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ADMS 4010 - Organizational Theory & Design Textbook Notes

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Administrative Studies
ADMS 4010
Ken Ogata

ADMS 4010 Org’l Theory and Design – Notes Ch 1- Organizations and Organizational Theory Current Challenges of Organizations Globalization- today’s orgs have to feel at home anywhere in the world -companies can locate diff parts of the org wherever it can benefit the bus the most -the growing interdependence means the env for cos is becoming more complex/competitive Ethics and CSR Speed of responsiveness- they must respond quick to env’l changes, org’l crises,shiftng cust expectations -employees have the power needed to keep the co competitive Digital workplace- orgs are becoming enmeshed in electronic networks -the trend toward disintermediation where the middle person is eliminated affects every indstry -org’l leaders must be technologically savvy, but also able to manage a web of r/ns that reaches beyond the physical organization Diversity- average worker is older, more women, visible minorities, immigrants -the diversity is beneficial, but brings challenges of maintaining strong org’l culture, balancing work and family, coping with the conflict by varying cultural styles Organizations are social entities that are goal directed; designed as deliberately structured and coordinated activity systems, and linked to the external environment -orgs comprise people and their relationships with one another Types of Organizations -large multinational corps -for profit -small family owned shops -nonprofit -managers in NPO must market their services to attract not just clients, but also volunteers and donors Importance of Organizations -brings together resources to achieve desired goals and outcomes -produce goods and services efficiently -facilitate innovation -use modern manufacturing and info techs -adapt to and influence a changing environment -create value for owners, customers, employees -accommodate ongoing challenges for diversity, ethics, motivation and coordination of employees Perspectives on Organizations (2) Open Systems Closed system- doesn’t depend on its environment, it is autonomous, sealed off -management would be easy; environment is stable and predictable Open System- must interact with the environment to survive -consumes resources, exports resources -it must consistently adapt to the environment System- interacting elements that acquires inputs from the env, transforms them, discharges outputs to the external environment Outputs would include specific products and services -employee satisfaction, pollution Subsystems- perform the specific functions required for organizational survival -maintains smooth operation and upkeep of an org’s physical and human elements -eg. Management Organizational Configuration *Exhibit 1.3B pg 17* There are five parts Technical Core- people who do the basic work, they actually produce the output -is the primary transformation from inputs to outputs Top Management- provides direction for the entire organization Middle Management- implementation at the departmental level Technical Support- helps the organization change and adapt Administrative Support –smooth operation and upkeep of the organization Dimensions of Organizational Design Structural dimensions give labels to describe the internal characteristics of an organization Contextual dimensions characterize the whole org, including its size, tech, env, goals -can be confusing; reps both the org and environment Structural Dimensions Formalizationthe amount of written documentation in the org -large orgs would be high on formalization -small family owned shops would be low Specializationdegree to which org’l tasks are subdivided into separate jobs Hierarchy of authoritywho reports to whom -when spans of control are narrow, hierarchy is usually taller Centralizationhierarchical level that has authority to make a decision Professionalismlevel of formal education and training of employees Personnel ratiosdeployment of people to various functions/departments Contextual Dimensions Goals and Strategy Environment  all elements outside the boundary of the org -the industry, government, customers, suppliers Sizenumber of people in the org -can be as a whole or for specific divisions Culturean org’s key values, beliefs Technologytools, techniques, actions used to transform inputs into outputs Management and Effectiveness Outcomes -understanding the structural and contextual dimensions of orgs is to design the org in such a way as to achieve high performance and effectiveness Efficiency- amount of resources used to achieve the org’s goals -doing things right Effectiveness- degree to which an org achieves its goals -dong the right thing Stakeholder approach- looks at various org’l stakeholders and what they want from the organization -the satisfaction level of each stakeholder group can be assessed as an indication of the org’s performance/effectiveness -managers strive to at least minimally satisfy the interests of all stakeholders because it’s difficult to satisfy one group without upsetting another -when any one group becomes really dissatisfied, they may withdraw its support Evolution of Organizational Theory and Design Historical Perspectives Scientific management- decisions about orgs and job design should be based on precise study -there are specific procedures for doing each job Administrative principles- the design and functioning of the org as a whole Bureaucratic organization- clearly defined authority and responsibility, formal record keeping, uniform application of standard rules Hawthorne studies showed that positive treatment of employees improved their motivation