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Organization Theory booklet

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Over the years, business analysts, economists, and academic researchers have pondered several theories that attempt to explain the dynamics of business organizations, including the ways in which they make decisions, distribute power and control, resolve conflict, and promote or resist organizational change.

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Organization Theory booklet

  1. 1. Organization Theory Organization behavior & practice First Edition 2013 Over the years, business analysts, economists, and academic researchers have pondered several theories that attempt to explain the dynamics of business organizations, including the ways in which they make decisions, distribute power and control, resolve conflict, and promote or resist organizational change. This publication is recommended for;  Masters introduction to Consumer behavior  Undergraduate Organization Theory exam papers  Business model for Organization Theories Director Kenya School of Finance & Social Sciences P. O. Box 19496-40123, Mega City-Kisumu Cell: +254 722 976 633 ; 716 455 743 Email: info.ksfss@gmail.com ; info@ksfss.ac.ke williamkasati@gmail.com williamkasati@yahoo.com 2013 Author: Dr. Oloo Sati Jaramogi Oginga Odinga University of Science & Technology School of Business & Economics
  2. 2. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 2 - TABLE OF CONTENTS PAGES Preface………………………………………………………………………………..-4- Nature, meaning, and purpose………………………………………………………-5- Organization theory background…………………………………………………….-6- Open-systems theory………………………………………………………………….-8- Basic organizational characteristics…………………………………………………-10- Organizational theory in the 1980s and 1990s…………………………………….-12- Classical management and bureaucracy…………………………………………...-13-  The classical management school…………………………………………..-13-  Models of thinking in organizational theories……………………………..-14- Scientific management……………………………………………………………...-16- Bureaucratic management………………………………………………………….-17- Administrative management………………………………………………………...-18- Management functions……………………………………………………………..-22- Organizational structure and design……………………………………………….-26- Operational organizations and informal organizations…………………………...-28- Matrix management..……………………………………………………………….-33- Hierarchy-community phenotype model of organizational structure……………..-38- Functional structure………………………………………………………………..-42- Divisional structure…………………………………………………………………-43- Matrix structure…………………………………………………………………….-44- Team structure………………………………………………………………………-45- Network structure…………………………………………………………………...-46- Total quality in organizations ……………………………………………………...-47-
  3. 3. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 3 - Philosophies and frameworks ……………………………………………………...-49- Communication Channel……………………………………………………………-55- Evolution of Management Thought……………………...…………………………-58- Corporate Life-Cycle……………………………………...…………………………-59- Phases of Organization’s Life Cycle Growth………………………………………-61- Implications for Growth Phases……………………………………………………-63- Organizational Problems (Normal & Abnormal)…………………..………………-64- Stages of Corporate Life-Cycles……………………..………………………………-65- Organizational Downsizing…………………………………………………………-67- Mergers and Acquisitions’………………….………………………………………-69- Motives for Mergers…………………………………………………………………-70- Methods of Merger Analysis…………………..……………………………………-77- Beneficiaries of Mergers……………………….……………………………………-82- Corporate Restructuring……………………………………………………………-83- Revision quizzes and suggested answers…………………………………………...-84- References……………………………………………..…………………………...-109-
  4. 4. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 4 - PREFACE Aims of the book; This publication is designed to provide a sound understanding of Organizational Theory and is particularly relevant for; a) Students pursuing higher level courses and undergraduates pursuing Business Studies, Management, and any course including Organization Theory. b) Students preparing themselves for professional and Academics examination. c) Managers and others in Organization Theory, commerce and local authorities who wish to obtain knowledge of Organizational Theory to aid them in their organizations operations. Teaching Methodology; This book is interactively tailored on teacher-student relationship with practical approach to emerging issues on Organization Theory and needs in the current market. The publication has been written in standardized format with review questions, suggested answers and summaries. Book Objectives The approach taken in this 1st edition is to teach the key aspects of Organization Theory through realistic and relevant examples from business arenas and various organizations. The course will also utilize the application of practical‗s needed for the implementation of Organization Theory. Class facilitations with lectures on assigned topics and group discussions are essential for any academic success. The book emphasizes on understanding the concepts in each topic. Techniques are commonly misused because the concepts are not sufficiently understood.
  5. 5. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 5 - NATURE, MEANING, AND PURPOSE. Organization Theory is an assembly of people working together to achieve common objectives through a division of labor. An organization provides a means of using individual strengths within a group to achieve more than can be accomplished by the aggregate efforts of group members working individually. Business organizations are formed to deliver goods or services to consumers in such a manner that they can realize a profit at the conclusion of the transaction. Over the years, business analysts, economists, and academic researchers have pondered several theories that attempt to explain the dynamics of business organizations, including the ways in which they make decisions, distribute power and control, resolve conflict, and promote or resist organizational change. As Jeffrey Peffer summarized in New Directions for Organization Theory, organizational theory studies provide "an interdisciplinary focus on; a) The effect of social organizations on the behavior and attitudes of individuals within them, b) The effects of individual characteristics and action on organization,' c) The performance, success, and survival of organizations, d) The mutual effects of environments, including resource and task, political, and cultural environments on organizations and vice versa, and e) Concerns with both the epistemology and methodology that undergird research on each of these topics." Of the various organizational theories that have been studied in this realm, the open-systems theory has emerged as perhaps the most widely known, but others have their proponents as well. Indeed, some researchers into organizational theory propound a blending of various theories, arguing that an enterprise will embrace different organizational strategies in reaction to changes in its competitive circumstances, structural design, and experiences.
  6. 6. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 6 - ORGANIZATION THEORY BACKGROUND Modern organization theory is rooted in concepts developed during the beginnings of the Industrial Revolution in the late 1800s and early 1900s. Of considerable import during that period was the research done by of German sociologist Max Weber (1864 -1920). Weber believed that bureaucracies, staffed by bureaucrats, represented the ideal organizational form. Weber based his model bureaucracy on legal and absolute authority, logic, and order. In Weber's idealized organizational structure, responsibilities for workers are clearly defined and behavior is tightly controlled by rules, policies, and procedures. Weber's theories of organizations, like others of the period, reflected an impersonal attitude toward the people in the organization. Indeed, the work force, with its personal frailties and imperfections, was regarded as a potential detriment to the efficiency of any system. Although his theories are now considered mechanistic and outdated, Weber's views on bureaucracy provided important insight into the era's conceptions of process efficiency, division of labor, and authority. Another important contributor to organization theory in the early 1900s was Henri Fayol. He is credited with identifying strategic planning, staff recruitment, employee motivation, and employee guidance (via policies and procedures) as important management functions in creating and nourishing a successful organization. Weber's and Fayol's theories found broad application in the early and mid-1900s, in part because of the influence of Frederick W. Taylor (1856 - 1915). In a 1911 book entitled Principles of Scientific Management, Taylor outlined his theories and eventually implemented them on American factory floors. He is credited with helping to define the role of training, wage incentives, employee selection, and work standards in organizational performance. Researchers began to adopt a less mechanical view of organizations and to pay more attention to human influences in the 1930s.
