Presentation on theme: "INTRODUCTION TO THE THEORY OF ORGANIZATIONS Alberto Veira Ramos"— Presentation transcript:
1 INTRODUCTION TO THE THEORY OF ORGANIZATIONS Alberto Veira Ramos email@example.com Types of organizations: etzioniclassical theoriesConflict and power theoriesHuman relation theoriesOrganizational analysisComplexityFormalizationCentralizationOrganizational goals and effectivenessOrganizational sizeOrganizational technologyThe environmentOrganizational cultureLeadership and governance
2 INTRODUCTIONModernization and development of secondary groups (organizations)Different types of OrganizationsTypology according to Amitai EtzioniType of controlType of conduct
3 CLASSICAL THEORIES Frederick Taylor Henri Fayol Max Weber Scientific ManagementHenri FayolAdministrative TheoryMax WeberTheory of Bureaucracy:Luther Gulick & Lindall Urwick“Papers on the Science of Administration”Others
4 HENRI FAYOL French mine engineer (1841-1925) “L´administration industrielle et générale” (1916)Focused on the administrative aspects of the organizational structureIdentified two basic managerial functions:CoordinationSpecializationNeed of “Formalization” and “Rationalization”His ideas inspired the creation of an academic journal devoted to study the functioning of organizations: “Papers on the Science of Administration”, edited by Gulick and Urwik in 1937His ideas were applied in 1949 by Mooney and Reyley, two top executives from GM
5 HENRI FAYOL Coordination The division of labor & specialization Organize departments (according to specialization principles)Chain of commandNever more than one supervisor per subordinateHierarchical structurePyramidalAuthority & ResponsibilityNever more subordinates than those that can be supervised efficientlyIt determines the number of levels of hierarchy an organization should have (according to Fayol the limit is somewhat between 5 and 10)Delegation of authority is a necessityExceptionality:Routine tasks to the less skilledComplex tasks to the more skilled
6 HENRI FAYOL Specialization Individuals performing similar tasks must be grouped into one “Department”Identifies two main functions:Executive functions: directly oriented to accomplish the main goals of the organizationSupport or Staff functions: oriented to provide support to the former (e.g.: legal counseling)
7 HENRI FAYOL Executive functions: Forecast & Plan: set the strategic goalsOrganize: assemble the necessary means to accomplish the goals and assign specific tasks to personnel: design the “Organigramme”Command & direct: lead the personnel, it requires extraordinary interpersonal skillsCoordinate: harmonize activities of different departments (avoid “animosity” that may derive from written communication)Control: monitoring, measuring performance, set corrective actions
8 HENRI FAYOL Formalization and Rationalization Must be designed and promoted from the top of the organizational pyramid (not at workshop level as in Taylor)Distinguish clearly between “positions” within the hierarchy and the individuals (persons) who occupy those positionsProvide managers with clear procedures and protocols to avoid the “Human Factor”Common interest must be place above individual interestFayol perceived the need for involving and motivating the worker byCreating an adequate atmosphere at the workplaceTreatment based on equity (job guarantee)“Esprit de corps” (team spirit)
9 HENRI FAYOL Fayol established 7 qualities a leader should have: Good health and physical “vigeur”IntelligenceMoral qualitiesPerseveranceCourage (to accept responsibilities)Committed to duty and to the general interestEducated and cultivatedExpertise on the professional domainKnowledge on management“Art de manier les hommes” Art on the way to handle men
10 HENRI FAYOL Tasks attributed to top managers Set the strategic plan (along with owners of the firma)Design the organizational structure (Organigramme)Hire competent advisors and collaborators,defining their salaries and career prospects according to their competenceDefine the rules regulating the way personnel must behaveDefine the communication channelsMeet regularly with advisors and collaborators (and listen to their suggestions)Read the reports and react in consequenceMonitor the budgetsReport to the owners the state of the business
11 HENRI FAYOL Tasks attributed to intermediate (middle-rank) managers Set the plan to accomplish the strategic goals established by the top managers in the shortest possible period of timeAttend the meetings organized by the top managersCoordinate with other colleagues (meetings)Define the structure of the department (identifying the different functions)Manage the personnel of the department (recruitment, salaries, lay-offs)Have initiatives and keep the top managers well informedIncrease their expertise by education and trainingControl the costs
12 HENRI FAYOL Tasks attributed to operators Execution of orders received Identifying and signaling any difficulty for the correct execution of the orderReport how orders have been executedCoordinate with other operators
13 MAX WEBER German Lawyer, Economist and Sociologist (1864-1920) Broader perspective than merely Administrative TheoryConsidered the founding father of the sociology of organizations due to his studies on bureaucracy and the importance of rationalization in industrial societiesInterested on the analysis of the administrative systems generated historically by different cultures or societiesBelieved that historically cultural factors (values & beliefs) and not only economic factors had influenced the configuration of administrative (bureaucratic systems), particularly under the capitalist regime
14 MAX WEBERInterested on identifying the distinctive features of administrative organization under capitalismNot the result of class struggle (something constant over history and not a peculiarity of Capitalist societies)Focused on the study of the growing rationalization process taking place in all domains and at all levels of social life in industrial societies (in capitalist as well as in socialist ones)Typology of systems of authority and domination:CharismaticTraditionalLegal & Rational
15 MAX WEBER Charismatic authority Traditional authority Source of authority is a charismatic leaderFollowers attribute the leader superior moral qualities (usually in exceptional critical times)Administrative system is unstable: depends on the wishes and appetites of the leader. Once the leader dies or disappears transition problems may ariseTraditional authoritySource of authority is the traditionAdministrative positions are patrimonial (inherited)Loyalty is assured by personal allegianceAdministration is more stable than the charismaticLegal & Rational authoritySource of authority is the LawBureaucratic Administration
16 MAX WEBERIn the real world these systems seldom exist in their purest expressionIn one given society (or organization) may very well coexist different elements of each type of dominationModern societies may keep elements derived from traditions like the MonarchyModern democracies may produce charismatic leadersOne company funded by one entrepreneur may function to a great extent led by his or her charisma, as well as by established rational and legal procedures and protocols in written documentsLet´s Remember Fayol’s description of a good manager!!!
17 MAX WEBERRational & legal systems are superior because they are more efficient on accomplishing tasks and all Western societies had evolved into this direction(idea inspired by the development of the Prussian army and bureaucracy)Bureaucratic Administrations are technically superior to any other form of AdministrationCharismatic leaders are useful only in times of crisis and do not create stable administrative systems because the replacement of the leader often entails problems
18 MAX WEBER Main features of a Bureaucratic Administration: Set of rules and procedures in written documentsAll personnel and its decisions are subject to those written rules and procedures. Their relations are impersonal and their decisions devoid of personal interestsDivision of labor and technical competence: members are employed on the basis of their expertise and are given extensive educationHierarchical structure of office is well defined: every position is accountable to and supervised by a higher officeIndividual performance is rewarded thanks to strict mechanisms of control that apply to all personnel. Salaries paid in moneyExistence of a professional career within the administration and a personal commitment to it among its members whom must work full timeClear separation between property and control: equipment and materials belong to the organization, not to those making use of it
19 MAX WEBER Advantages of Bureaucratic Administrations Promotes technical efficiencyProtects personnel from discriminationFits well into the cultural features (values) of Western societiesPowerful on solving conflicts between members of the personnel thanks to mere application of rulesDisadvantages of Bureaucratic AdministrationsMechanicismInsensible to human needsPromotes rigid conductsMay hinder individual motivation
20 ROBERT K. MERTONScholars started to ask themselves why by the late 1940’s bureaucracy had started to show some worrying signs of persistent inefficiency (slowness, excessive paperwork, etc.)From a functionalist perspective, Merton established by, under certain circumstances bureaucratic administrations may result inefficientSocial structures (as well as organizational structures) influence the individual who must adapt to them.One type of “dysfunctional” adaptation is the RitualismDysfunctional for the interests of the organizationRational from the point of view of the individual
21 ROBERT K. MERTON “Bureaucratic Structure and Personality” (1957) Strict set of rules and procedures and disciplinary codes have an influence on the person who must abide to them on a daily basisIt hinders risk-aversion making the primary target of the employee to avoid being sanctionedGoal displacement: the means turn into endsBureaucratic ritualism: officials stick primarily to the strict compliance with the regulations (instrumental value) prioritizing this even above the accomplishment of the strategic goals of the organization (final value)
