ORGANIZATIONS…
AND THEIR MANAGEMENT
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ORGANIZATIONS AND THEIR MANAGEMENT
Understand Topic’s Terminology
Understand Organizational Processes



Purpose and Structure
Management’s Role
Decision-Making
Designing Effective Organizations
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ORGANIZATIONS AND THEIR MANAGEMENT
Conrad Hilton (Hilton Hotels and Paris
Hilton’s Great-grandfather), was asked
at a Gala celebrating his life,
“What was the most important lesson
you’ve learned in your long and
distinguished business career?”
He immediately answered…
“REMEMBER TO TUCK THE
SHOWER CURTAIN
INSIDE THE BATHTUB”
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ORGANIZATIONS AND THEIR MANAGEMENT
Two Easy Steps
for Outrageous Success
DO THE RIGHT THING!
DO THE THING RIGHT!
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ORGANIZATIONS AND THEIR MANAGEMENT
THE LANGUAGE: KEY TERMS
 Governance
 Management
 Leadership
 Organization
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ORGANIZATIONS AND THEIR MANAGEMENT
GOVERNANCE
Set of Processes for Assigning
Decision Control Rights
Duty to Control Organization by Invoking or
Revoking Power to make Decisions
 Vested in Owners (Stockholders)
 Transferable to Elected Directors and
Delegable to Appointed Officers
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ORGANIZATIONS AND THEIR MANAGEMENT
GOVERNANCE’S
STRATEGIC FUNCTION
Deciding Proposals and Monitoring
“You miss 100%
of the Shots
you never take!”
“
Wayne Gretzky, “The Great One”
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Organizations and their Management
Management: Set of Processes
Designed to Keep a Complicated System
of People and Technology running Smoothly
Activities: Planning, Budgeting, Staffing,
Controlling and Problem-Solving
Tactical Role: Initiate Proposals and
Implement Ratified Decisions
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ORGANIZATIONS AND THEIR MANAGEMENT
Marcus Buckingham, The One
Thing You Need to Know
“The Key Difference between
Checkers and Chess is that in
Checkers the Pieces All Move the
Same Way (Supervising).
In Chess all the pieces Move
Differently (Managing) …
Discover What is Unique about
each Person and Capitalize on it.”
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Organizations and their Management
Leadership: A Set of Processes that
 Creates Organization in the First Place or…
 Adapts It to Significantly Changing
Circumstances
Leadership: Defines what Future should look like,
Aligns People with Vision and Inspires Them to
Make it Happen Despite Obstacles
Leadership necessary in both…
Governance and Management
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ORGANIZATIONS AND THEIR MANAGEMENT
MANAGEMENT focuses on answers…
LEADERSHIP is a function of questions
LEADERSHIP starts by asking
WHO DO WE
INTEND TO BE?
NOT…“How will we do it?”
Max DePree
Herman Miller
Organizations and Their Management
What are Organizations?
Joint Activities ranging from Society as
a Whole to Picnic Planning Group
Legal Entity that Serves as a Nexus for
Complex Set of Arrangements
between Individuals
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Organizations and Their Management
Organizational Functions
PURPOSE: Seek and Sustain Equilibrium
(“Organizing”) that Reconciles Conflicting Interests
of Input Suppliers and Output Consumers
PROCESS: Politically-Supported and AppropriatelyInformed Decision-making
ESSENTIAL RESOURCES:


Financial Capital
Human Capital
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Organizations and Their Management
Why do Organizations Look and
Act the Way They Do?
Two Identifying Characteristics…
Hierarchical or “Flat”
Form of Organizational Reporting and
Authority Relationships
Decentralized or Centralized
Location of Decision Rights (Power)
within Organization


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Organizations and Their Management
Organizational Hierarchy measured by
Number of Levels and Ranks of Authority-delegating and
Reporting Relationships
Extent of Integration of Functions and Outputs: Is
Organization’s Form characterized by:


