Samenvatting
Summary Lecture slides and notes for Organization Theory
- Instelling
- Tilburg University (UVT)
This document contains the lecture slides and very extensive notes taken during the lectures.
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Organization TheoryLecture 1: Introduction
Why Organization Theory?
Exercise – consultancy case: problem description by the CEO of a company
In the past five years several performance management and reward systems (Management
by Objectives/Quality Managements/Customer Relations Management) have been
implemented in my company. We aim for zero-defect and want to avoid product recall at all
costs, and I expected that these management systems would do the job.
The goals I listed were as follows. The purchase department must keep prices of raw
materials and spare parts at the bare minimum level. The lower the purchase prices the
higher their bonuses. The sales department gets their bonus if and only if they achieve higher
turnover. Production is rewarded with a bonus if they indeed reduced product recalls, below
the level of last year. Quality Management has to secure zero-defect and just-in-time
delivery, so customer complaints are lower than the year before.
I’m struck by the fact that people in different departments are so focused on achieving their
own goals while losing sight of what is good for the performance. Recently, we were
challenged by a clear sign of product deficiencies that urged us to a publicly announced
product recall. Product recall is bad for the company, and good consumer ratings are good
for the company.
Could you please help me understand what is going on?
Exercise
1. According to you, what problem(s) does this company face?
2. Reformulate your answer under (1) by adding the concept goal interdependence
Goal interdependence: the extent to which a goal’s achievement is hindered or
facilitated by other goals
3. Reformulate your answer under (2) by adding the concepts of negative and positive
goal interdependence
Positive goal interdependence: the achievement of goal A facilitates the
realization of goal B
Negative goal interdependence: the achievement of goal A hinders the
realization of goal B
4. Reformulate your answer under (3) by adding the following theory-based empirical
finding:
Negative goal interdependence induces rivalry between departments in
organizations, and consequently hampers collaboration.
5. What could the CEO do to change the negative impact of the bonus trap? creating
central goals for the departments, quality minimum for all departments, rearrange the
goals so they fit together better.
Tentative answers
1. The alignment of goals is not arranged properly. Goals are conflicting. Goals are not
SMART (= specific, measurable, attainable, realistic, time bound). All departments
only pursue their own goals
, 2. Goals interdependence: the achievement of goals by department is hindered b other
departments
3. There seems to be mostly negative goal interdependence
4. … which (according to evidence from research) hampers collaboration between the
departments
5. Lowering the number of negative interdependent goals and defining positive
interdependent goals may help the CEO to get out of the bonus trap.
Each time you get a better, more precise conceptualization, you have better
diagnostics of the situation, and you can explain and intervene.
Function and use of (organization) theories
- Partial truths
An elephant is like a wall, a spear, a snake, a tree, a fan, and a rope
The organization is like a sales department, a purchase department, quality
management, production, … ONLY
- To see and understand an elephant, an integrative view is needed
Only when you add two ears, a trunk, two tusks, four big legs, a big body, a bunch
of intestines, a hairy tail, etc., you have an actual elephant.
Only when you add up/combine the goal achievement/bonuses at the level of the
organization, we can observe the goal interdependencies and their organizational
effects.
We need an integrative view
Only when we add up…
- Humans
- Division of power
- Teams, departments, business units, projects
- Management
, - Manufacturing, purchasing
- Production
- An environment
- …
… we have a full organization, including its synergetic effects (1+1=3 two factors
combined have an effect that is bigger than the sum of their individual effects).
We also need a focused view
Only when we understand (in detail) …
- Humans
- Division of power
- Teams, departments, business units, projects
- Management
- Manufacturing, purchasing
- Production
- An environment
- …
… we can better understand the full organization, including its synergetic effects
Notes: parsimony/parsimonious: you cannot integrate everything into one theory.
Common wisdom and policy theories
- Each day, we work with ‘personal and policy theories’ theory is everywhere!
- Examples:
Opposites attract
In health, once a widespread belief among both patients and medical
professionals was that smoking cigarettes was not risky behaviour
If the government subsidizes the salary costs of R&D workers, firms’ innovation
will go up
The challenge with ‘theory’
- Most people contrast practice with theory and prefer examples over theories
- But: practice suffers from partial views that hinder complete observation, and thus
(better) explanations (see in-class exercise)
- Generalization – being able to claim the validity of a certain mechanism over a large
sample organizations – requires abstraction from the individual firm or practice, based
on impartial observation
- We need an integrated and focused view
- So, nothing as practical as a good theory
- How to study theory is challenging, but that is the aim of this course
Lecture 2: What is (Organization) Theory?
Objectives
- The student can define the core concepts of ‘organization’ and ‘theory’
, - The student knows the core elements of ‘theory’ according to Whetten (1989) – what
(concepts), how (relationships), why (argumentation), and who, where, when
(boundary conditions)
- The student understands how Whetten (1989) concepts can be applied to understand
and compare organization theories
- The student has insights into what theories is NOT (and why), following Sutton and
Staw (1995)
- The student is aware of the importance of organization theories, as well as five big
questions that can be answered with the organization theories included in the OT
course.
What is organization?
Definition (Daft 2010: 10):
“Organizations are social entities that are goal-directed, are designed as deliberately
structured and coordinated activity systems, and are linked to distinct external
environments.”
Types of organizations
- Corporations
- Charities
- Political organizations
- Non-for-profit organizations
- Non-governmental
organizations
- International organizations
- Schools
- Criminal organizations
- Secret societies
- Governments
- Voluntary associations
What is theory?
Definition (Johnson & Johnson, 2015: 20):
- “A theory consists of a set of interrelated concepts, definitions, and propositions that
explain or predict events or situations by specifying relations among variables.”
- “The word theorise comes from the Greek word theorein, which consists of a blend of
two words, thea which means to see or observe, and horan which means to see a
thing attentively or to contemplate it.
- A theory…
Typically focuses on a small part of reality
Abstracts of many other relevant aspects
Helps us to see detail this way
Helps us to understand that limited part of reality better
Is NOT the whole story and needs be seen in a larger theoretical context
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