Organizational
Theory, Design, and
Change
Summary
,Table of contents
1. ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS 4
1.1 WHAT IS AN ORGANIZATION? 4
1.2 WHY DO ORGANIZATIONS EXIST? 5
1.3 ORGANIZATIONAL THEORY, DESIGN, AND CHANGE 6
1.4 HOW DO MANAGERS MEASURE ORGANIZATIONAL EFFECTIVENESS? 7
2. STAKEHOLDERS, MANAGERS, AND ETHICS 8
2.1 ORGANIZATIONAL STAKEHOLDERS 8
2.2 ORGANIZATIONAL EFFECTIVENESS: SATISFYING STAKEHOLDERS’ GOALS AND INTERESTS 9
2.3 TOP MANAGERS AND ORGANIZATIONAL AUTHORITY 10
2.4 AN AGENCY THEORY PERSPECTIVE 11
2.5 TOP MANAGERS AND ORGANIZATIONAL ETHICS 12
2.6 CREATING AN ETHICAL ORGANIZATION 15
3. ORGANIZING IN A CHANGING GLOBAL ENVIRONMENT 16
3.1 WHAT IS THE ORGANIZATIONAL ENVIRONMENT 16
3.2 RESOURCE DEPENDENCE THEORY 17
3.3 INTERORGANIZATIONAL STRATEGIES FOR MANAGING RESOURCE DEPENDENCIES 18
3.4 STRATEGIES FOR MANAGING SYMBIOTIC RESOURCE INTERDEPENDENCIES 18
3.5 STRATEGIES FOR MANAGING COMPETITIVE RESOURCE INTERDEPENDENCIES 19
3.6 TRANSACTION COST THEORY 20
4. BASIC CHALLENGES OF ORGANIZATIONAL DESIGN 22
4.1 DIFFERENTIATION 22
4.2 BALANCING DIFFERENTIATION AND INTEGRATION 23
4.3 BALANCING CENTRALIZATION AND DECENTRALIZATION 24
4.4 BALANCING STANDARDIZATION AND MUTUAL ADJUSTMENT 25
4.5 MECHANISTIC AND ORGANIC ORGANIZATIONAL STRUCTURES 25
5. DESIGNING ORGANIZATIONAL STRUCTURE: AUTHORITY AND CONTROL 28
5.1 AUTHORITY: HOW AND WHY VERTICAL DIFFERENTIATION OCCURS 28
5.2 CONTROL: FACTORS AFFECTING THE SHAPE OF THE HIERARCHY 30
5.3 THE PRINCIPLES OF BUREAUCRACY 31
5.4 THE INFLUENCE OF THE INFORMAL ORGANIZATION 32
5.5 IT, EMPOWERMENT, AND SELF-MANAGED TEAMS 33
6. DESIGNING ORGANIZATIONAL STRUCTURE: SPECIALIZATION AND COORDINATION 34
6.1 FUNCTIONAL STRUCTURE 34
6.2 FROM FUNCTIONAL STRUCTURE TO DIVISIONAL STRUCTURE 35
6.3 DIVISIONAL STRUCTURE I: THREE KINDS OF PRODUCT STRUCTURE 36
6.4 DIVISIONAL STRUCTURE II: GEOGRAPHIC STRUCTURE 39
6.5 DIVISIONAL STRUCTURE III: MARKET STRUCTURE 40
6.6 MATRIX STRUCTURE 40
6.7 NETWORK STRUCTURE AND THE BOUNDARYLESS ORGANIZATION 41
1
,7. CREATING AND MANAGING ORGANIZATIONAL CULTURE 43
7.1 WHAT IS ORGANIZATIONAL CULTURE? 43
7.2 HOW IS AN ORGANIZATION’S CULTURE TRANSMITTED TO ITS MEMBERS? 44
7.3 WHERE DOES ORGANIZATIONAL CULTURE COME FROM? 45
7.4 CAN ORGANIZATIONAL CULTURE BE MANAGED? 48
7.5 SOCIAL RESPONSIBILITY 48
8. ORGANIZATIONAL DESIGN AND STRATEGY IN AND CHANGING GLOBAL ENVIRONMENT 50
8.1 STRATEGY AND THE ENVIRONMENT 50
8.2 FUNCTIONAL-LEVEL STRATEGY 52
8.3 BUSINESS-LEVEL STRATEGY 54
8.4 CORPORATE-LEVEL STRATEGY 55
8.5 IMPLEMENTING STRATEGY ACROSS COUNTRIES 57
9. ORGANIZATIONAL DESIGN, COMPETENCES, AND TECHNOLOGY 59
9.1 WHAT IS TECHNOLOGY? 59
9.2 TECHNOLOGY AND ORGANIZATIONAL EFFECTIVENESS 59
9.3 TECHNICAL COMPLEXITY: THE THEORY OF JOAN WOODWARD 60
9.4 ROUTINE TASKS AND COMPLEX TASKS: THE THEORY OF CHARLES PERROW 61
9.5 TASK INTERDEPENDENCE: THE THEORY OF JAMES D. THOMPSON 62
9.6 FROM MASS PRODUCTION TO ADVANCED MANUFACTURING TECHNOLOGY 63
9.7 ADVANCED MANUFACTURING TECHNOLOGY: INNOVATIONS IN MATERIALS TECHNOLOGY 64
10. TYPES AND FORMS OF ORGANIZATIONAL CHANGE 65
