Chapter Eight
Organization Size,
Life Cycle, and Control
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-1
Differences Between Large
and Small Organizations
• LARGE
• SMALL
– Economies of
scale
– Global reach
– Vertical hierarchy
– Mechanistic
– Complex
– Stable market
– “Organization men”
Source: Based on John A. Byrne,
“Is Your Company Too Big?”
Business Week, 27 March 1989, 84-94.
–
–
–
–
–
–
–
–
Responsive
Flexible
Regional reach
Flat structure
Organic
Simple
Niche finding
Entrepreneurs
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South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-2
Organizational
Life Cycle
Large
Development of teamwork
Addition of internal systems
S
I
Z
E
Crisis:
Need for
revitalization
Provision of clear direction
Creativity
Crisis:
Need for
leadership
1.
Small Entrepreneurial
Stage
2.
Collectivity
Stage
Crisis:
Need for
delegation
with control
Streamlining,
small-company
thinking
Continued
maturity
Decline
Crisis:
Need to deal
with too much
red tape
3.
Formalization
Stage
4.
Elaboration
Stage
ORGANIZATION STAGES OF DEVELOPMENT
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational
©2000
Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary
South-Western
College Publishing
Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,
Cincinnati,
Ohio
“Evolution and Revolution as Organizations Grow,” Harvard Business
Daft, Organizational Theory and Design, 7/e
Review 50 (July-August 1972): 37-46.
8-3
Organization Characteristics
During Four Stages of Life Cycle
1.
Entrepreneurial
2.
Collectivity
3.
Formalization
4.
Elaboration
Nonbureaucratic
Prebureaucratic
Bureaucratic
Very Bureaucratic
Informal, oneperson show
Mostly informal,
some procedures
Formal procedures,
division of labor,
specialties added
Teamwork within
bureaucracy, smallcompany thinking
Products or
services
Single product or
service
Major product or
service with
variations
Line of products or
services
Multiple product or
services lines
Reward and
control
systems
Personal,
paternalistic
Personal,
contribution to
success
Impersonal,
formalized systems
Extensive, tailored to
product and
department
By owner-manager
By employees and
managers
By separate
innovation group
By institutionalized
R&D
Survival
Growth
Internal stability,
market expansion
Reputation, complete
organization
Individualistic,
entrepreneurial
Charismatic,
direction-giving
Delegation with
control
Team approach,
attack bureaucracy
Characteristic
Structure
Innovation
Goal
Top
Management
Style
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,”
Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt,
“Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967):
102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business
Review 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “Organizational
Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.
8-4
Weber’s Dimensions of
Bureaucracy and Bases of
Organizational Authority
•
BUREAUCRACY
1. 1. Rules and
procedures
2. Specialization and
division of labor
3. Hierarchy of
authority
4. Technically
qualified personnel
5. Separate position
and incumbent
6. Written
communications
and records
•
LEGITIMATE
BASES OF
AUTHORITY
1. Rational-legal
2. Traditional
3. Charismatic
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South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-5
Percentage of Personnel
Allocated to Administrative and
Support Activities
Line employees
75
Percentage
of
Employees
50
Top administrators
Professional staff
25
Clerical
0
Small
Large
Organization Size
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-6
Three Organizational
Control Strategies
TYPE
REQUIREMENTS
Bureaucratic
Rules, standards, hierarchy,
legitimate authority
Market
Prices, competition,
exchange relationship
Clan
Tradition, shared values and
beliefs, trust
Source: Based upon William G. Ouchi, “A Conceptual Framework
for the Design of Organizational Control Mechanisms,” Management
Science 25 (1979): 833-48.
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South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-7
Management Control Systems
Used as Part of Bureaucratic
Control
Subsystem
Budget
Content and Frequency
Financial, resource expenditures,
monthly
Statistical
reports
Non-financial outputs, weekly or
monthly, often computer-based
Reward
systems
Annual evaluation of managers based
on department goals and
performance
Operating
Rules and regulations, policies that
prescribe correct behavior,
procedures
continuous
Source: Based on Richard L. Daft and Norman B. Macintosh,
“The Nature and Use of Formal Control Systems for Management
Control and Strategy Implementation,” Journal of Management
10 (1984): 43-66.
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-8
Major Perspectives of
the Balanced Scorecard
Financial
Do actions contribute to improving
financial performance?
Examples of measures: profits,
return on investment
Customers
How well do we serve our customers?
Examples of measures: customer
satisfaction, customer loyalty
Internal Business Processes
Mission
Strategy
Goals
Does the chain of internal activities and
processes add value for customers and
shareholders?
Examples of measures: order-rate
fulfillment, cost-per-order
Learning and Growth
Are we learning and changing?
Examples of measures: continuous
process improvement, employee
retention, new product introductions
Sources: Based on Robert S. Kaplan and David P. Norton, “Using
The Balanced Scorecard as a Strategic Management System,”
Harvard Business Review, January-February 1996, 71-79;
Chee W. Chow, Kamal M. Haddad, and James E. Williamson,
“Applying the Balanced Scorecard to Small Companies,”
Management Accounting 79, No. 2 (August 1997), 21-27; and
Cathy Lazere, “All Together Now,” CFO, February 1998, 28-36.
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-9
Workbook
Activity
Evaluation of Control
On the Job
Your job
responsibilities
How your
boss controls
Positives of
this control
Negatives of
this control
How you would
improve control
1.
2.
3.
4.
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South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-10
Workbook
Activity
Item
Evaluation of Control
At the University
How Prof. A
(small class)
controls
How Prof. B
(large class)
controls
How these
controls
influence you
What you think
is a better
control
1.
2.
3.
4.
©2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organizational Theory and Design, 7/e
8-11