INTRODUCTION TYPES OF ORGANIZATIONS: ETZIONI CLASSICAL THEORIES CONFLICT AND POWER THEORIES HUMAN...

I N T R O D U C T I O NT Y P E S O F O R G A N I Z AT I O N S : E T Z I O N I

C L A SS I C A L T H E O R I E SC O N F L I C T A N D P O W E R T H E O R I E S

H U M A N R E L AT I O N T H E O R I E SO R G A N I Z AT I O N A L A N A LY S I S

C O M P L E X I T YF O R M A L I Z AT I O N

C E N T R A L I Z AT I O NO R G A N I Z AT I O N A L G O A L S A N D E F F E C T I V E N E SS

O R G A N I Z AT I O N A L S I Z EO R G A N I Z AT I O N A L T E C H N O L O G Y

T H E E N V I R O N M E N TO R G A N I Z AT I O N A L C U LT U R E

L E A D E R S H I P A N D G OV E R N A N C E

INTRODUCTION TO THE THEORY OF ORGANIZATIONS

Alberto Veira [email protected]

INTRODUCTION

Modernization and development of secondary groups (organizations)

Different types of OrganizationsTypology according to Amitai Etzioni

Type of control Type of conduct

CLASSICAL THEORIES

Frederick Taylor Scientific Management

Henri Fayol Administrative Theory

Max Weber Theory of Bureaucracy:

Luther Gulick & Lindall Urwick “Papers on the Science of Administration”

Others

HENRI FAYOL

French mine engineer (1841-1925) “L´administration industrielle et générale” (1916)

Focused on the administrative aspects of the organizational structure

Identified two basic managerial functions: Coordination Specialization

Need of “Formalization” and “Rationalization”His ideas inspired the creation of an academic journal

devoted to study the functioning of organizations: “Papers on the Science of Administration”, edited by Gulick and Urwik in 1937

His ideas were applied in 1949 by Mooney and Reyley, two top executives from GM

HENRI FAYOL

Coordination The division of labor & specialization

Organize departments (according to specialization principles) Chain of command

Never more than one supervisor per subordinate Hierarchical structure

Pyramidal Authority & Responsibility

Never more subordinates than those that can be supervised efficiently It determines the number of levels of hierarchy an organization should

have (according to Fayol the limit is somewhat between 5 and 10) Delegation of authority is a necessity

Exceptionality: Routine tasks to the less skilled Complex tasks to the more skilled

HENRI FAYOL

Specialization Individuals performing similar tasks must be grouped

into one “Department” Identifies two main functions:

Executive functions: directly oriented to accomplish the main goals of the organization

Support or Staff functions: oriented to provide support to the former (e.g.: legal counseling)

HENRI FAYOL

Executive functions: Forecast & Plan: set the strategic goals Organize: assemble the necessary means to

accomplish the goals and assign specific tasks to personnel: design the “Organigramme”

Command & direct: lead the personnel, it requires extraordinary interpersonal skills

Coordinate: harmonize activities of different departments (avoid “animosity” that may derive from written communication)

Control: monitoring, measuring performance, set corrective actions

HENRI FAYOL

Formalization and Rationalization Must be designed and promoted from the top of the

organizational pyramid (not at workshop level as in Taylor) Distinguish clearly between “positions” within the hierarchy

and the individuals (persons) who occupy those positions Provide managers with clear procedures and protocols to

avoid the “Human Factor” Common interest must be place above individual interest Fayol perceived the need for involving and motivating the

worker by Creating an adequate atmosphere at the workplace Treatment based on equity (job guarantee) “Esprit de corps” (team spirit)

HENRI FAYOL

Fayol established 7 qualities a leader should have: Good health and physical “vigeur” Intelligence Moral qualities

Perseverance Courage (to accept responsibilities) Committed to duty and to the general interest

Educated and cultivated Expertise on the professional domain Knowledge on management “Art de manier les hommes” Art on the way to handle

men

HENRI FAYOL

Tasks attributed to top managers Set the strategic plan (along with owners of the firma) Design the organizational structure (Organigramme) Hire competent advisors and collaborators, defining their salaries and career prospects according to

their competence Define the rules regulating the way personnel must behave Define the communication channels Meet regularly with advisors and collaborators (and listen

to their suggestions) Read the reports and react in consequence Monitor the budgets Report to the owners the state of the business

HENRI FAYOL

Tasks attributed to intermediate (middle-rank) managers Set the plan to accomplish the strategic goals established

by the top managers in the shortest possible period of time Attend the meetings organized by the top managers Coordinate with other colleagues (meetings) Define the structure of the department (identifying the

different functions) Manage the personnel of the department (recruitment,

salaries, lay-offs) Have initiatives and keep the top managers well informed Increase their expertise by education and training Control the costs

HENRI FAYOL

Tasks attributed to operators Execution of orders received Identifying and signaling any difficulty for the correct

execution of the order Report how orders have been executed Coordinate with other operators

MAX WEBER

German Lawyer, Economist and Sociologist (1864-1920)Broader perspective than merely Administrative TheoryConsidered the founding father of the sociology of

organizations due to his studies on bureaucracy and the importance of rationalization in industrial societies

Interested on the analysis of the administrative systems generated historically by different cultures or societies

Believed that historically cultural factors (values & beliefs) and not only economic factors had influenced the configuration of administrative (bureaucratic systems), particularly under the capitalist regime

MAX WEBER

Interested on identifying the distinctive features of administrative organization under capitalism Not the result of class struggle (something constant over

history and not a peculiarity of Capitalist societies)Focused on the study of the growing

rationalization process taking place in all domains and at all levels of social life in industrial societies (in capitalist as well as in socialist ones)

Typology of systems of authority and domination: Charismatic Traditional Legal & Rational

MAX WEBER

Charismatic authority Source of authority is a charismatic leader Followers attribute the leader superior moral qualities (usually in

exceptional critical times) Administrative system is unstable: depends on the wishes and

appetites of the leader. Once the leader dies or disappears transition problems may arise

Traditional authority Source of authority is the tradition Administrative positions are patrimonial (inherited) Loyalty is assured by personal allegiance Administration is more stable than the charismatic

Legal & Rational authority Source of authority is the Law Bureaucratic Administration

MAX WEBER

In the real world these systems seldom exist in their purest expression

In one given society (or organization) may very well coexist different elements of each type of domination

Modern societies may keep elements derived from traditions like the Monarchy

Modern democracies may produce charismatic leaders

One company funded by one entrepreneur may function to a great extent led by his or her charisma, as well as by established rational and legal procedures and protocols in written documents Let´s Remember Fayol’s description of a good manager!!!

MAX WEBER

Rational & legal systems are superior because they are more efficient on accomplishing tasks and all Western societies had evolved into this direction (idea inspired by the development of the Prussian army

and bureaucracy)Bureaucratic Administrations are technically

superior to any other form of AdministrationCharismatic leaders are useful only in times of

crisis and do not create stable administrative systems because the replacement of the leader often entails problems

MAX WEBER

Main features of a Bureaucratic Administration: Set of rules and procedures in written documents All personnel and its decisions are subject to those written rules

and procedures. Their relations are impersonal and their decisions devoid of personal interests

Division of labor and technical competence: members are employed on the basis of their expertise and are given extensive education

Hierarchical structure of office is well defined: every position is accountable to and supervised by a higher office

Individual performance is rewarded thanks to strict mechanisms of control that apply to all personnel. Salaries paid in money

Existence of a professional career within the administration and a personal commitment to it among its members whom must work full time

Clear separation between property and control: equipment and materials belong to the organization, not to those making use of it

MAX WEBER

Advantages of Bureaucratic Administrations Promotes technical efficiency Protects personnel from discrimination Fits well into the cultural features (values) of Western

societies Powerful on solving conflicts between members of the

personnel thanks to mere application of rulesDisadvantages of Bureaucratic

Administrations Mechanicism Insensible to human needs Promotes rigid conducts May hinder individual motivation

ROBERT K. MERTON

Scholars started to ask themselves why by the late 1940’s bureaucracy had started to show some worrying signs of persistent inefficiency (slowness, excessive paperwork, etc.)

From a functionalist perspective, Merton established by, under certain circumstances bureaucratic administrations may result inefficient

Social structures (as well as organizational structures) influence the individual who must adapt to them.

