copyright 2004 prentice hall 1 organizational theory, design, and change text and cases fourth...

Copyright 2004 Prentice Hall 1

Organizational Theory, Design, and Change

Text and CasesFourth EditionGareth R. Jones


Learning Objectives

1. To understand why organizations exist and the purposes they serve

2. Describe the relationship between organizational theory and organizational design and change, and differentiate between organizational structure and culture


Learning Objectives

3. Understand how managers can utilize the principles of organizational theory to design and change their organizations to increase organizational effectiveness

4. Identify the three principal ways in which managers assess and measure organizational effectiveness

5. Appreciate the way in which several contingency factors influence the design of organizations


What is an Organization?

Organization: a tool used by people to coordinate their actions to obtain something they desire or value

Entrepreneurship: the process by which people recognize opportunities to satisfy needs, and then gather and use resources to meet those needs


How Does an Organization Create Value?

Value creation takes place at three stages: input, conversion and output.

Inputs – include human resources, information and knowledge, raw materials, money and capital

Conversion – the way the organization uses human resources and technology to transform inputs into outputs

Output – finished products and services


Figure 1 – 1: How Does an Organization Create Value?


Why Do Organizations Exist? To increase specialization and the

division of labor To use large-scale technology

Economies of scale: cost savings that result when goods and services are produced in large volume

Economies of scope: cost savings that result when an organization is able to use underutilized resources more effectively


Why Do Organizations Exist?

To manage the external environment

To economize on transaction costs Transaction costs: the costs

associated with negotiating, monitoring, and governing exchanges between people

To exert power and control


Figure 1-3: Why organizations exist


Organizational Theory, Design, and Change: Some Definitions

Organizational theory: the study of how organizations function and how they affect and are affected by the environment in which they operate

Organizational structure: the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals


Definitions Organizational culture: the set of

shared values and norms that controls organizational members’ interactions with each other and with suppliers, customers, and other people outside the organization

Organizational design: the process by which managers select and manage aspects of structure and culture so that an organization can control the activities necessary to achieve its goals


Organizational Change

Organizational change: the process by which organizations redesign their structures and cultures to move from their presents state to some desired future state to increase their effectiveness


Figure 1-4: Relationships Among Organizational Theory, Structure, Culture, Design and Change


Importance of Organizational Design and Change

To deal with contingencies Contingencies are events that might

occur and must be planned for. Gaining competitive advantage

Ability to outperform other companies because of the ability to create more value from resources

Managing diversity Promoting efficiency, speed, and

innovation


Consequences of Poor Design

Decline of the organization Talented employees leave to take

positions in growing organizations.

Resources become harder to acquire.


How Do Managers Measure Organizational Effectiveness?

The external resource approach: Control Method managers use to evaluate

how effectively an organization manages and controls its external environment.

Use of indicators such as stock price, profitability and return on investment


Measuring Organizational Effectiveness

The internal systems approach: Innovation Method that allows managers to

evaluate how effectively an organization functions and operates.

Organization needs to be flexible to rapidly create products and services.

Indicators such as amount of time to get new products to market or time spent on decision making can be used.


Measuring Organizational Effectiveness

The technical approach: Efficiency Method managers use to evaluate

how efficiently an organization can convert some fixed amount of organizational resources into finished goods and services.

Use of indicators such as increase in the number of units produced without additional labor


Table 1-1: Approaches to Measuring Effectiveness


Measuring Effectiveness: Organizational Goals

Official goals: guiding principles that the organization formally states in its annual report and in other public documents.

Mission: goals that explain why the organization exists and what it should be doing

Operative goals: specific long- and short-term goals that guide managers and employees as they perform the work of the organization


Figure 1-5: Plan of the Book


Part 2: Organizational Design


Part 3: Organizational Change

copyright 2004 prentice hall 1 organizational theory, design, and change text and cases fourth...

Documents

design of organizationswhat

human resources

underutilized resources

aspects of structure

cost savings

value creation

presents state

authority relationships