Week 1 Day 2.1. Organizational Theory.pptx

This is the first week presentation in the subject of Organizational Behavior

1. Organizational Theory: Organizational design, structures and processes as a basis for organizational effectiveness. Dr. Tamer Koburtay Department of Strategy, Leadership and Management College of Business Abu Dhabi University [email protected]

2. Organization Theory in Action Current challenges Globalization Ethics and social responsibility Speed of responsiveness The digital workplace Diversity

3. What is an Organization? Organizations are (1) social entities that (2) are goal-directed, (3) are designed as deliberately structured and coordinated activity systems, and (4) linked to the external environment.

4. What is an Organization? Types of organizations - Large, multinational corporations vs family-owned businesses. - For-profit business vs non-profit organizations. Sole proprietorship Family business Partnership Joint stock companies Multinational companies Cooperatives-businesses that are owned and democratically controlled by their members. Organizations can be for profit or non profit like charity, government schools, government hospitals etc.

5. Perspectives on Organizations Open systems - Open system thinking pays attention to the (open) boundary between the organization and its context. - Closed system design focuses exclusively upon the organization without consideration of its dependence upon or capacity to influence elements comprising its context.

6. Dimensions of Organizational Design Structural dimensions: Deals with internal characteristics of an organization. Contextual dimensions: Characterizes whole organization, including its size, technology, environment, and goals. To evaluate organization both structural and contextual dimensions must be examined.

7. Dimensions of Organizational Design Structural dimensions Formalization Specialization Hierarchy of authority Centralization Professionalism Personnel ratios Contextual dimensions Size Organizational technology Environment Goals and strategy Culture

8. Structural dimensions Formalization: written documents like procedures, job descriptions, regulations, and policy manuals. The size of documents determine the level of formalization. Specialization: is referred as division of labor. Greater the specialization higher is the division of work, hence specific works performed by workers. Hierarchy of authority: reporting and span of control in number of employees under each manager.

9. Structural dimensions Centralization: refers to hierarchical level that has authority to make decision. Top level concentration of decision making. Decentralization: when authority and responsibility is delegated to lower levels. Professionalism: is the level of formal education and training of employees. It is measured by average number of years of education of employees.

10. Structural dimensions Personnel ratios: The deployment of people to various functions and departments. Personnel ratios include the administrative ratio, the clerical ratio, the professional staff ratio and the ratio of indirect to direct labour employees. A personnel ratio is measured by dividing the number of employees in a classification by the total number of organizational employees.

11. Contextual dimensions Size of the organization is measured by number of employees, total sales, total assets, total output, also reflect size. Organizational technology: refers to tools, techniques, equipment and processes used to transform inputs into outputs. It includes manufacture, information systems and the internet. Environment: includes all the elements outside the boundary of the organization. Key elements include the industry, government, customers, suppliers and the financial com-munity. The environmental elements that affect an organization the most are often other organizations.

12. Contextual dimensions Goals and strategies: defines purpose and competitive techniques that is distinct to each company. - Goals are enduring (stable) written statements reflecting company’s intent. Strategy is a plan of action that describes resource allocation and activities used to reach goals under given circumstances.

13. Contextual dimensions Organization culture: is the underlying key values, beliefs, understanding pertain to ethical behavior, commitment to employees, efficiency or customer service that enables to retain with organization.

14. Interacting different dimensions of Organization Design

15. Major stakeholder groups and what they expect

16. Organizational Structure Three key components Vertical aspect of organizing 1- Formal reporting relationships including the number of levels and the span of control. 2- Grouping of individuals into departments and of departments into the total organization. Horizontal aspect of organizing 3- Design of systems to ensure effective communication, coordination and integration of efforts.

17. A Sample Organization Chart

18. Information-Processing Perspective on Structure Traditional organization versus learning organization - Traditional organization design emphasizes vertical communication and control. - Learning organization which emphasizes communication and collaboration. Centralized versus decentralized decision making - Centralized authority focused on top level decision making. - Decentralized authority focused on shared tasks and decisions.

