Organizations and Organization Theory

Organizations and Organization Theory
Organization Theory and Design Eleventh Edition Richard L. Daft ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Theory in Action
Current Challenges Globalization Intense Competition Ethics and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity Organization theory helps us explain what happened in the past, as well as what may happen in the future, so that we can manage organizations more effectively ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

What is an Organization?
Social entities that are goal-directed Designed as deliberately structured and coordinated activity systems Linked to the external environment Includes large multinational corporations, family owned businesses as well as nonprofits ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Importance of Organizations
Organizations are a means to an end The corporation has played a significant role in the last 100 years Produce goods and services efficiently Facilitate innovation Adapt to and influence a changing environment Create value for owners, customers, and employees Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Importance of Organizations
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Dimensions of Organization Design
Structural Dimensions Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios Contingency Factors Size Organizational technology Environment Goals and strategy Culture ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Interacting Structural Dimensions of Design and Contingency Factors

Characteristics of Three Organizations

Performance and Effectiveness Outcomes
Efficiency – amount of resources used to achieve the organization’s goals Effectiveness – the degree to which an organization achieves its goals Stakeholder Approach – balancing the needs of groups in and outside of the organization that has a stake in the organization’s performance ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Major Stakeholder Groups and What They Expect

The Evolution of Organization Theory and Design
Historical perspectives provide insight into how organization design and management practices have varied over time in response to changes in society. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Historical Perspectives
Efficiency is Everything Scientific Management: Pioneered by Frederick Winslow Taylor How to Get Organized Administrative Principles Contributed to Bureaucratic Organizations What about People? Hawthorne Studies Can Bureaucracies Be Flexible? Flexible and lean; focused on service, quality, and engaged employees (1908s) It All Depends: Key Contingencies Contingency: there is no “one best way” ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Mitzberg’s Organizational Types
Mintzberg proposed that the five parts could fit together in any type of organization In real-life organizations, the five parts are interrelated and often serve more than one function ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organic vs. Mechanistic
Mechanistic – characterized by machine-like standard rules and procedures with clear authority Organic – design of organization is looser, free-flowing, and adaptive Depends upon: Structure Tasks/Roles System Formality Communication Hierarchy versus Collaboration ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organic and Mechanistic Designs

Contemporary Ideas Today’s organizations are still imprinted with hierarchical, formalized mechanistic approach Open Systems are adaptive and interact with the environment Chaos theory states that relationships in complex systems are nonlinear Chaos operates with some predictability which is the challenge of today’s managers ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Framework for the Book Examine specific characteristics of organizations Examine the nature of and relationships among groups and departments Organizational behavior is the micro approach Organization theory is the macro examination Organization theory is concerned with the big picture of the organization and its major departments ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategy, Organization Design, and Effectiveness

Strategy Direction and Organization Design
Organizational goal - a desired state of affairs that an organization attempts to reach ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Purpose
Strategic intent - organization’s energies and resources are directed toward a focused, unifying, and compelling goal Operating Goals Overall Performance Resources Market Employee Development Innovation and Change Productivity Mission Competitive Advantage Core Competence ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Mission Statement for Machias Savings Bank

Organizational Operating Goals

The Importance of Goals

Selecting Strategy and Design
A strategy is a plan for interacting with the competitive environment Managers must select specific strategy design Models exist to aid in formulating strategy: Porter’s Five Forces Miles and Snow’s Strategy Typology ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Porter’s Competitive Strategies
Differentiation strategy – to distinguish products or services from others in the industry Low-Cost Leadership – increase market share by keeping costs low compared to competitors Organizations may choose to focus broad or narrow in reaching multiple markets. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Porter’s Competitive Strategies

Miles and Snow’s Strategy Typology
Managers should seek to formulate strategy that matches the demands of the external environment Prospector Learning orientation; flexible, fluid, decentralized structure Values creativity, risk-taking, and innovation Defender Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead Analyzer Balances efficiency and learning; tight cost control with flexibility and adaptability Emphasis on creativity, research, risk-taking for innovation Reactor No clear organizational approach; design characteristics may shift abruptly depending on current needs ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Strategy Affects Organization Design
Managers must design the organization to support the firm’s competitive strategy Strategy impacts internal organization characteristics ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Design Outcomes of Strategy

Contingency Factors Affecting Organization Design

Assessing Organizational Effectiveness
Effectiveness takes into consideration a range of variables at both the organizational and departmental levels. Efficiency relates to the working of the organization and amount of resources used to produce output. Measuring Effectiveness: The Goal Approach The Resource-Based Approach The Internal Process Approach The Strategic Constituents Approach ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Indicators of Organizational Effectiveness

