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SUMMARYSUMAARIES NOTES FOR THE MBA EDUCATION OF ORGANIZATIONAL BEHAVIOUR
Typology: Summaries
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Chapter 1: Introduction to Organizations
Coping with the rapid change is the most common problem facing managers and organizations. Some specific challenges are:
Organizations are social entities that are goal-directed , are designed as deliberately structured and coordinated activity systems and are linked to the external environment. Organizations are made up of people and their relationships with one another. Managers deliberately structure and coordinate organizational resources to achieve the organization’s purpose. The modern organization may be the most significant innovation of the past 100 years. What contribution do organizations make:
Organizational behaviour = micro approach to organizations because it focuses on the individuals within the organizations as the relevant units of analysis. Like motivation, leadership style etc. Organization theory = macro examination of organizations because it analyzes the whole organization as a unit. Like differences in structure and behaviour at the level of analysis. Meso theory = concerns the integration of both micro and macro levels of analysis.
Profit organizations : managers direct their activities toward earning money for the company. Non-profit Organizations: Managers direct their effort toward generating some kind of social impact. Problems: securing a steady income, difficult to measure the effect, marketing as well for the clients but also for volunteers and donors.
Perspectives on Organizations , two important perspectives:
A system is a set of interacting elements that acquire inputs from the environment, transforms them, and discharges outputs to the external environment. A system is made up of several subsystems , they perform the specific functions required for organizations to survive. Boundary subsystems are responsible for exchanges with the external environment (purchasing supplies, marketing products). Further there are Production, Maintenance, Adaption and Management subsystems.
Closed system : would not depend on its environment. It’s autonomous, enclosed and sealed of from the outside world.
Briefcase 1: Design the organization so that the five basic parts – technical core, technical support, administrative support, top management and middle management – adequately perform the subsystem functions of production, maintenance, adaptation, management and boundary spanning. Try to maintain a balance among the five parts so that they work together for organizational effectiveness.
Dimensions of organizational design: Organizational dimensions fall into two types:
Briefcase 2: Think of the organization as an entity distinct from the individuals who work in it. Describe the organization according to its size, formalization, decentralization, specialization, professionalism, personnel ratios and the like. Use these characteristics to analyze the organization and to compare it with other organizations.
Efficiency = refers to the amount of resources ( materials, money, employees) used to achieve the organizations goals. Effectiveness = meaning the degree to which an organization achieves its goals.
Briefcase 3: Consider the needs and interests of all stakeholders when setting goals and designing the organization to achieve effectiveness.
The evolution of organization theory and design. Organization theory is a way of thinking about organizations. It’s a way to see and analyze organizations more accurately and deeply than one otherwise could. There are general patterns and insights into organizational functioning.
Historical perspectives : the classical perspective is associated with the development of hierarchy and bureaucratic organizations and remains the basis of much of modern management theory and practice. (Mechanical System Design)
Chapter 2: The External Environment
The environmental domain Organizational environment = all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization. Domain = the chosen environment field of action. It defines the organization’s niche and those external sectors with which the organization will interact to accomplish it’s goals. Sector = subdivision of the external environment that contain similar elements. For each organization there are ten sectors (briefcase 1)
Briefcase 1: Organize elements in the external environment into ten sectors for analysis: a) Industry: competitors, industry size and competitiveness, related industries; b) Raw materials: Suppliers, manufacturers, real estate, services; c) Human resources: Labor market, employment agencies, universities, training schools, employees in other companies, unionization; d) Financial resources: stock markets, banks, savings and loans, private investors; e) Market: Customers, clients, potential users of products and services; f) Technology: Techniques of production, science, computers, information technology, e-commerce; g) Economic conditions: recession, unemployment rate, inflation rate, rate of investment, economics, growth; h) Government: city, state, federal laws and regulations, taxes, services, court system, political processes; i) Sociocultural: age, values, beliefs, education, religion, work ethics, consumer and green movements; j) International: competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate. Focus on sectors that may experience significant change at any time.
Task Environment: includes sectors with which the organization interacts directly and that have a direct impact on the organization’s ability to achieve it’s goals. Task environment typically includes a, b, e and perhaps c and j.
General Environment: includes those sectors that might not have a direct impact on daily operations of a firm but will indirectly influence them. General environment often includes h, i, g, f and d.
International Context: growing importance from the international sector. The environment for all organizations is becoming extremely complex and competitive.
Environmental uncertainty: several dimensions like stable/unstable, homogeneous/heterogeneous, simple/complex, the munifence (= amount of resources available) etc. These dimensions come together in two essential ways the environment influences organizations: need for information about environment and need for resources from the environment.
