Master in International Management Organization Theory Syllabus

CNAM – International Institute of Management
Master in International Management
Master 1
Organization Theory
Eric Hertzler
Senior Tenured Lecturer
Université Paris-Est Créteil
[email protected]
Introduction to Organizations
What DO YOU KNOW about Organization?
What is an organization?
What is NOT an organization?
Hospitals Families Schools
Professional associations, non profit organizations …

Businesses Social movements…
Stores Friendship cliques…
Companies Isolated individuals….
FactoriesStreet gangs…
What is an Organization?
A simple working definition:
Organizations are autonomous groups whose members
coordinate their behavior in order to accomplish shared
goals or to put out a product.
Examples Qualities
Organizations Companies, Schools,
voluntary associations,
Political parties
Roles, rules, goals,
recurring behaviors,
boundaries
Not Organizations Random collections of
persons, isolated
individuals
No rules, roles, goals,
pattern of recurrence, or
boundary

Ambiguous cases Street gangs, friendship
groups, social movements
Less clear roles, rules, and
goals, porous boundaries
and fluid participants
• Defining an Organization…
• Which of the following is REQUIRED in order to have an
organization?
☐Multiple people ☐A product that can be purchased
☐ Coordinated behavior ☐ An official name/logo
☐ A shared physical space
☐ A common goal or purpose
Defining an Organization…
Which of the following is REQUIRED in order to have an
organization?
☐A product that can be purchased

☐ A shared physical space
Organizations vary greatly.
• Size
• Market sector
• Social structure
• Environmental context
Organizational Problems and Reforms
• They are everywhere and complex => problems arise
• We feel compelled to reform organizations…
• But what shall we change?
List of educational reforms at the IAE School of Management in
2015

1. Merging two master degrees in marketing
2. Developing AACSB accreditation
3. Developing Harvard Business School case studies
4. Generalizing the evaluation of teaching
5. Merging with the University of Marne-la-Vallée
6. Creating a governing board
7. Developing ‘aprenticeship’ in all master degrees
8. Developing a balance score-card of quality
9. Evaluating the research performance of professors
10. Developing on-line programs
11. Gaining autonomy from the Faculty of Economics and
Management
12. Sharing all course materials between professors in
management
Which of the following best describes the issue of change in
organizations (select all
that apply)
☐It is rare for an individual, group or society to attempt to
change an organization in

meaningful ways. Once organizations are established, they
remain essentially the
same unless they are shut down
☐Organizations are usually fluid and flexible, and respond
easily at change and
improvement
☐ It is not uncommon for individuals, groups, or society to try
to change an
organization in order to make it better. Implementing reforms,
however, is fraught
with challenges and complications
☐ Attempts to change an organization may fail because the
environment in which a
reform was tested is different from the environment in which it
is being implemented
CNAM – International Institute of Management
Master in International Management
Master 1
Organization Theory - Syllabus
Eric Hertzler
Senior Tenured Lecturer
Université Paris-Est Créteil
[email protected]

Course Objectives
What’s the utility of this course to master’s students ? Why
should you care ?
participants,
environment fit
organizations and
THEORIES of organizations and THEORIES that help make
sense of what you have
observed
In summary…
Nothing more practical than a good theory
That your interpretations of organizational life are derived from
theories, but…
• Different people have different accounts for the same
phenomenon
• It is not enough to apply one perspective on one phenomenon
• Confronted to new problems or new situations, generalizing
previous

conclusions/solutions… does not apply
Course Content
The course explains and illustrates organizational phenomena
and their dynamics.
Organization Theory (OT) is a set of diverse approaches and
models that are at times
incommensurate with one another.
We first focus on macro theory initially rooted in sociology and
social psychology that
takes the organization as the level of analysis.
Then we turn to micro theory (or Organization behaviour),
drawing on
microeconomics and cognitive psychology, which tackle
Organizations from the
perspective of small groups or individual decision-making.
Course Content - Organization Theory (OT)
• Theory is a system of ideas explaining something, based on
general principles and on a
set of assumptions.
• There are many OTs. The diversity of OT will teach us

flexibility, which can help in those
times of complexity and rapid change.
• The various theories of Organization can guide our actions by
giving us abstract images
of:
What an Organization is
How it functions,
How its members and other interested parties (who) interact
with and within it.
• Knowing OT will help to understand how Organization works
and to diagnose its
problems.
Course content - Organization behavior (OB) can be challenging
Human behaviors are impossible to predict (can OB be a
science?)
OB course: generalizations are possible !
Everyone makes ‘value judgments’ about peoples’ behavior
OB course: understanding the behaviors instead of judging them
There is a natural tendency to look for solutions before
understanding problems
OB course: identifying ‘real’ problems before trying to fix them

Course Outline
1. Analytics Features of Organizations
2. OT: Classical Approach
3. Organization Sociology
4. Organization and Environment: Contingency theory
5. Case study: Patterns of structural change and design
6. Costs, outcomes and risks: Organizational Economics
7. Organizations as open systems: Evolutionary Theories
8. Cultures and Group Dynamics
9. Perceptions
10. Motivations
11. Decision-making Theories
12. Configurations, Power and Conflict
13. Leadership and Authority
Course Method
-depth analysis of some major theory on OB rather than a
collection of a wide

range of theories
-making, power, change)
through readings,
case studies, and YOUR work experience
-back’ => professor-student
reverse role, e.g. YOU will
work in class, I will work outside class on your projects
Assignments, Guidelines and Assessments
1. Case Studies to be performed before the class by a team of 3
students (approximately 10
slides, 20 minutes)
20% (total score) – each semester
2. Readings (Biography, Papers) to be performed before the
class by a team of 3 students
(approximately 5 slides, 10 minutes)
20% (total score) – each semester
3. Participation in class 10%
+
Mid term Exam #1 (45 min.) on an individual basis (Quiz): 20%
(total score) – Semester 1
Final Exam #2 "Design the ideal organization. Use course

