ch11 of org behavior by jones

8/10/2019 Ch11 of Org Behavior by Jones

1/39


2/39

11-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 2

Learning Objectives

1.

Appreciate the problems involved insurviving the perils of organizationalbirth and what founders can do to

help their new organizations tosurvive

2.

Describe the typical problems thatarise as an organization grows andmatures, and how an organizationmust change if it is to survive andprosper


3/39


Learning Objectives (cont.)

3.

Discuss why organizational declineoccurs, identify the stages of decline,and how managers can change their

organizations to prevent failure andeventual death or dissolution


4/39


The Organizational Life Cycle

!

Organizational life cycle:apredictable sequence of stages ofgrowth and change

!

The four principal stages of theorganizational life cycle:

! Birth

! Growth

! Decline

! Death


5/39


Figure 11.1: A Model of theOrganizational Life Cycle


6/39


Organizational Birth

!

Organizational birth:the foundingof an organization

! Occurs when entrepreneurs take advantage

of opportunities to use their skills andcompetences to create value

! A dangerous life cycle stage associated withthe greatest chance of failure

! Liability of newness:the dangers associatedwith being the first in a new environment

! A new organization is fragile because it lacks aformal structure


7/3911-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 7

Organizational Birth (cont.)!

Developing a plan for a new business!

Begins when an entrepreneur notices anopportunity to develop a new or improved

product or service! Tests the feasibility of the new product

idea

! SWOT analysis

! Examine the strengths and weaknesses of

the idea

! Decide whether the new product idea is

feasible



Organizational Birth (cont.)

!

Developing a plan for a new business(cont.)

! Plan should include:

! Statement of the organizations mission,goals, and financial objectives

! Statement of the organizations strategicobjectives

! List of all the functional and organizationalresources required to implement the idea

! Timeline that contains specific milestonesused to measure the progress of the venture



Table 11.1: Developing aBusiness Plan



A Population Ecology Modelof Organizational Birth

!

Population ecology theory:atheory that seeks to explain the factorsthat affect the rate at which neworganizations are born (and die) in apopulation of existing organizations

! Population of organizations:theorganizations that are competing for the

same set of resources in the environment! Environmental niches:particular sets

of resources or skills



Population Ecology Model(cont.)

!

Number of births determined by theavailability of resources

! Population density:the number of

organizations that can compete for thesame resources in a particularenvironment

! Factors that produce a rapid birthrate

!

Availability of knowledge and skills to generatesimilar new organizations

! New organizations that survive provide rolemodels and confer legitimacy




!

As the environment is populated witha number of successful organizations,birthrate tapers off because:

! Fewer resources are available for

newcomers

! First-mover advantages: benefits derivedfrom being an early entrant into a new

environment

! Difficulty of competing with existing

companies



Figure 11.2: OrganizationalBirthrates Over Time




!

Survival strategies! Strategies that organizations can use to

gain access to resources and enhance

their chances of survival in theenvironment

! r-strategy versus K-strategy

! r-strategy:a strategy of entering a new

environment early

! K-strategy:a strategy of entering an

environment late, after other organizationshave tested the environment




!

Survival strategies (cont.)!

Specialists:organizations thatconcentrate their skills to pursue anarrow range of resources in a singleniche

! Generalists:organizations that spreadtheir skills thin to compete for a broad

range of resources in many niches


16/39



Figure 11.3: Strategies for Competingin the Resource Environment




!

Natural selection:the process thatensures the survival of organizationsthat have the skills and abilities that

best fit with the environment!

Over time, weaker organizations diebecause they cannot adapt theirprocedures to fit changes in theenvironment

! Natural selection is a competitive

process

Th I i i l Th f



The Institutional Theory ofOrganizational Growth!

Organizational growth:the life-cyclestage in which organizations develop value-creation skills and competences that allowthem to acquire additional resources

!

Organizations can develop competitiveadvantages by increasing division of labor

!

Creates surplus resources that foster greater

growth!

Growth should not be an end-in-itself

Th I i i l Th f



The Institutional Theory ofOrganizational Growth (cont.)

!

Institutional theory:a theory thatstudies how organizations canincrease their ability to grow and

survive in a competitive environmentby becoming legitimate in the eyes oftheir stakeholders

!

Institutional environment:values

and norms in an environment thatgovern the behavior of a populationof organizations



The Institutional Theory of

Organizational Growth(cont.)

!

Organizational isomorphism:thesimilarity among organizations in apopulation

! Three processes that explain why

organizations become similar are:

! Coercive isomorphism

! Mimetic isomorphism

! Normative isomorphism

f




Organizational Growth(cont.)!

