Chapter Nine

Organizations: Structure,
Effectiveness, and
Cultures
 Chapter Objectives

Identify and describe four characteristics common

to all organizations.
Identify and explain the two basic dimensions of
organization charts.
Contrast the traditional and modern views of
organizations.
Describe a business organization in terms of the
open-systems model.
Explain the term learning organization.

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 Chapter Objectives (contd)

Explain the time dimension of organizational

effectiveness.
Explain the role of complacency in organizational
decline and discuss the ethics of downsizing.
Describe at least three characteristics of
organizational culture and explain the cultural
significance of stories.

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 What Is an Organization?

An Organization Is:
A cooperative and coordinated social system of two or
more people with a common purpose
An entity that derives its strength from the synergy of its
members coordinated efforts
A system designed to survive its members

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 What Is an Organization? (contd)

Common Characteristics of Organizations

Coordination of effort: Multiplying individual
contributions to achieve results greater than those
possible by individuals working alone
Common goal or purpose: Having a focus to strive for
something of mutual interest
Division of labor: Dividing tasks into specialized jobs
that use human resources efficiently
Hierarchy of authority: Using a chain of command to
control and direct the actions of others

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 Classifying Organizations

Business Organizations
Purpose: To make a profit in a socially acceptable
manner
Nonprofit Service Organizations
Purpose: To provide a specific public service to some
segment of society without attempting to earn a profit
Mutual-Benefit Organizations
Purpose: To provide a vehicle for individuals to pursue
their own self-interests

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 Classifying Organizations (contd)

Commonweal Organizations
Purpose: To provide standardized public
services to all members of a society without
attempting to earn a profit

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 Organization Charts

Organization Chart (Table)

A visual display of an organizations positions and lines
of authority that is useful as a blueprint for deploying
human resources
Vertical and Horizontal Dimensions
Vertical hierarchy establishes the chain of command.
Horizontal specialization denotes the division of labor.
A Case Study: The Growth of an Organization
Generally, specialization is achieved at the expense of
coordination when designing organizations.

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 Figure 9.1: The Evolution of an
Organization Chart

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 Contrasting Theories of Organization

The Traditional View

The organizations primary goal is economic efficiency.
The organization is characterized by closed-system
thinking and no or little interaction with the external
environment.
Planning and strict control are used to eliminate
uncertainty in the organization.
The organizations surrounding environment is fairly
predictable.

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 Contrasting Theories of Organization
(contd)

The Modern View

The organizations principal goal is survival in an
uncertain environment.
The organization is an open system interacting with its
environment.
The organizations surrounding environment is
composed of variables that are difficult to predict or
control.

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 The Traditional View of
Organizing

The Early Management Writers

Henri Fayol
Frederick W. Taylor
Four traditional principles of organization
A well-defined hierarchy of authority
Unity of command
Authority equal to responsibility
Downward delegation of authority

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 The Traditional View of
Organizing (contd)

Max Webers Bureaucracy

The most rationally efficient form of organization
Division of labor
Hierarchy of authority
Framework of rules
Impersonal management
Problems with overly bureaucratic organizations
Slow
Insensitive
Inefficient

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 Challenges to the Traditional
View of Organizations

Bottom-Up Authority
Acceptance theory of authority (Chester
Barnard)
A leaders authority is determined by the willingness
of subordinates to comply with authoritative
communications only when the message:
Is understood
Is consistent with the organizations purpose
Serves the subordinates interests
Provides a situation where the subordinate is able to
comply

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 Organizations as Open Systems:
A Modern View

Characteristics of Open Systems

Interaction with the external environment through
permeable boundaries
Synergy in combining resources to achieve superior
performance
Dynamic equilibrium in maintaining internal balances
with help from the external environment
Equifinality in achieving similar ends through different
means

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 Figure 9.2: Open-System Model of a
Business

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 Organizations as Open Systems:
A Modern View (contd)

Developing an Open-System Model

Interacting organizational subsystems:
Technical (production function) subsystems define the
organizations transformation process.
Boundary-spanning subsystems provide the organizations
interface with the external environment.
Managerial subsystems bridge (control and direct) the technical
and boundary-spanning subsystems.

