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.

All Rights Reserved. May not
be scanned, copied or
duplicated, or posted to a
publicly accessible website,
in whole or in part. 26
 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
Organization Environment – Strategy Relationship
and
Measuring Effectiveness
 External
Environment
 Opportunities
 Threat Organizational
 Resource availability Design
 Uncertainty
 Structure Effectiveness
 Information & Outcomes
Strategic Intent control systems
Top  Goal attainment
Management Define: Select:  Prod. tech.
 Resources
Team Mission, Operational  HR policies,
 Efficiency
Official Goal goals, incentives
 Strategic
Competitive  Culture
constituents
strategies  Inter-organizational
Internal Situations
linkages
 Strengths
 Weaknesses
 Distinctive
competence
 Leadership style

Strategic intent - organization’s energies and resources are directed toward a focused, unifying, and compelling goal

Organizational goal - a desired state of affairs that an organization attempts to reach

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

 Official goals , Mission
▪ guiding principles that the organization formally states in
its annual report and in other public documents
▪ a mission statement explains why the organization exists
and what it should be doing – gives purpose
▪ bestow legitimacy

 Operative goals
▪ specific long- and short-term goals that guide managers
and employees as they perform the work of the
organization
▪ provide performance standards
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
The mission of Southwest Airlines is dedication
to the highest quality of Customer Service
delivered with a sense of warmth, friendliness,
individual pride, and Company Spirit
Organizational Theory and Design (11th Edition) by Richard L Daft
 Strategy:
▪ a plan for interacting with the competitive
environment
 Managers must select specific and approriate
strategy design
 Strategy impacts internal
organization characteristics
Managers must design the
organization to
support the firm’s
competitive strategy

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

Strategic Constituents
Approach

Employees
Suppliers Customers
Owners Govt.
Creditors Community

Resource ORGANIZATION Product and

Inputs Service Outputs
Internal Activities
and
Processes
Resource-based Goal (Technical)
Approach Approach

Internal Process
Approach
Organizational Theory and Design (11th Edition) by Richard L Daft
Organizational Stakeholders
◼ Whosoever has a stake in the Business
◼ May be affected by actions, decisions,
policies, or practices of the business firm
◼ May affect the organization’s actions,
decisions, policies, or practices
 An interest or a share in an
Stake undertaking and can be
categorized as:

An Interest A Right Ownership

Legal Right

Moral Right
Production View of the Firm
Managerial View of the Firm
 An organization is used simultaneously by various
stakeholders to achieve their goals
 Each group evaluates the effectiveness of the
organization by judging how well it meets the
group’s goals
 For an organization to be viable, the dominant
coalition of stakeholders has to control sufficient
inducements to obtain the contributions required
of other stakeholder groups
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Agency theory
▪ suggests a way to understand the conflict that often
arises between shareholders’/ stakeholders’ goals
and top managers’ goals

 Agency relation
▪ occurs when one person (the principle, i.e.
shareholders) delegates decision-making authority
to another (the agent, i.e. managers)

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 There is a problem in determining managerial
accountability that arises when delegating
authority to managers
 Shareholders are at information disadvantage
compared to top managers
 It takes considerable time to see the
effectiveness of decisions managers may make

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The process by which an organization
allocates people and resources to
organizational tasks
 Establishes the task and authority
relationships that allow the organization to
achieve its goals
 Brings in Division of labor (the degree of
specialization in the organization)
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 In a simple organization, differentiation is low
because the division of labor is low
▪ Individuals typically perform all organizational
tasks
 In a complex organization, differentiation is
high because the division of labor is high

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Design Challenges
 Three Individual Organization

Bob and Amanda: Owners.

They cook and wait as needed.
They employ one additional Restaurant
waiter.

Owners B A

Waiter

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 22 Individuals Organization

Bob and Amanda: Owners.

They work in kitchen full-time.
They employ waiters, busboys, Restaurant
and kitchen staff.

Owners
B A

Waiters

Kitchen Staff

Busboys
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Set of task-related behaviors required of a
person by his or her position

▪ As the division of labor increases, managers specialize in

some roles and hire people to specialize in others
▪ Specialization allows people to develop their individual
abilities and knowledge within their specific role

 Organizational structure is based on a system

of interlocking roles

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Authority
▪ the power to hold people accountable for their actions
and to make decisions concerning the use of
organizational resources

 Control
▪ the ability to coordinate and motivate people to work in
the organization’s interests

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Function
▪ a subunit composed of a group of people, working
together, who possess similar skills or use the same kind
of knowledge, tools, or techniques to perform their jobs

 Division
▪ a subunit that consists of a collection of functions or
departments that share responsibility for producing a
particular good or service

 Organizational complexity
▪ the number of different functions and divisions possessed
by an organization
▪ degree of differentiation
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organization

Division

Function

Role

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Hierarchy
▪ a classification of people according to their relative authority and
rank

 Vertical differentiation
▪ the way an organization designs its hierarchy of authority and
creates reporting relationships to link organizational roles and
subunits
▪ Establishes the distribution of authority between levels

 Horizontal differentiation
▪ the way an organization groups organizational tasks into roles
and roles into subunits (functions and divisions)
▪ roles differentiated according to their main task responsibilities
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Owners
Organizational

Vertical Differentiation
Core

The Distribution of Authority

Competences
Managers

Functional
Skills & Kitchen Function
Dining Room Restaurant
Abilities Function Services Function

Individual
Dishwasher Busboy Bartender Other Roles
Abilities & Chef Role Waiter Role
Role Role Role (Cashier, Janitor)
Knowledge

Horizontal Differentiation
Grouping of Organizational Tasks

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Differentiation Balancing Integration

Centralization Balancing Decentralization

Mutual
Standardization Balancing
Adjustment

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Horizontal differentiation is supposed to
enable people to specialize and become more
productive
▪ Specialization often limits communication
between subunits
▪ People develop subunit orientation
▪ a tendency to view one’s role in the organization strictly
from the perspective of the time frame, goals, and
interpersonal orientations of one’s subunit

