Organization Theory

Course Notes

Prepared by
Adewale Adeniyi-Kie

Date: November, 2024

Bahir Dar, Ethiopia
 Table of Content
CHAPTER 1 ..................................................................................................................................................................1
Organizations and Organization Theory ........................................................................................................................1
1.1. Organization theory in action. ......................................................................................................................1
1.2. What is an organization and organizational theory ......................................................................................1
1.2.1. Organization theory Definition ............................................................................................................2
1.2.2. Organization Theory............................................................................................................................2
1.3. Perspectives on organizations: open systems and organizational configuration. .........................................3
1.3.1. Elements of a System ..........................................................................................................................4
1.4. Dimensions of organization design: structural and conceptual. ...................................................................5
1.4.1. Structural Dimensions .........................................................................................................................6
1.4.2. Key Factors In Organizational Design ................................................................................................6
1.4.3. Structural Design of Organization .......................................................................................................8
1.5. The evolution of organization theory and design. ........................................................................................8
1.5.1. Pre-Classical Era .................................................................................................................................8
1.5.2. Classical Organization Theory ............................................................................................................9
1.5.3. Neo-Classical Organization Theory .................................................................................................. 12
1.5.4. Modern (classical) Organization Theory ............................................................................................ 13
SELF-TEST EXERCISES .......................................................................................................................................... 13
CHAPTER 2 ................................................................................................................................................................ 16
Strategy, Organization Design, and Effectiveness ....................................................................................................... 16
INTRODUCTION................................................................................................................................................... 16
2.1. The role of strategic direction on organization design. .............................................................................. 16
2.1.1. Role of Top Managements in Strategic Direction ............................................................................. 17
2.2. Organization purpose. ................................................................................................................................ 18
2.2.1. The Mission or Official Goals ........................................................................................................... 18
2.2.2. Operational Goals .............................................................................................................................. 18
2.2.3. Importance of Purpose ....................................................................................................................... 19
2.3. Framework for selecting strategy and design/structure. ............................................................................. 20
2.3.1. The Porter‘s Generic Strategy ......................................................................................................... 20
2.3.1.1. Competitive Advantage: Low Cost Leadership - Broad Scope Strategies................................ 21
2.3.1.2. Competitive Advantage: Focus - Narrow Scope Strategies ....................................................... 21
2.3.1.3. Competitive Advantage: Differentiation – Broad/Narrow Scope Strategies ............................ 22
2.3.1.4. Competitive Advantage VS Competitive Scope ........................................................................ 22
2.3.1.5. Which Strategy is the best? ......................................................................................................... 22
2.3.2. Miles and Snow‘s Strategy Typology ............................................................................................. 22
2.3.2.1. Miles & Snow Strategies Based on Environment & Organizational Characteristics ............... 23
2.3.4. How Strategies Affect Organizational Design ................................................................................ 23
2.4. Assessing organizational effectiveness ...................................................................................................... 24
2.4.1. Organizational effectiveness vs organizational Efficiency ................................................................ 24
2.5. Organization Efficiency Measuring Approaches ....................................................................................... 24
2.5.1. Contingency Effectiveness Approaches ............................................................................................ 24
2.5.2. Resource Based Approaches ............................................................................................................. 25
2.5.3. Internal Process Approach ................................................................................................................. 25
 2.5.4. Goal Approach .................................................................................................................................. 25
2.6. An Integrated Effectiveness Model ............................................................................................................ 26
SELF-TEST EXERCISES .......................................................................................................................................... 28
CHAPTER 3 ................................................................................................................................................................ 30
Fundamentals of Organization Structure ..................................................................................................................... 30
3.1. Organization structure. ............................................................................................................................... 30
3.1.1. A sample organization Chart ............................................................................................................. 30
3.1.2. Key Elements of Organizational Structure ........................................................................................ 31
3.2. Information-Processing Perspective in Organization Structure ................................................................. 32
3.2.1. Centralized Vs. Decentralized Information Flow .............................................................................. 32
3.2.2. Vertical Vs. Horizontal Information Processing................................................................................ 33
3.2.2.1. Vertical Information Processing & Sharing .................................................................................. 33
Features of Vertical Information Sharing ........................................................................................................... 33
3.2.3. Horizontal Information Sharing and Collaboration ........................................................................... 34
How to improve horizontal coordination and information flow: ........................................................................ 34
3.3. Organization Design Alternatives .............................................................................................................. 35
3.4. Functional, divisional, and geographical designs ....................................................................................... 36
3.4.1. Functional Structure .......................................................................................................................... 36
3.4.2. Divisional Structure ........................................................................................................................... 37
3.4.2.1. Divisional Structure: Strengths and Weakness ............................................................................. 37
3.4.3. Geographical Structure ...................................................................................................................... 38
3.5. Matrix Structure ......................................................................................................................................... 39
3.5.1. Conditions for Matrix Sturtcure ........................................................................................................ 40
3.5.2. Types of Matrix Structure ................................................................................................................. 40
3.5.3. Matrix Structure: Strengths & Weaknesses ....................................................................................... 40
CHAPTER 4 ................................................................................................................................................................ 42
Open Systems Design Elements .................................................................................................................................. 42
4.1. Characteristics and mechanics of open systems ......................................................................................... 42
4.1.1. Homeostasis and the behavior of open systems ................................................................................ 43
4.2. Comparative management .......................................................................................................................... 48
4.3. Reasons for studying comparative management ........................................................................................ 49
4.3.1. Main results of comparative management research ........................................................................... 49
4.3.2. Differences ........................................................................................................................................ 50
CHAPTER 5 ................................................................................................................................................................ 52
Organizational Culture and Organizational theory ...................................................................................................... 52
5.1. Organization Culture .................................................................................................................................. 52
5.1.1. Levels of culture ................................................................................................................................ 52
5.1.2. Functions Of Culture ......................................................................................................................... 52
5.1.3. Handy defines four organizational culture types ............................................................................... 52
i. The Power Culture: .................................................................................................................................... 52
ii. The Role Culture: ....................................................................................................................................... 53
iii. The Task Culture: .................................................................................................................................. 53
iv. The Person Culture ................................................................................................................................ 54
5.2. Organization design and culture ................................................................................................................. 54
5.2.1. Methodology of Design Culture Process ........................................................................................... 55
5.2.1.1. Charter the design process ............................................................................................................ 55
5.2.1.2. Assess the current state of the business ......................................................................................... 55
5.2.1.3. Design the new organization ......................................................................................................... 56
5.2.1.4. Implement the design .................................................................................................................... 56
 5.3. Culture and the learning organization ........................................................................................................ 58
5.3.1. The Advantages of a Learning Culture........................................................................................................... 58
5.3.2. How to Create a Learning Culture in an Organization....................................................................................... 58
i. Formalize training and development plans ...................................................................................................... 58
ii. Give recognition to learning........................................................................................................................... 59
iii. Get feedback................................................................................................................................................. 59
iv. Promote from within ..................................................................................................................................... 59
v. Develop knowledge and information sharing into a formal process.................................................................... 59
5.3.3. Keep your company competitive by developing a learning culture...................................................................... 59
5.4. Ethical values in organizations ................................................................................................................... 59
5.5. Leadership and culture and ethics .............................................................................................................. 60
Self-Test Exercises ...................................................................................................................................................... 62
CHAPTER 6 ................................................................................................................................................................ 63
Innovation and Change and Organizational Theory .................................................................................................... 63
Introduction ............................................................................................................................................................. 63
6.1. Change in Organizations ............................................................................................................................ 64
6.2. Planning for Change ................................................................................................................................... 64
6.3. The Process of Change ............................................................................................................................... 66
6.4. Key Roles in the Change Process ............................................................................................................... 67
6.5. Strategies for Implementing Change .......................................................................................................... 67
6.6. Resistance to Change .................................................................................................................................. 68
6.6.1. Individual Resistance ........................................................................................................................ 69
6.6.2. Organizational Resistance ................................................................................................................. 70
6.7. Organizational Development: A Neglected Need ...................................................................................... 70
6.7.1. What is Organizational Development? .............................................................................................. 71
6.7.2. A Model for Organizational Development ........................................................................................ 73
6.7.2.1. Team-Building as an Integral OD Strategy ................................................................................... 74
6.7.2.2. Rx FOR THE DEVELOPMENT OF A TEAM-PLAYER CULTURE.................................................. 74
6.8. Leaders as Followers .................................................................................................................................. 75
6.9. Followers as Leaders .................................................................................................................................. 76
6.10. Team-Building Strategies ...................................................................................................................... 76
6.11. A Learning Organization........................................................................................................................ 77
Self-Test Exercises ...................................................................................................................................................... 78
CHAPTER 7 ................................................................................................................................................................ 79
Decision-Making Process ............................................................................................................................................ 79
7.1. Individual versus Group Decision Making ................................................................................................. 79
7.2. Group Decision-Making Techniques ......................................................................................................... 80
7.2.1. Brainstorming .................................................................................................................................... 81
7.2.2. Nominal Group Technique ................................................................................................................ 81
7.2.3. Delphi Technique .............................................................................................................................. 82
7.2.4. Devil‘s Advocacy .............................................................................................................................. 84
7.2.5. Dialectical Inquiry Method ................................................................................................................ 84
7.3. Rational approach ...................................................................................................................................... 85
Rational Decision Making ....................................................................................................................................... 85
7.3.1. The Process of Rational Decision Making ........................................................................................ 85
7.3.2. Assumptions of the Rational Decision-Making Model ..................................................................... 86
7.3.3. Problems with the Rational Decision-Making Model ....................................................................... 86
7.3.4. Critiques of the Rational Model ........................................................................................................ 86
7.3.5. Prospect Theory................................................................................................................................. 87
 7.3.6. Bounded Rationality .......................................................................................................................... 87
7.3.7. Non-Rational Decision Making ......................................................................................................... 87
CHAPTER 8 ................................................................................................................................................................ 88
Conflict, Power, and Politics ....................................................................................................................................... 88
8.1. Power an Introduction ................................................................................................................................ 89
8.2. Frameworks or Viewpoints‘ of Power in the Organizations ...................................................................... 89
8.3. Sources of Power in the Formal Organization ........................................................................................... 90
8.4. Effects of Power in the organization .......................................................................................................... 90
8.5. Politics........................................................................................................................................................ 91
8.6. Effects of Politics in an organization ......................................................................................................... 92
8.7. Conflict in the Organization ―an overview‖ ............................................................................................... 92
8.8. Frameworks of Conflicts ............................................................................................................................ 93
8.9. Sources of Conflicts ................................................................................................................................... 93
8.10. Effects and Management of Conflicts .................................................................................................... 94
Self-Test Exercises ...................................................................................................................................................... 95
 CHAPTER 1
Organizations and Organization Theory

1.1.Organization theory in action.

Organization theory and design gives us the tools to evaluate and understand how a huge,
powerful firm like ―Lehman Brothers can die and a company like Bank of America can emerge
almost overnight as a giant in the industry‖. It enables us to comprehend how a brand like the
Rolling Stones, which operates like a highly sophisticated global business organization, can
enjoy phenomenal success for nearly half a century, while some musical groups with equal or
superior talent don‘t survive past a couple of hit songs.

This is the same in Ethiopia, Sheik Alamondi was not present for many years in the country, but
his companies under the corporate Midrock continue to perform greatly without for the top man.
Furthermore, operations of companies like Dangote Cement factory, Abyssinia bank, Nigat
Corporate becomes difficult to explain without organization theory.

Organization theory helps us explain what happened in the past, as well as what may happen in
the future, so that we can manage organizations more effectively.

Organization theory concepts apply to all types of organizations in all industries. Organizations
are not static; they continuously adapt to shifts in the external environment. Today, many
companies are facing the need to transform themselves into dramatically different organizations
because of new challenges in the environment.

1.2. What is an organization and organizational theory

―An organization can be thought of as a group of two or more people working co-operatively
toward a common objective or set of objective‖. (Hodge, 1984),

In the view of Hodge (1984), an organization is a social system of co-operation that is designed
to enhance individual and group effort aimed at collective accomplishment.

Another definition offered by Edgar Schein (1970), stated that, ―an organization is the rational
co-ordination of the activities of a number of people for the achievement of some common
explicit purpose or goal, through division of labour and function, and through a hierarchy of
authority and responsibility.‖

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Gibson et al. (1976) define organizations as, ―Devices for pooling and harnessing talent and
ability together into an effective whole that can achieve for them some desired objectives.‖

In short, we can define an organization as a group of people working together to achieve a

special purpose which cannot be achieved by an individual working alone.

The term organization refers to the group of individuals who come together to perform a set of
tasks with the intent to accomplish the common objectives.

Four important aspects of organizations emerge from this definition:

1. Organizations are made up of people - the human component is therefore important
because of its complexity nature of social relationships, variability and diversity.
2. When people work together, various things become necessary. For example, the division
of labor among people and the need for specialized knowledge
3. Organizations have identifiable boundaries such as people and membership and where
certain activities take place.
4. Organizations are purposeful, goal seeking work arrangements. That is organizations
exist to pursue commonly held goals (Hodge et al., 2003).

Thus, the relationships between the individuals working together and their overall effect on the
performance of the organization are well explained through the organizational theories.
Organization theory is a set of concepts, and principles that provide framework for systematic
study of structure, functioning and performance of organization and of the behavior of
individuals and groups working in them.

Organization theory explains how organization structures are built. It also suggests how
organization can be designed to improve their effectiveness.

1.2.1. Organization theory Definition

Theory
Thomas (2017) defines a theory as a description of phenomenon and the interaction of its
variablesthat are used to attempt to explain or predict it.

Similarly, a theory can be described a set of statements that is understandable to others and can
be used to make predictions about empirical events.

1.2.2. Organization Theory

In his earlier attempt, Nicholson (1995) defined organization theory as a series of academic
viewpoints which attempt to explain the multiplicities of organizational structure and operating
process.

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Similarly, Zhu (1999) has described Organization theory as a knowledge system that focus
on the study and explanations organizational structure, function and operation, including
individual and organizational behaviors.
It involves the formation of general ideas and approaches that can be applied by all
organizations, no matter their activities, societal and or geographical surroundings (Irefin &
Bwala, 2012).

It is the study of the structure, functioning and performance of organizations and the behavior of
individuals and groups within it. It is as well concerned with explaining how the relationship of
an organization with the external world impacts it entirely.

Organization theory is a macro examination of organizations because it analyzes the whole

organization as a unit. Organization theory is concerned with people aggregated into
departments and organizations and with the differences in structure and behavior at the
organization level of analysis. Organization theory might be considered the sociology of
organizations, while organizational behavior is the psychology of organizations.

Organization theory is directly relevant to top- and middle-management concerns and partly
relevant to lower management. Top managers are responsible for the entire organization and
must set goals, develop strategy, interpret the external environment, and decide organization
structure and design.

Middle management is concerned with major departments, such as marketing or research, and
must decide how the department relates to the rest of the organization. Middle managers must
design their departments to fit work-unit technology and deal with issues of power and politics,
intergroup conflict, and information and control systems, each of which is part of organization
theory.

Organization theory is concerned with the big picture of the organization and its major
departments. Organization theory focuses on the organizational level of analysis, but with
concern for groups and the environment.

1.3. Perspectives on organizations: open systems and organizational configuration.

Any organization can be described as a ―system.‖ A system is a group of components (or parts)
that interact with each other and are dependent on each other to serve a common goal.
Organizations and other social systems can be ―closed‖ or ―open‖ systems.

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Closed systems have boundaries that cannot be penetrated by new information or ideas. Open
systems have permeable boundaries (or boundaries which allow things to pass through them).
Open systems interact with their environments and constantly let in new information and ideas so
that they can continue to grow.

An open system is a system that regularly exchanges feedback with its external environment.
Open systems are systems, of course, so inputs, processes, outputs, goals, assessment and
evaluation, and learning are all important. Aspects that are critically important to open systems
include the boundaries, boundaries, external environment and equifinality. Healthy open systems
continuously exchange feedback with their environments, analyze that feedback, adjust internal
systems as needed to achieve the system‘s goals, and then transmit necessary information back
out to the environment.

1.3.1. Elements of a System

i. Boundaries
All systems have boundaries, although the boundaries can be difficult to identify because
systems can be very dynamic. Open systems have porous boundaries through which useful
feedback can readily be exchanged and understood. Closed systems, unlike open systems, have
hard boundaries through which little information is exchanged. Organizations that have closed
boundaries often are unhealthy. Examples include bureaucracies, monopolies and stagnating
systems.

ii. Inputs
A system receives input which can be in the form of information; raw materials; personnel; semi-
processed inputs etc. The inputs are sent to the processing or transformation module for further
processing that gives the output which can be the final output or the input for another stage of
processing in another subsystem or other related system.

iii. External Environment

The external environment includes a wide variety of needs and influences that can affect the
organization, but which the organization cannot directly control. Influences can be political,
economic, ecological, societal and technological in nature. A highly effective organization is
regularly exchanging feedback with its external environment – it is an open system. Healthy
organizations regularly try to understand their environments through use of environmental
scanning, market research and evaluations. These organizations often try to influence their
external environment, as well, for example, through use of public relations, advertising and
promotions, lobbying and advocacy, and educating industry and local leaders.

iv. Outcomes (Results Among Customers)

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Outcomes are critically important to the success of an organization. Outcomes are in regard to
the changes, or benefits, that customers accomplish as a result of using a particular product or
service. Outcomes are usually specified in terms of changed:
 Knowledge (usually short-term outcomes).
 Behaviors, notably those that comprise useful skills (often intermediate outcomes).
 Attitudes, values and conditions, such as increased security, stability or pride (usually long-
term outcomes).
Some examples of outcomes from a product or service are when customers learn to read from
attending a training, achieve a healthier body by using a health club‘s facilities or have a cleaner
house from using the company‘s vacuum cleaner product. Notice the difference between
outcomes (measures of changes in customers) and outputs (measure of activities in an
organization).

OPEN SYSTEM VIEW OF ORGANIZATION

1.4. Dimensions of organization design: structural and conceptual.

Organizations shape our lives, and well-informed managers can shape organizations. The first
step for understanding organizations is to look at the features that describe specific
organizational design traits. These features describe organizations in much the same way that
personality and physical traits describe people.

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1.4.1. Structural Dimensions
Key structural dimensions of organizations include formalization, specialization, hierarchy of
authority, and centralization.

i. Formalization pertains to the amount of written documentation in the organization.

Documentation includes procedures, job descriptions, regulations, and policy manuals.
These written documents describe behavior and activities. Formalization is often
measured by simply counting_ the number of pages of documentation within the
organization. Large universities, for example, tend to be high on formalization because
they have several volumes of written rules for such things as registration, dropping and
adding classes, student associations, dormitory governance, and financial assistance. A
small, family-owned business, in contrast, may have almost no written rules and would
be considered informal.
ii. Specialization is the degree to which organizational tasks are subdivided into separate
jobs. If specialization is extensive, each employee performs only a narrow range of
tasks. If specialization is low, employees perform a wide range of tasks in their jobs.
Specialization is sometimes referred to as the division of labor.
iii. Hierarchy of authority describes who reports to whom and the span of control for each
manager. The hierarchy is related to span of control (the number of employees reporting
to a supervisor). When spans of control are narrow, the hierarchy tends to be tall. When
spans of control are wide, the hierarchy of authority will be shorter.
iv. Centralization refers to the hierarchical level that has authority to make decisions. When
decision making is kept at the top level, the organization is centralized. When decisions
are delegated to lower organizational levels, it is decentralized. Examples of
organizational decisions that might be centralized or decentralized include purchasing
equipment, establishing goals, and choosing suppliers, setting prices, hiring employees,
and deciding marketing territories.

1.4.2. Key Factors In Organizational Design

Key factors in Organizational design of an enterprise are divided into two types:
1. Internal factors:
There are many internal factors affecting an Organizational design. The most important are:
a. Organizational Objectives:
Every Organization is supposed to be an economic Organization as well as asocial Organization.
Therefore any business enterprises have to fulfill the needs of social groups like customers,
employees, Distributors, investors the society and the government. So the enterprise sets up
various goals and objectives which are capable of satisfying these groups. These objectives can
be achieved only when Organizational design is flexible and adaptable to the situation and
requirement. Sometimes the issues like flexibility, adaptability and technical superiority play

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important role in achieving Organizational goals. These issues are based on an Organizational
design.
b. Size of the Organization:
Size of the Organization is another important factor which influences the Organizational design.
E.g. If the enterprises is small in size, design will be very informal. Actions and decisions are
made on personal relationship. But as the Organization grows the Organizational design moves
from informal to the formalized structure. Because operations are spread geographically and
people are assigned roles on the basis of their specialization. Thus Organization becomes
bureaucratic.
c. Nature of employees:
Employees differ in nature and their characteristic. So some of them prefer formal Organization
and some prefer informal structure. This difference is because of their age, education,
intelligence, and experience etc. for example Old people feel safe in bureaucratic model but
younger ones prefer more dynamic and informal Organizational design and they are against rules
& regulations i.e. bureaucratic model. Similarly educated employees like interactive and
Participant model of decision making process as well as flexible Organizational design and
informal cooperation of people to get the work done. Further more intelligent employees are
against the bureaucratic rules and prefer short cut ways to get the work done more efficiently.
Employee experience also influences Organizational design. E.g. a newly hired employee seeks
guidance and need close control. But better experienced employees need less control and prefer
more flexible Organization.

