organization theory

1. Introduction to
Organization Theory

2. at is Theory?
• Theory is: “a plan or scheme existing in the
mind only, but based on principles
verifiable by experiment or obsemation”
Wagnalls page 302
)•

3. at is OrganiZatÎOKJ
• “Organizations are social entities that are
goal-oriented; are designed as deliberately
strucNred and coordinated activity systems,
and are linked to the extemal environment”
(Daft, 2004).

4. Definition of Organization
Theory
• Organization theory: is the set of
propositions (body of knowledge) stemming
from a definable field of study which can be
termed organizations science ‹Kast&Rosenrweig1970).
• The study of organizations: is an applied
science because the resulting knowledge is
relevent to problem solving or decision
making in ongoing enterprises or
instiNtions (K..‹&kosenzu•eigl970).

5. Definition of Organization
Theory Cont..
• Two things:
Knowledge
• Knowledge generated by practical experience and
scientific research
Solving problems managing resources
(KastAilosenzu eig1970) .

6. Definition of Organization
Theory Cont..
• “It is the application of scientific knowledge
in engineering and other forms of
technology that has brought such
spectacular changes in the material context
of our lives over the past
(Kast&Roscnzweig1970).

7. Organization theory and
Management
• “Managementtechnologystems
organizationtheory and even more applied
in the sense that it focuses on the practice of
managementin ongoing organizations'
(Kast&Rosenzweig1970).

8. Micro Perspective of
Organizations
• SimpliÇing Assumptions:
Firms viewed as an individual entrepreneur
maximization
kationality in achieving goals
Firms function is to transform inputs into
outputs
Staple environment in which operates
Concerned only with changes in prices and
quantities of inputs and outputs

9. Organization Theory from a
Historical Perspective
• Throughout history most managers
operated strictly on a trial-and-emor basis
• The management profession as we know it
today is relatively new
wide swings in management approaches over
the last 100 years
pañs of each approach have sumived and been
incorporated into modev perspectives on
management

10. Contingency
theory
Evolution Of ManagementThought
Classical Approaches
1900 l!?10 1920
ContemporaryApproaches
1940 1550 1960 l!?70
l8!?0 l!?.?0

11. Early ManagementConcepts And
Influences
• Industrial revolution
minor improvements in management tactics
produced impressive increases in production
quantity and quality
economies of'sctile - reductions in the average
cost of a unit of production as the total volume
produced increases
oppoñunities for mass production created by
the industrial revolution spawned intense and
systematic $J:ought about management

12. Contributions
Systematic Management
Systematized manufacmring operations
Coordination of procedures and processes built into internal operations
Emphasis on cz-onomical operatlons, inventory management, and z-ost
control
Beginning of formal management in the United States
Promotion of efPlcient, unintevlpted production
fgnored relationship between an organization and it environment
Ignored differences in managers' and workers' views

13. Scientific Management (The Classical
Organization Theory)
• Advocated the application of scientific methods to
analyze work and to determine how to complete
production tasks efFiciently
• Four principles
develop a scientific approach for each element of
one's work
scientifically select, train, teach and develop each
worker
cooperate with workers to ensure that jobs match
plans and principles
ensure appropriate division of labor

14. Contributions
Scientific Management (cont.)
Used scientific methods to determine the “one best way’
Emphasized study of tasks, selection and training of workers, and
cooperation between workers and management
Improved factory productivity and efficiency
Introduced scientific analysis to the workplace
Piscerats system equated worker rcwards and pcrformancc
Simplistic motivational assumptions
Workcrs viewed aS pilñs Of a maz-hine
Potential for exploitation of labor
Excluded senior management tasks

15. Administrative Management
• Emphasized the perspective of senior managers
• Five management functions
planning
organizing
commanding
coordinating
controlling
• Fouñeen principles of management
• Personalities
Henri Fayol
Chester Bavard