Approaches to Measuring Organizational Effectiveness

An Integrated Effectiveness Model
Competing values model tries to balance concern with various parts of the organization The human relations emphasis incorporates the values of an internal focus and flexible structure ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Four Approaches to Effectiveness Values

Effectiveness Values for Two Organizations

Design Essentials Organization exist for a purpose
Strategic intent includes competitive advantage and core competence Strategies may include many techniques There are models to aid in the development of strategy Organizational effectiveness must be assessed No approach is suitable for every organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Fundamentals of Organization Structure

Organization Structure
Formal Reporting Relationships Number of levels Span of control Grouping of Individuals Creation of departments Design of Systems Communication, coordination, and integration of efforts Horizontal information and coordination reflected in organization chart ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

A Sample Organization Chart

Information-Sharing Perspective on Structure
Vertical and horizontal information flow Traditional organization designed for efficiency? Centralized authority focused on top level decision-making Learning organization which emphasizes communication and collaboration Decentralized authority focused on shared tasks and decisions ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Efficiency versus Learning Outcomes

Vertical Information Sharing
Vertical linkages coordinate activities between the top and the bottom of the organization Hierarchical referral are the vertical lines which identify the chain of command Rules and Plans create vertical links Reports, computer systems, and written information are vertical information systems ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Horizontal Information Sharing
Horizontal linkage coordinates activities across organizational departments - not traditionally drawn on the organizational chart Information Systems Liaison Roles Task Forces Full-Time Integrator Teams ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Ladder of Mechanisms for Horizontal Linkages

Teams and Horizontal Coordination

Relational Coordination
High level of horizontal coordination Frequent, timely, problem-solving communication Relationships of shared goals, shared knowledge, and mutual respect ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Horizontal Coordination and Linkages

Organization Design Alternatives
Required Work Activities Reporting Relationships Departmental Grouping Options ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Departmental Grouping Options
Functional Grouping Divisional Grouping Multifocused Grouping Horizontal Grouping Virtual Network Grouping ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Functional Structure Activities grouped by common function
All specific skills and knowledge are consolidated Promotes economies of scale Slow response to environmental changes Prevalent approach but few companies can respond in today’s environment without horizontal linkages ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Functional: Strengths & Weaknesses

Divisional Structure Product structure or strategic business units
Divisions organized according to products, services, product groups Good for achieving coordination across functional departments Suited for fast change Loses economies of scale Lacks technical specialization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Reorganization from Functional to Divisional

Divisional: Strengths & Weaknesses

Geographic Structure Organizing to meet needs of users/customers by geography Many multinational corporations are organized by country Focuses managers and employees on specific geographic regions Strengths and weaknesses similar to divisional organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Geographic Structure

Matrix Structure Multifocused with strong horizontal linkage
Conditions for Matrix: Share resources across the organization Two or more critical outputs required: products and technical knowledge Environment is complex and uncertain Allows organization to meet dual demands Largest weakness is that employees have two bosses and conflicting demands ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Matrix Organization

Conditions for Matrix Structure
Need for shared and flexible use of people across products Two or more critical outputs like new products and technical knowledge The environment is complex and uncertain ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Matrix: Strengths & Weaknesses

Horizontal Structure Organization around core processes
Processes refers to tasks and activities Shift towards horizontal structure during reengineering Eliminates vertical hierarchy and departmental boundaries ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Horizontal Structure

Characteristics of Horizontal Structure
Structure is created around cross-functional processes Self-directed teams, not individuals, are dominant players Process owners are responsible for entire process People on the team are given authority for decisions Can increase organization’s flexibility Customers drive the organization, measured by customer satisfaction, employee satisfaction, and financial contribution Culture is one of openness, trust, and collaboration; focus on continuous improvement ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Horizontal: Strengths & Weaknesses

Virtual Networks and Outsourcing
Extend horizontal coordination beyond the boundaries of the organization Most common strategy is outsourcing Contract out certain tasks/functions Virtual or modular structures subcontract most of its major functions to separate companies The virtual network organization serves as a central hub with contracted experts ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Virtual Network Example

Virtual Network Strengths and Weaknesses

Hybrid Structure Combination of various structure approaches
Tailored to specific needs Often used in rapidly changing environments Greater flexibility ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Application of Structural Design
Each structure meets different needs and is a tool that can help managers be more effective Structural alignment aligns structure with organizational goals Symptoms of Structural Deficiency: Decision making is delayed or lacking quality Organization cannot meet changing needs Employee performance declines, needs are not meet Too much conflict ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Structure to Organization’s Need for Efficiency vs. Learning