1. External Factors:
External Factors also play important role in Organizational design. These include:
a. Environment:
Since the Organization are open systems they must respond to their external environments. The
environment may be of two types:
i) General Environment: This includes demographical, physical, political, legal, social,
cultural, technological economical etc. All these environments affect the Organizational
design.
ii) Task Environment: This includes competition, customers and suppliers etc. these are
more specific and therefore are highly relevant in designing Organizational structure.
b. Technology:
In highly- technology units operating on the frontiers of technical development is natural.
Organizational design should facilitate problem solving and risk taking. Conversely operating
with more well-known and stable processes should consider structures that facilitate efficiency.
As the range of products and services increases the structure of the Organization should
accommodate differences across product and services.

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1.4.3. Structural Design of Organization

Traditional and contemporary structures

Organizational structure has been changed recently which influenced the shape of an
Organization. This topic will discuss the different structural changes and their affects in decision
making and behaviour. TALL v\s FLAT Organizational structure: for example the shape of an
Organization has direct influence of the span of control. An Organization may have a ―TALL‖ or
―FLAT‖ structures. Tall structure has many hierarchical level and few workers reporting to each
manager. In his case the span of control is small or narrow. Flat structure may be another shape
of Organization in which span of control may large or wide. It has few hierarchical levels and
many workers reporting to each manager.

FLAT Structure (30employees & 3levels)

TALL structure (30 employees & seven levels)

As shown in above fig. two companies with an equal number of employees may have differently
shaped structures. Holding the number of employees constant, an increase in the no. of levels
decrease the span of control while decreasing the no. of levels increase the span of control.

Comparison of TALL & FLAT Structures:

1.5. The evolution of organization theory and design.

1.5.1. Pre-Classical Era

Most discussions on the evolution of Organization theory starts with the classical Organization
theory, albeit organizations have existed for several years to the effect that management as a
concept can be traced to 2900 BC when the Egyptians managed the workplace and built the
pyramids (Kitana, 2016). Early philosophers from the pre-classical era advocated conceptual
models which later formed the basis on which Organization theories are rooted.

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These contributors include Robert Owen (1771-1858) who was a pioneer in the field of human
resources management and advocated for improved living and working conditions for factory
workers. He considered his employees as being equally important as his machines. He was
among the first to manage his employees rather than order them and tried to gain their agreement
for his ideas rather than imposing it on them. He invented the ‗silent monitor‘ which was used as
a means of implementing discipline and reward and is considered a precursor to staff appraisal.

Adam smith (1723-1790) pioneered the concept of management (Kwok, 2014) and identified
division of labor and specialization as major drivers of productivity. He also discovered ‗the
invisible hand‘ principle which highlighted the importance of aligning the incentives of labor
with the goals of the Organization

Charles Babbage (1792-1871) is considered a giant in the field of operations research and
management science. He emphasized the importance of work specialization and the idea of
profit sharing to improve productivity. He invented a mechanical calculator, a versatile computer
and a punch-card machine and is considered the father of modern computing. These and other
pre-classical contributors presented ideas that became the foundation upon which Organization
theories are built.

However, the industrial revolution which resulted in social and technological changes that
occurred between mid19th and 20th centuries led to the emergence of larger and more
formalized organizations, thus stimulating interest in more people who became involved in
Organizations (Starbuck, 2003) and this also stimulated interest in more research on the concept
resulting in general propositions and theories on it.

1.5.2. Classical Organization Theory

This theory was the pioneer theory of Organizations and was the traditional theory of
Organizations in the 1930s and it is still relevant today. The advent of industrial revolution and
power -driven machines resulted in production workers and factory systems which led to capital
intensive and highly coordinated work processes. As a result, the old order of the Organization
process was no longer enough and classical theory emerged as an answer to this challenge.

The classical theory comprises three schools of thought comprising the scientific management-
which emphasized the one best way to complete a line of work, bureaucratic management-
which focuses on hierarchy, rules and procedure, and clear division of labour, and administrative
management which emphasized the transmission of information across the Organization.

Weber introduced bureaucracy and defined it as a specific set of structural arrangements, that
informed the functionality of Organizations (Shafritz et al, 2005). He maintained that
bureaucracy is key in the organization and as such there is that need for everyone to accomplish

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his responsibilities in a hierarchical arrangement (Celik & Dogan, 2011). His work is
summarized in the table below

Table 1: Max Weber‘s Bureaucracy

S/No Elements of Bureaucratic Explanation
Organization
1. Division of labor Jobs designed in a simple, routine, and well-definedtasks

2. Authority Offices or positions are organized to recognize hierarchy where

each lower position is being controlled and supervised by a
higher one.
3. Formal selection All staff of the organization are to be selected using technical
qualifications demonstrated by training, education, or formal
examination as yardsticks.
4. Formal rules and To ensure uniformity and to regulate the actions of employees,
regulations managers must rely deeply on formal organizational rules.
5. Impersonality Rules and controls are applied uniformly, avoiding involvement
with personalities and personal preferences of employees
6. Career orientation Managers are professional officials rather than owners of the
units they manage. They work for fixed salary and pursue their
career within the organization.
Source: Adapted from Robbins and Coulter (1999).

Administrative Management
In his case, Henry Fayol (1949) primarily contributed the fourteen principles of management
that birthed successful Organizations and are still rules managerial processes today. Fayol‘s 14
principles is hereunder presented in a tabular shape as discussed in Gabriel (2020).

Table 2: Fayol‘s 14 Principles of Management

S/N Element of the principle Explanations
1 Division of Work Specialization makes it possible for individuals to gather
experience, and get improved in skills for improved productivity.
2 Authority This implies that the right to issue commands, and authority must
go with responsibility because exercising authority gives rise to
responsibility. This principle suggests that there is a need for
managers to have authority in order to command subordinates so
they can perform their jobs while being responsible for their
actions.

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 3 Discipline. Employees must obey, but this is two-sided: employees willonly
obey orders if management plays her part through good
leadership.
4 Unity of Command Each worker should be answerable to one boss with no other
conflicting lines of command
5 Unity of Direction People engaged in the same kind of activities must have the same
objectives in a single plan. This is essential to ensure unity and
coordination in the enterprise. Unity of command does not exist
without unity of direction but doesnot necessarily arise from it.
6 Subordination of Management must see that the goals of the firms are
individual interest (to always paramount, and the interest of the employee must be
the general interest) subject to those of the organization.
7 Remuneration Compensation for work done should be sufficient and fair to both
employers and employees. Fayol suggests that, the significant
process of remuneration paid to employees should be fair,
reasonable, satisfactory to both employer & employees, and
rewarding their efforts
8 Centralization (or Decreasing the role of the subordinate in decision making is
Decentralization). centralization whereas increasing such role is decentralization.
9 Scalar chain (Line of A hierarchy is necessary for unity of direction. But lateral
Authority). communication is also fundamental, as long as superiors know
that such communication is taking place. Scalar chain refers to the
number of levels in the hierarchy from the ultimate authority to
the lowest level in the organization. It should not be over-
stretched and consist of too-many levels.
10 Order Both material order and social order are necessary. The former
minimizes lost time and useless handling of materials. The latter
is achieved through organization and selection.
11 Equity. In running a business, a ‗combination of kindliness and justice‘ is
needed. Treating employees well is important to achieve equity.
The principle of equality should be followed and applied at every
level of management.
12 Stability of Tenure of Employees work better if job security and career progress are
Personnel assured to them. An insecure tenure and a high rate of employee
turnover will affect the organization adversely
13 Initiative Allowing all personnel to show their initiative in some way is a
source of strength for the organization. Even though some
mistakes may arise in the process, the gains are surely more.

Organizational Theory Course Note – Adewale Adeniyi-kie Page

 14 Esprit de Corps According to Merriam Webster, espirit de corps is the common
spirit existing in the members of a group and inspiring
enthusiasm, devotion, and strong regard for the honor of the
group. William et al. (2005) describes it as the degree to which
employees obliged to common goal and to one another in the
organization.
Source: Adapted from Gabriel, J.M.O. (2020): Principles and practice of management for
successful business (in press).

1.5.3. Neo-Classical Organization Theory

The increase in output and the educational development of employee coupled with the
excessively severe principles and mechanical models of organization, the classical theories of
organization resulted in regular confrontations and tension between the workforce and
management, the inner communications are responsible for being misunderstood and the inner
clashes become, to a greater extent, common (Ferduous, 2017). Consequently, studies were
carried out to examine and identify the causes of these unpleasant outcomes. It is these studies
that will inspire the new theories of administration that would pay more consideration to the
human issue and birth the humanized organization (Yang et al, 2013).

Elton Mayo pioneered the Hawthorne studies which formed the basis for this theory. The study
started in 1924 at Hawthorne works, the western electric company in Chicago. Some of the
postulations of the theory are;

i. Organization is a general social system made up of both formal and informal

components.
ii. The social environments affect people and also affected by them (people also affect the
social environments)
iii. Bother the formal and informal organizations affects each other
iv. Integration between individual and organizational goal is a must
v. People behavior can be predicted based on the social factors
vi. Money is not the only motivation factor
vii. Man are socially diverse and the sociological factors are important.
viii. Man are not always rational
ix. Team work is essential of higher productivity

Other contributors to this theory include Abraham H. Maslow, Frederick Herzberg, Douglas Mc
Gregor, Rensis Likert, and Keith Davis who all worked to inspire and promote the drive for
human relations, which posit that workers react mainly to the societal setting of the workplace,
containing societal habituation, group customs and relational dynamics (Sarker & Khan, 2013).

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1.5.4. Modern (classical) Organization Theory
Modern Organization theory is an integration of valuable concepts of the classical models with
the social and behavioural sciences. Modern theorists view the organization as a dynamic open
system which has to adapt to changes in its environment. This theory still has a major influence
in contemporary society. Its distinctive features are its reliance on empirical research data,
conceptual-analytical base, and, more importantly, it‘s integrating nature (Ferdous, 2017).
Some of the Modern Organizational Theories include;
i. Contingency theory
What works well in one organization may not be suitable for another. This modern theory
emphasizes the need for flexibility and adaptability. It believes organization structure should be
built based on factors such as external environment; technology and organization size.
ii. System Theory
Organization is considered as complex system with different interdependent parts which works
together. It helps understand how the different components work together to achieve the goal
of the organization.
iii. Resource Dependency Theory
Focuses on how organization cope with dependency on external entities and the strategies the
organization use to secure and control essential resources.
iv. Organization Culture and Behavior
Values and beliefs that shape behavior of individuals in the organization are the focus of the
theory. The theory helps in creating positive work environment that can enhance employees‘
satisfaction and achieving organization goals.
v. Network Theory
The theory considered organization as network of inter-relationship of networks which includes
both the internal and external. The network interaction influences; decision making; information
flow and innovation. The above are important in the present constantly changing nature of the
world and organizations.
vi. Learning Organization Theory
Focus on learning and adapting to the challenges of the environment. It encourages learning,
innovation and knowledge sharing. Organizations that can learn can change how it relates to
the environment.

SELF-TEST EXERCISES
Part 1: TRUE or FALSE
Read the following sentences carefully and write TRUE if the statement is corrector FALSE if
the statement is incorrect on the space provided
1. An organization is the building and physical elements of the corporation.

Organizational Theory Course Note – Adewale Adeniyi-kie Page

2. Organization theory is a macro examination of organizations because it analyzes the whole
organization as a unit.
3. Organization theory is directly relevant to lower level management.
4. In modern theory any organization can be described as a ―system.‖
5. Esprit de Corps is a principle in administrative management and it implies the degree to
which employees obliged to common goal and to one another in the organization.
6. Scalar chain refers to the number of levels in the hierarchy from the highest authority to the
lowest level in the organization.

Part II: Multiple Choice Questions

1. The components of organization include which of the following?

A. People D. Goals of the organization
B. Division of Labor E. All of the above
C. Identifiable Boundaries
2. Which of the following describe the type of system an organization is in modern theory?
A. Closed System D. All of the Above
B. Modern System E. None of the Above
C. Open System
3. Elements of a System as described in Modern theory include all except ___________?
A. Inputs D. Experiments
B. External Environment E. None of the Above
C. Outcomes
4. Which of the following not included in the structural dimension of organization?
A. Formalization D. Centralization
B. Specialization E. None of the Above
C. Actualization
5. Which of the following is not part of the classical theory?
A. Management Science D. Bureaucratic Management
B. Administrative Management E. None of the Above
C. System Management

Short Answers and Discussion

1. What are the principles relating to the Weber Classic Bureaucratic Management?
2. Discuss the Fayol Administrative principles
3. Lists and discuss examples of the New Modern theory?

Organizational Theory Course Note – Adewale Adeniyi-kie Page

Answer Keys to Self-Test Exercises

Part I: TRUE or FALSE

1. False 3. False 5. True

2. True 4. True 6. True

Part II: Multiple Choice Questions

1. E 3. D 5. C
2. C 4. C

Organizational Theory Course Note – Adewale Adeniyi-kie Page

 CHAPTER 2
Strategy, Organization Design, and Effectiveness

INTRODUCTION
One of the job responsibilities of top management is to strategize and establish goals for their
Organization to stay competitive. The top managers are to set the overall direction in which the
organization is to go. That direction is often noted in the Mission and Business Statements of
that organization.

The Mission Statement of Ethiopian Airlines is

“To become the leading Aviation group in Africa by providing safe and reliable passenger and
cargo air transport, Aviation training, Flight Catering, MRO and Ground Services whose
quality and price “Value proposition” is always better than its competitors. To ensure being an
airline of choice to its customers, employer of choice to its employees and investment of choice
to its owners, To contribute positively to socio-economic development of Ethiopian particular
and the countries to which it operates in general by undertaking it corporate social
responsibilities and providing vital global air connectivity.”

Mission Statements are not just words, they are what the organization wants to do and to get that
mission achieved, the mid-level management assists through operating core.

The Mission statement will help to set the strategic goals at the top management level that is the
organizational goals while the operational goals which align with the organizational goals are
set at the mid-level. These operational goals are task-oriented and they achieving the overall
goal of the organization.

2.1. The role of strategic direction on organization design.

An organizational goal is a specific set-point which an organization attempts to achieve. For
better understanding we can interpret it as a target towards which organizational efforts are
directed. These goals are highly influenced by the nature of Organizational strategy.

Operational Goals
Examples include;
 The primary tasks of the organization
 Explicit tasks that align with the official goals
 Provide direction and guideline to perform the tasks

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In the example of the mission statement of the Ethiopian Airlines, the management needs to
formulate the strategy to achieve what is stated in the mission statement (official goal). To
achieve

In other words, Organizational strategy is implemented by dividing various goals grouped

together to be executed one after another. Top management decides and sets the goals and
determines the direction it will take to accomplish it. This process of setting new strategic
direction for the Organization brings a lot of opportunities and threats for the management to
deal with – for which a careful SWOT analysis is required. There are certain key areas which
can assist in setting a new strategic direction for an Organization including production, staff,
customers, systems, premises, quality and marketing.

2.1.1. Role of Top Managements in Strategic Direction

The primary responsibility of top management is to determine an organization‘s goals, strategy,
and design, therein adapting the organization to a changing environment.
i. Direction setting begins with an assessment of opportunities and threats in the
environment and an evaluation of internal strengths and weaknesses.
ii. Then the company can determine its mission, goals, and strategies.

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 iii. Organizational design reflects the way goals and strategies are implemented. This is the
role of organization theory. Considering how organization design is affected by the
choice of goals and strategy.
iv. New goals and strategies are often selected based on environmental needs, and then top
management attempts to redesign the organization to achieve those ends.
v. Performance measurements feedback into the internal environment, so that past
performance of the organization is assessed by top management in setting new goals and
strategies for the future.
Choices that top management makes about goals, strategy, and organizational design have a huge
impact on organizational effectiveness. If the goal, strategy and organizational design are not
S.M.A.R.T (S – specific, M – measureable, A – achievable, R – realistic, T – time based) based
on careful SWOT analysis, then failure is the likely case.

The rationale behind putting focus on Organizational design is that all policies, procedures,
internal and external environmental needs which are in the operational strategies (goal) are
interlinked. A change in one may upset the entire setting for others. Further, the choices top
management makes in setting a new strategy, underlying goals and Organizational design
ultimately determines Organizational effectiveness.

2.2. Organization purpose.

2.2.1. The Mission or Official Goals
Purpose may be referred to as the overall goal or mission. Different parts of the organization
establish their own goals to help the organization achieve its overall purpose.
i. Purpose refers to why you do what you do, not what you do or how you do it but why
you do it?
ii. They are the official goals or Official Mission of the organization.
iii. Purpose has been shown to positively impact employee engagement and commitment to
an organization thereby impacting organizational effectiveness
2.2.2. Operational Goals
Refer to the ends sought through operating procedures and describe specific measurable
outcomes in the short run. These goals include and are concerned with;
 Overall performance, boundary spanning, and maintenance, adaptation, and production
activities.
o Overall performance goals may be expressed in terms of profitability, delivery of
service, growth, or volume.
 Resource goals pertain to the acquisition of needed material and financial resources.
 Market goals which relates to the market share or market standing desired.
 Employee development goals pertain to the training, promotion, safety, and growth.
Organizational Theory Course note – Adewale Adeniyi-Kie Page 18
  Innovation and change goals pertain to internal flexibility and readiness to adapt to
unexpected changes in the environment.
 Productivity goals concern the amount of output achieved from available resources.
All the operational goals put together helps achieve the overall mission or official goals of the
organization as depicted in the diagram below.

Figure 1: integrated operating goals formed the total goal

 The mission or official goals provide legitimacy to stakeholders and overall direction for
the company.
 In contrast, operative goals provide employee direction and motivation, decision
guidelines, and criteria of performance.
2.2.3. Importance of Purpose
a. Organizational Purpose Today (for the Present)
Mission statements have become the contemporary means for declaring an organization's
purpose. There are different interpretations of what a mission statement is
 It is an enduring declaration that distinguishes the organization's business from that of
others.
 It identifies the scope of its work in product, service, and customer terms.
 It clarifies the customer needs the organization intends to satisfy
 It answers the question, "What would the world lose if this organization ceased to exist?"
 Define it include elements that we would normally suggest be included in a vision
statement, such as "the operational, ethical, and financial guidelines of companies.
 It articulates the goals, dreams, behavior, culture, and strategies of companies more than
any other document

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 b. Organizational Purpose for Tomorrow (for the Future)
Purpose of organization existence can also be considered in terms of the different
stakeholders, namely;
 Customers: Customers want the highest quality product and service they can get for the
lowest cost. Customers also want to do business with companies that keep social
responsibility.
 Stockholders: Shareholders who have invested in the business also seek maximum profits
and dividends on the investment. Organization purpose should also put these stakeholders
into consideration.
 Employees: Companies have come to understand that to achieve their purpose
employees should be properly paid, development and training programs and other needs
of employees should also be addressed to have the top and best staffs.
 Environment: The local, global environments in terms of pollution and environmental
impacts (e.g. carbon footprint) of organization is become a great important for operation
of organization. Purpose of the company must also be expressed in terms of the
environment.
 Social Responsibilities: Organization is the present should also include their social
responsibility roles in the purpose for which they exist.

The Ethiopian Airlines Motto addressed many of the above purposes as noted in the previous
section of this module.

2.3. Framework for selecting strategy and design/structure.

A strategy is a plan for interacting with the competitive environment to achieve
organizational goals. Goals define where the organization wants to go and strategies define
how the organization will get there.
Different strategies can be employed by the organization to achieve its goals. Here we will
consider two strategies that are widely used by organizations.

2.3.1. The Porter’s Generic Strategy

Michael Porter introduced a framework describing four competitive strategies namely, Cost
leadership, Differentiation, Cost focus and differentiation focus. The four competitive
strategies are evaluated base on two factors: competitive advantage and competitive scope.
Whether the organization competes on a broad or narrow scope determines the selection of
strategies.

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In the Porter‘s generic strategy, a firm can compete on two general dimensions: the source of
competitive advantage (Cost or uniqueness) and based on competitive Scope of operation
(Narrow or Broad).

