Theories of Organization (2) Flashcards
Any organised human activity involves 2 EQUALLY but CONTRASTING objectives
- Division of labor into tasks
2. Coordination of tasks
Definition : Structure
the set of parameters used by an organization to meet these objectives
Definition: Design
the task of setting parameters
What is the Classical Argument?
There is one best way to design organizations
What is its counterargument?
Mintzberg: there is more than one best way. Structures should be tailored to internal and external factors: - age and size -technical system -environment -power balance
Parts of an organization
- strategic apex
techno-structure -middle line- support staff
-operating core
what is the strategic apex (senior managers)
- at the top of the organization
- purpose: ensures organisation follows its mission and manages its relationship with environment
- CEO etc
- they are responsible to owners, government agencies, unions, communities and so on
What is the middle line? (middle managers)
- group of managers who convert the objectives and broad plans of the Strategic apex into operational plans that can be carried out by the workers.
- as org grows and more complex: development of separate group (techno structure): analysts, best way of doing a job, specifying output criteria (quality standards) and ensuring personnel have appropriate skills (organising training programmes)
- also adds administrative functions (support staff) that provide services to itself: legal advice, public relations, mailroom, cafeteria (jobs that could be outsourced)
What is the operating core?
- most important
- people who do the basic work of producing product or delivering service
Coordination mechanisms
- Mutual Adjustment
- Direct Supervision
- Standardization
Mutual Adjustment
Talking to each other to find ad-hoc solutions to problems (for very simple jobs or extremely complex ones: in the OR)
Direct Supervision
reporting to a manager who specifies solutions for problems (as the job gets a bit more complex)
Standardization
Using rules and procedures to prevent problems from arising (when job gets even more complex)
- one of the main function of techno structure
- 3 kinds:
- of work processes
- the inputs (workers’ skills)
- outputs
Administrative School: Henri Fayol
- managers’ purpose is getting things done (increasing efficiency, providing direct supervision)
- emphasis on forecasting and planning
unity of command: subordinates have one superior
scalar chain: line of command from top to bottom
span of control: a superior’s number of subordinates
Fayol’s principles
- Specialization
- Authority of managers
- discipline of workers
- Unity of command
- Unity of direction
- primacy of organization
- fair remuneration
- centralization
- scalar chain
- order
- equity/fairness
- Job security
- initiative
- esprit de corps (group spirit)
Managerial functions
Planning: forecasting future events and setting an appropriate course of action
Organizing: ensuring access to the resources needed to carry out the plan
Commanding: directly supervising the plan’s implementation
Coordination: Maintaining internal consistency among chosen design parameters
Controlling: Periodically evaluating progress toward organizational objectives
Scientific management: Frederick Taylor
Manager’s purpose is optimizing production (increasing efficiency, standardizing work processes)
- emphasis on scientific method
Taylorism: popularized work studies, assembly lines, quality control, contributed to birth of operations research
Taylor’s Principles
Scientific approach: work designed according to cause-effect relations
Selection and development: workers picked and trained to accomplish tasks
alignment of interests: managers and workers as elements of one system
division of responsibilities
managers design tasks, workers execute them
Time and Motion Studies (Taylor)
Different sets of instructions for workers: two workers independently place and fasten bolts; one workers places bolts and the other fasten them
productivity measured with a stopwatch
multiple iterations to maximize productivity
Industrial applications
- revolutionized American manufacturing (raised productivity)
- example: Ford (assembly lines), mass production of Model T
Bureaucracy: Max Weber
Managers’ purpose is simplifying decisions (increasing efficiency, standardizing outputs and skills)
-emphasis on rules and procedures
three conditions lead to the rise of bureaucracy: monetary economy, literacy, and colonization
Weber’s principles
based on a kind of formal authority called rational-legal authority
Ideal bureaucracy:
- clearly defined division of labor
- hierarchical chain of command
- written documents to ensure consistency
- separation of home and office
- meritocratic hiring and promotion
the Iron Cage
rational-legal authority will crush the human spirit
society will become a machine where “not only the Kaiser but also the proletarian has lost its rights”
Humanity will enter a “polar night of icy darkness”
Legacy of Classical Theories
- design exists only to increase efficiency (only one best way, regardless of context)
- job satisfaction irrelevant
- work is a set of supervised/standardized tasks (no mutual adjustment, no informal authority)
Human relations school: Elton Mayo
Managers’ purpose is maximizing well-being (increasing job satisfaction, facilitating mutual adjustment)
