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Lecture notes OTDLecture 1
Organization: task organization. Complexity is increasing 🡪 need more people
Why organize?
1. First-order rationales
a. Division of labor
b. Coordination of tasks
2. Second-order rationales
a. Specialization of labor
b. Economies of scale and scope
i. Scale: pays of if you do something in a larger scale
ii. Scope: do more similar tasks. It allows you to do the other tasks easier.
c. Manager interaction with environment
d. Exert power and control
4 ways to structure an organization
1. Differentiation vs integration
a. Roles (horizontal)
b. Hierarchies (vertical)
2. Centralization vs decentralization
a. Functional
b. Autoreactive
3. Standardization vs mutual adjustment
a. Formalization
b. Socialization
4. Organizational culture
Two types of organization
1. Mechanistic organization
a. Individual specialization
b. Simple integration
c. Hierarchy
d. Centralization
e. Standardization high
f. Example: manufacturing firm
2. Organic organization
a. Joint specialization
b. Complex integration
c. Decentralization
d. Mutual adjustment
e. Example: consultancy
,External requirement for determining structure is ‘what is your industry’
5 powers model of Porter (1980)
Influence the industry:
1. Power of buyers (influence with public relations, sales, marketing)
2. Threat of substitutes
3. Threat of new entrants (R&D training, need to be the ‘best product’)
4. Power of suppliers (supplier and materials management)
What is a theory?
Child with the hot pan
Abstraction 🡪 common sense 🡪 perceived reality 🡪 test 🡪 reality
Concept = abstract or idea generalized from instances.
Concept = hot object
Instances = pan
Theory = system of statements targeted at describing, explaining, and predicting a real-world
phenomenon.
Statements consist of constructs and propositions
This system presents a logical systematic, and coherent explanation of the real-world
phenomena within certain boundaries.
Bacharach & Whetten (1989) – theory formulation and generation
Boundary = assumption about values, time and space.
,Contingency theory = the greater the uncertainty induced by environmental characteristics,
the more the organization structure will contain organic elements. Why: theoretical causal
relationship
What: environmental uncertainty 🡪 how: mechanism 🡪 what: organic ness of structure
What is organizational design?
= crafting of an organization to fit the purpose
Elements: Stakeholders, environment, strategy, resources, customers, and products 🡪 theories
(make sense of reality. Explain why you expect something to happen) 🡪 structure
, Lecture 2.1: structure
Challenges in collective value generation
- Control
- Integrate
- Motivate
Motivate via:
1. Formal organizational (structure)
2. Informal organization (culture)
Weber’s 6 principles of bureaucracy
A bureaucratic structure should have…
1. Job specialization (simple routine tasks)
2. Formal rules and regulations
3. Career orientation (managers are professional officials)
4. Formal selection (members selected on their qualifications)
5. Impersonality (rules are applied infirmly, not according to personalities or personal)
6. Authority hierarchy
If you do the 6 principles, you will fit control, integrate and motivate.
- Everybody knows their role
- Low-cost reward/punish
- Position is independent (impersonality), so motivation works
Bureaucracy also generates costs
- Fail to control the development of hierarchy. The organization will grow large and
inefficient. Decision making goes slow.
- Members rely too much on rules to make decisions, which makes them unresponsive to
the needs of customers and other stakeholders.
Inherent conservatism of hierarchies: how longer the hierarchy, the slower goes the decision
making and ideas.
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