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 When subunit orientation occurs,
communication fails and coordination
becomes difficult

 Integration: the process of coordinating

various tasks, functions, and divisions so that
they work together and not at cross-purposes

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
1. Hierarchy of authority
▪ dictates “who reports to whom”
2. Direct contact
▪ managers meet face to face to coordinate
activities
▪ problematic that a manager in one function has no
authority over a manager in another
3. Liaison roles
▪ a specific manager is given responsibility for
coordinating with managers from other subunits
on behalf of their subunits
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
4. Task force
▪ managers meet in temporary committees to coordinate
cross-functional activities
▪ task force members responsible for taking coordinating
solutions back to their respective functions for further
input and approval

5. Teams
▪ a permanent task force used to deal with ongoing
strategic or administrative issues

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
6. Integrating role
▪ a new, full-time role established to improve
communications between divisions
▪ focused on company-wide integration

7. Integrating department
▪ a new department intended to coordinate the activities of
functions or divisions
▪ created when many employees enact integrating roles

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
 Centralized organization
▪ the authority to make important decisions is retained by
top level managers
▪ top managers able to coordinate activities to keep the
organization focused on its goals

 Decentralized organization
▪ the authority to make important decisions is delegated to
managers at all levels in the hierarchy
▪ promotes flexibility and responsiveness

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Ideal balance entails:
▪ enabling middle and lower managers who are at
the scene of the action to make important
decisions

▪ allowing top managers to focus on long-term

strategy making

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Standardization
▪ conformity to specific models or examples that are
considered proper in a given situation
▪ defined by rules and norms

 Mutual adjustment
▪ the process through which people use their
judgment rather than standardized rules to address
problems, guide decision making, and promote
coordination

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Socialization: Understood Norms
▪ Rules: formal, written statement that specify the
appropriate means for reaching desired goals
▪ Norms: standards or styles of behavior that are
considered typical for a group of people
▪ May arise informally
▪ External rules may become internalized norms
▪ Socialization: the process by which organizational
members learn the norms of an organization and
internalize these unwritten rules of conduct
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Challenge facing managers is:
▪ to find a way of using rules and norms to
standardize behavior, and

▪ to allow for mutual adjustment to give managers

opportunity to discover new and better ways to
achieve goals

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Mechanistic structures: designed to induce
people to behave in predictable, accountable
ways
▪ Decision-making authority is centralized
▪ Subordinates are closely supervised
▪ Information flows mainly in a vertical direction along a clearly
defined path
▪ Hierarchy principal integrating mechanism
▪ Tasks and roles coordinated primarily through standardization
and formal written rules
▪ Best suited to organizations that face stable, unchanging
environments
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organic structures: structures that promote
flexibility, so people initiate change and can
adapt quickly to changing conditions
▪ Decision making distributed throughout the hierarchy
▪ Coordination is achieved through mutual adjustments
▪ Status conferred by ability to provide creative
leadership
▪ Encourages innovative behavior
▪ Suited to dynamic environments

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 A management approach in which the design
of an organization’s structure is tailored to
the sources of uncertainty facing an
organization

 Organization should design its structure to fit

its environment

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Investigated how companies in different
industries differentiate and integrate their
structures to fit the environment
▪ Three industries that experienced different levels
of uncertainty:
▪ The plastics industry
▪ The food-processing industry
▪ The container or can-manufacturing industry

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Also found that organizations need different
kinds of structure to control their activities
based on the environment
▪ Organic structures are more effective when the
environment is unstable and changing
▪ Mechanistic structures are more effective in
stable environments

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Discuss the comment made by Shikhar on joing
Appex Corp. – “Appex needed Control and
Structure”.

 How will you justify so frequent Structural Changes

made by Shikhar in Appex Corp.?

 Personification of Organization facilitates

understanding the concept of organizational design
and its importance.
 The hierarchy begins to emerge when the
organization experiences problems in
coordinating and motivating employees
 Division of labor and specialization make it
hard to determine how well an individual
performs
 Almost impossible to assess individual
contributions to performance when
employees cooperate
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 To deal with coordination and motivation
problems, the organization can:

▪ Increase the number of managers it uses to

monitor, evaluate, and reward employees

▪ Increase the number of levels in its managerial

hierarchy, thereby making the hierarchy of
authority taller

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Size and height limitations
▪ Tall organization: an organization in which the
hierarchy has many levels relative to the size of
the organization

▪ Flat organization: an organization that has few

levels in its hierarchy relative to its size

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 1

1 2

4
2
5

3
7

A. Flat Structure
B. Tall Structure
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 By the time an organization has 1,000
members, it has 4 levels in its hierarchy
 At 3,000 members, it likely has 7 levels
 Between 10,000 to 100,000, organizations
have 9 or 10 levels
 Increase in size of the managerial component
is less than proportional to increase in size of
the organization
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 10
Number of hierarchical levels

8
7
6
5
4
3
2
1

0 1,000 3,000 9,000 10,000 100,000

Number of employees

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
A. Pyramid-like structure with decreasing B. Bloated structure with increasing
numbers of managers at each level numbers of managers at each level
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 800
14% increase
700

600
Number of managers

500

400
33% increase
300

200
50% increase 66% increase
100

0
1,000 2,000 3,000 4,000 5,000 6,000 10,000
Number of organizational members

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Problems with tall hierarchies:
▪ Communication problems: communication takes
longer and is likely to be distorted
▪ Information may be manipulated to serve managers’
own interests

▪ Motivation problems: as hierarchy increases, the

relative difference in the authority possessed by
managers at each level decreases, as does their area
of responsibility
▪ Less responsibility and authority could reduce
motivation

▪ Increased bureaucratic costs: managers cost money

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
▪ Parkinson’s Law Problem
▪ “Work expands so as to fill the time available for its
completion.”
▪ Argues that the number of managers and hierarchies
are based on two principles
▪ A manager wants to multiply subordinates, not rivals
▪ Managers make work for one another

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Ideal number of hierarchical levels
determined by:

