Chapter Nine
Organizations: Structure,
Effectiveness, and
Cultures
Chapter Objectives
• Identify and describe four characteristics common
to all organizations.
• Identify and explain the two basic dimensions of
organization charts.
• Contrast the traditional and modern views of
organizations.
• Describe a business organization in terms of the
open-systems model.
• Explain the term learning organization.
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Chapter Objectives (cont’d)
• Explain the time dimension of organizational
effectiveness.
• Explain the role of complacency in organizational
decline and discuss the ethics of downsizing.
• Describe at least three characteristics of
organizational culture and explain the cultural
significance of stories.
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What Is an Organization?
• An Organization Is:
– A cooperative and coordinated social system of two or
more people with a common purpose
– An entity that derives its strength from the synergy of its
members’ coordinated efforts
– A system designed to survive its members
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What Is an Organization? (cont’d)
• Common Characteristics of Organizations
– Coordination of effort: Multiplying individual
contributions to achieve results greater than those
possible by individuals working alone
– Common goal or purpose: Having a focus to strive for
something of mutual interest
– Division of labor: Dividing tasks into specialized jobs
that use human resources efficiently
– Hierarchy of authority: Using a chain of command to
control and direct the actions of others
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Classifying Organizations
• Business Organizations
– Purpose: To make a profit in a socially acceptable
manner
• Nonprofit Service Organizations
– Purpose: To provide a specific public service to some
segment of society without attempting to earn a profit
• Mutual-Benefit Organizations
– Purpose: To provide a vehicle for individuals to pursue
their own self-interests
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Classifying Organizations (cont’d)
• Commonweal Organizations
– Purpose: To provide standardized public
services to all members of a society without
attempting to earn a profit
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Organization Charts
• Organization Chart (Table)
– A visual display of an organization’s positions and lines
of authority that is useful as a blueprint for deploying
human resources
• Vertical and Horizontal Dimensions
– Vertical hierarchy establishes the chain of command.
– Horizontal specialization denotes the division of labor.
• A Case Study: The Growth of an Organization
– Generally, specialization is achieved at the expense of
coordination when designing organizations.
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Figure 9.1: The Evolution of an
Organization Chart
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Chapter Nine | 10
Contrasting Theories of Organization
• The Traditional View
– The organization’s primary goal is economic efficiency.
– The organization is characterized by closed-system
thinking and no or little interaction with the external
environment.
– Planning and strict control are used to eliminate
uncertainty in the organization.
– The organization’s surrounding environment is fairly
predictable.
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Contrasting Theories of Organization
(cont’d)
• The Modern View
– The organization’s principal goal is survival in an
uncertain environment.
– The organization is an open system interacting with its
environment.
– The organization’s surrounding environment is
composed of variables that are difficult to predict or
control.
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The Traditional View of
Organizing
• The Early Management Writers
– Henri Fayol
– Frederick W. Taylor
– Four traditional principles of organization
•
•
•
•
A well-defined hierarchy of authority
Unity of command
Authority equal to responsibility
Downward delegation of authority
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The Traditional View of
Organizing (cont’d)
• Max Weber’s Bureaucracy
– The most rationally efficient form of organization
•
•
•
•
Division of labor
Hierarchy of authority
Framework of rules
Impersonal management
– Problems with overly “bureaucratic” organizations
• Slow
• Insensitive
• Inefficient
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Challenges to the Traditional
View of Organizations
• Bottom-Up Authority
– Acceptance theory of authority (Chester
Barnard)
• A leader’s authority is determined by the willingness
of subordinates to comply with authoritative
communications only when the message:
–
–
–
–
Is understood
Is consistent with the organization’s purpose
Serves the subordinate’s interests
Provides a situation where the subordinate is able to
comply
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Organizations as Open Systems:
A Modern View
• Characteristics of Open Systems
– Interaction with the external environment through
permeable boundaries
– Synergy in combining resources to achieve superior
performance
– Dynamic equilibrium in maintaining internal balances
with help from the external environment
– Equifinality in achieving similar ends through different
means
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Figure 9.2: Open-System Model of a
Business
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Organizations as Open Systems:
A Modern View (cont’d)
• Developing an Open-System Model
– Interacting organizational subsystems:
• Technical (production function) subsystems define the
organization’s transformation process.
• Boundary-spanning subsystems provide the organization’s
interface with the external environment.
• Managerial subsystems bridge (control and direct) the technical
and boundary-spanning subsystems.
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Extending the Open-System Model:
The Learning Organization
• Learning Organization
– An organization that is skilled at creating, acquiring,
and transferring knowledge, and at modifying its
behavior to reflect new knowledge and insights
• Stages of Organizational Learning
– Cognition (learning new concepts)
– Behavior (developing new skills and abilities)
– Performance (actually getting something done)
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Extending the Open-System Model: The
Learning Organization (cont’d)
•
Five Critical Learning Skills
1.