22 ROBERT K. MERTON Merton (1968) Defined cultural goals Structurally defined means to achieve the goalsDepending on the acceptance/rejection of the goals and the access or lack of access to the means, individuals may develop different types of adaptation to society (or the organization)
23 ROBERT K. MERTON Five types of adaptation: Conformity occurs when individuals accept the culturally defined goals and the socially legitimate means of achieving them. Merton suggest that most individuals, even those who do not have easy access to the means and goals, remain conformists Innovation occurs when an individual accepts the goals of society, but rejects or lacks the socially legitimate means of achieving them. Innovation, the mode of adaptation most associated with criminal behavior, explains the high rate of crime committed by uneducated and poor individuals who do not have access to legitimate means of achieving the social goals of wealth and powerThe ritualist accepts a lifestyle of hard work, but rejects the cultural goal of monetary rewards. This individual goes through the motions of getting an education and working hard, yet is not committed to the goal of accumulating wealth or powerRetreatism involves rejecting both the cultural goal of success and the socially legitimate means of achieving it. The retreatist withdraws or retreats from society and may become an alcoholic, drug addict, or vagrantRebellion occurs when an individual rejects both culturally defined goals and means and substitutes new goals and means. For example, rebels may use social or political activism to replace the goal of personal wealth with the goal of social justice and equality
24 MAIN SOCIOLOGICAL THEORIES ACTIONALISMWeberCONFLICTMarxFUNCTIONALISMDurkheimMerton
25 THEORIES OF CONFLICT AND POWER Karl MarxLeninBruno RizziJames BurnhamHarry BravermanRobert Michels
26 THEORIES OF CONFLICT AND POWER Conflict oriented theories have their roots on Karl Marx’s vision of societySociety is the historical result of interest conflicts that at any given period are solved by the domination of one class by anotherFunctionalisits focused on the nature and origin of order and social equilibria, paying little attention to social problems and social changeConflictivists, on the contrary, focus on processes of social change derived from conflict, which is a permanent feature on any society
27 KARL MARXKarl Marx signaled that the typical conflict of the capitalist society is the class struggleWorkers (proletarians)Capitalists (property owners, bourgeoisie)Their interests are divergent and conflict results in dominationPrivate ownership of means of production allows capitalists to exercise political domination over the working classMarx associates political power with economic domination and considers the State as a mere instrument in the hands of the bourgeoisie.Bureaucracy is the executive arm of the State, thus, a mere instrument for class domination and plays an important role on the alienation process
28 KARL MARXSuch perspective on bureaucracy led Marx to assume that in a classless society bureaucracy should come to and endAs a result, Marx did not paid very much attention to the bureaucratic phenomenon, its importance and its decisive impact on the diffusion of rationalization and on the future development of modern societies
29 KARL MARXMarx did, however, leave some writings about the functioning of the bureaucracy from an organizational point of view:IncompetentDominated by the principle of CareerismMain concern of bureaucrats is to keep status and prestige“Infantile” attachment to symbols of status and power (to have a big office, several assistants, secretaries, etc.)The goal of serving citizens and the people becomes secondary
30 LENINLenin, once established in power, decided to follow Marx´s ideas and implemented a 3 point plan to undermine the Tsarist bureaucracyEligibility and revocability of functionariesSalary reduction to the level of an unskilled workerSimplification of tasks to make bureaucrats easily replaceable and interchangeableSuch plan did not work as expected and soon Lenin realized that the new Soviet bureaucracy increased in size and powerLenin admitted the need for a bureaucracy given the rural (feudal) features of Russian population
31 LENINThe expansion of the Soviet bureaucracy was seen as a temporary necessity in a time when a strong central government was needed to transform the predominately rural (feudal) Russian society into an industrial oneOn the end, Soviet bureaucratic apparatus expanded itself to levels not yet seen in Western societiesTrosky criticized that the rapid expansion of Soviet bureaucracy was caused by Stalin policies aimed to merge Party and State institutions
32 THEORIES OF CONFLICT AND POWER Weber perspective suggesting that the expansion of bureaucracy is to be associated with the need for “rationalization” characteristic of any modernization process and independent from the ideological nature of the State or the government was proved correct
33 THEORIES OF CONFLICT AND POWER Bruno Rizzi and the “Bureaucratic Collectivism”“La Bureaucratisation du Monde” (1939)Systems based on individual property change into ones based on collective property (Soviet Union and fascist Italy)Soviet bureaucracy (“nomenklatura”) turned into the new ruling class after having taken control over the means of production
34 THEORIES OF CONFLICT AND POWER James Burnham and the “Technocratic Regime”“The Managerial Revolution” (1941)The growing complexity of organizations transforms managers into the new ruling elite because of their technical knowledgeTechnocratic power is the new “post-capitalist” form of dominationOwnership, weather private or collective, is not the main cleavage separating the dominating from the dominated.Instead, it is the control of the means of production which divides societies intoManagers or Bureaucrats vs. the mass societyConservative Machiavellian perspective (not Marxist)
35 THEORIES OF CONFLICT AND POWER Marxist theorists see current sociology as locked into the capitalist paradigm and unable to envision something other than a rational view for future organizationsFor Marxists, Human relations theories don't challenge the exploitive nature of organizations and merely give managers new psychological tools to control workersHierarchy develops not as a rational means of coordination but as an instrument of control and a means of accumulating capital through the appropriation of surplus valueRationality is an ideology itself
36 THEORIES OF CONFLICT AND POWER Harry Braverman“Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century” (1974)Taylorism:Separation of conception from executionMonopoly over knowledge allows to control each step of the labor process and its mode of executionThe main goal of taylorist “rationalization” is the disassociation of the skills of workers from the labor process
37 THEORIES OF CONFLICT AND POWER Harry Braverman (1974)“…organizational structures are not rational systems for performing work in the most efficient manner; rather, they are power systems designed to maximize control and profits. Work is divided and subdivided not to improve efficiency but to "deskill" workers, to displace discretion from workers to managers, and to create artificial divisions among the work force…”Workers become deskilled and "part of the machine"Modern organizationsdeskill and segment workersreduce job securitymake work repetitive, mindless and boring
38 THEORIES OF CONFLICT AND POWER Machiavellism develops in Italy during the 1930’s coinciding with the rise of fascismWilfredo ParetoGaetano MoscaRobert Michels (pupil of Max Weber)Its main concern is the role of power as a fundamental element on shaping social relationsSocial organization is very dependent on how power is distributed and used in the society (or the organization)Robert Michels’ “Iron Law of Oligarchies” is one of the few widely accepted and undisputed principles in modern sociology
39 ROBERT MICHELS The “Iron Law of Oligarchies” “Zur Soziologie des Parteiwesens in der modernen Demokratie” (1911)“On the Sociology of Political Parties” (1915)Increasing size and complexity makes very difficult (nearly impossible) to govern (large) organizations on a purely democratic wayModern organizations can only be of oligarchic nature: Bureaucracy (organization) = OligarchyThis principle applies even to organizations committed to the very idea of democracy, like socialist political parties and trade unions
40 ROBERT MICHELS Five principles of the “Iron Law of Oligarchies” 1) The participation of all members of a large organization on the decision making process is technically inviable. Thus it is imperative to establish mechanisms for delegation or cooptation2) Once a reduced number of “elected officials” are appointed in charge of the governance of the organization they begin concentrating the relevant information concerning the functioning of the organization close to themselves3) The leader (or leaders) begin to be seen as “irreplaceable” due to their accumulation of specific knowledge and expertise4) Once in a position of power, the leader will seek as a primary objective to remain in power, identifying the survival of the organization with his/her ownmetamorphosis of the leader’s personality5) Oligarchies eventually develop the “ideology of power” aimed at emphasizing the need for internal harmony as the best way to face the menaces coming from of external enemies
