CH 1

Organization Theory
Structure, Design, and Applications

Third Revised Edition
Stephen P. Robbins and Mary Mathew
CHAPTER PART I: INTRODUCTION: WHAT’S IT ALL ABOUT?
1 An Overview
PowerPoint Presentation by Rajeesh Viswanathan

Jansons school of Business
After reading this chapter, you should be able to:
▪ Define organization theory

▪ Compare organization theory and organizational
behavior
▪ Explain the value in studying organization theory
▪ Describe the systems perspective
▪ Describe the life-cycle perspective
▪ Discuss how systems and life cycles are part of the
biological metaphor
1–2
What iis an Organizaattiion
An organization is a consciously
entity, with a relatively identifiable boundary, that
coordinated
social
functions on a relatively
continuous basis to achieve a
common goal or a set of goals.
1–3
What iis Orggaanniizzaattiion Struucture?
It defines how task are to be allocated, who reports to

whom and the formal coordination mechanisms and
interaction patterns that will be followed.
Organization structure has three components:

1. Complexity
2. Formalization
3. Centralization
1–4
Components of Organizzaattiion Structure
Complexity: It considers the extent of differentiation

within the organization.
Formalization: The degree to which an organization relies

on rules and procedures to direct the behavior of the
employees is formalization.
Centralization: It considers where the locus of decision

- making authority lies.
1–5
FFeeaattuurreess ooff aann OOrrggaanniizzaattiioonn
1. It has a relatively identifiable boundary.
2. People in the organization have some continuing

bond.
3. Organization has a goals and to attain it they set a

mission.
1–6
WWhhaatt
iiss aa OOrrggaanniizzaattiioonn DDeessiiggnn??
Organization design is concerned with constructing and

changing an organization’s structure to achieve the
organization’s goals.
It to have a smooth flow of the system without any

ambiguity in functions.
1–7
OOrrggaanniizzaattiioonn TThheeoorryy
It is a discipline that studies the structure and design of

organizations. It describes how organizations are actually
structured and offers suggestions on how they can
be constructed to improve their effectiveness. It
studies the organization at a macro level.
1–8
CCoonnttrraassttiinngg OOrrggaanniizzaatti
ioonn TThheeoorryy aanndd

➢ Organizational Behavior takes a micro view –
Oemphasizing
Orrggaanniizindividuals
zaattiioonand
n BBsmall
eehhgroups.
aavviioor
» OB focuses on the behavior in organizations,
r employees performance, and attitude
➢ Organizational Theory takes a macro

perspective. Its unit of analysis is organization itself or
its primary sub units
» OT is concerned not only with the performance of
employee and attitude but overall
organizations ability to adapt & achieve its goals
1–9
WWhhyy SSttuuddyy OOrrggaanniizzaattiioonn TThhee
oorryy??
To know how organizations operate from a scientific

point of view and then use the knowledge for
constructing and changing an organizations structure to
achieve the organizations goals.
1–10
Ten Difi fferentt Wayyss off Glalancing attOrrganizizaattioions
1. Organizations have been conceptualized in numerous ways

2. Rational entities in pursuit of goals
3. Coalitions of powerful constituencies
4. Open system
5. Meaning producing systems
6. Loosely coupled system
7. Political system
8. Instruments of domination
9. Information processing units
10. Psychic prisons
11. Social contracts
1–11
The Systems Peerrspectiive
A systems perspective offers important insights into the
working of an organization.
A system is a set of interrelated and interdependent parts

arranged in a manner that produces a unified whole.
An organization has divisions, departments and like units
separated out to perform specialized activities. At the same
time, in order to maintain unity among the
differentiated parts and form a complete whole, every
energy system has a reciprocal process of integration.
It is achieved through devices such as coordinated levels of

hierarchy; supervision, rules, procedures & policies.
1–12
Types of Systems
Closed system. It would be the one that receives no,
enclosed, and sealed off from the outside world. energy
from an outside source and from which no energy is
released to its surroundings. A closed system would not
depend on its environment; it would be autonomous.
Open System. An open system interacts with and

