AAE 3106: ORGANIZATION THEORY

CLASS NOTES
LECTURE ONE

1.1 Introduction
This lecture introduces you to the important concepts met in organization theory. We
shall learn what a theory is, what an organization is, and its importance in society We
shall further differentiate between organization theory and other theories we learn in
business such as Organization Behaviour (O.B.) Organizational Psychology and
Management theory. It is assumed that you have already studied and passed the following
two courses: i) Introduction to Business Course and ii) Principles of Agribusiness
Management.
1.2 What is a Theory?
A theory is a body of knowledge used to describe and predict. It is an integrated set of
statements that summarise and explain research findings. It is an explanation of some
phenomenon and it consists of principles that describe relationships observed in some
situation. In other words a theory tries to explain some practice observed in nature. In
organization theory the primary focus is the study of organizations at the macro level. In
other words we are trying to learn the whole organization or departments: the way it is
structured: the ways the various variables relate to each other and the way groups behave
in an organization set up.

1.3 What is Organization Theory?

Organization theory is the discipline that studies the structure and the design of
organizations. Organization theory refers to both the descriptive and prescriptive aspects
of the discipline. It describes how organisations are actually structured and offers
suggestions on how they can be structured to improve their effectiveness.
Another way of defining organization theory is that it is a body of knowledge about
organizations It is a body of knowledge about organizations which has been developed

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through the scientific method. It consists of concepts, principles, variables and
relationships between variables.
A variable is a word words or a phrase which describes a phenomenon. It describes
something that exists in nature. It describes reality existing somewhere. A tree is a
concept. A man is a concept. An organization is a concept. In organization theory we are
using concepts that describe something about the organization. For example organization
structure is a concept. Another concept is organization environment. Just like concepts in
other disciplines the concepts in organization theory a specific clear and unambiguous.

1.4 Sources of knowledge

(a) Common sense: When people share a common belief then it must be true e.g.
opposites attract, “birds of a feather flock together.” Although common sense
may at times be correct or true, it may sometimes present different versions of
the truth.

(b) Appeal to authority. The second source of knowledge is appeal to authority.

This means that what experts say is correct (is the truth) and it is to be accepted.

(c) Deductive reasoning. This method of building knowledge follows the following
format:-
all short men are clever
Kariuki is a short man
therefore, Kariuki is a clever person

(d) Unsystematic research. This form of creating knowledge entails the carrying out
of research and making conclusions without following a systematic (scientific)
method for example, one may want to find the proportion of cars in Nairobi which
are Toyotas. He or She stops at a main road e.g. Uhuru Highway, counts all the
cars that pass there, in terms of makes and at the end of his research, finds that
Toyotas were 10% of the cars passing through. He/She therefore concludes that
10% of cars in Kenya/Nairobi are Toyotas.

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 (e) Scientific/Systematic Research. In this method of building knowledge, the
researcher follows a systematic (scientific) method which can be tested and
followed by other researchers in order to confirm the findings. In the systematic
method the following steps are necessary:-
Step 1 State study objectives
Step 2 State in detail proposed data collection sources e.g. primary data or
secondary data
Step 3 State data analysis methods
Step 4 State data presentation
1.5 Purpose of Organization Theory
The purpose of organization theory is to explain the component parts of an organization
and their relationships so that some prediction can be made about how they are likely to
behave under certain conditions. It is a way that scholars try to see and think about
organizations based upon patterns and regularities in organization design. It is a theory
that studies organizations, their structure and the relationships between its various parts.
It focuses on organizations as entities in themselves ie the whole organization.
1.6 Management Theory, Organizational Behaviour and Organization Psychology
1.6.1. What is Organizational Behaviour?
Organizational behavior refers to the behavior of people in organizations. It tries to
understand the behavior, attitudes and performance of people in organizations. In
addition it discusses human psychological processes that can affect behavior in
organizations for example it tells us how a system of rewards affects a person’s behavior
and performance in organizations. Organizational behavior derives its concepts from
political science, psychology, anthropology and social psychology
Organizational behaviour as a theory seeks increased understanding of human behaviour
in organizational settings. It seeks to find out how individuals behave the way they do
and how one can change their behaviour and guide them to behave in a certain way. Thus
Organizational Behaviour (O.B) is about individuals (their attitudes, perceptions,
motives). O. B is defined as a field that seeks enhanced knowledge of behaviour in
organizational settings, through the scientific study of individuals and individual

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processes. The goal of such knowledge is to enhance both organizational effectiveness
and individual well being.
1.6.2. What is Organizational Theory?
Organizational theory focuses on the design and structure if organizations. It also looks
at organizations as social systems. The discipline of organization theory derives its
concepts from sociology, and anthropology. Organizational theory therefore studies
organizations from their macro aspects
1.6.3. How does Organizational Theory Differ from Organizational Behavior?
Organizational theory looks at an organization as a whole – its objectives, goals, structure
and context. On the other hand organizational behavior looks at the micro elements of the
organization, the individual worker

1.6.4. What is Management Theory?

Management theory on the other hand is the study of a particular group (managers) in the
organization. How this group behaves, what makes them do what they do and how they
can be made to behave in a way that benefits the organization is in the field of
management theory.
1.6.5. What is organizational psychology?
Organizational psychology is a science of behaviour and mental processes. Psychology is
a study of mind or the soul. Thus in psychology, we study both the mental experiences
such as hunger and thirst or anger and their outward manifestations such as drinking or
aggression.

 1.5 Importance of organization theory

 For people who are or will be managers, organization theory provides significant

insight and understanding to help them be better managers in a rapidly changing

world. For example, one of the greatest threats to organization today is the

inability of management to adapt to the speed and chaos of technological change.

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 Although companies have made massive investments in technology, they are only

beginning to implement the organizational and management changes needed to

make technology and the internet competitive weapons. Understanding

organization theory can help managers make these necessary changes by helping

them see and understand how technology interacts with other elements of

organization and its environment. In a very real sense organization theory can

make managers more competent and more influential by giving them an

understanding of how organizations work. Organization theory provides ideas,

concepts and ways of thinking and interpreting that help the managers effectively

guide their organizations. When the old approaches are no longer working,

organization theory helps managers understand why and develop new approaches

to meet changing conditions. The concepts provided by organization theory helps

managers describe organizations more accurately, concisely and specifically. The

relationships of variables presented by organizations theory help managers predict

outcome of actions taken and propose solutions to organizational problems.

1. 7 What do we mean when we say a theory is a science

1) It is systematically developed
In the systematic development the following steps are necessary:-
Step 1 State study objectives
Step 2 State in detail proposed data collection sources e.g. primary data or
secondary data
Step 3 State data analysis methods
Step 4 State data presentation
Step 5 Obtain approval from the scientific colleagues
A theory which is a science also has the following other characteristics
1) It must demarcate the area to which it applies
2) It must be testable, refutable and falsifiable..

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 3) It must be capable of replication or duplication.
4) Scientific theories are never static, i.e. they all perpetually changing.

1.7.1 Level of analysis

In systems theory, each system is composed of subsystems. Systems are nested within
systems and one level of analysis has to be chosen as the primary focus. Four levels of
analysis normally characterize organizations. The individual human being is the basic
building block of organizations. The human being is to the organization what a cell is to a
biological system. The next higher system level is the group or department. These are
collections of individuals who work together to perform group tasks. The next level of
analysis is the organization itself. An organization is a collection of groups or
departments that combine into a total organization. Organizations themselves can be
grouped together into the next higher level of analysis, which is the inter organizational
set and community. The inter organizational set is the group of organizations with which
a single organization interacts. Other organizations in the community also make up an
important part of an organization’s environment.
Organization theory focuses on the organizational level of analysis but with concern
for groups and environment. To explain the organization, one should look not only at its
characteristics but also at the characteristics of the environment and the departments and
groups that make up the organization.
Organization theory does consider the behavior of individuals, but in the aggregate.
People are important but they are not the primary focus of analysis. Organization theory
is a macro examination of organizations because it analyzes the whole organization as a
unit. Organization theory is concerned with people aggregated into departments and
organizations and with the differences in structure and behavior at the organizational
level of analysis.
A new approach to organization studies is called meso theory. Meso theory
[meso means in between] concerns the integration of both micro and macro levels of
analysis. Individuals and groups affect organizations and the organizations in focus
influence individuals and groups. To thrive in organizations, managers and employees
need to understand multiple levels simultaneously. For example research may show that
employee diversity enhances innovation. To facilitate innovation, managers need to
understand how structure and context [organization theory] are related to interaction
among diverse employees [organizational behavior] to foster innovation, because both
macro and micro variables account for innovation.
Organization theory is directly relevant to top and middle-management
concerns and partly relevant to lower management. Top managers are responsible for the
entire organization and must set goals, develop strategy, interpret the external
environment and decide organization structure and design. Middle management is
concerned with major departments such as marketing or research and must decide how
the departments relate to the rest of the organization. Middle managers must design their
departments to fit work-unit technology and deal with issues of power and politics; inter
group conflicts and information and control systems each of which is part of organization
theory. Organization theory is only partly concerned with lower management because this
level of supervision is concerned with employees who operate machines, type letters,

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teach class and sell goods. Organization theory is concerned with the big picture of the
organization and its major departments.

1.6. The Meaning of an Organization

An organisation is a consciously coordinated social entity with a relatively verifiable
boundary that functions on a relatively continuous basis to achieve a common goal/ or
goals. This definition brings out certain facts about an organization. These facts are that
organizations are:
 Consciously coordinated This implies that management deliberately allocate
tasks and responsibilities.
 Social entity This implies that the unit is composed of people or groups of
people who interact with each other while performing their various tasks. The
interaction pattern that people follow in an organisation does not just emerge
rather it is meditated
 An organisation has a relatively identifiable boundary. This boundary exists to
identify members from non- members. Members enter into explicit and implicit
contracts with the organisation.
 People in an organisation have some continuity or bond.
 Organisations exist to achieve certain goals.
1.6.1 Characteristics of organizations
All organizations exhibit the following characteristics:
(a) Composed of people who interact with each other
(b) Have identifiable boundaries.
(c) Are consciously coordinated and structured.
(d) Are relatively continuous. I.e. are established to last.
(e) Have goals, which they strive to achieve.
(f) It is a system: i.e. it is composed of subsystems or parts which constitute a
unitary whole.
1.6.2 Benefits of organisations
In this section we wish to find the answer to the question” why do we study
organizations?”

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Organisations pervade all aspects of contemporary human life – society as a
whole, the economy and even our personal lives. You may be interested in
pursuing a career in management. As a manager you may want to know how
organisations operate and how to structure them so that they become effective.
You may also want to pass a required course in a university or college – thus
you may have to study organisation theory. Organisations also satisfy us with
our needs which include:
(i) Basic needs (biological needs)
These are the needs necessary to maintain life. They include the need for
food, water and shelter. Many organisations are formed to satisfy the
biological needs.
(ii) Social needs.
These are needs that satisfy man’s desire for love, affection, social
acceptance, recognition and self-fulfilment.
(iii) Economic utilities: - these are the goods and services that provide
man with material well-being. The food he eats, the car he drives, e.g.
are examples. Other economic utilities include roads, education and
medical services.
(iv) Political utilities: - these refer to the benefits man receives associated
with political stability, national defence, security and internal stability.
(iv) Social utilities: - these are benefits attained through association with
other people e.g. sense of belonging, talking with other people and
social contacts, provides man with some of his most gratifying
experiences.
(v) Religious utilities: - helps man to find answers to questions on death,
life, morality and the universe.
(vi) Aesthetic utilities: - these help a man achieve his desires in art and
music.
(vii) Time utilities: - compared with an individual effort, an organisation
can make available a good for use by an individual within a short time
what would take years for an individual to manufacture. For example

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 one individual would take years if not decades to make an aeroplane
but through the use of an organisation, the same can be made within a
year or less.
(viii) Place utilities: - these are benefits enjoyed by people who live in
different climates of goods produced in another climate for example an
individual living in a cold climate e.g. Greenland is able to enjoy a cup
of coffee grown in a hot climate.
(ix) Form utilities: - a manufacturer who sells a pick-up vehicle to a
farmer exemplifies this. The manufacturer converts raw materials into
the form of the truck for the farmer who needs to know nothing about
the manufacturing process.
These utilities overlap. To some extent there can be a trade-off of
utilities. In other words, more or less of some utilities can be traded for
more or less of other utilities. For example economic utilities might be
used with political utilities. In similar version, a political utility can be
used as a way of making an economic utility.
(x) Organisations also store utilities: Organisations permit society to
create and store advances in knowledge and technology and to pass
them along to succeeding generations; thus with organisations, it is not
necessary to re- invent the wheel or other technological, social and
cultural advances. This permits rapid and higher level of technological
advancement as succeeding generations start from a higher level.
(xi) Organisations enable human beings to enjoy consumer surplus.
Consumer surplus is the difference between the total utility the
consumer receives from a quantity of a good and the total price he
pays for that quantity. Let us explain this further. The law of
diminishing marginal utility postulates that the first unit of a good has
more utility than the second unit of a good For example suppose the
utility of the first glass of milk to a hungry customer is kshs 30 while
the utility of the second glass is Kshs 28 and so on as depicted in the
table below. Customer surplus is the difference between the price he/

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 she pays for the glass of milk and the utility of that glass of milk to the
consumer.
Table1: Calculation of the consumer surplus
Unit numbers Utilities (utils) Price paid( kshs) Consumer
surplus( kshs)
1 30 15 15
2 28 15 13
3 26 15 11
4 24 15 9
5 22 15 7
6 20 15 5
7 18 15 3
8 15 15 0
Total 55

(a) Other benefits of organisations

In addition to the benefits cited above organizations do provide the following other
benefits

 They bring together resources to achieve desired goals and outcomes.

 They are able to produce goods and services efficiently.
 They facilitate innovation and creativity.
 They enable the use of modern technology.
 Are able to adapt to and influence a changing environment.
 They create value for owners, customers and employees.
 They accommodate on-going challenges and diversifying ethics and the
motivation and coordination of employees.
 They are able to accommodate and utilize ethnic and other diversities among
organizational participants
1.6.3 Creating an Organization
1.6.3.1 How is an organization formed or created?

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An organization is formed or created through the process of entrepreneurship.
Entrepreneurship is the process by which people recognize opportunities to satisfy their
needs and then gather resources to meet those needs.

How does an organization create value to its founders?

Value creation takes place at three stages. Each stage is affected by the environment in
which it operates. The environment is the set of factors or forces and conditions that
operate outside an organization’s boundary but affects its ability to acquire and use
resources to create value.

The three stages of value creation by organization are:

Stage 1: The organization obtains inputs from the environment to create value to its
owners. Inputs include raw materials, machinery, human resources, financial resources,
information and knowledge and customers. The way an organization chooses and obtains
from its environment the inputs it needs to produce goods and services determines how
much value the organization creates at this input stage.

Stage 2: This stage is the transformation process. Here the organization processes inputs
and adds value to them. The way the organization uses the human resources and
technology to transform inputs into outputs determines how much value is created at this
conversion stage. The amount of value created is a function of the quality of the inputs,
the skills of the human resources and the ability to learn from and respond to the
environment.

Stage 3: The result of the conversion process is the output of finished goods and services
that the organization releases to its environment. The organization uses the money it
receives from the sale of its outputs to obtain new supplies of inputs and the process of
value creation is repeated.

Why do organizations exist?

Organizations exist because people working together to produce goods and services
usually can create more value than people working separately. The collective nature of
organizations allows individuals to specialize and therefore become more skilled or
specialized in what they do. Organizations are also able to take advantage of economies
of scale and scope. Economies of scale are cost savings that result when goods and
services are produced in large volumes on automated production lines. Economies of
scope are cost savings that result when an organization is able to work under-utilized
resources more effectively because they can be shared across different products or tasks.

Organizations also are able to manage the challenges of their external environment.
Managing external environment is beyond the abilities of individuals but the organization
has the ability, the resources and the skills to manage the complexities arising from the
external environment. When people cooperate to produce goods and services, certain
problems arise. As they learn what to do and how to work with others to perform a task
effectively, people jointly have to decide who will do which task (division of labour) who
will get paid what amounts, and how to decide if each co-worker is doing his or her share

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of the work. The costs associated with negotiating, monitoring, and governing exchanges
between people to solve those kinds of transaction difficulties are called transaction costs.
Organizations’ ability to control the exchanges reduces the transaction costs associated
with those exchanges. Finally organizations can exert great pressure on individuals to
conform to task and production requirements in order to increase production efficiency.

Why organizations exist

Increase specialization
and division of labour

Use large scale

technology
The use of an
organization Which increases the
allows people Manage the external value that an
jointly to environment organization can
create

Reduce transaction costs

Exert power and control

Source: Jones, G. R. (2010) Organizational structure, design and change, sixth edition,
Pearson, London

1.7. Relationships in Organisations

In almost all organizations the following relationships are likely to exist:
 Accidental Relationships
 Parasitic Relationships
 Mutual Relationships
 Transcendental Relationships
Let us now briefly explain each of these;
1.7.1. Accidental relationship
This is an association in which no participant deliberately associates with another, yet
from such an association benefits often accrue to at least one participant. For example a

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man who happens (without planning the association) to walk down the street of a crime
ridden neighbourhood at the same time with a policeman is less likely to be hurt or
robbed by his assailants because of his association with the policeman which occurred
merely by accident. In a business scenario, this can occur when an executive of a clothing
store gets an idea for a new type of garment from two charting ladies in the street.
1.7.2. Parasitic relationship
This type of relationship exists when one gains from an association at the expense of
another. For example a flea gets its nourishment from its host- a dog, a cat or a human
being. In a business organisation, a parasitic relationship exists when one organisation as
a matter of policy receives support, advantage or service from another without payment
or proper return.
At another level, a relationship where work is extracted for less than appropriate pay is
parasitic. Another parasitic relationship can be demonstrated by firms which conspire to
form a monopoly and charge unreasonable prices to customers.
1.7.3. One-Way relationship
In this relationship, one party benefits without harming or helping the other. The one
providing the benefit indifferently tolerates the one benefited. Here the relationship is
deliberate at least on the part of the benefited one. An example is a business organisation
that goes about its normal business while permitting itself to be observed by a student.
However, for this relationship to be one- way, the organisation being researched must not
expect any form of benefit- including a copy of research project.
1.7.4. Mutual relationship
This relationship is both deliberate and mutual for both parties. Both parties expect to
benefit from this association. Most relationships in nature are mutual or mutually
beneficial. In most business organisations relationships are mutual. Both expect to make
profit. In addition, the relationship between the organization and its employees is mutual.

1.7.5. Transcendental relationship.

This type of relationship calls for much more than mutual. It requires the participants in
the relationship to aspire for more than their individual benefit or profit. The participants
in a transcendental relationship aspire for benefits to accrue not only to him and his

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partner but also to other individuals, organisations and society not directly associated
with the relationship. In a transcendental relationship, a person acts in such a way that his
advantage will also be the other’s advantage rather than his advantage being other’s
disadvantage. Achieving transcendental relationships in organisations offers a great
challenge in the human society. Nevertheless the advantages are great. In nature,
transcendental relationships can be seen in animals when it leaves its meat (after being
satisfied) to others. In the human society it requires an exceedingly high degree of
personal honesty and responsibility which for some reason, God has not bestowed upon
many humans.
1.9 Inter organizational relationships
1.9.1What is inter organizational relationship
Interorganizational relationships (IORs) are the relatively enduring transactions, flows,
and linkages that occur among or between an organization and one or more organizations
in its environment.
1.9.2 Inter organizational Relations Theory
 Addresses change across organizations
 Focuses on how organizations work together
 Based on the premise that collaboration among community organisations leads to
a more comprehensive, coordinated approach to a complex issue that can be
achieved by an organization
 Provides a useful foundation for understanding and enhancing community
organizations relationships
1.9.3 Factors Leading to the formation of an inter organizational relationship
 Recognition of the need to coordination and interdependence
 Mandate from a funding or regulatory agency, clear and mutually shared goals,
values, interests and norms
 Positive previous experience in working together
1.9.4 Benefits of an inter organizational relationship
 Access to new ideas, materials and other resources
 Reduced duplication of services
 More efficient use of resources

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  Increased power and influence
 Ability to address issues beyond a single organization domain
 Shared responsibilities to complex or controversial issues
1.9.5 Costs of collaboration
 Diversion of organizational resources or mission
 Incompatibility with partner organizations policies or position
 Delays in taking action due to consensus building
1.9.6 Critical Conditions of Relational Formation
Based on an integration of IOR literature from 1960 to 1990 six critical contingencies of
relationship formation are:
1. Generalizable determinants of IORs across organizations, settings, and linkages
2. Necessity
3. Asymmetry
4. Reciprocity
5. Efficiency
6. Stability
7. Legitimacy
1.10 Complexity of organizations
Organizations are complex structures. This is because they are composed of complex
beings in the form of human beings. Human beings bring their diversity, their
temperament, and their attitudes in to the organization making quite a complex whole.
Human beings are basic building blocks of organisations. Human beings are biological
rather than machine systems. Consequently, organisations are extremely complex
systems far more complex than other systems. The human organisation has many
characteristics of simpler systems but it also incorporates new forms of complexity. The
sources of these complexities are characteristics formed in human groups which include:
o Norms and values which are intangible and hard to detect.
o Cultural dimensions such as music and art.
o System elements (human beings) display awareness.
o The structure of elements and roles continuously changes.

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 o Information is processed through abstract forms of language, symbols and
meaning systems.
Organisation managers must be sensitive to social system complexity if they are to
understand and cope with organisational systems. In the human organisation, a large
number of dimensions interact so that it is impossible to completely understand and
predict future behaviour. These dimensions are interconnected so that changing one
element affects the whole system.

1.9. Informal and Formal Organisations

Informal organizations that are also referred to as work groups are:
o Formed in every formal organisation by its members.
o Parallel to the formal organisation.
o Are a shadows of the formal organization

1.9.1 Why do informal organisations arise?

In almost all organizations informal organizations exist to serve the following purposes:
o To satisfy social needs.
o To provide a sense of belonging.
o To provide information on approved behaviour.
o To provide a sympathetic ear.
o Assist individuals in meeting objectives.
o To provide opportunity for influence and creativity.
o To enable members to perpetuate cultural values.
o Provides the members with an additional channel of communication.
o Provides satisfaction and stability to members.
o Compensates for managerial limitations.

1.9.2 Comparison of informal and the formal organisation.

o Goals. The informal organisation also has goals that could either be congruent to
those of the formal organisation or not.

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 o Norms. A norm is a standard of behaviour expected from group members. Formal
groups have norms and so do informal groups. However, the pressure to conform
to the informal group member’s norms is greater.
o Role. A role consists of the total pattern of expected behaviour. In the formal
organisation, it includes but goes beyond the official content of the job
description. Informal group members are also expected to have a role. Whether
or not the informal group supports the role of group members, has a major impact
on the role of members in the formal group.
o Leadership. In the formal organisation leaders (or managers) are appointed. The
formal group leaders emerge from the group; there is no formal title attached to
the individual.
o Structure. A formal organisation has a structure- an organisational chart,
hierarchical and horizontal differentiation and formal coordinating mechanisms.
In the informal organisation there is also a structure, with hierarchical levels and
horizontal differentiations. However, there are no formal structures or coordinating
mechanisms. Differentiation is informal.
o Cohesiveness. This refers to the degree of attraction that the group has for each of its
members. This is important in both the formal and informal organisation.
Cohesiveness is measured by such things as loyalty to the group, feeling of
responsibility for a group effort, defending against outside attach, friendliness, e.t.c.
In the informal group, cohesiveness is usually stronger.
o Size. The size of the formal work group is determined by the need of the organisation.
The size of the informal group is determined by the size of the formal group. The size
of the informal group is usually smaller.
o Synergism. In the formal group, the concept of synergism achieves greater
importance.

1.8.3. Benefits of the informal organisation

 Assists in accomplishing work in organisations

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  Helps to remove weaknesses in the formal structure e.g. where a manager has
given orders which may be inconsistent with organisational needs e.g. 8.00 to
5.00 pm.
 Lengthens the effective span of control by exchanging knowledge and experience
within the group, workers are able to learn what is expected of them without
needing supervision.
 Compensates for violations of formal organisation principles for example a
manager may need the help of an employee to achieve efficiency or effectiveness.
 Provides additional channels of communication to some extent, which is faster
and accurate.
 Provides emotional support to employees which is necessary for efficient
performance for employees but which the formal organisation does not provide.
 Encourages better management. The acceptance by managers of the fact that
formal structures alone may not lead to efficiency in their organisation.
1.9.4 Dysfunctions of informal organisations
 May work counter to the purposes of the formal organisations especially when the
formal group goals are counter to the organisation’s goals.
 Reduces the degree of productivity and control by managers .Due to the influence
of the informal group on members behaviour, the manager is unable to control the
members, nor predict outcomes
 Reduces the number of practical alternatives. The solidarity developed in the
informal groups strengthens their cohesiveness and thus reduces manager’s ability
to change the groups of workers.
 Increases the time required to complete activities. Informal workgroup behaviour
such as gossiping, consultations, long coffee breaks, e.t.c are time consuming and
can lead to delay in task completion.
 Resistance to change. To the extent that change can affect informal groups they
will resist change. Therefore assuming change is functional, then any resistance to
the change is dysfunctional.
o Source of rumours.
o Group conformity to unacceptable standards.

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1.9.5 Managing informal organisations.
When managing organizations managers should be guided by the following
principles;
o Compatibility Try to set organizational goals that are compatible with those of
the members of the informal group
o Influence. Try to influence the informal group members rather than forcing
o Togetherness. Try to work together with the informal group members for the
interests of both the formal and the informal organizations.
1.9.6 Characteristics of informal organizations.
Standards of behaviour. Just as formal groups develop laws, taboos and beliefs about
what is right and wrong so does the informal group.
Pressure to conform. Informal groups apply pressure to members to conform to group
norms.
Informal leadership. Informal groups have leaders who guide and direct the
members through persuasion and influence.
Status systems. Informal groups also display status differences. Status is a differentiation
of social position from associates. It is the amount of prestige a person has and
defines the person’s position in terms of importance in the group. Status depends
upon the following factors:

a) External factors- these are factors that the individual brings to the organisation.
such as sex, education, age ethnicity and personality.
b) Internal factors- These are determined by the job one has e.g. job title, pay, and
work schedule.

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 LECTURE TWO
ORGANIZATONAL GOALS

Introduction
In this lecture we are going to discuss the concept, types, and functions of goals and the
various techniques of goal formulation. We shall also discuss the main approaches used
to measure goal efficiency and effectiveness.

