Organization Theory & Design - Textbook PDF

DAFT “This is an excellent textbook for university students and professionals alike. Its unique MURPHY practical features facilitate in-class and independent learning. The amalgamation of WILLMOTT organization theory with organizational examples offers readers insigh...

DAFT “This is an excellent textbook for university students and professionals alike. Its unique MURPHY practical features facilitate in-class and independent learning. The amalgamation of WILLMOTT organization theory with organizational examples offers readers insight and stimulates critical thinking.” Dr Cindy Wang-Cowham, Sheffield Business School, Sheffield Hallam University, UK “The authors present an excellent textbook that provides Bachelor and Master students with an approachable and highly readable resource to understand organizational design. Highly Organization Theory & Design recommended.” Norbert Steigenberger, Jönköping International Business School, Sweden The fourth edition of Organization Theory & Design provides you with an understanding of the different approaches to designing and managing an organization. Illustrated with many enlightening global examples, this book combines classic ideas and contemporary theories Organization to reflect the challenges faced by managers. Developed for students in the UK, Europe, the Middle East and Africa, it provides an up-to-date, international perspective to Richard L.Daft’s landmark text. Key features Theory & Design A Look Inside explores companies that have faced organizational design issues and provides real insight into how factors are often outside of management control. Leading by Design highlights organizations that have applied new design ideas based on contemporary thinking and technology, showing how transformation can occur in turbulent times. In Practice cases illustrate theoretical concepts in organizational settings to provide you with real-world stimulation throughout the text. An International Perspective End of chapter discussion questions, workbook assignments and cases enable you to practise your critical thinking skills with real-world challenges. Richard L. Daft, Digital Solutions A fully updated companion website is available to support your course, with an Instructor’s Manual, PowerPoint slides, online cases and a test bank. Jonathan Murphy About the Authors & Hugh Willmott Richard L. Daft is the Brownlee O. Currey, Jr. Professor of Management and Principal Senior Lecturer in the Owen Graduate School of Management at Vanderbilt University, USA. Jonathan Murphy leads the European Union’s global programme for parliamentary strengthening (INTER PARES) and holds a visiting professorship (docent) at Jyväskylä University, Finland. Fourth Hugh Willmott is Professor of Management at Cass Business School, UK and also holds Edition a position of Professor of Organization Studies at Cardiff Business School, Wales. cengage.com Fourth Edition  Organization Theory & Design An International Perspective Richard L. Daft, Jonathan Murphy & Hugh Willmott Australia Brazil Mexico Singapore United Kingdom United States Fourth Edition 65900_fm_hr_i-xvi.indd 1 1/9/20 12:05 PM  Organization Theory & Design, Fourth Edition © 2020, Cengage Learning EMEA US author: Richard L. Daft Adapted from Organization Theory & Design, 12th Edition, Adapters: Jonathan Murphy, Hugh Willmott by Richard L. Daft. Copyright © Cengage Learning, Inc., 2016. All Rights Reserved. Publisher: Annabel Ainscow ALL RIGHTS RESERVED. 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To learn more about Cengage platforms and services, ­register or access your online learning solution, or p ­ urchase materials for your course, visit www.cengage.com Printed in Singapore by Seng Lee Press Print Number: 01 Print Year: 2020 65900_fm_hr_i-xvi.indd 2 21/02/20 5:59 pm  BRIEF CONTENTS PART 1 INTRODUCTION TO ORGANIZATIONS 1 1 What are Organizations? 2 2 Perspectives on Organizations 19 PART 2 ORGANIZATIONAL PURPOSE AND STRUCTURAL DESIGN 48 3 Strategy, Organization Design and Effectiveness 49 4 Fundamentals of Organization Structure 92 PART 3 OPEN SYSTEM DESIGN ELEMENTS 136 5 The External Environment 137 6 Interorganizational Relationships 178 7 Designing Organizations for the International Environment 213 PART 4 INTERNAL DESIGN ELEMENTS 250 8 Manufacturing and Service Technologies 251 9 Information Technology and Control 291 10 Organization Size, Life Cycle and Decline 328 PART 5 MANAGING DYNAMIC PROCESSES 362 11 Organizational Culture and Ethical Values 363 12 Innovation and Change 402 13 Decision-Making Processes 442 14 Conflict, Power and Politics 486 INTEGRATIVE CASES 5 29 1.0 Luxurious Goat Milk Products: Working with Local Culture – RojaAHP 530 2.0 ‘Box-Ticking’ in Organizations: Lessons of the Nimrod Disaster 536 3.0 Onward to the Customer of One; from Debt Collectors to Customer Service Agents at New Zealand’s Inland Revenue 544 4.0 Changing the Culture at Trans-Gen PLC: What’s Wrong with Senior Management? 548 5.0 Blood on the Gatepost: Family Conflicts in the New Zealand Farming Industry 557 iii 65900_fm_hr_i-xvi.indd 3 1/9/20 12:05 PM  Contents Preface ix About the Authors xii PART 2 Acknowledgements xiv ORGANIZATIONAL PURPOSE AND PART 1 STRUCTURAL DESIGN 48 3 STRATEGY, ORGANIZATION DESIGN INTRODUCTION AND EFFECTIVENESS 49 TO ORGANIZATIONS 1 Purpose of this Chapter 52 The Role of Strategic Direction in Organization 1 WHAT ARE ORGANIZATIONS? 2 Design 52 Organization Theory in Action 4 Organizational Purpose 54 Topics 4 Mission 54 Current Challenges 6 Operative Goals 55 Purpose of this Chapter 9 The Importance of Goals 59 What is an Organization? 10 A Framework for Selecting Strategy and Definition 10 Design 60 Types of Organizations 11 Porter’s Competitive Strategies 60 Importance of Organizations 12 Miles and Snow’s Strategy Typology 64 Framework for the Book 14 Emerging Concepts in Business Strategy 66 How Strategies Affect Organization Design 66 Plan of Each Chapter 16 Other Factors Affecting Organization Design 68 Summary and Interpretation 16 Assessing Organizational Effectiveness 69 Contingency Effectiveness Approaches 69 2 PERSPECTIVES ON Goal Approach 69 Resource-based Approach 70 ORGANIZATIONS 19 Internal Process Approach 72 Purpose of this Chapter 21 An Integrated Effectiveness Model 74 From Closed to Open Systems 21 Organizational Configuration 23 Summary and Interpretation 78 Dimensions of Organization Design 24 Structural Dimensions 25 4 FUNDAMENTALS OF ORGANIZATION Contextual Dimensions 26 Performance and Effectiveness STRUCTURE 92 Outcomes 30 Purpose of this Chapter 94 The Evolution of Organization Theory and Organization Structure 94 Design 33 Organization Structure Represented Visually in Historical Perspectives 34 Organization Charts 94 Contemporary Organization Design 36 Information-Processing Perspective on Efficient Performance versus the Learning Structure 97 Organization 37 Vertical Information Linkages 98 Summary and Interpretation 41 Horizontal Information Linkages 98 iv 65900_fm_hr_i-xvi.indd 4 1/9/20 12:05 PM  CONTENTS v Organization Design Alternatives 103 Resource Dependence 160 Required Work Activities 103 Controlling Environmental Resources 162 Reporting Relationships 104 Establishing Interorganizational Linkages 162 Departmental Grouping Options 104 Controlling the Environmental Domain 166 Simple, Functional, Divisional and Geographical Organization–Environment Integrative Designs 106 Framework 169 Simple Structure 106 Summary and Interpretation 170 Functional Structure 108 Functional Structure with Horizontal Linkages 109 Divisional Structure 110 6 INTERORGANIZATIONAL Geographical Structure 114 RELATIONSHIPS 178 Matrix Structure 115 Purpose of this Chapter 180 Conditions for the Matrix 115 Strengths and Weaknesses 117 Organizational Ecosystems 181 Is Competition Dead? 182 Horizontal Structure 119 The Changing Role of Management 183 Characteristics 120 Interorganizational Framework 184 Strengths and Weaknesses 121 Resource Dependence 185 Virtual Network Structure 123 Resource Strategies 186 How the Structure Works 123 Power Strategies 186 Strengths and Weaknesses 125 Collaborative Networks 187 Hybrid Structure 126 Why Collaboration? 