Uncertainty = when decision makers don’t have sufficient information about the environmental factors and have a difficult time predicting environmental factors.
Simple-complex dimension: concerns environmental complexity, which refers to heterogeneity, or the number and dissimilarity of external elements relevant to an organization’s operations. Complex environment: organization is influenced by numerous diverse external elements. Simple environment: organization interacts with/ is influenced by only a few similar external components.
Stable-unstable dimension: refers to whether elements in the environment are dynamic. Stable environment: if it remains the same over a period of months or a year. Unstable environment: environmental elements shift abruptly. May occur when competitors react with aggressive moves.
Framework: for assessing environmental uncertainty which combines the simple-complex and stable- unstable dimensions.
Stable
Environmental
Simple + Stable = Low Uncertainty
Complex + Stable = Low-moderate Uncertainty
Change
Unstable
Simple + Unstable = High-moderate Uncertainty
Complex + Unstable = High Uncertainty
Simple Environmental Complexity Complex
Adapting to environmental Uncertainty Aspects of organizations that differ as the uncertainty increases:
(2) Buffering roles: purpose is to absorb uncertainty from the environment. They support the technical core and exchange materials, resources and money between the environment and the organization.
Boundary spanning roles: link and coordinate an organization with key elements in the external environment. Purpose of boundary spanning is the exchange of information to: a. Detect and bring into the organization information about changes in the environment; b. Send information into the environment that presents the organization in a favourable light. Boundary spanners prevent the organization from stagnating by keeping top managers informed about environmental changes. Business intelligence : is an approach to boundary spanning. It refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. BI is related to another important area of boundary spanning, known as competitive intelligence. This gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions. Use of internet, digging trash cans etc.
Briefcase 2: Scan the external environment for threats, changes and opportunities. Use boundary- spanning roles, such as market research and competitive-intelligence departments, to bring into the organization information about changes in the environment. Enhance boundary-spanning capabilities when the environment is uncertain.
(3) Differentiation = the differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments.
b. Shape the environment domain. Establish Interorganizational Linkages Controlling the environment domain
Establish Interorganizational Linkages Ownership: When a company buys a part of or a controlling interest in another company, this gives the company access to technology, products or other resources. Acquisition : involves the purchase of one organization by another so that the buyer assumes control. Merger: is the unification of two or more organizations into a single unit. Formal strategic alliances: When there is a high level of complementarity between the business lines, geographical positions, or skills of two companies, the firms often go the route of a strategic alliance rather than ownerships through merger or acquisition. Contracts: license agreements (1) that involve the purchase of the right to use an asset for a specific time (bijv. nieuwe technologie) or supplier arrangements (2) that contract for the sale of one firm’s output to another. Joint ventures: creation of a new organization that is formally independent of the parents, although the parents will have some control. Sharing of risks and costs with large projects or innovations. Cooptation, interlocking directorates: cooptation: when leaders from important sectors in the environment are made part of an organization (board of directors). Interlocking directorate: formal linkage that occurs when a member of the board of directors of one company sits on the board of directors of another company (can influence policies and decisions). Direct interlock = this person is the direct link between two companies. Indirect interlock = When director of company A and B are both in the board of directors from company C. Executive recruitment: transferring or exchanging executives. Advertising and public relations
Controlling the environmental domain
Change of domain: An organization may try to find a domain where there is little competition, no government regulation, abundant suppliers, affluent customers, and barriers to keep competitors out. Acquisition: deals with company’s in other domains. Divestment: afstoten bedrijfsgedeelten.
Political Activity, regulation: techniques to influence government legislation and regulation, like lobbyists and working with other organizations, also lobbying by CEO.
Trade associations: Accomplished jointly with other organizations that have similar interests.
Illegitimate activities: certain conditions (low profits, pressure from senior managers, scarce environmental resources etc) may lead managers to adopt illegitimate behaviour.
Briefcase 4: Reach out and control external sector that threaten needed resources. Influence the domain by engaging in political activity, joining trade associations, and establishing favourable linkages. Establish linkages through ownership, strategic alliances, cooptation, interlocking directorates and executive recruitment. Reduce the amount of change or threat from the external environment so the organization will not have to change internally.
Organization-Environment Integrative Framework: two themes about organiz-environm relationships:
Forces for
Global Integration
High
Low
Globalization Strategy: Global Product Structure
Export Strategy: International Division
Both Globalization and Multidomestic Strategy: Global Matrix Structure
Multidomestic Strategy: Global Geographic Structure
Low High Forces for national responsiveness
International Division (low-low) : export department grows into international division when companies begin to explore international opportunities. Geographical structure instead of functional structure because lines of functional hierarchy would extend too long.
