Organizations: Effectiveness,

Design, and Cultures

Lecture# 9

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Lecture ObjectivesIdentify and describe four characteristics

common to all organizations and distinguish between line and staff positions.

Describe a business organization in terms of the open-system model and explain the term learning organization.

Describe the time dimension of organizational effectiveness.

Explain the concept of contingency organization design and distinguish between mechanistic and organic organizations.

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Lecture ObjectivesIdentify and briefly describe the five

basic departmentalization formats.Describe how a highly centralized

organization differs from a highly decentralized one.

Define the term delegation and list at least five common barriers to delegation.

Explain how the traditional pyramid organization is being reshaped.

Describe at least three characteristics of organizational cultures and explain the cultural significance of stories.

Organization Structure and Effectiveness

An organization is a cooperative social system of two or more people with a common purpose

Common Characteristics of OrganizationsCoordination of effort: Multiplying

individual contributions to achieve results greater than those possible by individuals working alone

Common goal or purpose: Having a focus to strive for something of mutual interest

Division of labor: Dividing tasks into specialized jobs that use human resources efficiently

Hierarchy of authority: Using a chain of command to control and direct the actions of others

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Organization ChartsOrganization Chart (Table)

A visual display of an organization’s positions and lines of authority that is useful as a blueprint for deploying human resources

Vertical and Horizontal DimensionsVertical hierarchy establishes the chain of

command.Horizontal specialization denotes the

division of labor.Line and Staff Positions

Line managers make decisions and staff personnel provide advice and support.

Personal staff are assigned to a specific manager in supporting roles.

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Organizations as Open SystemsCharacteristics of Open Systems

Interaction with the external environment through permeable boundaries

An open-system model encourages managers to think about the organization’s life-support system

Interacting organizational subsystems:Technical (production function) subsystems

define the organization’s transformation process.

Boundary-spanning subsystems provide the organization’s interface with the external environment.

Managerial subsystems bridge (control and direct) the technical and boundary-spanning subsystems.

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Organizational LearningLearning Organization

One that can create, acquire, and transfer knowledge, and can then adapt its behavior accordingly

Necessary Skills for a Learning OrganizationSolving problemsExperimentingLearning from organizational experience and

historyLearning from othersTransferring and implementing

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Organizational EffectivenessEffectiveness

A measure of whether or not organizational objectives are accomplished

EfficiencyA measure of the relationship between inputs and

outputs for the organizationNo Silver Bullet

No single approach to the evaluation of effectiveness is appropriate in all circumstances or for all organizational types.

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Figure 9.4: The Time Dimension of Organizational Effectiveness

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Contingency DesignContingency Design

The process of determining the degree of environmental uncertainty and adapting the organization and its subunits to the situationHow much environmental uncertainty is there?

What combination of structural characteristics is most appropriate? 11

Table 9.1: Determining Degree of Environmental Uncertainty

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Table 9.2: Mechanistic versus Organic Organizations

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Basic Departmentalization FormatsDepartmentalization

Grouping of related jobs or processes into major organizational units

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Basic Departmentalization Formats (cont’d)

Functional Departments Categorize jobs according to the activity performed

Product-Service Departments Group jobs around a specific product or service

Geographic Location Departments Based on the physical dispersion of assets, resources, and

customersCustomer Classification Departments

Centered on various customer categoriesWork Flow Process Departments in Reengineered

Organizations Emphasis on smooth and speedy work flow between two

points: Identifying customer needs Satisfying the customer

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Span of ControlSpan of Control (Management)

The number of people who report to a manager.

Narrow spans of control foster tall organizations with many organizational/managerial layers.

Flat organizations have wider spans of control.

Is There an Ideal Span of Control? The right span of control efficiently balances

too little and too much supervision. Situational factors dictate the width of spans

of control. 16

Centralization and DecentralizationCentralization

The retention of decision-making authority by top management

DecentralizationThe sharing of decision-making

authority by management with lower-level employees

The Need for BalanceThe challenge to balance the need for

responsiveness to changing conditions (decentralization) with the need to create low-cost shared resources (centralization)

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The Changing Shape of OrganizationsCharacteristics of New Organizations

Fewer organizational layers More teams Smallness within bigness

New Organizational Configurations Hourglass organization: Three-layer structure

with constricted middle (management) layer Cluster organization: Collaborative structure in

which teams are the primary unit Virtual organizations: Internet-linked networks

of value-adding subcontractors

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Characteristics of Organizational Cultures

Collective: Organizations are social entities.Emotionally charged: The organization’s

culture serves as a security blanket to its members.

Historically based: Trust and loyalty result from long-term organizational associations.

Inherently symbolic: Actions often speak louder than words.

Dynamic: Culture promotes stability and control.

Inherently fuzzy: Ambiguity, contradictions, and multiple meanings are part of culture.

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Figure 9.11: Forms and Consequences of Organizational Culture

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SummaryAll organizations exhibit four characteristics: (1)

coordination of effort, (2) common goal or purpose, (3) division of labor, and (4) hierarchy of authority.

In open-system terms, business organizations are made up of interdependent technical, boundary-spanning, and managerial subsystems.

Organizations need to satisfy different effectiveness criteria in the near, intermediate, and distant future.

Contingency advocates contend that there is no one best organizational setup for all situations.

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Summary (cont’d)There are five basic departmentalization

formats: functional, product-service, geographic location, customer classification, and work flow process departmentalization.

Situational factors dictate degree of centralization and how many people a manager can directly supervise

Effective delegation permits managers to tackle higher-priority duties while helping train and develop lower-level managers.

Management is reshaping the traditional pyramid bureaucracy. Three emerging configurations are the hourglass, cluster, and virtual organization.

Organizational culture is the “social glue” binding people together through shared symbols, language, stories, and practices.

Terms to UnderstandOrganizationAuthorityOrganization chartLine and staff

organizationLearning organizationOrganizational

effectivenessContingency designMechanistic organizationsOrganic organizationsDepartmentalization

Span of controlCentralizationDecentralizationDelegationHourglass organizationCluster organizationVirtual organizationOrganizational cultureOrganizational valuesOrganizational

socialization

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