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Part – I : Organization and Its Environment # Organizations and Organizational Effectiveness: In simple terms, an organization is made of people with specific goals and objectives. It is also defined as the relations among components of a system. Organizational structure denotes these components and relations that bind people working in an organization. “An Organization is a system of consciously coordinated activities or efforts of two or more persons”:- Chester Barnard, Management Consultant. It is a consciously coordinated social entity, with a relatively identifiable boundary, that functions on relatively continuous basis to achieve a common goal. The key features of an organization can be described as follows:

1. It is a group of people who are organized to achieve a common purpose. It is an entity, a unit, or an establishment, which utilizes resources to achieve some common purpose.

2. It shows a structure of relationships among members of an enterprise. 3. It is a process that enables people working in an enterprise to relate to tasks and facilities, and helps them

achieve intended goals. # Organizational Effectiveness: Effectiveness is the extent to which an activity helps in achieving the long term goals of an organization. Since effectiveness is measured for specific activities, we can define activity-specific effectiveness as the outcome that supports the broader goals of an organization. Organizations perform at different levels of effectiveness. Their growth per year is an indicator of whether they are on a climb or decline. However, organizations in different sectors vary in the way effectiveness is measured and described. Both qualitative and quantitative tools are used to measure the overall effectiveness. Behavioral parameters, such as values, attitudes, skills etc. are measured using qualitative tools where as, Sales, profit, production etc. are measured by using quantitative tools. Hence, organizational effectiveness is the extent to which the organization, as a whole, achieves its goals while optimizing its resources. This depends on the management system, organization structure, degree of inter-personal skills, positive attitude, technical competencies, group activities etc. which together contribute to the achievement of organizational goals and objectives. There are basically three principal approaches in measuring and increasing organizational effectiveness. a) External Resource Approach: An organization using external resource approach uses technology to increase its ability to manage and control external stakeholders. Any new technological developments that allow an organization to improve its services to customers, such as the ability to customize products or to increase products quality and reliability, increase the organization’s effectiveness. b) Internal System Approach: An organization taking the internal system approach uses technology to increase the success of its attempts to innovate, to develop new products, services, and process, and to reduce the time needed to bring new products to market. c) Technical Approach: An organization taking the technical approach uses technology to improve efficiency and reduce costs while simultaneously enhancing the quality and reliability of its products. # Organizational Environment (Business Environment): Environment literally means the surroundings, external objects, influences or circumstances under which someone or something exists. Environment occupies a very significant place in the functioning of an organization. Every organization is affected by the change in environmental factors as they do exist in the same environment. Organizational environment consists of the forces and conditions outside the boundaries of a firm. These forces change overtime and thus present the firm with opportunities and threats that influence its ability to carry out its operations effectively to attain its objectives. However, these forces differ significantly from organization to organization, industry to industry and market to market.

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The components of organizational environment can be classified into two broad categories- Internal Environment and External Environment. The major forces in the organizational environment are shown in the figure below.

I. Internal Environment: The environmental forces that lie with in the organizational possession is called internal environment. These environmental forces are controllable to large extent. They pose strength and weakness for an organization. An organization’s internal environment has the following components.

a) Management/ Managers: The management system, and quality, competency, skill of managers largely shape the outcomes of an organization. Skillful and competent management is strength where as poor management is weakness for the organization.

b) Shareholders: Shareholders are the real owners of an organization who have a direct interest in the performance of the organization. The directors elected by them represent their interest in the board of the organization which ultimately influence the organization.

c) Structure: Structure is the architecture or framework for organizational roles, hierarchy, relations, authority and responsibility. It comprises individuals, groups, units, and their interrelationships. The type of structure and its frequent change also influence the organizational performance.

d) Employees and their unions: Employees are important assets of an organization. Participation and cooperation with employees is helpful to enhance productivity and attain the desired goals. Similarly, labour unions (representing the member employees) directly or indirectly work for the welfare of the labour, which has rich relation with organization decisions.

e) Corporate culture: Corporate culture represents the collective beliefs, values and attitude of the organizational employees. Both internal and external factors affect an organizational culture. Organizational culture has a powerful influence on the process of organizational change and decision-making.

II. External Environment: The external environment is more complex and difficult to predict. It is that portion of environment which lies outside the boundary of organization. The external environment can further be classified into two interrelated sub-categories: general (macro) environment, and task (micro) environment. External environment offers opportunities and threats caused by the external forces.

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a) General (macro) Environment: The general environment composed of a set of forces that are outside the organization’s operating system. It affects the organization and its task environment. It generally includes- political, economic, social, legal, and technological factors. These are the forces, which are beyond the control of the business firms. The general environment presents opportunities, threats and constraints for the organization. For a manager, opportunities and threats resulting from changes in the general environment are often more difficult to identify and respond to them in the task environment. i) Economic Environment: The economic environment for an organization involves the system of economic planning and control, fiscal, monitory and industrial policies, the prevailing conditions in the agriculture, industrial and service sectors and so on. Bad or poor economic conditions make the environment more complex and manager’s job more difficult and challenging. ii) Political and Legal Environment: The political environment refers to the government system, structure composition of bureaucracy, political stability, government-business relation. The policies the government undertakes regarding distribution of economic resources, liberalization, framework of rules and regulations, are highly responsible to determine investment friendly or poor business environment. Government action and decisions, and court decisions regarding encourage, guide and control business, and consumers, communities and workers actions are also important equally which shape the business organization’s environment. iii) Socio-cultural Environment: Socio-cultural environment comprises of social structural issues (class structure, desires, expectations, beliefs, customs etc.) and cultural issues (values, norms, behavior patterns etc.). These forces and factors largely affect the organizational activities directly or indirectly. So, the managers must keep on studying and respond to them. iv) Technological Environment: Drastic developments in the field of communication, information, and other technology have been taking place. In this global age, the outcomes of such changes are enormous and equally advantageous. The changes in this field pose both opportunities and threats for the organizations. b) Task Environment: Task environment is also called specific environment that is directly relevant to an organization in achieving its goals. At any given moment, it is that part of the environment with which management will be concerned because it is made up of those critical constituencies that can positively or negatively influence the organization’s effectiveness. It is unequal to each organization and it changes with conditions. Typically, it includes forces such as customers, suppliers, competitors, government, financial institutions, labour unions, media etc. i) Customers: A customer may be an individual, a family, a business house or an institution. They are important in the sense that an organization exist to serve them. They are not only linked with the organization for the purchase of goods or services but they are also an important source of ideas, opinions, information, and reactions. Managers, therefore, must maintain a close relationship with them. ii) Suppliers: Suppliers supply the raw materials for the business organization on which it operates. The regular supply of such materials with good quality at desirable price is very important for the organizations to operate or produce and deliver quality goods and services effectively. Changes in the nature, numbers or types of any supplier result in forces that produce opportunities and threats to the organization. iii) Competitors: Competition in the market for an organization is inevitable in this age. To take competitive advantages, information on market behavior and competitors’ strategies is gathered and analyzed to identify future opportunities and threats for the firm. Managers must work out strategies to deal with the competitors and competing products. Rivalry relation between competitors is potentially the most threatening force that the managers must deal with. iv) Labour Unions: Labour unions who work in the organization and other professional organization may exert pressure to fulfill their interests. These groups may influence the organization by drawing attention of the politicians, legislators and media. Sometime they may take the worse path so that strike and violence may take place in the organization. Progressive managers must understand their desire and employ a participative strategy to build a sound and constructive relation with them.

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v) Financial Institutions: Financial institutions provide financial services to the organizations to meet their long term as well as short term needs. The terms and conditions of loans and advances, and the quality of their services have an impact on the performance of an organization. # Managing in a Changing Global Environment (Contemporary issues and challenges of management): Globalization implies an integration of world economies. It includes a rapid increase in the movement of goods, services, and capital across national borders. It is related to increase in the significance of individual business that operates in a range of countries. Increasingly, these businesses see the world as a single market. Mangers must have the insight to see and understand the emerging organizational challenges. Several challenges confront managers today. These challenges are arising mainly from the significant changes in the outside world. We are faced with more turbulent economic periods. Managers face a more restless workforce, more domestic and international competition, and declining industrial performance. They must, therefore, have the skill to diagnose the environment, analyze competitors’ actions, compete in international market, and manage the organizational change. The managers’ task today, is to respond to emerging issues and challenges. Following are the key issues or challenges for managers in this globalized age. a) Workforce diversity: Organizations are becoming more heterogeneous in terms of gender race, ethnicity, and other backgrounds due to globalization. The participation of women and minorities in the workforce has been increasing. It will continue to increase in the years to come. Managers should realize that employees come to work with their cultural values and lifestyle preferences. The challenge for managers, therefore, is to become more accommodating to diverse groups of people. Conflicts are more apparent today. Consensus is more difficult to achieve because of the diverse backgrounds of employees. Managers, therefore, will need to shift their approaches and philosophy to workforce management. They should recognize the differences among employees and respond to them in ways that will ensure employee commitment. Diversity, if managed positively, can increase creativity and innovation in organizations. b) Empowerment: Organizations are becoming more and more participative these days. The role differences between the managers and workers have narrowed down considerably. Decision making is being pushed down to the operating level. Workers are now given freedom to make choice about schedules, procedures and solving work related problems. Managers are going considerably further by allowing employees full control of their work. More information is provided to employees to make them aware of the problems and prospects of their organization. Thus, managers are engaged in empowering employees. Various methods of empowerment ranging from simple participation to self-managed work teams have now been practiced in organizations. c) Technological Advancement: The modern business is characterized by newer and ever-changing technological perspective. Technological changes such as advances in computers and other electronic data processing equipment have changed the whole system of decision-making. Faster processing of information in material handling, storage, and transportation has enabled the managers to make products available to customers at right time, in the right place, and in relatively good condition. Managers must, therefore, have proper understanding of these aspects. Technology management has now emerged as an important and crucial management process in the modern business organizations to cope with technological change and match the competitive market. d) Innovation and Change: The taste and preference of customers regarding goods and services, an organization offers, have been changing. Hence, organizations must pay attention to innovation and change. Products or services need continuous improvement, upgradation, and modification. In order to beat competitors in the market place, managers must flow innovative products and services. The challenge for mangers is to stimulate employee creativity and wide participation and support for continuous innovation and change.

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e) Ethics and Social Responsibility: Ethics refers a code of conduct through which managerial activities are guided. Today, in most societies codes of ethics have been prescribed for business. Violence of these codes by organizations could be costly for itself. Similarly, as a member of a society, an organization should be responsible regarding social issues. Today, organizations are expected to contribute to the society as a whole. Environmental issues regarding discharge of waste, air and noise pollution are the matters for public attention. Therefore, social responsibilities and ethical issues are handled and managed by managers, which is really a challenging task for them. f) Corporate Governance: Corporate governance is concerned with the issues such as; fairness, accountability, responsibility, and transparency in the organizations. Today, it has been realized by the managers that corporate governance is an essential tool for improving performance. The stakeholders (shareholders, customers, government, society, employees, other institutions) have a demand of accountable and transparent management in the organizations. Their expectations would obviously create the challenge in this competitive global age. # Organizational Stakeholders: Organization exist because of their ability to create value and acceptable outcomes for various groups of stakeholders, people who have an interest, claim or stake in the organization, in what it does and in how well it performs. In general, stakeholders are motivated to participative in an organization if they receive inducements that exceed the value of the contributions they are require to make. Inducements are rewards such as money, power, and organizational status. Contributions are the skills, knowledge, and expertise that organizations require of their members during task performance. There are two main groups of organizational stakeholders: inside stakeholders and outside stakeholders. The inducements and contributions of each group are visualized in the table below. Stakeholders Contributions to the Organization Inducement to contribute Inside Stakeholders: Shareholders Money and Capital Dividends and Wealth maximization Managers Knowledge, Skill and Expertise Salaries, bonuses, status and power Employees/Workforce Skill and Expertise Wages, bonuses, job security and

promotion Outside Stakeholders: Customers Revenue by making expenditure in

goods and services Quality goods and services with desirable price

Suppliers High quality inputs (raw materials and accessories)

Revenue from purchase of Inputs

Government Rules and Business Environment Tax revenue and fair operation Labour Unions Fair collective bargaining Participations and employee welfare Society Social infrastructure, loyalty and

reputation Employment, Social welfare and pride

# Managerial Ethics: Ethics are moral principles or beliefs about what is right or wrong. These beliefs guide individuals in dealings with other individuals and groups (stakeholders) and provide a basis for deciding whether a particular decision or behavior is right and proper. Managerial ethics is a code of conduct through which managerial activities are guided. Ethics helps managers determine moral responses to situations in which the best course of action is unclear. Ethics guide managers in their decisions about what to do in various situations. Ethics also help managers decide how best to respond to the interests of various organizational stakeholders. Sometimes, making a decision is easy because some obvious standards, value or norm of behavior applies. In other cases, mangers have trouble deciding what to do and experience an ethical dilemma when comparing the competing claims or rights of various stakeholders. It is very difficult to make decisions in some cases. For example: whether a manager is to allow its representative to pay bribes to government officials in foreign counties where corruption is common way of doing business. In this situation managers are in a difficult situation because they have to balance their interest and interest of the organization against the interest of other stakeholders.

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Following an ethical rule avoids expending time and effort in deciding what is right thing to do. Thus reduce transaction cost between people, that is, the cost of monitoring, negotiating and enforcing agreements with other people. Ethics is also helpful equally to create a good reputation, because, people want to deal with those organizations operating with high ethical standards. Organizational ethics is also equally important to satisfy and make the managers and employees feel pride and valuable. In sum, acting ethically promotes the good of a society, and the well-being of its members. More value is created in societies where people follow ethical rules, and where criminal and unethical behaviors are prevented by law and by custom and practice from emerging. # Creating Ethical Organization: There are many ways in which managers can create organizational ethics. As a leader (figurehead), a manager can promote morale values that result in specific ethical rules and norms that people use to make decisions. An organization can encourage people to act ethically by putting in place incentives for ethical behavior and disincentives to punish those who behave unethically. As a liaison or spokesperson, a manager can inform prospective customers and other stakeholders about the organization’s ethical values and demonstrate those values through behavior toward stakeholders – such as by being honest and acknowledging errors. Following are the commonly used methods to ethical organization. a) Designing an ethical structure and control system: Managers can design an organizational structure that reduces the incentives for people to behave unethically. The creation of authority relationships and rules that promote ethical behavior and punish unethical acts will encourage members to behave in socially responsible way. Ethical values flow from the top of the organization but are strengthened or weakened by the design of the organizational structure. b) Creating ethical culture: The values, rules, and norms that define an organization’s ethical position are part of its culture. The behavior of top managers strongly influences organizational culture. An ethical culture is most likely to emerge if top managers are ethical, and an unethical culture can become an ethical one if top-management team is changed. The creation of an ethical corporate culture requires commitment at all levels of an organization, from the top to down. c) Supporting the interest of stakeholders: The interest of internal and external stakeholder is also helpful to create ethical organization. The owners do not want to hold stocks in companies that engage in socially questionable activities. So, the owners representing in the board of directors try to create organizational discipline. Pressure form outside stakeholders can also promote ethical organizational behavior. The government and its agencies, industry councils and regulatory bodies and consumer watchdog groups play a role in establishing the ethical rules that organizations should follow when doing business. # Sources of Environmental Uncertainty: The forces in the environment cause uncertainty for organizations and make it more difficult for managers to manage. The set of forces that cause problems, increases uncertainty and affect the complexity, dynamism and richness of the environment. As these forces cause the environment to become more complex, less stable, and poorer, the level of uncertainty increases. a) Environmental complexity: The presence of number of forces, their strength and interconnections determines the level of complexity in an organization’s environment. The greater the number and the greater the difference between them, more complex and uncertain is the environment and more difficult to predict and control. b) Environmental Dynamism: How frequently the forces in the environment change also contribute to the environmental uncertainty. An environment is stable if the forces affect the supply of the resources in a predictable way. An environment is unstable and dynamic if an organization cannot predict the way in which the forces will change over time. An

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organization in a dynamic, unstable environment will see ways to make to the environment more predictable and thereby lessens the organization’s uncertainty about environment. c) Environmental Richness: Environmental richness refers the amount of resources available to support an organization’s domain. In rich environment, resources are plentiful and uncertainty is low because organizations need not compete for resources. Basically there are two reasons for poor environment.

i) The organization is located in a poor country or poor site of a country ii) There is high level of competition, and organizations fight for resources

In poor environments, organizations have to battle to attract customers or obtain the best inputs. The result of these battles is greater uncertainty for the organizations. The poorer the environment, the more difficult the problems organizations face in managing resource transactions. # Interorganizational Strategies for Managing Resource Dependencies: Organizations are dependent on their environment for resources they need to survive and grow. The supply of resources, however, is dependent on the complexity, dynamism, and richness of the environment. Organizations attempt to manage their transactions with the environment to ensure access to the resources on which they depend. To reduce uncertainty, an organization needs to devise interorganizational strategies to manage the resource interdependence in the specific and general environment. In the specific environment, an organization needs to manage its relationships with forces such as suppliers, unions, and consumer interest groups. Following are the most commonly used strategies by the organizations in this regard. a) Long-Term Contracts: Long-term contract involves a contract between two or more organizations to carry-out future transactions with certainty. The purpose of these contracts is usually to reduce cost by sharing resources or by sharing risk of research and development, marketing, construction, and other activities. Contracts are the least formal type of alliance because no ties link the organizations apart from the agreement set forth in the contract. b) Strategic alliance: A strategic alliance is an agreement that commits two or more organizations to share their resources to develop joint new business opportunities (joint ventures). Joint ventures are the most formal of the strategic alliance because the participants are bounded by formal legal agreement that spells out their rights and responsibilities. c) Minority Ownership: Ownership is a more formal linkage than other contracts. Minority ownership makes organizations extremely interdependent, and that interdependence forges strong cooperative bonds. The Japanese system of “Keiretsu” shows how minority ownership network operates. Keiretsu is a group of organizations, each of which owns shares in the other organizations in the group, and all of which work together to further the group’s interests. d) Merger and takeover: An organization some times takes over another organization or one organization gets merged with another organization. As a result of a merger or takeover, resource exchanges occur within one organization rather than between organizations, and an organization can no longer be held hostage by a powerful supplier or by a powerful customer. e) Collusion and cartels: Collusion is a secret agreement among competitors to share information for a deceitful or illegal purpose. Organizations collude in order to reduce the competitive uncertainty they experience. Similarly, a cartel is an association of firms that explicitly agrees to coordinate activities. Cartel and collusion increase the stability and richness of an organization’s environment and reduces the complexity of relations among competitors.