Global Product Division Structure (high-low) : the product divisions take responsibility for global operations in their specific product area. Each division’s manager is responsible for planning, organizing and controlling all functions for the production and distribution of its products for any market around the world. This structure works best when products are standardized. A problem of this structure is that product divisions often do not work well together and some countries may be ignored by product managers.
Global Geographical Structure (low-high) : divides the world into geographical regions, with each geographical division reporting to the CEO. Customization of products to meet specific needs. A problem occurring is the autonomy of each regional division. How to increase efficiency and coordination without losing the benefits of the global geographical structure? Possible solution: use staff departments which have an overall view.
Global Matrix Structure (high-high) : A matrix structure provides a way to achieve vertical and horizontal coordination simultaneously along two dimensions. For multinational corporation the geographical distances for communication are great and the coordination is more complex. Uitleg: bedrijf is onderverdeeld in verschillende ‘business areas’, elke business area is wereldwijd verantwoordelijk voor zijn onderdeel (bijv. transportation). Hiernaast zijn er ‘country managers’ verantwoordelijk voor een bepaald land. Business managers (global boss) en country managers moeten goed samenwerken en sturen op hun beurt regiomanagers aan.
Briefcase 3: Choose a global product structure when the organization can gain competitive advantages through a globalization strategy (global integration). Choose a global geographical structure when the company has advantages with a multidomestic strategy (national responsiveness). Use an international division when the company is primarily domestic and has only a few international operations.
The Global Organizational Challenge : drie primaire segmenten voor ‘the global organizational challenge’:
Global Coordination Mechanisms:
Briefcase 4: Use mechanisms such as global teams, headquarters planning and specific coordination roles to provide needed coordination and integration among far-flung international units. Emphasize information and knowledge sharing to help the organization learn and improve on a global scale.
Cultural differences in coordination and control : Appreciate cultural value differences and strive to use coordination mechanisms that are in tune with local values. When broader coordination mechanisms are needed, focus on education and corporate culture as ways to gain understanding and acceptance. Denk aan systeem Hofstede! Power distance, uncertainty avoidance are reflected within organizations in beliefs regarding the need for hierarchy, centralized decision making and control, formal rules and procedures and specialized jobs.
Volgens Gesteland zijn er vier culturele patronen, logic patterns, die landen karakteriseren:
Briefcase 5: Appreciate cultural value differences and strive to use coordination mechanisms that are in tune with local values. When broader coordination mechanisms are needed, focus on education and corporate culture as ways to gain understanding and acceptance.
Three national approaches to coordination and control:
The transnational model of organization : most advanced kind of international organization. Use it when the company has to respond to multiple global forces simultaneously and needs to promote worldwide integration, learning and knowledge sharing. Dealing with multiple, interrelated, complex issues requires a complex form of organization and structure. Four characteristics distinguish the transnational organization from other globalization forms (such as the matrix):
Chapter 5: Strategy, Organization Design and Effectiveness
Organizational goal: a desired state of affairs that the organization attempts to reach.
The role of Strategic Direction in Organization Design: the primary responsibility of top management is to determine an organization’s goals, strategy, and design, therein adapting the organization to a changing environment. Organizational design is used to implement goals and strategy and also determines organization success.
Organizational purpose: Major distinction between the officially stated goals, or mission, of the organization and the operative goals the organization actually pursues.
Mission = official goals = mission statement , the organization’s reason for existence. It describes the organization’s vision, it’s shared values and beliefs and its reason for being. Refers to the formally stated definition of business scope and outcomes the organization is trying to achieve. One of the primary reasons is to serve as a communication tool.
Briefcase 1: Establish and communicate organizational mission and goals. Communicate official goals to provide a statement of the organization’s mission to external constituents. Communicate operational goals to provide internal direction, guidelines and standards of performance for employees.
Operative goals = designate the ends sought through the actual operating procedures of the organization and explain what the organization is actually trying to do. These goals concern overall performance, boundary spanning, maintenance, adaptation and production activities. They provide direction for the day-to-day decisions and activities within departments. Operative goals: a. Overall performance : reflected in profitability (net income, return on investment etc), growth in sales or profits over time and the volume of sales. b. Resources: acquisition of needed material and financial resources. c. Market: market share or market standing desired by the organization. d. Employee development: training, promotion, safety and growth of employees. e. Innovation and change: internal flexibility, readiness to adapt f. Productivity: amount of output achieved from available resources.
