Post on 06-Apr-2018
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Introduction toOrganization Theory
ByShevata Singhal
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What is Theory?
Theory is: a plan or scheme existing in themind only, but based on principles
verifiable by experiment or observation
(Funk &Wagnalls page 1302
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What is an Organization? Organizations are social entities that are
goal-oriented; are designed as deliberately
structured and coordinated activity systems,
and are linked to the external environment
(Daft, 2004).
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Definition of Organization
Theory Organization theory: is the set of
propositions (body of knowledge) stemming
from a definable field of study which can be
termed organizations science (Kast&Rosenzweig1970).
The study of organizations: is an applied
science because the resulting knowledge isrelevent to problem solving or decision
making in ongoing enterprises or
institutions (Kast&Rosenzweig1970).
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Definition of Organization
Theory Cont.. Two things:
Knowledge
Knowledge generated by practical experience and
scientific research
Solving problems & managing resources
(Kast&Rosenzweig1970).
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Definition of Organization
Theory Cont.. It is the application of scientific knowledge
in engineering and other forms of
technology that has brought such
spectacular changes in the material context
of our lives over the past century
(Kast&Rosenzweig1970).
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Organization theory and
Management Management technology stems from
organization theory and even more applied
in the sense that it focuses on the practice of
management in ongoing organizations
(Kast&Rosenzweig1970).
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Micro Perspective of
Organizations Simplifying Assumptions:
Firms viewed as an individual entrepreneur
Profit maximization
Rationality in achieving firm goals
Firms function is to transform inputs into
outputs Staple environment in which firm operates
Concerned only with changes in prices and
quantities of inputs and outputs
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Organization Theory from a
Historical Perspective
Throughout history most managers
operated strictly on a trial-and-error basis
The management profession as we know it
today is relatively new
wide swings in management approaches over
the last 100 years
parts of each approach have survived and been
incorporated into modern perspectives on
management
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Evolution Of Management Thought
1890 1900 1910 1920 1930 1940 1950 1960 1970
Systematic
management
Administrative
management
Quantitative
management
Systems
theory
Current and
future revolutions
Scientific
management
Human
relations
Organizational
behavior
Bureaucracy
Classical Approaches Contemporary Approaches
Contingency
theory
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Early Management Concepts And
Influences Industrial revolution
minor improvements in management tactics produced impressive
increases in production quantity and quality
economies of scale - reductions in the average cost of a unit of
production as the total volume produced increases
opportunities for mass production created by the industrial
revolution spawned intense and systematic thought about
management problems and issues
efficiency
production processes
cost savings
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Systematic Management
Systematized manufacturing operations
Coordination of procedures and processes built into internal operations
Emphasis on economical operations, inventory management, and cost
control
Beginning of formal management in the United States
Promotion of efficient, uninterrupted production
Ignored relationship between an organization and it environment
Ignored differences in managers and workers views
Key concepts
Limitations
Contributions
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Scientific Management (The Classical
Organization Theory)
Advocated the application of scientific methods to analyze work and
to determine how to complete production tasks efficiently
Four principles
develop a scientific approach for each element of ones work
scientifically select, train, teach and develop each worker
cooperate with workers to ensure that jobs match plans and principles
ensure appropriate division of labor
Personalities
FrederickW. Taylor
Frank and Lillian Gilbreth
Henry Gantt
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Scientific Management (cont.)
Used scientific methods to determine the one best way
Emphasized study of tasks, selection and training of workers, and
cooperation between workers and management
Improved factory productivity and efficiency
Introduced scientific analysis to the workplace
Piecerate system equated worker rewards and performance
Simplistic motivational assumptions
Workers viewed as parts of a machine
Potential for exploitation of labor
Excluded senior management tasks
Key concepts
Limitations
Contributions
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Administrative Management
Emphasized the perspective of senior managers
Five management functions
planning
organizing commanding
coordinating
controlling
Fourteen principles of management
Personalities
Henri Fayol
Chester Barnard
Mary Parker Follet
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Administrative Management (cont.)
