Chapter 18 Creating Effective Organizations Organizations: Organizations: Definition and Definition and Perspectives Perspectives The Changing Shape of Organizations The Changing Shape of Organizations Organizational Effectiveness (and the Organizational Effectiveness (and the Threat of Decline) Threat of Decline) The Contingency Approach to The Contingency Approach to Organization Design Organization Design Three Important Contingency Variables: Three Important Contingency Variables: Technology, Size, and Strategic Choice Technology, Size, and Strategic Choice

Characteristics Common to All Organizations Hierarchy of authority Division of labor Common goal Coordination of effort 18-2 Figure 18-1 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Organization Charts Strategic Planning Officer Legal Counsel Cost-Containment Staff Director of Patient and Public Relations Director of Outpatient Services 18-3 Figure 18-2 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Closed Vs. Open Systems Closed System a relatively self-sufficient entity Open System organism that must constantly interact with its environment to survive 18-4 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

The Organization as an Open System Goals and Values Subsystem Technical Subsystem Psychological Subsystem Structural Subsystem Managerial Subsystem Feedback Inputs  Material  Money  Human effort  Information Outputs  Products  Services  Human satisfaction  Organiz- ational survival and growth  Social benefit 18-5 Figure 18-3 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Organization Learning Organization proactively creates, acquires, and transfers knowledge throughout the organization 18-6 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Profiles of the New-Style and Old-Style Organizations Job requirements orientedCustomer oriented HierarchicalLateral/networked Command/control orientedInvolvement oriented Individual orientedTeam oriented FunctionalProduct/customer oriented LargeSmall and large LocalGlobal Information is scarceInformation rich StableDynamic, learning OldNew Job orientedSkill oriented 18-7 Table 18-1 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Ways to Organizational Effectiveness Goal Accomplishment Resource Acquisition Strategic Constituencies Satisfaction Internal Processes Figure 18-5 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational Effectiveness Criterion Goal Accomplishment the organization achieves its goals—most widely used effectiveness criterion Resource Acquisition the organization acquires the resources it needs Internal Processes the organization functions smoothly with a minimum of internal strain Strategic Constituencies Satisfaction the demands and expectations of key interest groups are at least minimally satisfied Figure 18-5 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Identifying Strategic Constituencies Financial community Environmentalists PressStockholders OPEC Competitors U.S., Foreign State and Local Government Customers Federal Government Auto Dealers Consumer activists Congress Executive Branch Government regulators Suppliers Employees Unions Figure 18-6 Major Auto Manufacturer McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Assessing Environmental Uncertainty UnstableModerately stable Highly stable 4) How stable is the demand for the organization’s product or service? UnreliableOccasional, predictable shortages Reliable 3) How reliable are resources and supplies? FrequentOccasionalInfrequent 2) How frequent are technological breakthroughs in the industry? IntenseModerateMinimal 1) How strong are social, political, and economic pressures on the organization? HighModerateLow Figure 18-7 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Differentiation and Integration are Opposing Structural Forces Differentiation Fragments the organization through specialization of labor Integration Pulls the organization together through the coordination of specialties Figure 18-8 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics of Mechanistic and Organic Organizations 4) Specification of techniques, obligations, and rights 3) Task flexibility 2) Linkage between individual’s contribution and organization’s purpose 1) Task definition and knowledge required Organic Organizations Mechanistic Organizations Characteristic Broad; generalNarrow; technical Clear or directVague or indirect Flexible; variedRigid; routine GeneralSpecific Table 18-2 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics of Mechanistic and Organic Organizations 8) Emphasis on obedience and loyalty 7) Primary decision- making style 6) Primary communication pattern 5) Degree of hierarchal control Organic Organizations Mechanistic Organizations Characteristic LowHigh LateralTop-down Democratic; participative Authoritarian LowHigh Table 18-2 cont. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

The Effect of Technology on Structure The more the technology requires interdependence between individuals and/or groups, the greater the need for coordination “As technology moves from routine to nonroutine, subunits adopt less formalized and centralized structures” McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Organizational Size and Performance: Research Insights Larger organizations tended to be more productive There were “no positive relationships between organizational size and efficiency, suggesting the absence of net economy of scale effects” There were zero to slightly negative relationships between subunit size and productivity and efficiency According to a more recent study, turnover was not related to organizational size McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Relationship Between Strategic Choice and Organizational Structure Organizational objectives Environmental constraints Strategic decisions made by dominant coalition Organizational Strategies  Target markets  Capital sources/uses  Human resources  Technology  Total quality management Decision maker’s personal beliefs, attitudes, values, and ethics Organizational structure Organizational effectiveness Corrective action Figure 18-9 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.