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Part II: Organizational Change

# Concept: Organization change is the process of adopting new idea or behavior by an organization. It involves alteration of the component/s (people, structure, or technology) of an organization. It is thus, a way of modifying an existing organization. It is a process of moving from a present state through a transitional state to a future state. Organizational change is a planned effort to improve a business’s capacity to get work done and better serve its market. Organizational change is basically about people. Real change happens when people realize that a new methodology, process or technology makes them more productive, more efficient or better able to serve the customers needs. Organizations can only institute a change program when employees who are involved in the program understand and have confidence in its value. Change management is the process of continually renewing an organization's direction, structure, and capabilities to serve the ever-changing needs of external and internal stakeholders. Mastering strategies for managing change is more important today since the rate of change is greater than at anytime in history. The marketplace is changing overnight. Organizational alliances and structures are shifting rapidly. Everything in the organization is open to scrutiny. Basic operating assumptions are questioned. Traditions are challenged. The risk of failure is greater than ever before and the tension within the workforce is great and needs constant attention. Managers, at one point or another, will have to changes in some aspects of their organization. They have to coordinate the process of planning and implementing change in their organizations in such a way as to minimize employee resistance and cost to the organizations. When organizational change is well planned and implemented, it helps organization better achieve its goals effectively and survive continuously. Hence, change can produce many benefits, including improved competitiveness, better financial performance, and higher levels of customer and employee satisfaction, if managed well. # Forces for Change: The organizational environment is constantly changing, and an organization must adapt to these changes in order to survive. There are many forces in the environment which have impact on an organization and recognizing and responding to these forces is very important to remain competitive and surviving. Following are the major forces that make an organization to change. a) Declining effectiveness: An organization that experiences continuous loss or declining performance undoubtedly motivates to do some corrective action in it. Cost reduction, alteration in the roles and duties, participation etc. can be undertaken to get improved from the problem. b) Organizational crisis: Crisis in the resources can also cause an organization to alter its business. The resignation of a key decision maker is another crisis that causes the organization to rethink the composition of its management team and its role in the organization. Similarly, new appointment of chief executive after crisis may lead to change in every aspect of the organization. c) Competition: Organizations are constantly striving to achieve a competitive advantage. Competition is a force for change because unless an organization matches or surpasses its competitors in efficiency, quality, or its capability to innovate new or improved goods or services it will not survive in the market. The adaptation of new skills or technology to be competitive usually brings a change to task relationships as workers learn new skills or techniques to operate the new technology. d) Economic and political force: Economic and political forces are general environmental forces that largely and continually affect an organization’s operation. Economic status of a state and political system and stability are factors responsible to create business environment. Change in such factors leads to change in the functioning of business organization. e) Globalization: Multinational and transnational organizations are heavily emerging as a result of globalization. Domestic organizations need to change their organizational structures to allow expansion into foreign markets, need to adopt

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a new and adoptive management style to operate and manage globally. Many organizations are pursuing joint ventures with organizations from other countries. f) Ethics: In the face of increasing government, political, and social demands for more responsible and honest corporate behavior, organizations need to take steps to promote ethical behavior. Conflicts are apparent in un-ethical organization today. Organizations need to make changes to allow managers and workers at all level to respond unethical behavior so that they can move quickly to eliminate such behavior and protect the general interest of its members and customers. # Forces for Resistance to Change: Resistance to change is an obstacle to make change in an organization. It is the action taken by individuals and groups when they perceive that is occurring as a threat to them. Resistance to change can also be a source of functional conflict. With every major or minor change, resistance typically occurs. The major forces that produce resistance include: a) Traditional mechanistic structure: Traditional mechanistic structure is characterized by a tall hierarchy, centralized decision making, and the standardization of behavior through rules and procedures. Mechanistic structures are more resistant to change. People who work within a mechanistic structure are expected to act in certain ways and do not develop the capacity to adjust their behavior to changing conditions. b) Organizational culture: The values and norms in an organization’s culture can be another source of resistance to change. Just as role relationships result in a series of stable expectations between people, so values and norms cause people to behave in a predictable ways. Sometimes, values and norms are so strong that even when the environment is changing and it clear that a new strategy is needed, managers cannot change because they are committed to the ways presently do business. c) Differences in functional orientation: Differences in the functional orientation are major impediments to change and a source of organizational inertia. Different functions and divisions often see the source of a problem differently because they see an issue or problem differently from their own interest and viewpoint. d) Traditions: The traditions are established in the organization with a long history. Change implies uncertainty, and uncertainty is uncomforting. There is resistance to trying a new approach as people unknown and have fear that they will not be able to supply the required technology and skills. e) Individual resistance: There are several reasons why individuals within an organization may be inclined to resist changes. Individual tend to resist change feeling uncertain and insecure about out outcomes will be. Workers might be given new tasks. Roles relationships may be reorganized. Some workers might loose their jobs. Some people might benefit at the expense of others. Absenteeism and turnover may increase as change takes place, workers may become uncooperative, attempts to delay and slow the change process, and otherwise passively resist the change. f) Group resistance: There are formal and informal groups in an organization to carryout different jobs. The characteristics of these groups can produce resistance to change. A change may alter task and role relationships in a group, it disrupts group norms and the informal expectations that group members have of one another. As a result, members of a group may resist change because a whole new set of norms may have to be developed to meet the needs of the new situation. Group cohesiveness, the attractiveness of a group to its members, also produces the resistance. # Types or Forms of Organizational Change: There are several types of change that managers can adopt to help their organizations achieve desired future states. In general, types of change fall into two broad categories: Evolutionary Change and Revolutionary Change. a) Evolutionary Change: Evolutionary change is gradual, incremental, and narrowly focused. Evolutionary change involves not a drastic or sudden altering of the basic nature of the organization’s strategy and structure but a constant attempt to improve, adapt, and adjust strategy and structure incrementally to accommodate to changes taking place in the environment.

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Hence, Evolutionary change is accomplished gradually and incrementally in every aspects of an organization. There are three instruments (forms) of evolutionary change. i) Socio-technical System Theory: Socio-technical theory proposes the importance of changing role and task or technical relationships to increase organizational effectiveness. It emerged from a study of changing work practices in British coal mining industry. Socio-technical system theory argues that managers need to fit the workings of an organization’s technical and social systems. A poor fit between an organization’s technology and social system leads to failure, but close fit leads to success. This theory argues that when managers change task and role relationships, they must recognize the need to adjust the technical and social system gradually so that group norms and cohesiveness are not disrupted. Managers need to be sensitive to the fact that the way they structure the work process affects the way people and group behave. Indeed, Socio-technical system is that method of change where new technology and way of doing business is supported by participative shared social system. This theory emphasizes the team works which are empowered to monitor and control important aspects of their own performance. Team based system will promote the development of values and norms that will boost efficiency and product quality. ii) Total Quality Management (TQM): Total quality management is an ongoing and constant effort by all of an organization’s functions to find new ways to improve the quality of the organization’s goods and services. TQM leads to continuous, incremental change, and all functions are expected to cooperate with each other to improve quality. Total Quality Management is a comprehensive and structured approach to organizational management that seeks to improve the quality of products and services through ongoing refinements in response to continuous feedback. TQM requirements may be defined separately for a particular organization or may be in adherence to established standards. More and more organizations are employing the continuous, incremental type of change that results from the implementation of TQM programs. Changing cross-functional relationship to help improve quality is very important in TQM. Members of the different functions work together to find new ways to reduce the number of inputs needed. Hence, the changes associated with TQM are change in task, role and group relationships. iii) Flexible Work Teams: Flexible work teams is a participative approach in the era of evolutionary change. A flexible work team is a group of workers who assume responsibility for performing all the operations necessary for completing a specified stage in the manufacturing process. It is an important method to change employees’ attitudes and behavior. A worker first develops the skills needed to accomplish one task and overtime is trained to perform other tasks. Each worker can substitute for any other workers. As the demand for components or finished products rises or falls, flexible workers can be transferred to the task most needed by the organization. As a result, the organization is able to respond quickly to changes in its environment. Flexible work teams approach is followed by the principal – “Generalization”. Performing more than one task also cuts down on repetition, boredom, and fatigue and rises workers’ incentives to improve product quality. When workers learn one another’s tasks, they also learn how the different tasks relate to each other. This understanding often leads to new ways of combining tasks to make the manufacturing process more efficient and less costly. b) Revolutionary Change: Some organizations may need to make major changes quickly. They do not want to take time to setup and implement programs that foster evolutionary change. Faced with drastic, unexpected changes in the environment (for example, a new technological breakthrough) or with impending disaster resulting from years of inaction and neglect, an organization needs to act quickly and decisively, the change takes place in this form is said to be a revolutionary change. Hence, revolutionary change is a rapid, dramatic, and broadly focused. It involves a bold attempt to quickly find new ways to be effective. It is likely to result in a radical shift in ways of doing things, new goals, and a new structure. The three important instruments (forms) of revolutionary change are:

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i) Reengineering: In an organizational setting reengineering has been used to refer to the process by which managers redesign how tasks are bundled into roles and functions to improve organizational effectiveness. It is fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed. Reengineering involves going the root of every step in work process to identify a better way to coordinate and integrate the activities necessary to provide customers with goods and services. Instead of focusing on an organization’s functions, the managers of a reengineered organization focus on business process. Processes, not organizations, are the object of reengineering. Companies don’t reengineer their sales or manufacturing departments; they reengineer the work the people in those departments. Reengineering deliberately ignore the existing arrangement of task, roles, and work activities. They start the reengineering process focusing customers with the aim of providing best quality products at lowest cost. The major guidelines for performing reengineering successfully are: a) Organize around outcomes, not task. Where possible, organize works so that one person or one function can perform all the activities necessary to complete the process, thus avoiding the needs for transfer between functions. b) Involve the people who are concerned stakeholders of the process, to make necessary rules and arrangements. c) Decentralize decision making to the point where the decision is made. Allow the people on the spot to decide how best to respond to specific problems that arise. ii) Restructuring: Restructuring refers to the process by which managers change task and authority relationships and redesign organizational structure and culture to improve organizational effectiveness. The move from a functional to some form of divisional structure or either form represents one of the most common kinds of restructuring effort. In the course of time, as the environment changes, and as the organization’s strategy changes, managers must analyze how well their structure fits them. In a new context, there might be a better way of grouping the products they now make to serve the customers needs and wants. A very popular restructuring in recent years is downsizing, the process by which managers streamline the organizational hierarchy and layoff managers and workers to reduce bureaucratic costs. The drive to reduce bureaucratic costs is often a response to increase competitive pressures in the environment as companies fight to increase their performance. The wave of mergers and acquisitions that has occurred in many industries such as telecommunications, banking and other industries has also resulted in downsizing because merged companies typically requires fewer managers. Often, after one industry company downsizes, other industry companies are forced to examine their own structures to search out inefficiencies; thus downsizing wave take place across companies in an authority. Similarly, the other reasons to downsize include; decline in the demand, loss of market share, inefficient tall structure, high operating cost etc. iii) Innovation: If the organizations are to avoid being left behind in the competitive race to produce new goods and services, they must take steps to introduce new products or develop new technologies to produce those products reliably at a low cost. Innovation is the successful use of skills and resources to create new technologies or new goods and services so that an organization can change and better respond to the needs of customers. The taste and preference of customers regarding goods and services, an organization offers, have been changing. Hence, organizations must pay attention to innovation. Products or services need continuous improvement, upgradation, and modification. In order to beat competitors in the market place, managers must flow innovative products and services. Although innovation brings about change, it is also associated with a high level of risk because the outcomes of research and development activities are often uncertain. # Process of Planned Organizational Change (Change Process): Organizational change is a well-known phenomenon; in order to survive organizations have to adapt themselves regularly to be able to meet the demands of the changing environment. In dealing with organizational change it is important to consider the need and results of organizational change as well as the dynamics of change processes.

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Conceptions of planned change have tended to focus on how change can be implemented in organizations. Called “theories of changing,” these frameworks describe the activities that must take place to initiate and carry out successful organizational change. Lewin’s change model and the action research model have received widespread attention in organizational development (OD) and serve as the primary basis for a general model of planned change. However, due to current conditions, these management models can not be considered as a panacea, they must be adapted constantly, being revised in order to lead, finally, the successful implementation of the changes initiated. a) Lewin’s Change Model: German-American psychologist Generally, managers anticipate change and prepare a strategy to respond to it. Kurt Lewin, a social psychologist, suggested that efforts to bring about planned change in organizations should approach change as a multi-stage process. He developed the “Field Force Analysis Model” to help us understand how the change process works. This model emphasizes that effective change occurs by unfreezing the current situation, moving to a desired condition, and then refreezing the system so that it remains in this desired state. The planned change is thus made up of three steps: Unfreezing, Change, and Refreezing. a) Unfreezing: It is the first stage of change process. It is a process by which people become aware of the need for change. The key factor in unfreezing is making employees understand the importance of a change and how their jobs will be affected by it. Unfreezing starts from the members’ understanding of the organizational crisis or vision that motivates them to change, normally, unfreezing will go through three stages. First of all, there must be enough information indicating that the current organizational condition is not ideal. Secondly, this information has to be related to the important goal of the organization, thus elicits members’ anxious feeling. Finally, a solution has to be proposed that will reduce the members’ insecure feeling and resistance to change. b) Change (Transition/movement): Once you have unfrozen the people, the next question is how you keep them going. Kurt Lewin was aware that change is not an event, but rather a process. He called that process a transition. Transition is the inner movement or journey we make in reaction to a change. This second stage occurs as we make the changes that are needed. People are 'unfrozen' and moving towards a new way of being. It is said this stage is often the hardest as people are unsure or even fearful. This is not an easy time as people are learning about the changes and need to be given time to understand and work with them. Support is really important here and can be in the form of training, coaching, and expecting mistakes as part of the process. Using role models and allowing people to develop their own solutions also help to make the changes. It's also really useful to keep communicating a clear picture of the desired change and the benefits to people so they don't lose sight of where they are heading. c) Refreezing: Refreezing is the third of Lewin's change transition stages, where people are taken from a state of being in transition and moved to a stable and productive state. Kurt Lewin refers to this stage as freezing although a lot of people refer to it as 'refreezing'. As the name suggests this stage is about establishing stability once the changes have been made. The changes are accepted and become the new norm. People form new relationships and become comfortable with their routines. This can take time. Freezing is to stabilize the change achieved in moving stage. The individual, the department, and the organization, all have an inertial way of thinking and doing, so that the change achieved in moving state will return to the previous stage if freezing is not done. Form new rules, regulate members’ new behavior directly, reinforce appropriate responses, are all possible ways to internalize the new value or behavior into the organizational culture. b) Action Research Model: Action research is a strategy for generating and acquiring knowledge that managers can use to define an organization’s desired future state and to plan a change program that allows the organization to reach the state. The

UNFREEZING CHNAGE (TRANSITION)

REFREEZING

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techniques and practices of action research, developed by experts, help managers to stabilize change and move to the desired future sate. The classic action research model focuses on planned change as a cyclical process in which initial research about the organization provides information to guide subsequent action. Then the results of the action are assessed to provide further information to guide further action, and so on. This iterative cycle of research and action involves considerable collaboration among organization members and OD practitioners. It places heavy emphasis on data gathering and diagnosis prior to action planning and implementation, as well as careful evaluation of results after action is taken. Following are major steps involved in action research. a) Diagnosing the Organization: In the first step in action research managers are required to recognize the existence of a problem that needs to be solved and acknowledge that some type of change is needed to solve it. In general, reorganization of the needs for change arises because somebody in the organization perceives a gap between desired performance and actual performance. Customers’ complaints about the quality of goods and services, decline in performance level and profit, employees’ turnovers, etc. can be the problems in the organization. In this stage managers need to analyze what is going on and why problems are occurring. Managers have to carefully collect information about the organization to diagnose the problem correctly and get employees committed to the change process. At this early stage of action research it is important for managers to collect information from people at all levels in the organization and outsiders such as customers and suppliers. Questionnaire surveys given to employees, customers, and suppliers or interviews may be taken to gather information to correctly diagnose the organizational present state. b) Determining the desired future state: After identification of the present state, the next step is to identify where the organization needs to be – its desired future state. It involves a complex planning process, as a manager work out various alternative course of action that could move the organization to where they would like to be and determine what type of change to implement. Identifying the desired future sate involves deciding what the organization’s structure (functional or cross-functional) and strategy should be.