Contingency- the goodness of fit between an org’s structure and the conditions in their external env -“it depends” -the correct management approach is contingent on the org’s situation Contemporary Organizational Design -leadership was based on solid management principles and was autocratic -communication done through formal memos, letters, reports -managers did all the planning and employees only did the manual labour for compensation Chaos theory- relationships in complex, adaptive systems are nonlinear and made up of numerous interconnections -managers can’t measure, predict the drama inside/outside the org -this theory suggests that orgs should be viewed more as natural systems than as well oiled, predictable machines Learning organization- promotes communications and collaboration so that everyone is engaged in identifying and solving problems -is based on equality, open info, little hierarchy Efficient Performance vs. the Learning Organization Vertical vs. horizontal structurevertical structure creates distance between managers at the top vs. workers in the technical core -boundaries between functions are eliminated in a learning org since teams include members from different functional areas Routine to empowered roles Task- narrowly defined piece of work Role- has discretion and responsibility, and allows the person in charge to achieve an outcome -there are few rules; the person is in charge -the sharing of info keeps the org functioning at an optimum level Formal control systems to shared infothe manager’s job is to find ways to open channels of communication so ideas flow in all directions, to enhance learning capability Competitive to collaborative strategystrategy emerges from partnerships with suppliers, customers, competitors and working with them to learn and adapt Rigid to adaptive cultureadaptation to the external environment Levels of Analysis Def’n- used to characterize organizations *Exhibit 1.7 Pg 32* Individual human being Group of Department Organization (collection of groups) Interorganizational set and community (group of orgs with which a single org interacts) Organizational Behaviour- focuses on the individuals within orgs as the relevant units of analysis -looks at concepts like motivation, leadership style, personality -micro approach; the psychology of organizations Organizational theory- looks at the whole org as a unit -concerned with people aggregated into departments and orgs, differences in structure and behaviour at the org level of analysis -macro approach; the sociology of organizations -is directly relevant to top and middle management, less of lower Meso theory- integration of both macro and micro Ch 3- Fundamentals of Organizational Structure Organizational Structure 3 Components to thisdesignates formal reporting relationships identifies the grouping together of individuals into departments includes the design of systems to ensure effective communication, coordination -first 2 is vertical; last is horizontal -org’l structure is reflected in the org chart -is a visual rep’n of a whole set of activities in an org -shows how they’re interrelated, how each position/dpt fits into the whole Information-Processing Perspective on Structure -the org should be designed to provide both vertical and horizontal info flow -tension may occur between the two though -vertical is designed for control -horizontal is designed for coordination and collaboration; reducing control -orgs can choose whether they want to pursue vertical or horizontal Centralized- decisions are funneled to top levels -emphasis on learning is associated with shared tasks Decentralized- decision making authority is down to lower org’l levels Vertical Information Linkages Vertical linkages- used to coordinate activities between the top and bottom of an org -deisgned mainly for control of the org Diff devices to achieve vertical linkage: hierarchical referral: chain of command; if a problem exists, employees can be referred up to the next level of management rules and plans: rule can be established so employees know how to respond w/o communicating directly with their manager vertical info systems: periodic reports, written info that’s distributed to managers -makes communication more efficient Horizontal Information Linkages Horizontal linkages- coordination among employees to achieve unity of effort -coordination horizontally across org’l departments Alternatives that can improve horizontal coordination: info systems; use of cross-functional info systems can enable managers to routinely exchange info about problems or decisions -some orgs encourage employees to use the co’s info system to build r/ns across the org direct contact: assigning somebody a liaison role, where the person is located in the department but also has the responsibility of communicating and achieving coordination with another dpt task forces: when linkage involves several departments -temp committee composed of reps from each org’l unit affected by a problem full time integrator: doesn’t report to one of the functional dpts being coordinated -is located outside the dpts and ahs the responsibility for coordinating several dpts -spans the boundary between departments and must be able to getr people together, maintain their trust teams: permanent task forces -strong coordination over a long period of time Virtual cross-functional teams: members from various countries Virtual team- made of organizationally/geographically dispersed members linked through advanced info technologies Organizational Design Alternatives Required Work Activities -new departments are created as a way to accomplish tasks -many companies are finding it important to establish departments to take adv of new tech and new