Definition of Goals
An organizational goal is a desired state of affairs which the organization attempts
to realize. It is that future state of affairs which the organization as a collectivity is trying
to bring about. It can also be defined as a state of affairs or situations which does not
exist at present but is intended to be brought into existence in the future by the activities
of the organization. A goal or purpose is an unrealized state or condition that the
members deem desirable.
All organizations are established for a purpose. This purpose may be referred to as
a goal or mission. Different parts of the organization establish their own goals and
objectives to help them meet the overall goal, mission or purpose of the organization.
The overall goal for an organization is often called the mission – the organization’s
reason for existence. The mission describes the organization’s vision, its shared values
and beliefs, and its reason for being.
The mission is sometimes called the official goals, which are the formally stated
definition of business scope and outcomes, the organization is trying to achieve. Official
goal statements typically define business operations and they may focus on values,
markets, and customers that distinguish the organization. Whether called a mission
statement or official goals, the organization’s general statement of its purpose and
philosophy is written down in a policy manual or the annual report.
In each of the above definitions, it is important to note that there are two elements
that goals describe. These elements are:
Future desired end results to which
Present efforts arte directed

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Both the terms “goals” and “objectives” are considered to have the same meaning in this
context. Other aspects of goals are the following;
Goals are ideal states
Goals represent targets established at certain points in time therefore it is inevitable
that actual performance of organisation tends to be less consistent and less perfect
than anticipated.
Sometimes the goals may be too low, harmful or otherwise misplaced.
Thus it would be meaningless to evaluate organisations in terms of effectiveness
using such types of goals.
Most organisations are multifunctional and they generally seek to accomplish
several different goals at the same time.
The realisation of one goal may inhibit the attainment of another. For instance, a high
rate of return may be well achieved at the expense of long-term organisational
growth. Thus, effectiveness in the attainment of one goal may be inversely related to
effectiveness in attainment of another.
Assessment of effectiveness on the basis of goal attainment depends upon the
extent to which goals are measurable.
While some goals are easily measurable e.g. sales, number of production units,
profitability, many organisations do not have such identifiable objectives. Service
organisations such as social welfare agencies and voluntary associations are examples
of organisations with non-measurable goals.
Interpretation of some goals is also subject to wide differences of interpretation.
Despite such problems however, the goal attainment remain an important measure of
organisational effectiveness.

3.4. Official and Operative Goals

a) Official goals refer to:
 The formally stated outcomes that the organisation states it is trying to achieve.
 What the organisation should be doing, the reason it exists and the values that
underlie its existence

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  Aims normally written down in a policy manual in a charter or in the annual
report.
 Goals emphasised in public pronouncements by the top officials of the
organisations.
 Goals that describe a value system.
 Goals that serve the purpose of legitimising the organisation to the various parties
such as customers, taxpayers, suppliers and employees.

Official goals are therefore the general purposes of the organization as put forth in the
charter, annual reports, public statements by key executives, and other authoritative
pronouncements.

b) Operative goals on the other hand represent the real aims of the organisation. They:
- Designate the end results sought through the actual operating policies of the
organisation.
- Tell what the organisation is actually trying to do regardless of what the official goals
say are the aims.
- Describe desired operational activities and are often concerned with the short run
Operative goals designate the end results sought through the actual operating procedures
of the organization and explain what the organization is actually trying to do. Operative
goals describe specific measurable outcomes and are often concerned with the short run.
Operative goals represent actual goals, while official goals represent stated goals.
Operative goals pertain to the primary tasks an organization must perform. These goals
concern overall performance, boundary spanning, and maintenance, adaptation, and
production activities
Operative goals are therefore the ends sought through the actual operating policies of the
organization; they tell us what the organization is actually trying to do regardless of what
the official goals say are the aims.
An example of an official goal is the one often stated regarding prisons. The prisons in
most countries are said to have the official goal of rehabilitating the prisoner. However in
actual practice the operative goal is to provide custodial care and to punish the offender.

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Official goals perform an important role in organizations. They give the organization a
favorable image and thus provide a source of legitimacy and hence justify its activities.
However, most organizations end up practicing operative goals rather than official goals
because:
i) Organizational members lack knowledge of what the organization’s official
goals are.
ii) Perceptions about how best to accomplish official goals differ between the
different organizational participants.
iii) Stated official goals cannot be achieved for financial and other reasons.
iv) The operative goals of an organization are the outcome of complex exchanges
between individuals and groups pursuing a diversity of aims.
v) While the official goals of an organization may remain unchanged over time,
the operative goals of an organization at different points in time may well vary
substantially as a sequence of the exchanges between the individuals.
vi) Some organizations also purposely avoid articulating specific goals so as not to
attract potential competition or become a focus of opposition groups.
.
3.5 Types of Goals
There are many ways of classifying goals, one way, discussed by Perrow, classifies goals
into five categories according to “whose point of view is being recognized”, that of
society, the customer, the investor, the top executive or others. Thus organizations may
be said to have:
a) Societal goals: The point of view recognized here is that of society in
general. Societal goals relate to the goods produced and services provided by
an organization to enhance general welfare, maintain order, and generate and
maintain cultural values.
b) Output goals: The point of view being recognized here is that of the
public for which goods are produced or services provided. Examples would
be the creation of consumer products, business services health care, and
education programs.

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 c) System goals: The point of view being recognized here is that of the
organization itself and the manner in which it functions, independent of the
goods it produces or services it renders. Examples would be the goals of
growth, stability, profit and market share.
d) Product Goals: The point of view being recognized here is that of the actual
good or service which is produced or provided. Product goals relate to the
characteristics (quality, styling, uniqueness, variety) of the goods and
services in question.
e) Derived Goals: The point of view being recognized here is that of the top
management of an organization, and what it chooses to do with the power
and resources it accumulates while pursuing other goals. For example top
management may use its power and wealth to further certain political aims, or
to support the arts or higher education, or to contribute to the personal
development of its employees.

You could also classify goals to help you catalogue what you know about goals and
the role they play in organizational life. One scheme of classifying goals was proposed
by R.C. Davis in his classic, The Fundamentals of Top Management. A summary is
presented in Table 2.1 below.

Table 2.1 Classification of Objectives

Type of objective Focus Serves Example

Primary Production and Primary beneficiary To increase sales of
distribution of groups. widgets by 10% by
goods and services. end of fiscal year
1990.
Secondary Support functions to Secondary To meet all major
achieve production beneficiary groups. occupational safety
and distribution of and health standards
goods and services. (OSHA) by 1990.

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Short Term One year or less Primary and To reduce the
accounting cycle. secondary groups. number of quality
control rejects by
20% within the next
12 months.
Long Term Two to twenty years Primary and To increase market
or more. secondary groups. share to 31% by
January 1995.
Equilibrium Maintain status quo Primary and To maintain market
with environment. secondary groups. share at 10%
through 1995.
Improvement Increase operating Primary and To reduce electrical
efficiency and secondary consumption
effectiveness. beneficiaries. (Kshs.) by 15% by
January 1.
Explicit (formal Publicly stated External groups and To increase hiring
official) top management. of minorities by
10% by January 1,
1991.
Implicit What people Operational To fill six positions
(operational, actually work managers. as soon as possible.
unofficial) toward.

Source B.J. Hodge and William P.Anthony1988 page 276

Primary Objectives:
These are objectives that are tied directly to satisfying the needs and desires of the
organization’s primary client group (primary beneficiaries). Whatever type of
organization is considered, it is basically established to provide goods and services to
some special group that may be called the primary client group.
This primary objective is of paramount importance to the organization because it
establishes the base for defining other supporting objectives by setting the basic purpose

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of the organization. Also it can be a determining influence on the structure and process
used in the organization. It sets the stage for an organization’s operations because the
process, technology, and even personnel are selected on the basis of what is required to
produce and distribute products and services that will satisfy primary client needs and
desires.

Secondary Objectives
All organizations must satisfy the needs and desires of a variety of secondary client
groups, and these needs and desires become the basis for determining the organization’s
secondary objectives. For example the organization’s employees expect certain utility
from the organization in return for their contribution to it. This utility can take many
forms, wages and salaries, pleasant working conditions, and a host of fringe benefits, are
but a few examples. Whatever form they take, however, secondary goals are the personal
goals of secondary client groups that can be satisfied only if the organization concentrates
on providing utility that the group desires.

Short -term and long-term objectives

This classification is not a new category per se, but a different way of looking at primary
and secondary objectives from the view point of establishing some sort of time boundary
for them.
Short-term goals Are those that the organization hopes to accomplish within a year.
Accounting cycles are often used as the time frames for these short term goals. The
organization then strives to attain this type of goal within the bounds of its accounting
cycle.
Long-term goals Are those that cannot be accomplished within the time frame of year or
so. A few years ago, long-term ranged from five to ten years. Now that period has been
prolonged to range up to twenty years. The reason for this is that technology has greatly
increased management’s ability to forecast. Whatever its definition, the long-term
objective of an organization will provide the overall direction for it for a considerable
number of years. It is important to keep the long-term objective in mind when setting
short term objectives so that their accomplishment can directly contribute to the

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attainment of long term goals. At the same time, it is important for management to
review the long term goals each year in order to reaffirm or alter them as the base for the
future direction of the organization, whether the organization deserves to be in a state of
equilibrium or improvement.

Equilibrium Objectives
Those organizations that wish to remain in or achieve a steady state will develop what
might be termed equilibrium objectives. These objectives are such that their attainment
would allow the organization to preserve its relative share of the market and its relative
share of resources over time. Basically, an organization that adopts equilibrium
objectives makes a conscious decision also to adopt the adaptation strategy for staying in
tune with its macro environment. This means that it will monitor this environment with a
view to making internal changes that will allow it to remain in consonance with outside
pressures. This means that the organization is in a reactionary mode in that it is reluctant
to adopt objectives that would require shaping or molding the macro environment.

Improvement Objectives
The desire to improve operations and to accomplish projects more efficiently is one of the
universal goals of most organizations. So for reasons of efficiency, conservation and
tradition, today’s organization counts the improvement objective among its goals.
Explicit Objectives
Organizations frequently set formal, official objectives that are printed and circulated
primarily to those outside the organization (e.g. owners, government, or the media).
These might appear in the annual reports, in press releases, or in other organization
pronouncements. These objectives may not even be the actual objectives of the
organization. They may be formally stated only for public – relations purposes.
Implicit Objectives
The actual or unofficial objectives that the organization works toward in reality might be
different from the formally stated. This might occur for several reasons.

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  Lower – level managers may not be aware of explicit
objectives and may therefore formulate their own objectives.
 Explicit objectives may be deemed unrealistic or
unattainable, and less ambitious ones may be implicitly set.
 Personal objectives of managers may cloud or even
negate formal objectives.

For whatever reasons, it is important to note that formally stated objectives may not be
the actual objectives that guide behavior in organizations.
3.6 Functions of Organizational Goals
Viewed in broad perspective organizational goals perform several important functions
which vary according to time and circumstances among other things. Organizational
goals perform the following functions:
a). Guidelines for action By describing future desired results, goals serve as guidelines
for action, directing and channeling efforts and activities of organizational participants. In
this regard, goals provide focus, and direction for organizational activity by prescribing
what should be done.
b). “Constraints” To the extent that goals prescribe what “should be” done, they also
serve to prescribe what should not be done. An organization that commits itself to certain
goals reduces the amount of discretion it has, to pursue other outcomes. For example, an
organization that commits itself to maximizing immediate stock holders’ dividends in
effect reduces the amount of financial resources available for expanding production
capacity or investing in research and development of future products, Thus, by their
nature, goals function to constrain the activities of organizational participants.
c). Source of legitimacy Goals also provide a source of legitimacy for an organization by
justifying its activities and indeed its existence to such groups as customers, politicians,
employees, stockholders and society at large. Prominent examples of organizations and
their stated official goals that provide legitimacy include: Hospitals – provision of
medical services aimed at cure, and prevention of diseases. Prisons and mental
hospitals – therapy and rehabilitation Churches – divine worship and spiritual salvation

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Universities – teaching, research and public service Recognition of legitimacy greatly
enhances an organization’s ability to deflect critics and obtain resources and support from
its surrounding environment. This largely explains the fundraising success of such
organizations as the Girl Guides, Boy Scouts, The Salvation Army, and the Red Cross.
d). Standards of performance: To the extent that goals are clearly stated and understood
they offer direct standards for evaluating an organization’s performance. Once an
organization establishes goals in such quantifiable areas as sales, market size, or profit,
the degree to which they have been obtained should be easily verifiable.
e) . Source of motivation: The goals of an organization can serve as an important source
of employee’s motivation and identification. In fact organizational goals give incentives
to members. This phenomenon is clearest in organizations that offer their members
bonuses for achieving specified levels of sales, or whose pay schemes are tried directly to
annual profit.
f). Rationale for organizing Organizational goals provide a basis for organizations
design; organizational goals and organizational structure interact in that the actions
necessary for goal accomplishment may impose unavoidable restrictions on employees
activities and resource initialization patterns, necessitating implementation of a variety of
organizations design elements; communication patterns, control mechanisms
departmental structures etc. for instance, the more the goals of a functionally structured
organization call for diversification, the greater will be the need to evaluate alternative
structural arrangement such as product or customer departmentalization.
3.7 Goal Formulation
3.7.1 Responsibility for goal setting
The process of setting organizational goals should ideally begin at the top levels of
the organization in order to set the basic direction for an entire organization. However,
even though the ultimate responsibility for goal setting rests with the top management
group, it is important that they gather sufficient input from within and without the
organization to make intelligent decisions about the goals that the organization will seek.
First-line managers and production workers can add valuable input to production oriented
goals, and the same can be said for sales managers and the sales force about establishing

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sales goals. These members are most familiar with the conditions surrounding the
process of goal achievement.
The management group at every level should set goals for their respective
departments and divisions. Goal setting should be shared, involving all members of
management and often non-managers as well, depending on management philosophy,
technology and so on. Often objectives are set by a dominant coalition of managers,
experts, or those with special interests and influence in the organization. These
individuals might not, in fact, be charged with the formal responsibility for goal setting,
nevertheless they can be very influential when it comes to establishing those goals toward
which the organization works, both formally and informally. Because of the impact,
actual as well as potential, that it can have on goal setting, the dominant coalition must be
considered when goals are being set.
3.7.2 Determinants of organization goals
The following are some of the major factors that organizations must consider when
setting goals:
a) Consumer needs:
All organization exist to serve some consumer groups (primary beneficiaries) so they
must carefully identify those people they will attempt to serve. A clear understanding of
these consumer needs is necessary for a management group to establish primary
organization goals. In addition, the organization should examine the needs of secondary
beneficiary groups. In this way there can be an integrated set of goals aimed at satisfying
primary consumer groups that also takes into account the needs of the secondary groups
such as government, distributors, and so on.
b Technology:
Organizations tend to change their goals to accommodate technological advances. The
classic example is this; once it became generally available, organizations began to change
goals in accordance with the computer. Production and sales quotas were revised upward
as technology made more rapid and efficient production and distribution possible. Such
actions were tied to goals affected by the availability of the computer and its capability of
increasing organizational efficiency.

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 c Resources:
Having the most critical aspects of goal setting is recognizing the role of resources. It is
not practical for instance to set objectives that require more resources than the
organization can reasonably expect to acquire.
d Management philosophy:
Because top management is ultimately responsible for establishing the organization’s
goals, the values that this group holds will exert a major influence on the statement of
goals. This set of values guides all management’s decision making, and it is recognized
here that goal setting is a major choice area. The goals of an organization can even be
taken as a reflection of the values that the management group seeks for the organization
since goals represent a desired end-state of the organization.
e Practices of others:
Often an organization sets its goals in response to what others in its industry are doing.
For example, when a competitor brings out a new product, others in the industry must
take this into account when setting sales and production goals for the coming period. For
example, in order to attract students as well as faculty, universities try to bring out new
courses and majors in response to the practices of other colleges and universities. In fact,
the goals of others can actually determine the goals of an organization.
f Mandates;
Occasionally, organizations are mandated, in effect, to set a particular goal. This can be
demonstrated in the case of the Environmental Protection Agency (EPA) of the U.S.
Government. When setting goals that can affect the environment, organizations must
abide by the rules and regulations of the EPA. Environmental impact studies must be
conducted to measure the projected effect of certain construction projects. For example in
cases such as housing developments, the developer must establish a goal to protect the
surrounding environment. Manufacturers are required to observe certain protection
standards. Mandates then can have a significant impact on the entire process of goal
setting and measurement.

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3.7.3 Goal Setting Techniques
Officially, organizations often have a formal and explicit means for establishing goals,
whether by a vote of the shareholders or the board of directors or by some other means.
In actuality, the setting of goals or objectives is often quite different from the formal
means that the organization espouses. In reality there are many factors that come into
play in establishing goals; internal policies frequently exert a great influence on the
process. A strong group or an individual in a key place can exert an inordinate amount of
influence on setting goals and also on determining their priority once they have been
selected. The following sections briefly discuss the main techniques that can be used to
establish organizational goals and the priority placed on them.
Conflict Setting goals by conflict can create the type of discussions that result in the
development of an effective base for conflict resolution. This means that conflict can
provide the impetus for the type of interaction that brings out the factors affecting the
goals of all parties. Without the conflict one of the parties might set a good goal that
would require the other(s) to set either sub-optimal or unreasonable goals. Conflict,
because it does focus attention on its own resolutions, points out the way to effective goal
setting. Unchecked, conflict can be potentially disastrous to an organization, and yet a
healthy level of conflict can bring pressure on the setting of realistic goals. A
management group can use it as a process to bring about the establishment of a sound
goal program for the organization.
Compromises: It is not unusual for managers to set goals that are quite ambitious in
their initial form in order to establish a base for compromise as well as for an increased
share of resources. Every organization has its own set of rules for such practices, and
these rules of the game play an important role in setting courses of action for the
organization. Managers who expect to use compromise set a given level of goal in the
hope of bargaining away some of the advantages that might be associated with this level
for other benefits. For example, a college administrator might set the goal for his or her
unit’s share of capital funds at an optimistic level in the hope of bargaining with superiors
for a larger share of current expense money. In other words, there is a deliberate attempt
to establish a base from which to retreat in an effort to gain an overall advantage through
compromise.

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Cooptation: When an organization or a group of people absorb another, the act is
termed cooptation. As mentioned earlier, this can be seen when a company becomes a
member of a larger organization. It is customary for its goals to be set in accordance with
guidelines furnished by the parent organization. This means that the goals of the parent
will determine to a large extent which goals of the members will fit into the overall, goal
structure of the conglomerate. The goals of an organization itself can be affected by the
practices of its members. The management of the conglomerate must take the conditions
and objectives of all its members into account when setting the goals of the entire
organizations. Therefore cooptation can be viewed as a two-edged effect, with influence
flowing from the top and the bottom of the organization.
Coalitions
While discussing the concept of organizational goals, it must be made clear that
organizations as such cannot have goals except in a purely metaphorical or figurative
sense. Attributing such things as goals and needs to organizations places us in a position
of treating organizations as having anthropomorphic (human) characteristics it does not
possess. In reality, organizations are mental abstractions, incapable of having an
existence and behavior independent of the behavior of their members. In other words,
people have goals, organizations do not. At the same time, the opposite extreme of
equating the goals of an organization with the sum total of the purposes and needs of its
individual members is also unacceptable. The personal goals and motives of an
organization’s members may or may not be the goals of the formal organization. If
organizations per se cannot be said to set and pursue goals, and if the goals of an
organization are more than the simple sum of the personal goals in the organization, how
then are the goals of an organization formulated? In an effort to explicitly deal with this
apparent goal setting dilemma, Cyert and March (1963) propose an alternative
conceptualization of organizations and organizational goal setting. Rather than viewing
organizations as integrated entities, they are seen as being comprised of interacting
interest groups or coalitions that make competing claims on an organization’s resources.
According to this model, organizational goals are determined by continued bargaining
among various groups attempting to ensure that their differing interests are represented.
For example stock holders bargain with employees over the relative division of profits,

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and departmental units bargain with one another for increased prestige and status. As a
consequence of such exchanges, organizational goals represent compromises reflecting
the relative power of various organizational coalitions. Power and thus influence is
achieved through control over critical events and essential resources. This approach
emphasizes that the impact of organizational goals or organizational action is mediated
by a continual process of bargaining in which various coalitions attempt to protect and
advance their special interests. This suggests that organizations do not necessarily
formulate goals and subsequently allocate resources based on rational criteria, but rather
on political influence. The impact of coalitions is not equal. A coalition or sub-group’s
political position and power in the bargaining process largely depends on the non-
substitutability of its activities and the centrality of its work. Substitutability is a
function of the replace ability of a group’s activities. Centrality refers to a group’s
importance and degree of connectivity of its assigned tasks. For instance an accounting
department (sub group) typically performs a set of activities that are essential to the
normal operations of a firm, exemplifying low substitutability. Likewise, the tasks it
performs generally have substantive ramifications for such other departments as credit,
sales, production, and shipping illustrating high centrality. In most instances, the
greater a group’s non substitutability and centrality the more secure its political
position and power.
Throughout the bargaining process, side payments are employed by coalitions to induce
other individuals or groups in an organization to join with them in the pursuit of certain
goals. These inducements to participate can take any of numerous forms; money,
perquisites, privileged personal treatment, grants of authority, position etc. Side payments
are the price in return for which participants will accede to the demands of other
participants or group of participants. Thus in exchange for decent wages and acceptable
working conditions, employees agree to produce. Similarly in exchange for dividends,
shareholders agree to invest. Note that what is a goal for one participant is simultaneously
a side payment for another participant and vice versa.
It should be noted that an organization will continue to be viable as long as the
payments made to its various interest groups (coalitions) are sufficient to induce them to
remain in the organization, or stated differently, if the utility the coalitions derive from

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the net balance of inducements over contributions is greater than what they could obtain
elsewhere.
Under favorable conditions, organizations often accumulate resources in excess of
those necessary to meet their required side payments (that is inducements). The resulting
difference between the total resources thus available to an organization and the total
payments necessary to maintain the contributions of coalition members comprises what
has been termed organization slack. Slack may take many forms. In general it is that
cushion of unused or convertible resources which enables an organization to successfully
adjust to various internal and external pressures as well as to initiate required changes in
strategic posture. Liquid financial assets such as cash, marketable securities, and current
account receivables are perhaps the most utilitarian form of slack. Other forms of slack
include dividends in excess of those required to ensure continued stockholder investment,
wages paid at a level above that necessary to attract an acceptable labor force and so on.
The capacity to absorb and release slack allows an organization to successfully respond
to variations in its workflow with minimal trauma.
Slack is of direct significance to the coalition process of goal formation. The
structuring of conditions and the intensity of their bargaining are directly related to the
availability of resources. The fierceness with which coalitions bargain is clearly affected
by the state of the organization as whole. If times are good and the organization is rich in
resources, the several groups can afford to be generous in the bargains they strike;
competing and even conflicting goals may be simultaneously pursued. However, in those
lean times when the organization is forced to struggle for its very survival, hard
bargaining takes place with the result that the desires of weaker groups are sacrificed.
3.7.4 Organizational Decision Making
Bounded Rationality
The classical economic theory portrays organizational decision makers as maximizing
intended outcomes based on complete information. This representation flows from two
fundamental assumptions upon which classical economic analysis rests. The first
assumption is that organizations seek to maximize expected utility or profits above all
else. The second assumption is that human beings are substantively rational. The realism
and applicability of these assumptions has been challenged by organizational theorists.

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One of them is the Nobel Laureate, Herbert A. Simon who advances the view that the
actual choice or decision to follow a course of action, far from being substantively
rational, is limited by the finite cognitive capacity and affective attributes of the
individuals involved as well as by environmental constraints over which there is virtually
no control. Thus, individuals make decisions under conditions of bounded (or limited)
rationality. Such circumstances are seen as not only reflecting the limited computational
capabilities of the human mind to process information, but also reflecting the uncertainty
of future organization events and an inability to order preferences for all consequences in
a single utility scale. Given that organizations exist in environments that do not fully
disclose the alternative courses of action available, or the consequences of those
alternatives, all intended rational behavior, is by definition, behavior that is inherently
bounded.
Satisficing:
This word is a Scottish word meaning satisfying. Simon argues that once decision
makers have isolated a limited set of variables, they again deviate from the demands of
rationality by generally selecting the first course of action that is deemed “satisfactory” or
good enough rather than searching further for the optimum source. That is rather than
examine all possible alternatives and attempt to order them according to a well organized
and stable hierarchy or preferences, they generally settle for the first satisfactory
alternative that presents itself. Examples of statisficing criteria include “reasonable share
of market” “adequate profit” “fair price” and “acceptable rate of return”.
Incrementalism:
Charles E. Lindblom (1959) contends that in many organizations, goals are not
necessarily either stabilized or agreed upon prior to the consideration of alternatives.
Rather, there is an ever ending series of attacks on the issues at hand through repeated
sequential or incremental analysis. Lindblom depicts managers as risk avoiders who
prefer to wrestle with problems and seize opportunities as they emerge, rather than
formulate goals at the outset of a comprehensive search process. Thus managers bumble
along, or “muddle through” without even attempting to survey all possible alternatives
for achieving superior performance.

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A course of action is selected and the consequences are evaluated as they develop,
becoming the focus of subsequent incremental analysis.

Garbage Can Model

March and Olsen (1972) challenge both the preexistence of goals to direct organizational
choices and the orderliness of choice processes. They claim decisions are an outcome of
four partially independent streams; a stream of problems, a stream of potential solutions,
a stream of participants, and a stream of choice opportunities. Likening organizations to
irrational garbage cans into which various participants have poured miscellaneous
problems and solutions, they view organizations as “organized anarchies” with no clear
or consistent idea of what they are trying to do, how they are supposed to do it or who is
to decide. Decisions are only made if a problem (for example declining sales), a solution
(for example a new product), the relevant participants (for example annual sales
convention) simultaneously intersect.
The Garbage Can Model emphasizes the impact of chance and timing in determining
organizational choices, and thus reflects reality.
Means-Ends Chain
Once specific courses of action are chosen for attaining agreed upon goals, subsequent
decisions must be made to complete what is called the means-ends chain or hierarchy.
That is, given the limited or bounded rationality of individual decision markers, and the
fact that both goals and means at the highest level of an organization are often both
complex and abstract, it becomes necessary to divide ultimate goals into sub goals for
participants at lower organizational levels. In other words, what are means intended to
contribute to the accomplishment of ends articulated at the highest level become ends in
themselves for individuals at the second level of organizations. These ends in turn are
translated into specific means and are parceled out to people at the third level who treat
what are means for the second level as ends of themselves. Through the elaboration of
chains, non-operational organizational chains, non-operational organizational goals are
eventually transformed into very specific routines of behavior for people at the lowest
level. An example of such a means-ends chain is illustrated as Figure 2.1

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Fig. 2.1 Means-ends Hierarchy

Board of
Goal
Directors

Goal
President
Organizational Survival

Vice Goal
President
Means

Middle Goal
Raise
Management Cut costs
Revenue
Goal Means
Operating
Management Increase
sales

3.8. Measuring Goal Efficiency and Effectiveness

3.8.1. Organisational efficiency is generally defined as the ratio of an organisation’s

output (products or services) to its inputs (labour, capital, raw materials.)
In economic terms, the concept of efficiency can be formulated as an optimisation
problem i.e. what is the least cost combination of inputs that will produce a given
level of outputs.
In normative terms, an organisation is judged efficient if when compared to similar
organisations its outputs (benefit received) are relatively high in comparison to its
inputs (cost). Thus if two companies making the same product finish the fiscal year
with equal production levels but one attained the same level with fewer invested

38
 resources than the other, that company is said to be more efficient. This is so because
it attained the same level of outputs with fewer inputs

3.8.2 Organisational effectiveness- This is a measure of how well an organisation

has achieved its goal. The greater the extent to which an organisation’s goals are met
or surpassed, the greater its effectiveness.

