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Midterm Review BU398.docx

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Shawn Komar

Organizations & Organizational Theory Current Challenges -Globalization -Ethics & Social responsibility -Speed of response -Digital workplace -Diversity What is an Organization? Definition -Organizations are social entities that are goal directed, designed as deliberately structured and coordinated activity systems and linked to the external environment -An organization is a collection of people working toward a common goal -Organizations comprise people and their relationships with one another -An organization exists when people interact with one another to perform essential functions that help attain goals -An organization cannot exist without interacting with customers, suppliers, competitors, and other elements of the external environment -Ex. Government, Wal-mart, WWF, Schools, etc. Importance of Organizations -Organizations exist to do the following: 1. Bring together resources to achieve desired goals and outcomes 2. Produce goods and services efficiently 3. Facilitate innovation 4. Use modern manufacturing and information technologies 5. Adapt to and influence a changing environment 6. Create value for owners, customers, and employees 7. Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees Why Study Organizational theory? -Organizational theory – ideas about what organizations are and how they work -Better understanding of organizations -Better organizational decision making -Design better organizational systems -Design better organizations Organizational Systems -A closed system would not depend on its environment; it would be autonomous, enclosed, predictable and sealed off from the outside world -Open system: Must interact with (and adapt to) environment -System – a set of interacting elements that acquires inputs from the environment, transforms them, and discharges outputs to the external environment -Inputs to an organizational system include raw materials and other physical resources, employees, information, and financial resources -Outputs include specific products and services for customers and clients -These subsystems perform the specific functions required for organizational survival -Boundary subsystems are responsible for exchanges with the external environment – activities such as purchasing supplies or marketing products -Problem – One way, we will eventually run out of inputs Mintzberg’s Organizational Configuration Technical Core -Actually produces the product and service outputs of the organization -Elimination of this core would cause business to fail the slowest Management -Provides direction, strategy goals and policies for the entire organization or major divisions -Middle management is responsible for implementation, and coordination at the departmental level Technical Support -Scans the environment for problems, opportunities, and technological developments Administrative Support -Responsible for the smooth operation and upkeep of the organization, including its physical and human elements Design Flaws of Organizations – Henry Mintzberg -Too focused on issues of leadership -Private sector is driving public and social sector -Power over society with advertising -Imbalance in society -Stock market is dysfunctional and too influential Dimensions of Organizational Design -These dimensions describe organizations -Structural dimensions: Describe the internal characteristics of an organization -Contextual dimensions: Characterize the whole organization and elements of the environment -Structural and contextual dimensions can tell us a lot about an organization and about differences among organizations Structural Dimensions 1. Formalization – written documentation 2. Specialization – job scope 3. Hierarchy of authority – reporting relationships 4. Centralization – location of authority for decisions 5. Professionalism – education/training 6. Personnel ratios – number of employees in particular classifications -If you ignore one of these, your organization will suffer Contextual Dimensions 1. The organization’s goals and strategies – what sets it apart from other companies 2. The environment – the industry, government, customers, suppliers and financial community 3. Size –number of people in the organization 4. An organization’s culture –key values, beliefs, understandings, and norms 5. Technology Effectiveness vs. Efficiency -Effectiveness – the degree to which an organization realizes stakeholder’s goals -Efficiency – the amount of resources used to produce a unit of output. The ratio of inputs to outputs -Have to consider both or else you might fail -Stakeholder approach - Have to consider stakeholder goals when deciding if a goal is efficient/effective or not -Managers adjust structural and contextual dimensions and organizational subsystems to most efficiently and effectively transform inputs into outputs and provide value -Many organizations are using new technology to improve efficiency and effectiveness -The assessment of multiple stakeholder groups is an accurate reflection of organizational effectiveness -Managers strive to at least minimally satisfy the interests of all stakeholders The Evolution of Organizational Theory and Design -Theory – Idea about what something is and how it works -Key elements of a theory: -Generalizability (chunking) -Explanation -Prediction -Meso theory – concerns the integration on both micro and macro levels of analysis -Contingency- a theory meaning one thing depends on other things Contemporary Organizational Design -Chaos theory – relationships in complex, adaptive system are nonlinear and made up of numerous interconnections and choices that create unintended effects and make the universe unpredictable -The world is full of uncertainty, characterized by surprise, rapid change, and