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Organization Theory and Design - Richard L. Daft

Organization Theory and Design
Richard L. Daft

LEESTOETS 1 ....................................................................................................................................... 2 PAGE 3 – 31: ORGANIZATIONS AND ORGANIZATION THEORY ............................................................... 2 PAGE 161 – 173: BUREAUCRACY AND AUTHORITY .............................................................................. 3 PAGE 201 – 220: ORGANIZATION STRUCTURE ...................................................................................... 4 PAGE 441 – 461: POWER AND POLITICS ................................................................................................ 4 LEESTOETS 2 ....................................................................................................................................... 6 PAGE 58 – 69: EFFECTIVENESS ............................................................................................................. 6 PAGE 81 – 106: ENVIRONMENT ............................................................................................................ 7 PAGE 119 – 149: TECHNOLOGY ............................................................................................................ 7 PAGE 201 – 233: STRUCTURE (ZIE LEESTOETS 1).................................................................................. 8 PAGE 249 – 258: STRUCTURE ............................................................................................................. 10 PAGE 346 – 355: CONTROL ................................................................................................................ 10 LEESTOETS 3 ..................................................................................................................................... 11 PAGE 45 – 58: GOALS AND STRATEGY ................................................................................................ 11 PAGE 285 – 314: INNOVATION AND CHANGE ...................................................................................... 11 PAGE 367 – 377: ORGANIZATION CULTURE......................................................................................... 13 PAGE 401 – 432: DECISION MAKING ................................................................................................... 14 PAGE 441 – 470: POWER AND POLITICS (ZIE LEESTOETS 1) ................................................................. 17

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Leestoets 1

Page 3 – 31: Organizations and organization theory
Recent Challenges • Global competition • Organizational renewal (to a “Learning organization”: Everyone is allowed to solve problems, flat structure etc.) • Strategic advantage (fast delivering, information technology) • Employee relationships (flatter organization, no “lifetime employment”) • Diversity (changing workforce) • Ethical and Social responsibility Organizations are: 1. Social entities 2. Goal directed 3. Designed as deliberately structured and coordinated activity systems 4. Linked to the external environment Closed system - doesn’t depend on environment (environment for granted) Open system - interacts with environment to survive System - set of interacting elements that acquire inputs from the environment, transforms them, and discharges outputs to the external environment. Chaos theory – we live in a complex world full of randomness and uncertainty. Butterfly aspect – aspect of Chaos theory, small events can have giant effects. Subsystems of an organization • Boundary subsystems – work directly with environment • Production subsystems – do primary transformation • Maintenance subsystems – smooth operation and upkeep of the organization • Adapting subsystems – organizational change and innovations • Management subsystems – directing/coordinating other subsystems Organizational dimensions 1. Structural dimensions – provide labels to describe the internal characteristics of an organization (create basis for measuring and comparing organizations) • Formalization - amount of written documentary • Specialization - division of labor, degree tasks are subdivided • Standardization • Hierarchy of authority – related to the span of control (number of employees reporting to a supervisor) • Complexity ¾ Vertical – number of levels in the hierarchy ¾ Horizontal – number of departments/job titles existing horizontal ¾ Spatial – number of geographically locations • Centralization – refer to the hierarchy level that has authority to make decisions • Professionalism – level of formal education and training employees • Personnel ratios – deployment of people to various functions and departments 2. Contextual dimensions – characterize the whole organization • Size • Organizational technology • Environment • Goals and strategy • Culture Paradigm – shared mind-set that represent a fundamental way of thinking, perceiving and understanding the world

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Information – primary form of capital in the postmodern organization Contingency – one thing depends on other things Distinct perspectives of organizational theories • Rational-Contingency Perspective – orientation towards efficiently and maintenance of the organizational status quo, managers are intentionally rational • Radical-Marxism Perspective - managers are intentionally rational, but with a twist, managers make decisions to maintain their position, belief in changing the status quo • Transaction-Cost Economic Perspective – individuals act in their self-interest, focuses on the exchange of services and goods rather then production, minimize costs Four levels of analyses normally characterize an organization (group, organization, group and individual) Organizational behavior – micro examination, focuses on individuals in organizations, psychology Organization theory – macro examination, analyses whole organization as a unit, sociology Meso theory – concerns the integration of micro and macro theory