41 ROBERT MICHELS Why the “Iron Law of Oligarchies” always works? All organizations that increase in size and complexity require the participation of dilligent full-time experts on the decision-making process. Such individuals tend to become “irreplaceable”The dichotomy between “internal democracy” and “organizational efficiency” becomes more evident. Often efficiency requires a strong and professional leadership which can only come to the detriment of internal democracyThe very psychology of the masses makes strong leadership unavoidable, even desirableApathy and incompetence make the majority of people unsuitable for leadership rolesMasses tend to be thankful to those who decide to exercise leadership and often some “cult of personality” arisesThe only function of the masses is to chose a new leader from time to time
42 ROBERT MICHELS Parliamentary regimes reinforce this dynamic Routine commissionsElected representatives are more visible than other membersLeaders of different factions may eventually unite to face new leaders arising from the massesFundamental contradiction on the functioning of democratic regimesParties are an indispensable requisiteParties, to be successful need to be organized bureaucraticallyMasses are not interested on taking active part on politicsOnly egoism may motivate some individuals to take part in political activity
43 ROBERT MICHELSNonetheless, a democracy though undermined to some degree by the oligarchic functioning of its political parties is still an improvement with respect to one of aristocratic nature becausePositions within the ruling elite are not transferred by inheritanceLeaders need to have some abilities and acquire some meritsElites (the “Political class”) are not a “closed” group“Circulation of elites” (old elites vs. new elites)
44 ROBERT MICHELSNonetheless, a democracy though undermined to some degree by the oligarchic functioning of its political parties is still an improvement with respect to one of aristocratic nature becauseProblem: the oligarchic nature of elites persists because all new elites soon acquire the traits of oligarchic behavior (Iron Law)“Bureaucracy happens (unavoidably because either centralization or delegation leads to specialization and enhances information control). If bureaucracy happens, power rises. Power corrupts…”“Large organizations give their officers a near monopoly of power”“The masses are incapable of taking part in the decision-making process and desire strong leadership”Class struggle over history simply generates new elitesSolution?: a direct relation between a charismatic leader and the people its interests represent (Mussolini)
45 ROBERT MICHELS Critics to the “Iron Law of Oligarchies” Utterly deterministicPessimisticRecent history has shown that democracies may indeed evolve improving their “modus operandi”It has been observed that alternance on power do limits the power of oligarchies
46 THEORIES OF CONFLICT AND POWER Jerry Pournelle and the “Iron Law of Bureaucracy”In any bureaucracy,The people devoted to the benefit of the bureaucracy itself always get in controlThose dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirelyIn any bureaucratic organization there will be two kinds of people:1) Those who work to further the actual goals of the organization, and2) Those who work for the organization itselfThe Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions
47 HUMAN RELATIONS Elton Mayo Chester Barnard Douglas McGregor The Hawthorne StudiesChester Barnard“The Functions of the Executive”Douglas McGregorTheory “X” and Theory “Y”Abraham MaslowHierarchy of needsFrederick HertzbergTwo factor theoryWilliam OuchiTheory “Z” Japanese ManagementWilliam Reddin3D Theory on “Managerial effectiveness”: There is no one “universal” best way
48 HUMAN RELATIONSReaction against extreme rationalism of the classical theories1) Exploring the role of groups within organizations (“Human Relations” school)2) Considering organization as an “Open System” within a “Context” (the “Contingency Theory” school)Informal relations taking place at the workplace constitute a psychological need for the individualInformal relations (primary groups) help to improve working performance
49 HUMAN RELATIONS Motivation has a tremendous impact on our performance Some studies have suggested that most persons make use of about 20% to 30% of our real capacities at the workplaceThe remaining capacity to increase our effort and our commitment depends on our motivationsInformal (primary) groups inside the organization may play an important role on motivation
50 HUMAN RELATIONS Theories of motivation Theories of Factors: focus on identifying the “factors” that determine motivation:Theories of Processes: focus on the mechanisms (“processes”) through which motivation developsTheories of Reinforcement: derive from Skinner´s “Psychological Conductism” and focus on the relationship between stimulus and response (SR)
51 HUMAN RELATIONS Motivation and Culture The sociological perspective contemplates motivation as one factor strongly attached to CultureAttitudes towards work determine to a great extent the motivation and the incentivesModern management is oriented to take into account individual and corporate values
52 HUMAN RELATIONS Classic works related to the “Human Relations” school Roethlisberger, Dickson and Elton MayoHawthorne Studies:Barnard“Functions of the Executive”McGregor“The human side of the enterprise”
53 ELTON MAYO Australian psychologist (1880-1949) “The human problems of an Industrialized Civilization” (1933)Research on industrial and organizational psychology (Hawthorne Studies)Created the foundation for “Human Relations Movement”Criticized Taylor’s “Scientific Management” approachOpened the field for studying the nature of motivation from both sociological and psychological perspective
54 ELTON MAYO The Hawthorne Study: Late 1920’searly 1930’s Western Electric Plant at Hawthorne, Illinois (USA)Experiments to improve productivityLength of rest and lunch breaksIlluminationPayment plansMonitoring proceduresInterviews (set the pattern for modern qualitative interview)
55 ELTON MAYO The Hawthorne Study: Illumination Study (November 1924) Designed to test the effect of lighting intensity on worker productivityHeuristic value: influence of human relations on work behaviorRelay Assembly Test Room Study ( )Assembly of telephone relays (35 parts - 4 machine screws)Production and satisfaction increased regardless of IV manipulationWorkers’ increased production and satisfaction related to supervisory practicesHuman interrelationships are important contributing factors to worker productivityBottom Line: Supervisory practices increase employee morale AND productivityInterviewing Program ( )Investigate connection between supervisory practices and employee moraleEmployees expressed their ideas and feelings (e.g., likes and dislikes)Process more important than actual resultsBank Wiring Room Observation Study (November May 1932)Social groups can influence production and individual work behaviorRQ: How is social control manifested on the shop floor?Informal organization constrains employee behavior within formal organizational structure
56 ELTON MAYO The Hawthorne Study: Illumination Study (November 1924) The mere practice of observing people’s behavior tends to alter their behavior (Hawthorne Effect)Relay Assembly Test Room Study ( )Relationships between workers and their supervisors are powerfulHuman interrelationships increase the amount and quality of worker participation in decision makingInterviewing Program ( )Demonstrated powerful influence of upward communicationWorkers were asked for opinions, told they mattered, and positive attitudes toward company increasedBank Wiring Room Observation Study (November May 1932)Led future theorists to account for the existence of informal communicationTaken together, these studies helped to document the powerful nature of social relations in the workplace and moved managers more toward the interpersonal aspects of organizing.
57 ELTON MAYO The Hawthorne Study: Workers should not be taken into consideration as individuals isolated from the groupInformal primary groups have a decisive influence on the workers’ behaviorProductivity may increase depending on the social patterns of informal interactionThe feeling of belonging to a group is more important than monetary incentives and good working conditionsManagers should bear in mind those “social needs” and balance two potentially conflicting elements:The “logic of cost and efficiency”The “logic of worker’s sentiments”The “scientific management “in an inadequate approach to organizing work
58 CHESTER BARNARD American businessman (1886-1961) “The Functions of the Executive” (1938)Most organizations do not live for very long (except for one in particular)This is because they miss to comply with two basic goals:Effectiveness: Attaining explicit goalsEfficiency : The extent to which an organization satisfies the motives of individuals
59 CHESTER BARNARD “The Functions of the Executive” (1938) Setting goals Establish and maintain a system of communicationAn adequate system of communication (which involves treating subordinates with respect) reinforces manager’s authoritySecuring members will do their partAn adequate system of incentives will assure that employees will be motivated to do their work properly
60 CHESTER BARNARD “The Functions of the Executive” (1938) An adequate system of communicationChannels of communication should be clearShould be accessible to everybody at any timeShould be as direct as possibleCommunication centers must be managed by competent employeesCommunications should be authenticated
61 CHESTER BARNARD “The Functions of the Executive” (1938) Adequate structure of incentivesSalaryNon-material distinctionsWork conditionsSymbolic gratification (pride for a well done work)Persuasion
62 DOUGLAS McGREGORAmerican professor at MIT school of Management ( )“The Human Side of the Enterprise” (1960)Contribution to management and motivational theoriesConsidered for some the most influential book on management of the 20th centuryProposed the so called Theory “X” and Theory “Y”Managers can be divided into two groups, depending on which of those theories they believe to be trueImportance of values and beliefs (and Culture!)