19. Efficiency versus Learning Outcomes

20. Vertical Information Linkages Vertical linkages coordinate activities between the top and the bottom of the organization. Hierarchical referral are the vertical lines which identify the chain of command. The lines of the organization chart act as communication channels. Rules and plans - Rules enabling employees to be coordinated. - Plans provide standing information for employees. Vertical information systems is a strategy for increasing vertical information capacity. It includes reports, computer-based communication and written information.

21. Horizontal Information Linkages Horizontal linkage refers to the amount of communication and coordinates activities across organizational departments. Information systems enable information exchange throughout the organization. Direct contact is a higher level of horizontal linkage (i.e. liaison role). A liaison person is located in one department but has the responsibility for communicating and achieving coordination with another department. Task force is a temporary committee composed of representatives from each department affected by a problem. Full-time integrator is responsible for coordination. Teams are the strongest horizontal linkage.

22. Organizational Design Alternatives Three key indicators of organization design: Required work activities Reporting relationships Departmental grouping options - Functional grouping - Divisional grouping - Multifocused grouping - Horizontal grouping - Virtual network grouping

23. Functional Structure Activities grouped by common function All specific skills and knowledge are consolidated e.g., all marketing people are located in the marketing department. All people associated with the assembly process for generators are grouped together in one department.

24. Functional Structure

25. Divisional Structure Product structure or strategic business units With this structure, divisions can be organized according to individual products, services, product groups, major projects or programs, divisions, businesses or profit centers. The distinctive feature of a divisional structure is that grouping is based on organizational outputs. e.g., Nestlé

26. Divisional Structure

27. Functional vs Divisional Structure – Example

28. Geographical Structure Organizing to meet needs of users/customers by geography. It is particular common in large nonprofit organizations. Many multinational corporations are organized by country. Focuses managers and employees on specific geographic regions. Strengths and weaknesses similar to divisional organization.

29. Geographical Structure for Apple Computer, Inc.

30. Matrix Structure Conditions for matrix: - Condition 1 : Share resources across the organization. - Condition 2 : Two or more critical outputs required – products and technical knowledge. - Condition 3 : Environment is complex and uncertain. Two variations of matrix structure - Functional matrix - Product matrix A dual-authority structure can help to ensure a balance between vertical and horizontal aspects of organizations.

31. Matrix Structure

32. Dual-Authority Structure in a Matrix Organization

33. Horizontal Structure Organization around core processes. Key characteristics: - Structure is created around cross-functional processes. - Self-directed teams are the basis of organization design and performance. - Process owners are responsible for entire process. - People on the team are given authority for decisions. - Can increase organization’s flexibility. - Customers drive the horizontal corporation. - The culture promotes openness, trust and collaboration.

34. Horizontal Structure

35. A Horizontal Structure

36. Virtual Networks and Outsourcing It extends the concept of horizontal coordination and collaboration beyond the boundaries of the organization. Most common strategy is outsourcing - Contract out certain tasks/functions. Virtual or modular structures subcontract most of their major functions to separate companies. The virtual network organization serves as a central hub with contracted experts.

37. Virtual Network Structure

38. Hybrid Structure Organizations often use a hybrid structure that combines characteristics of various structure approaches tailored to specific needs. One common type is the combination of the functional and divisional structures. Often used in rapidly changing environments. Greater flexibility.

39. Application of Structural Design Each type of structure is applied in different situations and is intended to meet different needs. Structural alignment aligns structure with organizational goals. Symptoms of structural deficiency : Decision making is delayed or lacking quality. Organization does not respond innovatively to a changing environment. Employee performance declines, goals are not being met. Too much conflict.

40. Mechanistic and Organic Forms

41. Framework for Organizational Responses to Uncertainty

42. Resources Dependence Resource-dependence means organizations depend on the environment but strive to acquire control over resources to minimize their dependence. Minimize vulnerabilities. Dependence on shared resources give power to other organizations. Will team up with others when resources are scarce and be more competitive. Also need to maximize their own autonomy and independence.