DISCONSIDER (too long) Flashcards
common features of organizations
- membership
- specified member roles
- formalized rules
- clear objectives
Economic foundations of business administration
- Role of markets
- Role of the entrepreneur and the purpose of the firm
- The firm in classical economics
- Basic variables
Efficiency
using as little resources as possible to attain a certain goal
How to design organizations so that they can fulfill a certain task?
- modern technologies enable large scale production
- large organizations enable specialization
- large organizations require coordination efforts
Classical organization theories
- Weber
- Taylor
- Fayol
Weber
Individuals follow authority if they regard it as legitimate
- different forms of authority in society.
- traditionally charismatic authority: makes them leaders.
- Traditional authority (kings).
Charismatic and traditional get replaced or complemented by legal authority.
Legal authority: future of modern society. Bureaucracy is legal authority
bureaucracy characteristics
- rules
- specified competencies
- hierarchy
- technical training
- neutrality
- written recording of rules and decisions
follow these and you’ll organize in the most efficient way. least resources. It’s reliable. Things don’t change unless changed formally. Work as precise as a machine
Critique and re-assessment to bureaucracy
- efficient, reliable, stable, and precise form of organization, but it might produce “one-dimensional” individuals, because there’s no space for freedom, creativity or emotion
- Analogy of machines is problematic
- oftentimes criticizes as the symbol for inefficiency.
Why is bureaucracy a symbol for ineffiency nowadays?
- blind rule following: employees lose sight of the organizational goals and instead follow the rules in an unreflected manner (rule following becomes the main objective)
- limited sustainability of rules to cover relevant tasks. Cannot cover everything in rules, so many things are beyond rules. Also need to rely on common sense in every organizational level
- inability of (per definition stable) rules to keep pace with dynamics in the organizational environment. Not flexible.
Taylor’s scientific management
- focus on the optimization of the labour process
- organization management based on scientific rules
basic ideas:
- separation of planning/control and execution of work
- managers concentrate on planning and control
- division of labour enables specialization and measurability
- time studies as a way to measure average time required for specific tasks. Leads to formulation of expected performance levels.
specialization and efficiency
- specialization leads to efficiency and optimal social welfare
because:
- learning effects: the most often a task is accomplished, the less effort is required
- economies of scale: cost per produced unit decreases with increasing quantities
- synergies: accomplishing similar tasks reduces overall effort
critique for Taylor’s scientific management
motivation exclusively through money
increased breakdown of work tasks into smaller subtasks leads to several negative things:
- monotony
- increased speed of work
- alienation: no worker understands the product to which they contribute
- increased surveillance: performance can be measured by the second. might be efficient, but humanly-speaking, simply not nice
- loss of self-determination
Fayol’s administrative approach
- critical insights from managerial practice as an instruction for successful organization and management
- within an optimal organization, a manager should focus mainly organizing, planning, and delegating: their only job is to make the organization optimal
- focus on the management process as a whole
- organizing as the design and implementation of an optimal organizational structure
“functions of management” by Fayol
- planning
- Organizing
- Command
- Coordination
- Control
Critique for Fayol’s administrative approach
Management principles as generally valid recipes for designing efficient organizations, but his principles are rather abstract. There is no empirical proof, so can the principles really be proved?
assumptions about the individual
- people are unreliable. There is a need for control and continuous supervision.
- individuals are unable to understand the organization and take responsibility. Managers understand what’s going on, and they’re in the position to tell the others what’s happening.
- individuals need to follow rules
- individuals are exclusively motivated by money.
assumption about the organization
- coordination need to come from the top of the organization
- all that matters is efficiency, no place for emotions
- the future can be foreseen - planning is possible
- division of labour always increases efficiency
- hierarchy as the only way to manage efficiently
assumptions about theory
- it’s able to produce generally applicable rules
- should aim at increasing organizational efficiency
U-form
- unitary structure
- division of labour and specialization increase efficiency through learning effects and economies of scale
- for increasingly large organizations this implies functional differentiation
functional differentiation
creation of sub-units with focus on specific tasks
limits of the unitary structure
Major risk: increasing size leads to increasing complexity
- too many interfaces: inefficient communication
- diffusion of responsibility because many actors contribute to a certain objective
- administrative load becomes overwhelming at the top
- low flexibility as a result of high specialization: how to handle unexpected issues?
