Transcript G.T. Payne

Managing Innovation
and Change
Major Theoretical Perspectives (2)
Dr. Tyge Payne (with Dr. Keith Brigham)
Office: BA1015
Office Phone: (806) 742-1514
Email: [email protected]
Our Approach to Organization Design
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Organization design as an ongoing activity
 Short term and routine
 Long term and intermittent
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Top down perspective (strategic approach)
Fit/Misfit perspective (multi-contingency)
 Supported by other major theories
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Organizational level of analysis
By studying organizations we can be better equipped to lead
and manage them.
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Organization Design’s Role
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Our Perspective of Organizations
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Open Systems
 Stresses the complexity and variability of the individual
organizational components and their loose connections.
 Views system boundaries as somewhat amorphous and
transitory.
 Highlights the interdependence of the organization and its
environment.
 A pragmatic and applied orientation – supports ways to
change and improve organizations rather than simply
describing and understanding them.
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(Multi-)Contingency Theory (i.e., fit/misfit).
– Misfits are misalignments within organizational design components
that can lead to deterioration in efficiency or effectiveness.
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Major Theories of Organizations
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Contingency
Transaction Cost Economics
Agency
Configurations
Institutional
Population Ecology
Resource-Dependence
Social Capital
We will be referring back to these throughout the course.
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Contingency Theory
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Contingency Theory: Developed from the recognition
that firms participating in the same industries or markets
had different performance records. CT asks why?
Can be summarized as:
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“The best way to organize depends on the nature of the
environment to which the organization must relate” (Scott, 1981:
114)
“There is no one best or most appropriate way for all
organizations to structure or organize. The best-fitting structure
depends on the context that the organization faces” (e.g.,
environment, technology, goals/objectives, size, or culture).
Just as there is no one best way to organize, there may also
be more than one equally good way to organize.
(equifinality)
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Configurations
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Contingency theory led the way to classification
schemes, although concern was expressed about
oversimplification.
– Mintzberg (1979) – Simple Structure, Machine Bureaucracy, Professional
Bureaucracy, Divisionalized, Adhocracy
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However, classification schemes continue to be utilized
but more so in a “fit” scenario and often utilizing
multiple constructs in a configurations approach.
Constructions of reality through classification:
– Typologies are constructed through theoretical means,
– Taxonomies are empirically driven.
– Most scholars use these terms interchangeably.
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Transaction Cost
Transaction Cost Economics (TCE): Seeks to explain
the existence and operation of organizations. It is mainly
concerned with the governance of contractual relations.
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Primary TCE (and Agency Theory) Assumptions:
 Self-interest Seeking Individuals – Opportunism with
Guile (Williamson, 1975)
 Bounded Rationality – refers to the behavior that is
intendedly rational but only limitedly so; a condition of
limited cognitive competence to receive, store, retrieve and
process information. All complex contracts are unavoidably
incomplete because of bounds on rationality.
Information Asymmetry – Information isn’t evenly
distributed among organizational participants.
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Agency Theory
Agency theory examines the appropriate types of
contracts and monitoring to ensure that owners can control
the behavior of employees and reduce agency costs.
 Agency:
 Agency
theory regards the organization as a series of
contractual relationships between owners and workers.
 Owners (or principals) contract with managers and
employees (or agents) to produce goods and services.
 Agency costs are any counterproductive activities or
behaviors due to shirking or moral hazard. Contracts are
used to safeguard their interests.
The goal here is to reduce the amount of agency costs. In
other words, find the most efficient arrangement of agentprincipal relationships.
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Institutional Theory
Institutional Theory: Emphasizes that organizations are
open systems—strongly influenced by their environments—but
that it is not only competitive and efficiency-based forces that
are at work. Socially constructed belief and rule systems
exercise enormous control over organizations—both how they
are structured and how they carry out their work (Meyer &
Rowan, 1977; Meyer & Scott, 1983).
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Institutional Isomorphism is used to explain why
organizations take the forms they do (DiMaggio & Powell,
1983):
Coercive forces (regulation & culture)
Mimetic forces (copy “successful” forms)
Normative forces (professionalization)
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Isomorphism Mechanisms
Mimetic
Coercive
Normative
Uncertainty
Dependence
Duty,
obligation
Events:
Innovation
visibility
Political law,
rules, sanctions
Professionalism—
certification,
accreditation
Social
basis:
Culturally
supported
Legal
Moral
Reasons to
become
similar:
Example:
Reengineering, Pollution controls,
benchmarking school regulations
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Accounting
standards,
consultant
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Pop Ecology
Natural Selection: Population Ecology posits that
environmental factors select those organizational
characteristics that best fit the environment (Aldrich & Pfeffer, 1976;
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Hannan & Freeman, 1977; McKelvey, 1982)
Population ecology does not assume that changes are
necessarily in the direction of more complex or better
organizations…just toward a better fit with the environment.
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Pop ecology is concerned with populations of organizations
and the forms that specific organizations have that “fit” the
environment. There are three stages to this model:
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Variation => Selection => Retention
 This theory tends to focus on birth or death of organizations.
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Resource Dependence
R-D: Begins with the assumption that no organization is
able to generate all the various resources that it needs to
operate. (Pfeffer & Salancik, 1978). Thus, organizational
decisions and actions are attempts to adapt to the environment.
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 Administrators
manage their environments as well as their
organizations, and the former activity may be as important or
more important that the latter.
Implies Strategic Choice! R-D describes tactics employed
by organizations to adapt to and modify their environments:
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Bargaining, contracting, co-optation, hierarchical
contracts, joint ventures, strategic alliances, mergers,
associations, etc.
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Networks / Social Capital
Social Capital: Refers to the goodwill gained from social
relationships between people or collectives (i.e., groups,
organizations, communities).
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Social relationships can deliver such resources as:
 Trust
 Respect
 Information
 Knowledge
The structure of a network of relationships can lead to
greater development of social capital.
 Density, # of ties, structural holes…
 Internal or External Ties
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