Design Essentials Structure must provide a framework, linking organization into whole Provide vertical and horizontal linkages Variety of alternatives for grouping Virtual network extends horizontal coordination Matrix structure attempts to achieve balance Managers must find right balance The purpose of the organization chart is to encourage and direct activities ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The External Environment

The Organization Environment
All the elements that exist outside the boundary of the organization Potential to affect all or part of the organization Domain is the chosen environmental field of action Sectors or subdivisions that contain similar elements ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

An Organization’s Environment

The Task Environment Sectors that the organization interacts with directly to achieve goals Typically the “industry” and market sectors Human Resources International Sector Raw Materials Sector ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

General Environment Sectors that might not have a direct impact on the daily operations of a firm Government sector: regulation Sociocultural sector: the green movement Economic conditions: global recession Technology sector: massive and constant changes Financial resources Extremely important to entrepreneurs ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

International Environment
Can directly affect many organizations Has grown in importance Distinction between foreign and domestic operations All organizations face domestic and global uncertainty ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Changing Environment
The dimensions of the environment range: Unstable Homogeneous Heterogeneous Simple Complex The dimensions boil down to: The need for information about the environment The need for resources from the environment Organizations must cope with and manage uncertainty to be effective. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Dimensions of the Environment
Simple-complex: heterogeneity; the number of dissimilarity of external elements Stable-Unstable: whether elements in the environment are dynamic ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Framework for Assessing Environmental Uncertainty

Adapting to a Changing Environment
Organizations need the right fit between internal structure and the external environment Adding Positions and Departments Building Relationships Boundary-spanning roles Business intelligence Differentiation and Integration Organic vs. Mechanistic Management Process Planning, Forecasting, and Responsiveness ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Departments Differentiate to Meet Needs of Sub-environments

Different Goals and Orientations among Departments

Environmental Uncertainty and Organizational Integrators

Mechanistic and Organic Forms
Tasks are specialized Tasks are rigidly defined Strict hierarchy of authority and control Knowledge and control of tasks are centralized Communication is vertical Employees contribute to the common task of the department Tasks are adjusted and redefined through teamwork Less hierarchy of authority and control Knowledge and control of tasks are located anywhere in the organization Communication is horizontal ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Contingency Framework for Uncertainty and Organizational Responses

Dependence on External Resources
Resource-dependence perspective means organizations depend on the environment Strive to acquire control over resources to minimize dependence Organizations are vulnerable if resources are controlled by other organizations Minimize vulnerabilities Will team up with others when resources are scarce ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Influencing External Resources
Balance linkages and independence Reach out and change or control elements in the environment Establish favorable relationships with key elements of the environment Shape the environment by influencing key sectors ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizing Strategies for Controlling the External Environment

Environmental Characteristics and Organizational Actions

Design Essentials Change and complexity have major implications for organizations Organizational environment differs regarding uncertainty and resource dependence The goal for organizations is managing efficiencies and survival Managers must understand how the environment influences the structure of an organization When risk is great, organizations can attempt to change or influence the environment Organizations can learn and adapt to the environment ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Interorganizational Relationships

Organizational Ecosystems
Interorganizational relationships – resource transactions, flows, and linkages that occur among two organizations Organizational ecosystem – a system formed by the interaction of a community of organizations and their environment ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Is Competition Dead? Changing technology and new regulations present organizations with international competition Organizations are involved in complex networks; the number of corporate alliances are increasing Traditional competition no longer exists ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Ecosystem

The Changing Role of Competition
In ecosystems, managers move beyond traditional responsibilities Managers must think about horizontal processes The old role of management relied on operation roles and boundaries Collaborative roles are becoming more important for success ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

A Framework for Interorganizational Relationships

Resource Dependence Locking in resources through long-term supplier relationships is a common resource-dependence theory Supply chain management refers to managing the sequence of suppliers and purchasers Large independent companies can have power over small suppliers ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

A Basic Supply Chain Model

Collaborative Networks
Emerging alternative to resource dependency Companies join together to become more competitive and to share scarce resources Alliances require managers who are good at building networks Companies can share risk and cooperation is a prerequisite for greater innovation, problem solving, and performance ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Changing Characteristics of Interorganizational Relationships

Population Ecology Organizational diversity and adaptation within a population of organizations Population is a set of organizations engaged in similar activities The theory notes that large, established organizations often become dinosaurs They have difficulty adapting The changing environment determines survival or failure Heavy investments can limit organizational adaptation Model looks at organizational form Organizational niche can help aid in the survival of an organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Elements in the Population-Ecology Model of Organizations

