- 1. Management Theory and Practice: An Overview EPGB 6113 Feb
2012
2. What is an Organization?
- Organizations are social entities that are goal-oriented; are
designed as deliberately structured and coordinated activity
systems, and are linked to the external environment ( Daft, 2004)
.
3. Organizations and Governance
- An organization (hierarchy) is a system of consciously
coordinated activities or forces of two or more persons.
- Organizations are social systems, hence complex.
- Public organizations (bureaucracies) are the states agents for
public collective action.
- Studying public organizations goes to the heart of governance
and corruption issues:
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- public organizations deliver public services with more or less
efficiency, equity, honesty, and accountability.
4. Public Organizations Matter
- Three management mechanisms for public administrations;
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- public finances: how the money is controlled;
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- civil service: how people are managed;
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- organization: how activities are coordinated.
5. What is Theory?
- Theory is: a plan or scheme existing in the mind only, but
based on principles verifiable by experiment or observation (Funk
& Wagnalls page 1302)
6. The role of theories
- Theories describe the distribution of power & resources in
organizations, how organizations function, how people interact in
organizations, and how organization systems maintain
themselves.
- Theories must be empirically tested and verified.
- Independent and dependent variables must be identified in order
to test a theory.
- Therefore theories contain assumptions about cause and effect
relationships
7. Theories can either be broad and abstract and pertaining to
general patterns in societyordescribe patterns that occur in
specific situations 8. Definition of Organization Theory
- Organization theory: is the set of propositions (body of
knowledge) stemming from a definable field of study which can be
termedorganizations science (Kast&Rosenzweig1970) .
- The study of organizations: is an applied science because the
resulting knowledge is relevent to problem solving or decision
making in ongoing enterprises or
institutions(Kast&Rosenzweig1970) .
9. Definition of Organization Theory Cont..
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- Knowledge generated by practical experience and scientific
research
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- Solving problems & managing
resources(Kast&Rosenzweig1970) .
10. Organization Theory: A Branch of Social Science
- Organization theory has blossomed since the 1930s.
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- It primarily covers the private sphere and the North
Atlantic.
- Organization theory has many competing schools of thought.
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- There is not a dominant paradigm.
- But there is a generally held view of organizations, in effect,
as living, evolving social systems.
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- Sociology and politics, rather than engineering and economics,
have driven OT.
11. Organization Theory: Some Common Ground
- Organizations have the characteristics of living, evolving
systems.
- There is a great variety of types of organization, responding
to different and changing needs and environments.
- The external authorizing environment i.e. who influences what
the organization does and provides its resources is important and
complex.
- Rationality is bounded progress is often by trial and
error.
- Worker motivation is complex, extending beyond economic
incentives into their social and personal needs.
- The formal trappings of organizations stated goals and rules
are only part of the story. Organizations also have a non-formal
life an organizational culture which is vital in determining the
actual tasks undertaken, the sense of mission, and organizational
effectiveness.
12. Organization theory and Management
- Management technology stems from organization theory and even
more applied in the sense that it focuses on the practice of
management in ongoing organizations(Kast&Rosenzweig1970) .
13. Organization Theoryfrom a Historical Perspective
- Throughout history most managers operated strictly on a
trial-and-error basis
- The management profession as we know it today is relatively
new
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- wide swings in management approaches over the last 100
years
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- parts of each approach have survived and been incorporated into
modern perspectives on management
14. Evolution Of Management Thought Classical Approaches
Contemporary Approaches
189019001910192019301940195019601970198019902000 Systematic
management Administrative management Quantitative management
Systems theory Current and future revolutions Scientific management
Human relations Organizational behavior Bureaucracy Contingency
theory 15. Early Management Concepts And Influences
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- minor improvements in management tactics produced impressive
increases in production quantity and quality
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- economies of scale- reductions in the average cost of a unit of
production as the total volume produced increases
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- opportunities for mass production created by the industrial
