Chapter 1: Introduction Flashcards
What are the 3 main components of Organizational Architecture?
- The assignment of decision rights within the company
- The methods of rewarding individuals
- The structure of systems to evaluate performance of individuals and business units
What does the assignment of decision rights refer to in Original Architecture?
It refers to determining who has the authority to make decisions within the company
How are individuals rewarded in Organizational Architecture?
Through methods that align incentives with organizational goals
What is the purpose of performance evaluation systems in Organizational Architecture?
To assess the performance of both individuals and business units
What does economics provide in decision-making?
A framework for analyzing decisions
What is the role of incentives in decision-making?
Incentives influence how individuals make choices
How can managers use organizational architecture to motivate employees?
By structuring it to align employee incentives with organizational goals
What challenges can arise in managing incentives?
Incentive conflicts and opportunistic behavior
What is Economic Darwinism?
The idea of “survival of the fittest,” where competition encourages efficient decisions
What must firms do to survive under Economic Darwinism?
Adapt to maximize shareholder value or face closure
What is the purpose of benchmarking in Economic Darwinism?
Firms benchmark to emulate successful practices and best practices
How does appropriate organizational architecture benefit firms?
It can lower costs and ensure high-quality production
Why is existing organizational architecture not random under Economic Darwinism?
Surviving architectures are optimal relative to competitors
What happens to organizational architecture as environments change?
The appropriate architecture evolves to adapt to the new environment
