Organization Theory & Design
Dikgedrukt= Kopje of hoofdstuk
Onderstreept= Betekenis
Schuingedrukt= Belangrijk
*tussen sterretjes*= Komt uit het boek, niet uit het college
VB.= Voorbeeld
Lecture 9-9
Group assignment 24%
Multiple-choice exam 76%
Assignment:
- Check syllabus for writing rules/ format.
- Include cover page, names, numbers and bibliography.
- No longer than 600 words for each part individually.
- Deadline 1: 29th of sept 12 am
- Deadline 2: 13th of oct 12 am
- Deadline 3: 20th of oct 12 am
Exam:
2 hours
Organization Theory and Design= refers to the study of how organizations function and their
interrelationships with the external environment. It examines the process through which
managers select and manage aspects of structure and culture to increase organizational
effectiveness.
Why do we have organizations?
You will need more than one person to do certain tasks and you need specialists to complete
certain tasks. The two rationales (Jones, 2013):
First-order rationales Second-order rationales
1. Division of labor 3. Specialization of labor
2. Coordination of tasks 4. Economies of scale and scope
5. Manage interaction with environment
6. Exert power and control
Organizations and the process of organizing simply starts with input that the organization
converts them into output. There are four ways to design an organization to generate output:
- Differentiation vs. Integration
Roles (horizontal)
Hierarchies (vertical)
- Centralization vs. Decentralization
Functional
Authoritative
- Standardization vs. Mutual adjustment
Formalization
Socialization
- Organizational culture
Two archetypes of organizations:
Mechanistic organizational structures Organic organizational structures
Individual specialization with clear tasks Joint specialization with ad hoc coordina-
tion
Simple integration mainly through hierar- Complex integration with special purpose
chy teams
, Strong centralization of authority and con- Strong decentralization as authority and
trol control are delegated
High level of standardization (Standard Mutual adjustment
operating procedures, SOPs)
The role of the environment
Following Porter (1980), organizations need to account for forces that
shape the markets they want to compete in. Consequently, organizations
need to attain fit between such market conditions, relevant stakeholders
and internal organizational Industr structures.
y
Rivalry
Threat of new entrants or substitutes Bargaining
power of suppliers or buyers.
- R&D, training - Supplier and materials
management
(research and development)…………… - Public relations, sales and marketing
What are theories?
Theory= a system of statements targeted at describing, explaining and predicting a real world
phenomenon (Bacharach, 1989). Everyone needs theories to help explain anything in life.
Concept= something conceived in the mind. From concepts to theories, statements consist of
constructs and propositions. Collectively, this system presents a logical, systematic and
coherent explanation of the real-world phenomenon within certain boundaries.
Think about: How, Why, Where, What, When, Who.
Contingency theory= an organizational theory that claims that there is no best way to organize
a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is
contingent (dependent) upon the internal and external situation. Certain factors make some
structures more effective.
Organizational design
Theory can be used in two ways:
- A sensitizing device that helps to make sense of reality (Understand reality).
- A scaffold that helps explain why you expect something to happen (Predict reality).
Lecture 16-9
Challenges in collective value generation
- Division of labor= break the work in doable work packages.
- Coordination of tasks= divide the different packages under different people.
Together engaging in collective value generation consists of three things:
1. Control
2. Integrate
3. Motivate
This can be done by two objectives:
1. Formal organization (structure) - Module 2
Designing effective organizational structures:
- Authority
- Control
- Specialization
- Coordination
4. Informal organization (culture)
Organization theory history
Max Weber came up with it due to personal organizational experience. He came up with
principles of bureaucracy. It should consist of:
, - Authority hierarchy= Positions are organized in a clear chain of command hierarchy.
- Job specialization= Jobs are broken down into simple, routine and well defined tasks.
- Formal rules and regulations= Ensures uniformity and to guide actions of employees
(facilitate managers’ monitoring).
- Career orientation= Managers are professional officials rather than owners.
- Formal selection= Members are selected on the basis of technical qualifications.
- Impersonality= Rules and controls that are applied uniformly, not according to personalities
or personal preferences.
Result—> interactions are efficiently regulated, everyone knows his role, rewards and
punishments for behavior (promotions) and every position is independent from the person.
Failure —> no hierarchy will show inefficiency, a large and slow decision making.
Unresponsiveness to the needs of customers or stakeholders when too much focussed on
procedures.
Benefits of direct supervision with collective value generation (as mentioned above):
1. Control:
- Continually question and probe subordinates
- Direct observation and evaluation/ training
- Prevent free-riding
2. Integrate:
- Continuous task-assignment
- Managing relations between multiple subordinates
3. Motivate:
- Mentor and professional development
- Immediate feedback and performance based rewards
Differences within organizations:
Vertical differentiation
1. Width of the span of control:
Limits in managers’s span of control= Pick optimal number of subordinates to supervise by one
manager depending on: more complexity of tasks and more interrelatedness of tasks. For
example; The more complex it is the smaller the span of control.
2. Length of the chain of command:
Levels of hierarchy; The number of levels of hierarchy increases along when number
employees increases. Tall organization= In which the hierarchy has many levels. Flat
organization= In which the hierarchy has a few levels.
The principle of minimum chain of command states you should choose the minimal of a
hierarchy, as flat as possible.
Pros and cons hierarchy level Tall:
Pros Cons
Increased control Communication problems top—> bottom
(takes longer, manipulation)
Increased integration Motivation problems (all managers do not
have the same power)
Increased motivation Bureaucratic costs (managers are expensive)
Horizontal differentiation
Horizontal differentiation= Concerns how many subunits in an organization you have. Each
function, department or division has its own hierarchy. Also, minimum chain of command.
Cons:
- Communication problem in subunits.
- People develop subunit orientation.