  7. 7. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 7 - This development was motivated by several studies that shed light on the function of human fulfillment in organizations. The best known of these was probably the so-called Hawthorn Studies. These studies, conducted primarily under the direction of Harvard University researcher Elton Mayo, were conducted in the mid-1920s and 1930s at a Western Electric Company plant known as the Hawthorn Works. The company wanted to determine the degree to which working conditions affected output. Surprisingly, the studies failed to show any significant positive correlation between workplace conditions and productivity. In one study, for example, worker productivity escalated when lighting was increased, but it also increased when illumination was decreased. The results of the studies demonstrated that innate forces of human behavior may have a greater influence on organizations than do mechanistic incentive systems. The legacy of the Hawthorn studies and other organizational research efforts of that period was an emphasis on the importance of individual and group interaction, humanistic management skills, and social relationships in the workplace. The focus on human influences in organizations was reflected most noticeably by the integration of Abraham Maslow's "hierarchy of human needs" into organization theory. Maslow's theories introduced two important implications into organization theory. The first was that people have different needs and therefore need to be motivated by different incentives to achieve organizational objectives. The second of Maslow's theories held that people's needs change over time, meaning that as the needs of people lower in the hierarchy are met, new needs arise. These assumptions led to the recognition, for example, that assembly-line workers could be more productive if more of their personal needs were met, whereas past theories suggested that monetary rewards were the sole, or primary, motivators. Douglas McGregor contrasted the organization theory that emerged during the mid-1900s to previous views. In the 1950s, McGregor offered his renowned Theory X and Theory Y to explain the differences.
  8. 8. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 8 - Theory X encompassed the old view of workers, which held that employees preferred to be directed, wanted to avoid responsibility, and cherished financial security above all else. McGregor believed that organizations that embraced Theory Y were generally more productive. This theory held that humans can learn to accept and seek responsibility; most people possess a high degree of imaginative and problem-solving ability; employees are capable of effective self- direction; and that self-actualization is among the most important rewards that organizations can provide their workers. OPEN-SYSTEMS THEORY Traditional theories regarded organizations as closed systems that were autonomous and isolated from the outside world. In the 1960s, however, more holistic and humanistic ideologies emerged. Recognizing that traditional theory had failed to take into account many environmental influences that impacted the efficiency of organizations, most theorists and researchers embraced an open-systems view of organizations. The term "open systems" reflected the newfound belief that all organizations are unique in part because of the unique environment in which they operate and that they should be structured to accommodate unique problems and opportunities. For example, research during the 1960s indicated that traditional bureaucratic organizations generally failed to succeed in environments where technologies or markets were rapidly changing. They also failed to realize the importance of regional cultural influences in motivating workers.
  9. 9. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 9 - Environmental influences that affect open systems can be described as either specific or general. The specific environment refers to the network of suppliers, distributors, government agencies, and competitors with which a business enterprise interacts. The general environment encompasses four influences that emanate from the geographic area in which the organization operates. These are:  Cultural values; which shape views about ethics and determine the relative importance of various issues.  Economic conditions; which include economic upswings, recessions, regional unemployment, and many other regional factors that affect a company's ability to grow and prosper. Economic influences may also partially dictate an organization's role in the economy.  Legal or political environment; which effectively helps to allocate power within a society and to enforce laws. The legal and political systems in which an open system operates can play a key role in determining the long-term stability and security of the organization's future. These systems are responsible for creating a fertile environment for the business community, but they are also responsible for ensuring via regulations pertaining to operation and taxation that the needs of the larger community are addressed.  Quality of education; which is an important factor in high technology and other industries that require an educated work force. Businesses will be better able to fill such positions if they operate in geographic regions that feature a strong education system. The open-systems theory also assumes that all large organizations are comprised of multiple subsystems, each of which receives inputs from other subsystems and turns them into outputs for use by other subsystems. The subsystems are not necessarily represented by departments in an organization, but might instead resemble patterns of activity.
  10. 10. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 10 - An important distinction between open-systems theory and more traditional organization theories is that the former assumes a subsystem hierarchy, meaning that not all of the subsystems are equally essential. Furthermore, a failure in one subsystem will not necessarily thwart the entire system. By contrast, traditional mechanistic theories implied that a malfunction in any part of a system would have an equally debilitating impact. BASIC ORGANIZATIONAL CHARACTERISTICS Organizations differ greatly in size, function, and makeup. Nevertheless, the operations of nearly all organizations from the multinational corporation to a newly opened delicatessen are based on;  Division of labor  Decision-making structure  Rules and policies. The degrees of formality with which these aspects of business are approached vary tremendously within the business world, but these characteristics are inherent in any business enterprise that utilizes the talents of more than one person. Organizations practice division of labor both vertically and horizontally. Vertical division includes three basic levels top, middle, and bottom. The chief function of Top managers, or executives, typically is to plan long-term strategy and oversee middle managers. Middle managers generally guide the day-to-day activities of the organization and administer top-level strategy. Low-level managers and laborers put strategy into action and perform the specific tasks necessary to keep the organization operating. Organizations also divide labor horizontally by defining task groups, or departments, and assigning workers with applicable skills to those groups. Line units perform the basic functions of the business, while staff units support line units with expertise and services.
  11. 11. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 11 - In general, line units focus on supply, production, and distribution, while staff units deal mostly with internal operations and controls or public relations efforts. Decision-making structures, the second basic organizational characteristic, are used to organize authority. These structures vary from operation to operation in their degree of centralization and decentralization. Centralized decision structures are referred to as "tall" organizations because important decisions usually emanate from a high level and are passed down through several channels until they reach the lower end of the hierarchy. Conversely, flat organizations, which have decentralized decision-making structures, employ only a few hierarchical levels. Such organizations are typically guided by a management philosophy that is favorably disposed toward some form of employee empowerment and individual autonomy. A formalized system of rules and policies is the third standard organizational characteristic. Rules, policies, and procedures serve as templates of managerial guidance in all sectors of organizational production and behavior. They may document the most efficient means of accomplishing a task or provide standards for rewarding workers. Formalized rules provide managers with more time to spend on other problems and opportunities and help ensure that an organization's various subsystems are working in concert. Poorly implemented rules can have a negative impact on business efforts to produce goods or services in a profitable or satisfactory manner. Thus, organizations can be categorized as informal or formal, depending on the degree of formalization of rules within their structures. In formal organizations, say researchers, management has determined that a comparatively impersonal relationship between individuals and the company for which they work is viewed as the best environment for achieving organizational goals. Subordinates have less influence over the process in which they participate, with their duties more clearly defined. Informal organizations, on the other hand, are less likely to adopt or adhere to a significant code of written rules or policies.
  12. 12. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 12 - Instead, individuals are more likely to adopt patterns of behavior that are influenced by a number of social and personal factors. Changes in the organization are less often the result of authoritative dictate and more often an outcome of collective agreement by members. Informal organizations tend to be more flexible and more reactive to outside influences. But some critics contend that such arrangements may also diminish the ability of top managers to effect rapid change. ORGANIZATIONAL THEORY IN THE 1980s AND 1990s By the 1980s several new organizational system theories received significant attention. These included Theory Z, a blending of American and Japanese management practices. This theory was a highly visible one, in part because of Japan's well-documented productivity improvements and the United States' manufacturing difficulties during that decade. Other theories, or adaptations of existing theories, emerged as well, which most observers saw as indicative of the ever-changing environment within business and industry. The study of organizations and their management and production structures and philosophies continued to thrive throughout the 1990s. Indeed, an understanding of various organizational principles continues to be seen as vital to the success of all kinds of organizations from government agencies to business of all shapes and sizes, from conglomerates to small businesses. The study continues and although academics are far from a single theory of organization development each serious academic undertaking adds to the knowledge base on the subject. The changes in the ways in which we communicate and others brought about by advances in technology will likely create more opportunity for study. As our societies change, so to do the ways in which our organizations operate.
