Org. Theory and Design: Chapter 4 (Matching)

Keiretsu = A mechanism for achieving benefits of a formal linkage mechanism without incurring its costs Franchising = A business authorized to sell a company’s products in a certain area Outsourcing = The process of moving a value creation activity that was performed inside an organization to outside where it is done by another company Vertical Differentiation = Refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits

Support Functions = Facilitate an organization’s control of its relations with its environment and its stakeholders Production Functions = Manage and improve the efficiency of an organization’s conversion processes so that more value is created Maintenance Functions = Enable an organization to keep its departments in operation Adaptive Functions = Allow an organization to adjust to changes in the environment

Hierarchy of Authority = Differentiates people by the amount of authority they possess and coordinates various organizational roles Direct Contact = Managers meet face to face to coordinate activities Task Force = A temporary committee set up to handle a specific problem Integrating Role = A full-time position established specifically to improve communication between divisions

Differentiation = The process by which an organization allocates people and resources to organizational tasks and establishes the task and authority relationships that allow the organization to achieve its goals Balancing Differentiation and Integration = The process of coordinating various tasks, functions, and divisions so they work together, not at cross purposes Vertical Differentiation = Refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits Horizontal Differentiation = Refers to the way an organization groups organizational tasks into roles and roles into subunits (functions and divisions)

Locating the sources of transaction costs and estimating their magnitude = Identifying cost-saving opportunities from using a particular linkage mechanism Weighing the savings in transaction costs against bureaucratic costs = Deciding how high the transaction costs are likely to be Deciding which strategy to pursue based on transaction cost theory = Enabling managers to make informed decisions on linkage mechanisms Assessing the impact of organizational control on transaction costs = Determining the level of control provided by different linkage mechanisms

Centralization = Retaining authority at the top of the hierarchy Decentralization = Delegating authority to managers at all levels Formalization = Use of written rules and procedures to standardize operations Socialization = Process by which organizational members learn the norms of an organization

Standardization = Conformity to specific models or examples defined by well-established sets of rules and norms Mutual Adjustment = Evolving process through which people use their current best judgment of events rather than standardized rules Norms = Standards or styles of behavior considered acceptable for a group of people Socialization = Process by which organizational members learn and internalize unwritten rules of conduct

Mechanistic Structures = Designed to induce predictable, accountable behavior Organic Structures = Promote flexibility and quick adaptation to changing conditions Con ngency Approach = Management approach tailoring organizational structure to face uncertainties Con ngency Theory = Organization designs its structure to control the external environment

Paul Lawrence and Jay Lorsch = Believe in the direct effect of external environment forces on internal differentiation in an organization Con ngency Theory = Designing internal structure to control external environment Centralization = Retaining authority at the top of the hierarchy Decentralization = Delegating authority to managers at all levels