business opportunities Reporting Relationships -how these departments should fit together in the org’l hierarchy; the chain of command Departmental Grouping Options Departmental grouping- common supervisor and common resources, are jointly responsible for performance, and tend to identify and collaborate with one another Functional grouping- places together employees who perform similar functions Divisional grouping- people are organized according to what the org produces Multi-focused grouping- org embraces two structural grouping alternatives simultaneously Horizontal grouping- employees are organized around core work processes Virtual network grouping- org is a loosely connected cluster of separate components Functional, Divisional, Geographical Designs Functional Structure Def’n- activities are grouped together by common function from the bottom to the top of the org -all human knowledge for specific activities are consolidated Adv; promotes economy of scale within functions -they can share facilities -promotes in depth skill development of employees Disadv; slow response to environmental changes -decisions may [pile up, so the vertical hierarchy becomes overloaded -employee has a restricted view of overall goals Divisional Structure Def’n- divisions can be organized according to individual products, services, product groups -grouping is based on organizational outputs -vs functional structure can be redesigned into separate product groups, and each group contains all functional departments -promotes flexibility and change because each unit is smaller and can adapt to the needs of its env -decentralizes decision making Adv; coordination across functional departments -works well when ors can no longer be controlled through the vertical hierarchy -suited to fast change in an unstable env -coordination across functions works best in orgs that have multiple products Disadv; ore loses economies of scale -critical mass required for each in depth research is lost, and physical facilities have to be duplicated for each product line Geographical Structure -each geographic unit includes all functions required to produce and market p&s in that region -for MNCs, self contained units are created for diff countries of the world Adv; org can adapt to specific needs of its own region -employees identify with regional goals, rather than national goals -horizontal coordination is emphasized Matrix Structure -can be used when technical expertise and product innovation and change are important for meeting organizational goals -strong form of horizontal linkage -both product division and functional structures are implemented simultaneously -product managers and functional managers have equal authority -employees report to both of them Conditions for the Matrix #1: pressure exists to share scarce resources across product lines #2: balance of power is needed between the functional and product sides of the org, and a dual authority structure is needed #3: env’l domain of the org is both complex and unstable Functional matrix- functional bosses have primary authority -product managers just coordinate product activities Product matrix- product managers have primary authority -functional managers assign technical personnel to projects Strengths and Weaknesses -is best when environmental change is high and when goals reflect a dual requirement -it facilitates communication and coordination; discussion and adaptation to unexpected issues -works best in orgs of moderate size Adv; enables an org to meet dual demands from customers -resources are flexibly allocated -employees can acquire general management skills Disadv; employees experience dual authority -conflict-resolution skills -managers must collaborate with one another Horizontal Structure Def’n- organizes employees around core processes Re-engineering- redesign of a vertical organization Process- organized group of related tasks/activities that work together to transform inputs into outputs -horizontal structure virtually eliminates both vertical hierarchy and old departmental boundaries Characteristics -structure is created around cross-functional core processes rather than tasks, function, geography -self directed teams are the basis of org’l design -process owners have responsibility for each core process -team members are cross trained to perform one another’s jobs -teams have the freedom to think creatively -customers drive the horizontal corporation -culture is of openness, trust, collaboration Strengths and Weaknesses Adv; increase the org’s flexibility and response to changes in customer needs -productivity, speed, efficiency -promotes an emphasis on teamwork -improves quality of life by giving them opportunities to share responsibility Disadv; can harm rather than help unless managers carefully determine which core processes are critical for bringing value to customers -can be time consuming -can limit skill development Virtual Network Structure Outsourcing- contracting out corporate functions to other companies Adv; ST trouble avoidance -LT contribution of maximizing opportunities Virtual network structure- firm subcontracts many major processes to separate companies and coordinates their activities from a small headquarters org How the Structure Works -may be viewed as central hub surrounded by a network of outside specialists -partners are located in diff parts of the world -incorporates a free market style to replace vertical hierarchy -is often advantageous for startup companies Strengths and Weaknesses Adv; the org can be truly global -enables new orgs to develop products without huge investments -new techs can be developed quickjly by tapping into a worldwide network of experts -reduced administrative overheard