Organization Theory & Design – Daft et al
Part 1
Chapter 1 – What are Organizations?
Organization theory is relevant to all organizations: profit organization, NGO, charity and public
organization. Organizing involves continuous challenges as organizations aren’t static, must adapt. But
organizational design is only one factor that helps organization to succeed.
Organizations are diverse. Also mostly hierarchical, undemocratic. Political economy of organizations:
a theoretical framework that focuses on polity (constitution, system of authority, power and
influence) and economy (economic structures and processes) of organizations.
Current challenges:
Globalization
Markets, technologies, organizations more interconnected. Creates new advantages, but
increases competitive pressure.
Issues of ethics and social responsibility
Are becoming increasingly important. Organizations are expected to take on leading role. But
also ethical scandals; e.g. avoiding taxation, lack of privacy.
Responsiveness
Necessary to respond quickly to environmental, organizational and consumer changes as
world is changing fast. Knowledge (and employees) are more important than machines and
factories.
The digital workplace
Information technology
affects how organizations are designed and managed, also external environment.
Organizations are enmeshed in electronic networks (vs. physical space), trend towards
disintermediation (eliminating mediator). Sharing information makes less hierarchy possible,
more effectiveness. But more and better leadership needed for a more complex and
intertwined network.
Diversity
Must be fully recognized and embraced. Balancing work/family, different cultural styles
within company. Especially important when operating on global basis.
Organizations have shared characteristics, but are diverse in both their composition and conditions of
their operation.
Organizations are social entities that are goal-directed, designed as deliberately structured and
coordinated activity systems and are linked to the external environment. They’re made up of people
and their relationships, only exists when people interact with one another. Growing emphasis on
empowering employees by increasing learning and contributing opportunities to work together
towards ‘common’ goals.
Managers are trying to achieve ‘organizations purpose’ by structuring and coordinating organizational
resources. Boundaries between departments are becoming more flexible to respond faster.
Activities of managers in for-profit organizations are directed primarily at producing goods and
services for benefit of shareholders. No concern of shareholders within NGO.
,With NGO difficulty securing funding/raising capital or competing with for-profit organizations.
Financial resources typically from government, private foundation and donation. NGO’s are
responsive to demands inadequately met by markets. Services are most of times provided to non-
paying clients, difficulty with steady stream of funds and staff. NGO’s measure intangible goals.
Social enterprise strives to combine commercial activity generating revenue while pursuing social
goals.
Organizations have become important because they:
Bring together resources to achieve desired goals and outcomes
Produce goods and services
Facilitate innovation
Harness modern manufacturing, service and information technologies
Adapt to and influence a changing environment
Create value
Accommodate ongoing challenges of diversity, ethics and the motivation and coordination of
employees
The Company: A Short History of a Revolutionary Idea – John Micklethwait, Adrian Wooldridge (2003)
Company (corporative organization) is seen as ‘most important organization in the world’:
independent from government. Companies must remain accountable to shareholders, but also to all
stakeholders.
Organizations bring together resources to generate wealth from production and services purchased
by consumer, can’t be done by individuals. Companies are under pressure to develop innovative ways
of producing and distributing through e-business and computer-based manufacturing technologies.
Organizations form alliances and partnerships with each other and engage in lobbying governments,
trying to influence the environment to ensure their stock remains attractive.
Summary
The primary focus of analysis for organization theory is not the psychology of individual employees
but, rather, their activities as organizational members. That is why this book is less directly concerned
with topics such as supervision or the motivation of employees which are the mainstay of courses on
organizational behaviour. Greater attention is paid here to how behaviour in organizations, which
includes the supervision and motivation of employees, is shaped within the structure of social
relations in which it occurs. Accordingly, our focus is upon the characteristics and dynamics of this
structure – how they are influenced by the wider environment, and how key decision-makers attempt
to manage their environment by designing effective structures. Students of this structure have
conceived of its aspects and dimensions in terms of degrees of formalization, specialization, hierarchy
of authority, centralization, professionalism, personnel ratios, size, organizational technology,
environment, goals and strategy, and culture. All of them have been invoked to offer conceptual
handles for analyzing organizations and informing actions within them.
