Chapter One

Organizations and
Organization Theory

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 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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 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
• Bring together resources to achieve desired goals and
outcomes
• Produce goods and services efficiently
• Facilitate innovation
• Use modern manufacturing and information technologies
• 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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 Dimensions of
Organization Design
Structural Dimensions Contextual Dimensions
– Formalization – Size
– Specialization – Organizational
– Hierarchy of authority technology
– Centralization – Environment
– Professionalism – Goals and strategy
– Personnel Ratios
– Culture

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 Interacting Contextual and Structural
Dimensions of Organization Design

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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)
• Don’t Forget the Environment
– Contingency: there is no “one best way”

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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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 Framework for the Book
• 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
• Meso theory is the integration of both the macro and
micro which is the approach of this text

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