M-form
- multidivisional structure
- aim: avoiding challenges of the u-form
- potential criteria for divisionalization: products/product groups; regions; customers
alternative designs for M-form
- divines as departments
- divisions as separate firms: holding
major dilemma of the M-form
- decentralization as manes to increase efficiency
vs
- loss of control for the CEO/top management
- independence of functions and units (“centrifugal tendency”)
Matrix-organization
- Avoiding the centrifugal tendencies of large U- and M-form organizations
- leadership of functions focus on efficiency
- leaders of products/projects focus on the integration of production
downsides of matrix-organizations
- Opacity
- lengthy decisions
- high coordination costs
- conflicts: stress
- high documentation effort
- too much communication effort
project-organization
- projects as means to organize under conditions of uniqueness (e.g.: development of new product) and novelty (e.g.: no standard routine available)
ways to organize projects
- matrix-project-organization
- pure project organization
Most large organizations are frequently subject to reorganization as. a result of
- mergers and acquisitions
- strategic re-orientation
- management fashions
integration
bringing together the different elements of a task to enable consistent processing of a task
modes of integration
- vertical integration (hierarchy, programs/rules)
- horizontal integration (meetings, coordinators, facilitators)
dilemma differentiation vs integration
specialization and functional differentiation in order to increase efficiency, but it also increases complexity, so integration is required
What makes bureaucracy so special?
Its characteristics
Burns & Stalker’s study
-study of the electronic industry
- dependent on the degree of environmental “turbulence”, successful companies have different organizational structures
- stable environment: mechanistic structures
- turbulent environment: organismic structures
- If an organization is very focused on efficiency, it’s very hard to adapt to what is changing and happening in the environment
- If too turbulent, then must switch to organismic system
turbulence
speed of innovation
characteristics mechanistic system
- high differentiation
- task as basic orientation: they work with tasks
- hierarchy
- responsibility concentrated on specific functional roles
- distributions of responsibility as functions
- top of the organization has the knowledge
- vertical communication
- governance by superiors
- loyalty towards superiors
- focus on internal knowledge
characteristics of organismic system
- low differentiation
- goals as basic orientation: work with goals
- interaction as mode of coordination
- shedding of responsibility or no shifting responsibility
- responsibility as a general commitment
- knowledge is anywhere in the organization
- lateral communication
- governance through information and advice
- loyalty towards tasks
- focus on general expertise
Contingency theory
- Organizational structures are determined by the organizational environment
- there’s no one best way to manage or lead. Instead, the best approach depends on the specific situation, including factors like the environment, tasks, and people involved.
foundational assumptions of organizational contingency theories
- Each environmental state implies one optimal organizational structure
- Organizations cannot change their environments
- Organizations need to deliver specific performance levels
contingency theory critique
- there is not one single solution for a problem, there are oftentimes “functional equivalents”
- organizations can choose their relevant environments and can also shape them through PR, or lobbying, as examples
- Organizations aren’t required to be maximally efficient
global environments
- Technological
- Political/legal
- Socio-cultural
- Ecological
- Macro-economic
Task environments
- Competitors
- Potential competitors
- Substitution products
- Demanders
- Suppliers
- Industrial relations
dimensions for characterizing organizational environments
- complexity: number and heterogeneity of elements in the environment
- dynamics: degree of changes in the environment
- pressure: degree of threat emanating from elements in the environment
features of information
- uncertainty: absence of information, implies that one can always know more. In order to understand change, just need to do some research and then adjust and adapt
- equivocality: existence of multiple and conflicting interpretations about an organizational situation. People don’t know what’s happening