2.3.1.1. Competitive Advantage: Low Cost Leadership - Broad Scope Strategies

This involves techniques for excelling at cost reduction and efficiency, with broad competitive scope.
The strategy depends on attracting large number of customers. The company will have to keep prices
low by large quantity from suppliers, so that they can get large discounts. In some cases, the company
will try to eliminate middlemen and buy directly from producers. As a way to reduce price some
companies may engage in backward integration (in which case, the company produce the products
themselves). With the Broad scope strategy, the company attempt to have every item that maybe
needed by every customers that visits their store.

2.3.1.2. Competitive Advantage: Focus - Narrow Scope Strategies

Focus strategies concentrate on a narrow market or buyer group. The company tries to achieve either
a focused low-cost or a focused differentiation advantage within a narrowly defined market. In this
case of Narrow Target, not all range of products are offered but only narrow range of products at very
competitive prices compared to the competitors. The target customers may also be narrow or specific
in nature.

In terms of competitive advantage, the Narrow Target scope of operations may have focused
differentiation in which unique (high price) products are marketed targeting specific range of
customers.

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2.3.1.3. Competitive Advantage: Differentiation – Broad/Narrow Scope Strategies
Differentiation strategy strives to create and market unique products by innovative product
characteristics and advertising. The products offered by the company are unique or different based on
features, quality, value compared to the competitors.

2.3.1.4. Competitive Advantage VS Competitive Scope

In USA, four retail stores compete using different strategies: Walmart compete on costs leadership –
Broad Target while Nordstrom builds on Differentiation – Broad Strategy offering designers‘
products with excellent services. Dollar General (another store) does not offer wide range of products
but have costs competitive advantage (i.e. Cost leadership – Narrow Strategy and Antropologies
stores focus on women cloths, accessories which are unique and expensive (Narrow Cost –
Differentiation) in nature.

2.3.1.5. Which Strategy is the best?

Each company must carefully
consider the best strategies to adapt
based on their SWOT and the
unique nature of the challenges of
the external environment.
If Differentiation or uniqueness is
the focus, the products can be
broad in scope or narrow but the
costs will be high.
If Low-Cost Leadership is the
strategy, the efficiency and
production costs reduction will be
an issue in which wide variety of
goods are offered for every
customer or fewer products with
low prices are offered.

2.3.2. Miles and Snow’s Strategy Typology

Raymond Miles and Charles Snow assume that managers create strategies compatible with
the external environment. Organizations strive to fit internal organization characteristics and
strategy to the external environment.

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The typology described 4 types of strategies that companies adapt based on the external
environment structure – Prospector; Defender; Analyzer; and Reactor.

 The prospector strategy involves innovation, taking risks, seeking out new
opportunities and growth.
 The defender strategy involves retrenchment, focusing on stability and seeking to
keep current customers without innovation or growth.
 The analyzer strategy lies between the prospector and defender by efficiently
maintaining a stable business for current product lines, while innovating on the
periphery
 The reactor approach is really just responding in an ad hoc manner to environmental
threats and opportunities, without a real long-range plan.

2.3.2.1. Miles & Snow strategies based on environment & organization characteristics
Strategy Environment Organizational Characteristics
Innovatee,Find new market opportunities,
Proepector Grow, Take risks Dynamic. Growing Creative, innovative, Flexible, Decentralized
Protect, Turf (boundary), Retrench, Hold Tight Control, Centralized, Production
Defender Current Markets Stable efficiency, low overhead
Maintain Current market plus Moderate Tight control and flexiblity, efficient
Analyzer innovation Moderate Change production, creativity
No clear strategy, React to specific No Clear organizational approach, depends
Reactor conditions. Drift Any condition on current needs

2.3.4. How Strategies Affect Organizational Design

Design must support the firm‘s competitive approach. For example, if the organization uses the
low-cost leadership or defender strategy, the design should be focused on efficiency, whereas if
the organization uses the differentiation or prospector strategy the design calls for a learning
organization structure with strong horizontal coordination mechanisms to increase collaboration
and teamwork.

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Porter's Competitive Strategies Miles & Snow's Strategy Typology
Strategy: Differentiation Strategy: Prospector
Organization Design: Organization Design:
* Learning orientation: Act in a flexibil, loosely knit way, with strong * Learning Orientation: Flexible, fluid (flowing), decentralized structure
horizontal coordination
* Stronge capacbility in research * Strong capacity for research
* Values and builds in mechanisms for customer intimacy Strategy: Defender
* Rewards employee creativity, risk taking and innovation Organization Design:
Strategy: Low-Cost Leadership * Efficiency Orientation: Centralized authoriy, tight costs control
Organization Design: * Emphasis on production effiency, low overhead
* Efficiency Orientation: String central authoriy, Tight cost control, with * Close supervision, little employee empowerment
frequent, detailed control reports
* Standard Operrating Procedures Strategy: Analyzer
* Highly efficient procurement and distribution systems Organization Design:
* Close supervision: Routin tasks, limitedd empoyee empowerment * Balances efficiency and learning; tight costs control with flexibility
and adaptability
* Efficiency production for stable product lines; emphasis on creativity,
research, risk-taking for innovation
Strategy: Reactor
Organization Design:
* No clear organiztional approach; design characteristics may shift
abruptly, depending on current needs

2.4. Assessing organizational effectiveness

2.4.1. Organizational effectiveness vs organizational Efficiency
 Effectiveness is the degree to which an organization realizes its multiple goals.
 Efficiency refers to the resources used to produce outputs (ratio of inputs to outputs).
 Effectiveness is often difficult to measure in organizations, especially those that are large,
diverse, fragmented and those that have multiple goals and measures of effectiveness like
not-for profit organizations or the Ethiopian Airlines at the beginning of this chapter.

2.5. Organization Efficiency Measuring Approaches

2.5.1. Contingency Effectiveness Approaches
Contingency effectiveness approaches are based on an examination of specific parts of the
organization that are considered to be the most important to measure. The method is different
from balanced effectiveness approaches that integrate several parts of the organization in an
effort to measure effectiveness.

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2.5.2. Resource Based Approaches
The resource-based approach evaluates the ability of the organization to obtain valued resources
from the environment. This looks at the input side of the transformation process. This approach
is useful when other indicators of performance are difficult to obtain. Indicators of system
resource effectiveness include dimensions such as bargaining position, ability to correctly
interpret properties of the environment, maintenance of internal day-to-day activities, and ability
to respond to environmental changes. A shortcoming can be an overemphasis on the acquisition
of resources rather than on their utilization.

2.5.3. Internal Process Approach

The internal process approach evaluates effectiveness by examining internal organizational
health and economic efficiency. An evaluation of human resources and their effectiveness is
important. Indicators of effectiveness include strong corporate culture, team spirit, trustful
communication, decision making near sources of information, undistorted communication,
managerial rewards for performance, and interaction between the organization and its parts

2.5.4. Goal Approach

The goal approach measures effectiveness by evaluating the extent to which operative goals are
achieved. It is more productive to measure effectiveness using operative goals than using official
goals which are more abstract and difficult to measure. The goal approach is used because output
Organizational Theory Course note – Adewale Adeniyi-Kie Page 25
goals can be readily measured after issues of multiple goals and subjective indicators of goal
attainment are resolved.

2.6. An Integrated Effectiveness Model

Managing multiple and conflicting goals is necessary when different managers champion
different goals, or when it is necessary to serve different environmental demands. Therefore,
effectiveness has to be measured by several factors and often cannot be assessed by a single
indicator.

The competing values approach recognizes that managers may emphasize different indicators of
performance and tries to balance concern with various parts of the organization rather than
focusing on one part.

 Two values can be used to categorize four models of effectiveness.

 Organizational focus is whether issues internal or external to the firm are valued.
 Organization structure is the emphasis on either flexibility or stability.
 The four resulting areas of management emphasis reflect the two values:
i. The open system‘s emphasis combines an external focus and flexible structure,
with management's primary goals being resource acquisition and growth;

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 ii. The rational goal emphasis focuses on the stable structure and external
environment with management's primary goals being productivity, efficiency,
and profit;
iii. The internal process emphasis reflects the values of internal focus and stability,
with management's primary goal being to maintain the status quo;
iv. The human relations emphasis combines internal focus and flexible structure with
management's primary goal being employee development.

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SELF-TEST EXERCISES
Part 1: TRUE or FALSE
Read the following sentences carefully and write TRUE if the statement is corrector FALSE if
the statement is incorrect on the space provided
1. Mission statement will help to set the strategic goals at the top management level while the
operational goals are at the operational mid-level.
2. Overall performance, boundary spanning, and maintenance are examples of operational goals
of an organization.
3. Employee development goals pertain to the training, promotion, safety, and growth.
4. In Porter generic Competitive Advantage, Low Cost Leadership with Broad Scope
Strategies involves techniques for excelling by differentiation of product at cost reduction and
efficiency.

Part II: Multiple Choice Questions

1. Which of the following is not part of the operational goals of an organization?
A. Overall performance goals D. Employee development goal
B. Mission Statement goal E. Productivity goals
C. Acquisition Resource goals
2. Operational goals are which of the following?
A. Primary tasks of the organization D. All of the Above
B. Official goals aligned Explicit tasks E. None of the Above
C. Tasks providing direction and
guidelines
3. Operational goals include and are concerned with which of the follow?
A. Overall performance, boundary spanning
B. Resource goals pertain to the acquisition.
C. Market goals which relates to the market share.
D. Innovation and change goals pertain to internal flexibility
E. All of the above
4. Some of the stakeholders that should be considered in an organization purpose for future
strategies to be successful include all except ___________?
A. Customers D. Social Responsibilities
B. Mission statements E. Employees
C. Environment
5. Which of the following not included in the portal generic strategies for competing?
A. Prospector D. Cost leader
B. Differentiation E. None of the Above
C. Differentiation Focus

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Part III. Based on Miles & Snow Match the column A item with Items in Column B
sn Column A Column B
1. Strategy involving innovation, taking risks, seeking out A. Analyzer
new opportunities and growth
2. Strategy involves retrenchment, focusing on stability B. Prospector
and seeking to keep current customers without
innovation or growth.
3. Strategy lies between the prospector and defender by C. The reactor
efficiently maintaining a stable business for current
product lines
4. Approach is really just responding in an ad hoc manner D. Defender
to environmental threats and opportunities

Part IV; Short Answers and Discussion

1. Efficiency and Effectiveness do not represent the same thing in an organization. Discuss the
reasons why the two cannot be equivalent in measuring performance of a company?
2. Discuss some of the organization efficiency measurement approach (tools) covered in this
course?

Answer Keys to Self-Test Exercises

Part I: TRUE or FALSE

1. T 3. T
2. F 4. F

Part II: Multiple Choice Questions

1. B 3. E 5. C
2. D 4. C

Part III.
1. B 3. A
2. D 4. C

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 CHAPTER 3
Fundamentals of Organization Structure
3.1.Organization structure.
An organizational structure is a system that outlines how certain activities are directed in order to
achieve the goals of an organization. These activities can include rules, roles and responsibilities.

An organization structure also determines the flow of information between the different levels
within the structure.

An organizational structure defines how job tasks are formally divided, grouped, and
coordinated.

According to Mintzberg (1972), the organization is a framework of the relations on the job,
system, operating processes, people and groups making efforts to achieve the goals. Organization
structure is a set of methods dividing the tasks to determine duties and coordinates them..

R.W. Griffin, ―Organization structures are set of construction elements which may be used I
shaping the elements‖

D.L Nelson, ―The linking of departments and jobs within an organization‖

Three key components define organization structure

i. Formal Reporting Relationships
 Number of levels in the hierarchy
 Span of control of managers and supervisors
ii. Grouping of Individuals
 Creation of departments
iii. Design of Systems
 To ensure effective communication, coordination and integration of the efforts of
individuals and groups.
The above three elements pertain to both vertical and horizontal aspects of organizing. The first
two element s are the structural framework, which are vertical hierarchy and the third element
pertain to the interactions among organizational employees.

3.1.1. A sample organization Chart

An organization chart is a visual representation of a whole set of underlying activities and
processing in an organization. It shows what positions exist, how they are grouped and who
reports to whom.
Organizational Theory Course note – Adewale Adeniyi-Kie Page 30
 CEO

Vice President Director

Vice Preseident
Finance Human
Manufacturing
Resources

Chief Budget Manufacturing Compenstati

Auditor Plant officer Training
Accountant Analyst supervisor on officer

3.1.2. Key Elements of Organizational Structure

i. Work specialization: Work specialization or division of labor to describe the degree
to which tasks in the organization are subdivided into separate jobs. The essence of
work specialization is that, rather than an entire job being done by one individual, it is
broken down into a number of steps, each step being completed by a separate
individual. In essence, individuals specialize in doing part of an activity rather than
the entire activity.
ii. Departmentalization: The basis by which jobs are grouped together is called
departmentalization. One of the most popular ways to group activities is by functions
performed. A manufacturing manager might organize his or her plant by separating
engineering, accounting, manufacturing, personnel, and purchasing specialists into
common departments. The functions change to reflect the organization‘s objectives
and activities. A hospital might have departments devoted to research, patient care,
accounting, and so forth.
iii. Chain of command: The chain of command is an unbroken line of authority that
extends from the top of the organization to the lowest eschelon and clarifies who
reports to whom. It answers questions for employees such as ―To whom do I go if I
have a problem?‖ and ―To whom am I responsible?‖ Chain of Command encompass
 Authority: which refers to the rights inherent in managerial position to give orders
and expect the orders to be obeyed.
 Unity of Command: The unity-of-command principle helps preserve the concept
of an unbroken line of authority. It states that a person should have one and only
one superior to whom he or she is directly responsible. If the unity of command is
broken, a subordinate might have to cope with conflicting demands or priorities
from several superiors.
Organizational Theory Course note – Adewale Adeniyi-Kie Page 31
 To facilitate coordination, each managerial position is given a place in the chain of
command, and each manager is given a degree of authority in order to meet his or her
responsibilities.
iv. Span of control: How many subordinates can a manager efficiently and effectively
direct? This question of span of control is important because, to a large degree, it
determines the number of levels and managers an organization has. All things being
equal, the wider or larger the span, the more efficient the organization. Obviously,
wider spans are more efficient in terms of cost. However, at some point wider spans
reduce effectiveness. That is, when the span becomes too large, employee
performance suffers because supervisors no longer have the time to provide the
necessary leadership and support.
v. Centralization and Decentralization: The term centralization refers to the degree to
which decision making is concentrated at a single point in the organization. The
concept includes only formal authority, that is, the rights inherent in one‘s position.
Decentralization on the other hand, places decision making at the lower levels, lower
managers are allowed to take initiatives with level of authority while the top-level
manager takes the responsibility in case something goes wrong.
vi. Formalization: Formalization refers to the degree to which jobs within the
organization are standardized. If a job is highly formalized, then the job incumbent
has a minimum amount of discretion over what is to be done, when it is to be done,
and how he or she should do it. Employees can be expected always to handle the
same input in exactly the same way, resulting in a consistent and uniform output.
There are explicit job descriptions, lots of organizational rules, and clearly defined
procedures covering work processes in organizations where there is high
formalization.

3.2.Information-Processing Perspective in Organization Structure

The basis for establishing structure is to have information and resource flow from one level of
the organization to another. The various structure of the organization provide different issues
which the organization will have to consider before deciding on which type of structure will be
appropriate for it to meet it goals both efficiently and effectively.

3.2.1. Centralized Vs. Decentralized Information Flow

The organization should be designed to provide both vertical and horizontal information flow as
necessary to accomplish the organization‘s overall goals. However, there is always tension
between vertical and horizontal mechanisms in an organization.
 Traditional organization designed for control based on Centralized authority which
focused on the top-level decision-making
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  Flexible learning organization which emphasizes the communication and the
collaboration through Decentralized authority focused on shared tasks and decisions
Organization with Branches in different geographical locations (Blue Nile College) are advised
to shift to a more flexible, decentralized structure, giving school Vice President (principals) more
autonomy, responsibility, and control over resources, to be able to perform better and efficient
than large districts that were highly centralized.
Toyota company with headquarters in Japan and branches in America and across the world is
able to achieve greater efficiency after decentralization.
Problems of Centralization
 Decision making takes longer
 If the Central Decision-maker is not present actions and decisions not made means the
organization work becomes slow or stop
 Problems in different branches may be unique and managers who are closer to the
physical organization may have better view or perspective compared to the manager at
the higher level.

3.2.2. Vertical Vs. Horizontal Information Processing

3.2.2.1.Vertical Information Processing & Sharing
Managers create information linkages to facilitate communication and coordination among
organizational elements. Vertical linkages are used to coordinate activities between the top and
the bottom of an organization and are designed primarily for control of the organization.

It is a strategy for increasing vertical information capacity. It includes period reports, written
information, and computer-based communication distributed to managers. It makes
communication up and down the hierarchy more efficient.

Features of Vertical Information Sharing

i. Hierarchical Referral- it is the first vertical device, or chain of command. If employees do
not know how to resolve a problem, it gets shifted up the ranks. Once the problem is solved,
it gets sent back down.
ii. Rules and Plans- to the extent that problems and decisions are repetitious, a rule or
procedure can be established so that the employees know how to deal with it. It`s standard
information for the employees. Managers carefully brief the production workers on goals, so
that employees themselves do most of the work, and the production process continues
running smoothly.
iii. Formal management Information System: Reports, computer systems and written
information are examples of vertical information systems. Information systems make
communication up and down the hierarchy more efficient.

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Need for Vertical Information system
In today`s world of corporate financial scandals and ethical concerns, many top managers are
considering strengthening their organization`s linkage for vertical information and control. The
other major issue in organizing is to provide adequate horizontal linkages for coordination and
collaboration.

3.2.3. Horizontal Information Sharing and Collaboration

Horizontal linkage: Refers to communication and coordination horizontally across
organizational departments. Horizontal communication overcomes barriers between departments
and provides opportunities for coordination among employees to achieve unity of efforts and
organizational objectives.
Small organizations usually have a high level of interaction among all employees, but in a large
organization, providing mechanism to ensure horizontal information sharing is critical to
effective collaboration, knowledge sharing, and decision making.
Horizontal linkage help achieve Collaboration - a joint effort between people from two or more
departments to produce outcome that meets a common goal or shared purpose and that are
typically greater than what any of the individuals or departments could achieve working alone.
Horizontal linkage mechanisms are often not drawn on organization chart but they are vital part
of organizational structure.

How to improve horizontal coordination and information flow:

a. Information Systems - A significant method of providing horizontal linkage is to use
cross-functional information systems. Computerized information systems enable
managers or frontline workers throughout the organization to routinely exchange
information about problems, opportunities, activities, or decisions. Company information
system can help build relationships across the organization.
b. Direct Contact or Liaison Roles- A higher level of horizontal linkage is direct contact
between managers or employees affected by a problem. One way to create direct contacts
is creating special liaison role. A liaison person is located in one department but has the
responsibility for communicating and achieving coordination and collaboration with
another department.
c. Task Forces- a temporary committee compound of representatives from each
organization unit affected by a problem. Each member represents the interest of a
department or division and can carry information from the meeting back to that
department. It`s an effective linkage device for temporary issues. They resolve problems
by direct horizontal collaboration and reduce the information load on the vertical
hierarchy.

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 d. Full-time Integrator- frequently has a title, such as product manager, project manager,
program manager, or brand manager. He or she does not report to one of the functional
departments being coordinated. He or she is located outside the departments and has the
responsibility for coordinating several departments.
e. Teams: Project teams tend to be the strongest horizontal linkage mechanism. Teams are
permanent task forces and are often used in conjunction with a full-time integrator.
Special project teams may be used when organizations have a large-scale project, a major
innovation, or a new product line. A virtual team is one that is made up of
organizationally or geographically dispersed members who are linked primarily through
advanced information and communications technologies. Members mostly use internet
for collaboration rather than meet face to face.

3.3.Organization Design Alternatives

Aside from the need for communication and the flow of authority from the previous section, the
overall design of organization structure indicates 3 things:
i. Required work activities
ii. Reporting relationships.
iii. Departmental groupings.

i. Required Work Activities

In a manufacturing company work activities fall into a range of functions that helps the
organization accomplish its goals, such as a human resource department to recruit and train
employees, a purchasing department to obtain supplies and raw materials, a production
department to build products, and a sale department to sell products. The needs of the
organization are put into consideration for the design to be able to meet the organizational
objective; as organization size increases the work activities and communication complexity
increases.
ii. Reporting Relationships
Often called the chain of command, it is represented by vertical lines on an organization chart.
The chain of command should be an unbroken line of authority that links all persons in an
organization and shows who reports to who.
iii. Department Grouping Options
Affects employees because they share a common supervisor and common resources, are jointly
responsible for performance, and tend to identify and collaborate with one another.
 Functional grouping- places together employees who perform similar functions or
work processes or who bring similar knowledge and skills to bear. This is also called
a U-form (unitary) structure.

