Chapter Eight

Organization Size, Life Cycle, and Control

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-1

Differences Between Large and Small Organizations
• LARGE
– Economies of scale – Global reach – Vertical hierarchy – Mechanistic – Complex – Stable market – “Organization men”
Source: Based on John A. Byrne, “Is Your Company Too Big?” Business Week, 27 March 1989, 84-94.

• SMALL
– – – – – – – – Responsive Flexible Regional reach Flat structure Organic Simple Niche finding Entrepreneurs
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©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

Organizational Life Cycle
Large
Development of teamwork
Addition of internal systems

Streamlining, small-company thinking Continued maturity Decline

S I Z E

Provision of clear direction Crisis: Need to deal with too much red tape

Crisis: Need for revitalization

Creativity Crisis: Need for leadership

Crisis: Need for delegation with control

1. Small Entrepreneurial Stage

2. Collectivity Stage

3. Formalization Stage

4. Elaboration Stage

ORGANIZATION STAGES OF DEVELOPMENT
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational ©2000 Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary South-Western College Publishing Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner, Cincinnati, Ohio “Evolution and Revolution as Organizations Grow,” Harvard Business Daft, Organizational Theory and Design, 7/e Review 50 (July-August 1972): 37-46.

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Organization Characteristics During Four Stages of Life Cycle
1. Entrepreneurial Characteristic Structure Products or services Reward and control systems Innovation
Survival

2. Collectivity Prebureaucratic
Mostly informal, some procedures Major product or service with variations Personal, contribution to success By employees and managers Growth

3. Formalization Bureaucratic
Formal procedures, division of labor, specialties added Line of products or services Impersonal, formalized systems

4. Elaboration Very Bureaucratic
Teamwork within bureaucracy, smallcompany thinking Multiple product or services lines Extensive, tailored to product and department By institutionalized R&D Reputation, complete organization Team approach, attack bureaucracy

Nonbureaucratic
Informal, oneperson show Single product or service Personal, paternalistic

By owner-manager

By separate innovation group Internal stability, market expansion Delegation with control

Goal Top Management Style
Individualistic, entrepreneurial Charismatic, direction-giving

Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business Review 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “Organizational Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-4

Weber’s Dimensions of Bureaucracy and Bases of Organizational Authority
• BUREAUCRACY
1. 1. Rules and procedures 2. Specialization and division of labor 3. Hierarchy of authority 4. Technically qualified personnel 5. Separate position and incumbent 6. Written communications and records

LEGITIMATE BASES OF AUTHORITY
1. Rational-legal
2. Traditional

3. Charismatic

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-5

Percentage of Personnel Allocated to Administrative and Support Activities
Line employees
75

Percentage of Employees

50

Top administrators
Professional staff

25

0

Clerical
Small Large

Organization Size
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-6

Three Organizational Control Strategies
TYPE
Bureaucratic Market Clan
Source: Based upon William G. Ouchi, “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science 25 (1979): 833-48.

REQUIREMENTS
Rules, standards, hierarchy, legitimate authority Prices, competition, exchange relationship Tradition, shared values and beliefs, trust
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-7

Management Control Systems Used as Part of Bureaucratic Control
Subsystem Budget
Statistical reports Reward systems

Content and Frequency
Financial, resource expenditures, monthly Non-financial outputs, weekly or monthly, often computer-based Annual evaluation of managers based on department goals and performance

Operating Rules and regulations, policies that prescribe correct behavior, procedures
continuous
Source: Based on Richard L. Daft and Norman B. Macintosh, “The Nature and Use of Formal Control Systems for Management Control and Strategy Implementation,” Journal of Management 10 (1984): 43-66.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-8

Major Perspectives of the Balanced Scorecard
Financial

Do actions contribute to improving financial performance?
Examples of measures: profits, return on investment
Customers Internal Business Processes

How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty

Mission Strategy Goals

Does the chain of internal activities and processes add value for customers and shareholders? Examples of measures: order-rate fulfillment, cost-per-order

Learning and Growth

Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions
Sources: Based on Robert S. Kaplan and David P. Norton, “Using The Balanced Scorecard as a Strategic Management System,” Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, No. 2 (August 1997), 21-27; and Cathy Lazere, “All Together Now,” CFO, February 1998, 28-36.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

8-9

Workbook Activity

Evaluation of Control On the Job
How your boss controls Positives of this control Negatives of this control How you would improve control

Your job responsibilities

1.

2.
3.

4.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

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Workbook Activity

Evaluation of Control At the University
How Prof. A (small class) controls How Prof. B (large class) controls How these controls influence you What you think is a better control

Item

1.

2.
3.

4.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organizational Theory and Design, 7/e

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