Strategies for Survival
Organizations struggle for existence (competition) Generalist strategies – wide niche or domain, broad range of products or services to a broad market Specialist strategies – narrow range of goods or services that serve a narrow market ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Institutionalism Institutional perspective: Institutional Environment
Manage survival Balance expectations of environment Institutional Environment Norms and values of stakeholders Adopt structures and processes to please outsiders Legitimacy - an organization’s actions are desirable, proper, and appropriate ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Institutional View and Organizational Design
Technical Structure Day-to-day work Technology Operating requirements Governed by norms and rationality of efficiency Institutional Structure Visible to the public Governed by expectations of the public ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Three Mechanisms for Institutional Adaptation

Design Essentials There has been an evolution in interorganizational relationships Organizations operate within an ecosystem Four perspectives have been developed to explain relationships among organizations Collaboration is an emerging alternative to resource dependence New organizations fill niches left open by established companies The institutional perspective notes that interorganizational relationships are shaped by legitimacy as well as products/services ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Organizations for the International Environment

Entering The Global Arena
More companies are doing business globally Companies need top leaders who have a global outlook Advancements in technology and world communications have changed the competitive landscape ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Motivations for Global Expansion
Economic, technological, and competitive forces have combined to push companies from a domestic to a global focus Motivations for Global Expansion: Economies of Scale Economies of Scope Low-Cost Production Factors ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Global Economy as Reflected in the Fortune Global 500

Stages of International Evolution

Global Expansion Through International Strategic Alliance
Licensing – allowing another firm to market your brands Joint Ventures – separate entity of two or more firms Consortia – groups of independent companies ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategies for Global vs. Local Opportunities
Global standardization versus local responsiveness Globalization or multidomestic strategy Globalization strategy - products are standardized throughout the world Multidomestic strategy - competition is handled in each country independently ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Fitting Organization Structure to International Advantages

Global Organization Structure
International Division Global Product Division Global Geographic Division Global Matrix Structure ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Domestic Hybrid Structure with International Division

Partial Global Product Structure

Global Geographic Structure

Global Matrix Structure

The Global Organizational Challenge

Leading Multinational Companies and Selected Countries

Examples of Trickle-Up Innovation

Global Coordination Mechanisms
Global Teams Headquarters Planning Expanded Coordination Roles ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Benefits of Collaboration
Cost Savings Better Decision Making Greater Revenue Increased Innovation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Cultural Differences In Coordination and Control
National Value System Power Distance: people accept inequality Uncertainty Avoidance: members feel uncomfortable with uncertainty and ambiguity ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

National Approaches to Coordination and Control
Centralized Coordination: Japanese Companies Decentralized Approach: European Firms Coordination and Control Through Formalization: The United States Tradition in Chinese companies remains more family-oriented and relatively small ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Transnational Model of Organization
Advanced international organization to deal with multiple, interrelated, complex issues Theory is based on interdependence Useful for large, multinational companies with subsidiaries Create an integrated network of individual operations that are linked together Not an organizational chart; it is a managerial state of mind ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

International Organizational Units

Transnational Organizations
Assets and resources are dispersed worldwide Structures are flexible and ever-changing Subsidiary managers initiate strategy and innovations that become strategy for the whole organization Corporate culture, shared vision, and management style guide the organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Elements Managers must design organizations for complex international coordination Organizations’ international strategies and structures evolve There are diverse options for specific international strategies There are a variety of challenges for global organizations Diverse national and cultural values influence an organization’s approach Companies operating globally require broad coordination ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Manufacturing and Service Technologies

Service and Manufacturing Technologies
Technology refers to the work processes, techniques, machines, and actions used to transform input into outputs Technology influences organizational structure Understanding technology helps dictate how organizations can be designed for efficiency Core technology relates to the transformation process to provide goods/service Non-core technology is not directly related to the primary mission of the organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Core Transformation Process for a Manufacturing Company

Pressures Affecting Organization Design

Manufacturing Firms Technical complexity defines the extent of mechanization of the manufacturing process Three basic technology groups defined by Woodward: Small-batch and unit production Large-batch and mass production Continuous-process production ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Woodward’s Classification Based on System of Production

Relationship between Technical Complexity and Structural Characteristics

Strategy, Technology, and Performance
Strategy, structure, and technology need to be aligned Successful firms have complementary structures and technologies Failing to adopt a new technology or failing to realign strategy can lead to poor performance ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Digital Factory The shop floor has been revolutionized
Computer-aided Design (CAD) Computer-aided Manufacturing (CAM) Manufacturing Process Management (MPM) Integrated Information Network Product life-cycle Management (PLM) Also called computer-integrated manufacturing, flexible manufacturing systems, smart factories, advanced manufacturing technology, and agile manufacturing ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Flexible Manufacturing Technology vs. Traditional Technologies