Coercive isomorphism:exists when anorganization adopts certain norms becauseof pressures exerted by other organizationsand by society in general

! Increasing dependence of one organization onanother leads to greater similarity

! Mimetic isomorphism:exists when

organizations intentionally imitate oneanother to increase their legitimacy

! Environmental uncertainty increases the likelihoodof imitation

Th I i i l Th f


23/39



Organizational Growth(cont.)

!

Normative isomorphism:existswhen organizations indirectly adopt thenorms and values of other

organizations in the environment!

Organizations acquire norms and valueswhen:!

Employees move from one organization to

another and bring with them the norms andvalues of their former employer

! They participate in the activities of industry,

trade, and professional associations

Th I tit ti l Th f


24/39


The Institutional Theory ofOrganizational Growth (cont.)

!

Disadvantages of isomorphism

! Organizations may learn ways to behave

that have become outdated and no

longer lead to organizationaleffectiveness

! Pressure to imitate may reduce the levelof innovation in the environment

G i M d l f


25/39


Greiners Model ofOrganizational Growth

!

Greiner proposes 5 sequential growthstages! Each stage results in a crisis

! Advancement to the next stage requires

successfully resolving the crisis in the previousstage

!

Stage 1: Growth through creativity! Entrepreneurs develop the skills to create and

introduce new products! Organizational learning occurs

! Crisis of leadership entrepreneurs may lackmanagement skills


26/39

G i M d l f


27/39


Greiners Model ofOrganizational Growth (cont.)

!

Stage 3: Growth through delegation!

To solve the crisis of autonomy, managersmust delegate

!

Strike a balance between the need forprofessional management and the opportunityfor entrepreneurship

! Movement toward product team structure

! Crisis of control as power struggles overresources emerge between top-level andlower-level managers

G i M d l f


28/39


Greiners Model ofOrganizational Growth (cont.)

!

Stage 4: Growth through coordination!

To resolve crisis of control, managersmust find right balance of centralized anddecentralized control

! Top management takes on role ofcoordinating different divisions

! Crisis of red tape!

Increasing reliance on rules and standardprocedures

! Organization becomes overly bureaucratic andstifles entrepreneurship


29/39


30/39


31/39


Organizational Decline and Death

!

Organizational decline:the life-cycle stage that an organization enterswhen it fails to anticipate, recognize,

avoid, neutralize, or adapt to externalor internal pressures that threaten its

long-term survival

! May occur because organizations growtoo much

Organizational Decline and


32/39


Organizational Decline andDeath (cont.)

!

Effectiveness and profitability!Assessing an organizations effectiveness

involves comparing its profitability relativeto others

!

Profitability:measures how well acompany is making use of its resourcesby investing them in ways to creategoods and services that generate profitwhen sold! Short-term profits say little about how well

managers are using resources to generatefuture profits

Figure 11 5: The Relationship Between


33/39


Figure 11.5: The Relationship BetweenOrganizational Size and OrganizationalEffectiveness



34/39



!

Organizational inertia:the forcesinside an organization that make itresistant to change

! Risk aversion:managers become

unwilling to bear the uncertainty ofchange as organizations grow

! The desire to maximize rewards:

managers may increase the size of thecompany to maximize their own rewardseven when this growth reducesorganizational effectiveness



35/39



!

Organizational inertia (cont.)! Overly bureaucratic culture:in large

organizations, property rights can

become so strong that managers spendall their time protecting their specificproperty rights instead of working toadvance the organization



36/39



!

Uncertain and changing environment! Affect an organizations ability to obtain

scarce resources, thereby leading to

decline! Makes it difficult for top management to

anticipate the need for change and tomanage the way organizations change

and adapt to the environment

Weitzel and Jonssons Model


37/39


Weitzel and Jonsson s Modelof Organizational Decline

!

5 stages of decline!Stage 1: Blinded:organizations are

unable to recognize the internal or

external problems that threaten theirlong-term survival

!Stage 2: Inaction:despite clear signs ofdeteriorating performance, top

management takes little actions to correctproblems

!Gap between acceptable performance andactual performance increases

Weitzel and Jonssons Model


38/39


Weitzel and Jonsson s Model(cont.)

!

5 stages of decline (cont.)! Stage 3: Faulty action: managers may

have made the wrong decisions becauseof conflict in the top-management team,

or they may have changed too little toolate fearing more harm than good fromreorganization

! Stage 4: Crisis: by the time this stagehas arrived, only radical changes in

strategy and structure can stop the decline! Stage 5: Dissolution: decline is

irreversible and the organization cannotrecover


39/39

Figure 11.7: Weitzel and JonssonsModel of Organizational Decline

ch11 of org behavior by jones

Documents