Summary oranization theory, Chapter 3 and 4
Organizational Structure (EBP670C05)
Rijksuniversiteit Groningen
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Organization theory
Summary chapter 3
Organization theory, as a discipline, clarifies which organization structure will lead to, or improve, organizational effectiveness. It is hard to give organizational effectiveness a clear definition. In the 1950’s they mainly used the goal attainment approach. This approach was all about how an organization was able to reach it goals. If an organization reached it’s goals, it was considered as an effective organization.
Another simple way to measure effectiveness is to look at the survival of an organization. A problem with this approach however is that it is hard to know when a organization is considered as ‘dead’. An organizations are getting remade or taken over by other organizations for instance.
In the 1960’s and 60’s there was a big growth of studies of organizational effectiveness. A review of these studies identified 30 different criteria to measure ‘organizational effectiveness’ (those 30 criteria can be found on page 75, table 3). A problem with these criteria is that a lot of them are contradictory. Efficiency and availability for instance. Efficiency means that all the resources are used to their maximum. But availability however requires some kind of stock.
We use the following definition for Organizational effectiveness: the degree to which an organization attains its short- and long-term goals, the selection of which reflects strategic constituencies, the self-interest of the evaluator and the life stage of the organization.
The goal-attainment approach Once again, this approach measures the ability of an organization to reach it’s goals to the effectiveness of the organization.
The problem with this approach is that it is hard to know which goals have to be applied for this approach. The levels within an organization often have different goals. There also can be struggles between the short- and long-term goals. Another complications might arise while the official goals and the actual goals from an organization often differ. Another complication might arise because organization often have several goals which might not always get together.
It however can remind us the reason why a certain organization exist. That’s to achieve goals.
The systems approach The systems approach: evaluating an organization’s effectiveness by its ability to acquire inputs, process the inputs, channel the outputs and maintain stability and balance. So it is all about the way the supply chain functions.
The problem however is that it might be hard to measure some critical ratios, like the rate of innovation for instance. Critics also say that this approach focuses more on the means necessary to achieve effectiveness rather than on organizational effectiveness itself.
The systems approach increases the managers’ awareness of the interdepence of organizational activities. Another plus is that it also takes the input for an account.
The strategic-constituencies approach The strategic-constituencies approach is an organization’s effectiveness is determined by how successfully it satisfies the demands of those constituencies in its environment from which it requires support for its continued existence. This might be the stakeholders or the bank for instance.
Larger companies should make a list of strategic-constituencies because they often have to deal with a lot of constituencies. Then the organization should find out what the needs of these constituencies are so they could satisfy them.
The stakeholders approach to effectiveness This approach is much like the strategic-constituencies approach, only this approach also focuses on those who might not have the political power to influence the existence of the organization or its direction. Such as family of workers or residents near the plant. The stakeholder approach considers that an organization is effective only if it takes into account the wider community that has an interest in the decisions of the organization, even if this is at the cost of profits.
The strategic-constituencies approach is not without problems. The environment changes quickly what was important for an organization yesterday, may not be so import today and may be entirely different tomorrow. Also it is hard to draw a line between strategic-constituencies and ‘’almost strategic- constituencies’’. This approach also assumes that the goal of an organization is to survive. But a lot of companies are made to sell and have an other goal.
The balanced scorecard approach The balanced scorecard seeks to balance the various demands on the organization with its capabilities. The balanced scorecard attempts to view performance in several areas simultanea=ously and identify not results but how the results were achieved.
The various components of the balanced scorecard are illustrated in figures 3- b on page 93. The components attempt to identify four basic questions facing any organization. These are: - How do important financial providers perceive us (financial perspective) the financial measures indicate whether an organization’s strategy and its execution are contributing to profitability, or covering costs. - How do consumers see us? (Costumer perspective) goals in this perspective also include service etc.
Spatial differentiation: the degree to which the location of an organisation’s facilities and personnel is dispersed(=verspreid) geographically. If it’s small: few problems of communication while they have the same language and culture. If it’s big: opposite
Formalization : the degree to which jobs and procedures within the organization are standardized. Employees are expected to undertake tasks in exactly the same way. This results in a consistent and uniform output.