3.8.3. Models of Measuring organizational efficiency and effectiveness

There are four models or approaches used to measure an organization’s efficiency and
effectiveness. These models are as explained below:
Systems Resource model of measuring organizational effectiveness
In the systems resource model organisations are viewed as being involved in a bargaining
relationship with their surrounding, importing various scarce resources (for example
physical facilities, ideas, raw materials, personnel, funds, e.t.c) to be returned to the same
environment in the form of products and services (outputs).
An organisation’s long- run success and sustainability depends upon its ability to
establish and maintain a favourable input- output ratio. The procurement and the
transformation of inputs to outputs and their subsequent distribution to the external
environment is therefore the frame of reference of measuring organisational
effectiveness. Accordingly, the systems resource model proposes that an organisation is
most effective when it maximises its bargaining position and optimises its resource
procurement.
The systems resource model emphasises the interdependence of an organisation and its
environment. The approach emphasises that the organisation is dependent upon its
environment and its effectiveness is measured in terms of how it is able to sustain its
environment. Thus, by drawing too heavily upon its supporting environment the
organisation endangers its effectiveness not only by potentially depleting its resource
base, but also by running the risk of stimulating countervailing forces (legislation) within
its environment.
A systems resource model defines organisational effectiveness as the extent to which an
organisation as a social system given certain resources and means fulfils its objectives

39
without incapacitating its means and resources and without placing undue strain upon its
members. The effectiveness of an organisation must therefore be measured in terms of:
- Productivity
- Absence of intra organisational strain or conflicts.
- Organisational flexibility conceptualised as the ability to adapt to internal
and external change.
Shortcomings of the systems resource model for evaluating organisational
effectiveness and efficiency
While the systems resource model takes into account that organisations are dependent on
their environment for their sustainability, it provides little or no guidance as to what
constitutes the optimum exploitation of resources. Thus, without some optimisation
criterion, the model is difficult to operationalize i.e. with this approach, we are left with
unanswered questions “how does one know when a system has reached a point of optimal
input exploitation.”
The systems resource model also fails to provide guidance in determining which scarce
and valued resources are relevant as the basis of determining the organisational
effectiveness. Without reference to specific output goals, the definition of resource
becomes ambiguous.
The model also fails to elaborate on the internal allocation of resources.
A further drawback of the systems resource model is that once essential resources have
been identified, something must be said about their desired state. E.g., if certain raw
materials are viewed as an essential resource, the nature and extent of raw materials
necessary must be determined. However this cannot be done unless some ultimate goal is
established, in other words, the desired state of essential resources must be defined in
relation to some objective. It is unrealistic to assume that organisations can be determined
to the necessary nature and extent of essential resources without doing so on the basis of
established goals.
Organisational effectiveness is based solely on resource acquisition rather than resources.
That is, the model ignores whether or not resources are being used effectively.
Internal process approach

40
In this approach, effectiveness is measured as internal organizational health and
efficiency. An effective organization has a smooth well-oiled internal process. Employees
are happy and satisfied. Departmental activities mesh with one another to ensure high
productivity. The following are the indicators of an effective organization as seen from an
internal process approach:
 Strong corporate culture and positive work climate
 Team spirit, group loyalty and teamwork
 Confidence, trust, and communication between workers and management
 Decision making near sources of information regardless of where those sources
are on the organization chart
 Undistorted horizontal and vertical communication; sharing of relevant facts and
feelings
 Rewards to managers for performance, growth, and development of subordinates
and for creating an effective working group
 Interaction between the organization and its parts with conflicts that occurs over
projects resolved in the interests of the organization
Shortcomings of this approach
Does not consider the external environment and it ignores the shareholders and other
external stakeholders. Further the internal process approach has been faulted for being
subjective because many of its aspects are not quantifiable
Usefulness of the approach
 Happy committed actively involved and satisfied employees are appropriate
measures of efficiency and effectiveness as it would be difficult to achieve
efficiency without satisfied staff
 Keeping staff happy is the key to long term success of a company
 The idea of a positive corporate culture is also part of this approach and this
also leads to corporate efficiency
c) Stakeholder approach
In this approach efficiency is measured from the perspective of the organizational
stakeholders. A stakeholder is any group within or outside an organization that has
a stake in the -organization’s performance. Creditors, suppliers, employees, and

41
 owners are all stakeholders. Each stakeholder will have a different criterion of
effectiveness because it has a different interest in the organization. Each
stakeholder group has to be surveyed to learn whether or not the organization
performs well from its viewpoint. The following table shows each stakeholder and
its criterion;

Table 2: Stakeholder and its criterion

Stakeholder Effectiveness criteria

1 Owners Financial return
2 Employees Work satisfaction, pay
3 Customers Quality goods and services
4 Creditors Creditworthiness
5 Community Contribution to community affairs
6 Suppliers Satisfactory transactions
7 Government Obedience to laws tax payment

Shortcomings of using the stakeholder approach

i) This approach is complicated as it seeks to satisfy many stakeholders at once
ii) It also ignores the major stakeholders
iii) It is also a subjective
iv) Business organizations would also find it difficult to simultaneously fulfil the
demands of all groups

Usefulness of the stakeholder approach

i) It takes a broad view of effectiveness and examines factors in the environment
as well as within the organization
ii) It includes the social aspects which are ignored by the other approaches.
iii) The approach further handles several criteria simultaneously and
acknowledges that there is no single measure of effectiveness.

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iv The approach is also gaining popularity based on the view that effectiveness is a
complex, multidimensional concept that has no single measure
v) Recent research has also shown that the assessment of multiple stakeholder groups
is an accurate reflection of effectiveness
vi) Moreover research shows that firms really do care about their reputation status
and actually do attempt to shape stakeholders’ assessment of their performance.

d) Goal approach
This approach consists of identifying an organization’s output goals and assessing
how well the organization has attained those goals. The main advantages of this
method are the following;
i) Organizations are established to achieve goals
ii) All organizations have goals
The main disadvantages are
i) Multiplicity of goals
ii) Subjectivity of goal measurement criteria

43
 LECTURE THRE ORGANIZATION AS A SYSTEM
Introduction
In this lecture we shall define a system and discuss the importance of looking at
organizations as open or closed systems. We shall also discuss the disadvantages of
looking at organization as closed or open systems.
Definition of a System
A system is an organised or complex whole, an assemblage or combination of things or
parts performing as a complex or unitary whole.
This definition conveys three very important ideas:
The first concept is that of interdependence. That is to say the parts that make up a
system are interdependent i.e. if change occurs in one part or set of parts, it affects all
other parts. This effect on each part or set of parts in a system may be direct or indirect
The second concept is that of holism. That is to say, the system should be considered as a
functioning whole. Changes in parts of the system and in the functioning of the elements
of the system should be considered from the standpoint of the systems overall
performance.
Finally is the concept of synergism. This refers to the fact that the interactive effects of
the parts of the system working together create an effect greater than the effect of the
parts acting separately. This means that, as each part performs its role within the system it
enhances the performance of other parts and hence the total performance of the system.
The system is capable of growth.
It is also capable of receiving inputs
It is also capable of producing outputs.
It is a goal searching system. (In fact also multi goal seeking).
It consists of both abstract and concrete subsystems.
It also a dynamic system.

The general subsystems of an organisation system are:

Production subsystems
Boundary spanning subsystem
Maintenance subsystem.

44
Management subsystem.
Adaptation subsystem
These subsystems are explained in detail in paragraph 4.4 below

What are Subsystems?

Subsystems are a group of functioning elements within a larger system. They are in fact
systems within a larger system. The determination of subsystems depends on the desired
level of abstraction at a given time for a desired type of analysis. If we are concerned
with analysing the University Of Nairobi as a system, we can break it into colleges as
subsystems. If we want to analyse the College of Humanities as a system, we can break it
into faculties and consider them as subsystems and so on. Thus, all systems can be
considered as subsystems and every sub system can be considered as a system depending
on the level of analysis desired. In the case of organisations, we are interested in looking
at an organisation as a system composed of subsystems (departments).

Figure 4.1 an example of systems and subsystems of the University of Nairobi

System subsystem subsystem

University Of Nairobi College of Humanities and Social Sciences Faculty of Commerce

College of Physical and Biological Sciences Faculty of Law
College of Architecture and Engineering Faculty of Arts

Organisation subsystems.
The sub-systems perform the specific functions required for organisational survival. Each
sub-system is a system on its own because it has a boundary and absorbs inputs from
other sub-systems and transforms them into outputs for use by the remainder of the
organisation. The organisational sub-systems can be divided into the following functional
sub-systems:
i. Production sub-system: this subsystem is responsible for producing the product
and service output of the organisation. This is where the primary transformation
takes place. In a manufacturing firm, the production sub-system is the production

45
 department. In a university, it is a teaching department. In a brewing company
it’s the department that actually produces beer.
ii. Boundary spanning: the boundary spanning subsystems handle transactions at
organisational boundaries. They are responsible for exchange with the
environment on both the input and the output sides. The boundary spanning
subsystems acquire the needed supplies and materials. On the output side, they
create demands and deliver outputs. On the input side they provide inputs to the
organization Boundary spanning subsystems work directly with the external
environment. In a beer manufacturing company, the boundary subsystem
includes the marketing department on the output side and the purchasing
department on the input side.
iii. Maintenance subsystem: this is a subsystem responsible for the smooth
operation and upkeep of the organisation. The maintenance subsystem includes
cleaning and painting of buildings and maintenance of machines. Maintenance
subsystem also includes departments, which take care of human needs such as
morale, compensation and physical comfort. Such departments include personnel,
salaries, and cafeteria e.t.c.
iv. The adaptation subsystem: This is the subsystem responsible for the
organisational change. It scans the organisation’s environment for problems,
opportunities, threats and technological developments and provides appropriate
recommendations to the organisation. It is also responsible for providing
information and helping the organisation to change and adapt. In a manufacturing
organisation, the adaptation subsystem includes such departments as marketing
research, Research and Development and corporate planning.
v. The management subsystem: this subsystem is responsible for directing the
other subsystems of the organisation. It provides direction, establishes strategy,
goals and policies for the whole organisation. The subsystem also coordinates the
performance and activities for the other subsystems and resolves conflicts
between them. It is also responsible for developing organisation structure and
directing tasks within each subsystem. This subsystem consists of the top
management team in an organisation.

46
Advantages of the systems approach.
i. Its holism approach enables one to consider the organisation as a whole. This
clearly emphasises the interdependence of the parts of the system.
ii. The approach allows the student or manager to clearly comprehend the various
concepts, ideas, or elements and their relationships.
iii. The approach also allows for model building, which makes presentations of ideas
easier. The diagrammatic presentation makes the understanding of the relationship
easier not only to understand but also to build up models to help in empirical
research and hypothesis generation and testing.
iv. The approach also allows for quantifications of relationships between elements in
the system.
v. It enables managers to view their jobs as parts of a system, not as static isolated
elements
Disadvantages of the systems approach.
There is a tendency for some students and practitioners who apply the system approach to
advocate for a more centralised administrative structure in organisation. That is looking
at the organisation as a whole may tempt one to concentrate decision-making power at
the top of the organisation with little delegation if any.
The systems approach tends to oversimplify organizational relationships. Relying
exclusively on these models at the expense of managerial judgment and experience can
lead to dysfunctional consequences.

Closed and Open Systems

Closed system
o A closed system would not depend on its environment
o A closed system would be autonomous, enclosed or sealed off from the outside
world.
o Although a closed system would not exist since it would die due to entropy, the
classical theorists looked at organizations as closed systems because they focused
on internal systems. This is because they took the environment for granted and

47
 assumed that the organizations could be made more effective only through
internal design. They assumed that the environment was stable and predictable
and did not affect the organization.
o Does not depend on its environment
o Does not interact with its environment
o It is enclosed and sealed off from its environment
o It has all the energy it needs.
o Assumes the environment is static and has no effect on the organisation.
o Assumes that the only thing that matters is internal structure and design, which
can be effectively structured by management.
It has all the energy it needs. It can function without the consumption of external
resources.
An approach that considers an organisation as a closed system takes the environment for
granted and assumes that the organisation can be made more efficient through internal
design.
This approach further considers the environment as stable, predictable and would not
cause problems.
According to this approach the main issue for management is internal efficiency.

a) Advantages of looking at organizations as closed systems:

 Some managers treat their organisations as closed systems.
 The classical theorists treated organisations as closed systems.
 As a basis of theory building, one can conceptualise the organisation as a closed
system to enable more understanding.

b) Disadvantages:
o No organisation is a closed system.
o This approach ignores the importance of the external environment in affecting the
organization

48
Open system
An open system: -
 Interacts with its environment to survive.
 To survive, it must continuously change and adapt to the environmental changes.
 It must correctly interpret and act on the changes happening to its environment.
 It must also control and coordinate its internal activities in the face of
environmental disturbances and uncertainty.
 The need for input from the environment and the need to export its output into the
environment denote an interdependence relationship between an organisation and
its environment.
 It both consumes resources from and exports resources to the environment.
 It cannot seal itself off from its environment. It must deal continuously with its
environment. At the same time, it must also deal with internal efficiency as well
as interact and act on the environmental changes.
 It must sell its output in the environment, coordinate its internal activities, and
deal with environmental changes and uncertainties.
 All systems that must deal with their external environments to survive are open
systems. Human beings are open systems. The University of Nairobi is an open
system.
 It must correctly interpret and act on the changes happening in its environment
 At the same time it must control, structure and coordinate its internal environment
to take account of changes in the external environment.
a) Advantages of looking at organizations as open system:
 Enables us to see the dependence of the organisation on the environment
 Enables us to understand the inter-relationship between the organisation and the
environment.

b) Disadvantages
o Tends to ignore the role of management behaviour and decision-making, capacity
to make the organisation efficient.

49
 o It ignores the importance of the internal environment to the organisation’s
efficiency and effectiveness.
Input – Output Analysis of a System
 An input- output analysis depicts the system as taking or receiving resources from
the environment, processing them into outputs and giving them to the
environment.
 Input – output analysis involves examining a flow of materials, ideas, concepts,
money, people, e.t.c. from the environment.
 The input- output analysis consists of 5 parts namely:
(a) Inputs: the resources, ideas, concepts and people coming from the environment.
(b) The transformation process: the process that works on the inputs and changes
them usually by adding value.
(c) The feedback: the process or flow of information regarding the quality or price
e.t.c. of inputs and outputs.
(d) The outputs: the end results of the transformation process that is taken to the
environment.
(e) The environment: the element, which constitutes these sources of inputs or the
users of the outputs.

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Figure 4.2 an input- output diagram of an open system
The organisation

Environment Environment

Inputs outputs
Transformation process

Feed back

Other Kinds of Systems

There are many kinds of systems with their own subsystems. The human being is one of
them, but it is the most complex because it:
i. Is alive- it has life.
ii. It can think, plan and remember.
iii. Is aware of its surroundings.
iv. Is also aware of itself.
v. Have attitudes, moods, feelings and norms.

You can also proceed to a higher and more complex system,

vi. The organization as a system. It is composed of human beings and

consequently transforms the complexity of the human system many times
over. The complexities of social system arises from:
 Complexities of the human system.
 The norms and values of human beings, which are intangible and hard
to detect.

51
  Cultural dimensions of human beings, which are even harder to
identify.
 The fact that these norms, values and cultures are constantly changing.
Thus the social system (the organisation) requires extra training to be understood,
manage and change. Other systems include :( from the simplest to the most complex).
1) Atom, map or bridge. Simplest because it’s static.
2) Clocks and watches. A higher complexity because it is dynamic.
3) Thermostat. Higher complexity because it is self regulating within
prescribed limits.
4) Cell. This is the beginning of a system that is not only Self-regulating but it is
a living thing.
5) Plant Complexity increases due to ability to reproduce and grow. (Several
cells).
6) Animal system Dynamic and living.
7) Human beings. Living, dynamic and has awareness of its surrounding.
Self- regulating
8) Social organisation. A social system is composed of complex systems namely
human beings that transfer their complexities to the social organisation.

Levels of analysis- in systems theory, each system is composed of subsystems. Four

levels of analysis usually characterise organisation.
o The individual human being is the basic building block of the
organisation.
o The next higher level of analysis is the group or department. These are
collections of individuals who work together and interact to perform
subsystem tasks.
o The next level of analysis is the organisation itself. An organisation is a
collection of individuals who work together and interact to perform
subsystem tasks.
o The next level is the community of organisations, which are grouped
together. They form an important part of the environment.

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Organisation theory focuses on the organisation level of analysis. Organisation theory is a
macro examination of the organisation because it analyses the whole organisation as a
unit. Organisation behaviour on the other hand focuses on the individuals within the
organisation as the relevant unit of analysis. Organisation behaviour examines concepts
such as motivation, leadership style and personnel and is concerned with cognitive and
emotional differences among people within the organisation.

CHAPTER FOU EVOLUTION OF ORGANIZATION THEORY

Introduction
In this lecture we shall trace the development of organization theory from the pre
classical period to the present. We shall discuss the 1) pre classical 2) the classical 3) the
neo classical 4) the contingency and 5) the contemporary approaches

Pre-classical Period
The evolution of organization can be traced from the following periods:

The Pyramids of Egypt

The pyramids of Egypt could not have been completed without sophisticated
organization practices and structures of the modern period.

The Chinese Empire

The construction of the Great Wall of China could not have been accomplished without
the sophisticated administrative and bureaucratic structures we know today.

The Catholic Church

The Catholic Church has also practiced many elements of classical theories for over
two thousand years.

53
The Roman Empire
The extensive bureaucracy of the Roman Empire could not have been maintained
in such a form and for such a long time without the application of a management theory
that we know today.

. The Classical Theories

The classical theories were developed in three streams/approaches namely:
(a) The Administrative theory
(b) The theory of Bureaucracy
(c) The Scientific Management Theory

Administrative Theory:
This theory was largely developed by Henri Fayol (1841 – 1925) who was a
French industrialist. He described a number of management principles that go
towards capturing the entire flavor of the administrative theory of management.
Some of those principles are:

 Division of work (or specialization): One should work at activities in which

he/she has comparatively higher skills. This should lead to higher productivity.

 Authority and responsibility Authority is the right to give orders. Each person
should have an appropriate authority to go with the given responsibility.
Responsibility is the task to be accomplished.

 Discipline There must be respect and obedience to the rules and objectives of the
organization.

 Unity of Command To reduce confusion and conflicts each member should

receive orders from and be responsible to only one superior.

54
 Unity of direction An organization is effective when members work together
towards the same objective.

 Subordination of individual interest to general interest The interests of one

employee or group of employees should not prevail over that of the organization.
Rather, the general interest must be maintained as paramount.

 Remuneration of personnel should be fair – not exploitative, and should reward

good performance.

 Centralization A good balance should be found between centralization and

decentralization.

 Scalar Chain There is a scalar chain or hierarchy dictated by the unity of

command linking members of the organization from the top to the bottom.

 Equity Kindliness and justice, largely based on predetermined conventions,

should prevail in the organization.

 Stability of tenure of personnel Job security should reward good performance.

 Initiative A manager who has initiative, and can get others junior to him to do it,
is far superior to the one who does not have this ability.
 Esprit de corps “Unity is Strength” Superior performance comes from working
together; thus, everyone in the organization should be encouraged to work
together and have a sense of belonging.

 Technical ability Technical ability predominates lower down the ladder and
management ability higher up.

55
  Fayol emphasized the importance of planning, organizing commanding,
coordination and controlling in organizations.

 Fayol recommend rational selection of and training of workers together with

professional training for managers.

2.4.2 The Theory of Bureaucracy

The theory of bureaucracy was developed by sociologists who took a relatively scholarly
descriptive point of view. The most famous of those sociologists was Max Weber (1864 –
1920) who was a German Sociologist. He published most of his works towards the end
of the 19th Century. Max Weber identified the following as the main characteristics of
bureaucracy:
 Labor is divided so that the authority and responsibility of each member is clearly
defined.
 Offices or positions are organized in a hierarchy of authority resulting in a chain of
command.
 All organization’s members are to be selected on the basis of technical qualifications
through formal examinations or by virtue of training or education.
 Officials are appointed not elected.
 Administrative officials work for salaries and are career people.
 The officials are separate from owners
 The officials are subject to strict rules and controls regarding the conduct of their
official duties. Those rules are impersonal and uniformly applied to all people and
cases.
The above specifications by Max Weber were necessary because during this period and
before, most organizations were managed on a “personal” family like basis. Employees
were loyal to an individual rather than to the organization or its mission. The
dysfunctional consequences of the practice were that resources were used to realize
individual desires and goals rather than organizational goals and needs. Employees in
effect owned the organization and used resources for their own rather than to serve
customers and organizations.

56
 Max Weber envisaged organizations that would be managed on an impersonal basis.
He called this form of an organization bureaucracy. Max believed that organizations
that exhibited the characteristics that he described would be more efficient and
adaptable to change.

2.4.3 Scientific Management Theory

First developed by Fredrick W. Taylor (1856 – 1915), a mechanical engineer in the
United States, the Scientific Management can be defined as:
 The application of scientific method of study, analysis and problem
solving to organizational problems.
Or
 A set of mechanisms or techniques for improving organizational problems.

Scientific Management focuses its unit of analysis on the physical activities of work.
Scientific management deals with the relationship of a worker and his or her work. Thus,
this lays emphasis on man-machine relationships with the objective of improving
performance of routine, repetitive production tasks.
Scientific management advocates for an empirical detailed study of each job to determine
how it could be done most efficiently.
The basic assumptions of scientific management theory are:
 Improved results in organizations will come from the application of the
scientific methods of analysis to organizational problems. In other words,
the scientific management approach holds that scientific solutions to
problems of management of organizations are superior to those of other
approaches.
 Scientific management focuses primarily on work itself and not on the
particular person doing the work.
 Each worker is assumed to be a classical economic man-interested in
maximizing his monetary income. The complications of emotional and
social actions and reactions of persons in organizations are not
emphasized.

57
The basic principles of scientific management as expounded by Fredrick W. Taylor are as
follows:
 Develop a science for each element of man’s work in order to maximize the
organizations output.
 Scientifically select and then train, teach and develop the worker.
 Management should heartily cooperate with the workers so as to ensure all the
work is being done in accordance with the principles of science.
 There is almost equal division of the work and responsibility between
management and the workers. The management should take over all work for
which they are better fitted than the workers, and the workers should do the work
for which they are better fitted.
 Application of the piece rate principle: This is the principle by which workers
are paid by piece rates on the basis of standards set by motion and time studies
rather than on other basis. Piece rates are effective in motivating workers.
Tailor’s piece rate system was called the differential piece rate system. Under
this system, workers were paid a low piece rate up to a standard (a standard was
based on a first class man performing under average conditions). At higher levels
of output the worker was paid a higher rate.
Tailor’s recommendations were designed to reduce the inefficiencies and the
wastefulness of the past through practicing scientific rather than rule of thumb
methods.

2.4.4. Comparison of the classical theories

(i) The theories were mainly developed during the early part of the
20th century.

(ii) The three streams were formed on similar assumptions about

organizations – organizations as a structure of relationships of
human beings with goals, objectives, roles, activities, power etc
that exist when persons work together.

58
 (iii) Their main goal was to find out what needs to be made to
organization structures and relationships to improve efficiency
in the organizations.
(iv) They considered the environment to be either static or to have
an insignificant role in organizational efficiency
However the three approaches had the following dissimilarities:
They were developed by separate groups of writers working totally independently of each
other:
Bureaucracy developed mainly by sociologists who generally took a scholarly point of
view.
Administrative theory and scientific management developed by writers who were
practicing managers; they were not merely content at describing organizations; they
prescribed practical purposes for better organizational performances.
Administrative theories focused on overall relatively macro aspects of organizations. The
scientific management theory looked at the micro aspects – the worker, and the foreman.
Bureaucracy also looked at the macro aspects of the organization.

2.4.5 Evaluation of the classical theories

The Administrative theory
1. The principles of administration as postulated by Henri Fayol fail to be universal
truths.
2. The principles lack scientific derivation and verification.
3. The administrative theory is power centered. It is thus in philosophical conflict
with those who desire limited individualism.
4. Administrative theory suffers from the dysfunctions of bureaucracy such as
rigidity, impersonality, and excessive categorization.
5. Administrative theory suffers from superficiality, oversimplification and lack of
realism. It is satisfied with theoretical rather than actual.
However, as a theory of organization, the Administrative theory is critical because:
(i) It recognizes the need for:
 Specialization

59
  Unity of command
 Discipline
 Separation of individual and organization interest.

(ii) It also introduces essential principles that even today lead to organization
efficiency.

The theory of bureaucracy

(1) Most of the characteristics described by Max Weber truly describe an ideal
organization. They described what should be rather than what is. However, to
the extent that organizations aspire to achieve the characteristics described by
Max Weber, their efficiency and effectiveness can be maintained.
(2) Some of the aspects envisaged by Weber, however, have sometimes taken on a
negative meaning .e.g. being associated with endless rules and red tape.
The Scientific Management Theory
The basic problem with the scientific management theory is that it assumed man to be
purely an economic man interested only in the satisfaction of his basic needs. His
rationality and motivation were purely financial/materialistic. These assumptions were
not realistic and man was motivated by more than his basic needs as later proved by the
neo classists.