10.1 WHAT IS ORGANIZATIONAL CHANGE 65
10.2 FORCES FOR AND RESISTANCE TO ORGANIZATIONAL CHANGE 65
10.3 EVOLUTIONARY AND REVOLUTIONARY CHANGE IN ORGANIZATIONS 67
10.4 MANAGING CHANGE: ACTION RESEARCH 68
10.5 ORGANIZATIONAL DEVELOPMENT 69
11. ORGANIZATIONAL TRANSFORMATIONS: BIRTH, GROWTH, DECLINE, AND DEATH 70
11.1 THE ORGANIZATIONAL LIFE CYCLE 70
11.2 ORGANIZATIONAL BIRTH 70
11.3 A POPULATION ECOLOGY MODEL OF ORGANIZATIONAL BIRTH 70
11.4 THE INSTITUTIONAL THEORY OF ORGANIZATIONAL GROWTH 72
11.5 GREINER’S MODEL OF ORGANIZATIONAL GROWTH 73
11.6 ORGANIZATIONAL DECLINE AND DEATH 74
12. DECISION MAKING, LEARNING, KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
76
12.1 ORGANIZATIONAL DECISION MAKING 76
12.2 MODELS OF ORGANIZATIONAL DECISION MAKING 76
12.3 KNOWLEDGE OF MANAGEMENT AND INFORMATION TECHNOLOGY 78
12.4 FACTORS AFFECTING ORGANIZATIONAL LEARNING 79
12.5 IMPROVING DECISION MAKING AND LEARNING 80
2
,13. INNOVATION, INTRAPRENEURSHIP, AND CREATIVITY 82
13.1 INNOVATION AND TECHNOLOGICAL CHANGE 82
13.2 INNOVATION, INTRAPRENEURSHIP, AND CREATIVITY 82
13.3 MANAGING THE INNOVATION PROCESS 83
13.4 INNOVATION AND INFORMATION TECHNOLOGY 85
13.5 INNOVATION AND INFORMATION SYNERGIES 85
14. MANAGING CONFLICT, POWER, AND POLITICS 86
14.1 WHAT IS ORGANIZATIONAL CONFLICT 86
14.2 PONDY’S MODEL OF ORGANIZATIONAL CONFLICT 86
14.3 MANAGING CONFLICT: CONFLICT RESOLUTION STRATEGIES 87
14.4 WHAT IS ORGANIZATIONAL POWER 88
14.5 SOURCES OF ORGANIZATIONAL POWER 88
14.6 USING POWER: ORGANIZATIONAL POLITICS 90
3
, 1. Organizations and Organizational Effectiveness
1.1 What Is an Organization?
People have a casual attitude toward organizations Because organizations are intangible
Organization A tool people use to coordinate their actions to obtain something they desire or
value – that is to achieve their goals.
Entrepreneurship The process by which people recognize opportunities to satisfy needs and then
gather and use resources to meet those needs.
How Does an Organization Create Value?
Value creation takes place at three stages, each stage is affected by the environment in which the
organization operates:
• Organization’s Inputs Included resources such as raw materials, machinery, information
and knowledge, human resources, and money and capital. 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 the input stage.
• Organization’s Conversion Process Organization transforms inputs and adds value to
them. It needs machinery, computer
or/and human skills and abilities.
• Organization’s Outputs Finished
goods and services that the
organization releases to its
environment, where they are
purchased and used by customers to
satisfy their needs. (The organization
uses the money earned from the sale
of its output to obtain new supplies of
inputs, and the cycle begins again.)
• Organization’s Environment The set
of forces and conditions that operate
beyond an organization’s boundaries
but affect its ability to acquire and use
resources to create value.
Value-creation model Can be used to
describe the activities of most kinds of
organizations.
