What is an Organization?

consciously coordinated social unit,

composed of two or more people, that
functions on a relatively continuous basis to
achieve a common goal or set of goals.

A Football team

A Provincial Sport Governing Body

The Board of Directors, The Office Staff

Municipal Parks and Recreation Dept.

The offensive line, defensive line

The Parks Dept., The Commissioners Office

Your Project Team

What is an Organization?

Definition

Organisations are (1) social entities that

(2) are goal-directed, (3) are designed as
deliberately structured and coordinated
activity systems, and (4) are linked to the
external environment (Daft, 2004: 11)

What is an Organization?

Bring together resources to achieve

desired goals and outcomes
Produce goods and services efficiently
to create value for owners, customers
and employees
Facilitate innovation by using modern
manufacturing and information
technologies

What is an Organization?

Adapt to and influence a changing

environment
Accommodate ongoing challenges of
diversity, ethics, and the motivation and
coordination of employees

4 common denominators of all organisations

when these factors operate together the dynamic
entity of an organisation exists

Coordination of effort : achieved through the

formulation and enforcement of policies, rules
and regulations
Common goal
Division of labour : common goal is achieved by
individuals performing separate but related
tasks
Hierarchy : chain of command right people do
the right things at the right time

The Evolution of
Management Theory

Scientific Management Theory

Evolution

of Modern Management

Began in the industrial revolution in the late 19th century

as:

Managers of organizations began seeking ways to better

satisfy customer needs.
Large-scale mechanized manufacturing began to supplanting
small-scale craft production in the ways in which goods were
produced.
Social problems developed in the large groups of workers
employed under the factory system.
Managers began to focus on increasing the efficiency of the
worker-task mix.

The Evolution of Management

Theory

Job Specialization and

the Division of Labor
Adam

Observed that firms manufactured pins in one of two

different ways:

Smith (18th century economist)

Craft-styleeach worker did all steps.

Productioneach worker specialized in one step.

Realized that job specialization resulted in much

higher efficiency and productivity

Breaking down the total job allowed for the division of

labor in which workers became very skilled at their specific
tasks.

F.W. Taylor and Scientific

Management
Scientific

Management

The systematic study of the relationships between

people and tasks for the purpose of redesigning
the work process for higher efficiency.

Defined by Frederick Taylor in the late 1800s to

replace informal rule of thumb knowledge.
Taylor sought to reduce the time a worker spent on
each task by optimizing the way the task was done.

Four Principles of Scientific

Management

Principles to increase efficiency:

1.

Study the ways jobs are performed now and determine new ways
to do them. (work study)
Gather

2.

3.

4.

detailed time and motion information.

Try different methods to see which is best.
Codify the new methods into rules. (organization and methods)
Teach to all workers the new method.
Select workers whose skills match the rules. (management by
exception)
Establish fair levels of performance and pay a premium for higher
performance (payment by results)
Workers should benefit from higher output

Based on 5 simple principles

Responsibility

for work organization in the

hands of the manager, that is the manager
takes responsibility, gives orders, controls
and workers follow instructions
Scientific methods leading to efficient work
organization
Select the best person for the job
Train workers to be efficient
Monitor performance and results

Problems with Scientific

Management
Managers

frequently implemented only the

increased output side of Taylors plan.

Workers did not share in the increased output.

Specialized

jobs became very boring, dull.

Degradation and de-skilling
Workers are reduced to robots
Workers could purposely under-perform.

Management responded with increased use of

machines and conveyors belts.

Frank and Lillian Gilbreth

Refined

Taylors work and made many

improvements to the methodologies of time and
motion studies.

Time and motion studies

Breaking up each job action into its components.

Finding better ways to perform the action.
Reorganizing each job action to be more efficient.

Also

studied worker-related fatigue problems

caused by lighting, heating, and the design of
tools and machines.

Administrative Management
Theory
Administrative

Management

The

study of how to create an organizational

structure that leads to high efficiency and
effectiveness.

Max

Weber

Developed

the concept of bureaucracy as a formal

system of organization and administration
designed to ensure efficiency and effectiveness.

Webers
Principles of
Bureaucracy

Webers Five Principles of

Bureaucracy

Authority is the power to hold people accountable for

their actions.
Positions in the firm should be held based on
performance, not social contacts.
Position duties are clearly identified so that people
know what is expected of them.
Lines of authority should be clearly identified such
that workers know who reports to who.
Rules, standard operating procedures (SOPs), and
norms guide the firms operations.