2.4.6 What prescription did each theory have on how to best structure
organizations?
The Scientific Management Theory
 Scientific way to do work
 Scientific selection of personnel
 Financial incentives
 Separation of management and workers
The theory of Bureaucracy
Contribution to organization theory
 well defined hierarchy of authority

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  A clear division of work
 A system of rules covering rights and duties of each position
 A system of procedures dealing with work situation
 Recommended impersonality of inter personal relationship
 Selection/promotion based on technical competence.
Criticisms
(i) Lack of empirical evidences
(ii) Assumed people are machines
(iii) Ignored practical situations

2.4.7. What prescriptions did each theorist have for how to best ensure compliance
– to ensure in other words that each worker carried out the task to which he
or she is assigned?

Scientific Management Theory

 Standards
 Procedures
 Incentives

Administrative theory
 Discipline
 Unity of command

Bureaucracy
 Rules and procedures
 Hierarchy of authority

2.4.8. What was it about the environment of the organizations each theorist focused
on that influenced the prescriptions for how to structure organizations and
gain compliance?

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 i.e. what influenced the theorists to make the type of recommendations that they
made.

 The tasks facing workers then were relatively routine and repetitive
 Efficiency rather than creativity was the rule
Consequently, the theorists were justified in making the type of recommendations
that they made about how to perform those tasks.

2.4.8. What was it about the environment of the organizations each theorist focused
on that influenced the prescriptions for how to structure organizations and
gain compliance?

 During the time, the organizations environments were relatively simple and
unchanging.
 Technology was generally static over long periods
 Political environment was also stable
 Equality and democratic ideas were developing

This type of environment motivated organization theorists to come up with the type of
proposals they came up with on how to structure organizations and to motivate workers.

2.3. The Neo Classical Theories

The neo classical theories are based on the classical theories. They seek to address
the shortcomings of the classical theories. A few of the neo classical theories are
discussed here below.
2.5.1. The Hawthorne Experiments
The experiments were carried out between 1927 and 1933 at the Chicago
Hawthorne plant of the Western Electric Company. Four studies were carried out
namely:
a) The illumination studies

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 These studies were expected to determine the relationship between the level of
illumination and worker’s productivity. It was expected that worker’s productivity
would increase with increasing levels of illumination. The studies failed to prove
any relationship between worker’s productivity and level of illumination
b) The Relay Assembly Test Room Studies
These studies were carried out to determine the relationship between
worker’s productivity and improved benefits and working conditions.
The studies found out that there was no cause – and – effect
relationship between working conditions and output. Rather, there were other
factors that affected worker’s output such as his/her attitudes and supervisor
behavior.
c) The interviewing Program
A group of employees were interviewed to learn more about their opinions with
respect to their work, working conditions and supervision. The workers suggested
that:
 Psychological factors help determine whether a worker is satisfied or
dissatisfied in any particular work situation
 The person’s need for self-actualization determines his/her satisfaction in
the work.
 A person’s work group and his relationship to it, also determines his/her
productivity
d) The Bank Wiring Room studies
This study was expected to study the effect of group influence on workers
productivity. The researchers found out that an informal grouping and
relationship was a critical factor in the workers’ productivity. The
informal group determined the group’s productivity, and
functioned as a protective mechanism (served both for internal and
external purposes).

The Hawthorne Experiments concluded that:

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(i) An industrial organization is a socio technical system. The socio part is the
human aspects that need to be taken care of in order to increase workers’
productivity and the technical system are the physical aspects that also need to be
improved.
(ii) Employee attitudes and morale are also important as determinants of productivity.
(iii) Other factors include worker’s personality and supervisor’s behavior. These two
also affect worker’s altitude and morale.
(iv) A worker’s social group has a prevailing effect on his or her altitude and
productivity.

Criticisms of the Hawthorne studies

(1) The philosophical basis
By emphasizing the social needs of human being rather than the economic needs
and self-interest, these studies conflict the philosophical basis of economic
theory.
(2) Methodology
The study methodology lacks the basis for generalizations.
(3) Findings
The cause – and – effect relationship conclusions lack general support and
scientific verifiability.
Contribution
The Hawthorne Studies have however made the following contribution to
Organization theory
 As a basis for organization theory Research, the Experiments were important.
They were some of the earliest scientific studies in human behavior.
 Their finding on the importance of informal groups is also a key to
organization theory.
 Their emphasis on employee altitude towards work as an additional to other
factors was a breakthrough in organization theory.

2.5.2. Mary Parker Follet

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She was a philosopher and political scientist. She was also a social worker among the
poor in Boston. She proposed the following principles:
 Emphasized the importance of subordinating individual freedom to that of
the group
 Stressed the importance of democracy in decision making – by involving
all in order to find a solution. Recommended the use of power with rather
than power over. Observed that Power cannot be delegated but authority
can. Power is the capacity to get things done. Authority is the right to give
orders. Power should be exercised with rather than over. Power over is
dominance or control, based on force. Power with is a jointly developed
power. She emphasized that power is a basic to management – especially
when used with.
 Defined conflict as the difference in opinion or interests. She emphasized
that conflict cannot be avoided, and therefore must be used to manage
organizations. Noted that there are three ways of managing conflict:
 Dominance – one side wins over the other
 Compromise – each side gains something to settle the conflict; also
each side loses something. In both dominance and compromise, the
basic causes of conflict are not settled. Follet recommends a third
way.
 Integration of desires. In this way a solution that fully meets the goals
of each party in a dispute is found. Both parties get what they want.
Neither party gives up anything. Integration lets the parties creatively
discover alternatives that satisfy both parties in conflict. In integration,
conflict is used to creatively discover alternatives that satisfy both
parties.

Follet also brought a new way of looking at leadership. She defined a leader as one with
a vision of the future and can articulate the common purposes towards which the
organization is striving. The leader focuses the energies of people towards that purpose.

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A leader not only knows the technical aspects of his job, but also understands the total
situation and the relationship among its many parties. Leaders also train and develop their
followers.

2.5.3 Chester Barnard

 Barnard was writing in the 1930s
 Was the President of New Jersey Bill Telephone Company
 Contributed to organization theory in three areas:
i) the importance of individual behavior
ii) theory of compliance
iii) theory of organization structure
1. The importance of the individual
Bernard was the first person after the Hawthorne studies to emphasize the importance and
variability of the individual in the work setting.
He emphasized that an essential element in organizations is the willingness of persons to
contribute their individual effort to the organization.
The individual is always the basic strategic factor in organizations.
Consequently the individual regardless of his history or his obligations must be induced
to cooperate or there cannot be cooperation.
2. Barnard’s theory of compliance
Barnard’s theory of compliance consisted of four basic elements.
the willingness to cooperate is a basic element of the individual in the organization
in complying, the individual surrenders his personal preferences i.e. surrender or foregoes
other preferences in order to comply in an organization.
An individual is only willing to comply if he is sufficiently induced.
The level/quantity of inducements determines his degree of compliance.
Barnard noted that material incentives by themselves are not enough. Other incentives
include: Opportunities for distinction; Prestige; Personal power, Coercion (i.e. sometimes
force is necessary to obtain compliance).
3. Barnard’s theory of organization structure
- Emphasized that the organization was a structure of decision makers

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 - Stressed the importance of communication in organizations
- Stressed the role and importance of informal organizations in
communication and cohesiveness
- He was also one of the first organization theorists to take a system’s view
of organizations.
2.5.4 McGregor’s theory X and Theory Y
McGregor proposed two sets of assumptions while motivating a worker; the theory X and
theory Y assumptions. A manager’s behavior towards his workers and his management
style will differ based on the assumptions guiding his behavior.

Theory X assumptions

i) The average person dislikes work and will avoid it if possible.

ii) Because of this dislike for work, the workers must be directed, tightly controlled
and pressured to get them to work towards organizational goals.
iii) The average person wants security, avoids responsibility and has little ambition.

Theory Y assumptions

i) The average person does not dislike work

ii) If a person is committed towards a set of goals, he will work towards them
without an external control.
iii) Goal commitment follows from the satisfaction of a person’s desire to achieve
iv) The average person can learn to accept responsibility. Lack of ambition is not a
basic human characteristic.
v) Creativity, ingenuity and imagination are human characteristics that are unduly
dispersed in the populations

2.5.5 Maslow’s hierarchy of needs theory

Maslow’s proposed that within every person is a hierarchy of needs (five). These are;
a) Physiological needs- these are the food, drink, shelter etc
b) Safety needs- security and protection from physical and emotional harm
c) Social needs- need for affection, belongingness, acceptance and friendship.
d) Esteem needs- self respect, autonomy and achievement.
e) Self actualization- need to achieve ones maximum potential and self fulfillment.

Maslow argued that;

1. Human beings require needs in a hierarchical order
2. Each level of need must be substantially satisfied before the next level is
activated.
3. Once a need has been satisfied it ceases to motivate and the next level becomes
more dominant.

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 4. Therefore if you want to motivate you must first identify the level that person is
on in the hierarchy of needs and focus on satisfying needs at or above that level.
5. Maslow separated the two needs into higher and lower level needs. Physiological
and safety needs were considered lower order needs, social esteem and self
actualization needs wee considered higher order needs. The difference was that
higher order needs are satisfied internally while lower order needs are
predominantly satisfied externally.

Management Implications of Maslow’s theory

1) Employees have different needs at different times
2) Employees have several interdependent needs not just one dominant need.
Managers must therefore understand that employees are motivated by a cluster
of needs not just one need
3) At some point most employees want to achieve their full potential. Therefore
managers must structure organizations to help people continue and develop
this motivation organization
4) Employees’ needs are influenced by values and norms. In other words higher
order needs are shaped to some extent by the norms and values of the team,
the organization and society in which the individual lives. Consequently
managers can adjust employee motivation and effort by reshaping these norms
and values for example by encouraging more performance oriented team
norms, managers can strengthen team members self actualization needs.

QUESTION FOR TO DAY

What is the neo classical approach With real examples in an organization you know
and using any three organization theories explain yourself fully
2.5.4 The basic elements of the Neo-Classical theories were:
(i) Individual needs. Recognizes the existence of, and the variability of
individual needs, and characteristics e.g. feeling, emotions, and
perceptions.
(ii) Work Groups – recognizes the existence and the importance of informal
groups in organizations.
(iii) Participatory Management – emphasizes the need of involving employees
in decision making especially on things that affect them.

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2.6. The Information Processing Theory
(i) The Information Processing theory views organizations as open systems
which face two basic situations
a) Environmental threats and uncertainties
a) Task uncertainty- this is the difference between the amount of
information already possessed by the organization and the amount
of information required to perform the task
i.e. Task uncertainty = Information required to perform the task
MINUS the information already possessed by the organization.
(ii) The organization must have the mechanism and be structured in such a way
that it can diagnose the information it has, and the information required. In
particular the organization must be able to gather, interpret, and use the
appropriate information in order to reduce this task uncertainty
(iii) The second assumption of the information processing theory is that given the
various sources of uncertainty a basic function of organization structure is to
create the most appropriate configuration of work units (as well as the
linkages between them) to facilitate the effective collection, processing and
distribution of information.
(iv) The third assumption of the theory deals with the sub systems or the various
departments of an organization. Because the sub systems have different
degrees of differentiation (that is to say they have different time perspectives,
goals, technology etc) the important question is not what the over all
organization should be but rather what are the optimal structures for the
different sub units within the organization.
(v) The information processing theory views the organization as having
 the tasks of the organization vary in their degrees of their uncertainty
 as work related uncertainty increases, so does the need for increased amount
of information and thus the need for increased information processing
capacity

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  an organization will be more effective when there is a match between the
information processing requirements facing the organization and the
information processing capacity of the organization
 if an organization ( or sub units) face different conditions over time more
effective units will adapt their structures to meet the changed information
requirements
2.4. The Contingency Theories
The contingency theories relate to how the organization structure adjusts to fit with both
the internal environment such as work technology and the external environment such as
economic or political legal.
Contingency means that one thing depends upon another thing or that one characteristic
depends upon another characteristic. What works in one setting may not work in another
setting. There are no universal principles that apply to every organization. There is no one
best way. Contingency theory means it depends. The most efficient organization structure
may be contingent upon the size, technology, strategy and since organizations are open
systems, its environment. These contingency factors are discussed in chapters 6 and 7.

2.8. The Population Ecology Theory

The Population- Ecology theory can be explained by the following characteristics:
(i) The carrying capacity of the environment is limited. An excess population of
organizations leads to congestion and subsequently to the survival of only
those organizations successful in creating a niche in the market place.
(ii) Like biological elements organizations are doomed to die unless they meet the
environmental test of fitness. Environmental forces select out the most
appropriate structural forms for survival from among populations of
organizations on the basis of fit between structural attributes and
environmental characteristics.
(iii) The population- ecology theory shifts away from preoccupation with
organization at the individual level towards population level. It is not the
fitness of any single organization that is of interest. It is the group or groups of

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 organizations and they may be influenced by actions and events with which
they have no obvious or direct links
(iv) Management has no effect in deciding whether or not the organization will
survive or die. Environmental factors solely determine the survival of any
organization.

Criticism of the Population ecology theory

The Population- Ecology theory is not without problems. The following has been cited as
the major weaknesses of the theory:
(i) The claim that the organizations’ existence and survival is determined by the
environments’ carrying capacity means that the theory cannot be used to
predict about the future. This is because the concept of environmental carrying
capacity is immeasurable and cannot be estimated. It can only be measured on
ex post or retrospective basis. Thus the theory cannot be used to make
organizations adapt to their environment and therefore ensure survival. Thus
as an organization theory it is therefore inappropriate.
(ii) The concept of fitness is not clearly defined by the theory. In other words it is
insufficient to state that only those organizations that environment determines
as fit survive. To do so would be tautological. A more meaningful and causal
pattern must be presented for a theory to be acceptable.
(iii) To claim that organizations are like biological organisms also ignores the fact
that organizations are created by men- a biological organism- to meet its
objective. To claim that a biological organisms, man, can create a biological
organism, an organization, endows man with supernatural powers.
(iv) The population ecology theory also ignores the role of managerial decision
makers. To assume or argue that managers should be passive, helpless
elements completely dependent on environmental forces is to denigrate the
important role managers can play in determining the success or failure of an
organization

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2.8 RESOURCE DEPENDENCE THEORY
The Resource Dependence theory proposes that organizations depend on their
external environments for their survival They procure inputs from the external
environment. They also depend on the external environment for marketing their goods
and services. These dependencies give environmental elements power over the
organization. When these dependencies are small and isolated as in the case of placid
randomized environments, significant coping is not required. When the dependencies are
large and are changing rapidly, the organization must take steps to cope with these
dependencies and reduce them. Organizations have two coping techniques:-
i)The first one is internal change. This involves altering its structure, internal work
patterns, or policies, or planning and forecasting to align the structure to the environment
situation and conditions
ii)The second technique is to reach out and change the external environment. The
organization can try to reduce environmental change, or to change external conditions in
a direction suitable to its own needs. These internal and external strategies are described
below
Internal changes can be categorised as follows;
Structural complexity. As the complexity in the external environment increases, so
does complexity in the organization structure. This is based on the law of requisite
variety that says that complexity in one system is required to control complexity in
another system.
Buffering. Buffers absorb uncertainty from the environment. The goal of buffer
departments is to protect the organization’s technical core from external disturbances so
that it can operate as efficiently as possible. Buffers are specific departments established
to deal with specific domains and absorb the uncertainty originating from each domain.
Advertising, sales and marketing departments attempt to buffer the technical core (the
production department) from environmental uncertainty
Boundary spanning roles. These are departments that link and co-ordinate the
organization with key elements in the external environment. The boundary role

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establishes a relationship with individuals and organizations in the external environment.
The boundary spanning role serves two purposes:-
a)To detect and process information about changes in the external environment.
b)To represent the organization to the external environment
Examples of departments which perform boundary spanning role include strategic
planning, public relations.
Differentiation. This is the difference in cognitive and emotional orientation among
managers in different functional departments and the difference in formal structure
among these departments. When the external environment is complex and rapidly
changing organizational departments become highly specialized to handle the uncertainty
in their external domain. For example, when the University of Nairobi faces a highly
hostile political environment, it establishes specific departments to deal with the
complex political environment
Integration. Integration is the quality of collaboration between departments. When
environments are highly uncertain, organizations form integrators to increase co-
ordination among departments. These integrators include liaison officers, management
committees, task forces, or integrators.
Planning and Forecasting. When the environment is stable, the organization can
concentrate on current operational problems and day-to-day efficiency. Long-range
planning and forecasting are easy to do because environmental demands in the future will
be the same as they are today. But when environments are hostile, rapidly changing and
complex, specific departments for planning and forecasting are essential since planning
required is extensive
External Strategies
The relationship between organization and its external environment is not simply one of
organizational adaptation. Organizations can also reach out and change the external
environment. Two strategies can be adopted to manage the external environment viz;
i)Establishing favorable linkages with the key elements in the environment and
ii)Shaping the environment domain
iii)Establishing favorable linkages. This may include:-

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iv)Mergers. In a merger, the organization acquires an organization in the domain that is
creating uncertainty
V)Contracts. The organization enters into contractual arrangements with suppliers or
purchasers.
vi)Joint Ventures. Organizations form companies with key stakeholders in the external
environment to reduce uncertainty
viiCo-optation. This occurs when leaders from important domains in the environment
are brought into the organization e.g. influential customers or suppliers are appointed to
the board of directors of the organization
Interlocking Directorates. The individuals appointed to the board of the organization
are also members of other key stakeholders in the external environment.
External Recruitment. Hiring, for example retired generals from the air force to
connect organization manufacturing air force equipment to the air force
Advertising. Organizations also advertise their products to customers
Public Relations. This is aimed the at public merely to cast the organization in a
favorable light
Controlling Environmental Domains of the External Environment. This entails three
techniques:-
Change domains. An organization may decide to produce other products.
Political activity. This involves influencing government officers or politicians to make
or repeal laws and regulations in the organizations favor.
Trade Associations. The organization may form forces with other organizations in the
industry that have similar interests, by pooling resources together to take care of their
interests, These organizations can afford to pay people full-time to carry out activities
such as lobbying legislators, influencing regulations, developing new relations,
campaigns and blocking competition

2.5 CONTEMPORAY APPROACHES

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2.5.1 THE CULTURE EXECELLENCE APPROACH)
This approach is led by five theorists namely Peters and Waterman, Edward
Denning, Peter Drucker, Rothabeth Moses Kanter and Charles Handy.

Peters and Waterman’s Management Principles

In their book, In Search of Excellence, the two authors made innovative proposals on
how to achieve efficiency and effectiveness in organizations. The book was based on a
study of 100 of the most successful U.S. companies during the 1970s. The authors
proposed the following principles to guide managers.

1) Bias for action – A preference for doing something, anything, rather than sending
an idea through endless circles of analysis and committee reports.
2) Staying close to the customer – Learning the customer’s preferences and catering
to them.
3) Autonomy and Entrepreneurship – Breaking the corporation into small units and
encouraging them to act independently and competitively. Encouraging and
rewarding creativity and innovation at all times.
4) Productivity through people – Creating in all employees the awareness that their
best efforts are essential and that they will share in the rewards of the company’s
success.
5) Hands on, value driven – Insisting that managers keep in touch with the
company’s essential business and promote a strong culture.
6) “Stick to the knitting” – remaining with the business the company knows best.
7) Simple form, lean staff- Few administrative layers, few people at the upper levels.
8) Simultaneous loose – tight properties – Fostering a climate of dedication to the
central values of the company, combined with tolerance for all employees who
accept those values

Edward Denning Total Quality Management Principles (TQM)

These principles were first developed in the 1940s by Edward Denning. Denning
emphasized the importance of employees in achieving high quality. He described TQM
as empowering, energizing, and enabling employees to work with one another. He
transplanted those ideas to Japan after the end of World War II. By the 1970’s Japanese
products were flooding markets around the world.

By the 1980S, the TQM philosophy was consolidated into the following principles.

(1) TQM (Meaning of) – a company wide effort that includes all employees,
suppliers and customers, and seeks to continuously improve the quality of
products and services to meet customer expectations.

(2) Under TQM, employees are encouraged to participate in the improvement of

quality and to find and solve problems that affect productivity.

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(3) Customer focus: The entire company is directed towards customer satisfaction

(4) Strategic Planning and Management : Managers must make long-term

commitment to improving the quality of their product

(5) Continuous Improvement: Managers should not expect their companies to reach
high quality productivity levels over-night. A step by step approach is much more
realistic.

(6) Empowerment and Teamwork: Since quality is attained through all employees,
and not just managers, a great deal of teamwork among all workers and across all
levels of the company must occur. Such teamwork is required not only vertically
(i.e. among top, middle, and lower, level managers and employees) but also
horizontally (i.e. within and across departments). In additional inter
organizational team work between the company and its suppliers is needed to
fully integrate supplier’s capabilities with those of the company.

Peter Drucker (1995) Drucker’s main contribution to management theory is in three

areas namely:
1) Ways of evaluating management
According to Drucker management should be evaluated in four other dimensions
in addition to the traditional one of goal achievement namely

i) Purpose and Mission

Management exists to enable a business achieve its objective. The objective of a
business is to supply goods and services using its resources to consumers at a
price the consumers are willing to pay.

ii) Productive work and worker achievement

A business accomplishes its performance through work. Work is performed by
workers. Making the worker work is a very important task for management; it
implies consideration of the human resource as human beings and not as things.
It means recognizing the worker as having a personality, and thus requiring
responsibility, motivation, participation, satisfaction, leadership, status and
function.

iii) Social Impacts and Social Responsibilities

Every organization is part of society, and it exists for the sake of society. To
produce economic goods and services, the business has to have impacts on
people, on community, on society and on the environment. It has to have impact
on the community as a source of jobs, tax revenues, waste products and
pollutions. It has an impact on the environment in terms of physical, geo-physical
and biological negative and positive effects. The business has therefore got to be
evaluated on the basis of its impact on people, community, society and the
environment, thus being concerned with the quality of life of community.

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 iv) The Time Dimension
Management has to consider both the present and the future: both the short run
and the long – run. Where the future and the present are not both satisfied, where
their requirements are not harmonized, or at least balanced, the interest of the
business is endangered, damaged or destroyed. Thus management has the
responsibility of ensuring that the present is not only efficiently managed but that
efficiency is harmonized with the future.

v) Administration and Entrepreneurship

Administration means getting the most out of what already exists.
Entrepreneurship means creating, innovating and bringing new things for a better
tomorrow. But to create a better tomorrow begins by making today’s business
successful. Thus the job of a manager is making today’s business successful in
terms of administrative and economic efficiency thus ensuring the success of the
same business tomorrow. Thus he is concerned with the efficiency of today’s and
tomorrow’s and therefore he/she creativity and innovation to create better ways to
enable survival for tomorrow.

2) Drucker’s other contribution is the philosophy of management by objectives. This

philosophy emphasizes that senior managers should establish long range goals.
Lower level managers should actively participate in setting those goals. In
addition each manager should set his/her own goals. Each manager’s goals
become the source of self control of his performance

3) Drucker’s other contribution is his proposals about what is likely to happen in the
future (until about 2010). For him the future (i.e. 21 st Century first decade) there
will be:
i) A rise in alliances globally linked by technology
ii) A compelling need for decentralized organizations in an increasingly
uncertain environment.
iii) An increase in the use of teams in organizations
iv) An increase in the number of knowledge workers and continued decline
in blue collar workers.
v) The evolution of society into three sectors: business; government; and
non-profit – the later will be interested only in social development. The
Non-profit sector will be characterized by volunteer services.
vi) A world economy in which world markets will become more important
than domestic markets.
Rosebeth Moss Kanter
“Corporate giants must learn how to dance”
According to Kanter to be competitive in a modern environment, companies must
i) Restructure to find synergies
ii) Open boundaries to form strategic alliances.

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 iii) Create new ventures from within, encouraging innovation and
entrepreneurship.
A. Restructuring to find Synergies
- Identify and concentrate on the core business areas
- Eliminate all non-core activities.
- Devolve authority to appropriate levels – those in the front line,
- The non-core areas can be done by computers or outsourced.
B. Opening Boundaries to Forms Strategic Alliances
- The need for alliances with other organization to exploit opportunities and share
ideas and information.
- These alliances may take three forms
 Opportunistic alliances
 Service alliances
 Stakeholders alliances
- Opportunistic alliances comprises a joint venture whose aim is to take advantage
of a particular opportunity that has arisen
- Stake holder alliances is a continuing almost a permanent partnership between an
organization and its key stakeholders eg employees, customers and suppliers
- Service alliance – organizations form a cross- company consortium to undertake
a special project with a limited lifespan
C Creating New Ventures from within
- Encouraging innovation and creativity
- Need to create new cultures that encourage and aid creativity and innovation. As a
result the innovative potential of employees is tapped, resulting in a proliferation
of new ideas, products, and ways of working, leading to improvements in
organizational performance
Charles Handy’s Emergence Future Organization
His thinking and writing were inspired by rising unemployment in Europe and the rise of
Japan as an economic power. Handy argued that if organizations were to survive the
competitiveness of the 1980s, and meaningful jobs were to be created for all those who
wished to work, then both organizations and individuals would have to change the way

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they perceived jobs and careers. In his book, The Age of Unreason, Handy identifies three
generic types of organizations that should dominate the future. These are: the Shamrock
organization, the Federal organization and the Triple I organization.
a) The Shamrock Organization
- Like the plant of the same name, a Shamrock organization has three interlocking
leaves or three distinct groups of workers – the core, the contractual and the
flexible labour force.
- Core workers form the specialists, the professionals, who form the brain, the hub
or the nerve centre of the organization. These are people who are seen as being
essential to the organization
- The contractual fringe These may or may not work exclusively for the
organization in question. They are contracted to carry out certain tasks for which
they are paid a fee. This group is cheaper (they are only paid for what they do),
their management is easier, and they are hired only when there is work.
- The flexible labour force comprises of a pool of part-time workers available for
use by the organization. These are people with relevant skills, who are not in need
of, or who cannot obtain full time employment but who are prepared to work on
part time basis.
b) The Federal Organization
Handy defines this type of organization as a collection or network of individual
organizations allied together under a common flag with some shared identity. Federation
combines the advantages of small size and those of a large organization. The smallness
allows for flexibility in decision making while largeness brings benefits of economies of
scale. The federal organization has the role of generating and collecting ideas from the
member organizations and making them into concrete, achievable strategies objectives.
The federal organization is concerned with the future, with looking forward, generating
new ideas and creating sceneries and options of what the future will look like. All this is
done with the ultimate aim of moving the organization forward and keeping it ahead not
only of competition but also of its time.
c) The Triple 1 Organization

JAPANESE APPROACH TO MANAGEMENT

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Many authors, Ouchi (1981), McKenna (1988), Pang and Oliver (1988), Keys and Miller
(1984) and Hellman (1997) have written extensively on why Japanese has achieved such
high levels of economic prosperity despite being a country of over 100 million, crowded
in four small mountainous islands and with no natural resources and having experienced
a devastating world war in the 1940s. They have noted that Japan after second war which
reduced the country almost to ashes, had become an industrial empire second to none,
having the second largest economy highest growth rates and lowest level of
unemployment. The reasons for this can be separated into two issues:
1) The personnel issues
 Lifetime employment
 Internal labour markets
 Seniority based promotion and reward system
 Teamwork and bonding
 Enterprise income
 Training and education
 Company welfarism
2) Business practices
 Long term planning
 Timeliness
 Quality
The above issues are briefly discussed below:
Personnel issues
1) Lifetime employment: Many employees are recruited from school and are
expected to spend the rest of their working life in the same organization.
2) Internal labour markets: Most positions are filled from within the company
3) Seniority based on promotion and reward systems: Employees are ranked and
rewarded primarily but not exclusively, on their length of service.
4) Teamwork and bonding: Japanese firms use teams and groups to perform tasks
jointly, so as to bond employees.
5) Enterprise (single-company) unions: Unlike western companies Japanese
companies tend to allow only one union to represent the interests of the
workforce.
6) Training and education: This forms an integral part of Japanese personnel
policies.

