Chapter 1: An Overview: What Is An Organization?
Chapter 1: An Overview: What Is An Organization?
Chapter 1: An Overview: What Is An Organization?
What is an Organization?
An Organization is a consciously coordinated social entity, with a relatively identifiable boundary, that
functions on a relatively continuous basis to achieve a common goal or a set of goals.
It merely means a group of people in a defined boundary, working continuously to achieve a set of goals.
What is Organization Structure?
Organization structure defines how tasks are allocated, who reports to whom, and the formal coordinating
mechanisms and interaction patterns that will be followed.
Organization structure has three components:
1. Complexity: The extent of differentiation within the organization. It includes the degree of
specialization, a division of labor, number of levels in the organization hierarchy, and the level to
which organization’s units are dispersed geographically.
2. Formalization: The degree to which an organization relies on procedures to direct the behavior
of employees.
3. Centralization: It tells where the locus of decision-making authority lies. In a highly centralized
organization, the top management has high authority to make decisions.
What is Organization Design?
It is concerned with constructing and changing an organization’s structure to achieve the organization’s
goals.
What is Organization Theory?
It is the discipline that studies the structure and design of organizations. It describes how organizations
are structured and offer suggestions on how they can be constructed to improve their effectiveness.
• functional specialization: jobs are broken down into simple and repetitive tasks
• social specialization: hiring professionals who hold skills that cannot be readily routinized
Grouping of specialists is called departmentation. It can be created on the basis of numbers, function,
product or service, client, geography, or process.
Vertical differentiation refers to the depth in the structure.
Spatial differentiation refers to the degree to which the location of an organization’s offices, plants, and
personnel are dispersed geographically. This separation includes by both number and distance.
FORMALIZATION:
Refers to the degree to which jobs within the organization are standardized. Employees can be
expected to always handle the same input in exactly the same way, resulting in consistent and uniform
output. There are explicit job descriptions, lots of organization rules, and clearly defined procedures
covering work process in organizations where there is high formalization.
Formalization has been defined as the extent to which rules, procedures, instructions, and
communications are written. Formalization measured by determining the policies and procedures
manual, assessing the number and specificity of its regulations. Formalizations apply to both written and
unwritten regulations.
IMPORTANCE OF FORMALIZATION
1. Standardizing behavior reduces variability
2. Standardization promotes coordination
3. Less discretion required from a job incumbent
FORMALIZATION TECHNIQUES
1. SELECTION: job applicants are processed through a series of process to differentiate individuals
likely to be successful job performers from those likely to be unsuccessful. These processes
include completion of application blanks, employment tests, interviews, and background
investigations. Applicants can and do rejected at each of these steps.
2. ROLE REQUIREMENT: Job analysis, defines the job that needs to be done in the organization and
outlines what employees behaviors are necessary to perform the jobs.
a. Job description, JD is a document that describes the general tasks, or other related
duties, and responsibilities of a position. It may specify the functionary to whom the
position reports, specifications such as the qualifications or skills needed by the person
in the job, and a salary range.
3. RULES PROCEDURES AND POLICIES: Rules are explicit statements that tell an employee what he
or she ought or ought to do.
a. Procedures are series of interrelated sequential steps that employees follow in the
accomplishment of their job tasks.
b. Policies are guidelines that set constraints on decisions that employees make. Each of
them represents techniques that organization use to regulate the behavior of members.
4. TRAINING: This includes on the variety where understudy assignments, coaching, and
apprenticeship methods are used to teach employees preferred job skills, knowledge, and
attitudes. It also includes off the job training such as classroom lectures, film, demonstrations,
simulation exercises, and programmed instruction.
5. RITUALS: Rituals are used as a formalization technique with members who will have a strong
and enduring impact on the organization.
CENTRALIZATION
Centralization refers to the process in which activities involving planning and decision-making within
an organization are concentrated to a specific leader or location. In a centralized organization, the
decision-making powers are retained in the head office, and all other offices receive commands from
the main office. The executives and specialists who make critical decisions are based in the head office.
ADVANTAGES OF CENTRALIZATION
1. A clear chain of command
2. Focused vision
3. Reduced costs
4. Quick implementation of decisions
5. Improved quality of work
DISADVANTAGES OF CENTRALIZATION
1. Bureaucratic leadership
2. Remote control
3. Delays in work
4. Lack of employee loyalty
Chapter 5: Strategy
What is Strategy?