Lean Manufacturing Highly trained employees at every stage of production Cut waste and improve quality Incorporates technological elements Paved the way for mass customization Using mass-production technology to quickly and cost-effectively assemble individual goods for customers ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Performance and Structural Implications
Flexible manufacturing allows diverse products to be made on one assembly line Computer-aided craftsmanship More efficient Increased productivity Decreased scrap Customer satisfaction ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Comparison of Organizational Characteristics

Service Firms Service technologies are different from manufacturing technologies and require different organizational design Education, health care, transportation, and banking all have unique dimensions Services have intangible output There is direct interaction with customer and employee Human element is important Quality of service cannot be directly measured ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Core Organization Service Technology

Trend Toward Lean Services
Customer expectations are rising Expectations have required that service firms must become lean, too Cut waste Improve customer service Adopt continuous improvement approach ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Structural Characteristics of Service Organizations versus Product Organizations

Designing the Service Organization
Service organizations are not necessarily large Often small locations, close to customers Service organizations require technical core employees – close to customer Service customers interact directly with technical employees The skills of technical employees need to be high Employees need knowledge, awareness, and interpersonal skills Decision making is often decentralized ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Non-Core Departmental Technology
Every department in an organization has a production process Variety: frequency of unexpected and novel events Analyzability: ability to apply standard procedures Routine vs. Nonroutine Dimension Engineering Technologies Craft Technologies ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Framework for Department Technologies

Department Design Overall design is either organic or mechanistic
Design characteristics vary depending on work unit Formalization Decentralization Employee skill level Span of control Communication and coordination ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Relationship of Department Technology to Structural and Management Characteristics

Workflow Interdependence Among Departments
The extent to which departments depend on each other for resources or materials Low interdependence means that departments can do their work independently High interdependence means departments depend on each other ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Interdependence and Management Implications

Interdependence of Departments Involved in the Flight Departure Process

Structural Priority and Implications
Reciprocal interdependence should receive first priority Reciprocal activities should be grouped together Poor coordination will cause poor performance Organizations should be designed to address interdependence ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Coordination for Interdependence

Relationship of Interdependence and Team Play Characteristics

Impact of Technology on Job Design
Job Simplification Job Rotation Job Enrichment Job Enlargement Technology impacts: Job Design Sociotechnical systems Sociotechnical systems approach recognizes the interaction of technical and human needs ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sociotechnical Systems Model

Design Essentials Key research notes that technology and structure can be co-aligned Service technologies differ in a systematic way from manufacturing technologies It is important to apply the correct management system to a department Interdependence among departments dictates the amount of communication and coordination required in design New technologies are enriching jobs to make organizations a happier place to work Sociotechnical system theory attempts to design systems that meet technical and human aspects ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Using Information Technology for Control and Coordination

Evolution of Organizational Applications of Technology

Information for Decision Making and Control
Technology can help managers make important decisions Management information systems include: Information reporting systems Executive information systems (EIS) Decision support systems (DSS) Organizations are using technology to add strategic value ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Managerial Control and Decision Making

A Simplified Feedback Control Model

Management Control Systems
Formal routines, reports, and procedures Formalized information based activities Controls include: Budgets, financial reports Reward systems Quality control systems Managers must define standards and measure performance ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Control Systems/Content Frequency

An Executive Dashboard

The Level and Focus of Control Systems
Organizational Level: The Balanced Scorecard Measures financial, customer, employee, and market concerns Comprehensive management control system Strategy map – visualization of organization success drivers and how they are linked Departmental Level: Behavior versus Outcome Control How people do their jobs Outcomes people produce ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Major Perspectives of the Balanced Scorecard

Strategy Map for Performance Management

Increasing internal coordination with customers and external partners
Strategic Approach I: Strengthening Employee Coordination and Efficiency Increasing internal coordination with customers and external partners Intranets Knowledge Management Social Networking Enterprise Resource Planning ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Two Approaches to Knowledge Management

Strategic Approach II: Strengthening Coordination with External Partners
Strengthening External Coordination with information technology Supply Chain Management Integrated enterprise Enhancing customer relationships eBusiness organizational design The Integrated Enterprise Information linkages are key for coordination Horizontal relationships coordinate the supply chain to meet customer needs ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Integrated Enterprise

Corrugated Supplies System in Action

Customer Relationships
Many companies are applying technology to build customer relationships Social Media Directors are blending marketing, promotions, customer service, and support through Facebook, Twitter, and company websites 65% of companies use company blogs to communicate with customers For CEOs, blogs and Twitter have become requirements ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

E-Business Organization Design
E-business is any business that takes place over a computer network E-commerce is transforming to m-commerce as more transactions take place on mobile devices Managers must figure out bricks and clicks strategies Separate business Spin-off companies Joint ventures ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategies for Integrating Bricks and Clicks

