HCM 381 Health Care Management

1
HCM 381- Health Care Management

• Chapters 1-5
• Information Overview

2
Ch. 1- Organizations and Org. Theory

• The purpose of Chapter One is to explore the
  nature of organizations and organization theory
  today.
• What is an organization?
• Organizations as diverse as a church, a hospital,
  and IBM have characteristics in common.
• Organizations are social entities that are goal
  directed, are designed as deliberately
  structured and coordinated activity systems, and
  are linked to the external environment.

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Thus,

• An organization is not just a building or a set
  of policies and procedures. An organization is a
  group of people who interact with one another.
• A manager, then, is someone who structures and
  coordinates organizational resources to achieve
  the organizations purpose.

4

• Note that even though work is structured into
  separate departments or sets of activities, most
  organizations today are looking for greater
  horizontal coordination of work activities.
• Boundaries between departments as well as those
  between organizations are becoming more flexible
  and diffuse as companies need to respond quickly
  to environmental changes.

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The importance of organizations

• Organizations as we know them are relatively
  recent - as late as the latter part of the
  1800s, there were few large organizations.
• The industrial revolution and the development of
  large organizations transformed all of society.
• Today, orgs. are central to peoples lives.

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Their importance?

• They bring together resources to achieve desired
  goals and outcomes.
• They produce goods and services efficiently.
• They facilitate innovation.
• They use modern manufacturing and computer based
  technology.
• They adapt to and influence a changing
  environment.
• They create value for owners, customers, and
  employees.
• They accommodate ongoing challenges of diversity,
  ethics, and the motivation and coordination of
  employees.

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The organization as a system

• Open vs. closed systems
• A closed system would not depend on its
  environment it would be autonomous, enclosed,
  and sealed off from the outside world.
• Early organizational studies focused on internal
  systems.
• Early mgt. concepts, including scientific mgt.,
  leadership style, and industrial engineering,
  were closed system approaches which took the
  external environment for granted, assuming it
  would remain stable.

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An open system...

• Must interact with the environment to survive. It
  both consumes resources and exports resources to
  the environment.
• It must continually adapt to the environment. The
  org. must continuously find and obtain needed
  resources, interpret and act on environmental
  changes, dispose of outputs, and control and
  coordinate internal activities in the face of
  environmental disturbances and uncertainty.

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Thus,

• A system is a set of interacting elements that
  acquires inputs from the environment, transforms
  them, and discharges outputs to the external
  environment.
• The need for inputs and outputs reflects
  dependency on the environment.
• Interacting elements mean that people and depts.
  depend on one another and must work together. Can
  this be defined in terms of H.C.?

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An Open System and Its Subsystems
Environment
Transformation Process
Raw Materials People Information
resources Financial resources
Products and Services
Input
Output
Production, Maintenance, Adaptation, Management
Boundary Spanning
Boundary Spanning
Subsystems
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• Note that a system is made up of subsystems, as
  reflected in Exhibit 1.2.
• These subsystems perform various functions
  required for org. survival, i.e. production,
  boundary spanning, maintenance, adaptation, and
  management.

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More on subsystems...

• The production subsystem produces the product and
  service outputs of the organization.
• Boundary subsystems are responsible for exchanges
  with the external environment, and include such
  activities as purchasing supplies or marketing
  products.

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• The maintenance subsystem maintains the smooth
  operation and upkeep of the orgs. physical and
  human elements.
• The adaptive subsystems are responsible for
  organizational change and adaptation.
• Management is responsible for coordinating and
  directing the subsystems of the organization.

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Note that various parts of the org. are designed
to perform subsystem functions.

• Mintzberg suggested that every org. has five
  parts
• The technical core.
• Top management
• Middle management.
• Technical support.
• Administrative support.

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Five Basic Parts of an Organization
Top Management
Technical Support
Administrative Support
Middle Management
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.
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Regarding the technical core

• It includes people who do the basic work of the
  organization.
• It performs the production subsystem function and
  actually produces the product and service outputs
  of the organization.
• This is where the primary transformation from
  inputs to outputs takes place.

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Regarding technical support

• The technical support function helps the org.
  adapt to the environment.
• Technical support is responsible for creating
  innovations in the technical core, helping the
  organization to change and adapt.

