(HER)TENTAMEN/ EXAM: Organizational Theory & Design (OTD) for Pre-MSc
Summary Organizational Theory, Design, and Change - Organizational Structure
Samenvatting Organizational Theory, Design, and Change - Organizational Structure (EBP670C05)
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Msc Human Resource Management
Organizational Theory, Design and Change (EBS003A05)
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Organizational Theory, Design and Change.
Hoofdstuk 1 Organizations and Organizational Effectiveness.
Organization = A tool people use to coordinate their actions to obtain something they desire
of value.
● People who value security create an organizations such as a bank or a police force.
● An organization is a response to and a means of satisfying soms human needs.
● New organizations are spawned when new technologies become available and new
needs are discovered. They die when the needs they satisfied are no longer
important. (For example: Video rentals)
Who creates the organizations?
- Sometimes an individual or a few people believe they possess the necessary skills
and knowledge and set up an organization to produce goods and services.
Entrepreneurship = The process by which people recognize opportunities to satisfy needs
and then gather and use resources to meet those needs.
Value Creation
1. Organization's Inputs
- Raw Materials
- Money and Capital
- Human resources
- Information and Knowledge
- Customers of service organizations
2. Organizations’s Conversion Process
- Machinery
- Computers
- Human skills and abilities
3. Organization’s Conversion Process
- Finished goods
- Services
- Dividends
- Salaries
- Value for stakeholders
,Organizational Envrionment = The set of forces and conditions that operate beyond an
organization’s boundaries (grens) but affect its ability to acquire and use resources to create
value.
The way the organizations uses human resources and technology to transform inputs into
outputs determines how much value is created at the conversion stage. The amount of value
the organization creates is a function of the quality of its skills, including its ability to learn
form and respond to the environment.
The result of the conversion process = output/finished goods/services, where they are
purchased.
● The money (earned from the sale) will be used for new supplies of inputs. (circle
begins again)
Why do organizations exist?
5 reasons:
1. To increase specialization and the division of labor (who will do which tasks)
For productive work the use of an organization allows the development of specialization and
a division of labor. The collective nature of organizations allows individuals to focus on a
narrow area of expertise, which allows them to become more skilled or specialized at what
they do.
2. To use Large-Scale Technology
Economics of scale = Cost that savings result when goods and services are produced in
large volume on automated production lines.
= Cost savings that result when an organization is able to use underutilized resources more
effectively because they can be shared across different products or tasks
● It can be achieved when it is possible to design an automated production line to
produce several different types of products simultaneously.
● For example: Toyota and Honda were the first carmakers to design assembly lines
capable of producing three models of a car instead of just onle. (Multimodel)
● So you have lower manufacturing costs and greater flexibility to change quickly form
making one model to another to meet customer needs.
3. To manage the Organizational Environment
An organization’s environment is the source of valuable input resources and is the
marketplace into which it releases outputs. It’s also the source of economic, social and
political pressures that affect an organization. An organizations has the resources to develop
specialists to anticipate or attempt to influence the many pressures from the environment.
So, an organization can get more value for the organizations, its members and customers.
4. To Economize on transaction costs
Transaction costs = The costs associated with negotiating, monitoring and governing
exchanging between people
- To control the exchanges between people reduces the transaction costs associated
with these exchanges.
, 5. To Exert Power and Control
When individuals work for themselves, they need to address only their own needs.
When they work for an organization, they must pay attention to the organization's
need as well as their own. Organizations can discipline or fire workers who fail to
conform and can reward good performance with promotion and increased rewards.
Employment, promotion and increased rewards are important, that’s why
organizations can use them to exert power over individuals.
Organizational Theory, Design and Change.
Organizational Theory = The study how organizations function and how they affect and are
affected by the environment in which they operate.
The relationship among Organizational Theory and Organizational Structure, Culture, and
Design and Change.
Organizational Theory:
1. Organizational Structure:
= The formal system of task and authority relationships that control how people coordinate
their actions and use resources to achieve organizational goals.
- Purpose: To control the way people coordinate their actions and to control the means
used to motivate people to achieve goals.
- Evolves as organization grows and differentiates.
- Can be managed and changed through the process of organizational design and
change.
- Controls coordination and motivations; shapes behavior of people and the
organization.
2. 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.
- Controls coordination and motivations; shapes behavior of people and the
organization.
- Is shaped by people, ethics, and organizational structure
- Can be managed and changed through the process of organizational design and
change.
3. Organizational Design and Change
= 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 structure and culture are the means the organization uses to achieve
it goals
- Organizational design is about how and why various means are chosen.
, - Balances the need of the organization to manage external (organization’s
environment) and internal pressures (bijv: choice of technology) so that it can survive
in the long run.
- Allows the organization to continually redesign and transform its structure and culture
to a changing global environment.
Organizational Change = The process by which organizations redesign their structures and
cultures to move from their present state to some desired future stat to increase their
effectiveness.
Competitive advantage = The ability of one company to outperform another because its
manager are able to create more value from the resources of their disposal.
- It springs from core competences = Managers’ skills and abilities in value-creating
activities. VB: Manufacturing, R&D, managing new technology
- Core competences allow a company to develop a strategy to outperform competitors
and produce better products, or produce the same products but a lower cost.
- Strategy = The specific pattern of decisions and actions that managers take to use
core competences to achieve a competitive advantage and outperform competitors.
● It is always changing in response to changes in the environment -
Continuously evolving managerial activity (continue change and redesign the
structure and culture to improve them) for a company to stay ahead of the
competition. There is never an ‘perfect’ design.
Managing Diversity:
- An organization needs to design a structure and control system to make optimal use
of the talents of a diverse workforce and to develop an organizational culture than
encourages employees to work together.
- An organization’s structure and culture determine how effectively managers are able
to coordinate and motivate workers.
- Organizational design involves constant search for new or better ways of
coordinating and motivating employees. Different structures and cultures cause
employees to behave in different ways.
Measure organizational Effectiveness
- Control = Having control over the external environment and having the ability to
attract resources and customers
- Innovation= developing an organization’s skills and capabilities so the organization
can discover new products and processes. Also creating new structures and cultures.
- Efficiency = developing modern production facilities using new information
technologies that can produce and distribute a company’s products in a timely and
cost-effective manner.
To evaluate the effectiveness, managers can take one of three approaches:
1. External resource approach
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