Many types of organizations exist. One important distinction is between for-profit businesses, in
which managers direct their activities towards earning money for the company, and nonprofit
organizations, in which managers direct their efforts towards generating some kind of social impact. It
is commonplace to conceive of managers as striving to design organizations to achieve what they
deem to be effective or efficient. But the meaning of what is ‘effective and efficient’, let alone the
,purpose of their pursuit, is often contested because different stakeholders have different priorities
that they want the organization to satisfy. In the end, the priorities that are pursued will reflect the
outcomes of negotiations between stakeholders, with the most privileged and well resourced of
these – owners and creditors in corporations – being able to exert the greatest influence upon how
organizational goals are defined and pursued. There is nothing natural or inevitable about this, but a
significant change – for example, in the direction of social enterprise, mutuality and sustainability –
would require a shift in the balance of power accompanying organized resistance to entrenched
forms of organization.
Chapter 2 – Perspectives on Organizations
Images of Organization – Gareth Morgan (1986)
Our experience is consciously and unconsciously framed by metaphors. Core idea: we act on the basis
of how we metaphorically conceive what organizations are. Multiple metaphors of organizations, e.g.
Organizations as Machines, Organizations as Brain, Organizations as Political. Makes it clear that our
knowledge is partial and perspectival, always a particular frame of reference.
Closed system perspective focuses only on organization, minimal consideration for environment.
Conceived as self-contained, assumption that organization could be made more effective through
internal design, i.e. refining existing structures.
Open system perspective focuses on boundary between organization and environment. Organizations
must adapt to changing environment. Reminds us of interdependence of subsystems and what’s
beyond boundaries of organizations.
Production subsystem produces product and service outputs. Boundary subsystem enables
exchanges with external environment. Maintenance subsystem maintains smooth operation and
upkeep of organization’s physical and human elements. Adaptive subsystem responsible for
organizational change and adaptation. Management is distinct subsystem, responsible for
coordinating and directing other subsystems.
Parts of every organization (may vary in size and importance):
Technical core
Includes diverse support staff who do basic work. Performs production subsystem and
produces output. Here primary transformation from input to output.
Technical support
Scans environment for problems, opportunities and technological developments to innovate
technical core.
Administrative support
Is responsible for smooth operation and upkeep of organization, including physical and
human elements.
Top management
Provides direction, strategy, goals and policy for entire organization/major divisions.
Middle management
Responsible for implementation and coordination at department level. Traditionally middle
managers mediate between top management and technical core.
In real life organizations, the parts aren’t distinguishable and may serve more than one subsystem.
Structural dimensions distinguishes key, internal characteristics, which provides basis for comparison.
, Formalization
Reliance upon written documentation in organization, e.g. procedures, job descriptions,
policy. Langer organizations tend to score higher.
Specialization
The degree to which organizational tasks are subdivided into separate jobs. The more
specialized, the narrower the tasks of an employee are.
Hierarchy of authority
Who reports to who and the span of control for each manager (number of employees
reporting). When spans of control are narrow, specialization is high and hierarchy tall.
Centralization
The hierarchical level that has authority to make a decision. If it’s kept at top level,
organization is centralized. When delegated, decentralized.
Professionalism
The level of formal education and training of employees. Is considered high when employees
require long periods of training.
Personnel ratios
The deployment of people to various functions and departments. Is measured by dividing
number of employees in a classification by total number of employees.
Contextual dimensions characterizes the organization and the broader organizational setting.
Size
Can be measured for whole organization or specific components. Usually measured by
number of employees.
Organizational technology
Refers to tools, techniques, actions used to transform inputs into outputs.
Environment
Includes all elements outside the boundary of the organization, e.g. industry, government,
supplier, financial community.
Goals and strategy
Define the purpose and competitive techniques that set it apart from others. Goals are
written down as statements and strategy is the plan of action to reach the goals.
Culture
Underlying set of key values, beliefs, understandings and norms shared by employees. Is
unwritten, but can be observed.
Contextual and structural dimensions interact with and influence each other.
Analysing perspectives on structural and contextual dimensions to achieve high performance and
effectiveness.
Efficiency: amount of resources used to achieve organizational goals (based on quantity).
Effectiveness: the degree to which an organization achieves its goals; broader than efficiency.
Complex to achieve, different people want different things.
Elements of successful design: clear objective accompanied by clear, focused goals and appropriate
strategies.
