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Organizational Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 5 Designing Organizational Structure: Auth...
Authority: How and Why Vertical Differentiation Occurs <ul><li>The hierarchy begins to emerge when the organization experi...
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>To deal with coordination and motivation problems, ...
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Size and height limitations </li></ul><ul><ul><li>T...
Figure 5.1: Flat and Tall Organizations
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>By the time an organization has 1,000 members, it h...
Figure 5.2: Relationship Between Organizational Size and Number of Hierarchical Levels
Figure 5.3: Types of Managerial Hierarchies
Figure 5.4: Relationship Between Organizational Size and the Size of the Managerial Component
Authority: How and Why Vertical Differentiation Occurs  (cont.) <ul><li>Problems with tall hierarchies: </li></ul><ul><ul>...
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Parkinson’s Law Problem  </li></ul><ul><ul><li>Argu...
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Ideal number of hierarchical levels determined by: ...
Figure 5.5: Spans of Control
Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Factors that determine the appropriate span of cont...
Figure 5.6: The Increasing Complexity of a Manager’s Job as the Span of Control Increases
Figure 5.7: Factors Affecting the Shape of the Hierarchy
Control: Factors Affecting the Shape of the Hierarchy <ul><li>Horizontal differentiation:  an organization that is divided...
Figure 5.8: Horizontal Differentiation into Functional Hierarchies
Figure 5.9: Horizontal Differentiation Within the R&D Functions
Control: Factors Affecting the Shape of the Hierarchy (cont.) <ul><li>Centralization:  with decentralization, less direct ...
Control: Factors Affecting the Shape of the Hierarchy (cont.) <ul><li>Standardization:  reduces the need for levels of man...
The Principles of Bureaucracy <ul><li>Max Weber designed a hierarchy so that it effectively allocates decision-making auth...
Max Weber, German Sociologist <ul><li>“ The purely bureaucratic form of administrative organization, that is the monocrati...
The Principles of Bureaucracy  (cont.) <ul><li>Principle one:  a bureaucracy is founded on the concept of rational-legal a...
The Principles of Bureaucracy  (cont.) <ul><li>Principle two:  Organizational roles are held on the basis of technical com...
The Principles of Bureaucracy  (cont.) <ul><li>Principle three:  A role’s task responsibility and decision-making authorit...
The Principles of Bureaucracy  (cont.) <ul><li>Principle four:  the organization of roles in a bureaucracy is such that ea...
The Principles of Bureaucracy  (cont.) <ul><li>Principle five:  rules, standard operating procedures, and norms should be ...
The Principles of Bureaucracy  (cont.) <ul><li>Principle six:  administrative acts, decisions, and rules should be formula...
Uniform Written Rules and Policies <ul><li>Set by board and management. </li></ul><ul><li>Rights and duties of employees a...
<ul><li>“ When I was president of this big corporation, we lived in a small Ohio town, where the main plant was located.  ...
<ul><li>Obsession with control also explains the frequent proliferation of support staff.  Purchasing staff services (e.g....
Standardized Procedures <ul><li>Govern how employees are to perform tasks. </li></ul><ul><li>“ You are not supposed to thi...
Standardized Procedures (cont.) <ul><li>When written down and stored as official documents, they increase the intelligence...
The Professional Career <ul><li>Lifetime career of advancing to higher levels in the chain of command. </li></ul><ul><li>R...
Impersonal Relations <ul><li>Role to role, not person to person. </li></ul><ul><li>Holder of particular role expected to c...
Role of Managers <ul><li>Handling the disturbances that arise among the highly specialized workers of  the operating core....
<ul><li>“ Ya know, nothing happens in this place until we  produce  something.”  </li></ul><ul><li>Production executive </...
Advantages of Bureaucracy <ul><li>It lays out the ground rules for designing an organizational hierarchy that efficiently ...
The Problems of Bureaucracy <ul><li>Managers fail to properly control the development of the organizational hierarchy </li...
Chuang-tzu, Chinese Sage, 4th century B.C. <ul><li>As Tzu-gung was travelling through the regions north of river Han, he s...
<ul><li>Then the gardener stood up, looked at him, and said, “And what would that be?” </li></ul><ul><li>Tzu-gung replied,...
<ul><li>who does his work like a machine grows a heart like a machine, and he who carries the heart of a machine loses his...
