Organizations and

Organization Theory
Chapter

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 Learning objectives for the Module

1. Introduce the concepts of organization

2. Explore the nature of organizations and organization theory.
3. Provide an overview of organization theory, its design and
configuration.

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 What is an Organization?

 Social entities that are goal-directed

 Designed as deliberately structured and coordinated
activity systems
 Linked to the external environment
 Includes large multinational corporations, family owned
businesses as well as nonprofits

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 Importance of Organizations

• Organizations are a means to an end

• The corporation has played a significant role in the last 100 years
• Produce goods and services efficiently
• Facilitate innovation
• Adapt to and influence a changing environment
• Create value for owners, customers, and employees
• Accommodate ongoing challenges of diversity, ethics, and the
motivation and coordination of employees

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The Importance of Organizations
 Organization Theory in Action
• Current Challenges
– Globalization
– Intense Competition
– Ethics and Social Responsibility
– Speed of Responsiveness
– The Digital Workplace
– Diversity
• 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
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Ambami Family
The Godrejs
The Mittal’s
Birla Family
How Kalyan Jewellers rose to international prominence On the back of trust, transparency and innovation, the Thrissur-based
Kalyan Jewellers has risen to national and international prominence ( Read the article)

TS Kalyanaraman (centre), founder and CMD of Kalyan Jewellers, with sons Ramesh
(left) and Rajesh, who are executive directors. They want revenues to touch around
Rs 15,000 crore in three years
 Refer for more Indian family owned Businesses

https://www.dailyindian.com/2018/04/05/indias-most-powerful-business-families/
The Kochi Metro addressing the Diversity in organization
 Dimensions of Organization Design

Structural Dimensions Contingency Factors

– Formalization – Size
– Specialization – Organizational
– Hierarchy of Authority technology
– Centralization – Environment
– Professionalism – Goals and strategy
– Personnel Ratios
– Culture

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Interacting Structural Dimensions of Design and Contingency Factors

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Organization Chart

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Characteristics of Three Organizations

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 Performance and Effectiveness Outcomes

• Efficiency – amount of resources used to achieve the organization’s

goals
• Effectiveness – the degree to which an organization achieves its
goals
• Stakeholder Approach – balancing the needs of groups in and
outside of the organization that has a stake in the organization’s
performance

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Major Stakeholder Groups and What They Expect

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 The Evolution of Organization Theory and Design

Historical perspectives provide insight into

how organization design and management
practices have varied over time in response
to changes in society.

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 Historical Perspectives
• Efficiency is Everything
– Scientific Management: Pioneered by Frederick Winslow Taylor
• How to Get Organized
– Administrative Principles
• Contributed to Bureaucratic Organizations
• What about People?
– Hawthorne Studies
• Can Bureaucracies Be Flexible?
– Flexible and lean; focused on service, quality, and engaged employees
(1908s)
• It All Depends: Key Contingencies
– Contingency: there is no “one best way”

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 A brief background to organization configuration

• In his 1979 book ‘The Structuring of Organizations’ Canadian management scientist Henry
Mintzberg indicates how organizations should be structured.
• In this book, he lays the foundation for various classifications of organizations, known as the
Henry Mintzberg Organizational Configurations. 
• Henry Mintzberg is an authority in the field of organizational structures and design.
The Fly :
• Henry Mintzberg bases his organizational structure and design on the ‘fly’; a model that visually
resembles the head and eyes of a fly. Every organization consists of six components;
1.The strategic apex (Top management),
2.Middle line (Middle management),
3.Operating core (Executive level),
4.Support staff (Staff organizations that play a supporting role),
5.Technostructure (Technological support of an organization) and
6.The ideology that characterizes an organization's culture.
 Mitzberg’s Organizational Types

 Mintzberg proposed that the five parts could fit together in any
type of organization
 In real-life organizations, the five parts are interrelated and often
serve more than one function 23
Henry Mintzberg (1992, 2009) suggests that organizations can be differentiated along three
basic dimensions:
(1) the key part of the organization, that is, the part of the organization that plays the major
role in determining its success or failure

(2) the prime coordinating mechanism, that is, the major method the organization uses to
coordinate its activities; and

(3) the type of decentralization used, that is, the extent to which the organization involves
subordinates in the decision-making process.

Operating Core: The people Techno-structure: This

directly involved in the The Strategic Apex: This essentially refers to the
production activities of caters to the needs of the analysts who are involved in
products and/or services people involved in planning, designing and
constitute the operating controlling the organization. making amendments to the
core. operating core.

Ideology: The unique Support Staff: The experts

traditions practiced by the who support the
organization and the organization outside the
existent beliefs constitute realms of the operating core
the Ideology. activities.
 Organic vs. Mechanistic
• Mechanistic – characterized by machine-like standard rules
and procedures with clear authority
• Organic – design of organization is looser, free-flowing,
and adaptive.
Depends upon:

– Structure
– Tasks/Roles
– System Formality
– Communication
– Hierarchy versus Collaboration
 Mechanistic vs Organic structures
• Mechanistic organization is “the Organic organization is characterized by
organization is hierarchical and “(1)Flatness: communications and
bureaucratic. interactions are horizontal,
• It is characterized by its (1) Highly
centralized authority, (2) (2)Low specialization: knowledge
Formalized procedures and resides wherever it is most useful, and
practices, and (3) Specialized
functions. (3)Decentralization:
• Mechanistic organization is A great deal of formal and
relatively easier and simpler to
informal participation in decision
organize, but rapid change is very
challenging. Contrast to organic making.”
organization.”
Organic and Mechanistic Designs

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 Contemporary Ideas
• Today’s organizations are still imprinted with hierarchical,
formalized mechanistic approach
• Open Systems are adaptive and interact with the
environment
• Chaos theory states that relationships in complex systems
are nonlinear
– Chaos operates with some predictability which is the challenge
of today’s managers

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 Framework for the module
• Examine specific characteristics of organizations
• Examine the nature of and relationships among groups and
departments
• Organizational behavior is the micro approach
• Organization theory is the macro examination
• Organization theory is concerned with the big picture of the
organization and its major departments

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