OTD Chapter 11 Flashcards
Organizational Life Cycle
A sequence of growth and development stages through which an organization might pass.
Organizational Life Cycle stages
- Organizational Birth
- Organizational Growth
- Organizational Decline
- Organizational Death
Organizational Birth
The founding of an organization. A dangerous life cycle stage associated with the greatest chance of failure due to the liability of newness.
Population Ecology Theory
A theory that seeks to explain the factors that affect the rate at which new organizations are born (and die) in a population of existing organizations.
Population of organizations
The organizations that are competing for the same set of resources in the environment.
Population density
The number of organizations that can compete for the same resources in a particular environment.
R-Strategy
A strategy of entering a new environment early.
K-strategy
A strategy of entering an environment late, after other organizations have already tested the waters.
Specialist
Organization that concentrates its skills to pursue a narrow range of resources in a single niche.
Generalist
Organization that spreads its skills thinly to compete for a broad change of resources in many niches.
R-specialist
Early entry, one niche.
R-generalist
Early entry, many niches.
K-specialist
Late entry, one niche.
K-generalist
Late entry, many niches.
Natural selection
The process that ensures the survival of the organizations that have the skills and abilities that best fit with the environment.
Organizational Growth (stage 2)
In this stage, organizations develop value creation skills and competences that allow them to acquire additional resources.
Institutional theory
A theory that studies how organizations can increase their ability to grow and survive in a competitive environment by satisfying their stakeholders.
Institutional environment
The set of values and norms in an environment that govern the behaviour of a population of organizations.
Organizational isomorphism
The similarity among organizations in a population.
Three processes that explain why organizations become more alike:
Coercive isomorophism
Mimetic isomorphism
Normative isomorphism
Coercive isomorphism
Pressured by other organizations or society in general.
E.g., Nike, Walmart, and Apple, how they were pressured by the public to boycot goods made by children in developing countries, and how these companies responded by creating uniform codes of supplier conduct.
Mimetic isomorphism
Organizations that intentionally imitate and copy one another to increase their legitimacy.
E.g., Fast-food chains mimicking how McDonalds standardised its global fast food network.
Uncertainty increases imitation.
Normative isomorphism
Organizations that come to resemble one another over time because they indirectly adopt the norms and values of other organization in the environment.
That is, because managers and employees are frequently moved from one organization to another, bringing the values and norms they learned at their former employer with them.
Disadvantages isomorphism
Out-date, inertia sets in, resulting in low effectiveness.
Reduced the incentive to experiment so the innovation level may decline.
Greiner’s Growth Model
Describes the phases that organizations go through as they grow. Each growth phase is made up of a period of relatively stable growth, followed by a “crisis” when major organizational change is needed if the company is to carry on growth.
Greiner’s Growth Model - stages
- Creativity
- Direction
- Delegation
- Coordination
- Collaboration
Greiner’s Growth Model - crises
- Leadership
- Autonomy
- Control
- Red-tape
Organizational decline (stage)
Stage that an organization enters when it fails to anticipate, recognise, avoid, neutralise, or adapt to external and internal pressures that threaten its long-term survival.
Organizational inertia
Forces inside organizations that make it resistant to change.
Factors that cause inertia are
Risk aversion
Desire to maximize rewards
Overly bureaucratic culture
Risk aversion
Unwillingness to bear the uncertainty associated with entrepreneurial activities.
Desire to maximize rewards
Managers’ desire for prestige, job security, power, and strong property rights that bring large rewards often lead them to focus on strategies that increase organizational size, even if it reduces future probability and organisational effectiveness.
Overly bureaucratic culture
In large organizations, property rights can become so strong that managers spend all their time protecting their specific rights instead of working to advance the organization’s interests.
Major sources for uncertainty in the environment are
Complexity
Dynamism
Richness
Complexity
The number of different forces that an organization has to manage.
Dynamism
The degree to which the environment is changing.
Richness
The number of resources available in the environment.
Weitzel and Jonsson’s five stage model of organizational decline
- Blinded stage
- Inaction stage
- Faulty action stage
- Crisis stage
- Dissolution stage
Blinded stage
Decline begins because key managers fail to recognise internal and external changes that harm their organization.
This blindness may be due to lack of awareness about changes or an inability to understand their significance.
Inaction stage
As an organization’s problems become more visible, managers may recognise the need to change, but still do not take action.
They may wait for the problem to correct itself. They don’t feel as if the situation is urgent.
Faulty action stage
Faced with rising costs and decreasing profits and market share, management will announce belt-tightening plans designed to cut costs, increase efficiency, and restore profits.
Rather than recognising the need for fundamental changes, managers assume that if they run a tighter ship, company performance will return to previous levels.
Crisis stage
Bankruptcy or dissolution are likely to occur unless the organization reorganises the way it does business.
At this point, companies typically lack the resources to fully change how they run their business. Cutbacks and layoffs will have reduced the level of talent among employees.
Dissolution stage
After failing to make the changes needed to sustain the organization, the company is dissolved.
A new CEO may be brought in to oversee the closing of stores, offices, and manufacturing facilities.