4
Theory, Design, and
Change
Summary
,Table of contents
1. ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS 4
1.1 WHAT IS AN ORGANIZATION? 4
1.2 WHY DO ORGANIZATIONS EXIST? 5
1.3 ORGANIZATIONAL THEORY, DESIGN, AND CHANGE 6
1.4 HOW DO MANAGERS MEASURE ORGANIZATIONAL EFFECTIVENESS? 7
2. STAKEHOLDERS, MANAGERS, AND ETHICS 8
2.1 ORGANIZATIONAL STAKEHOLDERS 8
2.2 ORGANIZATIONAL EFFECTIVENESS: SATISFYING STAKEHOLDERS’ GOALS AND INTERESTS 9
2.3 TOP MANAGERS AND ORGANIZATIONAL AUTHORITY 10
2.4 AN AGENCY THEORY PERSPECTIVE 11
2.5 TOP MANAGERS AND ORGANIZATIONAL ETHICS 12
2.6 CREATING AN ETHICAL ORGANIZATION 15
3. ORGANIZING IN A CHANGING GLOBAL ENVIRONMENT 16
3.1 WHAT IS THE ORGANIZATIONAL ENVIRONMENT 16
3.2 RESOURCE DEPENDENCE THEORY 17
3.3 INTERORGANIZATIONAL STRATEGIES FOR MANAGING RESOURCE DEPENDENCIES 18
3.4 STRATEGIES FOR MANAGING SYMBIOTIC RESOURCE INTERDEPENDENCIES 18
3.5 STRATEGIES FOR MANAGING COMPETITIVE RESOURCE INTERDEPENDENCIES 19
3.6 TRANSACTION COST THEORY 20
4. BASIC CHALLENGES OF ORGANIZATIONAL DESIGN 22
4.1 DIFFERENTIATION 22
4.2 BALANCING DIFFERENTIATION AND INTEGRATION 23
4.3 BALANCING CENTRALIZATION AND DECENTRALIZATION 24
4.4 BALANCING STANDARDIZATION AND MUTUAL ADJUSTMENT 25
4.5 MECHANISTIC AND ORGANIC ORGANIZATIONAL STRUCTURES 25
5. DESIGNING ORGANIZATIONAL STRUCTURE: AUTHORITY AND CONTROL 28
5.1 AUTHORITY: HOW AND WHY VERTICAL DIFFERENTIATION OCCURS 28
5.2 CONTROL: FACTORS AFFECTING THE SHAPE OF THE HIERARCHY 30
5.3 THE PRINCIPLES OF BUREAUCRACY 31
5.4 THE INFLUENCE OF THE INFORMAL ORGANIZATION 32
5.5 IT, EMPOWERMENT, AND SELF-MANAGED TEAMS 33
6. DESIGNING ORGANIZATIONAL STRUCTURE: SPECIALIZATION AND COORDINATION 34
6.1 FUNCTIONAL STRUCTURE 34
6.2 FROM FUNCTIONAL STRUCTURE TO DIVISIONAL STRUCTURE 35
6.3 DIVISIONAL STRUCTURE I: THREE KINDS OF PRODUCT STRUCTURE 36
6.4 DIVISIONAL STRUCTURE II: GEOGRAPHIC STRUCTURE 39
6.5 DIVISIONAL STRUCTURE III: MARKET STRUCTURE 40
6.6 MATRIX STRUCTURE 40
6.7 NETWORK STRUCTURE AND THE BOUNDARYLESS ORGANIZATION 41
1
,7. CREATING AND MANAGING ORGANIZATIONAL CULTURE 43
7.1 WHAT IS ORGANIZATIONAL CULTURE? 43
7.2 HOW IS AN ORGANIZATION’S CULTURE TRANSMITTED TO ITS MEMBERS? 44
7.3 WHERE DOES ORGANIZATIONAL CULTURE COME FROM? 45
7.4 CAN ORGANIZATIONAL CULTURE BE MANAGED? 48
7.5 SOCIAL RESPONSIBILITY 48
8. ORGANIZATIONAL DESIGN AND STRATEGY IN AND CHANGING GLOBAL ENVIRONMENT 50
8.1 STRATEGY AND THE ENVIRONMENT 50
8.2 FUNCTIONAL-LEVEL STRATEGY 52
8.3 BUSINESS-LEVEL STRATEGY 54
8.4 CORPORATE-LEVEL STRATEGY 55
8.5 IMPLEMENTING STRATEGY ACROSS COUNTRIES 57
9. ORGANIZATIONAL DESIGN, COMPETENCES, AND TECHNOLOGY 59
9.1 WHAT IS TECHNOLOGY? 59
9.2 TECHNOLOGY AND ORGANIZATIONAL EFFECTIVENESS 59
9.3 TECHNICAL COMPLEXITY: THE THEORY OF JOAN WOODWARD 60
9.4 ROUTINE TASKS AND COMPLEX TASKS: THE THEORY OF CHARLES PERROW 61
9.5 TASK INTERDEPENDENCE: THE THEORY OF JAMES D. THOMPSON 62
9.6 FROM MASS PRODUCTION TO ADVANCED MANUFACTURING TECHNOLOGY 63
9.7 ADVANCED MANUFACTURING TECHNOLOGY: INNOVATIONS IN MATERIALS TECHNOLOGY 64
10. TYPES AND FORMS OF ORGANIZATIONAL CHANGE 65