  13. 13. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 13 - Organizational theory This theory focuses on the identification of organizations‘ patterns and structures that they use to solve problems, maximize efficiency and productivity, and meet the expectations of stakeholders. CLASSICAL MANAGEMENT AND BUREAUCRACY The Classical Management School The twentieth century witnessed tremendous management theory ferment and activity. Efforts were taking place for the development of a comprehensive management theory. Traditional or classical management school of theory is a result of such efforts. Henri Fayol (1841-1925) is widely acclaimed as the founder of the Classical management school. Classical Management Theory concentrates on efficiency. Classical school has three distinct branches; scientific management, bureaucratic management, and administrative management. It envisages a pyramid hierarchical structure, autocratic management, clear chain of command and short spans of control. Difference between Lean Management and Classical Management A lean organization is where a few layers exist in the organization structure, and people at all levels work together in teams. In such organizations, managers, often in teams, monitor performance of the organization and plan for quality. They identify processes or problems that need improvement, and organize and lead people to find solutions. More and more organizations tend to delegate authority to make decisions to lower levels (empowered teams) lean organization structure. A classical organization structure is hierarchic with many levels from top management to workforce.
  14. 14. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 14 - In classical organizations, particularly in manufacturing industries, people are grouped into departments based functions. Hence, we observe departments such as marketing, design, manufacturing, and sales. Following the same reasoning, quality-related activities have been focused in a "quality department". Such a department would be responsible for assuring the quality of products through activities such as inspection, and statistical process control. In the last two decades, a major trend in many organizations has been assigning quality management tasks to all departments rather than the quality departments only. Models of thinking in Organizational theories. According to Ned Herman in physiological and functional specialization of the human brain. Ned Herrman explains physiological and functional specialization of the human brain by dicothamizing it into four quadrants (models of thinking). 1. Analytical thinking; Such skills include demonstration of the ability to apply logical thinking to gathering and analyzing information, designing and testing solutions to problems, and formulating plans. In 1999, Richards J. Heuer Jr. explained that: Thinking analytically is a skill like carpentry or driving a car. 2. Imaginative thinking; The ability to imagine things that are not real : the ability to form a picture in your mind of something that you have not seen or experienced; The ability to think of new things; Something that only exists or happens in your mind. 3. Sequential thinking; Sequential thinking is the process in which thoughts are put into the order of priority concerning the issue at hand and viewed individually as to their merits and demerits. This enables the individual to take the right decision.
  15. 15. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 15 - 4. Interpersonal thinking; Relating to the interactions between individuals: interpersonal skills existing or occurring between individuals: interpersonal communication or conflict. Interpersonal skills are the life skills we use every day to communicate and interact with other people, both individually and in groups. People who have worked on developing strong interpersonal skills are usually more successful in both their professional and personal lives. Employers often seek to hire staff with 'strong interpersonal skills' - they want people who will work well in a team and be able to communicate effectively with colleagues, customers and clients. 7% of individuals have dominance in a single quadrant 60% of individuals have double-dominance 30% of individuals have triple-dominance 3% of individuals have quadruple-dominance (whole brain) Even though individual team members may not have the whole brain (i.e. may have thinking preferences in less than four quadrants), the chances that the team has access to whole brain thinking is high. Individual differences due to human characteristics, race, culture and gender may yield both positive & negative impacts on teamwork. Diversity in a team may help establishment of synergy, and provides broader viewpoints in discussion of problems. However, it may also be the source of misunderstandings, conflict and ethnocentricity. Knowing and accepting individual differences help decreasing negative impacts of diversity on the team.
  16. 16. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 16 - SCIENTIFIC MANAGEMENT Frederick Winslow Taylor (1856-1915) is known as the "father of scientific management". Taylor began work at the age of 18 as a machinist apprentice to a pattern-maker. He later joined the Midvale Steel Company as a laborer and became chief engineer in eight years. During his period at the steel mill Taylor performed comprehensive experiments on worker productivity and tested what he called the "task system," later developed into the Taylor System and eventually progressed into scientific management. Scientific management theory analyzes and synthesizes workflow processes and improving labor productivity. Scientific management is also called Taylorism, the Taylor system, or the Classical Perspective. The core ideas of the theory were developed by Frederick Winslow Taylor in the 1880s and 1890s, and were first published in his monographs, Shop Management (1905) and The Principles of Scientific Management (1911). Taylor believed that decisions based upon tradition and rules of thumb should be replaced by precise procedures developed after careful study of an individual at work. Taylor's experiments included determining the best way of performing each work operation, the time it required, materials needed and the work sequence. He wanted to establish a clear division of labor between management and employees. Following are the four basic principles of scientific management theory:  Study the ways jobs are performed now and determine new ways to do them.  Codify the new methods into rules.  Select workers whose skills match the rules.  Establish fair levels of performance and pay incentive for higher performance. The scientific management is a 'manager centric' approach. The most fundamental aspect of scientific management is that the manager is primarily responsible for increasing an organization's productivity.
  17. 17. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 17 - Scientific management principles are to be applied by managers in a very specific fashion. The shortcomings of the Scientific Theory had triggered the quest for more workable solutions and resulted in the formulation of bureaucratic management, and administrative management theories. The scientific method was also got refined further during the course of time. BUREAUCRATIC MANAGEMENT Max Weber (1864-1920) is one of the strong advocates of bureaucracy. According to Weber the major characteristics of bureaucracy are: A well defined hierarchy All positions within a bureaucracy are structured in a way permitting the higher positions to supervise and control the lower positions. This provides a clear chain of command facilitating control and order throughout the organization. Division of labor and specialization All responsibilities in an organization are streamlined in a way that each employee will have the necessary expertise to master a particular task. This necessitates granting each employee the requisite authority to complete all such tasks. Rules and regulations All organizational activities are streamlined in a way that standard operating procedures are developed to provide certainty and facilitate coordination. Impersonal relationships between managers and employees Weber believed that managers should maintain an impersonal relationship with the employees so that the managers will be free to take rational decisions rather than one influenced by favoritism and personal prejudice. This organizational atmosphere would also facilitate rational evaluation of employee outcomes where personal prejudices shall not interfere.
  18. 18. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 18 - Competence Competence should be the basis for all decisions made in hiring, job assignments, and promotions. This would encourage ability and merit as the most important characteristics of a bureaucratic organization. Records Weber felt it is absolutely essential for a bureaucracy to maintain complete files regarding all its activities. This necessitates an accurate organizational "memory" where accurate and complete documents will be available concerning all bureaucratic actions and decisions. ADMINISTRATIVE MANAGEMENT Henri Fayol (1841-1925) is the prominent advocate of administrative management. He spent his entire working career with a mining company, where he rose from an apprentice to General Manager. As a result of his long management career, Fayol developed fourteen management principles: 1. Division of Work. Division of work, specialization, produces more and better work with the same effort. It focuses effort while maximizing employee efforts. It is applicable to all work including technical applications. There are limitations to specialization which are determined by its application. 2. Authority and responsibility. Authority is the right to give orders and the power to exact obedience. Distinction must be made between a manager's official authority deriving from office and personal authority created through individual personality, intelligence and experience. Authority creates responsibility. 3. Discipline. Obedience and respect between a firm and its employees based on clear and fair agreements is absolutely essential to the functioning of any organization. Good discipline requires managers to apply sanctions whenever violations become apparent.