16. Contiibritions
Administrative Management (cont.)
Fayol's five Łlnctions and l4 principles of management
Exectltives foimulate the organization's purpose, secure employees,
and maintain communications
Uanagers must respond to z-hanging developments
Viewed managementas a professionthat can be trainedand developed
Emphasized the broad pollcy aspects of top-level managers
Offered universalmanagerial prescriptionb
Universal prescriptions need qualifications for
environmental, technological, and personnel
factors

17. Human Relations
• Aimed to understand how psychological and social
processes interact with the work situation to influence
perfoimance
• Hawthorne Smdies
Hatvtlioi•neEffect - workers perform and react differently
when researchers obseme them
• Argued that managers should stress primarily employee
welfare, motivation, and communication
• Personalities
Abraham Maslow

18. Contributions
Human Relations (cont.)
Productivity and employee behavior are influenced by tlle informal
work group
Cohesion, stams, and grottp noims determine output
Social nceds have prccedencc ovcr economic needs
Psychologicaland social processes influence performance
Maslow's hierarchyof need
fgnored workers' rational side and the fonual organization's
contributions to productivity
Research oveWmed the simplistic belief that happy workers are more
productlVo

19. Bureaucracy
• Bureaucratic strucLres can eliminate the
variability that results when managers in the
same organization have diFerent skills,
experiences, and goals
• Allows large organizations to perform the many
routine activities necessary for their sumival
• People should be treated in unbiased manner
• Personalities
Max Weber

20. Contributions
Bureaucracy (cont.)
Stvctured network of relationships among specialized positions
Rules and regulations standardize behavior
Jobs staffed by trained specialists w/io follow rrlles
Hierarchy defines the relationship among jobs
Promotes efficient performance of routine operations
Eliminates subjective judgment by employees and management
EmphasiZes JaoSltlon rather than the person
i it or$d$ zationa e 1 i ty n o e eci ion a ing
Ignores the impoñance of people and interpersonal relationships
Rtlles may become ends in themselves

21. Quantitative Management
• Teams of quantitative expe4s tackle
issues facing large organizations
• Helps management make a decision by
developing formal mathematical models of
the problem
• Personalities
military planners in World War

22. Contributions
Quantitative Management (cont.)
Application of quantitative analysis to management decisions
Developed specific mathematical methods of problem analysis
Helped managers select the best altenatlVo dmong a set
Uodelb ncglez-t nonquantifiable faz-tors
Managers not trained in these techniques may not tvst or understand
the techniques' outcomes
Not suited for nonroutine or unpredictable management decisions

23. Organizational Behavior
• Studies management activities that promote
employee effectiveness
investigates the complex nature of individual, group,
and organizational processes
Tlieoi•y X
• managers assume that workers are lazy, irresponsible, and
require constant supervision
• managers assume employees want to work and control
themselves
• Personalities

24. Conti ibutİOlJS
Organizational Behavior (cont.)
Promotes employee effectiveness tliroitgh understanding of individual,
group, and organizational processes
Stresses relationships among employees, managers, and work
perfomed
Increased pa0icipation, greater autonomy, individual challenge and
initiative, and enriched jobs may increase pañicipation
Some approachesignored siŁlational factors, such as the environment
and tecllnology

25. Conti ibutioias
Systems Theory
Organization is viewed as a managed system
Management must interact with the environment
Organizational goals must address eJectiveness and efficiency
Organizations contain a series of subsystems
There dre many avenues to the same outcome
Synergies enable the whole to be more than the sum of the parts
Recognized thO llTl OrtarliiCOf the re/atlonship between the
organization and the environment
Does not provide specific guidance on the functions of managers

26. Conti ibritions
Contingency Perspective
Simational contingencies influence the strategies, stnlcmres, and
procosses that rssult in high performance
There is more than one way to reach a goal
Uanagers may adapt their organizations to the situation
Identified major contingencies
Argued against universal principles of management
Not all impo0ant contingencies have been identified
Theory may not be applicable to all managerial issiles

