Introduction to Organisation Theory and Design

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Introduction to Organisation Theory and Design

• Ho Sooi Hock

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Outline

• What is an organisation
• Importance of organisations
• Organisation design what and why
• Dimensions of organisational design
• Organisation theory what and why
• Historical perspectives
• Organisational strategies
• Contemporary organisation design

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What is an Organisation?

• Organisations are social entities that are goal
  directed, are designed as deliberately structured
  and coordinated activity systems, and are linked
  to external environment.
• Organisations are made up of people and their
  relationships with one another.

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Importance of Organisations

• Bring together resources to achieve desired goals
  and outcomes.
• Produce goods and services efficiently.
• Facilitate innovation.
• Use of 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, social responsibility, and the motivation
  and coordination of employees.

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Perspectives on Organisations

• Two views of organisations
• Open Systems
• Early organisation studies focused on closed
  internal systems, based on assumptions that
  environment is stable and predictable.
• Organisational Configuration
• Balance the five basic parts of an organisation
  to perform the subsystem functions effectively.

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Open Systems

• Closed Systems
• A closed system would not depend on its
  environment it would be autonomous, enclosed,
  and sealed off from the outside world. Primary
  issue is efficiency.
• Open Systems
• An open system interacts with and adapts to the
  environment by consuming resources and exporting
  product and services to it.
• Issues involved are more complex due to
  interdependence of various elements.

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An Open System and its Subsystems
Environment
People Raw materials Information Financial
resources
Products and Services
Transformation Process
Input
Output
Boundary spanning
Production, maintenance, adoption, management
Boundary spanning
Source Organization Theory and Design, Richard
L. Daft
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Organisational Configuration

• Technical Core
• Includes people who do the basic work.
• Technical Support
• Helps the organization adapt to the environment.
• Administrative Support
• Responsible for smooth operation and upkeep.
• Management
• Top Management provides direction, strategy,
  goals and policies.
• Middle Management implementation and
  coordination.

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Five Basic Parts of an Organisation
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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Organisation Design

• Emphasies the management side of organisation
  theory
• Concerned with constructing and changing an
  organisations structure and traits to achieve
  the organisations goals

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Dimensions of Organisation Design

• Organisation traits are described by
• Structural Dimensions
• Describes internal characteristics of an
  organisation.
• Contextual Dimensions
• Characterises the whole organisation, including
  its size, technology, environment and goals.

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Structural Dimensions

• Formalisation
• The amount of written documentation.
• Specialisation
• The degree to which organisational tasks are
  subdivided into separate jobs.
• Hierarchy of Authority
• Span of control of the managers.
• Centralisation
• Hierarchical level of authority for decision
  making.
• Professionalism
• Level of formal education and training of
  employees.
• Personnel ratios
• People deployed to each functions and departments.

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Contextual Dimensions

• Size
• Number of employees.
• Organisational Technology
• Tools, techniques and actions used to transform
  inputs into outputs.
• Goals and Strategy
• Purpose and competitive techniques that set it
  apart from other organisations.
• Environment
• All elements outside the organisational boundary.
• Culture
• Shared key values, beliefs, understandings and
  norms.

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Interacting Contextual and Structural Dimensions
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Organisation Theory

• Discipline that studies the structure and design
  of organisations
• Organisation theories are interdisciplinary,
  based on knowledge from the fields of psychology,
  political science, economics, anthropology and
  sociology
• Organisation theory is a macro examination of
  organisations analyses the whole organisation
  as a unit while organisation behaviour is the
  micro approach to organisations focuses on the
  individuals within organisation

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Organisation Challenges

• Globalisation
• Ethics and Social Responsibility
• Speed of Responsiveness
• The Digital Workplace
• Diversity

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Classical TheoriesEfficiency is Everything

• Fredrick Winslow Taylor
• Scientific management approach
• Managers develop precise, standard procedures
  for doing each job, select workers with
  appropriate abilities, train workers in standard
  procedures, carefully plan work, and provide wage
  incentives to increase output.
• The role of management is to maintain stability
  and efficiency.
• Thinking (top managers)
• Working (workers doing what they are told)
• Focused on the technical core.

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Classical TheoriesHow to Get Organised

• Max Weber
• Bureaucratic approach
• Clear division of labour
• Hierarchical structure in the organisation
• Predictability and stability
• Rationality
• Impersonal relationship
• Characteristics for most of todays large
  organisations

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Classical TheoriesHow to Get Organised

• Henri Fayol
• Administrative principles
• Concerned with the problems of management
• Develop general principles applicable to all
  managers and describe the functions a manager
  should perform
• 14 principles in total division of work,
  authority, discipline, unity of command, unity of
  direction, subordination of individual interests
  to the general interests, remuneration,
  centralisation, scalar chain, order, equity,
  stability of tenure of personnel, initiative,
  Esprit de corps

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Human-Relations TheoriesWhat About People?

