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8/8/2019 Revised Session 1-2 Organization Structure & DesignAn Introd
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Organization Structure & Design : Anintroduction
Organization : A consciously coordinated socialentity, with a relatively identifiable boundary,that functions on a relatively continuous basis toachieve a common goal or set of goals
1. Consciously coordinted Management
2. Social entity Need for coordinating theinteraction patterns of people
3. Relatively identifiable boundary Distinguishmembers from non-members dynamic
implicit/explicit contract between members andorganization
4. Continuing bond Not life long membership When members participation with some
regularity Eg: Sears sales executive vs.National Organization for Womens member
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Organization (contd..)
5. Goals : Attainment more efficient through group
effort Full endorsement of goals not necessary Defn implies general agreement withorganization mission
Organization Structure:
Need for formal coordination of interactionpatterns of members
Structure defines: How tasks to be allocated,
who reports to whom, formal coordinatingmechanisms and interaction patterns to befollowed
Structure has three components:
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1. Complexity: extent of differentiation: degree ofspecialization (division of labor), number oflevels, extent of dispersion of unitsgeographically
2. Formalization: Degree of reliance on rules and
procedures to direct behavior In someminimum standardized guidelines, in others allkinds of regulations ( can/can not do acts )
3. Centralization: Considers where the locus of
decision-taking authority lies highcentralization vs. decentralization two ends ofa continuum position of organization on itdetermines the kind of structure that exists
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Organization Design:
Management side of organization theory Concerned with constructing and changing
organizations structure to achieve goals beginswith end goal means/plan to achieve goal
blueprint is organization chartOrganization Theory:
Discipline that studies organization structure anddesign both descriptive and prescriptive aspects ofdiscipline
How they are actually structured, restructured toimprove effectiveness
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Organization Theory vs. Organization Behavior:
OB: Micro view emphasis on individuals/smallgroups performance, attitude variables productivity, absenteeism, turnover, jobsatisfaction etc individual: perception, values,learning, motivation, personality group topics:
roles, status, leadership, power, communication,conflict
OT: Macro perspective units of analysis
organization itself or its primary subunits focuson behavior of organizations uses broaderdefinition of organizational effectiveness overallorganizational ability to adapt and achieve goals
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OB/OT overlap OB: conflict people centric, OT:design centric issue not right/wrong emphasis ondifferent levels of organizational analysis
Why study OT:
Organizations dominant/all pervasive forms of currentlife birth in a hospital to rest in a mortuary
Intuitive theories of organizations vs. systematic study (
looking at relationships, attributing causes/effects,basing conclusions on scientific evidence) from gutfeeling to scientific study
Managers to know how organizations work, that
knowledge based on scientific evidence, useknowledge to construct/change structure to achievegoals
Study of IT may not be exciting but pragmatic captivein a course no value addition but means to an end
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The Biological Metaphor:
Metaphor a popular device for making comparisons
Extremely useful in gaining insights into workings oftwo phenomena one understood fairly well, the otherunknown
Comparing organizations with living organizations
some do not agree organizations are born, needcontinual nourishment for survival, but no natural death
Therefore biological metaphor is not perfect
However increasingly popular conceptual frameworkfor understanding organizations
Birth Growth predictable stages of development series of predictable transitions then deterioration ifenergy put out out not replaced by new inputs
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Ten Different Ways of Looking at Organizations:
1. Rational entities in pursuit of goals
2. Coalition of powerful constituencies
3. Open systems : input-output transformation systemsthat depend on environment for survival
4. Meaning-producing systems: artificially created
entities goals/purposes symbolicallycreated/maintained by management
5. Loosely coupled systems: relatively independentunits pursue dissimilar even conflicting goals
6. Political systems: composed of internalconstituencies seek control over decisionprocesses to enhance position
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7. Instruments of domination: members placed intojob boxes constrain what they can do, withwhom to interact given a boss who has authority
over them8. Information-processing unit: interpret
environment, coordinate activities, facilitatedecision making by processing informationhorizontally/vertically through a structural hierarchy
9. Psychic prisons: constrain members through jobdescriptions, departments, divisions, standards ofacceptable/unacceptable behaviors whenaccepted, become artificial barriers that limit
choices10. Social contracts: Organizations composed of
sets ofunwritten agreements whereby membersperform certain behaviors in return forcompensation
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The Systems Perspective:
System: set of interrelated andinterdependent parts arranged in a mannerthat produces a unified whole societies,automobiles, plants, human bodies
Inputs -> Transformation Process ->Outputs
System
Environment
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Interrelationship of parts within the system
System characterized by two diverse forces:differentiation and integration divisions,departments, like units separated out to performspecialized activities
Reciprocal process of integration to maintain unityamong differentiated parts and form complete whole
Integration achieved through: coordinated levels ofhierarchy; direct supervision; and rules, proceduresand policies
Concepts ofsupra system, system, subsystem:eg KIIT, IBAT SOM, Areas such as OB/HRD;Finance, Mkting etc
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Types of Systems:
C
losed vs.
