Organization Size, Life Cycle, and Control Dr. Horace Holmes Jr 1/13/2019

Objectives Advantages of Large verses Small Size Examine Historical Need for Bureaucracy Explore Organization Life-Cycle Examine Mechanisms for Organizational Control 1/13/2019

Is Bigger Better? Organizations often experience pressures for growth because of: Organizational Goals: Pushing firm to meet new challenges and become a more complete unit. Executive Advancement: The larger the organization, the more opportunities to advance. Economic Health: Associated with growth or through economies of scale that comes with size 1/13/2019

Large Versus Small Many organizations today that are small have a flat organic structure. As They grow, they shift to a mechanistic structure and fail to reward entrepreneurial approach. Big company/small hybrid may be a solution. Large or growing firms can retain flexibility and customer focus by decentralizing and cutting hierarchical layers. 1/13/2019

Large Versus Small Average size of industrial organizations is decreasing in united States, Britain, and Germany Organization Size and Bureaucracy Bureaucracy, as envisioned by Max Weber, is a logical, rational form compared to other bases for organizations like status, favoritism, family connections, or feudalism. 1/13/2019

Characteristics of Bureaucracy Include: Rules and procedures. Specialization and division of labor. Hierarchy of authority Technically qualified personnel Separation of position and incumbent. Written Communication and records. 1/13/2019

Basis of Authority Rational-Legal: Employee believes organization as legitimacy and superiors have right to issue orders. Traditional: Belief in sanctity of tradition. Charismatic: Devotion to exemplary individual and willingness to follow them. 1/13/2019

Size and Structural Characteristics Formalization: Large organizations have greater formalization(I.e., more rules, procedures, and written documents. Decentralization: As organizations grow larger, decisions cannot be passed to top or senior managers will be overload. Thus larger organizations should have greater decentralization or authority to make decisions more dispersed. 1/13/2019

Continued Complexity: Vertical Complexity (number of Levels. Horizontal Complexity (number of departments or jobs, and Sometimes greater spatial complexity (more locations) as they grow. 1/13/2019

Bureaucracy in a Changing World As Weber anticipated, bureaucracy met needs of industrial age well. With today’s rapid environmental changes, machine-like bureaucracy may not work as well. 1/13/2019

Organizational Life Cycle When organizations enter new life cycle, a new set of rules emerge for how organization functions internally and how irt relates to its environment. 1/13/2019

Stages Entrepreneurial: a. Known for creativity with control based on owner’s personal supervision. b. Followed by crisis from need for leadership. c. 84% of businesses that get by first year still fail within 5 years because they cannot get by this crisis. 1/13/2019

Characteristics Personal and paternalistic control systems. Innovation by owner manager. Top goal is survival. Top[ management style is entrepreneurial. 1/13/2019

2. Collectivity Known for development of clear goals and directions. Followed by autonomy crisis as managers want more freedom. 1/13/2019

Characteristics Rewards are personal and aimed at those who contribute to organization’s success. Innovation comes form employees and managers. Goal is growth. Top management style is charismatic with direction giving. 1/13/2019

3. Formalization: Known for addition of internal systems. Followed by crisis of needing to deal with too much red tape. 1/13/2019

Characteristics Rewards are imprsonal and ghrough formalized systems. Innovation by separate innovation groups. Goals are internal stability and market expansion. Top Management style is delegation with control. 1/13/2019

4. Elaboration: Mature organizations known for development of teamwork through task forces and manager teams frequently cutting across company divisions. Sometimes followed by periods of temporary decline with a crisis of need for revitalization. 1/13/2019

Characteristics Rewards extensive and tailored to product and department. Innovation by institutionalized R & D. Goals are for reputation. Top management style is on team approach with attacks on excessive bureaucracy. 1/13/2019

Three Organizational Control Strategies Type Requirements Bureaucratic Rules Standards, hierarchy, legitimate, Authority Market Prices, Competition exchange relationship Clan Tradition, shared values and belief, trust. 1/13/2019

Balanced Scorecard Is a comprehensive management control system that balances tradition financial measures with operational measures relating to a company’s critical success factors. 1/13/2019

Four Major Perspectives Financial performance. Customer service Internal business processes The organization’s capacity for learning and growth. 1/13/2019