One type of “dysfunctional” adaptation is the Ritualism Dysfunctional for the interests of the organization Rational from the point of view of the individual

ROBERT K. MERTON

“Bureaucratic Structure and Personality” (1957) Strict set of rules and procedures and disciplinary

codes have an influence on the person who must abide to them on a daily basis

It hinders risk-aversion making the primary target of the employee to avoid being sanctioned

Goal displacement: the means turn into ends Bureaucratic ritualism: officials stick primarily to the

strict compliance with the regulations (instrumental value) prioritizing this even above the accomplishment of the strategic goals of the organization (final value)

ROBERT K. MERTON

Merton (1968) Defined cultural goals Structurally defined means to achieve the goals Depending on the acceptance/rejection of the goals

and the access or lack of access to the means, individuals may develop different types of adaptation to society (or the organization)

ROBERT K. MERTON

Five types of adaptation: Conformity occurs when individuals accept the culturally defined goals and the

socially legitimate means of achieving them. Merton suggest that most individuals, even those who do not have easy access to the means and goals, remain conformists

Innovation occurs when an individual accepts the goals of society, but rejects or lacks the socially legitimate means of achieving them. Innovation, the mode of adaptation most associated with criminal behavior, explains the high rate of crime committed by uneducated and poor individuals who do not have access to legitimate means of achieving the social goals of wealth and power

The ritualist accepts a lifestyle of hard work, but rejects the cultural goal of monetary rewards. This individual goes through the motions of getting an education and working hard, yet is not committed to the goal of accumulating wealth or power

Retreatism involves rejecting both the cultural goal of success and the socially legitimate means of achieving it. The retreatist withdraws or retreats from society and may become an alcoholic, drug addict, or vagrant

Rebellion occurs when an individual rejects both culturally defined goals and means and substitutes new goals and means. For example, rebels may use social or political activism to replace the goal of personal wealth with the goal of social justice and equality

MAIN SOCIOLOGICAL THEORIES

FUNCTIONALISM

DurkheimMerton

CONFLICTMarx

ACTIONALISMWeber

THEORIES OF CONFLICT AND POWER

Karl MarxLeninBruno RizziJames BurnhamHarry BravermanRobert Michels


Conflict oriented theories have their roots on Karl Marx’s vision of society Society is the historical result of interest conflicts that at

any given period are solved by the domination of one class by another

Functionalisits focused on the nature and origin of order and social equilibria, paying little attention to social problems and social change

Conflictivists, on the contrary, focus on processes of social change derived from conflict, which is a permanent feature on any society

KARL MARX

Karl Marx signaled that the typical conflict of the capitalist society is the class struggle Workers (proletarians) Capitalists (property owners, bourgeoisie) Their interests are divergent and conflict results in domination Private ownership of means of production allows capitalists to

exercise political domination over the working classMarx associates political power with economic

domination and considers the State as a mere instrument in the hands of the bourgeoisie.

Bureaucracy is the executive arm of the State, thus, a mere instrument for class domination and plays an important role on the alienation process

KARL MARX

Such perspective on bureaucracy led Marx to assume that in a classless society bureaucracy should come to and end

As a result, Marx did not paid very much attention to the bureaucratic phenomenon, its importance and its decisive impact on the diffusion of rationalization and on the future development of modern societies

KARL MARX

Marx did, however, leave some writings about the functioning of the bureaucracy from an organizational point of view: Incompetent Dominated by the principle of Careerism Main concern of bureaucrats is to keep status and

prestige “Infantile” attachment to symbols of status and power

(to have a big office, several assistants, secretaries, etc.)

The goal of serving citizens and the people becomes secondary

LENIN

Lenin, once established in power, decided to follow Marx´s ideas and implemented a 3 point plan to undermine the Tsarist bureaucracy Eligibility and revocability of functionaries Salary reduction to the level of an unskilled worker Simplification of tasks to make bureaucrats easily

replaceable and interchangeable Such plan did not work as expected and soon

Lenin realized that the new Soviet bureaucracy increased in size and power

Lenin admitted the need for a bureaucracy given the rural (feudal) features of Russian population

LENIN

The expansion of the Soviet bureaucracy was seen as a temporary necessity in a time when a strong central government was needed to transform the predominately rural (feudal) Russian society into an industrial one

On the end, Soviet bureaucratic apparatus expanded itself to levels not yet seen in Western societies

Trosky criticized that the rapid expansion of Soviet bureaucracy was caused by Stalin policies aimed to merge Party and State institutions


Weber perspective suggesting that the expansion of bureaucracy is to be associated with the need for “rationalization” characteristic of any modernization process and independent from the ideological nature of the State or the government was proved correct


Bruno Rizzi and the “Bureaucratic Collectivism” “La Bureaucratisation du Monde” (1939) Systems based on individual property change into

ones based on collective property (Soviet Union and fascist Italy)

Soviet bureaucracy (“nomenklatura”) turned into the new ruling class after having taken control over the means of production


James Burnham and the “Technocratic Regime” “The Managerial Revolution” (1941) The growing complexity of organizations transforms

managers into the new ruling elite because of their technical knowledge

Technocratic power is the new “post-capitalist” form of domination

Ownership, weather private or collective, is not the main cleavage separating the dominating from the dominated.

Instead, it is the control of the means of production which divides societies into Managers or Bureaucrats vs. the mass society

Conservative Machiavellian perspective (not Marxist)


Marxist theorists see current sociology as locked into the capitalist paradigm and unable to envision something other than a rational view for future organizations

For Marxists, Human relations theories don't challenge the exploitive nature of organizations and merely give managers new psychological tools to control workers

Hierarchy develops not as a rational means of coordination but as an instrument of control and a means of accumulating capital through the appropriation of surplus value

Rationality is an ideology itself


Harry Braverman “Labor and Monopoly Capital: The Degradation of

Work in the Twentieth Century” (1974) Taylorism:

Separation of conception from execution Monopoly over knowledge allows to control each step of

the labor process and its mode of execution The main goal of taylorist “rationalization” is the

disassociation of the skills of workers from the labor process


Harry Braverman (1974) “…organizational structures are not rational systems

for performing work in the most efficient manner; rather, they are power systems designed to maximize control and profits. Work is divided and subdivided not to improve efficiency but to "deskill" workers, to displace discretion from workers to managers, and to create artificial divisions among the work force…”

Workers become deskilled and "part of the machine" Modern organizations

deskill and segment workers reduce job security make work repetitive, mindless and boring


Machiavellism develops in Italy during the 1930’s coinciding with the rise of fascism Wilfredo Pareto Gaetano Mosca Robert Michels (pupil of Max Weber)

Its main concern is the role of power as a fundamental element on shaping social relations

Social organization is very dependent on how power is distributed and used in the society (or the organization)

Robert Michels’ “Iron Law of Oligarchies” is one of the few widely accepted and undisputed principles in modern sociology

ROBERT MICHELS

The “Iron Law of Oligarchies” “Zur Soziologie des Parteiwesens in der modernen

Demokratie” (1911) “On the Sociology of Political Parties” (1915) Increasing size and complexity makes very difficult

(nearly impossible) to govern (large) organizations on a purely democratic way

Modern organizations can only be of oligarchic nature: Bureaucracy (organization) = Oligarchy

This principle applies even to organizations committed to the very idea of democracy, like socialist political parties and trade unions

ROBERT MICHELS

Five principles of the “Iron Law of Oligarchies” 1) The participation of all members of a large organization on the

decision making process is technically inviable. Thus it is imperative to establish mechanisms for delegation or cooptation

2) Once a reduced number of “elected officials” are appointed in charge of the governance of the organization they begin concentrating the relevant information concerning the functioning of the organization close to themselves

3) The leader (or leaders) begin to be seen as “irreplaceable” due to their accumulation of specific knowledge and expertise

4) Once in a position of power, the leader will seek as a primary objective to remain in power, identifying the survival of the organization with his/her own metamorphosis of the leader’s personality

5) Oligarchies eventually develop the “ideology of power” aimed at emphasizing the need for internal harmony as the best way to face the menaces coming from of external enemies

ROBERT MICHELS

Why the “Iron Law of Oligarchies” always works? All organizations that increase in size and complexity require

the participation of dilligent full-time experts on the decision-making process. Such individuals tend to become “irreplaceable”

The dichotomy between “internal democracy” and “organizational efficiency” becomes more evident. Often efficiency requires a strong and professional leadership which can only come to the detriment of internal democracy

The very psychology of the masses makes strong leadership unavoidable, even desirable Apathy and incompetence make the majority of people unsuitable

for leadership roles Masses tend to be thankful to those who decide to exercise

leadership and often some “cult of personality” arises The only function of the masses is to chose a new leader from time

to time

ROBERT MICHELS

Parliamentary regimes reinforce this dynamic Routine commissions Elected representatives are more visible than other

members Leaders of different factions may eventually unite to face

new leaders arising from the massesFundamental contradiction on the functioning of

democratic regimes Parties are an indispensable requisite Parties, to be successful need to be organized

bureaucratically Masses are not interested on taking active part on politics Only egoism may motivate some individuals to take part

in political activity

ROBERT MICHELS

Nonetheless, a democracy though undermined to some degree by the oligarchic functioning of its political parties is still an improvement with respect to one of aristocratic nature because Positions within the ruling elite are not transferred by

inheritance Leaders need to have some abilities and acquire some

merits Elites (the “Political class”) are not a “closed” group “Circulation of elites” (old elites vs. new elites)