Criticisms

Stifles initiative and creativity and thus luck of flexibility

Officials rely on symbols, status and rules
Rules become the objectives or the end and not the means to
the end
Lack of responsiveness to individual problems or incidents
Officious behaviour from position and responsibilities in
organisation
Ignores people and the informal organization

Note that rules and procedures do have a value in ensuring ethics

and values to be consistent and fair.

Bureaucracy
Key concepts

Structured network of relationships among specialized positions

Rules and regulations standardize behavior
Jobs staffed by trained specialists who follow rules
Hierarchy defines the relationship among jobs

Contributions
Promotes efficient performance of routine operations
Eliminates subjective judgment by employees and management
Emphasizes position rather than the person

Limitations

Limited organizational flexibility and slowed decision making

Ignores the importance of people and interpersonal relationships
Rules may become ends in themselves

Fayols Principles of
Management
Division

of Labor: allows for job specialization.

Fayol noted jobs can have too much specialization

leading to poor quality and worker dissatisfaction.

Authority

Fayol included both formal and informal authority

resulting from special expertise.

Unity

and Responsibility

of Command

Employees should have only one boss.

Fayols Principles of
Management

Line of Authority (contd)

A clear chain of command from top to bottom of

the firm.

Centralization

The degree to which authority rests at the top of

the organization.

Unity

of Direction

A single plan of action to guide the organization.

Fayols Principles of
Management
(contd)
Equity

The provision of justice and the fair and impartial

treatment of all employees.

Order

The arrangement of employees where they will be of

the most value to the organization and to provide
career opportunities.

Initiative

The fostering of creativity and innovation by

encouraging employees to act on their own.

Fayols Principles of Management

Discipline

Obedient, applied, respectful employees are

necessary for the organization to function.

Remuneration

An equitable uniform payment system that motivates

contributes to organizational success.

Stability

of Personnel

of Tenure of Personnel

Long-term employment is important for the

development of skills that improve the organizations
performance.

Fayols Principles of Management

(contd)
Subordination of Individual Interest to the
Common Interest

The interest of the organization takes precedence

over that of the individual employee.

Esprit

de corps

Encourages harmony as a basis of strength

companionship, shared enthusiasm foster
devotion to the common cause (organization).

Emphasized the perspective of senior managers

Five management functions

planning
organizing
commanding
coordinating
controlling

Fourteen principles of management

Behavioral Management
Theory
Behavioral

Management

The study of how managers should behave to

motivate employees and encourage them to
perform at high levels and be committed to the
achievement of organizational goals.
Focuses on the way a manager should personally
manage to motivate employees.

Behavioral Management
Mary

Parker Follett

An influential leader in early managerial theory

Held a horizontal view of power and authority in
organizations

Suggested workers help in analyzing their jobs for

improvementsthe worker knows the best way to
improve the job.
If workers have relevant knowledge of the task, then
they should control the task.

Theory X and Theory Y

Douglas

McGregor proposed the two different

sets of assumptions about workers.

Theory X assumes the average worker is lazy,

dislikes work and will do as little as possible.

Managers must closely supervise and control through

reward and punishment.

Theory Y assumes workers are not lazy, want to do a

good job and the job itself will determine if the worker
likes the work.

Managers should allow workers greater latitude, and

create an organization to stimulate the workers.

Theory X versus Theory Y

Management Science Theory

An approach to management that uses rigorous quantitative

techniques to maximize the use of organizational resources.

Quantitative managementutilizes linear programming,

modeling, simulation systems.
Operations managementtechniques to analyze all
aspects of the production system.
Total Quality Management (TQM)focuses on improving
quality throughout an organization.
Management Information Systems (MIS)provides
information about the organization.

Organizational Environment
Theory
Organizational

Environment

The set of forces and conditions that operate

beyond an organizations boundaries but affect a
managers ability to acquire and utilize resources.

Open systems
Systems

theory is primarily a synthesis of

classical and human relations theories of
management.
System may be defined as something that
functions by virtue of the interdependence of
its component parts. A system is defined in
terms of boundaries and is made up of subsystems rather like the human body.

Systems Theory
Key concepts
Organization is viewed as a managed system
Management must interact with the environment
Organizational goals must address effectiveness and efficiency
Organizations contain a series of subsystems
There are many avenues to the same outcome
Synergies enable the whole to be more than the sum of the parts

Contributions
Recognized the importance of the relationship between the
organization and the environment

Limitations
Does not provide specific guidance on the functions of managers

The Open-Systems View

Open

System

A system that takes resources for its external

environment and converts them into goods and
services that are then sent back to that
environment for purchase by customers.
Inputs: the acquisition of external resources.
Conversion: the processing of inputs into goods
and services.
Output: the release of finished goods into the
environment.

