Organization theory
Topic: introduction
What is organization theory? A theory is the answer to why and how, about connections
among phenomena or variables, a story about why acts, events, structure and thoughts occur.
It explains, predicts and delights. A theory helps us to sharpen our view, focus on specific
aspects, see phenomenon from different angles.
Historical development of organization theory:
- Until 1950s: organizations mostly studied from disciplinary angles
- Early 1950s: several case studies of organizations, development of general statements
- Also early 1950s: interdisciplinary group of people who studied behavior of various
organizations.
Different disciplines/analytical perspectives:
- Political scientists: focus on power and decision making
- Economist: focus on allocation of scare resources, efficiency and productivity
- Sociologist: focus on status orderings, norms, behavior
- Psychologist: focus on perception, cognition, motivation of participants
What are organizations?
“Organization is the arrangement of personnel for facilitating the accomplishment of some
agreed purpose through the allocation or functions and responsibilities.” Or, ‘a system of
consciously coordinated activities or forces of two or more persons.’
What are organizations:
- Two or more people (social dimension)
- Who cooperate with each other
- A formally established culture
- Mobilizing / using resources
- In order to achieve a certain goal
Delegation is key to analyze organizations
Tasks need to be divided between individuals participating in the organization
Delegation is intentional, outcome often unintended
Delegation and principal-agent problem
= the people to whom a task has been delegated (agents) do not do what they are supposed to
do by their superiors (principals)
Because agents pursue their own interests
It is not possible for principals to define all aspects of the tasks delegated
Negative consequences of organizations
- Exploitation of individuals through ‘power elites’
- Financial power of multinationals sometimes bigger than nation state
- Depersonalization of the individual
- Male organizational structures in conflict with female workers
,Possible exam question
Give a clear definition of ‚an organization‘ in line with the literature on organizations and
discuss whether ‚a family‘ and ‚a state‘ qualify as organizations according to this definition.
Be clear in the position you take and the reasons you provide!
Societal shifts affecting contemporary organizations:
1. Social inequality
- Inequality serves to motivate entrepreneurial action
- Reducing inequality (too much) decreases economic efficiency
- Trickle-down economics reduces inequality quasi-naturally
- Inequality reduces trust (in others and in institutions)
- Inequality increases social unrest
- Inequality reduces political consensus within a society
- Inequality is self-enforcing
2. Grand challenges
Massive social and environmental issues that have potential or actual negative effects on
large numbers of people, communities, and the planet as a whole. (Voegtlin et al. 2019)
Example: ending poverty and hunger, reducing gender and racial inequalities
Profit organizations are increasingly held accountable
3. Hypercompetition
An environment characterized by intense and rapid competitive moves, in which competitors
most move quickly to build advantages and erode the advantages of their rivals. This speeds
up the dynamic strategic interactions among competitors. By implication, it becomes
increasingly more important for organizations to be able to adapt quickly, to be agile, while it
becomes less relevant to have a well thought-out plan.
4. Millenials and zoomers rising
- Millenials (born 1980-1995) and zoomers (born 1995-2010) are the two most relevant
generations of employees and consumers today.
- Characteristic needs and wants: tech-savy, work-life balance is important, longing for
safety and purpose, many job changes, assertive
- Short supply, because it is an ageing population
- Contemporary organizations need to be prepared to win the war for talent: purposeful
jobs, cater to highly diverse WLB-needs, provide opportunities for development, etc.
Learning objectives:
- What are the main challenges that managers of contemporary organizations face
today?
- How do so-called Grand Challenges affect the management of contemporary
organizations?
- Why is it so important for contemporary organizations to cater the needs of
Millennials & Zoomers?
How does digital technology change organizations?
1. Platform based business models
, Digital technologies can often help to reduce transaction costs, thereby allowing for
platform-based business models
To be successful with a platform-based business model, organizations need to become
more open and accessible, drive a more collaborative vision, and create an attractive
ecosystem
2. Open innovation
Digital technology has dramatically reduced the costs and complexity of developing
new (digital) products and services and, as a consequence, has increased the pressure
to remain innovative for all companies.
One solution is for organizations to (make use of digital technology to) open up their
innovation process to new groups, in the hope of accelerating their innovation
process.
3. The Gig Economy
Digital technology enables broad recourse to spot contracts between platform owners
and service providers.
The new, much looser relationship between platform owners and their workers, or
service providers, makes organizational boundaries more diffuse and, consequently,
requires new HR and management practices.
How does digital technology change management practices?
1. The rise of self-management
Digital technology makes it possible to keep everyone informed and allows people to
connect and collaborate in the virtual space.
By facilitating coordination, IT tools make it possible to implement self-managed
forms of organizing in larger companies.
