What Is Organizational Theory? Organizational theory is the study of how organizations function and their relationships with their environment. It involves components of design, structure, and culture. The process of organizational design is used to diagnose and manage the structure and culture of organizations. 1-

What Is Organizational Theory? FIGURE 1.4 The Relationship among Organizational Theory and Organizational Structure, Culture, Design, and Change Organizational Structure The formal system of task and authority relationships that controls how people are to cooperate and use resources to achieve the organization's goals. Organizational Design and Change The process by which managers select and manage various dimensions and components of organizational structure and culture so that an organization can control the activities necessary to achieve its goals. Organizational Culture The set of shared values and norms that control organizational members’ interactions with each other and with people outside the organization. Organizational Theory The study of how organizations function and how they affect and are affected by the environment in which they operate. Copyright 2001 Prentice Hall 1-8

What Is Organizational Theory? Why is organizational design so important? Affects a company’s ability to deal with contingencies (events that might occur) Can influence an organization’s ability to be efficient and innovative 1-

What Is Organizational Theory? Why is organizational design so important? Can be a source of competitive advantage, which is the ability of one company to outperform another by creating more value. Competitive advantage springs from core competencies, managers’ skills and abilities in manufacturing, R&D, new technology, and organizational design. 1-

Can Tyson Fight ‘Chicken Fatigue’ with Pork, Beef? Tyson acquired IBP in 2001 (#1 beef, #2 pork processor) Allowed Tyson to become less dependent on chicken Consolidation among supermarket chains (top five control 50%+ of sales, cf. 30% in mid-90s), streamlining supply chains, spurring consolidation of food manufacturers Meatpackers about two decades behind chicken processors in marketing and product development One of biggest consumer complaints about red meat is lack of consistent quality (in large part due to scores of different cattle breeds) Most supermarkets employ their own butchers to disassemble carcass parts they buy from meatpackers 1-

Can Tyson Fight ‘Chicken Fatigue’ with Pork, Beef? Ability to capitalize on acquisition will depend on ability to “Tyson-ize” beef, pork Secret to Tyson’s success is that quality of its meat doesn’t vary much Co. owns hatcheries, feed mills, contracts with farmers to raise specially developed breed of chicken in climate-controlled sheds according to its specifications Takes just 11 weeks and 10 lbs. of grain to produce five-pound broiler ready for “processing” IBP (now Tyson Fresh Meats) thought to be too big to vertically integrate To achieve better uniformity without trying to control entire process, Tyson planned to accelerate IBP’s strategy of doing more preparation work (marinating, pre-cooking, hand-trimming) (also eliminates labor costs in supermarket) Source: Wall Street Journal, January 10, 2001. 1-

Tyson Robards KY ‘Poultry Complex’ Employs almost 1,200 people Includes a hatchery, feed mill, processing plant, cold storage facility, and rendering plant (which converts poultry by-products into ingredients for pet food) Processing plant handles 1.25 million birds per week, producing more than seven million pounds of fresh product Chickens for the Robards complex are raised at 90 area poultry farms Source: www.tyson.com 1-

Organizational Effectiveness Managers can take one of three approaches to evaluate how an organization confronts these three tasks: External Resource Approach: Control Internal Systems Approach: Innovation Technical Approach: Efficiency 1-

Organizational Effectiveness TABLE 1-1 Approaches to Measuring Organizational Effectiveness Goals to set to Approach Description measure effectiveness External resource approach Evaluates the organization’s ability to secure, manage, and control scarce and valued skills and resources • Lower costs of inputs • Obtain high-quality inputs of raw materials and employees • Increase market share • Increase stock price • Gain support of stakeholders such as government or environmentalists 1-

Organizational Effectiveness TABLE 1-1 Approaches to Measuring Organizational Effectiveness (continued) Goals to set to Approach Description measure effectiveness Internal systems approach Evaluates the organization’s ability to be innovative and function quickly and responsively • Cut decision-making time • Increase rate of product innovation • Increase coordination and motivation of employees • Reduce conflict • Reduce time to market 1-

Organizational Effectiveness TABLE 1-1 Approaches to Measuring Organizational Effectiveness (continued) Goals to set to Approach Description measure effectiveness Technical approach Evaluates the organization’s ability to convert skills and resources into goods and services efficiently • Increase product quality • Reduce number of defects • Reduce production costs • Improve customer service • Reduce delivery time to customer 1-