ROBERT MICHELS

Nonetheless, a democracy though undermined to some degree by the oligarchic functioning of its political parties is still an improvement with respect to one of aristocratic nature because Problem: the oligarchic nature of elites persists because all

new elites soon acquire the traits of oligarchic behavior (Iron Law) “Bureaucracy happens (unavoidably because either centralization

or delegation leads to specialization and enhances information control). If bureaucracy happens, power rises. Power corrupts…”

“Large organizations give their officers a near monopoly of power” “The masses are incapable of taking part in the decision-making

process and desire strong leadership” Class struggle over history simply generates new elites Solution?: a direct relation between a charismatic leader and

the people its interests represent (Mussolini)

ROBERT MICHELS

Critics to the “Iron Law of Oligarchies” Utterly deterministic Pessimistic

Recent history has shown that democracies may indeed evolve improving their “modus operandi”

It has been observed that alternance on power do limits the power of oligarchies


Jerry Pournelle and the “Iron Law of Bureaucracy” In any bureaucracy,

The people devoted to the benefit of the bureaucracy itself always get in control

Those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely

In any bureaucratic organization there will be two kinds of people: 1) Those who work to further the actual goals of the organization,

and 2) Those who work for the organization itself

The Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions

HUMAN RELATIONS

Elton Mayo The Hawthorne Studies

Chester Barnard “The Functions of the Executive”

Douglas McGregor Theory “X” and Theory “Y”

Abraham Maslow Hierarchy of needs

Frederick Hertzberg Two factor theory

William Ouchi Theory “Z” Japanese Management

William Reddin 3D Theory on “Managerial effectiveness”: There is no one “universal”

best way

HUMAN RELATIONS

Reaction against extreme rationalism of the classical theories 1) Exploring the role of groups within organizations

(“Human Relations” school) 2) Considering organization as an “Open System”

within a “Context” (the “Contingency Theory” school)Informal relations taking place at the

workplace constitute a psychological need for the individual

Informal relations (primary groups) help to improve working performance

HUMAN RELATIONS

Motivation has a tremendous impact on our performance

Some studies have suggested that most persons make use of about 20% to 30% of our real capacities at the workplace

The remaining capacity to increase our effort and our commitment depends on our motivations

Informal (primary) groups inside the organization may play an important role on motivation

HUMAN RELATIONS

Theories of motivation Theories of Factors: focus on identifying the “factors”

that determine motivation: Theories of Processes: focus on the mechanisms

(“processes”) through which motivation develops Theories of Reinforcement: derive from Skinner´s

“Psychological Conductism” and focus on the relationship between stimulus and response (SR)

HUMAN RELATIONS

Motivation and Culture The sociological perspective contemplates motivation

as one factor strongly attached to Culture Attitudes towards work determine to a great extent

the motivation and the incentives Modern management is oriented to take into account

individual and corporate values

HUMAN RELATIONS

Classic works related to the “Human Relations” school Roethlisberger, Dickson and Elton Mayo

Hawthorne Studies: Barnard

“Functions of the Executive” McGregor

“The human side of the enterprise”

ELTON MAYO

Australian psychologist (1880-1949)“The human problems of an Industrialized

Civilization” (1933)Research on industrial and organizational

psychology (Hawthorne Studies)Created the foundation for “Human Relations

Movement”Criticized Taylor’s “Scientific Management”

approachOpened the field for studying the nature of

motivation from both sociological and psychological perspective

ELTON MAYO

The Hawthorne Study: Late 1920’searly 1930’s Western Electric Plant at Hawthorne, Illinois (USA) Experiments to improve productivity

Length of rest and lunch breaks Illumination Payment plans Monitoring procedures Interviews (set the pattern for modern qualitative

interview)

ELTON MAYO

The Hawthorne Study:

Illumination Study (November 1924) Designed to test the effect of lighting intensity on worker productivity Heuristic value: influence of human relations on work behavior

Relay Assembly Test Room Study (1927-1932) Assembly of telephone relays (35 parts - 4 machine screws) Production and satisfaction increased regardless of IV manipulation Workers’ increased production and satisfaction related to supervisory practices Human interrelationships are important contributing factors to worker productivity Bottom Line: Supervisory practices increase employee morale AND productivity

Interviewing Program (1928-1930) Investigate connection between supervisory practices and employee morale Employees expressed their ideas and feelings (e.g., likes and dislikes) Process more important than actual results

Bank Wiring Room Observation Study (November 1931 - May 1932) Social groups can influence production and individual work behavior RQ: How is social control manifested on the shop floor? Informal organization constrains employee behavior within formal organizational

structure

ELTON MAYO

The Hawthorne Study:

Illumination Study (November 1924) The mere practice of observing people’s behavior tends to alter their behavior

(Hawthorne Effect) Relay Assembly Test Room Study (1927-1932)

Relationships between workers and their supervisors are powerful Human interrelationships increase the amount and quality of worker participation in

decision making Interviewing Program (1928-1930)

Demonstrated powerful influence of upward communication Workers were asked for opinions, told they mattered, and positive attitudes toward

company increased Bank Wiring Room Observation Study (November 1931 - May 1932)

Led future theorists to account for the existence of informal communication

Taken together, these studies helped to document the powerful nature of social relations in the workplace and moved managers more toward the interpersonal aspects of organizing.

ELTON MAYO

The Hawthorne Study: Workers should not be taken into consideration as

individuals isolated from the group Informal primary groups have a decisive influence on the

workers’ behavior Productivity may increase depending on the social patterns

of informal interaction The feeling of belonging to a group is more important than

monetary incentives and good working conditions Managers should bear in mind those “social needs” and

balance two potentially conflicting elements: The “logic of cost and efficiency” The “logic of worker’s sentiments”

The “scientific management “in an inadequate approach to organizing work

CHESTER BARNARD

American businessman (1886-1961)“The Functions of the Executive” (1938)Most organizations do not live for very long

(except for one in particular)This is because they miss to comply with two

basic goals: Effectiveness: Attaining explicit goals Efficiency : The extent to which an organization

satisfies the motives of individuals

CHESTER BARNARD

“The Functions of the Executive” (1938)Setting goalsEstablish and maintain a system of

communication An adequate system of communication (which involves

treating subordinates with respect) reinforces manager’s authority

Securing members will do their part An adequate system of incentives will assure that

employees will be motivated to do their work properly

CHESTER BARNARD

“The Functions of the Executive” (1938)An adequate system of communication

Channels of communication should be clear Should be accessible to everybody at any time Should be as direct as possible Communication centers must be managed by

competent employees Communications should be authenticated

CHESTER BARNARD

“The Functions of the Executive” (1938)Adequate structure of incentives

Salary Non-material distinctions Work conditions Symbolic gratification (pride for a well done work) Persuasion

DOUGLAS McGREGOR

American professor at MIT school of Management (1906-1964)

“The Human Side of the Enterprise” (1960)Contribution to management and motivational

theoriesConsidered for some the most influential book on

management of the 20th centuryProposed the so called Theory “X” and Theory “Y”Managers can be divided into two groups,

depending on which of those theories they believe to be true

Importance of values and beliefs (and Culture!)