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Regarding administrative support

• The admin. support function is responsible for
  the smooth operation and upkeep of the
  organization, including its physical and human
  resources.
• Includes such activities as recruiting and
  hiring, establishing compensation and benefits,
  and employee training and development, as well as
  maintenance activities.

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Regarding management

• Management is responsible for the directing and
  coordinating of other parts of the org.
• Top mgt. provides direction, strategy, goals, and
  policies for the entire org.
• Middle mgt. is responsible for implementation and
  coordination at the departmental level.
• Note that skills, roles, and managerial functions
  will vary by level.

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Continuing...

• An organization can be viewed structurally or
  contextually
• Structural dimensions provide labels to describe
  the internal characteristics of an organization.
• Structural dimensions include the following
• formalization
• specialization
• hierarchy of authority
• centralization
• professionalism
• personnel ratios

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Regarding structural dimensions..

• Formalization pertains to the amount of written
  documentation in the org.
• Specialization is the degree to which org. tasks
  are subdivided into separate jobs.
• Hierarchy of authority describes who reports to
  whom and the span of control for each manager.

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• Centralization refers to the hierarchical level
  that has authority to make a decision.
• Professionalism is the level of formal education
  and training of employees.
• Personnel ratios refer to the deployment of
  people to various functions and departments.

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Contextual Dimensions

• Size (number of people in the organization)
• Organizational technology (the tools, techniques,
  and actions used to transform inputs into
  outputs)
• Environment (all elements outside the boundary of
  the organization)
• Goals and Strategy (the purpose and competitive
  techniques that set the org. apart)
• Culture (underlying set of key values, beliefs,
  understandings, and norms shared by employees)

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• The eleven contextual and structural dimensions
  are interdependent.
• They provide a basis for the measurement and
  analysis of characteristics that cannot be seen
  by the casual observer, and they reveal
  significant information about an organization.

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Performance and Effectiveness Outcomes

• The point of understanding an organization better
  is so that you can design an org. in such a way
  as to achieve high performance and effectiveness.
• Efficiency refers to the amount of resources used
  to achieve the organizations goals.
• Effectiveness is a broader term, meaning the
  degree to which an organization achieves its
  goals.

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The evolution of org. theory and design

• Org. theory is not a collection of facts it is a
  way of thinking about organizations.
• The modern era of mgt. theory began with the
  classical mgt. perspective in the late 19th and
  early 20th century.
• The classical system sought to make organizations
  run like efficient and well-oiled machines.

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The classical perspective...

• Scientific management theory, ala Frederick
  Winslow Taylor
• postulated that decisions about organizations and
  job design should be based on precise, scientific
  study of individual situations.

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The Hawthorne Studies...

• The hierarchical system and bureaucratic
  approaches that developed during the industrial
  revolution remained the primary approach to
  organization design and functioning well into the
  1970s and 1980s.
• The Hawthorne Studies demonstrated that positive
  treatment of employees improved their motivation
  and productivity.
• Led to a host of human relations and behavioral
  approaches.

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By the 1980s...

• New corporate cultures that valued lean staff,
  flexibility, rapid response to the customer,
  motivated employees, caring for customers, and
  quality products.
• Old mgt. forms and mgt. methods are inadequate to
  cope with new problems in the emerging postmodern
  world.
• Contingency theory is the name of the game now.

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Contingency theory...

• Not all organizations are alike.
• The structures and systems that work in one
  setting may not work in another.
• Contingency means that one thing depends on other
  things, and for organizations to be effective,
  there must be a goodness of fit between their
  structure and the conditions in the external
  environment.

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Thus...

• The correct management approach is contingent on
  the organizations situation.
• Todays organizations must shift from a paradigm
  based on mechanical systems to one based on
  natural, biological systems.
• A paradigm is a shared mindset that represents a
  fundamental way of perceiving, conceptualizing,
  and understanding the world.

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More on contemporary organizational design

• Todays organizations and managers are shifting
  from a mindset based on mechanical systems to one
  based on natural and biological systems.
• Many managers are redesigning their companies
  toward something called the learning
  organization.
• The learning organization promotes communication
  and collaboration so that everyone is engaged in
  identifying and solving problems, enabling the
  organization to continuously experiment, improve,
  and increase its capability.

