Organizational Structure Concepts Quiz

Stakeholders Ethics

• Knowledge and decision making are key components of stakeholder ethics.
• Designing organizations presents challenges related to organizational culture and change.
• Organizational structures are also a significant part of this topic.

What is an Organization?

• A group of people coordinated to achieve value creation.
• They're linked to the external environment.

How do Organizations Create Value?

• Providing services or selling products.
• Transforming resources from input to output.
• Value creation occurs in three stages: input, conversion, and output

Organizational Environment

• The set of forces beyond an organization's boundaries that affect its ability to acquire and use resources for value creation.

Different Ways to Create Value

• External resources approach: A company's ability to secure scarce and valuable skills and resources from outside the organization.
  • Low-cost inputs
  • High-quality inputs (raw materials and employees)
• Internal system approach: How efficiently a company converts input into output.
  • Reducing decision-making time
  • Increasing the rate of production
• Technical approach: Converting skills and resources into goods and services efficiently.
  • Increasing product quality
  • Reducing defects and production costs

What does VSM Create Value?

• Creating knowledge for students and companies
• Creating smart people
• Creating a large number of graduates

Why do Organizations Exist?

• Exploiting specialization and labor division.
  • More speed and quality
  • Reduced costs from learning and labor
• using large-scale technology
  • Finding better ways to perform tasks

Relationship Between Strategy and Organization Design

• Organzation design influences strategie formulation and implementation.

Key Criteria for Organization Design

• Effectiveness: Achieving objectives
• Efficiency: Minimizing resources and costs
• Organizational justice: Perceived fairness

Organizational Design and Change

• Reasons for re-designing an organization include poor decision-making, lack of collaboration, unclear responsibilities, and underutilized skills.

Organization Levels

• Intra-organizational levels (macro, meso, micro)
• Inter-organisational levels (environment and stakeholders)

Who are the Organizational Stakeholders?

• Individuals with an interest, claim, or stake in the organization.
  • Internal contributors (e.g., Managers, Workforce)
  • External contributors (e.g, Customers, Suppliers, Partners)

Allocating Rewards

• Rewards/inducements offered to stakeholders affect their future motivation.
• Managers must decide on appropriate rewards for different groups (e.g., CEO, middle manager, employee).
• No CEO should earn more than 1000 times a regular employee's salary.

Top Managers and Organizational Authority

• Authority is the power to hold people accountable.
• Authority enables managers to make organizational decisions.
• The Hierarchical structure is the vertical ordering of organizational roles according to their relative authority.

Top Management Team

• A group of managers that report to the CEO and COO.
• They provide direction, plan strategies, and set goals for the organization.
• They also manage relationships with the external environment.

Middle and Divisional Managers

• Reporting to top management, they manage implementation and coordination at the departmental level.

Line Managers

• Have direct responsibility for creating goods or services.

Staff Managers

• In charge of specific organizational functions as support, for example.

The CEO's Role

• Setting organizational goals and designing the structure
• Selecting key executives
• Determining top management rewards and incentives
• Controlling resource allocation among functional areas
• Influencing stakeholder perceptions of the organization.

Competing Goals: Shareholders vs. Managers

• Different interests can cause conflicts between short-term profitability and long-term values.

Agency Problem: Moral Hazard and Information Asymmetry

• Information asymmetry (principals at a disadvantage compared to managers)
• Conflicts of interest (incentives to pursue different objectives).
• Self-dealing (managers exploiting their position).

Stakeholder Not Shareholders

• Global stakeholders expect accountability beyond financial performance for economic, environmental, and social impacts.
• Integrating stakeholders to achieve common objectives in a sustainable way

Top Managers and Organizational Ethics

• Ethical dilemmas arise when decisions benefit one group while harming another.
• Laws specify what is permitted, while ethics provide a guide for complex situations.
• Balancing stakeholder interests is a primary ethical concern.

What Determines an Ethical Decision?

• Utilitarian Model: Maximize good for the greatest number of people
• Moral Rights Model: Protect fundamental rights of all affected
• Justice Model: Fair distribution of benefits and harms

Organizational Design and the Environment

• Good organizational designs respond to environmental pressures.
• A company's goals need to be aligned with its resources and competencies

Simple Approach to Ethical Decision Making

• Evaluating your decision against organizational values.
• Communicating to stakeholders affected by the decision.
• Gaining approval from significant others.

Why Organizations Need Ethics

• Ethical behaviour prevents scandals; e.g. Equifax data breach

Ethical Structure and Culture

• Ethical goals, conduct standards, codes of ethics, and systems of incentives and punishments are part of creating an ethical culture
• Encouraging whistle-blowing is important

Horizontal and Vertical Differentiation

• Horizontal differentiation: dividing labour to create roles
• Vertical differentiation: creating management levels

Centralizing

• A process that brings people together with a shared supervision, resources, goals, and interpersonal orientation;

Interdependence

• A situation where actions of one unit affect the actions of other units

Coordination

• Standardization: Conformity to specific examples (rules and norms).
• Mutual adjustment: Adapting to particular situations using judgment.

Norms and Socialization

• Socialization: Process by which members learn and internalize the norms of the organization.

Authority and Decentralization

• Centralization: Authority concentrated at the top.
• Decentralization: Authority dispersed throughout the organization.

Contingency Theory

• Organizational structure needs to adapt to the environment of operation.

Organizational Structure Types (e.g., Simple, Mechanistic, Organic)

• Simple: Flat structure, few levels, central authority.
• Mechanistic: Complex, centralized hierarchy, highly standardized in stable environments.
• Organic: Flat, decentralized, adaptable and responsive for dynamic environments.

Case Studies (e.g., Nice Bottles, ING)

• Case studies provide examples of organizational structures and their effects.

Agile Organizational Structure

• Features:
• Flat structure, decentralized authority, and strong collaboration.
• Decisions are made quickly by cross-functional teams.

Network Structures

• Network structures: A cluster of organizational actions are coordinated through contracts.
• Many suppliers, providers, and distributors in more formalized arrangements.

Organizational Change

• Driving forces: Factors causing the need for change.
• Resistance forces: Obstacles to change, stemming from people and organizations

Creating and Managing Culture

• Influences behavior.
• Links to national cultures.
• Transmitted through socialization, ceremonies, and language
• CSR integrates social responsibility with values and norms.

Organizational change - Process and Forces

• Change processes involve moving organizations from current state to a desired future, often to increase effectiveness.
• This can be driven by internal forces (e.g., changes in leadership, M&A) or external forces (e.g., competition, technology).
• It's important that the "change process" should also address resistance forces.

Rational Decision Making Model, Carnegie Model and Unstructured Model

• Rational model of decision making optimizes decision based on knowledge and information;
• Carnegie model recognises bounded rationality because complete information is rarely possible.
• Unstructured model acknowledges uncertainty; decision paths vary.

Knowledge and Decision-Making

• An organization's ability to use knowledge is impacted by its ability and process.
• Organizational designs and configurations (circle, wheel) impact the ability to learn and organize effectively.

Test your knowledge on organizational structures and their implications with this quiz. Explore topics such as centralization, divisional structures, and coordination mechanisms. Perfect for students and professionals interested in management theories and practices.