• Elton Mayo, Chester Bernard, Douglas Mc Gregor
• Hawthrone Studies
• Work on industrial psychology and human
  relations.
• Chicago Western Electric Company
• Positive treatment of employees improved their
  motivation and productivity.
• Laid the groundwork for subsequent work examining
  worker treatment, leadership, motivation and HR
  management.
• Human relations and behavioural approaches

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Contingency Theory Dont Forget the Environment

• All organisations are not alike.
• The scientific management and administrative
  principles approaches attempted to design all
  organisation in the same manner.
• Contingency Theory there is no one best way for
  organisation design
• Contingency means that one thing depends on
  other things, and for organisations to be
  effective, there must be a goodness of fit
  between their structure and conditions in their
  external environment.
• Contingency means it depends.

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Organisational Strategies

• Defined as the determination of the basic
  long-term goals and objectives of an enterprise,
  and the adoption of courses of action and the
  allocation of resources necessary for carrying
  out these goals
• Two models
• Porter model
• Miles and Snow model

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Porters Competitive Strategies

• No firm can successfully perform at an
  above-average level by trying to be all things to
  all people
• Low-cost leadership
• Differentiation
• Focus

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Miles and Snows Strategies

• Classify organisations into one of four strategic
  types based on the rate at which they change
  their products or markets
• Defenders
• Prospectors
• Analysers
• Reactors

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Contingency Factors Affecting Organisation Design
Technology


Organizational Structure and Design
The Right Mix of Design Characteristics Fits the
Contingency Factors
Source Organization Theory and Design, Richard
L. Daft
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Discussions

• Discuss how the following organisational
  strategies affect organisation design
• Low-cost leadership
• Differentiation
• Defenders
• Prospectors
• Analysers
• Reactors

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Contemporary Organisation Design Learning
Organisations

• Organisations today need greater fluidity and
  adaptability.
• The learning organisation promotes use of
  communication and collaboration technologies, so
  that everyone is engaged in identifying and
  solving problems.
• All organisation members continuously help to
  experiment, improve and increase its capability.
• It is based on equality, open information,
  little hierarchy, and a culture that encourages
  adaptability and participation.
• Essential value is problem solving as opposed to
  efficient performance.

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Two Organisation Design Approaches
Organizational Change in the Service
of Performance
The slide adapted from David K. Hurst, Crisis
and Renewal Meeting the Challenge of
Organizational Change (Harvard Business School)
Original source Organization Theory and
Design, Richard L. Daft
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Vertical to Horizontal Structure

• Traditionally the activities were grouped
  together by common work from bottom to the top of
  the organisation, little collaboration occurs
  across functional departments.
• In a fast changing environment the vertical
  structure becomes overloaded.
• In the learning organisation, structure is
  created around horizontal workflows or processes
  rather than departmental functions.
• Self-directed teams are the fundamental work
  unit in the learning organisation.
• Boundaries between functions are eliminated.

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Routine Tasks to Empowered Roles

• The scientific management precisely define each
  job and how it should be done.
• In traditional organisations, tasks are broken
  down into specialized, separate parts, as in a
  machine. Knowledge and control of tasks are
  centralized.
• In learning organisations, employees are assigned
  roles with discretion and responsibility - in
  the team or department which are continuously
  redefined or adjusted.
• Employees are encouraged to take care of problems
  by working with each other and with customers.

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Formal Control to Shared Information

• Formal systems are often implemented to manage
  the growing amount of complex information and to
  detect deviations from established standard and
  goals.
• In the learning organisation ideas and
  information are shared throughout the
  organisation.
• Managers find ways to open channels of
  communication so that ideas flow freely in all
  directions.
• Learning organisations communicate with
  customers, suppliers, and even competitors to
  enhance learning capability.

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Competitive to Collaborative Strategy

• Strategy in traditional organisations is
  formulated by top managers and imposed on the
  organisation.
• In the learning organisations the accumulated
  actions of an informed and empowered workforce
  contribute to strategy development.
• Partnerships with suppliers, customers and
  competitors to find the best way to learn and
  adapt, forming modular or virtual organisations
  that are connected electronically.

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Rigid to Adaptive Culture

• Organisations should continuously adapt to
  external environment.
• In a learning organisation, employees are aware
  of the whole system and interactions of its parts
  and the culture encourage openness, equality,
  continues improvement and change.
• Each employee is a valued contributor and the
  organisation becomes a place for creating a web
  of relationships that allows people to develop
  their full potential.

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Resources

• Richard L. Daft, Organization Theory and
  Design, Thomson (South-Western), 8th edition,
  2004.
• Stephen P. Robbins, Neil Barnwell, Organisation
  Theory Concepts and cases, Prentice Hall, 4th
  edition, 2002.

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Acknowlegement

• This module was taught by Dr. Payam Mamaani
  Barnaghi since 2005. Most slides have been
  adopted from his lecture materials with some
  changes.