-emphasis on social relationships (personal ties over scalar chain, two-way communication, rest and relaxation btw tasks)
- part of a larger movement called behaviorism
Hawthorne studies (4 studies)
- Illumination study
testing effect of lighting on productivity:
productivity also increased for control group, and
continued to increase when lighting was reduced
(no correlation)
2nd study: Relay assembly test room study
Test effect of working hours, breaks on productivity:
- separate room, smaller than factory floor
- choice of coworkers, hours, breaks
Evidence of mutual adjustment:
productivity increased compared to factory floor, but
increased even after restoring normal conditions
(no correlation)
3rd study: Interviewing program
studying effects of supervision on morale
- workers asked in the morning to talk about anything
- evidence that workers like upward communication
- view of managers became more positive over time
- complaints not objective facts but rather symptoms of dissatisfaction
workers’ behavior influenced by group behavior
4th study: Bank wiring room study
pay proportional to speed of work
possibility of firing if work too slow
evidence of non-monetary motivation: faster workers slowed down to protect colleague
Conclusions of Hawthorne studies
- monitoring workers change their behavior
- job satisfaction increases productivity (allowing choice of work conditions, keeping open lines of communication, knowing reasons behind managerial decisions)
- informal relationships motivate workers (factory as a social rather than techno-economic unit)
Contingency theory
no best way, dependent on internal and external factors
Contingency factor: Age and Size
organizations have a life cycle (size increases with age, size leads to coordination costs, coordination costs lead to formalization, age leads to even more formalization)
- flexibility vs. reliability?
- with age comes rigidity
design of old org:
specialization: need for different skills within a unit
differentiation: greater division of labor across units
interdependence: connections btw labor of units
(in start-ups, people do multiple tasks ≠ specialization)
Contingency factor: Technical System
- Unit Production : doing a job for one particular client (consulting) ; ad-hoc adjustments btw workers
- Mass production: machines do the work; routine, unskilled, highly formalized work; standardization of outputs and processes (car manufacturing)
- Process production : when production is to be continuous; automation of the operating core; standardization of skills (mainly in R&D) (oil extraction, energy, pharmaceuticals)
Contingency factor: Environmental characteristics
- Speed
slower change in customer preferences means demand is predictable and responses can be scripted (slow change: bureaucratic/ fast change: organic structure) - Complexity
decisions that require deep domain knowledge must be delegated to unsupervised specialists (complex: professional bureaucracy, standardize skills)
Recent theories:
Organizations as open system
- systems are sets of interacting components
- interaction implied interdependence (low interdependence can be more efficient: additive effects on system performance, easier to mix and match components; high interdependence can be more effective: multiplicative effects on system performance, harder to mix and match components)
usually, low independence is not excellent
level of optimal dependence depends on competition
systems are open if subject to outside influences
- dynamic, if they change over time
- complex, if cause-effect relations are unclear
- adaptive, if they change based on feedback
Transaction costs theory
markets generate transaction costs (finding partners, negotiating, enforcing contracts), transaction costs are avoided by organizing
organizations generate coordination costs (setting incentives, preventing agency problems), coordination costs are avoided by outsourcing
Organize or outsource? depends on which cost is higher
resource dependence theory
organizations are nodes in a network (consume resources to survive, unable to generate all resources internally, enter relations to acquire resources)
trading autonomy in exchange for security
power balance as a determinant of structure
Power-related strategies
Buffering: absorbing changes in resource flows
Smoothing: Directly shaping resource flows
Forecasting: Monitoring flows and adapting
Rationing: Limiting production quantities
Co-opting: Interlocking boards and trustees
Coalitioning: making alliances, JVs, cartels
Merging: integrating vertically or horizontally
Institutional theory
organizational practices can become norms (teaching and learning centers in universities, analytics and data-driven decision-making, Six Sigma methods in manufacturing)
Adhering to norms gives legitimacy
(easier access to vital resources, greater chances of survival)
“Rationalized myths”
People’s behavior assumed to be purposeful and objective; norms assumed to be justified by efficiency
Organizational ecology
Organizations are subject to inertia
(formalization, institutionalization, power struggles and internal coalitions, imprinting of founding conditions)
Organizations inevitably die
(survival depends on design parameters, changing parameters becomes increasingly costly)
populations of organization survive (some born with new organizational structures, those with the best structure survive, survivors pass on their structures)
Structural change
through practice and necessity