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  Divisional grouping- means people are organized according to what the organization
produces. The MIDROCK Corporate for example is grouped according to the
products or what each sector in the organization provide.
 Multi-focused grouping- means an organization embraces two or more structural
grouping alternatives simultaneously. These structural forms are often called matrix
or hybrid.
 Horizontal grouping- means employees are organized around core work processes,
the end-to-end work, information, and material flows that provide value directly to
customers.
 Virtual network grouping- the organization is loosely connected cluster of separate
components. Departments are separated organizations that are electronically
connected for the sharing of information and completion of tasks.

3.4.Functional, divisional, and geographical designs

3.4.1. Functional Structure
Also called a U – form (unitary) structure with activities grouped into common function. All
specific skills and knowledge are consolidated, providing a valuable depth of knowledge for
the organization. It is however the structure is slow to response to environmental changes.
3.4.1.1.Functional Structure: Strengths & Weaknesses
sn Strengths Weaknesses

1 Allows economies of scale within Slow response time to environmental

functional departments changes

2 Enables in-depth knowledge and skill May cause decisions to pile on top
development resulting to leading to hierarchy overload
specialization

3 Enables organization to accomplish Leads to poor horizontal coordination

functional goals among departments

4 Is best when organization have only Results in less innovation

one or few products

5 Involves restricted view of organizational

goals

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 President

R&D Finance Marketing Division

Manager Manager Manager Product Z

Line
Design Purchasing Sales
Supervisor

Customer Prodution
Development Accounting
Services Teams

Testing Finance Distribution

Figure 2: Functional Organization

3.4.2. Divisional Structure

The divisional structure is also called a M-form (Multi-divisional) or a decentralized form or Product
structure or Strategic business unit structure.

Divisions are organized according to products, services, product groups that they provide. They are good
for achieving coordination across functional departments. Grouping of division is based on organizational
outputs.

Giant complex organizations such as general electric, Sony and MIDROCK are sub-divided into series of
smaller, self-contained organizations for better control.

Such organizations are suited for fast change; loses economies of scale as duplicate departments (e.g.
accounting) may exist in different division.

3.4.2.1.Divisional Structure: Strengths and Weakness

sn Strengths Weaknesses

1 Suited to fast change in unstable Eliminates economies of scales in

environment functional departments

2 Leads to customer satisfaction because Leads to poor coordination across product

product responsibility and contact lines

Organizational Theory Course note – Adewale Adeniyi-Kie Page 37

 points are clear

3 Involves high coordination across Eliminates in-depth competence and

functions technical specialization

4 Allows units to adapt to differences in Makes integration and standardization

products, regions, customers across product lines difficult.

5 Best in large organization with several

products

6. Decentralized decision making

President

Administrative &
Product A Division Product B Division Product C Division
Finance Division

Research & Research & Research & Human

Development Development Development Resources

Procurement
Manufacturing Manufacturing Manufacturing

Accounting & Finance PR/Communication

Accounting & Finance Accounting & Finance

Figure 3: Divisional Organizational Structure

3.4.3. Geographical Structure

Geographical structures are organizing to meet the needs of users/customers by geographical
areas. Many multinational corporations are organized by country. The strength and
weakness of this kind of structure are similar to those of divisional organizations.

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The national organization provides brand recognition, fundraising services and
administrative functions while day-to-day control and decision making are decentralized to
regional units. The manager focuses on employees and business on specific geographical
regions and regional sales targets.

The structure helps companies expand into new markets and uses resources more efficiently.
Organization can adapt to the specific needs of their own region and employees identify
with regional goals rather than national goals.

CEO

Asia
America Africa
Pacific

North Latin South

Japan Australia Ethiopia
America America Africa

Addis
Amhara
Ababa

Figure 4: Geographical Structure

3.5.Matrix Structure

Sometimes, an organization structure needs to be multi-focused in that both product and

function or product and geography are emphasized at the same time. The way to achieve the
structure is using matrix-structure. The matrix structure can be used when both technical
expertise and product innovation and change are important for meeting organization goals.

The matrix can be a strong form of horizontal linkage as both product divisions and
functional structures (horizontal & vertical) are implemented simultaneously.

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 The strength of the matrix lies in its ability to facilitate coordination when the organization
has a multiplicity of complex and interdependent activities. As an organization gets larger,
its information processing capacity can become overloaded. In a bureaucracy, complexity
results in increased formalization. The direct and frequent contact between different
specialties in the matrix can make for better communication and more flexibility.
Information permeates the organization and more quickly reaches those people who need to
take account of it. Furthermore, the matrix reduces bureau pathologies. The dual lines of
authority reduce tendencies of departmental members to become so busy protecting their
little worlds that the organization‘s overall goals become secondary.

3.5.1. Conditions for Matrix Sturtcure

Condition1: Pressure exists to share scarce resources across product lines. The organization is
typically medium-sized and has moderate number of product lines

Condition 2: Environmental pressure exists for two or more critical oupts such as for in-depth
technical knowledge (functional structure) and frequent new products (divisional structure).
This dual pressure means a balance of power is needed between the functional and product sides
of the organization and a dual-authority structure is needed to maintain that balance.

Condition 3: The environmental domain of the organization is both complex and uncertain.
Frequent changes and high interdependence between departments require a large amount of
coordination and information proceess in both vertical and horizontal directions.

3.5.2. Types of Matrix Structure

i. The functional Matrix: The functional boseses have primary authority and the
project or prodyct managers simply coordinate product actitives.
ii. The product Matrix; The project or product managers have primary authority and
functional managers simply assign technical personnel to projects and provide
advisory expertise as needed.
iii. Balanced Matrix: This provide dual (double) line of authority in which both the
project or product managers and functional managers have primary authorities.

3.5.3. Matrix Structure: Strengths & Weaknesses

sn Strengths Weaknesses
1 Achieve coordination necessary to meet Causes participants to experience dual
dual demands from customers authority which can be frustrating and
confusing

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2 Flexible sharing of human resources Means participants need good interpersonal
across products skills and extensive training
3 Suited to complex decisions and frequent Is time consuming: involves frequent
changes in unstable environment meetings and conflict resolution sessions
4 Provides opportunity for both functional Will not work unless participants
and product skill development understand it and adopt collegial rather
than vertical type relationships
5 Best in medium-sized organizations with Requires great effort to maintain power
multiple products balance

Figure 5: Sample Matrix Organizational Structure

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 CHAPTER 4
Open Systems Design Elements

Open systems and Organization theories was released, by the 1960s, that the assumption that
Organizations are closed systems was no longer tenable. The fact that Organizations
exchange resources with their environment is incompatible with the assumption in the
closed systems model of lack of interaction and interdependence between the system and its
environment. This release could possibly be explained by the increase in the complexity and
dynamism of the environment (e.g. technological, social, economic, and political) and the
impact of these changes on Organizations required Organizational theorists to rethink the
validity of the previous model and its assumptions. This led to the inception of a new
generation of theories, which were based on the open systems model, that were dominant
during the 1960s and through the 1970s.

4.1.Characteristics and mechanics of open systems

In a closed system, equilibrium is achieved when opposing variables in the system are in
balance (Miller, 1978). In addition, the equilibrium can be static or dynamic. The former is
commonly found in closed systems while the latter is a property of an open system. Since
living systems are open systems, with a recurrent alteration of fluxes of matter, energy, and
information, their equilibrium is dynamic. Miller (1978) termed the dynamic equilibrium a
‗flux equilibria‘ or ‗steady state‘.

The term dynamic equilibrium has, however, also been utilised interchangeably in both
closed and open systems (Bertalanffy, 1973). We argue that both closed and open systems
can exhibit equilibrium; however, in the latter case, the equilibrium is ‗quasi‘ rather than
being a true one as in closed systems. In the previous paragraph, a steady state was
characterised as a dynamic equilibrium that exists in open systems. According to Kramer
and De Smith (1977), a steady state refers to an open system maintaining an unchanging
state even when input and output are still in operation. This makes the system appear static
to the observer despite the fact that the flow of resources through the system is dynamic and
continuous.

The most important quality of an open system is that it can perform work, which is
unachievable in a closed system in an equilibrium state because a closed system in
equilibrium does not need energy for the preservation of its state, nor can energy be obtained
from it. In order for it to perform work, it is necessary that an open system is not in an
Organizational Theory Course note – Adewale Adeniyi-Kie Page 42
equilibrium state. Nevertheless, the system has a tendency to attain such a state. As a result,
the equilibrium found in an organism (or any open system) is not a true equilibrium,
incapable of performing work.

The similarity between an open system and human or work Organizations can be drawn
from the chain of logic mentioned in the previous paragraph. A fictitious Organization,
which is largely closed to the external environment, will eventually lose its alignment with
the environment because only limited or no resources (i.e. materials, energy, and
information) from the environment are allowed to cross the boundary into the Organization.
This leads to a misalignment between Organizational strategy-structure and the
environment, which results in substandard performance as the acquisition and usage of
resources become inconsistent with the demand from the environment.

The Organization that persistently performs poorly will deteriorate over time and, we argue,
is on the way to equilibrium according to the second law. On the other hand, a viable
Organization needs a continuous inflow of new members for new ideas, skills and
innovations, raw materials and energy to produce new products and/or services, and new
information for reasonable planning, strategy formulation and coordination.

4.1.1. Homeostasis and the behavior of open systems

It is necessary for many systems to maintain their equilibrium in changing environments or

disturbances, otherwise they cannot function properly or their goals cannot be attained. In
living systems, the process of self-maintenance or ‗homeostasis‘ is essential to ensure their
survival and viability. The term homeostasis is referred to by Flood and Carson (1993) as a
process by which a system preserves its existence through the maintenance of its dynamic
equilibrium. This equilibrium is termed ‗homeostatic equilibrium‘ (Van Gigch, 1978). Thus,
a mature organism as an open system appears to be unchanged over a period of time because
there is a continuous exchange and replacement of matter, energy, and information between
the system and the environment. Homeostasis can be explained mathematically as follows
(Flood and Carson, 1993): If we define x(t) as the state vector at time t and x(t+s) as the
state vector at time t+s, the preservation of the system‘s condition over a relatively short
period of time can be represented by a statement: x(t) = x(t+s), which means that at t+s, the
identity of the organism may appear to be unchanged; however, the actual materials that
constitute the organism at time t will be partially or entirely replaced by time t+s. This can
be shown graphically as in Figure below

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Homeostasis is not only one of the most important properties of any living organism, but is
also readily applicable to human or work Organizations treated as open systems. The
Organization needs to recruit new employees to replace those who retire; it also needs raw
materials, energy, and information for use in its processes and operations to maintain a
steady state. In fact, an Organization that appears externally static and un changed to outside
observers is internally in a state of flux, in a state of dynamic equilibrium. Another
significant aspect of an open system in a state of dynamic equilibrium is that it relies on
feedback mechanisms to remain in that state. Based on Boulding‘s system hierarchy, which
classifies the system according to its complexity, it is not surprising to find that properties
exhibited by systems lower in the hierarchy are also found in those higher in the hierarchy
because the latter are built on the former (Boulding, 1956). Therefore, a system that is
classified as an open system would possess all the qualities that belong to the system at a
cybernetic (or self-regulated systems) level.

The behaviour of open systems is, to a great extent, determined by the feedback mechanisms
present in them. There are two types of feedback that operate in most systems, namely
negative and positive. Negative feedback reduces or eliminates the system‘s deviation from
a given norm, so a negative feedback mechanism tends to neutralise the effect of disturbance
from the environment so the system can maintain its normal course of operation. On the
other hand, positive feedback amplifies or accentuates change, which leads to a continuous
divergence from the starting state.

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Positive feedback works together with negative feedback in living systems (e.g. in
organisms, and Organizations too, both types of feedback are present during growth even
though the net result is positive). However, the operation of positive feedback alone will
eventually result in the system‘s disintegration or collapse. Negative feedback plays the key
role in the system‘s ability to achieve a steady state, or homeostasis

Organizational life cycle: growth, maturity, decline and death Organizations exhibit a
similar, though not identical, life-cycle pattern of changes to living organisms. They grow,
mature, decline, and eventually pass away. However, there are some differences that require
attention. Firstly, the duration of each stage is less precise than that of typical organisms. In
human beings, physiological growth reaches its climax at about the age of 25 whereas the
growth phase of an Organization can vary to a great extent. Secondly, the mechanics upon
which changes are based are different. Living organisms are typical biological machines
with their own physics and chemistry, while Organizations are not.

According to Boulding (1956), Organizations are at a higher level of complexity than living
organisms. Genetic factors and available resources both influence growth in organisms.
Organisms develop from fertilisation to maturity through a programmed or predetermined
genetic code, a process termed ‗ontogenic development‘ (Ayres, 1994). Apart from this, it is
also necessary that the organism acquire sufficient necessary resources from the
environment to sustain its life and remain viable. Although the concept of ontogenic
development may not be directly applicable to the growth of real Organizations due to the
difference in basic constituents and mechanisms (i.e. biological vs. socio-technical), there is
a similar idea upon which the description of growth in Organizations can be based. Greiner
(1972) proposed a growth model that explained the growth in business Organizations as a
predetermined series of evolution and revolution (Figure 11.2). In order to grow, the
Organization is supposed to pass through a series of identifiable phases or stages of
development and crisis, which is similar, to some degree, to the concept of ontogenic
development. Thus, it is interesting to see that systems at different levels of complexity
(Boulding, 1956) can exhibit a similar pattern of change. This is also consistent with
General System Theory, which attempts to unify the bodies of knowledge in various
disciplines (Bertalanffy, 1973)

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Greiner‘s model suggests how Organizations grow, but the basic reasons behind the growth
process and its mechanics remain unclear. As mentioned previously, growth in a living
organism is a result of the interplay between the ontogenic factor and the environment. Here,
positive feedback plays a vital role in explaining changes in a living system. Although both
positive and negative feedback work in concert in any living system, in order to grow (or to
effect other changes in a system), the net type of feedback must be positive (Skyttner, 2001).

In organisms, starting at birth, the importation of materials and energy from the environment
not only sustains life but also contributes to growth. As they keep growing, so does their
ability to acquire resources. This means that the more they grow, the more capacity in
resources acquisition they have and the more resources they can access. This growth and the
increase in resource acquisition capabilities provides a positive feedback loop, which
continues until the organism matures. The positive feedback loop will be active again when
the organism starts to decline, which will be mentioned later.

An analogy can be made between the process of growth in a business Organization and that
in an organism (provided that the business Organization pursues a growth strategy). If the
resources in a niche or a domain are abundant, a business Organization in that niche is likely
to run at a profit (provided that the relevant costs are under control). An increase in profit
results in an improvement in return on investment (ROI), which tends to attract more funds
from the investors. The firm can use these funds to reinvest for expansion, to gain more
market control, and make even more profit. This positive feedback will continue until
limiting factors (e.g. an increase in competition or the depletion of resources within a
particular niche) take effect. A living system cannot perpetually maintain growth, nor can it

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ensure its survival and viability forever. After its growth, the system matures, declines, and
eventually ends.

This can be explained by using the concept of ‗homeokinesis‘ (Cardon, et al., 1972; Van
Gigch, 1978, 1991; Skyttner, 2001). It has already been argued that one of the most
important characteristics of any living system is that it has to be in a homeostatic, or
dynamic, equilibrium condition to remain viable. Nonetheless, the fact that a living system
deteriorates over time and eventually expires indicates that there is a limit to this. Rather
than maintaining its dynamic equilibrium, it is argued that a living system is really in a state
of disequilibrium, a state of evolution termed ‗homeokinesis‘.

Rather than being a living system‘s normal state, homeostasis is the ideal or climax state that
the system is trying to achieve, but that is never actually achievable. Homeostasis can be
described in homeokinetic terms as a ‗homeokinetic plateau‘ (Figure 11.3) – the region
within which negative feedback dominates in the living system.

In human physiology, after age 25 (the physiological climax state), the body starts to
deteriorate but can still function. After achieving maturity, it seems that a living system has
more factors and contingencies to deal with, and that require more energy and effort to keep
under control. Beyond the ‗upper threshold‘ (see Figure 11.3), it is apparent that the system
is again operating in a positive feedback region, and is deteriorating. Even though the living
system is trying its best to maintain its viability, this effort, nonetheless, cannot
counterbalance or defeat the entropically increasing trend. The system gradually and
continuously loses its integration and proper functioning, which eventually results in the
system‘s expiry. Although we argue that the concept of homeokinesis and net positive
feedback can also be applied to the explanation of deterioration and demise in
Organizations, as noted earlier it is very difficult to make a direct homology between
changes in organisms and changes in Organizations. Rather than being biological machines,
which can be described and explained, to a large extent if not (arguably) completely, in
terms of physics and chemistry, Organizations are much more complex socio-technical
systems comprising ensembles of people, artefacts, and technology working together in an
organised manner. Control requires that the system be maintained within the bounds of the
homokinetic plateau. Adapted from Van Gigch (1991).

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As mentioned earlier, after its maturity, the organism gradually and continuously loses its
ability to keep its integration and Organization under control (to counterbalance the
entropically increasing trend) and this finally leads to its demise. While this phenomenon is
normal in biological systems, even though Organizations in general may experience decline
and death (as many empires and civilisations did in history), it appears that the entropic
process in Organizations is less definite and more complicated than that in organisms.

A small business may, on average, last from several months to a number of years whereas,
in contrast, the Roman Catholic Church and the orthodox church has lasted for centuries
(Scott, 1998). It may be that the size and form of the Organization are influential factors in
this respect, a proposition that still requires further empirical investigation. To be in the
region of the homeokinetic plateau, the proper amount of control for a well-functioning and
sustainable living systems must be present, and similarly for Organizations. Too little
control will lead to poor integration and a chaotic situation whereas too much control results
in poor adaptation and inflexibility.

4.2.Comparative management
Comparative Management is the identifying, measuring and interpreting of similarities and
differences among managers‘ behaviours, techniques followed, and practices applied as
found in various countries. It focuses on the similarities and differences among business and
management systems from different contexts.

An important influence in the conduct of management is the total environment. The

fundamental functions of management denote what a manager does whether in U.S., U.K.
and Nigeria. However, what is trying to be achieved and the means being followed for
achievement can and do differ among countries. This is largely because of managers‘
beliefs, attitudes, experiences, customs and values.

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4.3. Reasons for studying comparative management

It helps the realization that there are managerial differences across nations. A manager going
overseas, a researcher and to the student of management will find it very valuable. Ideas
helpful for improving management can be obtained e.g. knowledge of how Sweden handles
relations may prove helpful to the U.S. manager. Again, the transfer and utilization of the
managerial idea is expedited.

Facilitation is given world understanding and trade. Simply getting to know how managers
in foreign countries do their tasks makes not only for better understanding, but also
expedites trade and cooperation. The effectiveness of management is increased because
willingness to accept change is encouraged and the opportunity to see how similar problems
are solved in different manners is offered. Development of skills necessary to understand
their and our ways of management are encouraged.

4.3.1. Main results of comparative management research

According to Negandhi (1975) there is no one way of doing things. The principle of
equifinality applies to the functioning of social organizations; managers may achieve given
objectives through various methods.

There is no universal applicability of either authoritarian or participating-democratic

management styles. In general the United States can best be characterized as following
democratic-participative style, while Germany, France, and most of the developing countries
are authoritarian in their management style. The authoritarian style is not necessarily
dysfunctional in developing countries. This perhaps may be the "right type" of leadership.

More objective measures are brought to bear in making managerial decisions with respect to
compensation, objectives, goal setting, etc., in the developed countries; subjective judgment
(emotions, religious beliefs) often enters the decision making processes in the developing
countries.

There are similarities and differences among the managers around the world. Similarities are
explained in terms of industrialization or the industrial subculture. Differences are explained
in terms of cultural variables. The cultural factors are considered the most important
influencing variables.

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4.3.2. Differences
 Customs: Customs are important in comparative management. This is because there
are diverse customs. For example in many foreign countries, it has been a custom to
take considerable time before a decision is made on a business proposal. Some
countries place a high priority on exact promptness, while in others it is relative.
Again in others haggling over a price is expected. Yet in others friendship rank high
and doing business with relatives and close family friends has priority.

 Social Value: - These are also extremely important in comparative management.

They influence to a great extent how the management task is carried out. Examples
are:- • In Japan, personal qualifications are given much weight in recruiting. Minimal
job mobility is the general rule, retirement at the age of 55 is desirable, women are
employed in great numbers, but most are considered temporary.

In India, social values are very important in the management styles. The varied racial
origins and languages have their effect, but the family system has great influence and
is the foundation on which many companies are based. Nepotism is widespread and
formal authoritarianism is the usual practice.

