Prof.

Sushil Kumar
1. Why do organizations exist and the
purposes they serve?
2. Relationship between organizational theory
(OT) and organizational design and change,
and distinction between organizational
structure and culture
3. How can managers utilize OT to design and
change their organizations to increase
organizational effectiveness
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
4. How do managers assess and measure
organizational effectiveness
5. The way contingency factors influence the
design of organizations

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Study of how organizations function and
how they affect and
are affected by
the environment in which they operate

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organization theory helps us explain:

what happened in the past, as well as

what may happen in the future, so that we can
manage organizations more effectively

Organizational Theory and Design by Richard L Daft

 Changing Management Paradigm
Old Paradigm New Paradigm

Key Industries Oil, mining, steel, vehicles, railways, Computers & software, biotechnology,
shipping personal & financial services

Key Resources Energy, labour, land Information, knowledge, & talent

Resource Availability Abundance Scarcity

Technology Power trains, machine tools etc. Information technology

Product Life Cycles Measured in decades Measured in years or months

Trade Pattern International Global

Working Day 8 hours 24 hours

Communication Media Letter, telephones, fax Mobile devices, email, internet &
intranet

Organization Centralized, hierarchical, functional Devolved, flat, flexible

Work Force Mainly male, semi-skilled or unskilled, No gender bias, high proportion of
Characteristics one or two ethnic groups graduates, multi-ethnic

Motivation Simplistic models Complex models

 a tool used by people to coordinate
their actions to obtain something they
desire or value

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
▪ Social entities that are goal-directed
▪ Designed as deliberately structured and
coordinated activity systems
▪ Linked to the external environment
▪ Includes large multinational corporations,
family owned businesses as well as nonprofits

9 Organizational Theory and Design (11th Edition) by Richard L Daft

 Top
Management

Technical Administrative
Support Staff Middle Management Support Staff

Technical Core

Organizational Theory and Design (11th Edition) by Richard L Daft

Why do we need
Organizations
 Organization’s Inputs Organization’s Conversion Process

Organization obtains Inputs from Organization transforms inputs and adds

environment: value to them:
 Raw material  Machinery
 Money and capital  Computers
 Human Resources  Human skills and abilities
 Information and knowledge

Organization’s Environment Organization’s Outputs

Sales of outputs help organization to Organization releases outputs to its

obtain new supplies of inputs: environment:
 Customers  Finished goods
 Shareholders  Services
 Suppliers  Dividends
 Distributors  Salaries
 Government  Value for stakeholders
1. Bring together resources to achieve desired
goals and outcomes

2. To increase specialization and the division of

labor
▪ Division of labor allows specialization
▪ Specialization allows individuals to become experts at
their job

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
3. To use large-scale technology

▪ Economies of scale: cost savings that result when

goods and services are produced in large volume

▪ Economies of scope: cost savings that result when an

organization is able to use underutilized resources more
effectively because they can be shared across several
different products or tasks

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
4. To manage the external environment
▪ External environment consists of the political, social,
economic, and technological factors
▪ Organizations regularly exchange products and services
for needed resources

5. To exert power and control

▪ Organizations structure their members to efficiently
produce products and services

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
6. To economize on transaction costs
▪ the costs associated with negotiating, monitoring, and
governing exchanges between people who must
cooperate

7. To facilitate innovations

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Importance of
Organizational Design
1. Dealing with contingencies

▪ Events that might occur and must be planned for

▪ Organizations must be designed to be able to respond to
changes in the complex and increasingly difficult
environment many organizations face
▪ Globalization and changing IT technologies are just two
challenges organizations must be ready to face

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design by Richard L Daft
2. Gaining competitive advantage

▪ The ability to outperform other companies because of the

capacity to create more value from resources

▪ Core competences: skills and abilities in value creation embedded

in the organization’s people or structures

▪ Strategy: pattern of decisions and actions involving core

competencies that produces a competitive advantage to
outperform competitors

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
3. Managing diversity

▪ Differences in the race, gender, and national origin of

organizational members have important implications for
organizational culture and effectiveness

▪ Learning how to effectively utilize a diverse workforce can

result in better decision making and more effective
workforce

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
4. Promoting efficiency, speed, and innovation

▪ The better the organizations function, the more value they

create

▪ The correct organizational design can lead to faster

innovation and quickly get new products to market

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Decline of the organization’s sales and profits
 Layoffs occur and talented employees leave
to take positions in growing organizations
 Resources become harder to acquire
 Resulting crisis may result in organizational
failure

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Historical perspectives provide insight into
how organization design and management
practices have varied over time in response
to changes in society

© 2010 Cengage Learning.

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duplicated, or posted to a
publicly accessible website,
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 Efficiency is Everything
▪ Scientific Management
 How to Get Organized
▪ Administrative Principles
▪ Contributed to Bureaucratic Organizations
 What about People?
▪ Hawthorne Studies
 Can Bureaucracies Be Flexible?
▪ Flexible and lean. Focused on service, quality and engaged employees
(1980s)
 Don’t Forget the Environment
▪ Contingency: there is no “one best way”

27 Organizational Theory and Design (11th Edition) by Richard L Daft

  Entrepreneurial
 Machine
 Professional
 Diversified
 Adhocracy

✓ Mitzberg proposed that the five parts could fit

together in any type of organization
✓ In real-life organizations, the five parts are
© 2010 Cengage Learning.
interrelated
All Rights Reserved. May not and often serve more than one function.
be scanned, copied or
duplicated, or posted to a
publicly accessible website,
in whole or in part. 28 Organizational Theory and Design (11th Edition) by Richard L Daft
 Today’s organizations are still imprinted with
hierarchy, bureaucracy and formalization
 As organizations become large and complex, the
orderly and predictable role of managers in the
industrial age must change
 Chaos theory states that relationships in complex
systems are nonlinear
▪ Chaos operates with some predictability which is the
challenge of today’s managers
© 2010 Cengage Learning.
All Rights Reserved. May not
be scanned, copied or
duplicated, or posted to a
publicly accessible website,
in whole or in part. 29 Organizational Theory and Design (11th Edition) by Richard L Daft
 Organizations require adaptability. Many
organizations are focused on building learning
organizations which promotes communication and
collaboration
→ From Vertical to Horizontal Structure
→ From Routine Tasks to Empowered Roles
→ From Formal Control Systems to Shared Information
→ From Competitive to Collaborative Strategy
© 2010 Cengage Learning.
All Rights Reserved. May not
→ From Rigid to Adaptive Culture
be scanned, copied or
duplicated, or posted to a
publicly accessible website,
in whole or in part. 30