Ch 6: Size

Question 1

How can you define organizational size?

Answer 1

The total number of employees in a organization

Question 2

What did Peter Blau find in his research?

Answer 2

That there is an increase in complexity of organization as size increases, but the rate of increase diminished once a certain size is reached.

Question 3

Name some size related problems.

Answer 3

• processing large amounts of data into useful information
• extended time frames for action: late to realize when a change is needed
• knowing where profits are made and costs are incurred
• growth of bureaucracy: higher demands on formalization
• bounded rationality & satisficing: the scale and scope of operations, it can be to much for individual persons or even groups to grasp all information → needs to reduce the complexity.
• balancing exploration and exploitation: the need to adapt to changing technologies and product life cycles
• difficulty in managing over a wide geographical area

Question 4

Name some solutions to the size related problems.

Answer 4

• dividing the organization into manageable parts
• outsourcing: hire companies that takes responsibility for parts of the process
• find the right balance between centralization and decentralization
• structuring to facilitate change: minimize the degree of formalization, find new ways of solving problems and don´t look back at old procedures.
• ensuring that important tasks have someone responsible for them
• physically separate those areas of the organization which undertake different types of work, e.g. separate the production from the administrative work

Question 5

Name some reasons for downsizing.

Answer 5

• increased competition
• computerisation and automation
• technological obsolescence: new processes and inventions to replace workers
• declining profitability
• information technology and middle management: controlling, coordination and decision-making that’s often related to tasks made by managers, gets replaced by IT.
• realization that size of itself does not bring advantages: due to low growth and bad adaptation.
• changes in strategy: reducing their businesses to a few core skills → business less diverse → fewer managers
• changes in structure: less head of staff for every division
• the rise of outsourcing

Question 6

Name some benefits from downsizing.

Answer 6

• lowered overheads: reduces costs → improve their competitive position
• less bureaucracy: less vertical complication, information can transport travel faster
• faster decision-making
• smoother communications
• greater entrepreneurship: decentralization of functions → innovative behavior
• increased productivity: more of the same amount of work for the remaining part