Page 161 – 173: Bureaucracy and authority
Reasons organizational growth: 1) Organizational goals 2) Executive advancement - necessary to keep and attract quality managers 3) Economic health Large versus small: Large Economies of scale Global research Vertical hierarchy, mechanistic Complex Stable market “Organization men” small responsive, flexible regional reach flat structure, organic simple niche finding entrepreneurs

Big-company/small-company hybrid – theory that combines a large corporation’s resources and reach with a small company’s simplicity and flexibility. Type’s of authority Weber identified that could explain the creation and control of a large organization: 1) Rational-legal authority - based on employees’ beliefs in the legality of rules, most common base 2) Traditional authority – based on belief in traditions, monarchies, churches 3) Charismatic authority – based on character individual person, military Dimensions of bureaucratic structure in which small organizations differ from large organizations / characteristics of bureaucracy: 1) 2) 3) 4) Formalization (in large organizations) Decentralization Complexity Personnel ratios (The administration ratio – most frequent used ratio: less top management in larger organizations and clerical and professional staff larger in large organizations, Parkinson’s law – book that argues work expands to fill the time available for it completion)

Greater organization size is associated with: 1) Increasing number of management levels (vertical complexity) 2) Greater number of jobs and departments (horizontal complexity) 3) Increases specialization of skills and functions 4) Greater formalization 5) Greater decentralization 6) Smaller percentage of top administrators

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7) Greater percentage of technical and professional support staff 8) Greater percentage of clerical and maintenance support staff 9) Greater amount of written communication and documentation Professional partnership – form of organization that is made up completely of professionals

Page 201 – 220: Organization structure
Elements of structure: 1. Designates formal reporting relationships, including the number of levels in the hierarchy and the span of control f managers and supervisors 2. Identifies the grouping together of individuals into departments and of departments into the organization 3. Includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments Linkage – the extend of communication and coordination among organizational elements Structural devices to achieve vertical linkage: 1. Hierarchical referral 2. Rules and plans 3. Add positions to hierarchy 4. Vertical information system (Fe. Periodic report) Structural devices to achieve horizontal linkage: 1. Information systems 2. Direct contact 3. Task forces – temporary committee 4. Full-time integrator 5. Teams Overall design of organization indicates: 1. Define work activities 2. Reporting relationships (chain of command) 3. Departmental grouping • Functional grouping • Divisional grouping (product or strategic business grouping) • Geographic grouping • Multifocused grouping

Page 441 – 461: Power and politics
Managers have 5 sources of personnel power: 1. Legitimate power 2. Reward power 3. Coercive power 4. Expert power 5. Referent power Power – the ability of one person or department in an organization to influence other people to bring about desired outcomes. Properties authority (also force for achieving desired outcomes): 1. Vested in organizational positions 2. Accepted by subordinates 3. Flows down the vertical hierarchy Power sources top management:

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1. 2. 3. 4.

Formal position (legitimate power) Resources (can exchange them in the form of salaries, personnel, promotion etc.) Control of decision premises and information Network centrality – locate themselves centrally in an organization

Without sufficient power, middle-level people cannot be productive. Power can be built into positions and departments through the design of task activities and interaction opportunities. Empowerment – power sharing, the delegation of power or authority to subordinates in the organization. Reasons firms adopt empowerment: 1. As a strategic imperative to improve products or services 2. Because other firms in the industry are doing so 3. To create an unique organization with superior performance capabilities (best) Empowerment increases the total amount of power. It also increases employee motivation (selfefficacy). Elements of empowerment: 1. Employees receive information about company performance 2. Employees have knowledge and skills to contribute to company goals 3. Employees have the power to make substantive decisions 4. Employees are rewarded based on company performance The empowerment process (the process can be accomplished in tree stages): 1. Diagnose the decisions within the organization that cause powerlessness for subordinates 2. Engage in empowerment practices that will increase power at lower levels 3. Feedback to employees that reinforces their success and feelings of effectiveness Horizontal power is not defined by the formal hierarchy of the organization chart. Some departments have more power than others do. Departments involved with strategic contingencies (=events that are essential for attaining organizational goals) intend to have greater power. Power sources horizontal power: 1. Dependency 2. Financial resources 3. Centrality 4. Nonsubstitutability 5. Coping with uncertainty

