Organization Theory And Structure Design

By Prof. Vivekanand Pawar

What is an Organisation?

An Organisation is consciously coordinated social entity, with a relatively identifiable boundary, that functions on relatively continuous basis to achieve a common goal or set of goals.

By Prof. Vivekanand Pawar

What is an Organisation?
A Consciously coordinated social entity
People or group of peoples interaction. Coordinate means Management.

Relatively

that differentiates who is and who is not a part of the organization. Boundary not always clear; can change over a period of time. Has both explicit & implicit contracts.

identifiable

boundary

Functioning on a continuous basis having

some continuing bond regular employee or visit once a while. either individually or though group effort.
By Prof. Vivekanand Pawar

Achieve a set of common goals achieved

Organisational Life Cycle

1.Entrepreneurial stage 2. Collectivity stage

Ambiguous goals High Creativity

3. Formalization and control stage

4. Elaboration-ofstructure stage

5. Decline stage

Informal communication Formalization of rules More complex and structure structure Stable structure High Commitment Decentralization Emphasis on efficiency Diversified markets

High employee turnover Increased conflict Centralization

By Prof. Vivekanand Pawar

Importance of Organisations
Bring together resources to achieve desired goals and outcomes.

Produce goods and services efficiently.

Facilitate innovation. Use of modern manufacturing and information technologies. Adapt to and influence a changing environment. Create value for stakeholders. Accommodate ongoing challenges of diversity, ethics, social responsibility, and the motivation and coordination of employees.

By Prof. Vivekanand Pawar

Five basic Parts of an Organisation

Top Management

Technical Support

Middle Management

Administrative Support

Technical Core

By Prof. Vivekanand Pawar

Five basic Parts of an Organisation

Technical Core (Operating Core): do the work Top Management (Strategic Apex) : executive leadership Middle Management (Middle Line) : mechanism of supervision Technical Support (Technostructure) : technical facilitation Administrative Support (Support Staff) : service facilitation

By Prof. Vivekanand Pawar

Organisation Structure
Organization Structure defines the manner in which tasks are allocated; who reports to whom and the formal coordinating mechanisms and interaction pattern that will be followed. The three elements of organization structure are:

Complexity organization

extent

of

differentiation

within

the

Formalization : extent to which an organization relies on rules & regulations Centralization : where the locus of decision making lies
By Prof. Vivekanand Pawar 8

Structures of Organic and Mechanistic Organizations

Organic Mechanistic

High Complexity
Low Centralization Low Formalization Low Standardization High Person Specialization High Task Specialization

Low Complexity
High Centralization High Formalization High Standardization Low Person Specialization Low Task Specialization

By Prof. Vivekanand Pawar

Organisation Design
Organisation Design emphasizes the management side of organization theory. Organization is concerned with constructing and changing an organizations structure to achieve the goals of the organization. It is extremely important to know how to design an organization.

By Prof. Vivekanand Pawar

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Interacting Contextual and Structural Dimensions

Environment

Goals and Strategy

Size

Culture
1. 2. 3. 4. 5. 6.

Structure Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios

Technology

By Prof. Vivekanand Pawar

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Organisation Theory

Organisation Theory is a discipline that studies the structure and design of an organization. It describes how organizations are actually structured and offers suggestions on how they can be constructed to improve its effectiveness.
By Prof. Vivekanand Pawar 12

Contrasting OT, OB, OD, and HRM

Macro View Theory

Micro View

OT

OB HRM

Practice

OD

By Prof. Vivekanand Pawar

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Some Applications of Organization Theory

Structuring activities and designing organizational processes to:

Strategy/Finance : Support goal achievement and performance monitoring.

Marketing : Align the organization & its brand strategy. Information Technology : Align information flows with work processes and outcomes. Operations : Support supply chain management. HRM

Human Resources : Provide a basis for activities, organizational development and change. Communication processes. : Design effective

communication

By Prof. Vivekanand Pawar

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The Systems Perspective

A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

Every system is characterized by two diverse forces; differentiation and integration.