confusion -Many organizations are shifting from strict vertical hierarchies to flexible, decentralized structures that emphasize horizontal collaboration, widespread information sharing and adaptability Efficiency Performance vs. Learning Organization -Learning organization – promotes communication and collaboration so that everyone is engaged in identifying and solving problems, enabling the organization to continuously experiment, improve, and increase its capability Efficiency Learning -Vertical, functional groupings -Structured around horizontal workflows -Tasks are routine, narrow -Empowered roles – employees are encouraged -Formal control systems to manage to deal with problems on their own complicated information -Widespread sharing of information/open -Top management strategy is competitive channels -Culture may become rigid from being -Collaborative strategy based on relationships successful in a stable environment -Culture adaptive to external environment encourages openness, equality, continuous performance -Managers today are involved in a struggle as they attempt to change their companies into learning organizations Strategy, Organizational Design, and Effectiveness The Role of Strategic Direction in Organizational Design -The primary responsibility of top management is to determine an organization’s goals, strategy, and direction, therein adapting the organization to a changing environment -The direction setting process typically begins with an assessment of the opportunities and threats in the external environment, including the amount of change uncertainty, and resource availability, -Top managers also assess internal strengths and weaknesses to define the company’s distinctive competence compared with other firms in the industry -The next step is to define the overall mission and official goals based on the correct fit between external opportunities and internal strengths -Organizational design is used to implement goals and strategy and also determines organization success Organizational Purpose -Organizations are created and continued in order to accomplish something -This purpose may be referred to as the overall goal, or mission -The purpose of business is whatever people decide it is Mission/Official Goals -Mission – the overall goal for an organization – what the organization is trying to achieve -Official goals – the formally stated definition of business scope and outcomes the organization is trying to achieve -The mission statement communicates to current and prospective employees, customers, investors, suppliers, and competitors what the organization stands for and what it is trying to achieve -Describe a value system for the organization -Want it to be: -Visually appealing -Simple -Emotionally engaging -Easy to remember -Gets the point across Operative Goals -Operative goals – explains what the organization is actually trying to do -Operative goals can provide employees with a sense of direction -Pertains to the primary tasks an organization must perform -Performance measures: -Profitability reflects the overall performance -Growth pertains to increases in sales/profit over time -Volume pertains to total sales or amount of products delivered -Resource measures: -Acquisition of material and financial resources -Market measures: -Market share/market standing -Employee development: -Training, promotion, safety and growth of employees (managers and workers) -Innovation and change: -Innovation refers to adapting to unexpected changes in the environment -Productivity: -Inputs/Outputs -Successful organizations use a carefully balanced set of operative goals -Makes sure goals are SMART: Specific, Measurable, Attainable, Relevant, and Time oriented Informal Goals -We don’t normally know what they are -They are the norm within the organization -We are driven by informal goals -Responsible for most of what we do in a day Aligning Goals 1. Official goals – Infuse official goals with values and ideals 2. Operative goals – Make sure all operative goals are consistent with official goals 3. Informal goals -Official goals should eventually end up as a norm – informal goals -Conscious: -Logical (facts, arguments) -Learns quickly -Processes slowly/effort fully -Prediction -Demanding -Non-conscious: -Associative (emotions, ideals) -Learns slowly -Processes quickly/effortlessly -Doesn’t care why things are related A Framework for Selecting Strategy and Design Strategy – plan for interacting with the competitive environment to achieve organizational goals -Goals define where the organization wants to go and strategies define how it will get there -Two models for formulating strategies: Porter model of competitive strategies and Miles and Snow’s strategy typology -Ex. Pepsi - “When running a company, you have to focus on all stakeholders goals, just like you can’t focus on today, you also have to worry about tomorrow” -Choice of strategy affects internal organization characteristics Porter’s Competitive Strategies Competitive Competitiv Strategy Example scope e (market) advantage Broad Low cost Low-cost leadership Wal-mart Broad Uniqueness Differentiation BullFrog Power Narrow Low cost Focused low-cost WestJet leadership Narrow Uniqueness Focused differentiation Four Seasons -Three competitive strategies: low-cost leadership, differentiation, and focus -Focus strategy – organization concentrates on a specific market or buyer group -To use this model, managers evaluate two factors, competitive advantage and competitive scope Differentiation -Differentiation strategy – organizations attempt to distinguish their product from others in the industry -Usually targets customers who are not particularly concerned with price, so it can be quite profitable -Ex. Roots clothing -Creates loyal customers which reduces threats Low-Cost Leadership -Tries to increase market share by emphasizing low cost compared