188 Applications of Structural Design 127 From Adversaries to Partners 189 Structural Alignment 127 Population Ecology 192 Symptoms of Structural Deficiency 128 Organizational Form and Niche 194 Summary and Interpretation 129 Process of Ecological Change 195 Strategies for Survival 197 Institutionalism 199 The Institutional View and Organization Design 200 PART 3 Institutional Similarity 200 Summary and Interpretation 203 7 DESIGNING ORGANIZATIONS FOR OPEN SYSTEM DESIGN ELEMENTS 136 THE INTERNATIONAL ENVIRONMENT 213 5 THE EXTERNAL ENVIRONMENT 137 Purpose of this Chapter 215 Purpose of this Chapter 142 Entering the Global Arena 215 Motivations for Global Expansion 216 The Environmental Domain 142 Stages of International Development 217 Task Environment 143 Global Expansion through International Strategic General Environment 145 Alliances 218 International Context 146 Designing Structure to Fit Global Strategy 219 Environmental Uncertainty 147 Model for Global Versus Local Opportunities 219 Simple–Complex Dimension 149 International Division 223 Stable–Unstable Dimension 150 Global Product Division Structure 224 Framework 152 Global Geographic Division Structure 224 Adapting to Environmental Uncertainty 154 Global Matrix Structure 227 Positions and Departments 154 Building Global Capabilities 228 Buffering and Boundary Spanning 154 The Global Organizational Challenge 228 Differentiation and Integration 156 Global Coordination Mechanisms 230 Organic versus Mechanistic Management Processes 158 Cultural Differences in Coordination and Planning, Forecasting and Responsiveness 159 Control 232 Framework for Organizational Responses to National Value Systems 232 Three National Approaches to Coordination and Uncertainty 160 Control 234 65900_fm_hr_i-xvi.indd 5 1/9/20 12:05 PM  viCONTENTS The Transnational Model of Organization 235 Management Control Systems 299 The Balanced Scorecard 302 New Approaches to Global Organizational Design 238 Adding Strategic Value: Strengthening Internal Dragon Multinationals 238 Coordination 304 Value Chains 240 Intranets 304 Enterprise Resource Planning 305 Summary and Interpretation 242 Knowledge Management 306 Adding Strategic Value: Strengthening External Relationships 308 PART 4 The Integrated Enterprise 310 Customer Relationship Management 313 E-Business Organization Design 314 IT Impact on Organization Design 316 INTERNAL DESIGN ELEMENTS 250 Future Trends 319 Summary and Interpretation 320 8 MANUFACTURING AND SERVICE TECHNOLOGIES 251 10 ORGANIZATION SIZE, LIFE CYCLE AND Purpose of this Chapter 255 DECLINE 328 Core Organization Manufacturing Purpose of this Chapter 330 Technology 255 Manufacturing Firms 255 Organization Size: Is Bigger Better? 330 Strategy, Technology and Performance 257 Pressures for Growth 330 Dilemmas of Large Size 331 Contemporary Applications 258 Flexible Manufacturing Systems 259 Organizational Life Cycle 336 Lean Manufacturing 262 Stages of Life Cycle Development 336 Performance and Structural Implications 266 Organizational Bureaucracy and Control 340 Core Organization Service Technology 268 What is Bureaucracy? 341 Service Firms 268 Size and Structural Control 342 Designing the Service Organization 270 Bureaucracy in a Changing World 344 Non-Core Departmental Technology 271 Organizing Temporary Systems for Flexibility and Variety 272 Innovation 346 Analyzability 272 Other Approaches to Reducing Bureaucracy 348 Framework 272 Organizational Decline and Downsizing 348 Department Design 273 Definition and Causes 348 A Model of Decline Stages 349 Workflow Interdependence among Downsizing Implementation 351 Departments 276 Types 276 Summary and Interpretation 353 Structural Priority 278 Structural Implications 278 Impact of Technology on Job Design 279 Job Design 280 PART 5 Sociotechnical Systems 280 Summary and Interpretation 282 MANAGING 9 INFORMATION TECHNOLOGY DYNAMIC PROCESSES 362 AND CONTROL 291 Purpose of this Chapter 294 11 ORGANIZATIONAL CULTURE AND Information Technology Evolution 294 ETHICAL VALUES 363 Information for Decision-Making and Control 296 Purpose of this Chapter 366 Organizational Decision-Making Systems 297 Organizational Culture 367 Feedback Control Model 298 65900_fm_hr_i-xvi.indd 6 1/9/20 12:05 PM  CONTENTS vii What Is Organizational Culture? 367 Strategies for Implementing Change 427 Emergence and Purpose of Culture 368 Leadership for Change 428 Interpreting Culture 369 Barriers to Change 430 Techniques for Implementation 431 Organization Design and Culture 374 The Adaptability Culture 375 Summary and Interpretation 433 The Mission Culture 375 The Clan Culture 377 The Bureaucratic Culture 377 13 DECISION-MAKING PROCESSES 442 Culture Strength and Organizational Purpose of this Chapter 445 Subcultures 378 Definitions 445 Organizational Culture, Learning and Performance 381 Individual Decision-Making 447 Rational Approach 447 Ethical Values and Social Responsibility 382 Bounded Rationality Perspective 451 Sources of Individual Ethical Principles 382 Managerial Ethics and Social Responsibility 383 Organizational Decision-Making 454 Does It Pay to Be Good? 384 Management Science Approach 455 Carnegie Model 459 Sources of Ethical Values in Organizations 385 Incremental Decision Process Model 460 Personal Ethics 385 Organizational Culture 385 The Learning Organization 464 Organizational Systems 386 Combining the Incremental Process and Carnegie External Stakeholders 386 Models 464 Garbage Can Model 466 How Leaders Shape Culture and Ethics 387 Values-based Leadership 388 Contingency Decision-Making Framework 469 Formal Structure and Systems 389 Problem Consensus 471 Technical Knowledge about Solutions 471 Corporate Culture and Ethics in a Global Contingency Framework 472 Environment 392 Different Types of Decision-Making Approaches 474 Summary and Interpretation 393 Special Decision Circumstances 474 High-Velocity Environments 475 12 INNOVATION AND CHANGE 402 Decision Mistakes and Learning 476 Purpose of this Chapter 404 Escalating Commitment 477 Innovate or Perish: The Strategic Role Summary and Interpretation 477 of Change 404 Incremental versus Radical Change 405 14 CONFLICT, POWER Strategic Types of Change 407 AND POLITICS 486 Elements for Successful Change 409 Purpose of this Chapter 489 Technology Change 411 The Ambidextrous Approach 412 Intergroup Conflict in Organizations 489 Techniques for Encouraging Technology Sources of Conflict 490 Change 413 Rational versus Political Model 493 New Products and Services 416 Power and Organizations 494 New Product Success Rate 416 Individual versus Organizational Power 495 Reasons for New Product Success 418 Power versus Authority 496 Horizontal Coordination Model 418 Vertical Sources of Power 496 Achieving Competitive Advantage: The Need Horizontal Sources of Power 501 for Speed 420 Political Processes in Organizations 507 Strategy and Structure Change 421 Definition 508 The Dual-Core Approach 421 When is Political Activity Used? 508 Organization Design for Implementing Administrative Using Power, Politics and Collaboration 509 Change 422 Tactics for Increasing Power 509 Culture Change 424 Political Tactics for Using Power 510 Forces for Culture Change 424 Tactics for Enhancing Collaboration 513 Organization Development Culture Change Summary and Interpretation 516 Interventions 425 65900_fm_hr_i-xvi.indd 7 1/9/20 12:05 PM  viiiCONTENTS INTEGRATIVE CASES 529 4.0 Changing the Culture at Trans-Gen PLC: What’s Wrong with Senior 1.0 Luxurious Goat Milk Products: Working with Management? 