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c) Implementing action: Implementation action is the third step of action research. It is a three step process. Firstly, managers need to identify possible impediments to change that they will encounter as they go about making changes. Managers must anticipate the obstacles they will encounter when they unfreeze the organization and make the changes. Functional managers, for example, are likely to strongly resist efforts to the change the company because the change will reduce their power and prestige in the organization. Mangers need to find ways to minimize control and co-operate resistance to change. They also need to devise strategies to bring organizational members on the board and foster their commitment to the process. The second step in implementing action is deciding who will be responsible for actually making the changes and controlling the change process. For this purpose outside consultants (experts) or managers from within organizations can be employed. Many consultants specialize in certain types of organizational change, such as restructuring, reengineering, or implementing total quality management, which is advantageous to implement change. The third step in implementing action is deciding which specific change strategy will be most effective. Basically, top-down change strategy and bottom-up change strategy are used in the course of implementing change.

Top-down change: Top-down change is a change which is implemented by managers at a high level in the organization. The result of radical organizational restructuring and reengineering is top-down change. Top level managers in the organization decide to make a change and implement it. The managers choose to manage and solve problems as they arise at the divisional, functional or individual levels.

Bottom-up change: Bottom-up change is that change that is implemented by employees at low levels in the organization and gradually rises until it is felt through out organization. Lower level employees at all levels are involved in the change process, to obtain their input and lessen their resistance. Bottom-up change process facilitates employees’ participation and thus reduces resistance.

d) Evaluating the action: The fourth step in the action research is evaluating the action that has been taken and assessing the degree to which the changes have accomplished the desired objectives. The best way to evaluate the change process is to develop measures or criteria that allow managers to assess whether the organization has reached its desired objectives. Different techniques (cost comparison, employees’ satisfaction, and customers’ satisfaction level before after change) are used to evaluate the result of change. Assessing the impact of change is not easy since the effects of change may emerge slowly. The action research process takes several years to complete. e) Institutionalizing action research: The need to make change is so vital in today’s quickly changing environment that organizations must institutionalize action research. Institutionalizing involves making a required habit or norm adopted by every members of an organization. Because change is so difficult and requires so much thought and effort to implement, members at all levels of the organization must be rewarded for being part of successful change efforts. Effective institutionalization makes all the stakeholders learn and sustain desired behaviors.

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# Organizational Transformations: Birth, Growth, Decline and Death (Organizational Life Cycle):

Organizational transformation through different stages is represented by a model of organizational life cycle. Organizational life cycle (OLC) is a model that proposes that businesses, over time, progress through a fairly predictable sequence of developmental stages. This model is linked to the study of organizational growth and development. It is based on a biological metaphor of living organisms, which have a regular pattern of development: birth, growth, maturity, decline, and death. Likewise, the OLC of businesses has been conceived of as generally having four or five stages of development: birth (start-up), growth, maturity, and decline. Organizations pass through these stages at different rates. Some organizations go directly from birth to death with out enjoying any growth stage; other may spend a long time in the growth stage. The organizational life-cycle model has been figured out here.

The way an

organization can change in response to the problems it confronts determines where and when it will go on to the next stage in the life cycle and survive and prosper or fail and die. A) Organizational birth: Organizations are born when individuals, (entrepreneurs), recognize and take advantages of opportunities to the use of their skills and competencies to create value for the customers. This stage is associated with failure because new organizations experience the liability of newness (the danger of failure associated with being first in the environment). Organizations are fragile as they lack formal structure. Everything is done on trial and error basis. During the birth sage, organizations accumulate capital, hire workers, and start developing their products or services. Toward the end of this stage, companies often experience explosive growth and begin to hire new employees rapidly, because business opportunities exceed infrastructure and resources. # A population Ecology Model of Organization Birth: Population ecology model seeks to explain the factors affecting the rate at which new organizations are born and die in a population of existing environment. Population of organizations comprises the organizations that are competing for the same set of resources in the environment. According to this model, the availability of resources determines the number of organizations in a population. Population ecology model assumes that growth in the number of organizational births in a new environment is rapid at first as new organizations are founded to take advantages of new environmental resources (customers). This model argues that there are two basic reasons for rapid birth rate of organization.

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i) Knowledge and skill: As new organizations are founded, there is an increase in the knowledge and skills available to generate similar organizations. Many new organizations are founded by entrepreneurs who leave existing companies to set up their own organizations.

ii) Role model: When new organization is founded and survives, it provides a role model for others. The success of a new organization makes it relatively easy for promoters to found similar new organizations, because success confers legitimacy.

Once an environment is populated with a number of successful organizations, the organizational birth rate tapers-off (decreases). According to this model, there are also two factors to decrease the organizational birth rate.

i) First mover advantages: The births rates declines, as the availability of resources (customers, geographical location, preferences) for the late entrants diminishes.

ii) Difficult competition: Difficulty of competing with existing organizations for resources leads to decrease in birth rate of organizations. Potential promoters are discouraged by the existing organizations as the large numbers of organizations are already competing for resources.

# Strategies for organizational survival: Population ecology model suggests two sets of strategies that organizations can use to gain access to resources and enhance their chances of survival in the environment.

i) r-strategy versus k-strategy: Organizations that follow r-strategy are founded early in a new environment (they are early entrants) where as, k-strategy following organizations founded later (they are late entrants). The advantage of r-strategy is that an organization obtains first mover advantages and has first pick of the resources in the environment. As a result, the organization is usually able to grow rapidly and develop skills and procedures that increase the chance of surviving and prospering. Organizations that follow a k-strategy are usually established in other environment and wait to enter in the industry until the uncertainty in the environment is reduced and correct way to compete is apparent. These organizations then take the skills they have established to in other environments and use them to develop effective procedure that allow them to compete with and often dominate organizations following r-strategy. ii) Specialist strategy versus Generalist strategy: Organizations following specialist strategy (specialist) concentrate their skills to pursue a narrow range of resources in a single niche. On the other hand, generalist organizations spread their skills thinly to compete for a broad range of resources in many niches. By focusing their activities in one niche, specialists develop core competencies that allow them to out perform generalist in the niche. Specialists are likely to offer customers much better services than the service offered by generalist. They may be able to develop superior products because they invest all their resources in a narrow range of products. Generalist can often compete specialist when there is a considerable uncertainty in the environment and when resources are changing so that niches emerge and disappear continually. Generalist can survive in an uncertain environment because they have spread their resources thinly. If one niche disappears they still have others to operate.

B) Organizational growth: After surviving in the birth stage of organizational lifecycle, organizations increase their control over resources by growing and becoming larger. In this stage organizations develop value-creation skills and competencies that allow them to acquire additional resources. Growth allows an organization to increase its division of labor and specialization and thus develop a competitive advantage. An organization that is able to acquire adequate resources is likely to generate surplus resources that allow it grow further. Overtime, organizations thus transform themselves. They become something very different than they were when they started. In this stage organizations increase their ability to grow and survive in a competitive environment by becoming legitimate in the eye of stakeholders. In the growth stage, organizations may copy one another’s strategies, structures, and cultures and try to adopt certain behaviors because they believe that doing so will increase their chances of survival. These activities lead to organizational isomorphism. Organizational isomorphism is the act of making similar to other organizations by imitating. There are three major form of organizational isomorphism. a) Coercive isomorphism:

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When an organization adopts certain norms because of pressure exerted by other organizations and by society, such practice is said to be coercive isomorphism. Coercive isomorphism takes place when an organization largely depends on the act of other organizations. Coercive isomorphism also results when organizations are forced to adopt non-discriminatory, equitable hiring practices because they are made mandatory by law. b) Mimetic isomorphism: Isomorphism is said to be mimetic when organizations intentionally imitate and copy another’s to increase legitimacy. A new organization is especially likely to imitate the structure and process of successful organizations to ensure success in uncertain environment. Mimetic isomorphism involves imitating other organizations’ structure, strategy, culture, technology etc. that will allow surviving. c) Normative isomorphism: Organizations may acquire norms and values in several ways. Managers and employees often move from one organizations to another and bring with in them the norms, values of former employers. Many organizations recruit managers from large organizations to acquire a good business idea. Organizations also indirectly acquire norms and values through industry, trade, and professional association. These ways of getting business ideas, norms and values is said to be normative isomorphism. # Greiner’s model of organizational growth: It is believed that organizations encounter a predictable series of problems that must be managed if organizations are to grow and survive in a competitive environment. Greiner’s model proposes that an organization passes through five sequential growth stages during the course of organizational evolution and that each ends in a crisis due to a major problem that organization encounters. To advance from one stage to the next, an organization must successfully change itself and solve the organizational problems associated with each crisis. Greiner’s model of organization change has illustrated in the given figure.

i) Phase 1: Growth through creativity and crisis of leadership: After an organization gets birth, it starts to grow through creativity and vision. Entrepreneurs develop the skills and abilities to create and introduce new products for new market. As the organization grows, the founding entrepreneurs confront the task of having to manage the organization, and they discover that management is a very different process. Thus, after securing a niche, the founding entrepreneurs are faced with the task of managing their organization, a task to which they are often not

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really suited and for which they lack the skills. When an entrepreneur takes control of management of the organization, significant problems arises that eventually leads to a crisis of leadership.

ii) Phase 2: Growth through direction and crisis of autonomy: The crisis of leadership ends with the recruitment of strong top-management team to lead the organization. The new top level management chooses an organization strategy and designs a structure and culture that allow the organization to meet its goal effectively. The structure designed by top managers and imposed on the organization centralizes decision making and limits the freedom of experiment, take risk and employ self senses. The centralized authority, formalized decision making often leads to another crisis. This situation leads to frustration and dissatisfaction which leads to departure of employees, reduce performance level, and also creates new competitors in the industry. Hence, a crisis of autonomy is realized.

iii) Phase 3: Growth through delegation and crisis of control: To solve the crisis of autonomy and grow further, organizations must delegate authority to lower level managers in all functions and divisions and link their contributions. In this stage, more autonomy and responsibility are given to managers at all levels and functions. Growth through delegation allows each department or division to expand to meet its own needs and goals, and organizational growth brings a new crisis. Explosive and excessive growth can cause top managers to feel that they have lost control of the company as a whole. Thus, when top managers compete with functional managers or corporate level managers compete with divisional managers for control of organizational resources, the result leads to a crisis of control.

iv) Phase 4: Growth through coordination and crisis of red tapes/staffs: In order to fill the crisis of control, top managements take on the role of coordinating different divisions and motivating divisional managers. At this stage the organization is too large that coordination is most that facilitates international cooperation between divisions and countries. Companies also implement systems of co-ordination to enable their various business units and departments to work together. These efforts, however, tend to cause an influx of red tape. Coordination techniques such as product groups, formal planning processes, and corporate staff become, over time, a bureaucratic system that causes delays in decision making and a reduction in innovation. At this stage, companies may become too large and diversified to function effectively with inflexible regulations and dense bureaucracy.

v) Phase 5: Growth through collaboration and un-known crisis: The way to solve the crisis of red tape and push the organization up the growth, collaboration is essential. Companies must emphasize growth through collaboration, which includes using teams, empowering workers, removing red tape, reducing corporate staff, simplifying formal systems, increasing conferences and educational programs, and introducing more sophisticated information systems. Because decline and closure is likely if companies proceed in the same direction as in the maturity stage, they must adopt these kinds of policies and implement these kinds of changes to ward-off shrinking sales and employee apathy.

Greiner’s model shows organizations continuing to grow through collaborations until they encounter some new, unnamed crisis, but it is possible that organization’s growth path leads down ultimately. Hence, the next stage in the life cycle is not continued growth but organizational decline.

C) Organizational decline and death: Greiner’s model suggest that organizations at all stages of growth encounter problems (crisis) that will lead to organizational decline if the organization fails to manage them. Managers must have ability to identify and solve organizational crisis so that they can maintain organizational growth. But if they lack the ability, motivation and desire to manage such issues at some point organizations die due to organizational inertia and environmental changes. In other words, the main cause of organizational decline and finally death are: organizational inertia and environmental change. i) Organizational inertia: Organizational inertia is a force inside the organization that produce resistant to change. Organizations are subject to considerable inertia, which prevents them from adopting and changing. Following are the major organizational forces responsible for producing inertia.

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a) Traditional mechanistic structure b) Overly bureaucratic culture c) Differences in functional orientation d) Management tradition e) Individuals and groups

ii) Changes in environment: Environmental changes also largely affect an organization’s ability to obtain scarce resources which finally lead to organizational decline. The major sources of uncertainty in the environment are complexity, the number of different forces that an organization has to manage (dynamism, degree of change in the environmental forces, richness, the amount of resources available etc.) The greater amount of uncertainty, the larger the chance of an organization to decline. Management inability to adopt and respond to the change in the environment may not survive in the market so far. The combination of uncertain, changing environment and organizational inertia makes it difficult for the top management to anticipate the need for change and to manage the way organizations change and adapt to the environment and make organization surviving and growth. # Strategies for Organizational Change: (Directive Strategy, Expert Strategy, Negotiation Strategy, Educative Strategy and Participative Strategy) Organizational change is an important issue in organizations. It is actually a process in which an organization optimizes performance as it works toward its ideal state. Organizational change occurs as a reaction to an ever-changing environment, a response to a current crisis situation, or is triggered by a leader. Successful organizational change is not merely a process of adjustment, but also requires sufficient managing capabilities. Strategy refers to the organization’s long term goals and the steps and resources needed to be considered in its decision-making. The strategy for managing organizational change can be divided into: Directive Strategy, Expert Strategy, Negotiation Strategy, Educative Strategy, and Participative Strategy. These strategies have their own value and implications. 1. Directive strategy: This strategy highlights the manager's right to manage change and the use of authority to impose change with little or no involvement of other people. The advantage of the directive approach is that change can be undertaken quickly. However, the disadvantage of this approach is that it does not take into consideration the views, or feelings, of those involved in, or affected by, the imposed change. This approach may lead to valuable information and ideas being missed and there is usually strong resentment from staff when changes are imposed rather than discussed and agreed. 2. Expert strategy: This approach sees the management of change as a problem solving process that needs to be resolved by an expert. This approach is mainly applied to more technical problems, such as the introduction of a new learner management system, and will normally be led by a specialist project team or senior manager. There is likely to be little involvement with those affected by the change. The advantages to using this strategy is that experts play a major role in the solution and the solution can be implemented quickly as a small number of 'experts' are involved. Again, there are some issues in relation to this strategy as those affected may have different views than those of the expert and may not appreciate the solution being imposed or the outcomes of the changes made. 3. Negotiating strategy: This approach highlights the willingness on the part of senior managers to negotiate and bargain in order to effect change. Senior managers must also accept that adjustments and concessions may need to be made in order to implement change. This approach acknowledges that those affected by change have the right to have a say in what changes are made, how they are implemented and the expected outcomes. The disadvantage to this approach is that it takes more time to effect change, the outcomes cannot be predicted and the changes made may not fulfill the total expectations of the managers affecting the change. The advantage is that individuals will feel involved in the change and be more supportive of the changes made.

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4. Educative strategy: This approach involves changing people's values and beliefs, 'winning hearts and minds', in order for them to fully support the changes being made and move toward the development of a shared set of organizational values that individuals are willing, and able to support. A mixture of activities will be used; persuasion; education; training and selection, led by consultants, specialists and in-house experts. Again, the disadvantage of this approach is that it takes longer to implement. The advantage is that individuals within the organization will have positive commitment to the changes being made. 5. Participative strategy: This strategy stresses the full involvement of all of those involved, and affected by, the anticipated changes. Although driven by senior managers the process will be less management dominated and driven more by groups or individuals within the organization. The views of all will be taken into account before changes are made. Outside consultants and experts can be used to facilitate the process but they will not make any decisions as to the outcomes. The main disadvantages of this process are the length of time taken before any changes are made, it can be more costly due to the number of meetings that take place, the payment of consultants/experts over a longer time period and the outcomes cannot be predicted. However, the benefits of this approach are that any changes made are more likely to be supported due to the involvement of all those affected, the commitment of individuals and groups within the organization will increase as those individuals and groups feel ownership over the changes being implemented. The organization and individuals also have the opportunity to learn from this experience and will know more about the organization and how it functions, thus increasing their skills, knowledge and effectiveness to the organization.

- Dharma Pd. Paudel 1 Kantipur Valley College

Part – III: Organizational Decision Making in Changing Environment # Organizational Decision Making: Decision making is an act of making a choice to solve confronting problems. In an organization, individuals, especially managers have to make decisions to choose an action from among alternative course of actions. Organizational decision making is the process of responding to a problem by searching for and selecting a solution or course of action that will create value (importance) for organizational stakeholders. Whether the problem is to find the best inputs, to decide which technology to use, to identify right way to provide a service to customers, or to figure out how to deal with a competitor, in each case managers must decide what to do. Organizational decisions for which mangers are responsible to make an optimal choice fall into two broad categories:

I) Programmed Decisions (routine) II) Non-programmed Decisions (non-routine)

I) Programmed Decisions: Programmed decisions are repetitive and routine in nature. They are bind by rules, routines, and standard operating procedures. Many of the routines and procedures for selecting an appropriate solution are formalized in an organization’s rules and standard operating procedures and the values and norms of its culture. Middle and lower level managers are involved in making routine decisions at operating levels. For example; hiring policy, purchasing decision, production and selling decisions etc. are routine in nature. II) Non-programmed Decisions: Non-programmed decisions are completely un-structured and novel. No, rules, routines or standard operating procedures can be developed to handle them. Solutions must be worked out as problems arise. Non-programmed decisions require much more search activity and judgmental skills. For example; continues experiments for research and development, creation of an organizations strategy and structure etc. involve non-programmed decisions. Non-programmed decision force managers to rely on judgment, intuition, and creativity to solve organizational problems as they cannot rely on rules and procedures. Non-programmed decisions lead to the creation of a new set of rules and procedures that would allow other members to make appropriate programmed decisions. Programmed decision making help an organization to increase efficiency, and reduce costs, provides stability and increase predictability. Where as, non-programmed decision making allows the organization to change and adapt to its environment and generate new ways of behaving. # Models of Organizational Decision making: There are different models for making organizational decisions. Early models consider decision making as a rational process in which managers make decisions to adjust perfectly to the environment. However, modern models recognize that decision making is an inherently uncertain process in which managers give solutions. 1) The Rational Model: (Ralph Tyler (1950): an American educator) Decision making is a straight forward three step process, according to this model. It involves: identifying and defining the problems, generate alternative solutions to the problem and select solution and implement it.