▪ Principle of minimum chain of command: an

organization should choose the minimum number of
hierarchical levels consistent with its goals and the
environment in which it operates

▪ Span of control: the number of subordinates a manager

directly manages

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
A. B.
CEO CEO

A B

Managers
Employees Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Factors that determine the appropriate span
of control
▪ There seems to be a limit to how wide a manager’s
span of control should be

▪ Dependent on the complexity and interrelatedness of

the subordinates’ tasks
▪ Complex and dissimilar tasks – small span of control
▪ Routine and similar tasks (e.g., mass production) – large
span of control

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 X Y X Y U

Z V
Z

A. The manager has two B. With the addition of just one

subordinates and must manage more subordinate (for a total of
three relationships three), the manager has six
relationships to handle
 Bureaucracy:

▪ a form of organizational structure in which

people can be held accountable for their actions
because they are required to act in accordance
with rules and standard operating procedures

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle one: a bureaucracy is founded on
the concept of rational-legal authority
▪ Rational-legal authority: the authority a person
possesses because of his or her position in an
organization
▪ Hierarchy should be based on the needs of the
task, not on personal needs
▪ People’s attitudes and beliefs play no part in how
the bureaucracy operates
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle two: Organizational roles are held
on the basis of technical competence, not
because of social status, kinship, or heredity

Principles one and two establish the

organizational role as the basic component of
organization structure

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle three: A role’s task responsibility and
decision-making authority and its relationship
to other roles in the organization should be
clearly specified
▪ Role conflict: when two or more people have
different views of what another person should do,
and as a result, make conflicting demands on that
person
▪ Role ambiguity: the uncertainty that occurs for a
person whose tasks or authority are not clearly
defined

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle four: the organization of roles in a
bureaucracy is such that each lower office in
the hierarchy is under the control and
supervision of a higher office
▪ Organizations should be arranged hierarchically
so that people can recognize the chain of
command

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle five: rules, standard operating
procedures, and norms should be used to
control the behavior and the relationships
among roles in an organization
▪ Rules and SOPs are written instructions that
specify a series of actions intended to achieve a
given end
▪ Norms are unwritten
▪ Rules, SOPs, and norms clarify people’s
expectations and prevent misunderstanding
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Principle six: administrative acts, decisions,
and rules should be formulated and put in
writing
▪ Bureaucratic structure provides an organization
with memory
▪ Organizational history cannot be altered

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
1. It lays out the ground rules for designing an
organizational hierarchy that efficiently controls
interactions between organizational members
2. Each person’s role in the organization is clearly spelled
out and they can be held accountable
3. Written rules regarding the reward and punishment of
employees reduce the costs of enforcement and
evaluating employee performance
4. It separates the position from the person
5. It provides people with the opportunity to develop their
skills and pass them on their successors
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
1. Managers fail to properly control the development of the
organizational hierarchy
2. Organizational members come to rely too much on rules
and standard operating procedures (SOPs) to make
decisions
3. Such overreliance makes them unresponsive to the needs of
customers and other stakeholders

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Formal Reporting Relationships
▪ Number of levels
▪ Span of control
 Grouping of Individuals
▪ Creation of departments
 Design of Systems
▪ Communication, coordination, and integration of
efforts
 Reflected in organization chart
Organizational Theory and Design (11th Edition) by Richard L Daft
 A functional structure is a design that groups people
on the basis of their common skills, expertise, or
resources they use
 Functional structure is the bedrock of horizontal
differentiation
 An organization groups tasks into functions to
increase economy of scale and the effectiveness
with which it achieves its goals

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

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

Research and Sales and Material

Manufacturing Finance
Development Marketing Management

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
1. Provides people with the opportunity to learn from
one another and become more specialized and
productive
2. People who are grouped together by common skills
can supervise one another and control each other’s
behavior
3. People develop norms and values that allow them
to become more effective at what they do

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Communication Problems: as more organizational
functions develop, each with their own hierarchy,
they become increasingly distant from one another
 Measurement Problems: information needed to
measure the profitability of any functional group is
difficult to obtain
 Location Problems: an organization must balance
the need for centralized decision making and the
need to decentralize regional operations
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Customer Problems: the ability to identify and
satisfy customer needs may fall short and sales are
lost

 Strategic Problems: top managers spend too much

time finding ways to improve coordination that they
have no time to address the longer term

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Managers can solve control problems by
redesigning the functional structure to
increase integration between functions

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Functional structure is appropriate if the
organization:
▪ Limits itself to producing a small number of
similar products
▪ Produces those products in one or a few locations
▪ Sells them to only one general type of client or
customer

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 As organizations grow, they produce more
products and serve many different types of
customers
 A new structure is needed that will
▪ Increase manager’s control of individual subunits
▪ Integrate the operation of the whole company
and ensure subunits are meeting organizational
goals

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organizations most commonly adopt the divisional
structure to solve control problems that arise with
too many products, regions, or customers

 The type of divisional structure depends on the

problem to be solved:

▪ Product structure
▪ Geographic structure
▪ Market structure

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
A. Product division structure:
▪ a structure in which a centralized set of support
functions service the needs of a number of different
product lines

▪ Each product division uses the services of the

central support function
▪ Support function is divided into product-oriented
teams who focus on the needs of one particular
product division
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 CEO

Vice President Vice President

Vice President Sales Vice President
Research and Materials
and Marketing Finance
Development Management

PDM PDM PDM PDM

Canned Frozen Frozen Baked

Soups Vegetables Entrees Goods
Division Division Division Division
Centralized Support functions
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Divisions
 Research and Development

Team 1 Team 2 Team 3 Team 4

PDM PDM PDM PDM

Canned Frozen Frozen Baked

Soups Vegetables Entrees Goods
Division Division Division Division

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
B. Multidivisional structure:
▪ structure in which support functions are placed in
independent self-contained product divisions with its
own set of support functions

▪ Corporate headquarters staff: responsible for

overseeing the activities of the managers heading
each division
▪ Allows a company to operate in many different
businesses
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 CEO

