This is an extensive summary of chapter 1-8, 10-12 & 14 from the book Organization Theory, Design, and Change by Jones. It contains all the relevant information and images.
Summary organization theories
Chapter 1 Organizations and organizational effectiveness
What is an organization? O0op
People have a casual attitude toward organizations because they are intangible. An organization is a
tool people use to coordinate their actions to obtain something they desire or value, it is a response to
and a means of satisfying some human need. Entrepreneurship is 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. Each stage is affected by the
organizational environment = the set of forces and conditions that operate beyond an organization’s
boundaries but affect its ability to acquire and use resources to create value. The way the organization
uses human resources and technology to transform inputs into outputs determines how much value is
created at the conversion stage. The result of the conversion process is an output of finished goods
and services, the money obtained is used to start the cycle again.
In the conversion stage, service organizations create value by applying their skills to yield an output;
satisfied hunger etc.
,Why do organizations exist?
To increase specialization and the 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.
To use large scale economy
Economies of scale are cost savings that result when goods and services are produced in large volume
on automated production lines. Economies of scope are cost savings that result when an organization
is able to use underutilized resources more effectively because they can be shared across several
different products or tasks.
To manage the organizational environment
An organization’s environment is the source of valuable input resources and is the marketplace into
which is releases outputs. It is also the source of economic, social and political pressures that affect an
organization’s ability to obtain these resources.
To economize on transaction costs
Transaction costs are the costs associated with negotiating, monitoring and governing exchanges
between people. Stability reduces transaction costs and increases productivity.
To exert power and control
Employment, promotion and increased rewards are important and often scarce and therefore
organizations can use them to exert power over individuals.
Organizational theory, design, and change
Organizational theory is the study of how organizations function and how they affect and are
affected by the environment in which they operate.
,Organizational structure
Organizational structure evolves to increase the effectiveness of the organization’s control of the
activities necessary to achieve its goals. Organizational structure is the formal system of task and
authority relationships that control how people coordinate their actions and use resources to achieve
organizational goals. An appropriate structure is one that facilitates effective responses to problems of
coordination and motivation. Organizational structure can be managed through the process of
organizational design and change.
Organizational culture
Organizational culture is the set of shared values and norms that controls organizational member’s
interactions with each other and with people outside the organization. It shapes and controls behavior
within the organization. It can be managed through organizational design and change.
Organizational design and change
Organizational design is the process by which managers select and manage aspects of structure and
culture so an organization can control the activities necessary to achieve its goals. Organizational
structure and culture are the means the organization uses to achieve its goals; organizational design is
about how and why various means are chosen.
Organizational change is the process by which organizations move from their present state to some
desired future state to increase their effectiveness. The goal is to find new or improved ways of using
resources and capabilities to increase an organization’s ability to create value, and hence its
performance.
The importance of Organizational design and change
Organizational design and change have important implications for a company’s ability to deal with
contingencies, achieve a competitive advantage, manage diversity effectively, and increase its
efficiency and ability to innovate.
, Dealing with contingencies
A contingency is an event that might occur and must be planned for, such as a changing environment
pressure like rising gas prices. Pressure from competitors, consumers and government can increase, of
changing technology.
Gaining competitive advantage
Competitive advantage is the ability of one company to outperform another because its managers are
able to create more value from the resources at their disposal. It springs from core competences =
managers’ skills and abilities in value-creating activities. Core competences allow a company to
develop a strategy to outperform competitors and produce better products. Imitating good
organizational structure and culture is difficult because these are embedded in the way people in an
organization interact. Also, because they form early, companies that possess them can have a long-
term competitive advantage.
Managing diversity
An organization needs to design a structure and control system to make optimal use of the talents of a
diverse workforce and develop an organizational culture that encourages employees to work together.
The consequences of poor organizational design
The consequence of poor organizational design or lack of attention to is the decline of the
organization.
How do managers measure organizational effectiveness?
Control, innovation and efficiency are the three most important processes managers use to assess and
measure how effective they, and their organizations are at creating value.
- Control means having control over the external environment and having the ability to attract
resources and customers.
- Innovation means developing an organization’s skills and capabilities so the organization can
discover new products and processes. It also means designing and creating new organizational
structures and cultures that enhance a company’s ability to change, adapt, and improve the
way it functions.
- Efficiency means developing modern production facilities using new information
technologies that can produce and distribute a company’s products in a timely and cost-
effective manner.
An organization is effective if it can:
- Secure scarce and valued skills and resources from outside the organization (external resource
approach)
- Coordinate resources with employee skills creatively to innovate products and adapt to
changing customer needs (internal systems approach)
- Convert skills and resources efficiently into finished goods and services (technical approach)
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