Functional “Silos” : Finance, Marketing,
Production, etc., or by…
Product Lines: Groceries, Clothing, etc.
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Organizations and their Management
Centralized or Decentralized?
Relative Number, Length and Complexity of Paths between
Where Decisions are Made and
Where Decisions are Implemented
May be unrelated to Hierarchical Form
Decentralized decision-making may be more democratic,
but is it more efficient?
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Hierarchical Versus Flat Organizations
Chief
Executive
Tall hierarchy
Relatively
narrow
span of
control
TALL
ORGANIZATION
FLAT
ORGANIZATION
Flat
hierarchy
Chief
Executive
Relatively wide
span of control
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ORGANIZATIONS AND THEIR MANAGEMENT
Do “Flat” Organizational Structures and
“Cube Farms” go together? Does they
promote efficient communication of
complex information?
Is it a safe bet that this Office is at a
“Hierarchical Organization?” Could
you have a relaxed and spontaneous
conversation with your boss here?
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The Bottleneck is at the Top of the Bottle
Theory of Organizational Design
Where are you likely to find
people with the least
diversity of experience, the
largest investment in the past
and the greatest reverence
for industry dogma?
Gary Hamel, Harvard
Business Review
AT THE TOP!
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Organizations and their Management
Management’s “Tool” for Performing its
Responsibilities:
“Decision-Making”
Making Choices from Set of Alternatives
(Choice Problems) about which:


Policy to Make or
Action to Take
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ORGANIZATIONS AND THEIR MANAGEMENT
CAVEATS
IDENTIFY PROBLEM: What is the
Question? Is a Decision Needed?
The Best Decision You may ever make:
DO NOTHING!
Don’t be a Solution looking for a Problem!
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ORGANIZATIONS AND THEIR MANAGEMENT
“DO ONE
THING EVERY
DAY THAT
SCARES YOU”
Eleanor
Roosevelt
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Organizations and Their Management
A DECISION PROCESS…
RATIFICATION
Choose Initiatives
to be Implemented
INITIATION
Generate
Proposals, Utilize
Resources or
Structure Contracts
MONITORING
Measure
Performance; Give
Rewards
IMPLEMENTATIO
N Execute Ratified
Decisions
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Organizations and Their Management
MONITORING STEP
Likely to be Weakest Link
Must be Comprehensive: Include
Operational Results with Strategic
Objectives
Assessments of Results include Rewards
and Punishments
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Organizations and their Management
"I've become much more decisive thanks to the
rock, paper, scissors technique."
Cartoon by Dave Carpenter
Copyright 2005, Harvard Business Review
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ORGANIZATIONS AND THEIR MANAGEMENT
EFFECTIVE DECISION-MAKING
CONSISTS OF …
POWER and…
KNOWLEDGE
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Organizations and their Management
POWER is Appropriate Combination of…
Authority: Ability to Compel Action
Obtained from Legal Grant or Delegation
Influence: Ability to Remove Impediments
to Action
Obtained from Experience and Trust
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Organizations and their Management
KNOWLEDGE - Two Types
SPECIFIC: Strategic - Describes What to Do;
Expensive to Obtain and Transfer
Examples: Relationships with Investors or
Information about Products or Processes
GENERAL: Tactical - Describes How to do
Something; Inexpensive to Obtain and Transfer
Examples: Operating Instructions or Product Prices
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ORGANIZATIONS AND THEIR MANAGEMENT
The “One Thing” you need
to know about sustained
individual success:
Discover what you don’t
like doing and STOP
doing it… NOW!
Marcus Buckingham,
The One Thing You
Need to Know
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Organizations and their Management
Political Processes used in
Organizations (Managing) include:
Conflict
Negotiation
Relationships: Form/Dissolve
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Organizations and their Management
“Dancing is a
Contact Sport…”
“Politics in Business
is a
Collision
Sport”
Johnson’s Corollary to Vince Lombardi’s Famous Quip
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Will I Like Business?
Can you Stretch – but not
Break – the Rules?
Are you Uncomfortable with
Competitors not wanting
you to Succeed?
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What Kind of Stuff do You have?
Are you Bothered by Not
Knowing What will Happen?
Can you make Decisions
under Pressure?
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Life should NOT be a
Journey to the Grave
where You Arrive Safely
in One Pretty and Well-Preserved
Piece… Instead, Don’t You want to
Skid Across the Finish Line Broadside,
Thoroughly Used Up, Worn Out,
Leaking Oil, Shouting…
Bill McKenna,
GERONIMO!!!
Professional
Motorcycle Racer
(Cycle Magazine,
February 1982)
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Organizations and their Management
The Best Organizational Design
happens when…
Knowledge (General or Specific) that is
Essential and Relevant is efficiently…
Co-located with (in same place as)
Decision-Maker(s) who (A) is Familiar
with Decision’s Circumstances and…
(B) has the Necessary Power
(Authority and Influence)
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Organizations and their Management
DECISION HIERARCHY