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 7) Company welfarism: Many Japanese companies provide a wide range of welfare
benefits such as medical treatment, housing and education for children.
Business practices
1) Long range planning: Japanese companies operate on far longer planning
horizons than that of many western companies.
2) Timeliness: Japanese are seen to emphasize a lot on developing and producing
their products faster than their western competitor.
3) Quality: The Japanese commitment to quality is far much higher than their
western counterparts.
Criticism of the Japanese approach
1) The approach only emphasized the manufacturing sector and ignored other sectors
with the result that the Japanese retail sector is only half as productive as the US
counterpart (Business 2009).
2) In many respects the approach appears oppressive through the combination of
personnel policies and work systems.
3) Lack of independent trade unions exacerbates the exploitation of works – leaves
them to the mercy of management.

THE LEARNING ORGANIZATION APPROACH

Organizational learning is the process by which organizations knowledge and value base
changes, leading to improved to problem solving ability and capacity for action (Probst
and Buchel, 1997: 15).
A learning organization is an organization skilled at creating, acquiring and transferring
knowledge and at modifying behaviour to reflect new knowledge and insights (Garvin,
1993: 80).
Organizational learning means the process of improving action through better knowledge
and understanding (Fiol and Lyles, 1985: 803).
Organizational learning occurs through shared insight, knowledge and mental models and
builds on past knowledge and experience that is on memory (Stata, 1989: 64).
Senge’s five disciplines that organizations need to foster amongst individuals and groups
in order to promote learning and success are:
1) Personal mastery: Individual growth and learning.

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 2) Mental models: Deeply ingrained assumptions that affect the way individual
think about people, situations and organizations.
3) Shared vision: The development of a common view of organization’s future.
4) Team building: The shift from individual to collective learning.
5) System thinking: The art of systems thinking lies in being able to recognize the
increasingly complex (dynamically) and stable structures and the wealth of
details, pressures and cross currents that attend all real management settings.
Factors promoting organizational learning
1) Structure: This needs to be flat network based in order to promote networking
both internally and externally.
2) Information systems: These need to be geared toward the rapid acquisition,
processing and sharing of information.
3) Human resources practices: These need to include appraisal and reward systems
which promote the acquisition and sharing of new skills and knowledge.
4) Organizational culture: This needs to be based on values and norms which
promote openness, creativity and experimentation in order to support successful
learning.
5) Leadership: Managers throughout the organization must lead, promote and be
involved in organizational learning.
Approaches to organizational learning
1) Learning by developing a strategy – shaping the organizations future through a
participative and practical learning exercise.
2) Learning by developing a structure – Developing structural form such as matrix
and network structures that promote learning.
3) Learning by developing a culture – the creation of a shared values, norms and
attitudes that promote collective success over individual attainment.
4) Learning by developing human resources – Developing staff through
participation and group oriented learning.

Criticism of the learning organization

Contribution
 An organization survival depends on its ability to learn at the same pace as or
faster than changes in its environment.

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  Learning must become a collective and not just an individual process.
 There must be a fundamental shift towards systems thinking by an organization’s
members.
 By adopting organizational learning an organization not only acquires the ability
to adopt circumstances, but it can also transform itself if necessary.
 As well as its ability to transform itself an organization can adopt to influence and
even transform its environment.
However, despite the above contribution of the organizational learning, it suffers from the
following:
1) There is no agreed definition of the concept.
2) Despite the volume of publications on the subject there is a scarcity of rigorous
empirical research on the area (Business, 2009).
3) Organizational learning is a misnomer in fact an organization doesn’t learn. It is
people who learn.
4) The learning organization and other cultural. Excellence approaches assume a
“one best way” approach.

=============================================================

LECTURE FIVE ORGANIZATIONAL STRUCTURE AND DESIGN

5.1 Introduction
In this lecture we shall define organization structure and design and discuss the structural
and contextual dimensions of organizations.
5.3. Meaning of Organization Structure and Design
An organisation design is defined as a structure and a process through which individuals
allocate tasks among members, identify relationships and integrate their activities
towards common objectives. It includes
 Allocation of tasks and responsibilities between the different members of the
organization
 Differentiating these tasks and activities into groups and departments
 Differentiating the tasks and responsibilities into hierarchies and locations

83
  Establishing coordination mechanisms to integrate the different groups, and
hierarchies into a unitary whole.
Organisation structure may also mean the following:
 The way the organisation is differentiated into various tasks and responsibilities.
 The way the tasks and responsibilities are allocated to the various members of the
organisation.
 The way the organisation is differentiated into hierarchies.
 The way the organisation is differentiated into different locations.
 The way the different responsibilities, tasks and locations are coordinated or integrated
into a unitary whole
Organisation structure is therefore the differentiation i.e. the way the organisation is
differentiated into tasks, responsibilities, departments and hierarchies and the integration
(the way the organisation is coordinated to form a unitary whole)
5.4. Dimensions of Organization Structure
There are several ways in which the organization structure is measured or differentiated.
The measures used are:
(a) Span of control. This refers to the number of employee directly controlled by a single
supervisor. The size of the span of control is a function of:
i) The degree of complexity of the work- simple tasks are easily supervised and
are therefore associated with long spans while more complex or advanced tasks
are associated with shorter span of control
ii) The level of staff skill and ability. Well-framed and able employees can be
supervised more efficiently in larger groups (wider spans) while untrained staff
require narrow or smaller span of control.
iii) The supervisors’ training and ability level. Too wide span of control is
associated with lack of control and the likelihood of costly mistakes being made
by subordinates. Too narrow a span of control leads to employee being over
supervised and denied the opportunity to be creative. This may lead to decline in
organisation growth as a result inability to be adaptive to environmental change
and dynamics.

84
(b) Chain of command: This identifies how power and control is passed down through
the organisation. A tall structure is a long chain of command and a flat structure is a short
chain of command. Chain of command is also described in terms of vertical complexity.
(c) Centralisation/decentralisation. This refers to the level in the organisational
hierarchy in which decisions are made. In a centralised hierarchy, the decisions are made
at higher level.
(d) Formalisation- the amount of written documentation in the organisation that
describes the procedures, job descriptions, regulations policies of these organisations.
(e) Specialisation- the degree to which organisational tasks is subdivided. (This is also
referred to as the division of labour.) If specialisation is extensive, each employee
performs only a narrow range of activities.
(f) Standardisation- is the extent to which similar work activities are performed in a
unified manner. In a highly standardised organisation, work content is described in detail,
so similar work is performed the same way across departments or locations.
(g) Hierarchy of authority- describes who reports to whom and the span of control for
each manager. Span of control refers to the number of employees reporting to a
supervisor. Hierarchy of authority is the number of hierarchal levels.
(i) Structural Complexity– refers to the number of activities or subsystems within the
organisation (horizontal complexity) the number of levels in the hierarchy (vertical
complexity) and the number of localities that is geographical (spatial complexity )
(j) Professionalism- is the level of formal education and training of employees.
Professionalism is considered high when employees require long periods of training to be
jobholders in the organisation. Professionalism is measured in terms of the average
number of years of education of employees.
(k) Personnel configuration is another structural dimension of organisation and this
refers to the deployment of people to various functions and departments. Personnel
configuration is measured by ratios such as administrative ratios, the ratio of direct/
indirect labour employees. It’s measured by dividing the number of employees in a
function by the total number of employees in the organisation.
5.5. Contextual Dimensions

85
They characterise the whole organisation including its environment. Contextual
dimensions are important because they influence the structure. The key contextual
dimensions are as follows:
i) Size- this is the number of people in the organisation. Since organisations are social
systems, the number of employees measures size. Other measures such as total sales or
amount of assets are related but do not indicate the size of the human part of the social
system.
ii) Organisational technology- the nature of the task to the production subsystem and
includes the actions, the knowledge and the technologies used to change inputs to
outputs. An assembly is one type of technology. E.g. college classroom or an oil refinery.
iii) Organizational environment- this refers to all the elements outside the organisation’
boundary but can affect or have the potential to affect the organization. The key elements
include: the industry, government, customers, suppliers and the financial sectors. Most
elements that affect the organisation are composed of other organisations. Both
contextual and structural dimensions represent variables that can be measured and
analysed for any organisation. They provide a basis for measurement and analysis.
iv) Organizational culture This refers to the beliefs, values and customs shared by
members of an organization or group. The shared beliefs, values and customs are strongly
held and shared by the group and they help guide the group in the pursuit of the group’s
goals
v) Organizational strategy This refers to the formulation of the organizations goals and
objectives and the way to achieve those goals

LECTURE SIX
ORGANIZATION ENVIRONMENT

6.1. Introduction
In this lecture we shall define organizational environment as all the elements outside the
boundary of the organization which affect or have the potential to affect the organization.

86
We will also discuss the various environmental sectors facing organizations such as
political/ legal, economic, industry and others
6.3. Definition of Organization’s External Environment
Organizational environment refers to all the elements existing outside the boundary of the
organization that have the potential to affect all or part of the organization. In a broad
sense, the environment is infinite and includes everything outside the organization. It
consists of sectors such as
 Raw material - these are individuals and other firms which supply the
organization with raw materials
 Human resources - these are organizations which supply the
organization with human resources
 Financial Resources - these are conditions, competitiveness, institutions
and instruments which supply the organization with financial resources
 Customer or Market - this sector includes the customers who purchase
the organization’s goods and services
 Economic - this includes the state of the economy, inflation, depression,
or unemployment rates, economic policies etc. of the country or region
where the organization sells its goods and service
 Political/legal - this includes the stability or instability, rules and
regulations, and the justice systems of the country
 Socio-cultural - consists of values, beliefs, standards of the society in
which the organization is situated
 Demographic - consists of all the demographic dimensions of the society
of the organization
 Natural Environment - consists of the climate, weather and other natural
conditions of the country or region of the organization
 International environment - consists of the elements, factors and other
organizations existing outside the country of the organization which have
the potential to affect the organization
6.4. Dimensions of Organizational environment

87
The external environment of an organization can be differentiated, measured or
categorized in many ways. The main ways in which this differentiation can be done
include the following studies:-
6.4.1. By Aldrich - Aldrich categorizes an organization’s external environments in
terms of:-
i) Environmental Capacity: This measures the environment in
terms of resources availability
ii) Homogeneity/Heterogeneity: This categorizes the environment
in terms of the degree of similarity among the environments
elements
iii) Stability/Instability: This categorizes environment in terms of the
degree of turnover of the elements
iv) Consensus/Dissensus: This categorizes the environment in terms
of the degree to which an organization’s claim to a specific domain
is disputed or recognized by other organizations
v) Concentration/ Dispersion: This measures the degree to which
resources and other elements are evenly distributed over the range
of the organization’s domain
vi) Environmental Turbulence: This measures the extent to which
the task environment of an organization is disturbed by an
increasing rate of interconnection between elements and trends.
6.4.2 Emory and Trist - Emory and Trist categorized external environments into
the following categories:

 Placid Randomized. This is a simple environment. It is placid in the

sense that elements change slowly. The environment is random
because when a change does occur, it is not predicted, and is not
coordinated with other environmental elements.
 Placid Clustered. This environment is stable. Elements are linked
together so that any slight change in one causes simultaneous change

88
 in other elements. When threats or opportunities occur they occur in
clusters which are more dangerous for the organization.
 Disturbed reactive. In this environment changes are no longer
random. Actions by one organization can disturb the environment and
provoke a reaction. This environment is made up of large
organizations. A decision by any one organization in this type of
environment is significant enough to cause a disturbance, and calls for
a reaction from other organizations. In a disturbed reactive
environment, management’s task is to carefully plan decisions and
strategic moves to allow for counter moves.
 Turbulent Field. This is an environment characterized by both
complexity and rapid changes. Multiple sectors experience dramatic
changes and the changes are connected. The turbulent field usually
has overwhelming negative consequences for the organization. The
distinguishing feature of the turbulent field is the inter-dependence and
the inter-connectedness of the elements.
6.4.3. Lawrence and Lorsch Studies
Lawrence and Lorsch of Harvard University examined three departments
(Manufacturing, Research & Development and Sales) in ten companies in the United
States of America. Their aim was to find out how organizational structure relates to
environmental complexity. Their findings were that;
 The plastics industry with high environmental complexity tended to
have higher departmental differentiation than either the food industry,
(facing moderate complexity), and the container industry, (facing low
environmental complexity). They defined differentiation as the
differences in cognitive and emotional orientation among managers in
different functional departments.
 The plastics industry also had a higher degree of integration than either
the foods industry or the container industry. Their findings are as
summarized in table 6.1.
Table 6.1 Environmental Uncertainty and Organizational Structures

89
 INDUSTRY
Plastic Food Contai
s ner
Environmental uncertainty High Moder Low
ate
Departmental differentiation High Moder Low
ate
Percentage in integrating roles 22% 17% 0%
(integration)

Source: Daft, R.I

6.4.4 Burns and Stalker Studies
Burns and Stalker observed 20 industrial firms in England and discovered that when
external environment was stable, the internal structure was characterized by rules,
procedures and a clear hierarchy of authority (i.e. high formalization). They were also
highly centralized.
However, the studies found out that in rapidly changing environments, the internal
organization was much looser, free flowing and adaptive. Rules and regulations often
were not written down, or if written down were ignored. The hierarchy of authority was
not clear. Decision making was decentralized. Burns and Stalker used the term
“organic” to describe the decentralized, low formalized, flexible- structures, and
“mechanistic” to describe centralized, highly formalized and inflexible structures.

LECTURE SEVEN ORGANIZATION TECHNOLOGY

7.1. Introduction
In this Lecture we shall define organizational technology and technology typology and
discuss its importance to the efficiency and effectiveness of organizations. We shall also
discuss the various technology typologies such as technical complexity, task
interdependence and knowledge analyzability and analyzability.

90
7.3. What is Technology?
Technology refers to the process of transforming inputs into outputs. It includes the
knowledge, tools, the equipment and the processes used in producing goods and services
in an organization. All organizations have technology
7.4. Importance of Technology
Technology is important because:-
i) It determines the efficiency of the organization
ii) It is the principal determinant of increase in production of limited and exhaustive
resources
iii) It affects the attitudes, feelings and the temperament of the worker, and therefore
affects his or her productivity
iv) It affects organization’s structure

7.5. Technology Typology and its Categories

Technology typology refers to the ways technology is measured, differentiated or
categorized.
Technology can be classified or differentiated in many ways. Some of the ways are
technical complexity of operations, interdependence of operations and knowledge
analyzability and variety. Technical complexity refers to the differentiation in terms of
the use of human labor versus the use of machinery and equipment in the transformation
process. The more the proportion of the human input the less complex the technology and
the more the proportion of the machine input the more complex the technology. In the
case of interdependence of operations, the greater the interdependence the higher the
technical complexity. In the case of knowledge analyzability and variability and task
variety the complexity of technology takes on four dimensions. These dimensions of
technology typologies are explained here below.
7.5.1. Joan Woodward’s Technical Complexity
Joan Woodward was a British Industrial Sociologist. Her studies covered 100
manufacturing firms in South Essex, England. Her study was conducted between
September 1954 and September 1955. The study was designed to test whether

91
management principles as applied on organization structure, span of control, chain of
command etc led to successful organizations.
Method of study
Woodward and her research team visited each of the firms studied, interviewed
managers, examined company records and observed its manufacturing operations. Her
data included a wide range of structural characteristics of these organizations such as
span of control, levels of management, management and clerical ratios, work skill level,
dimensions of management, (i.e. written versus verbal communications, use of sanctions)
type of manufacturing processes, data on commercial success of the company (such as
profitability, prices of shares in stock exchange) the history and rate of development,
reputation of the firm as an employer, level of salaries paid to senior staff, rate of staff
wastage and the relationship between the firm and outside organizations.
Data analysis
The initial study of data found that firms varied widely in such things as span of control,
number of hierarchical levels, administrative ratio and amount of verbal communications.
Thus her data did not show any proof to the “one best way” principle of management.
However a further look and analysis of the data and information showed a relationship
between organization structure and technology. Woodward developed a scale and
organized the firms according to technical complexity of the manufacturing processes.
Technical complexity represented the mechanization and predictability of the
manufacturing process. Her scale had ten categories that were grouped into three
production types as summarized in Annex 1 attached and discussed below.

Group 1: Small Batch and Unit Production

These firms tended to be job shop operations that manufacture and assemble small orders
to meet specific needs of customers. Customs work is the norm. This technology relies
heavily on the human operator. It is thus not highly mechanized and predictability of
outcome is low. Examples included many types of made to order manufactured products,
such as specialized construction equipment or custom made electronic equipment.

92
Group 11: Large Batch and Mass Production
This manufacturing process is characterized by long production of standardized parts.
Output often goes into inventory from which orders are filled because customers do not
have special needs. Examples would include most assembly lines, such as automobiles or
trailers homes. The integrated cotton mill is also a mass production technology.
Group III: Continuous Process Production
In this technology, the entire process is mechanized. There is no starting and stopping.
This represents mechanization and standardization one step beyond an assembly line. The
organization has high control over the process and outcomes are highly predictable.
Examples would include chemical plants, oil refining, and liquor production.
Her findings were as follows;
 Ratio of management staff to total personnel shows an increase from unit production,
to mass production and to continuous process production.
 Supervisor span of control is highest in mass production and lowest in process
production.
 Direct labor to indirect labor ratio decreases with technical complexity.
 Other characteristics such as span of control, formalized procedures, and
centralization are high for mass production and low for other technologies i.e. unit
production and process production.
 The number of skilled workers and the use of verbal versus written communication
also depend upon manufacturing technology. It is high in unit and process production
and low in mass production.
 Overall, the management system in both unit and process technology is characterized
by organic while mass production is characterized by mechanistic system.
 With respect to technology and performance, Woodward studies found that successful
firms tended to be those that had complementary structures and technologies i.e. firms
that most nearly approximated the typical structure for their technology were most
effective. Firms that deviated in either direction from their ideal structure were less
successful.
 Woodward was able to explain the disparity between her findings and the classical
prescriptions of management theorists’ – these principles must have been based on

93
 these theorists’ experiences with organizations that used mass production
technologies. The mass production firms had clear lines of authority, high
formalization, a low proportion of skilled workers achieved through a high division of
labor, wide span of control at the supervisory level and centralized decision making.
Evaluation of Woodward studies
Woodward’s findings were widely supported by a number of other researchers for
example: -
 Edward Harvey studied 43 different industrial organizations and rated them in similar
technologies. He found, consistent with Woodward’s findings that, a relationship
between technical specific technologies had more specialized sub-units, more
authority levels and higher ratio of managers to total personnel than did those with
diffuse technologies.
 Another study confirmed that there was no evidence that there was such a thing as a
universally optimum structural form. Each type of structure depends on many things.

Table 7. 1: Woodward’s classification of 100 British firms according to their system

of production

Group 1: Small Batch and Unit Production Technology

 Production of simple units to customer’s orders
 Production of technologically complex units
 Fabrication of large equipment in stages
 Production of small batches

Group 2: Large Batch and Mass Production Technology

 Production of components in large batches. Subsequently assembled directly
 Production of large batches assembly line type
 Mass production
Group 3: Process Production Technology
 Process production combined with the preparation of product for sale by large batch
or mass production methods

94
 Process production of chemicals in batches
 Continuous flow production of liquids, gases, and solid shapes.
Table 7.2: Relationship between technical complexity and structural characteristics
according to Woodward’s findings.
TECHNOLOGY
Unit mass process

Structural characteristics
Number of managerial levels 3 4 6
Supervision span of control 23 48 15
Direct labor/indirect labor ratio 9.1 4.1 1.1
Management staff/total personnel ratio low medium high
Number of skilled workers high low low
Formalized procedures low high low
Centralization low high low
Amount of verbal communication high low low
Amount of written communication low high low
Overall structure organic mechanistic organic

The technology Structure Fit (Technical complexity and structural complexity)

Structural
complexity
(high)

Lo 95
w Technical high
Unit batch Mass Continuo complexity
7.5.2 James Thompson’s Task Interdependence
 Another pioneer in the technology- typology arena was James Thompson. Unlike
Woodward’s, Thompson’s work was not based on field research. His contribution
was theoretical – he drew from a variety of sources and proposed new ideas and
frameworks about organizations. In Thompson’s view, organizations are open
systems and technology reflects the environment outside the organization as well as
internal task activities. He proposed three categories of technology that reflect
relationships with clients as well as internal transformation process. These categories
are:
Mediating or pooled technology: Mediating technology involves the mediation or
linking of clients with the external environment. Typically these clients cannot deal with
each other directly because of costs or complexities involved in face to face transactions.
A stockbroker for example mediates between sellers and buyers. So does a real estate
firm. Employment agencies bring together clients who are jobless with clients who have
job openings. Banks and retail stores also mediate between clients in the environment.
Long Linked or sequential Technology: the concept of long-linked technology refers
to the combination in one organization of successive stages of production, each stage of
production uses as its inputs the production of the preceding stage and produces inputs
for the following stage. Organizational activities occur in sequence in long linked
technologies: the output of operation 1 becomes the input of operation 2, the output of
operation 2 becomes the input of operation 3 and the finished product is then available to
customers. Large-scale organizations that use assembly-line production to produce goods
or services through a sequence of activities as in the automobile industry are examples of
long linked technologies.

96
Intensive or reciprocal Technology: intensive technologies are characterized by the
collection of specialized services for clients. A variety of activities can be brought to bear
on the client and have substantial impact on the client. Intensive technologies generally
go beyond providing a simple service and are designed to bring about change in the
client. Hospitals are an excellent example because they represent a collection of
specialized skills to bring about therapeutic change in patients. A university is another
example – a wide variety of disciplines and support services are available to facilitate
educational development of students. Figure 7.1 illustrates the three types of technology
typologies by Thompson.

Fig 7.3: Thompson’s Technology Classification.

Mediating Clients

Customers

Clients
Long-linked

Intensive
Clients

97
Evaluation of Thompson’s work
Thompson’s study fails to explain the departmental technologies – for example what
classification would one use for G.M which uses an intensive technology in its R&D
department, a long linked one in its assembly line, and a mediating technology in its
financing department.
Thompson also does not deal explicitly with the issue of complexity or variability of
technology in a given case (Robbins – 2000). For example some long linked technologies
are quite complex and allow variability and exceptions (e.g. assembling different
automobile models with color and other options) while others are less complex.

Interdependence of departmental operations and structure Fit: James Thompson

Structural
complexit
y

Mediating Sequentia Reciproc

Low l Medium al
High

98
7.6.3. Charles Perrow’s Knowledge Technology
Charles Perrow tried to look at the limitations of Woodward namely the fact that
Woodward studied only manufacturing firms. Since manufacturing firms represent less
than half of all organizations, technology needs to be operationalised in a more general
way if the concept is to have meaning across all organizations.
Per row looked at knowledge technology rather than production knowledge. He defined
technology as “the action that an individual performs upon an object, with or without the
aid of tools or mechanical devices, in order to make some change in that object”. He
identified two dimensions of technology viz:
 Task variability – this considers the number of exceptions encountered in one’s
work. These exceptions will be few in number if the job is high in routine ness. Jobs
that normally have few exceptions in their day-to-day practice include those on an
automobile assembly line or as a fry cook at McDonald’s. At the other end of the
spectrum if a job has a great deal of variety, a large number of exceptions can be
expected. Typically this characterizes top management positions, consulting jobs or
the work of those who make a living by putting out fires on off shore oil platforms.
So, task variability appraises work by evaluating it along a variety routine ness
continuum.
 Task/Problem Analyzability – the second dimension assesses the type of procedures
followed to find successful methods of responding adequately to task exceptions. The
search can at one extreme, be described as well defined. An individual can use logical
and analytical reasoning in search for a solution. If you are basically a high B-student
and you suddenly fail an exam given in a course, you logically analyze the problem
and find a solution. In contrast, the other extreme would be ill-defined problems. If
you are an architect assigned to design a building to conform to standards and
constraints that you never heard about or encountered before, you will not have any
formal search technique to use. You will have to rely on your prior experience,
judgment and intuition to find a solution. Through guesswork and trial and error, you
might find an acceptable choice. Perrow called this second dimension problem
analyzability ranging from well defined to ill define.

99
These two dimensions – task variability and problem analyzability – can be used to
contrast a two by two matrix- shown in fig 7.2 below. The four cells in this matrix
represent four types of technology, routine, engineering, craft and easy to analyze
problems.

Routine technologies are characterized by little task variety and the use of objective,
computational procedures the mass – production processes used to make steel or auto
mobiles or refine petroleum belongs in routine category. A bank’s teller’s job is also an
example of activities subsumed under routine technology.