to competitors -Means a company can undercut competitor’s prices, still offer comparable quality and earn a profit Focus -Organization concentrates on a specific regional market or buyer group -The company will try to achieve either a low-cost advantage or a differentiation advantage within a narrowly defined market Miles and Snow’s Strategy Typology -Based on the idea that managers seek to formulate strategies that will be congruent with the external environment -Prospector Strategy: -Innovate, take risks, seek out new opportunities, and grow -Suited to a dynamic, growing environment where creativity is more important than efficiency -Defender Strategy -Close supervision; little employee empowerment -Seeks to hold onto current customers, but it neither innovates nor seeks to grow -Emphasis on production efficiency, low overhead -Analyzer Strategy -Tries to maintain a stable business while innovating on the periphery -Attempts to balance efficient production for current product lines with the creative development of new product lines -Balances efficiency and learning; tight cost control with flexibility and adaptability -Reactor Strategy -Not really a strategy -No clear organizational approach; design characteristics may shift abruptly depending on current needs Assessing Organizational Effectiveness -Understanding organizational goals and strategies, as well as the concept of fitting design to various contingencies, is a first step toward understanding organizational effectiveness -Organizational goals – represent the reason for an organization’s existence and the outcomes it seeks to achieve -Effectiveness evaluates the extent to which multiple goals – whether official or operative – are attained -Organizational efficiency can be measured as the ratio of inputs to outputs -Triple Bottom Line: -Idea that business, society, and nature interact with one another -Use stakeholder goals as a measure of effectiveness -People, places, profit Contingency Effectiveness Approaches -Contingency approaches to measuring effectiveness focus on different parts of the organization -Pick 1 and stick to it Contingency – Resource-based -Looks at input side of the transformation process -Indicators: -Bargaining position -Understanding of external environment -Use of resources to achieve superior performance -Organization responds to environment -Goal is control of external environment coming in: high quality, cheap Contingency - Internal-Process Approach -Strong HR focus, does not consider the external environment -Indicators: -Culture/climate -Team spirit/teamwork -Confidence/trust in management -Decision making near information sources -Undistorted communication -Conflict resolved in the interest of the organization -Most managers believe that happy, committed, actively involved employees and a positive organizational culture are important measures of effectiveness Contingency - Goal Approach -Based on performance – something measurable -Indicators: -Operative goals (sometimes official goals) -Used in business organizations because output goals can be readily measured Competing-Values Model -Competing-values model – tries to balance a concern with various parts of the organization rather than focusing on one part -Human relations: Internal process approach -Open systems: Resource-based approach -Rational goals: Goal approach -Ex. Coke  rational, Pepsi  Open and human relations -Indicators: -Internal focus reflects a management concern for the well-being and efficiency of employees -External focus represents an emphasis on the well-being of the organization itself -Stability reflects a management value for efficiency and top-down control -Flexibility represents a value for learning and change Measures -Problem: “The measure may distract decision-makers from what’s actually important” -May be an outcome that lies out of measurement that is more important -Ex. Most people get distracted by points and engage in irrational decisions as a result Fundamentals of Organizational Structure Organizational Structure -Three key components in the definition of organizational structure: 1. Formal reporting relationships -Levels of hierarchy – who is whose boss -Span of control – what responsibility people have 2. Grouping -Departments within the organization -Within departments how people are organized 3. -Systems for: -Communication -Coordination -Integration -An organization chart is the visual representation of a whole set of underlying activities and processes Information-Processing Perspective on Structure -“Bottom up” – driven by demands and problems brought in from outside world -Vertical – want to ensure someone is an expert in what they do -Someone has responsibility over how things are supposed to unfold -While vertical linkages are designed primarily for control, horizontal linkages are designed for coordination and collaboration, which usually means reducing control -Decentralized – means decision making authority is pushed down to lower organizational levels Vertical Information Linkages -Vertical linkages – used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization 1. Hierarchical referral (up/down communication) -If a problem arises, it can be referred up to the next level in the hierarchy -When the problem is solved, the answer is passed down to lower levels 2. Rules and plans (for repetitious problems) 3. Vertical information systems -Reports information that gets transmitted upwards – Ex. Periodic reports, written information Horizontal Information Linkages -Horizontal linkage – refers to the amount of communication and coordination horizontally across organizational departments -Help one another out with decision making – introduce systems to coordinate information -Informations system: Ex. Putting Ray’s calendar on outlook for entire office to see
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