IT Impact on Organization Design
Smaller Organizations Decentralized Organizational Structures Improved Horizontal Coordination Improved Interorganizational Relationships Enhanced Network Structures ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Characteristics of Traditional vs
Key Characteristics of Traditional vs. Emerging Interorganizational Relationships ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Successful organizations leverage technology
Technology aids in better decision-making Organizations must employ controls to measure performance Technology is adding strategic value internally and externally Technology is impacting the design of organizations ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Size, Life Cycle, and Decline

Differences Between Large and Small Organizations

Organization Size: Is Bigger Better?
Pressures for Growth Companies in all industries strive for growth to acquire the size and resources needed to compete globally Size enables companies to take risks Dilemmas of Large Size Large organizations are able to get back to business more quickly following a disaster Large companies are standardized, mechanistic, and complex Small companies are flexible and can be responsive Many companies aim to have a big company/small-company hybrid ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Five Famous Mergers and Acquisitions Gone Wrong

Organizational Life Cycle
193 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Characteristics During Four Stages of Life Cycle

What is Bureaucracy? Weber defined bureaucracy as a threat to liberty
Bureaucracy includes: Rules and standard procedures Clear tasks and specialization Hierarchy of authority Technical competence Bureaucracy is the most efficient system for organizing The control introduced by Weber was rational and a significant idea ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Weber’s Dimensions of Bureaucracy and Bases of Organizational Authority

Size and Structural Control
Formalization – rules, procedures, and written documentation Centralization – level of hierarchy with authority to make decisions Personnel Ratios – clerical and professional support staff ratios ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Percentage of Personnel Allocated to Administrative and Support Activities

Bureaucracy in a Changing World
Bureaucracy worked for the industrial age The system no longer works for today’s challenges Organizations face new challenges and need to respond quickly Over-bureaucratization is evident in the inefficiencies of large U.S. government organizations Narrowly defined jobs and rules limit creativity, flexibility, and rapid response Some organizations are using temporary structures for emergencies or crisis situations ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Approaches to Busting Bureaucracy
Google uses bullpen sessions every afternoon Small geographic based teams Increasing authority of workers The increasing professionalism of employees is attacking bureaucracy ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Three Organizational Control Strategies

Examples of Rules at a Yacht Club

Organizational Decline and Downsizing
The decrease of an organization’s resources over time is caused by: Organizational atrophy Vulnerability Environmental decline or competition Downsizing refers to intentionally reducing the size of a company’s workforce ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stages of Decline and the Widening Performance Gap

Easing Downsizing Tension
Search for alternatives Communicate more, not less Provide assistance to displaced workers Help the survivors thrive ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Organizations experience pressures to grow
Organizations evolve through stages of the life-cycle Larger organizations usually adopt bureaucratic characteristics All organizations require systems for control Many organizations experience decline ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Culture and Ethical Values

What is Culture? Values, norms, guiding beliefs, and understandings that are shared by members of an organization Taught to new members as the correct way to think, feel, and behave Organizational culture exists at two levels Observable symbols Underlying values ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Levels of Corporate Culture

Emergence and Purpose of Culture
Provides sense of organizational identity Two critical functions in organizations: To integrate members so they know how to relate to one another To help organization adapt to external environment Internal Integration – collective identity and know how to work together External Adaption – how the organization meets goals and deals with outsiders ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Observable Aspects of Organizational Culture

Organizational Chart for Nordstrom
Nordstrom’s structure reflects the emphasis the department store chain puts on empowering and supporting lower-level employees. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Design and Culture
Managers want a corporate culture that reinforces the strategy and structural design the organization needs to be effective within environment. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Culture Strength and Organizational Subcultures
Culture strength is the degree of agreement among members of an organization about specific values Subcultures reflect the common problems, goals, and experiences of a team or department Different departments may have their own norms ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Culture, Learning, and Performance
Culture is important to learning and innovation during challenging times Strong adaptive cultures often incorporate the following values: The whole is more important than the parts Equality and trust are primary values The culture encourages risk taking, change, and improvement ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Constructive Versus Non-Constructive Cultures

Ethical Values and Social Responsibility
Ethics Ethics refer to the code of moral principles and values that govern the behaviors of a person or group with respect to what is right or wrong Managerial Ethics Ethical decisions go far beyond behaviors governed by law Managerial ethics guide the decisions and behaviors of managers ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sources of Individual Ethical Principles and Actions