Open Closed: self-contained ignores effects of
environment no energy received fromoutside nor given out More idealistic than
practical little contemporary applicability
Open: dynamic interaction of system withenvironment bank as an example
deposits -> loans & other investments-> useprofits for maintenance, growth, dividends,taxes shows active interaction withenvironment
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An Industrial Organization as an Open System
InputsMaterials
Labor
Capital
Technical ProcessingCore
(Transformation of RMs
into FGs)
Outputs
Finished
Products
Customers
Government
Financial institutions
Labor Force
Suppliers
Receipt of Revenues
Lob
bying
LobbyingRegulations
Consumer
Advocacy
Loan repayments
Wages
Payment
to creditors
Eg: General Motors migration
from a closed to open system
Can sell anything to
environment focus
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Open System : Characteristics :-
1. Environmental awareness:
system/environment interdependency concept ofboundary between system and environment physical and/or psychological( thru symbols: titles,uniforms, indoctrination rituals
Eg: Chryslers bankruptcy in early 1980s createdby environment( aggressive foreign competition,oil price hike in 1970s, US interest rate hikes tocheck inflation) product line (large, expensive,gas guzzling cars) hit hard FORD/GM: of huge
sales volume, comfortable cash position to investbillions of $ to retool & go in for small cars
Chrysler environment two way relationship suppliers, Michigan state, workers union, federalgovt (loan guarantees) came to rescue
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2. Feedback:
Receipt of environmental information systemadjusts initiated corrective action to rectifydeviation, modify course of action
Eg: Chryslers turnaround strategy effective
reading of feedback from customers fuelefficient k-cars, attractive convertibles, caravanwagons, rigorous quality control
3. Cyclical character: The outputs provide means
for new inputs that allow repetition of cycle Adequate revenues to pay off creditors, suppliersfor perpetual maintenance of cycle and survival
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4. Negative entropy: entropy -> propensity ofsystem to run down/disintegrate closed systemdue to no import of energy from environment fast
disintegrates open system repairs itself,maintains its structure, avoids death, growsbecause imports more than it expends
5. Steady state: even constant flow of new inputsinto system and a steady outflow, on balance the
character of the system remains the same6. Movement toward growth and expansion:
steady state characteristic descriptive ofsimple/primitive open systems withcomplexity/move to counter entropy, opensystems move toward growth/expansion not acontradiction of steady-state thesis systemquantity changes, quality remains same do moreof same thing than pursue new/innovativeactivities (colleges/varsities)
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7. Balance of maintenance and adaptiveactivities:
Open systems seek to reconcile two, oftenconflicting activities maintenance/adaptiveactivities counter rapid change effect
Maintenance: subsystems in balance, system inaccord with environment seeksstability/preservation of status quo purchase/maintenance, overhaul of machinery;recruitment/training; provision/enforcement ofrules/procedures
Adaptive: focuses on change through planning,market research, new-product development etc
Both essential for survival
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8. Equifinality:
A system can reach the same final state fromdiffering initial conditions and a variety of paths
Can accomplish objectives with varied inputs andtransformation processes
Helps consideration of variety of solutions to agiven problem than to seek some rigid optimal
solutionImportance of Systems Perspective : Help
conceptualize organization: whole withinterdependent parts jobs not static, isolatedelements appreciate organization/environmentinterface organization as stable patterns andactions within boundaries why they resistchange alternative inputs/processes to reachgoals glaring limitation is its abstractness
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Life-Cycle Perspective:
Organizations are born, grow and eventually die
Refers to a pattern of predictable change stages follow a consistent pattern transitionfrom one to another predictable not randomchance occurrences
Life-Cycle Stages: a five-stage model
1. Entrepreneurial Stage: formation stage of PLC infancy goals ambiguous creativity high needs steady supply of resources to move tonext
2. Collectivity Stage: innovation continues nowmission clarified communication/structureessentially informal long hours of work highcommitment to organization
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3. Formalization and control stage:
Formalization of rules - Stable structure -Emphasis on efficiency
4. Elaboration-of-Structure stage:
More complex structure Decentralization -
Diversified markets5. Decline stage: High employee turnover
Increased Conflict Centralization
Organizations not necessarily pass through five
stages stages no correlation with chronologicalage of organization
Perspective helps us appreciate organizations asdynamic entities promotes effectiveness
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Organization Theory:Aooroximatetime frame
1900-1930 1930-1960 1960-1975 1975-?