Decentralization
Dikgedrukt= Kopje of hoofdstuk
Onderstreept= Betekenis
Schuingedrukt= Belangrijk
*tussen sterretjes*= Komt uit het boek, niet uit het college
VB.= Voorbeeld
Lecture 9-9
Group assignment 24%
Multiple-choice exam 76%
Assignment:
- Check syllabus for writing rules/ format.
- Include cover page, names, numbers and bibliography.
- No longer than 600 words for each part individually.
- Deadline 1: 29th of sept 12 am
- Deadline 2: 13th of oct 12 am
- Deadline 3: 20th of oct 12 am
Exam:
2 hours
Organization Theory and Design= refers to the study of how organizations function and their
interrelationships with the external environment. It examines the process through which
managers select and manage aspects of structure and culture to increase organizational
effectiveness.
Why do we have organizations?
You will need more than one person to do certain tasks and you need specialists to complete
certain tasks. The two rationales (Jones, 2013):
First-order rationales Second-order rationales
1. Division of labor 3. Specialization of labor
2. Coordination of tasks 4. Economies of scale and scope
5. Manage interaction with environment
6. Exert power and control
Organizations and the process of organizing simply starts with input that the organization
converts them into output. There are four ways to design an organization to generate output:
- Differentiation vs. Integration
Roles (horizontal)
Hierarchies (vertical)
- Centralization vs. Decentralization
Functional
Authoritative
- Standardization vs. Mutual adjustment
Formalization
Socialization
- Organizational culture
Two archetypes of organizations:
Mechanistic organizational structures Organic organizational structures
Individual specialization with clear tasks Joint specialization with ad hoc coordina-
tion
Simple integration mainly through hierar- Complex integration with special purpose
chy teams
, Strong centralization of authority and con- Strong decentralization as authority and
trol control are delegated
High level of standardization (Standard Mutual adjustment
operating procedures, SOPs)
The role of the environment
Following Porter (1980), organizations need to account for forces that
shape the markets they want to compete in. Consequently, organizations
need to attain fit between such market conditions, relevant stakeholders
and internal organizational Industr structures.
y
Rivalry
Threat of new entrants or substitutes Bargaining
power of suppliers or buyers.
- R&D, training - Supplier and materials
management
(research and development)…………… - Public relations, sales and marketing
What are theories?
Theory= a system of statements targeted at describing, explaining and predicting a real world
phenomenon (Bacharach, 1989). Everyone needs theories to help explain anything in life.
Concept= something conceived in the mind. From concepts to theories, statements consist of
constructs and propositions. Collectively, this system presents a logical, systematic and
coherent explanation of the real-world phenomenon within certain boundaries.
Think about: How, Why, Where, What, When, Who.
Contingency theory= an organizational theory that claims that there is no best way to organize
a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is
contingent (dependent) upon the internal and external situation. Certain factors make some
structures more effective.
Organizational design
Theory can be used in two ways:
- A sensitizing device that helps to make sense of reality (Understand reality).
- A scaffold that helps explain why you expect something to happen (Predict reality).
Lecture 16-9
Challenges in collective value generation
- Division of labor= break the work in doable work packages.
- Coordination of tasks= divide the different packages under different people.
Together engaging in collective value generation consists of three things:
1. Control
2. Integrate
3. Motivate
This can be done by two objectives:
1. Formal organization (structure) - Module 2
Designing effective organizational structures:
- Authority
- Control
- Specialization
- Coordination
4. Informal organization (culture)
Organization theory history
Max Weber came up with it due to personal organizational experience. He came up with
principles of bureaucracy. It should consist of:
, - Authority hierarchy= Positions are organized in a clear chain of command hierarchy.
- Job specialization= Jobs are broken down into simple, routine and well defined tasks.
- Formal rules and regulations= Ensures uniformity and to guide actions of employees
(facilitate managers’ monitoring).
- Career orientation= Managers are professional officials rather than owners.
- Formal selection= Members are selected on the basis of technical qualifications.
- Impersonality= Rules and controls that are applied uniformly, not according to personalities
or personal preferences.
Result—> interactions are efficiently regulated, everyone knows his role, rewards and
punishments for behavior (promotions) and every position is independent from the person.
Failure —> no hierarchy will show inefficiency, a large and slow decision making.
Unresponsiveness to the needs of customers or stakeholders when too much focussed on
procedures.
Benefits of direct supervision with collective value generation (as mentioned above):
1. Control:
- Continually question and probe subordinates
- Direct observation and evaluation/ training
- Prevent free-riding
2. Integrate:
- Continuous task-assignment
- Managing relations between multiple subordinates
3. Motivate:
- Mentor and professional development
- Immediate feedback and performance based rewards
Differences within organizations:
Vertical differentiation
1. Width of the span of control:
Limits in managers’s span of control= Pick optimal number of subordinates to supervise by one
manager depending on: more complexity of tasks and more interrelatedness of tasks. For
example; The more complex it is the smaller the span of control.
2. Length of the chain of command:
Levels of hierarchy; The number of levels of hierarchy increases along when number
employees increases. Tall organization= In which the hierarchy has many levels. Flat
organization= In which the hierarchy has a few levels.
The principle of minimum chain of command states you should choose the minimal of a
hierarchy, as flat as possible.
Pros and cons hierarchy level Tall:
Pros Cons
Increased control Communication problems top—> bottom
(takes longer, manipulation)
Increased integration Motivation problems (all managers do not
have the same power)
Increased motivation Bureaucratic costs (managers are expensive)
Horizontal differentiation
Horizontal differentiation= Concerns how many subunits in an organization you have. Each
function, department or division has its own hierarchy. Also, minimum chain of command.
Cons:
- Communication problem in subunits.
- People develop subunit orientation.
Decentralization