Corporate Headquarters Staff

Senior Vice Senior Vice Senior Vice Senior Vice President

Corporate Research and
President President President
Managers Marketing Finance Materials Management Development

Divisional
Division A Division B Division C Division D
Managers

Functional
Managers

Support functions Support functions Support functions Support functions

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Increased organizational effectiveness: clear division of
labor between corporate and divisional managers generally
increases organizational effectiveness
 Increased control: extra control can encourage the stronger
pursuit of internal organizational efficiency by divisional
managers
 Profitable growth: when each division is its own profit
center, individual profitability can be clearly evaluated
 Internal labor market: the most able divisional managers
are promoted to become corporate managers

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

Corporate Headquarters Staff

Senior Vice Senior Vice Senior Vice President

Senior Vice President
President President Research and
Materials Management
Marketing Finance Development

General Manager President President

Functional Groups Functional Groups

Functional Groups

Functional Structure Product Division Structure Matrix Structure

Automotive Products Division Personal computers Division Consumer Electronics Division
 Managing the corporate-divisional relationship: finding the
balance between centralization and decentralization
 Coordination problems between divisions: divisions start
competing for resources and rivalry prevents cooperation
 Transfer pricing: problems between divisions often revolve
around the transfer price, i.e., the price at which one division sells
a product or information about innovations to another division
 Bureaucratic costs: multidivisional structures are very expensive
to operate
 Communication problems: tall hierarchies tend to have
communication problems, particularly the distortion of
information

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
C. Product team structure:
▪ specialists from the support functions are created that
specialize in the needs of particular kind of product

▪ Focus on the needs of one product (or client) or a

few related products
▪ Each team is a self-contained division headed by a
product team manager

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 When the control problems that companies
experience are a function of geography, a
geographic divisional structure is appropriate
 Allows the organization to adjust its structure
to align its core competences with the needs
of customers in different geographic regions
 Allows some functions to be centralized and
others decentralized
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 A market structure aligns functional skills and
activities with the needs of different
customer groups
 Each customer group has a different
marketing focus, and the job of each group is
to develop products to suit the needs of its
specific customers
 Each customer group makes use of
centralized support function
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 An organizational design that groups people & resources
in two ways simultaneously, by function and product
 A rectangular grid that shows a vertical flow of functional
responsibility and a horizontal flow of product
responsibility
 The members of the team are called two-boss employees
because they report to two superiors: the product team
manager and the functional manager
 The team is the building block and principal coordination
and integration mechanism
Organizational Theory and Design (11th Edition) by Richard L Daft
 The use of cross-functional teams reduces
functional barriers and subunit orientation
 Opens communication between functional
specialists
 The matrix enables an organization to maximize its
use of skilled professionals, who move from product
to product as needed
 The dual functional and product focus promotes
concern for both cost and quality
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Matrix lacks a control structure that leads
employees to develop stable expectations of one
another – Role ambiguity
 Lack of a clearly defined hierarchy of authority can
also lead to conflict between functions and product
teams over the use of resources – Role conflict
 People are likely to experience a vacuum of
authority and responsibility
▪ People then create their own informal organization to
provide themselves with some sense of structure and
stability Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organization around core processes: tasks and
activities
Organizational Theory and Design (11th Edition) by Richard L Daft
 Structure created around cross-functional processes
 Self-directed teams, not individuals, dominant
players
 Process owners responsible for entire process
 People on the team given authority for decisions
 Can increase organization’s flexibility
 Customers drive the organization, measured by
customer satisfaction, employee satisfaction, and
financial contribution
 Culture is one of openness, trust, and collaboration;
focus on continuous improvement
Organizational Theory and Design (11th Edition) by Richard L Daft
Organizational Theory and Design (11th Edition) by Richard L Daft
 Large complex organizations that have many
divisions make use of many different structures
 Each product division’s manager selects the
structure (functional, product, geographic) that best
meets the needs of their particular environment and
strategy

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 A cluster of different organizations whose actions
are coordinated by contracts and agreements rather
than through a formal hierarchy of authority
 Very complex as companies form agreements with
many suppliers, manufacturers, and distributors
 Such agreements are necessary as the organization
outsources many of the value creation activities
involved in production and marketing goods and
services
 If a network partner can perform a specific
functional activity reliably, and at a lower cost,
production costs are reduced
 Avoids the high bureaucratic costs of operating a
complex organizational structure
 Allows an organization to act in an organic way
 Network partners can be replaced if they do not
perform up to standards
 A considerable level of mutual adjustment is needed
to allow the groups to interact so that they can learn
from one another and constantly improve the
product
 Ability to control a complex value- creation process
is difficult because managers lack the means to
effectively coordinate and motivate the various
network partners
 Boundaryless organization: composed of people
who are linked by computers, faxes, CAD systems,
and video conferencing

 The use of outsourcing and the development of

network organization are increasing rapidly as
organizations recognize the many opportunities
they offer to reduce costs and increase flexibility
 Start-Up Circular Functional Team Divisional
1984-May 88 May 88-Feb 89 Feb 89-Mar 89 Mar 89-Aug 90 Aug 90-Jan 91
Division of Projects, Expertise Functional Products & Products
Labor Interests and Expertise Functional
Skills Expertise
Coordination Sr. Leadership Not clear Ghosh & Business Team Authority of
Mechanism & face-to-face functional Managers - Div. Head
managers Negotiate
Conflict Persuasion Consensus CEO Team Sr.
Resolution Persuasion Management
Distribution Informal Not clear Partitioned, Business team Div. Head
of Decision but Ghosh – Product
Rights involved Managers
Control Commitment Not specified Compliance Compliance P & L Results
actions actions
Identity and Entrepreneur Experts Functional Product & General
Careers experts Management Management
 Start-Up Circular Functional Team Divisional
1984-May 88 May 88-Feb 89 Feb 89-Mar 89 Mar 89-Aug 90 Aug 90-Jan 91
Strengths Responsive, Fast, Focused Balanced Profit focused,
Innovative, Egalitarian people on functional and strategic
Fast specific tasks, product focus, responsive
efficient Improved
pooling coordination
Weaknesses Short-term Difficult to Built walls Fighting Walls between
focus, understand around between divisions,
No functions, function and Innovation
accountability more expertise product down,
No career path not valued managers, Duplication of
resp. not clear, resources,
no focus on co. No corp. wide
wide profit standards
goal
 Functional Divisional Matrix Network

