIVE TENSION
• Represents difference between the “vision” of where the
organization could be and the reality of the current organizational
situation.
Impediments to Learning Organization
• Complexity of the Environment
• Difficult to determine cause and effect
• Multiple contributing elements in complex environments
• Internal Conflicts
• Individuals, teams, departments, and subcultures are often at odds
• Energy is drained by conflect
• Organization members must be trained in communication
and conflict-negotiation skills
Conclusion
• The
importance
of
studying
the
organization ’ s external environment
became clear in the 1960s.
• A main focus of such research was to find
methods to help managers improve the
ways they use organizational resources
and compete successfully in the global
environment.
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Bottom Line
The same misunderstandings and
problems that continue to occur
will eventually cause fatal damage
to the system.