concepts to defend your answer." –
30% final score Semester 2
The student’s work is assessed on a 20 points mark basis.
http://bobsutton.typepad.com/my_weblog/2012/04/final-exam-
design-the-ideal-organization-use-course-concepts-to-defend-
your-answer.html
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Readings
Alchian, A. A. and Demsetz, H. (1972) Production, Information
Costs, and Economic organization. The
American Economic Review, Dec., 62, 5, 777-795
Chandler, A. D. Jr. (1977) The visible hand: The managerial
revolution in American business. Cambridge,
MA: Belknap Press
Coase, R. H. (1937) The Nature of the Firm. Economica, New
Series, Nov., 4, 16, 386-405: Blackwell
Drucker P. F. (1973) What can we learn from Japanese
Management?, Harvard Business Review
Morel, C. (2001), “Absurd Decisions”, Minutes of the
Conference of the ‘Association des Amis de l’Ecole
de Paris du Management, December 7th, 2001, Paris
Campbell, A., Whitehead, J., Finkelstein, S. (2009), “Why Good

Leaders Make Bad Decisions”, Harvard
Business Review, p. 60-66
Eisenhardt, K., Kahwaji, J.-L, Bourgeois L.J. (1997), How Can
Management Teams Can Have a Good
Fight, Harvard Business Review, July, p. 77-85
Courpasson, D. (2000), Managerial Strategies of Domination.
Power in Soft Bureaucracies,
Organization Studies, 21/1, p. 141-146
Weick, K. (1993). “The collapse of sensemaking in
organizations: the Mann Gulch disaster.”
Administrative Science Quarterly, 38(4): pp.628-652
Financial Times, Wall Street Journal, NYT, The Economist
Harvard Business Review, Inc.,
Fast Company, Aeon should be regularly consulted
For next class! Presentations on early models of organizations
and their current values
Saint Simon, Bentham, Fourier, Jean Baptiste André Godin,
Fayol, Mary Parker Follett
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Do the last artical
2 pages of each.
1. ANALYTIC FEATURES OF
ORGANIZATIONS
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Organizational Elements
goals
participants
technology
social structure
ORGANIZATION
Organizational Elements: Participants
PARTICIPANTS : Organizational participants that make
contributions to and derive from
the organization
goalstechnology
social structures

ORGANIZATION
participants
1.1. What is an organization?
Definition 1: Groups of people acting together in order to
achieve a common aim
Different organizations, but same issues…
They may not have a ‘common’ aim
There may be conflicts within them
There may be problems of coordination/control
…
In an hospital: think about the managers, physicians&nurses
In a football team: think about the players & the coach
In a religious community: think about the conflicts between
collective values &
individual objectives

Definition 2: Groups of people acting together… despite various
aims, values,
motivations, cultures…
So, what is OB for?
Instrumental view: assumes a single set of values within the
organization, OB to
help managers manage more effectively
Conflict view: assumes values are irreconcilable, normally as
between managers
and workers, and OB is to help expose, explore and perhaps
participate in this
conflict
Pluralist view: assumes a varied set of values, including but not
limited to
managers, and OB is to help all parties to understand
organizations better
CONCLUSION
An Organization is:
• A set of people
• A goal (a reason to be)
• A structure (of activities)
• A “boundary” (in an environment)
Organization (O) is the combination of:
A structure (S) and a group of human beings (H) O = S x H
To organize is to set rules (structure) helping people to live and
work together.

Scott (1987)
• An organization is a human entity, which aims at conducting
collective action.
• The definition of an Organization encapsulates 3 aspects:
- Its nature (What kind of entity?) and functions (Why?);
- its structure (Which design?) and choices (How?) ;
- its environnement (construction et interpretation) and the
interaction of its actors
(Who?).
‘Organization’ is an ambiguous concept, which proves difficult
to distinguish from the
concept of institution.
Organizations structures are diverse
• Pyramid (administrative chart based on hierarchy):
Military design
Functional design
• Network (decentralized interdependant links):
Matrix design
(e.g. forum, mailing list)

• Team spirit (control over scarce resources):
Corporate body or public body
(e.g. engineers, civil servants)
Organizations need co-ordination and co-operation
• organizations gather and combine resources (production
factors including human capital
or competences) and co-ordinate their use in order to realize
specific tasks.
• Co-ordination is designed and planned by the authority,
according to rules and
procedures, and relies on the division of labor.
• Co-operation (i.e. division of labor) among individuals brings
in economic performance as
well as potential conflict, which induces waste or losses.
• Co-ordination must reduce waste due to co-operation.
• Economies of scale enable to reduce costs and reach higher
efficiency. However, they do
not define the optimal size of a given organization neither do
they mark the boundaries
of its activity.

Organizations need to be efficient
Effectiveness Efficiency
(decided by the client) (measured by the management)
Quality (asked) Quality (decided)
Quality (perceived) Quality (realised)
Price Cost
Time limit Time cycle (to produce)
Personal touch Flexibility
Efficiency and dynamics
Efficiency is not a stable attribute, for organization change
overtime:
• The lifecycle model [Kotter, 1978] emphasizes the process
which drives the Organization
from birth to death, although decline may be avoided.
• The evolutionary model [Nelson & Winter, 1982] emphasizes
the dual nature of
Organizations, which is grounded on routines and prospects, the
former being very
efficient.
Organizations need to be managed strategically
• From “program, command, organize, co-ordinate, control”
to “vision, project, implication, client orientation, quality
leadership”:

