IT 107 Organization and Management

HandOut #012

CONCEPTS IN ORGANIZING
Organizing: An Important Management Function Good organizational skills are essential for manager to bring together people and resources productively. Organizing jobs clarifies individual performance expectations and focuses effort on the tasks needed to accomplish the company's objectives. We organize companies to define authority, create a logical division of work, and allocate resources efficiently. Organizing also produces a logical flow of activities and establishes communication channels for decision making and control. An essential aspect of organizing is to develop a structure for a company that coincides with its technology and work environment. Environmental Factors that Influence Organizational Structure The age of a company and of an industry influences organizational structure. The size of a company influences the degree of formal systems needed to control it. Perhaps the most influential factor is a company's technology. Other environmental influences are legislation, politics, economics, competitors, and changes in information technology. Informal Structures within Organizations They form intricate patterns of influence beyond the rigid lines of formal organizational charts. Informal description of authority, yet they are often more influential than formal structures of authority. Formal structures can be completely circumscribed by these shadow structures.

Cost and Benefits of Informal Structures Informal structures influence patterns of behavior and can either usurp or support management authority. This implies possible benefits and the equal likelihood of costs. On the cost side, workers can band together into informal groups and settle into work routines somewhat less productive than management desires; productivity suffers. There is also an implied dilution of formal authority; rumors may become more believable than facts. Workers may rally to informal leaders and resist change. Their power diffused, managers may have great difficulty enforcing policies. On the benefit side, cohesive informal groups result in predictable behavior and performance. Mutual support by members may also ensure fluid communications, enhance socialization, and provide a sense of group identification. Informal group leaders gain status although without rank, which can help satisfy employees' need for leadership. The last point is important because employees who sense a lack of leadership usually turn to their co-workers for support. Most organizations seem to have at least one person who knows how it all works, as well as many fine employees with tremendous leadership ability to whom other worker turn for advice.
Managing Informal Structures Managers who try to suppress informal relationships risk having workers unite against them in retaliation. If, instead, they encourage cohesion, managers may make their own work easier. By encouraging informal group leaders who constructively enhance group efforts, managers gain allies rather than enemies. Given current trends toward greater worker participation, a coalition between key workers and managers, even if informally accomplished, intensified behavior directed at achieving organizational objectives. In cohesive work groups that include managers, workers will be more receptive to authority. The ultimate result of informal liaison is a shift toward organic organizations. The uncoupling of formal lines of authority, leads to more flexible management. In effect, formal and informal organizations are integrated to improve organizational effectiveness. In smaller organizations, this melding is less important because they contain only a few individuals who work in proximity to one another. In larger complex firms, accommodation informal system is crucial for effective coordination. Formal structures are those with established rules, procedures, and channels of communication, clear lines of decision-making authority, and well-defined jobs. Informal structures are shadow organizations that evolve through personal interaction, sentiments, and social activities of individuals working in proximity. These informal relationships create patterns of behavior that influence decision and can usurp sources of support of formal management authority. Evolution of Organization Larry E. Greiner has identified a growth model with five phases of change corresponding to a range of development from organizational inception to maturity the figure illustrates. 1. Creative Stage. Entrepreneurial firms start with a creative stage in which they are often headed by one person who "is" the company.