  19. 19. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 19 - 4. Unity of command. An employee should receive orders from only one superior. Employees cannot adapt to dual command. 5. Unity of direction. Organizational activities must have one central authority and one action plan. 6. Subordination of Individual Interest to General Interest. The interests of one employee or group of employees are subordinate to the interests and goals of the organization and cannot prevail over it. 7. Remuneration of Personnel. Salaries are the price of services rendered by employees. It should be fair and provide satisfaction both to the employee and employer. The rate of remuneration is dependent on the value of the services rendered as determined by the employment market. 8. Centralization. The optimum degree of centralization varies according to the dynamics of each organization. The objective of centralization is the best utilization of personnel. 9. Scalar chain. A chain of authority exists from the highest organizational authority to the lowest ranks. While needless departure from the chain of command should be discouraged, using the "gang plank" principle of direct communication between employees can be extremely expeditious and increase the effectiveness of organizational communication. 10. Order. Organizational order for materials and personnel is essential. The right materials and the right employees are necessary for each organizational function and activity. 11. Equity. In organizations equity is a combination of kindliness and justice. The desire for equity and equality of treatment are aspirations to be taken into account in dealing with employees. 12. Stability of Tenure of Personnel. In order to attain the maximum productivity of personnel, it is essential to maintain a stable work force. Management insecurity produces undesirable consequences. Generally the managerial personnel of prosperous concerns is stable, that of unsuccessful ones is unstable.
  20. 20. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 20 - 13. Initiative. Thinking out a plan and ensuring its success is an extremely strong motivator. At all levels of the organizational ladder zeal and energy on t he part of employees are augmented by initiative. 14. Esprit de Corps. Teamwork is fundamentally important to an organization. Creating work teams and using extensive face-to-face verbal communication encourages this. Difference between Bureaucratic & Scientific Management? Theoretical models try to define the structure and management of small and large businesses and government organizations. The bureaucratic and scientific management models belong to the early classical school. They aim to improve managerial effectiveness by providing tools and suggesting organizational structures. Bureaucratic management is common in government organizations, while scientific management is an aspect of manufacturing operations. Basics The basics of bureaucratic management include specialization, hierarchy and formal processes. Specialization refers to groups of people working in specific functional areas, such as finance and manufacturing. Hierarchy refers to management layers and formal processes refer to how companies organize internally and interact externally with investors, suppliers and customers. Scientific management emphasizes process improvements and efficiencies, and it makes managers accountable for improving organizational productivity. Characteristics Bureaucratic management structures share certain characteristics, such as a defined hierarchy, rules and regulations, and detailed recordkeeping and documentation. Each position in a bureaucracy supervises another, thus providing direction and control throughout the organization. A small business may have everybody in the organization reporting to the owner.
  21. 21. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 21 - A large business may have layers of department managers and vice presidents reporting ultimately to the chief executive, who reports to the board of directors, which is accountable to shareholders. Scientific management involves finding the best way to complete tasks, including providing financial incentives to employees to improve their productivity. Additionally, scientific management involves developing a management methodology, selecting and training employees, and supervising them closely. Significance Companies all over the world have adopted bureaucratic management principles. Public sector organizations--commonly known as bureaucracies--rely on formal processes and hierarchies to achieve stable structures and consistent results. However, bureaucracies tend to be rigid and slow to adapt to change, while small businesses need to be flexible and adaptable. Scientific management has been responsible for steady improvements in business operations, such as better job definitions, automated inventory tracking, just-in-time manufacturing and compensation schemes that seek to link incentives to performance. Issues The main problem with bureaucratic management is its reliance on top-down direction and control. Some have argued that this leads to additional management layers, higher cost structures and slower decision making. Scientific management's insistence on close managerial involvement may lead to a loss of productivity because employees tend to be more motivated when they are provided the tools and left alone to do their work. Other Models The administrative management method is another classical management model. It consists of a set of organizing principles, such as division of work, discipline, initiative and teamwork. Modern management methods include statistical quality management and managing virtual organizations.
  22. 22. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 22 - MANAGEMENT FUNCTIONS Effective management and leadership involve creative problem solving, motivating employees and making sure the organization accomplishes objectives and goals. There are five functions of management and leadership: planning, organizing, staffing, coordinating and controlling. Functions of Managers Managers just don't go out and haphazardly perform their responsibilities. Good managers discover how to master five basic functions: planning, organizing, staffing, leading, and controlling.  Planning: This step involves mapping out exactly how to achieve a particular goal. Say, for example, that the organization's goal is to improve company sales. The manager first needs to decide which steps are necessary to accomplish that goal. These steps may include increasing advertising, inventory, and sales staff. These necessary steps are developed into a plan. When the plan is in place, the manager can follow it to accomplish the goal of improving company sales.  Organizing: After a plan is in place, a manager needs to organize her team and materials according to her plan. Assigning work and granting authority are two important elements of organizing.  Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing by recruiting, selecting, training, and developing employees. A manager in a large organization often works with the company's human resources department to accomplish this goal.  Leading: A manager needs to do more than just plan, organize, and staff her team to achieve a goal. She must also lead. Leading involves motivating, communicating, guiding, and encouraging. It requires the
  23. 23. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 23 - manager to coach, assist, and problem solve with employees.  Controlling: After the other elements are in place, a manager's job is not finished. He needs to continuously check results against goals and take any corrective actions necessary to make sure that his area's plans remain on track. Timings All managers at all levels of every organization perform these functions, but the amount of time a manager spends on each one depends on both the level of management and the specific organization. Roles performed by managers A manager wears many hats. Not only is a manager a team leader, but he or she is also a planner, organizer, cheerleader, coach, problem solver, and decision maker all rolled into one. And these are just a few of a manager's roles. In addition, managers' schedules are usually jam‐packed. Whether they're busy with employee meetings, unexpected problems, or strategy sessions, managers often find little spare time on their calendars. In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of ten roles that a manager fills. These roles fall into three categories:  Interpersonal: This role involves human interaction.  Informational: This role involves the sharing and analyzing of information.  Decisional: This role involves decision making.
  24. 24. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 24 - Table 1 contains a more in‐depth look at each category of roles that help managers carry out all five functions described in the preceding ―Functions of Managers‖ section. Management is the process of reaching organizational goals by working with and through people and other organizational resources.
  25. 25. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 25 - Management has the following 3 characteristics: a) It is a process or series of continuing and related activities. b) It involves and concentrates on reaching organizational goals. c) It reaches these goals by working with and through people and other organizational resources. The 4 basic management functions that make up the management process are described in the following sections: 1. PLANNING 2. ORGANIZING 3. INFLUENCING 4. CONTROLLING. PLANNING: Planning involves choosing tasks that must be performed to attain organizational goals, outlining how the tasks must be performed, and indicating when they should be performed. Planning activity focuses on attaining goals. Managers outline exactly what organizations should do to be successful. Planning is concerned with the success of the organization in the short term as well as in the long term. ORGANIZING: Organizing can be thought of as assigning the tasks developed in the planning stages, to various individuals or groups within the organization. Organizing is to create a mechanism to put plans into action. People within the organization are given work assignments that contribute to the company‘s goals. Tasks are organized so that the output of each individual contributes to the success of departments, which, in turn, contributes to the success of divisions, which ultimately contributes to the success of the organization.