2. BPM
BPM methods use digital tools and feeds on digital data on the work accomplished in
the organization in order to discover, model, analyze, measure, improve, optimize,
and automate business processes.
Successful BPM implementations have shown to lead to large increases in the
efficiency of core processes in the organization, e.g. by identifying and resolving
bottle necks.
Learning objectives:
- What are platform-based business models?
- Think about the ethical implications of the Gig Economy for employment relations.
What role does digital technology play in this?
- How does digital technology enable open innovation?
Economic globalization: two definitions
- “The increase of trade around the world, especially by large companies producing and
trading goods in many different countries.” (Cambridge Dictionary)
- “The process of economic integration of countries, through the increasing flow of
goods, services, capital and labor.” (Stiglitz)
Global production: special fragmentation and organizational fragmentation
, Consequences of globalization
- More equal distribution of wealth and knowledge
- Increase in life expectancy
- Decrease of infant mortality rate
- Increases in productivity
- Free flow of capital, goods, technology and knowledge
- But also: majority of wealth flows from poor countries to rich countries
Global production
Macro-institutional structures (transnational, national, regional) > network of actors >
producing and reproducing > uneven geographical distribution of power and wealth
Consequences of economic globalization for (western) organizations:
- Shifts in tasks and required skills
- Shifts in working relationships (e.g. global collaboration)
- Shifts in composition of workforce (e.g. cultural diversity)
- Shifts in means of communication (e.g. digital vs. face-to-face)
- Shifts in management (e.g. managing diversity, managing corporate social
responsibility globally)
Learning objectives:
- Describe ‚economic globalization‘. Use your own words, as if you would explain to
your grandmother what economic globalization means?
- Name some of the implications that globalization has for organizations, both in
Western capitalisms and in the so-called Global South?
- Why is it that different countries (and the organizations and people within these
countries) benefit differently from globalization?
- Do a little websearch of a multinational company of your choice: in which countries
does this company operate and how does it account for the complexities of operating
globally?
Topic: bureaucracy
How did large firms become possible?
- Securing sufficient investments to foster growth
- Securing the efficient management of core processes at scale
- Securing integration of effort between different parts of the firm
What is the corporation and why is it important?
A corporation is a firm with special legal attributes that make it capable of owning property,
entering into contracts, and standing in court independently of its owners.
Important legal attributes of the corporation:
1. Representation
2. Entity shielding
3. Limited liability
4. Capital lock-in
5. Tradable shares
Topic: introduction
What is organization theory? A theory is the answer to why and how, about connections
among phenomena or variables, a story about why acts, events, structure and thoughts occur.
It explains, predicts and delights. A theory helps us to sharpen our view, focus on specific
aspects, see phenomenon from different angles.
Historical development of organization theory:
- Until 1950s: organizations mostly studied from disciplinary angles
- Early 1950s: several case studies of organizations, development of general statements
- Also early 1950s: interdisciplinary group of people who studied behavior of various
organizations.
Different disciplines/analytical perspectives:
- Political scientists: focus on power and decision making
- Economist: focus on allocation of scare resources, efficiency and productivity
- Sociologist: focus on status orderings, norms, behavior
- Psychologist: focus on perception, cognition, motivation of participants
What are organizations?
“Organization is the arrangement of personnel for facilitating the accomplishment of some
agreed purpose through the allocation or functions and responsibilities.” Or, ‘a system of
consciously coordinated activities or forces of two or more persons.’
What are organizations:
- Two or more people (social dimension)
- Who cooperate with each other
- A formally established culture
- Mobilizing / using resources
- In order to achieve a certain goal
Delegation is key to analyze organizations
Tasks need to be divided between individuals participating in the organization
Delegation is intentional, outcome often unintended
Delegation and principal-agent problem
= the people to whom a task has been delegated (agents) do not do what they are supposed to
do by their superiors (principals)
Because agents pursue their own interests
It is not possible for principals to define all aspects of the tasks delegated
Negative consequences of organizations
- Exploitation of individuals through ‘power elites’
- Financial power of multinationals sometimes bigger than nation state
- Depersonalization of the individual
- Male organizational structures in conflict with female workers
,Possible exam question
Give a clear definition of ‚an organization‘ in line with the literature on organizations and
discuss whether ‚a family‘ and ‚a state‘ qualify as organizations according to this definition.
Be clear in the position you take and the reasons you provide!