When an enterprise is created, it usually makes or sells a product or service through personal efforts of a few individuals. Young firms are small and informal, and management is not concerned with delegation of authority. In fact, owner-managers may "be" their organizations. As firms grow, they add employees and confront the first crisis of organizing. Greiner identify this crisis as one of Leadership in which owner-managers are too overworked to manage operations and supervise employees. In some instances, owners may want to grow, but not to the extent of losing touch with their entrepreneurial roots. 2. Direction Stage. The enterprise grows and reaches the direction stage: the founder must turn to other managers to shoulder some of the decision-making responsibilities. As formalization occurs, centralized management develops a "functional" structure of responsibilities. Top management still controls the firms, but functional specialists are added in accounting, marketing, production, personnel, and other areas. A management hierarchy evolves even though the firm may still be relatively small. A crisis of autonomy develops as the firm grows and a formal hierarchy solidifies. The centralized management structure created to bridge the leadership gap constrains expansion. Lower-level managers seek greater authority, but too often top managers are unwilling to delegate it. Their initial strength as hands-on leader becomes a serious weakness in later growth stages. 3. Delegation Stage. The third stage of growth is called "delegation" because managers must find ways to diffuse authority as the company diversifies into new product lines and new markets. The crisis of autonomy is resolved through effective delegation, leading successful firms into phase 3 growth. Organizations that manage this transition suddenly make giant strides forward. They expand their markets, broaden their products lines, and strengthen their assets. Top management reconciled decision making by decentralizing authority and giving lower-level managers greater leadership responsibilities. More middle managers have been hired to provide the vertical coordination required by expansion. A crisis of control threatens, this success as rapid changes are accompanied by rapid diffusion of authority, Rapid or haphazard delegation is precarious and can lead to disintegration. 4. Coordination Stage . The fourth stage, collaboration, suggests a transition away from bureaucratic paralysis toward more flexible and adaptive forms of organization. If an organization survives the control crisis, it will face coordination problems. A firm in this phase is usually operating in a mature market, growth has slowed, competitors are established, and technology is relatively stable. Management roles are standardized early in this stage with formal systems and channels of communication of formal procedures. In short, it develops a bureaucratic profile. In this stage, a coordination crisis develops, often accompanied by too much "red tape." Such a crisis is akin to organizational paralysis; managers are so bogged down in procedures that they cannot coordinate their efforts. Avoiding paralysis is a matter of redefining authority to instill innovation and adaptability in jobs and management systems. Bureaucratic methods may be appropriate if the company is in a stable industry, but more frequently, companies face stiff competition in rapidly changing industries that require adaptability. Survival requires flexible organization and management decision making that is responsive to competition. 5. Collaboration Stage. There may be a fifth stage, characterized by instantaneous communications and reorganization tempered by global linkage and the need for managers to make and diffuse decisions without intermediaries. Greiner suggest that many corporations are entering this phase of organization. Many are with participative systems of decision making. Mutual goal setting and employee work groups are emerging through program such as MBO and quality circles, and labor and management are collaborating on mutually beneficial labor contracts. Many American firms have integrated team management to foster innovation and avoid the "paralysis syndrome."

