Organization Theory:

Organizations and their

Effectiveness

Managing Organizations
PGPBM & PGPHRM 20142014-17
Session 11-2

What Is an Organization?

 A social entity
Goal directed
Structured and coordinated activity
systems
External environment

People

Structure
and
Processes
Technology

Environment

Why Do Organizations Exist?

Produce goods and
services efficiently
Facilitate
innovation
An organization
allows people to
jointly

Adapt to and influence

a changing
environment
Create value for
owners, customers,
and employees
Accommodate
ongoing challenges
of diversity

Value Creation:
Product or Service

Levels of Analysis
Three levels of
analysis
We move from
individual to
organizational
systems level (or viceversa)
Each level is
constructed on the
previous

Approaches to Study Organizations

Meso Approach

Sociology, Psychology,
Anthropology, Political
Science, Economics and
others

INPUT

Organization

Micro Approach
Macro Approach
Organizational
Behavior

Organizational
Theory

Organization Theory
The study of how organizations function and how they
affect and are affected by the environment in which
they operate

Organization theory helps us explain what happened in

the past, as well as what may happen in the future, so
that we can manage organizations more effectively

The Evolution of Organization Theory

and Design

Historical perspectives provide insight into

how organization design and management
practices have varied over time in response
to changes in society.

A brief History
Efficiency is Everything: Scientific Management- Time and
Motion studies by Frederick Taylor (1890s)
How to Get Organized: Administrative Principles (Henry Fayol)
- Contributed to Bureaucratic Organizations
What about People? -Hawthorne Studies: Elton Mayo (19241932)- social and psychological factors like participation in DM
Can Bureaucracies Be Flexible?
Open systems approach (1980s): Flexible and lean; focused
on service, quality, and engaged employees, flattened hierarchy
It All Depends: Key Contingencies
Contingency: there is no one best way

The Absolutes in studying organizations

Contingency Factors

Organizational Technology
Organizational Size
Organizational Culture
Environment
Organizational Strategy

Dimensions of Organization Design

Structural Dimensions

Formalization
(Standardization)
Specialization
Hierarchy of Authority
(Chain of command, span
of control)
Centralization
Professionalism (Level of
formal education of
employees)
Personnel Ratios
(Distribution of employees
in various departments)

Contingency Factors

Size
Organizational
technology
Environment
Goals and strategy
Culture

Interacting Structural Dimensions of Design

and Contingency Factors

An Example,
(Characteristics of Three Organizations)

Mintzbergs Elements of Organization

Top
Management
Technical
Core

Support
Staff
Middle Line

Operating Core

Five basic elements any of which may dominate

The dominant element determines the most effective design in that
situation
In real-life organizations, the five parts are interrelated and often serve
more than one function

 Top Management: Top level executives responsible for running

an entire organization
Middle Line: Managers who transfer information between
higher and lower levels of the organizational hierarchy
Operating Core: Employees who perform basic work related to
an organizations product/service
Technical Core: Organizational specialists responsible for
standardizing various aspects of an organizations activities
Support Staff: Staff which helps the organization to adapt with
the environment. Example, engineers, researchers

Mintzbergs Organizational Forms

Simple Structure: Simple, informal, centralized authority (small
entrepreneurial business); Dominant group: Top Management
Machine Bureaucracy: Highly complex, formal (government
office); Dominant Group: Technical Core
Professional Bureaucracy: Complex, centralized DM (university);
Dominant Group: Operating Core
Divisionalized Structure: Large, formal, various divisions
(multidivisional firm); Dominant Group: Middle Line
Adhocracy: Simple, informal, decentralized authority, flexible to
changing environment (software development firm); Dominant
Group: Support Staff

Organizational Effectiveness
Effectiveness: Producing the intended or expected
result
Efficiency: Getting the maximum output with
minimum resources
Stakeholder Approach: Balance between the needs of
groups in and outside of the organization that has a
stake in the organizations performance

Stakeholder Approach

Measuring Organizational Effectiveness

The External Resource Approach: Control- Evaluates the
organizations ability to secure, manage, and control scarce and
valued skills and resources. Example, increase market share,
lower cost of inputs
The Internal Systems Approach: Innovation- Evaluates the
organizations ability to be innovative and function quickly and
responsively. Example, reduced decision making time, increased
rate of product innovation, reduced conflict, increased
motivation
The Technical Approach: Efficiency- Evaluates the
organizations ability to convert skills and resources into goods
and services efficiently. Example, Increased product quality,
reduced defects, improved customer service, reduced delivery
time

Measuring Effectiveness:
Organizational Goals
Official Goals: Mission and Vision
Operative Goals: Specific short and long term goals
which guides the managers and employees as they
perform the work of their organization.
Where we started? ------- Where we are today?

MISSION
Mission Statement (Why you exist/purpose): To achieve
a specific goal for specific people.

Characteristics: Short, Memorable, Inspiring, Market

focused (target audience)
To organize the worlds information and make it
universally accessible and useful

VISION
Vision Statement: (What you want to be in future)
Characteristics: future casting, clear & visible,
descriptive, time frame (5-10 years)
To be earth's most customer centric company; to build a
place where people can come to find and discover
anything they might want to buy online."

Case Analysis