548 Local Culture – RojaAHP 530 5.0 Blood on the Gatepost: Family Conflicts in 2.0 ‘Box-Ticking’ in Organizations: Lessons the New Zealand Farming Industry 557 of the Nimrod Disaster 536 Counterpoints – Recommended Supplementary 3.0 Onward to the Customer of One; from Debt Reading 562 Collectors to Customer Service Agents at New Glossary 563 Zealand’s Inland Revenue 544 Subject Index 570 65900_fm_hr_i-xvi.indd 8 1/9/20 12:05 PM  PREFACE T his fourth edition of Organization Theory and Design: An International Perspective, explores contemporary issues in organization design using both classic ideas and contemporary theories while also mobilizing critical thinking. The aim is to help students understand differ- ent approaches to management. Throughout this new edition, examples are drawn from global sources, reflecting different issues and best practices faced by managers working in national and international business, public sector and non-profit environments around the world. International economic liberalization combined with advances in information and commu- nication technologies means that companies do not need to be enormous in order to compete internationally. We explore in the text how numerous smaller, more agile companies, often based in emerging economies, have been able to grow rapidly, and have in many cases outstripped the former market leaders in the established developed countries. These companies are embedded in distinctive cultures and they incorporate practices that have proven highly effective. These new- comers have often humbled many industry giants, although at the same time other well-estab- lished companies have adapted and flourished in new conditions nurtured by globalization and market liberalization. These developments have served to underscore the key, yet repeatedly overlooked, insight that there is no single, effective way of designing and managing an organization. When we look around the world, we find very different organizations, designed on highly divergent principles and­ philosophies, succeeding in national and international markets. Similarly, organizations with very different management styles coexist in the global business environment. What does this mean for managers? First of all, it is extremely important to be able to stand back, take stock, be self-reflective. How we see things is often quite different from the way others see things. Secondly, our efforts to exert control over our internal and external environments are likely to be partially successful at best. The potency and scope of management control should not be exaggerated, as unexpected and unscheduled developments and events disrupt the best laid plans. Appreciating the limits of executive intervention and control encourages the development of a more agile, facilitating and adaptable, rather than controlling, approach. Thirdly, it points to the importance of developing an ability to understand more intuitively and respond more skilfully to change, rather than relying upon techniques and procedures which hold out the overblown promise of rendering the future predictable. In this textbook, we have tried to avoid one-size-fits-all answers because as noted, there is no single best way to design an organization, and no single best way to manage. These are contingent on circumstances, capacities, and in no small measure, on chance. We have sought to provide some, necessarily partial, illumination of how different organizations have dealt with diverse issues, as well as the pros and cons of their decisions, again bearing in mind that every situation is distinctive and dynamic. Leaders of organizations in both private and public sectors must become increasingly attuned to demands for economic and social justice in both their own organizations and in wider society. These challenges and responsibilities that we all face as members and leaders of organizations are what make the study of organization design both intellectually rewarding and of critical practical importance. ix 65900_fm_hr_i-xvi.indd 9 1/9/20 12:05 PM  xPREFACE Distinguishing Features of Organizational Theory and Design: An International Perspective Many students on a typical organization theory course do not have extensive work experience, especially at the middle and upper management levels, where organization theory tends to be consciously applied. Therefore, to help engage students in the world of organizations, this book contains a number of special learning features: A Look Inside chapter introductions, Bookmarks, the Leading by Design feature, Counterpoint features, In Practice examples, and end-of-chapter and integrative cases for student analysis. A Look Inside This feature introduces a topic by exploring examples of companies that have faced the organizational design issues featured in that chapter. Many of the A Look Inside organizations have enjoyed success, but others have struggled despite imaginative responses to organizational challenges. These cases show that in a turbulent business environment, failure may be due to factors outside the control of management, rather than because of bad decisions or poor management skills. A Look Inside examples include companies from around the world such as Philips NV, Uber, Nokia, Interpol, Boots PLC, Tesla and Nissan. Bookmarks Bookmarks are a unique feature of the Organization Theory and Design texts. The Bookmarks are short reviews of books that address current issues of concern for managers. They offer an introduction into the wider management literature that addresses real-life chal- lenges of contemporary organizations, encouraging students and practical managers to extend their reading on organizational theory and design. Updated Case Examples This fourth edition contains a balance of case examples from different parts of the world as well as numerous examples to illustrate theoretical concepts in today’s context. We look at companies from emerging economies, like India’s Tata Group. ­European organizations are a particular focus, with discussion of corporations such as ­Germany’s Continental and Volkswagen, Britain’s Virgin Group and Spain’s Zara. The success of – and ­challenges facing – Asia-Pacific organizations is also examined, through numerous examples such as Toyota and Sony of Japan, Korea’s Samsung and Australia’s Oroton. Leading by Design This feature highlights organizations that have applied new design ideas, based both on contemporary management thinking and the availability of new information and communication technologies. Typically, these organizations have undergone a major shift in organization design, strategic direction, values, or culture as they strive to be more competitive in today’s turbulent global environment. Many of the Leading by Design examples illustrate com- pany transformations towards knowledge sharing, empowerment of employees, new structures, new cultures, the breaking down of barriers between departments and organizations, and the joining together of employees in a common mission. Once again, the Leading by Design examples for this edition have been drawn from across the world, with up-to-date exploration of organiza- tional structure and performance. Cases include the Rolling Stones, Canva, Google and Shazam. In Practice These cases illustrate theoretical concepts in organizational settings. In Practice cases include Ryanair, Zara, PayPal and Pret A Manger. WWW Manager’s Brief This feature, which is located on the associated online platform, tells ONLINE BRIEF 1.1 students how to use concepts to analyze cases and manage organizations. 