8-1 chapter eight organization size, life cycle, and control ©2001 south-western college publishing...

8-1

Chapter EightChapter Eight

Organization Size,Organization Size,

Life Cycle, and ControlLife Cycle, and Control

©2001South-Western College Publishing

Cincinnati, OhioDaft, Organizational Theory and Design, 7/e

©2001

South-Western College PublishingCincinnati, Ohio

Daft, Organizational Theory and Design, 7/e8-2

Differences Between Large and Differences Between Large and Small OrganizationsSmall Organizations

• LARGELARGE– Economies ofEconomies of

scalescale– Global reachGlobal reach– Vertical hierarchyVertical hierarchy– MechanisticMechanistic– ComplexComplex– Stable marketStable market– ““Organization men”Organization men”

• SMALLSMALL– ResponsiveResponsive– FlexibleFlexible– Regional reachRegional reach– Flat structureFlat structure– OrganicOrganic– SimpleSimple– Niche findingNiche finding– EntrepreneursEntrepreneurs

Source: Based on John A. Byrne,“Is Your Company Too Big?”Business Week, 27 March 1989, 84-94.

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Organizational Organizational Life CycleLife Cycle

ORGANIZATION STAGES OF DEVELOPMENT

1.Entrepreneurial

Stage

2.Collectivity

Stage

3.Formalization

Stage

4.Elaboration

Stage

Crisis:Need to dealwith too much

red tapeCrisis:Need for

delegationwith control

Crisis:Need for

leadership

Creativity

Provision of clear direction

Addition of internal systems

Development of teamwork

Crisis:Need for

revitalization

Decline

Continuedmaturity

Streamlining,small-company

thinking

SIZE

Large

Small

Sources: Adapted from Robert E. Quinn and Kim Cameron, “OrganizationalLife Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,“Evolution and Revolution as Organizations Grow,” Harvard BusinessReview 50 (July-August 1972): 37-46.

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Organization Characteristics During Organization Characteristics During Four Stages of Life CycleFour Stages of Life Cycle

1.Entrepreneurial

2.Collectivity

3. Formalization

4.Elaboration

Characteristic Nonbureaucratic Prebureaucratic Bureaucratic Very Bureaucratic

Structure

Informal, one-person show

Mostly informal, some procedures

Formal procedures, division of labor, specialties added

Teamwork within bureaucracy, small-company thinking

Products or services

Single product or service

Major product or service with variations

Line of products or services

Multiple product or services lines

Reward and control systems

Personal, paternalistic Personal, contribution to success

Impersonal, formalized systems

Extensive, tailored to product and department

Innovation

By owner-manager By employees and managers

By separate innovation group

By institutionalizedR&D

Goal

Survival Growth Internal stability, market expansion

Reputation, complete organization

Top Management Style

Individualistic, entrepreneurial

Charismatic, direction-giving

Delegation with control

Team approach, attack bureaucracy

Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard BusinessReview 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “OrganizationalLife Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.

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Weber’s Dimensions of Bureaucracy Weber’s Dimensions of Bureaucracy and Bases of Organizational and Bases of Organizational

AuthorityAuthority

• BUREAUCRACYBUREAUCRACY1.1. 1. Rules and 1. Rules and

proceduresprocedures2.2. Specialization and Specialization and

division of labordivision of labor3.3. Hierarchy of authorityHierarchy of authority4.4. Technically qualified Technically qualified

personnelpersonnel5.5. Separate position and Separate position and

incumbentincumbent6.6. Written Written

communications and communications and recordsrecords

• LEGITIMATE BASES LEGITIMATE BASES OF AUTHORITYOF AUTHORITY

1.1. Rational-legalRational-legal

2.2. TraditionalTraditional

3.3. CharismaticCharismatic

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Percentage of Personnel Allocated to Percentage of Personnel Allocated to Administrative and Support ActivitiesAdministrative and Support Activities

50

75

25

0

Organization Size

Small Large

Line employees

Top administrators

Clerical

Professional staff

Percentageof

Employees

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Three Organizational Three Organizational Control StrategiesControl Strategies

TYPETYPE

BureaucraticBureaucratic

MarketMarket

ClanClan

REQUIREMENTSREQUIREMENTS

Rules, standards, hierarchy, Rules, standards, hierarchy, legitimate authoritylegitimate authority

Prices, competition, exchange Prices, competition, exchange relationshiprelationship

Tradition, shared values and Tradition, shared values and beliefs, trustbeliefs, trust

Source: Based upon William G. Ouchi, “A Conceptual Frameworkfor the Design of Organizational Control Mechanisms,” ManagementScience 25 (1979): 833-48.

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Management Control Systems Used Management Control Systems Used as Part of Bureaucratic Controlas Part of Bureaucratic Control

SubsystemSubsystem

BudgetBudget

Statistical Statistical reportsreports

Reward Reward systemssystems

Operating Operating proceduresprocedures

Content and FrequencyContent and Frequency

Financial, resource expenditures, monthlyFinancial, resource expenditures, monthly

Non-financial outputs, weekly or monthly, Non-financial outputs, weekly or monthly, often computer-basedoften computer-based

Annual evaluation of managers based on Annual evaluation of managers based on department goals and performancedepartment goals and performance

Rules and regulations, policies that Rules and regulations, policies that prescribe correct behavior, continuousprescribe correct behavior, continuous

Source: Based on Richard L. Daft and Norman B. Macintosh, “The Nature and Use of Formal Control Systems for ManagementControl and Strategy Implementation,” Journal of Management10 (1984): 43-66.

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Major Perspectives of the Major Perspectives of the Balanced ScorecardBalanced Scorecard

MissionStrategy

Goals

Internal Business ProcessesDoes the chain of internal activities and processes add value for customers andshareholders?Examples of measures: order-ratefulfillment, cost-per-order

FinancialDo actions contribute to improving financial performance? Examples of measures: profits, return on investment

Learning and GrowthAre we learning and changing?

Examples of measures: continuous process improvement, employee retention, new product introductions

Customers

How well do we serve our customers?

Examples of measures: customer satisfaction, customer loyalty

Sources: Based on Robert S. Kaplan and David P. Norton, “UsingThe Balanced Scorecard as a Strategic Management System,”Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, No. 2 (August 1997), 21-27; andCathy Lazere, “All Together Now,” CFO, February 1998, 28-36.

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Evaluation of Control Evaluation of Control On the JobOn the Job

WorkbookActivity

1.1.

2.2.

3.3.

4.4.

Your jobresponsibilities

How yourboss controls

Positives ofthis control

Negatives ofthis control

How you wouldimprove control

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Evaluation of Control Evaluation of Control At the UniversityAt the University

WorkbookActivity

1.1.

2.2.

3.3.

4.4.

Item

How Prof. A(small class)controls

How thesecontrols influence you

What you thinkis a bettercontrol

How Prof. B(large class)controls

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