An Overview of Organization Theory

Chapter 1

Class Agenda
Five basic parts of an organization Organization Theory Biological Metaphor The system perspective Life cycle perspective

What is an Organization
An organization is a consciously coordinated social entity with a relatively identifiable boundary, that functions on a relatively continuous basis to achieve a common goal or set of goals Consciously coordinated imply management Social entity means that the unit is composed of people or groups of people who interact with each other Organization has a relatively identifiable boundary People in organizations have some continuing bond ( does not mean life long membership) Finally organization exist to achieve something (goals)

What is an Organization Structure

Organization structure defines how tasks are to be allocated, who reports to whom, and the formal coordinating mechanisms and interaction patterns that will be followed Organization structure can be described as having three components: complexity, formalization, and centralization Complexity considers the extent of differentiation within the organization. This includes Degree of specialization or division of labor The number of levels in the organization hierarchy The extent to which the organizations units are dispersed geographically Formalization: The degree to which an organization relies on rules and procedures to direct the behavior of employees Centralization Considers where the locus of decision making authority lies

What is Organization Design

Term Organization Design represent the management side of organization theory Organization design is concerned with constructing and changing an organizations structure to achieve organizations goals

What is Organization Theory

It is the discipline that studies the structure and design of organization Refers to both the descriptive and prescriptive aspects of the discipline It describes how organizations are actually structured and offers suggestions on how they constructed to improve their effectiveness

Contrasting OB and OTD

OB takes a micro view- emphasizing individuals and small groups OB focuses on behavior in organizations and a narrow set of employee performance and attitude variables employee productivity, absenteeism, turnover, and job satisfaction OTD takes macro perspective. Its unit of analysis is the organization itself or its primary subunits OT is concerned not only with employee performance and attitudes but with overall organizations ability to adapt and achieve its goals

Five Basic Parts of an organization

The operating core Encompasses those members the operators who perform the basic work related to the production of products and services The operators perform four prime functions 1. They secure the inputs for production ( in manufacturing firm the purchasing department buys the raw materials and the receiving department takes it in the door) 2. They transform the inputs into outputs 3. They distribute the outputs 4. They provide support to input, transformation ,functions output 1.

Five Basic Parts of an organization

2. The Strategic Apex Those people who are charged with overall responsibility for the organization the chief executive officer, any other top-level managers whose concerns are global - Included here are those provide direct support to top managers ( secretaries, assistants) - In some organizations strategic apex includes the executive committee( because its mandate is global even if they represent specific interests) - In some organizations it includes Chief Executive Office two or three individuals who share the job of chief executive They are charged with ensuring that the organization serve its mission in an effective way, and also it serves the needs of those people who control or otherwise have power over the organization

Five Basic Parts of an organization

1. i. Strategic apex (contd.) Three main functions of Strategic Apex Supervision: The extent to which an organization depends on this mechanism of coordination, it is the managers of strategic group and the middle line who affect it Among the managerial roles associated with direct supervision are: Resource Allocator: - design of the structure it self - the assignment of people, resources and task - issuing of work orders - the authorization of major decisions made by the employees

Five Basic Parts of an organization

Strategic apex (contd.) ii. Disturbance handler - resolution of conflict iii. Monitor - review of employees activities iv. Disseminator transmission of information to the employees v. Leader - staffing of the organization - motivating and rewarding employees 2. Management of organization boundary conditions, its relationship with its environment i. Spokes person - informing influential persons about the activities of the organization ii. Liaison - develop high level contact for the organization

Five Basic Parts of an organization

iii. Monitor - tap those for information iv. Negotiator - when major agreements must be reached with outside parties v. Figurehead - carrying out ceremonial duties 3. Development of organizational strategy Strategies must be considered as a mediating force between the organization and its environment Strategy formulation involves interpretation of environment and development of consistent patterns of streams of organizational decisions In entrepreneur role search for effective ways to carry out the mission In general strategic apex takes the widest, most abstract perspective of the organization Work at this level is generally characterized by minimum of repetition, standardization, considerable discretion, and relatively long decision making cycles

Five Basic Parts of an organization

3. The Middle Line The strategic apex is joined to the operating core by a chain of middleline managers with formal authority The chain runs from the senior managers just below the strategic apex to first line supervisors In the hierarchy middle manager performs a number of tasks in the flow of direct supervision above and below him Collects feedback, information on the performance of his own units and passes some of this up to managers above him Intervenes in the flow of decisions Flowing up are disturbances in the unit, proposals for change, decisions requiring authorization Flowing down are resources that he must allocate, rules and plans that must elaborate, and projects that he must implement Has boundary conditions to manage, horizontal one related to the environment of his own unit - environment may include other units within the organization as well groups outside the organization

Five Basic Parts of an organization

Middle line (contd.) In general middle line managers perform all the managerial roles of the chief executive but in context of his unit: i. must serve as a figure head for his unit ii. Lead its members iii. Develop a network of liaison contacts iv. Monitor the environment of his unit v. Transmit some of the information he receives to his unit, up the hierarchy and outside the chain of command vi. Allocate resources within his unit vii. Negotiate with outsiders viii. Initiate strategic change ix. Handle exceptions and conflicts

Five Basic Parts of an organization

Middle line (contd.) Managerial jobs shift in orientation as they descend in the chain of authority Jobs become more detailed and elaborated, less abstract, more focused on the work flow itself
Superiors Analysts outsiders Subordinates Support staff Other middle line managers The line manager in middle

Five Basic Parts of an organization

Middle line (contd.) Line manager is in the middle of forces Some times these forces become so great that especially those of analyst to institutionalize his job by imposition of rules on the unit that the individual in the job can hardly be called a manager at all, in the sense of being really being in charge of an organizational unit This is common at the level of first line supervisor

Five Basic Parts of an organization

The Technostructure: Analyst and their supporting staff who serve the organization by affecting the work of others These analysts are removed from the operating work flow They may design it, plan it, or train people who may do it, but do not do it themselves Technostructure is affective only when it can use the analytical techniques to make the work of others more effective The analyst focus their attention directly on the design and functioning of structure and affect standardization These control analysts are of three types: i. Work Study analyst: industrial engineers, who standardize work processes ii. Planning and control analyst: long-range planners, budget analyst, and accountants, who standardize out puts iii. Personnel analyst: trainers and recruiters, who standardize skills 4.

