Gilbert Mansour, A1510681
Chapter one LJ.
Organizations and organizational effectiveness
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Organization: an organization is an intangible tool, set up by an individual or a few people who
believe they possess the necessary skills and knowledge, used by people to coordinate their actions
to obtain something they desire or value. In other words, it is a deliberate arrangement of people
brought together to achieve a certain goal or purpose. They are spawned when new technologies
become available and new needs are discovered, and they die or are transformed when the needs
they satisfied are no longer important.
Note that people only think about organizations when they fail to satisfy their needs.
The value creation process: consists of three stages, input, conversion, output. Each stage is
affected by the organizational environment which is the set of forces and conditions that operate
beyond an organization's boundaries but affect its ability to acquire and use resources to create
value, it includes customers, shareholders, suppliers, distributors, the government and also
competitors. Inputs include raw materials, money and capital and customers of service
organizations so on. As for the conversion process, it is mainly made of machinery, computers and
human skills and abilities. Finally concerning the outputs, they could be finished goods, services,
dividends, salaries or value for stakeholders. The amount of value the organization creates is a
function of the quality of its skills including its ability to learn from and respond to the environment.
Why do organizations exist: simply because working in an organization creates more value than
when working individually, because the use of an organization allows people jointly to increase
specialization and the division of Labor, use large scale technology, manage the external
environment, economize on transaction costs, exert power and control, which increases the value
that an organization can create.
Organizational theory, structure, design, change and culture: Org. theory is the study of how
organizations function and how they affect and are affected by the environment in which they
operate. Organizational structure is the formal system of task and authority relationships that
control how people coordinate their actions and use resources to achieve organizational goals. Org.
design is the process by which managers select and manage aspects of structure and culture so that
an organization can control the activities necessary to achieve its goals. Org. change is the process
by which organizations redesign their structures and cultures to move from their present state to
some desired future state to increase their effectiveness. Organizational design and change are
important to increase the effectiveness and the value created (creates a competitive advantage
which springs from the strategy of using the core competencies of the company), and also in order
to deal with contingencies and outside pressure and competition. The consequences of poor
organizational design or lack of attention to it is the decline of the organization caused by making
talented employees leave to take positions in strong growing companies, and resources become
harder and harder to acquire and the whole process of value creation slows down.
Org. culture is the set of shared values and norms that controls organizational members interactions
with each other and with suppliers, customers, and other people outside the organization. They are
related and depend on each other to evolve and change.
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Managing diversity: it is an important process because differences in race, gender and so on have
important implications on the values of an organization's culture and for organizational
effectiveness. From the quality of organizational decision making to changes of the characteristics
of the workforce… diversity is very important to be managed correctly and efficiently.
Promoting efficiency, speed and innovation: this is also an important process because the ability
of companies to compete successfully in today's competitive environment is increasingly a function
of how well they innovate and how quickly they can introduce new technologies. Note that this
process is affected by the organization's culture and structure.
Measuring organizational effectiveness: it is an important process because utilizing
organizational resources in a way that maximizes an organization's ability to create value is the
responsibility of managers and so it is important to understand how they evaluate organizational
performance. There are three approaches to measuring organizational effectiveness, the external
resource approach, the internal systems approach and finally the technical approach. The external
approach evaluates the organization's ability to secure manage and control rare and valued skills
and resources. The internal approach evaluates the organization's ability to be innovative and
function quickly and responsively. The technical approach evaluates the organization's ability to
convert skills and resources into goods and services efficiently. And of course, goals should be set
to measure effectiveness, like lowering cost of inputs, increasing market share, cutting decisionmaking time, reducing time to market and so on…
Definitions:
Operative goals: specific long-term and short-term goals that guide managers and employees as
they perform the work of the organization.
Official goals: guiding principles that the organization formally states in its annual report and in
other public documents.
Mission: goals that explain why the organization exists and what it should be doing.
Economies of scale: cost savings that result when goods and services are produced in large volume
on automated production lines.
Economies of scope: cost savings that result when an organization can use underutilized resources
more effectively because they can be shared across different products or tasks.
Entrepreneurship: it is the process by which people recognize opportunities to satisfy needs and
then gather and use resources to meet those needs.
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