Ch01 - Organisation theory design and change gareth jones

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Ch01 - Organisation theory design and change gareth jones

  1. 1. 1- 1- Organizational Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 1 Organizations and Organizational Effectiveness
  2. 2. What is an Organization? <ul><li>Organization: a tool used by people to coordinate their actions to obtain something they desire or value </li></ul><ul><li>Organizations provide goods and services </li></ul><ul><li>Organizations employ people </li></ul><ul><li>Organizations bring together people and resources to produce products and services </li></ul><ul><li>Basically, organizations exist to create value </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  3. 3. How Does an Organization Create Value? <ul><li>Value creation takes place at three stages: input, conversion, and output </li></ul><ul><li>Each stage is affected by the environment in which the organization operates </li></ul><ul><li>Environment – the set of forces and conditions that operate beyond an organization’s boundaries but affect its ability to acquire and use resources to create value </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  4. 4. Figure 1.1: How an Organization Creates Value Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  5. 5. Why Do Organizations Exist? <ul><li>People working together to produce goods and services create more value than people working alone </li></ul><ul><li>5 major reasons why organizations exist: </li></ul><ul><li>To increase specialization and the division of labor </li></ul><ul><ul><li>Division of labor allows specialization </li></ul></ul><ul><ul><li>Specialization allows individuals to become experts at their job </li></ul></ul><ul><li>To use large-scale technology </li></ul><ul><ul><li>Economies of scale: cost savings that result when goods and services are produced in large volume </li></ul></ul><ul><ul><li>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 </li></ul></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  6. 6. Why Do Organizations Exist? (cont.) <ul><li>To manage the external environment </li></ul><ul><ul><li>External environment consists of the political, social, economic, and technological factors that affect organizations </li></ul></ul><ul><ul><li>Organizations regularly exchange products and services for needed resources </li></ul></ul><ul><ul><li>Organizations need to manage their external environment </li></ul></ul><ul><li>To exert power and control </li></ul><ul><ul><li>Organizations structure their members to efficiently produce products and services </li></ul></ul><ul><li>To economize on transaction costs </li></ul><ul><ul><li>Transaction costs: the costs associated with negotiating, monitoring, and governing exchanges between people who must cooperate </li></ul></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  7. 7. Figure 1.3: Why Organizations Exist Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  8. 8. Organizational Theory, Design, and Change: Some Definitions <ul><li>Organizational theory: the study of how organizations function and how they affect and are affected by the environment in which they operate </li></ul><ul><li>Organizational structure: the formal system of task and authority relationships that control how people to coordinate their actions and use resources to achieve organizational goals </li></ul><ul><li>Organizational culture: is the set of key values, beliefs, and attitudes shared by organizational members and helps shape the behavior within the organization </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  9. 9. Some Definitions (cont.) <ul><li>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 </li></ul><ul><li>Organizational change: the process by which organizations move from their present state to some desired future state to increase their effectiveness </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  10. 10. Figure 1.4: The Relationship Among Organizational Theory, Structure, Culture, Design, and Change Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  11. 11. Importance of Organizational Design and Change <ul><li>Effective design is required for high organizational performance </li></ul><ul><li>4 Major Reasons why Organizational Design and Change are Important </li></ul><ul><li>Dealing with contingencies </li></ul><ul><ul><li>Contingencies are events that might occur and must be planned for – most come from environment </li></ul></ul><ul><ul><li>Organizations must be designed to be able to effectively respond to environmental changes </li></ul></ul><ul><li>Managing diversity </li></ul><ul><ul><li>Differences in the race, gender, and national origin of organizational members have important implications for organizational culture and effectiveness </li></ul></ul><ul><ul><li>Learning how to effectively utilize a diverse workforce can result in better decision making and more effective workforce </li></ul></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  12. 12. Importance of Organizational Design and Change (cont.) <ul><li>Gaining competitive advantage </li></ul><ul><ul><li>The ability to outperform other companies because of the capacity to create more value from resources </li></ul></ul><ul><ul><li>Core competences: skills and abilities in value creation embedded in the organization’s people or structures </li></ul></ul><ul><ul><li>Strategy: pattern of decisions and actions involving core competences that produces a competitive advantage to outperform competitors </li></ul></ul><ul><li>Promoting efficiency, speed, and innovation </li></ul><ul><ul><li>The better organizations function, the more value they create </li></ul></ul><ul><ul><li>The correct organizational design can lead to faster innovation and quickly get new products to market </li></ul></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  13. 13. Consequences of Poor Organizational Design <ul><li>Decline of the organization </li></ul><ul><li>Lower performance </li></ul><ul><li>Talented employees leave to take positions in other organizations </li></ul><ul><li>Resources become harder to acquire </li></ul><ul><li>Resulting crisis may result in organizational failure </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  14. 14. Why is Organizational Effectiveness Important? <ul><li>What is the point is you are not going to perform well? </li></ul><ul><li>Maximizing value creation = organizational effectiveness </li></ul><ul><li>There are multiple ways to create value and perform well </li></ul><ul><li>3 primary ways discussed in chapter: </li></ul><ul><ul><li>Control: external resource approach </li></ul></ul><ul><ul><li>Innovation: internal system approach </li></ul></ul><ul><ul><li>Efficiency: technical approach </li></ul></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  15. 15. Table 1.1: Approaches to Measuring Effectiveness Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  16. 16. Measuring Effectiveness: Organizational Goals <ul><li>Managers also measure effectiveness by creating and measuring performance goals </li></ul><ul><li>Official goals: guiding principles that the organization formally states in its annual report and in other public documents </li></ul><ul><li>Mission: a mission statement explains why the organization exists and what it should be doing </li></ul><ul><li>Operative goals: specific long- and short-term goals that guide managers and employees as they perform the work of the organization </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
  17. 17. Summary <ul><li>Organizations are a tool people use to achieve their goals </li></ul><ul><li>Organizational theory is the study of how organizations function and how they affect and are affected by their environment </li></ul><ul><li>Organizational effectiveness must be monitored by managers </li></ul>Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

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