Chapter One

Organizations and
Organization Theory

1
Organization Theory in Action
Topics
Current Challenges
– Globalization
– Ethics and Social Responsibility
– Speed of Responsiveness
– The Digital Workplace
– Diversity

2
 What is an Organization?
Definition
Types of Organizations
Importance of Organizations
– Bring together resources to achieve desired goals
and outcomes
– Produce goods and services efficiently
– Facilitate innovation
– Use modern manufacturing and information
technologies

3
Importance of Organizations
Importance of Organizations (cont’d)
– 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

4
Perspectives on Organizations
Open Systems
Organizational Configuration
– Technical Core
– Technical Support
– Administrative Support
– Top Management
– Middle Management

5
 An Open System
and Its Subsystems
Environment

Raw Materials Transformation

People
Information Products
resources Input Output and
Financial Services
resources
Process

Production,
Boundary Boundary
Subsystems Spanning
Maintenance,
Spanning
Adaptation,
Management

6
Dimensions of Organization Design
Structural Dimensions

Contextual Dimensions

Performance and Effectiveness Outcomes

7
 Five Basic Parts of an
Organization
Top
Management

Technical Middle Administrative

Support Management Support

Technical Core

Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297;
and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.

8
 Organization Chart Illustrating the Hierarchy of Authority
for a Community Job Training Program

Board of
Directors

Advisory Executive
Committee Committee

Level 1 Executive
Director

Level 2 Assistant Executive Director Assistant Executive Director

for Community Service for Human Services

Level 3 Director Director Director Director Director Director Director

Economic Dev. Reg. Planning Housing Criminal Justice Finance AAA CETA

Public Asst. Director Lead Lead

Info Finance Counsel Counsel
Coord.

CETA CETA CETA

CETA
Couns. Couns. Couns.
Intake
Program Contract Program Devs. Devs. Devs.
&
Housing Alcohol Spec. Fiscal Planner Title II Youth Title II D CETA
Level 4 Coord. Coord.
Account. AAA Manager AAA
Orient
ABC IV &VI&VII Planner

Records
Level 5 Secretary Clerk Secretary Adm. Asst Payroll Clerk Secretary MIS Specialist Staff Clerk Adm. Asst.

9
 Goals and
Strategy
Environment Size

Culture Technology
Structure
1. Formalization
2. Specialization
3. Hierarchy of Authority
4. Centralization
5. Professionalism
6. Personnel Ratios

10
 Characteristics of Three
Organizations
100
Formalization

Specialization
50
Centralization

Configuration
(%nonworkflow 0
W.L. Gore & Wal-Mart State Arts
personnel)
Associates Agency

TECHNOLOGY Manufacturing Retailing Government

Service
SIZE (#employees) 6,000 250,000 35

11
 The Evolution of Organization
Theory and Design
Historical Perspectives

Contemporary Organization Design

Effective Performance versus the Learning

Organization

12
 Two Organization Design
Approaches
Mechanical System Design Natural System Design

Vertical Horizontal
Structure Structure

Routine Rigid Organizational Change Empowered Adaptive

Tasks Culture in the Service of Roles Culture
Performance

Formal Competitive Shared

Collaborative
Systems Strategy Information Strategy

Stable Environment Turbulent Environment

Efficient Performance Learning Organization

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)

13
Workbook
Activity

Organizational Dimensions

High Formalization 1-4 5-6 7 - 10 Low Formalization

High Specialization 1-4 5-6 7 - 10 Low Specialization
Tall Hierarchy 1-4 5-6 7 - 10 Flat Hierarchy
Product Technology 1-4 5-6 7 - 10 Service Technology
Stable Environment 1-4 5-6 7 - 10 Unstable Environment
Strong Culture 1-4 5-6 7 - 10 Weak Culture
High Professionalism 1-4 5-6 7 - 10 Low Professionalism
Well-Defined Goals 1-4 5-6 7 - 10 Poorly-Defined Goals
Small Size 1-4 5-6 7 - 10 Large Size
Modern 1-4 5-6 7 - 10 Postmodern

14
Workbook
Activity Xerox
Use for 1959-1990, Use for 1990-present

High Formalization 1-4 5-6 7 - 10 Low Formalization

High Specialization 1-4 5-6 7 - 10 Low Specialization
Tall Hierarchy 1-4 5-6 7 - 10 Flat Hierarchy
Product Technology 1-4 5-6 7 - 10 Service Technology
Stable Environment 1-4 5-6 7 - 10 Unstable Environment
Strong Culture 1-4 5-6 7 - 10 Weak Culture
High Professionalism 1-4 5-6 7 - 10 Low Professionalism
Well-Defined Goals 1-4 5-6 7 - 10 Goals Not Defined
Small Size 1-4 5-6 7 - 10 Large Size
Modern 1-4 5-6 7 - 10 Postmodern

15
 SS Technologies (A & D)
Incorporated in 1992 (Canada)
$6.3 Million Revenue in 1993
Integrated engineering and construction
company
Expertise in factory automation
Software and hardware
33% per year growth over last three years
PG – 64%, ISG – 30%
Anticipating further growth (30 to 120
employees) 16
 SS Tech. Org. Chart
O w n e r
R ic k B r o c k