Engineering technologies have a large number of exceptions, but they can be handled in
a rational and systematic manner. The construction of office buildings would fall in this
cell, as would be the activities performed by tax accountants.
Craft technologies (Cell 3): deal with relatively difficult problems with a limited set of
exceptions. This would include shoe making, furniture restoring, or the work of
performing artists.
Non-routine technologies: are characterized by many exceptions and difficult to analyze
problems. Examples of non-routine technologies would be strategic planning basic
research activities. In summary, Perrow argued that if a problem can be studied
systematically using logical and rational analysis cells 1 or 2 would be appropriate.
Problems that can be handled only by intuition, guesswork or unanalyzed experience
requires the technology of cell 3 or 4. Similarly if new, unusual, or unfamiliar problems
appear regularly, they would be in either cell 2 or cell 4. If problem are familiar, then cell
1 or 3 are appropriate.
Perrow also proposed that task variability and problem analyzability were positively
correlated. By that he meant that it would be unusual to find instances where tasks had a
very few exceptions and search was clearly unanalyzable or where tasks had a great many
exceptions and search was well defined and easily analyzable. This means that the four
technologies can be combined into a single routine, non-routine dimension. This is shown
in the figure 2 as a diagonal line.
Figure 7.4. Perrow’s Technology Classification

100
Task variability

Few Exceptions Many Exceptions

Craft C
Ill defined
4

non-routine
3

Routine 1 2
Well
defined
Routine engineering

Technology and Structure

Perrow argued that control and co-ordination methods should vary with technology type.
The more routine the technology, the more highly structured the organization should be.
Conversely, non-routine technology requires greater structural flexibility. Perrow then
identified the following as the key aspects of structure that could be modified to the
technology.
 The amount of discretion that can be exercised for completing tasks
 The power of groups to control the units goals and basic strategies.
 The extent of inter-dependence between these groups.
 The extent to which these groups engage in co-ordination of their work using either
feedback work or the planning of others.

The above means that:

 The most routine technology (cell 1) can be accomplished best through standardized
co-ordination and control. These technologies should be aligned with structures that
are high in both formalization and centralization.

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 Non-routine technologies (cell 4) demand flexibility. Basically they would be
decentralized have high interaction among all members, and be characterized as
having minimum degree of formalization.
 Craft technology (cell 3) requires that problem solving be done by those with the
greatest knowledge.
 Engineering technology because it has many exceptions but analyzable search
process, should have decisions centralized but should maintain flexibility through low
formalization.

Table 7.5 Perrows: Technology – Structure Predictions

Cell Technology Formalization Centralization Span of control Co-ordination and

control
1 Routine High High Wide Planning and rigid
rules
2 Engineering Low High Moderate Reports and meetings
3 Craft Moderate Low Moderate-wide Training and
meetings
4 Non-routine Low Low Moderate – Group norms and
narrow meetings

NB: Perrow did not test his work but others did for example
 One study of 14 medium sized manufacturing firms supported Perrow’s prediction.
 Another covering 16 health and welfare agencies confirmed that organizations do
have diverse technologies.
 That the more routine the work, the more likely decision making will be centralized.
 Another study covered state employment service agencies. In this study technology
was operationalized at the unit rather than the organizational level, in the belief that if
routine ness of technology actually affects structure, this effect would be greatest at
the unit level. The results of this study also proved consistent with Perrows
predictions; work that was high in routines was associated with high formalization.

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Evaluation of Perrow’s typology
At the general level, i.e. where technologies can be differentiated on the basis of routine
ness and where more routine technologies are associated with higher degrees of
formalization and centralization – there is evidence to support Perrows theories.
i) Task analyzability/task variety structure – technology framework
Structural
complexit
y

Low

Routine Engineerin Craft Non Routine

g

DIAGRAMMATIC REPRESENTATION OF THE RELATIONSHIP BETWEEN

STRUCTURE AND CONTINGENT VARIABLES

a) The strategy imperative

The strategy structure relationship

Structural
complexity
(mechanisti
c)

(organic
)
Cost Product
leadership differentiatio
n

103
104
 LECTURE EIGHT
ORGANIZATIONAL CHANGE AND ORGANIZATIONAL DEVELOPMENT

8.1 Introduction
In this lecture we shall define organizational change and explain the various processes of
implementing change. We shall also discuss the main causes of change and give an
insight into the causes of resistance to change. Lastly we shall also discuss in detail the
meaning of organizational development and the main techniques of achieving
organizational development.
8.3. What is Organizational Change?

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According to Daft (1986), organizational change is the “adoption of a new idea or
behaviour by an organization”. Similarly, Hodge and Anthony (1988) define
organizational change as an alteration in the status quo. Change occurs mainly because
organisations as open systems, must frequently cope with shifts in key environmental
domains. If they do not change to cope with shifts in important environmental domains,
they may face serious problems and they may even die. By adapting to new conditions,
they can continue to grow and prosper. Thus organisations must change to cope with
changes generated by changes in their external environment, which are continuously
changing. Changes may also be generated by the internal environment (from within the
organisation). Change generated from within the organization is endogenous, while that
generated from without is known as exogenous.

Organizations face a dilemma with respect to change. On the one hand, organizations
desire change in order to remain competitive, adopt more effective and efficient
technology and methods; on the other hand, organisations resist change because they
desire stability and predictability. Organisations desire stable output, predicable costs,
and financial stability. The key question for the organization thus becomes how can we
achieve desired change without disrupting current stability?

A question that arises is whether organisations bring about change deliberately or change
is brought about by the environment. In other words, do organisations actually determine
their own fate with regard to change? Can organisations actually adapt to environmental
change or does environmental change occur in such a manner that many organizations
cannot adopt, and therefore they die. The central issue here is between environmental
determinism and freedom of organisational choice and adaptation. This idea builds on
Darwin’s theory of natural selection, which holds that only those species that can adjust
to environmental change survive; they are selected for survival by the environment.
Those that are not selected die. This theory argues that there is little, if any, adaptation
(i.e. planned change by the organization). The environment weeds out those organisations
that do not fit.

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According to Hodge and Anthony (1988) although organizational ecology’s main
contribution is its dynamic environmental conceptualisation, this does not “displace all
other explanatory variables”. In much of research, ecological variables are combined with
institutional and structural variables to explain organisational adaptation. This paper takes
the position that organisational change can be planned and managed to a certain extent by
the management. To the extent that change can be planned then the uncertainty and
instability associated with change can be reduced. Organizational change is therefore;
- alteration of the status quo
- varying or modifying the current state of the organization aspect
- reactive change- change in response to external circumstances
- Proactive change: change primarily caused by desire by management to change.
- Organizational change can influence and be influenced by several features of the
organizational life.
- Change in one part of an organization affects people and processes in another
- Change can be triggered by a number of external and internal factors.

8.4. Sources of Organizational Change

Organizational change can be caused by either external or external forces or both.
External triggers include: change in demand for an organization’s products or services (as
a result of changing consumer preferences, action by competitors, government etc),
threatening tactics of competitors, arrival of a new comer in the market, or take over of
the business. Internal Triggers include: need to change strategy as a result of external
forces, need to introduce a new culture in the organization, need to improve productive
efficiency, need to improve the quality of product or services, or the need to improve
standards. Change can have an impact on various aspects of an organization. It can
impact on task, technology, structure or people. Organizational growth or retrenchment as
well as new government action often changes structure. Changes in technology can also
affect people’s attitudes, emotions, skills, abilities, expectations and interest. Seldom is
the impact of change neatly compartmentalized as affecting just one or two parts of an
organization. The arrows in the diagram below indicate that change usually has an
interactive, dynamic effect on the other parts of the organization.

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Fig.8.1: The Impact of Change on Aspects of the Organization.

Structure

Change
Task Technology

People

Technology changes pertain to the organization’s production processes. These changes

are designed to make the transformation process more efficient or to produce greater
volume. Changes in technology involve new techniques for making products or services.
Product (task) changes pertain to the product or service outputs of the organization. New
products include small adaptations of existing products or entirely new product lines.
Structure changes pertain to the changes in the organization structure, goals, policies,
reward systems, labor relations, linkage devices etc. They also pertain to the changes in
the supervision and management of the organization. People changes refer to the changes
in the attitudes, skills, expectations and behavior of employees.

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It is important to note that each type of change often influences the others. A new product
may require changes in the production technology. A change in the structure may
influence the attitude and skills of employees.

Although changes affect each other, most changes can be classified as technology,
structure, people or task depending upon the primary target.

8.5. Need for Organizational Change

Organizations face a continuously changing environment for example competitors
introduce new products, new production technologies are developed, political
environments change, economic environment changes e.g. economic growth, economic
depression, increase or decrease in interest rates etc.
The organization’s internal environment also changes eg employees retire or resign, or
inter group conflicts arise
These changes and others give managers daily challenges. The managers must constantly
respond to those challenges. They meet these challenges by implementing one or more of
the organizational change and development techniques namely the three phase the four
phase or the six phase processes. Each of three processes is discussed below.

8.6. Organization Change Processes

There are THREE processes of organizational change frequently encountered in
management. These are:
1. The three phase process by Kurt Lewis
2. The four phases process by Mint berg
3. The six phase process by Greiner

8.6.1 Kurt Lewis’s three phase process proposes that every human grouping has some
forces within it which help keep it in balance and provide it with stability. On the one
hand there are forces that force it to maintain stability and others which provide it with a
reason to change (the force – field theory)

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 Forces resisting change – maintaining stability

Equilibrium

Forces for change.

Field force theory

- all behavior is the result of an equilibrium between the two sets of opposing
forces (driving forces and restraining forces )
Driving forces: push one way to attempt to bring about change
Restraining forces: push the other way in order to maintain the status quo

Lewis suggests that the best way to implement change is to use a three –step approach
to change the behavior of those opposing the change as follows.

Step 1: Unfreezing existing behavior by persuading and convincing those with

restraining force

Step 2: - Changing Behavior by Adopting new Attitudes

- implementing the changes
- use of a change agent

Step 3: Refreezing - reinforcing continuously convincing the organizational members

that change is not only necessary and desirable, but inevitable. This can be consolidated
by various support mechanisms such as encouragement, participative management styles
etc.
8.6.2. Mint berg’s four phase change process
Mint berg identifies a four-phase process of change as follows;

Stage 1: Identification of the need for change

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 During the first phase of the change process management identifies the need for
change

Stage 2: Identification of the alternatives

In the second phase management identifies the various alternatives of
implementing the change

Stage 3: Evaluation of the various alternatives

In this phase the various alternatives are evaluated using a given criteria and the
most efficient alternative is selected for implementation

Stage 4: Implementation
During this phase change is implemented

8.6.3. Greiner’s six phase change process

Greiner identified six phases common to successful change efforts each involving a
stimulus to the power structure and a reaction from the power structure of an
organization. A general overview of this process is discussed here below.
Phase 1: Pressure and Arousal: The process begins as a result of pressure on top
management. These pressures may arise either externally or internally. In successful
changes, the result is the same – arousal to take action.
Phase 2: Intervention and Reorientation: Arousal in itself does not automatically
ensure proper response. It is quite likely that top managers will be tempted to see
problems as temporary or to blame them on other things. As a consequence, successful
change typically involves intervention by an outsider. It is important that this individual
be known for his improvements and that he or she enters an organisation at the top or as a
consultant who reports directly to the highest level of management.
Phase 3: Diagnosis and Recognition: This phase is characterized by a shared approach
to power as the newcomer, with top management support and active personal
involvement, engages members at several lower levels in collaborative, fact finding,

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problem solving discussion in order to recognize and diagnose current and potential
organizational problems, as well as to reduce any anticipated opposition.

Phase 4: Invention and Commitment: During this phase, attention switches to the
invention of new solutions capable of generating sustained commitment to new courses
of action. As in previous phase, the newcomer plays an active role, involving all
management levels in developing new ideas and methods for solving problems and taking
action. Solutions are based on shared power, emphasizing participation in the invention
of group solutions to the problems identified in phase 3. Such collaboration has been
shown to be particularly effective in developing quality solutions and sustained
commitment to action.

Phase 5: Experimentation and Search: In this phase solutions identified in phase 4 are
tested for credibility on a small scale before they are introduced on a companywide basis.
In addition, the method previously used to generate solutions (interaction and shared
power) is carefully evaluated. Further, rather than implementing major changes at the top,
numerous small changes are introduced at all organizational levels on an experimental
basis.

Phase 6: Reinforcement and Acceptance: This last phase is an outgrowth of the

acceptance and internalization of change as previously experienced. As change is found
to be successful, and as participants support grows, it is introduced on a much larger
scale, ultimately being absorbed into all parts of an organization. Accordingly, this phase
involves reinforcement from positive results, leading in due course to an acceptance of
new practices. Greiner suggests that apart from the change itself, the most significant
outcome of this phase is greater acceptance at all organizational levels of the use of
shared power as an approach for introducing change.

8.7. Additional Aspects of Successful Change

Another way of looking at the change process and the elements necessary for change to
occur is by referring to the views of Daft (1986), Daft concedes that in order for a new

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idea or behavior to be adopted, a series of activities has to be completed. If any one of
these elements is missing the change process will fail. These elements are:
i) Need: A need for change occurs when managers are dissatisfied with current
performance.
ii) Idea: An idea is a new way of doing things. The idea may be a model, concept or
plan that can be implemented by the organization. The idea may be a new
product, a new machine, or a new technique for managing employees.
iii) Proposal: A proposal occurs when someone within the organization requests the
adoption of a new behavior, idea, or technique. The proposal gives the
organization the opportunity to decide if it wants to try the change.
iv) Decision to Adopt: A decision occurs when the organization makes a choice to
adopt the proposed change.
v) Resources: Human force and activity are required to bring about change. Change
requires resources. Change does not happen on its own. In order for a change to
be successfully proposed and implemented, resources must be allocated to it.

8.8. Principles of Successful Organizational Change

Margulies and Wallace drawing on an in-depth analysis of techniques and applications of
organizational change offer several guiding propositions on successful organizational
change.
Proposition 1: planned change efforts are much more likely to be successful if initiated
and supported by the top management of an organization.

Proposition 2: Changes will flow most smoothly when those who will be affected are all
brought into the process at the earliest possible stage.

Proposition 3: Successful changes require time and repeated effort. That is, before
becoming successfully incorporated as an ongoing part of organizational life, a change
effort will typically require reinforcement over some period of time.

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Proposition 4: A successful change requires careful monitoring to secure accurate
feedback concerning intended outcomes. No matter how good a job one does of initially
selecting a change strategy and facts, something-unexpected will eventually occur during
implementation. Only by carefully monitoring the process can one identify the
unexpected in a timely fashion and react to it intelligently.

8.9. Resistance to Change and Dealing with Resistance to Change

8.9.1. Although change is a universal and an inevitable phenomenon, it rarely occurs in a

smooth, balanced fashion. Resistance to change is a frequent and natural occurrence. The
paragraphs that follow discuss four of the most common reasons for resisting change.

(a) Parochial self-interest: Virtually all organizational members can be expected

to behave in ways that will maximize those goals that they personally consider
most important. Consequently, to the extent that all proposals for change
represent a threat to the status quo, individuals and groups are likely to resist if
they believe they stand to lose something of value as a result. In such
circumstances, the parties involved will for the most part focus on their own
self interest, and only incidentally on the overall good of the organization. The
following are some of the personal goals, that when threatened, will almost
inevitably provoke resistance; power, money, prestige, convenience, security
etc.
(b) Lack of understanding and trust: People also tend to resist when they do not
understand the intended purpose, mechanics, or consequences of a planned
change.
(c) Different assessments: Resistance to change frequently occurs when
organizational participants differ in their evaluation of associated costs and
benefits resulting from a proposed change.
(d) Low tolerance for change: Opposition may stem from a low tolerance for
change. Different people have varying abilities to absorb change. Unknown

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 consequences of change may present a psychological threat to many individuals
challenging their sense of adequacy as well as threatening their self-esteem.

8.9.2. Dealing with Resistance to Change

There are six methods suggested by Bedeian (1983) to influence participants to accept
changes. These methods are briefly discussed below.

i) Education and Communication Education is the sharing of knowledge or

perception that a change initiator has acquired through means not typically
available to other members of his or her general organization. This approach
involves securing relevant facts, eliminating misunderstanding due to incorrect or
incomplete information and resolving difficult viewpoints through discussion.

ii) Participation and Involvement This involves the participation of potential

resisters in the planning and implementation of a proposed change. This method is
based on the notion that the most effective way to reduce opposition and to
engender commitment to a proposed change is to work collaboratively with the
members of the targeted system.

iii) Facilitation and Support: This involves the use of facilitative and supportive
skills. Particularly appropriate when resistance develops as a result of fear and
anxiety, this method may be traced to the interest stirrings of human relation’s
movement.

iv) Negotiation and Agreement: This involves the use of covert attempts to side
step potential resistance to change. Manipulation is not simply a matter of
persuasion but more a devious tactic for persuading different minded groups that a
proposed change should be adopted. As such, manipulation involves supporting a
position through slanted appeals to the particular interests of a target system.
Selective distortion of information by both omission and commission may be
involved. In addition facts and emotional appeals most likely to be convincing to

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 the principal parties may be consciously misrepresented. Co-operation may be
classified as a form of manipulation. Absorption of various key resisters into an
organization’s selection making structure has long been a popular method to avert
opposition.

v) Explicit and implicit Coercion: This method assumes that there is a basic
disagreement and that the principal parties involved are operating from relatively
fixed positions. Typified by at least temporary abandonment of efforts at
consensus, coercion involves the use of force or threats or both to compel
acceptance of an enacted change. Tactics involved may include violent
disagreements as well as threatened firings, transfers and loss of promotion
possibilities. Coercion is generally used sparingly in practice.

8.10. Creating a Climate of Total Organizational Change

In order for a meaningful and total organizational change to occur it is important not only
to adhere to above methods of managing change, it is also important to ensure that a new
climate and culture of people in the organization is created. Climate refers to the way
people behave and think and culture refers to the values of people in the organization. For
an effective change to occur, both the ways people behave and think, and their values,
must change. The more these values and beliefs of people can be changed, the more
organizational change can be achieved.

8.11. Organizational Development

Organizational development is a technique of changing the people’s culture, knowledge,
behavior, values and attitudes so that the people adopt new values that espouse (enhance)
trust and openness, and open and democratic leadership styles. It also changes
management styles from dictatorial to democratic styles. According to Bennin,
organizational development is “a response to change using a complex educational
strategy intended to change the beliefs, attitudes, values and structures of organizations so
that they can better adapt to new technologies, markets, and challenges and the dizzying
rate of change itself.

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8.11.1 Organizational development techniques
This mainly refers to changing the people. There are many techniques in use depending
on the organization and the consultant. The four most widely used include.
i) Survey feedback
ii) Confrontation meetings
iii) Sensitivity training
iv) The managerial grid

i) The Survey feedback technique

In this technique a questionnaire is used to measure altitudes of employees. The
questionnaire is administered by outside consultants and the results are sent to top
management. The main aim is to find out the views of employees on certain
issues. This information can be used to identify the existence of some problem for
example low morale and seek employees’ proposals of the solutions to the
problems. They can also be used to follow up on the success or not of the
proposed solutions. Some examples of attitude survey questions include:
- the hours of work here are okay( select one)
 Very low
 Low
 Average
 Very high
 High

- I am paid fairy compared with other similar companies(select one)

 Very low
 Low

- formalization is a problem in my department

ii) The Confrontation Meetings

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Confrontation meeting is a type of focused exercise in which the management group
meets with employees to discuss and come to grips with problems that have arisen in the
organization. A consultant is included in the meeting to help slash the issues that face the
organization at any particular moment. A confrontation meeting usually begins with the
consultant introducing the subject matter in general terms, emphasizing the need for
communication, mutual trust and understanding and the need for members and
management to share responsibility for accomplishing organization goals. In such
meetings, discussions on organization’s operating problems are held, and solutions
proposed.

(iii) Sensitivity Training (or T-Group training)

This method or technique is a group experience designed to provide maximum possible
opportunity for the individuals to expose their behavior, give and receive feedback,
experiment with new behavior, and develop awareness and acceptance of self and others.
It provides managers with sensitivity for themselves and others and with skills necessary
to more effectively guide and direct changes in social arrangements and relationships. It
develops in managers the sensitivity understanding and skills to participate effectively
both as group leaders and members. It also enables managers discover and develop tested
principles and improved methods of human relations training
Sensitivity training is arranged usually away from the job, no activities or discussion
topics are planned and the focus is on the here and now issues. The participants are
encouraged to portray themselves in the group rather than in terms of past experiences or
future problems. The consultant or trainer sees to it that an environment of mutual trust,
understanding and frankness is created

(iv) The Managerial Grid

This method is used to bring about change in employees’ attitudes and values. The
technique was developed by two gentlemen Blake and Moulton. The basic objective of
the program is to develop managers with a high concern for people and high concern for
production. The program is carried out in six phases:

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 Phase1: Consists of seminal training in a one-week conference where managers
study the theory of managerial effectiveness.

Phase II: The manager implements a climate of openness developed in phase I

Phase III: The experiences of phase II are extended to include the

interrelationship of related organizational units

Phase IV: Top management works with other groups to develop an ideal model
of employee management relationship.

Phase V: During this phase tactics are developed of moving the company to the
ideal organizational model development in phase IV.

Phase VI: The achievement of phases I-V is evaluated with the objective of
identifying weaknesses and taking corrective actions as necessary.

Therefore O.D is a strategy of improving organizational effectiveness by means of

behavioural science approaches involving the application of diagnostic and problem
solving skills by an external consultant in collaboration with the organizations
management. It is an organization wide process that utilizes the techniques and
approaches of the behavioural sciences i.e. psychology, social psychology and sociology
in so far as they relate to the study at work in organizations. It involves the intervention
of an external third party in the shape of a change agent trained and experienced in
behavioural science applications in the work situation. It is aimed at organizational
effectiveness, not just changing people or structures for the sake of change. The change
agent and the organization must adopt a collaborative relationship – which means being
open with one another, having a high degree of trust, and being prepared to work through
conflict in a constructive way.

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Role of the change agent
The success of any O.D program depends largely on the part played by the third party.
The role ranges from the highly directive leader type of role to non-directive counseling
role. In the first mentioned role, the third party will tend to prescribe what is best for his
client, at the other extreme, he will tend to reflect on issues and problems back to his
clients without offering any judgment himself. He will let the client make / suggest
proposals. In between these extremes are several other possible roles, as indicated below:

Role of third party

Plans/ prescribes recommends/ proposes clarifies/ reflects/ listens

The following are the qualities of a good third party in an O.D process
- Intellect and personality, in particular the ability to listen diagnostically, and to
apply rational approaches to problems and situations.
- Mature outlook in terms of awareness, and acceptance of personal strengths and
weakness.
- A preference for interpersonal relations based on mutual trust and liking, for
teamwork rather than competitiveness and for conflict to be handled openly and
constructively.
- Must have basic understanding of behavioral science knowledge and more
generally, intervening skills, presentation skills and ability to establish and
maintain comfortable relationships with a wide cross-section of people.

8.11.2 Benefits of an O.D program

- It enables an organization to adopt to change in a way that obtains the full
commitment of the employees concerned.
- It can lead to organizational structures that facilitate employee co-operation and
the achievements of task.
- It releases latent energy and credibility in the organization.

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 - It can improve understanding of organizational objectives by employees
- It can improve decision making processes and skills.
- It provides opportunities for management development in the context of real
organizational problems
- It may stimulate more creative approaches to problem solving throughout the
organization.
- It usually increases the ability to management groups to work as teams.

8.11.3 Principles of Implementing an O.D Program Successfully.

- create and sustain a sense of urgency about the future
- create and empower a leadership team ( a guiding coalition)
- develop a vision and a strategy for achieving it
- constantly communicate the new vision.
- Empower employees to help the change happen by removing obstacles such as
restrictive structure, lack of necessary skills, inflexible managers, and
unimaginative reward systems.
- Generating some benefits in the short term so that people can see some tangible
improvements on the way to achieving the end goal
- Consolidating short gains
- Embedding the new approaches in the organizations culture.

8.12. Business Process Re-engineering (bpr)

8.12.1. What does BPR involve? BPR is a strategic approach to organizational change
where the entire business architecture of the enterprise is restructured. It is a fundamental
rethinking and a radical redesign of business processes to achieve dramatic improvements
in critical contemporary measures of performance, such as quality, cost, service and
speed. BPR is vital, under modern conditions of customer expectations, intense
competition and the pervasive nature of change. BPR processes include all the collection
of activities that take one or more kinds of inputs and creates an output that is of value to
the customer. Typical processes include ordering, buying, manufacturing, product

121
development, delivery, invoicing. The reengineering process tends to lead to the
following changes in the way work is undertaken:
- Several jobs or tasks becoming combined with related tasks.
- Workers become more involved in decision making (empowerment increase)
- The various steps in a process being performed in accordance with the needs of
the next process rather than in some pre-determined linear form.
- Processes having several versions to deal with differing customer requirements
- Work is performed where it makes most sense.
- A reduction in the number of checks and controls insisted on during the process.
- The minimization of reconciliations (e.g. of orders) between customers and
suppliers.
- A single point of contact with the customer
- Hybrid centralized / decentralized operations prevail.

8.12.2. The structural changes likely in a BPR are

- Work structures move away from functional departments towards process teams.
- Employees are empowered to act in ways that were previously controlled by rules
- Empowerment implies a willingness and an ability to accept greater responsibility
for work outcomes
- Preparation for work implies a greater emphasis on education (i.e to understand
the why) rather than on training (understanding the how)
- The focus for performance and payment shifts from activities to results (expressed
in terms of value created for the customers).
- Advancement within the organization is more likely to be based on the ability to
undertake the work rather than on performance in the current job.
- A culture change will occur in which the typical employee will see the customer
as more important than the boss.
- Organizational structures are likely to become flatter and bureaucracies less
critical.
- Senior executives assume the role of culture leaders than financial score cards

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 - The role of IT (Information Technology) will be vital in facilitating the re-
engineering process. The personal computer, the photocopies, the fax machine, e
–mail, and the mobile phones, all show the importance of IT in facilitating the
BPR processes.

8.12.3. The shortcomings of the BPR

BPR has been challenged on the following grounds:
i) Much of what passes as BPR is not so much of process engineering, but process
simplification, is process led rather than vision led, is not revolutionary just an
improvement of existing systems, and works with existing systems rather than
challenging them.
ii) BPR as practiced makes people work harder, than smarter
iii) It is used as a tool of downsizing
iv) Hence people become victims rather than beneficiaries
v) The drive to please the customer rather than the boss can lead to dysfunctional
consequences to the organization.

8.13. Ambidextrous Approach to Organizational Change

8.13.1 Meaning
In an ambidextrous approach to change, the change agent incorporates structures and
management processes that are appropriate to both the creation and the use of the idea of
change. For example the organization can behave in an organic way (or create organic
structures) during the innovation and creation of new ideas, and then adopt mechanistic
structures when the change is being implemented.

8.13.2 Justification
Organic structures such as decentralization and low formalization encourage creativity
and innovation. On the other hand, mechanistic structures such as high centralization and
high formalization stifle creativity, with emphasis on rules, procedures and regulation but
results in efficiency and effectiveness.