Fayols five functions and 14 principles of management
Executives formulate the organizations purpose, secure employees,
and maintain communications
Managers must respond to changing developments
Viewed management as a profession that can be trained and developed
Emphasized the broad policy aspects of top-level managers
Offered universal managerial prescriptions
Universal prescriptions need qualifications for
environmental, technological, and personnel factors
Key concepts
Limitations
Contributions
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Human Relations
Aimed to understand how psychological and social
processes interact with the work situation to influence
performance
Hawthorne Studies
Hawthorne Effect- workers perform and react differently
when researchers observe them
Argued that managers should stress primarily employee
welfare, motivation, and communication
Personalities
Abraham Maslow
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Human Relations (cont.)
Productivity and employee behavior are influenced by the informal
work group
Cohesion, status, and group norms determine output
Social needs have precedence over economic needs
Psychological and social processes influence performance
Maslows hierarchy of need
Ignored workers rational side and the formal organizations
contributions to productivity
Research overturned the simplistic belief that happy workers are more
productive
Key concepts
Limitations
Contributions
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Bureaucracy
Bureaucratic structures can eliminate the
variability that results when managers in the
same organization have different skills,
experiences, and goals
Allows large organizations to perform the many
routine activities necessary for their survival
People should be treated in unbiased manner
Personalities
MaxWeber
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Bureaucracy (cont.)
Structured network of relationships among specialized positions
Rules and regulations standardize behavior
Jobs staffed by trained specialists who follow rules
Hierarchy defines the relationship among jobs
Promotes efficient performance of routine operations
Eliminates subjective judgment by employees and management
Emphasizes position rather than the person
Limited organizational flexibility and slowed decision making
Ignores the importance of people and interpersonal relationships
Rules may become ends in themselves
Key concepts
Limitations
Contributions
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Quantitative Management
Teams of quantitative experts tackle
complex issues facing large organizations
Helps management make a decision by
developing formal mathematical models of
the problem
Personalities
military planners in WorldWar II
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Quantitative Management (cont.)
Application of quantitative analysis to management decisions
Developed specific mathematical methods of problem analysis
Helped managers select the best alternative among a set
Models neglect nonquantifiable factorsManagers not trained in these techniques may not trust or understand
the techniques outcomes
Not suited for nonroutine or unpredictable management decisions
Key concepts
Limitations
Contributions
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Organizational Behavior
Studies management activities that promote employee
effectiveness
investigates the complex nature of individual, group, and
organizational processesTheory X
managers assume that workers are lazy, irresponsible, and require
constant supervision
Theory Y
managers assume employees want to work and control themselves
Personalities
Douglas McGregor
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Organizational Behavior (cont.)
Promotes employee effectiveness through understanding of individual,
group, and organizational processes
Stresses relationships among employees, managers, and work
performed
Assumes employees want to work and can control themselves
Increased participation, greater autonomy, individual challenge and
initiative, and enriched jobs may increase participationRecognized the importance of developing human resources
Some approaches ignored situational factors, such as the environment
and technology
Key concepts
Limitations
Contributions
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Systems Theory
Organization is viewed as a managed system
Management must interact with the environment
Organizational goals must address effectiveness and efficiency
Organizations contain a series of subsystems
There are many avenues to the same outcome
Synergies enable the whole to be more than the sum of the parts
Recognized the importance of the relationship between the
organization and the environment
Does not provide specific guidance on the functions of managers
Key concepts
Limitations
Contributions
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Contingency Perspective
Situational contingencies influence the strategies, structures, and
processes that result in high performance
There is more than one way to reach a goal
Managers may adapt their organizations to the situation
Identified major contingencies
Argued against universal principles of management
Not all important contingencies have been identified
Theory may not be applicable to all managerial issues
Key concepts
Limitations
Contributions
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Organizing ForEnvironmental
Response (cont.)
Organizing for customer responsiveness (cont.)
Total Quality Management(TQM) - comprehensive approach
to improving quality and customer satisfaction
characterized by a strong orientation toward internal and externalcustomers
involves people across departments in improving all aspects of the
business
requires integrative mechanisms that facilitate group problem solving,
information sharing, and cooperation across business functionsBaldrige award- given to U.S. companies that achieve quality
excellence
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W. Edwards Demings 14 Points
OfQuality
Create constancy of purpose
Dont tolerate delays or mistakes
Cease dependencies on mass inspection
Dont award business on price tag alone
Constantly and forever improve the system of production or service Institute training and retraining
Institute leadership
Drive out fear
Breakdown barriers among departments
Eliminate slogans, exhortations, and arbitrary targets
Eliminate numerical quotas
Remove barriers to pride in workmanship
Educate your people who should be viewed as assets, not commodities
Provide a structure that enables quality
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Organizing ForEnvironmental
Response (cont.)