DOUGLAS McGREGOR

Theory X: Assumes employees are inherently lazy and dislike

working Employees have little ambition unless a very generous

incentive is promised Employees will avoid taking responsibilities Employees must be closely supervised by comprehensive

control systems A hierarchical structure is needed Narrow spans of control at each hierarchical level Need to rely on threat and coercion When something is wrong it is usually someone else’s fault

(not the system) It is the manager’s job to monitor closely employees’ work

DOUGLAS McGREGOR

Theory Y: Employees may be ambitious and self-motivated Employees can be relied on to abide to some sort of self-control Employees may enjoy doing their work and may find

satisfaction in doing so (source of motivation) Employees may be responsible and have abilities for creative

problem solving Organization may underuse employees’ talents It is the duty of the manager to

promote and enhance self-control and self-responsibility among employees by creating a climate of trust and by communicating openly with subordinates and reducing

hierarchical distances and favoring the sharing of the decision-making process

ABRAHAM MASLOW

American Psychologist (1908-1970)Hierarchy of needs

Physiological Safety Love and belonging Esteem Self-actualization

Maslow’s hammer

FREDERICK HERTZBERG

The two-factor TheorySome factors cause job satisfaction and

others cause dissatisfactionTo great extent based on Maslow’s principles

but!Satisfaction and dissatisfaction is NOT a

continuumInterviewed more than 200 engineers and

accountants about their jobs and what made them happy being at it

FREDERICK HERTZBERG

The two-factor Theory Hygiene factors: need to avoid dissatisfaction

Status Job security Salary and benefits Work conditions

Motivators: elements that cause satisfaction Interesting tasks Responsibility Recognition

Difference between “Movements” and “Motivation”

FREDERICK HERTZBERG

The two-factor Theory Importance of “job enrichment”

Promote employees to take part in planning and self-evaluation processes

Remove some elements of control to enhance self-accountability

Create work units led entirely by employees Provide regular feed-back to employees initiatives and

report to them results on productivity (not only to top managers)

Encourage employees to take on new challenging tasks Encourage employees to become experts

THEORY “Z”

William Ouchi “Japanese Management” “Theory Z: How American Business Can Meet the Japanese

Challenge” (1981) Promote strong corporate culture and employee loyalty to the

firm by providing employment for life Employment stability leads to high productivity and high morale

and satisfaction Workers have sense of order, discipline, a moral obligation to work

hard, and a sense of cohesion with their fellow workers Workers will be participating in the decisions of the company to a

great degree Avoid making workers specialists into just a few simple tasks, instead

aim to increase their knowledge of the company and its processes through job rotations and constant training (Quality Circles)

Slow paces of promotion: long term commitment with the firma is required

Based on Edward Demings’ “14 points”

EDWARD DEMING’S POINTS

Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

The responsibility of supervisors must be changed from sheer numbers to quality Cease dependence on inspection to achieve quality Institute leadership: The aim of supervision should be to help people and machines do

a better job. Institute training on the job Drive out fear, so that everyone may work effectively for the company Remove barriers that rob the hourly worker of his right to pride of workmanship. Break down barriers between departments Move towards a single supplier for any one item, on a long-term relationship of loyalty

and trust Eliminate slogans, exhortations, and targets for the work force asking for zero defects

and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. Eliminate work standards (quotas) on the factory floor. Substitute with leadership. Eliminate management by objective. Eliminate management by numbers and

numerical goals. Instead substitute with leadership. Put everybody in the company to work to accomplish the transformation. The

transformation is everybody's job

THEORY “Z”

Abraham Maslow Managers must understand employees’ needs

William Reddin “Managerial Effectiveness” (1984) 3D Theory

There is no one best way for managing There are different types of managing which, depending on the

contest can be effective or not Task oriented manager (autocrat) Relationships oriented manager (developer) Task and relationship oriented (executive) Not strongly committed to task or relations (bureaucrat)

Effectiveness ought to be measured by looking at the output The main an only way to evaluate the performance of a manager

is not evaluating what he/she does but what he/she accomplished

ORGANIZATIONAL ANALYSIS

Three structural dimensions of organizations (B. Hodge): Complexity

Vertical differentiation Horizontal differentiation Spatial differentiation

Formalization Routine activities Highly specialized and educated professionals

Centralization Power distribution Participation and Empowerment

Standardization Achieve integration by setting consistent input processes or

output requirements


Complexity Vertical differentiation determined by the number of

hierarchical positions between plant workers and the “Prezes i dyrektor generalny” (CEO/PDG/DG). Hall suggests measuring it by taking the number of positions in

each department and divide it by the total number of departments

Horizontal differentiation determined by the number of different tasks required to the functioning of the organization Counting the number of specialists and educational levels Blau and Schoennher : Counting the number of departments and

sub-departments on the Organizational chart (“organigramme”) Spatial differentiation determined by the concentration or

dispersion of the different units of the organization

LOW HORIZONTAL COMPLEXITY

CEO

MarketingProduction HHRR Finances

(Zasoby Ludzkie)(Produkcja) (Finanse)

HIGH HORIZONTAL COMPLEXITY

Director General

VentasInvestigación de

Mercados y publicidad

ComprasProducción del

Producto BFinanzas

Producción delProducto A

ContabilidadRRHH

LOW VERTICAL COMPLEXITY

Presidente

VicepresidenteMarketing

VicepresidenteOperaciones

Vicepresidente RRHH

VicepresidenteFinanciero

AdjuntosDe Marketing

Adjuntos deProducción

Adjuntos deRRHH

Adjuntos deDirección Financiera

Asystent wykonawczyWystępek

HIGH VERTICAL COMPLEXITY

Director general

Presidente

Vice. Ejec. Marketing Vice. Ejec. Operaciones Vice. Ejec. RRHH Vice. Finanzas

Adj. ViceAdj. Vice Adj. Vice Adj. Vice

AyudantesAyudantes Ayudantes Ayudantes


Increasing differentiation may lead to dehumanization of work. A key issue facing many managers today is how much tasks should be differentiated

Many organizations are delayering hierarchies to facilitate communication, gain other efficiencies, and reduce costs

A typical worker stationed in a home-based mobile office would travel to customers or clients and log in sales or service calls on a lap top computer Some companies claim that mobile office workers increased by 15 to 20

percent the amount of time employees spend with customers or clients Some concerns regarding home-based mobile office workers include

overwork and safetyThe level of complexity is determined largely by the amount

of the three types of differentiation that exists. Complexity is often related to size, but not always so. Small companies can be complex (a medical clinic)


Integration involves the various means that the organization uses to pull together the highly differentiated tasks into cohesive output

Integration, or coordination, is the prime responsibility of managers. The functions of management—decision-making and influence—imply coordinating and integrating. Formalization

Routine activities Highly specialized and educated professionals

Centralization Power distribution Participation and Empowerment

Standardization Achieve integration by setting consistent input processes or output

requirements


Formalization: All organizations need to make sure that

Goals are accomplished Individuals behave accordingly (cooperation) to expectations

Rules, norms and procedures are established to ensure members of the organization will behave in a proper “predictable” manner How to approve a line of credit for a new client How to accept a patient and direct him/her to the proper

specialist The higher the level of formalization (bureaucratization)

the lower the level of autonomy of workers Organizations using technology based on routine

activities tend to be more formalized than those requiring highly educated specialists


Freedom

of action

Formalization

High

Low

High Low

Routines

Self-control


Alienation

Formalization

Form

alization

Professionalization

Alienation+

_ +

+

_ +


Formalization: Some organizations (hospitals) require both

highly routinized activities (Admission department) highly standardized procedures

highly specialized activities (Surgery department) self-control of highly educated professionals

All organizations need a minimum level of formalization Even those whose members are subjected to a great

deal of uncertainty regarding their daily tasks The police: dealing with unexpected emergencies but still it

may be formally established when and how to make use of the gun

ESeC: European Socioeconomic Classification of Occupations Routine-ization of occupations


Centralization: Refers to the distribution of power within the organization;

the levels at which strategic decision-making is adopted Pyramidal distribution vs. Cone distribution (Robbins)

Decision-making at the top level of the cone Execution at the base of the cone Information channel (line stretching from the vortex of the

cone to its base) At each level it is important how close or far a person is

from the information line Importance of position within the organizational chart

(“organigramme”) but also the access to strategic information • maintenance workers • mass media


Top level of power

Information

Adapted from S. Robbin

Position of an individual or a group

POWERDISTRIBUTION


Centralization: An organization is highly centralized

If all decisions are made at the top levels of the hierarchical pyramid

An organization is decentralized If employees of middle and lower levels can make decisions

regarding their tasks According to Max Weber, those highly competent bureaucrats

situated at the lower levels of the structure should be able to make decisions regarding tasks falling within their field of expertise

Empowerment: when employees possess both information and autonomy to organize their own work. Highly decentralized organizations rely on this practice to increase

motivation and job satisfaction (thus, job performance) among their employees


Influence, power and participation

High

None

CEO’s Plant Managers Dept. chiefs Employees


Centralization: Spans of Control refers to the number of immediate

subordinates’ positions that a superior position controls or coordinates

In the past, a suggested span of control was from five to seven

The thinking on spans of control now has shifted to looking at a number of factors including: the ability and experience of the manager, the ability and experience of subordinates, the nature of the task being performed, the spatial differentiation, and the amount and type of interaction needed by the supervisor.

Another way to think about spans of control is whether an organization employs a tall or flat structure


Organizations must differentiate work in order to accomplish the job.