27. OrganizingFor Environmental
Response (cont.)
• Organizing for customer responsiveness (cont.)
Total Quality Management (TQM) - comprehensive
approach to improving quality and customer
satisfaction
• characterized by a strong orientation toward internal and
external customers
• involves people across departivlents in improving all
aspects of the business
• requires integrative mechanisms that facilitate group
problem solving, information sharing, and cooperation
across business functions
BalJi•ige awurJ - given to U.S. companies that

28. W. Edwards Deming's “14Points”
Of Quality
• Create constancy of purpose
• Don't tolerate delays or mistakes
• Cease dependencies on mass inspection
• Don't award business on price tag alone
• Constantly and forever improve the system of proc
• Institute training and retraining
• Institute leadership
• Drive out fear
• Breakdown bamiers among depaJments
• Eliminate slogans, exhoñations, and arbitrary targ‹
• Eliminate numerical ouotas

29. Organizing For Environmental
Response(cont.)
• Organizing for customer responsiveness
(cont.)
ISO 9000 - a series of quality standards
developed by a committee working under the
Intevational Organization for Standardization
• intended to improve total quality in all businesses
• companies that comply with standards entitled to
certification
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30. Dynamic Network

31. Macro Perspective of Organizations
• Organizations are open systems
affected by, and in tuv affect, their exteval
environments
• Exteval environment
all relevant forces outside a firm's boundaries
• i•clevant - factors to which managers ieust pay attention
two elements comprise the external environment
• coitipetitive cilvironiiiciit - immediate environment
suaounding a firm
• iiiticroenvii•oniiicnt - fundamentalfactors that generally
affect all organizations

32. The Extenal Environment

33. The Macroenvironment
• The macroenvironment
most general elements in the external
environment that can potentially influence
strategic decisions
all organizations are affected by the general
components of the macroenvironment
• Laws and regulations
impose strategic constraints and provide
opportunities
i•egiilators- specific government

34. The Macroenviro em (cont.)
• The economy
created by complex intercomiections among
economies of diJerent countries
impoñant elements include interest rates, inflation
rates, unemployment rates, and the stock market
economic conditions change and are difficult to
predict
• Technology
creates new products, advanced production
techniques, and improved methods of managing and
communicating

35. The Macroenviro em (cont.)
• Demographics
measures of various characteristics of the
people comprising groups or other social units
• age, gender,family size, lncome, education,
occupation
workforce demographicsmust be considered in
formulatinghuman resourcesstrategies
• population growth influences the size and
COlTl}3OSltion Of the labor force
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36. The Macroenviro em (cont.)
• Social issues and the environment
management must be aware of how people
thiW and behave
• the role of women ln the workplace
• providing benefits for domestic partners of
employees
• protection of the natural environment

37. Competitive Enviro em
• Competitive environment
comprises the specific organizations with
which the organization interacts
• Michael Porter - defined the coiepetitive
environment
successŁl managers:
• react to the competitive environment; and
• act in ways that actually shape or change the
competitive environment

38. Competitive Enviro em

39. Competitive Enviro ent (cont.)
• Competitors
competitors within an industry must deal with
one another
organizations must:
• identiÇ their competitors
• analyze how competitors compete
• react to and anticipate competitors’ actions
competition is most intense:
• where there are many competitors
• when industry growth is slow

40. Competitive Enviro ent (cont.)
• Threat of new entrants
harriei-.s to enti-y - inhuence the degree of
tLeat
• conditionsthat prevent new companies from
enteringan industry
• include government policy, capital requirements,
and brand identification, cost disadvantages, and
distributlon channels
• Threat of substiNtes
technological advances and economic
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41. Competitive Enviro ent (cont.)
• Suppliers
provide the resources needed for production
powerful suppliers can reduce an
organization's profits
• international labor unions are noteworthy suppliers
dependence on powerful suppliers is a
competitive disadvantage
• power of supplier determined by:
—availability of other suppliers from whom to buy
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