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Nature of Organizations Natural versus Rational Systems Natural versus Rational Systems Are organizations organisms that grow change and adapt or are they.

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Presentation on theme: "Nature of Organizations Natural versus Rational Systems Natural versus Rational Systems Are organizations organisms that grow change and adapt or are they."— Presentation transcript:

1 Nature of Organizations Natural versus Rational Systems Natural versus Rational Systems Are organizations organisms that grow change and adapt or are they tools that are designed for a specific purpose? Are organizations organisms that grow change and adapt or are they tools that are designed for a specific purpose? Open versus Closed Systems Open versus Closed Systems What level of interaction do the parts of the organization have with each other and the environment? What level of interaction do the parts of the organization have with each other and the environment?

2 Rational Systems Organizations as tools that are controlled as purposeful and coordinated agents for the principal Organizations as tools that are controlled as purposeful and coordinated agents for the principal Rational calculation Rational calculation Goal Specificity Goal Specificity Formalized planning Formalized planning Translation of plans into specific objectives Translation of plans into specific objectives Formalization of structure Formalization of structure Explicit and visible Explicit and visible Division of labor Division of labor

3 Natural Systems Organizations as natural organisms that exist within an environment Organizations as natural organisms that exist within an environment Goal complexity Goal complexity Informal structure Informal structure Irrationality leads to informal norms and behaviors Irrationality leads to informal norms and behaviors Functional analysis of organizations Functional analysis of organizations Population ecology Population ecology

4 Closed Systems One or few points of contact with the environment One or few points of contact with the environment No change of system No change of system No intake of energy, material, or information No intake of energy, material, or information

5 Open Systems Connection of many parts that make up the organization Connection of many parts that make up the organization Multiple or many points of interaction with the environment Multiple or many points of interaction with the environment Self-maintenance Self-maintenance Goal directed Goal directed Reciprocal ties that bind and relate the organization to the environment Reciprocal ties that bind and relate the organization to the environment Environment is ultimate source for materials energy and information Environment is ultimate source for materials energy and information

6 Examples Natural Rational OpenClosed Prisons Boarding schools Military schools Schools Franchises Police Departments Social clubs Universities Corporations Governments Hmmmmm?

7 Chapter 16: Organization Design7 Options of Organizational Design Functional Design Simple Simple, Stable Complex, Dynamic ComplexTechnological Forces Environmental Forces Place Design Product Design Matrix Design Multinational Design Network Design

8 Division of Labor and Coordination Division of labor Division of labor Subdivision of work into separate jobs assigned to different people Subdivision of work into separate jobs assigned to different people Coordination of work activities Coordination of work activities informal communication informal communication formal hierarchy formal hierarchy standardization standardization

9 Span of Control Number of people directly reporting to the next level Assumes coordination through direct supervision Wider span of control possible when: other coordinating mechanisms exist people do similar tasks tasks are routine Flatter structures require narrow span (if same # of people)

10 Mechanistic vs. Organic Structures Mechanistic High formalizationHigh formalization Narrow span of controlNarrow span of control High centralizationHigh centralization Organic Low formalizationLow formalization Wide span of controlWide span of control Low centralizationLow centralization

11 Chapter 16: Organization Design11 Variables That Differentiate Between Mechanistic and Organic Systems Hierarchy of authority Hierarchy of authority Centralization Centralization Division of labor Division of labor Rules Rules Procedures Procedures Impersonality Impersonality Chain of command Chain of command Unity of command Unity of command Span of control Span of control

12 Chapter 16: Organization Design12 Callaway Golf’s Design by Function and Process New Products Manufac- turing PlanningFinance ForgingAssembly Quality Control Shipping President Processes Functions Source: Adapted from Callaway Golf 1996 Annual Report. Carlsbad, Calif., 1997.

13 Chapter 16: Organization Design13 Practical Implications of a Functional Design Clear identification of responsibilities. Clear identification of responsibilities. May be effective when company has a narrow product line, competes in a uniform environment, pursues a low-cost or focused business strategy, and does not serve different regions and customers. May be effective when company has a narrow product line, competes in a uniform environment, pursues a low-cost or focused business strategy, and does not serve different regions and customers. Specialized staff departments enable firm to deal more effectively with environmental complexity and dynamism. Most employees may lose sight of need to meet or exceed customer expectations.