 Selection and Promotion of personnel:- in Japan Candidates are sought who not
only have the required skills or potential for the work, but also conform to the
viewpoints of members of the company. Through referrals, interviews and tests,
potential employees with ideas and desire at variance with those of the company are
excluded from selection.

A recruit is normally on probation for the first two years not a permanent employee:
Must have a degree from the ‗right‘ school, because many of the large and
prestigious Japanese corporations recruit primarily from these schools.

Though entrance exams are rigorous and include comprehensive and difficult
questions, any person can apply regardless of family background – opportunity for
upward economic and social mobility is available. Promoting is handled informally
with attention and judgment given mainly to the person‘s family and contributions
made to the company. Few Japanese companies use a performance rating system.

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 In Europe: When a person retires everyone knows who the successor will be.
Promoting reaches down the line for the one who is advanced. The general practice
is to wait for your superior to retire, and then promotion comes. But there are so
many exceptions to this mundane approach. For example, the younger generations
are reacting rapidly to it, by insisting that ability should be considered. Seniority
alone is inadequate and inequitable.

 Participative decision making:- In almost all foreign countries we are seeing more
participation by the employee in decision making. This is because the employee
wants to feel associated with the decision making process of the enterprises for
which she or he works. Around the world there now exists variety of degrees and
ways in which employees participate in managerial decisions that affect them.

In Japan for example decision making is by consensus or ringisei – Japanese spend

much time on finding out what others are thinking and how they feel about issues.
The prevailing belief is that the Japanese manager must know how subordinates feel
about a certain issue; otherwise one cannot maintain the peace and harmony of the
group. Again a decision is always started by an employee at a low level in the
Organization.

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 CHAPTER 5
Organizational Culture and Organizational theory

5.1.Organization Culture
Organizational culture is a system of shared assumptions, values, and beliefs, which
governs how people behave in organizations. These shared values have a strong influence on
the people in the organization and dictate how they dress, act, and perform their jobs.

The practices, principles, policies and values of an organization form its culture. The culture of
an organization decides the way employees behave amongst themselves as well as the people
outside the organization.

 Culture represents the informal organization, whereas structure, size, systems, and
strategy represent the formal organization.
5.1.1. Levels of culture
i. Observable symbols – Visible artifacts and observable behaviors (shared ceremonies,
slogans, dress, stories, physical settings, like the office layout, etc.),
ii. Underlying values – Assumptions, beliefs, attitudes, feelings (examples are offices
located near the factories where managers and workers can interact as equals? How
about openness, collaboration, egalitarianism, and teamwork?) Provides people with a
sense of organizational identity and creates a sense of something larger.
5.1.2. Functions Of Culture
i. Internal integration – developing a collective identity so that members know how to
interact with each other (ex. communication structures and methods, power structures
and status allocations, acceptable and unacceptable behaviors, etc.)
ii. External adaptation – refers to how the organization meets goals and deals with
outsiders. It helps them adapt to the external environment

5.1.3. Handy defines four organizational culture types

i. The Power Culture:

According to Handy, this culture is akin to a spider‘s web – the spider oversees its entire eco-
system sitting in the center. The center of power, in the spider, is surrounded by circles of
associates. Closeness to the spider, at the center, brings power to those that take such a position.

Organizations with a power culture share some characteristics: they respond very quickly to
disaster as the lines of command are obvious; they attract a particular profile of staff – power

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oriented, politically minded, and risk-taking individuals; and power is got from one‘s ability to
control resources. Individual success is judged on results – therefore, power determines success.
The power culture orientation augurs well with the geographical organizational architecture. The
configuration is used when companies have operations spread across global, regional, and
national borders. It works best in instances where local decision-making is needed to meet the
unique needs of a particular market. The leadership is deployed by country or regional
geography.

ii. The Role Culture:

Handy describes the role culture organization as a building supported by columns and beams.
Like structurally viable buildings, columns and beams are designed to fulfill a specific role in
sustaining the integrity of the structure.

Organizations with a role culture share some characteristics: strong functional or specialized
areas that are coordinated by a small team of seniors at the apex of the organization; in this case
manifesting in high levels of formalization and standardization; formal job definitions and the
accompanying authority matrix.

Power in this type of organization is held by individuals in high-level positions. The political
dynamics of the power culture are not tolerated in this type of entity. Rules and procedures
define what is right to do.

iii. The Task Culture:

The task culture is project or task specific. The matrix type organization thrives in the task
culture. The emphasis in this type of entity is getting the job done. The work rubric is: to identify
the task at hand, how to go about its accomplishment on time, and identifying and mobilizing the
resources needed.

The task culture is about getting the best out of teams. Managing the psychology of teams for
results is key to delivering SMART outcomes. Team members with expertise in team tasks enjoy
significant influence over the others. However, because every team member ideally contributes
some kind of expertise, power is more widely shared amongst team members.

Organizations with a task culture share many characteristics: teamwork produces results; the
structure of such organizations is flexible since it‘s mostly based on specific task needs; decision
making is fast as each group is empowered to make decisions that steer them towards task
outcomes.

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 iv. The Person Culture
Person organizational culture is quite unusual as it serves individual needs. We may consider it a
‗selfish‘ culture since it serves the interests of the individual.

It‘s important to note that this kind of entity is rare, and may never operate as an independent
organization. Instead, it works within the culture types listed above. A good example is a
specialist consultant in a hospital environment that runs both GP services as well as private
specialist clinics. Such individuals have specialized skills and are extraordinarily employable and
therefore in high demand – they‘re also tricky to manage since they don‘t have to bend to the
power maneuvers at the organization.

The Person culture, for all its entrepreneurial traits, aligns itself well with both the product and
customer/market organizational design configurations. The product configuration is determined
according to the products or services that the company offers. It works best when there is a need
to encourage entrepreneurialism.

5.2. Organization design and culture

Organizational design is a step-by-step methodology which identifies dysfunctional aspects of
work flow, procedures, structures and systems, realigns them to fit current business
realities/goals and then develops plans to implement the new changes. The process focuses on
improving both the technical and people side of the business.
For most companies, the design process leads to a more effective organization design,
significantly improved results (profitability, customer service, internal operations), and
employees who are empowered and committed to the business. The hallmark of the design
process is a comprehensive and holistic approach to organizational improvement that touches all
aspects of organizational life, so you can achieve:
 Excellent customer service
 Increased profitability
 Reduced operating costs
 Improved efficiency and cycle time
 A culture of committed and engaged employees
 A clear strategy for managing and growing your business
By design we‘re talking about the integration of people with core business processes, technology
and systems. A well-designed organization ensures that the form of the organization matches its
purpose or strategy, meets the challenges posed by business realities and significantly increases
the likelihood that the collective efforts of people will be successful.

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As companies grow and the challenges in the external environment become more complex,
businesses processes, structures and systems that once worked become barriers to efficiency,
customer service, employee morale and financial profitability. Organizations that don‘t
periodically renew themselves suffer from such symptoms as:
 Inefficient workflow with breakdowns and non value-added steps
 Redundancies in effort (―we don‘t have time to do things right, but do have time to do
them over‖)
 Fragmented work with little regard for good of the whole (Production ships bad parts to
meet their quotas)
 Lack of knowledge and focus on the customer
 Silo mentality and turf battles
 Lack of ownership (―It‘s not my job‖)
 Cover up and blame rather than identifying and solving problems
 Delays in decision-making
 People don‘t have information or authority to solve problems when and where they occur
 Management, rather than the front line, is responsible for solving problems when things
go wrong
 It takes a long time to get something done
 Systems are ill-defined or reinforce wrong behaviors
 Mistrust between workers and management

5.2.1. Methodology of Design Culture Process

Although adaptable to the size, complexity and needs of any organization, the design process
consists of the following steps.

5.2.1.1. Charter the design process

As senior leaders, you come together to discuss current business results, organizational health,
environmental demands, etc. and the need to embark on such a process. You establish a charter
for the design process that includes a ―case for change,‖ desired outcomes, scope, allocation of
resources, time deadlines, participation, communications strategy, and other parameters that will
guide the project.

(At times, senior teams may go through either a strategic planning process or an executive team
development process prior to beginning a redesign initiative, depending on how clear they are
about their strategy and how well they work together as a team.)

5.2.1.2. Assess the current state of the business

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You don‘t want to begin making changes until you have a good understanding of the current
organization. Using our Transformation Model, we facilitate a comprehensive assessment of
your organization to understand how it functions, its strengths and weaknesses, and alignment to
your core ideology and business strategy. The assessment process is astounding in the clarity it
brings an organization‘s leaders and members, not only regarding how the organization currently
works but how the various parts are interrelated, its overall state of health and, most importantly,
what needs to be done to make improvements.

5.2.1.3. Design the new organization

The senior team (and/or others who have been invited to participate in the process), look to the
future and develop a complete set of design recommendations for the ―ideal future.‖ At a high
level, the steps in this process include the following:
 Defining your basic organizing principle. (Will you organize primarily around functions,
processes, customer-types, technologies, geographies, etc.?)
 Streamlining core business processes—those that result in revenue and/or deliverables to
customers.
 Documenting and standardizing procedures.
 Organizing people around core processes. Identifying headcount necessary to do core
work.
 Defining tasks, functions, and skills. What are the performance metrics for each
function/team? How are they evaluated and held accountable?
 Determining facility, layout and equipment needs of various teams and departments
throughout the organization.
 Identifying support resources (finance, sales, HR, etc.), mission, staffing, etc. and where
should these should be located.
 Defining the management structure that provides strategic, coordinating and operational
support.
 Improving coordinating and development systems (hiring, training, compensation,
information-sharing, goal-setting etc.).

At some point the design process morphs into transition planning as critical implementation
dates are set and specific, concrete action plans created to implement the new design. And a key
part of this step includes communicating progress to other members of the organization. A
communications plan is developed that educates people in what is happening. Education brings
awareness, and everyone‘s inclusion brings the beginning of commitment.

5.2.1.4. Implement the design

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Now the task is to make the design live. People are organized into natural work groups which
receive training in the new design, team skills and start-up team building. New work roles are
learned and new relationships within and without the unit are established. Equipment and
facilities are rearranged. Reward systems, performance systems, information sharing, decision-
making and management systems are changed and adjusted. Some of this can be accomplished
quickly. Some may require more detail and be implemented over a longer period of time.

Example:
A few years back we worked with a company within the aluminum industry. The company
recognized they were becoming bureaucratic and unresponsive to their customers needs.
Following a period of assessment of the strengths and weaknesses of the existing organization,
they went through a process of organizational redesign in which they organized their front office
functions to become more collaborative and customer focused. The diagrams below illustrate, at
a high level, this change.

The first chart illustrates the tendency of most people within organizations to think in terms of
silos and organize people according to the similarity of their functions.

The second chart illustrates how the company redefined structural boundaries to become much
more cross-functional on the front end of their business. They combined people from a number
from a number of departments into teams that took full responsibility for managing customer
orders. The company was able to improve their total billings of a major product line by 50% and
increase their margins by 25%.

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Of course, this chart greatly simplifies all of the design decisions which included improvements
in workflow and system support, and the role of leaders and other support functions in the new
organization. But this gives you an idea of the kinds of integration and improved collaboration
that can result from organizational design.

5.3. Culture and the learning organization

A learning culture is a collection of organizational conventions, values, practices and processes.
These conventions encourage employees and organizations to develop knowledge and competence.
An organization with a learning culture encourages continuous learning and believes that systems
influence each other. Since constant learning elevates an individual as a worker and as a person, it
opens opportunities for the establishment to transform continuously for the better.

5.3.1. The Advantages of a Learning Culture

There are many benefits of a cultivated learning culture in an organization. These include, but are not
limited to:
i. Increased efficiency, productivity and profit
ii. Increased employee satisfaction and decreased turnover
iii. An improvement mindset among employees
iv. A developed sense of ownership and accountability
v. Ease in succession/transition
vi. A culture of knowledge inquiry and sharing
vii. An enhanced ability for workers to adapt to change

For learning to be effective in an organization, the knowledge that is encouraged must be related to
the business. More so, individuals in an organization should be working together rather than learning
individually. Shared learning enables companies to increase their staff quicker and solve problems
more efficiently.

5.3.2. How to Create a Learning Culture in an Organization

The first step in creating a culture of learning in your workplace begins with your leaders. Since they
are reinforcing training initiatives, they should be supportive of a learning environment. Otherwise,
they should alter the way they see the company and look at it from a different perspective. Some key
steps in creating a learning culture in the workplace are as follows:
i. Formalize training and development plans

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For a learning culture to be ingrained, it should be mandatory for all individuals in the organization.
Training and development plans that are not formalized run the risk of not being taken seriously and
as a result, not implemented.
ii. Give recognition to learning
Employees who have successfully learned new skills and abilities should be recognized and
encourage others to follow suit.
iii. Get feedback
Sessions and polls should regularly be done to evaluate the benefits of training and development, as
well as to determine whether the training investment is well spent.
iv. Promote from within
One of the advantages of training is having employees who are ready for a bigger role. Announce an
internal job posting to encourage employees to gain knowledge.
v. Develop knowledge and information sharing into a formal process
People will be more encouraged to share knowledge and information if they are required to do so.
Formalizing the process makes sure that everyone who needs the information gets it.

5.3.3. Keep your company competitive by developing a learning culture

Since the business environment quickly changes, many companies feel pressure to learn faster than
the competitor or risk losing the business altogether. This is apparent in digital technology where
companies keep churning out new models of products at a fast pace to outperform competitors who
are doing the same. Developing a learning culture is no longer just another fanciful idea. It is
becoming more imperative for companies to cultivate learning if they wish to stay in business.

The question that every organization faces as it considers a learning culture is its readiness to
embrace such a radical concept. Is your company ready to give up confrontational attitudes for an
open culture of trust and inquiry? Are you ready to unlearn competition among groups and
individuals, and replace it with cooperation, openness and dialogue?.

5.4. Ethical values in organizations

Establishing a clear link between the purpose of the Organization (why are we in business) and
the ethical values (how will we get there) is very important to ensure that ethics becomes part of
the culture and guides decision-making at all levels of the Organization, promoting the desired
behaviours. Purpose and values are the foundation of an ethics programme. Ethical values guide
the way that business is done - what is considered acceptable or desirable behaviour, above and
beyond compliance with laws and regulations.
It may be that the Organization‘s values are implicit rather than explicit. Although they may not
yet have been formally articulated, values underpin ‗the way business is done around here‘. Core
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values exist in most Organizations whether they have been consciously created through many
years of leaders behaving in a certain way and consciously setting ethical standards, or just left
entirely to chance. Whatever the size or sector, or what policies and programmes are in place, it
is the Organization‘s values that underpin those policies, and provide the framework for the
company‘s culture and decision-making.
i. Ethics policy
The values inform the Organization‘s ethics policy. This sets out the Organization‘s commitment
to high ethical standards and how this will be governed, implemented and monitored.

What are core values?

If an Organization wants to take ethics seriously, it needs to identify the core values or principles
to which it wishes to be committed and held accountable. It then needs to translate those values
into guidance for all employees so that they are helped with discretionary decisions i.e. when
there are no rules or when facing an ethical dilemma. These form the foundation for a set of
corporate ethical commitments and the Organization's approach to corporate responsibility.

What is the difference between ethical values and business values?

At the IBE, we differentiate between ethical values (such as honesty, fairness, integrity,
trustworthiness, respect) and business values (such as innovation, value-for-money, customer-
focus). Business values are what the company will deliver; ethical values are how the business
values will be achieved.

What are ethical dilemmas?

An ethical dilemma involves a situation that makes a person question what the 'right' thing to do
is. Ethical dilemmas make individuals think about their obligations, duties or responsibilities. It
is through a dilemma that most employees experience business ethics.
These dilemmas can be highly complex and difficult to resolve. Complex ethical dilemmas
involve a decision between right and right (choosing between right or wrong should not be a
dilemma!). An example might be where you uncover a friend's misdemeanour: You have a duty
to your employer to report it, but also a duty to be loyal to your friend in a situation that could
lead to their dismissal.

5.5. Leadership and culture and ethics

In this topic we will define the concept of culture and show its relationship to leadership.
Culture is both a dynamic phenomenon that surrounds us at all times, being constantly

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enacted and created by our interactions with others and shaped by leadership behavior, and a
set of structures, routines, rules, and norms that guide and constrain behavior.

When one brings culture to the level of the organization and even down to groups within the
organization, one can see clearly how culture is created, embedded, evolved, and ultimately
manipulated, and, at the same time, how culture constrains, stabilizes, and provides structure
and meaning to the group members. These dynamic processes of culture creation and
management are the essence of leadership and make one realize that leadership and culture
are two sides of the same coin.

Leadership has been studied in far greater detail than organizational culture, leading to a
frustrating diffusion of concepts and ideas of what leadership is really all about, whether one
is born or made as a leader, whether one can train people to be leaders, and what
characteristics successful leaders possess. One thing to be uniquely associated with
leadership is the creation and management of culture. As we will see, this requires an
evolutionary perspective. Cultures begin with leaders who impose their own values and
assumptions on a group. If that group is successful and the assumptions come to be taken for
granted, we then have a culture that will define for later generations of members what kinds
of leadership are acceptable.

The culture now defines leadership. But as the group runs into adaptive difficulties, as its
environment changes to the point where some of its assumptions are no longer valid,
leadership comes into play once more. Leadership is now the ability to step outside the
culture that created the leader and to start evolutionary change processes that are more
adaptive. This ability to perceive the limitations of one‘s own culture and to evolve the
culture adaptively is the essence and ultimate challenge of leadership. If leaders are to fulfill
this challenge, they must first understand the dynamics of culture, so our journey begins
with a focus on definitions, case illustrations, and a suggested way of thinking about
organizational culture.

Culture forms in two ways. In spontaneous interaction in an unstructured group gradually

lead to patterns and norms of behavior that become the culture of that group—often within
just hours of the group‘s formation. In more formal groups an individual creates the group or
becomes its leader. This could be an entrepreneur starting a new company, a religious
person creating a following, a political leader creating a new party, a teacher starting a new
class, or a manager taking over a new department of an organization.

The individual founder—whether an entrepreneur or just the convener of a new group—will

have certain personal visions, goals, beliefs, values, and assumptions about how things
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should be. He or she will initially impose these on the group and/or select members on the
basis of their similarity of thoughts and values. We can think of this imposition as a primary
act of leadership, but it does not automatically produce culture. All it produces is
compliance in the followers to do what the leader asks of them. Only if the resulting
behavior leads to ―success‖—in the sense that the group accomplishes its task and the
members feel good about their relationships to each other—will the founder‘s beliefs and
values be confirmed and reinforced, and, most important, come to be recognized as shared.

Organizational culture can be analyzed at several levels: (1) visible artifacts, (2) espoused
beliefs, values, rules, and behavioral norms, and (3) tacit, taken-for-granted, basic
underlying assumptions.

Self-Test Exercises

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 CHAPTER 6
Innovation and Change and Organizational Theory

Introduction
Change is a constant, a thread woven into the fabric of our personal and professional lives. Change occurs
within our world and beyond -- in national and international events, in the physical environment, in the
way organizations are structured and conduct their business, in political and socioeconomic
problems and solutions, and in societal norms and values. As the world becomes more complex and
increasingly interrelated, changes seemingly far away affect us. Thus, change may sometimes appear to
occur frequently and randomly. We are slowly becoming aware of how connected we are to one
another and to our world. Organizations must also be cognizant of their holistic nature and of the ways
their members affect one another. The incredible amount of change has forced individuals and
organizations to see ―the big picture‖ and to be aware of how events affect them and vice versa.

Organizational development (OD) is a field of study that addresses change and how it affects
organizations and the individuals within those organizations. Effective organizational development can
assist organizations and individuals to cope with change. Strategies can be developed to introduce
planned change, such as team-building efforts, to improve organizational functioning. While change is a
―given,‖ there are a number of ways to deal with change -- some useful, some not. Organizational
development assists organizations in coping with the turbulent environment, both internally and
externally, frequently doing so by introducing planned change efforts.

Organizational development is a relatively new area of interest for business and the professions. While
the professional development of individuals has been accepted and fostered by a number of
organizations for some time, there is still ambiguity surrounding the term organizational development.
The basic concept of both professional development and organizational development is the same,
however, with an essential difference in focus. Professional development attempts to improve an
individual‘s effectiveness in practice, while organizational development focuses on ways to improve an
organization‘s overall productivity, human fulfillment, and responsiveness to the environment
(Cummings & Huse, 1988). These goals are accomplished through a variety of interventions aimed at
dealing with specific issues, as well as through ongoing processes.