The Organization as an Open

System

Other System Considerations

Closed

system

A system that is self-contained and thus not affected

by changes occurring in its external environment.
Often undergoes entropy and loses its ability to
control itself, and fails.

Synergy

Performance that results when individuals and

departments coordinate their actions

Performance gains of the whole surpass the sum of the

performance of the individual components.

An Open System and Its Subsystems

Environment

Transformation

Raw Materials
People
Information
resources
Financial
resources

Input

Subsystems

Boundary
Spanning

Output
Process
Production,
Maintenance,
Adaptation,
Management

Boundary
Spanning

Products
and
Services

Contingency Theory
Contingency

The idea that the organizational structures and control

systems manager choose depend onare contingent
oncharacteristics of the external environment in
which the organization operates.
Assumes there is no one best way to manage.

Theory

The environment impacts the firm and managers must be

flexible to react to environmental changes.

In rapidly changing organizational environments,

managers must find ways to coordinate different
departments to respond quickly and effectively.

Contingency Theory

Organizations are open systems that need careful

management to satisfy and balance internal needs and to
adapt to environment circumstances

There is no one best way of organizing. The appropriate

form depends on the kind of task or environment with which
one is dealing
Management must be concerned, above all else, with
achieving good fits. Different approaches to management
may be necessary to perform different tasks within the same
organization, and quite different types of species of
organization are needed in different types of environment
Burns & Stalker, 1961; Lawrence and Lorsch, 1967;
Galbraith, 1973; Woodward; etc

Contingency Perspective
Key concepts
Situational contingencies influence the strategies, structures,
and processes that result in high performance
There is more than one way to reach a goal
Managers may adapt their organizations to the situation

Contributions
Identified major contingencies
Argued against universal principles of management

Limitations

Not all important contingencies have been identified

Theory may not be applicable to all managerial issues

Contingency Theory of
Organizational Design

Mechanistic and Organic

Structures
Mechanistic

Authority is centralized at the top. (Theory X)

Employees are closely monitored and managed.
Can be very efficient in a stable environment.

Organic

Structure

structure

Authority is decentralized throughout the

organization. (Theory Y)
Tasks and roles are left ambiguous to encourage
employees to react quickly to changing environment.

Current Challenges for

Organisations
Global Competition
Ethics and and Social Responsibility
Speed of Responsiveness
The Digital Workplace
Diversity

Perspectives on Organisations

Closed Systems

Not dependent on environment internal efficiency

Open Systems

Environment vital customers, suppliers and competitors

System designed to acquire inputs, transform them and
discharge outputs to external environment
Importance of subsystems in organisations

Perspectives on Organisations
Top
Management

Technical
Support

Middle
Management

Administrative
Support

Technical Core
Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297;
and Henry Mintzberg, Organization Design: Fashion or Fit? Harvard Business Review 59 (Jan. Feb. 1981): 103-116.

Organisational Design

Structural

Contextual

Labels to describe internal characteristics

Requirements for organising efficient internal
operations
Characterise the whole organisation and describe the
organisational setting in detail

Performance and Effectiveness Outcomes

Importance of Stakeholders

Environment

Culture

Goals and
Strategy

Size

Structure
1.
2.
3.
4.
5.
6.

Formalization
Specialization
Hierarchy of Authority
Centralization
Professionalism
Personnel Ratios

Technology

Stakeholders for Organisations

THE WIDER ENVIRONMENT
THE NATURAL ENVIRONMENT
Pollution
IMMEDIATE STAKEHOLDERS
Creditors
Government

Local Community
THE
ORGANISATION

Customers
Suppliers

Employees

Regulatory
Interest
Groups

Owners
and
Investors

Sustainability of Resources
Source: Rollinson with Broadfield
(2002: 48)

Efficient Performance v The Learning

Organisation:
Two Organisation Design Approaches
Natural System Design

Mechanical System Design

Horizontal
Structure

Vertical
Structure

Routine
Tasks

Formal
Systems

Rigid
Culture

Competitive
Strategy

Stable Environment
Efficient Performance

Organizational Change
in the Service of
Performance

Empowered
Roles

Shared
Information

Adaptive
Culture

Collaborative
Strategy

Turbulent Environment
Learning Organisation

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)

Summary and Conclusions

Organisational

Theory is study of aggregate

behaviour of individuals in organisations
Organisations are important in society
Need for understanding of structure and
systems to cope with current challenges
Interesting trends in organisational design
and management practices