It can be defined as the determination of the basic long-term goals and objectives of an enterprise, and
the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
• Planning mode: It describes strategy as a plan or explicit set of guidelines developed in advance.
• Evolutionary Mode: It emphasizes the evolution of strategy throughout its execution as a
pattern of decisions.
Types of strategy
Corporate level strategy determines the roles that each business in the organization will play. It answers
to the question, in what set of business we should be?
Business level strategy seeks to answer the question, how should we compete in each of our business. It
sets a blueprint for the company to achieve it’s both long-term and short-term goals.
Strategic Dimensions
Innovation Strategy does not mean a strategy merely for simple or cosmetic changes from previous
offerings but rather one for meaningful and unique innovations.
The marketing differentiation strategy strives to create customer loyalty by uniquely meeting a
particular need. IT doesn’t necessarily mean the organization is producing a higher quality or more up-
to-date product.
Breadth Strategy refers to the scope of the market to which the business caters: the variety of products,
the geographic range and the number of products.
The Cost-Control strategy considers the extent to which the organization tightly controls the costs,
refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic
product.
Chandler’s Strategy-structure thesis
As per Chandler “A new strategy required a new or refashioned structure if he enlarged enterprise was
to be operated efficiently…. Unless structure follows strategy, inefficiency results.”
The efficient structure for an organization with a single product strategy is one that is simple – highly
centralization, low formalization, and low complexity. As the organization grows the structure changes
from simple to divisional over the time.
Decision
Maker’s Organization’s
Interests Interests
Dominant Coalitions
Coalitions in the organization flourish largely because of the ambiguity surrounding goals, organizational
effectiveness, and what is thought to be rational. The Dominant Coalition is the one that has the power
to affect structure. In small organizations, the owners are typically the power coalition but in large
organizations it is not always the case. Any coalition that can control the resources on which the
organization depends can become dominant.
Power
The existence of divergent interests and dominant coalitions leads naturally to the role of power in the
organizations. Coalitions wrestle in a power struggle because there is dissension concerning preferences
or in the definition of the situation.
Authority- the right to act or command others to act, towards the attainment of the organization’s
goals. It is legitimate. Authority goes with the job, i.e., when you leave your managerial job, the
authority goes with that position.
Power- It is conceptualized best as a three-dimensional cone. The power of individuals within the
organization depends on the vertical position in the cone and the distance from the center of it. The
closer one is to the power core; the more influence one has to affect decisions.
Power
Authority
Power
Each wedge of the cone, as shown in the figure below, represents a functional area. The cone analogy
considers two facts-
1) The higher one moves in the organization; the closer one moves towards the power cone.
2) It is not necessary to have authority to wield power because one can move horizontally inward
toward the power core without moving up.
Marketing
3) Complexity
Increased differentiation- horizontally, vertically or spatially- leads to difficulties in coordination
and control. Management would prefer. Therefore, all things being equal, to have low
complexity.
4) Formalization
Those in power will influence the degree of rules and regulations under which employees work.
Because control is the desired end for those in power, organizations should have a high degree
of formalization.
5) Centralization
Mistakes in organizations can be very costly, when temporary external threats exist, or when it
is important that decisions reflect an understanding of the ‘big picture’. Power-control
advocates claim that decentralization should occur infrequently. Even when it does, it may be
pseudo-decentralization. That is, the top management will create the appearance of delegating
decisions downward but use information technology for feedback. This feedback allows them to
monitor lower-level decisions closely and to intercede and correct any decisions they don’t like.
Also, it can be argued that those in power maintain control in decentralized situations by
defining the parameters of decisions.
Organizational culture: Organizational culture is defined as the underlying beliefs, assumptions, values
and ways of interacting that contribute to the unique social and psychological environment of an
organization. There are ten characteristics that when mixed and matched tap the essence of an
organization’s culture.
1. Individual initiative
2. Risk Tolerance
3. Direction
4. Integration
5. Management support
6. Control
7. Identity
8. Reward system
9. Conflict tolerance
10. Communication patterns