MG312 Exam Notes

Chapter 6 Organizational Development and Change

Self-Designing Organization

- This is a type of approach that assists members to translate corporate values and general
prescriptions for change into specific structures, processes and behaviors suited to their
situations.
- A growing number of researchers and practitioners have called for self-designing
organizations that have the built in capacity to transform themselves continually to
achieve high performance in today competitive and changing environments.

Learning Organization

- The second continuous change intervention is aimed at helping organizations develop and
use knowledge to change and improve themselves constantly. It includes two interrelated
change processes: organization learning (OL), which enhances an organization’s
capability to acquire and develop new knowledge, and knowledge management (KM),
which focuses on how that knowledge can be organized and used to improve
performance. Both OL and KM are crucial in today’s complex, rapidly changing
environments. They can be a source of strategic renewal and can enable organizations to
acquire and apply knowledge more quickly and effectively than competitors, thus
establishing a sustained competitive advantage.12 Moreover, when knowledge is
translated into new products and services, it can become a key source of wealth creation
for organisations.13 OL and KM are among the most widespread and fastest-growing
interventions in OD. They are the focus of an expanding body of research and practice
and have been applied in such diverse organizations as the Australian Army, Minter
Ellison, McKinsey, Microsoft and Boeing.

Chapter 7 Organisation development interventions: People and process

A model of Performance Management

- Performance management is an integrated process of defining, assessing and reinforcing
employee work behaviors and outcomes.
- Performance management includes practices and methods for goal setting, performance
appraisal and reward system, all of which work together to influence the performance of
individuals and work groups.
- Because performance management occurs in a larger organizational context, at least three
contextual factors determine how these practices affect work performance: business
strategy, workplace technology and employee involvement.
- High level of work performance tend to occur when goal setting, performance appraisal
and reward system are jointly aligned with the following organizational factors:
 Business strategy: This defines the goals and objectives that are needed if an
organisation is to compete successfully. Performance management needs to focus,
assess and reinforce member work behaviors towards those objectives, thus ensuring
that work behaviours are strategically driven.
 Workplace technology: This affects the decision as to whether performance
management practices4 should be based on the individual or the group. When
technology is low in interdependence and work is designed for individual jobs, goal
setting, performance appraisal and reward systems should be aimed at individual
work behaviours. Conversely, when technology is highly interdependent and work is
designed for groups, performance management should be aimed at group behaviours
 Employee involvement: Finally, the level of employee involvement in an
organization should determine the nature of performance management practices.
When organizations are highly bureaucratic with low levels of participation, goal
setting, performance appraisal and reward systems should be formalized and
administered by management and staff personnel. In high-involvement situations, on
the other hand, performance management should be heavily participative, with both
management and employees setting goals and appraising and rewarding performance.
In high-involvement plants, for example, employees tend to participate in all stages of
performance management. They are heavily involved in both designing and
administering performance management practices.
- Goal setting involves managers and subordinates establishing and clarifying employee
goals. Goal setting can affect performance in at least three ways: it influences what
people think and do as it focuses behaviour in the direction of the goals; goals energise
behaviour, motivating people to make an effort to achieve difficult goals that are
accepted; and, finally, goal setting leads to persistence in effort over time when goals are
difficult but achievable.
- Characteristics of goal setting
 Establishing challenging goals
The first element of goal setting concerns the establishment of goals perceived as
challenging, but which are realistic and will entail a high level of commitment. This
can be accomplished by varying goal difficulty and the level of employee
participation in the goal-setting process. Increasing the difficulty of employee goals,
‘stretch goals’ can increase their perceived challenge and enhance the amount of
effort necessary for their achievement.9 Thus, more difficult goals tend to lead to
increased effort and performance, as long as they can be regarded as feasible. When
set too high, however, goals may lose motivational potential, and employees will give
up when failing to achieve them. Another aspect of establishing challenging goals is
to vary the amount of employee participation in the goal-setting process. Having
employees participate can increase motivation and performance, but only to the extent
that members set higher goals than those typically assigned to them. All three
contextual factors play an important role in establishing challenging goals. First, there
must be a clear ‘line of sight’ between the business strategy goals and the goals
established for individuals or groups. Second, employee participation in goal setting
is more likely to be effective if employee involvement policies in the organisation
support it. Third, when tasks are highly interdependent and work is designed for
groups, group-oriented participative goal setting tends to increase commitment.
 Clarifying goal measurement
The second element in the goal-setting process involves specification and clarification
of the goals. Employees tend to perform better when given specific goals than when
simply told to do their best, or when receiving no guidance at all. Specific goals
reduce ambiguity about expectations, and focus the search for appropriate behaviours.
To clarify goal measurement, objectives should be operationally defined. For
example, employees may agree to increase productivity by 5%, a challenging and
specific goal. Clarifying goal measurement also requires that employees and
supervisors negotiate the resources necessary for their achievement. These may
include time, equipment, raw materials or access to information. Contextual factors
also play an important role in the clarifying process. Goal specification and clarity can
be difficult in high-technology settings. The work is often uncertain and highly
interdependent. Increasing employee participation in the clarification of goal
measurement can give employees ownership of a non-specific but challenging goal.
Finally, the process of specifying and clarifying goals is extremely difficult if the
business strategy is unclear. Under these conditions, attempting to gain consensus on
the measurement and importance of goals can cause frustration and resistance to
change.