65900_fm_hr_i-xvi.indd 10 1/9/20 12:05 PM  PREFACE xi Counterpoints To provide examples of how different organizations have dealt with diverse issues, as well as the pros and cons of their decisions, we provide Counterpoint fea- tures that look at organizational practices and problems to challenge conventional wisdom and stimulate reflection. Counterpoints are available within the text with additional examples in the companion material online. They are intended to signal the existence of alternative ONLINE COUNTERPOINT ways of looking at organization theory and design, providing different perceptions and per- spectives. The Online Counterpoints hosted on the associated online platform are labelled independently and are identifiable by the margin icon shown here. Text Exhibits Frequent exhibits are used to help students visualize organizational relation- ships, and the artwork has been presented to communicate concepts clearly. Summary and Interpretation The summary and interpretation section tells students how the chapter points are important in the broader context of organizational theory. Case for Analysis Cases from prominent business scholars, tailored to chapter concepts to provide a vehicle for student analysis and discussion. Integrative Cases The integrative cases at the end of the text are positioned to encourage student discussion and involvement, and cover cross-cutting themes that have been addressed in the text. Particular attention has been paid to selecting integrative cases from a diverse range of geographical and organizational settings, from profiling the sequence of potentially avoidable errors that led to the Nimrod disaster (when a military aircraft caught fire tragically killing the crew), to a dispute on a New Zealand farm which highlights the inherent tensions and challenges faced when a business moves from a family-run to a corporate organization. 65900_fm_hr_i-xvi.indd 11 1/9/20 12:05 PM  ABOUT THE AUTHORS RICHARD L. DAFT Richard L. Daft is the Brownlee O. Currey, Jr. Professor of Management and Principal Senior Lecturer in the Owen Graduate School of Management at Vanderbilt University. Professor Daft specializes in the study of organization theory and leadership and is a fellow of the Academy of Management. He has served on the editorial boards of the Academy of Management Journal, Administrative Science Quarterly and Journal of Management Education. He was the associate editor in chief of Organization Science and served for three years as associate editor of Adminis- trative Science Quarterly. Professor Daft has authored or co-authored 14 books, including Management (Cengage/South Western, 2017), Building Management Skills: An Action-First Approach (with Dorothy Marcic, South-Western, 2014); The Executive and the Elephant: A Leader’s Guide for Building Inner Excellence (Jossey-Bass, 2010); The Leadership Experience (South-Western, 2018) and Fusion Leadership: Unlocking the Subtle Forces That Change People and Organizations (with Robert Lengel, Berrett-Koehler, 2000). He has also written dozens of scholarly articles, papers and chap- ters in other books. His work has been published in Administrative Science Quarterly, Academy of Management Journal, Academy of Management Review, Strategic Management Journal, Jour- nal of Management, Accounting Organizations and Society, Management Science, MIS Quarterly, California Management Review and Organizational Behavior Teaching Review. Professor Daft is also an active teacher and consultant. He has taught management, leadership, organizational change, organizational theory and organizational behaviour. Professor Daft has served as associate dean, produced for-profit theatrical productions and helped manage a start-up enterprise. He has been involved in management development and con- sulting for many companies and government organizations, including the National Academy of Science, Oak Ridge National Laboratory, American Banking Association, Autozone, Aegis Tech- nology, Bridgestone, Bell Canada, Allstate Insurance, the National Transportation Research Board, Nortel, the Tennessee Valley Authority (TVA), State Farm Insurance, Tenneco, the US Air Force, the US Army, Eli Lilly, Central Parking System, Entergy Sales and Service, Bristol-Myers Squibb, First American National Bank and the Vanderbilt University Medical Centre. JONATHAN MURPHY Jonathan Murphy has combined research and teaching with international management roles throughout his career. He is an internationally recognized expert in Parliamentary Development. Currently he leads INTER PARES, the European Union’s global programme for parliamentary strengthening, and was previously a UN diplomat in Ukraine and Tunisia where he headed major democracy development programmes. As a scholar, Jonathan has written on a variety of topics in international and critical manage- ment, and taught for many years at Cardiff Business School in Wales. He currently holds a visiting professorship (docent) at Jyväskylä University in Finland. xii 65900_fm_hr_i-xvi.indd 12 1/9/20 12:05 PM  ABOUT THE AUTHORS xiii Jonathan is author of The World Bank and Global Managerialism (Sage, 2008), co-editor with Virpi Malin and Marjo Siltaoja of Getting Things Done: Practice in Critical Management Studies (Emerald, 2013), and with Nimruji Jammulamadaka of Governance, Resistance and the Post-Colonial State: Management and State Building (Routledge, 2018), as well as numerous arti- cles and book chapters on international management, the non-profit sector, international develop- ment, and parliamentary development issues. He holds a doctorate in management from the Judge Business School at Cambridge University, UK. HUGH WILLMOTT Hugh Willmott joined Cass Business School in 2014 as a Professor of Management and also holds the position of Professor of Organization Studies at Cardiff Business School, Wales. He has previously held professorial appointments at Cambridge (Judge Business School) and UMIST (now Manchester Business School), both UK, and visiting appointments at Copenhagen Business School, Denmark, University of Sydney, Australia, and Uppsala University, Sweden. Hugh’s research interests span the sub-fields of management organization studies. He has co-authored two major textbooks, including Introducing Organizational Behaviour & Management (co-edited with David Knights, Cengage Learning, 2017) and, additionally, has published over 20 books and contributed to a wide range of management and social science journals. He is particularly interested in the development and application of management theory by drawing upon the resources of critical social science. Substantively, his research has contributed to the areas of professionalization, teamwork, regulation, business ethics, management learning, accounting policy and practice, organizational culture, financialization and the management of higher education. With Jeroen Veldman, Senior Research Fellow at Cass, he is currently engaged in the study of comparative models of corporate governance [themoderncorporation.wordpress.com/]. Hugh is a past Associate Editor on The Academy of Management Review and also served an equivalent role on the journal Organization. He has been a board member of numerous other journals including Administrative Science Quarterly, Journal of Management Studies, and Organization Studies. He was appointed to the Business and Management Panel for the UK Research Assessment Exercise 2008 and was also a member of the 2014 REF Panel. He is a member of the British Academy and in 2011 he was awarded an honorary doctorate at Lund University, Sweden. Contributor Henrik B. SØRENSEN Henrik B. Sørensen is Associate Professor of Organizational Theory at the Department of ­Management, BSS, Aarhus University, Denmark. He holds a master’s degree from Aarhus School of Business and his PhD dealt with company collaboration in strategic alliances that specifically develop firms’ core competencies. Currently he focuses on three elements of organizational theory: organizational development, strategic development and HR. He approaches these three topics from both a theoretical and a practical perspective, and his work is based on the idea that the interaction of theory and practice is particularly fruitful when the two aspects challenge each other. His contributions include many books, articles and lectures. 65900_fm_hr_i-xvi.indd 13 1/9/20 12:05 PM  ACKNOWLEDGEMENTS T extbook writing is a team enterprise, and no more so than this text, which is a thorough revi- sion of Richard Daft’s original Organization Theory and Design, focused on the requirements of students studying within Europe, the Middle East and Africa. Reviewers made an important contribution that has greatly strengthened the book through the various stages of its development. They praised many features, were critical of things that didn’t work well, and offered valuable suggestions. Bushra Jaleel, Teaching Assistant, Abu Dhabi University (United Arab Emirates) Des McLaughlin, Retired Lecturer in Management Information Systems, Dublin City University Business School (Ireland) Cindy Wang-Cowham, Sheffield Hallam University (UK) Norbert Steigenberger, Associate Professor, Jonkoping International Business School (Sweden) Dirk Akkermans, Assistant Professor, Department of International Economics and Business, Faculty of Economics and Business, University of Groningen (Netherlands) John Cullen, Department of Business & Law, National University of Ireland Maynooth (ROI) Robert Finnigan, Associate Lecturer, Bradford University School of Management (UK) Hugo Gaggiotti, Senior Lecturer, Bristol Business School (UK) Anni Hollings, Principal Lecturer, Staffordshire University Business School (UK) Theo Lynn, Lecturer, DCU Business School, Dublin City University (ROI) Thomas Pawlik, Professor of Maritime Management, University of Applied Sciences, Bremen (Germany) Jawad Syed, Professor of Organizational Behaviour and Diversity Management, University of Huddersfield (UK) Patricia Plackett, Assistant Professor, Copenhagen Business School (Denmark) Menno de Lind van Wijngaarden, Senior Lecturer, HU University of Applied Sciences Utrecht (Netherlands) We would also like to thank the team of international academics that contributed case studies and integrative cases prepared specifically for this textbook: Mehdi Boussebaa, University of Bath (UK) Helga Drummond, University of Liverpool (UK) xiv 65900_fm_hr_i-xvi.indd 14 1/9/20 12:05 PM  ACKNOWLEDGEMENTS xv Kate Kenny, Queen’s University Belfast (UK) Glenn Morgan, University of Warwick (UK) Yuri Narayen, VU University Amsterdam (Netherlands) Cliff Oswick, Queen Mary University of London (UK) Tuomo Peltonen, University of Oulu (Finland) Craig Prichard, Massey University (NZ) Maxine Robertson, Queen Mary University of London (UK) Renee Scheerman, VU University Amsterdam (Netherlands) Henrik B. Sørensen, University of Aarhus (Denmark) Brian Tjemkes, VU University Amsterdam (Netherlands) Anni Hollings, Staffordshire University Business School (UK) Kim Maya Sutton, Jade University of Applied Sciences (Germany) Patricia Plackett, Copenhagen Business School (Denmark) Dr Bobby Mackie, University of West Scotland (UK) Neil Coade, Regent’s University London (UK) The publisher would also like to thank Felix Rowe for his editorial help with this edition and the various copyright holders for granting permission to reproduce material throughout the text. IMAGE Credits Chapter 1 Chapter 9 Page 2 - © EtiAmmos/iStockphoto Page 291 - © AndreyPopov/iStockphoto Chapter 2 Chapter 10 Page 19 - © gobyg/iStockphoto Page 328 - © gorodenkoff/iStockphoto Chapter 3 Chapter 11 Page 49 - © oatawa/iStockphoto Page 363 - © Rowan Jordan/iStockphoto Chapter 4 Chapter 12 Page 92 - © PHOTOCREO Michal Bednarek/Shutterstock Page 402 - © GaiBru_Photo/iStockphoto Chapter 5 Chapter 13 Page 137 - © Bet_Noire/iStockphoto Page 442 - © AGCreativeLab/iStockphoto Chapter 6 Chapter 14 Page 178 - © paulbranding/iStockphoto Page 486 - © skynesher/iStockphoto Chapter 7 Feature Credits Page 213 - © mbortolino/iStockphoto A Look Inside: © PeopleImages/iStockphoto Leading by Design: © wacomka/iStockphoto Chapter 8 Bookmark 1.0: © clu/iStockphoto Page 251 - © vladru/iStockphoto In Practice: © wacomka/iStockphoto 65900_fm_hr_i-xvi.indd 15 1/9/20 12:05 PM  Teaching & Learning Support Resources Cengage’s peer-reviewed content for higher and further education courses is accompanied by a range of digital teaching and learning support resources. The resources are carefully tailored to the specific needs of the instructor, student and the course. Examples of the kind of resources provided include: A password-protected area for instructors with, for example, a test bank, PowerPoint slides and an instructor’s manual. An open-access area for students including, for example, useful weblinks and glossary terms. Lecturers: to discover the dedicated teaching digital support resources accompanying this textbook please register here for access: cengage.com/dashboard/#login Students: to discover the dedicated student digital support resources accompanying this textbook, please search for Organization Theory & Design, Fourth Edition on: cengage.com Learn more at cengage.com 65900_fm_hr_i-xvi.indd 16 1/9/20 12:06 PM  PART 1 INTRODUCTION TO ORGANIZATIONS 1 What are Organizations? 2 Perspectives on Organizations 65900_ch01_hr_001-018.indd 1 11/15/19 7:24 AM  CHAPTER 1 WHAT ARE ORGANIZATIONS? Organization Theory in Action Framework for the Book Topics Plan of Each Chapter Current Challenges Purpose of this Chapter Summary and Interpretation What is an Organization? Definition Types of Organizations Importance of Organizations 2 65900_ch01_hr_001-018.indd 2 11/15/19 7:24 AM  CHAPTER 1 WHAT ARE ORGANIZATIONS? 3 Unilever.1 But consumer electronics are different from household products; they are costly to develop and A LOOK INSIDE generally don’t require tailoring to individual markets; thus centralized product development tends to be the preferred approach. Autonomy sometimes reached extremes, for example when Philips in North America decided to manufacture early video recorders based Philips NV on a competitor’s product. Another problem was bureaucracy and inefficiency. P hilips was one of the world’s first genuine multi- nationals. Founded in Eindhoven, Netherlands by Gerard Philips in 1891, the company initially manu- Philips was so successful, for so long, that workers and managers began to see their positions as jobs- for-life. Employment grew and grew; ultimately Philips factured light bulbs, seizing the opportunity of wide- had over 300,000 employees worldwide. Eindhoven spread home and business electrification. Electricity itself was every bit the company town; Philips took soon brought opportunities for inventing and selling on numerous social projects ranging from the Philips further electrical devices, and during much of the library and theatre to the PSV Eindhoven football twentieth century, no European company seized mar- team, which under Philips’ benevolent sponsorship ket opportunities better than Philips. The relatively became one of the giants of European club soccer. small size of Holland’s domestic market pushed the The Philips product development division seemed to company to seek new markets on the continent and lose its knack for creating products that fit customer eventually beyond. By the mid-1980s, the company needs. Its early forays into computers, in particular, was active in 14 different divisions ranging from the were not competitive with either the US giants like original lighting sector to large appliances and the new IBM and later Compaq, or the emerging brands from field of computers. Philips’ product development lab- the Far East. oratories were unparalleled, developing c ­ utting-edge By the 1980s, Japan had emerged from its early electrical equipment across the company’s vast prod- post-war avatar as producer of cheap copies of West- uct range. ern consumer goods. In motorcycles, then the auto- But as is often the case in business, at the height mobile industry, and fatefully for Philips, in electronics. of Philips’ success, storm clouds were gathering on Philips’ bottom line suddenly turned red. Despite the horizon. Several different factors were beginning fitful efforts to cut costs in the late 1980s, by 1990 to work against the company as it approached its the company had run up an accumulated deficit of second century. $2.6 billion.2 One issue was the very loose organizational struc- Philips turned to a new company president, Jan ture that the company was forced to adopt when it Timmer, who slashed the company’s workforce by internationalized. Before the great era of trade and 50,000, got out of the computer business altogether, market liberalization that began in the 1970s, it was terminated a number of unprofitable joint ventures simply not possible to centralize functions globally. and reoriented the company towards Asian produc- Indeed, during the Second World War, when Holland tion facilities in place of increasingly costly Europe. was occupied by the German Nazis, international Timmer’s hard-nosed strategy stemmed some but branches of Philips basically operated entirely inde- not all the bleeding. In 1996, Sony, Philips’ big- pendently. Even in normal times, companies wishing to gest competitor, generated sales of $43 billion with enter different countries’ markets were typically forced 150,000 employees, while Philips managed only to set up fully functional national units, with their own $37 billion with almost twice as many workers. In manufacturing, marketing and distribution systems. 1996, and again in 2001, the company changed its The national units that had to be set up tended top management, but the same cycle of job cuts, to become autonomous power bases. In theory this divestments, market upticks and then disappointing could have been beneficial, if innovative approaches losses continued.3 The competitive situation became were developed and tested in one country and then even more dire, as Korean brands like LG had joined rolled out internationally, as was the case for exam- the Japanese giants as global competitors, cleaning ple for the Anglo-Dutch consumer products firm, up the cost-conscious market segment, while Sony 65900_ch01_hr_001-018.indd 3 11/15/19 7:24 AM  4 PART 1 INTRODUCTION TO ORGANIZATIONS and Toshiba had a stranglehold on the most affluent the computer and entertainment segments can wipe customers. out whole product categories overnight while creat- The enigma of Philips was that while the com- ing new ‘must haves’ such as tablets. Televisions, pany’s engineers brought many of electronic tech- long the company’s talisman products, were ditched nology’s most important innovations to market (for altogether, along with video players, another declin- example the audio cassette, the compact disc and ing segment. the DVD), it didn’t seem able to take commercial Van Houten is acutely aware that in a sprawling advantage of the breakthroughs. In the early years of company such as Philips, wayward units can lose the new millennium, Philips resolved to move away touch with market trends and eventually end up hurt- from being a manufacturing-driven company towards ing the overall bottom line. So in conjunction with the one that would be customer-driven, a change in CFO, van Houten designed a ‘Dashboard’ computer direction that involved a much greater focus on what programme allowing senior managers to look at per- insiders called ‘The Marketing Journey’.4 formance across the company and its different geo- From 2004 onwards, Philips’ fortunes seemed to graphic and product operations, and quickly check be on the upswing. Finally, the company seemed to performance and trends. be doing well with its innovations. Medical systems This helped Philips to develop a more sophisti- and consumer electronics sales were up 9 per cent cated and forward-looking product focus. For exam- and 10 per cent respectively, but temporary growth ple, in Western markets with their affluent, ageing blips like that had been seen before. What was more populations, the company is focusing particularly on important, sales from newly introduced products rose consumer healthcare products, while in emerging sharply. In the medical area, 70 per cent of sales were markets it is tailoring its product design and market- of products introduced in the previous two years, ing to meet the needs of new and discriminating con- unusual for a field with typically long product cycles. sumers. Originally, Philips focused on other products Company-wide, the proportion of sales derived from in emerging markets, such as vegetable choppers in products introduced in the previous two years rose Russia, and shavers in China. Increasingly, in both from a quarter in 2003 to over half in 2006. developed and emerging markets, however, Philips is In 2008, Philips moved to simplify its organiza- focusing on health care, and indeed brands itself as a tional structure, establishing three core divisions health care business. Revenues and profits have been of consumer, healthcare and lighting, which helped solid. In 2017 the company had profits of €1.8 billion to focus the company on its best-performing prod- on sales of €18 billion. uct lines. The current CEO Frans van Houten, who Philips’ trajectory is similar to that of many other arrived in mid-2011, has taken this focused strat- companies in today’s volatile environment, where egy to a new level, by ruthlessly eliminating ‘sunset’ companies constantly revisit their organizational products, particularly in the globally cut-throat home design in order to address changing consumer prefer- entertainment sector, where convergence between ences and business environments. Organization Theory in Action Topics Many of the topics covered in this book are illustrated in the Philips case. Consider, for exam- ple, the company’s failure to respond to, or control, competitors and customers in the fast-paced external environment; its difficulties implementing strategic and structural changes to attain effec- tiveness; difficulties coping with the problems of large size and bureaucracy; lack of adequate cost controls; challenges associated with an outmoded corporate culture that stifled innovation and change; and its repeated efforts to redesign itself in order to address these challenges. These are illustrative of the issues with which organization theory is concerned (but see the Counterpoint, below, for another viewpoint on organizational design). 65900_ch01_hr_001-018.indd 4 11/15/19 7:24 AM  CHAPTER 1 WHAT ARE ORGANIZATIONS? 5 COUNTERPOINT 1.1 Note how these topics tend to take a managerial focus and also to assume that problems are the same for everyone. Those who lost their jobs at Philips might well question this view. They might challenge the legitimacy of a system that resulted in poor performance. What about the accountability of executives to their employees as well as to their shareholders? Employees bore the brunt of the poor decision-making; but they had little input into the strategic decision-making process. Organization theory extends beyond a managerial perspective to ask more fundamental questions about how and why organizations are designed the way they are, who creates and authorizes the design, and who may also explore alternative designs. Design is not reducible to a technical matter; it is an inherently political one that involves the distribution of power and opportunity. Whatever design is calculated to be most appropriate, efficient or effective, it will reflect the values and priorities of its architects. Implementation of the design will be contingent upon the political will to implement and the capacity to overcome resistance to it. Of course the application of organization theory is not limited to firms like Philips. All companies and other organizations – from the largest to struggling start-ups – undergo WWW changes that can be illuminated and informed by theories of organization and its design. Organization theory is no less relevant to public sector and nonprofit organizations, includ- ONLINE BRIEF 1.1 ing central and local government departments, non-governmental organizations (NGOs), arts organizations, charities and so on. In different ways, people responsible for the design and development of organizations as well as everyone working in them face challenges comparable to Philips, even if they are accountable to politicians or trusts rather than shareholders, and are gen- erally more influenced by an ethos of public or charitable service rather than private gain. The story of Philips is important because it demonstrates that organizing involves contin- uous challenges in the face of uncertainty and change. No organization – not even tax depart- ments or funeral parlours – are protected from changes in technologies, conventions, customer preferences, availability of supplies, etc. Organizing is a fraught and vulnerable process. Lessons are not learned automatically. Designs are only as strong – ethically as well as economically and ­technically – as the decision-makers who take primary responsibility for shaping structures and cultures. Organizations (see Counterpoint 1.2) are not static. There is a continuous process of adaptation in response to changes beyond the organization. Managers of change endeavour to exploit or control those changes and, in so doing, contribute to the changes which affect the other organizations. Surveys of top executives indicate that coping with rapid change is the most com- mon problem facing managers and organizations.5 Organizations face the challenge of finding ways of changing themselves or changing their environments to become technically, economically and ethically more responsive and effective. Of course, it is important to acknowledge that organ- izational design is only one factor that can help a company to succeed. Conversely, if a company is successful, it doesn’t necessarily mean that this was because of good organizational design, and therefore others should emulate the organizational structure. Perhaps the company’s healthcare division designers just came up with a market-leading gadget, for example! COUNTERPOINT 1.2 The term ‘organizations’ is repeatedly used in everyday life as well as in this text. How are we to interpret it? When we say ‘organizations face challenges’ or ‘the company failed to …’ we probably do not mean all the people who work in that organization or company. In fact, organizations are often very diverse, with different departments and factions pulling in different directions as well as attempting to cooperate with each other. 65900_ch01_hr_001-018.indd 5 11/15/19 7:24 AM  6 PART 1 INTRODUCTION TO ORGANIZATIONS Organizations are often also hierarchical and undemocratic. That means that it is only a handful of people who actually determine how ‘challenges’ are to be ‘faced’ or how ‘failure’ is to be addressed. In corporations, executive decision-makers are typically accountable primarily to the owners, or shareholders and creditors. Decisions that they make may pay attention to other stakeholders insofar as they are relevant for the profitable growth of the business. These decisions may also be coloured by executives’ own priorities and preferences, including any material or career advantages that flow from the decisions they make. When reading this book, therefore, it is relevant to take acount of what may be termed the ‘political economy’ of organizations. The political economy of organizations is defined by Zald and Hasenfeld as ‘a theoretical framework that focuses on two key components of organizations and their interaction: the polity and the economy of organizations. The polity, or political system of organizations, is the constitution, or fundamental norms, of the organization and the system of authority, power and influence. The economy is the economic structures and processes of the organization; that is, the system for processing and transforming raw materials into the goods and services that the organization produces’.6 Current Challenges Some specific challenges are dealing with globalization, maintaining high standards of ethics and social responsibility, responding rapidly to environmental changes and customer needs, and sup- porting diversity. Perhaps most significant of all has been the disruption – in both a positive and a negative sense – of the information revolution: the rise of the digital organization, in an increas- ingly digital world. Globalization With rapid advances in technology and communications, the time it takes to exert influence around the world from even the most remote locations has been reduced from years to only seconds. Markets, technologies and organizations are becoming increasingly inter- connected.7 It is now more feasible to locate different parts of an organization wherever it makes the most business sense: top leadership in one country, technical brainpower and production in other locales, depending upon calculations of where is best for cutting costs, generating revenues and thereby increasing the return on capital invested to shareholders. A related trend is to contract out some functions to organizations in other countries or to partner with foreign organizations to gain global advantage. India’s Wipro Ltd used to sell cooking oils; by 2018, the company had 165,000 employees in over 50 countries, who develop sophisticated software applications, design semiconductors and manage back-office solutions for giant companies from all over the world. In 2013, the company decided to demerge all of its ‘old’ non-IT units from the main company, helping the company focus on its IT core.8 Globalized production is not just a feature of emerging economy companies; many of Intel’s new chip circuits are designed by companies in India and China. These organizations can often do the job 50 to 60 per cent more cheaply than companies based in more developed, but more expensive, capitalist economies, creating new advantages as well as increased competitive pressures.9 Companies large and small are searching for the struc- tures and processes that can help them reap the advantages of global interdependence and mini- mize the disadvantages. Ethics and Social Responsibility Issues of ethics and social responsibility – relating to concerns about ecological sustainability, and not just corporate survival – are becoming increas- ingly important; and corporations, in particular, are being expected to take a lead on addressing these issues. At the same time, the list of executives and major corporations involved in financial and ethical scandals casts a shadow over corporate life. The sordid story of high-flying Enron Corporation, where managers admitted they inflated earnings and hid debt through a series of complex partnerships, was hardly unprecedented but has, hopefully, been a loud wake-up call. 65900_ch01_hr_001-018.indd 6 11/15/19 7:24 AM  CHAPTER 1 WHAT ARE ORGANIZATIONS? 7 Executives profited handsomely from the fraud at Enron, but when the company collapsed, employees and average investors lost billions. Arthur Andersen LLP, the company’s auditor, was found guilty of obstruction of justice for improperly shredding documents related to the Enron investigation, and the scandal caused Andersen to disappear altogether as a company. Elsewhere, the UK’s flagship defence contractor, BAE, became embroiled in a multi-­billion pound corruption scandal that precipitated a diplomatic crisis and diverted attention away from the company’s business activities.10 Lax financial and management controls at France’s giant Société Générale financial services company allowed a junior trader to gamble away over a billion euros in com- pany funds.11 In 2016, the release of the so-called P ­ anama Papers detailing the efforts many major corporations have made to avoid taxation caused a major stir and raised ­questions about the overall ethical foundations of capitalism.12 Scandals are not confined to private corporations. Britain’s Revenue and Customs agency managed to lose personal data on 25 million citizens – nearly half the entire population – somewhere in the mail system.13 In 2018, Malaysia’s long-time ruling party was defeated in elections following revelations of massive corruption at 1Malaysia Development Berhad (1MDB), a state-owned investment firm. 14 Pick up any major newspaper on almost any day, and there will be a story about some corporation, government department or even entire administration embroiled in some form of ‘sleaze’ or wilful incompetence. While executives and officials are inclined to insist that it is a few bad apples or a single junior employee involved in all the wrongdoing, the ordinary citizen is quickly forming the opinion that all executives and senior managers are crooks.15 The public is disillusioned with such ‘leadership’, and leaders – corporate and political – are under pressure to hold their organizations and employ- ees to higher standards of ethics and competency. Responsiveness A third significant challenge for organizations is to respond quickly and decisively to environmental changes, organizational crises and shifting customer expec- tations. For much of the period between the end of the Second World War in 1945 and the onset of the global financial crisis, organizations operated in relatively stable conditions. ONLINE There was little need to search for new ways to cope with increased competition, volatile COUNTERPOINT 1.1 environmental shifts or changing customer demands. Today, globalization and advancing technology have accelerated the pace at which organizations in all industries must adapt their internal structures and systems in order to keep rolling out new products and services that are sufficiently competitive. Innovations can be incremental or disruptive; technological innovations have increasingly had combined impacts resulting in the rapid emergence of new markets and the sudden disappearance of others. Fifty years ago, Philips’ managers probably never imagined that the company would ever abandon its flagship television production as young people increasingly consume information and entertainment on mobile devices!16 Companies that relied on mass production and distribution techniques have had to adjust to customer demands, often fuelled by leaner and more nimble competitors, for the tailoring of products and services to their specific requirements. Reflecting the importance attributed to ‘cus- tomization’ and branding, the financial basis of today’s economy is information, not machines and factories. Intangible assets, including corporations’ investments in people as well as financial prod- ucts, become increasingly important relative to tangible assets. In the mid-1900s, tangible assets represented 73 per cent of the assets of nonfinancial corporations in the United States. By 2002, the percentage had shrunk to about 53 per cent, and by 2017 it was claimed that intangibles accounted for 80 per cent of US corporate assets.17, 18, 19 Knowledge involved in designing and coordinating the manufacture of products and the delivery of services becomes increasingly important. In this process, it becomes clearer that, ultimately, it is employees and their knowledge, not the means of production or of service delivery, who provide the best chance of organizational prosperity. (See Counterpoint 1.3). At the same time, as demonstrated by the Enron and Société Générale scan- dals, among many others that continue to come to light as a result of the global financial crisis that began in 2007, the line between making appropriate use of knowledge and indulging in out-and-out gambling with other people’s money, or even illegal schemes, has become ever more blurred.20 65900_ch01_hr_001-018.indd 7 11/15/19 7:24 AM  8 PART 1 INTRODUCTION TO ORGANIZATIONS COUNTERPOINT 1.3 If this point about employees being the most precious resources is accepted, why do you think that employees are typically able to exert so little influence over key corporate decision-making, and what are the implications of this for organizational theory and design? The Digital Workplace Organizations have been flooded by information technology that affects how they are designed and managed, and the external environments in which they do business. In today’s workplace, many employees perform much of their work on computers and may work in virtual teams, connected electronically to colleagues around the world. In addition, organizations are becoming enmeshed in electronic networks. More and more business takes place by digital processes over a computer network rather than in physical space. End-to-end digi- tal supply-chain networks are used to keep in touch with customers, take orders, buy components from suppliers, coordinate with manufacturing partners and ship customized products directly to consumers. This trend towards disintermediation – e­ liminating the middleman often by consum- ing the unpaid time of the customer who, for example, experiences the frustration of waiting for, and dealing with, responses from call centres – is affecting every industry.21 Increasingly, compa- nies and even networks of businesses share information openly across the organization, enabling decision-making to be made with less reference to organizational hierarchy. These developments mean that a pressing requirement of leadership in organizations is to become technologically savvy in addition to managing a web of relationships that reaches far beyond the boundaries of the physical organization to employees, suppliers, contract partners and customers.22 Diversity In advanced capitalist societies, today’s average worker is older, and many more women, ethnic minorities and immigrants are seeking job and advancement opportunities. This development brings a variety of challenges, including fully recognizing and embracing diversity, balancing work and family concerns, and coping with the differences associated with varying cultural styles. People from diverse ethnic and cultural backgrounds offer varying styles of inter- acting and working; and managing diversity may be one of the most rewarding challenges for organizations competing on a global basis. Consider the consulting firm McKinsey & Co. In the 1970s most consultants were American, but by the turn of the twenty-first century McKinsey’s chief partner, Rajat Gupta, was Indian, and 60 per cent of consultants were from outside the United States, coming from 40 different countries. 23 But diversity is often the exception rather than the rule. Research has indicated that women’s style of working may hold important lessons for success in the emerging global world of the twenty-first century, but the glass ceiling which keeps women from reaching positions of top leadership remains in place.24 company embarked on a highly lucrative four-concert 50th anniversary tour, with Mick Jagger, 69, Keith LEADING BY DESIGN Richards, 68, Ronnie Wood, 65, and Charlie Watts, 71, joined for the first time in 20 years by former mem- bers Bill Wyman and Mick Taylor. Tickets sold out in minutes de