Chapter Nine Organizations: Structure, Effectiveness, and Cultures.

Chapter Nine

Organizations: Structure, Effectiveness, and Cultures

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Chapter Objectives

• Identify and describe four characteristics common to all organizations.

• Identify and explain the two basic dimensions of organization charts.

• Contrast the traditional and modern views of organizations.

• Describe a business organization in terms of the open-systems model.

• Explain the term learning organization.


Chapter Objectives (cont’d)

• Explain the time dimension of organizational effectiveness.

• Explain the role of complacency in organizational decline and discuss the ethics of downsizing.

• Describe at least three characteristics of organizational culture and explain the cultural significance of stories.


What Is an Organization?

• An Organization Is:– A cooperative and coordinated social system of two or

more people with a common purpose– An entity that derives its strength from the synergy of its

members’ coordinated efforts– A system designed to survive its members


What Is an Organization? (cont’d)

• Common Characteristics of Organizations– Coordination of effort: Multiplying individual

contributions to achieve results greater than those possible by individuals working alone

– Common goal or purpose: Having a focus to strive for something of mutual interest

– Division of labor: Dividing tasks into specialized jobs that use human resources efficiently

– Hierarchy of authority: Using a chain of command to control and direct the actions of others


Classifying Organizations

• Business Organizations– Purpose: To make a profit in a socially acceptable

manner

• Nonprofit Service Organizations– Purpose: To provide a specific public service to some

segment of society without attempting to earn a profit

• Mutual-Benefit Organizations– Purpose: To provide a vehicle for individuals to pursue

their own self-interests


Classifying Organizations (cont’d)

• Commonweal Organizations– Purpose: To provide standardized public

services to all members of a society without attempting to earn a profit



Organization Charts

• Organization Chart (Table)– A visual display of an organization’s positions and lines

of authority that is useful as a blueprint for deploying human resources

• Vertical and Horizontal Dimensions– Vertical hierarchy establishes the chain of command.– Horizontal specialization denotes the division of labor.

• A Case Study: The Growth of an Organization– Generally, specialization is achieved at the expense of

coordination when designing organizations.


Figure 9.1: The Evolution of an Organization Chart


Contrasting Theories of Organization

• The Traditional View– The organization’s primary goal is economic efficiency.– The organization is characterized by closed-system

thinking and no or little interaction with the external environment.

– Planning and strict control are used to eliminate uncertainty in the organization.

– The organization’s surrounding environment is fairly predictable.


Contrasting Theories of Organization (cont’d)

• The Modern View– The organization’s principal goal is survival in an

uncertain environment.– The organization is an open system interacting with its

environment.– The organization’s surrounding environment is

composed of variables that are difficult to predict or control.



The Traditional View of Organizing

• The Early Management Writers– Henri Fayol– Frederick W. Taylor– Four traditional principles of organization

• A well-defined hierarchy of authority• Unity of command• Authority equal to responsibility• Downward delegation of authority



The Traditional View of Organizing (cont’d)

• Max Weber’s Bureaucracy– The most rationally efficient form of organization

• Division of labor• Hierarchy of authority• Framework of rules• Impersonal management

– Problems with overly “bureaucratic” organizations• Slow• Insensitive• Inefficient



Challenges to the Traditional View of Organizations

• Bottom-Up Authority– Acceptance theory of authority (Chester

Barnard)• A leader’s authority is determined by the willingness

of subordinates to comply with authoritative communications only when the message:

– Is understood– Is consistent with the organization’s purpose– Serves the subordinate’s interests– Provides a situation where the subordinate is able to

comply


Organizations as Open Systems: A Modern View

• Characteristics of Open Systems– Interaction with the external environment through

permeable boundaries– Synergy in combining resources to achieve superior

performance– Dynamic equilibrium in maintaining internal balances

with help from the external environment– Equifinality in achieving similar ends through different

means


Figure 9.2: Open-System Model of a Business


Organizations as Open Systems: A Modern View (cont’d)

• Developing an Open-System Model– Interacting organizational subsystems:

• Technical (production function) subsystems define the organization’s transformation process.

• Boundary-spanning subsystems provide the organization’s interface with the external environment.

• Managerial subsystems bridge (control and direct) the technical and boundary-spanning subsystems.