- Dharma Pd. Paudel 2 Kantipur Valley College

Stage – I: Managers identify problems that need to be solved. Managers spend a great deal of time and effort analyzing all aspects of their organization’s specific and general environments to identify conditions or problems that call for new action. In other words, they most analyze the environment and recognize opportunities and threats it presents. Stage – II: Managers collectively or individually seek to design and develop a list of alternative solutions and course of actions to the problems they have identified. They study ways to take advantage of the organization’s skills and resources to respond to opportunities and threats. Stage – III: Managers compare the possible consequences of each alternative and decide which course of action offers the best solution to the problem they identified in stage 1. In a predictable idle state, managers can conduct such a business as stated. The rational model ignores the ambiguity and uncertainty that typically increase the complexity in decision making. It is based on the following assumptions, which the researchers have criticized.

1) The assumption that the decision makers have all the information they need 2) The assumption that decision makers (managers) are smart and capable 3) The assumptions that decision makers agree about what they need to be done (same

preference) 2) The Carnegie Model (developed by a group of experts from industry, government, and the Software Engineering Institute (SEI) at Carnegie Mellon University in Pittsburgh): Carnegie model is a progressive approach over rational model in organizational decision making. In an attempt to describe the realities of the decision-making process more accurately researchers introduced into decision-making theory a new set of assumptions: Satisfying, Bounded Rationality and Organizational Coalitions. Carnegie model advocates that information is very limited, decision making is costly, it is affected by preferences and values of decision makers, solution is chosen by compromise, bargaining, and accommodation between organizational coalitions and solution chosen is satisfactory for the organization. The core assumptions involved are:

a) Satisfying: Instead of searching for all possible solutions to a problem, as the rational suggests, managers resort to satisfying i.e. they decide on certain criteria that they will use to evaluate possible acceptable solutions. The criteria automatically limit the set of possible alternatives. The manager then select one alternative form the range of alternatives that that they have generated. Thus it involves a much less costly information search and puts far less of a burden on managers than does the rational model.

b) Bounded by Rationality: The rational model assumes that managers possess the intellectual capacity to evaluate all possible alternatives. The Carnegie model assumes that managers are limited by bounded rationality – a limited capacity to process information. Thus, Carnegie model recognizes that much of decision making is subject to and relies on manager’s prior experience, beliefs and intuitions.

Stage-I: Identify and define problem

Stage-II: Generate alternative solution to the problem

Stage-III: Select solution and implement it

- Dharma Pd. Paudel 3 Kantipur Valley College

c) Organizational Coalitions: Unlike the assumption of same preference among different managers and stakeholders regarding the evaluation of alternatives in the same way, the Carnegie model explicitly recognizes that the preferences and values of managers differ and the conflict between managers and other stakeholders is inevitable. Carnegie model views an organization as a coalition of different interests, in which decision making takes place by compromise, bargaining, and negotiation between managers and other stakeholders.

3) The Incrementalist model: According to incrementalist model of organizational decision making, managers select the alternative course of action that are only slightly, or incrementally different from those used in the past thus lessening their chance of making mistakes. In other words new decisions are made in an incremental structure. This model implies that mangers rarely make major decisions that are radically different from decisions they have made before. Managers correct or avoid mistakes through a succession of incremental changes, which may lead to completely new course of action. The major three stages involved in this model are:

a) Identification stage: In identification stage, managers develop routines to recognize problems and understand what is happening to the organization.

b) Development stage: In this stage, they search for and design alternatives to solve the problems they have identified.

c) Selection stage: In the selection stage, managers use an incremental selection process – judgment and intuition, bargaining and other methods to reach a final decision.

The incrementalist model works best in a relatively stable environment where managers can accurately predict movements and trends. In an environment that changes suddenly or abruptly, the incrementalist approach might prevent managers from changing quickly enough to meet new conditions. 4) The Unstructured Model (developed by Henry Mintzberg and his colleagues): The unstructured model of organizational decision making describes how decision making takes place when uncertainty is high. This model argues that decision making is not linear, sequential process but a process that may evolve unpredictably in an unstructured way. Decision making may be constantly interrupted because uncertainty in the environment alters managers’ interpretations of a problem. The managers must then generate new solutions and find new strategies that help the organization adapt to and modify its environment. This model emphasizes the unstructured nature of decision making: Managers make decisions in a haphazard, intuitive way, and uncertainty force them to constantly adjust and find new ways to behave in the constantly changing situation. The organization tries to make the best decisions it can, but uncertainty force it to adopt an unstructured way of making decisions. Thus the unstructured model tries to explain how organizations make the non-programmed decisions. 5) The Garbage Can Model (Dr. Michael D. Cohen (22 March 1945 - 2 February 2013 – professor in University of Michigan): The extreme level of unstructured decision making process is represented by the Garbage Can model. This model turns the decision making process around and argues that organizations are likely to start making decisions from the solution side rather than problem side. In other words, decision makers may pose solutions to problems that do not exist; hence they create a problem that they can solve with solutions that are already available.

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Under garbage can model, decision making arises in the following ways: a) An organization has a set of solutions, or skills with which it can solve certain problems b) Mangers create problems or decision making opportunities in the way that the skills and

solutions they possess can be used c) The solutions they possess are used to solve the problems and taken the advantage of

superiority In an organization different coalitions of managers may champion different alternatives and compete for resources to implement their own chosen solutions. Thus, decision making becomes like a “garbage can” in which problems, solutions, and the preference of different individuals and coalitions all mix and contend with one another for organizational attention and action. # Organizational Learning: Organizational learning is the process by which an organization gains new knowledge about its environment, goals, and processes. It is an important process that helps managers to make better non-programmed decisions – decisions that allow adopting to modify and change the environment to increase an organization’s chances of survival. It is the process through which managers seek to improve organization members’ desire and ability to understand and manage organization and its environment so that they make decisions that continuously raise organizational effectiveness. Hence, Organizational learning can be defined as a relatively permanent change in behavior that occurs as a result of experience. Organizational learning is vital process today for organizations to manage because of rapid pace of change affecting every organization. Organizations are racing to develop new and improved core competences and fighting to respond to the low-cost competitive challenges. They are searching for every opportunity to use advanced materials, technology and information system to more effectively pursue their strategies and manage their structures. For these said purposes, they must learn new ways to operate more efficiently if they are to survive. Hence, managers must understand how organizational learning occurs and the factors that can promote and impede it. There are two principal types of organizational learning that can be pursued: Exploration and Exploitation. a) Exploration: Exploration involves organizational members searching for and experimenting with new kinds or forms of organizational activities and procedures to increase effectiveness. Learning that involves exploration might involve finding new ways of managing the environment – such as experimenting with the use of strategic alliances and network organizations – or inventing new kinds of organizational structure for managing organizational resources – such as product team structure and cross-functional terms. Hence, it is revolutionary in nature. b) Exploitation: Exploitation involves organizational members learning ways to refine and improve existing organizational activities and procedures in order to increase effectiveness. Learning that involves exploitation might involving implementing a total quality management program to promote the continuous refinement existing operating procedures, or developing an improved set of rules to perform specific kinds of functional activities effectively. Hence, it is more evolutionary in nature.

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# Levels of Organizational Learning: In order to create a learning organization, managers generally need to create learning at four levels in an organization. a) Individual level learning: At the individual level managers need to use their effort to facilitate the learning of new skills, norms, and values so that individual can increase their own personal skills and abilities and thereby help build the organization’s core competencies. Organizations should empower individuals and allow them to experiment and create and explore what they want. The goal is to give employees the opportunities to develop an intense appreciation for their work that may lead to distinct competence for the organization. A learning organization can encourage employees to form complex mental models and develop a sense of personal mastery by providing them with the opportunity to assume more responsibility for their decisions. This can be done in variety of ways, such as; providing cross training, redesigning the job, reengineering etc. which may increase the level of organizational learning as the worker finds new ways to get the job done. b) Group level learning: At group level, managers need to encourage learning by promoting the use of various kinds of groups – such as self managed groups, cross-functional teams – so that individuals can share or pool their skills and abilities to solve problems. Group is helpful to join individual efforts and create synergy (the whole is more than the sum of individual) – which can enhance organizational effectiveness. Many scholars have argued that team learning is important than individual learning because most important decisions are made in subunits such as groups, functions, and divisions. Hence, creation of empowered work teams can take over full responsibility for measuring, monitoring and controlling their own behavior to find ways continuously to increase performance. c) Organizational level learning: At the organizational level, managers can promote organizational learning through the way of creating an organization’s structure and culture. Organization’s structure can be designed to inhibit or facilitate intergroup communication and problem solving. Both mechanistic and organic structures encourage different approaches to learning. The design of a mechanistic structure seems likely to facilitate exploitive learning where as the design of an organic structure seems more likely to facilitate explorative learning. Similarly, organizational culture is equally influencing factor for learning. An adoptive culture of an organization promote higher learning because managers can quickly introduce in a new way the organization operate that allow the organization to adapt to change occurring in the environment. d) Inter-organizational level learning: A linkage between organization leads to inter-organizational level learning. At this level learning organizations can improve their effectiveness by copying and imitating each others’ distinctive competencies. The mimetic, coercive and normative processes encourage organizations to learn from each other in order to increase their legitimacy and also increase their effectiveness. Organizations can also encourage explorative and exploitive learning by cooperating with their suppliers and distributors to find new and improved ways of handling inputs and outputs. By encouraging and promoting organizational learning at each of these four levels – by looking at organizational learning as a system – managers can create a learning organizations that facilitate a quick response to the changes in the environment that are constantly taking place around it.

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There are several factors that inhibit learning and lead to organizational inertia. If an organization achieves success, the successful standards and procedures, fear of unknown, cognitive structure, cognitive dissonance, illusion of control, frequency and repetitiveness, motivation level, learning context etc. are common factors affecting learning and make an organization passive in learning and acquiring knowledge. Following are the major reasons to affecting learning.

1. Cognitive structure 2. Cognitive dissonance 3. Illusion of control 4. Frequency and repetitiveness 5. Individual motivation 6. Learning context 7. Role of instructors and learners in the learning-scenario and how technology changes these

roles # Knowledge Management and Information Technology: Knowledge management was initially defined as the process of applying a systematic approach to the capture, structuring, management, and dissemination of knowledge throughout an organization to work faster, reuse best practices, and reduce cost. Knowledge management is a kind of IT-enabled organizational relationship that has important implications for both organizational learning and decision making. IT-enabled organizational structure allows for new kinds of tasks and job reporting relationships among electronically connected people that promote superior communication and coordination. It involves sharing and integrating of expertise within and between functions and divisions through real-time interconnected information technology. The most important benefit from utilizing knowledge management system is the development of synergies between people and groups which may result in competitive advantage in the form of product or service differentiation. Unlike more rigid bureaucratic organizing methods, IT-enabled organizations can respond more quickly to changing environmental conditions such as increased global competition. Basically, there are two approaches for knowledge management. a) Codification Approach: With a codification approach, knowledge (idea) is carefully collected, analyzed, and stored in database where it can be retrieved easily by users who input organization-specific commands and key-words (codes). Essentially, codification approach results in collection of standardized organization best practices and rules that can be drawn upon by anyone who needs them. It is a form of bureaucratic control that can result in major gains in technical efficiency and allow an organization better manage its environment. It opens up the possibility of achieving scale in knowledge reuse and thus growing the business. b) Personalization Approach: In a personalization approach, information systems are designed to show employees who in the organization might possess the knowledge they might need or who might have confronted a similar problem in the past. It involves dialogue between individuals rather than knowledge stored in the database. Information is transfer through one-to-one conversation. It involves developing a network for linking people so that tacit knowledge can be shared person-to-person. It is an approach to provide analytically rigorous advice on high level strategic problems by channeling individual expertise.

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# How firms manage their knowledge? Codification Personalization

Provides high quality, reliable and fact information using codified knowledge.

Provides analytically rigorous advice on high level strategic problems by channeling individual expertise.

Investment in once in knowledge assets; reuse it many times.

Charge high fees for high customized solution to unique problems

Develop an electronic document system that codifies stores, disseminates, and allows reuse of knowledge (people-to-people).

Develop network for linking people so that tacit knowledge can be shared (person to person).

Invest heavily in IT. The goal is to connect people with reusable codified knowledge.

Invest moderately in IT. The goal is to facilitate conversation and exchange of tacit knowledge.

# Innovation: Innovation is the process by which organizations use their resources and competencies to develop new or improved goods and services or to develop new production and operating system so that they can better respond to the needs of their customers and other stakeholders. Although innovation brings about change, it is also associated with a high level or risk because the outcomes of research and development activities are often uncertain. Changes in technology are at the heart of the innovation process, and at present the world is characterized by a rapid rate of technological change. Generally speaking, there are two types of innovation brought by technological change.

a) Quantum innovations b) Incremental innovations

a) Quantum innovations: New products or operating systems that incorporate a quantum technological improvement are referred to as quantum innovations. Quantum technological change refers to a fundamental shift in technology that revolutionizes products or the way in which they are produced. The introduction of Intel’s 4004 Microprocessor, the first “computer on a chip” is an example of quantum product innovation. c) Incremental innovations: Incremental innovations refer to the change brought by an incremental technological change. Incremental change represents that technological change which involves a refinement of some base technology. Flexible manufacturing, use of TQM are examples of incremental innovations. # Methods for Managing Innovation: There are several methods that can be used to manage innovation in an organizational setting. These methods also serve to overcome the resistance to the change. Following are the most widely used methods to raise the level of both quantum and incremental innovation. a) Project Management: A project is a subunit whose goal centers on developing the products or service on time, within budget, and in conformance with predetermined performance standard. Project management enables the process of leading and controlling the project so that it results in the effective creation of new or

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improved products. In the race to produce advance technological products quickly, a project has been proved as an effective and efficient tool. A project comprises a team of experts who possess skills and qualities to design and develop innovative products. Effective project begins with a clearly articulated plan that takes a product from its concept phase, to its initial test phase, to the modification phase, and to the final manufacturing or – in service – setup phase. b) Cross-functional Product Team: In a structured new product development effort cross-functional product team is critical element. An organization involves in research and development (R&D) activity where cross functional employees meet together with high level of coordination in product reengineering, process reengineering, material management, manufacturing and marketing. Hence, marketing, engineering, and manufacturing personnel become the core members of successful new product development teams. Effective leadership is assigned to coordinate and manage the cross functional diversified personnel effectively. c) Skunk Works: A skunk work is a task force, temporary team, which is created to expedite new product design and promote innovation by coordinating the activities of functional groups. This task force consists of members of engineering and research and developments and other support functions such as marketing and is assigned to other facilities, often at a location away from the rest of the organization. This setting provides the opportunity for the intensive face-to-face interaction necessary to generate successful innovation. Hence skunk works – as a small-organization-type setting in which team members have the opportunity and motivation to bring a new product to the market quickly. d) Joint Ventures: Joint ventures between two or more organizations, which jointly put their effort, are another important means of managing high-tech innovations. A joint venture allows organizations to combine their skills and technologies and pool their resources to embark on risky R&D projects. When both the companies share returns, risks and costs this often can result in the development of a stream of profitable new products. e) Innovation supportive structure and culture: Organizational structure influences the way people behave, creating the right setting is important to fostering an innovation. Increasing organizational size, its age, flexibility, level of growth etc. are equally influencing factors for innovation and ability of organization to introduce new products. Organizational culture also plays important role in shaping and promoting innovation. Values and norms can reinforce the entrepreneurial spirit and allow an organization to respond quickly and creatively to a changing environment. # Entrepreneurship and Creativity: The leaders for innovation and new product development in established organization are intrapreneurs, employees who notice opportunities for either quantum or incremental product improvements and responsible for managing the product development process to obtain them. Many managers, scientists, or researchers employed by existing companies engage in intrapreneurial activity. Entrepreneurs are on the other hand, people who start new business ventures and found organizations. They assume the risk and receive many of the returns associated with the new business venture. There

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is an interesting relationship between entrepreneurs and intrapreneurs. Many intrapreneurs become dissatisfied with their employers and set their own business and become entrepreneur. All innovation begins with creative ideas. It is important to realize, however, that creative ideas are not just those that lead to major new inventions or achievements: Creative ideas are any that take existing practices a step farther than the norm. Creativity is no more than going beyond the current boundaries, where those boundaries are technology, knowledge, social norm or beliefs. Creativity is the act of turning new and imaginative ideas into reality. Creativity is characterized by the ability to perceive the world in new ways, to find hidden patterns, to make connections between seemingly unrelated phenomena, and to generate solutions. Creativity involves two processes: thinking, then producing. If you have ideas, but don’t act on them, you are imaginative but not creative.