• The strategist is “a vision negotiator, with a capacity to attract
people’s support, and a
communicator”.
A difficult balance of responsibility
• Management: Strategy design and decision making
• Organization: Men and Structure
• Administration: Pilot and performance
Organization: Structure and people
Functions (jobs, positions, status): A static vision
Structure Process (continuous, value added): A dynamic vision
Projects (changes, steps, adjustment): A flexible vision
Professional (craft, personal development): Recognition
People
Personality (emotions, communication): Complexity
Administration
Optimizing the capital resources (investments) is the role of the
pilot
with a “dashboard” (performance indicators)
A pilot
and action levers (management chart)

Organizations need to perform
What constitutes performance or how it should be measured?
• Efficiency in production?
• Market share?
• Strategic effectiveness?
• Quality?
• Social responsibility?
• Environmental impact?
• Financial gain?
Goals / Resources / Results: The magic triangle
Effectiveness
Consistence/relevance Productivity
Goals need to be specific, measurable and set in time.
7 Morgan’s Metaphores (1989)
Organization as …
…machine

…living organism
…brain
…culture
…political system
…psychic space
… domination’s instrument
Added Value to the vision on
Organizations
Useful et efficiency
Predicbility
Open on Environment and
Adaptabilty
Importance of Information
Management
Importance of standards, rules and
values
Governance, power and leadership
Space of pleasure and pain
Power distribution
Power and Society
Management Concepts

Profit, control, managing and
leading
System, retroaction, regulation,
connection,
Information Systems, Decisions
Culture, identity, social link, myths,
behaviors
Powers, actors, strategy, influence,
coalition
Stress, motivation, inconscient,
psychological contracts
Control, domination
Evolution of Organization Theories
Mechanistic
Approach
Social Approach
Organization as a
Closed System
Organization as an
Open System
Directive

Management
Human
Relations
Contingency
and
Planification
Collaborative
Management
L’ordre régi
par la règle
L’organisation
façonnée par
des forces
exogènes
Groupe, moral
et conditions
de travail
Complexité,
changement
et adhocratie

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NEO- Classic p.
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2. Organizational Theory:
Classical Approaches
2.1. The Study of Bureaucracy
2.2. The Scientific Management
2.3. The Human Relation Theory

2.1. The Study of Bureaucracy
The Study of Bureaucracy
The concept of authority and its relation to organizations
The ‘ideal-type’ of bureaucracy
The virtues of bureaucracy
Max Weber
1864 - 1920
Three types of Authority
Authority is the right to obedience and is different to power
because it is
legitimate
Charismatic – right to obedience based on personality (of
leader)
Jesus’s disciples, religious cults
Traditional – right to obedience based on custom or habit
Household: family hierarchy
Vassals: feudal lords who swear loyalty to monarch
Rational-Legal – right to obedience based on a system of rules

Ideal-type bureaucracy
Weber’s thesis: The rational-legal authority is gaining
importance in the modern
economic organization, the bureaucracy
Bureaucracy: the ‘ideal-type’ rational-legal organization
Authority comes from ‘office’ or position
Work performed as official duties
Paid, full-time, career structure
Hierarchy and reporting structure
Division of labor
Employment based on qualifications and experience
Uniformity and impersonality in treatment of staff and
customers
The virtues of Bureaucracy
Hierarchy: A chain of command and responsibility, officials are
‘accountable’ to
their immediate superior for their conduct
Impersonality: The bureaucrat performs duties in a ‘spirit of
formalistic

impersonality…without hatred or passion’
System of rules: A ‘consistent system of abstract rules’ defines
limits to authority
and specific procedures for task performance
– Calculability, precision, discipline, predictability
=> Rules provide predictability and protect from risks
=> Rules provide equal treatment thanks to impersonal rules
(for ex. everyone can
climb the career-ladder)
But what is rationality?
• Substantive rationality vs formal rationality
• Substantive: the end is in itself ‘rational’
• Formal: the best means to achieve a given end
So,
• ‘doing the thing right’ (formal) or ‘doing the right thing’
(substantive) ?
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http://www.youtube.com/watch?v=TbD6j_1-
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Bureaucratic dysfunctions - Weber’s legacy
• American organizational sociologists
• Gouldner: The issue of unintended consequences: even if the
intended ends
of the organization are rational, its actual effects may not be
(ex. “French
public policy of 35h”)
• Blau: ‘work to rule’ – efficiency depends upon not following
rules
• French organizational sociologist
• Crozier: the myth of impersonality – bureaucracies do not in
fact protect from
power relations
2.2. The Scientific Management
Context of SM and Taylor’s problem
• Context: 19th century large-scale industry
• 1878: factory worker in a steel-factory at Midvale
• His production numbers are excellent, he is appointed as team
manager

• He observes:
– Obstruction and laziness
– Gap between management and workers
• After 3 years, failure: he finds no means to convince the
workers to increase
productivity
Frederick Taylor
1856 - 1915
• Taylor invents a solution: paychecks on the basis of the
effective production
• An ideal to reconcile workers and managers interests
• Necessity to measure the production capacity of each worker
• To achieve this, a « one best way », scientific management
Context of SM and Taylor’s problem
The

Solution
: 4 Principles of Scientific Management
• A science for each element of work (time and motion studies)
• Scientific selection and training of workers
• Co-operation between managers and workers
• Division of responsibility between managers and workers
(‘conception’ and
‘execution’)
The legacy of SM
• In the management of organizations. Despite early resistance,
it was widely
adopted and continues to define much present practice

– In the industry, it led to the ‘Fordist’ system of the moving
assembly line
– In the management, H. Fayol
– In the service sector, Mc Donaldization
– The Quality Management Systems are also legacies of SM
• In the study of management. Taylor’s SM is the first attempt
to ‘study’
work&workers (originates the industrial sociology)
and rising living
standards, but also to persistent problems of working conditions
and their
social effects

t the human body but what about the human
Usual criticisms of SM
2.3. The Human Relation Theory
Human Relations Theory: Outline
• The Hawthorne experiments
• Implications of Hawthorne experiments
• Problems with Hawthorne experiments
• Relationship to scientific management