63 DOUGLAS McGREGOR Theory X: Assumes employees are inherently lazy and dislike workingEmployees have little ambition unless a very generous incentive is promisedEmployees will avoid taking responsibilitiesEmployees must be closely supervised by comprehensive control systemsA hierarchical structure is neededNarrow spans of control at each hierarchical levelNeed to rely on threat and coercionWhen something is wrong it is usually someone else’s fault (not the system)It is the manager’s job to monitor closely employees’ work
64 DOUGLAS McGREGOR Theory Y: Employees may be ambitious and self-motivatedEmployees can be relied on to abide to some sort of self-controlEmployees may enjoy doing their work and may find satisfaction in doing so (source of motivation)Employees may be responsible and have abilities for creative problem solvingOrganization may underuse employees’ talentsIt is the duty of the manager topromote and enhance self-control andself-responsibility among employees bycreating a climate of trust andby communicating openly with subordinates and reducing hierarchical distances andfavoring the sharing of the decision-making process
65 ABRAHAM MASLOW American Psychologist (1908-1970) Hierarchy of needs PhysiologicalSafetyLove and belongingEsteemSelf-actualizationMaslow’s hammer
66 FREDERICK HERTZBERG The two-factor Theory Some factors cause job satisfaction and others cause dissatisfactionTo great extent based on Maslow’s principles but!Satisfaction and dissatisfaction is NOT a continuumInterviewed more than 200 engineers and accountants about their jobs and what made them happy being at it
67 FREDERICK HERTZBERG The two-factor Theory Hygiene factors: need to avoid dissatisfactionStatusJob securitySalary and benefitsWork conditionsMotivators: elements that cause satisfactionInteresting tasksResponsibilityRecognitionDifference between “Movements” and “Motivation”
68 FREDERICK HERTZBERG The two-factor Theory Importance of “job enrichment”Promote employees to take part in planning and self-evaluation processesRemove some elements of control to enhance self-accountabilityCreate work units led entirely by employeesProvide regular feed-back to employees initiatives and report to them results on productivity (not only to top managers)Encourage employees to take on new challenging tasksEncourage employees to become experts
69 THEORY “Z” William Ouchi “Japanese Management” “Theory Z: How American Business Can Meet the Japanese Challenge” (1981)Promote strong corporate culture and employee loyalty to the firm by providing employment for lifeEmployment stability leads to high productivity and high morale and satisfactionWorkers have sense of order, discipline, a moral obligation to work hard, and a sense of cohesion with their fellow workersWorkers will be participating in the decisions of the company to a great degreeAvoid making workers specialists into just a few simple tasks, instead aim to increase their knowledge of the company and its processes through job rotations and constant training (Quality Circles)Slow paces of promotion: long term commitment with the firma is requiredBased on Edward Demings’ “14 points”
70 EDWARD DEMING’S POINTS Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.The responsibility of supervisors must be changed from sheer numbers to qualityCease dependence on inspection to achieve qualityInstitute leadership: The aim of supervision should be to help people and machines do a better job.Institute training on the jobDrive out fear, so that everyone may work effectively for the companyRemove barriers that rob the hourly worker of his right to pride of workmanship.Break down barriers between departmentsMove towards a single supplier for any one item, on a long-term relationship of loyalty and trustEliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.Eliminate work standards (quotas) on the factory floor. Substitute with leadership.Eliminate management by objective. Eliminate management by numbers and numerical goals. Instead substitute with leadership.Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job
71 THEORY “Z” Abraham Maslow William Reddin Managers must understand employees’ needsWilliam Reddin“Managerial Effectiveness” (1984)3D TheoryThere is no one best way for managingThere are different types of managing which, depending on the contest can be effective or notTask oriented manager (autocrat)Relationships oriented manager (developer)Task and relationship oriented (executive)Not strongly committed to task or relations (bureaucrat)Effectiveness ought to be measured by looking at the outputThe main an only way to evaluate the performance of a manager is not evaluating what he/she does but what he/she accomplished
72 ORGANIZATIONAL ANALYSIS Three structural dimensions of organizations (B. Hodge):ComplexityVertical differentiationHorizontal differentiationSpatial differentiationFormalizationRoutine activitiesHighly specialized and educated professionalsCentralizationPower distributionParticipation and EmpowermentStandardizationAchieve integration by setting consistent input processes or output requirements
73 ORGANIZATIONAL ANALYSIS ComplexityVertical differentiation determined by the number of hierarchical positions between plant workers and the “Prezes i dyrektor generalny” (CEO/PDG/DG).Hall suggests measuring it by taking the number of positions in each department and divide it by the total number of departmentsHorizontal differentiation determined by the number of different tasks required to the functioning of the organizationCounting the number of specialists and educational levelsBlau and Schoennher : Counting the number of departments and sub-departments on the Organizational chart (“organigramme”)Spatial differentiation determined by the concentration or dispersion of the different units of the organization
77 HIGH VERTICAL COMPLEXITY Director generalPresidenteVice. Ejec. MarketingVice. Ejec. OperacionesVice. Ejec. RRHHVice. FinanzasAdj. ViceAyudantes
78 ORGANIZATIONAL ANALYSIS Increasing differentiation may lead to dehumanization of work. A key issue facing many managers today is how much tasks should be differentiatedMany organizations are delayering hierarchies to facilitate communication, gain other efficiencies, and reduce costsA typical worker stationed in a home-based mobile office would travel to customers or clients and log in sales or service calls on a lap top computerSome companies claim that mobile office workers increased by 15 to 20 percent the amount of time employees spend with customers or clientsSome concerns regarding home-based mobile office workers include overwork and safetyThe level of complexity is determined largely by the amount of the three types of differentiation that exists. Complexity is often related to size, but not always so. Small companies can be complex (a medical clinic)
79 ORGANIZATIONAL ANALYSIS Integration involves the various means that the organization uses to pull together the highly differentiated tasks into cohesive outputIntegration, or coordination, is the prime responsibility of managers. The functions of management—decision-making and influence—imply coordinating and integrating.FormalizationRoutine activitiesHighly specialized and educated professionalsCentralizationPower distributionParticipation and EmpowermentStandardizationAchieve integration by setting consistent input processes or output requirements
80 ORGANIZATIONAL ANALYSIS Formalization:All organizations need to make sure thatGoals are accomplishedIndividuals behave accordingly (cooperation) to expectationsRules, norms and procedures are established to ensure members of the organization will behave in a proper “predictable” mannerHow to approve a line of credit for a new clientHow to accept a patient and direct him/her to the proper specialistThe higher the level of formalization (bureaucratization) the lower the level of autonomy of workersOrganizations using technology based on routine activities tend to be more formalized than those requiring highly educated specialists
81 ORGANIZATIONAL ANALYSIS FormalizationHighLowFreedom of actionSelf-controlHighLa formalización puede entenderse como el grado de burocratización de una organización. La formalización es un requerimiento de la necesidad de control de toda organización para que se cumplan los objetivos previstos. Formalización es sinónimo de programación, certidumbre y dirección por instrucciones. En el gráfico se puede apreciar que cuando se da un alto grado de formalización y baja libertad de acción para efectuar las tareas el modelo sugiere que el trabajo es rutinario y que se emplean tecnologías de rutina. Por el contrario cuando la formalización es baja y la libertad de acción es alta quiere decir que nos encontramos ante una organización donde los trabajadores son muy cualificados y en consecuencia se puede confiar en su autocontrol dado su alto grado de profesionalidad (por ejemplo, los profesores de universidad)LowRoutines
82 ORGANIZATIONAL ANALYSIS ++AlienationFormalizationAlienation_+_+Cuanto más profesionalizada (mano de obra profesional) está una organización menos formalización requiere. La continua elevación del nivel de estudios de la población en general hace que las empresas estén cada vez más profesionalizadas. De todos modos la formalización siempre es necesaria, es un requisito de la organización. Pero su implantación no debe ahogar la iniciativa y la responsabilidad.En el gráfico de la izquierda se puede apreciar que la alienación de los empleados (medida en términos de falta de autonomía) sube a medida que aumenta la formalización (medida en términos de burocratización). En consecuencia podemos afirmar que a medida que podamos disminuir la formalización y aumentar el grado de profesionalización contribuiremos a disminuir el nivel de alienación (gráfico de la derecha. Línea amarilla).FormalizationProfessionalization
83 ORGANIZATIONAL ANALYSIS Formalization:Some organizations (hospitals) require bothhighly routinized activities (Admission department) highly standardized procedureshighly specialized activities (Surgery department) self-control of highly educated professionalsAll organizations need a minimum level of formalizationEven those whose members are subjected to a great deal of uncertainty regarding their daily tasksThe police: dealing with unexpected emergencies but still it may be formally established when and how to make use of the gunESeC: European Socioeconomic Classification of OccupationsRoutine-ization of occupations
84 ORGANIZATIONAL ANALYSIS Centralization:Refers to the distribution of power within the organization; the levels at which strategic decision-making is adoptedPyramidal distribution vs. Cone distribution (Robbins)Decision-making at the top level of the coneExecution at the base of the coneInformation channel (line stretching from the vortex of the cone to its base)At each level it is important how close or far a person is from the information lineImportance of position within the organizational chart (“organigramme”) but also the access to strategic informationmaintenance workersmass media
85 ORGANIZATIONAL ANALYSIS POWERDISTRIBUTIONTop level of powerPosition of anindividual or a groupInformationLa representación del poder siempre adopta una figura piramidal. Pero la figura del cono nos recuerda que hoy en día el acceso a la información (representada por la línea punteada) es la principal fuente de poder, de tal modo en cualquier lugar de la pirámide hay grupos o individuos que por su accesibilidad a las fuentes de poder (una secretaria de dirección por ejemplo) tiene más poder que otros (línea roja). A nivel macro social esto se puede ilustrar con el papel de los medios de comunicación: no están en la cúspide del poder, pues no forman parte orgánica de ninguno de los tres poderes del estado, y sin embargo ejercen un gran poder dado que tienen prácticamente acceso a toda la información.Adapted fromS. Robbin
86 ORGANIZATIONAL ANALYSIS Centralization:An organization is highly centralizedIf all decisions are made at the top levels of the hierarchical pyramidAn organization is decentralizedIf employees of middle and lower levels can make decisions regarding their tasksAccording to Max Weber, those highly competent bureaucrats situated at the lower levels of the structure should be able to make decisions regarding tasks falling within their field of expertiseEmpowerment: when employees possess both information and autonomy to organize their own work.Highly decentralized organizations rely on this practice to increase motivation and job satisfaction (thus, job performance) among their employees
87 ORGANIZATIONAL ANALYSIS HighInfluence,power andparticipationEl juego de suma no cero (donde todos ganan) debe sustituir al juego de suma cero donde lo que uno gana lo pierde el otro.La distribución del poder (línea amarilla) entre Alta Dirección, Gerentes de Planta, Jefes de Departamento y Empleados puede ser sustituida por la distribución representada por la línea roja., donde todos ganan algo de poder. El gráfico representa la vieja metáfora de la tarta: un juego de suma cero es aquel que intenta repartir la tarta entre empleadores y empleados (alguien siempre sale perdiendo) mientras que un juego de suma no cero comienza por el compromiso de aumentar la tarta para que el reparto, aunque siga siendo desigual, todos puedan ganar.NoneCEO’sPlant ManagersDept. chiefsEmployees
88 ORGANIZATIONAL ANALYSIS Centralization:Spans of Control refers to the number of immediate subordinates’ positions that a superior position controls or coordinatesIn the past, a suggested span of control was from five to sevenThe thinking on spans of control now has shifted to looking at a number of factors including:the ability and experience of the manager,the ability and experience of subordinates,the nature of the task being performed,the spatial differentiation, andthe amount and type of interaction needed by the supervisor.Another way to think about spans of control is whether an organization employs a tall or flat structure
89 ORGANIZATIONAL ANALYSIS Organizations must differentiate work in order to accomplish the job.Managers must then integrate the various tasks into a coordinated wholeThe span of control can be wider…the more competent the manager and subordinates arethe less geographical dispersion existsthe more routine the tasks of the subordinates areThe span of control will be narrowerthe more differentiated the work isthe more complex is the job of integrationNot one best way the work of the manager can hardly be routinized by formalization
90 ORGANIZATIONAL ANALYSIS Standardization:It can help achieve integration by reducing the uncertainty or unpredictability of tasksSetting consistent inputDealing with only one supplier of raw materialsOrganizations may standardize human resources by hiring only graduates of certain MBA programs or requiring training or certificationSetting consistent processesHow to do something, such as preparation of fast food or manufacturing certain fabricSetting consistent output requirementsTextile industry in developing countries
91 ORGANIZATIONAL ANALYSIS Other instruments for achieving integration (B.J. Hodge)Liaison roleshorizontal linking positions between two units or departments at the same level of the organizationproduction and shipping depts. need to coordinate their activitiesTeamsorganizing employees and managers into work and inter-unit groups in order to enhance communications, coordination, and control Cultureinformal and unwritten rules, norms, and values that are commonly shared by organizational membersInformation Systemshow the system gathers, processes, analyzes, and distributes information., networks, video, conference calling, and LAN networksInformal organization
92 ORGANIZATIONAL ANALYSIS (B.J. HODGE) The organization chart showsthe formal organization that is the officially sanctioned structuredelineates the authority, or reporting relationships, that exist in the organization.The informal organizationrepresents the de facto relationships that are not necessarily sanctioned by the organization, even though they may be perceived as actually existingpersonal characteristics and patterns of social relationships that may not be captured in the formal structure are ever-present and important to the formal structure
93 ORGANIZATIONAL ANALYSIS (B.J. HODGE) The informal organization (B.J. Hodge)It is impossible to separate the roles and the relationships from people.Evolves from people working in organizations that are political.Is often the result of flaws, vagueness, incompleteness, or inefficiencies in the formal design, or because of changes in organization faces.In theory, in a perfect organization, the informal organization would either not exist or would be of little importance.Virtually all organizations have an informal organization.Skilled managers understand and utilize both the formal and informal organization to accomplish their objectives.