Resource efficiency Excellent Poor Moderate Good

Time efficiency Poor Good Moderate Excellent

Responsiveness Poor Good Moderate Excellent

Adaptability Poor Good Moderate Excellent

Accountability Good Excellent Poor Moderate

Environment for Complex;

Stable Heterogeneous Volatile
which best suited multiple demands

Strategy for which

Focused/Low Diversified Responsiveness Innovations
best suited
 All the elements that exist outside the
boundary of the organization

 Potential to affect all or part of the

organization

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

Sectors that the organization interacts with
directly to achieve goals

▪ Typically the “industry” and market sectors

▪ Human Resources

▪ International Sector

▪ Raw Materials Sector

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

 Sectors that might not have a direct impact
on the daily operations of a firm

▪ Government sector: regulation

▪ Sociocultural sector: the green movement
▪ Economic conditions: global recession
▪ Technology sector: massive and constant changes
▪ Financial resources
▪ Extremely important to entrepreneurs

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

 Simple-complex: heterogeneity; the number
of dissimilarity of external elements

 Stable-Unstable: whether elements in the

environment are dynamic

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

Organizational Theory and Design (11th Edition) by Richard L Daft
 Organizations need the right fit between
internal structure and the external
environment
▪ Adding Positions and Departments
▪ Building Relationships
▪ Boundary-spanning roles
▪ Business intelligence
▪ Differentiation and Integration
▪ Organic vs. Mechanistic Management Process
▪ Planning, Forecasting, and Responsiveness
Organizational Theory and Design (11th Edition) by Richard L Daft
 Low Uncertainty Low-Moderate Uncertainty

1. Mechanistic design: 1. Mechanistic design:

Formal, centralized formal, centralized
Stable
2. Few departments 2. Many departments, some
boundary spanning
3. No integrating roles
3. Few integrating roles
4. Current operations orientation;
low speed response 4. Some planning moderate-speed
response

ENVIRONMENTAL
CHANGE
High-Moderate Uncertainty High Uncertainty

1. Organic design, teamwork: 1. Organic design, teamwork:

participative, decentralized participative, decentralized
Unstable
2. Few departments, much 2. Many departments differentiated,
boundary spanning extensive boundary spanning

3. Few integrating roles 3. Many integrating roles

4. Planning orientation; fast 4. Extensive planning forecasting;

response high-speed response

Simple Complex
Organizational Theory and Design (11th Edition) by Richard L Daft
ENVIRONMENTAL COMPLEXITY
 Resource-dependence perspective means
organizations depend on the environment
▪ Strive to acquire control over resources to
minimize dependence
▪ Organizations are vulnerable if resources are
controlled by other organizations
▪ Minimize vulnerabilities
▪ Will team up with others when resources are
scarce
 Symbiotic inter-dependencies

 Competitive inter-dependencies
Keiretsu
 allow an
1. Ability to obtain 2. An organizational
organization
scarce resources strategy
to create

and invest
which
resources to
increases its
develop

which enable
4. A Competitive the
3. Core competences
advantage organization
to create

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
1. Specialized resources
▪ Functional resources: the skills possessed by an
organization’s functional personnel

▪ Organizational resources: the attributes that give

an organization a competitive advantage such as
the skills of the top-management team or
possession of valuable and scarce resources

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
2. Coordination ability
▪ An organization’s ability to coordinate its
functional and organizational resources to create
maximal value
▪ Effective coordination of resources leads to
competitive advantage by means of:
▪ Control systems
▪ Centralization or decentralization of authority
▪ Development and promotion of shared cultural values

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Strategies to lower costs or differentiate
products
▪ The manufacturing function can lower the costs of
production by pioneering the adoption of the
most efficient production methods
▪ The human resource management (HRM) function
can lower costs by designing appropriate control
and reward systems to increase employee
motivation and reduce absenteeism and turnover

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Functional-level strategy and structure
▪ The strength of a function’s core competence
depends not only on the function’s resources, but
on its ability to coordinate the use of its resources
▪ According to contingency theory, each function
should develop a structure that suits its human
and technical resources

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Manufacturing Sales R&D
Mechanistic Organic
structure structure

Manufacturing Sales R&D

Tall Flat
organization organization

Manufacturing Sales R&D

Centralized Decentralized
decision decision
making making

Manufacturing Sales R&D

Mutual
Standardization
adjustment
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The business-level strategy involves:
▪ Selecting and managing the domain the
organization will compete in
▪ Positioning the organization so that it can use its
resources and abilities to manage its specific and
general environments to protect and enlarge that
domain

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Strategies to lower costs or differentiate
products
▪ Low-cost business-level strategy: use of skills in
low-cost value creation to produce for a customer
group that wants low-priced goods and services

▪ Differentiation business-level strategy: use of

skills to differentiate products for customer
groups that want and can afford differentiated
products that command a high or premium price
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Matrix Product team Product, market, Functional
structure structure or geographic structure
structure

Differentiation Strategy Low-Cost Strategy

Complex structure Simple structure

Decentralized decision making Centralized decision making

High differentiation Low differentiation

High integration Low integration

Organic structure Mechanistic structure

Involves search for new domains in
which to exploit and defend the
ability to create value from its core
competences

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Input Related
Domains Domain
Backward Related
vertical diversification
integration

Core Domain

Output Forward Unrelated Unrelated

Domain vertical diversification Domain
integration

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 For organizations operating in more than one
domain, a multidivisional structure is
appropriate
 Conglomerate structure and unrelated
diversification
▪ Conglomerate structure: a structure in which
each business is placed in a self-contained division
and there is no contact between divisions