  26. 26. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 26 - INFLUENCING: Influencing is also referred to as motivating, leading or directing. Influencing can be defined as guiding the activities of organization members in he direction that helps the organization move towards the fulfillment of the goals. The purpose of influencing is to increase productivity. Human-oriented work situations usually generate higher levels of production over the long term than do task oriented work situations because people find the latter type distasteful. CONTROLLING: Controlling is the following roles played by the manager: 1. Gather information that measures performance 2. Compare present performance to pre established performance norms. 3. Determine the next action plan and modifications for meeting the desired performance parameters. Controlling is an ongoing process. ORGANIZATIONAL STRUCTURE AND DESIGN An organizational structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
  27. 27. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 27 - Organizational structure affects organizational action in two big ways:  First, it provides the foundation on which standard operating procedures and routines rest.  Second, it determines which individuals get to participate in which decision making processes, and thus to what extent their views shape the organization‘s actions. History Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today's post industrial structures. In ancient Indian mythology it reflects everywhere that the King being selected from the merits and he further selected his ministers, they all participated in their respective specialized field in delivering judgment and making policies for the welfare of the state. As pointed out by Lawrence B. Mohr, the early theorists of organizational structure, Taylor, Fayol, and Weber "saw the importance of structure for effectiveness and efficiency and assumed without the slightest question that whatever structure was needed, people could fashion accordingly. Organizational structure was considered a matter of choice. When in the 1930s, the rebellion began that came to be known as human relations theory, there was still not a denial of the idea of structure as an artifact, but rather an advocacy of the creation of a different sort of structure, one in which the needs, knowledge, and opinions of employees might be given greater recognition." However, a different view arose in the 1960s, suggesting that the organizational structure is "an externally caused phenomenon, an outcome rather than an artifact." In the 21st century, organizational theorists such as Lim, Griffiths, and Sambrook (2010) are once again proposing that organizational structure development is very much dependent on the expression of the strategies and behavior of the management and the workers as constrained by the power distribution between them, and influenced by their environment and the outcome.
  28. 28. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 28 - OPERATIONAL ORGANIZATIONS AND INFORMAL ORGANIZATIONS The set organizational structure may not coincide with facts, evolving in operational action. Such divergence decreases performance, when growing. E.g., a wrong organizational structure may hamper cooperation and thus hinder the completion of orders in due time and within limits of resources and budgets. Organizational structures shall be adaptive to process requirements, aiming to optimize the ratio of effort and input to output. Types There are two mega clusters of organizations i.e. Hierarchical and Flat organization as detailed below; Pre-bureaucratic structures Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most common in smaller organizations and is best used to solve simple tasks. The structure is totally centralized. The strategic leader makes all key decisions and most communication is done by one on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the founder to control growth and development. They are usually based on traditional domination or charismatic domination in the sense of Max Weber‘s tripartite classification of authority. Bureaucratic structures Weber (1948) gives the analogy that ―the fully developed bureaucratic mechanism compares with other organizations exactly as does the machine compare with the non-mechanical modes of production. Precision, speed, un ambiguity, strict subordination, reduction of friction and of material and personal costs- these are raised to the optimum point in the strictly bureaucratic administration. Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations, usually adopting a tall structure.
  29. 29. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 29 - The tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker's distinction between mechanistic and organic structures. The Weberian characteristics of bureaucracy are:  Clear defined roles and responsibilities  A hierarchical structure  Respect for merit Bureaucratic Structures have many levels of management ranging from senior executives to regional managers, all the way to department store managers. Since there are many levels, decision-making authority has to pass through more layers than flatter organizations. Bureaucratic organization has rigid and tight procedures, policies and constraints. This kind of structure is reluctant to adapt or change what they have been doing since the company started. Organizational charts exist for every department, and everyone understands who is in charge and what their responsibilities are for every situation. Decisions are made through an organized process and a strict command and control structure is present at all times. In bureaucratic structures, the authority is at the top and information is then flowed from top to bottom. This causes for more rules and standards for the company which operational process is watched with close supervision. Some advantages for bureaucratic structures for top-level managers are they have a tremendous control over organizational structure decisions. This works best for managers who have a command and control style of managing. Strategic-decision making is also faster because there are fewer people it has to go through to approve. Some disadvantages in bureaucratic structures are it can discourage creativity and innovation in the organization. This can make it hard for a company to adapt to changing conditions in the marketplace.
  30. 30. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 30 - Post-bureaucratic The term of post bureaucratic is used in two senses in the organizational literature: one generic and one much more specific. In the generic sense the term post bureaucratic is often used to describe a range of ideas developed since the 1980s that specifically contrast themselves with Weber's ideal type bureaucracy. This may include total quality management (TQM), culture management and matrix management, amongst others. None of these however has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type, and the organization is still rule bound. Heckscher, arguing along these lines, describes them as cleaned up bureaucracies, rather than a fundamental shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of bureaucratic control - the formalization, codification and enforcement of rules and regulations does not change in principle; but it shifts focus from organizational structure to the organization's culture'. Another smaller group of theorists have developed the theory of the Post-Bureaucratic Organization; provide a detailed discussion which attempts to describe an organization that is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post bureaucratic organization, in which decisions are based on dialogue and consensus rather than authority and command, the organization is a network rather than a hierarchy, open at the boundaries (in direct contrast to culture management); there is an emphasis on meta-decision making rules rather than decision making rules. This sort of horizontal decision making by consensus model is often used in housing cooperatives, other cooperatives and when running a non-profit or community organization. It is used in order to encourage participation and help to empower people who normally experience oppression in groups.
  31. 31. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 31 - Still other theorists are developing a resurgence of interest in complexity theory and organizations, and have focused on how simple structures can be used to engender organizational adaptations. For instance, Miner et al. (2000) studied how simple structures could be used to generate improvisational outcomes in product development. Their study makes links to simple structures and improviser learning. Other scholars such as Jan Rivkin and Sigglekow, and Nelson Repenning revive an older interest in how structure and strategy relate in dynamic environments. Functional structure A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report. One traditional way of organizing people is by function. Some common functions within an organization include production, marketing, human resources, and accounting. This organizing of specialization leads to operational efficiency where employees become specialists within their own realm of expertise. The most typical problem with a functional organizational structure is however that communication within the company can be rather rigid, making the organization slow and inflexible. Therefore, lateral communications between functions become very important, so that information is disseminated, not only vertically, but also horizontally within the organization. Communication in organizations with functional organizational structures can be rigid because of the standardized ways of operation and the high degree of formalization. As a whole, a ―Functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable.
  32. 32. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 32 - Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost. For instance, a small business could make components used in production of its products instead of buying them. Even though functional units often perform with a high level of efficiency, their level of cooperation with each other is sometimes compromised. Such groups may have difficulty working well with each other as they may be territorial and unwilling to cooperate. The occurrence of infighting among units may cause delays, reduced commitment due to competing interests, and wasted time, making projects fall behind schedule. This ultimately can bring down production levels overall, and the company-wide employee commitment toward meeting organizational goals. Divisional structure The divisional structure or product structure consists of self-contained divisions. A division is a collection of functions which produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. According to Zainbooks.com, divisional structure in America is seen as the second most common structure for organization today. Employees who are responsible for certain market services or types of products are placed in divisional structure in order to increase their flexibility. Examples of divisions include regional (a U.S Division and an EU division), consumer type (a division for companies and one for households), and product type (a division for trucks, another for SUVS, and another for cars). The divisions may also have their own departments such as marketing, sales, and engineering. The advantage of divisional structure is that it uses delegated authority so the performance can be directly measured with each group. This results in managers performing better and high employee morale. Another advantage of using divisional structure is that it is more efficient in coordinating work between different divisions, and there is more flexibility to respond when there is a change in the market.
  33. 33. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 33 - Also, a company will have a simpler process if they need to change the size of the business by either adding or removing divisions. When divisional structure is utilized more specialization can occur within the groups. When divisional structure is organized by product, the customer has their own advantages especially when only a few services or products are offered which differ greatly. When using divisional structures that are organized by either markets or geographic areas they generally have similar function and are located in different regions or markets. This allows business decisions and activities coordinated locally. The disadvantage of the divisional structure is that it can support unhealthy rivalries among divisions. This type of structure may increase costs by requiring more qualified managers for each division. Also, there is usually an over-emphasis on divisional more than organizational goals which results in duplication of resources and efforts like staff services, facilities, and personnel. MATRIX MANAGEMENT The Matrix management groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. An example would be a company that produces two products, "product a" and "product b". Using the matrix structure, this company would organize functions within the company as follows: "product a" sales department, "product a" customer service department, "product a" accounting, "product b" sales department, "product b" customer service department, "product b" accounting department. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature.
