Transcript Contemporary Perspectives

Key Challenges Faced by
Organizations Today
• Managing in a global environment
• Designing and restructuring organizations
• TQM – improving quality, empowerment,
and competitiveness
• Reducing complexity, increasing speed, and
reacting to environmental changes
• Ethical and moral management of
organizational members
OT Concepts
• Theory – an explanation of some phenomenon in
real life that consists of principles that state
relationships observed in association with that
phenomenon
• Descriptive Theory – describes why and how
something happens
• Prescriptive (Normative) Theory – suggests how
things should be or what can be done about
conditions identified by a descriptive theory
• Organization Theory (OT) – a set of related
concepts, principles, and hypotheses about
organizations that is used to explain components
of organizations and how they relate to each other
OT Concepts
• Systems Theory – a way to model
organizations by focusing on the structure
and relationships or interdependence among
parts of the organization
• Holism – a system should be considered as
a function whole (changes in any one part
of the system are likely to have an impact
throughout the system)
• Synergism – the interactive effects of the
parts of a system working together ( the
sum is greater than the individual parts)
Closed System vs. Open System
• Closed System – self-perpetuating and
receives no outside energy or resources
– Entropy – when a closed system runs out of
energy; a state of collapse
• Open System – interacts with its external
environment; can experience negative
entropy by importing energy through
physical, human, and financial resources
OT Concepts
• Strategic Systems Approach to organization theory
states that managers should consider contextual or
contingency factors when they determine the
strategies for managing the organization.
• Some contingency factors are organizational goals,
environment, technology, size, and cultural effects of
managerial choices
• Contingency – one thing depends on something else
• Contingency Approach – no one best way for all
organizations to structure and organize
• The best fitting structure depends on the context that
the organization faces.
Managing the Environment
• Managers should formulate strategies so as
to maximize the organization’s fit with the
environment.
• Three Associated Tasks:
– Knowing the Environment
– Adapting or Responding to the Environment
– Changing the Environment
Boundary Permeability,
Resilience, & Maintenance
• Permeability: the extent to which the organization
facilitates the inward and outward flow of
information
• Resilience: the degree to which boundaryspanning units respond to changes in the mission
and goals of the organization, as well as changes
in the environment
• Maintenance: keeping the boundary-spanning
units focused on the organization’s mission and
goals
Uncertainty can come from 3
aspects of the Environment
• Complexity: involves the number of sectors or
elements of the environment relevant to the
organization
• Change: an organization has limited capacity to
monitor the environment. Increasing levels of
change and complexity cause uncertainty.
Turbulence refers to fluctuations in environmental
conditions
• Munificence: abundant resources in the
environment. When resources become more
scarce, they create uncertainty for an organization
The Environment is the Source of
Opportunities and Threats
• Organizations learn about these through:
– Boundary Spanning: activities and/or functions
that require members of the organization to
spend time interacting with individuals and
organizations outside the boundaries of their
own organizations
– Environmental Scanning: a type of boundary
spanning, which includes the collecting and
processing of information, and assessing and
projecting change in various environmental
sectors.
OT Concepts
• Organization Structure – an organization’s framework as
expressed by its degree of complexity, formalization, and
centralization
• Complexity – the amount of differentiation in an
organization
• Formalization – the degree to which an organization relies
on rules and procedures to direct the behaviors of
employees
• Centralization – the concentration of decision-making
authority to lower levels in upper management
• Decentralization – the handing down of decision-making
authority to lower levels in an organization
• Organization Design – the development or changing of an
organization’s structure
The Organization & Its Environment
• General Environment
– Global, Political, Social, Technological, &
Economic
• Specific Environment
– The Organization, Suppliers, Customers,
Competitors, Government, Public Pressure
Groups
OT Concepts
• Unity of command – the principle that a subordinate should have one
and only one superior to whom he/she is directly responsible
• Authority – the rights inherent in a managerial position to give orders
and expect them to be obeyed
• Responsibility – an obligation to perform assigned activities
• Chain of command – the flow of authority from the top to the bottom
of an organization
• Line Authority – the authority that entitles a manager to direct the
work of subordinates
• Staff Authority – authority given to individuals who support, assist,
and advise others who have line authority
• Acceptance theory of authority – the theory that authority comes from
the willingness of subordinates to accept it
• Power – the capacity to influence decisions
• Span of control – the number of subordinates a manager can supervise
effectively and efficiently
• Empowerment – a managerial approach in which employees are given
substantial authority and say to make decisions on their own
Differentiation & Integration:
Key Elements of Structure
• All organizations must split their works into
tasks—the division of labor into tasks is
called differentiation.
• Organizations must split up work but they
then must integrate or coordinate it.
Integration involves the various means to
pull together highly differentiated tasks into
cohesive output.
Three Types of Differentiation
• Horizontal differentiation: Division of work into
tasks and sub-tasks at the same organizational
level.
• Vertical differentiation: Division of work by level
of authority, hierarchy, or chain of command.
• Spatial differentiation: Geographical location of
different organizational activities.
