Chapter

18 Creating Effective Organizations

Creating Effective Organizations

Organizations: Organizations: Definition and Definition and

PerspectivesPerspectives The Changing Shape of OrganizationsThe Changing Shape of Organizations Organizational Effectiveness (and the Organizational Effectiveness (and the

Threat of Decline)Threat of Decline) The Contingency Approach to The Contingency Approach to

Organization DesignOrganization Design Three Important Contingency Variables:Three Important Contingency Variables:

Technology, Size, and Strategic ChoiceTechnology, Size, and Strategic Choice

Characteristics Common to All Organizations

Hierarchy of authority

Division of labor

Common goal

Coordination of effort

18-2Figure 18-1

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Organization Charts

Exam ple of Hospita l's O rganization Chart

Director ofH um an

R esources

D irector ofAdm issions

D irector ofAccounting

D irector ofN utritionand FoodServices

Ex ecutiveAdm in istrative

D irector

D irector ofX-R ay andLaboratory

Services

D irector ofSurgery

D irector ofPharm acy

C h iefPhysician

Ex ecutiveM edicalD irector

President

C h ief Ex ecutiveO ffi cer

Board of D irectorsType title here

Strategic Planning Officer

Legal Counsel

Cost-Containment

Staff

Director of Patient and

Public Relations

Director of Outpatient Services

18-3Figure 18-2

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Closed Vs. Open Systems

Closed System a relatively self-sufficient entity

Open System organism that must constantly interact with its environment to survive

18-4

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The Organization as an Open System

Goals and Values Subsystem

Technical Subsystem

Psychological Subsystem

Structural Subsystem

Managerial Subsystem

Feedback

Inputs Material

Money

Human effort

Information

Outputs Products Services Human

satisfactionOrganiz-

ational

survival and

growth Social

benefit

18-5Figure 18-3

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Learning Organization

Learning Organization proactively creates, acquires, and transfers knowledge throughout the organization

18-6

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Profiles of the New-Style and Old-Style Organizations

Job requirements orientedCustomer oriented

HierarchicalLateral/networked

Command/control orientedInvolvement oriented

Individual orientedTeam oriented

FunctionalProduct/customer oriented

LargeSmall and large

LocalGlobal

Information is scarceInformation rich

StableDynamic, learning

OldNew

Job orientedSkill oriented

18-7Table 18-1

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Ways to Organizational Effectiveness

Goal Accomplishment

Resource Acquisition

Strategic Constituencies

Satisfaction

Internal Processes

18-11Figure 18-5

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Organizational Effectiveness Criterion

Goal Accomplishment the organization achieves its goals—most widely used effectiveness criterion

Resource Acquisition the organization acquires the resources it needs

Internal Processes the organization functions smoothly with a minimum of internal strain

Strategic Constituencies Satisfaction the demands and expectations of key interest groups are at least minimally satisfied

18-12Figure 18-5

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Identifying Strategic Constituencies

Financial community

Environmentalists

PressStockholders

OPEC Competitors U.S., Foreign

State and Local Government

Customers

Federal Government

Auto Dealers

Consumer activistsCongress

Executive Branch

Government regulators

Suppliers

Employees

Unions

18-13Figure 18-6

Major Auto Manufacturer

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Assessing Environmental Uncertainty

Unstable

Moderately stable

Highly stable4) How stable is the demand for the organization’s product or service?

Unreliable

Occasional, predictable shortages

Reliable3) How reliable are resources and supplies?

FrequentOccasionalInfrequent2) How frequent are technological breakthroughs in the industry?

IntenseModerateMinimal1) How strong are social, political, and economic pressures on the organization?

HighModerateLow

18-16Figure 18-7

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Differentiation and Integration are Opposing Structural Forces

th u isa d fjhk

ta th kha d fa f

ta ts ta t

T ype n am e he reT ype t i t le he re

a ta t

a ta s t

a ts t

T ype n am e he reT ype t i t le he re

T ype t i t le he re

Differentiation Fragments the

organization through specialization of labor

Integration Pulls the organization together

through the coordination of specialties

18-17Figure 18-8

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Characteristics of Mechanistic and Organic Organizations

4) Specification of techniques, obligations, and rights

3) Task flexibility

2) Linkage between individual’s contribution and organization’s purpose

1) Task definition and knowledge required

Organic Organizations

Mechanistic Organizations

Characteristic

Broad; generalNarrow; technical

Clear or directVague or indirect

Flexible; variedRigid; routine

GeneralSpecific

18-18Table 18-2

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Characteristics of Mechanistic and Organic Organizations

8) Emphasis on obedience and loyalty

7) Primary decision-making style

6) Primary communication pattern

5) Degree of hierarchal control

Organic Organizations

Mechanistic Organizations

Characteristic

LowHigh

LateralTop-down

Democratic; participative

Authoritarian

LowHigh

18-19Table 18-2 cont.

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The Effect of Technology on Structure

The more the technology requires interdependence between individuals and/or groups, the greater the need for coordination

“As technology moves from routine to nonroutine, subunits adopt less formalized and centralized structures”

18-20

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Organizational Size and Performance: Research Insights

Larger organizations tended to be more productive

There were “no positive relationships between organizational size and efficiency, suggesting the absence of net economy of scale effects”

There were zero to slightly negative relationships between subunit size and productivity and efficiency

According to a more recent study, turnover was not related to organizational size

18-21

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Relationship Between Strategic Choice and Organizational Structure

Organizational objectives

Environmental constraints

Strategic decisions made by dominant coalition

Organizational Strategies

Target markets Capital

sources/uses Human

resources Technology Total quality

management

Decision maker’s personal beliefs,

attitudes, values, and

ethics

Organizational structure

Organizational

effectiveness

Corrective action

18-22Figure 18-9

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