1. Organizational Effectiveness
Organizational Theory, Design, and Change Fifth Edition Gareth R. Jones
Chapter 1
Organizations and
Organizational Effectiveness
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2. Copyright 2007 Prentice Hall
Learning Objectives
Explain why organizations exist and the purposes they serve
Describe the relationship between organizational theory and organizational design and change, and differentiate between organizational structure and culture
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3. Learning Objectives (cont.)
Understand how managers can utilize the principles of organizational theory to design and change their organizations to increase organizational effectiveness
Identify the three principal ways in which managers assess and measure organizational effectiveness
Appreciate the way in which several contingency factors influence the design of organizations
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4. What is an Organization?
Organization: a tool used by people to coordinate their actions to obtain something they desire or value
Entrepreneurship: the process by which people recognize opportunities to satisfy needs, and then gather and use resources to meet those needs
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5. How Does an Organization Create Value?
Value creation takes place at three stages: input, conversion and output
Inputs: include human resources, information and knowledge, raw materials, money and capital
Conversion: the way the organization uses human resources and technology to transform inputs into outputs
Output: finished products and services that the organization releases to its environment
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6. Figure 1 – 1: How An Organization Creates Value
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7. Why Do Organizations Exist?
To increase specialization and the division of labor
To use large-scale technology
Economies of scale: cost savings that result when goods and services are produced in large volume
Economies of scope: cost savings that result when an organization is able to use underutilized resources more effectively because they can be shared across several different products or tasks
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8. Why Do Organizations Exist? (cont.)
To manage the external environment
Pressures from the external environment make organizations the favored mode for organizing productive resources
To economize on transaction costs
Transaction costs: the costs associated with negotiating, monitoring, and governing exchanges between people who must cooperate
To exert power and control
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9. Figure 1-3: Why organizations exist
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10. Organizational Theory, Design, and Change: Some Definitions
Organizational theory: the study of how organizations function and how they affect and are affected by the environment in which they operate
Organizational structure: the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals
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11. Some Definitions (cont.)
Organizational culture: the set of shared values and norms that control organizational members’ interactions with each other and with suppliers, customers, and other people outside the organization
Organizational design: the process by which managers select and manage aspects of structure and culture so that an organization can control the activities necessary to achieve its goals
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12. Some Definitions (cont.)
Organizational change: the process by which organizations move from their present state to some desired future state to increase their effectiveness
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Figure 1-4: Relationships Among Organizational Theory, Structure, Culture, Design and Change
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14. Importance of Organizational Design and Change
Dealing with contingencies
Contingencies are events that might occur and must be planned for
Gaining competitive advantage
The ability to outperform other companies because of the capacity to create more value from resources
Core competences: skills and abilities in value creation
Strategy: pattern of decisions and actions involving core competences that produces a competitive advantage
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15. Importance of Organizational Design and Change (cont.)
Managing diversity
Differences in the race, gender, and national origin of organizational members have important implications for organizational culture and effectiveness
Promoting efficiency, speed, and innovation
The better organizations function, the more value they create
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16. Consequences of Poor Organizational Design
Decline of the organization
Talented employees leave to take positions in growing organizations
Resources become harder to acquire
Resulting crisis impels managers to change organizational structure and culture
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17. How Do Managers Measure Organizational Effectiveness?
Control: external resource approach
Method evaluates how effectively an organization manages and controls its external environment
Innovation: internal system approach
Method allows managers to evaluate how effectively an organization functions and operates
Efficiency: technical approach
Method evaluates how efficiently an organization converts a fixed amount of resources into finished goods and services
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18. Table 1-1: Approaches to Measuring Effectiveness
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19. Measuring Effectiveness: Organizational Goals
Official goals: guiding principles that the organization formally states in its annual report and in other public documents
Mission: goals that explain why the organization exists and what it should be doing
Operative goals: specific long- and short-term goals that guide managers and employees as they perform the work of the organization
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20. Figure 1-5: Plan of the Book
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21. Figure 1-5: Plan of the Book (cont.)
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22. Figure 1-5: Plan of the Book (cont.)
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