• The level of complexity is largely determined by
the amount of the three types of differentiation
that exists.
Integration
• Integration or coordination is the prime
responsibility of managers.
• Several integrating structures are available:
– Formalization: rules, policies, and procedures
– Centralization: decision making can be vested in top
management or decentralized with decision making
authority vested in the lower level employees
– Spans of control: number of immediate subordinate
positions that a supervisor position controls or
coordinates
– Standardization: integration by setting consistent input,
process, and output requirements.
Non-Structural Means for Integration
Other mechanisms that are important in integration
– Liaison roles: Horizontal linking positions that link two
units or departments at the same level of the
organization
– Teams: Organizing employees and managers into work
and inter-unit groups in order to enhance,
communications, coordination, and control
– Culture: Informal and unwritten rules, norms, and
values that are commonly shared by organizational
members
– Information Systems: Aid integration by how they
structure the system that gathers, processes, analyzes,
and distributes information
Characteristics of Effective Structures
•
•
•
•
Efficiency
Innovation
Flexibility and Adaptiveness
Facilitation of Individual Performance &
Development
• Facilitate Coordination and Communication
• Facilitate Strategy Formulation and
Implementation
Types of Organizational Designs
• Simple structure – an organizational design that is
low in complexity and formalization but high in
centralization
• Functional structure – an organizational design
that groups similar or related occupational
specialties together
• Divisional structure – an organization structure
made up of autonomous self-contained units
• Team-based structure – an organization structure
made up of work groups or teams that perform
that organization’s work
Functional Designs
• People are grouped on the basis of functions they perform or
equipment they use.
• Strengths
– Like-skilled or knowledged workers can develop refined expertise and
skills leading to economies of scale.
– Communication is facilitated because workers are likely to have a
similar language or jargon.
– Employees gain functional expertise and have a clear career path.
• Difficulties
– Difficulty in coordinating across functional lines
– May produce a functional view of the organization.
– Coordination may be pushed up the hierarchy, wasting top managerial
resources.
– Likely to inhibit innovations that require an integrative, crossfunctional view.
Output Groups
Products, Markets, & Geography
• Strengths
– Focus attention and effort on the specific requirements
– Good match for non-routine, high interdependence
technologies.
– Relieve the need for centralized coordination.
– Well-suited for uncertain environments.
– Easier to identify and track responsibility.
• Weaknesses
– Can create product, market, or geographical biases.
– May reduce economies of scale.
– May reduce the company’s ability to share information
and resources across divisions.
Matrix Structures:
Combining Function & Output
• Description
– Joint existence of functional groups and output groups that overlap.
– Functional resources are allocated among the products, projects, or
programs on the basis of need.
• Advantage
– Allows the proper technical advice, expertise, and other functional
resources to be present at the proper location and at the desired time.
• Problems
– A portion of the workforce has two different bosses.
– Because of the competing functional and product, project, or program
dimensions of the matrix, potential conflict is inherent in the design.
– The matrix design may have difficulty in responding to a fast-changing
environment.
Hybrid Organization: Two or
more structures in one company
• Strengths
– Can achieve adaptability and coordination product
divisions & efficiency in centralized functional
departments
– Better alignment between corporate and division-level
goals.
– Achieves coordination both within and between product
lines.
• Weaknesses
– Potential for excessive administrative overhead.
– Potential for conflict between division and corporate
departments.
st
21
Organizations for the
Century: Evolving Designs
• Three related sets of changes are driving the
interest in new forms:
– Inexpensive, fast, and pervasive computer and
communication technologies.
– Task technology has been changed.
– The move towards a more global marketplace
especially based on technology.
Contemporary Perspectives
• Organizational Economics – Based on Transaction Cost Economics
and Agency Theory.
– Transaction Cost Economics - Organization is viewed as a series of
transactions internally & externally. Uncertainty brings about transaction
costs (fees). Transaction costs indicate the inefficiency in a transaction.
Organization seeks lowest possible transaction costs.
– Agency Theory – The primary interests of owners (principals) & workers
(agents) are different. Principals seek to maximize investments by most
efficient use of organization. Agents seek to minimize their efforts and
maximize their pay rate.
• Institutional Theory – Emphasizes the similarities among
organizations. Managers tend to imitate past practices of other
successful organizations.
• Population Ecology – Organizations are ineffective in their effort to
control environmental uncertainty. The environment selects those
organizations that will survive in the long run.
3 Approaches to Examining
Organizations
• Rational System – Organizations are collectivities
oriented to the pursuit of relatively specific goals &
exhibiting relatively highly formalized social structures
• Natural System – Organizations are collectivities whose
participants are pursuing multiple interests, both disparate
and common, but recognize the value of perpetuating the
organization as an important resource. The informal
structure of relations that develops among participants
provides a more informative and accurate guide to
understanding organizational behavior than the formal.
• Open System – Organizations are systems of
interdependent activities linking shifting coalitions of
participants; the systems are embedded in – dependent on
continuing exchanges with and constituted by – the
environments in which they operate.