This chapter provides an overview of both change and organizational development. Educators,
including those in the judiciary, must be familiar with the dynamics of organizational change, since all
educational activities, both at the individual and organizational level, deal with effecting change.
Organizational development and change efforts go hand-in-hand; judicial educators who are interested in
effecting change within their organizations must first thoroughly understand the dynamics of change. They
must think in terms of the court system and the judicial education apparatus as organizations for which

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they may play a role as change agent. Within different parts of these systems, judicial educators may
play different roles in the change process.

6.1.Change in Organizations
Organizational development efforts, whether facilitated by an outside expert or institutionalized and
conducted on an ongoing basis, bring about planned change within organizations and teams.
However, they are but one type of change that occurs in organizations, for change can be both planned and
unplanned and can occur in every dimension of the universe. A change in chief justice,
appropriations, or staff support can dramatically alter the character of a judicial education organization.
Institutional alignment of the state bar, local law schools, area colleges and universities, and judicial
professional associations may yield similar impacts.

Planned change takes conscious and diligent effort on the part of the educator or manager. Kanter (1983)
originated the concept of the change master: a person or organization adept at the art of anticipating
the need for and of leading productive change. As a way to reinforce the judicial educator‘s role in the
change process, this term will be used to refer to educators and managers who are interested in effecting
change in their organizations or work teams.

Change will not occur unless the need for change is critical. Because individuals and organizations usually
resist change, they typically do not embrace change unless they must. One OD consultant describes
how ―pain‖ drives change (Conner, 1990). Pain occurs when people pay the price for being in a dangerous
situation or for missing a key opportunity. As such, change is needed to relieve the pain.

According to this perspective, change will not occur just because ―it‘s a good idea.‖ It will only occur
when the pain of an individual or an organization is sufficiently high to justify the difficulties of
assimilating change. Therefore, a change master must focus on the absolute need of the organization to
change, rather than simply on the benefits of the anticipated change. Effective change masters
understand this, and they then assist others in recognizing that the organization has no choice but to
change. The organization cannot afford to maintain the status quo; change is simply that critical. The
Ohio Judicial College‘s movement to full funding emerged from such a catharsis. In other states,
mandatory training saved the office of justice of the peace.

6.2.Planning for Change

Before embarking on an organizational change initiative, it is wise to carefully plan strategies and
anticipate potential problems. One useful method of planning comes from an early researcher on
change, Kurt Lewin (1947), who developed the concept of force-field analysis. The term describes
analysis that is deceptively simple and can be used to help plan and manage organizational change.
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Lewin believed that behavior within an organization was a result of the dynamic balance of two
opposing forces. Change would only occur when the balance shifted between these forces. Driving
forces are those forces which positively affect and enhance the desired change. They may be persons,
trends, resources, or information. Opposing them are the restraining forces, which represent the
obstacles to the desired change. As these two sets of forces exist within an organization, they create a
certain equilibrium. That is, if the weights of the driving and restraining forces are relatively equal, then
the organization will remain static. As changes occur and affect the weight of either one of the forces, a
new balance will occur, and the organization will return to what Lewin called ―quasi-stationary
equilibrium.‖ Individuals practicing their vocation in the context of a political organization may
intuitively employ these concepts in defining and redefining what change is possible. Judicial educators
operate in such a context.

What is the usefulness of this perspective? Force-field analysis assists in planning in two major ways: (a)
as a way for individuals to scan their organizational context, brainstorming and predicting potential
changes in the environment; and (b) as a tool for implementing change. In the former, force- field analysis
becomes a method of environmental scanning (which is useful in strategic planning), whereby
organizations keep abreast of impending and potential changes -- from societal trends and potential
budget constraints to staff turnover and purchases of new office equipment. The more change can be
anticipated, the better individuals and organizations are prepared to deal with the resulting effects.
The second use of force-field analysis is similar, offering a way to systematically examine the potential
resources that can be brought to bear on organizational change and the restraining forces that can be
anticipated. This advance planning and analysis assists in developing strategies to implement the desired
change.

An example may help illustrate this point. A judicial educator wishes to introduce a computer class for
a particular group of judges. In her role as a change master, she identifies the driving forces as follows: (a)
most judges are presently obtaining the necessary equipment, (b) software and databases are available that
are user-friendly and appropriate, (c) computers can help judges handle information quickly and
efficiently, and (d) the use of computers as information sources allows court personnel to perform other
functions. On the other hand, restraining forces may include the following: (a) judges have limited time
for attending additional courses; (b) they appear to be intimidated by computers, so they passively resist
using them; and (c) they feel more comfortable utilizing human resources for their judicial research rather
than a computer and databases.

Force-field analysis provides the necessary information for the judicial educator to plan most
effectively for change. If he or she is more aware of some of the potential pitfalls that can accompany the
planned change, steps can be taken in advance to overcome them. One strategy for successfully
implementing change is to confront the potential obstacles at the outset. In order for the educator to be
proactive, however, the positive driving forces and the negative restraining forces must be listed, so that a
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strategy for change can include enhancing or adding to the positive forces, while decreasing or
minimizing the negative forces. In this process, skills such as coalition building, networking, conflict
resolution, and the appropriate utilization of power are necessary.

6.3. The Process of Change

A method such as force-field analysis is the beginning step of any planned change. There are many
different models for the change process in the literature; the following is a simple, straightforward one
proposed by Egan (1988, p. 5). He delineates three steps:

 The assessment of the current scenario.

 The creation of a preferred scenario.
 Designing a plan that moves the system from the current to the preferred scenario.

It is evident Egan has been influenced by Lewin, in the emphasis on both planning and
assessment. Additionally, Egan argues that planning must lead to an action that produces valued
outcomes or results for the organization. Thus, both planning and change must be directed toward a
specific goal.

Once the need for change has been determined, one follows the steps of the model in sequence. While
these steps could each be examined in detail, only step three will be discussed in an in-depth manner
here. The first step, ―assessing the current scenario,‖ can be accomplished through a mechanism such as
force-field analysis. It provides the necessary information on the forces that can facilitate the desired
change and the forces that will resist and deter the change. Step two, ―creating a preferred scenario,‖
is often accomplished through team effort in brainstorming and developing alternative futures. While
the need that precipitates the change is clearly compelling, there may be several ways in which the
change could actually occur within the organization. It is important to examine the various alternatives
thoroughly.

The third step of the process, ―devising a plan for moving from the current to the preferred
scenario,‖ includes the strategies and plans that educators and managers must develop to overcome the
restraining forces in an organization. This is a political process, requiring individuals to harness and
utilize power. Power is necessary for change to occur. It is neither inherently good nor bad; it simply
assists individuals in accomplishing their goals. In his recent book Mastering the Politics of Planning,
Benveniste (1989) notes that even well-thought-out plans for change can be derailed when the politics of
implementation are not considered. Change masters must gather support for the desired change
throughout the organization, using both formal and informal networks. The multiplier or ―bandwagon‖
effect, he notes, is often necessary to rally enough support for the change.

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6.4. Key Roles in the Change Process
During this stage of planning, it is useful to distinguish the different roles associated with the change
process. These roles must remain distinctive in order to implement planned change effectively. However,
within different settings or systems, a judicial educator may play more than one role. The various roles
that individuals can play, as described by Conner (1990), are:

Change Sponsor: Individual or group who legitimizes the change.

Change Advocate: Individual or group who wants to achieve a change but
does not possess legitimization power.
Change Agent: Individual or group who is responsible for implementingthe change.
Change Target: Individual or group who must actually change.

One of the most critical tasks for the educator in implementing change is to harness the support of an
effective change sponsor. The sponsor is in a position to legitimize the change. Sponsorship is critical to
implementing the desired change. Directly or indirectly, pain can motivate the sponsor to foster the
planned change. Within the state judicial system, this sponsor may be the chief justice, the head of the
education committee, or the state court administrator. Conner (1990) argues that weak sponsors
should be educated or replaced, even by someone at a lower level in the organization, or, he
emphasizes, failure will be inevitable.

Educators and managers are often in the position of change advocates, who perceive the need for change
and desire and advocate the change, but who do not have the necessary organizational power to implement
the change. Alternatively, these individuals may function as the change agent, with the responsibility
(but again, not the power) to implement change. And, of course, in an organizational change effort,
educators and managers may be part of the group affected by the change, or the change target. It is useful
to consider each of these roles in planning strategies not only for implementation, but for gathering
support for the change effort.

6.5. Strategies for Implementing Change

In order to move an OD effort from the idea stage into implementation, educators and managers must
also rally the resources and support of the organization. Kanter (1983) describes how the following three
sets of ―basic commodities‖ or ―power tools‖ can be acquired by members of an organization to gain
power:
 Information (data, technical knowledge, political intelligence, expertise).
 Resources (funds, materials, staff, time).
 Support (endorsement, backing, approval, legitimacy).

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The first strategy in implementing a change would be to collect as many of these power tools as
possible. As this occurs, individuals can ―plant seeds of support‖ for the planned change. This is
particularly important in helping others see the critical need for the planned change. It may be possible to
plant these seeds before sponsorship of the change is sought so that the sponsor feels he or she is
proactively responding to a critical need.

Another strategy is to ―package‖ the change in a way that makes it less threatening and, therefore, easier
to sell. For instance, it is easier to implement change of a product or a project when it is: (a)
conducted on a trial basis; (b) reversible, if it doesn‘t succeed; (c) done in small steps; (d) familiar and
consistent with past experience; (e) a fit with the organization‘s current direction; or (f) built on the prior
commitments or projects of the organization (Kanter, 1983). This packaging should be completed prior to
submitting the OD effort to the designated change sponsor, although that person needs to be involved in
further assisting in the packaging and selling of the planned change.

Building coalitions is a strategy that often occurs throughout the entire phase of implementing the change.
Support must be gathered from all areas which will be affected by the desired change, across different
levels of the organization. It is always advisable to get the support of an immediate supervisor early on,
although this may not always be possible. In such instances, other support could be gathered across the
organization to influence the supervisor to reconsider lending support to the change efforts.

Effective change masters use their informal networks and deal with any concerns or questions of
supporters individually rather than in formal meetings. ―Pre-meetings‖ can provide a safer environment
for airing concerns about implementing change. In such settings, an individual may have the
opportunity to ―trade‖ some of the power tools that he or she has acquired in order to generate support.
Additionally, some individuals will support a project or change effort for reasons that are fairly reactive:
―If so-and-so supports it, then I will, too," or ―If such-and-such state is moving in that direction, then we
should, too.‖ Obviously, the more change masters know about how particular individuals may react, the
better able they are to plan for ways to garner support.

6.6. Resistance to Change

With every major and minor change, resistance typically occurs. Every judicial educator has seen this
tendency, whether the change involves a certain speaker or a particular topic, a customary time of year or
time of day to meet, a favorite location for conferences or planning sessions, or a given style for delivering
a speech or organizing a paper. This resistance should be accepted as a ―given,‖ so that the educator can
predict and plan for effectively dealing with inevitable resistance. This section will address some of the
causes and types of resistance to change, particularly at the organizational level.

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6.6.1. Individual Resistance
Why does resistance to change occur? The primary reason is that people fear change. They are not usually
eager to forego the familiar, safe, routine ways of conducting their business in favor of unknown and
possibly unsafe territory. As humans, we tend to prefer routines and accumulate habits easily;
however, fear of change may be attributed to more than a tendency toward regularity. Change
represents the unknown. It could mean the possibility of failure, the relinquishing or diminishing of
one‘s span of control and authority, or the possibility of success creating further change. It might be that the
planned change has little or no effect on the organization whatsoever. Any one of these possibilities can
cause doubt and thus fear, understandably causing resistance to the change efforts.

Additionally, the transition between the present state and the changed state is difficult for both
individuals and organizations. On an individual level, people must be reminded that every transition or
change effort begins with an ending -- the end of the current state. The first step toward change is going
through the process of ending. Endings must be accepted and managed before individuals can fully
embrace the change. Even if the impending change is desired, a sense of loss will occur. Because our
sense of self is defined by our roles, our responsibilities, and our context, change forces us to redefine
ourselves and our world. This process is not easy. William Bridges does an excellent job of discussing the
process of individual change in his book Transitions (1980). In describing the process of ending, Bridges
presents the following four stages that individuals must pass through in order to move into the transition
state and effectively change:

 Disengagement. The individual must make a break with the ―old" and with his or her current
definition of self.
 Disidentification. After making this break, individuals should loosen their sense of self, so that they
recognize that they aren‘t who they were before.
 Disenchantment. In this stage, individuals further clear away the ―old,‖ challenging
assumptions and creating a deeper sense of reality for themselves. They perceive that the old way
or old state was just a temporary condition, not an immutable fact of life.
 Disorientation. In this final state, individuals feel lost and confused. It‘s not a comfortable state, but a
necessary one so that they can then move into the transition state and to a new beginning.

In this process, it is important to recognize how the change was initiated. While all change is
stressful, it is easier to go through the process of ending and into the transition if the change was
internally driven, rather than if it was initiated by an external source. When we make changes in our
lives (e.g., marriage, a new home, or new career), there is a greater sense of control over the change;
therefore, we feel more capable of coping with the unpleasant aspects of transition. This is not

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necessarily true when the change is driven or mandated by an external source (e.g., new job
responsibilities, unexpected changes in finances, or job relocation). In externally driven change, the
process of transition is more difficult, and there is more resistance as individuals refuse to begin the
ending process and make the initial break with the past. This almost innate resistance to externally
driven change makes a convincing argument for the change master to facilitate ―ownership‖ of the
change efforts by both the change sponsor and the change target. In other words, we should assist others in
perceiving the change as desirable and internally driven, rather than an externally driven mandate that is
thrust upon them.

6.6.2. Organizational Resistance

With even this very brief discussion on the difficulties involved in individual change, it should be
apparent that this phenomenon occurs at the organizational level as well. Organizations, regardless of
size, are composed of individuals. The extent to which individuals within the organization can
appropriately manage change represents the overall organizational capacity for change.

However, there are other factors peculiar to the organizational setting that can act as barriers to
implementing change. These include:

 Inertia. One of the most powerful forces that can affect individuals and organizations is inertia. The
day-to-day demands of work diminish the urgency of implementing the change effort until it slowly
vanishes within the organization.
 Lack of Clear Communication. If information concerning the change is not communicated
clearly throughout the organization, individuals will have differing perceptions and expectations of the
change.
 Low-Risk Environment. In an organization that does not promote change and tends to punish
mistakes, individuals develop a resistance to change, preferring instead to continue in safe, low- risk
behaviors.
 Lack of Sufficient Resources. If the organization does not have sufficient time, staff, funds, or other
resources to fully implement the change, the change efforts will be sabotaged.
These factors, combined with others characteristic to the specific organization, can undermine the change
effort and create resistance. A wise change agent will spend the necessary time to anticipate and plan for
ways to manage resistance. Techniques such as force-field analysis, discussed earlier, are useful tools to
assist in developing strategies for overcoming organizational resistance to change.

6.7. Organizational Development: A Neglected Need

Judicial educators may be in the best position to sense the need for organizational change and
development efforts within their committees, boards, or work teams. While they may not have the

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organizational power to ensure that appropriate efforts are implemented (the role of a change sponsor),
they can certainly ―raise the consciousness‖ of the organization and advocate that OD needs be
addressed. Healthy organizations are willing to commit time and energy toward improving both the
individual and the organization as a whole. A synergistic effect can be created when professional
development and organizational development efforts are simultaneously put into place.

However, many organizations and teams unfortunately overlook the need for organizational
development, often because of their unfamiliarity with the concept or their emphasis on professional
development. While ―professionals‖ are generally considered to be independently-based practitioners, the
majority of professionals function within an established organizational setting. Judicial personnel are no
exception. While members of a judicial office may make decisions in an independent fashion, they are still
part of the larger system in which they work (e.g., the state justice system) and are related to the
organizational context in which they function (e.g., Administrative Office of the Courts). Judges in
particular work in a highly independent fashion. Yet, they too are part of an overarching system. The
system itself must have the benefit of development as well as the individual professionals who are a part of
the system. However, judicial educators may unwittingly neglect the needs of the organization or system
in favor of professional development alone. Indeed, some observers have argued that this is a fundamental
part of conflict between state judicial educators and state court administrators.

With this focus on improving the practice of individual professionals, educators and managers may
overlook the equally important needs of the organization to support its institutional mission as well as
individual vocational growth. Individuals can improve only as much as their organizations ―allow‖ them
to grow. Nowlen, among others, has discussed this challenge in A New Approach to Continuing
Education for Business and the Professions (1988).

6.7.1. What is Organizational Development?

According to Middlemist and Hitt (1988, p. 493), organizational development is: A systematic means
for planned change that involves the entire organization and is intended to increase organizational
effectiveness.

Cummings and Huse (1988, p. 1) define OD in broader terms: A system wide application of behavioral
science knowledge to the planned development and reinforcement of organizational strategies,
structure, and processes for improving an organization‘s effectiveness.

Several parts of the above definitions are particularly worth emphasizing. The first is that
organizational development is a systematic activity, an ongoing process that can help organizations deal
with current and anticipated problems, putting leaders in a proactive, rather than reactive, stance. This
stance differs from the ―putting-out-fires‖ approach that so many groups and organizations have relied
upon historically.

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The second noteworthy item is that OD involves planned change within an entire organization or work
team. This means that a proactive stance is absolutely necessary for change to be effective;
otherwise, the planned change effort will lag too far behind the need that it is intended to address. For
example, judicial employees who have recently come under the jurisdiction of the State Court
Administrator‘s Office may find difficulty in adjusting to new procedures, new channels of
communication and authority, and new roles. Concurrently, existing staff within the Office will
experience their own difficulties in assimilating the new group, sharing information, and performing
roles that also may have changed.

Is it then time for a ―team-building‖ session? While it‘s often ―better late than never,‖ the real effort
should have already occurred before the organizational changes were enacted. Staff from all areas
ideally should have been brought together and the job restructuring discussed, procedures and
policies formulated, and team-building efforts begun. After changes have taken place, it‘s often too
late to begin organizational development efforts. This fact makes planning even more critical and
highlights the advantage of institutionalizing the concept of team-building so that staff are empowered and
able to cope with changes in the work team.

The third part of an OD definition to keep in mind is the rationale for organizational development -- to
improve organizational effectiveness. Organizations and work teams must be effective and efficient,
particularly in the current environment of limited resources. In thinking about effectiveness, every
organization and team would be well-advised to adopt a ―quality‖ mentality regarding OD efforts. Ongoing,
institutionalized OD strategies are akin to continuous quality improvement. Quality concepts originated in
the manufacturing sector, but today, the quality movement is being incorporated into service
organizations as well. While not as technically oriented, work teams providing services can effectively
determine quality standards and work proactively as a team to insure that standards are met. Concepts of
quality can be applied in the educational arena. For instance, the National Association of State Judicial
Educators (NASJE) has recently developed a set of ―Principles and Standards for Judicial Education.‖ This
endeavor signifies commitment not only to quality, but also to the professionalization of the field. Ensuring
quality, like strengthening an organization‘s effectiveness, is an ongoing task.

Organizational development can, of course, occur in groups or teams, as well as within an entire
organization. Effective OD is ongoing and systematic, strengthening both the individual and the group.
Many organizations today accomplish their tasks through a project management approach that brings
together teams for a short period of time. Members of the team may be brought from various parts of the
organization, representing different constituencies and levels within the organization. These work teams
do not always have a unified focus or vision of the task to be accomplished; therefore, they can falter in
their responsibilities because of conflicting perspectives, communication difficulties, or lack of clear
objectives. An ongoing system of organizational development strategies is useful in this situation. Team-

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building in particular is effective when incorporated and supported by the organization. This concept
will be discussed later in the chapter.

6.7.2. A Model for Organizational Development

Now that we have examined the major emphases associated with organizational development, a broad
picture of the actual process is needed. While there are variations on any model, Figure 1
represents the major components of a planned OD effort.

MODEL OF ORGANIZATIONAL DEVELOPMENT

 Recognition of need for changeDiagnosis of cause(s)

 Development of change alternativesImplementation of change Reinforcement of change Evaluation of

change

 Further change action taken, if requiredFeedback

The first step of the model is critical. Often, educators and managers will recognize the need for change
before others who have decision-making power do. In such instances, these decision-makers, or change
sponsors, will need to be convinced of the need for change. Ongoing diagnosis and systematic
examination of the environment can provide a rationale for planned OD efforts. An environmental
scanning program, strategic planning, employee or ―customer‖ feedback survey, or similar methods can
detect changes in the internal or external environment that will have impact on the organization.
Organizations can also examine the quality of their products and/or processes to determine whether OD
efforts need to be directed toward specific areas within the organization or work team.