94 DIFFERENTIATION (B.J. HODGE) Organizations today must accomplish complex workIt is virtually impossible for an individual to accomplish all of the tasks that are required to deliver products and servicesTo carry out its mission more efficiently, organizations:Must divide its work into many tasksMust allocate tasks to different workersWorkers apply their skills to a limited part of the total product or service (part of their talent may be underused which may lead to alienation and demotivation)Organizations tend to differentiate in three different ways:horizontallyverticallyspatially
95 INTEGRATION (B.J. HODGE) Organizations must divide up work (differentiation)Integration is the necessary coordination among the various tasks to ensure that the overall goals of the organization are achievedIn smaller organizations, integration can often be achieved by direct contact and supervision of one or two key peopleIn large organizations that are highly differentiated often turn to both formal and informal integrating meansFormal structures include:formalization (through rules, policies, and procedures)centralizationspans of controlstandardizationInformal or non-structural integrating means include:liaison roles, teams, culture, and information systems
96 MECHANISTIC AND ORGANIC (HODGE) The mechanistic and organic structures are prototypes and represent extremesMechanistic organizations havehigh vertical and horizontal complexity,high formalization,high centralization,narrow spans of control, andhigh standardization.Organic organizations havelow vertical and horizontal complexity,low formalization,high decentralization,broad spans of control andlow standardization.Rarely one of the pure forms is the most appropriate
97 STRUCTURAL DESIGN (B.J HODGE) According to contingency theory, five contextual factors must be considered in selecting the proper balance in the structural design:GoalsSizeTechnologyEnvironmentCultureLeadership and governance
98 ORGANIZATIONAL GOALS Organizational Goals (definition): Mission statements, official goals, or, strategic objectivesset forth the officially chartered purpose of organizations (before operative goals are established)Operative goalsderived from official goals, are more specific statements about what the organization, division, department or business unit intends to doOperational goalsvery specific and narrowly stated goals of the organizationOrganizations have short-term and long-term goals.Short-term goalsthose that an organization hopes to accomplish within a year or specific accounting cycle. (Amazon.com, 1st to build traffic, 2nd visitors would become shoppers and revenues would follow)Long-term goalsthose that cannot be accomplished in the short runthese goals may be for as long as ten to twenty yearsIn practice it is difficult to plan much beyond three to five years.
99 ORGANIZATIONAL GOALS Organizational Goals (definition): Strategic goalsThese statements are broad, but they state the direction the organization is taking and often the philosophy of the organizationOperative goalsStated in measurable outcomesThey set standards and guide what people in the organization should be doingMarketFinancial PerformanceResourceInnovationProductivityManagement DevelopmentEmployee Performance and AttitudesSocial Responsibility and Ethical Behavior
100 ORGANIZATIONAL GOALS Organizational Goals (importance): It is important to have a united set of goalsThe overall mission of the organization needs to be set before operative goals can be developed to support the missionOrganizations that are divided into many units and departments need some unifying purpose.If left on their own, they end up working at cross-purposes and detract from the organization’s larger purposeHighly centralized organizationswill pass down specific and detailed goalsDe-centralized organizationsmay give lower-level managers more discretion in setting direction at the operative and operational levels.Even though there is a natural sequencing of goal setting, many effective organizations build an elaborate feedback system that allows ideas to flow up and down the chain of command, as well as across unitsThere is no one best way to implement them; it depends on the organization in question
101 ORGANIZATIONAL GOALS (ETHICS) Much of what organizational members do on a day-to-day basis involves ethicsEthical dilemmas have five characteristics:1) Actions have extended consequences.2) Managers have alternatives and can make choices.3) Outcomes are mixed—not all of the consequences are totally positive or negative.4) Consequences are uncertain.5) Decisions that managers make have personal implications—they affect people.
102 ORGANIZATIONAL GOALS (ETHICS) Brady suggests an approach that balances two quite different views on ethics: ethical utilitarianism and ethical formalismEthical utilitarianism is based on the works of Jeremy BenthamEthical correctness is judged by consequences, and is guided by the “greatest happiness principles.”Actions that produce good outcomes are ethical.Actions that produce pain or suffering are unethical.Ethical judgment is essentially that of cost/benefit analysis.If the positive outcomes outweigh the negative consequences, then the action is deemed ethical.Ethical formalism is based on the works of Emanuel KantKant believed that we could know what is ethical before we know the consequences.Ethics are based on laws, principles, or widely held beliefs or values.Actions that violate these are considered unethical.Formalism emphasizes universality and consistency in the application of rules.
103 ORGANIZATIONAL GOALS (ETHICS) Ethics play a major role in setting and measuring goalsEthics will determine what are the core values of the organization.Ethics will provide a strong impetus for certain types of goals and eliminate others from considerationOrganizations often use a form of ethical formalism, whereby they use a common set of beliefs, rules, and principles to guide the action of their organizationsThe achievement of goals should be done in such a way as to be consistent with the accepted principlesAn organization might also apply utilitarian ethics, whereby they judge their actions, after the fact, by whether the consequences are positive or negative
104 ORGANIZATIONAL GOALSOther factors to bear in mind related to goals include:Who are the beneficiaries of the organizationWhat is the relevant time frame for specific goalsWhat is the relative importance of specific goalsOrganizations have multiple constituents or beneficiariesPrimarySecondaryExamples:Justice system (judges, criminals, victims)Private corporation (shareholders, clients, workers)Because an organization has multiple constituencies, they will have multiple goals, some of which may be in conflict.EmployeesOwners and ShareholdersSuppliers,Members of the communities served by the firmaPatients, students, transport commuters, etc.
105 ORGANIZATIONAL GOALS Managing Goals and Objectives (conflict): In a perfectly rational world, managing diverse goals would not be a significant problemGoal setting is often a political process.Coalitions form within the organization.Stakeholders might have goals that are different from internal goals.What seems rational to one member or group may appear to be misguided, wrong, or irrational to another.Individuals or groups operate with hidden goals or agendas.