Type of goals Purpose of goals Official goals, mission: Legitimacy
Define mission, official goals
Select operational goals, competitive strategy
Top management team
Strategic direction Effectiveness Outcomes
Internal Situation
- Strengths
External Environment
Organization Design
Operative goals: => describe a value system Employee direction and motivation, decision guidelines, standard of performance => represent the primary tasks of the organization
A framework for selecting strategy and design: two models for formulating strategy are Porter’s model of competitive strategies and Miles and Snow’s strategy typology. The essence of formulating strategies is choosing whether the organization will perform different activities than it’s competitors or similar activities more efficiently. Strategy: plan for interacting with the competitive environment to achieve organizational goals.
Briefcase 2: After goals have been defined, select strategies for achieving those goals. Define specific strategies based on Porter’s competitive strategies or Miles and Snow’s strategy typology.
Porter’s competitive strategies:
Broad
Competitive
Low-cost leadership
Example: Ryanair
Differentiation
Example: Starbucks Coffee
Scope
Narrow
Focused low-cost leadership
Example: Edward Jones Investments
Focused differentiation
Example: Puma
Low Cost Competitive Advantage Uniqueness
Miles and Snow’s Strategy typology: Organizations strive for a fit among internal organization characteristics, strategy, and the external environment. Four strategies:
Briefcase 3: Design the organization to support the firm’s competitive strategy. With a low-cost leadership or defender strategy, select design characteristics associated with an efficiency orientation. For a differentiation or prospector strategy, choose characteristics that encourage learning, innovation, and adaptation. Use a balanced mixture of characteristics for an analyzer strategy.
Porter’s competitive stragegies Miles and Snow’s Strategy Typology Strategy: Differentiation Organization design:
Strategy: Low-cost leadership Organization design:
Strategy: Prospector Organization design:
Flexibility Structure Control a. Indicators: whether the focus lies on internal or external environment and the structure emphasizes stability or flexibility. b. Usefulness: The model integrates diverse concepts of effectiveness into a single perspective. The model calls attention to effectiveness criteria as management values and shows how opposing values exist at the same time.
Chapter 6: Fundamentals of Organization Structure
Organization structure , three key components:
Briefcase 1: Develop organization charts (organogrammen) that describe task responsibilities, reporting relationships, and the grouping of individuals into departments. Provide sufficient documentation so that all people within the organization know to whom they report and how they fit into the total organization picture.
Eerst was de organisatie structuur zodanig (laat in de 19e eeuw/begin 20ste eeuw) dat de top van het bedrijf het denken deed. In een snel veranderende omgeving is dit niet effectief. Tegenwoordig zijn organisaties vaker horizontaal geformeerd = decentralisatie.
Information-Processing perspective on structure : the organization should be designed to provide both vertical and horizontal information flows as necessary to accomplish the organization’s overall goals. Or else: too little information, irrelevant information. Vertical linkages = designed primarily for efficiency and control on the organization. When a vertical structure is dominant there are: specialized tasks, strict hierarchy with many rules , vertical information system (database with reports etc), few teams/task forces/integrators, centralized decision making. Horizontal linkages = designed for learning (reducing control, more coordination and collaboration) Refers to the amount of communication and coordination horizontally across organizational departments. When a horizontal structure is dominant, there are: shared tasks and empowerment, relaxed hierarchy with few rules, horizontal (face-to-face) communication, many teams and task forces, decentralized decision making. Horizontal linkage mechanisms are often not drawn on the organization chart.
According to Malone there will be more horizontal organizations, his key points on the future of work:
Briefcase 2 : Provide vertical and horizontal information linkages to integrate diverse departments into a coherent whole. Achieve vertical linkage through hierarchy referral, rules and plans, and vertical information systems. Achieve horizontal linkage through cross functional information systems, direct contact (by liaison roles = persoon die tussen twee afdelingen staat), task forces (tijdelijk team van verschillende deskundigen), full-time integrators (located outside departments, responsibility for coordinating several departments) and teams (permanent task forces).
Amount of horizontalcoordination required
High
Low
Teams Ο Full-time integrators Ο Task Forces Ο Direct Contact Ο Information Systems Low High Cost of coordination in time and human resources
Briefcase 3 : Recognize that the strongest horizontal linkage mechanisms are more costly in terms of time and human resources but are necessary when the organization needs a high degree of horizontal coordination to achieve its goals.
Organization design alternatives , the overall design of organization structure indicates three things:
Functional, divisional and geographical designs : functional and divisional are most common.