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Leestoets 2

Page 58 – 69: Effectiveness
Effectiveness: Degree in which an organization realizes its goals Efficiency: Amount of resources used to produce a unit of output Traditional effectiveness approaches: • Goal approach: concerned with the output side and whether the organization achieves its goals in terms of desired level of output ¾ Indicators: operative goals ¾ Usefulness: goede maatstaf (problemen: meerdere doelen en subjective indicators) • System Resource approach: observes the beginning of the process and evaluates whether the organization effectively obtains resources necessary for high performance ¾ Indicators: - Bargaining position – ability to exploit its environment - The ability to interpret the real properties of the external environment - Maintaining of internal day-to-day activities - Ability tot respond to changes in the environment ¾ Usefulness: when other indicators are difficult to obtain or its hard to measure • Internal Process approach: looks at internal activities and assesses effectiveness by indicators of internal health and efficiency ¾ Indicators: - Strong corporate culture and positive work climate - Team spirit, group loyalty, and teamwork - Confidence, trust, and communications between workers and management - Decision making near information sources, regardless were those sources are on the organizational chart - Sharing of relevant fact and feelings (horizontal & vertical) - Rewards to managers for performance, growth, and development of subordinates and for creating an effective working group - Interaction between the organization and its parts, with conflicts that occurs over projects resolves in the interest of the organization - William Evan: O/I ratio (output/input) Æ overall financial efficiency, or T (transformation) ¾ Usefulness: important because the efficient use of resources and harmonious internal functioning are ways to measure effectiveness. Contemporary effectiveness approaches: • Stakeholder approach: Integrates diverse organizational activities by focusing on organizational stakeholders. ¾ Indicators: The satisfaction of stakeholder ¾ Usefulness: broad view of effectiveness and examines factors in the environment as well as within the organization. Handles several criteria simultaneous. • Competing values approach: uses a list of underlying dimensions of effectiveness criteria that represented competing management values in organizations. ¾ Indicators: - Focus (internal or external) - Structure (stability versus flexibility) The combination of focus and structure provides 4 models: ƒ Open system model (external & flexible, goals: growth and resource acquisition. subgoals: flexibility, readiness, and positive external evaluation) ƒ Rational goal model (control & external, goals: productivity, efficiency and profit. Subgoals: internal planning and goal setting) ƒ Internal process model (internal & control, goal: stability) ƒ Human relations model (internal & flexible, goal: development of human resource, subgoals: cohesion, morale, and training opportunities)

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¾

Usefulness: (1) integrates diverse concepts of effectiveness into a single perspective (2) calls attention to effectiveness criteria as management values and shows how opposing values exist at the same time.

Page 81 – 106: Environment
Organizational environment: all elements that exist outside the boundary of the organization and have the potential to effect all or part of the organization. Environment domain: chosen environmental field of action. The environment comprises several sectors of subdivisions, ten can be analyzed by each organization: 1. Industry 2. Raw materials 3. Human resource 4. Financial resource 5. Market 6. Technology 7. Economic conditions 8. Government 9. Sociocultural 10. International The environment can be subdivided into: • Task environment (interacts directly and has direct impact on the organizations ability to achieve its goals. • General environment (indirect influence) Ways the environment influences organizations: 1. The need for information about the environment 2. The need for resources from the environment Characteristics of the environment that influence uncertainty: • Simple – complex (many - less elements that influences) • Stable – unstable The stable – unstable and simple – complex dimensions are combined in a framework: • Simple + stable = low uncertainty • Complex + stable = low-moderate uncertainty • Simple + unstable = high-moderate uncertainty • Complex + unstable = high uncertainty T/m page 89

Page 119 – 149: technology
Vanaf page 129 CIM is organic Service technology based on 5 elements: 1. Simultaneous production and consumption 2. Customized output 3. Customer participation 4. Intangible output 5. Labor intensive