Extending the Open-System Model: The Learning Organization

• Learning Organization– An organization that is skilled at creating, acquiring,

and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights

• Stages of Organizational Learning– Cognition (learning new concepts)– Behavior (developing new skills and abilities)– Performance (actually getting something done)


Extending the Open-System Model: The Learning Organization (cont’d)

• Five Critical Learning Skills1. Solving problems

2. Experimenting

3. Learning from organizational experience/history

4. Learning from others

5. Transferring and implementing


Figure 9.3: Garvin’s Model of the Learning Organization

Source: Adapted from discussion in David A. Garvin, “Building a Learning Organization,” Harvard Business Review, 71 (July-August 1993): 78-91.


Organizational Effectiveness

• Effectiveness– A measure of whether or not organizational objectives

are accomplished

• Efficiency– A measure of the relationship between inputs and

outputs for the organization

• No Silver Bullet– No single approach to the evaluation of effectiveness

is appropriate in all circumstances or for all organizational types.


Organizational Effectiveness (cont’d)

• The Time Dimension of Organizational Effectiveness Involves:– Meeting organizational objectives and prevailing

societal expectations in the near future– Adapting to environmental demands and developing as

a learning organization in the intermediate future– Surviving as an effective organization into the distant

future


Figure 9.4: The Time Dimension of Organizational Effectiveness

Source: Adapted from James L. Gibson, John M. Ivancevich, and James H. Donnelly, Jr., ORGANIZATIONS: BEHAVIOR, STRUCTURE, PROCESSES, 5th ed. (Homewood, IL: Richard D. Irwin, Inc.), p. 37. © l991.


Organizational Decline

• The weakening of an organization by resource or demand restrictions and/or mismanagement

• Sources of decline– Mismanagement (complacency)– Unsteady economic growth– Resource shortages– Global competition– End of the cold war

• Reactions to decline– Downsizing, demassing, reengineering


Figure 9.5: Complacency Can Lead to Organizational Decline


Characteristics of Organizational Decline

• Decline Dilemmas– Exit of leaders from the organization– Control that suppresses participation and morale– Preference for short-term thinking and risk avoidance– Intense conflict, preventing teamwork– Strong resistance to change

• Counteracting Organizational Decline– Kaizen: The philosophy of continuous improvement



Downsizing

• An Ethical Perspective– Downsizing: The planned elimination of positions or

jobs• Commodity versus human resources viewpoints of the worth of

employees

• Does Downsizing Work?– Not nearly as well as expected

• Only 30-45% of downsized companies report increased productivity and/or profits.


Downsizing (cont’d)

• Ways of Making Layoffs a Last Resort– Redeployment– Downgrading– Work sharing– Job banks– Employee sharing– Voluntary early retirement– Early warning of facility closings– Outplacement– Helping layoff survivors


Organizational Cultures

• Organizational Culture– The collection of shared beliefs, values, rituals, stories,

myths, and specialized language that creates a common identity and sense of community

– The “social glue” that binds an organization’s members together


Characteristics of Organizational Cultures

• Collective: Organizations are social entities.• Emotionally charged: The organization’s culture

serves as a security blanket to its members.• Historically based: Trust and loyalty result from

long-term organizational associations.• Inherently symbolic: Actions often speak louder

than words.• Dynamic: Culture promotes stability and control.• Inherently fuzzy: Ambiguity, contradictions, and

multiple meanings are part of culture.


Forms and Consequences of Organizational Cultures

• Organizational values are shared beliefs about what the organization stands for.

• The degree of sharing and the degree of intensity determine whether an organization’s culture is strong or weak.


Figure 9.6: Forms and Consequences of Organizational Culture


The Organizational Socialization Process

• Organizational socialization: The process of transforming outsiders into accepted insiders

• Orientations– Orientation programs familiarize new employees with

the organization’s history, culture, competitive realities, and compensation and benefits.

• Storytelling– Recitations of heroic or inspiring deeds provide “social

road maps” for new employees.


Strengthening Organizational Cultures

• Symptoms of a weak organizational culture– Inward focus– Morale problems– Fragmentation/inconsistency– Ingrown subcultures– Warfare among subcultures– Subculture elitism


Terms to Understand

• Organization• Authority• Commonweal organization• Organization chart• Bureaucracy• Acceptance theory of

authority• Dynamic equilibrium• Equifinality

• Learning organization• Organizational

effectiveness• Organizational decline• Downsizing• Outplacement• Organizational culture• Organizational values• Organizational

socialization

Chapter Nine Organizations: Structure, Effectiveness, and Cultures.

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