org theory introduction

8/3/2019 Org Theory Introduction

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Introduction toOrganization Theory

ByShevata Singhal


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What is Theory?

Theory is: a plan or scheme existing in themind only, but based on principles

verifiable by experiment or observation

(Funk &Wagnalls page 1302


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What is an Organization? Organizations are social entities that are

goal-oriented; are designed as deliberately

structured and coordinated activity systems,

and are linked to the external environment

(Daft, 2004).


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Definition of Organization

Theory Organization theory: is the set of

propositions (body of knowledge) stemming

from a definable field of study which can be

termed organizations science (Kast&Rosenzweig1970).

The study of organizations: is an applied

science because the resulting knowledge isrelevent to problem solving or decision

making in ongoing enterprises or

institutions (Kast&Rosenzweig1970).


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Theory Cont.. Two things:

Knowledge

Knowledge generated by practical experience and

scientific research

Solving problems & managing resources

(Kast&Rosenzweig1970).


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Theory Cont.. It is the application of scientific knowledge

in engineering and other forms of

technology that has brought such

spectacular changes in the material context

of our lives over the past century



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Organization theory and

Management Management technology stems from

organization theory and even more applied

in the sense that it focuses on the practice of

management in ongoing organizations



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Micro Perspective of

Organizations Simplifying Assumptions:

Firms viewed as an individual entrepreneur

Profit maximization

Rationality in achieving firm goals

Firms function is to transform inputs into

outputs Staple environment in which firm operates

Concerned only with changes in prices and

quantities of inputs and outputs


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Organization Theory from a

Historical Perspective

Throughout history most managers

operated strictly on a trial-and-error basis

The management profession as we know it

today is relatively new

wide swings in management approaches over

the last 100 years

parts of each approach have survived and been

incorporated into modern perspectives on

management


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Evolution Of Management Thought

1890 1900 1910 1920 1930 1940 1950 1960 1970

Systematic

management

Administrative

management

Quantitative

management

Systems

theory

Current and

future revolutions

Scientific

management

Human

relations

Organizational

behavior

Bureaucracy

Classical Approaches Contemporary Approaches

Contingency

theory


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Early Management Concepts And

Influences Industrial revolution

minor improvements in management tactics produced impressive

increases in production quantity and quality

economies of scale - reductions in the average cost of a unit of

production as the total volume produced increases

opportunities for mass production created by the industrial

revolution spawned intense and systematic thought about

management problems and issues

efficiency

production processes

cost savings


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Systematic Management

Systematized manufacturing operations

Coordination of procedures and processes built into internal operations

Emphasis on economical operations, inventory management, and cost

control

Beginning of formal management in the United States

Promotion of efficient, uninterrupted production

Ignored relationship between an organization and it environment

Ignored differences in managers and workers views

Key concepts

Limitations

Contributions


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Scientific Management (The Classical

Organization Theory)

Advocated the application of scientific methods to analyze work and

to determine how to complete production tasks efficiently

Four principles

develop a scientific approach for each element of ones work

scientifically select, train, teach and develop each worker

cooperate with workers to ensure that jobs match plans and principles

ensure appropriate division of labor

Personalities

FrederickW. Taylor

Frank and Lillian Gilbreth

Henry Gantt


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Scientific Management (cont.)

Used scientific methods to determine the one best way

Emphasized study of tasks, selection and training of workers, and

cooperation between workers and management

Improved factory productivity and efficiency

Introduced scientific analysis to the workplace

Piecerate system equated worker rewards and performance

Simplistic motivational assumptions

Workers viewed as parts of a machine

Potential for exploitation of labor

Excluded senior management tasks

Key concepts

Limitations

Contributions


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Administrative Management

Emphasized the perspective of senior managers

Five management functions

planning

organizing commanding

coordinating

controlling

Fourteen principles of management

Personalities

Henri Fayol

Chester Barnard

Mary Parker Follet


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Administrative Management (cont.)