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Boundary roles less in service firms than in manufacturing firms. Service firms don’s have to be large but near to the people. Task employees need to be higher in service firms. Dimensions of departmental activities that were relevant to organizational structure and process (Perrow): 1. Variety 2. Analyzability (yes Æ standard problem solving) Variety and Analyzability form the basis of four major categories of technology: 1. Routine (low variety, high analyzability) 2. Craft (low variety, low analyzability) 3. Engineering (high variety, high analyzability) 4. Nonroutine (high variety, high analyzability) Types of interdependence (in which departments depend on eachother): 1. Pooled – lowest form of interdependence, exists in firms with a mediating technology (Thompson)(link clients, every department can work independently 2. Sequential – output one department = input other department, exists in long-linked technology (Thompson) 3. Reciprocal – highest form of interdependence, output A = input B, output B = input A, exists in intensive technologies (Thompson), should receive first priority in organization structure Aspects of Advanced information technology (AIT): • Executive information system – support information needs of senior managers, non-routine decisions • Groupware – interaction with employees from PC’s • Workflow automation – automatic sends documents to the correct location Specific improvements in management process trough AIT: • Broader participation in decision making • Faster decision making • Better organizational intelligence, including more rapid identification of problems and opportunities Impact AIT on the administrative structure of the organization: • Flatter organization structure • Greater centralization or decentralization • Improved coordination • Fewer narrow tasks • Larger professional staff ratio Socialtechnical systems approach: combines needs of people with the needs of technical efficiency, goal: Joint optimization (social and technical systems are designed to fit needs of one another (Tavistock institute).

Page 201 – 233: Structure (zie leestoets 1)
Key components in the definition of organization structure: 1. Designates formal reporting relationships 2. Identifies the grouping together of individuals into departments and of departments into the total organization. 3. Includes the design of system to ensure effective communication, coordination, and integration of effort across departments. 1+2: framework 3: interactions

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Linkage – the extend of communication and coordination among organizational elements Vertical linkage: to coordinate activities between the top and the bottom of an organization. Structural devices to achieve vertical linkage: 1. Hierarchical referral – hierarchy, chain of command 2. Rules and plans 3. Add positions to hierarchy 4. Vertical information systems (Fe. Periodic report) Van onder naar boven gerangschikt. Onderste werkt het meest. Horizontal information linkages: refers to the amount of communications and coordination horizontally across the organizational departments. Structural alternatives that can improve horizontal coordination and information flow: 1. Information systems 2. Direct contact – liaison role 3. Task forces – temporary committee composed of representatives from each department affected by a problem, for temporary issues. 4. Full-time integrator 5. teams Van onder naar boven gerangschikt. Onderste werkt het meest. Overall design of organization indicates: 1. Define work activities 2. Reporting relationships (chain of command) 3. Departmental grouping • Functional grouping +: economics of scale -: slow respond environmental changes medium-sized organizations with few products • Divisional grouping (product or strategic business grouping) +: flexible, better control and coordination -: less economics of scale decentralizes decision making, uncertain environment, technology nonroutine • Geographic grouping – zie divisional grouping • Multifocused grouping (2 structural grouping alternatives simultaneous) ¾ Hybrid (characteristics of both product & function or product & geography) +: combine alternatives and provide of the strengths of each and avoid some of the weaknesses -: administrative overhead, conflict corporal and divisional personnel uncertain environment, large size ¾ Matrix (product & functional, strong form horizontal linkage) Hybrid: organization divided in separate parts Matrix: product and functional managers equally authority Conditions for Matrix: a) Pressure exists to share scarce resources across production lines (medium-sized organization) b) Environment pressure for 2 or more critical outputs c) Environmental domain both complex and uncertain Key Matrix roles: a) Top leader b) Matrix boss (department & product bosses) c) Two-boss employee Environment uncertain -: employees can experience dual authority, managers spend al great time in meetings +: flexible and adaptable variations: Functional and project matrix – resp. functional or project have primary authority, other just coordinates the activities symptoms of structural deficiently when organization structure is out of allignement with organizational needs:

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1. 2. 3.