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

Corporate
Headquarters Staff

A B C D E F G H I
Division Division Division Division Division Division Division Division Division

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Structure for
Implementing Strategy Across Countries
Organizational Theory and Design by Richard L Daft
1. Identify what technology is and how it relates to organizational
effectiveness
2. Differentiate between three different kinds of technology that
create different competences
3. Understand how each type of technology needs to be matched
to a certain kind of organizational structure
4. Understand how technology affects organizational culture
5. Appreciate how advances in technology, and new techniques for
managing technology, are helping to increase organizational
effectiveness

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
the combination of
skills, knowledge, abilities, techniques,
materials, machines, computers, tools, and
other equipment
that people use to
convert or change raw materials into
valuable goods and services

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
 Core technology relates to the
transformation process to provide
goods/service

 Non-core technology is not directly related to

the primary mission of the organization

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

 Technology exists at three levels
1. Individual level
▪ the personal skills, knowledge, and competences that
individuals possess

2. Functional or department level

▪ the procedures and techniques that groups work out to
perform their work and create value

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
3. Organizational level: the way an organization
converts inputs into outputs

▪ Mass production: the organizational technology based

on competences in using standardized, progressive
assembly process to manufacture goods

▪ Craftswork: the technology that involves groups of

skilled workers who interact closely to produce
custom-designed products

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Technology is present in all organizational
activities:
▪ Input: allows each organizational function to
handle relationships with outside stakeholders so
that the organization can effectively manage its
specific environment
▪ Conversion: transforms inputs into outputs
▪ Output: allows an organization to effectively
dispose of finished goods and services to external
stakeholders
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design (11th Edition) by Richard L Daft
 Technical complexity: the extent to which a
production process can be programmed so
that it can be controlled and made predictable
▪ High technical complexity: exists when conversion
processes can be programmed in advance and fully
automated
▪ Low technical complexity: exists when conversion
processes depend primarily on people and their
skills and knowledge and not on machines

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Woodward identified 10 levels of technical
complexity that are associated with three types
of production technology

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 1. Production of simple units to
customers’ orders Low technical
2. Production of technically complex complexity (production
Group 1 Small-batch
units depends primarily on
and unit production
3. Fabrication of large equipment in
skills, knowledge, and
stages procedures)
4. Production of small batches

5. Production of components in large-

batches subsequently assembled

Technical complexity
diversely

6. Production of large batches,

Group 2 Large-batch assembly-line type
and mass production
7. Mass production

8. Process production combined with

the preparation of a product for sale
by large-batch or mass production
methods High technical
complexity (production
9. Process production of chemicals in depends primarily on
Group 3 Continuous- batches physical machinery,
process production equipment, and
10. Continuous flow production of
liquids, gases, and solid shapes computers)
 An organization that uses small-batch
technology
▪ Impossibility of programming conversion
activities because production depends on the
skills and experience of people working together

▪ An organic structure is the most appropriate

structure for this technology

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 An organization that uses mass production
technology
▪ Ability to program tasks in advance allows the
organization to standardize the manufacturing
process and make it predictable

▪ A mechanistic structure becomes the

appropriate structure for this technology

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 An organization that uses continuous-process
technology
▪ Tasks can be programmed in advance, and the
work process is predictable and controllable in a
technical sense
▪ Still the potential for a major systems breakdown
▪ An organic structure is the appropriate structure
for this technology

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Low Technical Complexity High

Structural Small-Batch Technology Mass Production Continuous-Process

Characteristics Technology Technology
Level in the hierarchy 3 4 6

Span of control of CEO 4 7 10

Span of control of first line

23 48 15
supervisor

Ratio of managers to non-

1 to 23 1 to 16 1 to 8
managers

Approximate shape of
organization

Relatively flat, with narrow Relatively tall, with wide Very tall, with very narrow
span of control span of control span of control

Type of structure Organic Mechanistic Organic

Cost of operation High Medium Low

Organizational Theory and Design (11th Edition) by Richard L Daft
Organizational Theory and Design (11th Edition) by Richard L Daft
 Perrow’s two dimensions underlie the
difference between routine and nonroutine or
complex tasks and technologies:

▪Task variability
▪Task analyzability

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Task variability: the number of exceptions –
new or unexpected situations – that a person
encounters while performing a task
▪ is low when a task is standardized or repetitious

 Task analyzability: the degree to which

search activity is needed to solve a problem
▪ is high when the task is routine

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 (Routine tasks, few Task Variability (Nonroutine tasks,
exceptions) many exceptions)
Low High
Low

(Nonroutine tasks,
programming
impossible) Nonroutine
Craftswork
research

Task Analyzability

Routine Engineering
(Routine tasks, manufacturing production
programming
possible)

High
 (Routine tasks, few Task Variability (Nonroutine tasks,
exceptions) many exceptions)
Low High

Low

(Nonroutine tasks,
programming
impossible)

Task Analyzability

(Routine tasks,
programming
possible)

High

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

 Task interdependence: the manner in which
different organizational tasks are related to
one another affects an organization’s
technology and structure

 Three types of technology

▪ Mediating
▪ Long-linked
▪ Intensive

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Mediating technology: a technology
characterized by a work process in which
input, conversion, and output activities can be
performed independently of one another

▪ Based on pooled task interdependence

▪ Each part of the organization contributes separately

to the performance of the whole organization

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Long-linked technology: based on a work
process in which input, conversion, and
output activities must be performed in series
▪ Based on sequential task interdependence
▪ Actions of one person or department directly affect the
actions of another
▪ Slack resources: surplus resources that enable an
organization to deal with unexpected situations

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Intensive technology: a technology
characterized by a work process in which
input, conversion, and output activities are
inseparable
▪ Based on reciprocal task interdependence
▪ The activities of all people and all departments are fully
dependent on one another
▪ Specialism: producing only a narrow range of
outputs
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The shop floor has been revolutionized
▪ Computer-aided Design (CAD)
▪ Computer-aided Manufacturing (CAM)
▪ Manufacturing Process Management (MPM)
▪ Integrated Information Network
▪ Product life-cycle Management (PLM)

