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Chapter 1
Organizations and Organizational Effectiveness
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
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Learning Objectives
1. Explain why organizations exist and the purposes they serve 2. Describe the relationship between organizational theory and organizational design and change, and differentiate between organizational structure and culture
What is an Organization?
Most people have a casual attitude toward organizations because organizations are intangible. Even though most people in the world today are born, work, and die in organizations, nobody has ever seen or touched an organization. We see the products or services that an organization provides, and sometimes we see the people whom the organization employs, for example, when we go into a Kinko's store. But the reason an organization, such as Kinko's, is motivated to provide goods and services, and the way it controls and influences its members so that it can provide them, are not apparent to most people outside the organization. Nevertheless, grouping people and other resources to produce goods and services is the essence of organizing and of what an organization does.
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What is an Organization?
Organization: a tool used by people to coordinate their actions to obtain something they desire or value. E.g., People who value security create an organization called a police force. An organization is a response to and a means of satisfying some human need. New organizations are spawned when new technologies become available and new needs are discovered, and organizations die or are transformed when the needs they satisfied are no longer important.
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What is an Organization?
Who creates the organizations that arise to satisfy people's needs? Sometimes an individual or a few people believe they possess the necessary skills and knowledge and set up an organization to produce goods and services. Sometimes several people form a group to respond to a perceived need by creating an organization. In general, entrepreneurship is the term used to describe the process by which people recognize opportunities to satisfy needs and then gather and use resources to meet those needs.
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Organizations employ people Organizations bring together people and resources to produce products and services Basically, organizations exist to create value
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Organizations have the ability to control the exchanges between people to reduces the transaction costs associated with these exchanges. Suppose Intel bought the services of its scientists on a daily basis and thousands of scientists had to spend time every day discussing what to do and who should work with whom. Such a system will be costly and waste valuable time and money. The structure and coordination imposed by the Intel organization, lets managers hire scientists on a long term basis, assign them to specific tasks and work teams, and gives Intel the right to monitor their performance. The resulting stability reduces transaction costs and increases productivity. 1-18
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4. Organizational design:
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Figure 1.4: The Relationship Among Organizational Theory, Structure, Culture, Design, and Change
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Because of increased competitive pressures and because of the increasing use of information technology (IT), organizational design has become one of management's top priorities. Today, as never before, managers are searching for new and better ways to coordinate and motivate their employees to increase the value their organizations can create. There are several specific reasons why designing an organization's structure and culture, and changing them to increase its effectiveness, are such important tasks. Organizational design and change have important implications for a company's ability to deal with contingencies, achieve a competitive advantage, effectively manage diversity, and increase its efficiency and ability to innovate. Four Major Reasons why Organizational Design and Change are Important
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Contingencies are events that might occur and must be planned for most come from environment, like rising gas prices or a competitor like Amazon.com that decides to use new technology in all innovative way. Organizations must be designed to be able to effectively respond to environmental changes, and so obtains scarce resources. For example, an organization's ability to attract skilled employees, loyal customers, or' government contracts is a function of the degree to which it can control those three environmental factors. An organization can design its structure in many ways to increase control over its environment.
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Differences in the race, gender, and national origin of organizational members have important implications for organizational culture and effectiveness Learning how to effectively utilize a diverse workforce can result in better decision making and more effective workforce. An organization needs to design a structure to make optimal use of the talents of a diverse workforce and to develop cultural values that encourage people to work together. An organization's structure and culture determine how effectively managers are able to coordinate and motivate workers. (e.g., multinational companies)
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Control: external resource approach Innovation: internal system approach Efficiency: technical approach
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Managers also measure effectiveness by creating and measuring performance goals Official goals: guiding principles that the organization formally states in its annual report and in other public documents Mission: a mission statement explains why the organization exists and what it should be doing Operative goals: specific long- and shortterm goals that guide managers and employees as they perform the work of the organization
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Summary
Organizations are a tool people use to achieve their goals Organizational theory is the study of how organizations function and how they affect and are affected by their environment Organizational effectiveness must be monitored by managers
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