Fayols five functions and 14 principles of management

Executives formulate the organizations purpose, secure employees,

and maintain communications

Managers must respond to changing developments

Viewed management as a profession that can be trained and developed

Emphasized the broad policy aspects of top-level managers

Offered universal managerial prescriptions

Universal prescriptions need qualifications for

environmental, technological, and personnel factors

Key concepts

Limitations

Contributions


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Human Relations

Aimed to understand how psychological and social

processes interact with the work situation to influence

performance

Hawthorne Studies

Hawthorne Effect- workers perform and react differently

when researchers observe them

Argued that managers should stress primarily employee

welfare, motivation, and communication

Personalities

Abraham Maslow


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Human Relations (cont.)

Productivity and employee behavior are influenced by the informal

work group

Cohesion, status, and group norms determine output

Social needs have precedence over economic needs

Psychological and social processes influence performance

Maslows hierarchy of need

Ignored workers rational side and the formal organizations

contributions to productivity

Research overturned the simplistic belief that happy workers are more

productive

Key concepts

Limitations

Contributions


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Bureaucracy

Bureaucratic structures can eliminate the

variability that results when managers in the

same organization have different skills,

experiences, and goals

Allows large organizations to perform the many

routine activities necessary for their survival

People should be treated in unbiased manner

Personalities

MaxWeber


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Bureaucracy (cont.)

Structured network of relationships among specialized positions

Rules and regulations standardize behavior

Jobs staffed by trained specialists who follow rules

Hierarchy defines the relationship among jobs

Promotes efficient performance of routine operations

Eliminates subjective judgment by employees and management

Emphasizes position rather than the person

Limited organizational flexibility and slowed decision making

Ignores the importance of people and interpersonal relationships

Rules may become ends in themselves

Key concepts

Limitations

Contributions


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Quantitative Management

Teams of quantitative experts tackle

complex issues facing large organizations

Helps management make a decision by

developing formal mathematical models of

the problem

Personalities

military planners in WorldWar II


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Quantitative Management (cont.)

Application of quantitative analysis to management decisions

Developed specific mathematical methods of problem analysis

Helped managers select the best alternative among a set

Models neglect nonquantifiable factorsManagers not trained in these techniques may not trust or understand

the techniques outcomes

Not suited for nonroutine or unpredictable management decisions

Key concepts

Limitations

Contributions


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Organizational Behavior

Studies management activities that promote employee

effectiveness

investigates the complex nature of individual, group, and

organizational processesTheory X

managers assume that workers are lazy, irresponsible, and require

constant supervision

Theory Y

managers assume employees want to work and control themselves

Personalities

Douglas McGregor


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Organizational Behavior (cont.)

Promotes employee effectiveness through understanding of individual,

group, and organizational processes

Stresses relationships among employees, managers, and work

performed

Assumes employees want to work and can control themselves

Increased participation, greater autonomy, individual challenge and

initiative, and enriched jobs may increase participationRecognized the importance of developing human resources

Some approaches ignored situational factors, such as the environment

and technology

Key concepts

Limitations

Contributions


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Systems Theory

Organization is viewed as a managed system

Management must interact with the environment

Organizational goals must address effectiveness and efficiency

Organizations contain a series of subsystems

There are many avenues to the same outcome

Synergies enable the whole to be more than the sum of the parts

Recognized the importance of the relationship between the

organization and the environment

Does not provide specific guidance on the functions of managers

Key concepts

Limitations

Contributions


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Contingency Perspective

Situational contingencies influence the strategies, structures, and

processes that result in high performance

There is more than one way to reach a goal

Managers may adapt their organizations to the situation

Identified major contingencies

Argued against universal principles of management

Not all important contingencies have been identified

Theory may not be applicable to all managerial issues

Key concepts

Limitations

Contributions


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Organizing ForEnvironmental

Response (cont.)

Organizing for customer responsiveness (cont.)

Total Quality Management(TQM) - comprehensive approach

to improving quality and customer satisfaction

characterized by a strong orientation toward internal and externalcustomers

involves people across departments in improving all aspects of the

business

requires integrative mechanisms that facilitate group problem solving,

information sharing, and cooperation across business functionsBaldrige award- given to U.S. companies that achieve quality

excellence


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W. Edwards Demings 14 Points

OfQuality

Create constancy of purpose

Dont tolerate delays or mistakes

Cease dependencies on mass inspection

Dont award business on price tag alone

Constantly and forever improve the system of production or service Institute training and retraining

Institute leadership

Drive out fear

Breakdown barriers among departments

Eliminate slogans, exhortations, and arbitrary targets

Eliminate numerical quotas

Remove barriers to pride in workmanship

Educate your people who should be viewed as assets, not commodities

Provide a structure that enables quality


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Organizing ForEnvironmental

Response (cont.)