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8.13.3 Techniques for encouraging ambidextrous change in technology change

i) Switching structures: This means that an organization creates an organic

structure when such structure is intended for the innovation of new ideas, and
reverts to mechanistic structures during the implementation of the changes.
ii) Creative departments: In some organizations, the creation of new ideas is
assigned to separate departments for adoption by other departments. Departments
that initiate change are organically structured to facilitate generation of new ideas
and techniques. Departments that are supposed to implement those changes tend
to have mechanistic structures so as to achieve efficiency in the implementation.

Diagram 8.1: Creative Departments

General Manager

Creative department Using

Organic structure department
mechanistic

iii) Venture teams: These teams encourage creativity. The teams are often given a
separate location and facilities so that they are not constrained by organizational
procedures. The teams may be given total license to establish new venture
projects for any department.
iv) New venture fund: A fund is created to provide financial resources for
employees who can develop new ideas, products or business. Employees are
given leave and resources to go out of the organization and create new business
opportunities for the organization. Employees can also use company labs and
equipment to develop a business idea. If the idea is successful, the company can
provide the necessary financial resources to start – up the business.

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v) Corporate entrepreneurship: Here the company attempts to develop internal
entrepreneurial spirit, philosophy, and structures that will produce a higher than
average number of innovations.

LECTURE NINE
ORGANIZATION CULTURE

9.1 Introduction
In this lecture we shall explain the meaning of culture, its importance and its dimensions.
We shall also discuss the relationship between culture and also propose methodologies of

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increasing culture in an organization.
Organization culture is a pattern of values, beliefs and customs shared by members of an
organization or group. It is often unspoken, but is clearly understood by members of the
organization. It dictates how members are to behave. It is also unwritten. All
organizations have culture, which has emerged over time. Culture generally evolves over
time and begins with a founder or early leader who articulates and implements particular
ideas and values as a vision, philosophy or business strategy. When these ideas and
values lead to success they become institutionalized and an organization culture emerges
that reflects the vision and strategy of the founder or leader. Over time, culture becomes
artifacts, stories, symbols and language of the organization.

9.3.1 Artifacts
These are the obvious features of an organization that are immediately visible to a new
employee. They include sounds, behavior, language, products, rites and ceremonies. Rites
and ceremonies are the elaborate, planned activities that make up a special event, and are
often conducted for the benefits of an audience.

9.3.2 Stories:
These are narratives based on time events that are frequently shared among
organizational employees and told to new employees to inform them about an
organization. Many stories are about company heroes who serve as models or ideals for
serving cultural norms and values. Some stories are considered legends because the
events are historic, and may have been embellished with fictional details. The stories are
myths, which are consistent with the values and beliefs of the organization but are not
supported by facts.
9.3.3 Symbols:
A symbol is something that represents other things. Rites and ceremonies are symbols
but symbols generally refer to physical aspects of culture.

9.3.4 Language:
Language refers to sayings, metaphors and other forms of language used to convey

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special meaning to employees.

9.4. Importance of Culture

Culture provides members with a sense of organizational identity and generates
commitments to beliefs and values. Culture integrates members so that they know how to
relate to one another. Culture also helps the organization to adapt to the external
environment.
9.5. Organizational Design and Culture
The culture of an organizational should reinforce the strategy and structural design that
the organization needs to be effective within its environment. That is to say if the external
environment requires flexibility and responsiveness the culture should encourage
adaptability.
9.6. Dimensions / Categories / Types of Culture
The organization culture can be differentiated into four categories based on the extent to
which the competitive environment requires flexibility or stability and the extent to which
the strategic focus and strength is internal or external. These categories are:
(i) Adaptability / entrepreneurial culture
This type of culture is categorized by strategic focus on the external environment,
through flexibility and change to meet customer needs. This type of culture
encourages norms and beliefs that support the capacity of the organization to
detect, interpret and translate signals from the external environment into new
behavior responses. Innovation, creativity and risk-taking are valued and
rewarded.
(ii) The Mission Culture
This type of culture is characterized by emphasis on a clear vision of the
organization purpose and on the achievement of goals, such as growth,
profitability or market share, to help achieve the purpose. A mission culture
reflects a high level of competitiveness and profit making orientation. Its
environmental characteristic is stability

(iii) The Clan Culture

Has a primary focus on the involvement and participation of the

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 organization’s members. Emphasis is on the needs of employees as a route to
high performance. Involvement and participation are assumed to create a
sense of responsibility and ownership, which would lead to greater
commitment to the organization. Its external environment is stable and
therefore requires less flexibility.

(iv) The bureaucratic culture

In this type of culture, symbols, heroes and ceremonies support cooperation,
tradition and following established policies, and practices as a way to achieve
goals. The organization succeeds by being highly integrated and efficient. There
is a high level of consistency, conformity and collaboration among members.
Strategic focus is internal rather than external and the external environment
requires stability rather than flexibility.

Table 9.1. Relationship between Environment, Strategy and Corporate Culture

Environmental need

Flexibility Stability
Strategic focus

Internal Entrepreneur Mission

External clan Bureaucratic

9.8. Changing Organization Culture

Cultures do change. As the external and internal factors that affect or influence culture
change, so culture will change. However, because culture is locked up in people’s beliefs,

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values and norms, cultural change will be slow and may not change in the same fashion
or speed required to keep up with changes in the environmental factors. Since a
successful culture is one based on values and assumptions appropriate to the environment
to keep up with rapidly changing external environment, the culture must therefore change
or be changed appropriately. Cummings and Worley (2001) propose six practical steps
for achieving cultural change as follows.

(i) Formulate a clear strategic vision. Effective cultural change should start form
a clear vision of the firm’s view strategy and of the shared values and behavior
needed to make it work.

(ii) Display top management commitment – Cultural changes must be managed

from the top of the organization; senior managers need to be committed to the
new values.

(iii) Model culture change at the highest level – Senior management must
communicate the new culture through their own actions.

(iv) Modify the organization to support the culture changes – Cultural change
must be accompanied by applying modifications in organizational structure,
human resource systems, information and control systems, and management
styles.

(v) Select and socialize newcomers and terminate deviants – One of the most
effective methods for changing culture is to change organizational membership.
People can be selected in terms of their fit with the new culture.

(vi) Develop ethical and legal sensitivity – Most cultural change programs attempt
to change people’s integrity and values. When implementing cultural change
programs, organizations need to be aware of ethical and legal pitfalls. In other
words, care should be taken to follow equity, ethical, and legal methods.

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 LECTURE TEN
ORGANIZATIONAL GROWTH AND DECLINE

10.1. Introduction
In this chapter, we are going to define size, growth and decline. We also discuss two
models of organizational growth and propose strategies for dealing with decline.

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10.3. What is Organization Size?
Organizational size can be measured in many ways including:
i. Market share – organizations that dominate the market place are considered large
ii. Number of branches: organizations with many branches in several towns are
considered to be larger than single branch organizations
iii. Number of products: organizations with varied products are considered larger than
those with few products
iv. Asset size is also considered as a measure of size.
v. Number of full –time employees can also be used as a measure of size.

Use of full-time employees as a measure of size

Using the number of employees as a measure of size because it is simple to understand,
is the most commonly used. All organizations have employees or people and it is a less
subjective measure than many of the other measures.
10.4. Organizational Size and Complexity

When organizations grow in size the organization complexity as measured by the

following measures also increases

(a) Formalization
Formal communication in terms of rules, written procedures etc increases

(b) Differentiation – this is the process of dividing the work of the organization into
manageable units. This may include
 Vertical differentiation – differentiation on hierarchal levels
 Horizontal differentiation – differentiation on functional departments

(c) Specialization- concentration of tasks into specialist areas

(d) Routinization – development of a set of routines for the performance of work

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(e) More impersonal work environment
 More impersonal atmosphere in the work place
 Friendship groups tend to be limited to a few co-workers

(f) Less direct involvement by the chief executive: In small organizations the
entrepreneur is involved or takes part in all operations. As the organization grows,
this is no longer feasible and delegation becomes absolutely necessary.

10.5. Organizational Growth

10.5.1 What is growth?
Growth is the increase in size for an organization. The motives for growth (why do firms
grow) include: adventure and risk, prestige power and job security, increases
compensation, organizational self-realization, to achieve a stable environment,
organizational survival, increased profits, increased revenue, decreased costs via
economies of scale, and to achieve monopolistic power.

10.5.2 Growth models

1. Lippitt – Schmidt model
This model suggests that organizations normally experience three stages in their
development i.e. birth, youth, and maturity. As an organization enters each of these stages
it encounters a predictive series of critical crises accompanied by recognizable key issues
and results. A true measure of an organization’s stage of development is best gained
through analysis of how it handles predictable organizational crises, rather than through
simply making judgments based on its age or economic size. Consequently, a relatively
small or newly founded organization may rapidly achieve developmental maturity, and a
relatively large (or comparatively older) organization remain youthful.

2. Larry Grainer Growth Model

Greiner observed that organizations often go into trouble when the specific structure was
not appropriate to the organizations stage of growth and development. He identified five

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phases through which organization pass through in their growth. For each phase there
was dominant issues and crises that faced a growing organization.
Phase 1 Creativity
The organization is born. Emphasis is on creating a product and surviving in the market
place. The founders are entrepreneurs and they devote full energies to the technical
activities of production and marketing. The organization is informal and non-
bureaucratic. Control is based on the owners’ personal supervision.
Leadership crisis: when the organization starts to grow, it faces a leadership crisis
because founders are not skilled or interested in management activities. They may
restrict growth. A strong manager, who can introduce good management techniques is
needed. If the leadership crisis is resolved, the organization grows into the next phase.
Phase 2 Direction
New management systems and clear organizational structures are introduced to guide the
organization into more growth. Departments are established along with a hierarchy of
authority, job assignments, and division of labor. Communication may become more
formal. Elements of bureaucracy become apparent.
The Autonomy crisis If the new management structures and techniques are successful
lower level employees find themselves restricted by the strong leadership and increasing
bureaucracy. Lower level managers begin to acquire confidence in their own functional
areas and want more discretion. The autonomy crisis occurs when top managers do not
want to give up responsibility
Phase 3 Delegation
For the organization to grow into this phase, it must overcome the autonomy crisis. Top
management must delegate responsibility and decentralize decision making. Top
management becomes concerned with top management issues such as strategy and
planning and leaves the operations of the firm to lower level management. Internal
control and information systems are installed and used. Communication is less frequent
and more formal. New products and new employee’s specialists may be added.

The control crisis: as middle and lower – level managers become more autonomous, top
executives feel that they are losing control of the organization. In order to overcome the

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crisis, new techniques to coordinate the increased number of departments and activities
must be found.

Phase 4 Coordination
The response to the control crisis is sophisticated techniques of coordination. Staff
personnel and specialists are required to review company wide programs. Product groups
or other decentralized units may be formed to improve coordination. Incentive systems
based on profits may be implemented to ensure that managers work towards what is best
for the overall company. If the new systems are successful, and effective, the
organization will grow to the next phase

The red – tape crisis: the proliferation of systems and programs may begin to frustrate
middle level executives. The organization may become over-bureaucratized. The
organization may seem too large to manage through formal program.

Phase 5 Cooperation
The solution to the red tape crisis is a new sense of collaboration and cooperation.
Managers develop skills for confronting problems and resolving interpersonal differences
and conflicts. Formal systems may be simplified and partially replaced by manager
conferences and task forces.
10.6. Organizational Growth and other Organization Characteristics
Greater organization size is associated with
(i) Increased number of management levels (vertical complexity)
(ii) Greater number of jobs and departments (horizontal complexity)
(iii) Increased specialization of skills and functions
(iv) Greater formalization
(v) Greater decentralization
(vi) Smaller percentage of top administrators
(vii) Greater percentage of technical and professional support staff.

10.7. Organizational Decline

The term decline denotes a cut or break in the size of the organization’s workforce, profit,

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budget, or clients. Decline may occur because an organization’s command of
environmental resources has been reduced (e.g. smaller share of market) or because the
environment itself has become poorer (e.g. erosion of a city’s tax base)
Organizations may also decline because:
1. Organizational atrophy: atrophy occurs when the organization grows order,
inefficient and gets used to success. It sees no need of striving to grow. The
alternative is to decline.
2. Vulnerability – vulnerability reflects the inability of the organization to prosper
in its environment. Often this happens because the organization is small and has
not become fully established. It is vulnerable to changes in consumer tastes or in
the economic health of the larger society
3. Loss of legitimacy – certain services or products may lose legitimacy. This may
be because the organization products and services have become out of step with
the values and attitudes of the public.
4. Environmental atrophy – this refers to the reduced capacity of the environment
to support the organization.
Managing the effects of decline
1. The first and most positive approach to dealing with decline is to simply embrace
the change and try to make the best of it.
2. People should also be made to understand and be informed of the need for decline
3. Be prepared for conflict, since decline necessarily means or results in decline of
resources, conflict is inevitable.
4. When decline has to occur then all sub-units should suffer equally.
5. Innovations and strategies adopted in response to the decline should be designed
to increase efficiency, and better utilization of resources

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 LECTURE ELEVEN
POWER AND POLITICS IN ORGANISATIONS

1.0 The Objectives of this chapter are to:

- Define power, politics and leadership.
- Identify and contrast five bases of power.
- Identify nine power or influence tactics and their contingencies.
- Identify causes and consequences of political behaviour.
- Apply impression management techniques
- Show the influence of culture on the uses and perceptions of politics.

1.1 What is power

Robbins, Judge and Sanghi (2010)
Power refers to a capacity that A has to influence the behaviour of B so that B acts in
accordance with A’s wishes.
Power implies a potential that need not be actualized to be effective. In other words
power exists even when it is not used. Power is therefore the capacity or potential one has
to influence the behaviour of others.
Power also implies a dependency. That is the greater B’s dependency on A, the greater
A’s power on B. Dependence is also based on alternatives that B perceives and the
importance that B places on the alternatives that A controls. A person can have power
over you only if he or she controls something you desire
Champoux (2001)
Power is a person’s ability to get something done the way he wants it done. Power is the
ability to affect other people’s behaviour, to get people to do what they otherwise might
not do. It includes the ability to gather and use physical and human resources to read the
person’s goals.
Power is the capacity to get things done in an organization. Potential power exists when
one person perceives another party as having power and the ability to use it. Actual
power is the presence and use of power Power relationship in organizations have three
dimensions, the relationship dimension is the social interaction part of power i.e. power
in organizations happens during social interactions between people and groups.
The dependence dimension views pair as owing to the reliance of one party on the actions
of another. Dimension is high when valued results are unavailable from another source.
High power follows from high dependence.
The sanctioning dimension refers to the ability of one party to affect the results of other
party by using resources, rewards, penalties. Sanctioning dimension can have both actual
and potential aspects. Actual sanctioning arises because of observations of sanctioning
behaviour. Potential sanctioning arises from expected sanctions or from the person’s
reputation for using sanctions.
Power and authority

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Authority is the right to make decisions and to give direction to other people to an
organization.
Such authority comes to a person because of his position in the organization. It often is
formally recognized in writing so people know their authority relationships.
On the other hand, power is a person’s ability to get things done not with the person’s
position in an organization. A person with power can be at any level in an organization,
not just at senior levels.
Power flows in all directions in an organization. It flows along the following dimensions
(i) Superior – subordinates
(ii) Subordinate – superior
(iii) Lateral dimension
(iv) Influence of people outside reporting relationship (i.e. influence on people
and groups in other departments in other work units, and outside the
organization.
Power is dynamic, not static. As the organization’s external environment changes
different subsystems of the organization, different subordinates, and different coalitions
may emerge as seats of power, individuals, departments, and work units that are powerful
at one point in the organizations history may not be powerful at another point
McShane, Von Glinow and Sharma (2006)
Power is the capacity of a person, team, or organization to influence others. Power is the
potential to change people’s behaviour. The most basic prerequisite of power is that one
person or group believes it is dependent on another person or group for something of
value.
The use of power depends on one person or group’s ability to control something another
person or group needs to achieve his or her goals.
Power exists when others believe that you control resources that they want. Although
power requires dependence, it is really more accurate to say, that the parties are
interdependent. One party may be more dependent but the relationship exists only when
each party has something of value to the other

2.0 Sources of power in organizations

2.1 Legitimate power
The capacity to influence others through formal authority. Legitimate power arises out of
an agreement among organizational members that people in certain roles can request
certain behaviours of others. This perceived right party comes from formal job
description, as well as informal rules of conduct. Legitimate power is the person’s
authority to make discretionary decisions as long as followers accept the discretion.
2.2 Reward power
Reward power is derived from a person’s ability to control the alleviation of rewards
valued by others and to remove negative sanctions. Managers have formal authority
which give them reward power over the distribution of organizational resources and
rewards such as pay, promotions, time off work, assignments and others. Employees also
have reward power over their bosses through the 360 degrees feedback system. Employee

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feedback system affects their supervisors promotion, and to her rewards, so they tend to
behave differently toward employees after the 360 degree feedback is introduced.
2.3 Coercive power
Coercive power is the ability to apply punishment. Coercive power refers to efforts to
affect the behaviour of another person through fear of punishment. Coercive power is
dependent on fear. A person reacts to this power out of fear of the negative results that
might occur if he/she failed to comply. It rests on the application or the threat of
application of physical sanctions such as the infliction of pain, the generation of
frustration through restriction of movement or the controlling by force of basic
physiological or safety needs. Employees have coercive power by reprimanding
employee and threatening to fire them. Employees also have coercive power, ranging
from sarcasm to ostracism, to ensure that co-workers conform to team norms.
2.4 Expert power
Expert power refers to an individual’s or work unit capacity to influence others by
possessive knowledge or skills that they value. Expert power is the influence wielded as a
result of expertise, special skill or knowledge. Employees are gaining expert power as our
society moves from an industrial to a knowledge based economy. The reason is that
employee knowledge becomes a means of production and is ultimately outside the
control of those who own the company. And without this control over production owners
are more dependent on employees to achieve their corporate goals.
2.5 Referent power
Referent power is based on identification with a person who have desirable resources or
personal traits. Referent power is based on the personal liking an individual subordinate
has for a manger. The more the subordinate identified with the manager the stronger the
referent power. A manager who is disliked by subordinates has low referent power.
Referent power develops out of admiration of another and a desire to be like that person.
One of the ways in which individuals acquire referent power is through charisma.
2.6 Information power
Information power derives either from the legitimate or expert sources of power and
exists in two forms:
i) Control over the flow and interpretation of information given to others.
ii) The perceived ability to cope with uncertainties
Control over flow of information
There are two alternative forms of controlling the flow of information: wheel formation
(centralized information flow) or all-channels formation (decentralized information
flow). The wheel formation depicts highly centralized control over information. In this
communication structure, employees are dependent on the information gatekeepers in the
middle of this configuration to provide the information they require (see diagram below).
In the all channels communication structure all employees have relatively equal access to
information. This allows employees and self-directed teams to make better decisions. In
its purest form, the all-channels communication structure seems chaotic, and large
organizations with bureaucratic structures tend to slip back into the wheeled pattern.

On the other hand, centralized information system is incompatible with knowledge

management and high performance work teams. Consequently, organizations today are

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moving towards the all-channels communication structure in which all employees have
relatively equal access to information.
Which bases of power are most effective? Of the three bases of formal power (coercive,
reward and legitimate) and two bases of personal power (expert, referent), research
suggests that personal sources of power are most effective. Both expert and referent
power are positively related to employees satisfaction with supervision, their
organizational commitment and their performances whereas reward and legitimate power
seem to be unrelated to these outcomes. Moreover, coercive power can backfire, in that
there is negatively related to employee satisfaction and commitment.

3.0 Power tactics:

There refer to options individuals have for influencing those they have power over e.g.
their bosses, their co-workers or employees. Research has identified nine distinct power
tactics.
1) Legitimacy: Relying on one’s authority position or stressing that a request is in
accordance with the organizational policies or rules.
2) Rational persuasion: Presenting logical arguments and factual evidence to
demonstrate that a request is reasonable.
3) Inspirational appeal: developing emotional commitment by appealing to a
targets’ values, needs, hopes and aspirations.
4) Consultation: Increasing the targets’ motivation and support by involving him or
her in deciding how the plans or change will be accomplished.
5) Exchange: Rewarding the target with benefits or favours in exchange for
following a request.
6) Personal appeal: Asking for compliance based on friendship or loyalty.
7) Ingratiation: Using flattery, praise, or friendly behaviour prior to making a
request.
8) Pressure: Using warnings repeated demands and threats.
9) Coalitions: Enlisting the aid of other people to persuade the target, or using the
support of others as a reason for the target to agree.

What is motivation?
Motivation is the process that account for an individuals’ intensity direction and
persistence of effort toward attaining a goal (Robbins et al., 2011).
Motivation can be defined as psychological processes that arouse and detect goal-directed
behaviour. Motivation is inferred from one’s behaviour (Kinicki & Williams, 2008).
Motivation is the set of forces that cause people to behave in certain ways (Griffin, 2005).
The three key elements are the following:

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Intensity – This is concerned with how hard a person tries.
Direction – The effort must be directed towards the achievement of organization’s goal.
Persistence – Is the measure of how long a person can maintain effort.
NB: High intensity is unlikely to lead to favourable job performance outcomes unless the
effort is channelled in a direction that benefits the organization.

Coping with uncertainty

Organizations operate in changing environment, so they depend on information to reduce
uncertainty of future events. The more firms can cope with uncertainty of future events,
the more easily they can achieve their goals. Individuals and work units acquire power by
helping organizations cope with uncertainty. Coping includes any activity that effectively
deals with environmental uncertainties affecting the organizations. There are three
general strategies of helping organizations deal with uncertainty, namely prevention,
forecasting, and absorption.

Prevention: Financial experts acquire power by preventing organizations from

experiencing a cash shortage or defaulting on loans.
Forecasting: Power can also be acquired by predicting changes or variation. In this
respect, marketing specialists gain power by predicting changes in consumer preferences.
Absorption: Individuals and work units also gain power by absorbing or neutralizing the
impact of environmental shifts as they occur.

Contingencies of power
Power basis, generate power only under certain conditions. The four conditions – known
as contingencies of power – include: substitutability, centrality, discretion and visibility.
These contingencies determine the extent to which people can leverage their power bases.
You may have lots of power, but you won’t be able to influence others with this power
base if the contingency factors are not in place.

Substitutability: This refers to the availability of alternatives. Power is strongest over

valued resources. Conversely power decreases as the number of alternative sources of the
critical resources increase. Substitutability refers not only to other sources that offer the
resource, but also to substitutions of the resource itself. For instance, labour unions are
weakened when companies introduce technologies that replace the need for their union
members. Technology is a substitute for employees, and consequently reduces union
power. The following ways are used by individuals and work units to increase non-
substitutability:
i) Controlling tasks: The government passes laws that give certain professions
exclusive rights to perform particular tasks.
ii) Controlling knowledge: Professions control access to the knowledge of their
work domain.

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 iii) Controlling labour: Labour unions try to organize as many people as
possible within a particular trade union so that employers have no other source
of labour supply.
iv) Differentiation: Differentiation occurs when an individual or work which
claims to have a unique resource – such as raw material or knowledge – that
the organization would want. The tactic here isn’t so much the non-
substitutability of the resource, but making organizational leaders believe that
the resource is unique.

Centrality
Centrality refers to the nature and the degree of interdependence between the power
holder and others for example airline pilots have high centrality because their actions
affect many people and because their actions quickly affect other people. If you have a
high centrality most people in the organization would be adversely affected by your
absence and they would be affected quickly.

Visibility
Is the extent to which others are aware of the power bases of those who yield power.
Power has no effect until others are aware of the position or status in the organization.
People who hold/yield power increases visibility in many ways.
(i) Making yourself available
(ii) By being visible e.g. locating oneself ie into offices where co-workers pass
most often displaying certificate and awards in office walls.
(iii) Spending more time at work.
(iv) One can also increase visibility through mentoring
Networking
This refers to cultivating social relationship with others to accomplish one’s goals.
Networking increases one’s power in three ways:
i) Networks consists of people who trust each other. This helps to increase the
flow of information among those within the network the more you network
the more you will receive valuable information that increases your expert
power in the organization.
ii) People to identify more with partners within their own networks, which
increases referent power among people within each network. The network
based referent power may lead to more favourable decisions by others in the

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 network. Finally networking increases a person’s visibility and possibly
centrality, which are important aspects of power.

11.3 Definition of power

Power is defined as the possession of the potential for influencing others or the ability to
act or produce some effect. Power is the probability that one actor within a social
relationship will be in a position to carry out his own will despite resistance, regardless of
the basis on which this probability rests. Similarly, power is also defined as an actor’s
ability to induce or influence another actor to carry out his directions or any other norms
he supports.
Hodge and Anthony (1985) also define power as the ability (potential or actual) to
impose one’s will on others. It is the ability of one person to affect the behavior of
someone else. The author identifies five bases of power. These are reward power,
coercive power, legitimate power, referent power and expert power. These bases are
explained below.
All organizations are a complex mix of individuals and groups pursuing various goals
and interests. Conflict is a natural and inevitable outcome of the close interaction of
people who may have diverse opinions and values, pursue different objectives and have
differential access to information and resources within the organization. Individuals and
groups will use power and political activity to handle their differences and manage
conflict.
Organizational power is often the results of structural characteristics.
Organizations are large complex systems that contain hundreds even thousands of people.
These systems have a formal hierarchy in which some tasks are more important
regardless of who performs them. In addition some positions have access to greater
resources or their contribution to the organization is more critical. Thus organizational
power is vested in the position not in the person.

Authority is a form of power which is prescribed by the formal hierarchy and reporting
relationships. Authority has three properties viz;
 It is vested in organizational positions
 It is accepted by subordinates
 It flows down the vertical hierarchy.

Vertical sources of power

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All employees along the vertical hierarchy have access to some sources of power. There
are three sources of vertical power;
 Formal position-Certain rights, responsibilities and prerogatives
accrue to the positions one holds in the organization. The amount of
power provided to each position is prescribed into the organization’s
structural design. Allowing people to make their own decisions
increases their power. Access to powerful people in the organization
also increases ones power.
 Resources; Access to resources and having resources is power.
Resources can be used as rewards and punishments. Resource
allocation also creates a dependency relationship.
 Network centrality; Network centrality means being centrally located
in the organization and having access to information and people that
are critical to the company’s success.