revolution spawned intense and systematic thought about management
problems and issues
16. Bureaucracy
- Bureaucratic structures can eliminate the variability that
results when managers in the same organization have different
skills, experiences, and goals
- Allows large organizations to perform the many routine
activities necessary for their survival
- People should be treated in unbiased manner
17. Bureaucracy (cont.)
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- Structured network of relationships among specialized
positions
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- Rules and regulations standardize behavior
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- Jobs staffed by trained specialists who follow rules
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- Hierarchy defines the relationship among jobs
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- Promotes efficient performance of routine operations
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- Eliminates subjective judgment by employees and management
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- Emphasizes position rather than the person
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- Limited organizational flexibility and slowed decision
making
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- Ignores the importance of people and interpersonal
relationships
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- Rules may become ends in themselves
Key concepts Limitations Contributions 18. Macro Perspective of
Organizations
- Organizations are open systems
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- affected by, and in turn affect, their external
environments
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- all relevant forces outside a firms boundaries
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- relevant- factors to which managers must pay attention
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- two elements comprise the external environment
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- competitive environment- immediate environment surrounding a
firm
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- macroenvironment - fundamental factors that generally affect
all organizations
19. The External Environment Macroenvironment Competitive
Environment Organization Laws and politics Economy Technology
Demographics Social values Suppliers New Entrants Substitutes
Rivals Buyers 20. The Macroenvironment
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- most general elements in the external environment that can
potentially influence strategic decisions
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- all organizations are affected by the general components of the
macroenvironment
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- impose strategic constraints and provide opportunities
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- regulators- specific government organizations in a firms more
immediate task environment
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- have the power to investigate company practices and take legal
action to ensure compliance with the laws
21. The Macroenvironment (cont.)
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- created by complex interconnections among economies of
different countries
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- important elements include interest rates, inflation rates,
unemployment rates, and the stock market
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- economic conditions change and are difficult to predict
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- creates new products, advanced production techniques, and
improved methods of managing and communicating
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- strategies that ignore or lag behind competitors in considering
technology lead to obsolescence and extinction
22. The Macroenvironment (cont.)
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- measures of various characteristics of the people comprising
groups or other social units
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- age, gender, family size, income, education, occupation
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- workforce demographics must be considered in formulating human
resources strategies
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- population growth influences the size and composition of the
labor force
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- immigration also is a significant factor
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- increasing diversity of the labor force has both advantages and
disadvantages
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- must assure equal employment opportunity
23. The Macroenvironment (cont.)
- Social issues and the natural environment
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- management must be aware of how people think and behave
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- the role of women in the workplace
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- providing benefits for domestic partners of employees
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- protection of the natural environment
24. Competitive Environment
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- comprises the specific organizations with which the
organization interacts
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- Michael Porter- defined the competitive environment
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- react to the competitive environment; and
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- act in ways that actually shape or change the competitive
environment
25. Competitive Environment (cont.)
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- competitors within an industry must deal with one another
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- identify their competitors
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- analyze how competitors compete
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- react to and anticipate competitors actions
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- competition is most intense:
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- where there are many competitors
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- when industry growth is slow
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- when the product or service cannot be differentiated
26. Competitive Environment (cont.)
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- barriers to entry- influence the degree of threat
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- conditions that prevent new companies from entering an
industry
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- include government policy, capital requirements, and brand
identification, cost disadvantages, and distribution channels
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- technological advances and economic efficiencies may result in
substitutes for existing products
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- substitutes can limit another industrys revenue potential
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- companies need to think about potentially viable
substitutes
27. Competitive Environment (cont.)
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- provide the resources needed for production
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- powerful suppliers can reduce an organizations profits
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- international labor unions are noteworthy suppliers
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- dependence on powerful suppliers is a competitive
disadvantage
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- power of supplier determined by:
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- availability of other suppliers from whom to buy
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- the number of customers for the suppliers products
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- switching costs- fixed costs buyers face if they change
suppliers
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- close supplier relationship is the new model for
organizations
28. Competitive Environment (cont.)
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- purchase the products or services the organization offers
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- final consumers- purchase products in their final form
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- intermediate consumers- buy raw materials or wholesale products
before selling them to final consumers
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- customer service- giving customers what they want, the way they
want it, the first time
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- disadvantageous to depend too heavily on powerful
customers
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- powerful customers make large purchases and/or have other
suppliers
29. Changes in public organizations: older challenges
- The growth of government and the growth of the bureaucratic
machine
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- A dramatic increase in the scope and size of government since
the early Nineteenth Century has progressively exacerbated the
principal-agent problem.
