1. Thomson Learning © 20049-1 Chapter Nine Organization Size, Life Cycle, and Decline

2. Thomson Learning © 20049-2 Differences Between Large and Small Organizations LARGE Economies of scale Global reach Vertical hierarchy Mechanistic Complex Stable market Career longevity and stability SMALL Responsive Flexible Regional reach Flat structure Organic Simple Niche finding Entrepreneurs Source: Based on John A. Byrne, “Is Your Company Too Big?” Business Week, 27 March 1989, 84-94.

3. Thomson Learning © 20049-3 Organizational Life Cycle ORGANIZATION STAGES OF DEVELOPMENT 1. Entrepreneurial Stage 2. Collectivity Stage 3. Formalization Stage 4. Elaboration Stage Crisis: Need to deal with too much red tape Crisis: Need for delegation with control Crisis: Need for leadership Creativity Provision of clear direction Addition of internal systems Development of teamwork Crisis: Need for revitalization Decline Continued maturity Streamlining, small-company thinking SIZESIZE Large Small Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46.

4. Thomson Learning © 20049-4 Organization Characteristics During Four Stages of Life Cycle 1. Entrepreneurial 2. Collectivity 3. Formalization 4. Elaboration CharacteristicNonbureaucraticPrebureaucraticBureaucraticVery Bureaucratic Structure Informal, one-person show Mostly informal, some procedures Formal procedures, division of labor, specialties added Teamwork within bureaucracy, small- company thinking Products or services Single product or serviceMajor product or service with variations Line of products or services Multiple product or services lines Reward and control systems Personal, paternalisticPersonal, contribution to success Impersonal, formalized systems Extensive, tailored to product and department Innovation By owner-managerBy employees and managers By separate innovation group By institutionalized R&D Goal SurvivalGrowthInternal stability, market expansion Reputation, complete organization Top Management Style Individualistic, entrepreneurial Charismatic, direction- giving Delegation with controlTeam approach, attack bureaucracy Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business Review 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “Organizational Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.

5. Thomson Learning © 20049-5 Weber’s Dimensions of Bureaucracy and Bases of Organizational Authority BUREAUCRACY 1. Rules and procedures 2. Specialization and division of labor 3. Hierarchy of authority 4. Technically qualified personnel 5. Separate position and incumbent 6. Written communications and records LEGITIMATE BASES OF AUTHORITY 1. Rational-legal 2. Traditional 3. Charismatic

6. Thomson Learning © 20049-6 Percentage of Personnel Allocated to Administrative and Support Activities 50 75 25 0 Organization Size Small Large Line employees Top administrators Clerical Professional staff Percentage of Employees

7. Thomson Learning © 20049-7 Three Organizational Control Strategies TYPE Bureaucratic Market Clan REQUIREMENTS Rules, standards, hierarchy, legitimate authority Prices, competition, exchange relationship Tradition, shared values and beliefs, trust Source: Based upon William G. Ouchi, “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science 25 (1979): 833-48.

8. Thomson Learning © 20049-8 Market Control Basis of control: Price competition Req: 1) tangible outputs 2) competition 3) any size unit OK Good ex: divisions Bad ex: HR, IT

9. Thomson Learning © 20049-9 Bureaucratic Control Basis of control: use of rules, hierarchy Req: 1) accept authority 2) extensive policies 3) best for large units Good ex: HR, IT Bad ex: R&D

10. Thomson Learning © 20049-10 Clan / Professional Control Basis of control: use of values, culture Req: 1) shared emp values 2) high level of trust 3) orient / socialize 4) best for small units Good ex: SME, R&D Bad ex: large unit/org

11. Thomson Learning © 20049-11 Evaluation of Control On the Job Workbook Activity 1. 2. 3. 4. Your job responsibilities How your boss controls Positives of this control Negatives of this control How you would improve control

12. Thomson Learning © 20049-12 Evaluation of Control At the University Workbook Activity 1. 2. 3. 4. Item How Prof. A (small class) controls How these controls influence you What you think is a better control How Prof. B (large class) controls