Chapter 18 Organizational Design and Effectiveness

1. Organizational Behaviour2nd European Edition Chapter 18 Organizational Design and Effectiveness

2. Four Characteristics Common To All Organizations Hierarchy ofauthority Coordinationof effort Division of labor Commongoal

3. Sample Organization Chart for a Hospital Board of Directors StrategicPlanningAdvisor LegalCounsel Chief ExecutiveOfficer Cost-ContainmentStaff President ExecutiveAdministrativeStaff ExecutiveMedicalDirector

4. Sample Organization Chart for a Hospital (continued) ExecutiveAdministrativeStaff ExecutiveMedicalDirector Dir.OfHumanResources Dir.OfPatient& PublicRelations Dir.OfNutrition& FoodServices Dir.X-Ray &LabServices Dir.OfOut-PatientSerices ChiefPhysician Dir.OfAdmissions Dir.OfAccounting Dir.OfSurgery Dir.OfPharmacy

5. Evolution of Organizational Metaphors Closed System: ‘A self-sufficient entity, closed to the surrounding environment.’ (For example, a battery-powered clock.) Open system: ‘Depends on constant interaction with the surrounding environment for survival.’ (For example, the human body.)

6. Weber’s Bureaucracy (A Closed-System Model) German sociologist Max Weber believed the following four factors should make bureaucracies the epitome of efficiency: • Division of labour (people become proficient when they perform standardized tasks over and over again). • A hierarchy of authority (a formal chain of command ensures co-ordination and accountability). • A framework of rules (carefully formulated and strictly enforced rules ensure predictable behaviour). • Administrative impersonality (personnel decisions such as hiring and promoting should be based on competence, not favouritism). For class discussion: Why are today’s bureaucracies the epitome of inefficiency?

7. The Organization as anOpen System: The Biological Metaphor • Inputs- Material - Money- Human effort - Information • Interdependent Subsystems - Managerial subsystem - Goals and values subsystem-Technical subsystem - Psychosocial subsystem- Structural subsystem • Outputs- Products - Services- Human Satisfaction - Organizational survival and- Social benefit growth • Feedback

8. Organizations as Ecosystem Participants (A new open-system perspective) Organizational ecologists: ‘Seek to explain how social, economic and political conditions affect the relative abundance and diversity of organizations and attempt to account for their changing composition.’

9. Organizations as Ecosystem Participants (A new open-system perspective) • Dimensions of Organizational Ecology:- Populations (groups of similar organizations).- Communities (networks of differing organizations).- Darwin’s theory of natural selection (survival of the fittest).- Co-evolution (Competing companies selectively co-operate for mutual benefit).- Strategy making within opportunity environments. For class discussion: What do you think about organizational ecologists’ conclusion that today’s businesses need to learn how to selectively co-operate with their competition? Why is this a difficult balancing act?

10. Generic Organizational-Effectiveness Criteria ‘No single approach to the evaluation of effectiveness is appropriate in all circumstances or for all organization types.’ • Goal accomplishment • Resource acquisition • Internal processes • Strategic constituencies satisfaction

11. Organizational Decline Is anEver-present Threat • ‘Decline is almost unavoidable unless deliberate steps are taken to prevent it.’ • ‘Complacency is the number one threat because it breeds overconfidence and inattentiveness.’ • ‘Total quality management advocates remind us that continuous improvement is the first line of defense against organizational decline.’

12. 1. Excess personnel 2. Tolerance of incompetence 3. Cumbersome administrative procedures 4. Disproportionate staff power 5. Replacement of substance with form 6. Scarcity of clear goals and decision benchmarks 7. Fear of embarrassment and conflict 8. Loss of effective communication 9. Outdated organizational structure 10. Increased scapegoating by leaders 11. Resistance to change 12. Low morale 13. Special interest groups are more vocal 14. Decreased innovation Fourteen Early-Warning Signsof Organizational Decline:

13. Contingency Approach to Organization Design ‘A contingency approach can be put into practice by first assessing the degree of environmental uncertainty. Next, the contingency model calls for using various organization design configurations to achieve an effective organization-environment fit.’ Lawrence and Lorsch Study • Differentiation: ‘Occurs through a division of labor and technical specialization.’ (Technical specialists think and act differently.) • Integration: ‘Occurs when specialists co-operate to achieve a common goal.’

14. Lawrence and Lorsch Study(continued) • Integrating Mechanisms:- Formal hierarchy- Standardized policies, rules and procedures- Departmentalization- Committees and cross-functional teams- Human relations training- Individuals and groups acting as liaisons between specialists- Computer networks, Internet, Intranets (not listed in text) • Research Conclusion: ‘As environmental complexity increased, successful organizations exhibited higher degrees of both differentiation and integration.’ • For class discussion: What is today’s greatest challenge? Too much differentiation or too much integration? Explain. What can be done to meet this challenge?

15. Burns and Stalker’s Mechanistic and Organic Organizations • Mechanistic organizations: ‘Rigid bureaucracies with strict rules, narrowly defined tasks and top-down communication.’ (Tend toward centralized decision-making.) • Organic organizations: ‘Flexible networks of multi-talented individuals who perform a variety of tasks.’ (Tend toward decentralized decision making.)

16. Characteristics of Mechanistic andOrganic Organizations Mechanistic Organic Characteristic Organization Organization 1. Task definition and Narrow; technical Broad; general knowledge required2. Linkage between Vague or indirect Clear or direct individual’s contribution and organization’s purpose3. Task flexibility Rigid; routine Flexible; varied4. Specification of Specific General techniques, obligations and rights

17. Characteristics of Mechanistic andOrganic Organizations(continued) Mechanistic Organic Characteristic Organization Organization 5. Degree of hierarchical High Low (self-control control emphasized)6. Primary communication Top-down Lateral (between pattern peers)7. Primary decision-making Authoritarian Democratic; style participative8. Emphasis on obedience High Low and loyalty

18. The Shape of Tomorrow’s Organizations New Old * Dynamic, learning * Stable * Information rich * Information is scarce * Global * Local * Small and large * Large * Product/customer oriented * Functional * Skills oriented * Job oriented * Team oriented * Individual oriented * Involvement oriented * Command/control oriented * Lateral/networked * Hierarchical * Customer oriented * Job requirements oriented

19. Three New Organizational Patterns • Horizontal organizations (product of re-engineering) • Hourglass organizations • Virtual organizations For class discussion: As an employee, which of these new organizational patterns appeals most (and least) to you? Why?