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Thomson South-Western Wagner & Hollenbeck 5e 1 Chapter Thirteen Technology, Environment, And Organization Design.

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Presentation on theme: "Thomson South-Western Wagner & Hollenbeck 5e 1 Chapter Thirteen Technology, Environment, And Organization Design."— Presentation transcript:

1 Thomson South-Western Wagner & Hollenbeck 5e 1 Chapter Thirteen Technology, Environment, And Organization Design

2 2 Chapter Overview  This chapter examines the following topics: – An Adaptive Model of Organization Design Organizational Effectiveness Structural Alternatives Structural Contingencies – Lifecycle Contingencies: Age and Stage of Development – Inception Contingencies – Formalization and Elaboration Contingencies Core Technology The External Environment – Transformation Contingencies Environmental Turbulence Transaction Costs Final Considerations

3 3 Introduction  Organization design, the process of managing organization structure, has important implications for the competitiveness and continual survival of business organizations  Contemporary managers need to know about the different kinds of structures as well as the key strengths and weaknesses of each structural type

4 4 An Adaptive Model of Organization Design  The fact that many different kinds of structures exist implies that no one type will be suitable for all organizations  Structuring an organization involves making well- considered choices among the various alternatives available  Organization design is the process of making these choices  The process of organization design is consciously adaptive and is guided by the principle that the degree to which a particular type of structure will contribute to the effectiveness of an organization depends on the contingency factors that impinge on the organization and shape its business

5 5 Organizational Effectiveness  Organizational effectiveness is a measure of an organization’s success in achieving goals and objectives  An effective organization must satisfy the demands of the various constituency groups that provide it with the resources necessary for its survival  Effectiveness differs from organizational productivity in that productive measures do not take into account whether a firm is producing the right goods or services  Organizational efficiency means minimizing the raw materials and energy consumed by the production of goods and services  Efficiency means doing the job right whereas effectiveness means doing the right job  Effectiveness is a measure of whether a company is producing what it should in light of the goals, objectives, and constituency demands that influence its performance and justify its existence

6 6 Structural Alternatives  The structure of an organization strongly influences its effectiveness  To clarify the fundamental differences among the various types of structures, alternatives are classified along a dimension ranging from mechanistic to organic  Purely mechanistic structures are: – Machine-like – Lacking in flexibility – Centralized with tall hierarchies of vertical authority  Purely organic structures are: – Analogous to living organisms – Flexible and able to adapt – Decentralized with flat hierarchies

7 7 Structural Contingencies  It is critically important that managers identify key structural contingency factors that can help determine whether a particular type of structure will function successfully in the organization  These factors constitute the situation that managers must perceive and diagnose correctly to determine how to conduct business most effectively

8 8 Lifecycle Contingencies: Age and Stage of Development  Company age and stage of development are lifecycle contingencies associated with organizational growth  Developmental stages include: – Inception The organization is created and its purpose is identified – Formalization Work becomes divided into different functional areas and organizational direction is determined through formal planning and goal setting – Elaboration Firm seeks out new product, location, or client opportunities – Transformation Firm is confronted by extremes of both change and complexity in its business situation

9 9 Inception Contingencies  Organizations at the inception stage are typically new, small, and fairly simple in form  They are most likely to have prebureaucratic structures  The type of structure is influenced by the organization size, which is considered to be the number of members within the organization

10 10 Formalization and Elaboration Contingencies  Organizations that have progressed beyond the inception stage and outgrown prebureaucratic structures must consider the adoption of more bureaucratic forms of structure  The most influential contingency factors at the formalization and elaboration stages of development consist of core technologies and the environment that surrounds the firm

11 11 Core Technology  An organization’s technology includes the knowledge, procedures, and equipment used to transform unprocessed resources into finished goods or services  Core technology is a more specific term that encompasses the dominant technology used in performing work in the operational center of the organization  Two contingency models that delineate basic differences in core technology are: – The Woodward manufacturing model – The Thompson service model

12 12 Woodward’s Manufacturing Technologies  Joan Woodward began studying organizations in the early 1950s  Woodward discovered that not all companies with the same type of structure were equally effective  Woodward devised a classification scheme to describe the three basic types of manufacturing technology – Small-batch production – Mass production – Continuous process production  In the years since Woodward’s studies, flexible-cell production technology has evolved

13 13 Thompson’s Service Technologies  James D. Thompson’s model examines the technologies often employed in service organizations  His study included the following technologies: – Mediating technology – Long-linked technology – Intensive technology

14 14 Technological Contingencies: Integration  Both the Woodward and Thompson technology models help identify which general form of organization structure is most likely to enhance the effectiveness of a firm whose primary operations incorporate a specific type of core technology – Standardization and mechanistic structuring generally enhance the effectiveness of firms using core technologies that are suited to more routine work – mass production, mediating, and long-linked technologies – Mutual adjustment and organic structuring promote effectiveness in firms that use core technologies suited to unpredictable, often rapidly changing requirements – small-batch, continuous process, flexible-cell, and intensive technologies

15 15 The External Environment  An organization’s environment encompasses everything outside the organization  The environment influences structural effectiveness by placing certain coordination and information-processing restrictions on the firm  Five specific environmental characteristics influence structural effectiveness: – Environmental change concerns the extent to which conditions in an organization’s environment change unpredictably – Environmental complexity comprises the degree to which an organization’s environment is complicated and therefore difficult to understand – Environmental uncertainty reflects a lack of information about environmental factors, activities, and events Boundary spanner – Environmental receptivity is the degree to which an organization’s environment supports its progress toward fulfilling its purpose – Environmental diversity refers to the number of distinct environmental sectors or domains served by an organization

16 16 Environmental Contingencies: Integration  Diagnosing the nature of a firm’s environment during the process of organization design requires that managers perform five environmental analyses more or less simultaneously – (no separate analysis or question is needed regarding uncertainty because this property is a combination of change and complexity and is assessed by questions 1 & 2 below) – Is the environment stable or dynamic? – Is the environment simple or complex? – Is the environment munificent or hostile? – Is the environment uniform or diverse?

17 17 Transformation Contingencies  Transition beyond bureaucratic structuring occurs because the standardization intended to stimulate efficient performance can actually reduce efficiency and production  This reduction can happen for several reasons: – The very existence of bureaucratic rules and procedures can encourage the practice of following them to the letter – Rigid adherence to rules and regulations can discourage workers from taking the initiative and being creative – Standardization can narrow the scope of workplace activities

18 18 Environmental Turbulence  Environmental turbulence describes the speed and scope of change that occurs in the environment surrounding an organization  Conditions of high turbulence are sometimes referred to as hypercompetitive conditions  By determining the degree of flexibility and adaptability an organization must have to perform effectively, the level of environmental turbulence can also act as a contingency factor that influences choices between the two postbureaucratic alternatives

19 19 Transaction Costs  Transaction costs associated with preserving a single company or maintaining contractual relationships are affected by two considerations: – Information processing that proves to be overwhelming – Threat of opportunism

20 20 Final Considerations  If successful, transitions that occur during an organization’s stages of development can have a vast impact on the structure of an organization


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