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• The trade off is between efficient performance
  versus a learning environment.
• Put another way, 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 cultures

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Ch. 2- Strategy, Org. Design and Effectiveness

• This chapter will look at strategies top managers
  use to help their organizations achieve
  organizational goals. The chapter will also look
  at the impact of strategy on organization design,
  and how designing the organization to fit
  strategy and other contingencies can lead to
  organizational effectiveness.

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Top Management Role in Organization Direction,
Design, and Effectiveness
External Environment
Organization Design
Opportunities Threats Uncertainty Resource
Availability
Effectiveness Outcomes
Structural Form learning vs.
efficiency Information and control
systems Production technology Human resource
policies, incentives Organizational
culture Interorganizational linkages
Strategic Management
Resources Efficiency Goal attainment Stakeholders
Competing values
Define mission, official goals
Select operational goals, collaborative strategies
CEO, Top Management Team
Internal Environment
Strengths Weaknesses Distinctive
competence Leadership Style Past Performance
Source Adapted from Arie Y. Lewin and Carroll
U. Stephens, Individual Properties of the CEO as
Determinants of Organization Design, unpublished
manuscript, Duke University, 1990 and Arie Y.
Lewin and Carroll U. Stephens, CEO Attributes as
Determinants of Organization Design An
integrated Model, Organization Studies 15, no. 2
(1994) 183-212
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• An organization is created and designed to
  achieve some end which is decided by the top
  executive and upper management.
• The primary responsibility of top mgt. is to
  determine an organizations goals, strategy, and
  design, thereby adapting the organization to a
  changing environment.
• Middle mgrs. do the same thing for major depts.

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• The direction-setting process begins with an
  assessment of the opportunities and threats in
  the external environment, as well as an
  assessment of internal strengths and weaknesses.
• This is referred to as a S.W.O.T. assessment.

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Following the S.W.O.T. eval.

• Define overall mission and official goals based
  on the correct fit between external opportunities
  and internal strengths.
• Specific operational goals or strategies can then
  be formulated to define how the organization is
  to accomplish its overall mission.
• Note that organizational design reflects the way
  goals and strategies are implemented.
• Organizational design is the administration and
  execution of the strategic plan.

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Put another way...

• New goals and strategies are selected based on
  environmental needs, and then top management
  attempts to redesign the organization to achieve
  those ends.
• Note that managers can interpret the environment
  differently and develop different goals. The
  choices that top managers make about goals,
  strategies, and organizational design can have a
  tremendous impact on organizational effectiveness.

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More on goals and strategy...

• The overall goal for an organization is called
  the mission, which is the organizations reason
  for existing.
• The mission describes the organizations vision,
  its shared values and beliefs, and its reason for
  being.
• The mission is sometimes called the official
  goals of the organization.

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Operative goals...

• Operative goals designate the ends sought through
  the actual operating procedures of the
  organization and explain what the organization is
  actually trying to do.
• Operative goals describe specific measurable
  outcomes and are often concerned with the short
  run.
• Operative vs. official goals represent actual vs.
  stated goals.

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More on operative goals...

• These goals concern overall performance, boundary
  spanning, maintenance, adaptation, and production
  activities.
• Goals are important. While official goals
  (through the mission statement) serve to provide
  legitimacy, operative goals provide employee
  direction, decision guidelines, and criteria for
  performance.

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Examples of operative goals

• Overall performance (i.e. profitability, volume,
  etc.) Also known as operative goals.
• Resource allocation goals (pertain to the
  acquisition of needed material and financial
  resources from the environment)
• Market share goals (relate to market share, and
  are the responsibility of marketing, sales, or
  advertising department)

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More goals

• Goals for employees (training, promotion, safety,
  and growth)
• Innovation and change goals (pertain to internal
  flexibility and readiness to adapt to unexpected
  changes in the environment, and may include
  development of new services and products)
• Productivity goals (P I/O, which describes the
  amount of resources needed to reach desired
  outputs- use standardized cost accounting to
  track productivity goals)

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In addition to setting goals, an organization
needs to develop a strategy...

• Michael Porter introduced the concept of two
  basic competitive strategies
• low-cost leadership , or
• differentiation
• Note that focus can be broad or narrow, within
  the context of each of the above strategies.

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Low cost leadership...

