Organizations and Organization Theory: Chapter One

Organizations and Organization Theory
Chapter One
Organization Theory in Action
Topics
The subjects with which organization theory is concerned are:

How to respond or control such elements as competitors, creditors, and customers in
the fast paced external environment;
The ability to apply strategic and structural changes to help organization attain
effectiveness;
Difficulties managing with the problems of large size and bureaucracy;
Lack of adequate cost controls;
The negative power and politics among managers;
Outmoded corporate culture that stifled innovation and change
Organization theory also applies to nonprofit organizations.

This chapter demonstrates that even large and successful organizations are vulnerable and that
they are only as strong as their decision makers. Organizations are not static but they are
continuously adapted to changes in the external environment.
Current Challenges
Challenges facing organizations today are quite different from those of the past, and the
concept of organization theory is evolving. The world is changing rapidly and dealing with
this rapid change is the most common problem facing managers and organizations. Some
specific challengers are dealing with:
Globalization:
Today, the world is getting smaller and advances in technology and communication take just
seconds to exert influence around the world. Marketers, technologies and organizations are
becoming interconnected. Organizations have to learn to cross line of time, culture, and
geography to survive and have also to find the good way and process that can help them pick
the advantages of global interdependence
Ethics and Social Responsibility :
The professional standards are becoming more important today, people pay more attention to
this point which makes leaders in a bad position. They face terrific pressure from the
government and the public.
Speed of Responsiveness:
Todays customers want products and services adapted to their needs, organizations must
respond quickly and efficiently to environmental changes, organizational crises or shifting
customer expectations. Today, knowledge becomes the primary factor of production.
Organization must increase the power of employees.
The Digital Workplace:
Today the computer network takes more importance in organizations. People feel more
comfortable in their work on computers and may work in virtual teams. Leaders and managers
are responsible today for managing a web of relationships building flexible e-links between a
company and its employees, suppliers, contract partners, and customers.
Diversity:
Organizations increase in a global playing field where customers and the workforce are
growing. There are also people from diverse ethnic and cultural backgrounds offer varying
styles, and managing diversity may be the most rewarding challenges for organizations
competing on a global basis.
What Is an Organization?
Organization is vague and abstract. Organizations are social entities that are goals-directed
are designed as deliberately structured and coordinated activity systems, and are linked to the
external environment.
Types of organizations:
We can make the difference between organizations through their Size (Large, multinational
corporations and small, family owned firms), Output (manufacturing product or providing
service), and for-profit businesses and nonprofit organizations.
Importance of Organizations:
Organizations exist to do the following:
1. Bring together resources to achieve desired goals and outcomes
2. Produce goods and services efficiently
3. Facilitate innovation
4. Use modern manufacturing and information technologies
5. Adapt to and influence a changing environment
6. Create value for owners, customers and employees
7. Accommodate ongoing challenges of diversity, ethics, and the motivation and
coordination of employees
Perspectives on Organizations
Open systems:
There are various ways to look at and think about organizations, there are two important
perspectives: The open-systems approach and the organizational-configuration structure.
The organization must be viewed as a system.
Closed system doesnt depend on its environment, it is autonomous, enclosed and sealed off
from the outside world.
Open system must interact with the environment to survive, it cannot seal itself off. It must
continuously adapt to the environment.
A system is made up of several subsystems which perform the specific functions required for
organizational survive, such as production, boundary spanning, maintenance, adaptation and
management.
Organizational Configuration:
Henry Mintzberg suggests that every organization has five parts:
1. Technical Core: Includes people who do the basic work of the organization. This is
where the primary transformation from inputs to outputs takes place.
2. Technical Support: It helps the organization adapt to the environment. It is responsible
for creating innovations in the technical core, helping the organization change and
adapt.
3. Administrative Support: It is responsible for the smooth operation and preservation of
the organization including its physical and human elements.
4. Management: It is a distinct subsystem, responsible for directing and coordinating
other parts of the organization. Top Management provides direction, strategy, goals,
and policies for entire organization or major divisions. Middle Management is
responsible for implementation and coordination at the departmental level.
Dimensions of Organization Design:

