1· 1

0ryanìzatìonal Theory,
0esìyn, and Chanye
Fìfth Edìtìon
6creth R. 1ones
Chapter 1
DrganIzatIons and
DrganIzatIonaI
EffectIveness

ACT!vE LEARN!NC CREDO
(adapted from Confucius)
When ! hear it, ! forget.
When ! hear and see it, ! remember a
little.
When ! hear, see and ask questions
about it or discuss it with someone
else, ! begin to understand.
When ! hear, see, discuss, and do it, !
acquire knowledge and skill.
When ! teach it to another, ! master.
1· 3
Teaching and Examination
Nethods
1. Class participation and case analysis
(20%): have your names clearly written in front of
you!!
2. Analysis of the organization (40%)
3. Exam (short essay questions, multiple
choice, True·False Ouestions) (40% =
20+20)
4. NOT CONPULSORY!!! Presenting
(teaching) an article on theoretical
aspects of organization. (max 20 bonus
points)
1· 4
Learning Objectives
1. Explain why organizations exist and
the purposes they serve
2. Describe the relationship between
organizational theory and
organizational design and change,
and differentiate between
organizational structure and culture
1· S
Learning Objectives (cont.)
3. Understand how managers can utilize
the principles of organizational theory
to design and change their
organizations to increase organizational
effectiveness
4. !dentify the three principal ways in
which managers assess and measure
organizational effectiveness
S. Appreciate the way in which several
contingency factors influence the
design of organizations
1· 6
What is an Organization?
"9ganization: a tool used by people
to coordinate their actions to obtain
something they desire or value
Ent9ep9eneu9ship: the process by
which people recognize opportunities
to satisfy needs, and then gather and
use resources to meet those needs
]eff Bezos and
Amazon.com
1· 7
How Does an Organization
Create value?
value creation takes place at three
stages: input, conversion and output
nputs: include human resources,
information and knowledge, raw
materials, money and capital
onve9sion: the way the organization
uses human resources and technology to
transform inputs into outputs
"utput: finished products and services
that the organization releases to its
environment
1· 8
Figure 1 - 1: How An Organization
Creates value
1· 3
Why Do Organizations Exist?
To increase specialization and the
division of labor
To use large·scale technology
Economies of scale: cost savings that
result when goods and services are
produced in large volume
Economies of scope: cost savings that
result when an organization is able to use
underutilized resources more effectively
because they can be shared across
several different products or tasks
1·10
Why Do Organizations Exist?
(cont.)
To manage the external environment
Pressures from the external environment
make organizations the favored mode for
organizing productive resources
To economize on transaction costs
T9ansaction costs: the costs associated
with negotiating, monitoring, and
governing exchanges between people
who must cooperate
To exert power and control
1·11
Figure 1·3: Why organizations
exist
Cive examples
when
organizations
have not
served you
well?
1·12
Organizational Theory, Design, and
Change: Some Definitions
"9ganizational theo9: the study of
how organizations function and how
they affect and are affected by the
environment in which they operate
"9ganizational st9uctu9e: the formal
system of task and authority
relationships that control how people
coordinate their actions and use
resources to achieve organizational goals
1· Copyright 2007 Prentice Hall 13
Some Definitions (cont.)
"9ganizational cultu9e: the set of
shared values and norms that control
organizational members' interactions
with each other and with suppliers,
customers, and other people outside the
organization
"9ganizational design: the process
by which managers select and manage
aspects of structure and culture so that
an organization can control the activities
necessary to achieve its goals
1·14
Some Definitions (cont.)
"9ganizational change: the process
by which organizations move from
their present state to some desired
future state to increase their
effectiveness
1·1S
Figure 1·4: Relationships Among
Organizational Theory, Structure, Culture,
Design and Change
1·16
!mportance of Organizational
Design and Change
Dealing with contingencies
Contingencies are events that might occur
and must be planned for
Caining competitive advantage
The ability to outperform other companies
because of the capacity to create more
value from resources
o9e competences: skills and abilities in
value creation
&t9ateg: pattern of decisions and
actions involving core competences that
produces a competitive advantage
1·17
!mportance of Organizational
Design and Change (cont.)
Nanaging diversity
Differences in the race, gender, and
national origin of organizational members
have important implications for
organizational culture and effectiveness
Promoting efficiency, speed, and
innovation
The better organizations function, the
more value they create
1·18
Consequences of Poor
Organizational Design
Decline of the organization
Talented employees leave to take
positions in growing organizations
Resources become harder to acquire
Resulting crisis impels managers to
change organizational structure and
culture
1·13
How Do Nanagers Neasure
Organizational Effectiveness?
ont9ol: external resource approach
Nethod evaluates how effectively an
organization manages and controls its external
environment
nnovation: internal system approach
Nethod allows managers to evaluate how
effectively an organization functions and
operates
Efficienc: technical approach
Nethod evaluates how efficiently an
organization converts a fixed amount of
resources into finished goods and services
1·20
Table 1·1: Approaches to
Neasuring Effectiveness
1· Copyright 2007 Prentice Hall 21
Neasuring Effectiveness:
Organizational Coals
"fficial goals: guiding principles that
the organization formally states in its
annual report and in other public
documents
Nission: goals that explain why the
organization exists and what it should
be doing
"pe9ative goals: specific long· and
short·term goals that guide managers
and employees as they perform the
work of the organization
1·22
Figure 1·S: Plan of the Book
1·23
Figure 1·S: Plan of the Book
(cont.)
1·24
Figure 1·S: Plan of the Book
(cont.)

Notivational video
UN!NERCO
Reflections
2S

ASS!CNENENT
Each student selects a company to
study throughout the semester
Each chapter requires the student to
collect and analyze company
information for a report to be
submitted at the end of the semester
Sources:
www.researchnavigator.com (textbook)
On·line resources in our library
26



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