# Characteristics of an Entrepreneur:

Successful businesspeople have many traits in common with one another. They are confident and optimistic. They are disciplined self starters. They are open to any new ideas which cross their path. Here are ten traits of the successful entrepreneur.

1. Disciplined

These individuals are focused on making their businesses work, and eliminate any hindrances or distractions to their goals. They have overarching strategies and outline the tactics to accomplish them. Successful entrepreneurs are disciplined enough to take steps every day toward the achievement of their objectives.

2. Confidence

The entrepreneur does not ask questions about whether they can succeed or whether they are worthy of success. They are confident with the knowledge that they will make their businesses succeed. They exude that confidence in everything they do.

3. Open Minded

Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly being generated about workflows and efficiency, people skills and potential new businesses. They have the ability to look at everything around them and focus it toward their goals.

4. Self Starter

Entrepreneurs know that if something needs to be done, they should start it themselves. They set the parameters and make sure that projects follow that path. They are proactive, not waiting for someone to give them permission.

5. Competitive

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Many companies are formed because an entrepreneur knows that they can do a job better than another. They need to win at the sports they play and need to win at the businesses that they create. An entrepreneur will highlight their own company’s track record of success.

6. Creativity

One facet of creativity is being able to make connections between seemingly unrelated events or situations. Entrepreneurs often come up with solutions which are the synthesis of other items. They will repurpose products to market them to new industries.

7. Determination

Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity for success. They are determined to make all of their endeavors succeed, so will try and try again until it does. Successful entrepreneurs do not believe that something cannot be done.

8. Strong people skills

The entrepreneur has strong communication skills to sell the product and motivate employees. Most successful entrepreneurs know how to motivate their employees so the business grows overall. They are very good at highlighting the benefits of any situation and coaching others to their success.

9. Strong work ethic

The successful entrepreneur will often be the first person to arrive at the office and the last one to leave. They will come in on their days off to make sure that an outcome meets their expectations. Their mind is constantly on their work, whether they are in or out of the workplace.

10. Passion

Passion is the most important trait of the successful entrepreneur. They genuinely love their work. They are willing to put in those extra hours to make the business succeed because there is a joy their business gives which goes beyond the money. The successful entrepreneur will always be reading and researching ways to make the business better.

How to foster Creativity in an Organization?

Creativity drives problem solving, innovation and entrepreneurship. It is a critical skill (and mindset) that leads to new and more efficient solutions to existing problems. It also enables individuals and organizations to find ways to address customers’ needs as a differentiating factor. In theory, creativity is widely praised and desired. But, in reality, creative solutions are often met with pushback, reluctance and even hostility.

“Being creative is going to be associated with a lot of failure,” says Dr. Lynne Vincent, co-author of Outside Advantage: Can Social Rejection Fuel Creative Thought? “You have to have the confidence to persevere and continue on past the hurdles and barriers.”

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People say they value creativity, but in reality they celebrate the successful outcome of its implementation. Following are the main instruments to foster creativity in an organization.

1. Training and Development 2. Motivation/Inducement 3. Involvement/ Participation

# Organizational Conflict: An organization consists of different stakeholders, each of which contributes to the organization in return for rewards. Stakeholders need to cooperate with one another to jointly contribute for the organization. Stakeholders such as employees, management, and shareholders, however, compete over their share of the rewards and resources that the organization generates. Conflict arises when one group of stakeholder pursues its own interest at the expense of other groups. It is the state of disagreement in the interest between stakeholders. Because the goals, preferences, and interests of stakeholder groups differ, conflict is inevitable in organizations. Although conflict is often perceived as something negative, researcher suggests that some level of conflict is good for an organization and can improve organizational effectiveness. Beyond some point however, extreme conflict can hurt organizational performance. Conflict can be beneficial because it can overcome organizational inertia and lead to organizational learning and change. Conflict between stakeholder groups can improve decision making and organizational learning by revealing new ways of looking at a problem putting together the constructive ideas. It can be both functional and dysfunctional as visualized in the figure. Functional Outcomes: • Conflict may stimulate innovation, creativity, and growth. • Organizational decision making may be improved. • Alternative solutions to a problem may be found. • Conflict may lead to synergistic solutions to common problems. • Individual and group performance may be enhanced.

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• Individuals and groups may be forced to search for new approaches. • Individuals and groups may be required to articulate and clarify their positions. Dysfunctional Outcomes: • Conflict may cause job stress, burnout, and dissatisfaction. • Communication between individuals and groups may be reduced. • A climate of distrust and suspicion can be developed. • Relationships may be damaged. • Job performance may be reduced. • Resistance to change can increase. • Organizational commitment and loyalty may be affected. Conflicts are of various types. Several types of conflicting situations confront organizations. Understanding how these types of conflicts differ can help managers to deal with them. The various types of conflict that might take place in an organization are as following:

a) Intrapersonal conflict b) Interpersonal conflict c) Intrateam conflict d) Interteam conflict e) Intra-organizational Conflict f) Inter-organizational Conflict

# Sources of Conflict: Mainly horizontal and vertical differentiation with the establishment of organizational subunits (functions) with different goals, preferences and perceptions lead to organizational conflict. The five main sources of organizational conflict can be discussed as following. a) Interdependence: As organizations differentiate, each functional unit develops a desire for autonomy and begins to pursue goals and interests that it values over the goals of other units. Because the activities of different functional units are interdependent, functional unit’s desire for autonomy leads to conflict between groups. b) Difference in goals: Difference in functional unit’s orientation affect the way each function or division views the world and cause each subunit to pursue different goals that are often inconsistent or incompatible. Once goals become incompatible, the potential for conflict arises because the goals of one subunit may affect negatively the ability of another to achieve its goals. c) Bureaucratic factors: The way in which relationships develop in organizations can also be a potential source of conflict. Over time, conflict can occur because of status inconsistencies between different groups in the organization’s bureaucracy. A classic type of bureaucratic conflict occurs between line and staff functions. d) Incompatible performance criteria: Sometimes conflict arises between functional units not because their goals are incompatible but because of the organization’s way of monitoring, evaluating, and rewarding different units brings them into conflict. For example the reward to sales function only for achieving sales target may

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hinder the manufacturing function (there is a common thought that sales are possible due to timely production). e) Competition for scarce resources: When resources go scarce, allocations have to be made, and functional units have to compete for their share. If there is limited budget, there can be conflict over the amount of funds to allocate to sales, or to manufacturing, or to R&D to meet their objectives. Thus, to increase access to resources, functions promote their interest and importance often at one another’s expense. # Conflict resolution strategies and techniques: There are different strategies and techniques that can be used to manage and resolve conflict. Different scholars have presented various strategy and techniques to manage conflict. Understanding conflict management techniques and strategies help management to work out a creative solution for it. Following are most commonly used strategies and technique to reduce and manage conflicts. a) Expansion of Resources: When conflict is predicted upon the scarcity of resources (money, materials, machines, office space etc.), the most suitable technique to resolve the conflict is through the expansion of these resources. If the resource base is expanded, everyone gets the required amount of resources to get the assigned job done. Expanding resources as a resolution technique is extremely successful because it leaves the conflicting parties satisfied and create a win-win situation. b) Avoidance: Conflict of minor nature are ignored and avoided. No attention is paid to such conflicts. The belief of some managers is that with the passes of time, conflicts of trivial nature are automatically resolved. This approach is based on “no winner- no looser” strategy. c) Force/ power: People who tend towards a forcing (competing) style take a firm stand. They usually operate from a position of power, drawn from things like position, rank, expertise, or persuasive ability. This style can be useful when there is an emergency and a decision needs to be made fast; when the decision is unpopular; or when defending against someone who is trying to exploit the situation selfishly. d) Compromise: It is based on the principal: “I sacrifice a little so do you.” Negotiations are held for the settlement of issues and conflicts usually through the intervention of managers. In compromising, each party to the conflict gives up something. Hence, this technique uses a “lose-lose” strategy. e) Third party intermediary: When the conflict cannot be solved internally, neutral outside negotiator, conciliator, mediator or arbitrator/s can be brought in to solve the conflict. They try to facilitate negotiated solutions. A negotiated agreement can become a contract and be enforceable. This technique is widely used in solving labour-management conflicts. This technique generally follows “win-win” strategy. f) Legislation/ Appeals: Litigation is the use of the courts and civil justice system to resolve legal controversies. It begins by filing a lawsuit in a court. Specific rules of procedure, discovery and presentation of evidence must be followed. If the parties cannot agree how to settle the case, either the judge or a jury will decide the dispute. The decision is made by applying the facts of the case to the applicable law. That verdict or decision can conclude the litigation process and be enforceable; however, if appropriate, the loser can appeal the decision to a higher court.

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# Organizational Power: Power is an attribute of an individual’s influence over other individual. Organizational power is the ability of A to cause B to do something that B would not otherwise have done. Organizational power is the mechanism through which conflicts gets resolved. It can be defined as the ability of one person or group to overcome resistance by others to achieve a desired objective or result. Power can influence, shape or control the behavior of others. Organizational power is defined as the capacity to produce intended effects in the organization. It can be noted as:

the ability to control the behavior of another person capacity to mobilize people and resources to get things done reflects actions of any individual or organizational system that controls the behavior or beliefs

of an organizational member power is the capacity or ability to influence organizational outcomes relationships in the workplace affect one’s power to mobilize employees and resources to get

things done # Sources of Power: There are various sources or bases of power in the workplace. Power bases refer to individuals’ resources that constitute the foundation to control other individuals. Power in the workplace is an important concept to managers because they must mobilize employees and resources to get things done. It is also important for managers to be aware of the relationship between the use of power and subordinate satisfaction and organizational commitment. To be an effective manger, one must be aware of his base/s of power, select the appropriate base/s of power given the situation, and engage in an appropriate strategy to use the power base/s. Sources of power are categorized as: legitimate, reward, expert, referent, and coercive power. a) Legitimate Power Legitimate Power is based on the manager’s position in the organization and is validated by the members of the organization. The formal organizational structure provides the framework to enact legitimate power because it defines the rights and responsibilities within the organization, and it establishes the hierarchy. b. Reward Power Reward Power is based on the manager’s ability to control and administer rewards (such as money, praise, or promotions) to his subordinates. Rewards may also be formal, informal and in this case, that exist as a perception of the employee. For example, an employee may perceive his manager’s respect, autonomy, and personal approval as a result of exemplary performance. c. Expert Power Expert Power is based upon the manager’s knowledge, expertise, skills, or abilities concerning his job. Expert power is apt to be accomplished through reasoning and empowerment activities. Expert power is independent of hierarchal position and job title, and it is considered a source of personal power within the workplace. A common example is the “employee of the month,” who is selected for his diligence, attitude, and expertise. d. Referent Power Referent Power is based upon others’ desire to emulate the manager. Managers with referent power likely have an ability or quality that subordinates identify with. For example, if a manager is admired and respected (for numerous reasons), his subordinates may emulate his characteristics in order to gain the same admiration and respect. The term “Be Like Anil” is an example of the referent power.

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There are positive relationships between referent and expert power in part because they both can lead to admiration and emulation. One may infer that these positive relationships suggest that referent power is independent of hierarchal position and job title, as well. e. Coercive Power Coercive Power is based on the ability of the manager to control and administer punishment (such as pay cuts, verbal reprimands, or demotions) to his subordinates. Coercive power is used when employee actions are incongruent with workplace policies, codes, and procedures and with organizational expectations. # Organizational Politics: Organizational politics is defined as; activities taken within organizations to acquire, develop, and use power and other resources to obtain one’s preferred outcomes in a situation in which there is uncertainty or disagreements about choices. OP is usually defined as behavior strategically designed to maximize self-interests and therefore contradicts the collective organizational goals or the interests of other individuals. Organizational politics is perceived as self-serving behavior by employees to achieve self-interests, advantages, and benefits at the expense of others and sometimes contrary to the interests of the entire organization or work unit. To mange the change process and to get conflict resolved in their favor, individuals, subunits, and coalitions often engage in political activity and behavior to enhance the power and influence they have. This behavior was frequently associated with manipulation, defamation, subversiveness, and illegitimate ways of overusing power to attain one’s objectives. Even if organizational members or units have no personal desire to play politics, they still must understand how politics operates because sooner or later political member gets benefited personally than the non-political member. # Tactics for playing organizational politics: Individuals or units in an organization use different strategies and tactics to increase their chance of winning the political game. The reward for success in change that gives them greater shares of organizational resources –authority, money, status, and so on. a) Increasing Non-substitutability: Will managers deliberately engage in behaviors and actions that make them non-substitutable? They may develop specialized organizational skills, such as knowledge of computers that allow them to solve problems for other managers. Individuals and subunits that use these tactics are often called in to solve problems as they arise, and the ability to come up with solution increases their status and prestige. b) Increasing Centrality: Taking positions at a central level can enhance their personal reputation and that of their function. By being central, they may also enhance their ability to obtain information that they can use to make themselves and their functions non-substitutable pursue personal goals, such as supply of scare resources. c) Association with Powerful Managers: Another political way of getting power is by attaching owenself to powerful managers who are clearly on their way to the top. By supporting a powerful manager and making oneself indispensable to that person, it possible to create a good relationship with powerful managers. d) Building Coalition:

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Forming a coalition of different interests, stakeholders, individual, and units around some common issue is a political tactic that a manger can use to obtain the power to resolve a conflict in her or his favor. Coalitions can be built through many levels in an organization, between various functions, divisions, and between important external or internal stakeholders. A good level of coordination and sharing is important to create powerful coalition to employ for politics. e) Influencing Decision Making: Important and influencing decision making is an important political tactic a manager, group or divisional unit can pursue to acquire, increase and use power. Not only possessing power, but also knowing how and when to use it is equally important. Influencing and important decisions of managers prove managers non-substitutability. f) Controlling the Agenda: Controlling the agenda, managers are able to control the issues and problems to be considered by important decision makers. The ability to control the agenda is similar to the ability to control the premises of decision making. This tactic gives space to play politics and gain personal interest. # Effects of Organizational Politics: Organizational politics is an integral part of decision making in an organization. Coalitions form to control the premises behind decision making, to lobby for their interest, to control the path or organizational change and to resolve conflict in their own favor. Similarly, politics plays important role to control the scarce resources. Politics is not aside in the course of changing organization structure and strategy. Politics actively plays its role in every major organizational decision and may have positive impacts upon organization. It can improve the choices and decisions that an organization makes, but it can also produce problems and promote conflict if it is not managed skillfully. To manage organizational politics and gain its benefits, an organization must establish a balance of power in which alternative views and solutions can be offered and considered by all parties and dissenting views can be heard. An organization that confers power to shift over time, toward those who can promote the changes that will help it the most can take advantage of the political process to improve the quality of organizational decision making. By allowing managers to use their power to advance their future objectives, an organization can improve the quality of decision making by encouraging useful and productive debate about alternatives. The politics can improve organizational effectiveness if it results in change that allocates resources to where they can produce more value. There should a proper balance the power and politics in an organization to produce positive outcomes. When stakeholders or units do not force the allocation of resources to where they can best create value, organizational effectiveness suffers. When powerful managers can suppress the views of those who oppose their interests, debate becomes restricted, checks and balances fade, bad conflict increases, and organizational inertia increases. Hence, politics and power benefit if managed well, but harm an organization if not managed properly.

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Part – IV: Organizational Development and Design # Organizational Development: Theory and practice of planned, systematic change in the attitudes, beliefs, and values of the employees through creation and reinforcement of long-term training programs. Organizational development is a field of study that helps organizations to introduce planned change. OD is action oriented. It starts with a careful organization-wise analysis of the current situation and of the future requirements, and employs techniques of behavioral sciences such as behavior modeling, sensitivity training, and transactional analysis. Its objective is to enable the organization in adopting-better to the fast-changing external environment of new markets, regulations, and technologies. In the word of Cummings and Worley - “Organization development is a system wide application and transfer of behavioral science knowledge to the planned development, improvement, and reinforcement of strategies, structures, and processes that lead to organization effectiveness” There is no single definition of organizational development. It is defined by different scholars in many different ways. If we go to these definitions, we summarize OD in the following points.

OD is systematic approach to planned change. OD values human and organizational growth. The goal is to increase the health and performance of

organization, while enriching the lives of its members. OD is an educational approach to change the belief, attitudes, values and structure of organization. OD involves the application of behavioral science theory and research to enhance organizational

functioning. The purpose of OD is to increase motivation, remove obstacles, and make change easier.