Higher-level Managers RATIFY (Affirm
Recommendations/Not Make Yes/No
Choice) and Monitor Proposals Initiated
and Implemented by Lower-level Managers
Formality of Process varies with
Organizational Complexity
Eliminating or Bypassing any Procedural Step
produces Ineffective Decisions
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Organizations and their Management
TYPE OF KNOWLEDGE IS
FUNCTION OF ASSET TYPE
Tangible Assets (Plant and Equipment) use
General Knowledge: Easy to Obtain and
Inexpensive to Transfer through Hierarchical
Levels and Disperse to Decision-makers
Intangible Assets (R&D or Brands) use Specific
Knowledge: Hard to Obtain and Expensive to
Transfer through Hierarchical Levels and
Disperse to Decision-makers
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Organizations and their Management
HOW TO DO THIS?
 Either Move Knowledge to Decision-Makers (Flatten
the Organization’s Hierarchy) or…
 Move the Decision-making Power to Source of
Knowledge and People familiar with the Decision’s
Particular Circumstances (Centralize or Decentralize)… But… How Much Knowledge
and How Many People?
 And Be Constantly Evaluating the Best Organizational
Place (Balance of Power and Knowledge) for Each
Type of Decision
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Organizations and their Management
KEY: UNDERSTANDING INTERDEPENDENCIES
Functionality of Organization’s Assets
Obtaining the Necessary Knowledge and
Minimizing the Cost of Moving it to the
Decision-maker
Empowering Decision-makers who are most
familiar with and must adapt most quickly
to a Decision’s Particular Circumstances
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Organizations and Their Management
Sustaining Equilibrium requires
continuously Changing an Organization's
Behaviors by choosing either:
A Different Form of Equilibrium or
A Different Way to Get to Equilibrium
Governance defines “What” is Equilibrium
Management decides “How” Desired
Equilibrium will be Achieved
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Organizations and Their Management
Effectively Managing Organizations
Requires Understanding and Using
Political Systems
Concepts influencing these Political
Functions include:
Power and Knowledge
Social Networks
Dominant Coalitions
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THEORY OF FIRM GROWTH AND
OPTIMAL ORGANIZATION SIZE
TOTAL
EXPENSES
Direct (Variable)
and Indirect
(Fixed/Overhead)
HIGH
Unprofitable
C
A
B
LOW
Profitable
STRATEGIC CHOICE
Maintain Size and
Decrease Expenses or…
Consider Optimal Size
FEW
Market
MOST
Internal
FIRM SIZE
Controlled Resources
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Designing and Operating Effective Organizations
KNOWLEDGE
Amount/Type
Needed for Best
Decisions
SPECIFIC
Strategic: Know
What to Do
GENERAL
Tactical: Know
How to Do It
WELL-DESIGNED
ORGANIZATIONS
Balance Types and Amounts of
Information for Every Decision
TANGIBLE
Real/Personal
Property
INTANGIBLE
Intellectual Property
(Knowledge)
ORGANIZATION’S ASSETS
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