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Organizational Theories
The current state of organization theory is the result of an evolutionary process. Theories have been introduced, evaluated and refined over time ; new insights tend to reflect the limitations of earlier theories.
Neoclassical organizational theorists (such as McGregor,Argyris ) their approach emphasizes the need to pay attention to basic human needs to succeed and express oneself.
Differentiation
Differentiation
The process by which an organization allocates people and resources to organizational tasks and establishes the task & authority relationships that allows organization to achieve its goal. Process of establishing division of labour.
Example
Differentiation at B.A.R. and Grille restaurant.
Organizational Role
The basic building block of differentiation. It is the set of task related behaviors required of a person by his or her position in an organization. Example of B.A.R. and Grille restaurant.
Contd..
Authority
Control
Sub units
Function: is a sub-unit composed of group of people, working together, who possess similar skills or use same kind of knowledge, tools or techniques to perform their jobs
Support functions Production function Maintenance Adaptive Managerial
Sub-units
Division: A sub unit that consists of a collection of functions or departments that share responsibility for producing a particular good or service.
What is differentiation?
The process by which an organization allocates people & resources to organizational tasks & establishes the tasks & authority relationships that allow the organization to achieve its goal.
What is integration?
The process of coordinating various tasks, functions and divisions so that they work together and not at cross-purpose.
7-integrating mechanism
1) 2) 3) 4) 5) 6) 7) Hierarchy of authority Direct contact Liaison role Task force Team Integrating role Integrating department
Hierarchy of authority
Simplest device Allocation of authority E.g. Becton Dickinson
Liaison team
Productio n
Marketin g
R&D
Marketin g
Engineerin g
Expensive in terms of the number of managers employed & the amount of managerial time spent on coordinating organizational activities. Unnecessary investment
Carefully guide the process of differentiation so that it develops the core competencies that give the organization a competitive advantage Carefully integrate the organization by choosing appropriate integration mechanism that allow subunits to cooperate & that build up the organization core competencies
Summary
Organizational setup whereby the authority to make important decision is retained by managers at the top of the hierarchy
What is Centralization?
An organizational setup whereby the authority to make important decision about organizational resources and to initiate new projects is delegated to managers at all levels in the hierarchy
What is Decentralization?
Centralization
Advantages Disadvantages
Top managers coordinate organizational activities effectively & keep the organization focused on its goal.
Top management become overloaded & need to take care of day-to-day activities & cannot focus on long term decision making Lower hierarchy-afraid to make news or express their ideas Hierarchy of authority exists , people are constantly looking to their superiors for help.
Decentralization
Advantages Disadvantages
Promotes flexible & responsiveness by allowing subordinate to make on the spot decisions
Standardization
Which is defined by sets of rules and norms, that are considered proper in a given situation
Mutual adjustment.
It is a process in which people use their judgment rather than standardized rules to address problems
Formalization: Use of written rules and procedures to standardize operations. Formalization and Mutual adjustment: High level of
formalization implies centralization of authority, and lower one implies mutual adjustment and dynamic decision making.
Rules: Formal and written statements Norms: standards and styles of behaviour
Socialization
Process by which organizational members learn the norms of organization and internalize these unwritten rules of conduct in them. Why is behavior rigid when rules change?
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Mechanistic structure
It is designed to induce people to behave in predictable, accountable ways. Decision-making authority centralized. Task associated with role and are coordinated through standardization. Each person knows his responsibility.
Organic Structure
It promotes flexibility, so people initiate change and can adapt quickly to changing conditions. Decision-making authority decentralized. Roles are loosely defined. High level of integration needed.
Co-ordination is achieved through mutual adjustment as people and functions workout role and responsibility. Informal norms and values. Status conferred by ability not by any formal position in hierarchy. Best suited to organization that face unstable, changing environment. Eg: Sony (Sonys Magic Touch)
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Standardization
Mutual Adjustment
Organizational Structure
It had Mechanistic structure having standardized operations and formalization.
The burger and fries served in London tasted & looked same as in New York.