# Organizational Development Process: 1. Initial Diagnosis: The initial diagnosis refers to finding the inadequacies within the organization that can be corrected by OD activities then it is necessary to find out the professionally competent persons within organization to plan and execute OD activities. The outside consultants can be also employed to help in diagnosing the problems

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and diagnosing OD activities. The consultants adopt various methods and that primarily includes interviews, questionnaires, direct observation, analysis of documents and reports for diagnosing the problem. 2. Data Collection: The survey method is employed to collect the data for determining organizational climate. It also helps in identifying the behavioral problems that are rising in the organization. 3. Data Feedback: The collected data are analyzed and reviewed by various work groups that are formed for this purpose. It is done in order to intervene in the areas of disagreement or confrontation of ideas or opinions. 4) Selection of Interventions: The interventions can be described as the planned activities that are introduced into the system to achieve desired changes and improvements. The suitable interventions are to be selected and designed at this stage. 5) Implementation of Interventions: The selected intervention should be implemented progressively as the process is not a one shot, quick cure for organizational problems. Consequently, it achieves real and lasting change in the attitudes and behavior of employees. 6) Action Planning and Problem Solving: To solve the specific and identified problems by using the collected data, groups prepare recommendations and specific action planning. 7) Team Building: The consultants explain the advantages of the teams in OD process and encourage the employees throughout the process to form into groups and teams. 8) Inter-group Development: After the formation of groups/teams, the consultants encourage the inter-group meetings, interaction etc. 9) Evaluation and follow up: The organization should evaluate the OD programmes and should find out their utility, and develop the programmes further for correcting the deviations. The consultants make great significance to the organization in this respect. The entire steps in the OD processes should be followed by the organization in order to derive full range of OD benefits. # Organizational Design: The term organizational design refers to the structure or architecture by which organization operates. To organize and control, management must design an organizational architecture that makes the best use of resources to produces the goods and services customers want. Organizational design thus constitutes the building block of an organization. This architecture is the combination of the organizational structure, control systems, culture, and human resource management system that determines how efficiently and effectively organizational resources are used. # Basic challenges of organizational Design: The two basic building block of organizational design are: differentiation (allocation of people to tasks) and integration (coordination between people or functions or divisions). The principal design challenge is how to manage differentiation and integration to achieve its goals. The principal challenges of organizational design are as following: a) Differentiation: Differentiation is the process by which an organization allocates people and resources to organizational tasks and establishes the task authority relationships that allow the organization to achieve its goals. In other words, it is the process of establishing and controlling the division of labor, or degree of specialization, in the organization. In simple organization, differentiation is low because the division of labour is low. Few people perform all organizational tasks, so there are problems with coordinating who does what, for whom and when. With growth, however, comes complexity. In large and complex organization division of labour and differentiation is high. i) Vertical differentiation: Vertical differentiation refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link the organizational roles (set of task related behaviors required in a position) and subunits (functions). Vertical differentiation establishes the distribution of authority between levels to give the organization more control over its activities and increase its ability to create value. ii) Horizontal differentiation: Horizontal differentiation refers to the way an organization groups organizational tasks into roles and roles into subunits (functions and divisions). Horizontal differentiation establishes the division of labour, which enables people in the organization to become more specialized and productive and increases the organization’s ability to create value.

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iii) Organizational Roles: An organizational role is a set of task-related behaviors required of a person by the concerned positions in the organization. Certain role with identifiable tasks and responsibilities of an individual employee helps to make accountable in his/her duty. As the division of labour increases in an organization, managers specialize in some roles and hire people to specialize in others. Organization structure is based on the system of interrelated roles, and the relationship of one role to another is defined by task-related behaviors. Some roles require managers to make them accountable by monitoring and controlling using authority. The differentiation of an organization into individuals and individual organizational roles results in clear authority and responsibility requirements for each role in the system. Authority is the power to hold people accountable for their actions, where as control are the act to coordinate and motivate people in the organization’s interest. iv) Subunits (Functions and Divisions): People with similar and related roles are grouped into a subunit. The main subunits that are developed in organizations are Functions (departments) and divisions. A function is a subunit composed of a group of people working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs. Similarly, a division is a subunit that consists of a collection of functions or departments that share responsibility for producing a particular goods or services. The number of different functions and divisions that an organization possesses is a measure of the organization’s complexity –its degree of differentiation. Differentiation into functions and divisions increases an organizations control over its activities and allows the organization to accomplish its task more effectively. As organizations grow in size, they differentiate into five different kinds of functions:

1. Support function: Facilitate an organization’s control of its relations with its environment and its stakeholders. Support functions include purchasing (to handle the acquisition of inputs), marketing and sales (to handle the disposal of outputs), and public relations and legal affairs (to respond to the need of outside stakeholders).

2. Production function: Manage and improve the efficiency of an organization’s conversion process so that more value is created. Production may include production operation, production control, and quality control.

3. Maintenance function: Enables an organization to keep its departments in operation. Maintenance function include personnel (to recruit and train workers and improve skills), engineering (to repair broken machinery and maintenance service).

4. Adaptive function: Allow an organization to adjust to changes in the environment. Adaptive functions include research and development, market research, and long range planning, which will allow an organization to learn from and attempt to manage its environment and thus increase core competencies.

5. Managerial function: Facilitate the control and coordination of activities within and among departments. Managers at different organizational level direct the acquisition of, investment in, and control of resources to improve the organization’s ability to create value.

b) Integration: Horizontal differentiation is supposed to enable people to specialize and thus become more productive. However, it may limits communication and coordination between subunits and prevent from learning from one another. As a result of horizontal differentiation, the members of different functions or divisions develop a subunit orientation towards self goals and interest. Hence, different function see things differently, communication fails and coordination becomes difficult. To avoid the communication problems arisen from horizontal differentiation, organization try to find new or better ways to integrate functions. To maintain balance between differentiation and integration, organizations may use fallowing mechanisms. i) Delegation of authority: As hierarchy dictates who reports to whom, it coordinates various organizational roles. Managers must carefully divide and allocate authority within a function and between function to promote coordination. ii) Direct contact: Direct contact between people in different subunits is an integrating mechanism that is more complex than creating hierarchy and delegating authority. The main problem with integration across functions is

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that a manager in one function has no authority over a manager in another. Direct contact between managers helps them to work together to solve common problems. iii) Liaison role: When the need for communication among subunits increases, one member or few members from subunits are likely made responsible assigning such role for coordinating with subunits. This role helps to overcome communication barriers between subunits. iv) Task forces or teams: As organizations grow, a taskforce, a temporary committee is setup to facilitate communication and coordination among different units. This task force makes each department and units put their effort together to serve customers effectively. When the issue a task force is dealing with becomes an ongoing strategic or administrative issue, the task force becomes a permanent team. v) Integration of roles and departments: As organizations become large and complex, communication barriers between functions and divisions are likely to increase. To overcome this problem, an integrating role or an integrating department is created to coordinate the activities of functions or divisions. c) Centralization and Decentralization: When the authority to make important decisions is retained by managers at the top of the hierarchy, authority is said to be highly centralized. By contrast, when the authority to make decisions about the use of organizational resources to initiate new projects is delegated to managers at all levels in the hierarchy, authority is highly decentralized. Each alternative has certain advantages and disadvantages. Centralizations becomes problem, when top managers become overloaded and so involved in operational decision making that they have no time for long term strategic decision making. The advantages of decentralization is that it promotes flexibility and responsiveness by allowing lower level managers to make on-the-spot decisions. However, over high decentralization may leads to weak coordination and control. d) Standardization and Mutual Adjustment: Strictly following written rules and standard operating procedures, and unwritten values and norms may discourage innovation, leave no space for creativity, and slow downs the decision making and performance level. The change facing all organizations is to design a structure that achieves the right balance between standardization and mutual adjustment. Standardization is conformity to specific models; for example –defined by set of rules and norms that are proper in a given situation. Standardized decision making makes organization inflexible, inadoptive and highly bureaucratic. Mutual adjustment on the other hand is the process through which people use their judgment rather than standardized rules to address problems, guide decision making, and promote coordination. It gives employees the freedom to behave in such a way that they can respond to new and changing situations creatively. # Organizational Structure and Authority & Control: Tall shape and flat shape of organizational structure are two widely used structures to put effort together to attain the desired objectives. Different hierarchies are made to furnish the structure and facilitate coordination and control. Deciding how much authority to centralize at the top of the hierarchy and how much to decentralize to middle and lower levels is a basic challenge to design organization structure. The shape of the organizational structure determines how effectively the organizations decision-making and communication works. Decisions concerning the shape of the hierarchy and the balance between centralized and decentralized decision making establishes the extent of vertical differentiation in an organization. An organization’s hierarchy begins to emerge when the organization experiences problems in coordinating and motivating employees. As an organization grows, employees increase in number and begin to specialize; performing widely different kinds of tasks; the level of differentiation increase, and the coordinating and controlling employees’ activities become more difficult. The division of labour and specialization produce motivational problems. Moreover, if people are cooperating to achieve a goal, it is difficult to measure individual contributions and to reward individuals for their personal contributions. An organization does two things to improve its ability to control i.e. to coordinate and motivate -its members.

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1. Increases number of managers: Number of managers it uses to monitor, evaluate and reward employees is increased.

2. Increases the number of hierarchy: The number of hierarchical levels is increased there by making the hierarchy of authority taller.

Increasing both the number of managers and the levels of management increases vertical differentiation and gives the organization direct, face-to-face control over its members –managers personally control their subordinates. Direct supervision is vital because managers can continually question, probe, consult, motivate promote on-the-job learning and enhance self skills in the work place. Thus, personal supervision can be a very effective way of motivating employees and promoting behaviors that increase effectiveness. Personal authority relationship in an organization is taken as the most significant to crate and bond people into an organization. # Tall and Flat Organizations: An organization in which the hierarchy has many levels relative to the size of organization is a tall organization. An organization that has few levels in its hierarchy is a flat organization. Tall organization has more levels and thus uses more managers personally to direct and control members’ activities in comparison to flat organizations. There are large number of job titles and a career path to the employee. Fewer numbers of subordinates a particular manager is required to guide, the organizational structure would be taller. Contrarily, a flat structure would have wide span of management. The number of hierarchy would be less. Larger the number of subordinates a particular manager is required to guide the organizational structure would be flatter. Choosing an appropriate span of management is important for two reasons. First, it affects efficiency. Too wide a span may mean that managers are over extended and subordinates are receiving too little guidance or control. When this happens, managers may be pressured to ignore or condone serious errors. In contrast, too narrow a span may mean that managers are underutilized. Thus, the extent of division of work, the nature of delegation of authority, the process of departmentation and the requirement of effective supervision i.e., span of control influence the designing of organization structure. The advantages and disadvantages of tall and flat organization structure are: 1. Tall Structure:

a) Advantages of Tall Organization

1. The quality of performance will improve due to close supervision. 2. Discipline will improve. 3. Superior - Subordinate relations will improve. 4. Control and Supervision will become easy and convenient. 5. The manager gets more time to plan and organize the future activities. 6. The efforts of subordinates can be easily coordinated. 7. Tall Organization encourages development of staff. 8. There is mutual trust between superior and subordinates.

b) Disadvantages of Tall Organization

1. Tall Organization creates many levels of management. 2. There are many delays and distortion in communication. 3. Decisions and actions are delayed. 4. It is very costly because there are many managers. (managers are paid high salaries) 5. It is difficult to coordinate the activities of different levels. 6. There is strict supervision. So the subordinates do not have any freedom. 7. Tall Organization is not suitable for routine and standardized jobs. 8. Here, managers may become more dominating.

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2. Flat Structure:

a) Advantages of Flat Organization

1. Flat Organization is less costly because it has only few managers. 2. It creates fewer levels of management. 3. Quick decisions and actions can be taken because it has only a few levels of management. 4. Fast and clear communication is possible among these few levels of management. 5. Subordinates are free from close and strict supervision and control. 6. It is more suitable for routine and standardized activities. 7. Superiors may not be too dominating because of large numbers of subordinates.

b) Disadvantages of Flat Organization

1. There are chances of loose control because there are many subordinates under one manager. 2. The discipline in the organization may be bad due to loose control. 3. The relations between the superiors and subordinates may be bad. Close and informal relations may not be

possible. 4. There may be problems of team work because there are many subordinates under one manager. 5. Flat organization structure may create problems of coordination between various subordinates. 6. Efficient and experienced superiors are required to manage a large number of subordinates. 7. It may not be suitable for complex activities. 8. The quality of performance may be weak.

# Ideal Organizational Structure: An organizational structure that optimizes the capabilities to compete in a given market is said to be an ideal organization structure. Several factors affect the structure of an organization. Following are the key factors to be considered in designing optimal or ideal organizational structure where effective coordination and control is possible at minimal cost. a) Chain of Command: A general principal for designing a hierarchy is the principal of minimum chain of command. According the principal of minimum chain of command, an organization should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it exists. In other words, the organization should be kept as flat as possible, and managers should be evaluated for their ability to control organizational activities with the smallest number of managers possible. An organization with a flat structure will experience fewer communications, motivation, and cost problems than will a tall organization. The only reason why an organization should choose a tall structure over flat structure is that it needs a high level of direct control or supervision over subordinates. b) Span of Control: Too much tall structure may create problems in the organization. To prevent from making tall organization, organizations can increase the managers’ span of control –the number of subordinates a manager directly manages. If the span of control of each manager increases as the number of employee increases, then the number of managers or hierarchical levels does not increase in proportion to increase in the number of employees. However, while determining the span of control, the complexity of tasks should be considered because if managers become overloaded, the organization can lose control of its activities. c) Shape of the Hierarchy: Generally large organizations increase the level of horizontal differentiation for effective operation. Horizontal differentiation leads to the emergence of specialized subunits –functions or divisions. For making effective structure, each function should choose the lowest number of hierarchical levels i.e. should be flat as far as possible. Horizontal differentiation avoids many of the problems of tall hierarchies because it leads to the development of many subunits hierarchies, which allow the organization to remain flat.

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d) Decentralization: Decentralization largely overcomes the work load of managers for close monitoring and supervision. When authority is decentralized, the authority to make significant decisions is delegated to people throughout the hierarchy, not centralized at the top. Decentralization of authority to the lower level managers reduces the monitoring burden on upper level managers and reduces the need for managers to monitor subordinates. This also enhances quick and efficient decisions to solve the problems at the work place. e) Standardization: Managers can gain control over organizational activities by standardizing work activities to make them predictable. Standardization reduces the need for managers and extra levels in the hierarchy because rules and standard operating procedures substitute for direct supervision. Organizations standardize activities by creating detailed work rules and by socializing employees to organizational norms and values. As subordinates’ tasks are increasingly standardized and controlled by means of rules and norms, and the amount of supervision that is required lessens, a manager’s span of control can be increased. # Organizational Structure and Specialization & Coordination: The working relationships — vertical and horizontal associations between individuals and groups — that exist within an organization affect how its activities are accomplished and coordinated. Effective organizing depends on the mastery of several important concepts: work specialization, chain of command, authority, delegation, span of control, and centralization versus decentralization. One popular organizational concept is based on the fundamental principle that employees can work more efficiently if they're allowed to specialize. Work specialization, sometimes called division of labor, is the degree to which organizational tasks are divided into separate jobs. Employees within each department perform only the tasks related to their specialized function. When specialization is extensive, employees specialize in a single task, such as running a particular machine in a factory assembly line. Jobs tend to be small, but workers can perform them efficiently. Organizations exist to coordinate complementary activities in the presence of specialization. Different organizational structures, through their impact on the information available and the incentives of decision makers, involve tradeoffs in the type and level of synergies and coordination that can be achieved.

a) Functional Structure: functional structure is arguably the most common type of organizational structure. The objective of most small companies is to group their workers by department as their businesses grows, and grouping workers by various functions often makes the most sense. Companies that use functional structures divide their departments by functions such as marketing, accounting, engineering and business development. An advantage of the functional structure is that grouping jobs by skills and knowledge enables a greater efficiency of human resources. Departments are likely to make the right management decisions because of the combined expertise.