• The legacy of HRT
What were the Hawthorne experiments?
• Conducted at the Hawthorne works (Chicago), part of the
Western Electric
Company of AT&T between 1924 and 1932
• Findings were analysed by Mayo, Roethlisberger & Dickson
and Whitehead
• Gave rise to Human Relations Theory (HRT) which
transformed the theory and
practice of organizations and management through to the
present day
Elton Mayo
The Hawthorne experiments (1/3)

• Illumination experiment: the effect of varying lighting levels
• Relay assembly room experiment: the effect of varying
conditions of work
Hawthorne Plant c. 1932 Working at Hawthorne
• 1st experience at the Relay assembly room experiment: the
effect of varying
illumination in the assembly room (1924)
• 2 groups of workers were chosen:
• One where illumination is improved
• One where illumination remains in initial condition
• After several weeks of observation,

• The productivity in the first group increases
• The productivity in the second group also increases
• 2nd experience at the Relay assembly room experiment: the
effect of varying
conditions of work (1927-1932)
• 2 women asked to choose 4 co-workers and work in a separate
room
• In five years, many changes in the working conditions:
• changing the pay rules so that the group was paid for overall
group production, not
individual production
• giving two 5-minute breaks (after a discussion with them on
the best length of time), and
then changing to two 10-minute breaks

• providing food during the breaks
• shortening the day by 30 minutes (output went up); shortening
it more (output per hour
went up, but overall output decreased)
• Then, returning to the initial conditions
• Output of the room regularly measured & discussed with a
supervisor and observed
by the researchers
• Again, output increases !!!
Analytical implications of Hawthorne
• The ‘Hawthorne effect’ is one of the classic results in social
science. It tells us that

human behaviour changes as a consequence of being studied and
observed
• People in organizations do not act like parts in a machine –
they have other needs
e.g. for involvement in a group, recognition of leadership,
participation in change
• There is an ‘informal’ set of social relations in organizations
with its own norms,
ruled, leaders etc.
Managerial implications of Hawthorne
• Work is a social as well as an economic activity, and needs to
be structured and
motivated accordingly
• Managers should interest themselves in the social well-being

and morale of
workers
• Managers must establish systems to communicate, consult and
support the
workforce
• The ‘informal organization’ needs to be managed
• Bank wiring room experiments
The study was conducted between 1931 and 1932 on a group of
14 men who put together
telephone switching equipment. The purpose of the study was to
find out how payment
incentives would affect group productivity.
. The researchers found that although the workers were paid
according to individual

productivity, productivity did not go up because the men were
afraid that the company
would lower the base rate.
The surprising result was that it contradicted the Hawthorne
effect: Although the workers
were receiving special attention, it didn’t affect their behavior
or productivity. However,
the informal group dynamics studied were a new milestone in
organizational behavior.
Detailed observation between the men revealed the existence of
informal groups or 'cliques'
within the formal groups. These cliques developed informal
rules of behaviour as well as
mechanisms to enforce them. The cliques served to control
group members and to

manage bosses; when bosses asked questions, clique members
gave the same responses,
even if they were untrue.
These results show that workers were more responsive to the
social force of their peer
groups than to the control and incentives of management. Hence
it is in managers'
interest to collaborate with these informal groups to increase
cohesion for the company's
benefit...
Summary of Mayo's beliefs
• Individual workers cannot be treated in isolation, but must be
seen as members of a
group.

• Monetary incentives and working conditions are less important
to the individual than
the need to belong to a group.
• Informal groups formed at work have a strong influence on the
behavior of those
workers in a group.
• Work performance is dependent on both social issues and job
content.
• There is a tension between workers' 'logic of sentiment' and
managers' 'logic of cost and
efficiency' which can lead to conflict within organizations.
• Managers must be aware of the 'social needs' and cater for
them to ensure that
employees collaborate with the official organization rather than
work againstit.

Legacy: Reconciling Taylor and HRT?
• Douglas McGregor – Theory X and Theory Y
• These are both influential attempts to combine the insights of
HRT and SM into a
single framework
McGregor
1906 - 1964
•McGregor distinguished two theories of management
• Theory X
•People basically don’t like working
•They are only motivated by money
•They must be closely directed and supervised if they are to

contribute
to the organization
Theory X - Theory Y
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• Theory Y
•Work is a natural part of human experience
•People will exercise self-direction and self-control to serve
goals that
they believe in

•People seek rewards other than economic rewards, including
intrinsic
satisfaction of their work
•People enjoy autonomy and self-control
•Most workers’ potential is only partially utilized
Theory X - Theory Y
Evaluating McGregor
• This is a ‘contingency approach’ to management, which moves
away from the
idea that there is a single formula for managing
• Both theories are ‘true’ in practice => management has to use
‘carrots & sticks’
alternately

3. Beyond Classical Approaches:
Organizational Sociology
Starting point: a critique of the previous theories
• Scientific management & Bureaucracy: if the rules and
structures are well defined,
all organizational problems (conflicts, laziness,…) will be
solved
• Human Relation Theory: taking care of the people in
organizations will abolish all
organizational problems
• Organizational sociology: Studies of bureaucracies show
that :

•“structures” (or rules) do not dictate behaviors
•psychological well-being not enough to secure individual
participation to
organizational goals
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Very Important. This the most important theory
Starting point: A case study of a French
Bureaucracy (2)
The case of the « Tobacco industry » in France
•A monopolistic company
• A taylorian model of work organization
• Bureaucratic modes of employees management

Plant manager
Manager
Engineer
Maintenance men
Foremen
Specialitst workers
Maintenance men
Foremen
Specialist workers
« Insincere »
« Bossy »
Indifferent

Stay
in the
background Agressive
Judgemental
relations may
develop, parallel to the formal organization
are related to their position into these
power relations
And it is difficult to
change
Crozier et E. Friedberg
in the book: Actors and Systems, the Politics of Collective