Bureaupathic Pathologies <ul><li>Bureaupathic behaviour:  Tendency of employees to become more interested in the rules and...
Bureaupathic Pathologies (cont.) <ul><li>Groupthink:  Tendency of groups or organizations for people to go along with the ...
Bureaupathic Pathologies (cont.) <ul><li>Failure to acknowledge the informal organization:   The bureaucracy disregards th...
Bureaupathic Pathologies (cont.) <ul><li>Distorted communications:   Upward, downward, horizontal communications are disto...
Conditions of the Bureaucracy <ul><li>Found in environments that are simple and stable. </li></ul><ul><li>Typically found ...
The Influence of the  Informal Organization <ul><li>Decision making and coordination frequently take place outside the for...
Charles Handy, The Age of Unreason <ul><li>The Shamrock Organization </li></ul><ul><ul><li>Contingent workers:  workers wh...
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Ch05 - Organisation theory design and change gareth jones

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  1. 1. Organizational Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 5 Designing Organizational Structure: Authority and Control
  2. 2. Authority: How and Why Vertical Differentiation Occurs <ul><li>The hierarchy begins to emerge when the organization experiences problems in coordinating and motivating employees </li></ul><ul><li>Division of labor and specialization make it hard to determine how well an individual performs </li></ul><ul><li>Almost impossible to assess individual contributions to performance when employees cooperate </li></ul>
  3. 3. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>To deal with coordination and motivation problems, the organization can: </li></ul><ul><ul><li>Increase the number of managers it uses to monitor, evaluate, and reward employees </li></ul></ul><ul><ul><li>Increase the number of levels in its managerial hierarchy, thereby making the hierarchy of authority taller </li></ul></ul>
  4. 4. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Size and height limitations </li></ul><ul><ul><li>Tall organization: an organization in which the hierarchy has many levels relative to the size of the organization </li></ul></ul><ul><ul><li>Flat organization: an organization that has few levels in its hierarchy relative to its size </li></ul></ul>
  5. 5. Figure 5.1: Flat and Tall Organizations
  6. 6. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>By the time an organization has 1,000 members, it has 4 levels in its hierarchy </li></ul><ul><li>At 3,000 members, it likely has 7 levels </li></ul><ul><li>Between 10,000 to 100,000, organizations have 9 or 10 levels </li></ul><ul><li>Increase in size of the managerial component is less than proportional to increase in size of the organization </li></ul>
  7. 7. Figure 5.2: Relationship Between Organizational Size and Number of Hierarchical Levels
  8. 8. Figure 5.3: Types of Managerial Hierarchies
  9. 9. Figure 5.4: Relationship Between Organizational Size and the Size of the Managerial Component
  10. 10. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Problems with tall hierarchies: </li></ul><ul><ul><li>Communication problems: communication takes longer and is likely to be distorted </li></ul></ul><ul><ul><ul><li>Information may be manipulated to serve managers’ own interests </li></ul></ul></ul><ul><ul><li>Motivation problems: as hierarchy increases, the relative difference in the authority possessed managers at each level decreases, as does their area of responsibility </li></ul></ul><ul><ul><ul><li>Less responsibility and authority could reduce motivation </li></ul></ul></ul><ul><ul><li>Increased bureaucratic costs: managers cost money </li></ul></ul>
  11. 11. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Parkinson’s Law Problem </li></ul><ul><ul><li>Argues that the number of managers and hierarchies are based on two principles </li></ul></ul><ul><ul><ul><li>A manager wants to multiply subordinates, not rivals </li></ul></ul></ul><ul><ul><ul><li>Managers make work for one another </li></ul></ul></ul>
  12. 12. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Ideal number of hierarchical levels determined by: </li></ul><ul><ul><li>Principle of minimum chain of command: an organization should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it operates </li></ul></ul><ul><ul><li>Span of control: the number of subordinates a manager directly manages </li></ul></ul>
  13. 13. Figure 5.5: Spans of Control
