Organizational Theory

Chapter 1

1.1 Current Challenges of Organizations.

 Globalization: Differences in production costs from developed to
developing countries. Multi-national companies can afford these
expansions but not everyone.

 Ethics and Social Responsibility: Nowadays we care about

sustainability, human rights, equality between genders,
transparency over finances, way of operation business

 Speed of responsiveness: More and rapid competition than

before, the pace of our daily life has been increased over the
years.

 Digital Workplace: E-commerce, Big data, helps keep things

more organized and accessible and we saw what covid-19 did,
pushing organizations to constantly explore new ways of
operations.

Chapter 2

2.1 Open vs Closed systems

Closed systems aims to limit the influences from external
environment and focuses on internal ideas and design. Early
management philosophies tended to use it us they assumed that
the organization could be more effective and limit the possibilities
of compromising its context.
Open systems pay attention to open boundaries between the
organization and its context, for example even in the same
company, departments communicate with each other. Phillips
 struggled a lot due to a closed system as it missed many product
opportunities.

Organizational configuration:

Technical Core:
Staff that does the basic work, produces the product and services
of the organization

Technical Support:
Engineers and researchers that scan the environment for
problems, opportunities, technological developments and
innovations helping the organization to adapt and change
(marketing, research, technology, R&D).

Administrative Support:
Responsible for smooth operation and upkeep of the organization.
Includes human resource activities, employee training as well as
maintenance activities like cleaning of buildings, service and repair
of machines. Is a combination of human resource department and
maintenance staff.

Management – Top and Middle:

Responsible for directing, coordinating, setting goals, strategies
and policies, the parts of the organization.
 Middle management is responsible for mediating between the top
management and technical support, such as implementing rules
and passing information up and down the hierarchy. In real life
departments are mixed and involved in 2 or more.

2.2 Dimensions of Organization Design

Structural Dimensions:
1. Formalization
 Reliance upon written documents in the organization, such as
procedures, job descriptions, regulations and policies.

2. Specialization
 At which degree the tasks are subsided into separate jobs, how
specialized to its work a department/ worker will be and is used
to be found in production lines.

3. Hierarchy
 Who reports to whom and the boundaries of control of each
manager.

4. Centralization
 Is the hierarchical level that has authority to make decisions.
When decision-making is kept at top level, the organization is
centralized.

5. Professionalism
 The level of formal education and training of employees.

6. Personnel ratio
 The deployment of people to various functions and
departments. Is measured by dividing the number of employees
in a classification by the total number.

Contextual Dimensions:

1. Size
 Measured by the number of employees.
 2. Organizational technology
 The tools, techniques and actions that used to transform inputs
int outputs.

3. Environment
 The industry, government, customers, suppliers and financial
community outside of the organization. Mostly other
organizations affect its environmental elements.

4. Goals and Strategy

 The purpose and competitive techniques that set it apart from
other organizations.

5. Culture
 Key values, beliefs, understandings and norms shared by
employees. They also contain ethical behavior, commitment,
efficiency or customer service. An organization’s culture is
unwritten with goal to glue and hold its members together and
they can be observed in its stories, slogans, ceremonies, dress,
etc…

2.3 Performance and Effectiveness Outcomes

1. Efficiency: Refers to the amount of resources used to achieve the

organization’s goals. Less means more efficiency and vice versa.

2. Effectiveness: Refers to, in which degree the organization

achieves its goals.

3. Stakeholder approach: Balancing the need of groups in and

outside of the organization that owns a stake (I don’t really agree
with this approach, shareholders are much better and will become
trendier in the future)

2.6 Scientific Management

Scientific Management focuses primarily on the technical core
and its immediate support functions of work performed on the
shop.
 On the other hand, Administrative principles aim at the design
and functioning of the organization as a whole.

Bureaucratic organizations emphasize on designing and

organizing organizations on an impersonal and rational basis by
establishing clearly defined authority and responsibilities as well as
formal record keeping.

Should be forgotten also the human factor, since humans operate

organizations, which the benefits of this approach were clearly
seen at the so-called Hawthorne Studies where positive
treatment of employees, simply by acknowledging their presence
and contribution to the organization, improved their motivation and
productivity

Modern Organization Design

1. Chaos theory: Suggests that relationships in complex systems

and non-linear and consists of numerous interconnections and
divergent choices. In other words, in a world full of uncertainty,
characterized by surprise, rapid change and confusion, you need
to be flexible and operate within this chaos.