▪ Also called computer-integrated manufacturing, flexible

manufacturing systems, smart factories, advanced
manufacturing technology, and agile manufacturing
You didn’t do that
Accusation Opinion
very well

I hope you do
Threat Encouragement
better next time
 The set of shared values and norms that
controls organizational members’ interactions
with each other and with people outside the
organization

▪ can be a source of competitive advantage

▪ can be used to increase organizational effectiveness

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
The pattern of basic assumptions that
a given group has invented, discovered, or developed
in learning to cope with its problems of external
adaptation and internal integration, and
that have worked well enough to be considered valid,
and therefore, to be taught to new members
as the correct way to perceive, think and feel in relation
to these problems
(Schein, 1985: 6)
 Culture strength is the degree of agreement
among members of an organization about
specific values
 Subcultures reflect the common problems,
goals, and experiences of a team or
department
▪ Different departments may have their own norms
 Organizational Culture

What is visible is only the tip of the Iceberg!!!

 Rites and
Ceremonies

Symbols Stories and

Myths

Organizational
Culture

Power
Organization Relationships
Structures

Control Systems
 Managers want a
corporate culture
that reinforces the
strategy and
structural design the
organization needs
to be effective within
environment.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
General criteria, standards, or guiding principles
that people use to determine
which types of behaviors, events, situations, and
outcomes are
desirable or undesirable

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

Terminal Values Instrumental Values

Desired end states or Desired modes of behavior
outcomes (e.g., high quality, (e.g. being helpful, working
excellence) hard)

Specific norms, rules, and SOPs

(e.g., being courteous to
coworkers, tidying up the work
area)
 Socialization:
▪ the process by which members learn and internalize
the values and norms of an organization’s culture

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Value-Based Leadership
 Formal Structure and Systems
▪ Structure
▪ Disclosure Mechanisms
▪ Code of Ethics
▪ Training Programs
 Managers play key role in providing
leadership and examples of ethical behavior
 Organizational decision making: the process
of responding to a problem by searching for and
selecting a solution or course of action that will
create value for organizational stakeholders

▪ Programmed decisions: decisions that are repetitive

and routine

▪ Nonprogrammed decisions: decisions that are novel

and unstructured
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Do we make rational decisions?
 The rational model (cont.)
▪ Underlying assumptions

▪ Decision makers have all the information they need

▪ Decision makers can make the best decision
▪ Decision makers agree about what needs to be done

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The rational model (cont.)
▪ Criticisms of the assumptions
▪ Information and uncertainty: the assumption that
managers are aware of all alternative courses of action
and their consequences is unrealistic
▪ Managerial abilities: managers have only a limited
ability to process the information required to make
decisions
▪ Preferences and values: assumes managers agree about
what are the most important goals for the organization

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The incrementalist model: managers select
alternative courses of action that are only
slightly, or incrementally, different from those
used in the past
▪ Perceived to lessen the chances of making a
mistake
▪ Called the science of “muddling through”
▪ They correct or avoid mistakes through a succession
of incremental changes

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organizational learning: the process through
which managers seek to improve organization
members’ desire and ability to understand and
manage the organization and its environment

▪ Creates an organizational capacity to respond

effectively to the changing business environment

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Types of organizational learning
▪ Exploitation: organizational members learn
ways to refine and improve existing
organizational activities and procedures

▪ Exploration: organizational members

search for and experiment with new kinds or
forms of organizational activities and
procedures
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Individual-level learning: managers need to
facilitate the learning of new skills, norms, and
values so that individuals can increase their own
personal skills and abilities
▪ Employees develop a sense of personal mastery to
create and explore what they want
▪ Employees must develop a commitment and
attachment to their job so they will enjoy
experimenting and risk taking
▪ Organizations should encourage employees to
assume more responsibility for their decisions

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Group-level learning: managers need to
encourage learning by promoting the use of
various kinds of groups so that individuals can
share or pool their skills and abilities

▪ Allows for the creation of synergy

▪ Group routines can enhance group effectiveness
▪ Group learning is even more important than
individual learning in promoting organizational
learning

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organizational-level learning: managers can
promote organizational learning through the way they
create an organization’s structure and culture

▪ Cultural values and norms are an important influence on

learning

▪ Adaptive cultures: value innovation and encourage and reward

experimentation and risk taking by middle and lower-level managers

▪ Inert cultures: are cautious and conservative, and do not encourage

risk taking by middle and lower-level managers

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Several factors may reduce organizational
learning over time

▪ Managers may develop rules and standard operating

procedures to facilitate programmed decision
making
▪ Past success with SOPs inhibits learning
▪ Programmed decision making drives out
nonprogrammed decision making

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Cognitive structure: system of interrelated
beliefs, preferences, expectations, and values
that predetermine responses to and
interpretations of situations

▪ These shape the way managers make decisions and

perceive environmental opportunities and threats

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Projection and Cognitive
ego-defensiveness dissonance

Escalation of Managers’ Organizational

commitment Cognitive Decision
Structure Making

Frequency and Illusion of

representativeness control
 Strategies for organizational learning

▪ Cause managers to continuously unlearn old ideas

and confront errors in their beliefs and perceptions

▪ Listening to dissenters
▪ Converting events into learning opportunities
▪ Experimenting

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Nature of the top-management team
▪ The way the top management is constructed and
the type of people who are on it affect
organizational learning
▪ Wheel configuration decreases org learning because
managers report separately to the CEO
▪ Wheel works best when problems are simple and require
minimal coordination
▪ Circle configuration works best for team and
organizational learning
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 CEO

CEO

Wheel Circle
 Learning occurs best when there is
heterogeneity of the top- management team

▪ Groupthink: the conformity that emerges when

like-minded people reinforce one another’s
tendencies to interpret events and information in
similar ways

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Devil’s advocate: a person who is responsible
for critiquing ongoing organizational learning
▪ A method for overcoming cognitive biases and
promoting organizational learning by
institutionalizing dissent

