ch01 - organisation theory design and change gareth jones

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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1-1 1-1 Organizational Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 1 Organizations and Organizational Effectiveness

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Page 1: Ch01 - Organisation theory design and change gareth jones

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall1-11-1

Organizational Theory, Design, and Change

Sixth EditionGareth R. Jones

Chapter 1

Organizations and Organizational Effectiveness

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1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 22

What is an Organization? Organization: a tool used by people to

coordinate their actions to obtain something they desire or value

Organizations provide goods and services Organizations employ people Organizations bring together people and

resources to produce products and services

Basically, organizations exist to create value

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How Does an Organization Create Value?

Value creation takes place at three stages: input, conversion, and output

Each stage is affected by the environment in which the organization operates

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

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Figure 1.1: How an Organization Creates Value

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Why Do Organizations Exist?People working together to produce goods

and services create more value than people working alone

5 major reasons why organizations exist: To increase specialization and the division of

labor Division of labor allows specialization Specialization allows individuals to become experts at

their job To use large-scale technology

Economies of scale: cost savings that result when goods and services are produced in large volume

Economies of scope: 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

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Why Do Organizations Exist? (cont.)

To manage the external environment External environment consists of the political,

social, economic, and technological factors that affect organizations

Organizations regularly exchange products and services for needed resources

Organizations need to manage their external environment

To exert power and control Organizations structure their members to efficiently

produce products and services To economize on transaction costs

Transaction costs: the costs associated with negotiating, monitoring, and governing exchanges between people who must cooperate

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Figure 1.3: Why Organizations Exist

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Organizational Theory, Design, and Change: Some Definitions

Organizational theory: the study of how organizations function and how they affect and are affected by the environment in which they operate

Organizational structure: the formal system of task and authority relationships that control how people to coordinate their actions and use resources to achieve organizational goals

Organizational culture: is the set of key values, beliefs, and attitudes shared by organizational members and helps shape the behavior within the organization

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Some Definitions (cont.) Organizational design: 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 change: the process by which organizations move from their present state to some desired future state to increase their effectiveness

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1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 101010

Figure 1.4: The Relationship Among Organizational Theory, Structure, Culture, Design, and Change

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1-Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 111111

Importance of Organizational Design and ChangeEffective design is required for

high organizational performance

4 Major Reasons why Organizational Design and Change are Important

Dealing with contingencies Contingencies are events that might occur and

must be planned for – most come from environment Organizations must be designed to be able to

effectively respond to environmental changes Managing diversity

Differences in the race, gender, and national origin of organizational members have important implications for organizational culture and effectiveness

Learning how to effectively utilize a diverse workforce can result in better decision making and more effective workforce

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Importance of Organizational Design and Change (cont.)

Gaining competitive advantage The ability to outperform other companies because of

the capacity to create more value from resources Core competences: skills and abilities in value

creation embedded in the organization’s people or structures

Strategy: pattern of decisions and actions involving core competences that produces a competitive advantage to outperform competitors

Promoting efficiency, speed, and innovation

The better organizations function, the more value they create

The correct organizational design can lead to faster innovation and quickly get new products to market

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Consequences of Poor Organizational DesignDecline of the organizationLower performanceTalented employees leave to take

positions in other organizationsResources become harder to

acquireResulting crisis may result in

organizational failure

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Why is Organizational Effectiveness Important?What is the point is you are not

going to perform well?Maximizing value creation =

organizational effectivenessThere are multiple ways to create

value and perform well3 primary ways discussed in

chapter: Control: external resource approach Innovation: internal system approach Efficiency: technical approach

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Table 1.1: Approaches to Measuring Effectiveness

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Measuring Effectiveness: Organizational GoalsManagers also measure

effectiveness by creating and measuring performance goals

Official goals: guiding principles that the organization formally states in its annual report and in other public documents

Mission: a mission statement explains why the organization exists and what it should be doing

Operative goals: specific long- and short-term goals that guide managers and employees as they perform the work of the organization

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Summary

Organizations are a tool people use to achieve their goals

Organizational theory is the study of how organizations function and how they affect and are affected by their environment

Organizational effectiveness must be monitored by managers

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