Organizing for customer responsiveness (cont.)
ISO 9000 - a series of quality standards developed by a
committee working under the InternationalOrganization for Standardization
intended to improve total quality in all businesses
companies that comply with standards entitled to certification
reengineering- revolutionizes key organizational
systems and processes
based on a vision for how the organization should run
completely overhauls the operation in revolutionary ways
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A Dynamic Network
DistributorsSuppliers
Brokers
ProducersDesigners
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Macro Perspective of Organizations
Organizations are open systems
affected by, and in turn affect, their external
environments
External environment
all relevant forces outside a firms boundaries
relevant- factors to which managers must pay attention
two elements comprise the external environment competitive environment- immediate environment
surrounding a firm
macroenvironment- fundamental factors that generally
affect all organizations
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Laws and
politics
Economy
Technology
DemographicsSocial
values
MacroenvironmentCompetitive
EnvironmentOrganization
Suppliers
New
Entrants
SubstitutesRivals
Buyers
The External Environment
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The Macroenvironment The macroenvironment
most general elements in the external environment that can
potentially influence strategic decisions
all organizations are affected by the general components of
the macroenvironment
Laws and regulations
impose strategic constraints and provide opportunities
regulators - specific government organizations in a firms
more immediate task environment have the power to investigate company practices and take legal
action to ensure compliance with the laws
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The Macroenvironment (cont.)
The economy
created by complex interconnections among economies of
different countries
important elements include interest rates, inflation rates,unemployment rates, and the stock market
economic conditions change and are difficult to predict
Technology
creates new products, advanced production techniques, andimproved methods of managing and communicating
strategies that ignore or lag behind competitors in
considering technology lead to obsolescence and extinction
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The Macroenvironment (cont.)
Demographics
measures of various characteristics of the people comprising
groups or other social units
age, gender, family size, income, education, occupation
workforce demographics must be considered in formulating
human resources strategies
population growth influences the size and composition of the labor
force
immigration also is a significant factor
increasing diversity of the labor force has both advantages and
disadvantages
must assure equal employment opportunity
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The Macroenvironment (cont.)
Social issues and the natural environment
management must be aware of how people
think and behave
the role of women in the workplace
providing benefits for domestic partners of
employees
protection of the natural environment
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Competitive Environment
Competitive environment
comprises the specific organizations with
which the organization interacts
Michael Porter - defined the competitive
environment
successful managers:
react to the competitive environment; and
act in ways that actually shape or change the
competitive environment
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Rival firms
New
entrants
Suppliers Customers
Substitutes
Competitive Environment
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Competitive Environment (cont.)
Competitors
competitors within an industry must deal with one
another organizations must:
identify their competitors
analyze how competitors compete
react to and anticipate competitors actions
competition is most intense:
where there are many competitors
when industry growth is slow
when the product or service cannot be differentiated
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Competitive Environment (cont.)
Threat of new entrants
barriers to entry - influence the degree of threat
conditions that prevent new companies from entering an industry
include government policy, capital requirements, and brand
identification, cost disadvantages, and distribution channels
Threat of substitutes
technological advances and economic efficiencies may result in
substitutes for existing products
substitutes can limit another industrys revenue potential
companies need to think about potentially viable substitutes
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Competitive Environment (cont.)
Suppliers
provide the resources needed for production
powerful suppliers can reduce an organizations profits
international labor unions are noteworthy suppliers
dependence on powerful suppliers is a competitive disadvantage
power of supplier determined by:
availability of other suppliers from whom to buy
the number of customers for the suppliers products
switching costs - fixed costs buyers face if they change suppliers
close supplier relationship is the new model for organizations
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Competitive Environment (cont.)
Customers
purchase the products or services the organization offers
final consumers - purchase products in their final form
intermediate consumers - buy raw materials or wholesale productsbefore selling them to final consumers
customerservice - giving customers what they want, the way
they want it, the first time
disadvantageous to depend too heavily on powerful customers
powerful customers make large purchases and/or have other suppliers