It is often advisable for an organizational development expert to assist in the implementation of change
efforts. For many organizations, this consultation is not always an option due to limited resources,
the unavailability of consultants, or political reasons, among others. Various strategies are available for
use within organizations. Some can be used in an ongoing fashion, while others are ―one- shot‖ efforts.
Two major types of strategies that can be used are:

 Process Strategies: team-building, quality circles, sensitivity training, survey feedback, career
planning.
 Structural Strategies: job redesign, job enrichment, management by objectives, organizational
restructuring, flextime options.
The change strategy chosen should relate appropriately to the organizational or team need. Political,
technological, or legal factors may cause an organization to move in directions that require OD efforts. All
too frequently, however, interpersonal change efforts are chosen as the appropriate strategy. For instance, a
simple problem such as the overuse of a particular piece of office equipment may result in disgruntled

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employees. This problem may be solved by purchasing more equipment or restructuring the use of the
equipment, rather than developing a team-building program. Interpersonal or even process strategies cannot
adequately equip an organization to deal with these types of external pressures.

6.7.2.1.Team-Building as an Integral OD Strategy

Now that we are more familiar with organizational change and development, we can look at one OD
strategy that is being successfully employed in many organizations. Team-building is an OD
strategy that is often used in organizations to make work groups more cohesive, committed, satisfied, and
productive. A variety of assessment tools and exercises are available for groups to diagnose their capacity
as a team and improve their team functioning. Attachment A lists characteristics of an effective team,
which can be used as a benchmark to evaluate the level of team functioning within an
organization or committee. Assessment is the first step in attempting to build an effective team.
However, team-building efforts are most effective when perceived as an integral concept within an
organization and not merely as a sporadic intervention. These efforts then become part of the shared
vision of that organization, a priority to which leaders are committed.

If institutionalized by a work group, team-building shapes the way everyone within that group thinks
about his or her role in relationship to others and to the organization. Understandably, many
organizations, as well as many small work teams or committees, have difficulty orienting themselves to a
team approach rather than an individual approach. Individual, rather than team, effort is traditionally
recognized and appreciated within organizations. Figure 2 lists several suggestions that an organization can
implement to overcome this tendency toward individual effort and to encourage a team culture. The list has
been adapted for judicial education organizations.

6.7.2.2. Rx FOR THE DEVELOPMENT OF A TEAM-PLAYER CULTURE

1. Public statements by leaders on the importance of team players -- not just the
2. State court administrators, judges, and other leaders serving as models of team players.
3. Promoting people who are both technically competent and team players.
4. Giving important assignments to positive team players.
5. Incorporating team-player behaviors in the performance appraisal system.
6. Offering training workshops on the skills of effective team players.
7. Giving higher salary increases to positive team players.
8. Developing incentive systems that reward team effort.
9. Designing flexible compensation programs that pay individuals for their contributions to a
team approach.

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6.8. Leaders as Followers
In organizations, attention is typically directed toward leaders within the group through leadership training,
self-assessments, style inventories, and the like. Most believe that sound leadership is the key to an
effective work team. There is no doubt that the abilities of the leader can affect the team as a whole, but
some of our traditional notions of leadership include outdated modes of behavior or unrealistic
expectations. Even if we have moved from thinking of leaders in the John Wayne stereotype, we may
still expect leaders to create an inspirational work setting by producing vision statements that motivate
and unify the organization. Recently, however, some authors have discussed the concept of leadership in
different terms, moving the leaders even further from the grandstand and closer to the audience.

In a recent talk to educators and business leaders, Dr. Badi Foster, President of AEtna Institute for
Corporate Education, discussed how the mission of the organization must be connected to all members of
the team and how leaders are needed to develop this connection. Everyone needs to believe in
something bigger than just "making a buck" at work; people need to feel that they are contributing to "the
big picture." Their gifts or talents brought to the work setting should be connected to an
organizational vision so that they feel an integral part of the team. He prefers "vision" over "mission,"
believing that the first implies impelling people, while the second term connotes compelling employees in
their work environment.

How can organizations develop congruence between individual team members' vision and a larger
organizational vision? Leaders must first encourage all employees to create their own personal vision,
motivating and inspiring them in their work setting. Secondly, leaders must discern these personal
visions, as well as the particular gifts that employees bring to work. Foster‘s belief is that leaders can
help ―bring forth that which is already there‖ within individuals. Leaders can work with team members
to help make the connection between their personal visions and goals and the vision of the organization. In
some instances, organizations may be restructured, job descriptions may be altered, or jobs may be
redefined to provide the employee more responsibility. Empowering employees creates an environment in
which they can feel more connected and committed to the organization. If there is clearly no congruence
between team members and the organization, then something must change; however, these changes
will ultimately benefit both the individual and the organization.

Lee (1991) takes this idea even further and argues that often the best leaders are the best followers:

[Leaders] can create an environment in which followers can develop their own goals (in other words, a
culture of empowerment), as well as provide the training to develop competence. It then becomes the
leader‘s task to sense where followers want to go, align their goals with the larger goals of the organization,
and invite them to follow. (p. 33)

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In this conception of teams, the leader does not set himself or herself apart from the other members of the
group but is intimately connected to them, helping them to align their goals with the organization and
providing motivation through empowerment.

6.9. Followers as Leaders

What, then, is the role of the follower within a committee or work team? Team members are not merely
waiting for inspiration and direction from leaders; rather, they are active participants in creating the vision
and direction of their organization. They have ―ownership‖ in their work setting, are involved in making it
effective, and feel a connection between themselves and that vision. They speak the truth, take
responsibility for themselves, and have both personal integrity and organizational loyalty. In short, they
behave in ways traditionally considered behavior of ―leaders.‖

Team members who strive for these characteristics within a supportive organization will find that their
personal satisfaction in the work environment increases. Many organizations are now embracing the
―self-directed work team‖ concept and truly dispersing leadership throughout the organization. In small
groups, this concept may already be a reality. However, it takes some managers a considerable amount
of time to rethink their role in the group and move from ―boss‖ to ―enabler‖ or ―coach.‖ At the same
time, members of a team may not initially feel comfortable taking on more responsibility and
accountability. New ideas and behaviors require some adjusting on everyone‘s part. But the result may be
worth the effort -- teams become more effective and productive, and team members experience
greater satisfaction with their work and feel more connected to the organization and other team
members.

6.10. Team-Building Strategies

The literature on developing more cohesive teams is vast. However, in addition to the
organizational strategies to encourage a team culture, there are some strategies that team leaders can use to
help build effective teams. Specific team-building efforts vary depending upon a number of variables,
including the nature of the team, its duration, the task at hand, and the organizational culture. Team-
building efforts can range from T-groups to outdoor adventure weekends, from self-assessments to
team assessments, and from one-hour team-building videotapes to multi-day workshops by OD
consultants.

The general strategies listed below relate to the characteristics of an effective team, noted in
Attachment A. Therefore, they may serve as guidelines to leaders for achieving a high level of team
functioning. According to Parker, successful team-building strategies for team leaders are:

• Get to know the team.

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• Define the team‘s purpose.
• Clarify roles.
• Establish norms.
• Draw up a game plan.
• Encourage questions.
• Share the limelight.
• Be participatory.
• Celebrate accomplishments.
• Assess team effectiveness.

6.11. A Learning Organization

In considering these perspectives on the roles of the team leader and team members, it is helpful to bring
these ideas together into a more comprehensive view of organizations. For instance, how can teams
work together in an integrated whole, rather than as a group of individuals? How can the capacities
of each member interact with the talents of other members to maximize the organization‘s
productivity?

Peter Senge‘s (1990) book The Fifth Discipline: The Art and Practice of the Learning
Organization offers an inspiring look at how organizations can focus on growth and renewal, overcome
threats from the external environment, and develop the capacities of individuals within the organization. He
argues that changes in our ―mindset‖ are needed to truly develop a learning organization. In the
earlier discussion on change, we noted that changes in one area of the world affects others. Senge
recognizes this phenomenon and emphasizes the concept of systems thinking, which he calls the ―fifth
discipline.‖ This is a holistic way of viewing organizations, as well as individuals, and provides a
perspective useful in planning and change efforts. Senge writes:

The tools and ideas presented...are for destroying the illusion that the world is created of separate,
unrelated forces. When we give up this illusion - we can then build ―learning organizations,‖
organizations where people continually expand their capacity to create the results they truly desire,
where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and
where people are continually learning how to learn together.(p. 3)

One of the disciplines that characterizes the learning organization is team learning. Senge discusses
how unaligned teams produce a great amount of wasted energy. While individuals within the team may
work diligently, the team effort is low. He writes:

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By contrast, when a team becomes more aligned, a commonality of direction emerges, and
individuals‘ energies harmonize. There is less wasted energy.... There is commonality of purpose, a
shared vision, and an understanding of how to complement one anothers‘ efforts....

Individuals do not sacrifice their personal interests to the larger team vision; rather the shared vision
becomes an extension of their personal visions.

Again, this congruence of personal and organizational vision can only occur when visions have been
developed by both the organization and the individual. A shared vision is a necessity in this type of
context. Neither the organization nor the individual can shirk responsibility in developing a vision.

Senge notes three critical dimensions of the concept of team learning that have implications for judicial
educators, as well as other teams. First, he believes that teams need to tap the minds of individual
members in order to think insightfully about complex issues. Everyone must take responsibility for
contributing to the group. Secondly, there is a need for coordinated action, through which team
members can trust and expect certain behaviors from one another. He likens this to jazz musicians
playing together in spontaneous, yet coordinated, action. And thirdly, team learning is dispersed
throughout an organization through the actions of team members. Each member of a team will also be
a member of other teams; his or her behavior can therefore encourage team learning in other areas as well.

It is clear that these new ideas can radically change the way we look at teams. Changing our
perspective and our expectations of teams can transform organizations and the way that work gets
accomplished. Active participation is required of both team leaders and followers, as well as
commitment. Effective teams need a vision for the organization, but, additionally, each member must feel
connected to it and perceive it as part of his or her own personal vision. Through both
organizational and individual clarity of vision, organizations can expect commitment, diligence, and a
passion for work from its members. Individuals and organizations who can find a passion for work will
not only flourish and be productive, but will also find an excitement in carrying out even the most
mundane functions in everyday work.

Self-Test Exercises

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 CHAPTER 7
Decision-Making Process

Today, many decisions in organizations are made by groups, teams, or committees. The
benefits of group decision making include: More knowledge and expertise is available to
solve the problem; a greater number of alternatives are examined; the final decision is better
understood and accepted by all group members; and there is more commitment among all
group members to make the final decision work. There are some common dysfunctions of
effective group decision making. There are several ways in which the organization can
counter these dysfunctions and improve group decision making. They include brainstorming,
nominal group technique, Delphi technique, devil‘s advocacy, anddialectical inquiry.

Think about the difficulties involved in making individual decisions in your own personal life.
Thus, you can appreciate how complicated—and important—the process of decision making
can be in organizations, where the stakes are considerable and the impact is widespread
(Greenberg, 2011). In both cases, the essential nature of decision making is identical. Decision
making may be defined as the process of making choices from among alternatives (March,
2010).

Management theorists agree that decision making is one of the most important—if not the
most important—of all management activities (Drucker, 2010; Mintzberg, 2008; Simon,
1997). It is important to note, however, that not only managers make decisions in
organizations, but also employees at every level in an organization participate in decision
making as well. Today, many decisions in organizations are made by groups, teams, or
committees (Bonito, 2012).

The term group decision making refers to being involved in making decisions. Group decision
making takes place in different degrees. At one extreme is consultative decision making, in
which the leader consults with group members before making a decision. At the other extreme
is democratic decision making, in which the problem is given to the group, and group
members are empowered to make the decision.

In between the two is consensus decision making, in which the leader shares the problem with
group members. Together the group leader and members generate and evaluate alternatives
and attempt to reach agreement on a solution to the problem (DuBrin, 2012).

7.1. Individual versus Group Decision Making

Considerable debate has occurred concerning the relative effectiveness of individual versus
group decision making. The benefits of group decision making include
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 (1) more knowledge and expertise is available to solve the problem;
(2) a greater number of alternatives are examined;
(3) the final decision is better understood and accepted byall group members; and
(4) there is more commitment among all group members to makethe final decision work

In fact, a considerable amount of research has indicated that consensus decisions with five or
more participants are superior to individual, majority vote, and leader decisions.

Unfortunately, open discussion can be negatively influenced by behavioral factors, such as

i. social pressure to conform, i.e., individuals may feel compelled to go along with the
wishes of the group;
ii. minority domination, i.e., the group‘s decision may be forced, or ramrodded
through, by one individual or a dominant clique; and
iii. time delays, i.e., with more people involved in the dialogue and discussion, group
decisions usually take longer to make than individual decisions

7.2. Group Decision-Making Techniques

For groups to be more effective, they must overcome some of the problems and dysfunctions
that groups generally encounter: groupthink (Janis, 1982), risky shift (Stoner, 1968), group
polarization (Bordley, 1983), and escalation of commitment Whyte, 1993). Traditional
models of group effectiveness include creating the right climate where support, commitment,
goals, rewards, communication systems, and physical space are all synchronized to allow the
group to work in a productive atmosphere (Lunenburg, 1983). Group size should be kept
ideally between five to 12 participants depending on the task (Hare, 1976; Seijts & Latham,
2000; Shaw, 1981; Thomas & Fink, 1963) and members should be selected based on their
motivation and ability (Hersey & Blanchard, 2008). Furthermore, group cohesion should be
built by either establishing homogeneous groups or overcoming potential problems associated
with diversity; by encouraging interaction and contact; and by making the group seem
somewhat ―exclusive,‖ so that members are honored to be included (Luthans, 2011).

Moreover, group success tends to build greater cohesiveness (Mullen & Copper, 1994; van
Kippenberg, DeDreu, & Homan, 2004).

Several other techniques have been developed to assist groups to make sound decisions that
promote high performance levels and positive attitudes and avoid some of the potential
dysfunctions of group decision making. These include techniques that involve the structuring
of group discussions in specific ways. Five important alternative structures are brainstorming,
nominal group technique, Delphi technique, devil‘s advocacy, and dialectical inquiry.

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7.2.1. Brainstorming
Brainstorming, developed by Alex Osborn (1957) more than fifty years ago, is a technique for
creatively generating alternative solutions to a problem. The unique feature of brainstorming
is the separation of ideas from evaluation. Earlier, we noted the importance of generating a
wide variety of new ideas during the generating alternatives step of the decision-making
process. This increases the number of alternatives from which managers can choose when
evaluating alternatives and making their decisions. People tend to evaluate solutions to
problems when they are proposed, which often eliminates many creative and feasible ideas
from further consideration. The following rules are central to brainstorming:

1. Do Not Evaluate or Discuss Alternatives. Evaluation comes later. Avoid criticism of

your own or others‘ ideas.
2. Encourage “Freewheeling.” Do not consider any idea outlandish. An unusual idea
may point the way to a truly creative decision.
3. Encourage and Welcome Quantities of Ideas. The greater the number of ideas
generated, the greater the number of useful ideas will remain after evaluation.
4. Encourage “Piggybacking.” Group members should try to combine, embellish, or
improve on an idea. Consequently, most of the ideas produced will belong to the group
and not to a single individual.

As an idea-generating technique, group brainstorming may not be any more effective than
individual brainstorming. However, the technique is in widespread use today in all types of
organizations.

7.2.2. Nominal Group Technique

Another technique that can be used in group decision making, which incorporates some of the
features of brainstorming, is the nominal group technique (Delbecq, Van de Ven, & Gustafsen,
1986). As in brainstorming, individuals are brought together to develop a solution to a problem.
Unlike brainstorming, the nominal group technique is concerned with both the generation of
ideas and the evaluation of these ideas. The process of decision making in nominal groups
has several steps:

i. Silent generation of ideas. Allow five to ten minutes for this phase. The problem
should be posted on a flip chart in the front of the room. Group members are asked
to solve the problem on the chart. They are cautioned not to talk to or look at the
worksheetsof other participants.

ii. Round-robin recording of ideas. The leader circulates around the room eliciting one
idea from each group member and recording it on the flip chart. This continues, round-

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 robin fashion, until all ideas are exhausted. The chief objective of this step is to place
before the group an accurate list of ideas that can serve as a compilation of group
ideas.

iii. Discussion of ideas. Each idea on the flip chart is discussed in the order it appears on
the chart. The leader reads each item and asks the group if there are any questions,
needs for clarification, agreement, or disagreement.

iv. Preliminary vote on item importance. Each participant makes an independent

judgment about the alternatives by rank ordering them secretly on 3 x 5 inch cards.
The average of these judgments is used as the group‘s decision. The nominal group
process may end here, or the decision may be further refined through discussion and
revoting.

v. Additional discussion. The voting patterns are analyzed and reasons examined to
determine if a more accurate decision can be made.

vi. Final vote. The final voting occurs in the same manner as the preliminary vote, by
secret rankings. This action completes the decision process and provides closure.

As noted, the nominal group technique separates ideation from evaluation. Ideas are generated
nominally (without verbal communication). This prevents inhibition and conformity, which
occurs in the phenomenon of groupthink (Janis, 1982). Evaluation occurs in a structured
manner that allows each idea to get adequate attention.

7.2.3. Delphi Technique

Researchers at the Rand Corporation developed the Delphi technique in the 1960s (Dalkey,
1969). Unlike brainstorming and the nominal group technique, the Delphi approach relies
completely on a nominal group; that is, participants do not engage in face-to-face discussions.
Instead their input is solicited by mail at their various home bases, thus allowing the polling
of large numbers of experts, clients, executives, or constituencies who are removed from
the organization by distance and scheduling problems. For example, suppose the president of
a large manufacturing firm wishes to evaluate a new technology for manufacturing a new
product line. Selected members of the organization, plant managers, executives, consumers,
and nationally renowned experts could participate in the various phases of the Delphi process.
The Delphi technique has many variations, but generally it works as follows.

i. The organization identifies a panel of experts, both inside and outside the
organization, and solicits their cooperation.
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 ii. Each member of the panel receives the basic problem.
iii. Each individual expert independently and anonymously writes comments,
suggestions, and solutions to the problem.
iv. A central location compiles, transcribes, and reproduces the experts‘ comments.
v. Each panelist receives a copy of all the other experts‘ comments and solutions.
vi. Each expert provides feedback on the others‘ comments, writes new ideas
stimulated by their comments, and forwards these to the central location.
vii. The organization repeats Steps 5 and 6 as often as necessary until consensus is
reached or until some kind of voting procedure is imposed to reach a decision.

Success of the Delphi technique depends on the expertise, communication skills, and
motivation of the participants and the amount of time the organization has available to make a
decision. There are several benefits of the Delphi approach. First, it eliminates many of the
interpersonal problems associated with other group decision-making approaches. Second, it
enlists the assistance of experts and provides for the efficient use of their time. Third, it allows
adequate time for reflection and analysis of a problem. Fourth, it provides for a wide diversity
and quantity of ideas. And, finally, it facilitates the accurate prediction and forecasting of
future events. The major objectives of the Delphi technique include thefollowing:

 To determine or develop a range of possible program alternatives.

 To explore or expose underlying assumptions or information leading to different
judgments.
 To seek out information that may generate a consensus among the group
members.
 To correlate informed judgments on a subject that spans a wide range of
disciplines.
 To educate group members concerning the diverse and interrelated aspects of the
subject.

One special type of Delphi approach is a procedure called ringi used by the Japanese. This
version of the Delphi technique involves the circulation of a written document from member to
member, in nominal group fashion, for sequential editing until no more changes are required
and each participant has signed off the final document. Another Japanese variation of the
Delphi technique is assigning parts of the problem to each of several subgroups who prepare
responses for their assignments. This version differs from the pure Delphi approach in that the
written mini-reports are then circulated among the group members before face-to-face
discussion starts. In essence, the latter Japanese version of the Delphi technique combines with
simple group decision making (Eto, 2003).

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7.2.4. Devil’s Advocacy
Devil’s advocacy, another technique for improving the quality of group decisions, introduces
conflict into the decision-making process (Schwenk, 1984). Janis (1982) suggests that this
concept is an antidote for groupthink. Groupthink, one of the dysfunctions of group decision
making, results in inhibitions and premature conformity to group norms. Devil‘s advocacy can
nullify these and other group phenomena to which group members are subjected (Schwenk,
1990). After a planning group has developed alternative solutions to a problem, the plan is
given to one or more staff members, with instructions to find fault with it. If the plan
withstands the scrutiny of the devil‘s advocates, it can be presumed to be free of the effects of
groupthink and thus viable. Although devil‘s advocacy can be used as a critiquing technique
after alternative solutions to a problem have been developed, it can also be used during the
early stages of the decision-making process. For example, during a decision-making session
one member could be assigned the role of devil‘s advocate, expressing as many objections to
each alternative solution to a problem as possible (Schweiger & Finger, 1984).