14 Chapter 16: Organization Design14 Practical Implications of a Place Design Promotes direct contact among different organizational units and stakeholders demands. Promotes direct contact among different organizational units and stakeholders demands. Lower costs. Lower costs. Marketing tactics can be tailored to regions. Marketing tactics can be tailored to regions. Control and coordination problems increase. Control and coordination problems increase. Employees may overemphasize own unit’s goals and needs. Employees may overemphasize own unit’s goals and needs.

15 Chapter 16: Organization Design15 United Technologies CEO Otis * Elevators * Escalators * Moving walks UT Auto- motive * Automotive electrical systems * Electric motors * Automotive interior & exterior trim Flight Systems * Helicopters * Propellers * Space life support systems Carrier * Heating & air conditioning * Building controls * Refriger- ation equipment Pratt & Whitney * Jet engines * Rocket engines * Industrial gas turbines Source:

16 Chapter 16: Organization Design16 Practical Implications of a Product Design Reduces information overload Reduces information overload The addition of product lines, diverse customers, and technological advances increases the complexity and uncertainty. The addition of product lines, diverse customers, and technological advances increases the complexity and uncertainty. Incorporates features of functional design. Incorporates features of functional design. Eases problems of integration by focusing functional expertise and knowledge on specific goods or services. Eases problems of integration by focusing functional expertise and knowledge on specific goods or services. Higher costs result from duplication of various functions. Higher costs result from duplication of various functions.

17 Chapter 16: Organization Design17 Practical Implications of a Multidivisional Design Eases problems of integration by focusing functional expertise and knowledge on specific goods or services. Eases problems of integration by focusing functional expertise and knowledge on specific goods or services. Higher costs result from duplication of various functions. Higher costs result from duplication of various functions.

18 Chapter 16: Organization Design18 Partial Illustration of Basic Matrix Design * These product managers also have full responsibility for the marketing activities associated with their own product lines. Manager, Personnel Quality Control Engineer for Product Line A Manager, Product Line A* Manager, Product Line B* Manager, Product Line C* Quality Control Engineer for Product Line B Quality Control Engineer for Product Line C Manager, Production Manager, Finance and Accounting President and Chief Executive Officer

19 Chapter 16: Organization Design19 Practical Implications of a Matrix Design Enables employees to be highly responsive to dual concerns. Enables employees to be highly responsive to dual concerns. Enables firm to deal with uncertain environment and technologies. Enables firm to deal with uncertain environment and technologies. Enables firm to deal effectively with multiple products and limited resources. Enables firm to deal effectively with multiple products and limited resources. Makes specialized knowledge available to all projects. Makes specialized knowledge available to all projects. Uses people flexibly. Demands substantial managerial resources while employees learn to operate in the new organization. Learning may be a lengthy process because of required attitude changes. Special training programs may be needed.

20 Chapter 16: Organization Design20 Implications of a Multinational Design Worldwide product-line divisions will be more dominant than geographically based divisions under certain conditions. Worldwide product-line divisions will be more dominant than geographically based divisions under certain conditions. A worldwide product-line division may not be as effective at opening up new territories as a geographically organized division. A worldwide product-line division may not be as effective at opening up new territories as a geographically organized division. A division operating under a place design often can establish relations with host governments, invest in distribution channels, develop brand recognition, and build competencies that no single product-line division could afford. A division operating under a place design often can establish relations with host governments, invest in distribution channels, develop brand recognition, and build competencies that no single product-line division could afford.

21 Chapter 16: Organization Design21 Key Elements of a Network Design Distinctive competence Distinctive competence Responsibility Responsibility Goal setting Goal setting Communication Communication Information technology Information technology Organizational culture Organizational culture Balanced view Balanced view

22 Core Firm (U.S.A.) Product Development Firm (France) Marketing Firm (U.K.) Customer Service Firm (U.S.A.) Production Firm (China) Accounting Firm (U.S.A.) Network Organizational Structure


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