Slow response time to environmental changes Enables in-depth knowledge and skill development
May cause decisions to pile on top, hierarchy overloaded Enables organization to accomplish functional goals
Leads to poor horizontal coordination among departments Is best with only one or a few products Results in less innovation Involves restricted view of organizational goals
Leads to poor coordination across product lines Involves high coordination across functions Eliminates in-depth competence and technical specialization Allows units to adapt to differences in products, regions, customers
Makes integration and standardization across product lines difficult
Briefcase 6 : Consider a horizontal structure when customer needs and demands change rapidly and when learning and innovation are critical to organizational success. Carefully determine core processes and train managers and employees to work within the horizontal structure.
Strengths Weaknesses Promotes flexibility and rapid response to changes in customer needs
Determining core processes is difficult and time consuming Directs the attention of everyone toward the production and delivery of value to the customer
Requires changes in culture, job design, management philosophy and information and reward systems Each employee has a broader view of organizational goals
Traditional managers may balk when they have to give up power and authority Promotes a focus on teamwork and collaboration
Requires significant training of employees to work effectively in a horizontal team environment Improves quality of life for employees by offering them the opportunity to share responsibilities, make decisions and be accountable for outcomes
Can limit in-depth skill development
Virtual Network Structure : extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization. With a virtual network structure ( modular structure ) the firm subcontracts many or most of its major processes to separate companies and coordinates their activities from a small headquarters organization. Outsourcing = to contract out certain corporate functions, such as manufacturing, information technology, or credit processing to other companies. Strengths Weaknesses Enables even small organizations to obtain talent and resources worldwide
Managers do not have hands-on control over many activities and employees Gives a company immediate scale and reach without huge investments in factories, equipment, or distribution facilities
Requires a great deal of time to manage relationships and potential conflicts with contract partners Enables the organization to be highly flexible and responsive to changing needs
There is a risk of organizational failure if a partner fails to deliver or goes out of business Reduces administrative overhead costs Employee loyalty and corporate culture might be weak because employees feel they can be replaced by contract services
Briefcase 7 : Use a virtual network structure for extreme flexibility and rapid response to changing market conditions. Focus on key activities that give the organization its competitive advantage and outsource other activities to carefully selected partners.
Hybrid structure: many structures in the real world do not exist in the pure forms that are outlined in this chapter. Organizations often use a hybrid structure that combines characteristics of various approaches tailored to specific strategic needs.
Briefcase 8 : Implement hybrid structures, when needed, to combine characteristics of functional, divisional and horizontal structures. Use a hybrid structure in complex environments to take advantage of the strengths of various structural characteristics and avoid some of the weaknesses.
Applications of structural design Briefcase 9: Find the correct balance between vertical control and horizontal coordination to meet the needs of the organization. Consider a structural reorganisation when symptoms of structural deficiency are observed.
Vertical control = goals of efficiency and stability. Horizontal coordination = learning, innovation and flexibility.
Symptons of Structural deficiency:
Chapter 7: Organizational Culture and Ethical Values
Social Capital (goodwill) = refers to the quality of interactions among people and whether they share a common perspective. In organizations with a high degree of social capital, relationships are based on trust, mutual understandings, and shared norms and values that enable people (inside and outside the organization) to cooperate and coordinate their activities to achieve organizational goals.
Organizational culture Culture = the set of values, norms, guiding beliefs and understandings that is shared by members of an organization and is taught to new members. Organizational culture operates on two levels:
Emergence and purpose of culture: culture provides members with a sense of organizational identity and generates in them a commitment to beliefs and values that are greater than themselves. Culture generally begins with a founder or early leader who articulates and implements ideas and values as a vision, philosophy or business strategy. When these ideas and values lead to success they become institutionalized. Cultures serve two critical functions in organizations :
Interpreting culture: to identify and interpret culture requires that people make inferences based on observable artefacts.
1) Rites and ceremonies: are important artefacts for culture. These are the elaborate, planned activities that make up a special event and are often conducted for the benefit of an audience. Four types of rites that appear in organizations are: Type of rite Example Social consequences Rites of passage (doorgang/nieuwe functie))
Induction and basic training, US army
Facilitate transition of persons into social roles and statuses that are new for them. Rites of enhancement (prestige)
Annual awards night Enhance social identities and increase status of employees Rites of renewal Organization development parties
Refurbish social structures and improve organization functioning Rites of integration Office holiday party, cheering
Encourage and revive common feelings that bind members together and commit them to the organization
Briefcase 1: Pay attention to corporate culture. Understand the underlying values, assumptions, and beliefs on which culture is based as well as its observable manifestations. Evaluate corporate culture based on rites and ceremonies, stories and heroes, symbols and language.
Culture of discipline : according to Collins, this is one of the aspects that define truly great companies. Some of the key factors of a culture of discipline are: