Lecture 1 - Introduction to Organizations PDF

MGT 410 Org. Theory and Design Topic 1: Introduction to Organizations and OT DR H AMMAD AKBAR  Structure What is an organization? Why are organizations important or why they exist? Organization design – what and why Dimensions of organizational design Orga...

MGT 410 Org. Theory and Design Topic 1: Introduction to Organizations and OT DR H AMMAD AKBAR  Structure What is an organization? Why are organizations important or why they exist? Organization design – what and why Dimensions of organizational design Organization theory – what and why Historical perspectives Contemporary organization design 2  What is an Organization? Goal-directed/purposive, social entities Deliberately designed (structured, coordinated and interactive) activity systems Linked to the external environment (contextual) 3  Concept of Organization - Evolved over time - From sole (one), via partnership (few) to Ltd company (many) - Limited liability - Going concern - Types: Business (products and services), NGOs, government and quasi- government 4  Why organizations exist and are important? Transaction Combinative costs theory Capabilities Source: Richard L. Daft. Organization Theory and Design Eleventh Edition 5  Current Challenges - Globalization - Intense competition - Speed and responsiveness - Digitization and digitalization - Ethics, social responsibility and diversity - Availability of information/knowledge 6 Organizations from two perspectives Open Systems Early organization studies focused on closed internal systems, based on assumptions that environment is stable and predictable. Organizational Configuration Balance the five basic parts of an organization to perform the subsystem functions effectively. 7 Organizations as Open Systems Closed Systems “A closed system would not depend on its environment; it would be autonomous, enclosed, and sealed off from the outside world”. Primary issue is efficiency. Open Systems An open system interacts with and adapts to the environment by consuming resources and exporting product and services to it. Issues involved are more complex due to interdependence of various elements. 8  Organizations as Open Systems People Raw Products materials Input Transformation Output and Information Process Services Financial resources Boundary Production, maintenance, Boundary spanning adoption, management spanning External Environment (Opportunities and Threats) Stakeholders Shareholders; Society; Customers; Employees; Suppliers Source: Richard L. Daft. Organization Theory and Design Eleventh Edition 9 Organizational Configuration Technical Core Includes people who do the basic work. (e.g., Doctors, teachers, workers) Technical Support Helps the organization adapt to the environment. (e.g., Research, engineers, scientists, analysts) Administrative Support Responsible for smooth operation and upkeep. (e.g., Human resources and other supporting services) Management Top Management – provides direction, strategy, goals and policies. Middle Management – implementation and coordination. 10  Five Basic Parts of an Organization Top Management Technical Middle Administrative Support Management Support Technical Core Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116. 11  Organization Chart Source: Richard L. Daft. Organization Theory and Design Eleventh Edition 12 Organization Design Emphasizes the management side of organization theory Concerned with constructing and changing an organization's structure and traits to achieve the organization's goals 13 Dimensions of Organization Design Organization traits are described by: Structural Dimensions  Describes internal characteristics of an organization. Contextual Dimensions  Characterises the whole organization, including its size, technology, environment and goals. 14  Organization Design Goals and Strategy Environment Size Interacting Contextual and Culture Structure Technology Structural Dimensions Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios Source: Richard L. Daft. Organization Theory and Design Eleventh Edition 15 Structural Dimensions Formalization  The amount of written documentation. Specialization  The degree to which organizational tasks are subdivided into separate jobs. Hierarchy of Authority  Span of control of the managers. Centralization  Hierarchical level of authority for decision making. Professionalism  Level of formal education and training of employees. Personnel ratios  People deployed to each functions and departments. 16 Contextual Dimensions Size  Number of employees. Organizational Technology  Tools, techniques and actions used to transform inputs into outputs. Goals and Strategy  Purpose and competitive techniques that set it apart from other organizations. Environment  All elements outside the organizational boundary. Culture  Shared key values, beliefs, understandings and norms. 17 Organization Challenges Globalization Ethics and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity 18 Organization Theory Discipline that studies the structure and design of organizations Organization theories are interdisciplinary, based on knowledge from the fields of psychology, political science, economics and sociology Organization theory is a macro examination of organizations – analyses the whole organization as a unit; while organization behavior is the micro approach to organizations – focuses on the individuals within organization 19 Classical Theories: Effi ciency is Everything Fredrick Winslow Taylor Scientific management approach “Managers develop precise, standard procedures for doing each job, select workers with appropriate abilities, train workers in standard procedures, carefully plan work, and provide wage incentives to increase output.” “The role of management is to maintain stability and efficiency.”  Thinking (top managers)  Working (workers doing what they are told) Focused on the technical core. 20 Classical Theories: How to Get Organized? Max Weber  Bureaucratic approach  Hierarchical structure  Specialization of labor  Coordination and control through rules and standard operating procedures  Rational-legal authority  Separation of jobs and people  Formalization of administrative acts, decisions and rules 21 Classical Theories: How to Get Organized? Henri Fayol  Administrative principles  Concerned with the problems of management  Develop general principles applicable to all managers and describe the functions a manager should perform  14 principles in total – division of work, authority, discipline, unity of command, unity of direction, subordination of individual interests to the general interests, remuneration, centralization, scalar chain, order, equity, stability of tenure of personnel, initiative, Esprit de corps (i.e., enthusiasm and devotion to the group) 22 Human-Relations Theories: What About People? Elton Mayo, Chester Bernard, Douglas Mc Gregor Hawthorne Studies (Increase productivity by paying more attention to workers)  Work on industrial psychology and human relations.  Chicago Western Electric Company  “Positive treatment of employees improved their motivation and productivity.”  Laid the groundwork for subsequent work examining worker treatment, leadership, motivation and HR management.  Human relations and behavioral approaches 23 Contingency Theory: Don’t Forget the Environment  All organizations are not alike.  The scientific management and administrative principles approaches attempted to design all organization in the same manner.  Contingency Theory – there is no one best way for organization design  “Contingency means that one thing depends on other things, and for organizations to be effective, there must be a goodness of fit between their structure and conditions in their external environment.”  Contingency means it depends. 24  Contingency Factors Affecting Organization Design Env Size iro Lif / nme Techno e Cy nt cle Cu y lt logy ur t eg e ra St Organizational Structure and Design ght Mix of Design Characteristics Fits the Contingency Fact Source: Richard L. Daft. Organization Theory and Design Eleventh Edition 25 Contemporary Organization Design: Learning Organizations  Organizations today need greater fluidity and adaptability.  The learning organization promotes use of communication and collaboration technologies, so that everyone is engaged in identifying and solving problems.  All organization members continuously help to experiment, improve and increase its capability.  “It is based on equality, open information, little hierarchy, and a culture that encourages adaptability and participation.”  Essential value is problem solving as opposed to efficient performance. 26  Two Organization Design Approaches Mechanical System Design Natural (i.e., Organic) System Design Vertical Horizontal Structure Structure Routine Rigid Empowered Adaptive Tasks Culture Organizational Change Roles Culture in the Service of Performance Formal Competitive Shared Collaborative Systems Strategy Information Strategy Stable Environment Turbulent Environment Efficient Performance Learning Organization Adapted from: David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Harvard Business School) Source: “Organization Theory and Design”, Richard L. Daft 27 Vertical to Horizontal Structure  Traditionally the activities were grouped together by common work from bottom to the top of the organization, little collaboration occurs across functional departments.  In a fast changing environment the vertical structure becomes overloaded.  In the learning organization, structure is created around horizontal workflows or processes rather than departmental functions.  “Self-directed teams are the fundamental work unit in the learning organization.”  Boundaries between functions are eliminated. 28 Routine Tasks to Empowered Roles  The scientific management precisely define each job and how it should be done.  “In traditional organizations, tasks are broken down into specialized, separate parts, as in a machine. Knowledge and control of tasks are centralized.”  In learning organizations, employees are assigned roles – with discretion and responsibility - in the team or department which are continuously redefined or adjusted.  Employees are encouraged to take care of problems by working with each other and with customers. 29 Formal Control to Shared Information  “Formal systems are often implemented to manage the growing amount of complex information and to detect deviations from established standard and goals.”  In the learning organization ideas and information are shared throughout the organization.  Managers find ways to open channels of communication so that ideas flow freely in all directions.  Learning organizations communicate with customers, suppliers, and even competitors to enhance learning capability. 30 Competitive to Collaborative Strategy  Strategy in traditional organizations is formulated by top managers and imposed on the organization.  In the learning organizations the accumulated actions of an informed and empowered workforce contribute to strategy development.  Partnerships with suppliers, customers and competitors to find the best way to learn and adapt, forming modular or virtual organizations that are connected electronically. 31 Rigid to Adaptive Culture  Organizations should continuously adapt to external environment.  In a learning organization, employees are aware of the whole system and interactions of its parts and the culture encourage openness, equality, continues improvement and change.  “Each employee is a valued contributor and the organization becomes a place for creating a web of relationships that allows people to develop their full potential.” 32