106 ORGANIZATIONAL GOALS Managing Goals and Objectives (conflict): Because of the previously cited problems, organizations have explicit ways of establishing goals. But to fully understand how goals are set, we need to examinethe formal processthe political processManaging goals is frequently a process ofmanaging conflictpursuing negotiationsbargainingCompromises may result insome winners and some losers—a win-lose scenarioall parties are better off and a win-win situation developsClassic problem: employees prefer to have a very high rate of pay, but this may frustrate the organization’s ability to remain competitive, or it may compromise stockholders’ targeted return rates
107 ORGANIZATIONAL GOALS Managing Goals and Objectives (conflict): Conflict is a fact of organizational life, so it can never be eliminated entirelyThe organization needs to recognize conflictIn the formal levelby establishing procedures and mechanisms for goal negotiation and bargainingIn the informal level (greatly influenced by culture)Goal conflict at informal level can reveal what is really going onShould provide feedback to managers on whether established goals are realistic and workableThis information needs to be taken into account in the formal goal-setting process
108 ORGANIZATIONAL GOALS Managing Goals and Objectives (conflict): SatisficingGoals are not always fully metManagers may be satisfied with less than perfect or complete goal achievementTwo additional techniques are available for managing multiple and potentially conflicting goals.Setting prioritiesmeans that some goals will take priority over othersSequencing of goalsassumes that all goals will eventfully be met, but some will be met before others
109 ORGANIZATIONAL GOALS“The concept of goals is among the most important and most controversial concepts to be confronted in the study of organizations.”Hodge’s key points regarding organizational goals:1) Without goals, organizations wander aimlessly and cannot survive long.2) Goals provide a road map or direction. The very definition of an organization delineates the importance of goals. Goals establish a future direction, provide legitimacy, and provide standards.3) The goals an organization selects will determine the markets it serves, how it will service those markets, where it will operate, the structure it will use, and so forth.4) Goals also provide a basis for measurement and a way to judge effectiveness. Change and adjustment needs to be based on feedback regarding the accomplishment of goals.
110 EXAMPLES OF GOAL DEFINITION (Germany)(Japan)(Poland)(Ukraine)
111 ORGANIZATIONAL EFFECTIVENESS Goals and effectiveness are related but the term effectiveness is unclearWhether an organization is effective or not may depend on who is asking the questionInternal effectivenessEfficiency: it maximizes outputs with respect to the costs of inputs and the costs of the transformation of those inputs into outputsEmotional or affective health is the concern of the Human Relations School: workers are happy and satisfiedThe goal approachDefines effectiveness in terms of “if,” and “how well,” an organization accomplishes its goals.For this to work, goals must be measurable. There are at least 3 problems:If the goals are ill defined, complex or inappropriate, the mere attainment of these goals does not guarantee effectiveness.If the goals do not represent the diverse interests of important stakeholders, the organization may find itself in trouble.Many times the meeting of one goal means that a conflicting goal cannot be achieved.Resource acquisitionFocus on the organization’s ability to acquire adequate resources from the external environment to meet its objectives (the basis of the systems resources model).While acquiring resources is necessary, this alone does not give us a comprehensive picture of organizational effectivenessPerformance from the stakeholders’ perspectiveAccording to this perspective, organizations are effective to the extent that key groups are least minimally satisfiedBecause stakeholders have conflicts, this approach forces the difficult issue of whose claims are the most important
112 ORGANIZATIONAL EFFECTIVENESS Contradictions ModelThis model argues that the idea of trying to characterize a whole organization as totally effective is problematic.Four central assumptions drive the model.1) Organizations face complex environments that place multiple and conflicting demands and constraints on them. It may not be possible to meet all of these conditions.2) Organizations have multiple conflicting goals. It is impossible to maximize achievement of all goals.3) Organizations face multiple internal and external stakeholders, and it may be impossible to meet all of their conflicting demands.4) Organizations must manage multiple and conflicting time demands. There may be a tradeoff between satisfying short-term and long-term demands.This model does not suggest one best way of assessing effectiveness; rather, it makes us cognizant of these potential contradictions.
113 ORGANIZATIONAL EFFECTIVENESS Competing Values ModelNo single measure of effectiveness is, by itself, satisfactory.This approach relies on a two dimensional approach depending on the main focus of the organization is placedinternal vs. externalcontrol vs. flexibilityThe combination of these two-dimensions yields four distinct approaches.Human Relations ModelInternally focused and desire flexibility (Team culture collaboration “do it together”)Cohesion, morale, mutual support, human resource developmentOpen Systems ModelExternally oriented and flexible (Entrepreneurial culture innovation “do it first”)Flexibility and creativity, control of resources, responsive to environmental changesInternal Process ModelInternally focused and control-oriented (Hierarchical culture control “do it right”)Clear lines of authority, stability, predictabilityRational Goal ModelExternally focused and flexible (Rational culture competition “do it fast”)Clarity of tasks, efficiency, measurable outcomes, predictability
114 ORGANIZATIONAL EFFECTIVENESS There is not one best approach to effectiveness; we must determinewhy we want to measure effectivenessthe appropriate time frameapply the proper model to the type of organization in question
115 ORGANIZATIONAL EFFECTIVENESS Balance ScorecardIn the 1990’s, a variety of approaches to effectiveness have emerged that recognize the multidimensional nature of performanceMany of these approaches are direct products of the TQM movementRobert Kaplan and David Norton have developed a balanced scorecard approach.To be successful, a firm must succeed infinancial performanceinternal operational performancecustomer performanceinnovation and learning performanceA good balanced scorecard approach must contain both leading and lagging measures
116 ORGANIZATIONAL ANALYSIS Factors conditioning organizational structureSizePeter BlauRichard SchoennherTechnologyJoanne WoodwardCharles PerrowJames ThompsonEnvironmentSystems TheoriesCultureGeert HofstedeScheinLeadership and governanceHersey and BlanchardStrategic designChandler
117 ORGANIZATIONAL SIZEService and manufacturing companies often use different measures and definitions of size:1) Financial and market measures, such as asset value, revenues, or market share.2) Concentration levels, such as the percent of business for the top three to five businesses.automakers vs pizzerias3) Number of markets that an organization serves, or the number of products they offer. Markets can include both domestic and foreign locations.4) The number of employees working for the organization.largely the result of the technology and industry
118 ORGANIZATIONAL SIZE Definitions of size (examples): How to measure the size of a University?1) The total number of students.2) The percent of total students in the country/region/state who attend a particular University.3) If it is a private university—the percent of the target market who attend.4) For a research university, the number of dollars received in contracts and grants, and the number of articles published.A private company?Nº of workers? Nº of clients?A hospital?Nº of beds? Nº of doctors?An NGO?Nº of volunteers? Hired professionals? People served?
119 ORGANIZATIONAL SIZE Organizational growth: Auto repair workshop: the effects of growth (and success) can be seen ontask differentiation:Hiring mechanics specialized on different areasincreasing support functions:Hiring bookkeepers, marketing experts, accountants
120 ORGANIZATIONAL SIZE Organizations that grow in size Become more formalized and complexFormalization and complexity are the direct result of the needto divide the increased work in the organizationthe desire to achieve greater specializationGrowth in rules and regulationsMore job specializationMore administrative layers
121 SIZE AND COMPLEXITY Y´ X´ Complexity Y X Size (nº members) High “Complexity increases alongwith size but at a decreasing rate”(P. Blau)Al principio una organización crece en complejidad rápidamente cuando pasa de 300 a 800 empleados pero a partir de ahí la complejidad sigue aumentando pero mucho menos en reñlación al número de empleados.Low30080023002800Size (nº members)
122 ORGANIZATIONAL SIZE Differences between large and small organizations: Number of employees, size of sales and revenues, market share, and other measures related to size will be larger in the larger organization.Large organizations will tend to be more formalized than small organizations; they will have more layers of management, more rules and procedures.More complex organizational charts in the larger organization.Larger companies will tend to have broader product and service lines, perhaps organized into divisions, whereas, smaller organizations will not.Larger organizations will tend to have power over suppliers, and maybe even buyers. Smaller organizations will not.
125 ORGANIZATIONAL SIZE Organizational Birth: Primary activity is to invent a new product or service, create a new technology, or improve an existing product or service.The organization is not necessarily officially created (might be an adhocracy).It is organic, and the entrepreneur is firmly in control.The critical task in this first stage is survival; between 60 and 75 percent fail in the first six years because of the liability of newness.At some point, outside talent needs to be brought in to create some structure and permanenceOften the transition between the entrepreneur and professional managers is very difficult and rocky
126 ORGANIZATIONAL SIZEMany small businesses are started by entrepreneurs who understand a craft, a process, technology, or a market niche from a technical viewpoint.The entrepreneur may be a great cook, mechanic, computer programmer, salesperson, and so forth.As the business grows, he or she needs help in administrative support areas where he or she either has little interest and/or significantly fewer skills.Even though the entrepreneur may not have these skills, it is still difficult to give up control of these areas, and that often becomes a major stumbling block for new firms as they start to move through the life cycle
127 ORGANIZATIONAL SIZE Emergent structure: If the new venture solves the financial, market, and managerial problems of its birth, it must thenprovide leadership,establish clear goals,differentiate departments,divide labor,delegate responsibilities,develop a hierarchy.This stage is referred to as a collectivity stageThe critical task, at this point, is to balancethe need for a formal structure withthe need to continue to grow and adapt to external conditions
128 ORGANIZATIONAL SIZE The formal organization: Over time, but at a slower pace, the organization moves towards more formalized structure and bureaucracy.There is now a time of greater stability and predictability.The formalization stage is marked by greater reliance on traditional bureaucratic mechanisms of control.The organization may expand into more markets and geographical areas.It may need more complex structures, such as divisions.Organizations must balancethe need for control and structure withthe need to remain flexible and innovative.
