Chapter One

Organizations and Organization Theory

Introduction
• Organizations are not static.
• Not only are they continuously adapting to shifts in the external
environment but they try to control those changes.
• Surveys of top executives indicate that coping with rapid change is the
most common problem facing managers and organizations.
• Current Challenges
• Globalization
• Ethics and Social Responsibility
• Speed of Responsiveness
• The Digital Workplace
• Supporting Diversity etc…
Meaning of Organizations
• It means formed by two or more people to produce and provide goods
and services.
• Organizations are social entities that are goal-directed, are designed as
deliberately structured and coordinated activity systems and are linked
to the external environment.
• Types of Organizations
• Small, medium, and large
• Public and private
• Profit and non profit
• Formal and informal
• Manufacturing, merchandize and services etc…
Importance of Organizations
• Organizations bring together resources
• Produce goods and services efficiently
• Facilitate innovation
• Use modern manufacturing and information technologies
• Adapt to and influence a changing environment
• Create value for owners, customers and employees
• Accommodate ongoing challenges of diversity, ethics and the
motivation and coordination of employees etc…
Perspectives on Organizations
• Two important perspectives are the open-systems approach and the
organizational-configuration framework.
 Cont…nd
• Closed system: It would not depend on its environment. It’s
autonomous, enclosed and sealed off from the outside world.
• Open system: Every system that must interact with the environment
to survive.
Organizational Configuration Framework

Mintzberg’s
Five Basic Parts of an Organization

Top
Management

Technical Middle Administrative

Support Management Support

Technical Core
Cont…nd
• According to Mintzberg every organization has five parts:
• Technical core (people who do the basic work),
• Top management (provides direction, strategy, goals and policies for the
entire organization),
• Middle management (responsible for implementation and coordination on
department level),
• Technical support (R&D, marketing research) and
• Administrative support (responsible for the smooth operation and upkeep of
the organization).
Dimensions of Organization Design
• Organizational dimensions fall into two types: Structural and
Contextual.
Structural dimensions
• It provides labels to describe the internal characteristics of an organization.
• Formalization: Amount of written documentation/rules etc.
• Specialization: The degree in which organizational tasks are subdivided.
• Hierarchy of authority: Who reports to whom and the span of control for
managers.
• Centralization: Refers to the hierarchical level that has authority to make a
decision.
• Professionalism: Level of formal education and training of employees.
• Personnel ratios: Deployment of people to various functions and departments.
It is measured by dividing the number employees in a classification by the total.
Contextual dimensions
• They represent both the organization and the environment.
• Size: Organizations are social systems, thus size is measured by the
number of people in the organization.
• Organizational technology: Tools, techniques and actions used to
transform inputs to outputs.
• Environment: All elements outside the boundary of the organization.
• Goals and strategy: Define the purpose and competitive techniques.
• Culture: The underlying set of values, beliefs, understandings and
norms shared by employees.
Performance and Effectiveness Outcomes
• The whole point of understanding varying perspectives and the
structural and contextual dimensions of organizations is to design the
organization in such a way as to achieve high performance and
effectiveness.
• Efficiency refers to the amount of resources (materials, money,
employees) used to achieve the organizations goals.
• Effectiveness meaning the degree to which an organization achieves
its goals.
The Evolution of Organization Theory and
Design
• Organization theory is a way of thinking about organizations. It’s a way to see and
analyze organizations more accurately and deeply than one otherwise could.
Historical perspectives: the modern era of management theory began with the
classical management perspective in the late nineteenth and early twentieth century.
• Efficiency Is Everything. Pioneered by Frederick Winslow Taylor, scientific
management emphasizes scientifically determined jobs and management practices
as the way to improve efficiency and labor productivity.
• How to get organized: Administrative principles looked at the design and
functioning of the organization as a whole. These principles contributed to the
development of bureaucratic organizations: which emphasized designing and
managing organizations on an impersonal, rational basis.
Cont…nd
• What about people: The Hawthorne Studies concluded that positive
treatment of employees improved their motivation and productivity.
Don’t forget the environment
• Contingency means that one thing depends on other things; there
must be a constant ‘goodness of fit’ between organizations’ structure
and the external environment.
• There is no “one best way.”
• Contingency theory means it depends.
Contemporary Organization Design
• The challenges of today’s environment call for dramatically different responses
from people and organizations.
• The science of chaos theory: The world is full of uncertainty, characterized by
surprise, rapid change, and confusion. This theory suggest that organizations
should be viewed more as natural systems than as well-oiled, predictable
machines.
• Many managers are redesigning their companies to become so-called learning
organizations.
• The principle of the learning organization is for communication and
collaboration to be actively promoted so that everyone is engaged in
identifying and solving problems, enabling the organization to continuously
experiment, improve and increase its capability.
 Cont…nd
Efficient Performance versus the Learning Organization

Two Organization Design

Approaches
Mechanical System Design Natural System Design

Vertical Horizontal
Structure Structure

Routine Rigid Organizational Change Empowered Adaptive

Tasks Culture in the Service of Roles Culture
Performance

Formal Competitive Shared

Collaborative
Systems Strategy Information Strategy

Stable Environment Turbulent Environment

Efficient Performance Learning Organization
Cont…nd
• From vertical to horizontal structure: Vertical can be quite effective/efficient,
Horizontal often operate with self-directed teams.
• From routine tasks to empowered roles: A role holder has discretion and
responsibility that allowing the person to use his or her discretion and ability to
achieve an outcome or meet a goal.
• From formal control systems to shared information: much information is
accessible and shared in a way that optimizes performance.
• From competitive to collaborative strategy: Traditionally strategy is formulated by
top managers, In the learning organization the accumulated actions of an
informed and empowered workforce contribute to strategy development.
• From rigid to adaptive culture: The culture encourages openness, equality,
continuous improvement and change.
Thank you!!!