The Characteristics of Service Organization Service organizations provide people with intangible benefits, service firms sell results, perceptions, or images to customer's clientele. Often through the personal efforts of expertise of professions, not-for-profit service organizations serve a public constituency and therefore must account carefully for results. This can lead to formality in procedures and authority structures; however, most service firms are profit-oriented, requiring a customer service relationship with adaptable and responsive managers. A SYNOPSIS FOR LEARNING How Organizations Departmentalize to Improve Coordination Departmentalization is the horizontal grouping of activities. This grouping is normally accomplished through a functional pattern of organization in which personnel with similar technical skills and capabilities are gathered in separate departments. Departmentalization by product, geographic territory, and customer can emerge as companies grow. Line & Staff Management Consideration for Organizing Line managers are those directly involved with a company's primary activities. Generally, they are primarily responsible in the production of goods or delivery of services. They direct the operations of the main products or services of the organization. Staff managers hold supporting roles. The demarcation between line and staff is not always clear, but staff responsibilities generally are to advise and support line management activities. Factors that Influence Centralization and Decentralization Centralization and decentralization relate to the vertical organization of management authority. In a centralized firm, a single executive or a small cadre of executives' controls the majority of decisions, delegating little authority to lower-level managers. Decentralized firms have more managers with greater authority diffused to lower operational levels. How Information Systems Influence Organization Designs With improved centralized computer systems and widespread use of data bases, many companies have decentralized decision making. Executives can access information on operations almost instantaneously through information networks and decision-support systems and so relieve the company of hands on middle management coordination. More decisions are made at the top with direct effects on first-line operations. Extensive information systems also allow rapid diffusion of information so that managers at all levels have excellent support for making localized decisions. New Forms of Organization and Temporary Structures Several new forms of organization are emerging as companies enter into joint ventures, limited partnerships, and participative systems. Also, many firms are seeking to become more entrepreneurial, to generate innovative products through independent operating units. These units, informally called "skunkworks" and formally called "new venture units" aim to give autonomy to small groups of employees so that they can pursue new ideas for products and services without bureaucratic restraints. The new venture teams are kept apart from normal organizational activities. Matrix Organization and its Implications for Management A matrix organization is a temporary formation of teams of projects using personnel drawn from existing departments. A matrix creates two-boss system: a person assigned to a matrix team reports both to a project manager within the matrix and to his or her functional department supervisor, Matrix management systems permit results to be achieved rapidly and efficiently. Cultural and Social Changes Affecting Jobs and Work Groups Global changes in technology, information exchange, and science have accelerated the growth of economic activity during the past several decades. These changes have led to a dual-career work force, signaling new family and work relationships. We are rapidly accepting group decision making, cooperative environments, and new system of work that require interdependent performance. The nature of jobs has altered so that workers have become parties in a psychological contract in which the company provide economic, social, and psychological reward commensurate with workers' performance. Frederick Herzberg's Factors of Job Satisfaction The two-factor theory of motivation distinguishes between job satisfaction and dissatisfaction. According to Herzberg, hygiene factors (company policies, pay, working conditions, rules) are related to

dissatisfaction. Satisfier factors (the psychological rewards of work, recognition, opportunities for achievement, promotion, and responsibility for work-related decisions) are related to satisfaction. The Concepts of Job Design and Task Attributes Job design is the process of evaluating job-related activities, the work environment, and the expectations for performance by individuals in a job. After evaluation, jobs are developed, related to one another and filled by employees who have proper skills and abilities. Every job has three behavioral elements: task activities, interaction with others, and mental states. Each element has requisite task attributes, including autonomy, interaction, and responsibility In addition, there are associated task attributes such as pay and task identity Job Redesign Efforts and Strategic Job Redesign Programs Job redesign is the process of changing the content of a job to improve performance. Since one job can seldom be changed in isolation, companies need a strategy of systematic redesign that considers how changes in one job affect other jobs and how total performance will change in the process. Group Cohesiveness, Work norms, and Group Decision making Work cohesiveness is the extent to which employees are attracted to a group and what activities are done to maintain close bond with other group members, A cohesive group works together more efficiently than a non-cohesive group, and reinforces members' expectations for performance and work-related behavior. It also establishes work norms, which are informal standards of conduct governing pace and quality of work, length of work breaks and other rules of behavior that often bear little relationship to company expectations. Decisions are made by consensus in cohesive groups; members usually conform to group decisions to protect the group's unity. Advantages and Disadvantages of Group Decision making Advantages: 1. A group can resolve complex problems by bringing together knowledgeable people from diversified back ground. 2. A group often develops more alternative solutions, and perhaps a richer array of creative ideas than people acting individually. 3. Group decisions result in broad-based acceptance. 4. Group decisions are better communicated because those who have been involved in making the decision understand it and can explain it clearly.