129 ORGANIZATIONAL SIZE Dinosaurs and Turnarounds: Once-successful organizations sometimes reach the point at which bureaucratic controls no longer work.To deal with increasing complexity, managers write more and more complex rules that inhibit control and communication rather than enhancing it.This stage is called the elaboration stage because of the need to elaborate on bureaucratic mechanisms.Often, organizations will utilize teamwork and self-management of shared values and norms to replace bureaucratic rules and procedures.These changes are labeled in a variety of ways, including re-inventing, downsizing, restructuring, re-engineering.1) Restructuring refers to re-configuring organizational units or departs.2) Re-engineering refers to re-configuring the work process.3) Rethinking refers to reevaluation of the organization—its identity, its purpose, and its methods and capabilities.
130 ORGANIZATIONAL SIZE Organizational decline The organization’s inability or reduced capacity to cope with this environment.Organizations generally do not decline rapidly; rather, it happens in a slow, agonizing retreat described as a “downward spiral.”Decline is hard to reverse because, in many cases, the decline exacerbates the difficulty of obtaining resources.Decline has five distinct stages:1) Blinded—failure to detect environmental pressure.2) Inaction—failure to decide on corrective action, misinterpretation of information, noticeable decline.3) Faulty action—faulty decision and/or faulty implementation of solutions.4) Crisis—last chance for reversal, given a favorable environment and a slow decline.5) Dissolution—given a hostile environment—quick demise; given a favorable environment—slow decline.
131 ORGANIZATIONAL SIZE Should organizations grow? Growth may be pursued to gain power over suppliers, buyers, regulatorsto profit from economies of scaleIt may have, however, dysfunctional consequencesDiminishing returnsNeed for adaptationCultural changeIn recent years, because of technological and environmental changes, smaller organizations are beginning to be able to achieve economies of scale that were formerly reserved for large organizations
132 ORGANIZATIONAL SIZE The advantages of small size: 1) Downsizing. As organizations grow, they tend to increase administrative structures and develop more specialization. Downsizing often involves eliminating some layers and, perhaps, broadening job descriptions and responsibilities.2) Redesign: redesigning a formerly bureaucratic structure into a flatter, more organic organization with fewer layers of hierarchy. It may also mean elimination of certain divisions. This could result in selling off or spinning off divisions 3) Virtual organizations: subcontracting out much of their work in order to achieve the advantages of smaller size and flexibility. They sometimes do this to such an extent that they become a shell or an umbrella organization.4) Coordination and control: changing the culture. To make a large organization behave like a smaller organization, managers often have to change the underlying corporate culture. Large companies can emphasize small firm values, such as entrepreneurship, risk-taking, closeness to customers, decentralized authority, individual responsibility, innovativeness, responsiveness, etc.
133 ORGANIZATIONAL SIZE Is growth good? It depends on how do we define it!!!Advantages of sizeNeed for downsizing
134 ORGANIZATIONAL TECHNOLOGY Technology is a major factor in the contingency model of organizationsTechnology refers to the knowledge, tools, machines, information, skills, and materials used to complete tasks within organizations, as well as to the nature of the outputs of the organizationPopular meanings related to “high tech” or “low tech” are too limiting.Two questions must be answered to guide our thinking:1) How does the organization get its work done?2) How can management control that technology?
135 ORGANIZATIONAL TECHNOLOGY The technology used in an organization causes an organization to structure or organize a certain way and also affects individual conduct of membersEfficiencies are gained, there are also costs in training, human resource dislocationsThree levels of technology:1) Core Technology—used to characterize the entire organization;2) Work unit or department technology;3) Interdependent relationships that result from the flow of work between work units.
136 ORGANIZATIONAL TECHNOLOGY Joan Woodward’s 1950's study of British manufacturing companies. She developed a three-category scheme for classifying organization-level technology:1) Unit or Small Batch(Hull & Collins: traditional Skilled craftsmen or technological skilled programmers and automatization)2) Mass or Large Batch3) Continuous Process or Flow.Woodward’s work also identified a contingency relationship between technology and structure.1) The unit or small batch needed an organic structure.2) The mass or large batch needed a mechanistic/bureaucratic structure.3) The continuous process or flow needed an organic structure.
137 ORGANIZATIONAL TECHNOLOGY Special attention needs to be focused on service as a core technology.Services tend to be intangible.Examples include teaching, medical services, legal services, banking, etc.Differences between services and manufacturing can be seen by examining the extreme or prototypical cases on five dimensions:1) Tangibility—which refers to the concreteness or abstractness of output. Services tend to be more intangible.2) Standardization—services tend to be less standardized and more tailored to customer needs.3) Customer participation—services directly involve the customer in the process.4) Timing—services require simultaneous production and consumption.5) Labor intensity—services, in general, tend to be more labor intensive.
138 ORGANIZATIONAL TECHNOLOGY Managing Service Technology:Managing service technology is somewhat different from managing manufacturing technology.The Ashton Group developed a scale for classifying technology based on three factors:automation of equipment;workflow rigidity; andspecificity of evaluation.These are combined into a workflow integration scale.High levels of automation, greater rigidity of work, and more precise measures of operations characterize organizations with technologies that scored high on work integration.Low scores indicate the opposite.Services tend to score low on workflow integration,thus service organizations should be managed with organic organizational structures that include low formalization, low specialization, and decentralization.
139 ORGANIZATIONAL TECHNOLOGY This framework was developed by Perrow,Technology is defined on the dimensions ofexceptions/varietyanalyzabilityHigh-task variety jobs have many exceptions to standard operating procedures.Low variety technologies permit little flexibility,High variety permits greater flexibility.Examples:jobs at pizza carryout are low variety;at a marketing department, high variety.
140 ORGANIZATIONAL TECHNOLOGY The second dimension is analyzability.Tasks characterized by readily available information, that is easily obtained, are high analyzability tasks.Those characterized by unavailable information or information difficult to obtain are designated as low-analyzability tasks.High-analyzability tasks can usually be standardized or programmed (even the resolution of problems).Low-analyzability tasks are uncertain, ambiguous, and complex.Problem solvers must rely on judgment, instincts, intuition, and experience.
141 ORGANIZATIONAL TECHNOLOGY Based on these two dimensions, Perrow developed four categories:1) Routine—low variety/high analyzability;2) Engineering—high variety/high analyzability;3) Craft—low variety/low analyzability;4) Non-routine—high variety/low analyzability.ESeC
142 CHARLES PERROW’S MODEL Variability/diversity of tasksFew exceptionsMany exceptionsUndefinedNon-routine(aerospace)Craft(Artisanship: glass)Problem solving protocolsAnalyzabilityNon-routineRoutine(Steel)Engineering(Heavy machinery)RoutineWell-definedAdapted from Perrow
143 ORGANIZATIONAL TECHNOLOGY James Thompson developed a technology framework (which has been elaborated on by others) that focuses on the nature of interdependence and coordination among departments. There are three essentials questions about interdependence that must be asked:1) How much does one unit or department depend on another to complete work?2) What is the nature of that interdependence?3) How can we achieve the necessary coordination?Mediating Technology (pooled interdependence)Long-linked technologiesIntensive technology (reciprocal interdependence)
144 ORGANIZATIONAL TECHNOLOGY Task Design and Technology:Fitting People to Jobs: The Traditional Industrial Ethic.Jobs are regarded as nearly inflexible, as determined by the technology, and people are seen as being flexible enough to fit the job.People can be selected and trained.This approach is conducive to job specialization and for assembly-line operations.In many cases, human beings are not infinitely malleable.People may not be able to adapt, and this can cause disruption
145 ORGANIZATIONAL TECHNOLOGY Task Design and Technology:Fitting Jobs to People: The Task of the Postindustrial Society.Here the capabilities of the available labor force take precedence over the technology.The skills, abilities, and aspirations of the labor force are analyzed, and a technology is adopted that results in jobs that are consistent with the available skills and abilities.This view has led to job redesign and job enrichment efforts.The idea is to create more challenging and motivating jobs.However, some workers may prefer highly structured jobs with little responsibility.Thus, these approaches have not solved all of the problems, and the sociotechnical approach suggests that the set of relationships between individuals, organizations, tasks, and technology may be more complex
146 ORGANIZATIONAL TECHNOLOGY Task Design and Technology:Sociotechnical Systems: A Middle Ground.Here we combine both approaches outlined above.This approach explicitly considers both people and technology.The whole person is considered, and the range of factors that impinge on the human-machine interface is explicitly considered.This approach assumes that technology cannot be fully understood apart from the relationship to people.The design of tools, equipment, and process must consider human aspects, including strength, durability, range of motion, and the ability to socially interact in the conduct of one’s job.Also, the design must take into account the degree to which humans can adapt through learning, conditioning, and experience
147 THE ENVIRONMENT The Environment Managers should formulate strategies and conduct the organization in such a way so as to maximize the organization’s fit with the environment. Three associated tasks are:1. Knowing the environment2. Adapting or responding to the environment3. Changing the environment
148 THE ENVIRONMENT The Environment Uncertainty can come from three aspects of the environment1. Complexitynumber of sectors or elements of the environment relevant to the organization.2. ChangeSince an organization has limited capacity to monitor the environment, increasing levels of change and complexity cause uncertainty.3. Munificence (means there are abundant resources)When resources become scarce, they create uncertainty for an organization because it becomes more dependent on others for the vital resources it needs.This dependence can also occur when there are large power differences between organizations, such as between Wal-Mart and its suppliers.
