04-09-2019 Lecture 1: Organizati on Theory & Design
Textbook: Jones, Gareth R. (2013) Organizational Theory, Design and Change, 7th global edition,
Prentice Hall.
Also: case study, articles.
We will be using the topics, details and chapters of the textbook. The lectures give you extra
information.
Enrolled in progress (course and credits) and in Nestor (information of the course).
Multiple choice exam: study, pay attention in lectures.
Group assignment: case study, tree different parts, group discussion. Look at the syllabus for
formatting, writing and submission. You can also look at the slides of the lectures.
Assignment 1: 27 th September 12:00 hours.
Assignment 2: 11 th October.
Group assignment. Deadline for group to sign up: Monday, September 9 at 23:59 hrs. Group of 5
members.
Why organize?
Look at the first-order rationales and the second-order rationales.
Organizations are between the input and the output. (differentiation vs. integration/mutual
adjustment vs standardization/centralization vs. decentralization). This means the organizational
cultural. How can you change with those aspects?
There are two archetypes of organizations:
1. Mechanistic organizational structures (Henry Ford). When/where. Everything is a clock. It looks like
a motor company.
2. Organic organizational structures (creative in the moment and specific).
A organization has a lot of different pressures. For example: suppliers, substitutes, new entrants,
power of the buyers and the industry. This makes the impact of the organization.
What is theory?
Theory tries to take observations. The theory tells you the reality. We believe that theory would
explain, until we found out a better theory. So, we would never now if a theory is true. You should be
testing it. It is a system of statements targeted at describing, explaining and predicting a real world
phenomenon. Use the theory where we did talk about. Why does some relations exist? How is this
happening?
A concept is an abstract idea. You can generalise it.
What is an organizational design?
Organizational Design makes a combination of organization and theory. It helps you to find out your
type of organization.
To do:
- Syllabus
- Group assignment
- Lecture materials week 02
,11-09-2019 Lecture 2: Organizati onal Theory & Design
“Why do we have organizations?”
- We want to create value
- Collective
- Economic scale, because you do something together
- Business ideas from small group to larger groups
Challenges in collective value generation: going from one to five to a larger group. Coordination of
tasks.
You have to do the next for creating value:
- Control: Make sure everyone sticks to the plan
- Integrate: resources
- Motivate: people do what you ask them to do
Formal organization structure (lecture 2)
Informal organization culture (lecture 3)
Bureaucracy - Max Weber. He started the personal organizational experience. You need to
understand what the principles are. There are 6 of it:
- Job specialization (simple, routine)
- Authority hierarchy (organized and clear)
- Formal rules and regulations (guide the actions of employees)
- Career orientation (manager is professional)
- Formal selection (members are selected on basis of technical qualifications)
- Impersonality (rules and controls, treated in the same way)
They tell you how you need to do it (interactions, role, costs, position and persons)
If you fail to control the development of hierarchy, it is inefficient and unresponsive to the needs of
customers. This is all about costs.
If you have a couple of levels in the hierarchies, this means that the percentage of ideas will be less.
Your contact with the customers is slower/less.
Why do companies still rely on it?
Managers will give control (direct observation), it is easy to integrate (continuous tasks/managing
relations), and motivation (mentoring/feedback). Design depends on the environment.
Design choices in vertical differentiation. There are a couple of differences.
- Width of the span of control
Important design principles: limits in managers span of control. You know a lot of what happens.
Better to coordinate, you know the tasks.
- Length of the chain of command
Different number of levels in “’boss” in the same organizations.
Tall organization: a lot numbers of employees (higher number of hierarchy levels)
Flat organization: a few numbers of employees (lower number of hierarchy levels)
, The more hierarchy levels, the more problems. Like communication-, motivation-, bureaucratic
problems. When you have more levels, you also have higher costs.
Smaller gives more control and coordination.
“How to determine the ideal number of hierarchical levels?”
You need to know your organization before you can decide if you are a tall of a small organization.
Example tall organization: Multinational/manufactory, different locations. You need to have different
levels because it is about a lot of money. You need to make good decisions.
Example flat organization: industry
Questions
1. C is incorrect
2. C is incorrect
3. B is correct
4. C is correct
5. B is correct
Factors that shape the hierarchy. The four factors are:
- Horizontal differentiation: different levels of functions, department, divisions and its own
hierarchy. Different areas gives problems in communication and people develop in subunits
(only thinking about your own subunits instead of role).
- Decentralization: Authority is delegated to the lower levels. The option of making decisions
higher up or making own decisions in the field. This is more flexible in responding to the
changes in the business environment. This is motivating for lower level staff who receive
more autonomy.
- Standardization: Rules act as substitute for direct supervision. Easily able to control and less
direct managerial supervision is needed. The control is exercised by making their own
actions.
- Informal organization: coordination is outside the formal channels/network. Think of
personal relationships and shared understandings may affect the formal hierarchy.
How to design a small organization? Exercise small organization:
- Levels of hierarchy: keep it relatively flat. Like 3 levels.
- What is the span of control in your organizational design and what is the widest span of
control? Managing must be motivate. They need to work pretty close together and make
sure that the coordination is possible, but small control is good. You need to have someone
to oversee.
- How many subunits, like 5.
- How much authority do you propose to decentralization to these subunits? Keep it relative,
you only need decentralization in a tall organization.
- How much standardization? (machinery, installations. You can see this as a standard
progress). It depends on the type of the organizations.
- What are important values for management in informal organization? Like communication.
Ideal type: ab abstraction of features.
Contingency theory: it depends!! No one best way to organize (poor fit or close fit). So it’s about
finding the right fit.