Disadvantages: 1. Group participants often compromise to preserve group unity and therefore arrive at less-than-optimal decisions. 2. Conflicts among group members may result in poor decisions. 3. Many groups are dominated by a strong individual of a power block that overwhelms other members and imposes its preferences. 4. Group decisions usually take longer to make, so when time is of the essence, individual decisions are preferable. 5. Group members arc always in danger of falling into the trap of "group think," or the delusion that their collective efforts are necessarily wise and invulnerable.
STAFFING Human personnel management has taken on strategic importance as companies prepare to compete in an increasingly complex work environment. Technological advances will increase the skill and knowledge requirements of jobs. The work force of the year 2000 will be demographically more diverse. HRM can become a source of sustained competitive advantage. The legal environment of FIRM is complex and constantly changing. Law governs all aspects of HRM, including recruitment and selection, performance appraisal, promotions, demotions, lay offs, termination, rewards, health and safety, and labor relations. Organizations must understand this laws and monitors HRM practices for compliance with relevant regulation. The personnel planning process consists of three stages: planning, programming, and evaluation. Job analysis is a fundamental activity that provides the information necessary for programming each of the keys HRM activities. Job analysis provides information on the characteristics of the job and the person selected to perform the job.

Staffing is the flow of employees into, through, and out of the organization. Key activities of the input stage are recruitment and selection. Recruitment is the development of a pool of job applicants. Selection decisions are choices about which applicant to hire. Different selection tests have different validities (the abilities to predict job performance) and adverse impact (discriminatory effects). Out placement activities include termination interviews and layoffs. Training and development activities are essential for organizations desiring an effective work force. Increasing emphasis on quality and productivity, rapidly changing technology, and changing demography of the work force has increased training demands. Organizations should identify their training needs, implement appropriate design programs, and then evaluate whether the training has achieved the objectives. Performance appraisal (PA) is the assessment of employees' job performance. Four types of performance measures are used: production data, personnel data, management by objectives (MBO), and judgmental data. These measures have different strengths and weaknesses. Like termination interviews, performance appraisal should be conducted following recommended procedures. Compensation involves decision regarding pay level, pay structure, and individual pay distinction. Wage and salary surveys permit organization to set their pay levels to market rates. Job evaluation is an important process for determining pay structure within the company. Incentive systems can be linked to the performance appraisal process at the individual, group, organizational level. Employee benefits are both legally mandated and voluntarily provided by employers. Labor relations deal with unionization and the management of collective bargaining agreements. Workers join unions for economic reason and because of dissatisfaction with management practices. Collective bargaining agreements provide basic worker protection. The role of unions is continually evolving; labor-management collaboration has the potential to transform the competitiveness of organizations and industries. CONTINGENCY THEORY AND ORGANIZATIONAL STRUCTURES Contingency theory implies that organizations must be capable of adapting to situations under various circumstances. The notion of "one best design" for most companies is discarded in favor of "design based on contingencies" Researchers have categorized contingency factors into four basic concerns: 1. The organization's age and size; 2. Its technology and that of the industry; 3. Environmental forces that influence decisions; and 4. Power and personal attributes of the organization's executives. Age and Size The longer an organization has existed, the more formalized its behavior is likely to be. With age come standardization of systems and procedures. It follows that older established organizations in both private and public sectors reflect bureaucratic decision-making. The size oil an organization influences its structure in several ways. Small utility companies, for example, may not imitate the bureaucratic style of larger cousins even though they are often drawn toward the prevailing design. Instead, smaller firms with less complex management relationship may be quite informal. A small college, for instance, may be able to register students in classes without elaborate procedures, whereas a large university requires complex procedures. Size and age of the organizations usually define the need for approximately elaborate control systems. The larger the firm, the more elaborate the system needed for control; hence, the more complex its administration. Older firms, particularly in older industries, develop more elaborate relationships with more differentiated and specialized administrative tasks. Hierarchies grow with specialization. And since authority becomes more sharply focused with differentiation, these firms evolve toward bureaucracy. An organization's size also influences whether work will be approximately departmental. Departmental organizations make systematic efforts to replicate standardized patterns of work. Management wants predictability across departments and stability within them. McDonald's worldwide chain of fast food restaurants was initially a small, rapidly changing organization, but today virtually every process and most operations are standardized. Rules, procedures, job descriptions, uniform's restaurant design, prices, servings and so on are formalized and replicated in nearly every McDonald's locations. Technology Technology is the total accumulation of tools, systems, and work methods used collectively to transform inputs into outputs. One way to think of technology is to divorce knowledge and behavior from the work process. This leaves "instrumentation," the equipment not physical processes of work, as technology.