  34. 34. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 34 -  Weak/Functional Matrix: A project manager with only limited authority is assigned to oversee the cross- functional aspects of the project. The functional managers maintain control over their resources and project areas.  Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and the Functional manager. It brings the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing of power is a delicate proposition.  Strong/Project Matrix: A Project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed. Matrix structure is only one of the three major structures. The other two are Functional and Project structure. Matrix management is more dynamic than functional management in that it is a combination of all the other structures and allows team members to share information more readily across task boundaries. It also allows for specialization that can increase depth of knowledge in a specific sector or segment. There are both advantages and disadvantages of the matrix structure; some of the disadvantages are an increase in the complexity of the chain of command. This occurs because of the differentiation between functional managers and project managers, which can be confusing for employees to understand who is next in the chain of command. An additional disadvantage of the matrix structure is higher manager to worker ratio that results in conflicting loyalties of employees. However the matrix structure also has significant advantages that make it valuable for companies to use. The matrix structure improves upon the ―silo‖ critique of functional management in that it diminishes the vertical structure of functional and creates a more horizontal structure which allows the spread of information across task boundaries to happen much quicker.
  35. 35. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 35 - Moreover matrix structure allows for specialization that can increase depth of knowledge & allows individuals to be chosen according to project needs. This correlation between individuals and project needs is what produces the concept of maximizing strengths and minimizing weaknesses. Organizational circle: moving back to flat circle The Flat organization is common in small companies (entrepreneurial start-ups, university spin offs). As companies grow they tend to become more complex and hierarchical, which leads to an expanded structure, with more levels and departments. However, in rare cases, such as the examples of Valve Corporation, GitHub Inc. and 37signals, the organization remains very flat as it grows, eschewing middle managers. All of the aforementioned organizations operate in the field of technology, which may be significant, as software developers are highly skilled professionals, much like lawyers. Senior lawyers also enjoy a relatively high degree of autonomy within a typical law firm, which is typically structured as a partnership rather than a hierarchical bureaucracy. Some other types of professional organizations are also commonly structured as partnerships, such as accountancy companies and GP surgeries. Often, growth would result in bureaucracy, the most prevalent structure in the past. It is still, however, relevant in former Soviet Republics, China, and most governmental organizations all over the world. Shell Group used to represent the typical bureaucracy: top-heavy and hierarchical. It featured multiple levels of command and duplicate service companies existing in different regions. All this made Shell apprehensive to market changes, leading to its incapacity to grow and develop further. The failure of this structure became the main reason for the company restructuring into a matrix. Starbucks is one of the numerous large organizations that successfully developed the matrix structure supporting their focused strategy. Its design combines functional and product based
  36. 36. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 36 - divisions, with employees reporting to two heads. Creating a team spirit, the company empowers employees to make their own decisions and trains them to develop both hard and soft skills. Some experts also mention the multinational design, common in global companies, such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of the matrix, as it maintains coordination among products, functions and geographic areas. With the growth of the internet, and the associated access that gives all levels of an organization to information and communication via digital means, power structures have begun to align more as a wirearchy, enabling the flow of power and authority to be based not on hierarchical levels, but on information, trust, credibility, and a focus on results. In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual. Team One of the newest organizational structures developed in the 20th century is team and the related concept of team development or team building. In small businesses, the team structure can define the entire organization. Teams can be both horizontal and vertical. While an organization is constituted as a set of people who synergize individual competencies to achieve newer dimensions, the quality of organizational structure revolves around the competencies of teams in totality. For example, every one of the Whole Foods Market stores, the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit centre composed of an average of 10 self-managed teams, while team leaders in each store and each region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as well. Xerox, Motorola, and Daimler Chrysler are all among the companies that actively use teams to perform tasks.
  37. 37. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 37 - Network Another modern structure is network. While business giants risk becoming too clumsy to proact (such as), act and react efficiently, the new network organizations contract out any business function that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy. The potential management opportunities offered by recent advances in complex networks theory have been demonstrated including applications to product design and development, and innovation problem in markets and industries. Virtual Virtual organization is defined as being closely coupled upstream with its suppliers and downstream with its customers such that where one begins and the other ends means little to those who manage the business processes within the entire organization. A special form of boundary-less organization is virtual. Hedberg, Dahlgren, Hansson, and Olve (1999) consider the virtual organization as not physically existing as such, but enabled by software to exist. The virtual organization exists within a network of alliances, using the Internet. This means while the core of the organization can be small but still the company can operate globally is a market leader in its niche. According to Anderson, because of the unlimited shelf space of the Web, the cost of reaching niche goods is falling dramatically. Although none sell in huge numbers, there are so many niche products that collectively they make a significant profit, and that is what made highly innovative Amazon.com so successful.
  38. 38. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 38 - Hierarchy-Community Phenotype Model of Organizational Structure In the 21st century, even though most, if not all, organizations are not of a pure hierarchical structure, many managers are still blind to the existence of the flat community structure within their organizations. The business is no longer just a place where people come to work. For most of the employees, the firm confers on them that sense of belonging and identity the firm has become their ―village‖, their community. The firm of the 21st century is not just a hierarchy which ensures maximum efficiency and profit; it is also the community where people belong to and grow together, where their affective and innovative needs are met. Lim, Griffiths, and Sambrook (2010) developed the Hierarchy- Community Phenotype Model of Organizational Structure borrowing from the concept of Phenotype from genetics. "A phenotype refers to the observable characteristics of an organism. It results from the expression of an organism‘s genes and the influence of the environment. The expression of an organism‘s genes is usually determined by pairs of alleles. Alleles are different forms of a gene. In our model, each employee‘s formal, hierarchical participation and informal, community participation within the organization, as influenced by his or her environment, contributes to the overall observable characteristics (phenotype) of the organization. In other words, just as all the pair of alleles within the genetic material of an organism determines the physical characteristics of the organism, the combined expressions of all the employees‘ formal hierarchical and informal community participation within an organization give rise to the organizational structure.
