SAMENVATTING ORGANISATION THEORIES
CHAPTER 1
Organizations are intangible, unable to touch. An organization is a tool people use to
coordinate their actions to obtain something they desire or value. An organization is a
response to and a means of satisfying some human need.
An organization can be created by an individual or a few people that believe they possess
the necessary skills and knowledge to produce
goods and services. Sometimes several people
form a group to respond to a perceived need by
creating an organization. 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 environment. Organizational environment
is 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 that the
organization releases to its environment, where they are purchased and used by customers
to satisfy their needs.
A value-creation model can be used to describe the activities of most kinds of organizations.
Service organizations interact directly with customers or clients, who are ‘inputs’ to their
operations.
Why do Organizations exist?
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.
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
different product of tasks.
Scope = efficiencies formed by variety, scale = volume
Managing complex environments is a task beyond the
abilities of most individuals, but an organization has the resources to develop specialists to
anticipate or attempt to influence the many pressures from the environment.
Transactions costs are the costs associated with negotiating, monitoring, and governing
exchanges between people. Organizations ability to control the exchanges between people
reduces the transactions costs associated with these exchanges.
In order to do the job the right way, people have to follow the rules set by the organization.
This make production less costly and more efficient but put a burden on individuals who must
conform to organizational requirements.
Because employment, promotion and increased rewards are important and often scarce,
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 is the formal system of task and authority relationships that control
how people coordinate their actions and use resources to achieve organizational goals. The
principal purpose is therefore to control the way people coordinate and control the means
used to motivate people.
For any organization, an appropriate structure is one that facilitates effective responses to
problems of coordination and motivation.
Organizational culture is the set of shared values and norms that controls organizational
members interactions with each other and with suppliers, customers, and other people
outside the organization. It influences how people respond to a situation and how they
interpret the environment surrounding the organization. Like organization structure,
organizational culture evolves and can be management through organizational design and
change.
Organizational design is the process by which managers select and manage aspects of
structure and culture so that 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 redesign their structures and
cultures to move from their present state to some desired future state to increase their
effectiveness. Once again, organizational structure and culture are principal means or
fulcrum that managers use to change the organization so it can achieve its future desired
state.
Because of increased global competitive pressures and the increasing use of advances IT,
organizational design has become one of management’s top priorities.
Contingency is an event that might occur and must be planned for.
An organization can design its structure in many ways to increase control over its
environment; might change the way the organization relates to other organizations by
establishing new contracts or joint ventures.
Organizational design is important in a global context because to become a global
competitor, a company often needs to create a new structure and culture. Changing
technology is another contingency to which organizations must respond.
Increasingly, organizations are discovering that organizational design, change and redesign
are a source of sustained 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.
Strategy = the specific pattern of decisions and actions that managers take to use core
competences to achieve a competitive advantage and outperform competitors.
The way managers design and change organizational structure is an important determinant
of how much value the organization creates because this affects how it implements strategy.
An organization’s strategy is always changing in response to changes in the environment;
organizational design must be a continuously evolving managerial activity for a company to
stay ahead of the competition.
The quality of organizational decision making, for example, is a function of the diversity of the
viewpoints that get considered and of the kind of analysis that takes place. An organization
needs to design a structure and control system to make optimal use of the talents of a
diverse workforce and to develop an organizational culture that encourage employees to
work together.
The better that organizations function, the more value, in the form of more or better goods
and services, they create. The ability of companies to compete successfully in today’s
competitive environment is increasingly a function of how well they innovate and how quickly
they can introduce new technologies.
,The consequence of poor organizational design or lack of attention to organizational design
is the decline of the organization.
How do managers measure organizational effectiveness?
In this context, 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.
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
External resource approach is a
method managers use to evaluate
how effectively an organization
manages and controls its external
environment.
To measure the effectiveness of their
control over the environment,
managers use indicators such as
stock price, profitability, and return on investment, which compare the performance of their
organization with the performance of other organizations.
Top management’s ability to perceive and respond to changes in the environment or to
initiate change and be first to take advantage of a new opportunity is another indicator of an
organization’s ability to influence and control its environment. Managers know that the
organization’s aggressiveness, entrepreneurial nature, and reputation are all criteria by which
stakeholders judge how well a company’s management is controlling its environment.
Internal systems approach is a method that allows managers to evaluate how effectively
an organization functions and resources operate.
To be effective, an organization needs a structure and a culture that foster adaptability and
quick responses to changing conditions in the environment. It also needs to be flexible so it
can speed up decision making and create products and services rapidly.
Measures of an organization’s capacity of innovation include the length of time needed to
make a decision, the amount of time needed to get new products to market, and the amount
of time spent coordinating the activities of different departments.
Technical approach is a method managers use to evaluate how efficiently an organization
can convert some fixed amount of organizational resources into finished goods and services.
Technical effectiveness is measured in terms of productivity and efficiency (the ratio of
outputs to inputs).
Two types of goals used to evaluate organizational effectiveness are…
• Official goals (guiding principles that the organization formally states in its annual
report and in other public documents). Usually these goals lay out the mission →
goals that explain why the organization exists and what it should be doing. Official
goals include being a leading producer of a product, demonstrating an overriding
concern for public safety, and so forth.
, • Operative goals (specific long-term and short-term goals that guide managers and
employees as they perform the work of the organization). Table 1.1 (zie hierboven)
are operative goals.