• Tries to increase market share by emphasizing low
  cost.
• With this strategy the organization is very
  concerned about efficiency, cost reductions, and
  will use tight controls to produce products more
  efficiently than its competitors.
• Concerned with stability vs. taking risks or
  innovating.

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Differentiation strategy...

• In a differentiation strategy, orgs. will try to
  distinguish their products or services from
  others in the same industry.
• May use advertising, distinctive product
  features, exceptional service, or new technology
  to achieve a product uniqueness.
• Maytag
• Tommy Hilfiger
• Intel Pentium chips- note no price sensitivity.

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Or, another approach is the Miles and Snow
Strategy Typology

• Speculated that managers will seek to formulate
  strategies that will be congruent with the
  external environment. Thus,
• the Prospector strategy will innovate, take
  risks, seek new opportunities, and grow
• the Defender strategy is one of retrenchment and
  stability
• the Analyzer tries to maintain a stable business
  while innovating on the periphery
• the Reactor is not really a strategy at all.

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Strategy affects Org. Design

• Choice of strategy affects internal org.
  characteristics which in turn need to support the
  firms competitive approach.
• Example with a low-cost leadership strategy,
  mgrs. take an efficiency approach to
  organization.
• The prospector strategy requires characteristics
  similar to a differentiation strategy, and the
  defender strategy takes an efficiency approach
  similar to the low-cost leadership.

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So, strategy is one factor that affects
organizational design.

• Other factors might include environment, size,
  life cycle, technology, and organizational
  culture.
• For example, in a stable environment, the org.
  can have a traditional structure that emphasizes
  vertical control, efficiency, specialization,
  etc.Likewise, with mass production technology
  (think of the auto assembly line), efficiency,
  formalization, specialization, tight control, and
  centralized decision making are appropriate.

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How do we know if were being effective?

• By reaching goals (see next slide for various
  reported goals)
• By being able to obtain needed resources (by
  getting inputs) See Slide 53
• By looking at internal indicators of
  effectiveness or health (how strong is the org.
  culture, team spirit, group loyalty, trust
  between workers, etc.) See Slide 54

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Reported Goalsof U.S. Corporations (Ex. 2.8)
Goal Corporations
Profitability 89 Growth 82 Market
Share 66 Social Responsibility 65 Employee
welfare 62 Product quality and
service 60 Research and development 54 Diversifica
tion 51 Efficiency 50 Financial
stability 49 Resource conservation 39 Management
development 35
Source Adapted from Y. K. Shetty, New Look at
Corporate Goals, California Management Review
22, no. 2 (1979), pp. 71-19.
53

• Another approach to evaluating effectiveness is
  to consider whether the organization is
  successful in obtaining and managing valued
  resources in order to be effective.
• From this perspective you would look at whether
  you are able to obtain scarce and valued
  resources and successfully integrate and manage
  them.

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Internal indicators of effectiveness

• There are seven indicators of an effective
  organization as seen from an internal process
  approach
• 1. strong corporate culture and positive work
  environment.
• 2. team sprit, group loyalty, and teamwork
• 3. confidence, trust, and communication between
  workers and management
• 4. decision making near sources of information
• 5. undistorted horizontal and vertical
  communication and the sharing of relevant facts
  and feelings
• 6. rewards to managers for performance, growth,
  and development of subordinates and for creating
  an effective work group
• 7. interaction between the organization and its
  parts.

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Yet another approach, the stakeholder approach...

• The satisfaction of the various groups can be
  assessed as an indicator of the orgs.
  performance. Constituents can include
• owners (financial return)
• employees (pay, work satisfaction)
• customers (quality of goods and services)
• creditors (creditworthiness)
• community (contribution to community affairs)
• suppliers (satisfactory transactions)
• government (obedience to laws and regulations)

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Ch.3- Fund. Of Org. Structure

• This chapter introduces basic concepts of
  organizational structure, and defines structure.
• There are three key components to organizational
  structure.

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The 3 components of org. structure

• Org. structure designates formal reporting
  relationships, including the number of levels in
  the hierarchy and span of control of managers and
  supervisors.
• This is depicted in the organizational chart.
• It identifies the grouping together of
  individuals into departments and departments into
  the organization.
• It includes the design of systems to ensure
  coordination and effective communication.