  14. 14. Authority: How and Why Vertical Differentiation Occurs (cont.) <ul><li>Factors that determine the appropriate span of control </li></ul><ul><ul><li>There seems to be a limit to how wide a manager’s span of control should be </li></ul></ul><ul><ul><li>Dependent on the complexity and interrelatedness of the subordinates’ tasks </li></ul></ul><ul><ul><ul><li>Complex and dissimilar tasks – small span of control </li></ul></ul></ul><ul><ul><ul><li>Routine and similar tasks (e.g., mass production) – large span of control </li></ul></ul></ul>
  15. 15. Figure 5.6: The Increasing Complexity of a Manager’s Job as the Span of Control Increases
  16. 16. Figure 5.7: Factors Affecting the Shape of the Hierarchy
  17. 17. Control: Factors Affecting the Shape of the Hierarchy <ul><li>Horizontal differentiation: an organization that is divided into subunits has many different hierarchies, not just one </li></ul><ul><ul><li>Each function or division has its own hierarchy </li></ul></ul><ul><li>Horizontal differentiation is the principal way an organization retains control over employees without increasing the number of hierarchical levels </li></ul>
  18. 18. Figure 5.8: Horizontal Differentiation into Functional Hierarchies
  19. 19. Figure 5.9: Horizontal Differentiation Within the R&D Functions
  20. 20. Control: Factors Affecting the Shape of the Hierarchy (cont.) <ul><li>Centralization: with decentralization, less direct managerial supervision is needed </li></ul><ul><ul><li>Authority is delegated to the lower levels </li></ul></ul><ul><ul><li>Decentralization does not eliminate the need for many hierarchical levels in large, complex organizations </li></ul></ul><ul><ul><ul><li>Assists relatively tall structures to be more flexible and reduces the amount of direct supervision needed </li></ul></ul></ul>
  21. 21. Control: Factors Affecting the Shape of the Hierarchy (cont.) <ul><li>Standardization: reduces the need for levels of management because rules substitute for direct supervision </li></ul><ul><ul><li>Gain control over employees by making their behavior and actions more predictable </li></ul></ul>
  22. 22. The Principles of Bureaucracy <ul><li>Max Weber designed a hierarchy so that it effectively allocates decision-making authority and control over resources </li></ul><ul><li>Bureaucracy: a form of organizational structure in which people can be held accountable for their actions because they are required to act in accordance with rules and standard operating procedures </li></ul>
  23. 23. Max Weber, German Sociologist <ul><li>“ The purely bureaucratic form of administrative organization, that is the monocratic variety of bureaucracy, is, as regards the precision, constancy, stringency, and reliability of its operations, superior to all other forms of administrative organization.” </li></ul>
  24. 24. The Principles of Bureaucracy (cont.) <ul><li>Principle one: a bureaucracy is founded on the concept of rational-legal authority </li></ul><ul><ul><li>Rational-legal authority: the authority a person possesses because of his or her position in an organization </li></ul></ul><ul><ul><li>Hierarchy should be based on the needs of the task, not on personal needs </li></ul></ul><ul><ul><li>People’s attitudes and beliefs play no part in how the bureaucracy operates </li></ul></ul>
  25. 25. The Principles of Bureaucracy (cont.) <ul><li>Principle two: Organizational roles are held on the basis of technical competence, not because of social status, kinship, or heredity </li></ul><ul><li>Principles one and two establish the organizational role as the basic component of organization structure </li></ul>
  26. 26. The Principles of Bureaucracy (cont.) <ul><li>Principle three: A role’s task responsibility and decision-making authority and its relationship to other roles in the organization should be clearly specified </li></ul><ul><ul><li>Role conflict: when two or more people have different views of what another person should do, and as a result, make conflicting demands on that person </li></ul></ul><ul><ul><li>Role ambiguity: the uncertainty that occurs for a person whose tasks or authority are not clearly defined </li></ul></ul>
  27. 27. The Principles of Bureaucracy (cont.) <ul><li>Principle four: the organization of roles in a bureaucracy is such that each lower office in the hierarchy is under the control and supervision of a higher office </li></ul><ul><ul><li>Organizations should be arranged hierarchically so that people can recognize the chain of command </li></ul></ul>
  28. 28. The Principles of Bureaucracy (cont.) <ul><li>Principle five: rules, standard operating procedures, and norms should be used to control the behavior and the relationships among roles in an organization </li></ul><ul><ul><li>Rules and SOPs are written instructions that specify a series of actions intended to achieve a given end </li></ul></ul><ul><ul><li>Norms are unwritten </li></ul></ul><ul><ul><li>Rules, SOPs, and norms clarify people’s expectations and prevent misunderstanding </li></ul></ul>