2. Learning Organizations: That’s one way to achieve it. It is based

on equality, open information that everyone can get engaged, little
hierarchy and a culture that encourages adaptability and
participation. In order to achieve this, senior managers have to
release some control and employees to take actions
responsibilities where needed without the presence of a manager.

Efficient Performance vs Learning Organization

1. From Vertical to Horizontal Structure:

2. From Routine Tasks to Empowered Roles:

 Not just doing a simple, narrow task that is precisely defining
each job and how it should be performed, but take action in
teams or departments with the knowledge and control of tasks
going also to the workers, not only to the managers.
 3. From Formal Control (closed) to Shared Information (Open):
 All Employees are knowledgeable about many aspects of the
operation of the organization. Can be achieved by paying
regular visits to the sharp end of their organizations for example

4. From Competitive to Collaborative Strategy:

5. From Rigid to Adaptive culture:

Chapter 3

3.1 Top management Role in Organization Direction.

All organizations have a Purpose or several ones.

1. Mission
It’s the organization’s vision, its shared values, beliefs and its
reason of existence.

2. Operative Goals
Describe specific measurable outcomes and are often concerned
with the short run. Operative goals typically focus to the primary
tasks an organization must perform.

 Overall Performance
Profitability, growth, output volume, reputation, corporate
responsibility

 Resources
Finding less expensive sources for raw material or hiring top-
quality technology graduates.

 Market
Relates to the market share goals
  Employee development
Training, promoting, health and safety and growth of employees.

 Innovation and change

Internal flexibility and readiness to adapt to unexpected changes in
the environment.

 Productivity
Sales per employee, better equipment can achieve it.

3.2 Selecting Strategy and Design

1. Porter’s Competitive Strategies (close system)

 Low-Cost Leadership
Focus on efficiency, low cost, strong market share, cost reductions
and tight control for mor efficiency than competitors.

 Differentiation
Distinguish your products or services from others in the industry
(pioneers). Advertisement, distinctive product features or new
technologies. This targets customers who aren’t concerned with
the price (Rolex, apple, Tommy, Jaguar, etc.)

 Focus
Concentrates on a specific market or buyer group.

2. Miles and Snow’s Typology (open system)

 Prospector Strategy
Learning orientation: Innovate, take risks, seek out new
opportunities, creativity is more important, flexible, fluid,
decentralized structure.

 Defender Strategy
Almost the opposite of prospector. Focuses on stability or even
retrenchment. Produces reliable and high-quality products for
existing customers.
  Analyzer Strategy
Somewhere between the other 2. Maintain a stable business while
innovating. Some products will target stable, low innovation
environments to keep current customers while trying to innovate,
keeping everything in a balance

 Reactor
Top management has not defined a long-range plan or explicit
mission, so actions meet immediate needs.

3.3 Concepts in Business Strategy (Especially for start-ups)

 Star
Recruiting top talent and paying highly

 Engineering
Emphasizing professional commitment

 Commitment
Building a strong family identity in order to be loyal, most important

 Bureaucracy
Documented rules and systems for every eventuality

 Autocracy
Hierarchical discipline.

3.3 Contingency Effectiveness Approaches

Measures effectiveness focus on different parts of the organization

1. Goal approach
 Whether the organization achieves its goals in terms of desired
levels of output. Helps to keep on track and see where needs
more attention.
 Indicators: Efforts to measure effectiveness using operative
goals.
 Usefulness: Evaluation of the performance in terms of
profitability, growth market share and return on investment
2. Resource-based approach
 Indicators: Obtaining and successfully managing resources.
 Bargaining position: The ability to obtain from the
environment scarce and valued resources like financial, raw
material, human resources, knowledge and technology.
 Appropriately responds to changes
 The ability to use tangible (supplies, people) and intangible
(knowledge, corporate culture) resources in day-to-day activities

3. Internal process approach

 Indicators:

1. Strong corporate culture and positive work climate

2. Team spirit, group loyalty and teamwork
3. Confidence, trust and communication between workers and
management
4. Decision-making near sources of information of all types
5. Undistorted horizontal and vertical communication; sharing of
relevant facts and feelings
6. Rewards to managers for performance, growth and
development.

4. An Integrated Effectiveness Model