Organizing for customer responsiveness (cont.)

ISO 9000 - a series of quality standards developed by a

committee working under the InternationalOrganization for Standardization

intended to improve total quality in all businesses

companies that comply with standards entitled to certification

reengineering- revolutionizes key organizational

systems and processes

based on a vision for how the organization should run

completely overhauls the operation in revolutionary ways


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A Dynamic Network

DistributorsSuppliers

Brokers

ProducersDesigners


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Macro Perspective of Organizations

Organizations are open systems

affected by, and in turn affect, their external

environments

External environment

all relevant forces outside a firms boundaries

relevant- factors to which managers must pay attention

two elements comprise the external environment competitive environment- immediate environment

surrounding a firm

macroenvironment- fundamental factors that generally

affect all organizations


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Laws and

politics

Economy

Technology

DemographicsSocial

values

MacroenvironmentCompetitive

EnvironmentOrganization

Suppliers

New

Entrants

SubstitutesRivals

Buyers

The External Environment


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The Macroenvironment The macroenvironment

most general elements in the external environment that can

potentially influence strategic decisions

all organizations are affected by the general components of

the macroenvironment

Laws and regulations

impose strategic constraints and provide opportunities

regulators - specific government organizations in a firms

more immediate task environment have the power to investigate company practices and take legal

action to ensure compliance with the laws


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The Macroenvironment (cont.)

The economy

created by complex interconnections among economies of

different countries

important elements include interest rates, inflation rates,unemployment rates, and the stock market

economic conditions change and are difficult to predict

Technology

creates new products, advanced production techniques, andimproved methods of managing and communicating

strategies that ignore or lag behind competitors in

considering technology lead to obsolescence and extinction


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Demographics

measures of various characteristics of the people comprising

groups or other social units

age, gender, family size, income, education, occupation

workforce demographics must be considered in formulating

human resources strategies

population growth influences the size and composition of the labor

force

immigration also is a significant factor

increasing diversity of the labor force has both advantages and

disadvantages

must assure equal employment opportunity


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Social issues and the natural environment

management must be aware of how people

think and behave

the role of women in the workplace

providing benefits for domestic partners of

employees

protection of the natural environment


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Competitive Environment

Competitive environment

comprises the specific organizations with

which the organization interacts

Michael Porter - defined the competitive

environment

successful managers:

react to the competitive environment; and

act in ways that actually shape or change the

competitive environment


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Rival firms

New

entrants

Suppliers Customers

Substitutes

Competitive Environment


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Competitive Environment (cont.)

Competitors

competitors within an industry must deal with one

another organizations must:

identify their competitors

analyze how competitors compete

react to and anticipate competitors actions

competition is most intense:

where there are many competitors

when industry growth is slow

when the product or service cannot be differentiated


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Threat of new entrants

barriers to entry - influence the degree of threat

conditions that prevent new companies from entering an industry

include government policy, capital requirements, and brand

identification, cost disadvantages, and distribution channels

Threat of substitutes

technological advances and economic efficiencies may result in

substitutes for existing products

substitutes can limit another industrys revenue potential

companies need to think about potentially viable substitutes


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Suppliers

provide the resources needed for production

powerful suppliers can reduce an organizations profits

international labor unions are noteworthy suppliers

dependence on powerful suppliers is a competitive disadvantage

power of supplier determined by:

availability of other suppliers from whom to buy

the number of customers for the suppliers products

switching costs - fixed costs buyers face if they change suppliers

close supplier relationship is the new model for organizations


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Customers

purchase the products or services the organization offers

final consumers - purchase products in their final form

intermediate consumers - buy raw materials or wholesale productsbefore selling them to final consumers

customerservice - giving customers what they want, the way

they want it, the first time

disadvantageous to depend too heavily on powerful customers

powerful customers make large purchases and/or have other suppliers

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