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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall1-11-1
Organizational Theory, Design, and Change
Sixth EditionGareth R. Jones
Chapter 1
Organizations and Organizational Effectiveness
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall1-2
Chapter 1Organizations
and Organizational Effectiveness
Dr. Anwar F. Chishti
Question 1.1 Relationship between Organizational Theory, Structure, Culture, Design, and Change?
Question 1.2 Organizational theory? Organizational structure? Organizational culture? Organizational design? Organizational change?
Question 1.3 Importance of Organizational Design and Change?
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Chapter 1
Organizations and
Organizational EffectivenessDr. Anwar F. Chishti
……………….………………..Continue
Question 1.4 Consequences of Poor Organizational Design?
Question 1.5 How Can One Measure Organizational Effectiveness?
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 3
1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 44
What is an Organization?
Organizations provide goods and services
Organizations employ peopleOrganizations bring together
people and resources to produce products and services
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What is an Organization? (cont.)
Organization: a tool used by people to coordinate their actions to obtain something they desire or value
Entrepreneurship: identify opportunities to satisfy needs, and then gather and use resources to meet those needs
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How Does an Organization Create Value?Value creation takes place at three
stages: input, conversion, and output Inputs: include human resources,
information and knowledge, raw materials, money and capital
Conversion: the way the organization uses human resources and technology to transform inputs into outputs
Output: finished products and services that the organization releases to its environment
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Figure 1.1: How an Organization Creates Value
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Why Do Organizations Exist?To increase specialization and the
division of labor
Division of labor allows specialization
Specialization allows individuals to become experts at their job
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Why Do Organizations Exist? (cont.)
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
1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 1111
Why Do Organizations Exist? (cont.)
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 Exist
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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
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Some Definitions (cont.)Organizational culture: is the set
of key values, beliefs, and attitudes shared by organizational members and helps shape the behavior within the organization
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
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Some Definitions (cont.)
Organizational change: the process by which
organizations move from their present state to some desired future state to increase their effectiveness
Organizational redesign and transformation
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Figure 1.4: The Relationship Among Organizational Theory, Structure, Culture, Design, and Change
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Importance of Organizational Design and ChangeDealing with contingencies
Contingencies are events that might occur and must be planned for
Organizations must be designed to be able to respond to changes in the complex and increasingly difficult environment many organizations face
Globalization and changing IT technologies are just two challenges organizations must be ready to face
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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
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Importance of Organizational Design and Change (cont.)
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 workforce
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Importance of Organizational Design and Change (cont.)
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 DesignDecline of the organization’s sales
and profitsLayoffs occur and talented
employees leave to take positions in growing organizations
Resources become harder to acquire
Resulting crisis may result in organizational failure
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How Do Managers Measure Organizational Effectiveness?
Control: external resource approach Monitors how effectively an organization
manages and controls its external environment
Innovation: internal system approach Develops an organization’s skills and
capabilities to change, adapt, and improve the way it functions
Efficiency: technical approach Measures how efficiently an organization
converts a fixed amount of resources into finished goods and services
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Table 1.1: Approaches to Measuring Effectiveness
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Measuring Effectiveness: Organizational GoalsOfficial 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 organization
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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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Assignment – 1Case for Analysis
………………Due in next class
Case “Change and More Change at AOL-
Time Warner”Go through the case study and answer the discussion questions
given at the end.ALSO
(ANSWER TO THE ‘DISCUSSION QUESTIONS’ ON NEXT SLIDE)Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 26
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ALSOANSWER TO THE
FOLLOWING DISCUSSION QUESTIONS
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 27
1. How do organizations create value? What is the role of entrepreneurship in this process?
2. What is the relationship among organizational theory, organizational design and change, and organizational structure and culture?
3. What is organizational effectiveness? Discuss three approaches to evaluating effectiveness and the problems of each approach.
4. Draw up a list of effectiveness goals that you would use to measure the performance of (a) a fast-food restaurant and (b) a school of business.