Summary Organisational Theory, - H3-4
Organizational Structure (EBP670C05)
Rijksuniversiteit Groningen
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Organisation Theory – Concepts and Cases, Summary of chapter 3 & 4
Chapter 3
Effective organisation What is an effective organisation? Based on different approaches we can find a definition for an effective organisation. Organisational effectiveness is the degree to which an organisation 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 organisation. (organisation theory)
Goal-attainment approach The first of these various approaches is the goal-attainment approach. Here an organisation's effectiveness judged in terms if whether it meets goals. Assumptions of this approach are that (1) the organisation has goals, (2) that they are explicit, clear and widely known, (3) manageable number of goals and that they reflect areas important for the organisation. (4) also there must be a general consensus on these goals. (5) finally progress towards goals must be measurable and there should be a time limit attached to them.
Problems of this approach are the following: (1) ‘whose goals do you apply?’, who is the key group who sets the goals for the organisation? (2) another complication is the difference between its official and non-official goals. Official goals are influenced by what society wants to hear while non-official goals are mostly to be kept away from competitors.(3) the multiple goals also create difficulties; for example ‘high product quality’ and ‘low unit cost’. These are directly odds of each other. (4) whether a goal has been achieved is not easy; for example being environmentally responsible this means different things to different people. (5) multiple goals must be ordered to importance but how do you allocate importance to goals that may be incompatible and represent diverse interests?
A organisation exists to achieve goals but the problem lies in their identification and measurement.
The systems approach The second approach is the system approach evaluating an organisations effectiveness by its ability to acquire inputs, process the inputs, channel the outputs and maintain stability and balance. Assumption is that the organisation is made up of interrelated subparts. If any of these subparts perform poorly, it will have a negative effect on the whole system. This approach has a finance orientation so it has little applicability to government or charitable organisations.
Problems: (1) measurement, rates of innovation or quality of management team is hard to measure. (2) it makes little sense to be a great producer is the product is no longer asked for or if there is a glut (overvloed) of it. The systems approach leaves us with the impression that it is better at measuring the efficiency of the system rather than the effectiveness of the organisation.
The strategic-constituencies approach An organisation’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. Thus it seeks to appease only those in the environment who can threaten the organization’s survival.
Problems: (1) The environments tend to change so rapidly that it’s very difficult to keep up. (2) what separates the strategic constituencies from the almost strategic constituencies (families of workers, residents near the working site)? (3) how do you identify the expectations of the constituencies?
The balance scorecard approach The balanced scorecard attempts to integrate all of the upper approaches. This approach looks at the (1) financial perspective, how profitable, rate of return on assets. (2) customer perspective, time to delivery, service, market share (3) internal perspective, availability of equipment, costs of production (3) innovation and learning perspective, ability to develop and introduce new products, production effeciencies.
Problems: (1) top management and major stakeholders are involved when identifying the goals. But the identification and ranking of goals by importance is often a subjective process, which influenced by personal agendas. (2) what is important often changes and it is difficult to identify or quantify these changes. (3) this approach hasn’t built in a buffer for crises because they have a benign (positieve) view of the environment.
Comparing the 4 approaches
Approach Definition An organization is effective to the extent that....
When useful The approach is preferred when... Goal attainment It accomplishes its stated goal Goals are clear, time-bound and measurable Systems It acquires needed resources A clear connection exists between inputs and outputs Strategic constituencies All strategic constituencies are at least minimally satisfied
Constituencies have a powerful influence on the organisation, and the organisation must respond to demands Balance scorecard Areas critical to the business are identified and measured.
The organization is complex and is operating in a demanding environment Source: page 97 “Organisation theory concepts and cases”.
Cartoon matching to chapter 3:
Difference efficiency & effectiveness: Many people tend to mix some definitions up. Efficiency and effectiveness. These people think that lowering the costs directly results in bigger space for profits. But is this true? It's true that the company is working more efficient but the company will not be more effective. This situation is happening in this cartoon. The manager seems happy because the costs are lower. But his view on effectiveness is narrow minded because he can't see the long term problems. Lowering costs might at first seem a great way to make more profit short term. But long term the
opposite will happen.
Why is formalisation important? (1) companies ensure that their store presentation and standards of service are the same on every location (2) when each worker on the line performs highly standardised and coordinated the products on the assemble line are produced more smoothly. (3)it permits members of the organisation to anticipate how others will act in certain situations and lays down guidelines to follow (fire-fighting team). (4)the greater the formalisation the less discretion(beleid) is required as a result, their pay is low.