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 Extending the Open-System Model:
The Learning Organization

Learning Organization
An organization that is skilled at creating, acquiring,
and transferring knowledge, and at modifying its
behavior to reflect new knowledge and insights
Stages of Organizational Learning
Cognition (learning new concepts)
Behavior (developing new skills and abilities)
Performance (actually getting something done)

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 Extending the Open-System Model: The
Learning Organization (contd)

Five Critical Learning Skills

1. Solving problems
2. Experimenting
3. Learning from organizational experience/history
4. Learning from others
5. Transferring and implementing

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 Figure 9.3: Garvins Model of the
Learning Organization

Source: Adapted from discussion in David A. Garvin, Building a Learning Organization, Harvard
Business Review, 71 (July-August 1993): 78-91.

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 Organizational Effectiveness

Effectiveness
A measure of whether or not organizational objectives
are accomplished
Efficiency
A measure of the relationship between inputs and
outputs for the organization
No Silver Bullet
No single approach to the evaluation of effectiveness
is appropriate in all circumstances or for all
organizational types.

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 Organizational Effectiveness (contd)

The Time Dimension of Organizational

Effectiveness Involves:
Meeting organizational objectives and prevailing
societal expectations in the near future
Adapting to environmental demands and developing as
a learning organization in the intermediate future
Surviving as an effective organization into the distant
future

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 Figure 9.4: The Time Dimension of
Organizational Effectiveness

Source: Adapted from James L. Gibson, John M. Ivancevich, and James H. Donnelly, Jr., ORGANIZATIONS:
BEHAVIOR, STRUCTURE, PROCESSES, 5th ed. (Homewood, IL: Richard D. Irwin, Inc.), p. 37. l991.

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 Organizational Decline

The weakening of an organization by resource or

demand restrictions and/or mismanagement
Sources of decline
Mismanagement (complacency)
Unsteady economic growth
Resource shortages
Global competition
End of the cold war
Reactions to decline
Downsizing, demassing, reengineering

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 Figure 9.5: Complacency Can Lead
to Organizational Decline

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 Characteristics of Organizational Decline

Decline Dilemmas
Exit of leaders from the organization
Control that suppresses participation and morale
Preference for short-term thinking and risk avoidance
Intense conflict, preventing teamwork
Strong resistance to change
Counteracting Organizational Decline
Kaizen: The philosophy of continuous improvement

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 Downsizing

An Ethical Perspective
Downsizing: The planned elimination of positions or
jobs
Commodity versus human resources viewpoints of the worth of
employees
Does Downsizing Work?
Not nearly as well as expected
Only 30-45% of downsized companies report increased
productivity and/or profits.

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 Downsizing (contd)

Ways of Making Layoffs a Last Resort

Redeployment
Downgrading
Work sharing
Job banks
Employee sharing
Voluntary early retirement
Early warning of facility closings
Outplacement
Helping layoff survivors

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 Organizational Cultures

Organizational Culture
The collection of shared beliefs, values, rituals, stories,
myths, and specialized language that creates a
common identity and sense of community
The social glue that binds an organizations members
together

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 Characteristics of Organizational
Cultures
Collective: Organizations are social entities.
Emotionally charged: The organizations culture
serves as a security blanket to its members.
Historically based: Trust and loyalty result from
long-term organizational associations.
Inherently symbolic: Actions often speak louder
than words.
Dynamic: Culture promotes stability and control.
Inherently fuzzy: Ambiguity, contradictions, and
multiple meanings are part of culture.

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 Forms and Consequences of
Organizational Cultures
Organizational values are shared beliefs about
what the organization stands for.
The degree of sharing and the degree of intensity
determine whether an organizations culture is
strong or weak.

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 Figure 9.6: Forms and Consequences of
Organizational Culture

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 The Organizational Socialization
Process

Organizational socialization: The process of

transforming outsiders into accepted insiders
Orientations
Orientation programs familiarize new employees with
the organizations history, culture, competitive realities,
and compensation and benefits.
Storytelling
Recitations of heroic or inspiring deeds provide social
road maps for new employees.

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 Strengthening Organizational Cultures

Symptoms of a weak organizational culture

Inward focus
Morale problems
Fragmentation/inconsistency
Ingrown subcultures
Warfare among subcultures
Subculture elitism

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 Terms to Understand

Organization Learning organization

Authority Organizational
Commonweal organization effectiveness
Organization chart Organizational decline
Bureaucracy Downsizing
Acceptance theory of Outplacement
authority Organizational culture
Dynamic equilibrium Organizational values
Equifinality Organizational
socialization

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