  29. 29. The Principles of Bureaucracy (cont.) <ul><li>Principle six: administrative acts, decisions, and rules should be formulated and put in writing </li></ul><ul><ul><li>Bureaucratic structure provides an organization with memory </li></ul></ul><ul><ul><li>Organizational history cannot be altered </li></ul></ul>
  30. 30. Uniform Written Rules and Policies <ul><li>Set by board and management. </li></ul><ul><li>Rights and duties of employees and managers; who can give orders to whom. </li></ul><ul><li>Limit arbitrary behavior. A structure with an obsession of control. </li></ul><ul><li>“ At every Holiday Inn, the best surprise is no surprise.” </li></ul>
  31. 31. <ul><li>“ When I was president of this big corporation, we lived in a small Ohio town, where the main plant was located. The corporation specified who you could socialize with, and on what level. (His wife interjects: “Who were the wives you could play bridge with.”) The president’s wife could do what she wants, as long as it’s with dignity and grace. In a small town they didn’t have to keep check on you. Everybody knew. There are certain sets of rules.” </li></ul>
  32. 32. <ul><li>Obsession with control also explains the frequent proliferation of support staff. Purchasing staff services (e.g. law office, factory cafeteria) from outside suppliers exposes the bureaucracy to the uncertainties of the open market. So it “makes” rather than “buys.” </li></ul>
  33. 33. Standardized Procedures <ul><li>Govern how employees are to perform tasks. </li></ul><ul><li>“ You are not supposed to think. There are other people paid for thinking around here.” </li></ul><ul><li>Frederick Taylor </li></ul>
  34. 34. Standardized Procedures (cont.) <ul><li>When written down and stored as official documents, they increase the intelligence expressed in organizations by instituting a “memory” of lessons learned. </li></ul><ul><li>Standardize actions to be learned where frequent employee turnover occurs. </li></ul>
  35. 35. The Professional Career <ul><li>Lifetime career of advancing to higher levels in the chain of command. </li></ul><ul><li>Rising in ranks: Increase in power and status symbols. </li></ul><ul><li>Lure of rising in hierarchy and security of professional career: Aid success of bureaucracy. </li></ul>
  36. 36. Impersonal Relations <ul><li>Role to role, not person to person. </li></ul><ul><li>Holder of particular role expected to carry out its responsibilities in a rational and unemotional manner. </li></ul><ul><li>Prevents feeling of friendship/family/pity etc. get in the way of tough decisions and enforcing rules. </li></ul>
  37. 37. Role of Managers <ul><li>Handling the disturbances that arise among the highly specialized workers of the operating core. </li></ul><ul><li>By virtue of their design, Machine Bureaucracies are structures ridden with conflict; the control systems are required to contain it. </li></ul>
  38. 38. <ul><li>“ Ya know, nothing happens in this place until we produce something.” </li></ul><ul><li>Production executive </li></ul><ul><li>“ Wrong, nothing happens until we design something!” </li></ul><ul><li>R&D manager </li></ul><ul><li>“ What are you talking about? Nothing happens here </li></ul><ul><li>until we sell something!” Marketing executive </li></ul><ul><li>“ It doesn’t matter what you produce, design or sell. No one knows what happens until we tally up the results! ” Accounting manager </li></ul>
  39. 39. Advantages of Bureaucracy <ul><li>It lays out the ground rules for designing an organizational hierarchy that efficiently controls interactions between organizational members </li></ul><ul><li>Each person’s role in the organization is clearly spelled out and they can be held accountable </li></ul><ul><li>Written rules regarding the reward and punishment of employees reduce the costs of enforcement and evaluating employee performance </li></ul><ul><li>It separates the position from the person </li></ul><ul><li>It provides people with the opportunity to develop their skills and pass them on their successors </li></ul>
  40. 40. The Problems of Bureaucracy <ul><li>Managers fail to properly control the development of the organizational hierarchy </li></ul><ul><li>Organizational members come to rely too much on rules and standard operating procedures (SOPs) to make decisions </li></ul><ul><li>Such overreliance makes them unresponsive to the needs of customers and other stakeholders </li></ul><ul><ul><li>Slow response to changing customer tastes, foreign competition, technological innovation, etc. </li></ul></ul>