Horizontal sources of power

Horizontal power pertains to relationships across departments. Horizontal power is not
defined by the formal hierarchy or the organization chart. Each department makes a
unique contribution to organizational success. Some departments will have greater say
and will achieve their desired outcomes faster than others. The theoretical concept that
explains relative power is called strategic contingences.
Strategic contingences are events and activities both inside and outside an organization
that are essential for attaining organizational goals. Departments involved with strategic
contingences for the organization tend to have greater power. Departmental activities are
important when they provide strategic value by solving problems or crises for the
organization. For example, if an organization faces an intense threat from law suits and
regulations, the legal department will gain power and influence over organizational
decisions because it copes with such a threat.
Other sources of organizational power include;
a. Dependency-Interdepartmental dependency is a key element underlying
relative power. When eight departments must come for help to the
engineering department, engineering is in a strong power position. In
contrast, a department that depends on many other departments is in a low
power position.
b. Financial resources-control over various kinds of resources and
particularly financial resources is an important source of power in
organizations. Money can be converted into other kinds of resources that
are needed by other departments.
c. Centrality-centrality reflects a department’s role in the primary activity of
an organization. One measure of centrality is the extent to which the work
of the department affects the final output of an organization. Centrality is
associated with power because it reflects the contribution made to the
organization.
d. Non substitutability-this means that a department’s function cannot be
performed by other readily available resources. If an employee cannot be
easily replaced, his or her power is greater.

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 Coping with uncertainty. Uncertainty means that decision makers do not have
sufficient information about environmental factors and they have a difficult time
predicting external changes. Uncertainty increases the risk of failure for the
organizational response and makes it difficult to compute costs and probabilities
associated with decision alternatives. In the face of uncertainty, little information is
available to managers on appropriate courses of action. Departments that cope with this
uncertainty will increase their power. Just the presence of uncertainty does not provide
power; reducing the uncertainty on behalf of other departments will. Forecasting is one
technique for coping with uncertainty. Sometimes uncertainty can be reduced by taking
quick and appropriate action after an unpredictable event occurs. Other techniques
departments can use to cope with uncertainties include; obtaining prior information,
Prevention and Absorption.
Obtaining prior information means a department can reduce an organizations
uncertainty by forecasting an event.
Departments increase their power through prevention by predicting and forecasting
negative events.
Absorption occurs when a department takes action after an event to reduce its negative
consequences.

Reward power is defined as power whose basis is the ability to reward. The strength of
the reward power one person holds over another increase with the magnitude of the
rewards the latter perceives the former can mediate for him.

Coercive power involves one person’s ability to manipulate the attainment by another of
positive (or negative) rewards. The coercive power of one person over another stems
from real or imagined expectation on the part of the latter that he will be punished if he
fails to conform to the influence.

Legitimate power stems from internalized values in a person that dictate that another
person has a legitimate right to influence. The actual source of this legitimate power and
the reasons subordinates feel they ought to obey might be tradition or may derive from
the office the supervisor holds.

The referent power is based on the fact that one person identifies with and is highly
attracted to another.

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Finally expert power derives from the fact that one person is viewed as an expert in
some area and others MUST therefore depend on him for advice and counsel. Expert
power in an organization often stems from a person’s position in the communication
network and from that person’s ability to control access to coveted information.

Power is an important concept in organizations as individuals exert power to get things

done. Power, once gained usually confers major benefits on those who hold it. Such
persons can change the actions of many other people. In addition they often acquire a
high degree of status, with all respects, prestige and perks this implies. Given such
outcomes, many people in an organization invest considerable time and energy to get
power.

11.4. Effects of Power on its Holders

Power exerts strong effects upon those who hold it and those over whom it is exercised.
In addition power affects a wide range of key organizational processes. An example of
such processes is negotiation. The most obvious way in which power can affect
negotiations is through differential possession of this capacity in opposing sides. To the
extent one party to negotiations has an advantage in this respect it can shape the course of
the exchange, and obtain an agreement favorable to itself. Another way in which power
can affect negotiations concerns the relationship between negotiators and their
constituents – the people they represent. If the persons representing an organization in a
beginning situation are low in power, they will have to answer for their actions during
negotiations. As a result they may feel constrained, and adopt cautious or defensive
strategy. In contrast, if negotiators are high in power, they will be protected from such
censure and may feel free to choose a more flexible and open approach. The result is that
negotiations involving high power representatives from both sides may be more
successful and more efficient than negotiations between persons of lower power.

11.5. Organizational Politics

Organizational politics can be defined as any actions taken by individuals or groups to
gain power and so secure goals and outcomes that they personally desire. In other words

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politics is selfish in its orientation. Indeed this element of using or gaining power to
further one’s own or groups’ self-interest is one of the major factors distinguishing
politics from other more legitimate uses of power. Politics is one way of using power- for
personal or group gain.
In most organizations, politics is common. In fact, organizations appear to be highly
political environments in which various persons, groups and units are constantly
jockeying for position and power. As a result promotions, salary raises and other rewards
are not always distributed solely on the basis of merit. Major decisions are not always
made on the basis of careful study of all available data. And the principles of fair play
and rationality do not always serve as the guiding precepts. Instead, “politics rules and
rules with a vengeance” (Baron 1980).

Approaches to organizational politics

There are two approaches to defining politics. One is the negative approach. In this
approach, politics is seen as self-serving, and involves activities that are not sanctioned
by, nor in the interest of the organization. In this view politics involves deception and
dishonesty for purposes of individual self-interest and or for group interest without regard
to organizational interest. In this view politics leads to conflict and disharmony within the
work environment. This view of politics is widely held by lay people. Studies have
shown that workers who perceive this kind of political activity at work within their
companies often have related feelings of anxiety and job dissatisfaction. Studies also
support the belief that inappropriate use of politics is related to low employee morale,
inferior organizational performance and poor decision making.
The second view of politics sees it as natural organizational process for resolving
differences among organizations’ interest groups. They view politics as a process of
bargaining and negotiation that is used to overcome conflicts and differences of opinion.
In this view politics is very similar to coalition building decision processes. The
organization theory perspective views politics in this positive way-as a normal decision
making process. This approach views politics as simply the activity through which power
is exercised in the resolution of conflicts and uncertainty. Politics is neutral and not
necessarily harmful to the organization. Thus, from this perspective, organizational
politics involves the activities to acquire, develop and use power and other resources to
obtain the preferred outcome when there is uncertainty or disagreement about choices.

11.6. Techniques Used in Organizational Politics

People gain and exercise power in organizations in many ways. Among them includes:
(i) Coalitions – forming the right alliances

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This involves joining forces with persons or groups who have something to
contribute and who can be relied upon. To get such a group or persons requires
search.
(ii) Choosing a powerful mentor
Having an experienced and powerful mentor is beneficial to the group or
individual seeking this relationship and can be an effective tactic for acquiring
power and reaching important goals. Since there are many more would be
protégés than there are openings for them, competition in this regard can be
intense. However, given the substantial benefits yielded by the protection and
guidance of a powerful mentor, efforts to establish such a relationship are well
worthwhile.

(ii) Projecting the right image

This includes demonstrating a high level of competence, adopting a co-operative
attitude and displaying good behavior. For this reason, polishing one’s image
often yields valuable dividends where organizational politics is concerned. In fact,
the old adage “nothing succeeds like success” is very applicable to organizational
politics.
(iv) Establishing control over access to information
This is another highly effective tactic for gaining power that can be used both by
individuals and by groups. This involves gaining control over vital information.
Since information is the life blood of organizations, any one who can control its
flow or access to it, acquires considerable power.
(v) Co-optation – neutralizing opponents
This tactic involves bringing people whose support is desired and who currently
stand in the group’s way into the fold. Once they are made part of the group they
become part of it, subject to its norms, and often adopt its values and goals.
(vi) The use reciprocity
A guiding principle of all human relations- whether between individuals or groups
– seems to be reciprocity. In general people treat others as they have been treated
previously. By doing favors to others, or supporting them against opponents, it is

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 possible to place them in one’s debt, then at appropriate times (when their
assistance is needed most) reciprocity can be invoked and requests for repayment
made.
(vii) The use of ‘dirty tricks’
This refers to strategies that most people view as deceitful, underhanded and
dishonest – ones that violate the ethical principles of human beings. Included
among dirty tricks are such steps as:

a) Falsely attributing blame for negative outcomes to others (holding them

responsible for events they did not produce).
b) Announcing one agenda for meetings, but then following a totally different
hidden one thus preventing opponents from being adequately
prepared.
c) Restricting the flow of information to others or providing them with
“misleading facts”.
d) Spreading false rumors about their personal lives, lack of commitment to
the organization etc.

Although the above tactics are highly objectionable they are quite effective and are
commonly used by unscrupulous persons in their perpetual quest for power.

11.7. Some General Guidelines on the Ethics of Organizational Politics

As noted above some of the tactics in acquiring power in organizations can be quite
ethical while others are quite unethical.
Some tactics are manipulative, dishonest and in some cases even illegal. Others are quite
reasonable and even desirable such as coalitions and co-optation. Such situations leave us
with one issue: when are efforts to acquire and use power through organizational
politics justified, and when are they inappropriate? The following principles suggested
by Cavanaugh, Mob erg and Velasquez (1980) offer some general guidelines in this
regard.

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i) Whenever the use of politics is contemplated, the following questions about their
ultimate purpose should be addressed: are they designed to further purely selfish
iends or will they help to promote organizational goals and values as well? To
the extent the former applies, the use of such tactics is unethical.
ii) The impact of political behaviors upon the rights of individuals should be
addressed. To the extent such tactics violate basic human rights, they are
unacceptable.
iii) The relationship of political behaviors to principles of equity and fair play should
be considered. Almost everyone likes to feel that they will be judged by their
merit. Further most persons like to behave that although all individuals would not
finish together they can at least begin from the same point and run the same
course. By their very nature political actions run counter to such views. Indeed in
an important sense, their ultimate aim is that of establishing two sets of rules –
one for those in power and another one for those without it. To the extent that
political tactics operate in this manner, and directly conflict with the principles
of fairness and justice, they are unacceptable.

Thus political behavior in organizations is ethical only when it furthers organizational as

well as individual goals; when it does not violate individual rights and when it is
consistent with the principles of equity, fair play and justice.

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 CHAPTER TWELVE

ORGANIZATIONAL CONFLICT COMPETITION AND COOPERATION

12.1. Introduction
In this chapter we shall define conflict, competition and cooperation. We shall also
discuss the functions and the dysfunctions of the three behaviors and attempt to compare
and contrast cooperation and competition with conflict. We shall discuss the sources /
causes of conflict and propose some principles of managing conflict.
12.3. Definition Conflict
Conflict refers to the interactive, opposing behaviors between two or more people, groups
or larger social systems having incompatible goals. Conflict is usually experienced as
troublesome if not disruptive. Conflict ranges form disagreements, debates, to physical
confrontation, murder, and or annihilations (elimination) i.e. can be presented in the form
of a continuum) Conflict may be overt or covert, perceived or actual, non-verbal or
verbal, active or passive, manifest or latent.
There are five levels of conflict:

Level I Intra-individual conflict

Level II Inter personal conflict
Level III Inter group conflict
Level IV Organizational conflict
Level V Conflict between larger social systems

The main causes of inter group, organizational, and larger social systems conflicts are
i) Intra-Individual conflict
ii) Inter personal conflict
The main cause of interpersonal and intrapersonal conflict is stress. Thus in order to
understand conflict one must understand stress.

 What is intra-individual conflict

- Opposing behavior between different sub-systems of an individual
- Can be caused by stress
- Can also be caused by the following

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  Conflict due to frustration. Frustration occurs when
a motivated drive is blocked before a person reaches a desired goal. The
barrier may be either overt (outward, or physical) or covert (inward or
mental)
Example

Need drive Goal

Barrier

 Goal Conflict: Three separate types of goal conflicts can be identified.

- Approach – approach conflict - where the individual is motivated to
approach two or more positive but mutually exclusive goals.
- Approach – avoidance conflict – where the individual is motivated to
approach a goal and at the same time is motivated to avoid two or more negative
but mutually exclusive goals
- Avoidance – avoidance conflict – where the individual is not clear about
what role he is supposed to play in his different capacities in an organization.

 Interpersonal Conflict: There are four major sources of interpersonal conflict.

i) Personal differences: This refers to differences in upbringing, cultural and

family traditions, and socialization processes, education, values etc. These
differences cause conflict among organizational participants.

ii) Information deficiency: This may be a result of misinformation or

communication breakdown.

iii) Role incompatibility: This may arise when the organizational participants
are expected to perform incompatible roles in an organization. For example, a
sales manager may be required to increase sales which means increasing
output and stock levels. The production manager may be required to reduce
stock levels to reduce costs. This may be a cause of interpersonal conflict.

iv) Environmental stress: In an environment characterized by scarce or

shrinking resources, downsizing, competitive pressures, high degrees of
uncertainty, etc, interpersonal conflict could be amplified.
Inter group conflict
Inter group conflict arises when individuals belonging to one group interact, collectively
or individually, with another group or its members in terms of their reference group
identification.

Causes of Inter group Conflict

i) Competition for resources
ii) Task interdependence

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iii) Jurisdictional ambiguity
iv) Status struggles – this conflict occurs when one group attempts to improve its
status, and another group views this as a threat to its place in its status hierarchy.

In an inter group conflict the following conditions prevail:

 There is a clear distinction between “we” and “they”
 A group that feels that it is in conflict with another group becomes more
cohesive and pulls together to present a solid front to defeat the other group
 The positive feelings and cohesion within the in-group do not transfer to
the members of the out-group. The members of the out-group are viewed as the
enemy rather than as neutrals
 Threatened group members feel superior – they over-estimate their own
strengths, and underestimate that of members of other groups
 The amount of communication between conflicting groups decrease.
When there is communication, it is characterized by negative comments and
hostility.
 If a group is loosing in a conflict, the member’s cohesion decreases and
they experience increased tension in themselves. They look for a scapegoat to
blame their failure on.

12.4 Competition
Competition refers to rivalry between two or more organizations which is mediated by a
thrilled party. In business, the third party may be a customer, a supplier of raw materials,
or distributor, or potential employee. In a free market system, competing organizations
attempt to influence third party decision through various appeals and offerings. A third
party choice may be viewed as a vote of success for one of the competing organizations.

12.5 Cooperation
Cooperation consists of mutually reinforcing or supportive behaviors between two or
more people, groups or larger social systems. The behaviors may steal from a perception
that collaboration will help obtain mutual goals, or just from predisposition to behave this
way. Cooperative behavior may be verbal, or non-verbal or both. Cooperative behavior is
usually active, although there may be degrees of competition. The groups, individuals or
larger systems work together in order to enhance, the outcomes received by each.
Assistance is two way or reciprocal in nature.
Example
i. workers work together to lift a heavy load

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 ii. managers use their expertise to reach an important decision

The persons, groups or units involved coordinate their actions in order to reach goals and
levels of performance they could not attain alone. Once the mutually desired goals are
reached the benefits are shared among the parties in some agreed manner. Cooperation
often pays, for all concerned. Cooperation results in synergistic benefits to all.

12.6 What happens during competition / conflict?

in general the following development can be expected in groups competing for goals that
only one group can attain, such as writing a contest or attaining a particularly attractive
reward of some trend.
(1) A WE –VERSUS – THEY constellation of attitudes and feelings forms
Both groups take pride in the group’s accomplishments and make
favorable evaluation of “our” group in contrast to favorable or less
negative evaluations of characteristics of other groups.
(2) Each group has distorted perceptions and judgments about the other group
Favorable information about the other group is either ignored or
interpreted in favor of one’s own group
(3) The performance of one’s own group is over estimated, and the
performance of the other group is underestimated
(4) Each group sees the other as the enemy. In addition to making disparaging
remarks within ones own group about the other groups, contact with the
other group is frowned upon and generally avoided. A great deal of energy
is used to outwit the enemy
(5) Group solidarity, cooperation and morale increases If the odds are not over
whelming i.e. – groups in conflict or competition become more cohesive and
mutual help increases
(6) Negative perceptions and feelings carry over into noncompetitive situations
(7) Information is used to erode the position of the other group. When
negotiations or intermediaries are used to negotiate between two groups in
conflict information supplied by group members to their representations

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 is aimed at improving the relative position of ones group rather than at
clarifying matters or enhancing communication
(8) Representatives may become either ‘heroes’ or traitors.’ A representative
who is negotiating with the other group and who gives in too readily to the
position of the other group is branded a traitor

12.7. What Happens after the Competition / Conflict?

The following things happen to the winning group after the context is order
1. The winning group tends to be joyful, self-congratulatory, and reveal in the glow
of victory.
2. The role of the leader(s) is enhanced. Leaders are congratulated, their status is
enhanced, and group members are even more willing to follow their leaders in the
future.
3. The wining group becomes complacent. Characteristically the winners bask in
their success and do not critique their performance. They do not examine in what
respects their performance might improve for future situations. They become fat
and happy.
4. The winning group has little empathy for the losers. The winners typically cannot
understand why the defeated group is so defensive and sullen. Further they cannot
understand why the other group takes the matter so seriously.

12.8. What Happens to the Losing Group?

The following things happen to the loosing group.
1. Gloom settles over the loosing group – the members of the losing group tend
to be gloomy more so and subdued.
2. The judges are seen as unfair. The judges who hard done the decision are
frequently perceived by the losing groups as biased, unfair, and incompetent,
and having no grasp of the problem. They are wrong, not group.
3. The leader(s) lose in status and influence and status of the leader(s) decline
dramatically. Feelings may sometimes run so high that the leader or negotiator
is deposed or resigns.

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 4. Some critique of what happened readily occurs. There is some attempt to
assess the reason for defeat, but considerable blaming of the circumstances or
the judges or of each other can occur.
5. Recriminations may occur within the losing group. In the losing group, mutual
blaming for the defeat frequently occurs. The persons blame one another, and
other group members support the criticism or defend the person attacked.
Recriminations may proliferate for a while, with some disorganizing and
splintering occurring. Sometimes the splintering leads to group dissolution.
6. The losing group has little empathy for the winning group. They see the
celebration of the other group as excessive and they resent their self
congratulatory behavior.
12.9 Functions and dysfunctions of Conflict
12.9.1 Functions of conflict
1. Conflict and competition are the vehicles for surfacing and resolving
disagreements and different points of view
2. Conflict can help redefine a group’s or organization’s mission and can also help
review group norms
3. Some levels of conflict can also provide an energizing and vitalizing dimensions
to organizational life
4. Conflicts can also
- Lead to production of better ideas
- Lead to search for new products
- Lead to better clarification of news.
5. Conflict can also lead to group solidarity and cooperation against the other group
6. Conflict can lead to morale and increased productivity
12.9.2 Dysfunctions of Conflict
1. Can lead to physical harm or even killings
2. Can lead to destruction of property
3. In a work environment conflict can make people too upset to work
4. Can lead to break down or distortion of communication
5. Conflict can also lead to stress (both emotional or physical)

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 6. Can produce excessive levels of tension anxiety and stress
7. Can drive out people who cannot tolerate high levels of conflict
8. Can reduce trust, leading to antagonistic interactions. This can lead to withholding
/ distorting of information by one party.
9. Low conflict fails to encourage new ideas or tolerate different points of view. This
leads to poor decisions made with poor information

12.10 Functional and dysfunctional Consequences of Competition

12.10.1 Functional Consequences of Competition
Competition encourages creativity, lowering of prices, and quality production. Within
groups, it encourages effectiveness and efficiency. Within larger social systems, it
encourages creativity, innovation and effectiveness. Competition therefore:
- promotes and encourages creativity and innovation
- clarifies differences between people or groups
- motivates
- increases group solidarity
- after the win, may result in group friendship and cooperation
12.10.2 Dysfunctional consequences of competition
Competition may lead to the:
- development of a we versus they attitudes
- distorted perceptions and judgment about the other groups
- each group sees the other as an enemy
- misinformation about the other group
- the wining group might become complacent
- the loosing group might become gloomy leading to loss of morale and drive

12.11 Functional and Dysfunctional Consequences of Cooperation

12.11.1 Functions of Cooperation
 Shared benefits
 Increased outcomes (synergy)
 Peace and stability within or between group

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12.11.2 Dysfunctional Consequences of Cooperation
 Complacency
 Lack of creativity and innovation
 Failure to adopt change
12.12 Differences between Conflict and Competition
1. Incompatibility of goals
In conflict, there is incompatibility of goals between parties while in competition
there compatibility of goals between parties

2. Opposing behavior
In conflict, behavior is entirely (or mostly), opposing while in competition, there
is some opposing behaviors and some cooperative behavior

3. Rules
In conflict there are few or no rules of behavior while in competition rules exist

4. Willingness to enter
In conflict one or both parties may be drawn or forced into the conflict while in
competition usually both parties enter willingly

12.13 If cooperation is so beneficial, why don’t people, groups or units cooperate?

 The main reason is that the goals sought by the groups or individuals cannot be
shared for example if two people are seeking the same promotion, they cannot
cooperate to attain it. In many cases therefore, competition or conflict is the result.
 The other reason is that many valued goals in organizations (e.g. status, power
promotions etc,) are in short supply and are sought by many more persons or units
than can hope to attain them: cooperation is scarce, whereas competition and conflict
are the norm.
 The other reason is that in many instances the individuals or groups may find that
they have an alternative to cooperation. They can either choose to cooperate to

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 achieve mutually desired goals, or they can work on their own to achieve the desired
goals.
 Reciprocity: people treat others the way they are treated rather than treating others
the way they would have others do to them.
 Communication: in many situations where cooperation could develop, but it does
not, its absence is blamed on failure to communicate.
 Group size: as the number of individuals rises, the level of cooperation drops.
Several factors contribute to this outcome.
 The greater the number of persons, the greater the possibility that one will be
totally selfish, exploitative or simply uncooperative.
 As groups increase in size communication among their members, becomes more
difficult.
 As the number of individuals increases, diffusion of responsibility develops such
as pass – the back

12.14 Comparison between Conflict and Cooperation

12.14.1 Differences.
a) Cooperation has largely positive consequences at least for the parties involved
while conflict has both positive and negative consequences
b) Cooperation consists of mutually reinforcing or supportive behaviors between two
or more people, groups or larger systems while conflict consists of opposing
behavior.
c) Cooperative behavior stems from a perception that collaboration will help obtain
mutual goals, while conflict stems from a perception of conflicting goals.
d) Cooperation may stem from a predisposition to behave this while conflict is
largely caused by perceived or actual goal incompatibility.
e) In cooperation, since each of the parties involved is obtaining something
desirable, or expects to, there is little reason for the behaviors or be sub rosa.
Therefore cooperative behavior is open and disclosed to all parties who may wish
to hear or know about the cooperation; conflict is usually sub-rosa.
12.14.2 Similarities

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 (i) Cooperative behavior, like conflict behavior may be verbal or nonverbal or both.
(ii) Both conflict and cooperation can be functional or dysfunctional
(iii) In both conflict and cooperation, there are at least three parties to the situation.
(iv) In both conflict and cooperation, behaviors are interactive in the sense that it is
between at least two people and there is usually more than one cycle of behavior
and counter behavior.

(v) Both conflict and cooperation can be considered as parts of a continuum

Low high
Conflict conflict

Low cooperation high cooperation

High conflict low conflict low cooperation high cooperate

12.5 Conflict management model

12.5.1The management of conflict requires that when conflict is dysfunction ally high,
the manager tries to reduce it and if the conflict is dysfunction ally low, he tries to
increase it. In the same way a thermostat maintains a desired room temperature, conflict
management maintains a desired conflict level.

Signs of a dysfunction ally high conflict are:

 Low trust in a work unit
 Deliberate distortion of information

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 High levels of tension during interpersonal interactions
 Antagonism between parties
 Sabotage
 Violence between the parties

Symptoms of dysfunction ally low conflict are:

 Suppression – includes denial of differences, a desire to perceive similarities between
parties that do not exist, repressing controversial information, and prohibiting
disagreements about legitimate issues.
 Withdrawal – reduced communication avoidance of interactions, the belief in “ peace
at any price” and walking away from a disagreeable interaction.

12.5.2 Reducing conflict

When conflict increases to dysfunction ally high levels, managers must develop
techniques for reducing it to acceptable levels. There are three approaches to reducing
conflict in organizations. These are: win-lose, lose-lose, and win-win

Lose-lose methods
- none of the parties to the conflict episode get what they want.
- Typical lose – lose methods are

(i) Avoidance – parties to the conflict avoid confrontation. However although

manifest conflict may be reduced through avoidance , latent conflict can arise.
(ii) Compromise – in compromise parties in conflict use bargaining and negotiation
to reduce conflict. Each party to the conflict gives up values. In compromise
however, manifest conflict may reduce, but latent conflict persists.
(iii) Smoothing: in smoothing parties to the conflict emphasis similarities not
differences. Thus , because differences are not discussed, latent conflict exists.

Win –lose methods

In win-lose method, one party to the conflict becomes a clear winner, and the other party
a clear loser. Consequently win-lose methods clearly leave latent conflict. Nevertheless,
they reduce conflict. Main methods of win- lose are: dominance; authoritative command;
and majority rule.
(i) Dominance: dominance happens when one party to a conflict overwhelms the
other either because the overwhelming party has a higher authority status, or is
physically over powering. It can also happen when one party to the conflict has a
low tolerance for conflict. Although dominance reduces conflict, if leaves latent
conflict.
(ii) Authoritative command: this occurs when the parties in conflict refer their
conflict to a common superior who decides the solution to the conflict manifest
conflict stops, but conflict episode ends with a conflict after ***
(iii) Majority rule: in this method, the issue in conflict is put to a vote. Some members
(majority) win, and the minority loses. If this is acceptable to all concerned, this
method can reduce conflict.

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The win - win methods of conflict reduction
In these methods, each party to the conflict episode gets what he/she wants. These
methods include: problem solving, integration, and establishing super ordinate goals.

(i) Problem solving: this method tries to find the basis of conflict and ensures that all
differences among the parties are fully exposed. The parties regard differences as
important sources of information which lead to creative solutions to the conflict.
Properly done, problem solving is an effective way of reducing conflict.
(ii) Integration: this method seeks solutions that are in the best interests of all parties.
It assumes that peoples’ deeply held interests and desires are the bases of conflict.
Thus, the method tries to find a solution that meets the goals of every party in the
conflict.
(iii) Super ordinate goal: a super ordinate goal is a goal desired by all parties in the
conflict but is unattainable by any party alone. Super ordinate goals compel
cooperation even if the parties otherwise do not wish to cooperate.

12.15.3 Increasing Conflict

Conflict management includes increasing conflict when the conflict becomes dysfunction
ally low. The goal of increasing conflict is to get the functional qualities of conflict so as
to increase efficiency and effectiveness increasing information and proposing creative
solutions to problems. Managers must ensure that conflict in increased to levels that are
not dysfunction ally high. The following are the major methods of increasing conflict:
(a) Deliberately forming heterogeneous groups to find solutions to problems
(b) By developing an organizational culture that supports openness about debate
and opinions.

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