Decision making is delayed or lacking in quality The organization does not respond innovatively to a changing environment Too much conflict is evidence

Page 249 – 258: Structure
Recent organizational design are a significant shift toward horizontal rather than vertical management. Characteristics horizontal corporation: 1. Structure is created around workflows or processes rather than departmental functions 2. The vertical hierarchy is flattened 3. Management tasks are delegated to the lowest level Æ decentralization 4. Customers drive the horizontal corporation Self-directed teams building blocks of the new horizontal organization. Consist of 5 to 30 workers with different skills who rotate jobs and produce an entire product or service and who take over managerial duties. Include following elements: 1. Team is given access to resources 2. The team includes a range of employees skills 3. The team is empowered with decision-making authority Advantages: • improvements speed en efficiency • reduced barriers among departments • better morale • administrative overhead is reduced Disadvantages: • shifting difficult process reengineering: cross-functional initiative involving the radical redesign of business to bring about simultaneous changes in structure, culture and information technology. Dynamic Network Design: Other trend, choice companies make to limit themselves to only a few activities they do extremely well. Free market style. Outsourcing other functions. +: less administrative overhead, products quickly to the market without much start-up costs, develop new products without high investments, flexible, rapid response -: little hands on control, difficult to define organizations, weakened employee loyalty.

Page 346 – 355: Control
Overall approaches for control (W. Ouchi): 1. Market control – used to evaluate the output and productivity of an organization, requirements; prices, competition, and exchange relationship. 2. Bureaucratic control – standardizes behavior, rules, regulations etc. • Management control systems ¾ Budget ¾ Statistical reports ¾ Reward system ¾ Operating procedures • Technology overcontrol, information technology can be used to increase the speed and intensity of control over employees. 3. Clan control – uses social characteristics to control behavior, important when ambiguity and uncertainty are high (small, informal organizations with a strong culture)

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Leestoets 3

Page 45 – 58: goals and strategy
The primary-sibility of top management is to determine an organization’s goals, strategy and design, therein adapting the organization to a changing environment. Role of organizational theory: Organization design reflects the goals and strategies are implemented. Goals: • Mission, official goals (reason for existence, organization’s vision) • operative goals (goals the organization actually pursues, describe specific measurable outcomes) ¾ Overall performance (profitability) ¾ Resources ¾ Market ¾ Employee development ¾ Innovation ¾ Productivity Purposes of goals: • legitimacy (mission) • employee direction and operation (operative) • decision guidelines • criteria of performance Strategy: plan for interacting with the compatitive environment to achieve organizational goals Goals define where the organization wants to go, strategy how it will get there. Porter’s framework of 3 competitive strategies: 1. low-cost leadership (stability rather than risk) 2. differentiation (distinguishing) 3. focus (specific regional market or buyer group) Ideas to built internal organizational characteristics: • Strategic orientation ¾ Close to the customer ¾ Fast response ¾ A clear business focus and goals • Top management ¾ Leadership vision ¾ A bias toward action ¾ Promoting a foundation of core values • Organization design ¾ Simple form and lean staff ¾ Decentralization to increase entrepreneurship ¾ A balance between financial and nonfinancial numbers of performance • Corporate culture ¾ Climate of trust ¾ Encouraging productivity through people (everyone must participate) ¾ Long-time view

Page 285 – 314: innovation and change
Change:

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incremental change (a series of continual progresses, establishing structure and management processes) radical change (change of structures and management processes)

