Session One

OB-II
Prof. Manish Kumar

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Why Study OB-II
 It 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.
 What is an Organization
 Why an Organization Exists – Relevance for the Society
 How an Organization Exists – The Organization of an
Organization

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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
 What is the link if any?

 Includes large multinational corporations, family owned

businesses as well as nonprofits

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Relevance of Organizations for Society

 Brings together resources to achieve desired goals and

outcomes
 Produces goods and services efficiently
 Facilitates innovation
 Uses modern manufacturing and information technologies
 Adapts to and influences a changing environment
 Creates value for owners, customers and employees
 Accommodates ongoing challenges of diversity, ethics, and the
motivation and coordination of employees

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How an Organization Exists? The
Organization of an Organization
Structural (internal) Contextual Dimensions
Dimensions (shape structural
 Formalization dimensions)
 Specialization  Size
 Hierarchy of authority
 Organizational technology
 Centralization
 Environment
 Professionalism
 Personnel Ratios  Goals and strategy
 Culture

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Dimensions of Organizations (Contd..)
 Formalization: amount of written documentation in the
organization; no. of pages
 Specialization: degree to which organizational tasks are
subdivided into separate jobs; division of labour
 Hierarchy of authority: who reports to whom and the span of
control for each manager
 Centralization: hierarchical level that has authority to make a
decision; purchasing equipment, goal setting, hire and fire….
 Professionalism: level of education (avg. number of years of
education of employees) and training of employees
 Personnel ratios: deployment of people to various functions
and departments

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Dimensions of Organizations (Contd..)
 Size: typically as no. of employees or as total sales or assets
 Organizational Technology: tools, techniques, and actions used
to transform inputs into outputs; e.g., classroom as technology
 The environment: all elements outside the boundary of the
organization
 Goals as enduring statement of company intent and Strategy
as plan of action describing resource allocation and activities
for dealing with the environment and reaching the
organization’s goals
 Culture: underlying set of key values, beliefs, understandings,
and norms shared by employees

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Interacting Contextual and Structural
Dimensions of Organization Design

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Organizational Personalities? -
Characteristics of Three Organizations

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Purpose of Organizations? 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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Who Constitutes an Organization?
Internal and External Environment

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Challenges Facing Organizations Today
 Current Challenges
 Globalization
 Connectivity, outsourcing, strategic partnering, cross-border acquisitions,
emergence of developing economies
 Intense Competition
 Fluctuating cost advantage, can’t simply pass the increased costs to
consumers
 Ethics and Social Responsibility
 Questionable business practices; spilled over to non-profits, governments
and academics too
 Speed and Responsiveness
 Maruti phasing out 800 model; crisis management
 The Digital Workplace
 Concepts of teams, communication, and space arrangements
 Diversity
 Maintaining a strong culture while supporting diversity

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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
(1980s)
 Don’t Forget the Environment
 Should all organizations be treated as similar? Contingency: there is no
“one best way”; fit b/w structure and external environment
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Mitzberg’s Organizational Types
 Entrepreneurial
 Machine
 Professional
 Diversified
 Adhocracy
• Mitzberg 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.

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Contemporary Ideas
 Today’s organizations are still imprinted with
hierarchy, bureaucracy and formalization
 As organizations become large and complex, the
orderly and predictable role of managers in the
industrial age must change
 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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Efficient Performance Versus The
Learning Organization
 Organizations require adaptability. Many
organizations are focused on building learning
organizations which promotes communication and
collaboration
→ From Vertical to Horizontal Structure
→ From Routine Tasks to Empowered Roles
→ From Formal Control Systems to Shared Information
→ From Competitive to Collaborative Strategy
→ From Rigid to Adaptive Culture

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Two Organization Design Approaches

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 Strategy, Organization Design,
and Effectiveness

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Strategy Direction and Organization
Design

Organization
al goal - a
desired state of
affairs that an
organization
attempts to reach

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 Organizational Purpose

Strategic intent - organization’s energies and resources are

directed toward a focused, unifying, and compelling goal

Operating Goals
• Overall Performance
• Mission • Resources
• Competitive Advantage • Market
• Core Competence • Employee Development
• Innovation and Change
• Productivity

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Mission Statement for Machias Savings
Bank

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Organizational Operating Goals

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The Importance of Goals

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Selecting Strategy and Design

 A strategy is a plan for interacting with the competitive

environment

 Managers must select specific strategy design

 Models exist to aid in formulating strategy:

 Porter’s Five Forces

 Miles and Snow’s Strategy Typology

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 Porter’s Competitive Strategies

Differentiation strategy – to distinguish products or

services from others in the industry

Low-Cost Leadership – increase market share by

keeping costs low compared to competitors

Organizations may choose to focus broad or narrow in

reaching multiple markets.
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Porter’s Competitive Strategies

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 Miles and Snow’s Strategy Typology
Managers should seek to formulate strategy that matches the demands of the
external environment
 Prospector
 Learning orientation; flexible, fluid, decentralized structure
 Values creativity, risk-taking, and innovation
 Defender
 Efficiency orientation; centralized authority and tight cost control
 Emphasis on production efficiency, low overhead
 Analyzer
 Balances efficiency and learning; tight cost control with flexibility and
adaptability
 Emphasis on creativity, research, risk-taking for innovation
 Reactor
 No clear organizational approach; design characteristics may shift abruptly
depending on current needs

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How Strategy Affects Organization
Design

Strategy impacts internal

organization characteristics
Managers must design the organization to
support the firm’s competitive strategy

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Organizati
on Design
Outcomes
of
Strategy
Contingency Factors
Affecting Organization Design

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Assessing Organizational Effectiveness
Effectiveness takes into consideration a range of variables
at both the organizational and departmental levels.

Efficiency relates to the working of the organization and

amount of resources used to produce output.
Measuring Effectiveness:
→ The Goal Approach
→ The Resource-Based Approach
→ The Internal Process Approach
→ The Strategic Constituents Approach
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Indicators of Organizational Effectiveness

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Approaches to Measuring
Organizational Effectiveness

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An Integrated Effectiveness Model

 Competing values model tries to balance concern with

various parts of the organization

 The human relations emphasis incorporates the values

of an internal focus and flexible structure

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Four Approaches to Effectiveness
Values

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Effectiveness Values for
Two Organizations

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Design Essentials
 Organization exist for a purpose
 Strategic
intent includes competitive advantage and
core competence
 Strategies may include many techniques
 There are models to aid in the development of
strategy
 Organizational effectiveness must be assessed
 No approach is suitable for every organization

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