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Functional structure is the bedrock of horizontal differentiation. An organization groups tasks into functions to increase the effectiveness with which it achieves its principal goal: providing customers with high-quality products at reasonable prices. As a function specializes, skills and abilities improve, and the core competencies that give an organization a competitive advantage. Advantages: 1. Division of labor: The natural division of labor associated with the formation and maintenance of functional groups allows the members of each group to become more specialized and productive and creates opportunities for them to continuously learn and improve through their interactions with other group members. 2. Consistency in task and training: Since the members of each functional group are brought together and linked by their common skills, education and training, it is easier for them to supervise one another and control the activities and behavior of all of the members of the group. 3. Functional efficiency: The consistent interaction and collaboration among group members ultimately leads to a team orientation that makes the group more effective in tackling and completing the projects assigned by the senior managers overseeing all of the functional groups. 4. Efficient use of resources: The functional structure facilitates segregation of company assets and resources into the areas that are most important for the company’s success and thus makes it easier for senior management to identify, manage and control resource deployment during a time when the company is growing rapidly and adding new resources quickly. Disadvantages: 1. Communication problem: As the company creates more functional groups, and each of those groups expands and develops it own unique hierarchy and system of interaction among members of the group, the chances of communication problems between groups increases substantially. Not surprisingly, each functional group begins to develop its own orientation towards its own goal. 2. Measurement problem: As the company grows and creates new functional groups and adds new products and services it becomes more difficult for senior management to identify and measure the contribution that each employee and functional group is making to the necessary activities of the company. 3. Control problem: The problem facing a successful organization is how to keep control of increasingly complex activities as it grows and differentiates. As it produces more and more products, becomes geographically diverse, or faces increasing competition for customers, control problems impede the organization’s ability to coordinate and control activities. 4. Customers problems: Serving the needs of new kinds of customers and tailoring products to suit them are relatively difficult in a functional structure. Functions like production, marketing, and sales have little opportunity to specialize in the needs of a particular customer group; instead, they are responsible for servicing the complete product range. 5. Strategic problems: Top management may spend so much time trying to find solutions to everyday coordination problems that they have no time to address the longer term strategic problems facing the company. As a result, the organization may lose the direction. b) Divisional Structure: Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas. A divisional structure group functions according to the specific demands of products, markets or customers. Divisional structure can be formed on different base. The type of divisional structure managers select depends on the specific control problems to be solved. If the control problem is due to the number and complexity of products,

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the organization will divide its activities by product and use a product structure. If the control problem is due to the number of locations in which the organization produces and sells its products, the organization will divide its activities by region and use a geographic structure. Similarly, if the control problem is due to the need to serve a large number of different customer groups, the organization will divide its activities by customer group and use a market structure. The benefit of this structure is that needs could be met more rapidly and more specifically; however, communication is inhibited because employees in different divisions are not working together. Divisional structure is costly because of its size and scope. i) Product divisional Structure: A product divisional structure is a structure in which a centralized set of support functions service the needs of a number of different product lines. In other words, in product structure products (goods or services) are grouped into separate divisions, according to their similarities or differences, to increase control. This design decision increases the differentiation within the organization, for each division a separate manufacturing unit that has its own hierarchy headed by a product division manager. Each product manager is responsible for his/her division’s manufacturing, services and coordination. An organization producing completely differentiated products, such as automobiles and food items, product divisional structure cannot provide a proper control the organization needs. For this purpose a multidivisional structure is used. In multidivisional structure, each division is independent and self- contained. When divisions are self contained, each division has its own set of support functions and controls its own value creation activities. Advantages: 1) Organizational effectiveness: A division of labour generally increases organizational effectiveness. In a product structure there is a clear division of labour between different product groups. In multidivisional structure division of labour can be found to a large extent. 2) Control:

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The control position in simple product structure and multidivisional structure is much strong. The extra control provided by the corporate office can encourage the stronger pursuit of internal organizational efficiency by divisional managers. 3) Profitable growth: The corporate executives can make better capital resource allocation decisions to products and divisions so that investment of fund is likely to yield higher returns. 4) Employees career paths: Since, there are more levels, divisions and functions, employees have more chance to be promoted and enhanced their professional career. A large divisional company possesses an internal labour market, which increases motivation for people at all levels to increase organizational performance level. Disadvantages: 1) Coordination problem: When multidivisional structure is created, divisions may begin to compete for resources and the rivalry relations may be developed which may prevent them from cooperating with each other. 2. Bureaucratic cost: Product structure and multidivisional structures are very expensive to operate. Each division has a full complement of support functions, including research and development. Thus increases bureaucratic costs. 3. Communication problem: Tall hierarchies tend to have communication problems, particularly the distortion of information. These problems are common in product and multidivisional structure. ii) Geographical Structure: Under geographical structure, organizations organize divisions according to the requirements of the different geographical locations. A geographical structure allows some functions to be centralized at one headquarters location and others to be decentralized to a regional level. When transportation and other management become costly to carryout from the central level, different business units are dispersed at different geographical locations. Advantages:

1. Garb the local resources. 2. Specialized business units 3. Effective control

Disadvantages:

1. Communication problem

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2. Costly 3. Coordination problem

c) Matrix Structure: The matrix structure combines functional and divisional structures. This form brings numerous skilled workers from various parts of the organization together as a team. They focus on a specific project that is to be completed within a set time frame and often have more than one manager. This organizational structure form is often used in multinational companies. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of strengths and make up for weaknesses of functional and decentralized forms. The defining feature of a matrix structure is the fact that team members have two superiors. The team is both the basic building block of the matrix and principal mechanism for coordination and integration.

The matrix structure relies on minimal vertical control from the formal hierarchy and maximum horizontal control from the use of integrating mechanism –teams which promote the mutual adjustment. Strengths and weaknesses of this structure are similar to those encountered with functional and divisional structure. Advantages: 1. Reduce functional barriers:

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The use of cross-functional team is designed to reduce functional barriers and overcome the problem of subunit orientation. The matrix’s team structure facilitates integration, adaptation and learning for the whole organization. It is designed to make the organization flexible and able to respond quickly to changing product and customer needs. 2. Foster innovations: Matrix structure opens up communication between functional specialists and provides an opportunity for team members from different functions to learn from one another and develop their skills. Thus matrix structure facilitates technological progress because the interaction of different specialists produces the innovations that give a company its core competencies. 3. Efficient use of resources: The matrix enables an organization to maximize its use of skilled professionals, who move to produce product as needed. People move around the matrix to wherever they are most needed; team membership is constantly changing to suit the needs of the product. 4. Optimize quality and cost: The dual functional and product focus promotes concern for both cost and quality. The primary goal of functional specialists is likely to produce the highest quality, most innovative products possible. Similarly, the primary goals of product managers are likely to concern cost and speed of development. Disadvantages: 1. Bureaucratic complexities: A matrix structure lacks the advantages of bureaucratic structure. As there are projects along with hierarchies, the cost associated with the structure is comparatively higher. There can be role conflict because of overlapping direction from product and function. 2. Possibility of conflict: The lack of a clearly defined hierarchy of authority can also lead to conflict between functions and product teams over the use of resources. The cost and resource allocation between functions and products may increase conflict between them. Power struggle may emerge between product and functional managers, and politicking takes place to gain the support of top management. 3. Intervention from top management: When top managers do not get the results they expect, they sometime try to increase their control over the matrix and to increase their power over decision making. Slowly but surely, people struggle for power and authority, a system started with very flat and decentralized turns into a centralized and less flexible structure. d) Network Structure: A group of legally independent companies or subsidiary business units that use various methods of coordinating and controlling their interaction in order to appear like a larger entity. We can characterize network structures as long-term agreements among companies, which enable them to obtain and maintain competitive advantages in relation to other companies not belonging to the network. Network agreements are characterized as specific system of values. The specific system of values is based on mutual trust, which is a compulsory condition for existence and stability of the network and common responsibilities. There are formal and informal contracts, based upon norms typical for every network. Another sign of the specific system of values is the common support and willingness of individual participants of the network to abnegate short-time advantages on behalf of the common development. The network form of arrangement of the company enables the companies involved to gain a lot of advantages, for instance cutting production costs due to specialization and division of labor, having access to modern technologies and information, forming common databanks, faster introducing of the new methods and obtaining possibilities for entering the new markets. As long as we speak about organizational-managerial aspect of network structures, managerial parts are different than in the organization, which has hierarchical structure. In network structures a managerial center is created for the purpose of a coordination of all cooperating companies on the basis of the contract. The responsibility is divided among all parts of the network. In the network structure, centralized control of operations does not exist (in contrast to hierarchical structure) and the main company only co-ordinates the plans and activities.

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Advantages: 1. Competitive advantages: Network with partner organizations can perform a specific functional activity reliably, and at a lower cost, production costs are reduced. So, employing and adopting this structure leads to competitive strengths. 2. Less costly: As the organization contracts with other organizations to perform specific value creation activities, it avoids the high bureaucratic costs of operating a complex organizational structure. For example the hierarchy can be kept as flat as possible and fewer managers are needed. 3. High flexibility: A network structure allows an organization to act in an organic way. If the environment changes, for example, and new opportunities become apparent, an organization can quickly alter its network in response. But an organization that performs all of its own functional activities would take a longer time to respond to the changes taking place. Disadvantages: 1. Incompatible goods and services: The goods or services offered by the contracting organization may not be consistent to one another. This increases the chance of loosing customers’ trust. 2. Difficult to coordinate and control: It is not easy to coordinate and control the activities of the network organization as it has very flat and dispersed structure. Mangers would lack the means at their disposal to effectively coordinate and motivate the various network partners.

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Part – V : Organizational Culture:

Organizational culture is a set of shared values and norms that control organizational members’ interactions with each other and with suppliers, customers, and other people outside the organization. Organizational culture refers to the shared values, attitudes, standards, and beliefs that characterize members of an organization and define its nature. It is rooted in an organization's goals, strategies, structure, and approaches to labor, customers, investors, and the greater community. Culture therefore gives organizations a sense of identity and determines through the organization’s legends, rituals, beliefs, meanings, values, norms and language, the way in which ‘things are done around here’. An organizations’ culture encapsulates what it has been good at and what has worked in the past. These practices can often be accepted without question by long-serving members of an organization. One of the first things a new employee learns is some of the organization’s legends. Legends can stay with an organization and become part of the established way of doing things. Over time the organization will develop ‘norms’ i.e. established (normal) expected behavior patterns within the organization. A norm is defined as an established behavior pattern that is part of a culture. Organizational culture includes an organization's expectations, experiences, philosophy, and values that hold it together, and is expressed in its self-image, inner workings, interactions with the outside world, and future expectations. It is based on shared attitudes, beliefs, customs, and written and unwritten rules that have been developed over time and are considered valid. Also called corporate culture, it is shown in; (1) the ways the organization conducts its business, treats its employees, customers, and the wider community, (2) the extent to which freedom is allowed in decision making, developing new ideas, and personal expression, (3) how power and information flow through its hierarchy, and (4) how committed employees are towards collective objectives. # Elements of Organizational Culture: There are four major elements which play a key role in creating and managing organizational cultures. a) Values: Values are general criteria, standards, or principles that guide the behavior of organization members. There are two kinds of values: terminal and instrumental. A terminal value is a desired end state or outcome that organization members seek to achieve. Organizations might adopt any of the following terminal values that are as guiding principles: quality, excellence, success, responsibility, profitability, innovativeness, economy, morality etc. An instrumental value is a desired mode of behavior. Models of behavior that organizations advocate include working hard, respecting traditions and authority, being conservative and cautious, being creative and courageous, being honest, taking risks, and maintaining high standards. Thus, an organization’s culture consists of outcomes that the organization seeks to achieve (its terminal values) and the modes of behavior the organization encourages (its instrumental values). Ideally, instrumental values help the organization achieve its terminal values. For example, a computer company whose culture emphasizes the terminal value of innovativeness may attain this outcome through the instrumental values of working hard, being creative, and taking risks. Terminal values are reflected in an organization’s mission statement and official goals, which tell organization members and other stakeholders that the company values excellence and has high ethical standards. So that members understand instrumental values i.e. the models of behavior that they are expected to follow as they pursue desired end states –an organization develops specific norms, rules, and standard operating procedures that embody its instrumental values. b) Heroes: Most successful organizations have their heroes. Heroes are born and created. The born hero is the visionary institution builder like Henry Ford, founder of the Ford Motor Company, and Mary Kay Ash, founder of Mary Kay Cosmetics. Created heroes, on the other hand, are those the institution has made by noticing and celebrating memorable moments that occur in the day-to-day life of the organization. Heroes perpetuate the organization’s underlying values, provide role models, symbolize the organization to others, and set performance standards that motivate participant achievement. In many organizations heroes and heroines—exemplars of core values—provide role models of what everyone should be striving for in the organizations. These deeply committed staff come in early; are always willing to meet with stakeholders; and are constantly upgrading their skills.

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c) Rites and Rituals Another key aspect in creating organizational cultures is the everyday activities and celebrations that characterize the organization. Rituals are practices that are performed regularly and with some specific purpose in mind. These can be individual actions, department actions, or organizational actions. For example, one department may have a tradition of holiday parties, Friday afternoon Happy Hours, or any numbers of specific behaviors that help define who this group is and what they stand for. Most successful organizations feel that these rituals and symbolic actions should be managed. Through rites and rituals, recognition of achievement is possible. The employee of the Year Award and organization of the year are examples. Some organizations have even created their own reward rituals. d) Communication Networks: Stories or myths of heroes are transmitted by means of the communications network. This network is characterized by various individuals who play a role in the culture of the organization. Each institution has storytellers who interpret what is going on in the organization. Their interpretation of the information influences the perceptions of others. These individuals always have time to listen and provide alternative solutions to problems. Communication networks always keep everyone well informed about what is going on in the organization. The concerned individuals play a key role in building and maintaining an organization’s culture through communication. Thus, communication networks are important in creating an institution’s organizational culture. # Transmission of Organizational Culture to its members: The ability of an organization’s culture to motivate employees and increase organizational effectiveness is directly related to the way in which members learn the organization’s values. Organizational members learn pivotal values from an organization’s formal socialization practices and from the stories, ceremonies, and organizational languages that develop informally as an organization’s culture matures. a) Socialization: Newcomers to an organization must learn the values and norms that guide existing members’ behavior and decision making. New comers are outsiders, and only when they have learned and internalized the organization’s values and act in accordance with its rules and norms will longtime members accept them as insiders. To learn an organization’s culture, newcomers must obtain information about cultural values. Socialization is the most effective process by which newcomers learn values and utilize the norms of an organization’s culture. Through a socialization process, newcomers learn values that the organization wants them to learn. In this process newcomers are oriented to roles. Role orientation is the way in which newcomers respond to a situation. There are different socialization tactics that influence a newcomer’s role orientation. The use of different sets of these tactics leads to two different role orientation: institutionalized and individualized. An institutionalized role orientation results when individuals are taught to respond to a new context in the same way that existing organizational members respond to it. In contrast, an individualized role orientation results when individuals are allowed and encouraged to be creative and experiment with changing norms and values so that an organization can better achieve its values. Following are the tactics used to socialize newcomers in the organization. i) Collective vs. Individual: Collective tactics provide newcomers with common learning experiences designed to produce a standardized response to a situation. With individual tactics, each newcomer’s learning experience are unique, newcomers can learn new, appropriate responses for each situation. ii) Formal vs. Informal: Formal tactics segregate newcomers from existing organizational members during the learning process. With informal tactics, newcomers learn on the job, as members of a team. iii) Sequential vs. Random: Sequential tactics provide newcomers with explicit information about the sequence in which they will perform new activities or occupy new roles as they advance in an organization. With random tactics, training is based on interest and needs of the individual newcomers because there is no set of sequence to the newcomers learning in the organization.

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iv) Fixed vs. Variable: Fixed tactics give newcomers precise knowledge of timetable associated with completing each stage in the learning process. Variable tactics provide no certain information about when newcomers will reach a certain stage in the learning process. v) Serial vs. Disjunctive: When serial tactics are employed, existing organizational members act as a role models and mentors for newcomers. Disjunctive process requires newcomers to figure out and develop their own way of behaving; they are not told what to do. vi) Divestiture vs. Investiture: With divestiture, newcomers receive negative social support i.e. they are ignored and existing members withhold support. With investiture, newcomers immediately receive positive social support from other organizational members and are encourage to be themselves. b) Stories/Myths/Legends: Organizational stories are important to provide clues of organizational culture. Studying such stories can reveal the values that guide behavior. Perhaps the most colorful and effective way in which organizations communicates their culture to new employees and organizational members is through the skillful use of stories. A story can highlight a critical event an organization faced and the organization’s response to it, or a heroic effort of a single employee illustrating the company’s values. The stories usually engage employee emotions and generate employee identification with the company or the heroes of the tale. A compelling story may be a key mechanism through which managers motivate employees by giving their behavior direction and by energizing them toward a certain goal. Moreover, stories shared with new employees communicate the company’s history, its values and priorities, and create a bond between the new employee and the organization. c) Ceremonies/Rituals: Ceremonies are regular organizational activities and events that are in practice. Everyday practices that are repeated frequently are known as rituals. Typically unwritten, rituals send a clear message about the way things are done in an organization. A rite or ritual is an important artifact of culture and may be defined as a regular organizational activity that carries more meaning than it does actual purpose. Rites and rituals openly publicize the values of an organization. Announcement of organizational success, office parties, news paper releases, employee promotion, etc. contribute certain culture in an organization. d) Organizational Language: Organizational language is the discourse organizations produce to communicate with their internal and external audiences. Language is another way to identify an organization’s culture. It encompasses not only spoken language but also how people dress, the offices they occupy, the company cars they drive, and how they formally address one another. Companies often have their own acronyms and buzzwords that are clear to them and help set apart organizational insiders from outsiders. In business, this code is known as jargon. Jargon is the language of specialized terms used by a group or profession. e) Organizational Symbols: Organizational symbols often convey an organization’s cultural values to its members and to others outside the organization. In some organizations, for example, the size of people’s offices, their location on particular floor, the luxury with which they are equipped, organization’s popularity etc. are symbols that convey images about the values in an organizational culture. Sometimes, the design of the building and logo itself are symbols of organizational values. # Sources of Organizational Culture: Organizational culture develops from the interaction of four factors: the personal and professional characteristics of people within organization, organizational ethics, the property rights that the organization gives to employees, and the structure of the organization. The interaction of these factors produces different cultures in different organizations and causes changes in culture overtime.