High-Tech Electronics Firm Creating new industries, such as computers, space technologies, equipment, etc., There was an even more fluid organizational style Jobs allowed to shape themselves People hired for general expertise and brains and then allowed/encouraged to find their own place in the organization to make their contribution As situations changed, people would take on different activities but without changing jobs People continually inquiring into what they should be doing and then acting
Functional structure
A design that group people on the basis of their common expertise and experience or because they uses the same resources.
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Functional structure
CEO
R&D
manufacturing
Material management
Finance
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Functional structure
Advantages Specialization each department focuses on its own work Accountability someone is responsible for the section Clarity know your and others roles Learning- from one another
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Functional structure
Disadvantages Closed communication could lead to lack of focus. Departments can become resistant to change. Coordination . Customer problem.
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Control problems
CEO
Sales
marketing
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continue
CEO
Divisional structure
Divisional structure is one in which set of relatively autonomous units or divisions are governed by central corporate office, but each operation division has its own functional specialist who provides product and services different from those of other divisions
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Market structure
Divisions by type of customer
Geographic structure
Global or regional divisions
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Divisional Structures
Functions according to the specific demands of products, markets, or customers.
Divisional Structures
Divisional Structures
Divisional Structures I
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Divisional Structures II
Divisional Structure I
A structure in which functions are grouped together according to the specific demands of products, markets, or customers. The type of divisional structure selected is driven by the specific type of control problem experienced.
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I) Product structures
A divisional structure in which products are grouped into separate divisions, according to their similarities or differences.
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PDM
PDM
PDM
PDM
Divisions
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4-19
To manage complex and diverse value creation activities. Support functions are placed in selfcontained divisions. Typically used by an organization whose products are very different and that operates in several different industries. E.g. Cars and fast food industries.
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b) Multidivisional Structure
Multidivisional Structure.
CEO
Corporate Managers
Senior VP Marketing
Senior VP Finance
Divisional Managers
Division A
Division B
Division C
Division D
Functional Managers
Support functions
Support functions
Support functions
Support functions
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COMPARISON
MULTIDIVISIONAL STRUCTURE PRODUCT DIVISION STRUCTURE
Independence of each division self Divisions shares the services of a set contained. of centralized functions. New level of management a corporate head quarters staff adds more control. Structure is designed to allow a Company to operate in many different businesses.
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Structure can only be used to control the activities of a Company that is operating in one business or Industry.
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ADVANTAGES
Increased Organizational Effectiveness. Increased control. Profitable growth. Internal Labour Market.
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Managing the Corporate- Divisional relationship. Coordination problems between divisions. Transfer pricing. Bureaucratic costs. Communication Problems.
DISADVANTAGES
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CEO
Functions
PTM
PTM
Product Division
Product Division
Product Division
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Divisional Structure II
Geographic Structure: Used when an organization experiences control problems that are a function of geography. Such a structure organizes divisions according to the requirements of different locations.
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Geographic Structure
Regional Operations
Regional Operations
Regional Operations
Individual stores
Regional Operations
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Commercial Division
Consumer Division
Government Division
Corporate Division
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JAYASHREE C43
MATRIX STRUCTURE
Matrix Structure
The search for better and faster ways to develop products and meet customer needs led to the matrix structure.
A matrix structure groups people and resources in two ways simultaneously: -by function and -by product
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CEO
Matrix Structure
Vice President Engineering Vice President Sales and Marketing Vice President Finance Vice President Research and Development Vice President Purchasing
Product A Manager
Product B Manager
Product Team
Product C Manager
Product D Manager
Two-boss employee
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CEO
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Network Structure
A recent innovation in organizational architecture is the use of network structures. A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreements rather than through a formal hierarchy.
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Network Structure
Network structures often result from outsourcing.
Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).
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Boundaryless Organization
The boundaryless organization is composed of people who are linked by computers, faxes, computer-aided design systems, and video teleconferencing, and who may rarely or ever see one another face to face.
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CONCLUSION
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Bibliography
Organizational Theory, design, and Change Fourth Edition, Gareth R. Jones.
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