Action, 1980
Learning from this case study: A new theory called
“Strategic Analysis of Organizations”
“Strategic Analysis of Organizations”: POWER
• Definition: capacity to make individuals adopt behaviors that
they wouldnot
have adopted spontaneously
relation between a
professor and his/her students)
other actors do not
control

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“Strategic Analysis of Organizations”: ZONE OF
UNCERTAINTY
• Definition: ‘fuzzy zones’ that are controlled by a few
individuals in the organization
• Some uncertainties in organizations
-how
• When you control a ZU, you hold power:

Power thus leads to negotiations
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“Strategic Analysis of Organizations”: ACTORS
• Why “Actors” and not “Agents”?
• Two important postulates:
• Individuals are never entirely passive (dominated by the
structures and/or the
other individuals)
• Individuals have objectives (limited rationality)
• For organizational sociologists, individuals at work are not

only a hand, or a heart,
but a head!
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We all actors
“Strategic Analysis of Organizations”: STRATEGY
• If actors have objectives, they will then develop a strategy to
attain these goals
• Definition: a range of behaviours adopted in order to attain
individual goals
• Strategy may be conscious or unconscious
• Strategy is not expressed by the actors, it is constructed by the
analyst (discovering
the ‘rationality’ of actors)

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“Strategic Analysis of Organizations”: STRATEGY
• Examples of strategies:
• Aggressiveness: a means to keep the other members at
distance
• Good will: a means to obtain a favour
• Bad will: a means to manifest angriness/ lack of power
(ex. Students of
that class)

CONCLUSION:
Which of the following are reasons why organizational theories
are
important ?
ual
experience
phenomena
variety of familiar and
unfamiliar contexts, rather that particular knowledge that is
relevant only to a single
situation or organization
☐They explain everything that goes on in every organization in
a way that makes

things clear and simple
The Analysis of a Personal Experience with the
ORGANIZATIONAL SOCIOLOGY TOOL-BOX
Learning objectives
• Apply a theoretical frame to a concrete case study – the
organizational sociology
as a ‘tool-kit’ for understanding organizations
• Develop a capacity of empathy & analytical distance
• Present clearly an organizational situation that looks complex
at first
• A comprehensive versus normative approach

• Understanding problems first and foremost, before inventing
solutions
Schedule
TODAY
1/ Select a partner
2/ Decide which situation/organization you will study
3/ The methodology of the case analysis, step by step
How to select your case-study?
One or several organizational situations that look paradoxical or
raise
questions
Examples of situations: strange individual behaviors, decision-
making

processes that seem irrational, inter-personal conflicts, etc.
Transform those observations into a set of questions
• Why nobody communicate in an open space?
• Why is there a recurrent tension between the front and back
offices?
• Why people always circumvent organizational rules?
ANALYZING THE CASE STUDIES:
A 4-STEPS METHODOLOGY
1. IDENTIFYING the actors involved in your
organization –
2. DESCRIBING - Make the actors “talk” about
their work, problems and relations
3. ANALYZING – 2 tools

• Diagram of relations
• Summarize actors’objectives/
constraints/ressources/strategies
4. INTERPRETING
1 - IDENTIFYING the actors involved in your
organization
Draw a organization chart (with chain of command)
actors
organization (clients, suppliers)
(ex. the CEO)
(!) In the course of the analysis, you may

discover actors that were not identified at the
very beginning of the study
2 – DESCRIBING - Make the actors “talk” about
their work, problems and relations
-to-day work
sales targets, etc.)
Describe what they said about:
behaviors (aggressive, passive at work, cooperative, fully
committed, etc.)
(!) At this step, do not try to explain/interpret, just describe
with
empathy

3 – ANALYZING, the diagram of relations (1/2)
Acteur C
Acteur D
Acteur B
Acteur A
-
-
- -
+
+ for relations of cooperation (spontaneous exchange of
informations,
reciprocal help, arrangements, etc.)
-for tense relations (refusal to cooperate, relation of
dependance, bad

will, reluctance to convey information, etc.)
= for neutral relations, or absence of relations
3 – ANALYZING, the diagram of relations (2/2)
g the elaboration of the
diagram, you have to make decisions on the
nature of the relation
-g. helps to raise questions (ex.
why such actor has – relations with everyone?)
3- ANALYZING
Establish a table that summarizes your findings
Individual

objectives
Constraints Resources Actors’
strategies
Actor A (ex.
maintenanc
e men)
Being
autonomous
Officially under
the responsability
of the the
foremen
Expertise to
repair the

machines
Director outside
the factory
Aggressive with
the foremen
Shambling with
the workers
Actor B
Actor C
4 - INTERPRETING
is consistent with the actor’s individual objective in his (her)
given context?

facts (behaviors, relations, organization rules…)
A (very) simple example
Relations
The sales have a good relation with the sales manager
The sales are in conflict with the after-sales service department
Behaviors/Attitudes
The after-sales department often receives clients’ complaints
about product quality
The sales manager never organizes meetings to discuss the
‘quality issue’
Organizational rules
Bonuses of the sales department based on the sales numbers
What causal relations between all those elements?
4. Organization and Environment
– Contigency Theory

4.1. Corporation: an economic organization
Introduction: Historic Roots A.D. Chandler
4.1.1. From Family Workshop to Modern Corporation
4.1.2. Structures according A.D. Chandler
4.1.3. From Market Mechanisms to Administrative Mechanisms
88
A.D. Chandler
-2007)
« Business history » @ Harvard Business School.
Main books :

et de
diversification)
Research:
second industrial
revolution in the USA
89
©Harvard
Business School

Introduction: Historic Roots with A.D. Chandler
18th Century (GB) 1st Industrial Revolution: new industrial,
organizational and
technological issues:
le
infrastructure)
Local and limited answers, then general principles and rise of
management («
Administration »)
90