Managers must then integrate the various tasks into a coordinated whole

The span of control can be wider… the more competent the manager and subordinates are the less geographical dispersion exists the more routine the tasks of the subordinates are

The span of control will be narrower the more differentiated the work is the more complex is the job of integration

Not one best way the work of the manager can hardly be routinized by formalization


Standardization: It can help achieve integration by reducing the

uncertainty or unpredictability of tasks Setting consistent input

Dealing with only one supplier of raw materials Organizations may standardize human resources by

hiring only graduates of certain MBA programs or requiring training or certification

Setting consistent processes How to do something, such as preparation of fast food or

manufacturing certain fabric Setting consistent output requirements

Textile industry in developing countries


Other instruments for achieving integration (B.J. Hodge) Liaison roles

horizontal linking positions between two units or departments at the same level of the organization

production and shipping depts. need to coordinate their activities Teams

organizing employees and managers into work and inter-unit groups in order to enhance communications, coordination, and control

Culture informal and unwritten rules, norms, and values that are commonly

shared by organizational members Information Systems

how the system gathers, processes, analyzes, and distributes information.

E-mail, networks, video, conference calling, and LAN networks Informal organization

ORGANIZATIONAL ANALYSIS (B.J. HODGE)

The organization chart shows the formal organization that is the officially

sanctioned structure delineates the authority, or reporting relationships,

that exist in the organization. The informal organization

represents the de facto relationships that are not necessarily sanctioned by the organization, even though they may be perceived as actually existing

personal characteristics and patterns of social relationships that may not be captured in the formal structure are ever-present and important to the formal structure

ORGANIZATIONAL ANALYSIS (B.J. HODGE)

The informal organization (B.J. Hodge) It is impossible to separate the roles and the relationships

from people. Evolves from people working in organizations that are

political. Is often the result of flaws, vagueness, incompleteness, or

inefficiencies in the formal design, or because of changes in organization faces.

In theory, in a perfect organization, the informal organization would either not exist or would be of little importance.

Virtually all organizations have an informal organization. Skilled managers understand and utilize both the formal

and informal organization to accomplish their objectives.

DIFFERENTIATION (B.J. HODGE)

Organizations today must accomplish complex work It is virtually impossible for an individual to accomplish

all of the tasks that are required to deliver products and services

To carry out its mission more efficiently, organizations: Must divide its work into many tasks Must allocate tasks to different workers Workers apply their skills to a limited part of the total product or

service (part of their talent may be underused which may lead to alienation and demotivation)

Organizations tend to differentiate in three different ways: horizontally vertically spatially

INTEGRATION (B.J. HODGE)

Organizations must divide up work (differentiation)Integration is the necessary coordination among the

various tasks to ensure that the overall goals of the organization are achieved

In smaller organizations, integration can often be achieved by direct contact and supervision of one or two key people

In large organizations that are highly differentiated often turn to both formal and informal integrating means Formal structures include:

formalization (through rules, policies, and procedures) centralization spans of control standardization

Informal or non-structural integrating means include: liaison roles, teams, culture, and information systems

MECHANISTIC AND ORGANIC (HODGE)

The mechanistic and organic structures are prototypes and represent extremes Mechanistic organizations have

high vertical and horizontal complexity, high formalization, high centralization, narrow spans of control, and high standardization.

Organic organizations have low vertical and horizontal complexity, low formalization, high decentralization, broad spans of control and low standardization.

Rarely one of the pure forms is the most appropriate

STRUCTURAL DESIGN (B.J HODGE)

According to contingency theory, five contextual factors must be considered in selecting the proper balance in the structural design: Goals Size Technology Environment Culture

Leadership and governance

ORGANIZATIONAL GOALS

Organizational Goals (definition): Mission statements, official goals, or, strategic objectives

set forth the officially chartered purpose of organizations (before operative goals are established)

Operative goals derived from official goals, are more specific statements about what the

organization, division, department or business unit intends to do Operational goals

very specific and narrowly stated goals of the organization

Organizations have short-term and long-term goals. Short-term goals

those that an organization hopes to accomplish within a year or specific accounting cycle. (Amazon.com, 1st to build traffic, 2nd visitors would become shoppers and revenues would follow)

Long-term goals those that cannot be accomplished in the short run these goals may be for as long as ten to twenty years In practice it is difficult to plan much beyond three to five years.


Organizational Goals (definition): Strategic goals

These statements are broad, but they state the direction the organization is taking and often the philosophy of the organization

Operative goals Stated in measurable outcomes They set standards and guide what people in the organization should

be doing Market Financial Performance Resource Innovation Productivity Management Development Employee Performance and Attitudes Social Responsibility and Ethical Behavior


Organizational Goals (importance): It is important to have a united set of goals The overall mission of the organization needs to be set before operative

goals can be developed to support the mission Organizations that are divided into many units and departments need some

unifying purpose. If left on their own, they end up working at cross-purposes and detract from the

organization’s larger purpose Highly centralized organizations

will pass down specific and detailed goals De-centralized organizations

may give lower-level managers more discretion in setting direction at the operative and operational levels.

Even though there is a natural sequencing of goal setting, many effective organizations build an elaborate feedback system that allows ideas to flow up and down the chain of command, as well as across units

There is no one best way to implement them; it depends on the organization in question

ORGANIZATIONAL GOALS (ETHICS)

Organizational Goals (ethics): Much of what organizational members do on a day-to-

day basis involves ethics Ethical dilemmas have five characteristics:

1) Actions have extended consequences. 2) Managers have alternatives and can make choices. 3) Outcomes are mixed—not all of the consequences are

totally positive or negative. 4) Consequences are uncertain. 5) Decisions that managers make have personal

implications—they affect people.


Brady suggests an approach that balances two quite different views on ethics: ethical utilitarianism and ethical formalism Ethical utilitarianism is based on the works of Jeremy Bentham

Ethical correctness is judged by consequences, and is guided by the “greatest happiness principles.”

Actions that produce good outcomes are ethical. Actions that produce pain or suffering are unethical. Ethical judgment is essentially that of cost/benefit analysis. If the positive outcomes outweigh the negative consequences, then the

action is deemed ethical. Ethical formalism is based on the works of Emanuel Kant

Kant believed that we could know what is ethical before we know the consequences.

Ethics are based on laws, principles, or widely held beliefs or values. Actions that violate these are considered unethical. Formalism emphasizes universality and consistency in the application of

rules.


Organizational Goals (ethics): Ethics play a major role in setting and measuring goals Ethics will determine what are the core values of the

organization. Ethics will provide a strong impetus for certain types of

goals and eliminate others from consideration Organizations often use a form of ethical formalism,

whereby they use a common set of beliefs, rules, and principles to guide the action of their organizations

The achievement of goals should be done in such a way as to be consistent with the accepted principles

An organization might also apply utilitarian ethics, whereby they judge their actions, after the fact, by whether the consequences are positive or negative

www.bradyservices.com

http://www.bradyservices.com/


Other factors to bear in mind related to goals include: Who are the beneficiaries of the organization What is the relevant time frame for specific goals What is the relative importance of specific goals

Organizations have multiple constituents or beneficiaries Primary Secondary Examples:

Justice system (judges, criminals, victims) Private corporation (shareholders, clients, workers)

Because an organization has multiple constituencies, they will have multiple goals, some of which may be in conflict. Employees Owners and Shareholders Suppliers, Members of the communities served by the firma

Patients, students, transport commuters, etc.


Managing Goals and Objectives (conflict): In a perfectly rational world, managing diverse goals

would not be a significant problem Goal setting is often a political process. Coalitions form within the organization. Stakeholders might have goals that are different from

internal goals. What seems rational to one member or group may

appear to be misguided, wrong, or irrational to another.

Individuals or groups operate with hidden goals or agendas.


Managing Goals and Objectives (conflict): Because of the previously cited problems, organizations have

explicit ways of establishing goals. But to fully understand how goals are set, we need to examine the formal process the political process

Managing goals is frequently a process of managing conflict pursuing negotiations bargaining

Compromises may result in some winners and some losers—a win-lose scenario all parties are better off and a win-win situation develops Classic problem: employees prefer to have a very high rate of pay,

but this may frustrate the organization’s ability to remain competitive, or it may compromise stockholders’ targeted return rates


Managing Goals and Objectives (conflict): Conflict is a fact of organizational life, so it can never

be eliminated entirely The organization needs to recognize conflict

In the formal level by establishing procedures and mechanisms for goal

negotiation and bargaining In the informal level (greatly influenced by culture)

Goal conflict at informal level can reveal what is really going on

Should provide feedback to managers on whether established goals are realistic and workable

This information needs to be taken into account in the formal goal-setting process


Managing Goals and Objectives (conflict): Satisficing

Goals are not always fully met Managers may be satisfied with less than perfect or

complete goal achievement Two additional techniques are available for managing

multiple and potentially conflicting goals. Setting priorities

means that some goals will take priority over others Sequencing of goals

assumes that all goals will eventfully be met, but some will be met before others


“The concept of goals is among the most important and most controversial concepts to be confronted in the study of organizations.”