By Prof. Vivekanand Pawar

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Types of System
Closed System that which totally ignores the effect of environment on the system; one that receives no energy from an outside source and from which no energy is released to it surroundings. Open System that which recognizes the dynamic interaction of the system with its environment

By Prof. Vivekanand Pawar

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Basic Open System

By Prof. Vivekanand Pawar

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An Industrial Organization as an Open System

INPUTS Materials Labor Capital TECHNICAL PROCESSING CORE (Transformation of Raw material into finished product) OUTPUTS Finished Products CUSTOMERS

By Prof. Vivekanand Pawar

Regulations

Government

Financial Institutions Labor Force

Suppliers

Lobbying
Consumer Advocacy Receipt of Revenue Repayment of Loans Wages Payment to Creditors

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Characteristics of An Open System

Environment awareness: Recognition of interdependency between the system and its environment. Changes in the environment can one or more attributes of the system, and conversely, change in the system affect its environment. Feedback: Open systems continuously received information from their environment. This helps the system to adjust and allows correction to rectify deviation from its specific course. Cyclical character: Open systems are cycles of events. The systems outputs furnish the means for new inputs that allow for repetition of cycle.
By Prof. Vivekanand Pawar 19

Characteristics of An Open System

Negative entropy: entropy is the propensity of a system to run down or disintegrate. A closed system, as it does not receive inputs from environments will run down over a period of time. Whereas an Open system can repair, maintain its structure and avoid death. Movement towards growth: As the system becomes more complex, it moves to counteract entropy and move towards growth. Balance of maintenance & adaptive activities: Maintenance activities ensure that various subsystems are in place; and the total system is in accordance with the environment; while adaptive activities are necessary to adjust over time to variations and internal and external demands. Equifinality: This means an organization can achieve its objectives with varied inputs and transformation process.
By Prof. Vivekanand Pawar 20

Learning Objective
To understand .
1.

The importance effectiveness.

of

organizational

2.

The relative importance of Strategy, Size of organization, Technology, Environment and power control in determining the structure of the organization.

By Prof. Vivekanand Pawar

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Learning Objective
3. To know different forms of excellence. 4. To learn the strategies to manage: The environment Organizational change Organizational conflict Organizational culture Organizational evolution

By Prof. Vivekanand Pawar

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Framework for Analysing Organization Theory

Determinants of Organisation Structure : Strategy Organisation Size Technology Environment Power-control Applications : Managing Managing Change Managing Conflict Managing Culture Managing Evolution the Environment Organisational Organisational Organisational Organisational

Organisation Structure

Organisation Designs Design Options Bureaucracy Adhocracy

Organisational Effectiveness

By Prof. Vivekanand Pawar

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Course Content
1. Evolution of the Organizational Theories. 2. Determinants of Organization Structure: Strategy Organization Size Technology Environment

Power-control

By Prof. Vivekanand Pawar

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Course Content
3. Organization Structure, Design and Organizational Effectiveness. 4. Applications: Managing the Environment

Managing Organizational Change

Managing Organizational Conflict Managing Organizational Culture Managing Organizational Evolution.
By Prof. Vivekanand Pawar 25

Course Content
With special reference to :

Impact of mergers, Acquisition and globalization on organizational structure.

Managing dynamic processes decision making, conflict, power and politics. Learning Organizations, Virtual organizations, boundary-less organizations, network Organizations, organizational design for change and innovation.
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Course Content
5.Keys to Organizational Excellence

6. Forms of Excellence

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Course Content
7. Review of Research Related to Organizational Designs for excellence (some examples) : Viable and effective organizational designs of firms P.N. Khandwalla

In search of Excellence T. Peters

Designing and managing human resource systems Uday Pareek

Survival strategies in a Hostile Environment -W. Hall

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List of Books to refer

Stephen P. Robbins, Organization TheoryStructure, Design and Applicatons Hatch Mary Jo & Cunliffe Ann L. Organization Theory Modern, Symbolic, and Postmodern perspectives, Oxford University Press. Hall Richard H. Organizations Structures, Processes and outcomes, Prentice Hall of India.

