Introduction to Organisation

Theory and Design

Ho Sooi Hock

04/08/23 2

Outline What is an organisation Importance of organisations Organisation design – what and why Dimensions of organisational design Organisation theory – what and why Historical perspectives Organisational strategies Contemporary organisation design

04/08/23 3

What is an Organisation?

Organisations are social entities that are goal directed, are designed as deliberately structured and coordinated activity systems, and are linked to external environment.”

“Organisations are made up of people and their relationships with one another.”

04/08/23 4

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 owners, customers and

employees. Accommodate ongoing challenges of diversity,

ethics, social responsibility, and the motivation and coordination of employees.

04/08/23 5

Perspectives on Organisations

Two views of organisations: Open Systems

Early organisation studies focused on closed internal systems, based on assumptions that environment is stable and predictable.

Organisational Configuration Balance the five basic parts of an

organisation to perform the subsystem functions effectively.

04/08/23 6

Open Systems Closed Systems

“A closed system would not depend on its environment; it would be autonomous, enclosed, and sealed off from the outside world”. Primary issue is efficiency.

Open Systems An open system interacts with and adapts

to the environment by consuming resources and exporting product and services to it.

Issues involved are more complex due to interdependence of various elements.

04/08/23 7

An Open System and its Subsystems

Input Transformation Process

Output

Productsand

Services

Environment

PeopleRaw materialsInformationFinancial resources

Boundaryspanning

Boundaryspanning

Production, maintenance,adoption, management

Source: Organization Theory and Design, Richard L. Daft

04/08/23 8

Organisational Configuration

Technical Core Includes people who do the basic work.

Technical Support Helps the organization adapt to the

environment. Administrative Support

Responsible for smooth operation and upkeep. Management

Top Management – provides direction, strategy, goals and policies.

Middle Management – implementation and coordination.

04/08/23 9

Five Basic Parts of an Organisation

TopManagement

TechnicalSupport

Technical Core

AdministrativeSupport

MiddleManagement

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.

04/08/23 10

Organisation Design

Emphasies the management side of organisation theory

Concerned with constructing and changing an organisation’s structure and traits to achieve the organisation’s goals

04/08/23 11

Dimensions of Organisation Design

Organisation traits are described by: Structural Dimensions

Describes internal characteristics of an organisation.

Contextual Dimensions Characterises the whole organisation,

including its size, technology, environment and goals.

04/08/23 12

Structural Dimensions Formalisation

The amount of written documentation. Specialisation

The degree to which organisational tasks are subdivided into separate jobs.

Hierarchy of Authority Span of control of the managers.

Centralisation Hierarchical level of authority for decision making.

Professionalism Level of formal education and training of

employees. Personnel ratios

People deployed to each functions and departments.

04/08/23 13

Contextual Dimensions Size

Number of employees. Organisational Technology

Tools, techniques and actions used to transform inputs into outputs.

Goals and Strategy Purpose and competitive techniques that set it

apart from other organisations. Environment

All elements outside the organisational boundary.

Culture Shared key values, beliefs, understandings and

norms.

04/08/23 14

Goals and Strategy

Environment Size

Culture TechnologyStructure

1. Formalization2. Specialization3. Hierarchy of Authority4. Centralization5. Professionalism6. Personnel Ratios

Interacting Contextual and Structural Dimensions

04/08/23 15

Organisation Theory Discipline that studies the structure and

design of organisations Organisation theories are interdisciplinary,

based on knowledge from the fields of psychology, political science, economics, anthropology and sociology

Organisation theory is a macro examination of organisations – analyses the whole organisation as a unit; while organisation behaviour is the micro approach to organisations – focuses on the individuals within organisation

04/08/23 16

Organisation Challenges

Globalisation Ethics and Social Responsibility Speed of Responsiveness The Digital Workplace Diversity

04/08/23 17

Classical TheoriesEfficiency is Everything

Fredrick Winslow Taylor Scientific management approach “Managers develop precise, standard

procedures for doing each job, select workers with appropriate abilities, train workers in standard procedures, carefully plan work, and provide wage incentives to increase output.”

“The role of management is to maintain stability and efficiency.”

Thinking (top managers) Working (workers doing what they are told)

Focused on the technical core.

04/08/23 18

Classical TheoriesHow to Get Organised

Max Weber Bureaucratic approach Clear division of labour Hierarchical structure in the

organisation Predictability and stability Rationality Impersonal relationship Characteristics for most of today’s large

organisations

04/08/23 19

Classical TheoriesHow to Get Organised

Henri Fayol Administrative principles Concerned with the problems of management Develop general principles applicable to all

managers and describe the functions a manager should perform

14 principles in total – division of work, authority, discipline, unity of command, unity of direction, subordination of individual interests to the general interests, remuneration, centralisation, scalar chain, order, equity, stability of tenure of personnel, initiative, Esprit de corps

04/08/23 20

Human-Relations TheoriesWhat About People?