In a classic study, Joan Woodward identified three distinct categories of technology in modern industry, each defining a different trend in structure. Her three categories of unit, mass, and process production also describe a general pattern of change as accompany of industry grows. Unit Production. Woodward observed that most new enterprises start with a customized service for a select clientele. Units for small batches of products of services are emphasized rather than mass production. In some instances, companies make it their business to customize products through a unit or small batch process. Unit production is nonstandard, often informal, and indicates a close system of individual control in management Owner-manager usually have a hands-on style of decision-making. They are involved in most aspects of the company and employee specialization is not sharply defined. Frequently, employees work independently, and middle managers supervise many subordinates in diverse jobs, Thus, in unit or small-batch systems, flatter organizations with fewer layers of hierarchy exist. Each manager supervises greater numbers of subordinates than in mass or process systems, and operators have greater autonomy over a wider range or work, resulting in less formalization. Mass production technology is characterized by formalized work. Specialization is the rule, and there is rigid separation of formal authority for decision-making. In stereotypical assembly line mass production labor is subdivided, work is interdependent, and there are a great number of management controls. Work is entrenched in form methods and well documented through job description. Technical equipment may be sophisticated, but job specialization's reduces work to simple, easy replicated tasks, Mass-production technology makes possible the kind of fine-tuned operation with emphasis on efficiency that is crucial when a company is producing thousands of like items for customer. Company success is often predicated on mass production techniques that make it the low-cost competitor. Mass production is the basis for the "machine bureaucracy" Warren Bennis calls as a cold and dehumanizing work environment that alienated employees. Woodward also found that mass production systems stifled individuality and were so stressful that workers often became hostile toward their work and one another. In a machine-paced environment, rules and procedures dictate activity and make workers feel exploited. A fighter span of control by more managers over fewer workers is necessary to moderate conflicts and this results in taller organizations with many layers of management. Process production, Companies that require continuous production use a process technology that converts materials into homogenous and undifferentiated products. Examples are chemical production, petroleum refining, and beer brewing processes. The difference between these process systems and production technology is automation. Mass production relies on interdependent assembly-line mechanisms, whereas process production relies on continuous conversion of materials through automatic systems. Mass production uses many less skilled workers to repetitive machine-paced task. Process production uses fewer higher-skilled individuals to control more sophisticated technology. Thus, technicians monitor equipment, maintain equipment, and control automated systems that perform the conversion tasks. In technologically advanced firms, taller organizational structures are being replaced by flatter ones.

Process organizations tend to have more people gather at the strategic apex that are found in the executive suites of mass-production firms. But their roles differ significantly. Process executives include a cadre of specialists who make decisions that affect the entire production system. Executives in mass production and in process environments, have similar responsibilities. But in mass production companies, a more complicated hierarchy of middle managers implements decision. The process hierarchy therefore has fewer middle managers with broader responsibilities.

The Technological Imperative Joan Woodward's studies, together with research by Henry Mintzberg and others, define what is called technological imperative. Simply put, this means that technology often dictates the structure of the firm. Small batch operators who expand toward mass production techniques therefore have to expand middle

management, tighten span of control, and strive for greater formalization. Mass manufacturers in the process of automation have to reduce the number of middle managers, enhance strategic echelons, and emphasize more highly skilled supervision at all levels. Mintzberg concludes that "the more regulated the technical systems the more formalized the operating work and the more bureaucratic the structure of the operating core." By operating core, he means the focal activity of the firms, such as factory operations in manufacturing. Mintzberg also says that automation of the operating core will transform bureaucratic organizations into organic structures with fewer production employees and more sophisticated technical specialist. Information technology is yet another factor that is rapidly changing organizational structures affecting not only the operation core but middle management job as well.