Khandwalla Pradip N. Organizational designs for excellence, Tata Mc Graw Hill Publishing Company Ltd.
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Teaching Learning Process

Classroom discussion Case study method Review of related literature

Group Projects and Presentations.

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Evaluation
1. Internal Assessment ( 40 Marks).
Attendance and class participation (20 marks).
Group Research Projects to critically evaluate the structure and design of the chosen organization. Group presentation of the same. Group research presentations on review of research related to organizational design for excellence.
By Prof. Vivekanand Pawar 31

Evaluation
2. External Assessment:
Term End UniversityExam. (60 Marks)

By Prof. Vivekanand Pawar

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Evolution of Contemporary Theory

Type 1

Closed Rational Mechanical Efficiency. 1900 1930. The Type 1 theorists, also known as the classical school, developed universal principles or models that would apply in all situations. As noted previously, each essentially perceived organization as closed systems created to achieve goals efficiently.
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Type 1: Closed Rational Mechanical Efficiency

Frederick Taylor & Scientific Management Fredrick Taylor was a mechanical engineer by background & he strongly believed that worker output was only about one-third of what was possible. He set out to correct the situation by applying the scientific method to jobs on the shop floor. His desire to find the one best way in which each job should be done would be part of what today we would call the issue of work design.

By Prof. Vivekanand Pawar

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Type 1: Closed Rational Mechanical Efficiency

Accordingly, he proposed 4 principles of scientific management, that, he argued, would result in significant increases in productivity: (1) the replacement of rule-ofthumb methods for determining each element of a workers job with scientific determination; (2) the scientific selection of training of workers; (3) the cooperation of management & labor to accomplish work objectives, in accordance with the scientific method; & (4) a more equal division of responsibility between managers & workers, with the former doing the planning & supervising, & the latter doing the execution.

By Prof. Vivekanand Pawar

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Type 1: Closed Rational Mechanical Efficiency

At the same time the Frenchman Henri Fayol was consolidating the principles of organization. Though they were writing at the same time, Fayols & Taylors foci were considerably different. Fayol sought to develop general principles applicable to all managers at all levels of the organization & to describe the functions a manager should perform. Taylor focused on the lowest level in the organization shop level management & accordingly proposed 14 principles that he argued were universally applicable & could be taught in schools & universities. We shall be discussing the said 14 principles in the topic of Organizational Structure.
By Prof. Vivekanand Pawar 36

Type 1: Closed Rational Mechanical Efficiency

The third contribution made by Type 1 theorists was the ideal-type organization structure proposed by the German sociologist, Max Weber. He developed a structural model that, he argued, was the most efficient means by which organizations can achieve their ends. He called this ideal structure bureaucracy.

By Prof. Vivekanand Pawar

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Type 1: Closed Rational Mechanical Efficiency

It was characterized by division of labor, a clear authority hierarchy, formal selection procedures, detailed rules & regulations, & impersonal relationships. The final contribution of the Type 1 theorists is the rational-planning perspective which was best expressed in the work of Ralph C.Davis.
By Prof. Vivekanand Pawar 38

Type 1: Closed Rational Mechanical Efficiency

He stated that the primary objective of a business firm is economic service. No business can survive if it doesnt provide economic value. The economic value is generated by the activities members engage in to create the organizations products or services.