Elton Mayo, Chester Bernard, Douglas Mc Gregor

Hawthrone Studies Work on industrial psychology and human

relations. Chicago Western Electric Company “Positive treatment of employees improved

their motivation and productivity.” Laid the groundwork for subsequent work

examining worker treatment, leadership, motivation and HR management.

Human relations and behavioural approaches

04/08/23 21

Contingency Theory Don’t Forget the

Environment All organisations are not alike. The scientific management and administrative

principles approaches attempted to design all organisation in the same manner.

Contingency Theory – there is no one best way for organisation design

“Contingency means that one thing depends on other things, and for organisations to be effective, there must be a goodness of fit between their structure and conditions in their external environment.”

Contingency means it depends.

04/08/23 22

Organisational Strategies

Defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals

Two models Porter model Miles and Snow model

04/08/23 23

Porter’s Competitive Strategies

No firm can successfully perform at an above-average level by trying to be all things to all people Low-cost leadership Differentiation Focus

04/08/23 24

Miles and Snow’s Strategies

Classify organisations into one of four strategic types based on the rate at which they change their products or markets Defenders Prospectors Analysers Reactors

04/08/23 25

Contingency Factors Affecting Organisation

Design

Source: “Organization Theory and Design”, Richard L. Daft

Strategy

Environment Technolog

y

Size/Life Cycle Culture

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors

04/08/23 26

Discussions

Discuss how the following organisational strategies affect organisation design Low-cost leadership Differentiation Defenders Prospectors Analysers Reactors

04/08/23 27

Contemporary Organisation Design Learning Organisations Organisations today need greater fluidity and

adaptability. The learning organisation promotes use of

communication and collaboration technologies, so that everyone is engaged in identifying and solving problems.

All organisation members continuously help to experiment, improve and increase its capability.

“It is based on equality, open information, little hierarchy, and a culture that encourages adaptability and participation.”

Essential value is problem solving as opposed to efficient performance.

04/08/23 28

Two Organisation Design Approaches

VerticalStructure

RoutineTasks

RigidCulture

CompetitiveStrategy

FormalSystems

HorizontalStructure

AdaptiveCulture

EmpoweredRoles

CollaborativeStrategy

SharedInformation

Organizational Changein the Service of

Performance

Mechanical System Design

Natural System Design

Stable EnvironmentEfficient Performance

Turbulent EnvironmentLearning Organization

The slide adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Harvard Business School)

Original source : “Organization Theory and Design”, Richard L. Daft

04/08/23 29

Vertical to Horizontal Structure

Traditionally the activities were grouped together by common work from bottom to the top of the organisation, little collaboration occurs across functional departments.

In a fast changing environment the vertical structure becomes overloaded.

In the learning organisation, structure is created around horizontal workflows or processes rather than departmental functions.

“Self-directed teams are the fundamental work unit in the learning organisation.”

Boundaries between functions are eliminated.

04/08/23 30

Routine Tasks to Empowered Roles

The scientific management precisely define each job and how it should be done.

“In traditional organisations, tasks are broken down into specialized, separate parts, as in a machine. Knowledge and control of tasks are centralized.”

In learning organisations, employees are assigned roles – with discretion and responsibility - in the team or department which are continuously redefined or adjusted.

Employees are encouraged to take care of problems by working with each other and with customers.

04/08/23 31

Formal Control to Shared Information

“Formal systems are often implemented to manage the growing amount of complex information and to detect deviations from established standard and goals.”

In the learning organisation ideas and information are shared throughout the organisation.

Managers find ways to open channels of communication so that ideas flow freely in all directions.

Learning organisations communicate with customers, suppliers, and even competitors to enhance learning capability.

04/08/23 32

Competitive to Collaborative Strategy

Strategy in traditional organisations is formulated by top managers and imposed on the organisation.

In the learning organisations the accumulated actions of an informed and empowered workforce contribute to strategy development.

Partnerships with suppliers, customers and competitors to find the best way to learn and adapt, forming modular or virtual organisations that are connected electronically.

04/08/23 33

Rigid to Adaptive Culture Organisations should continuously adapt

to external environment. In a learning organisation, employees are

aware of the whole system and interactions of its parts and the culture encourage openness, equality, continues improvement and change.

“Each employee is a valued contributor and the organisation becomes a place for creating a web of relationships that allows people to develop their full potential.”

04/08/23 34

Resources

Richard L. Daft, “Organization Theory and Design”, Thomson (South-Western), 8th edition, 2004.

Stephen P. Robbins, Neil Barnwell, “Organisation Theory: Concepts and cases”, Prentice Hall, 4th edition, 2002.

04/08/23 35

Acknowlegement

This module was taught by Dr. Payam Mamaani Barnaghi since 2005. Most slides have been adopted from his lecture materials with some changes.