Weaknesses: lack of control -increased time spent managing relationships with partners and resolving conflicts -risk of failure if one org’l partner fails to deliver -employee loyalty can be weak if they stress over job security -turnover may be higher; low emotional commitment b/n org and employees Hybrid Structures Def’n- combines characteristics of various approaches tailored to specific strategic needs -used in rapidly changing environments Applications of Structural Design Structural Alignment -to find the right balance between vertical control and horizontal coordination Verticalgoals of efficiency and stability Horizontallearning, innovation, flexibility *Exhibit 3.19 for types of structure* Symptoms of Structural Deficiency One or more will appear if an org’l structure is out of alignment with org needs -decision making is delayed or lacking in quality -delegation to lower levels may be insufficient -org doesn’t respond innovatively to a changing environment -departments aren’t coordinated horizontally -employee performance declines and goals aren’t being met -structure doesn’t provide clear goals, responsibilities, mechanisms for coordination -too much conflict is evident -horizontal linkage mechanisms are inadequate New Directions Morgan’s 8 metaphors through which we can understand organizations: -machines -brains -political systems -flux and transformation -organisms -cultures -psychic prisons -instruments of domination *Fig 3.20* Boundaryless organization- learn to permeate their boundaries so they can be more flexible and responsive to their stakeholders -are able to generate good ideas Ch 4- The External Environment The Environmental Domain Org’l env- all elements that exist out the org that have the potential to affect all/part of the org -org’l design and theory looks at green environment indirectly Domain- is the chosen field of action of an organization -sectors with which the org will interact to accomplish its goals Sectors- subdivisions of the external env that contain similar elements -sectors can be further subdivided into the task env and general environment Task Environment Def’n- factors with which the org interacts directly Includes industry, raw materials, market, HR, international sector General Environment Def’n- they might not have a direct impact of a firm, but will indirectly influence it Includes gov, sociocultural, economic conditions, technology, financial resources sectors International Context -it can directly affect many orgs -all domestic sectors can be affected by international events -the growing importance of the int’l sector means environment for all orgs is becoming more complex and competitive Environmental Uncertainty Uncertainty- sectors that an org deals with on a daily basis -focuses on sectors of the task environment, like how many elements the org deals with regularly, how quick these elements change Simple-Complex Dimension A complex environment is one where the org interacts with numerous external elements A simple env is one where the org interacts by only a few similar external elements Stable-Unstable Dimension -refers to whether elements in the env are dynamic Stable domain is if it stays the same over a period of time Under unstable conditions, environmental elements are abrupt and unexpected -for most orgs, environmental domains are increasingly unstable -instability can occur when competitors react with aggressive moves Framework *Exhibit 4.3* Simple & stable environment  low uncertainty Complex & stable environment uncertainty Simple & unstable environmentmore uncertainty Complex & unstable environmentmost uncertainty Adapting to Environmental Uncertainty -orgs facing uncertainty generally have a more horizontal structure that encourages cross-functional communication Positions and Departments -as the external env becomes more complex, so does the numbers of dpts within an org -this then increases internal complexity -each sector in the external env requires an employee to deal with it Buffering and Boundary Spanning Buffering roles- to absorb uncertainty from the environment -they surround the technical core and exchange resources b/n the env and the org -newer approach is for orgs to drop the buggers and expose the core to the uncertain environment, so they can better connect to customers and suppliers Boundary spanning roles- coordinate an org with key elements in the external env brings info about changes in the env to the organization send info into the environment hat presents the org in a favourable light -new approach to boundary spanning is business intelligence; high tech analysis of internal/external data to spot patterns for organizations -there are also competitive intelligence (CI) Differentiation and Integration Organizational differentiation are the differences in cognitive and emotional orientations among managers in different functional departments Integration- quality of collaboration among departments -formal integrators are often required to coordinate departments -when the env is highly uncertain, integrators become necessary Organic vs. Mechanistic Management Processes Mechanistic org’l system-internal org is formalized, centralized when external env is stable Organic- adaptive, free-flowing, decentralized organization in quick changing environments -as uncertainty increases, centralization decreases, therefore becoming more organic Planning, Forecasting, Responsiveness -planning can soften the impact of external shifts in increasing env’l uncertainty -orgs often establish a separate planning department -planning can’t substitute for other actions, like effective boundary spanning and adequate internal integration -orgs that are most successful in uncertain envs are those