Formalisation techniques
- Selection: interviewers will always be looking at the ability of a person to fit into the organisation and reflect its values as one of the prime requirements for selection.
- Role requirements: every job carries with it task requirements, these may be explicit and defined in great detail, in which case the degree of formalisation is high.
- Rules, procedures & policies
- Socialisation: learning the organisation’s culture to the new employees.
- Training: giving the employees on-the-job and off-the-job trainings is intended to instil in employees preferred work behaviour and attitudes.
- Rituals: essentially communal activities which bring people and groups together (Christmas parties, after-dinner drinks) Rituals are a way to show loyalty and thereby show that it can be trusted to reflect the organisation’s norms and values.
(3) Centralisation ; the degree to which decision making is concentrated in a single point in the organisation, usually top management.
Why is centralisation important? Decentralisation facilitates speedy action because information doesn’t need to process through the vertical hierarchy and also decentralisation can provide more detailed input into the decision. The greater the number involved in decision making the more the decision may be described as decentralised. Decentralised decision making can act as a motivator to employees by allowing them to participate in the decision making process. Final plus for decentralisation is the training opportunity that it creates for lower-managers.
But with centralised decision the top-level managers will make decisions with the best interest of the whole organisation. Also for some decisions expertise is necessary. This discussion between centralised decision making or decentralised leads to the conclusion that either may be desirable.
Coordination all organisations requires coordination between the individuals and groups within a company. Where coordination is absent, efficiency is lost as staff duplicate work, lose time while waiting for others to finish something. 3 coordination devices;
- Programmed coordination: planning, time tabling
- Individual coordination: where unusual circumstances demand a unique solution to a problem. Appointment of one person whose main task is to coordinate the work of others (project manager)
- Informal coordination: voluntary action on a day-to-day basis. Achieved by face-to-face discussion, emails, phone calls.
Organisation design options: Although many different and complicated organisational structures do exist, nearly all large-size organisations have common elements which are called as the ’’five basic elements“ and consist of the :
operating core (employees doing the basic work) the strategic apex (top managers which form the head of the organisation) the middle line (managers who link the top managers with the employees), the technostructure (people who develop standardisation of an organisation) and the support staff (people who fill staff unit).
There are 5 distinct design configurations and each one is associated with the domination by one of the 5 basic parts.
Simple structure: low in complexity, low in formalisation and in which authority is centralised in a single person. Flat organisation with an organic operating core and almost everyone reporting to a one person strategic apex. Strength: decision making is fast, operations are flexible and require little cost to maintain, minimum amount of goals because of two layers. Weakness: only applicable to small organisations and one man’s life or shortages in skills can ruin entire company
Divisional structure: (unilever) structure characterised by a set of self-contained, autonomous units coordinated by a central headquarter. Strength: clear accountability and responsibility for the performance of each division. Frees head office staff from involvement with day-to-day operating details so that they can pay attention to the longterm. Another strength is that each division is autonomous and can be sold or disposed with minimal effect on the entire organisation. Same for adding businesses. Ineffective performance of one of the divisions has little effect on another. Weakness: duplication of activities and resources. Another is that cooperation between divisions is difficult. And so is coordination because divisions are often in very different brands and might even compete with each other.
Machine bureaucracy: an organisation with very routine and formalised operating tasks, rules and regulations which is highly centralised. Standardisation is the key concept. Strength: ability to perform standardised activities in a highly efficient manner. Can get by with less talented and less costly managers because of rules and regulations. Weakness: specialisation creates conflicts in communications and goals between subunits. Another weakness is employees find it hard to adapt to changes because they always follow the rules and regulations.
Proffesional bureaucracy: (advocatenkantoor) structural form that has highly skilled professionals, high complexity, decentralisation and the use of internalised professional standards in place of external formalisation. Strength: employees can perform specialized tasks Weakness: tendency for subunit conflicts to develop because they tend to place own self-interest over that of the organisation. Also adapting to changing circumstances. Further, difficulty in coordinating the work of the various professionals. Another is that it is difficult to set strategic priorities, because there is no top management.
Adhocracy: (team of filmmakers) characterised by highly decentralised, high horizontal differentiation, low vertical differentiation, low formalisation, intensive coordination and great flexibility and responsiveness. Strength: ability to respond rapidly to change and innovation. Weakness: can create social stress and tension for members because of lack of rules and policies.
Summary Organisational Theory, - H3-4
Vak: Organizational Structure (EBP670C05)
Universiteit: Rijksuniversiteit Groningen