4.1.1. From Family Workshop to Modern Corporation
4.1.1.1. Historical developments
1/ Family Workshop under supervision of a « master »
2/ Manufacture Workforce / Assembly / Division of labor/
Payroll / Hierarchy
3/ Industrial Workshop Machines/ Higher productivity / Less
resistance and know- how
La machine « réussit enfin à briser la résistance que le
travailleur mâle opposait encore
dans la manufacture au despotisme du capital » (K.MARX
[1867], Le Capital, livre 1er,
IVème section, chap. XV)
4/ Factory: Standardization / Knowledge management /
Discipline

5/ Modern Firm: Modern Management/Mergers/ Networking
/Increasing weight of
management/ Recrutement of skillful managers 91
4.1.1.2 – Modern Firm
Produce, distribute, organize
The Modern Firm according Chandler has 3 type of investments
marketing,
commercial, distribution
« Human Resource Management is vital for exploiting full
potential of new
technological processes » (A.D. Chandler, Scale and Scope, vol.
I)

92
yazeedmostafa
Highlight
make sure about it
4.1.2. Structures according Chandler
4.1.2.1. Findings
1 – Modern Firm is a complex institution based on a
hierarchical structure
2 – Each strategic move led big US corporation to change their
structure
93
4.1.2.2. Strategy/Structure : 4 stages

1- Initial Stage
-activity non structured
2- Geographic expansion in main activity
ation of production sites
3- Vertical Integration
4- Growth through diversification
-activity
n (divisional)
94

From Market Mechanisms to Administrative Mechanisms
According Chandler[1990]
corporation
when the administrative coordination allowed better results than
the
market coordination
supervise and
coordinate the units
development for
the firm itself.

95
Conclusion
The Visible Hand of Managers replaced the Invisible
Hand of the Market
96
Organization is also about organizing – about setting structures
Organizing:
How to allocate tasks and authority?
Centralization or decentralization?
Why and how coordinate?
Differenciation or integration?

How odes the environment impact structure?
To which extend should we standardize?
4.2. Mainstream Structures
4.2.1. – Functional Centralized Structure
4.2.2 – Divisional Decentralized Structure
-firme ») has its own structure and
management
4.2.3 - Matrix Organizational Structure
98

4.2.1. Centralized Functional Structure
Basic Functional Structure
99
Managing Director
Sales Operations Finances
Staff/Human
Ressources
R & D Administration
Functional structure at FedEx: This organizational chart shows
a broad functional structure at FedEx. Each
different functions (e.g., HR, finance, marketing) is managed
from the top down via functional heads (the CFO, the

CIO, various VPs, etc.).
1.2. Divisional Structure
Headquarters
4.2.3. Matrix Organizational Structure
A customer unhappy with a product suggests that a change be
made.
A salesman who finds the interesting suggestion passes it on to
his
sales manager.
The sales manager passes it on to the Marketing Director, etc.

Then the
latter to the Management Committee .... The director order a
study to
the operational research department (constitution of a working
group).
The results are forwarded to the management committee, which
decides and refers to the operations the newly decided
decisions.
18 months later, the salesman makes a decision: return to his
client
with a new offer.
Exercise – Draw the chart and
present alternatives
4.3. Contingency Theory

What’s the best structure/ organization?
« Contingency »: something might happen or not.
According Chandler:
Other sources of contigency:
105
Age, size and structure

Age
Max Weber (1864-1920) : the older a company the more
standardized/organized it is
Size
labor, coordinate it
throught hierarchical supervision
106
Technology and structure
Joan Woodward (1916-1971),
-57 : Study of an hundred of british corporation
structures.

107
Process-Technology Structure
« Project »
Single product customized for a client,
(building)
Simple: small hierarchy, strong
collaboration étroite, mutual ajustment
« Mass Production »
Standardized products, large quantity
Very formalized, : important hierarchy,
less skilled workforce , less managers
« Continuous Production »
Single product manufactured (i.e;.
chemistry, steel)
Large automation, skilled workforce

(control and maintenance). Huge
Hierarchy
No « best structure »
Environment and structure
Impact of environment?
: Complexity/ Frequency of Change
• Stable Environnement: Mechanistic Systems
• Disruptive Environnement: Organic System
108

Mechanistic System suitable for stable condition
s
headquarters
109
Organic System is suitable for unstable condition (new issues):
changed

110
Environment and Structure
Burns and Stalker The management of innovation [1966]
111
Dimensions
Importance
Hierarchy
Centralization
Division of labor
Rules
Process
Individuals

Fort
Mechanistic SystemOrganic System
Les
s
Organic
System
Mechanistic
System
Mo
re
Conclusion

Several issues: Structures, efficiency, contingency,
motivations…
Study Paul Lawrence and Jay Lorsch, USA
»
1- None best structure
2- Some structure are more efficient than others
See Mintzberg
112
4.4. Structural Configurations (H. Mintzberg)
Assumptions:
An organization is a set of variables that are linked together in

order to achieve a
« harmonious whole »
The is only a limited number of configurations that are able to
survive (1983)
Mintzberg’s typology of configurations
The organization is defined through:
Its various parts
(Operational centre, Top hierarchy, Hierarchy line,
Technostructure, Line staff)
Its co-ordination mechanisms
(mutual adjustement, direct supervision; standardized processes,
outcomes, qualifications, norms
and behaviors)

The organization is constrained by:
- External pressure (environment, external coalitions)
- Internal pressure (size, age, technical system, internal
coalitions)
yazeedmostafa
Sticky Note
understand it
6 configurations [Mintzberg 1983]
Context Design parameters Examples
Configuration Environment Internal characteristics Key part
Key process