  39. 39. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 39 - Due to the vast potentially different combination of the employees‘ formal hierarchical and informal community participation, each organization is therefore a unique phenotype along a spectrum between a pure hierarchy and a pure community (flat) organizational structure." Organization Structure chart Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories:  Technical: This skill requires the ability to use a special proficiency or expertise to perform particular tasks. Accountants, engineers, market researchers, and computer scientists, as examples, possess technical skills. Managers acquire these skills initially through formal education and then further develop them through training and job experience. Technical skills are most important at lower levels of management. Vice President President Directors Managers Legal Accounting Marketing Human Resources Entry Level
  40. 40. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 40 -  Human: This skill demonstrates the ability to work well in cooperation with others. Human skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in interpersonal relationships. A manager with good human skills has a high degree of self‐awareness and a capacity to understand or empathize with the feelings of others. Some managers are naturally born with great human skills, while others improve their skills through classes or experience. No matter how human skills are acquired, they're critical for all managers because of the highly interpersonal nature of managerial work.  Conceptual: This skill calls for the ability to think analytically. Analytical skills enable managers to break down problems into smaller parts, to see the relations among the parts, and to recognize the implications of any one problem for others. As managers assume ever‐higher responsibilities in organizations, they must deal with more ambiguous problems that have long‐term consequences. Again, managers may acquire these skills initially through formal education and then further develop them by training and job experience. The higher the management level, the more important conceptual skills become. Although all three categories contain skills essential for managers, their relative importance tends to vary by level of managerial responsibility. Business and management educators are increasingly interested in helping people acquire technical, human, and conceptual skills, and develop specific competencies, or specialized skills that contribute to high performance in a management job. Following are some of the skills and personal characteristics that the American Assembly of Collegiate Schools of Business (AACSB) is urging business schools to help their students develop.  Leadership — ability to influence others to perform tasks  Self‐objectivity — ability to evaluate yourself realistically  Analytic thinking — ability to interpret and explain patterns in information
  41. 41. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 41 -  Behavioral flexibility — ability to modify personal behavior to react objectively rather than subjectively to accomplish organizational goals  Oral communication — ability to express ideas clearly in words  Written communication — ability to express ideas clearly in writing  Personal impact — ability to create a good impression and instill confidence  Resistance to stress — ability to perform under stressful conditions  Tolerance for uncertainty — ability to perform in ambiguous situations Five Approaches to Organizational Design Managers must make choices about how to group people together to perform their work. Five common approaches; a) Functional, b) divisional, c) matrix, d) team, and e) networking; help managers determine departmental groupings (grouping of positions into departments). The five structures are basic organizational structures, which are then adapted to an organization's needs. All five approaches combine varying elements of mechanistic and organic structures. For example, the organizational design trend today incorporates a minimum of bureaucratic features and displays more features of the organic design with a decentralized authority structure, fewer rules and procedures, and so on.
  42. 42. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 42 - FUNCTIONAL STRUCTURE The functional structure groups‘ positions into work units based on similar activities, skills, expertise, and resources. Production, marketing, finance, and human resources are common groupings within a functional structure. As the simplest approach, a functional structure features well‐defined channels of communication and authority/responsibility relationships. Not only can this structure improve productivity by minimizing duplication of personnel and equipment, but it also makes employees comfortable and simplifies training as well. But the functional structure has many downsides that may make it inappropriate for some organizations. Here are a few examples:  The functional structure can result in narrowed perspectives because of the separateness of different department work groups. Managers may have a hard time relating to marketing, for example, which is often in an entirely different grouping. As a result, anticipating or reacting to
  43. 43. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 43 - changing consumer needs may be difficult. In addition, reduced cooperation and communication may occur.  Decisions and communication are slow to take place because of the many layers of hierarchy. Authority is more centralized.  The functional structure gives managers experience in only one fields of their own. Managers do not have the opportunity to see how all the firm's departments work together and understand their interrelationships and interdependence. In the long run, this specialization results in executives with narrow backgrounds and little training handling top management duties. DIVISIONAL STRUCTURE Because managers in large companies may have difficulty keeping track of all their company's products and activities, specialized departments may develop. These departments are divided according to their organizational outputs. Examples include departments created to distinguish among production, customer service, and geographical categories. This grouping of departments is called divisional structure. These departments allow managers to better focus their resources and results. Divisional structure also makes performance easier to monitor. As a result, this structure is flexible and responsive to change.
  44. 44. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 44 - The divisional structure – Disney in the early 1990s However, divisional structure does have its drawbacks. Because managers are so specialized, they may waste time duplicating each other's activities and resources. In addition, competition among divisions may develop due to limited resources. MATRIX STRUCTURE The matrix structure combines functional specialization with the focus of divisional structure; this structure uses permanent cross‐functional teams to integrate functional expertise with a divisional focus. Employees in a matrix structure belong to at least two formal groups at the same time a functional group and a product, program, or project team. They also report to two bosses one within the functional group and the other within the team. This structure not only increases employee motivation, but it also allows technical and general management training across functional areas as well. Potential advantages include  Better cooperation and problem solving.  Increased flexibility.  Better customer service.  Better performance accountability.  Improved strategic management. Predictably, the matrix structure also has potential disadvantages. Here are a few of this structure's drawbacks:  The two‐boss system is susceptible to power struggles, as functional supervisors and team leaders vie with one another to exercise authority.
  45. 45. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 45 -  Members of the matrix may suffer task confusion when taking orders from more than one boss.  Teams may develop strong team loyalties that cause a loss of focus on larger organization goals.  Adding the team leaders, a crucial component, to a matrix structure can result in increased costs. TEAM STRUCTURE Team structure organizes separate functions into a group based on one overall objective. These cross‐functional teams are composed of members from different departments who work together as needed to solve problems and explore opportunities. The intent is to break down functional barriers among departments and create a more effective relationship for solving ongoing problems. The team structure The team structure has many potential advantages, including the following:  Intradepartmental barriers break down.  Decision‐making and response times speed up.  Employees are motivated.  Levels of managers are eliminated.  Administrative costs are lowered. The disadvantages include:
  46. 46. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 46 -  Conflicting loyalties among team members.  Time‐management issues.  Increased time spent in meetings. Managers must be aware that how well team members work together often depends on the quality of interpersonal relations, group dynamics, and their team management abilities. NETWORK STRUCTURE The network structure relies on other organizations to perform critical functions on a contractual basis. In other words, managers can contract out specific work to specialists. This approach provides flexibility and reduces overhead because the size of staff and operations can be reduced. On the other hand, the network structure may result in unpredictability of supply and lack of control because managers are relying on contractual workers to perform important work.
  47. 47. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 47 - TOTAL QUALITY IN ORGANIZATIONS A core definition of total quality in management (TQM) in any organization describes a management approach to long-term success through customer satisfaction. In a TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work. The methods for implementing this approach come from the teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, and Joseph M. Juran. When an organization adopts total quality management, they are really creating a new culture of customer satisfaction and quality products and services utilizing the skills of highly qualified employees and strong supplier relations to meet and exceed organizational goals. No one approach to change works for every organization. Organizational culture, management processes and systems that exist in the current organization need to be carefully analyzed to determine the best way to go. Total Quality Management (TQM) emerged as a key competitive strategy for business organizations in the global marketplace. TQM has become a new management paradigm in all types of organizations. In recent years, many organizations have demonstrated that significant improvements in business can be achieved through TQM. Several research works, however, have raised some issues in the implementation of TQM including the Malcolm Baldrige National Quality Award. Although the Baldrige Award criteria have become recognized as the best set of TQM standards, there is no evidence that the Baldrige criteria can be universally effective tools to measure TQM success for all types of industries. A major reason for this is that each organization has a unique set of ingredients for success.
  48. 48. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 48 - This empirical study extensively investigated the factors affecting successful implementation of TQM in three different industries; 1. Large manufacturing companies, 2. Small firms and 3. Service organizations. Implementing TQM in an organization requires rigorous self-reflection. Managers tackle important questions like: What is the purpose of our organization? What is our vision? What is our mission statement? What are our overall organizational objectives? How closely linked to our mission are our objectives? What values do we hold dear to us as an organization? Total Quality Management (TQM) is considered an important catalyst in the development and improvement of public and private firms. This is why the TQM concept has captured the attention of all sides of commerce and industry, as well as that of politicians and academics. During the past decade, quality improvement has become one of the most important organizational strategies for achieving competitive advantage. Improving the quality with which an organization can deliver its products and services is critical for competing in an expanding global market. TQM begins with the primary assumption that employees in organizations must cooperate with each other in order to achieve quality for the needs of the customer. One can achieve quality by controlling manufacturing/service processes to prevent defects. TQM, however, does not only consist of quality tools and techniques. TQM processes also depend on a certain set of values and beliefs shared by all organizational members.