10.1 WHAT IS ORGANIZATIONAL CHANGE 65
10.2 FORCES FOR AND RESISTANCE TO ORGANIZATIONAL CHANGE 65
10.3 EVOLUTIONARY AND REVOLUTIONARY CHANGE IN ORGANIZATIONS 67
10.4 MANAGING CHANGE: ACTION RESEARCH 68
10.5 ORGANIZATIONAL DEVELOPMENT 69
11. ORGANIZATIONAL TRANSFORMATIONS: BIRTH, GROWTH, DECLINE, AND DEATH 70
11.1 THE ORGANIZATIONAL LIFE CYCLE 70
11.2 ORGANIZATIONAL BIRTH 70
11.3 A POPULATION ECOLOGY MODEL OF ORGANIZATIONAL BIRTH 70
11.4 THE INSTITUTIONAL THEORY OF ORGANIZATIONAL GROWTH 72
11.5 GREINER’S MODEL OF ORGANIZATIONAL GROWTH 73
11.6 ORGANIZATIONAL DECLINE AND DEATH 74
12. DECISION MAKING, LEARNING, KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
76
12.1 ORGANIZATIONAL DECISION MAKING 76
12.2 MODELS OF ORGANIZATIONAL DECISION MAKING 76
12.3 KNOWLEDGE OF MANAGEMENT AND INFORMATION TECHNOLOGY 78
12.4 FACTORS AFFECTING ORGANIZATIONAL LEARNING 79
12.5 IMPROVING DECISION MAKING AND LEARNING 80
2
,13. INNOVATION, INTRAPRENEURSHIP, AND CREATIVITY 82
13.1 INNOVATION AND TECHNOLOGICAL CHANGE 82
13.2 INNOVATION, INTRAPRENEURSHIP, AND CREATIVITY 82
13.3 MANAGING THE INNOVATION PROCESS 83
13.4 INNOVATION AND INFORMATION TECHNOLOGY 85
13.5 INNOVATION AND INFORMATION SYNERGIES 85
14. MANAGING CONFLICT, POWER, AND POLITICS 86
14.1 WHAT IS ORGANIZATIONAL CONFLICT 86
14.2 PONDY’S MODEL OF ORGANIZATIONAL CONFLICT 86
14.3 MANAGING CONFLICT: CONFLICT RESOLUTION STRATEGIES 87
14.4 WHAT IS ORGANIZATIONAL POWER 88
14.5 SOURCES OF ORGANIZATIONAL POWER 88
14.6 USING POWER: ORGANIZATIONAL POLITICS 90
3
, 1. Organizations and Organizational Effectiveness
1.1 What Is an Organization?
People have a casual attitude toward organizations Because organizations are intangible
Organization A tool people use to coordinate their actions to obtain something they desire or
value – that is to achieve their goals.
Entrepreneurship The process by which people recognize opportunities to satisfy needs and then
gather and use resources to meet those needs.
How Does an Organization Create Value?
Value creation takes place at three stages, each stage is affected by the environment in which the
organization operates:
• Organization’s Inputs Included resources such as raw materials, machinery, information
and knowledge, human resources, and money and capital. 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 the input stage.
• Organization’s Conversion Process Organization transforms inputs and adds value to
them. It needs machinery, computer
or/and human skills and abilities.
• Organization’s Outputs Finished
goods and services that the
organization releases to its
environment, where they are
purchased and used by customers to
satisfy their needs. (The organization
uses the money earned from the sale
of its output to obtain new supplies of
inputs, and the cycle begins again.)
• Organization’s Environment The set
of forces and conditions that operate
beyond an organization’s boundaries
but affect its ability to acquire and use
resources to create value.
Value-creation model Can be used to
describe the activities of most kinds of
organizations.
4