 Dialectical inquiry: teams of decision makers

generate and evaluate alternative scenarios and
provide recommendations
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Collateral organizational structure: an
informal organization of managers that is set
up parallel to the formal organization structure
to “shadow” the decision making and actions of
managers in the formal organization

▪ Allows an organization to maintain its capacity for

change at the same time that it maintains its
stability

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The founding of an organization occurs when
entrepreneurs take advantage of opportunities to use
their skills and competences to create value

 A dangerous life cycle stage associated with the

greatest chance of failure
▪ Liability of newness: the dangers associated with being the
first in a new environment
▪ A new organization is fragile because it lacks a formal
structure

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Survival strategies
▪ Strategies that organizations can use to gain access
to resources and enhance their chances of survival
in the environment
▪ r-strategy versus k-strategy
▪ r-strategy: a strategy of entering a new environment
early
▪ k-strategy: a strategy of entering an environment late,
after other organizations have tested the environment

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Survival strategies (cont.)

▪ Specialists: organizations that concentrate their

skills to pursue a narrow range of resources in a
single niche

▪ Generalists: organizations that spread their skills to

compete for a broad range of resources in many
niches

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Pressures for Growth
▪ Companies in all industries strive for growth to acquire the
size and resources needed to compete globally
▪ Size enables companies to take risks

 Dilemmas of Large Size

▪ Large organizations are able to get back to business more
quickly following a disaster
▪ Large companies are standardized, mechanistic, and
complex
▪ Small companies are flexible and can be responsive
▪ Many companies aim to have a big company/small-
company hybrid
Organizational Theory and Design (11th Edition) by Richard L Daft
Organizational Theory and Design by Richard L Daft
 Greiner proposes 5 sequential growth
stages

▪ Each stage results in a crisis

▪ Advancement to the next stage requires successfully
resolving the crisis in the previous stage

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Organizational Theory and Design by Richard L Daft
Organizational Theory and Design (11th Edition) by Richard L Daft
 Organizational decline: the life-cycle stage
that an organization enters when it fails to
anticipate, recognize, avoid, neutralize, or
adapt to external or internal pressures that
threaten its long-term survival

▪ May occur because organizations grow too much or

▪ Because of reduction in organizational resources

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The decrease of an organization’s resources
over time is caused by:
▪ Organizational atrophy

▪ Vulnerability
▪ Environmental decline or competition

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

1. Understand the relationship among organizational change,
redesign, an organizational effectiveness
2. Distinguish among the major forms or types of evolutionary
and revolutionary change organizations must manage
3. Recognize the problems inherent in managing change and the
obstacles that must be overcome
4. Describe the change process and understand the techniques
that can be used to help an organization achieve its desired
future state

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 The process by which organizations move from
their present state to some desired future state
to increase their effectiveness

▪ Goal is to find improved ways of using resources and

capabilities in order to increase an organization’s
ability to create value

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
◼ Transformation of an organization between two
points involves
◼ Restructuring

◼ Redistribution of human and financial resources

◼ New organizational relationships

◼ New value systems (culture)

 Technology is a key driver of organizational
change
 Change is easily embraced by organizations
with empowered employees
 Innovative organizations are flexible and free-
flowing without rigid work rules
 Mechanistic structures stifle innovation and
focus on rules and regulations
 The failure rate for new food products is 70-
80%
 Producing products that fail is part of
business
 Reasons for success:
▪ Innovating companies understand customers
▪ Innovating companies successfully use technology
▪ Top management supports innovation
 Organizations need to change strategies,
structures, processes, and procedures more often to
adapt
 Many organizations are preparing for more change
by:
▪ Cutting out layers
▪ Decentralizing decision making
▪ Shift toward horizontal structures
▪ Empowered teams and workers
▪ Virtual network strategies
▪ Incorporating eBusiness
 Change in value system, beliefs, and
assumptions

 Most diffcult
1. Competitive forces: organization must make
changes to attempt to match or exceed its
competitors on at least one of the following
dimensions:
▪ Efficiency
▪ Quality
▪ Innovation

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
2. Economic, political, and global forces: affect
organizations by forcing them to change how
and where they produce goods and services
▪ Need to change organizational structure to:
▪ Allow expansion in foreign market
▪ Adapt in a variety of national cultures
▪ Help expatriates adapt to the cultural values of where they
are located

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
3. Demographic and social forces: changes in
the composition of the workforce and the
increasing diversity of employees has
presented many challenges for organizations
▪ Increased need to manage diversity

4. Ethical forces: government, political, and

social demands for more responsible
corporate behavior
▪ Creation of ethics officer position
▪ Encourage employees to report unethical behaviors
Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 One of the main reasons for some
organizations’ inability to change is
organizational inertia that maintains the status
quo

 Resistance to change lowers an organization’s

effectiveness and reduces its chances of survival

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Organization-level resistance to change stems
from:
▪ Power and conflict
▪ When change causes power struggle and conflicts, there
is resistance
▪ Differences in functional orientation
▪ Mechanistic structure
▪ Organizational culture

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Group-level resistance to change stems from:

▪ Group norms
▪ Group cohesiveness
▪ Groupthink
▪ Escalation of commitment

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
 Individual-level resistance to change stems
from:

▪ Uncertainty and insecurity

▪ Selective perception and retention
▪ Habit

Organizational Theory, Design, and Change (Sixth Edition) by Gareth R. Jones and Mary Mathew
Stages:

unfreezing change refreezing

Kurt Lewin, 1950

1. Establish a sense of urgency for change
2. Establish a coalition to guide the change
3. Create a vision and strategy for change
4. Find an idea that fits the need
5. Develop plans to overcome resistance
6. Create change teams
7. Foster idea champions
1. Alignment with needs and goals of users
2. Communication and training
3. An environment with psychological safety
4. Participation and involvement
5. Forcing and coercion
The illiterate of the 21st century
will not be those
who cannot read and write,
but those
who cannot learn, unlearn, and relearn
Alvin Toffler

Thank You
&
All the Best