Lecture 2.1: Authority and control
What is an organization?
An organisation is a tool people use to coordinate their actions to obtain something they desire or
value. For example, an organization has many complex tasks, these are too many to manage on your own.
Therefore you will need more than one person to continue.
Entrepreneurship is the process by which people recognize opportunities to satisfy needs and then
gather and use resources to meet those needs. Entrepreneurship can be described as the process of
designing, launching and running a new business, which is often initially a small business.
Why do we organize? (rationales = beweegredenen)
First order rationales Second-order rationales
1) Divisions of labor 3) Specialization of labor
2) Coordination of tasks 4) Economies of scale and scope
5) Manage interaction with environment
6) Exert power and control
An organisation creates value in three stages: Input > Conversion > Output. With each stage is
affected by the environment of the organisation.
Environment
Organization
Input (Of conversion processes, Output
for example raw materials)
The organisational Environment is the set of forces and conditions that operate beyond an
organizations’ boundaries but is affected by its ability to acquire and use resources to create value.
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 design Organizational culture
The formal system of task and The process by which managers select The set of shared values and norms
authority relationships that control and manage aspects of structure and that controls organizational members’
how people coordinate their actions culture so an organization can control interactions with each other and with
and use resources to achieve the activities necessary to achieve its suppliers, customers, and others
organizational goals. goals outside the organization.
Controls coordination and motivation; Balances the need of the organization Is shaped by the people, ethics and
shapes behaviour so that it can survive the long run organizational structure
,There are four different ways to structure an organization and to help shape it:
Differentiation vs. Integration
Roles are horizontal and hierarchies vertical
Centralization vs. Decentralization
Functional and authoritative
Standardization vs. Mutual adjustment
Formalization and socialization
Organizational culture
There are two archetypes of organizations:
Mechanistic organizational Organic organizational structures
structures
Individual specialization with Joint specialization with ad hoc
clear tasks coordination
Simple integration, mainly Complex integration, with special
through hierarchy purpose team
Strong centralization of authority Strong decentralization as
and control authority and control are
delegated
Higher level of standardization Mutual adjustment
Mechanical organizational structure is for example an organization with an assembly line.
Organic organizational structure is for example an organization that is a consultancy.
Porters’ five forces.
Organizations need to account for forces that shape the market they want to compete in, following
Porter (1980). Therefore Porter created a new model called ‘Porters five forces’.
For example, an organization with strong power of suppliers has to set up a special supplier and materials
management system.
An organization with high threat of substitutes can focus on R&D and training.
An organization with a strong power of buyers can set up a special department for public relations, sales and
marketing
Organizations need to attain a specific ‘fit’ between such market conditions, relevant stakeholders,
and internal organizational structures.
,What is a theory?
A theory arises from a difference between a perceived reality and the actual reality. Therefore
everyone has theories. Here is an example of a theory:
Think about a kid that is trying to touch a pan on a stove. The kid’s perceived reality is that it is a pan, after
trying the kid found out that the pan is hot and that’s the new reality. Therefore the new common sense is that
a pan might be hot.
A theory is a system of statements targeted at describing, explaining, and predicting a real world
phenomenon (Bacharach 1989).
As for a scientific theory, these are built up from five main elements:
Explicit, formal, measurable, generalizable, falsifiable
, The Contingency theory for example says that the greater the uncertainty included by environment
characteristics, the more the organizational structure will contain organic elements (Jones, 2013).
What is an organizational design?
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.
A theory is a sensitizing device that helps make sense of reality.
A theory as a scaffold that helps explain why you expect something to happen.
Organization
Organization
Theories
Lecture 2.2: Design levers
How to increase control without increasing hierarchy?
Factors that shape the hierarchy:
Level of horizontal
differentiation
Level of vertical Level of
Informal organization
differentitation decentralization
Level of
standardization