adapts to the environment by consuming resources and
exporting product and services to it. Because of its
interdependence with various elements issues involved
are more complex in nature.
1–13
An Industrial Organization Open Process
Environment
People
Raw
materials Input Transformation Output Customers
Information Process
Financial
resources
Transforming of raw material into Finished
Finished products.
Products
Government
Financial Institutions - loans
Labor Force - Wages
Suppliers – Pay credicators
1–14
Characteriistiics of an Oppeen Syyssttem
All systems have three activities—inputs,
transformation process and outputs
1. Environment awareness
2. Feedback
3. Cyclical character
4. Negative Entropy
5. Steady state
6. Movement toward growth and expansion
7. Balance of maintenance and adaptive
activities
8. Equifinality
1–15
IImmppoorrttaannccee ooff tthhee SSyysstteemmss PPeer
rssppeeccttiivvee
For managers and future managers, the systems
perspective permits seeing the organization as a whole
with interdependent parts – a system composed
of subsystems.
It helps all managers to identify and understand the

environment in which their system operates.
1–16
TThhee LLiiffee CCyyccllee PPeerrssppeeccttiivvee
A life cycle refers to a pattern of predictable change. By

applying it to an organization, we are saying that their
are distinct stages through which organizations proceed,
that the stages follow a consistent pattern and that the
transitions from one stage to another are predictable
rather than random occurrences.
1–17
LLiiffee CCyyccllee SSttaaggeess
1. Entrepreneurial stage. The organization is in its infancy. Goals
tend to be ambiguous. Creativity is high.
2. Collectivity stage. Organizations mission is clarified. Communication

& structure within the organization remain informal.
3. Formalization and control stage. Organization structure is

stabilized with rules and procedures being imposed. Organization exists beyond
the presence of any one individual.
4. Elaboration of structure stage. It diversifies its products

and services in the market. Decisions are decentralized
5. Decline stage. As a result of competition its products demands

decreases. Management looks for alternatives to sustain and
development of new product.
1–18
Organization Life Cycle
Entrepreneur Stage Collective Formalization Elaboration of Decline

Stage & Control Structure
Stage 1)Emp turnover
2)Increased
1 Informal 1)Complex Structures Conflicts
2)Decentralisation
Communicati 1)Rules &
on Structures 3)Market Diversified
2) High Formalized
commitment
2) Emphasis
on Efficiency
1) Ambiguous goals
2) High Creativity
Ti
1–19

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Organization Theory

Structure, Design, and Applications

CHAPTER PART I: INTRODUCTION: WHAT’S IT ALL ABOUT?

PowerPoint Presentation by Rajeesh Viswanathan

▪ Define organization theory

It defines how task are to be allocated, who reports to

Organization structure has three components:

Complexity: It considers the extent of differentiation

Formalization: The degree to which an organization relies

Centralization: It considers where the locus of decision

1. It has a relatively identifiable boundary.

2. People in the organization have some continuing

3. Organization has a goals and to attain it they set a

Organization design is concerned with constructing and

It to have a smooth flow of the system without any

It is a discipline that studies the structure and design of

ioonn TThheeoorryy aanndd

➢ Organizational Theory takes a macro

To know how organizations operate from a scientific

1. Organizations have been conceptualized in numerous ways

A system is a set of interrelated and interdependent parts

It is achieved through devices such as coordinated levels of

Open System. An open system interacts with and

Financial Institutions - loans

Labor Force - Wages

Suppliers – Pay credicators

It helps all managers to identify and understand the

A life cycle refers to a pattern of predictable change. By

2. Collectivity stage. Organizations mission is clarified. Communication

3. Formalization and control stage. Organization structure is

4. Elaboration of structure stage. It diversifies its products

5. Decline stage. As a result of competition its products demands

Entrepreneur Stage Collective Formalization Elaboration of Decline

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