Five Basic Parts of an organization

i. The Technostructure (contd.): In a fully developed organization, the techno structure may perform at all levels of hierarchy At the lowest level of manufacturing firm analyst standardize the operating work flow of by scheduling production, carrying time and method studies of the operators work, and instituting systems of quality control At the middle level they seek to standardize intellectual work of the organization, by training middle level managers, carry out operations research studies of informational task On behalf of strategic apex they design strategic planning system and develop financial systems to control the goals of major units While analyst exist to standardize the work of others their own work is coordinated through mutual adjustments Standardization of skills does play a part in this coordination Analyst spend a great deal of their time in informal communications

ii. iii.

Five Basic Parts of an organization

5. Support staff: Specialized units, that exist to provide support to the organization outside the operating workflow Most often they are lumped together with technostructure and labeled as staff that provides advice to management These support units are most decidedly separate from technostructure They are not preoccupied with standardization and they cannot be looked upon primarily as advice givers ( although they may do some of that too), they have distinct function to perform The support units can be found at various levels of the hierarchy depending on the receivers of the service In most manufacturing firms, public relations and legal council; are located at the top, since tend to serve the strategic apex only At the middle levels are found the units that support decision making there such as industrial relations, pricing and research and development At the lower level are found units with more standardized work, that akin to the work of operating core such as cafeteria, mailroom, reception, payroll

What is Organization Theory

It is a discipline that studies the structure and design of organizations It refers to both descriptive and prescriptive aspects of an organization It describes how organizations are actually structured and offers suggestions on how they can be constructed to improve their effectiveness

The Biological Metaphor

Metaphor is a popular device for making comparison Like living organisms: - organizations grow, - pass through predictable stages of development - undergo predictable transitions - deteriorate if energy they put out isnt replaced by new inputs Describing organizations as system and proceeding through a life-cycle provides an insight into their makeup

The Systems Perspective

Definition of a System A system is a set of interrelated and interdependent parts arranged in a manner that produces a unitary whole They take inputs, transform them, and produce some outputs Every system is characterized by two diverse forces: differentiation and integration In a system specialized functions are differentiated which replace diffuse global patterns In order to maintain unity among differentiated parts and form a part of complete whole, every system has a reciprocal process of integration Supra-system: Organizations are made up of parts or subsystems they are themselves subsystems within a larger system The classification of supra-system, system and subsystem depends on the unit of analysis

Types of Systems
Closed system - Has rigid , impenetrable boundaries and close it self to the external environment - views systems a self contained and ignores the impact of environment on the system Open system - Imports energy from the environment, process it and provides its output to the environment.

System Theory

Inputs

Processing Technology Systems procedures

Outputs

Feedback

Characteristics of Open Systems

1. Subsystems or components 2. Holism, Synergism, Gestalt: The whole is not just sum of its parts: the system can only be explained in totality 3. Input transformation output model 4. System boundaries 5. Negative entropy 6. Steady state , dynamic equilibrium and Homeostasis: open system attain a state in which system remain in dynamic equilibrium through continuous inflow of materials, energy and information 7. Feedback

Characteristics of open system

8. Hierarchy: A system is composed of subsystems of a lower order and is also a part supra-system 9. Internal Elaboration: open systems appear to move in the direction of greater differentiation, elaboration, higher level of organization 10. Multiple goal seeking 11. Equifinality

Organizational Subsystems
1. 2. 3. 4. 5. Perform five essential functions: Boundary spanning: Handle input output transaction Production system Produces product and service outputs Maintenance Smooth operations and upkeep of the organization Adaptation scans the environment for problems, opportunities, and technological development Management Directing and coordinating other subsystems. Provides direction, strategy, goals and policies for the entire organization

Life Cycle Perspective

Lifecycle refers to a pattern of predictable change Organizations have lifecycles whereby they evolve through a standardized sequence of transitions as they develop over time There are distinct stages through which organizations proceed The stages follow a consistent pattern The transition from one stage to another are predictable rather than random occurrences

Life Cycle Stages

1. Entrepreneurial Stage: (Infancy) - Goals tends to be ambiguous - Creativity is high - Acquiring and maintaining a steady supply of resource 2. Collective Stage - Continues the innovation of next stage - Organization mission is clarified - Communication and structure remains essentially informal - Members put in long hours and demonstrate high commitment to the organization

Life Cycle Stages

4. Elaboration of Structure Stage: - Organization diversifies its products or service markets - Management searches for new products and growth opportunities - Organization structure becomes more complex and elaborated - Decision making is decentralized 5. Decline Stage - Shrinking of markets as result of competition or other environmental forces - Management looks for ways to hold markets and new opportunities - Employee turnover increases - Conflicts increases within organization - New people assume leadership to arrest the decline - Decision making is centralized

Frame Work for analyzing Organization Theory

Determinants of organization structure

Strategy Organization Size Technology Environment Power and control Organization Structure Organization Design Design Options Bureaucracy Adhocracy

Applications Managing the environment Managing organization Change Managing organization conflict Managing organization Culture Managing organizational evolution

Organizational effectiveness