149 THE ENVIRONMENT Abundance Stable Simple Complex Scarcity Dynamic El entrono puede ser definido por tres dimensiones: Estable/dinámico; Simple/complejo (monopolio-competitividad) y abundante/escaso. Las organizaciones se encuentran hoy en día en un entorno caracterizado por la escasez de recursos, altamente competitivo (complejo) y turbulento(dinámico). En España, como en otros países, antes de la entrada en la UE se encontraban en entornos estables y abundantes.ScarcityAdapted fromS. RobbinsDynamic
150 ORGANIZATIONAL CULTURE Organization culture vs general societal cultureTwo levels of organizational culture:1) observable traces or indicators, such as architecture, artwork, dress, language, stories, myths, behavior, formal rules, rituals, ceremonies, and appearances; and2) unobservable forces present in the organization, such as norms, assumptions, ideology, values, and shared perceptions.Culture is the pattern or configuration of these two levels of characteristics that orients or directs organizational members to manage problems and their surroundingsWeber’s Trains (self-interest) and Railroads (values)
151 ORGANIZATIONAL CULTURE Five Elements of Corporative Culture:ValuesDesirableDesiredRites (formal and informal)ProtocolCompany parties / CEO public speechSymbolsCompany logosHeroesFounding father’s of the organizationNormsDressing codesSchedules (time at office)
152 ORGANIZATIONAL CULTURE Six Dimensions of Corporative CultureEmployee oriented vs task orientedTaylorism vs Human Relations SchoolProcess oriented vs goal (result) orientedFlexibility/autonomy vs protocols and rulesCorporatism vs professionalismLevel of educationSelf-identification with corporate valuesOpen system vs closed systemAcceptance of new membersLoose control vs strict controlRegarding expenditures and use of meansNormativism vs pragmatismClient oriented vs norm oriented (Public/Bureaucratic)
153 ORGANIZATIONAL CULTURE Geert Hofstede and William OuchiOrganizational cultures are influenced greatly by the national cultureHofstede has proposed five dimensions1) Individualism-Collectivism2) Uncertainty Avoidance3) Power DistanceImportance of hierarchy4) Masculinity-FemininityAssertivenessSalary vs working environment5) Time Orientation (Confusion Dynamism)Short term vs long term goals
154 ORGANIZATIONAL CULTURE Four Views Based on Four-Leading ScholarsSchein’sStages of Culture FormationScholz’sTopology of Culture FormationFombrunLevels of CultureLouisMultiple Cultures
155 ORGANIZATIONAL CULTURE Schein’s Stages of Culture FormationLeader characteristics, such as age, training, background, gender, and experience, are important in the formation of cultureConfrontation ofintimacy,role differentiationpeer relationship issuesCreativity and stability issues must be confronted.Much of the early success, based on innovation and creativity, comes into conflictNeeds for more predictability and stabilityThe organization matures and has to confront growth and survival issues
156 ORGANIZATIONAL CULTURE Scholz’s Topology of Culture FormationCulture develops along three dimensions1) Evolutionary dimension.Not all organizations follow a sequence, nor is any one stage better than another.The stages are: the stable stage, the reactive stage, the anticipating stage, the exploring stage, and the creative stage.2)Internal dimension.The internal conditions within the organization affect the culture.For example, an organization that uses standardized production processes would create conditions for a culture that is constant and process oriented. The result is a consistency culture that places a high value on standard procedures and consistency outputs, as illustrated by McDonald’s.On the other hand, a professional organization with employees possessing varied skills and high levels of professional expertise is likely to foster development of a culture that emphasizes individualism and professionalism. This type of culture is referred to as a clan or involvement culture.3) External dimension.The external environment will impact the development of culture.A complex and dynamic environment is likely to develop a culture that values flexibility, innovativeness, and risk taking.The external focus can be manifested in two different ways: as an adaptability culture based on innovations and/or attempts to change in response to the environment, or as a mission culture with a focus on meeting customer needs.Conversely, an organization facing a simple and stable environment is likely to adopt a culture that features conservatism, risk aversion, and bureaucracy.
157 ORGANIZATIONAL CULTURE Fombrun—Levels of Culture1) Societal level.Culture represents the values, attitudes, and meanings that members bring to the organization.The educational system, political system, economic conditions, and social structure of the larger society may influence this.The organization operates within this general cultural atmosphere and is influenced by it.2) Industrial level.There are some similarities and differences of culture between industries.The majority of organizations within an industry may espouse certain dominant values. (the banking industry vs Silicon Valley).3) Organizational level.The organizational level must be understood in terms of both the individual organization and as a function of the larger society and industry in which the organization finds itself.
158 ORGANIZATIONAL CULTURE Louis—Multiple CulturesLouis suggests that organizations are not simply a single monolithic culture. Large organizations often develop different cultures at different sites or loci within the organization. Subcultures can develop among different levels in the organization or within different divisions or departments
159 LEADERSHIP AND GOVERNANCE Hersey, P. and Blanchard, K. H.“Management of Organizational Behavior” (1972)There is no single "best" style of leadershipEffective leadership depends onthe person or group that is being influenced,the task, job or function to be accomplishedA good leader develops “the competence and commitment of their people so they’re self-motivated rather than dependent on others for direction and guidance”Four combinations of competence and commitment make up the development levelFour types of leadership styles
163 LEADERSHIP AND GOVERNANCE Governance and controlTheoretical backgroundMethodological approaches (Ficha 7)Holistic: individual behavior is result of structures; focus on Explain structures and their changeIndividualistic methodology: structures are created by individuals acting rationally; focus on explaining individual behaviorRational choice theoriesAgency theories (Jensen & Meckling 1976)Transaction cost theories (Williamson 1981)
164 LEADERSHIP AND GOVERNANCE Governance and controlAgency theory is concerned about the relationship between principals (owners) and agents (employees).Agency theory assumes that agents will act in opportunistic ways; therefore, appropriate contracts and monitoring is necessary to reduce agency costs.Organizations are seen as a series of contractual relationships between principals and agents.Agency costs are the costs associated with monitoring agent behavior and enforcing contracts.Transaction cost economics focuses on how to maximize efficiency of transactions by determining the proper boundaries of the organization. That is, what should be done internally vs. what should be contracted for on the outside.A transaction is defined as the exchange of goods and services among groups within the organization or across organizational boundaries.A transaction cost is an explicit fee or cost associated with a transaction, or an implicit cost of monitoring and controlling a transaction.Develop professionalism and/or externalize services which are not at the core activity of the organization to reduce costs
165 LEADERSHIP AND GOVERNANCE Organizational economists use the term “cost” to refer to a wide range of problems that owners must remedy in order to create an organization that allows for wealth maximization.1) Bounded rationality.Owners and managers are unable to process all of the available information, and face uncertainty in transactions or contract relationships. Because of this, employees, suppliers, and contractors may be in a position to take advantage of the owner. Therefore, costs are incurred by the owner in gathering and processing information in order to reduce these costs.2) Opportunism.Principals and agents often have different goals and will seek their own self-interest. The theory states that agents will not always fulfill their obligations because they prefer leisure to work and are subject to shirking. This problem is referred to as moral hazard—workers will not put forth the agreed-upon effort.3) Information Asymmetry.Information related to exchanges or transactions is not evenly distributed. One participant is likely to have more than another. Agency theory has used this concept to explain opportunism and moral hazard. It assumes that agents have certain information about their own behavior and shortcomings that is not available to the principal, or a contractor may have information that is not available to the principal. In order to reduce this asymmetry in information, costs are incurred in gathering additional information and using various governance mechanisms. Information asymmetry, in part, is what motivates key decisions as to which tasks should be conducted within or outside the organization.4) Asset specificity.Assets that are very specific and fixed can reduce the flexibility of an organization. That is, it may be hard to transfer them to another purpose or to sell them at a reasonable level. The decision to invest or not to invest in specific assets has implications on how the organization governs its relationship with employees and other firms.5) Small Numbers.An organization may incur a transaction problem when it is faced with only a small number of potential trading partners (an oligopoly). The major problem with this situation is that an organization can more easily be exploited by a trading partner.
166 LEADERSHIP AND GOVERNANCE Mechanisms for control: Owners try to protect their interests byCreating either behavioral contracts or outcome-based contractsPay-for-performance at the CEO levelMarkets as disciplinary forcesThe stock market, labor market, and debt market, can provide feedback about the company’s performance.The price of the company’s stock can result in managerial rewards or punishmentsBureaucratic control1) Comprehensive job descriptions and performance appraisal systems.2) Statistical or numerical control systems.3) Budgeting and accounting systems.4) Work rules or procedural guidelines.Clan controlBureaucracies can become inefficientClan control utilizes the shared norms, values, and beliefs of organizational members to ensure that people pursue common goals and objectives.It doesn’t eliminate all transaction costs but it does reduce problems of opportunism