that keep everybody in close touch Framework for Organizational Responses to Uncertainty *Exhibit 4.8* Low-uncertainty envsimple and stable Low-moderate uncertaintymore integrating roles, some planning may occur High-moderate uncertaintysimple but unstable -organic and decentralized High-uncertaintycomplex and unstable -most difficult environment to work in Resource Dependence - the need for material and financial resources Resource dependence- orgs depend on the env but strive to acquire control over resources to minimize their dependence -to maintain autonomy, organizations that already have abundant resources will tend not to establish new linkages -orgs that need resources will give up independence to acquire those resources Controlling Environmental Resources -orgs maintain this balance b/n linkages with other orgs and their own independence through attempts to modify other orgs -two strategies can be adopted to manage resources in the external env: establish favourable linkages with key elements in the env -shape the environmental domain Establishing Interorganizational Linkages Ownership: buy a part of another company -acquisition or merger Formal strategic alliances: through contracts and joint ventures, license agreements -large retailers are gaining so much power that they can pretty much dictate contracts and tell manufacturers how to make, what to make, how much to charge Cooptation, Interlocking Directorates: Cooptation is when leaders from important sectors in the env are made part of an organization -when influential customers are appointed to the board of directors Interlocking directorate is a formal linkage when a member of the board of one co is also on the board of another co (that person is a direct interlock) Indirect interlock is when one person from 2 diff companies are on the board of another one Executive recruitment: transferring/exchanging execs offers a method of establishing favourable linkage with external organizations Advertising and PR: advertising to influence the taste of consumers PR to shape the company’s image in the minds of customers and suppliers Controlling the Environmental Domain (4 Techniques) Change of Domain: organizations are able to choose for themselves which business it’s in, the market to enter, and the suppliers, banks, employees, location to use -acquisition and divestment are methods to change their domain Political Activity, Regulation: techniques to influence gov legislation and regulation Trade Associations: to influence the external env is accomplished with other orgs -these orgs can also pay people to carry out these activities, like lobbying legislators, influencing new legislations, developing PR campaigns Illegitimate Activities: can be questionable/unethical -payoffs to foreign govs, illegal political contributions, excessive promotional gifts, wiretapping Ch 9- Organization Size, Life Cycle, and Decline Organization Size, Is Bigger Better Pressures for Growth -companies in all industries strive for growth to acquire the size and resources needed to compete on a global scale, invest in new tech, to control distr’n channels, guarantee access to markets -many execs observed cos grow to stay economically healthy -for them, to stop growing is to stagnate Dilemmas of Large Size -what size of an org is better in competing in a global env; Largelarge orgs have the resources to be a supportive economic/social force in difficult times -they’re quicker to return to business following a disaster -able to give employees a sense of security and belonging during an uncertain time -they’re often standardized, more complex and mechanistically run Smallmain requirements are responsiveness and flexibility in fast changing markets -they can react quick to changing customer needs -they have a flat structure; organic, free flowing management style -the growth of Internet has also made it easier for small cos to act big -many service companies remain small to better serve customers Big-Organization/Small-Organization Hybridsmall cos can become victims of their own success as the grow bigger though; focusing on corporate drones than entrepreneurs -giant companies are built for optimization, not innovation -combines a large co’s resources, reaches a small co’s simplicity and flexibility -divisional structure is one way orgs attain a big/small design Organizational Life Cycle Life cycle- orgs are born, grow old, and eventually die out Stages of Life-Cycle Development *Exhibit 9.2* Entrepreneurial Stage: emphasis is on creating a p&s and surviving -long work hours -control is based on the owner’s personal supervision -as the org starts to grow though, mgmt issue arise, but managers may prefer to focus on makinf the product instead. They have to decide whether to adjust the structure, or hire another manager to accommodate the growth Collectivity stage: org grows and develops a more elaborated design -org begins to develop clear goals and direction -dpts are established along with a hierarchy of authority -employees identify with the mission and spend long hours helping the org succeed -if new mgmt was successful in the past, lower employees may be restricted by this leadership Formalization stage: installation of rules, procedures -less frequent communication and is more formal -middle management begins to bear more roles -incentive systems are implemented -at this stage, orgs may seem too large and complex to be managed through formal programs Eg. This was when Steve Jobs stepped down as CEO Elaboration stage: org becomes more flexible -new sense of collaboration and teamwork -formal systems are simplified, teams for formed -after the org reaches maturity, it may enter periods of temp decline Organizational Characteristics