The advantage of formalization is that it leads to less variability. So stores for instance (like mcdonalds) are the same everywhere. Another advantage is that the staff doesn’t need to be very clever, because they will always follow procedures. They don’t have to think for themselves.
Formalization techniques
Selection: Recruiters will search someone who fits the formalizations of the organization.
Role requirements: Requirements about how the incumbent is suppose to behave.
Rules, procedures and policies
Socialisation: and adaptation process by which individuals learn the values, norms and expected behavior patterns for the job and the organization of which they will be a part.
Training
Rituals: Processes by which members probe their trustworthiness and loyalty to the organization by participating in various behaviours in which predetermined responses are expected.
Centralization: The degree to which decision making is concentrated in a single point in the organization, usually top management.
Advantages of decentralization: - the pressure of decision making is shared between several people/groups - Decisions can be made quicker because the information doesn’t need to go al the way up the vertical hierarchy - Decentralization may bring more input into the decision making, because the people most familiar with the issue make a decision. - Decisions may require input from specialists.
- It can motivate employees because they become a part in the decision- making process.
Centralization however brings out a clear decision. Also will the decision be made by the top management, and they also carry out the task of choosing the strategic direction of a company.
Coordination: The process of integrating the objectives and activities of the separate units of an organization in order to achieve organizational goals efficiently.
Programmed coordination: bureaucracy, planning, goal setting, scheduelling etc.
Individual coordination: This generally involves the appointment of a person whose main task is to coordinate the work of others. Where situations cannot be fully anticipated or where unusual circumstances demand a unique solution to a problem, individual coordination is often used.
Informal coordination: a large amount of coordination that takes place in an organization results from the voluntary action of those who need to cooperate with others.
Organization design options
Configuration: a complex clustering of elements that are internally cohesevie and where the presence of some elements suggests the reliable occurrence of others.
Henry Mintzberg argues that there are five basic parts to any organization.
- Operating core – employees, who perform the basic work related to the production of products and services.
- Strategic apex – Top-level managers who are charged with the overall responsibility for the organization.
- Middle line – managers who connect the operating core to the strategic apex
- The technostructure – analysts who have the responsibility for developing the programs, procedures and rules which stadardise the work of the organization.
- Support staff – people who fill the staff units that provide indirect support services for the organization.
We have got five basic organizational structures:
The simple structure A structure that is low in complexity, low in formalization, and in which authority is centralized in a single person.
The strength of this structure lies in its simplicity. Decision making is fast and giving information is easy because there are only two layers of management. It’s
The primary reason for using the divisional structure is product or market diversity. But it only can be applied when the technologies of the organization are divisible.
The professional bureaucracy A structural form that has highly skilled professionals, high complexity, decentralization and the use of internalized professional standards in place of external formalization. It is a decentralized configuration in which highly trained specialists form the operating core but where the benefits of standardization and decentralization are still achieved. It is created for companies with high trained personnel. These professionals are given space by this structure so they can apply their expertise/training well.
Strength: - high skilled personnel is able to face unique problems by the freedom they get. Weakness - the professionals often place their own self-interest over that of the organization, because the various professional function seek to pursue their own narrow objectives. - The specialists are often constrained (=beperkt) by the rules of their profession. - The work is compartmentalized which makes it hard to coordinate for the management.
It should be used in a stable but complex environment. This environment needs high skilled employees.
The Adhocracy An organizational form characterized by high horizontal differentiation, low vertical differentiation, low formalization, intensive coordination, and great flexibility and responsiveness. It has high skilled professionals and it is for temporary organizations. This organization is far more coordinated compared to a professional bureaucracy. The adhocracy depends on the high skilled professionals for decision making.
Strength: - are able to respond quickly to change and innovation and to facilitate the coordination of diverse specialists.
Weakness: - conflicts arise easily while it’s not clear who is the boss. - It can create stress because it is not easy to set up and quickly dismantle work relationships. - It is mostly inefficient. Because of it’s limitations, its I only applicable under certain circumstances. The environment has to be dynamic an complex for it to be an advantage. It is not only an temporary form. There is also a permanent form, small innovative organization often use this structure.
Summary oranization theory, Chapter 3 and 4
Vak: Organizational Structure (EBP670C05)
Universiteit: Rijksuniversiteit Groningen
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