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• When designing the organizational structure, it
  should be designed to provide both vertical and
  horizontal information flow.
• Note that there is a tension between vertical and
  horizontal mechanisms in the organization.
• Vertical linkages are designed for control, while
  horizontal linkages are designed for coordination
  and collaboration.

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When designing the organization

• One must choose whether to orient toward a
  traditional organization designed for efficiency
  which emphasizes vertical communication and
  control, or toward a contemporary learning
  organization which emphasizes horizontal
  communication and coordination.
• See exhibit 3.2 on page 93

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What is linkage?

• Linkage is the extent of communication and
  coordination among organizational elements.
• Vertical linkages connect the top of the
  organization with the bottom.
• Organizations use various devices to connect the
  top with the bottom hierarchical referral,
  rules, plans, and vertical information systems.

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Horizontal linkage?

• Horizontal linkage refers to the amount of
  communication and coordination horizontally
  across organizational departments.
• You can improve horizontal linkage through
  information systems, direct contact using liaison
  persons, task forces, the hiring of a full time
  integrator (may be called a product manager,
  program manager, etc.), and the use of project
  teams.

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Various ways to group activities are detailed in
the text

• The functional grouping (similar functions or
  work processes).
• The divisional grouping (by product or strategic
  business).
• The geographic structure (best meets the needs of
  users and customers).
• The multi-focused grouping (e.g. matrix or
  hybrid- a combination of functional and
  divisional grouping).
• The geographic grouping

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A recent development- the horizontal structure...

• Organizes employees around core processes (not
  tasks, functions, or geography).
• Eliminates the vertical hierarchy and old
  departmental boundaries. Teams, not individuals,
  are the basis of organization.
• People on the team are given the skills, tools,
  motivation, and authority to make decisions.

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More on horizontal structure...

• Strengths and weaknesses are listed in exhibit
  3.12 on page 111.
• Strengths include flexibility and rapid response
  as well as promoting a focus on teamwork and
  collaboration. It also improves quality of work
  life.
• Weaknesses include the fact that it is hard to
  determine, sometimes, core processes and managers
  may have to give up power.

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In reality...

• Many structures in the real world do not exist in
  the pure forms outlined in this chapter, and thus
  a hybrid structure may evolve to meet individual
  organizational needs.
• Most companies combine characteristics of
  functional, divisional, geographical, or
  horizontal structures to take advantage of the
  strengths and weaknesses of the various
  structures.

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How do you know if you have structural problems?
Symptoms

• When organization structure is out of alignment
  with organization needs, one or more of the
  following symptoms will appear
• delayed decision making or lack of quality in
  making decisions.
• The organization does not respond innovatively to
  a changing environment.
• Too much conflict is evident.

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Ch.4 -The External Environment

• The external environment includes that
  environment to which the org. is sensitive and
  must respond to survive.
• This relates to domain, or the chosen
  environmental field of action. It is the
  territory an org. stakes out for itself with
  respect to products, services, and markets served.

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An Organizations Environment

• (a) Competitors, industry size and
• competitiveness, related issues
• (b) Suppliers,
• manufacturers, real
• estate, services
• (c) Labor market,
• employment agencies,
• universities, training
• schools, employees
• in other companies,
• unions
• (d) Stock markets,
• banks, savings and
• loans, private
• investors
• (e) Customers, clients,
• potential users of products
• and services
• (f) Techniques of production, science,

(g) Recession, unemployment rate, inflation rate,
rate of investment, economics, growth (h) City,
state, federal laws and regulations,
taxes, services, court system, political
processes (i) Age, values, beliefs, education,
religion, work ethic, consumer and
green movements (j) Competition from and
acquisition by foreign firms, entry into
overseas markets, foreign customs,
regulations, exchange rates
International Context
(j) International Sector
(a) Industry Sector
DOMAIN
(b) Raw Materials Sector
(i) Socio-cultural Sector
(h) Government Sector
(c) Human Resources Sector
ORGANIZATION
(d) Financial Resources Sector
(g) Economic Conditions Sector
(e) Market Sector
(f) Technology Sector
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• The domain can be further subdivided into
  sectors, or subdivisions, of the external
  environment. In turn, ten sectors can be analyzed
  for each organization
• industry, raw materials, human resources,
  financial resources, market, technology, economic
  conditions, government, socio-cultural, and
  international.