SystemsPerspective
Closed Closed Open Open
EndsPerspective
Rational Social Rational Social
Central
Theme
Mechanical
efficiency
People and
humanrelations
Contingenc
y designs
Power and
politics
Theoreticalclassification
Type I Type II Type III Types IV
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Type I Theorists:
Frederick Taylor and Scientific Management:1911 Principles of Scientific Management one best way to do a job issue of workdesign application: supervisory level
Four Principles of Scientific Management:
1. Scientific determination of workers job, notdependence on rule-of-thumb methods
2. Scientific selection/training of workers
3. Cooperation of management and labor toaccomplish work objectives
4. More equal division of responsibility : Mangers:Planning, supervising; Workers: Execution
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Henri Fayol and Principles of Organization:research based on experience as working
executive principles apply to all levels ofmanagement
14 Principles:
1. Division of work, 2. Authority, 3. Discipline,4. Unity of command, 5. Unity of direction, 6.
Subordination of individual interests toorganizations interests, 7. Remuneration, 8.
Centralization, 9. Scalar chain, 10. Order, 11.Equity, 12. Stability of tenure of personnel, 13.Initiative, 14. Esprit de Corps
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Max Weber and Bureaucracy:
Ideal structure called bureaucracy to achieve ends characterized by division of labor, clear authorityhierarchy, formal selection, detailedrules/regulations, impersonal relationships
design prototype for todays large organizations
Ralph Davis and Rational Planning:
Structure logical outcome of organizations
objectives firms objective economic service economic value creation through activites likeproduction/services Mgt to group these activitiesto form structure
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Type II Theorists: social nature of organizations humanrelations school organizations as tasks + people
Elton Mayo and the Hawthorne Studies:
Western Electric Company, Hawthorne Works, Cicero Effecton illumination of light intensity on productivity effect ofgroup piecework incentive pay system on productivity grouppressure, acceptance, concomitant security more significantpredictors of output organizational humanism include
effects on work groups, employee attitudes, manager-employee relationships in organization design
Chester Barnard and Cooperative Systems:
The Functions of the Executive experience from AT & T,President, New Jersey Bell Organizations are cooperative
systems composed of tasks/people to be maintained atequilibrium state matching task requirements with peoplesneeds informal organization authority in terms ofsubordinates response managers to facilitatecommunication stimulate them to high levels of effort
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Douglas McGregor: Theory X-Theory Y:
Theory X : dislike work, attempt to avoid it
must be coerced, controlled, threated to achievedesired goals shirk responsibilities and seekdirection security as topmost priority, noambition
Theory Y: work as natural as rest or play commitment to objectives elicit self-direction/control average person learns toaccept/seek responsibility creativity widelydispersed, not prerogative of managers alone
Participative decision making,responsible/challenging jobs creation, developinggood group relationships attributed to McGregor
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Warren Bennis and the Death of Bureaucracy:
Bureaucracys centralized decision making,impersonal submission to authority, narrowdivision of labor being replaced bydecentralized, democratic structures organized
around flexible groups Authority based influence to expertise influence
Flexible adhocracies the emerging ideal
organizational form Movement from one extreme to other just in ifty
years time
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Type III Theorists:
Neither mechanistic nor humanistic solution rightfor all occasions Thesis + antithesis=Synthesisis contingency approach
Herbert Simon and Principles of backlash:
Classical principles are just proverbs onecontradicted the other
He argued OT to go beyondsuperficial/oversimplified principles To studyconditions where competing principles areapplicable
Katz and Kahns Environmental Perspective:
Open systems perspective environment-structure relationship contemporary research onorganization derives a lot from this
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The case for Technology:
1960s Joan Woodward, Charles Perrow,James Thompson Technology as the
determinant of appropriate structure contemporary relevance
The Aston Group and Organization size:
Relationship between size and structure smallvs. large organization help managers takedesign decisions as organizations grow
Type 4 Theorists:
Most recent theory focuses on political natureof organization
March and Simons cognitive limits t rationality:
Most decision makers select satisfactory
alternatives that are just good enough
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Only in exceptional cases they go for optimal alternatives
Called for a revised model of OT different from the rational-cooperative model
The revised model will recognize the limits of decisionmakers rationality acknowledge presence of conflictinggoals
Pfeffers Organizations as Political Arenas:
His theory encompasses power coalitions, inherent conflictsover goals, organizational design decisions favoring self-interest of those in power
Control becomes an end rather than means to rational goals Design decision reflection of power struggles by diverse
coalitions
View currently very much in vogue
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Organizational Effectiveness
Organization Theory definition ofeffectiveness: Proper organizationstructure
Which organization structure will leadto/improve effectiveness
1950s: Effectiveness the degree to
which an organization realized its goals(ambiguities in this: whose goal; ST/LT;official goals or actual goals etc)