Relationship between the Rule of Law and Ethical Standards

Corporate Social Responsibility (CSR)
Does it pay to be good? Extension of the idea of managerial ethics Management’s obligation to make choices and take action that positively impact stakeholders Increase in social responsibility Customers and public are paying closer attention to what organizations do Social responsibility can enhance a firm’s reputation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Managers Shape Culture and Ethics
Value-Based Leadership Formal Structure and Systems Structure Disclosure Mechanisms Code of Ethics Training Programs Managers play key role in providing leadership and examples of ethical behavior ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Characteristics of Values-Based Leaders

Corporate Culture and Ethics in a Global Environment
The global environment presents tough ethical challenges Countries have varied attitudes and beliefs Components that characterize a global culture: Multicultural rather than national values Basing status on merit rather than nationality Managers must think broadly about ethics Social audits measure and report ethical, social, and environmental impact of a company’s operation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Cultural and ethical values help determine the organization’s social capital and can contribute to success Managers can use rites and ceremonies, stories, symbols, structures, control systems, and power relationships to influence culture Subcultures may emerge even in strong cultures Strong cultures can be constructive or non-constructive Managerial ethics and corporate responsibility are important aspects of organizational values Managers can shape culture and ethics through formal systems Social audits are important tools for companies trying to maintain high ethical standards ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Theory and Design
Innovation and Change Organization Theory and Design Eleventh Edition Richard L. Daft ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Strategic Role of Change
Organizations must run fast to keep up with changes taking place all around them Today’s organizations must keep themselves open to continuous innovation to survive Three types of change: Episodic change Continuous change Disruptive change Change has become the norm today ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Forces Driving the Need for Major Organizational Change

Strategic Types of Change

Elements for Successful Change
Organizational change is the adoption of a new idea or behavior by an organization Organizational innovation is the adoption of an idea or behavior that is new to the organization’s industry, market, or general environment Change process within organizations comes from innovation and new ideas regardless of timing Successful change includes ideas and creativity, need, decision to adopt, implementation, and resources ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Successful Change Elements

Technology Change Technology is a key driver of organizational change
Change is easily embraced by organizations with empowered employees Innovative organizations are flexible and free- flowing without rigid work rules Mechanistic structures stifle innovation and focus on rules and regulations ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Ambidextrous Organization
Incorporates structures and management processes that are appropriate for innovation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Techniques for Encouraging Technology Change
Switching Structures – create an organic structure Creative Departments – department for innovation Venture Teams – a small company within the organization Corporate Entrepreneurship – promote entrepreneurial spirit Bottom-up Approach – useful ideas come from people and daily work ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

New Products and Services
The failure rate for new food products is 70-80% Producing products that fail is part of business Reasons for success: Innovating companies understand customers Innovating companies successfully use technology Top management supports innovation Horizontal Coordination Model: Specialization Boundary Spanning Horizontal Coordination Open Innovation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

New Product Success Rates

Horizontal Coordination for Innovation

Achieving Competitive Advantage: The Need for Speed
The rapid development of new products and services can be a major strategic weapon Time-based competition means delivering products and services faster than competitors Many companies use fast cycle teams to support highly important projects ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategy and Structure Change
Organizations need to change strategies, structures, processes, and procedures more often to adapt Many organizations are preparing for more change by: Cutting out layers Decentralizing decision making Shift toward horizontal structures Empowered teams and workers Virtual network strategies Incorporating eBusiness ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Dual-Core Approach to Organization Change

Organization Design for Implementing Management Change
Change related to restructuring and downsizing can be painful for employees Managers should be quick, authoritative, and humane Successful change managers are fast and focused to implement change ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Forces for Culture Change
Reengineering and Horizontal Organization Diversity The Learning Organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

OD Culture Change Interventions
Large Group Intervention Team Building Interdepartmental Activities ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Barriers to Change Excessive focus on costs
Failure to perceive benefits Lack of coordination and cooperation Uncertainty avoidance Fear of loss Leadership for Change: 80% of successful innovative companies have top leaders who reinforce the value and importance of innovation. Transformational leadership is well-suited for leading change. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Techniques for Change Implementation
Establish a sense of urgency for change Establish a coalition to guide the change Create a vision and strategy for change Find an idea that fits the need Develop plans to overcome resistance Create change teams Foster idea champions ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Techniques for Overcoming Resistance
Alignment with needs and goals of users Communication and training An environment with psychological safety Participation and involvement Forcing and coercion ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Change, not stability, is the challenge for managers
There are four types of change Organic structures foster innovation A top-down approach is best for change and strategy Top managers must foster culture change The implementation of change can be difficult ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision-Making Processes

Types of Decisions Organizational decision making – process of identifying and solving problems Problem Identification Problem Solution Programmed Decisions – repetitive and well defined Nonprogrammed Decisions – novel and poorly defined ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision Making in Today’s Environment