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Further...

• The organizations environment can be categorized
  as a task environment (includes sectors with
  which the organization interacts directly and
  that have a direct impact on the organizations
  ability to achieve its goals), and the general
  environment (those sectors that may not have a
  direct impact on the daily operations of a firm
  but will indirectly influence it.

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Regarding the international sector

• Can directly affect many organizations.
• All domestic sectors can be affected by
  international events.
• Recent economic turmoil in Asia and Eastern
  Europe has impacted the American economy.
• The impact of the international sector has grown
  rapidly with advances in technology and
  communication.

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How does the environment affect the organization?

• Complexity and change in the environment create a
  need for information about the environment.
• The organization also needs materials from the
  environment.
• There is uncertainty regarding both of these
  factors.

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The environment can be viewed, then, as either
simple or complex...

• The simple-complex dimension concerns
  environmental complexity, which refers to
  heterogeneity, or the number and dissimilarity of
  external elements relevant to an organization's
  operations.
• In a complex environment, many diverse external
  elements interact with and influence the
  organization.

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Or as stable or unstable...

• Refers to whether elements in the environment are
  dynamic. If the environment remains the same over
  a period of months or years, it is stable. Under
  unstable conditions, environmental elements shift
  abruptly.
• Instability may occur when a competitor reacts
  with aggressive moves.

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Put the simple-complex and stable-unstable
dimensions together, and you will have 4 possible
environments facing you...

• The four environments
• The simple-stable environment (low uncertainty).
• The complex-stable environment (greater
  uncertainty). Universitys and Appliance Manfs.
• The simple-unstable environment (rapid change
  creates uncertainty). Soft drink retailers and
  beer distributors.
• The complex-unstable environment (the greatest
  uncertainty). Computers and the airline industry.

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Contingency Framework for Environmental
Uncertainty and Organizational Responses
STABLE
ENVIRONMENTAL CHANGE
Uncertainty
UNSTABLE
SIMPLE
COMPLEX
ENVIRONMENTAL COMPLEXITY
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Adapting to environmental uncertainty...

• As the complexity in the external environment
  increases, so does the number of positions and
  departments within the org., which in turn
  increases internal complexity.
• For example, each sector in the external
  environment requires an employee or department to
  deal with it.

78
Or...

• The organization might take a traditional
  approach to coping with environmental uncertainty
  by establishing a buffer department.
• The buffering departments role is to absorb
  uncertainty from the environment it surrounds
  the technical core of an organization and
  protects it.
• A newer approach sees the org. dropping the
  buffers and exposing the tech. core to
  uncertainty.

79
Or...

• The organization may establish boundary-spanning
  activities.
• Boundary spanning is primarily concerned with the
  exchange of information to (1) detect and bring
  into the organization information about changes
  in the environment and (2) send information into
  the environment that presents the organization in
  a favorable light.

80
Another response to environmental uncertainty...

• Differentiation in the cognitive and emotional
  orientations among personnel when the external
  environment is complex and rapidly changing,
  departments become highly specialized, and
  success requires special expertise and behavior-
  unique attitudes, values, goals, and education
  may distinguish these folks from others.

81

• And, integration, or the quality of collaboration
  among departments. When the environment is highly
  uncertain, frequent changes require more
  information processing to achieve horizontal
  coordination so integrators become a necessary
  addition to the organizational structure.

82

• Indeed, Lawrence and Lorschs research found that
  organizations perform better when the levels of
  differentiation and integration match the level
  of uncertainty in the environment.
• Organizations that performed well in uncertain
  environments had high levels of both
  differentiation and integration.

83
Management processes...

• Another response to environmental uncertainty is
  the amount of formal structure and control
  imposed on employees.
• When the external environment is stable, the
  internal organization is characterized by rules,
  procedures, and a clear hierarchy of authority.
  This is known as a mechanistic org. system.
• In rapidly changing environments, the internal
  org. has to be much looser, free-flowing, and
  adaptive. Decision-making authority is
  de-centralized. This is an organic type of
  management structure.

84
Thus,

• Change and complexity dimensions can be combined
  and represent 4 levels of uncertainty.
• (1) The low uncertainty environment is simple and
  stable.
• Organizations in this environment will have few
  departments and a mechanistic structure.