2.
3.
4.
5.
Solving problems
Experimenting
Learning from organizational experience/history
Learning from others
Transferring and implementing
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Figure 9.3: Garvin’s Model of the
Learning Organization
Source: Adapted from discussion in David A. Garvin, “Building a Learning Organization,” Harvard
Business Review, 71 (July-August 1993): 78-91.
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Organizational Effectiveness
• Effectiveness
– A measure of whether or not organizational objectives
are accomplished
• Efficiency
– A measure of the relationship between inputs and
outputs for the organization
• No Silver Bullet
– No single approach to the evaluation of effectiveness
is appropriate in all circumstances or for all
organizational types.
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Organizational Effectiveness (cont’d)
• The Time Dimension of Organizational
Effectiveness Involves:
– Meeting organizational objectives and prevailing
societal expectations in the near future
– Adapting to environmental demands and developing as
a learning organization in the intermediate future
– Surviving as an effective organization into the distant
future
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Figure 9.4: The Time Dimension of
Organizational Effectiveness
Source: Adapted from James L. Gibson, John M. Ivancevich, and James H. Donnelly, Jr., ORGANIZATIONS:
BEHAVIOR, STRUCTURE, PROCESSES, 5th ed. (Homewood, IL: Richard D. Irwin, Inc.), p. 37. © l991.
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Organizational Decline
• The weakening of an organization by resource or
demand restrictions and/or mismanagement
• Sources of decline
–
–
–
–
–
Mismanagement (complacency)
Unsteady economic growth
Resource shortages
Global competition
End of the cold war
• Reactions to decline
– Downsizing, demassing, reengineering
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Figure 9.5: Complacency Can Lead
to Organizational Decline
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Characteristics of Organizational Decline
• Decline Dilemmas
–
–
–
–
–
Exit of leaders from the organization
Control that suppresses participation and morale
Preference for short-term thinking and risk avoidance
Intense conflict, preventing teamwork
Strong resistance to change
• Counteracting Organizational Decline
– Kaizen: The philosophy of continuous improvement
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Downsizing
• An Ethical Perspective
– Downsizing: The planned elimination of positions or
jobs
• Commodity versus human resources viewpoints of the worth of
employees
• Does Downsizing Work?
– Not nearly as well as expected
• Only 30-45% of downsized companies report increased
productivity and/or profits.
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Downsizing (cont’d)
• Ways of Making Layoffs a Last Resort
–
–
–
–
–
–
–
–
–
Redeployment
Downgrading
Work sharing
Job banks
Employee sharing
Voluntary early retirement
Early warning of facility closings
Outplacement
Helping layoff survivors
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Organizational Cultures
• Organizational Culture
– The collection of shared beliefs, values, rituals, stories,
myths, and specialized language that creates a
common identity and sense of community
– The “social glue” that binds an organization’s members
together
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Characteristics of Organizational
Cultures
• Collective: Organizations are social entities.
• Emotionally charged: The organization’s culture
serves as a security blanket to its members.
• Historically based: Trust and loyalty result from
long-term organizational associations.
• Inherently symbolic: Actions often speak louder
than words.
• Dynamic: Culture promotes stability and control.
• Inherently fuzzy: Ambiguity, contradictions, and
multiple meanings are part of culture.
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Forms and Consequences of
Organizational Cultures
• Organizational values are shared beliefs about
what the organization stands for.
• The degree of sharing and the degree of intensity
determine whether an organization’s culture is
strong or weak.
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Figure 9.6: Forms and Consequences of
Organizational Culture
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The Organizational Socialization
Process
• Organizational socialization: The process of
transforming outsiders into accepted insiders
• Orientations
– Orientation programs familiarize new employees with
the organization’s history, culture, competitive realities,
and compensation and benefits.
• Storytelling
– Recitations of heroic or inspiring deeds provide “social
road maps” for new employees.
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Strengthening Organizational Cultures
• Symptoms of a weak organizational culture
–
–
–
–
–
–
Inward focus
Morale problems
Fragmentation/inconsistency
Ingrown subcultures
Warfare among subcultures
Subculture elitism
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Terms to Understand
•
•
•
•
•
•
Organization
Authority
Commonweal organization
Organization chart
Bureaucracy
Acceptance theory of
authority
• Dynamic equilibrium
• Equifinality
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• Learning organization
• Organizational
effectiveness
• Organizational decline
• Downsizing
• Outplacement
• Organizational culture
• Organizational values
• Organizational
socialization
Chapter Nine | 40