Strategic types of change: • Technology changes • Product and service changes • Strategy and structure changes • People and culture changes The changes are interdependence, changes in one, often requires changes in another. Organizational change: adoption of a new idea or behavior by an organization Organizational innovation: adoption of a new idea or behavior that is new to the organization’s market, industry, or general environment. Change process: identical by organizational change or organizational innovation. Series of steps or elements for successful change: 1. Ideas 2. Need (for change) 3. Adoption (decision makers choose to go ahead of a proposed idea) 4. Implementation 5. Resources (human energy and activity) Technology change: The challenge for organizations is to create both organic and mechanic conditions to achieve both innovations and efficiency. To achieve both aspect of technological change, many organizations use the ambidextrous approach (to incorporate structures and management processes that are appropriate to both the creation and use of innovation). Techniques for encouraging technology change: • Switching structures (an organization creates an organic structure when such structure is needed for the initiation of new ideas) • Creative departments (Fe R&D, engineering, design) • Venture teams (given separate location and facilities so they are not constrained by organizational procedures) • Corporate entrepeneurship (attempts to develop an internal spirit, philosophy and stucture) Idea champions (provide the time and energy to make things happen), 2 types: ¾ technical or product champion ¾ management champion (supporter/sponsor) To be successful, the new products had to pass 3 stages of development: 1. Technical completion 2. Commercialization 3. Market success Reasons for new products success: • Understanding of customers needs and paying attention to marketing • Making effective use of (outside) technology and advise • Having influential top managers support Æ horizontal linkages across departments Horizontal linkage model: • departmental specialization • boundary spanning (each department with new products had excellent linkage with relevant sectors in the external environment) • horizontal linkages (departments share ideas and information) Paradigm for success: Provide the most value for the least cost in the least elapsed time. Design products for a global scale and marketing them successfully.

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Dual core approach: compares administrative and technical changes, identifies the unique processes associated with administrative change. 1. Administrative changes occur less frequently than do technical changes 2. Administrative changes occur in response to different environmental sectors and follows a different internal process than do technology-based changes. Organization can be conceptualized as having 2 cores: 1. Administrative core (above technical core, many administrative changes Æ mechanistic, topdown) 2. Technical core (many technical changes Æ organic, bottom-up) Trends that generally lead to significant changes in corporate culture: • Reengineering (vertical Æ horizontal structure) • Horizontal organization • Total-quality management programs (Quality circles: groups (6-12) who meet to analyze and solve problems. Benchmarking: imitate other companies) Organizational development: method of bringing out cultural change, focuses on the development and fulfillment of people, uses knowledge and techniques of the behavior sciences. Techniques used by many organizations for improving people skills through OD include: • survey feedback • off-side meetings • team building • intergroup activities Strong leadership is needed to support change. They built organizationwide commitment by taking employees through 3 stages of the change commitment process: 1. preparation Æ initial contact, awareness 2. acceptance Æ understanding, decision to implement 3. commitment Æ installation Barriers to change: 1. excessive focus on costs 2. failure to perceive benefits 3. lack of coordination and cooperation 4. uncertainty avoidance 5. fear of loss Techniques for implementation: 1. Identify a true need for change 2. Find an idea that fits the need 3. Get top management support 4. Design the change for incremental implementation (large changes implement seperatly) 5. Develop plans to overcome resistance to change ¾ Alignment with needs and goals of users ¾ Communication and training ¾ Participation and involvement ¾ Forcing and coercion 6. Create change teams 7. Foster idea champions

Page 367 – 377: organization culture
Culture: set of values, guiding beliefs, understandings, and ways of thinking that is shared by members of an organization and that is taught to new members as correct.

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2 levels of organizational culture: • Surface: visible artifacts and observable behaviors • Deeper values in de minds of organizational members Critical functions culture in organization: 1. Internal integration - to integrate members so that they know how to relate to one another. 2. External adaptation - to help the organization adapt to the external environment. Observable aspects of culture: • Rites and ceremonies ¾ Passage – facilitate transition of persons into social roles ad statuses that are new for them (bij promotie) ¾ Enhancement – enhance social identities and increase status of employees (rewards) ¾ Renewal – Refurbish social structures and improve organization functioning (kwaliteits wedstrijden) ¾ Integration – Encourage and revive common feelings that bind members together and commit them to the organization (kerstfeest) • Stories (heroes, legends or myths – keep alive the primary values of the organization and provide a shared understanding among all employees) • Symbols • Language (slogan, metaphor etc.) Culture strength: degree of agreement among members of an organization about the important of specific values. A strong culture can not ensure success unless the culture is one that encourages a healthy adaptation to the external environment.

