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  1. 1. Organizational Theory, Design, and Change Text and Cases Fourth Edition Gareth R. Jones Copyright 2004 Prentice Hall
  2. 2. Learning Objectives 1. 2. To understand why organizations exist and the purposes they serve Describe the relationship between organizational theory and organizational design and change, and differentiate between organizational structure and culture Copyright 2004 Prentice Hall
  3. 3. Learning Objectives 3. 4. 5. Understand how managers can utilize the principles of organizational theory to design and change their organizations to increase organizational effectiveness Identify the three principal ways in which managers assess and measure organizational effectiveness Appreciate the way in which several contingency factors influence the design of organizations Copyright 2004 Prentice Hall
  4. 4. What is an Organization?   Organization: a tool used by people to coordinate their actions to obtain something they desire or value Entrepreneurship: the process by which people recognize opportunities to satisfy needs, and then gather and use resources to meet those needs Copyright 2004 Prentice Hall
  5. 5. How Does an Organization Create Value?     Value creation takes place at three stages: input, conversion and output. Inputs – include human resources, information and knowledge, raw materials, money and capital Conversion – the way the organization uses human resources and technology to transform inputs into outputs Output – finished products and services Copyright 2004 Prentice Hall
  6. 6. Figure 1 – 1: How Does an Organization Create Value? Copyright 2004 Prentice Hall
  7. 7. Why Do Organizations Exist?   To increase specialization and the division of labor To use large-scale technology   Economies of scale : cost savings that result when goods and services are produced in large volume Economies of scope : cost savings that result when an organization is able to use underutilized resources more effectively Copyright 2004 Prentice Hall
  8. 8. Why Do Organizations Exist?   To manage the external environment To economize on transaction costs   Transaction costs: the costs associated with negotiating, monitoring, and governing exchanges between people To exert power and control Copyright 2004 Prentice Hall
  9. 9. Figure 1-3: Why organizations exist Copyright 2004 Prentice Hall
  10. 10. Organizational Theory, Design, and Change: Some Definitions   Organizational theory : the study of how organizations function and how they affect and are affected by the environment in which they operate Organizational structure : the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals Copyright 2004 Prentice Hall
  11. 11. Definitions   Organizational culture : the set of shared values and norms that controls organizational members’ interactions with each other and with suppliers, customers, and other people outside the organization 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 Copyright 2004 Prentice Hall
  12. 12. Organizational Change  Organizational change : the process by which organizations redesign their structures and cultures to move from their presents state to some desired future state to increase their effectiveness Copyright 2004 Prentice Hall
  13. 13. Figure 1-4: Relationships Among Organizational Theory, Structure, Culture, Design and Change Copyright 2004 Prentice Hall
  14. 14. Importance of Organizational Design and Change  To deal with contingencies   Gaining competitive advantage    Contingencies are events that might occur and must be planned for. Ability to outperform other companies because of the ability to create more value from resources Managing diversity Promoting efficiency, speed, and innovation Copyright 2004 Prentice Hall
  15. 15. Consequences of Poor Design    Decline of the organization Talented employees leave to take positions in growing organizations. Resources become harder to acquire. Copyright 2004 Prentice Hall
  16. 16. How Do Managers Measure Organizational Effectiveness?  The external resource approach: Control   Method managers use to evaluate how effectively an organization manages and controls its external environment. Use of indicators such as stock price, profitability and return on investment Copyright 2004 Prentice Hall
  17. 17. Measuring Organizational Effectiveness  The internal systems approach: Innovation    Method that allows managers to evaluate how effectively an organization functions and operates. Organization needs to be flexible to rapidly create products and services. Indicators such as amount of time to get new products to market or time spent on decision making can be used. Copyright 2004 Prentice Hall
  18. 18. Measuring Organizational Effectiveness  The technical approach: Efficiency   Method managers use to evaluate how efficiently an organization can convert some fixed amount of organizational resources into finished goods and services. Use of indicators such as increase in the number of units produced without additional labor Copyright 2004 Prentice Hall
  19. 19. Table 1-1: Approaches to Measuring Effectiveness Copyright 2004 Prentice Hall
  20. 20. Measuring Effectiveness: Organizational Goals    Official goals: guiding principles that the organization formally states in its annual report and in other public documents. Mission: goals that explain why the organization exists and what it should be doing Operative goals: specific long- and shortterm goals that guide managers and employees as they perform the work of the organization Copyright 2004 Prentice Hall
  21. 21. Figure 1-5: Plan of the Book Copyright 2004 Prentice Hall
  22. 22. Part 2: Organizational Design Copyright 2004 Prentice Hall
  23. 23. Part 3: Organizational Change Copyright 2004 Prentice Hall