By Prof. Vivekanand Pawar

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Type 1: Closed Rational Mechanical Efficiency

These activities then link the organizations objectives to its results. It is the managements job to group these activities together in such a way as to form the structure of the organization. Davis concluded, therefore, that the structure of the organization is contingent (dependent) upon the organizations objectives.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations Type 2. Closed Social People & Human Relations. 1930 1960. The common theme among Type 2 theorists is recognition of the social nature of organizations. These theorists, who are frequently referred to as forming the human relations school, view organizations as made up of both tasks & people. Type 2 theorists represent a human counterpoint to Type 1s machine view.
By Prof. Vivekanand Pawar 41

Type 2: Closed Social People & Human Relations

The second stage in contemporary (modern-day) organization theory began with a set of experiments undertaken at Western Electric Companys Hawthorne Works in Cicero, Illinois between 1924 & 1927. These studies which would eventually be widely expanded & would carry on through the early 1930s were initially devised by Western Electric industrial engineers to examine the effect of various illumination levels on worker productivity.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

Control & experimental groups were established. The experimental group was presented with varying intensity of illumination, while the controlled unit worked under constant illumination intensity. The engineers had expected individual output to be directly related to the intensity of light. However, the light level was increased in the experimental unit, output rose for each group. To the surprise of the engineers, as the light level was dropped in the experimental group, productivity continued to increase in both.
By Prof. Vivekanand Pawar 43

Type 2: Closed Social People & Human Relations In fact, a productivity decrease was observed in the experimental group only when the light intensity had been reduced to that of moonlight. The engineers concluded that illumination intensity clearly was not directly related to group productivity, but they could not explain the behavior they had witnessed.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

Merging the ideas of Taylor, Fayol, & Weber with the results from the Hawthrone studies led to the conclusion that organizations are cooperative systems. They are composed of tasks & people that have to be maintained at an equilibrium state. Attention only to technical jobs or the needs of people who do the jobs sub optimizes the system. So managers need to organize around the requirements of the tasks to be done & the needs of the people who will do them.
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Type 2: Closed Social People & Human Relations The notion that an organization is a cooperative system is generally credited to Chester Barnard. He presented his ideas in The Functions of the Executive, in which he drew upon his years of experience with American Telephone & Telegraph, including the presidency of New Jersey Bell.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations One of the most frequently mentioned contributions from Type 2 theorists is Douglas McGregors thesis that there are two distinct views of human beings : Theory X & the other basically positive Theory Y.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations After reviewing the way managers dealt with employees, McGregor concluded that a managers view of the nature of human beings is based on a certain grouping of assumptions & that he or she tends to mold his or her behavior toward subordinates according to these assumptions.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

Under Theory X, 4 assumptions are held by managers: Employees inherently dislike work &, whenever possible, will attempt to avoid it. Since employees dislike work, they must be coerced, controlled, or threatened with punishment to achieve desired goals. Employees will shirk responsibilities & seek formal direction whenever possible. Most workers place security above all other factors associated with work & will display little ambition.
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Type 2: Closed Social People & Human Relations

In contrast to these negative views of human beings, McGregor listed 4 assumptions that he called Theory Y: Employees can view work as being as natural as rest or play. Human beings will exercise self-direction & self-control if they are committed to the objectives.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

The average person can learn to accept, even seek, responsibility. Creativity-that is, the ability to make good decisions-is widely dispersed throughout the population is not necessarily the sole province of those in managerial functions.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

In his theory, McGregor argued that Theory Y assumptions were preferable & that they should guide managers in the way they designed their organizations & motivated their employees.

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Type 2: Closed Social People & Human Relations

The strong humanistic theme of the Type 2 theorists culminated with a eulogy to the passing of bureaucracy. Warren Bennis, for example, claimed that bureaucracy, centralized decision making, impersonal submission to authority, & narrow division of labor was being replaced by decentralized & democratic structures organized around flexible groups. Influence based on authority was giving way to influence derived from expertise.

By Prof. Vivekanand Pawar

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Type 2: Closed Social People & Human Relations

The strong humanistic theme of the Type 2 theorists culminated with a eulogy to the passing of bureaucracy. Warren Bennis, for example, claimed that bureaucracy, centralized decision making, impersonal submission to authority, & narrow division of labor was being replaced by decentralized & democratic structures organized around flexible groups. Influence based on authority was giving way to influence derived from expertise.

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