1. Chapter Nine Organizations: Structure, Effectiveness, and Cultures

2. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 2 Chapter Objectives Identify and describe four characteristics common to all organizations. Identify and explain the two basic dimensions of organization charts. Contrast the traditional and modern views of organizations. Describe a business organization in terms of the open-systems model. Explain the term learning organization.

3. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 3 Chapter Objectives (cont’d) Explain the time dimension of organizational effectiveness. Explain the role of complacency in organizational decline and discuss the ethics of downsizing. Describe at least three characteristics of organizational culture and explain the cultural significance of stories.

4. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 4 What Is an Organization? An Organization Is: –A cooperative and coordinated social system of two or more people with a common purpose –An entity that derives its strength from the synergy of its members’ coordinated efforts –A system designed to survive its members

5. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 5 What Is an Organization? (cont’d) Common Characteristics of Organizations –Coordination of effort: Multiplying individual contributions to achieve results greater than those possible by individuals working alone –Common goal or purpose: Having a focus to strive for something of mutual interest –Division of labor: Dividing tasks into specialized jobs that use human resources efficiently –Hierarchy of authority: Using a chain of command to control and direct the actions of others

6. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 6 Classifying Organizations Business Organizations –Purpose: To make a profit in a socially acceptable manner Nonprofit Service Organizations –Purpose: To provide a specific public service to some segment of society without attempting to earn a profit Mutual-Benefit Organizations –Purpose: To provide a vehicle for individuals to pursue their own self-interests

7. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 7 Classifying Organizations (cont’d) Commonweal Organizations –Purpose: To provide standardized public services to all members of a society without attempting to earn a profit

8. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 8

9. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 9 Organization Charts Organization Chart (Table) –A visual display of an organization’s positions and lines of authority that is useful as a blueprint for deploying human resources Vertical and Horizontal Dimensions –Vertical hierarchy establishes the chain of command. –Horizontal specialization denotes the division of labor. A Case Study: The Growth of an Organization –Generally, specialization is achieved at the expense of coordination when designing organizations.

10. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 10 Figure 9.1: The Evolution of an Organization Chart

11. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 11 Contrasting Theories of Organization The Traditional View –The organization’s primary goal is economic efficiency. –The organization is characterized by closed-system thinking and no or little interaction with the external environment. –Planning and strict control are used to eliminate uncertainty in the organization. –The organization’s surrounding environment is fairly predictable.

12. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 12 Contrasting Theories of Organization (cont’d) The Modern View –The organization’s principal goal is survival in an uncertain environment. –The organization is an open system interacting with its environment. –The organization’s surrounding environment is composed of variables that are difficult to predict or control.

13. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 13

14. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 14 The Traditional View of Organizing The Early Management Writers –Henri Fayol –Frederick W. Taylor –Four traditional principles of organization A well-defined hierarchy of authority Unity of command Authority equal to responsibility Downward delegation of authority

15. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 15

16. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 16 The Traditional View of Organizing (cont’d) Max Weber’s Bureaucracy –The most rationally efficient form of organization Division of labor Hierarchy of authority Framework of rules Impersonal management –Problems with overly “bureaucratic” organizations Slow Insensitive Inefficient

17. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 17

18. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 18 Challenges to the Traditional View of Organizations Bottom-Up Authority –Acceptance theory of authority (Chester Barnard) A leader’s authority is determined by the willingness of subordinates to comply with authoritative communications only when the message: –Is understood –Is consistent with the organization’s purpose –Serves the subordinate’s interests –Provides a situation where the subordinate is able to comply

19. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 19 Organizations as Open Systems: A Modern View Characteristics of Open Systems –Interaction with the external environment through permeable boundaries –Synergy in combining resources to achieve superior performance –Dynamic equilibrium in maintaining internal balances with help from the external environment –Equifinality in achieving similar ends through different means

20. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 20 Figure 9.2: Open-System Model of a Business

21. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 21 Organizations as Open Systems: A Modern View (cont’d) Developing an Open-System Model –Interacting organizational subsystems: Technical (production function) subsystems define the organization’s transformation process. Boundary-spanning subsystems provide the organization’s interface with the external environment. Managerial subsystems bridge (control and direct) the technical and boundary-spanning subsystems.

22. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 22 Extending the Open-System Model: The Learning Organization Learning Organization –An organization that is skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights Stages of Organizational Learning –Cognition (learning new concepts) –Behavior (developing new skills and abilities) –Performance (actually getting something done)

23. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 23 Extending the Open-System Model: The Learning Organization (cont’d) Five Critical Learning Skills 1.Solving problems 2.Experimenting 3.Learning from organizational experience/history 4.Learning from others 5.Transferring and implementing

24. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 24 Figure 9.3: Garvin’s Model of the Learning Organization Source: Adapted from discussion in David A. Garvin, “Building a Learning Organization,” Harvard Business Review, 71 (July-August 1993): 78-91.

25. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 25 Organizational Effectiveness Effectiveness –A measure of whether or not organizational objectives are accomplished Efficiency –A measure of the relationship between inputs and outputs for the organization No Silver Bullet –No single approach to the evaluation of effectiveness is appropriate in all circumstances or for all organizational types.

26. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 26 Organizational Effectiveness (cont’d) The Time Dimension of Organizational Effectiveness Involves: –Meeting organizational objectives and prevailing societal expectations in the near future –Adapting to environmental demands and developing as a learning organization in the intermediate future –Surviving as an effective organization into the distant future

27. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 27 Figure 9.4: The Time Dimension of Organizational Effectiveness Source: Adapted from James L. Gibson, John M. Ivancevich, and James H. Donnelly, Jr., ORGANIZATIONS: BEHAVIOR, STRUCTURE, PROCESSES, 5th ed. (Homewood, IL: Richard D. Irwin, Inc.), p. 37. © l991.

28. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 28 Organizational Decline The weakening of an organization by resource or demand restrictions and/or mismanagement Sources of decline –Mismanagement (complacency) –Unsteady economic growth –Resource shortages –Global competition –End of the cold war Reactions to decline –Downsizing, demassing, reengineering

29. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 29 Figure 9.5: Complacency Can Lead to Organizational Decline

30. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 30 Characteristics of Organizational Decline Decline Dilemmas –Exit of leaders from the organization –Control that suppresses participation and morale –Preference for short-term thinking and risk avoidance –Intense conflict, preventing teamwork –Strong resistance to change Counteracting Organizational Decline –Kaizen: The philosophy of continuous improvement

31. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 31

32. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 32 Downsizing An Ethical Perspective –Downsizing: The planned elimination of positions or jobs Commodity versus human resources viewpoints of the worth of employees Does Downsizing Work? –Not nearly as well as expected Only 30-45% of downsized companies report increased productivity and/or profits.

33. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 33 Downsizing (cont’d) Ways of Making Layoffs a Last Resort –Redeployment –Downgrading –Work sharing –Job banks –Employee sharing –Voluntary early retirement –Early warning of facility closings –Outplacement –Helping layoff survivors

34. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 34 Organizational Cultures Organizational Culture –The collection of shared beliefs, values, rituals, stories, myths, and specialized language that creates a common identity and sense of community –The “social glue” that binds an organization’s members together

35. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 35 Characteristics of Organizational Cultures Collective: Organizations are social entities. Emotionally charged: The organization’s culture serves as a security blanket to its members. Historically based: Trust and loyalty result from long-term organizational associations. Inherently symbolic: Actions often speak louder than words. Dynamic: Culture promotes stability and control. Inherently fuzzy: Ambiguity, contradictions, and multiple meanings are part of culture.

36. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 36 Forms and Consequences of Organizational Cultures Organizational values are shared beliefs about what the organization stands for. The degree of sharing and the degree of intensity determine whether an organization’s culture is strong or weak.

37. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 37 Figure 9.6: Forms and Consequences of Organizational Culture

38. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 38 The Organizational Socialization Process Organizational socialization: The process of transforming outsiders into accepted insiders Orientations –Orientation programs familiarize new employees with the organization’s history, culture, competitive realities, and compensation and benefits. Storytelling –Recitations of heroic or inspiring deeds provide “social road maps” for new employees.

39. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 39 Strengthening Organizational Cultures Symptoms of a weak organizational culture –Inward focus –Morale problems –Fragmentation/inconsistency –Ingrown subcultures –Warfare among subcultures –Subculture elitism

40. Copyright © Houghton Mifflin Company. All rights reserved.Chapter Nine | 40 Terms to Understand Organization Authority Commonweal organization Organization chart Bureaucracy Acceptance theory of authority Dynamic equilibrium Equifinality Learning organization Organizational effectiveness Organizational decline Downsizing Outplacement Organizational culture Organizational values Organizational socialization