during the Life Cycle Entrepreneurialtop manager provides the structure and control system -org’l energy is devoted to survival and the production of a single product Collectivityrapid growth, employees are committed -continued growth is a major goal Formalizationentering mid-life; bureaucratic characteristics emerge -orgs may develop complementary products Elaborationbureaucratic, extensive reward/control systems; rules and procedures Organizational Bureaucracy and Control -Max Weber developed a framework of administrative characteristics What is Bureaucracy *Exhibit 9.5* Def’n- rules and standard procedures that enable activities to be performed in a routine manner -each employee had a clear task to perform Size and Structural Control (large orgs are diff from small orgs along these dimensions) Formalization and Centralization Formalization- rules, procedures, written documentation that prescribe the rights of employees -large orgs are more formalized Centralization- the level of hierarchy with authority to make decisions -large orgs permit greater decentralization Personnel Ratios -the ratio of top admin to total employees is smaller in large orgs -clerical ratio increases b/c of grater comm’n needed as orgs grow larger -professional staff ratio increases because of greater need for specialized skills in a larger org Bureaucracy in a Changing World Organizing Temporary Systems for Flexibility and Innovation Incident command system (ICS)- the org can glide between a highly formalized structure and one that’s more flexible and loosely structured that’s needed ot respond well to unexpected environmental conditions -often used by police and fire departments, emergency management agencies Other Approaches to Reducing Bureaucracy -cut layers of the hierarchy -keep headquarters staff small -give lower level workers greater freedom Organizational Control Strategies (3) Bureaucratic Control Def’n- use of rules, policies, hierarchy of authority, standardize and control employee behaviour -to make it work, managers must have the authority to maintain control over the org 3 types of authority: Rational-legal authority- based on employees’ belief in the legality of rules and the right of those elevated to positions of authority to issue commands -they have authority because of their position Traditional authority- belief in traditions and of the status of people excercising authority -because of religion Charismatic authority- based on devotion to the exemplary character -because of the person Market Control Def’n- occurs when price competition is used to evaluate the output and productivity of an org -managers can compare prices and profits to evaluate the efficiency of their corp -is increasingly used in product divisions -it can be used only when the output of an org can be assigned a dollar price, and when there’s comp Clan Control Def’n- use of social characteristics to control behaviour to socialize into a group -shared values and trust among employees -important when ambiguity and uncertainty are high -today’s companies often use clan or self control rather than bureaucratic Self control- stems from the values and goals of individuals -trying to induce change in employee’s values to fit it with the organization -used when uncertainty is high and performance is difficult to measure Organizational Decline and Downsizing Definition and Causes Organizational decline- absolute decrease in an org’s resource base occurs over a period -often associated with environmental decline Organizational atrophy -when orgs grow older and become inefficient and overly bureaucratized -follows a long period of success, but fails to adapt to changes -warning signals may include excess admin staff, lack of effective comm’n, outdated org’l structure Vulnerability -an org’s strategic inability to prosper in its environment -unable to define the correct strategy to fit the environment Environmental decline or competition -reduced resources available -new competition increases the problem A Model of Decline Stages (5) Blinded Stageleaders miss the signals of decline here -their solution is to develop effective scanning and control systems Inaction Stagedenial occurs; leaders may try to persuade employees all is well -creative accounting may come into play Faulty Action Stageleaders are forced to consider major changes -they may think about downsizing, retrenchment -they should also reduce employee uncertainty by clarifying values Crisis Stageorg begins to panic -if managers are at this stage, the only solution is a major reorganization Dissolution Stageit is now irreversible; organization has to close down Downsizing Implementation Downsizing- individuals are permanently laid off, or are not replaced when they retire -downsizing has often not achieved the intended benefits of an org Communicate more, not less: provide advance notice -remaining employees need to know what is expected of them Provide assistance to displaced workers: training, severance packages, extended benefits -outplacement assistance, counseling Help the survivors thrive: remember the emotional needs of those as well Ch 2- Strategy, Organizational Design, and Effectiveness Role of Strategic Decision in Org’l Design -the primary responsibility of top management is to determine an org’s goals, strategy, and design, therein adapting the org to a changing env *Exh 2.1 for r/n through which top managers provide direction and design* -org’l design reflects the way goals and strategies are implemented -is the administration and execution of the strategic plan -top and middle managers must select goals for their own units -the ability to make these choices determines the firm’s success Organizational Purpose Mission Def’n- overall