Simple Dynamic
Simple
Hostile
Small size
Young
Simple tasks
Control: Owner
Top hierarchy Direct
supervision
SMEs
start-ups
Mechanistic
Bureaucracy

Stable
Simple
Large size (U form)
Ageing
Standardized tasks
Control: Technostructure
Process, rules,
technostructure
Planning and
control
Basic products
and services
Professional

Bureaucracy
Stable
Complex
Complex but
repeating tasks
Operational
Centre
Planning
Social process
Hospital
University
Divisionalized Simple,
dynamic

Diverse
Large size (M form)
Ageing
Heterogenous tasks
Control: Hierarchy
Hierarchy Line Performance
goals
Multi
national
Adhocracy Dynamic
complex
Young
Complex tasks

Innovative
Control: Experts
Line staff
support
Social
process
Tailored
services
Missionnaire Stable
Simple
Simple systems
Control: Beliefs
Ideology Social

process
NGOs
4.5. The Need for Flexibility and Collaborative Management
https://www2.deloitte.com/us/en/insights/focus/human-capital-
trends/2017/organization-of-the-future.html
4.5.1. Network Structures
4.5.2. Agile Structures (for punctual or long term costly
projects)
https://www2.deloitte.com/us/en/insights/focus/human-capital-
trends/2017/organization-of-the-future.html
4.5.1. Network Structures (H&M
https://advergize.com/business/network-

organizational-structure-examples-definition-advantages-
disadvantages/ )
Control of satellites by center
(Market/ Bureaucracy/Teams)
https://advergize.com/business/network-organizational-
structure-examples-definition-advantages-disadvantages/
4.4.2. Agile or Scrum (Project-based) Structures fostering a
collaborative management
Spotify and its agile culture
https://labs.spotify.com/2014/03/27/spotify-
engineering-culture-part-1/
https://labs.spotify.com/2014/03/27/spotify-engineering-culture-
part-1/

Conclusion:
The organization is constrained by:
-External pressure (environment, external coalitions)
-Internal pressure (size, age, technical system, internal
coalitions)
Organization Structures are bound to the Organization strategy
and vice
versa
Do not underestimate:
- Methodological flaws
- Shortage of pilots or actors
- Personal Issues and strategies
- Resistance to changes

- Problems of social relations and informal structure
- Difficulties in evaluating the results
5. Case study: Pattern of Structural
Change and Design
5.1. Pharmaceutical Company
5.2. Petzl Company
5.3. General Motors Company
6. Costs, outcomes and risks:
organizational Economics
6.1. The Neo-Classic School
6.2. Transaction costs (Coase, North and Williamson)

6.3. Information and cooperation (Alchian and Demsetz)
6.4. Agency issues (Jensen and Meckling)
6.1. The Neo-Classic School :
Maximization of profit and consequences
When we consider (in chronological order), the succession of
the different schools:
productivist, behaviorist, mathematic, and psycho-sociological,
we are struck by the
growing elaboration (increasing complexity) of concepts and
tools.
Educated under Taylor and Fayol, of a body of principles which
are stamped with
common sense and accessible to any manager, “the science of
organization” became
little by little a highly formalised field, with a university

jargon, inaccessible to the non
initiated in that field.
It is in reaction against this divorce between practice and
theory, or between the
manager and the specialists (experts), that the “empirics” or
“neo-classics” (Sloan,
Chandler, Drucker) rose up.
As the name indicates, the Neo-classic school comes up firmly
within the framework which
was defined by the classics:
the autonomy of the field
in comparison with related sciences of organization.

, it has a normative attitude and tries to
define action rules, which
are explicit with Drucker, and implicit with Chandler.
any organization.
The Neo- classic school premises
• Profit maximisation
• Decentralisation of responsibilities and decisions
• Widening of subordination range
• Management By Objectives (MBO)
• Control by exception “self management principles of the
autonomous units”
• Motivation by competition

yazeedmostafa
Highlight
Important why?
Profit maximisation
• Profit is above all a guarantee of survival and security.
• The employees of the company get benefits from growth, and
higher salaries and
promotion as well.
The whole organization must strive towards maximisation;
hence:
• Structure efficiency measurement with a battery of ratios
• Detection of elements contributing to the productivity or
penalizing it.

• Implementation of any means able to improve actual or
potential earnings
• The principle of maximisation served as a base for “the profit
centre concept” (Sloan)
yazeedmostafa
Highlight
Decentralisation
• To maximize profits, implies the decision making process to
be decentralized to the
lowest level as possible, and some product specialization
(departments).
• The “lowest level” in decision making is the one compatible
with information collection.
• Employees have to “take risks”, because they do not have all
the information necessary

for a decision. They also have to be “trained” to make
decisions.
Subordination range
• This is a core concept of the Neo-Classic school.
• As soon as the manager is discharged with “small decision
making” (decentralization), he
can embrace, at one glance, a lot of different and various
activities.
• So the span is wider and the structure can spread.
Management By Objectives (MBO)
• Increase of the managers’ (executives and officers) sense of
responsibilities.
• Worthy reinforcement of the integration links.
• To integrate means:

• to make and have each individual accept the main objectives
which are imposed in the
general interest,
and
• make accept the permanent arbitration from the highest level
of management, which is
the only one having an overview to elaborate the main
objectives.
See Peter F. Drucker/ Mc Manara
yazeedmostafa
Highlight
Competitiveness and motivation
In the Productivity School, motivations were limited by:

Fear of sanctions, lure of gain, job security
The Human Resources School added the need of integration to
the group and social
coherence/ fairness (Mc Gregor, Herzberg, Maslow, Mayo, J.
Adams, Vroom, Mc Clelland)
http://www.worldstarhiphop.com/videos/video.php?v=wshhzkL
mz0alrRH9neMq
The Neo-classic school insists on positive needs, to have the
individuals and the groups
surpassing themselves.
Main motivations that strive men to improve their work:
• The interest to do it,
• The right to widen constantly the field of their
responsibilities.

