OI Lecture 1 02-09
Organisations and Organisational E ectiveness (CH1)
Value creation takes place at three stages
1. Input e.g. raw material
2. Conversion e.g. machinery
3. Output e.g. nished good
The ve reasons for the existence of organizations
1. To increase specialization and the division of labor
2. To use large-scale technology
• Economies of scale: cost savings that result when goods and services are produced in
large volume on automated production lines
• Economies of scope: cost savings that result when an organization is able to use
underutilized resources more e ectively because they can be shared across di erent
products or tasks
3. To manage the organizational environment
• Organizational environment = the set of forces and conditions that operate beyond an
organization’s boundaries but a ect its ability to acquire and use resources to create value.
4. To economize on transaction costs
• Transaction costs: costs associated with negotiating, monitoring, and governing
exchanges between people, explains the boundaries of organizations
5. To exert power and control
• Making the production less costly and more e cient by exerting pressure on employees
-> more value can be created by working together and coordinating actions in an organized
setting
Organisational theory
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, Dealing with contingencies (events that might occur and must be planned for)
The design of an organisation determines how e ectively an organisation is able to respond to
various pressures. As pressures from competitors, consumers, and the government increase, the
environment is becoming increasingly complex and di cult to respond to, and more e ective
types of structure and culture are continually being developed and tried. Organisational Design
and Change is has become top priority in many rms nowadays because of the fast changes in IT.
The design constantly has to be updated.
Gaining competitive advantage
Competitive advantage springs from core competencies (managers’ skills and abilities in value-
creating activities), R&D, managing new technology or organisational design and change.
Managing diversity
Di erences between organisational members or changes in the characteristics of the workforce
could lead to implications for the value of an organisation’s culture & e ectiveness.
Three approaches for measuring organisational e ectiveness
1. External resource approach: manage and control valued skills and resources
• Indicators: stock price, pro tability, return on investment
2. Internal systems approach: organisation’s ability to be innovative and quick functioning
• Indicators: time needed to make a decision, time needed to get new products to market,
time spent coordinating the activities of di erent departments
3. Technical approach: e ciently convert skills and resources into goods and services
• Indicators: productivity and e ciency
- O cial goals: guiding principles that the organization formally states in its annual report and in
other public documents, laying out the mission of the organisation.
- Operative goals: speci c long-term and short-term goals that guide managers and employees
as they perform the work of the organization.
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, OI Lecture 2 09-09
Stakeholders, Managers and Ethics (CH2)
Goals of this lecture
- Understand top-management & the problems arising from separation of ownership and
management
- Understand the relation between stakeholder management and corporate power
- Basics of organizational ethics & why unethical behaviour occurs
The Top-Management Hierarchy
Board of Directors
- Monitors corporate managers’ activities and
rewards them
Corporate-level management: usually, a CEO
leads a company, under that: COO.
Board of Management is not Board of Directors
(short term: focus on getting the money back for
the shareholders).
The Top-management team (group of managers
who report to the CEO and COO and help the
CEO set the company’s strategy and its long-term
goals and objectives):
- Line-role: e.g. global business services
- Sta -role: e.g. CFO, development, HR, chief
communications o cer
- Corporate managers
Structural and strategic focus points are pretty clear when looking at the Top-Management team.
There is often a very complex structure in the Top-management of big companies, because there
are often many things involved.
Stakeholder Theory
- Agency theory: O ers a useful way of understanding the complex authority relationship
between top management and the board of directors. Arises when someone delegates
decision-making authority over resources to another.
- Agency Problem: Shareholders don’t have the info that the managers have, but have the long
term interest. The more complex the company, the more time it takes to see the consequences
ff ffi
ff
Organisations and Organisational E ectiveness (CH1)
Value creation takes place at three stages
1. Input e.g. raw material
2. Conversion e.g. machinery
3. Output e.g. nished good
The ve reasons for the existence of organizations
1. To increase specialization and the division of labor
2. To use large-scale technology
• Economies of scale: cost savings that result when goods and services are produced in
large volume on automated production lines
• Economies of scope: cost savings that result when an organization is able to use
underutilized resources more e ectively because they can be shared across di erent
products or tasks
3. To manage the organizational environment
• Organizational environment = the set of forces and conditions that operate beyond an
organization’s boundaries but a ect its ability to acquire and use resources to create value.
4. To economize on transaction costs
• Transaction costs: costs associated with negotiating, monitoring, and governing
exchanges between people, explains the boundaries of organizations
5. To exert power and control
• Making the production less costly and more e cient by exerting pressure on employees
-> more value can be created by working together and coordinating actions in an organized
setting
Organisational theory
fi fi ffff ffi ff ff
, Dealing with contingencies (events that might occur and must be planned for)
The design of an organisation determines how e ectively an organisation is able to respond to
various pressures. As pressures from competitors, consumers, and the government increase, the
environment is becoming increasingly complex and di cult to respond to, and more e ective
types of structure and culture are continually being developed and tried. Organisational Design
and Change is has become top priority in many rms nowadays because of the fast changes in IT.
The design constantly has to be updated.
Gaining competitive advantage
Competitive advantage springs from core competencies (managers’ skills and abilities in value-
creating activities), R&D, managing new technology or organisational design and change.
Managing diversity
Di erences between organisational members or changes in the characteristics of the workforce
could lead to implications for the value of an organisation’s culture & e ectiveness.
Three approaches for measuring organisational e ectiveness
1. External resource approach: manage and control valued skills and resources
• Indicators: stock price, pro tability, return on investment
2. Internal systems approach: organisation’s ability to be innovative and quick functioning
• Indicators: time needed to make a decision, time needed to get new products to market,
time spent coordinating the activities of di erent departments
3. Technical approach: e ciently convert skills and resources into goods and services
• Indicators: productivity and e ciency
- O cial goals: guiding principles that the organization formally states in its annual report and in
other public documents, laying out the mission of the organisation.
- Operative goals: speci c long-term and short-term goals that guide managers and employees
as they perform the work of the organization.
ffi
ff ffifi fi ffi ff fi ff ff ffi ff ff
, OI Lecture 2 09-09
Stakeholders, Managers and Ethics (CH2)
Goals of this lecture
- Understand top-management & the problems arising from separation of ownership and
management
- Understand the relation between stakeholder management and corporate power
- Basics of organizational ethics & why unethical behaviour occurs
The Top-Management Hierarchy
Board of Directors
- Monitors corporate managers’ activities and
rewards them
Corporate-level management: usually, a CEO
leads a company, under that: COO.
Board of Management is not Board of Directors
(short term: focus on getting the money back for
the shareholders).
The Top-management team (group of managers
who report to the CEO and COO and help the
CEO set the company’s strategy and its long-term
goals and objectives):
- Line-role: e.g. global business services
- Sta -role: e.g. CFO, development, HR, chief
communications o cer
- Corporate managers
Structural and strategic focus points are pretty clear when looking at the Top-Management team.
There is often a very complex structure in the Top-management of big companies, because there
are often many things involved.
Stakeholder Theory
- Agency theory: O ers a useful way of understanding the complex authority relationship
between top management and the board of directors. Arises when someone delegates
decision-making authority over resources to another.
- Agency Problem: Shareholders don’t have the info that the managers have, but have the long
term interest. The more complex the company, the more time it takes to see the consequences
ff ffi
ff