  49. 49. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 49 - The concept of quality has migrated from being considered as a non-price factor on which imperfect competition in the markets is based, to being considered as a strategic resource of firms. Total quality management (TQM) consists of organization-wide efforts to install and make permanent a climate in which an organization continuously improves its ability to deliver high- quality products and services to customers. While there is no widely agreed-upon approach, TQM efforts typically draw heavily on the previously developed tools and techniques of quality control. TQM enjoyed widespread attention during the late 1980s and early 1990s before being overshadowed by ISO 9000, Lean manufacturing, and Six Sigma PHILOSOPHIES AND FRAMEWORKS Total Quality Management (TQM) is a management approach that originated in the 1950s and has steadily become more popular since the early 1980s. Total quality philosophies and Frameworks is a description of the culture, attitude and organization of a company that strives to provide customers with products and services that satisfy their needs. The culture requires quality in all aspects of the company‘s operations, with processes being done right the first time and defects and waste eradicated from operations. To be successful in management, an organization must concentrate on the eight key elements: 1. Ethics 2. Integrity 3. Trust 4. Training 5. Teamwork 6. Leadership 7. Recognition 8. Communication
  50. 50. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 50 - Key Elements TQM has been coined to describe a philosophy that makes quality the driving force behind leadership, design, planning, and improvement initiatives. For this, TQM requires the help of those eight key elements. These elements can be divided into four groups according to their function. The groups are: 1. Foundation – It includes: Ethics, Integrity and Trust. 2. Building Bricks – It includes: Training, Teamwork and Leadership. 3. Binding Mortar – It includes: Communication. 4. Roof – It includes: Recognition. I. Foundation TQM is built on a foundation of ethics, integrity and trust. It fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to unlocking the ultimate potential of TQM. These three elements move together, however, each element offers something different to the TQM concept. 1. Ethics – Ethics is the discipline concerned with good and bad in any situation. It is a two- faceted subject represented by organizational and individual ethics. Organizational ethics establish a business code of ethics that outlines guidelines that all employees are to adhere to in the performance of their work. Individual ethics include personal rights or wrongs. 2. Integrity – Integrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity. The characteristic is what customers (internal or external) expect and deserve to receive. People see the opposite of integrity as duplicity. TQM will not work in an atmosphere of duplicity.
  51. 51. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 51 - 3. Trust – Trust is a by-product of integrity and ethical conduct. Without trust, the framework of TQM cannot be built. Trust fosters full participation of all members. It allows empowerment that encourages pride ownership and it encourages commitment. It allows decision making at appropriate levels in the organization, fosters individual risk-taking for continuous improvement and helps to ensure that measurements focus on improvement of process and are not used to contend people. Trust is essential to ensure customer satisfaction. So, trust builds the cooperative environment essential for TQM. II. Bricks Basing on the strong foundation of trust, ethics and integrity, bricks are placed to reach the roof of recognition. It includes: 4. Training – Training is very important for employees to be highly productive. Supervisors are solely responsible for implementing TQM within their departments, and teaching their employees the philosophies of TQM. Training that employees require are interpersonal skills, the ability to function within teams, problem solving, decision making, job management performance analysis and improvement, business economics and technical skills. During the creation and formation of TQM, employees are trained so that they can become effective employees for the company. 5. Teamwork – To become successful in business, teamwork is also a key element of TQM. With the use of teams, the business will receive quicker and better solutions to problems. Teams also provide more permanent improvements in processes and operations. In teams, people feel more comfortable bringing up problems that may occur, and can get help from other workers to find a solution and put into place.
  52. 52. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 52 - There are mainly three types of teams that TQM organizations adopt: i. Quality improvement teams or excellence teams (QITs) – These are temporary teams with the purpose of dealing with specific problems that often recur. These teams are set up for period of three to twelve months. ii. Problem solving teams (PSTs) – These are temporary teams to solve certain problems and also to identify and overcome causes of problems. They generally last from one week to three months. iii. Natural work teams (NWTs) – These teams consist of small groups of skilled workers who share tasks and responsibilities. These teams use concepts such as employee involvement teams, self-managing teams and quality circles. These teams generally work for one to two hours a week. 6. Leadership – It is possibly the most important element in TQM. It appears everywhere in organization. Leadership in TQM requires the manager to provide an inspiring vision, make strategic directions that are understood by all and to instill values that guide subordinates. For TQM to be successful in the business, the supervisor must be committed in leading his employees. A supervisor must understand TQM, believe in it and then demonstrate their belief and commitment through their daily practices of TQM. The supervisor makes sure that strategies, philosophies, values and goals are transmitted down throughout the organization to provide focus, clarity and direction. A key point is that TQM has to be introduced and led by top management. Commitment and personal involvement is required from top management in creating and deploying clear quality values and goals consistent with the objectives of the company and in creating and deploying well defined systems, methods and performance measures for achieving those goals.
  53. 53. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 53 - III. Binding Mortar 7. Communication – It binds everything together. Starting from foundation to roof of the TQM house, everything is bound by strong mortar of communication. It acts as a vital link between all elements of TQM. Communication means a common understanding of ideas between the sender and the receiver. The success of TQM demands communication with and among all the organization members, suppliers and customers. Supervisors must keep open airways where employees can send and receive information about the TQM process. Communication coupled with the sharing of correct information is vital. For communication to be credible the message must be clear and receiver must interpret in the way the sender intended. There are different ways of communication such as; a) Downward communication;– This is the dominant form of communication in an organization. Presentations and discussions basically do it. By this the supervisors are able to make the employees clear about TQM. b) Upward communication;– By this the lower level of employees are able to provide suggestions to upper management of the affects of TQM. As employees provide insight and constructive criticism, supervisors must listen effectively to correct the situation that comes about through the use of TQM. This forms a level of trust between supervisors and employees. This is also similar to empowering communication, where supervisors keep open ears and listen to others. c) Sideways communication;– This type of communication is important because it breaks down barriers between departments. It also allows dealing with customers and suppliers in a more professional manner.
  54. 54. ………………..ABA 207 Organization Theories……………….. S O William: Lecturer - Jaramogi Oginga Odinga University of Science & Technology: williamkasati@gmail.com Page - 54 - IV. Roof 8. Recognition;– Recognition is the last and final element in the entire system. It should be provided for both suggestions and achievements for teams as well as individuals. Employees strive to receive recognition for themselves and their teams. Detecting and recognizing contributors is the most important job of a supervisor. As people are recognized, there can be huge changes in self-esteem, productivity, quality and the amount of effort exhorted to the task at hand. Recognition comes in its best form when it is immediately following an action that an employee has performed. Recognition comes in different ways, places and time such as, Ways – It can be by way of personal letter from top management. Also by award banquets, plaques, trophies etc. Places – Good performers can be recognized in front of departments, on performance boards and also in front of top management. Time – Recognition can be given at any time like in staff meeting, annual award banquets, etc. Conclusion We can conclude that these eight elements are key in ensuring the success of quality in an organization and that the supervisor is a huge part in developing these elements in the work place. Without these elements, the business entities cannot be successful TQM implementers. It is very clear from the above discussion that TQM without involving integrity, ethics and trust would be a great remiss, in fact it would be incomplete. Training is the key by which the organization creates a TQM environment. Leadership and teamwork go hand in hand. Lack of communication between departments, supervisors and employees create a burden on the whole TQM process. Hence, lead by example, train employees to provide a quality product, create an environment where there is no fear to share knowledge, and give credit where credit is due is the motto of a successful TQM organization.

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