85

• (2) In the low-moderate uncertainty environment,
  more departments are needed along with more
  integrating roles to coordinate the departments.
• (3) In the high-moderate uncertainty environment,
  things are unstable but simple. Organizational
  structure is organic and decentralized. Planning
  is emphasized.

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Lastly,

• The high uncertainty environment is both complex
  and unstable and it is the most difficult to deal
  with. Organizations are large and have many
  departments, but they are also organic. A large
  number of management personnel are assigned to
  coordination and integration, and the
  organization uses boundary spanning, planning,
  and forecasting.

87
Thus far we have been discussing ways in which
org. adapt to the lack of information and to
uncertainty.

• What about the need for material and financial
  resources?
• Resource dependence means that organizations
  depend on the environment but strive to acquire
  control over resources to minimize their
  dependence.
• When material costs and risks are high, companies
  may team up with other companies, but this
  creates risk in itself, because dependence on
  shared resources gives power to other
  organizations.

88
To meet the need for resources...

• Organizations will maintain a balance between
  linkages with other organizations and their own
  independence. They will maintain this balance
  through attempts to modify, manipulate, or
  control other organizations.
• They will use ownership, establish formal
  strategic alliances, use co-optation and/or
  interlocking directorates, share or transfer
  executives, and/or use advertising and PR.

89
Further, the org. may try to change the
environment itself...

• The domain can be changed, where it seeks new
  environmental relationships and drops old ones.
• Refers to the line of business, the market to
  enter, and the suppliers, banks, and employees it
  uses.
• It can try to influence government legislation
  and regulation.
• It can work jointly with similar organizations,
  through trade organization, to change the
  environment.

90
Ch. 5- Inter-organizational Relationships

• This refers to the flow and linkages that occur
  among two or more organizations.
• Traditionally these transactions and
  relationships have been seen as a necessary evil
  to obtain what an organizations needs.
• The presumption has been that the world is
  composed of distinct businesses that thrive on
  autonomy and compete for supremacy.

91
However

• A recent trend is to reduce boundaries and
  increase collaboration between companies, to
  include competitors, in order to survive in
  todays chaotic environment.
• In this regard, organizations can choose to build
  relationships in many ways, such as appointing
  preferred suppliers, establishing agreements,
  business partnering, joint ventures, or even
  mergers and acquisitions.

92
Again, the term inter-organizational
relationship...

• Refers to the resource transactions, flows, and
  linkages that occur among two or more
  organizations.
• A new view espoused by James Moore is that
  organizations are now evolving into business
  ecosystems.
• An organizational ecosystem is a system formed by
  the interaction of a community of organizations
  and their environment.

93
An ecosystem can cut across industry lines and a
company can create its own ecosystem.

• Consider Microsoft- it travels in 4 major
  industries consumer electronics, information,
  communications, and personal computers. Its
  ecosystem also includes hundreds of suppliers,
  including HP and Intel, and millions of customers
  across many markets.

94
Is competition dead?

• If by competition you mean a distinct company
  competing for survival and supremacy with other
  stand-alone businesses, it may be dead.
• In today's world, a new form of competition is
  intensifying. Companies now need to co-evolve
  with others in the ecosystem so that everyone
  gets stronger.
• Consider the wolf and the caribou.

95
Ecosystem management requires a new role for the
manager...

• Top management can no longer look down to enforce
  order and uniformity.
• In this new world managers think about horizontal
  processes rather than vertical structures.
• Important initiatives are not just top down, they
  cut across the boundaries separating
  organizational units. This is a much broader
  leadership role.

96
Within the context of a larger organizational
ecosystem, then...

• Managers must evaluate external relationships to
  determine whether they are competitive or
  cooperative, and are the other organizations
  dissimilar or similar. A framework for analyzing
  the different views of inter-organizational
  relationships is in Exhibit 5.2 on Page 176.
• By understanding these perspectives, managers can
  assess their environment and adopt strategies to
  suit their needs.

97
With regard to resources...

• Resource dependence theory argues that
  organizations try to minimize their dependence on
  other organizations for the supply of important
  resources and try to influence the environment to
  make resources available.
• How dependent you are depends on the importance
  of the resource to the firm, and how much
  discretion or monopoly those who control a
  resource have over its allocation and use.

