Nature of organizations: Context and Components Dr. Fred Mugambi Mwirigi JKUAT 1

Introduction  An organization is a social and economic group which distributes tasks for a collective goal.  The word itself is derived from the Greek word organon, itself derived from the better- known word ergon - as we know `organ` - and it means a compartment for a particular job. 2

Introduction Contd.  A social unit of people, systematically structured and managed to meet a need or to pursue collective goals on a continuing basis.  All organizations have a management structure that determines relationships between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carry out defined tasks.  Organizations should be open systems in that they affect and are affected by the environment beyond their boundaries 3

Stages of Organizational Development Chaos Stability High Performance 4

Stage I: Chaos (Fire- Fighting Mentality)  Crisis/short-term focus  Lack of clear direction and goals  Shifting priorities  Unclear policies and procedures  "Us" vs. "them" attitude  Blame and lack of ownership  Alienated work force 5

Stage II: Stability (Back to the Basics)  Clarity of goals and direction  Consistency in priorities  Well-defined policies and procedures (technical and personnel)  Agreement on roles and responsibilities  Basic management processes rewarded and practiced (goal-setting, performance reviews, etc.) 6

Stage III: High Performance  Clear statement of mission that creates sense of esprit de corp.  Well defined values which result in distinctive culture  Respect for people that is a deeply ingrained part of culture  Good communication and information sharing systems  High involvement and empowerment of people  Design (work flow, structure, systems) that supports mission and values 7

A Framework for Studying Organizational Dynamics The Organizational System and the Global Environment Organizational structure and design Organizational culture and change The learning organization and knowledge management Cultural diversity and international organizational behavior Individual Level Individual differences, mental ability, and personality Learning, perception, attitudes, values, and ethics Individual decision making and creativity Foundation concepts of motivation Conflict, stress, and well-being Groups and Interpersonal Relations Interpersonal communication Group dynamics and teamwork Leadership Power, politics, and influence 8

Organizational Components  Goals/objectives  Tasks  People  Structure  Equipment  Culture 9

Types of Organizations  Static Organizations  Dynamic Organizations  Adaptive Organizations 10

Static Organizations  fixed practices  fixed size  time doesn't change them significantly  they persist until some new organization occupies their niche 11

Dynamic Organizations  have fixed practices  variable size- these organizations vary in size over time, even though their underlying practices don't change much.  go through a single life cycle, each growing rapidly as it occupies its niche, then declining as its competitors implement better practices that steal away its clients. 12

Adaptive Organizations  Variable practices  variable size  Complex adaptive systems,  vary their practices, seeking the constant improvement that launches life cycle after life cycle, creating new products, services, and processes that hold on to clients generation after generation.  motivate employees to climb adaptation curves  Slowly displace dynamic and static organizations in economic competition 13

The transformational model Transformation Outputs Inputs 14

Organizational functions  Organizational functions are the activities performed in a firm.  Clustered into functional units namely: 1. Marketing 2. HR 3. Production R&D 4. Finance 5. Procurement 6. Other support services 15

Organizational Structures  Functional Organizational Structures  Product/ activity based structures  Geographical structures  Matrix structures 16

Functional Structures  Functional organizational structures focus on hierarchy and departmentalization of a firm Marketing ProductionAccountsPersonnelIT Board of Directors Chief Executive 17

Functional Structures Advantages  Specialisation – each department focuses on its own work  Accountability – someone is responsible for the section  Clarity – know your and others’ roles Disadvantages  Closed communication could lead to lack of focus  Departments can become resistant to change  Coordination may take too long  Gap between top and bottom 18

Product/Activity Structures Imaging and Printing Group Personal Systems Group Enterprise Systems Group HP Services HP Financial Services Hewlett Packard 19

Organisation by Product/ Activity Advantages  Clear focus on market segment helps meet customers’ needs  Positive competition between divisions  Better control as each division can act as separate profit centre Disadvantages  Duplication of functions (e.g. different sales force for each division)  Negative effects of competition  Lack of central control over each separate division 20

Organisation by Geography Americas Houston, Texas Europe, Middle East, Africa Geneva, Switzerland Asia Pacific Hong Kong Hewlett Packard 21

Organisation by Geography Advantages  Serve local needs better  Positive competition  More effective communication between firm and local customers Disadvantages  Conflict between local and central management  Duplication of resources and functions 22

Matrix Structure 23

Matrix Organization Advantages  Is oriented towards end results  Professional identity is maintained  Pin-points product-profit relationship Disadvantages  Conflict in organization authority exists  Possibility of disunity of command exists  Requires manager effective in human relations  high bureaucratic costs  two boss role can create conflict 24

Other Challenges of Matrix Organizations 1.State of conflict between functional and project managers 2.Role conflict, role ambiguity, role overload leading to stress 3.Imbalance in power 4.Time-consuming meetings 25

How to Make Matrix Structures Effective  Define objectives clearly  Clarify roles. Authority and responsibilities of managers and team members  Influence based on knowledge & information and not on rank  Balance power of project and functional managers  Provide an experienced manager to head project-leadership  Install cost,time, quality controls-deviations  Reward project managers team members fairly 26

Types of Organizational Interdependence  Pooled Interdependence  Sequential Interdependence  Reciprocal Interdependence 27

Pooled Interdependence  Each organizational department or business unit performs completely separate functions.  While departments may not directly interact and do not directly depend on each other in the pooled interdependence model, each does contribute individual pieces to the same overall puzzle. 28

Sequential Interdependence  Occurs when one unit in the overall process produces an output necessary for the performance by the next unit.  Example of sequential interdependence is an assembly line.  Scheduling and planning an organization’s resources in a sequential interdependence model is essential to efficient operations 29

Reciprocal Interdependence  Similar to sequential interdependence in that the output of one department becomes the input of another, with the addition of being cyclical.  In this model, an organization’s departments are at their highest intensity of interaction.  Reciprocal models are the most complex and difficult to manage 30

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