Needs of the environment Flexibility Stability External Adaptability/ Entrepeneurial culture Mission culture

Strategic focus Clan culture Internal Bureaucratic culture

Types of cultures: • The adaptebilty/entrepeneural culture: innovation, creativity, and risk-taking are valued and rewarded, it actively creates environmental changes • The mission culture: serving specific customers, emphasis on a clear vision of the organization’s purpose and on the achievement of goals. • The clan culture: primary focus on the involvement of the organization’s members and on rapidly changing expectations from the external environment, needs of employees as the roots of hogh performance. • The bureaucratic clan: methodical approach of doing business.

Page 401 – 432: decision making
Organizational decision making: process of identifying en solving problems. 2 stages in the process:

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1. 2.

problem identification stage problem solution stage

Organizational decisions vary in complexity and can be categorized in: • programmed decisions – repetitive and well defined • nonprogrammed decisions – novel and poorly defined Individual decision making can be described in 2 ways: • Rational approach – how managers should try to make decisions (1) monitor the decision environment (2) define the decision problem (3) specify decision objectives (details) (4) diagnose the problem (cause) (5) develop alternative solutions (6) evaluate alternatives (7) choose the best alternative (8) implement the chosen alternative Steps 1-4: problem identification stage Steps 5-8: problem solution stage of the decision making proces. • Bounded rationality perspective – how decisions actually have to be made under severe time and resource constraints. The attempt to be rational is bounded by the enormous complexity of many problems. Associated with Intuitive decision making: experience and judgement rather than sequential logic or explicit reasoning are used to make decisions. Intuition is not arbitrary or irrational. 4 types of organizational decision making processes: 1. Management science approach – analog to the rational approach by individual managers, excellent device for organizational decision making when problems are analyzable and the variables can be identified and measured. 2. Carnegie model – (Cyert, March & Simon) organization-level decisions involve many managers, final choice is based on a coalition among those managers. Managers coalitions are needed for 2 reasons: (1) Organizational goals are often ambiguous, and operative goals of departments are often inconstant. (disagree about problem priorities) (2) Individual managers intend to be rational but function with human cognitive limitations and other constraints Implications of the process of coalition formation: (1) Decisions are made to satisfy rather to optimize problem solutions (2) Managers are concerned with immediate problems and short-run solutions Æ Problemistic search: managers look around in the immediate environment for a solution to quickly resolve a problem (3) Discussion and bargaining are important in the decision making stage. Difference with management science approach: managers adopt the first satisfying solution. 3. Incremental decision process model – (Mitzberg) Identified each step in the decision sequence, less political and social factors, more of the structure sequence of the activities undertaken. Steps take place in 3 major decision phases: (1) Identification Æ recognition - diagnosis (2) Development Æ search (previous experience) Æ design (problem is novel) (3) Selection Three ways to accomplish evaluation and choice: (a) Judgement (based upon experience) (b) Bargaining (c) Authorization 4. Garbage can model – (Cohen, March & Olsen) Combination of incremental process and Carnegie models, when parts of the decision making process are extremely high uncertainty simultaneous. One of the most recent and interesting organizational decision process. Not directly comparable because it deals with patterns of multiple decisions. To explain patterns of decisions in organizations that experience extremely high uncertainty. Organized anarchy: highly uncertain conditions, which is an extremely organic organization.

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Characteristics organic organization: (1) Problematic preferences – problems are ill defined, ambiguity characterizes each step of a decision process. (2) Unclear, poorly understood technology (3) Turnover (of participants) Problem identification and problem solution may not be connected to each other. Decisions are the outcome of independent streams of events. 4 streams relevant to organizational decision making: (1) problems (2) potential solutions (3) participants (4) choice opportunities Consequences garbage can decision process: (1) solutions may be proposed even when problems do not exist (2) choices are made without solving problems (3) problems may persist without being solved (4) a few problems are solved Characteristics of organizations that determine the use of decision approaches are: • Goal consensus – refers to agreement among managers about which organizational goals and outcomes to pursue. Goal consensus is low when organizations are differentiated. Important for the identification stage. • Technical knowledge – refers to understanding and agreement of how to reach organizational goals. The Contingency decision-making framework brings together the 2 organizational dimensions of goal consensus en technical knowledge. The determine the extend to wich problem identification and solution stages are uncertain. Goal Consensus