Hodge’s key points regarding organizational goals: 1) Without goals, organizations wander aimlessly and cannot

survive long. 2) Goals provide a road map or direction. The very definition

of an organization delineates the importance of goals. Goals establish a future direction, provide legitimacy, and provide standards.

3) The goals an organization selects will determine the markets it serves, how it will service those markets, where it will operate, the structure it will use, and so forth.

4) Goals also provide a basis for measurement and a way to judge effectiveness. Change and adjustment needs to be based on feedback regarding the accomplishment of goals.

EXAMPLES OF GOAL DEFINITION

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http://jp.pg.com/ (Japan)http://www.pg.com/pl_PL/ (Poland)http://www.pg.com.ua/

(Ukraine)

http://www.procterundgamble.de/

http://www.procterundgamble.de/

http://jp.pg.com/

http://www.pg.com/pl_PL/

http://www.pg.com/pl_PL/

http://www.pg.com.ua/

http://www.pg.com.ua/

ORGANIZATIONAL EFFECTIVENESS

Goals and effectiveness are related but the term effectiveness is unclear Whether an organization is effective or not may depend on who is asking the question Internal effectiveness

Efficiency: it maximizes outputs with respect to the costs of inputs and the costs of the transformation of those inputs into outputs

Emotional or affective health is the concern of the Human Relations School: workers are happy and satisfied

The goal approach Defines effectiveness in terms of “if,” and “how well,” an organization accomplishes its goals. For this to work, goals must be measurable. There are at least 3 problems:

If the goals are ill defined, complex or inappropriate, the mere attainment of these goals does not guarantee effectiveness.

If the goals do not represent the diverse interests of important stakeholders, the organization may find itself in trouble.

Many times the meeting of one goal means that a conflicting goal cannot be achieved.

Resource acquisition Focus on the organization’s ability to acquire adequate resources from the external environment to

meet its objectives (the basis of the systems resources model). While acquiring resources is necessary, this alone does not give us a comprehensive picture of

organizational effectiveness Performance from the stakeholders’ perspective

According to this perspective, organizations are effective to the extent that key groups are least minimally satisfied

Because stakeholders have conflicts, this approach forces the difficult issue of whose claims are the most important


Contradictions Model This model argues that the idea of trying to characterize a whole

organization as totally effective is problematic. Four central assumptions drive the model.

1) Organizations face complex environments that place multiple and conflicting demands and constraints on them. It may not be possible to meet all of these conditions.

2) Organizations have multiple conflicting goals. It is impossible to maximize achievement of all goals.

3) Organizations face multiple internal and external stakeholders, and it may be impossible to meet all of their conflicting demands.

4) Organizations must manage multiple and conflicting time demands. There may be a tradeoff between satisfying short-term and long-term demands.

This model does not suggest one best way of assessing effectiveness; rather, it makes us cognizant of these potential contradictions.


Competing Values Model No single measure of effectiveness is, by itself, satisfactory. This approach relies on a two dimensional approach depending on the main focus

of the organization is placed internal vs. external control vs. flexibility

The combination of these two-dimensions yields four distinct approaches. Human Relations Model

Internally focused and desire flexibility (Team culture collaboration “do it together”)

Cohesion, morale, mutual support, human resource development Open Systems Model

Externally oriented and flexible (Entrepreneurial culture innovation “do it first”) Flexibility and creativity, control of resources, responsive to environmental changes

Internal Process Model Internally focused and control-oriented (Hierarchical culture control “do it

right”) Clear lines of authority, stability, predictability

Rational Goal Model Externally focused and flexible (Rational culture competition “do it fast”) Clarity of tasks, efficiency, measurable outcomes, predictability


There is not one best approach to effectiveness; we must determine why we want to measure effectiveness the appropriate time frame apply the proper model to the type of organization in

question


Balance Scorecard In the 1990’s, a variety of approaches to effectiveness have

emerged that recognize the multidimensional nature of performance

Many of these approaches are direct products of the TQM movement

Robert Kaplan and David Norton have developed a balanced scorecard approach.

To be successful, a firm must succeed in financial performance internal operational performance customer performance innovation and learning performance

A good balanced scorecard approach must contain both leading and lagging measures


Factors conditioning organizational structure Size

Peter Blau Richard Schoennher

Technology Joanne Woodward Charles Perrow James Thompson

Environment Systems Theories

Culture Geert Hofstede Schein

Leadership and governance Hersey and Blanchard

Strategic design Chandler

ORGANIZATIONAL SIZE

Service and manufacturing companies often use different measures and definitions of size: 1) Financial and market measures, such as asset

value, revenues, or market share. 2) Concentration levels, such as the percent of

business for the top three to five businesses. automakers vs pizzerias

3) Number of markets that an organization serves, or the number of products they offer. Markets can include both domestic and foreign locations.

4) The number of employees working for the organization. largely the result of the technology and industry

ORGANIZATIONAL SIZE

Definitions of size (examples):How to measure the size of a University?

1) The total number of students. 2) The percent of total students in the country/region/state who attend a

particular University. 3) If it is a private university—the percent of the target market who

attend. 4) For a research university, the number of dollars received in contracts

and grants, and the number of articles published.A private company?

Nº of workers? Nº of clients?A hospital?

Nº of beds? Nº of doctors?An NGO?

Nº of volunteers? Hired professionals? People served?

ORGANIZATIONAL SIZE

Organizational growth:Auto repair workshop: the effects of growth

(and success) can be seen on task differentiation:

Hiring mechanics specialized on different areas increasing support functions:

Hiring bookkeepers, marketing experts, accountants

ORGANIZATIONAL SIZE

Organizations that grow in size Become more formalized and complex Formalization and complexity are the direct result of

the need to divide the increased work in the organization the desire to achieve greater specialization

Growth in rules and regulations More job specialization More administrative layers

SIZE AND COMPLEXITY

Com

plexity

Size (nº members)

Y´X´

YX

High

Low

300 800 2300 2800

“Complexity increases along with size but at a decreasing rate”(P. Blau)

ORGANIZATIONAL SIZE

Differences between large and small organizations: Number of employees, size of sales and revenues, market

share, and other measures related to size will be larger in the larger organization.

Large organizations will tend to be more formalized than small organizations; they will have more layers of management, more rules and procedures.

More complex organizational charts in the larger organization.

Larger companies will tend to have broader product and service lines, perhaps organized into divisions, whereas, smaller organizations will not.

Larger organizations will tend to have power over suppliers, and maybe even buyers. Smaller organizations will not.

HUMOR

http://www.glasbergen.com/business-computer-cartoons/




ORGANIZATIONAL SIZE

Organizational Birth: Primary activity is to invent a new product or service,

create a new technology, or improve an existing product or service.

The organization is not necessarily officially created (might be an adhocracy).

It is organic, and the entrepreneur is firmly in control. The critical task in this first stage is survival; between 60

and 75 percent fail in the first six years because of the liability of newness.

At some point, outside talent needs to be brought in to create some structure and permanence

Often the transition between the entrepreneur and professional managers is very difficult and rocky

ORGANIZATIONAL SIZE

Many small businesses are started by entrepreneurs who understand a craft, a process, technology, or a market niche from a technical viewpoint.

The entrepreneur may be a great cook, mechanic, computer programmer, salesperson, and so forth.

As the business grows, he or she needs help in administrative support areas where he or she either has little interest and/or significantly fewer skills.

Even though the entrepreneur may not have these skills, it is still difficult to give up control of these areas, and that often becomes a major stumbling block for new firms as they start to move through the life cycle

ORGANIZATIONAL SIZE

Emergent structure: If the new venture solves the financial, market, and

managerial problems of its birth, it must then provide leadership, establish clear goals, differentiate departments, divide labor, delegate responsibilities, develop a hierarchy.

This stage is referred to as a collectivity stage The critical task, at this point, is to balance

the need for a formal structure with the need to continue to grow and adapt to external

conditions

ORGANIZATIONAL SIZE

The formal organization: Over time, but at a slower pace, the organization moves

towards more formalized structure and bureaucracy. There is now a time of greater stability and predictability.

The formalization stage is marked by greater reliance

on traditional bureaucratic mechanisms of control. The organization may expand into more markets and

geographical areas. It may need more complex structures, such as divisions. Organizations must balance

the need for control and structure with the need to remain flexible and innovative.

ORGANIZATIONAL SIZE

Dinosaurs and Turnarounds: Once-successful organizations sometimes reach the point at which

bureaucratic controls no longer work. To deal with increasing complexity, managers write more and more

complex rules that inhibit control and communication rather than enhancing it.