Dimensions describe organizational design qualities:
1. Structural Dimensions provides labels to describe the internal characteristics of
organizations. They create basis for measuring and comparing organizations:
Formalization: Includes the written documentation in the organization like procedures, job
descriptions regulation and policy manuals. They describe behavior and activity.
Specialization: the degree to which organizational tasks are subdivided into separate jobs
Hierarchy of authority: reports to whom and the span of control for each manager.
Centralization: the hierarchical level that has authority to make decision.
Professionalism: the level of formal education and training of employees.
Personnel ratios: the development of people to various functions and departments
= The number of employees in a classification/The total number of organizational employees
2. Contextual Dimensions characterize the whole organization and describe the

organizational setting that influences and shapes the structural dimensions.
Size: Because organizations are social systems, size is typically measured by the number
of employees.
Organizational technology: It concerns how the organization actually produces the
products and services which means how the organization transform the inputs to outputs.
The environment: includes all elements outside the boundary of the organization as the
industry, government, customers suppliers and financial community.
The organizations goal and strategy: define the purpose and competitive techniques that
set it apart from other organization.
The organizations culture: Is the values, beliefs, understanding and norms shared by
employees.
3. Performance and Effectiveness Outcomes: understanding varying perspectives and the

structural and contextual dimensions of organizations to design the organization in
such a way to achieve high performance and effectiveness. Managers adjust structural
and contextual dimensions and organizational subsystems to most efficiently and
effectively transform input into outputs and provide value:
Efficiency: refers to the amount of resources used to achieve the organizations goals.
Effectiveness: The degree to which an organization achieves its goals.
The Evolution of Organization Theory and Design:

Organization theory is a way to see and analyze organization more accurately and deeply
than one otherwise could. The way to see and think about organizations is based on
patterns and regularities in organizational design and behaviour.
1. Historical perspectives:
Organization design and management practices have changed over time in response to
changes in the larger society.
Efficiency is everything: Taylor postulates that decisions about organizations and job design
should be based on precise, scientific study of individual situations.
Another subfield of the classical perspective took a broader look at the organization. The
bureaucratic characteristics worked extremely well for the needs of the industrial age. One
problem with the classical perspective, however, is that it failed to consider the social context
and human needs.
2. Contemporary Organization Design:

Todays organizations and managers may be seen as shifting from a mindset based on
mechanical systems to one based on natural and biological systems. With the turbulence of
recent years, managers can no longer maintain an illusion of order and predictability. The
world is full of uncertainty, characterized by surprise, rapid change and confusion.
3. Efficient Performance versus the Learning Organization:

When we compare organizations designed for efficient performance with those designed for
continuous learning we look five elements of organization design: structure, tasks, systems,
culture and strategy. All of these elements are interconnected and influence one another.
From Vertical to Horizontal Structure: In the vertical structure is the traditional one in which
activities are grouped by common work from the bottom to the top of the organization. This
structure can be quite effective. It promotes efficient production and in-depth skill
development and the hierarchy of authority provides a sensible mechanism for supervision
and control in large organizations. However in a rapidly changing environment, the hierarchy
becomes overloaded. In the learning organization self-directed teams are the fundamental
work unit. Boundaries between functions are practically eliminated because teams include
members from several functional areas.
From Routine Tasks to Empowered Roles: In traditional organizations, tasks are broken down
into specialized, separate parts, as in a machine. Employees are expected to do as they are
told. Whereas in learning organizations, employees play a role in the department or the team
and a role is a part in dynamic social system. It has discretion and responsibility allowing the
person to use his or his ability to achieve a goal.
From Formal Control Systems to Shared Information: In learning organization, information
serves a very different purpose. Employees have complete information about the company so
they can act quickly.
From Competitive to Collaborative Strategy: In traditional organizations designed for efficient
performance, strategy is formulated by top managers and imposed in the organization. In the
learning organizations in contrast the accumulated actions of an informed and empowered
workforce contribute to strategy development.
From Rigid to Adaptive Culture: The culture must encourage adaptation to the external
environment. The danger is that the culture becomes fixed, as if set in concrete.

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Organizations and Organization Theory

Organization Theory in Action

The subjects with which organization theory is concerned are:

Organization theory also applies to nonprofit organizations.

Dimensions of Organization Design:

2. Contextual Dimensions characterize the whole organization and describe the

3. Performance and Effectiveness Outcomes: understanding varying perspectives and the

The Evolution of Organization Theory and Design:

2. Contemporary Organization Design:

3. Efficient Performance versus the Learning Organization:

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