goal for an org; describes the org’s vision Official goals- formally stated def’n of business scope -defines business operations; focuses on values, markets, customers that distinguish the org -the mission statement is also used as a communication tool -what the org stands for and what it’s trying to achieve -companies guided by mission statements that focus on their social purpose typically attract better employees, have better r/ns with external parties, and perform better Operative Goals Def’n- explains what the org is actually trying to do -describes specific measurable outcomes and often concerned with the short run -pertain to the primary tasks an org must perform Overall Performanceprofitability, net income, earnings per share, ROI, goal, output volume Resourcesacquisition of needed material and financial resources from the env Marketmarket share, or market standing desired by the org Employee developmenttraining, promotion, safety, growth of employees -includes managers and workers, and contributes to being a good org Innovation and changeinternal flexibility and readiness to adapt to unexpected changes Productivityamount of output achieved from available resources -successful orgs use a carefully balanced set of operative goals Importance of Goals Office goalsdescribe a value system for the org Operative goalsrep the primary tasks of the org -can provide employees with a sense of direction so they know what they’re working toward -goals mainly act as guidelines for employee behaviour and decision making -helps define the appropriate decisions concerning org’l structure, innovation, employee welfare -also provides a standard for assessment Framework for Selecting Strategy and Design Strategy- plan for interacting with the competitive env to achieve org’l goals -how an org will get to where it wants to go; diff than a goal -choosing whether the org will perform diff activities than it competitors or will execute similar activities more efficiently than it competitors do -there are two models for formulating strategies: Porter’s Competitive Strategies (3) Focus strategy- org concentrates on a specific market or buyer group -further divided into focused low-cost leadership focused differentiation -managers evaluate two factors; C.A and competitive scope -broad scope = competing in many customer segments -narrow scope = selected customer segment -managers determine to compete through lower cost, or distinctive products Differentiation- advertising, distinctive product features, exceptional service, new tech -can reduce rivalry with competitors and fight off the threat of substitute products because customers are loyal to the co’s brand Low Cost leadership- emphasizes low cost compared to competitors -concerned with stability rather than taking risks or seeking new opportunities and growth Focusconcentrates on a specific regional market -company will try to achieve either a low cost adv, or a differentiation advantage -when managers fail to adopt a competitive strategy, performance will suffer Miles and Snow’s Strategy Theory -managers seek to formulate strategies that will be congruent with the external env Prospectorinnovate, take risk, seek out new opportunities, and grow Defenderrather than taking risks, this is concerned with stability -holds onto current customers, but it neither innovates nor seeks to grow Analyzertries to maintain a stable business while innovating on the periphery -some products will be targeted toward stable environments -others targeted toward new environments Reactortop management hasn’t defined a LT plan -the org takes whatever actions to meet immediate needs How Strategies Affect Org’l Design *Exh 2.4 for comparison of Porter and Snow* -Porter’s low cost leadership allows managers to take an efficiency approach -strong, centralized authority, tight control -employees perform routine tasks under close supervision -where differentiation calls for a learning approach -employees are constantly experimenting -Snow’s prospector is similar to differentiation -defender strategy takes an efficiency approach, similar to low cost leadership Other Factors Affecting Org’l Design -in a stable env, structure that emphasizes vertical control, efficiency, specialization -a rapidly changing env will call for a more flexible structure -small orgs have little division of labour, few rules and regulations -large orgs will have an extension division of labour, there will be standard procedures and systems -organizational culture that values teamwork -wouldn’t function well with a tight, vertical structure Assessing Org’l Effectiveness Organizational goals- rep the reason for an org’s existence -org’l effectiveness is the degree to which an org realizes its goals -org’l efficiency is the amount of resources used to produce a unit of output -is difficult to measure in orgs -leading companies are finding new ways to measure it, such as customer delight and employee satisfaction Contingency Effectiveness Approaches Goal approach- whether the org achieves its goals in terms of desired levels of output Resource based approach- observing the beginning of the process and evaluating whether the org effectively obtains resources necessary for high performance Internal process approach- looks at internal activities by indicators of internal health and efficiency Resource Based Approach -org’l effectiveness is defined as the ability of the org to obtain scarce and valued resources and successfully integrate them Indicatorsability of the org to obtain from its env scarce and valued resources -ability of the org’s decision makers to interpret the real properties of the external env -abilities of manager
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