This stage is called the elaboration stage because of the need to elaborate on bureaucratic mechanisms.

Often, organizations will utilize teamwork and self-management of shared values and norms to replace bureaucratic rules and procedures.

These changes are labeled in a variety of ways, including re-inventing, downsizing, restructuring, re-engineering. 1) Restructuring refers to re-configuring organizational units or departs. 2) Re-engineering refers to re-configuring the work process. 3) Rethinking refers to reevaluation of the organization—its identity, its

purpose, and its methods and capabilities.

ORGANIZATIONAL SIZE

Organizational decline The organization’s inability or reduced capacity to cope with

this environment. Organizations generally do not decline rapidly; rather, it happens in

a slow, agonizing retreat described as a “downward spiral.” Decline is hard to reverse because, in many cases, the decline

exacerbates the difficulty of obtaining resources. Decline has five distinct stages:

1) Blinded—failure to detect environmental pressure. 2) Inaction—failure to decide on corrective action, misinterpretation of

information, noticeable decline. 3) Faulty action—faulty decision and/or faulty implementation of

solutions. 4) Crisis—last chance for reversal, given a favorable environment and a

slow decline. 5) Dissolution—given a hostile environment—quick demise; given a

favorable environment—slow decline.

ORGANIZATIONAL SIZE

Should organizations grow?Growth may be pursued

to gain power over suppliers, buyers, regulators to profit from economies of scale

It may have, however, dysfunctional consequences Diminishing returns Need for adaptation Cultural change

In recent years, because of technological and environmental changes, smaller organizations are beginning to be able to achieve economies of scale that were formerly reserved for large organizations

ORGANIZATIONAL SIZE

The advantages of small size: 1) Downsizing. As organizations grow, they tend to increase

administrative structures and develop more specialization. Downsizing often involves eliminating some layers and, perhaps, broadening job descriptions and responsibilities.

2) Redesign: redesigning a formerly bureaucratic structure into a flatter, more organic organization with fewer layers of hierarchy. It may also mean elimination of certain divisions. This could result in selling off or spinning off divisions

3) Virtual organizations: subcontracting out much of their work in order to achieve the advantages of smaller size and flexibility. They sometimes do this to such an extent that they become a shell or an umbrella organization. www.nike.com

4) Coordination and control: changing the culture. To make a large organization behave like a smaller organization, managers often have to change the underlying corporate culture. Large companies can emphasize small firm values, such as entrepreneurship, risk-taking, closeness to customers, decentralized authority, individual responsibility, innovativeness, responsiveness, etc.

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ORGANIZATIONAL SIZE

Is growth good?It depends on how do we define it!!!

Advantages of size Need for downsizing

ORGANIZATIONAL TECHNOLOGY

Technology is a major factor in the contingency model of organizations

Technology refers to the knowledge, tools, machines, information, skills, and materials used to complete tasks within organizations, as well as to the nature of the outputs of the organization

Popular meanings related to “high tech” or “low tech” are too limiting.

Two questions must be answered to guide our thinking: 1) How does the organization get its work done? 2) How can management control that technology?


Technology: The technology used in an organization causes an

organization to structure or organize a certain way and also affects individual conduct of members

Efficiencies are gained, there are also costs in training, human resource dislocations

Three levels of technology: 1) Core Technology—used to characterize the entire

organization; 2) Work unit or department technology; 3) Interdependent relationships that result from the flow

of work between work units.


TechnologyJoan Woodward’s 1950's study of British manufacturing

companies. She developed a three-category scheme for classifying organization-level technology: 1) Unit or Small Batch

(Hull & Collins: traditional Skilled craftsmen or technological skilled programmers and automatization)

2) Mass or Large Batch 3) Continuous Process or Flow.

Woodward’s work also identified a contingency relationship between technology and structure. 1) The unit or small batch needed an organic structure. 2) The mass or large batch needed a mechanistic/bureaucratic

structure. 3) The continuous process or flow needed an organic structure.


Technology: Special attention needs to be focused on service as a core

technology. Services tend to be intangible. Examples include teaching, medical services, legal services, banking,

etc. Differences between services and manufacturing can be seen by

examining the extreme or prototypical cases on five dimensions: 1) Tangibility—which refers to the concreteness or abstractness of

output. Services tend to be more intangible. 2) Standardization—services tend to be less standardized and more

tailored to customer needs. 3) Customer participation—services directly involve the customer in

the process. 4) Timing—services require simultaneous production and consumption. 5) Labor intensity—services, in general, tend to be more labor

intensive.


Managing Service Technology: Managing service technology is somewhat different from

managing manufacturing technology. The Ashton Group developed a scale for classifying technology

based on three factors: automation of equipment; workflow rigidity; and specificity of evaluation.

These are combined into a workflow integration scale. High levels of automation, greater rigidity of work, and more

precise measures of operations characterize organizations with technologies that scored high on work integration.

Low scores indicate the opposite. Services tend to score low on workflow integration,

thus service organizations should be managed with organic organizational structures that include low formalization, low specialization, and decentralization.


Technology This framework was developed by Perrow, Technology is defined on the dimensions of

exceptions/variety analyzability

High-task variety jobs have many exceptions to standard operating procedures.

Low variety technologies permit little flexibility, High variety permits greater flexibility. Examples:

jobs at pizza carryout are low variety; at a marketing department, high variety.


Technology The second dimension is analyzability. Tasks characterized by readily available information,

that is easily obtained, are high analyzability tasks. Those characterized by unavailable information or

information difficult to obtain are designated as low-analyzability tasks.

High-analyzability tasks can usually be standardized or programmed (even the resolution of problems).

Low-analyzability tasks are uncertain, ambiguous, and complex. Problem solvers must rely on judgment, instincts,

intuition, and experience.


TechnologyBased on these two dimensions, Perrow

developed four categories: 1) Routine—low variety/high analyzability; 2) Engineering—high variety/high analyzability; 3) Craft—low variety/low analyzability; 4) Non-routine—high variety/low analyzability.

ESeC

CHARLES PERROW’S MODEL

Analyzability

Problem

solving protocols

Undefined

Well-defined

Craft(Artisanship: glass)

Routine(Steel)

Non-routine(aerospace)

Engineering(Heavy machinery)

Routine

Non-routine

Few exceptions Many exceptionsVariability/diversity of tasks

Adapted from Perrow


TechnologyJames Thompson developed a technology framework

(which has been elaborated on by others) that focuses on the nature of interdependence and coordination among departments. There are three essentials questions about interdependence that must be asked: 1) How much does one unit or department depend on another

to complete work? 2) What is the nature of that interdependence? 3) How can we achieve the necessary coordination?

Mediating Technology (pooled interdependence)Long-linked technologies Intensive technology (reciprocal interdependence)


Task Design and Technology: Fitting People to Jobs: The Traditional

Industrial Ethic. Jobs are regarded as nearly inflexible, as determined

by the technology, and people are seen as being flexible enough to fit the job.

People can be selected and trained. This approach is conducive to job specialization and

for assembly-line operations. In many cases, human beings are not infinitely

malleable. People may not be able to adapt, and this can cause

disruption


Task Design and Technology:Fitting Jobs to People: The Task of the

Postindustrial Society. Here the capabilities of the available labor force take precedence

over the technology. The skills, abilities, and aspirations of the labor force are analyzed,

and a technology is adopted that results in jobs that are consistent with the available skills and abilities.

This view has led to job redesign and job enrichment efforts. The idea is to create more challenging and motivating jobs. However, some workers may prefer highly structured jobs with

little responsibility. Thus, these approaches have not solved all of the problems, and the

sociotechnical approach suggests that the set of relationships between individuals, organizations, tasks, and technology may be more complex


Task Design and Technology: Sociotechnical Systems: A Middle Ground.

Here we combine both approaches outlined above. This approach explicitly considers both people and technology. The whole person is considered, and the range of factors that

impinge on the human-machine interface is explicitly considered. This approach assumes that technology cannot be fully understood

apart from the relationship to people. The design of tools, equipment, and process must consider human

aspects, including strength, durability, range of motion, and the ability to socially interact in the conduct of one’s job.

Also, the design must take into account the degree to which humans can adapt through learning, conditioning, and experience

THE ENVIRONMENT

The EnvironmentManagers should formulate strategies and

conduct the organization in such a way so as to maximize the organization’s fit with the environment. Three associated tasks are: 1. Knowing the environment 2. Adapting or responding to the environment 3. Changing the environment

THE ENVIRONMENT

The EnvironmentUncertainty can come from three aspects of the

environment 1. Complexity

number of sectors or elements of the environment relevant to the organization.