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a) Characteristics of Organizational Members: The ultimate source of the organizational culture is the people who make up the organization. The culture differs due to the distinct characteristics of members. The founder of an organization has a substantial influence on the organization’s initial culture because of his or her personal values and beliefs. The members’ attitudes and characteristics lay down the foundation of organization’s culture. Many cultural values derive from the personality and beliefs of the founder and the top-management team. For example; Microsoft founders Bill Gates is a workaholic who still often works 18 hours a day, this leads to effortful working culture. b) Organizational Ethics: The moral values, beliefs, and rules that establish the appropriate way for organizational members to deal with one another and with the organization’s stakeholders, called organizational ethics is another important source to create and manage organizational culture. In the course of making decisions in an organization, managers rely on ethical instrumental values embodied in the organization’s culture. Such values outline the right and wrong ways to behave in a situation in which an action may help one person on stakeholder group, but hurt another. Ethical values, and the rules and norms that they embody, are an inseparable part of an organization’s culture because they help the values that members use to manage situations and make decisions. Personal and professional ethics also influence how a person will act in an organization, so an organization’s culture is strongly affected by the people who are in a position to establish its ethical values. c) Property Rights: The value in an organization’s culture reflects the ethics of individuals in the organization, of professional groups, and of the society in which the organization distributes property rights. Property rights refer to the rights that an organization gives to its members to receive and use organizational resources. Property rights define the rights and responsibilities of each inside stakeholders groups and cause the development of different norms, values, and attitudes towards the organization. Shareholders have the stronger property rights of all stakeholder groups because they own the resources of the company and share in its profit. Top managers often have strong property rights because they are given large amounts of the organizational resources, such as high salaries, stock option, decision making power etc. Similarly, organization’s workforce may be given strong property rights, such as guarantee of lifetime employment and involvement in an employee stock-ownership plan or profit sharing plan. The distribution of property rights has a direct effect on instrumental values that shape employee behavior and motivate organizational members. Property rights encourage employees to use organizational resources to find better ways of serving customers can foster commitment and loyalty, as at companies like Microsoft and Wal-Mart. The distribution of property rights to different stakeholders determines:

i. How effective an organization is and ii. The culture that emerges in the organization.

d) The structure: Organizational structure is another important source of culture. Because different structure gives rise to different cultures, managers need to design a certain kind of organizational culture. Mechanistic structure and organic structures, for example, give rise to totally different sets of cultural values. The values, rules, and norms in a mechanistic structure are different from those in an organic structure. In mechanistic structure (tall, highly centralized and standardized), people have relatively little personal autonomy, and desirable behaviors include being cautious, obeying superior authority, and respecting traditions. In organic structure (flat and decentralized), people have more freedom to choose and control their own activities, and desirable behaviors include being creative, courageous and taking risk. Thus an organic structure is likely to give rise to a culture in which innovation and flexibility are desired end states. An organization’s structure can promote cultural values that foster integration and coordination. Out of stable task and role relationships, for example, emerge shred norms and rules that help reduce communication problems, prevent the distortion of information, and speed the flow of information. Similarly, centralization or decentralization also largely develops different types of culture. By decentralizing authority, an organization can establish values that encourage and reward creativity or innovation. Centralization can contribute to create cultural values that reinforce obedience and accountability.

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# Corporate Social responsibility: Corporate social responsibility (CSR) can be defined as the "economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time" - Carroll and Buchholtz. The concept of corporate social responsibility means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. A traditional view of the corporation suggests that its primary, if not sole, responsibility is to its owners, or stockholders. However, CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, customers, the local community, the government, environmental groups, and other special interest groups.

Corporate social responsibility is related to, but not identical with, business ethics. While CSR encompasses the economic, legal, ethical, and discretionary responsibilities of organizations, business ethics usually focuses on the moral judgments and behavior of individuals and groups within organizations. Thus, the study of business ethics may be regarded as a component of the larger study of corporate social responsibility.

The strength of an organization’s commitment to social responsibility ranges from low to high level. At the low end of the range is an obstructive approach. Obstructionist managers choose not to behave in socially responsible way, whereas, proactive managers actively embrace the need to behave in socially responsible ways, at the other end.

a) Obstructive Approach: A company that takes an obstructive stance toward social responsibility attempts to defend its economic priorities by blocking any attempts to point out the company's lack of social responsibility. An obstructive company does not make social responsibility an effort, instead making profits the most important aspect of its business. Some people view obstructive businesses as immoral since they may exploit their employees, pollute natural lands or deceive customers. The result of this approach may leads to not only loss of reputation but also its devastation.

b) Defensive Approach: A defensive approach indicates at least commitment to ethical behavior. In most cases, companies that take a defensive stance towards social responsibility are not particularly responsible. These companies may consider themselves neutral, and they make profits a more important motive than performing actions in a socially responsible way. These companies make a point of following the law to ensure that others cannot take legal action against them. For example, a company may create more waste than necessary, but it will remove of the waste in a legal method rather than dumping it illegally.

c) Accommodating Approach: An accommodating stance signifies that a company believes social responsibility is important - and perhaps as important as making a profit. These companies satisfy all legal requirements and attempt to meet ethical standards. An accommodating company does not attempt to hide its actions and remains open about why it takes specific actions. For example, it may decrease its creation of waste, source products that are not tested on animals and pay its employees a fair wage. The company would keep its records open to the public. Though these companies are often socially responsible, they may change their policies in response to criticism. Managers adopting this approach want to make choices that are responsible in the eyes of society and want to do the right thing when called on to do so.

d) Proactive Approach: Managers taking a proactive approach actively embrace the need to behave in socially responsible ways, go out of their way to learn about the needs of different stakeholder groups, and are willing to utilize organizational resources to promote the interest not only of stockholders, but of the stakeholders. Like an accommodating company, a proactive company makes social responsibility a priority. Instead of reacting to criticism, a proactive company attempts to remain ahead of the curve when it comes to social responsibility. It may make ethics part of its mission statement and attempt to avoid any harm to the environment or its employees. A proactive company may go out of

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its way to institute new recycling programs, give all of its employees a living wage and benefits, and donate a portion of its profits to charity.

# Strategy and the Environment:

An organization’s strategy is a specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors. An organization develops a strategy to increase the value it can create for its stakeholders. In this context, value is anything that satisfies the needs and desires of the organizational stakeholders. Shareholders want a company to set goals and develop an action plan that maximizes the long-run profitability of the company and the value of their stocks. Customers are likely to respond to a strategy that is based on the goal of offering high-quality products and services at appropriate prices. Through its strategy, an organization seeks to use and develop core competencies to gain a competitive advantage so that it can increase its share of scarce resources in its environment. Core competencies are skills and abilities in value creation activities, such as manufacturing, marketing, or R&D, that allows a company to achieve superior efficiency, quality, innovation, or customer responsiveness. An organization that poses superior core competencies can outperform its rivals. Organizational strategy allows an organization to shape and manage its domain to exploit its existing core competences and develop new competences that make it better competitors for resources. The more resources an organization can obtain from the environment, the better able to set ambitious long term goals and then develop a strategy and invest resources to create core competences to allow it to achieve those goals. In turn, improved competences give organization a competitive advantage, highly qualified employees, or attract new resources –for example, new customers, highly qualified employees, or new resources of financial support. # Core Competences: The ability to develop a strategy that allows an organization to create value and outperform competitors is a function of the organization’s core competencies. Core competencies allow small businesses to deliver value to their customers. The core competences that an organization holds are difficult to replicate. Businesses can develop core competencies by identifying key internal strengths and investing in the capabilities valued by their customers. A core competency is a specific factor that a business sees as central to the way the company or its employees work. It fulfills three key criteria:

1. It is not easy for competitors to imitate. 2. It can be reused widely for many products and markets. 3. It must contribute to the end consumer's experienced benefits and the value of the product or service to its

customers. A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication, best Human Resource Management (HRM), good market coverage, or kaizen or continuous improvement over time. A core competency results from a specific set of skills or production techniques that deliver additional value to the customer. These enable an organization to access a wide variety of markets. The strength of its core competences is a product of the specialized resources (functional and Organizational) and coordination abilities that it possesses and other organizations lack.

# Different Levels of Organizations Strategies: a) Functional Level b) Business Level c) Corporate Level d) International Level

(Four levels of organizational strategies, focus, elements, relations with structure and culture of organization)

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Part – VI : Organizational Design, Competences and Technology:

# Technology: Technology is the making, modification, usage, and knowledge of tools, machines, techniques, crafts, systems, and methods of organization, in order to solve a problem, improve a pre-existing solution to a problem, achieve a goal, handle an applied input/output relation or perform a specific function. It can also refer to the collection of such tools, including machinery, modifications, arrangements and procedures. Hence, technology is the combination of skills, knowledge, abilities, techniques, materials, machines, computers, tolls, and other equipments that people use to convert or change raw materials into valuable goods and service. Inside an organization, technology exists at three levels: individual, functional or departmental, and organizational. At the individual level, technology is the personal skills, knowledge, and competencies that individual employee possess. At the functional or departmental level, the procedures and technique that the groups work out to perform their work create competences that constitute technology. The interactions of the members in a team, their cooperative efforts and techniques developed and used are technologies at functional level. Similarly, the way an organization converts inputs into outputs is used to characterize technology at the organizational level. Mass production is the organizational technology based on competences in using a standardized, progressive assembly process to manufacture goods. Craftwork is the technology that involves groups of skilled workers, interacting closely and blending their competences to produce custom-designed products. # Technology and Organizational Effectiveness: Organizations are always involves in a process: Input, Transformation and Output. Organizations take inputs from the environment and create value from the inputs by transforming them into outputs through a conversion process. In the entire process technology is present.

Input Stage: At the input stage, technology –skills, procedures, techniques, and competencies –allows each organizational function to handle relationships with outside stakeholders so that the organization can effectively manage its specific environment. Technology is involved in the acquisition of manpower in the HR function, competencies are used at the time of material purchase, and techniques are applied for obtaining capital at cost favorable to the company.

Conversion Stage: At the conversion stage, technology –a combination of machines, techniques, and work procedures –transforms inputs into outputs. The best technology allows an organization to add the most value to its inputs at the least cost of organizational resources. Organizations often try to improve the efficiency to their conversion processes, and they can improve it by training employees in new time management techniques and by allowing employees to devise better ways of performing their jobs.

Output Stage: At the output stage, technology allows an organization to effectively produce finished goods and services to external stakeholders. To be effective, an organization must possess competencies in testing the quality of finished product, in selling and marketing the product, and in managing after-sales services to customers.

The technology of an organization’s input conversion, and output process is an important source of its competitive advantage. Every organizations use technology to create competencies that lead to higher value for stakeholders. There are basically three principal approaches in measuring and increasing organizational effectiveness.

a) External Resource Approach: An organization using external resource approach uses technology to increase its ability to manage and control external stakeholders. Any new technological developments that allow an organization to improve its services to customers, such as the ability to customize products or to increase products quality and reliability, increase the organization’s effectiveness.

b) Internal System Approach: An organization taking the internal system approach uses technology to increase the success of its attempts to innovate, to develop new products, services, and process, and to reduce the time needed to bring new products to market.

c) Technical Approach: An organization taking the technical approach uses technology to improve efficiency and reduce costs while simultaneously enhancing the quality and reliability of its products.

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Organizations use technology to become more efficient, more innovative, and better able to meet the needs and desires of stakeholders. Each department or function in an organization is responsible for building competencies and developing technology that allows it to make a positive contribution to organizational performance. When an organization has technology that enables it to create value, it needs structure that maximizes the effectiveness of the technology. # Different Types of Technologies: Some kinds of technology are more complex and difficult to control than others because some are more difficult to program than others. Technology is said to be programmed when procedures for converting inputs into outputs can be specified in advance so that task can be standardized and work process can be made predictable. According to researcher, Joan Woodward, the technical complexity of a production process –that is, the extent to which it can be programmed so that it can be controlled and made predictable –is the important dimension that differentiates technologies.

High Technical Complexity exists when conversion processes can be programmed in advance and fully automated. With full automation, work activities and outputs that result from them are standardized and can be predicted accurately.

Low Technical Complexity exists when conversion processes depend primarily on people and their skills and knowledge and not on machines. With increased human involvement and less reliance on machines, work activities cannot be programmed in advance, and results depend on the skills of the people.

Mainly there are three types of production technology with different level of complexity. a) Small-Batch and Unit Technology: Organizations that employ small-batch and unit technology makes one-of-a-kind, customized products or small quantities of products. Small-batch and unit technology has lowest level of technological complexity because any machines used during the conversion process are less important than people’s skills and knowledge. People decide how and when machines will be used, and the production process reflects their decisions about how to apply their knowledge. With small-batch and unit technology, the conversion process is flexible because the worker adapts techniques to suit the orders of individual customers. The flexibility of small-batch technology gives an organization the capacity to produce a wide range of products that can be customized for individual customers. Small-batch and unit technology is relatively expensive to operate because the work process is unpredictable and the production of customized, made-to-order products makes advance programming of work activities. b) Large-Batch and Mass Production Technology: Organizations that employ large-batch or mass production technology produce large volumes of standardized products such as cars, razor blades, aluminum cans and soft drinks. With large-batch and mass production technology, machines control the work process. Their use allows tasks to be specified and programmed in advance. As a result, work activities are standardized, and the production process is highly controllable. To increase control over the work process and make it predictable, organizations try to increase their use of machines and equipment –that is, they try to increase the level of technical complexity and increase their efficiency. The control provided by large-batch and mass production technology allows an organization to save money on production and charge a lower price for its products. c) Continuous-process Technology: With continuous-process technology, technical complexity reaches its height. In continuous-process technology, the conversion process is almost entirely automated and mechanized; employees generally are not directly involved. Their role in production is to monitor the plant and its machinery and ensure its efficient operation. The task of employees engaged in continuous-process technology is primarily to manage exceptions in the work process, such as machine breakdown or malfunctioning equipment. The hall mark of continuous-process technology is the smoothness of fits operations. Production continues with little or no variation and the outputs and rarely stops. Continuous-process production tends to be more technically efficient than mass production because it is more mechanized and automated and thus is more predictable and easier to control. It is more cost efficient than both unit and mass production because labor costs are such a small proportion of its overall costs.

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# Technical Complexity and Organizational Structure: There is found to be a strong relationship between structure and the type of technology –by different research studies. Each technology is associated with a different structure because each technology presents different control and coordination problems. Organizations with small-batch technology typically have three levels in their hierarchy; organizations with mass production technology typically have four levels; and organizations with continuous-process technology, six levels. As technical complexity increases, organizations become taller, and the span of control of the CEO widens. The span of control of first-line supervisors first expands and then narrows. It is relatively small with small-batch technology, widens greatly with mass production technology and contracts dramatically with continuous-process technology. These findings results in the very different shaped structures as shown in the figure. In the small-batch technology there is impossibility of programming conversion activities because production

depends on the skills and experience of people working together. An organization that uses small-batch technology has to give people flexibility to the customer’s request and produce the exact product the customer wants. For this purpose, such an organization has a relatively flat structure (three levels in the hierarchies), and the decision making is decentralized to small teams where first-line supervisors have a relatively small span of control. Each supervisor and work group decides how to manage each decision as it occurs at each step of the input-conversion-output process. This type of decision requires mutual adjustment-face-to-face communication with co-workers and often with customers. The most appropriate structure for unit and small-batch technology is an organic structure in which managers and employees work closely to coordinate their activities to meet changing work demands. In the organizations that use mass production technology, the ability to program tasks in advance allows the organization to standardize the manufacturing process and make it predictable. The first-line supervisors span of control increases because formalization through rules and procedures becomes the principal method of coordination. Decision making becomes centralized, and the hierarchy of authority becomes taller as managers rely on vertical communication to control the work activities in a mass production setting, and the organizational structure becomes taller and wider, as shown in the above figure. In the organization that uses continuous-process technology, tasks can be programmed in advance, and the work process is predictable in a technical sense, but there is still the potential for a major systems breakdown. The principal control problem facing the organization is monitoring the production process to control and correct unforeseen events before they lead to disaster. The need to constantly monitor the operating system, and make sure that each employee conforms to accepted operating procedures, is the reason why continuous-process technology is associated with the tallest hierarchy of authority. Managers at all levels closely monitor their subordinates’ actions. Because employees also work together as a team and jointly work out procedures for managing and reacting to unexpected situations, mutual adjustment becomes the primary means of coordination. Thus an organic structure is appropriate for managing continuous-process technology, because the potential unpredictable events require the capability to provide quickly, flexible response.

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# Task Interdependence and Organization structure and Technology: In the 1967 book "Organizations in Action," sociologist James D. Thompson defined three types of interdependence to describe the intensity of interactions and behaviors within an organizational structure. Task interdependence is the manner in which different organizational tasks are related to one another which affects an organization’s technology and structure. When task interdependence is low, people and departments are individually specialized –i.e. they work separately and independently to achieve organizational goals. When tasks interdependence is high, people and departments are jointly specialized –that is, they depend on one another for supplying the inputs and resources they need to get the work done. The study of interdependence helps business owners understand how the different departments or units within their organization depend on the performance of others.

a) Mediating Technology and Pooled Interdependence: Mediating Technology is characterized by a standardised transformation process and unique inputs and outputs. Service providers deliver unique services to unique clients based on a pre-defined delivery process. Mediating technology is based on pooled task interdependence, which means that each part of the organization –whether a person, team, or department –contributes separately to the whole organization. With this technology, task interdependence is low because people do not directly rely on others to help them perform their tasks. While departments may not directly interact and do not directly depend on each other in the pooled interdependence model, each does contribute individual pieces to the same overall puzzle. This creates an almost blind, indirect dependence on the performance of others wherein one department’s failures could lead to the failure of the overall process.

b) Long-Linked Technology and Sequential Interdependence:

Long-linked technology is a production process consisting of a fixed sequence of steps to transform standardised inputs into standardised outputs. Long-linked technology is based on sequential task interdependence, which means that the actions of one person or department directly affect the actions of another, so work cannot be successful completed by allowing each person or department to operate independently. Mass production is based on sequential task interdependence. The actions of the employee at the beginning of the production line determine how successfully the next employee can perform his task, and so forth on down the line. Because sequential interactions have to be carefully coordinated, long-linked technology requires more coordination than mediating technology. One result of sequential interdependence is that any error that occurs at the beginning of the production process becomes magnified in the letter stages.

c) Intensive Technology and Reciprocal Interdependence:

Intensive technology is characterized by a work process where input, conversion, and output activities are inseparable. Intensive technology is based on reciprocal interdependence, which means that the activities of all people and all departments are fully dependent on one another. Reciprocal interdependence is similar to sequential interdependence in that the output of one department becomes the input of another, with the addition of being cyclical. In this model, an organization’s departments are at their highest intensity of interaction. The move to reciprocal interdependence and intensive technology has two effects: Technical complexity declines as the ability of managers to control and predict the work process lessens, and task becomes more complex and non-routine.