PI: LU PS: LU Individual: rational approach Organization: management science

PI: HU PS: LU Individual: bargaining, coalition formatation Organizational: Carnegie

Technical Knowledge
PI: LU PS: HU Individual: Judhement, trial and error Organization: incremental PI: HU SP: HU Individual: bargaining, judgement, imitating Organizat.: garbage can

PI: Problem Identification, SI: Solution Identification High velo-city environments: Market where compative and technological change is extreme. Only by making mistakes managers and organizations can go through the process of decision learning. Escalate commitment: persist in a course of action when it is failing. Explanations for escaleting commitment to a failing decision: 1. Managers block or distort negative information wheb they are personel responsible for a negative decision. 2. Consistency and persistant are valued in contemporary society.

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Organization Theory and Design - Richard L. Daft

Page 441 – 470: power and politics (zie leestoets 1)
Managers have 5 sources of personnel power: 1. Legitimate power 2. Reward power 3. Coercive power 4. Expert power 5. Referent power (voorbeeldfunctie) Power – the ability of one person or department in an organization to influence other people to bring about desired outcomes. Properties authority (also force for achieving desired outcomes): 1. Vested in organizational positions 2. Accepted by subordinates 3. Flows down the vertical hierarchy Power sources top management: 1. Formal position (legitimate power) 2. Resources (can exchange them in the form of salaries, personnel, promotion etc.) 3. Control of decision premises and information 4. Network centrality – locate themselves centrally in an organization Without sufficient power, middle-level people cannot be productive. Power can be built into positions and departments through the design of task activities and interaction opportunities. Empowerment – power sharing, the delegation of power or authority to subordinates in the organization. Reasons firms adopt empowerment: 1. As a strategic imperative to improve products or services 2. Because other firms in the industry are doing so 3. To create an unique organization with superior performance capabilities (best) Manager’s fear of power loss is the biggest barrier to empowerment of employees. Empowerment increases the total amount of power. It also increases employee motivation (selfefficacy). Elements of empowerment: 1. Employees receive information about company performance 2. Employees have knowledge and skills to contribute to company goals 3. Employees have the power to make substantive decisions 4. Employees are rewarded based on company performance The empowerment process (the process can be accomplished in tree stages): 1. Diagnose the decisions within the organization that cause powerlessness for subordinates 2. Engage in empowerment practices that will increase power at lower levels 3. Feedback to employees that reinforces their success and feelings of effectiveness Horizontal power is not defined by the formal hierarchy of the organization chart. Some departments have more power than others do. Departments involved with strategic contingencies (=events that are essential for attaining organizational goals) intend to have greater power. Power sources horizontal power (Pfeffer & Salanick): 1. Dependency 2. Financial resources 3. Centrality 4. Nonsubstitutability 5. Coping with uncertainty Techniques to cope with critical uncertainties: a) obtaining prior information (forecasting) b) prevention (Prediction and forestalling negative events) c) absorption (action after a negative event to reduce negative consequences) Politics: Use of power to influence decisions in order to achieve desirable outcomes.

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MT&O 2

Organization Theory and Design - Richard L. Daft

2 ways to define politics: 1. as self-serving behavior 2. as a natural organizational decision process (Process of bargaining and negotiation that is used to overcome conflict and differences of opinion Æ coalition building decision process) Rational choice versus political behavior: • rational model (outcome of the rational approach to decision making) • political model (opposite) • mixed model Politics is related to the Carnegie-model. When uncertainty is high and there is disagreement over goals and problem priorities. More politics in top management (more uncertain decisions). Domains of political activity (areas in which politics plays a role): 1. Structural change 2. Interdepartmental coordination 3. Management succession 4. Resource allocation Tactics for increasing the Power Base: 1. Enter areas of high uncertainty (cope with critical uncertainties) 2. Create dependencies 3. Provide resources 4. Satisfy strategic contingencies Political tactics for using power: 1. Build coalitions 2. Expand networks • by reaching out to establish contact with additional managers • by co-operating dissenter 3. Control decision premises (constraint the boundaries of a decision) 4. Enhance legitimacy and expertise 5. Make preferences explicit, but make power implicit.

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