Individual Decision Making
Rational approach – ideal method for how managers should make decisions Bounded rationality perspective – how decisions are made under severe time and resource constraints ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Steps in the Rational Approach

Bounded Rationality Perspective
There is a limit to how rational managers can be—time and resource constraints Nonprogrammed decisions Constraints and Tradeoffs Constraints impinge the decision maker The Role of Intuition Experience and judgment rather than logic ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Constraints and Tradeoffs During Nonprogrammed Decision Making

Organizational Decision Making
Management Science Approach Carnegie Model Incremental Decision Model ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Management Science Approach
Use of statistics to identify relevant variables Remove human element Very successful for military problems Good tool for decisions where variables can be indentified and measured A drawback of management science is that quantitative data are not rich and lack tacit knowledge ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Incremental Decision Model
Focus on structured sequence of activities from discovery to solution Large decisions are a collection of small choices Decision interrupts are barriers Identification Phase Development Phase Selection Phase Dynamic Factors ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Incremental Decision Model

Problem Identification and Problem Solution
When problem and problem solution are uncertain ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Garbage Can Model Pattern or flow of multiple decisions
Think of the whole organization Explain decision making in high uncertainty - organized anarchy: Problematic preferences Unclear, poorly understood technology Turnover Streams of events instead of defined problems and solutions ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Consequences of the Garbage Can Model
Solutions may be proposed even when problems do not exist Choices are made without solving problems Problems may persist without being solved A few problems are solved ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making

Contingency Framework for Using Decision Models

Special Decision Circumstances
Today’s environment presents high-stakes, quick decisions Managers must deal with: High-velocity environments Learning from decision mistakes Understanding cognitive and personal biases Escalating commitment Prospect theory Groupthink Evidence-based management Encourages dissent and diversity ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Most decisions are not made in a logical manner
Individuals make decisions, but organizational decisions are not made by a single individual Conflict exists when problems are not agreed on The garbage can model has become a description of decision-making Organizations operate in high-velocity environments Allowing biases to cloud decision making can have negative consequences ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conflict, Power, and Politics

Interdepartmental Conflict in Organizations
Groups may be dispersed across the organization Intergroup conflict requires three ingredients: Group Identification Observable Group Differences Frustration Conflict is similar to competition but more severe ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sources of Conflict Goal Incompatibility Differentiation
Task Interdependence Limited Resources ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Marketing-Manufacturing Areas of Potential Goal Conflict

Rational versus Political Model
The rational model where behavior is not random or accidental Goals are clear and choices are made logically The political model involves push and pull debate regarding goals Organization groups have separate interests and goals ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Sources of Conflict and Use of Rational versus Political Model

Top 10 Problems from Too Much Conflict

Tactics for Enhancing Collaboration
Create integration devices Use confrontation and negotiation Schedule intergroup consultation Practice member rotation Create shared mission and superordinate goals ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Negotiation Strategies

Power and Organizations
Power is the potential ability of one person to influence other people Individual versus Organizational Power Legitimate Power Reward Power Coercive Power Expert Power Referent Power ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Power versus Authority
Authority is more narrow than power Defined by the formal hierarchy and reporting relationships Authority is vested in organizational positions Authority is accepted by subordinates Authority flows down the vertical hierarchy Power can be exercised upward, downward, and horizontally Authority is exercised downward along the hierarchy ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Vertical Sources of Power
Formal Position – legitimate power accrued to top positions Resources – resources can be used as a tool for power Control of Information – information is a primary business source Network Centrality – being centrally located in the organization and having access People – loyal executives/managers ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Information Flow for Computer Decision at Clark Ltd.

Illustration of Network Centrality

The Power of Empowerment
Power sharing, the delegation of power or authority to subordinates Empowerment benefits: Employees receive information about company performance Employees have knowledge and skills to contribute to company goals Employees have the power to make substantive decisions ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Horizontal Sources of Power
Relationships across departments, divisions, units Strategic Contingencies – groups most responsible for key organization issues Power Sources – five power sources that departments may possess ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Ratings of Power among Departments in Industrial Firms

Strategic Contingencies That Influence Horizontal Power among Departments

Political Processes in Organizations
Politics is the use of power to influence decisions toward goals Organizational Politics - activities to acquire, develop, and use power to influence goals Domains of political activity: Structural Change Management Succession Resource Allocation ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Power and Political Tactics in Organizations

Design Essentials Conflict, power, and politics are natural outcomes of organizing There are two views for organizations: rational and political models There are vertical and horizontal sources of power Certain characteristics make some departments more powerful than others Managers need political skills Managers should enhance collaboration to reduce conflict ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizations and Organization Theory

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