- The call for greater efficiency and flexibility:
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- The costs of hierarchical organization, perceived from the
beginning of the Twentieth Century.
- The growth of special interests:
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- Continued growth in the Twentieth Century has threatened the
effectiveness of government.
30. Changes in public organizations:newer challenges
- The growth of citizen voice:
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- Progressively stronger electorates, in terms of their knowledge
and ability to organize, have however made the control problem
potentially more soluble.
- A crisis of trust and the rise of accountability
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- An apparent erosion of trust in recent decades has led to
demands for more formal forms of accountability, and it may have
undermined social capital within the public administration.
- Better management, better information:
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- Improved management technologies, including the falling cost of
information, make the control problem potentially more
soluble.
31. Changes in public organizations: early responses
- Problems of poor control and inflexibility have led to a
constant experimentation with new organizational techniques,
including those that use economic incentives.
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- Special-purpose, quasi-independent agencies
(agencification).
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- Budget reform (e.g. program budgeting).
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- The dilemma: trading off control and flexibility.
32. Changes in public organizations: the New Public
Management
- Recent, more systematic efforts to make public administrations
more accountable, efficient, and responsive.
- The core techniques borrow from the managerial methods of the
private sector.
33. Changes in public organizations: core techniques of the
NPM
- Quasi-market competition(and contractualization).
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- Management, relational, and personnel contracts; competition
between public agencies; inter-agency fee charging;
out-sourcing.
- Performance orientation : changing the accountability
relationship from an emphasis on inputs and legal compliance to one
on outputs.
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- Results-oriented budgeting, full-costing of products.
- Devolution of discretion . Devolution of decision making:
reducing the burden of hierarchical rules and fostering greater
discretion at lower points in the hierarchy.
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- Agencification, decentralization of personnel-management.
- Specializationby splitting policy making and policy
implementation, service financing and service delivery.
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- Executive agencies, hospital trusts.
- Client-focus : reporting to and "listening" to the clients of
the public sector.
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- Citizens Charter; e-government, participative budgeting.
34. Public organizations indevelopingcountries: superficial
similarities
- Superficially, the issues look similar for more advanced and
less advanced countries.
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- Less advanced countries have pursued similar formal
arrangements: a legally-determined hierarchy of agencies, with even
tighter procedural rules.
- There is a similar debate on the tensions between hierarchy and
efficiency (and the merits of NPM) , with similar efforts to modify
rules to encourage more efficiency.
- But the similarities are often superficial:
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- Public organizations typically perform poorly in developing
countries
35. Public organizations in developing countries: different
politics
- Proposition 1: the control (principal-agent) problem is more
acute in developing countries: democratic control is often weak,
even in many nominally democratic countries:
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- Patronage politics (and sometimes predatory-state politics) are
more likely to prevail.
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- Kinship ties and other ties of mutual obligation tend to be
stronger than professional ties.
- Proposition 2: politics and ideology in today developing
countries have led to over-sized, often corporatized public
sectors, thus undermining organizational performance.
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- Origins of large public sectors in developmentalist
ideologies.
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- Sustained in many regions by governments becoming
employers-of-last-resort.
36. Public organizations in developing countries: different
outcomes
- These political conditions often lead to a conflict between
announced and effective rules:
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- Announcedrules favor a hierarchical ordering of public agencies
and their rules-base operation.
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- Effectiverules may favor quite different objectives such as
bureaucratic survival, patronage, or corruption.
- This organizational informality makes it more difficult for
public organizations to function effectively in the public
interest.
- By the same token, these conflicts make island solutions
attractive for instance autonomous agencies that heads of states
are better able to protect from political interference.
37. Public organizations in developing countries: what makes for
good performance?
- Results from a study on building sustainable capacity in public
organizations in developing countries show the importance of
organizational culture and managerial autonomy in good
performance:
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- A broadly shared sense of mission improves performance.
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- Management emphasizing performance, participation, flexibility,
teamwork, problem solving, and equity improves performance.
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- Clear signals about performance expectations (work to be
accomplished, rewards and sanctions) improve performance.
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- Organizations with some autonomy in personnel matters are more
able to set and reward performance standards.