2. Change Since an organization has limited capacity to monitor the environment,

increasing levels of change and complexity cause uncertainty. 3. Munificence (means there are abundant resources)

When resources become scarce, they create uncertainty for an organization because it becomes more dependent on others for the vital resources it needs.

This dependence can also occur when there are large power differences between organizations, such as between Wal-Mart and its suppliers.

THE ENVIRONMENT

Stable

Dynamic

ComplexSimple

Abundance

ScarcityAdapted fromS. Robbins

ORGANIZATIONAL CULTURE

Organizational Culture:Organization culture vs general societal culture Two levels of organizational culture:

1) observable traces or indicators, such as architecture, artwork, dress, language, stories, myths, behavior, formal rules, rituals, ceremonies, and appearances; and

2) unobservable forces present in the organization, such as norms, assumptions, ideology, values, and shared perceptions.

Culture is the pattern or configuration of these two levels of characteristics that orients or directs organizational members to manage problems and their surroundings

Weber’s Trains (self-interest) and Railroads (values)


Five Elements of Corporative Culture: Values

Desirable Desired

Rites (formal and informal) Protocol Company parties / CEO public speech

Symbols Company logos

Heroes Founding father’s of the organization

Norms Dressing codes Schedules (time at office)


Six Dimensions of Corporative Culture Employee oriented vs task oriented

Taylorism vs Human Relations School Process oriented vs goal (result) oriented

Flexibility/autonomy vs protocols and rules Corporatism vs professionalism

Level of education Self-identification with corporate values

Open system vs closed system Acceptance of new members

Loose control vs strict control Regarding expenditures and use of means

Normativism vs pragmatism Client oriented vs norm oriented (Public/Bureaucratic)


Geert Hofstede and William OuchiOrganizational cultures are influenced greatly

by the national cultureHofstede has proposed five dimensions

1) Individualism-Collectivism 2) Uncertainty Avoidance 3) Power Distance

Importance of hierarchy 4) Masculinity-Femininity

Assertiveness Salary vs working environment

5) Time Orientation (Confusion Dynamism) Short term vs long term goals


Organizational CultureFour Views Based on Four-Leading Scholars

Schein’s Stages of Culture Formation

Scholz’s Topology of Culture Formation

Fombrun Levels of Culture

Louis Multiple Cultures


Schein’s Stages of Culture Formation Leader characteristics, such as age, training,

background, gender, and experience, are important in the formation of culture

Confrontation of intimacy, role differentiation peer relationship issues

Creativity and stability issues must be confronted. Much of the early success, based on innovation and

creativity, comes into conflict Needs for more predictability and stability

The organization matures and has to confront growth and survival issues


Scholz’s Topology of Culture Formation Culture develops along three dimensions 1) Evolutionary dimension.

Not all organizations follow a sequence, nor is any one stage better than another. The stages are: the stable stage, the reactive stage, the anticipating stage, the exploring stage,

and the creative stage. 2)Internal dimension.

The internal conditions within the organization affect the culture. For example, an organization that uses standardized production processes would create

conditions for a culture that is constant and process oriented. The result is a consistency culture that places a high value on standard procedures and consistency outputs, as illustrated by McDonald’s.

On the other hand, a professional organization with employees possessing varied skills and high levels of professional expertise is likely to foster development of a culture that emphasizes individualism and professionalism. This type of culture is referred to as a clan or involvement culture.

3) External dimension. The external environment will impact the development of culture. A complex and dynamic environment is likely to develop a culture that values flexibility,

innovativeness, and risk taking. The external focus can be manifested in two different ways: as an adaptability culture based

on innovations and/or attempts to change in response to the environment, or as a mission culture with a focus on meeting customer needs.

Conversely, an organization facing a simple and stable environment is likely to adopt a culture that features conservatism, risk aversion, and bureaucracy.


Fombrun—Levels of Culture 1) Societal level.

Culture represents the values, attitudes, and meanings that members bring to the organization.

The educational system, political system, economic conditions, and social structure of the larger society may influence this.

The organization operates within this general cultural atmosphere and is influenced by it.

2) Industrial level. There are some similarities and differences of culture between

industries. The majority of organizations within an industry may espouse certain

dominant values. (the banking industry vs Silicon Valley). 3) Organizational level.

The organizational level must be understood in terms of both the individual organization and as a function of the larger society and industry in which the organization finds itself.


Louis—Multiple Cultures Louis suggests that organizations are not simply a

single monolithic culture. Large organizations often develop different cultures at different sites or loci within the organization. Subcultures can develop among different levels in the organization or within different divisions or departments

LEADERSHIP AND GOVERNANCE

Hersey, P. and Blanchard, K. H. “Management of Organizational Behavior” (1972)There is no single "best" style of leadershipEffective leadership depends on

the person or group that is being influenced, the task, job or function to be accomplished

A good leader develops “the competence and commitment of their people so they’re self-motivated rather than dependent on others for direction and guidance” Four combinations of competence and commitment make up

the development level Four types of leadership styles

HERSEY & BLANCHARD MODEL


Governance and controlTheoretical background

Methodological approaches (Ficha 7) Holistic: individual behavior is result of structures; focus

on Explain structures and their change Individualistic methodology: structures are created by

individuals acting rationally; focus on explaining individual behavior Rational choice theories

• Agency theories (Jensen & Meckling 1976)• Transaction cost theories (Williamson 1981)


Governance and control Agency theory is concerned about the relationship between

principals (owners) and agents (employees). Agency theory assumes that agents will act in opportunistic ways; therefore,

appropriate contracts and monitoring is necessary to reduce agency costs. Organizations are seen as a series of contractual relationships between

principals and agents. Agency costs are the costs associated with monitoring agent behavior and

enforcing contracts. Transaction cost economics focuses on how to maximize

efficiency of transactions by determining the proper boundaries of the organization. That is, what should be done internally vs. what should be contracted for on the outside. A transaction is defined as the exchange of goods and services among groups

within the organization or across organizational boundaries. A transaction cost is an explicit fee or cost associated with a transaction, or an

implicit cost of monitoring and controlling a transaction. Develop professionalism and/or externalize services which are not at the core

activity of the organization to reduce costs


Organizational economists use the term “cost” to refer to a wide range of problems that owners must remedy in order to create an organization that allows for wealth maximization. 1) Bounded rationality.

Owners and managers are unable to process all of the available information, and face uncertainty in transactions or contract relationships. Because of this, employees, suppliers, and contractors may be in a position to take advantage of the owner. Therefore, costs are incurred by the owner in gathering and processing information in order to reduce these costs.

2) Opportunism. Principals and agents often have different goals and will seek their own self-interest. The theory states that

agents will not always fulfill their obligations because they prefer leisure to work and are subject to shirking. This problem is referred to as moral hazard—workers will not put forth the agreed-upon effort.

3) Information Asymmetry. Information related to exchanges or transactions is not evenly distributed. One participant is likely to have more

than another. Agency theory has used this concept to explain opportunism and moral hazard. It assumes that agents have certain information about their own behavior and shortcomings that is not available to the principal, or a contractor may have information that is not available to the principal. In order to reduce this asymmetry in information, costs are incurred in gathering additional information and using various governance mechanisms. Information asymmetry, in part, is what motivates key decisions as to which tasks should be conducted within or outside the organization.

4) Asset specificity. Assets that are very specific and fixed can reduce the flexibility of an organization. That is, it may be hard to

transfer them to another purpose or to sell them at a reasonable level. The decision to invest or not to invest in specific assets has implications on how the organization governs its relationship with employees and other firms.

5) Small Numbers. An organization may incur a transaction problem when it is faced with only a small number of potential trading

partners (an oligopoly). The major problem with this situation is that an organization can more easily be exploited by a trading partner.


Mechanisms for control: Owners try to protect their interests by

Creating either behavioral contracts or outcome-based contracts Pay-for-performance at the CEO level Markets as disciplinary forces

The stock market, labor market, and debt market, can provide feedback about the company’s performance.

The price of the company’s stock can result in managerial rewards or punishments Bureaucratic control

1) Comprehensive job descriptions and performance appraisal systems. 2) Statistical or numerical control systems. 3) Budgeting and accounting systems. 4) Work rules or procedural guidelines.

Clan control Bureaucracies can become inefficient Clan control utilizes the shared norms, values, and beliefs of organizational

members to ensure that people pursue common goals and objectives. It doesn’t eliminate all transaction costs but it does reduce problems of

opportunism

INTRODUCTION TYPES OF ORGANIZATIONS: ETZIONI CLASSICAL THEORIES CONFLICT AND POWER THEORIES HUMAN...

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