The creation of these motivations requires:
• The participation of the workers to the tasks definitions which
are assigned to them,
• clear objectives and interesting job,
• sanctions in case of failure, within a tolerance margin (to
make a mistake once but not
the same one twice)
The two main positive motivations are:
• Personal interest for a work we are responsible for,
• Ambition and need of accomplishment and fulfilment.
The negative motivations are:
• Fear of failure
• Anxiety resulting from competition and rivalry.

Incentives and motivations
Incentives are mechanisms whereby the contribution
(information, effort), which is
requested by the management from the participants is fulfilled.
[Barnard, 1938]
They are often limited to the payroll that does not match the
participants’ motivations,
which may be the search of prestige. [March & Simon, 1958;
Akerlof, 1982]
Motivations are the reasons that drive the participants to
provide the contribution
requested by the management
They are measurable to a certain extent in terms of mobility
(turnover or sick leave) that
form X-efficiency [Leibenstein, 1976].

The contribution/reward model [March & Simon, 1958]
The internal coherence of the organization requires that
incentives and motivations
interact, but they do not necessarly match.
The organization as a
coalition of interests
Stake
holders
Firm
Contribution: Labor, capital,
goods and services.
Reward: Wages, dividend,

goods and services.
Shareholders
Staff
Customers
Suppliers
Sales
Others
Conclusion on the Neo-Classic school
-
Classic one did, at the level of
individual efficiency.

emphasizes individual
ambition qualities, group and team spirit, exclusively based on
results.
sufficient anymore to progress in
the knowledge of the organizations.
6.2.1. The Nature of firm introduction
6.2.2. The economic system and The Price Mechanism
6.2.3. Emergence of a firm
6.2.4. The size of firm
6.2.5. Conclusion
6.2. Transaction Coast - Ronald Coase

yazeedmostafa
Sticky Note
137-160 is not important
yazeedmostafa
Highlight
He formed the ideas during his undergraduate years in London
in 1932, but the paper was
later published in 1937.
In 1991 he was awarded Nobel Prize for Economics for his work
on transaction cost.
1910 – 2013
Ronald Coase
6.2.1. The nature of firm introduction
1. Economic system,

The price mechanism: an economic term that refers to the
manner in which the
prices of commodities affect the demand and supply of goods
and services .
2. Why do the firms emerge?
3. How various factors like the division of labor affect the size
of a firm.
4. Cost of size enlargement of a firm
Definition
▪ Adam Smith, one of the Founding Fathers of economics
described the “Invisible
hand of the price mechanism”
▪ Price mechanism occurs in Perfect Competition Market
✓ Price manipulation

✓ Transparency information
✓ No barriers to entry more and more firm ➔ Large numbers
6.2.2. The Economic System and the Price Mechanism
The function of Price Mechanism
▪ The direction of resources is dependent directly on the price
mechanism
• Signaling function
➢ Demonstrate where resources are directed
• Transmission of preferences
➢ Information to producers about the changing nature of needs
and
wants
• Rationing function

➢ As a rationing device to equate demand with supply
Economic system
Limited resource Price mechanism effect
➔ Free market in Perfect competition condition
Market
Feature of the Market
COMPETITIVE SYSTEM
▪ Prices as a coordination mechanism.
▪ Balancing the resource in distribution and control of the
supply.
▪ Produce exchanges and the devised technique for minimizing

costs.
✓ Maximizing the revenues and profits
✓ Determine the right detailed information in the market.
The limitation of the Price Mechanism
ECONOMIC SYSTEM " Works itself“
▪ Being used to allocate resources ➔ Scare resource allocated
▪ No vertical integration
▪ No incentive to produce or possibility for invention.
▪ Consumption manipulation
▪ Costly to compete
▪ No employment

6.2.3. Emergence of a firm
1. High Market Cost
2. Complexity of contract in the market due to uncertainty.
3. External factors as government and other regulatory powers
treat transaction
differently
4. As a result of formal relation
● Some people prefer to work under the direction of another
● "Being ones own boss" a person can decide to pay another to
work for them.
● The relationship of choosing what is known, a purchaser
prefers a commodity
produce by a firm rather than what is not produced.

6.2.4. The size of firm
Why firms get bigger in size and scope?
1. Additional transaction organized by an entrepreneur
2. Vertical integration and combination will cause a firm to
increase in size
3. Dissimilarity in transaction in the market
4. Changes which improve managerial techniques will increase
the size of a firm
Other things being equal, a firm tends to be larger when
❖ Certainty of low organization costs.
❖ Confidence in managerial efficiency.
❖ Lower supply price.

Cost of enlargement
As a firm gets larger, the costs of organizing transactions within
the firm may
rise.
"Diminishing management return" : The efficient and effective
allocation of
factors of productions becomes a rising concern.
As a firm gets larger, the supply price of one or more of the
factors of
production may rise.
6.2.5. Conclusion
A firm consist of a system of relationship which comes into
existence when the
direction of resources is dependent on the entrepreneur

Using transaction cost to describe firm the nature of a firm;
three categories of
transaction
. Cost of discovering the relevant price
. Cost of negotiating a contract Coordinated cost
. Cost of concluding a contract Managerial cost
❑ There will always be constant experimenting of more or less
transaction by
businessmen giving the theory of moving equilibrium.
❑ The interplay of marginal cost as it relates to marginal
revenue in
describing the cost curve of a firm.
❑ Clarification that management function is influenced by
marketing cost,
which help to state what is meant by “marginal product”

6.3. Information and cooperation (Alchian
and Demsetz) to be presented
Alchian, A. A. and Demsetz, H. (1972) Production,
Information Costs, and Economic organization. The
American Economic Review, Dec., 62, 5, 777-795
1. Biographies of Authors
2. Theory of the firm
3. Team Production
4.

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