Environmental Contingencies Environmental Factors There are potentially many environmental factors that influence organizational design. Several of these are concerned with competition, product innovations, market changes, and other external conditions. One factor is the relative stability of the industry A stable industry leads to a more bureaucratic structure. Another environmental ' factor is relative complexity. More complex environments result from market diversification and changes in consumers, world competition, and geographic location. In addition, when markets become complex, decentralization of authority is essential to control distribution systems. Decentralization is the process of giving more authority to lower-level managers in more diversified roles. These apparently conflicting forces result in four general models of organization: 1. Decentralized bureaucratic organizations standardized systems and skills to provide replication of marketing systems in complex but stable market environments. 2. Decentralized organic organizations - develop field specialists who have authority over divisions. Systems and skills are not standardized. Therefore, such companies have a cadre of highly trained managers with authority to react to unpredictable market's situations. 3. Centralized bureaucratic organizations - standardize work processes and systems. These are he classic pyramid structures, with many layers of management that formalize behavior with a tight chain of command. 4. Centralized organic organizations - cannot standardize process, systems, or behavior. These include young entrepreneurial firms in rapidly changing markets or those with rapidly changing technologies. Microcomputer firms and software manufacturers are recent examples. Managers must maintain close control, but uncertain and environment dynamics preclude standardization.

Culture

Cultural issues in organizations depend on the individual values of their employees. Structure changes to conform to changing human values. Today this means a propensity toward participative management. Thus bureaucratic guidelines are softening to allow greater joint decision making. Organization charts may not yet reflects this, but behavior is changing, as evidence by team decision processes at Hallmark, Ford, Pacific Bell, Hewlett Packard and many other companies Our culture has also produced more highly educated individuals who seek challenge and growth in their occupations. Individual jobs are therefore being redesigned to enrich human endeavor. Two forces are at work here. One, specialization pulls people toward well-defined and more standardized jobs. The other, individualism's pulls them away from standardization and toward greater freedom of choice. The combined influences of education, cultural changes, jobs (and career) expectations, and counterpoised. forces that at once encourage participation and lament lost individuality have serious implications for managers who must design jobs. Managers today are accountable for job enrichment programs and redesign of jobs in an era of every rapid organizational change.

Economic and Legal Aspects. As the economy changes, markets become disrupted. As international competition increases, stability decreases. With changes in inflation or unemployment, labor markets personal expectations, consumer taste, demand, and many other factors also change. These conditions have dramatically undercut assumptions about appropriate behavior in organizations. Decentralized bureaucracies, have evolved into more centralized and organic enterprises. Legal considerations have historically constrained organizations and helped shaped authority. During the past few decades, legislation has proliferated to complicate organizational decision making. In turn, this has led to greater standardization.
Power and Personal Attribute In Management All organizations, regardless of their size, age, or technology are influenced significantly by their executives. This is also an age of imposed prerogatives - a period in which external power struggles often dictate managerial style. Entrepreneurial companies, often targets of acquisition, are initially organic in form and manner. Once acquired, they are suddenly vested with the acquiring firm's corporate structure and culture. This usually means a sudden forced change to formalized structures that bureaucratize the organization. Some managers and firm's founders cannot accommodate this sudden transformation to a formalized structure of authority. For example, Mitch Kapor, Lotus Corporation's charismatic founder and creator of LOTUS 1-2-3, walked away from his firm in 1987, citing an oppressive environment tempered by rules and regulations he found stifling. Organizations are also influenced by executives in search of "quick fixes" to company problems. Some fads turn into long-term structural changes; many others disrupt organizations before they are discarded. Good practices that have been tried and often implemented include management by objectives (MBO) and quality control circles (QCCs). Westinghouse, for example, initially sought to improve product quality through QCCs during the 1970s. Then, after several years, the company's executives found that shop-floor participation groups had subsequently improved performance in sales, product development production processes, and leadership methods as well. So they decided to implement quality circles throughout the firm on a permanent basis.
By JinAd