7.2.5. Dialectical Inquiry Method

Like devil‘s advocacy, dialectical inquiry is an alternative approach for controlling group
phenomena such as groupthink in decision making (Schweiger, Sandberg, & Ragan, 1986). The
process can be described as follows:

1. The process begins with the formation of two or more divergent groups to represent the full
range of views on a specific problem. Each group is made as internally homogeneous as
possible; the groups, however, are as different from one another as possible. Collectively
they cover all positions that might have an impact on the ultimate solution to a problem.
2. Each group meets separately, identifies the assumptions behind its position, and rates them
on their importance and feasibility. Each group then presents a ―for‖ and an ―against‖
position to the other groups.
3. Each group debates the other groups‘ position and defends its own. The goal is not to
convince others but to confirm that what each group expresses as its position is not
necessarily accepted by others.
4. Information, provided by all groups, is analyzed. This results in the identification of
information gaps and establishes guidelines for further research on the problem.
5. An attempt to achieve consensus among the positions occurs. Strategies are sought that will
best meet the requirements of all positions that remain viable. This final step permits
further refinement of information needed to solve the problem

Although agreement on a management plan is a goal of this approach, a full consensus does not
always follow. Nevertheless, the procedure can produce useful indicators of the organization‘s
planning needs.
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7.3. Rational approach
Rational Decision Making
Rational decision making is a multi-step process, from problem identification through solution,
for making logically sound decisions.

7.3.1. The Process of Rational Decision Making

Rational decision making is a multi-step process for making choices between alternatives. The
process of rational decision making favors logic, objectivity, and analysis over subjectivity and
insight. The word ―rational‖ in this context does not mean sane or clear-headed as it does in the
colloquial sense.

The approach follows a sequential and formal path of activities. This path includes:
1. Formulating a goal(s)
2. Identifying the criteria for making the decision
3. Identifying alternatives
4. Performing analysis
5. Making a final decision.

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7.3.2. Assumptions of the Rational Decision-Making Model

The rational model of decision making assumes that people will make choices that maximize
benefits and minimize any costs. The idea of rational choice is easy to see in economic theory.
For example, most people want to get the most useful products at the lowest price; because of
this, they will judge the benefits of a certain object (for example, how useful is it or how
attractive is it) compared to those of similar objects. They will then compare prices (or costs). In
general, people will choose the object that provides the greatest reward at the lowest cost.
The rational model also assumes:
 An individual has full and perfect information on which to base a choice.
 Measurable criteria exist for which data can be collected and analyzed.
 An individual has the cognitive ability, time, and resources to evaluate each alternative
against the others.
The rational-decision-making model does not consider factors that cannot be quantified, such as
ethical concerns or the value of altruism. It leaves out consideration of personal feelings,
loyalties, or sense of obligation. Its objectivity creates a bias toward the preference for facts, data
and analysis over intuition or desires.

7.3.3. Problems with the Rational Decision-Making Model

Critics of the rational model argue that it makes unrealistic assumptions in order to simplify
possible choices and predictions.

7.3.4. Critiques of the Rational Model

Critics of rational choice theory —or the rational model of decision-making—claim that this
model makes unrealistic and over-simplified assumptions. Their objections to the rational model
include:
 People rarely have full (or perfect) information. For example, the information might not be
available, the person might not be able to access it, or it might take too much time or too
many resources to acquire. More complex models rely on probability in order to describe
outcomes rather than the assumption that a person will always know all outcomes.
 Individual rationality is limited by their ability to conduct analysis and think through
competing alternatives. The more complex a decision, the greater the limits are to making
completely rational choices.
 Rather than always seeking to optimize benefits while minimizing costs, people are often
willing to choose an acceptable option rather than the optimal one. This is especially true
when it is difficult to precisely measure and assess factors among the selection criteria.
Alternative Theories of Decision-Making

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7.3.5. Prospect Theory
Alternative theories of how people make decisions include Amos Tversky‘s and Daniel
Kahneman‘s prospect theory. Prospect theory reflects the empirical finding that, contrary to
rational choice theory, people fear losses more than they value gains, so they weigh the
probabilities of negative outcomes more heavily than their actual potential cost. For instance,
Tversky‘s and Kahneman‘s studies suggest that people would rather accept a deal that offers a
50% probability of gaining $2 over one that has a 50% probability of losing $1.

7.3.6. Bounded Rationality

Other researchers in the field of behavioral economics have also tried to explain why human
behavior often goes against pure economic rationality. The theory of bounded
rationality holds that an individual‘s rationality is limited by the information they have, the
cognitive limitations of their minds, and the finite amount of time they have to make a decision.
This theory was proposed by Herbert A. Simon as a more holistic way of understanding
decision-making. Bounded rationality shares the view that decision-making is a fully rational
process; however, it adds the condition that people act on the basis of limited information.
Because decision-makers lack the ability and resources to arrive at the optimal solution, they
instead apply their rationality to a set of choices that have already been narrowed down by the
absence of complete information and resources.

7.3.7. Non-Rational Decision Making

People frequently employ alternative, non-rational techniques in their decision making processes.

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 CHAPTER 8
Conflict, Power, and Politics

Organization activity can be defined as the culture or the working environment of an

organization. This organizational activity depends upon the people who build up the
organizational environment and often are the deciphering factor. Power, politics and conflict are
the three important and vital pillars on which the organizational activity rests. They play an
important factor in deciding the structure of the environment of a particular organization. They
also differ with each other in terms of their manifestation in the organizational activity.

Moreover, they are so real in the organization that whether the formal organizations like
government organization or non formal organization like non profit organization falls under its
ambit. Often power, politics and conflicts are closely related with each other and they interplay
with each other. People often practice them in the organizations in order to achieve their
favoured ends. A number of researches and studies have been conducted by eminent researchers
to investigate as to how these three controversial topics affect the nature of organization. These
studies have found that the power, politics and conflict in organizational activity forms the basic
foundation of the organizational structure and also corroborates to the functioning of the
organizations.

The occurrence of all these controversial topics in an organization can be a boon and curse at the
same time. They can even cause the death of the organization if not dealt or exercised properly
and on the other hand it can also boost up the activity of organization where each and every
individual can be benefitted.

To comprehend these concepts more closely we shall look on all these topics separately whereby
each and every topic is dealt with complete information and each and every nuances of the topics
have been covered. It also renders us an opportunity to have a close insight of each and every
subject in detail, its origin, how it effects the organizations, their sources and their positive and
negative effects in the organization. I have tried my level best to cover every pros and cons of the
subject. I have specially tried to focus on the sources of the conflict.

To begin with let us have a view of power in the organization, in which forms it may occur, what
are its effect on the organizational activity and how people use and misuse the power that they
have. Later on in the essay various other aspects of politics are covered like the reasons why
people sought political approaches and an attempt to know the attributes of those people who
indulge in these approaches. Various effects of politics on the organizational activity are also

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studied. Furthermore, the concept of conflict occurrence is investigated its frameworks through
which it can be studied, the sources of conflicts, its effect on the organizational activity.

8.1. Power an Introduction

Power has been regarded as one of the major factors that affect the organizational activity. It has
a wide range of applicability in the organizational activity. Various analysts and researchers have
tried to analyse the various forms of power that occurs in the organizations. Power in terms of
organizational activity can be defined as ―the capacity of the individuals to overcome resistance
on the part of others, to exert their will and to produce results consistent with their interest and
objectives‖(Buchanan and Huczynski,2001:805).

Power can be multidirectional and that may be accessed upwards, downwards or horizontally
which means it can be exercised upwards in the hierarchy (lower level employees such as
accountants when they form a certain working union to upper level employee such as managers)
or it can be operated downwards in the hierarchy (upper level employee such as managers to
lower level employee such as accountant) or it can be accessed within a certain group. Often
power also plays an important role in the politics and people who seek political approaches often
use power in obtaining their preferred results (Catherine Casey 2009, Lecture 8). Power can
occur in various forms. Now we can see some of the frameworks through which it can be
studied.

8.2. Frameworks or Viewpoints’ of Power in the Organizations

We can consider some frameworks of power devised by some of the authors. They illustrate the
different shades of power and the stakeholders of the power (Buchanan and Huczynski, 2001).
There are mainly three frameworks through which power can be studied in the organizational
activity. First is the power possessed by the individuals who operates it in a range of
interpersonal and social skills. It also illuminates some of the findings of Jeffrey Pfeiffer
(Managing with Power and influence in Organization, 1992) described below:

Structural Sources of individual power include:

 Formal position and authority in the organization structure
 Ability to cultivate allies and supporters
 Access to and control over information and other resources
 Physical and social position in the organization‘s communication network
 Being irreplaceable
 Degree of unity of your section, lack of internal dissent. (Buchanan and Huczynski 2001;
Pfeffer J 1983)

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Personal sources of individual power include:
 Energy, endurance and physical stamina
 Ability to focus energy and avoid wasteful effort
 Sensitivity and ability to read and understand others
 Flexibility in selecting varied means to achieve goals ((Buchanan and Huczynski 2001;
Pfeffer, 1983)

The second perspective of power describes that power depends upon the relationship between the
power holder and his subordinates. The third view of power illustrates the notion that sometimes
power is so much deep seated in the organization that it is not visible. The effect of this is that it
only gives the preference to certain people to exercise their power neglecting others.(Buchanan
and Huczynski, 2001)

8.3. Sources of Power in the Formal Organization

Various authors have also argued about the sources of power in the formal organization. They
have proposed five different kinds of sources of power in the formal organization.

First is the reward power (Glinow and McShane2005) which arises from the notion that the
leader has access to some rewards which will be allocated in return of the compliance with
instructions.

Second is the legitimate power (Glinow and McShane2005) which arises when the leader has
authority and the subordinates believe in that authority. Often in formal organizations the
concept of power and authority are seen together, but according to Weberian ideal type
bureaucratic phenomenon rational legal authority is a type of power which is the authority in
which the subordinates accepts the authority of a person willingly and it is the only legitimate
source of power (Catherine Casey, 2009, Lecture 1).

Third source of power is the coercive power (Glinow and McShane2005) which arises when the
leader applies influence and forces the lower level employee to comply with the instructions
forcefully. The fourth source of power is referent power (Glinow and McShane2005) when the
subordinates think that the leader has some qualities that need to be imbibed and acknowledged.
Last the expert power (Glinow and McShane2005) which arises when the leader has some
expertise and the subordinates comply by it because of that superior knowledge (Glinow and
McShane2005; Buchanan and Huczynski 2001).

8.4. Effects of Power in the organization

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In the formal organization, power can play an important role in the structure of the organizational
activity. It can affect the organization in many positive and negative aspects. Some of the
positive aspect can be that power can be a source to boost healthy competition between the
employees; it can also be persuasive and inspiring. It can be an important source where people
working at higher level can socialise with their counterparts working at the lower level more
efficiently. On the contrary, it also sometimes effect the organizations negatively like it can be an
important factor to boost up personal dominance where people who have power can try to
dominate others and often ends up misusing their power. It also can be exploitative, aggressive
and unsocial all these factors lead to misuse of power (Catherine Casey, Lecture 8, 2009).

8.5. Politics
The use of politics in the organizational activity is endemic. Its presence in the organizational
activity has been regarded as a potential factor which effects the organization negatively.
Ambrose Bierce(1842) defines politics as the strife of interests masquerading as a contest of
principles, through which one can understands that the notion of politics often involves the
justifications or quest for achieving self interest. However, politics in terms of its application in
organizational activity can be defined as the numerous kinds of activities happening within the
organization in order to achieve the favoured results by using power in a situation where there is
no concord in the choices (Buchanan and Huczynski, 2001).

People often get engaged in the usage of various political approaches. Various researchers have
argued time and again about the presence of power as important element of political influence in
the organizational activity(Fulop,Gosling,Green,Linstead,Richards 2004).Power in politics is
often applicable as people try to misuse their power in order to attain their political goals.

Astley and Sachdeva (1984) identified several important variables including, resource control,
hierarchical authority, non-substitutability, uncertainty coping, and centrality as sources of
politics and as connecting links to organizational politics. Many authors have also suggested that
the notion of politics occurring in an organizational activity depends upon the individual that
envision it (Glinow and Shane, 2005).They often suggests that various kinds of influential
techniques used by the people in the organization are also often referred to as politics.

Within an organization people often resort to political approaches in pursuit of their preferred
ends. Over a considerable span of time a number of researchers and writers have claimed that a
person who gets engaged into political behaviour has four kinds of special traits (Buchanan and
Huczynski, 2001).They have given the hypothesis which throws the light on the characteristics
of the people who gets involves in the politics. Firstly, they explicitly demonstrated the urge to
influence others and such quality also often gets associated with effective management skills. So,

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companies often try to hire those employees who have an edge in managerial expertise.
Moreover, they also exhibit the Machiavellian nature(named after the Italian Philosopher name
Niccolo Machiavelli) which symbolises a character in a person‘s behaviour where he tries to
manage things skilfully, involves in morally questionable practices in order to attain their own
desired consequences. (Buchanan and Huczynski, 2001).

In addition to these the third distinct factor is that these people think that all the things happen in
their life are under their own control and it is they who determine their destiny. They are said to
have ―internal locus of control‖ (Buchanan and Huczynski, 2001:825). They are not generally
motivated by any one. Furthermore, the fourth distinguishing factor is that these types of people
are often ready to take risks.

8.6. Effects of Politics in an organization

Politics and its effects are negatives in the organizations. Some authors have studied this notion
and conclude that the political approaches retard the merit system of selection in the organization
(Wilson, 1995). Secondly, the useful values of public interests are compromised, where the
interests of other people working in the organization are overlooked. Thirdly, it seizes the career
objectives of the employees and could decrease their commitment.(Wilson,1995). However,
these findings promotes the idea that only political disengaged bureaucracy should hold in the
organization where the interest of each and every individual should be catered freely and fairly.(
Catherine Casey,2009; Buchanan and Huczynski 2001; Wilson 2009)

8.7. Conflict in the Organization “an overview”

Conflict in the society and the in the organization is real and palpable and has wide occurrence.
In simple words, it originates when two people or two groups does not have consensus on an
issue. The concept of conflict in the organization has wide range of applicability as there are a
number of people who harbour various schools of thoughts and often these thoughts do not
match with each other and this give rise to conflict within the organization. In a more definitive
way,conflict in terms of its manifestation in the organization can be defined as ―a process when
one party perceives that the other party has negatively affected or is about to negatively affect,
something the first party comes across‖ (Buchanan,Huczynski 2001:Page No 770).

According to various organization theories, the conflict in an organization has been regarded
differently. The notion of conflict in an organization has been viewed differently in various
models of organizational theories. Some models advocates the fact that the conflict in an
organization is not acceptable and should be eradicated with compliance and controlling
measures while some other suggests that the conflict in the organizational activity is normal
part(Buchanan,Huczynski 2001). Additionally, some researchers believe that the occurrence of

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conflict in the organizational activity can be latent that is it can be present but does not visible
when there are different views of the employees working in the organization but is not acted
upon and on the contrary, it can be manifested when people begin to realise their different
inclinations. (Fulop,Gosling,Green,Linstead,Richards 2004). Conflict often involve power
relations as people involved in the conflicts often resort to power and political measures to
justify their ends(Glinow and Shane 2005).

8.8. Frameworks of Conflicts

According to various authors, there are mainly four frameworks or models of reference on
conflict (Buchanan, Huczynski 2001, Fulop, Gosling, Green, Linstead, Richards 2004).

The first framework is based on the unitarist approach to conflict which is very basic and has
some origins in scientific management theories of Frederick Taylor (1911). This perspective of
conflict projects it as one unit in which each and every individual strives for a common goal
ascertained by the organization.

The second aspect is the pluralist view which considers the organization diversified where
people try to achieve their varied goals. In this view the conflict in the organization is obvious.
This view regards the opinion that conflict occurs due to various factors termed as ―pressure
points‖ which are the reasons of conflict occurrence in an organization are different needs and
interests of people, different sizes of the office, lack of proper leaderships, titles, jobs etc.

The third dimension of the conflict is the interactionist frame or model which opines that the
conflict in the organization can be considered as positive energy source which can enhances the
efficiency of the employee. But one fact which holds in this model is that the amount of the
conflict in the organization should be optimal, it should be on the threshold level where it can not
hamper the performance of the employee and for this the managers of the organization are
responsible.

Lastly, the fourth model is the radical way of approaching the conflict in which the work place is
seen as a stage where the dispute arises between the managers and the employee (two
stakeholders). In this view the concept of occurrence of conflict is inevitable. This model also
underpins the notion of exploitation of employees by the managers in order to maximise the
profits.

8.9. Sources of Conflicts

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The notion of conflict occurring in the organization has been further studied by a number of
researchers that suggests various sources of the conflicts (Glinow and Shane 2005). They suggest
five different sources of conflicts.

The first source of conflict is incompatible goals where one person‘s or group goals intersect
with that of the other. This is the main underlying source of conflicts that is being reported in
various organizations.

The second source of conflict comes into play when there is difference in backgrounds, beliefs
and values. The people working within an organization when they have varied beliefs and
differentiation they often tend to fall into conflict. There have been a number of cases reported in
the past where cultural differences led to the failure of the mergers. For example the failure of
Daimler- Chrysler where because of different cultural beliefs of their employees the merger
eventually failed (Camerer, Weber 2003).

Furthermore, the third source can be task interdependence where the same task is performed by a
number of people and conflict occurs when the reward is shared that is dependent upon the
efficiency of the employee.

Fourth source of conflict is the scarce resources or when the resources are sporadic and it must
be utilised by the employee. As resources are less and each and every person must use it
eventually, conflict happens because of the competition. The significant example of this case is
the conflict that arose between the pilots of Air Canada and the pilots of Canadian Airlines when
the former acquired the latter. The underlying difference there was the seniority level. The pilots
of the Canadian Airlines were not getting that seniority level which their counterparts were
having. The conflict in this case would have not taken place if everyone would have got the same
seniority level (Glinow and McShane 2005).

Fifth factor that corroborates conflict in the organization is the ambiguous rules or when the
employees working in the organization are not clearly told the rules of the organization. The
employees do not know what to expect from each other and also interference of goals or interest
occurs between different parties. This also involves the usage of political measures by the
employees.(Glinow and McShane,2005).

8.10. Effects and Management of Conflicts

The conflict in the organization has some positive as well some negative aspects. According to
some of the theorists it can have various strengths and weaknesses
(Fulop,Gosling,Green,Linstead,Richards ,2004; Glinow and Shane 2005). It can foster action

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among the employees within the organization, promotes self-evaluation thereby, improving the
quality of decision making, can lead to a healthy competition between the workers of the
organization. These kinds of positive aspect of conflict can be termed as the generative conflict
where it enhances the performance of the employees and also contributes in the development of
coordination between the workers and is regarded as the constructive force in the organizational
activity. On the contrary, it can be lethal for the organizations if not dealt with properly. It can
even cause death of the organizations or firms, development of lack of trust between the
employees of the organization, lack of decision making etc.(Catherine Casey, Lecture 7,2009)

The concept of conflict in an organization can be dangerous if not measured correctly. However,
various analysts have this opinion that it can be kept an optimal level where it helps in a positive
way for the organizations. However, these conflicts arising in an organization can be managed
through two different approaches. One is the radical way of approach which is the systematic
approach in which the root of the conflict is analysed and then proper diagnosis of that cause is
done and then further any options are considered and then the action on the plan is done. The
second is political approach in which the two stakeholders use political approach to reach their
preferred goals. Out of these two rational ways of approach is considered more appropriate
measure to curb the existence of the conflicts in the organization.(Catherine Casey,2009;
Gabor,1976).

Self-Test Exercises

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Bibliography

 Richard D. Daft (2013), Organization Theory and Design (11 th ed.), Mason, OH:
South-Western, Cengage Learning.
 Shafritz, Jay, Ott, Steven, and Young Suk Jang. 2005. Classics of Organization
Theory. 6th edition.
 Miles, J. A. (2014). New Directions in Management and Organization Theory.
Newcastle upon Tyne: Cambridge Scholars Publishing
 Stanford, N. (2007). The Economist Guide to Organization Design: Creating High
Performance and Adaptable Enterprises. London:
 Richard m. Hodgets& Donald F. Kuralko, ―Management,‖ Harcount Brace Jovanovich
publishers, 1991, third ed.

 Robert N. Lussier, Management: concepts, Applications, and skil development, ―South

western college publishing, 1997.

 Samul C.Certo, ―Principles of Modern Management‖, Allyn and Bacon Inc., boston,
1986.

 Y.K Bushan, ―Fundamentals of business Organization and Management‖, Sultan chand

& sons, New Delhi.

Note

Module Compilation and Additional Lectures Notes: Adewale Adeniyi-Kie

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