  41. 41. Chuang-tzu, Chinese Sage, 4th century B.C. <ul><li>As Tzu-gung was travelling through the regions north of river Han, he saw an old man working in his vegetable garden. He had dug an irrigation ditch. The man would descend into the well, fetch up a vessel of water in his arms, and pour it out into the ditch. While his efforts were tremendous, the results appeared to be very meager. </li></ul><ul><li>Tzu-gung said, “There is a way whereby you can irrigate a hundred ditches in one day, and whereby you can do much with little effort. Would you not like to hear of it?” </li></ul>
  42. 42. <ul><li>Then the gardener stood up, looked at him, and said, “And what would that be?” </li></ul><ul><li>Tzu-gung replied, “You take a wooden lever, weighted at the back and light in front. In this way you can bring up water so quickly that it just gushes out. This is called a draw-well.” </li></ul><ul><li>Then anger rose up in the old man’s face, and he said, “I have heard my teacher say that whoever uses machines does all his work like a machine. He </li></ul>
  43. 43. <ul><li>who does his work like a machine grows a heart like a machine, and he who carries the heart of a machine loses his simplicity. He who loses his simplicity becomes unsure in the strivings of his soul. </li></ul><ul><li>Uncertainty in the striving of the soul is something which does not agree with honest sense. It is not that I do not know of such things; I am ashamed to use them.” </li></ul>
  44. 44. Bureaupathic Pathologies <ul><li>Bureaupathic behaviour: Tendency of employees to become more interested in the rules and their enforcement than in their purposes and goals of the organization. </li></ul><ul><li>Bureautic behaviour: Seen in large bureaucracies. Frustrated employees, bottled up by high formalization, resort to sabotage, absenteeism, etc. to express their alienation and powerlessness. </li></ul>
  45. 45. Bureaupathic Pathologies (cont.) <ul><li>Groupthink: Tendency of groups or organizations for people to go along with the suggestions or directives of a dominant elite, even if they have doubts about them. </li></ul><ul><li>Lack of personal growth: Large organizations treat people like children, reducing opportunities for personal growth and maturity. </li></ul>
  46. 46. Bureaupathic Pathologies (cont.) <ul><li>Failure to acknowledge the informal organization: The bureaucracy disregards the influence of the informal power system, e.g. coffee room, gossip mill, grapevine. </li></ul><ul><li>Outdated systems of control and authority: Formal authority is obsolete in relation to knowledge workers, who may know more about how to do a job than their bosses. </li></ul><ul><li>Poor conflict resolution technology: “Win-lose” strategies in bureaucracies lead to dysfunction. </li></ul>
  47. 47. Bureaupathic Pathologies (cont.) <ul><li>Distorted communications: Upward, downward, horizontal communications are distorted to achieve goals important to senders. </li></ul><ul><li>Mistrust, fear of reprisals: Common wherever people are preoccupied with self-safety strategies and staying within their job descriptions. </li></ul><ul><li>E.g. “It’s not my job to worry about that,” “I’m here to do what I’m told,” “That’s his responsibility, not mine.” </li></ul><ul><li>Organization man syndrome: Tendency to marry the organization, getting one’s personal rewards there and becoming dependent on the bureaucracy and rewards its dispenses. </li></ul>
  48. 48. Conditions of the Bureaucracy <ul><li>Found in environments that are simple and stable. </li></ul><ul><li>Typically found in the mature organization, large enough to have the volume of operating work needed for repetition and standardization, and old enough to have been able to settle on the standards it wishes to use. </li></ul>
  49. 49. The Influence of the Informal Organization <ul><li>Decision making and coordination frequently take place outside the formally designed channels as people interact </li></ul><ul><li>Rules and norms sometimes emerge from the interaction of people and not from the formal rules blueprint </li></ul><ul><li>Managers need to consider the informal structure when they make changes as it may disrupt informal norms that work </li></ul><ul><li>Informal organization can actually enhance organizational performance </li></ul>
  50. 50. Charles Handy, The Age of Unreason <ul><li>The Shamrock Organization </li></ul><ul><ul><li>Contingent workers: workers who are employed temporarily by an organization and who receive no indirect benefits such as health insurance or pensions </li></ul></ul>
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