Societal shifts affecting contemporary organizations:
1. Social inequality
- Inequality serves to motivate entrepreneurial action
- Reducing inequality (too much) decreases economic efficiency
- Trickle-down economics reduces inequality quasi-naturally
- Inequality reduces trust (in others and in institutions)
- Inequality increases social unrest
- Inequality reduces political consensus within a society
- Inequality is self-enforcing
2. Grand challenges
Massive social and environmental issues that have potential or actual negative effects on
large numbers of people, communities, and the planet as a whole. (Voegtlin et al. 2019)
Example: ending poverty and hunger, reducing gender and racial inequalities
Profit organizations are increasingly held accountable
3. Hypercompetition
An environment characterized by intense and rapid competitive moves, in which competitors
most move quickly to build advantages and erode the advantages of their rivals. This speeds
up the dynamic strategic interactions among competitors. By implication, it becomes
increasingly more important for organizations to be able to adapt quickly, to be agile, while it
becomes less relevant to have a well thought-out plan.
4. Millenials and zoomers rising
- Millenials (born 1980-1995) and zoomers (born 1995-2010) are the two most relevant
generations of employees and consumers today.
- Characteristic needs and wants: tech-savy, work-life balance is important, longing for
safety and purpose, many job changes, assertive
- Short supply, because it is an ageing population
- Contemporary organizations need to be prepared to win the war for talent: purposeful
jobs, cater to highly diverse WLB-needs, provide opportunities for development, etc.
Learning objectives:
- What are the main challenges that managers of contemporary organizations face
today?
- How do so-called Grand Challenges affect the management of contemporary
organizations?
- Why is it so important for contemporary organizations to cater the needs of
Millennials & Zoomers?
How does digital technology change organizations?
1. Platform based business models
, Digital technologies can often help to reduce transaction costs, thereby allowing for
platform-based business models
To be successful with a platform-based business model, organizations need to become
more open and accessible, drive a more collaborative vision, and create an attractive
ecosystem
2. Open innovation
Digital technology has dramatically reduced the costs and complexity of developing
new (digital) products and services and, as a consequence, has increased the pressure
to remain innovative for all companies.
One solution is for organizations to (make use of digital technology to) open up their
innovation process to new groups, in the hope of accelerating their innovation
process.
3. The Gig Economy
Digital technology enables broad recourse to spot contracts between platform owners
and service providers.
The new, much looser relationship between platform owners and their workers, or
service providers, makes organizational boundaries more diffuse and, consequently,
requires new HR and management practices.
How does digital technology change management practices?
1. The rise of self-management
Digital technology makes it possible to keep everyone informed and allows people to
connect and collaborate in the virtual space.
By facilitating coordination, IT tools make it possible to implement self-managed
forms of organizing in larger companies.
2. BPM
BPM methods use digital tools and feeds on digital data on the work accomplished in
the organization in order to discover, model, analyze, measure, improve, optimize,
and automate business processes.
Successful BPM implementations have shown to lead to large increases in the
efficiency of core processes in the organization, e.g. by identifying and resolving
bottle necks.
Learning objectives:
- What are platform-based business models?
- Think about the ethical implications of the Gig Economy for employment relations.
What role does digital technology play in this?
- How does digital technology enable open innovation?
Economic globalization: two definitions
- “The increase of trade around the world, especially by large companies producing and
trading goods in many different countries.” (Cambridge Dictionary)
- “The process of economic integration of countries, through the increasing flow of
goods, services, capital and labor.” (Stiglitz)
Global production: special fragmentation and organizational fragmentation
, Consequences of globalization
- More equal distribution of wealth and knowledge
- Increase in life expectancy
- Decrease of infant mortality rate
- Increases in productivity
- Free flow of capital, goods, technology and knowledge
- But also: majority of wealth flows from poor countries to rich countries
Global production
Macro-institutional structures (transnational, national, regional) > network of actors >
producing and reproducing > uneven geographical distribution of power and wealth
Consequences of economic globalization for (western) organizations:
- Shifts in tasks and required skills
- Shifts in working relationships (e.g. global collaboration)
- Shifts in composition of workforce (e.g. cultural diversity)
- Shifts in means of communication (e.g. digital vs. face-to-face)
- Shifts in management (e.g. managing diversity, managing corporate social
responsibility globally)
Learning objectives:
- Describe ‚economic globalization‘. Use your own words, as if you would explain to
your grandmother what economic globalization means?
- Name some of the implications that globalization has for organizations, both in
Western capitalisms and in the so-called Global South?
- Why is it that different countries (and the organizations and people within these
countries) benefit differently from globalization?
- Do a little websearch of a multinational company of your choice: in which countries
does this company operate and how does it account for the complexities of operating
globally?
Topic: bureaucracy
How did large firms become possible?
- Securing sufficient investments to foster growth
- Securing the efficient management of core processes at scale
- Securing integration of effort between different parts of the firm
What is the corporation and why is it important?
A corporation is a firm with special legal attributes that make it capable of owning property,
entering into contracts, and standing in court independently of its owners.
Important legal attributes of the corporation:
1. Representation
2. Entity shielding
3. Limited liability
4. Capital lock-in
5. Tradable shares
