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Chapter 1: Organizations and Organizational Theory

Evolution of Organizational Theory and Design

Historical Perspectives

Scientific management (Frederik Winslow Taylor)

-organizations and job design should be based on precise, scientific study of individual
-precise, standard procedures for each job
-carefully plan work and provide wage incentives to increase output

Administrative principles – design and functioning of organization as a whole

-principle of management (Henri Fayol)
Bureaucratic organizations – emphasized designing and managing organizations on an
interpersonal, rational basis through elements such as clearly defined authority and

Hawthorne Studies – positive treatment of employees improved their motivation and

-lead groundwork for treatment of workers, leadership, human resource management

1980s produced new organization cultures that valued: lean staff, flexibility, rapid response to
the customer

Current challenges
– contracting out some business functions to other countries to gain global
-increased competition
-companies searching for structures and processes that can help them reap
advantages of global interdependence and minimize disadvantages

Ethics and Social Responsibility

-executive and major corporations involved in financial and ethical scandals
-public forming opinion that all corporate executives are crooks
-tremendous pressure from governments and public to hold organizations and
employees to high ethical and professional standards

Speed of Responsiveness
-globalization accelerated pace in which organizations in all industries must roll
out new products and services to stay competitive
-customers want products tailored to their exact needs
-increasing importance information, not machines and factory
Digital Workplace
-employees perform much of their work on computers and work in virtual teams

-organizations must have an international face
-international employees
-glass ceiling for women in workplace

What is an Organization?

Organizations are:
(1) Social entities that are
(2) Goal direct
(3) Designed as deliberately structured and coordinated activity systems
(4) Linked to the external environment

Organization exists when people interact with one another to perform essential functions that
help attain goals.
Managers deliberately structure and coordinate resources to achieve the organization’s
Striving to greater horizontal coordinator, using teams of employees from different functional
area to work together on projects

For-profit vs non profit

Manager in business direct their activities towards earning money for the company
Managers in nonprofits direct their efforts towards generating some kind of social

For Profit
-revenue stream from products or services

Non profit
-Financial resources for nonprofits come from government grants and individual and
corporate donations
-services are provided to nonpaying clients
-managers focus on keeping organizational costs low with highly efficient use of
-managers must market their services to not only clients but also volunteers and donors
Importance of Organizations

Perspective on Organizations

Closed system – not depend on environment

-autonomous, enclosed, sealed off from outside world
-early management concepts (scientific management) were closed-system as they
assumed organization would be better with an internal design

Open system – interact with environment to survive

-consumes resources and exports resources to the environment
-must adapt to environment
-environmental changes, disposal of output, uncertainty

System – set of interacting elements that requires inputs from the environment, transforms
then, and discharges output to the external environment

Subsystem – specific function required for the organizational survival

-i.e. boundary spanning, production, maintenance, adaptation
Organizational Configuration

Technical core – people who do the basic work of the organization

-performs production subsystem function
-produces product and service outputs of the organization
-i.e. manufacturing

Management – responsible for directing and coordinating

Top management – provides direction, strategy, goals, and policies
Middle management – responsible for implementation and coordination at the
departmental level
-mediating between top management and the technical core, i.e implementing
rules and passing information

Technical support – helps organization adapt to the environment

-i.e. engineers and researchers scan environment for problems, opportunities
-creating innovations in the technical core, help org change and adapt
Administrative support – responsible for smooth operation and upkeep of the organization
-includes HR such as recruiting and hiring, compensation and benefits, employee

Some parts have boundary spanning functions that connect each function to each other

Dimensions of Organization Design

Structural dimensions – labels to describe the internal characteristics of an organization

Formalization – amount of written documentation in the organization
-procedures, job descriptions, regulations, policy manuals
-these written documents describe behaviour and activities
-i.e. university written rules for registration, adding or dropping classes
Specialization – degree to which organizational tasks are subdivided into separate jobs
Hierarchy of authority – describes who reports to whom and the span of control for
each manager
Centralization – hierarchical level that has authority to make a decision
-more centralized = decision making at top levels
Professionalism – level of formal education and training employees
Personnel ratios – deployment of administrative people to various functions and
-i.e. administrative ratio, professional staff ratio
Contextual dimensions – characterize the whole organization: size, technology, culture,
environment, goals and strategy
Goals and strategy – define purpose and competitive techniques that set it apart from
other organizations
-goals are enduring statement of company intent
-strategy is plan of action that describes resource allocation and activities for
dealing with the environment
Environment – all elements outside the boundary of the organization
-i.e. industry, government, customer and suppliers
Size – organization’s magnitude in number of people in the organization
Culture – underlying key values, beliefs, understanding, norms shared by employees
-provide glue to hold organizational members together
Technology – tools, techniques, actions used to transform inputs into outputs
-concerns how organization actually produces the products and services

Performance and Effectiveness Outcomes

Efficiency – amount of resources used to achieve the organization’s goals

-amount of raw materials, money, employees necessary to produce a given level of
Effectiveness – degree to which an organization achieves its goals

Organizations need clear, focused goals and appropriate strategies for achieving them

Stakeholder approach – integrates diversity organizational activities by looking at various

stakeholders and what they want from the organization
-stakeholder is any group within or outside the organization that has a stake in the
organization’s performance
Contingency – one thing depends on other things
-for organizations to be effective, there must be a goodness of fit between their
structure ad conditions in their external environment

Contemporary Organizational Design

Chaos theory – relationship in complex, adaptive system is nonlinear and made up of numerous
interconnections and divergent choices that create unintended effects and render the universe

Learning organization – orgs that promote communication and collaboration so that everyone
is engaged in identifying and solving problems

Efficient Performance versus the Learning Organization

Vertical to horizontal structure

-promotes efficient production and in-depth skill development
-top executive is not able to response fast enough to problems and opportunities

Routine tasks to empowered roles

Task - narrowly defined piece of work assignment to a person
-knowledge and control of tasks are centralized at the top of the organization
and employees are expected to do as they are told
Role - part of a dynamic social system (discretion and responsibility)
-employees are encourage to work with one another to solve problems

Formal Control System to Shared Information

-small organizations generally informal and face-to-face
-large organization face issue of large distance between top leaders and workers
Shared information - rather than using information to control employees, try to open
channels of communication so that ideas flow in all directions

Competitive to Collaborative Strategy

-organizations designed originally for efficient performance, strategy formulate by top
managers and imposed on the organization
-collaborate strategy accumulates action of an informed and empowered workforce to
contribute to strategy development

Rigid to Adaptive Culture

- danger for culture becomes ossified, as if set in concrete
-people are aware of the whole organization
-each is a valued contributor and allow people to develop
Framework for the Book

Levels of analysis – characterize organizations

-human being  group or department  organization  inter-organization set

Organizational behaviour – micro approach to organizations because it focuses on individuals

within organizations as the relevant units of analysis
Organizational theory – macro examination of organizations because its analyzes the whole
organization as a unit
Meso theory – concerns integration of both micro and macro level of analysis