P r e s id e n t
K e it h P r i t c h a r d

P r o d u c t G r o u p I n t e g r a t e d S y s
G r o u p

M a r k e t i n gT e c h n i cS a y l s t e m s P A r no aj e l yc st t M a
I a n S u t t ie M a r k S c h V w i v a i er t n z n e

17
 Context
How well is SST structured to achieve future
goals?
Consultant Hired
Appropriate Organizational Design
Culture, people, layers of mgt., admin. Systems
Are marketing opportunities being missed?
Employee compensation
Formalized measurement system directly tied to
strategies of firm
18
 Products Group
Direct Link Interface PICS (Programmable
Cards Industrial Control
PLCs Simulator)
Links office To simulate factory
computers with environment on a PC
factory computers Examine functioning
Enhances of PLC software
communication and Debugging, retooling,
control employee training

19
 Integrated Systems Group
Consulting, Systems engineering, Customer
Support
Employed Computer professionals and engineers
– for complex factory floor systems
Data collection, custom control, batching
systems, diagnostic systems, PLC simulation
Implemented and commissioned packaged
software
Provides Project Management
Customers: Industrial manufacturers, institutional
organisations
20
 Key Success Factors
PG ISG
Quality product On-time project
performance
completion
Quick replacement of
defectives Within budget, high
Pace of New Product quality
Development Quality of employees
Product awareness – Excellent customer
systems integration
feedback
engrs.
Effective/efficient
distribution network
21
 Environment
Early 1990s Recession in North America
Maintaining margins by downsizing,
reducing costs
Outsourcing engineering systems
SST’s products helped firms meet these
objectives
SST benefited from recession (partly)

22
 SST Revenues

10000000

8000000
Y ear
6000000 PG
Revenues

4000000 IS G
To ta l
2000000

0 1990 1991 1992 1993 1994

1 2 3 4 5
Ye a r

23
 SST’s Org. Structure
Flat organisational structure – to respond quickly
to environmental change
Doors left open (Open door policy)
Consultative decision making
Empowerment – ‘ownership’ of decisions
Projects – individuals and teams (self-managed)
Project scheduling, budgeting, execution up to
team members
Minimum overhead resources (mktg & admin)
4 mktg people, 2 admin, shared controller

24
 Owner
Rick Brock

President
Keith Pritchard

Product Group Integrated Systems

Group

Marketing Systems Analyst Project Manager

Technical Mark Schwartz Vivienne Ojalla
Ian Suttie
25
 Rick Brock
CEO of SST
Eight yrs as President of Sutherland-
Schultz
Nurtured PG and ISG
Continued involvement
Extensive Knowledge of Bus. & Mgt.

26
 Owner
Rick Brock

President
Keith Pritchard

Product Group Integrated Systems

Group

Marketing Systems Analyst Project Manager

Technical Mark Schwartz Vivienne Ojalla
Ian Suttie
27
 Keith Pritchard
President of SST
Risen through the company ranks
Developed PICS product ($500K in
revenues)
Skills in mgt. and technical areas –
excellent leadership

28
 Owner
Rick Brock

President
Keith Pritchard

Product Group Integrated Systems

Group

Marketing Systems Analyst Project Manager

Technical Mark Schwartz Vivienne Ojalla
Ian Suttie
29
 PG Resources
Linda Oliver – Lead Programmer for PICS
Bruce Andrews – Development PICS
Lorne Diebel – Communications Guru
Jonathan Malton – Hardware designer
– Highly motivated, highly competent, leaders in
their respective fields, worked well together

30
 Owner
Rick Brock

President
Keith Pritchard

Product Group Integrated Systems

Group

Marketing Systems Analyst Project Manager

Technical Mark Schwartz Vivienne Ojalla
Ian Suttie
31
 Marketing Team
Well rounded, both marketing and
technical people, stretched to the limit
Ian Suttie – design, review, mktg., distbn.,
and sales
Colleen Richmond – trade shows,
promotions, advertising
Steve Blakely – Inside Sales
Colleen Dietrich – Analyst
No formal audit of customer satisfaction
32
 Owner
Rick Brock

President
Keith Pritchard

Product Group Integrated Systems

Group

Marketing Systems Analyst Project Manager

Technical Mark Schwartz Vivienne Ojalla
Ian Suttie
33
 ISG Resources
Technically competent, motivated, loyal
Mark Schwarz – Systems Analyst, did
most of the marketing, business
development, scheduling personnel
Vivienne Ojala – Project Manager,
excellent with customers, training and
developing people,
(Who’s the boss?)
Wide area of expertise – Team
Flexible and innovative
34
 Challenges for future
Unclear goals and strategies – despite frequent
meetings with Brock
Hierarchical structure – Suttie; Schwartz & Ojalla
Physical space
Compensation – bonuses, performance
measurement, low salary, stock options
Partnering – for retention
High commitment, loved work environment, no
politics, flex. work hours, ‘overtime!!’
Informal induction, Informal appraisals

35
 Recommendations
Third group – focused around customers – linking
PG and ISG
More consulting/service oriented
Increase awareness of products internally across
groups – to generate better solutions
FORMALISATION!!
Clearer Hierarchy

36
 Recommendations
Enhance Role clarity – specialisation
Profit Sharing plans – depending on
individual, department, and organisational
objective accomplishment
Stock Options
Foster continued commitment to culture –
stories, rituals, symbols etc.

37