98
Orgs. that are aware of resource dependence
develop strategies...

• They can adapt to or alter the interdependent
  relationships (purchase ownership, develop
  long-term contracts or joint ventures, etc.)
• Join trade associations,sign trade agreements, or
  merge with another firm.
• Political action, etc.
• Use power strategies (large independent companies
  have power over small suppliers).

99

• Also, instead of being resource dependent, the
  development of collaborative networks can be
  pursued.
• Companies join together to become more
  competitive and to share scarce resources.
• Why this interest in inter-organizational
  collaboration?
• Major reasons are sharing risks when entering new
  markets, mounting expensive new programs and
  reducing costs.

100
So...

• North Americans have learned from their
  international experience how effective
  inter-organizational relationships can be.
• Consider Japan, and the traditions of corporate
  clans or industrial groups that collaborate and
  assist each other. This grouping is called
  Keiretsu.
• We have traditionally considered interdependence
  a bad thing, believing it would reduce
  competition.

101
Thus,

• We are seeing the development of new
  organizational structures and forms to meet the
  demands of an ever changing environment.
• The author also discusses the fact that not all
  new organizational forms or organizations, for
  that matter, will survive (see next slide).

102
New organization development

• New organizational forms continually appear, and
  this is referred to as variation. As these
  variations evolve, some will suit the marketplace
  better than others, and orgs. will move through a
  process of selection, leading to retention, which
  is the preservation and institutionalization of
  selected organizational forms.

103

• From the population ecology perspective, the
  environment becomes an important determinant of
  organizational success or failure. The org. must
  meet an environmental need, or it will be
  selected out. The process of variation,
  selection, and retention leads to the
  establishment of new org. forms in a population
  of organizations.

104
Another view of this process

• Each organization struggles for survival, for its
  very existence.
• Organizations and populations of organizations
  are engaged in a competitive struggle over
  resources, and each organizational form is
  fighting to survive.
• As a result, generalist or specialist strategies
  might be brought to bear as a means to surviving.

105

• In this view, organizations with a wide niche or
  domain, that is, those that offer a broad range
  of products or services or that serve a broad
  market, are generalists. Organizations that
  provide a narrower range of goods or services or
  that serve a narrower market are specialists.

106
Moreover

• Organizations are highly interconnected. Just as
  companies need efficient production to survive,
  the institutional view argues that they also
  need legitimacy from their stakeholders.
• Legitimacy is defined as the general perspective
  that an organizations actions are desirable,
  proper and appropriate within the environments
  system of norms, values, and beliefs.

107

• So, organizations have a strong need to appear
  legitimate. Their structure and behavior will be
  geared toward environmental acceptance rather
  than toward internal technical efficiency.
• This will cause organizations in a similar
  population to look like one another.
• Put another way, this is why organizations in the
  same field may develop similar structures and
  approaches and appear similar. This is called
  Institutional Similarity.

108
Other forces may lead to organizations looking
similar

• Some organizations face great uncertainty. It is
  not clear what products, services, or
  technologies will achieve desired goals, and
  sometimes those goals themselves are not clear.
  In the face of this uncertainty, mimetic forces,
  or the pressure to copy or model other
  organizations, occur.
• Benchmarking is an example of this process. Its
  really just official copying of what works for
  others.

109

• The mimetic process leads to banks, or high
  schools, or manufacturing firms looking and
  acting like one another.

110
Further

• All organizations are subject to pressure, both
  formal and informal, from Government. Coercive
  forces (e.g. regulation) may exist, and these
  forces exert pressure on an organization to adopt
  structures, techniques, or behaviors similar to
  other organizations.

111

• Lastly, normative forces, or those forces or
  pressures to change and to achieve certain
  standards of professionalism by adopting
  techniques that are considered by the
  professional community to be up to date and
  effective, may lead to organizational change.

112
Put another way, to achieve legitimacy...

• The organization may be pressured to copy or
  model other organizations (mimetic forces).
• It may be coerced into doing so (coercive forces
  are the external pressures exerted on
  organizations to adopt structures, techniques, or
  behaviors similar to other organizations).
• They may change because they are expected to do
  so (normative forces).