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ORGANIZATIONS ANDORGANIZATION THEORY

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Current challenges

Global competition: Globalization:

- Orgns have to learn to cross lines of time, culture and geography inorder to survive.

Ethics and social responsibility:- Large corporations can fall: Enron, Arthur Anderson, Satyam.

Speed of response:

Todays customers expect products & services developed more oftenand delivered more rapidly.

Digital workplace:

- Digital supply chain to keep connection with customers; Eliminationof middlemen, Facebook, e-commerce.

Diversity: Organizations have an international face.

CASE: Royal Dutch Shell

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Organization?

Organizations are:

- Social entities

- Goal directed

- Designed as deliberately structured and coordinated activity- Linked to an external environment

Orgns are made up of people and their relationships with each other.

- People interact with each other to perform essential functions thathelp attain goals.

Managers deliberately structure and coordinate organizationalresources to achieve organizations purpose.

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Organization types

Large multi-national organizations

Small family owned shops

Some manufacture goods, others provide services

Some are for profit, others not for profit. In profit orgns managers direct activities towards earning money.

Not for profit managers direct effort towards generating some socialimpact:

- Finance comes from government appropriations, grants, donations

- Need to measure intangible goals (improve public health)

- Need to market services to attract clients but also volunteers & donors(doctors without frontiers)

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Orgns exist to do the following

Bring together resources to achieve desired goals and outcomes.

Produce goods and services efficiently.

Facilitate innovation

Use modern manufacturing and information technology Adapt to and influence a changing environment

Create value for owners, customers and employees.

Accommodate ongoing challenges of diversity, ethics, and themotivation and coordination of employees.

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Perspectives on orgns

Two important perspectives:

1. Open systems:

- A closed system will not be dependent on the environment:

autonomous, enclosed and sealed off from outside worldSystems would be stable. Primary management issues would be torun the things efficiently.

- Open systems: can be enormously comples.

A system: set of interactions elements that acquire input from the

environment, transforms them and discharges outputs into theexternal environment.

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Perspectives on orgns

2. Open configurations: Henry Mintzberg:

- Organizations have five parts:

a) Technical core: People who do the basic work of the organization.

b) Technical support: helps the orgn adapt to the environment; create,innovate, help orgns change and adapt.

c) Administration support: Upkeep of orgn including physical andhuman element; (HRM, admin, OD, welfare, maintenance)

d) Middle management: implement & coordinate at department

levels

e) Top management: Vision and strategy.

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Dimensions of orgn design

Dimensions that describe specific orgn design traits:

Two types a) Structural & b) Contextual.

a) Structural dimensions provide labels to describe the internalcharacteristics of the orgn. create a basis for measuring andlabeling organizations:\

i) Formalization: Amount of written documentation: procedures,job descriptions, regulation and policy manuals

ii) Specialization: Degree to which orgn tasks are subdivided into

separate jobs: division of labour, multi-skilling.iii) Hierarchy of authority: Who reports to whom and the span ofcontrol for each manager; tall and flat structure.

iv) Centralization: Hierarchical levels that has authority to takedecisions: Decision at top, centralization; delegated, decentralized

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Dimensions of orgn design

a) Structural dimensions (contd):

v) Professionalism: Level of formal education and training ofemployee; High when employee needs long periods of training tohold jobs in the orgn.: measured as the average age of education

and experience of an employee(20 yrs for medical professional)

vi) Personal rations: deployment of people to various functions anddepts: Admin ratio; prof to student ratio; direct to indirect empratio, etc.

b)Contextual dimensions:

- Characterize the whole orgn incl its size, technology, environmentand goals.

- They describe the orgn setting that influences and shapes thestructural dimensions.

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Dimensions of orgn design:

b) Contextual dimensions (contd.)

i) Size: the orgn magnitude as reflected in the no. of people in theorgn. typically measured by the no of employees.

ii) Organizational technology: tools, techniques and actions used totransform inputs into outputs concerns how the orgn actuallyproduces its products & services.

iii) The environment: All outside the boundary of the orgn: industry,govt., customer, suppliers, etc.

iv) The orgnss goals and strategy define the purpose, competitivetechniques that set apart from other orgns

Goals and strategies define the scope of operations and therelationship with employees, customers and competition

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Dimensions of orgn design

b) Contextual dimensions:

v) Culture: Underlying set of key values, beliefs, understanding andnorms shared by the employees

CASE: W L Gore and Associates

CASE: Knight Ridder

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Efficient performance vs

learning organization Mechanical system design: Stable environment, efficient perf.

Natural system design: turbulent environment, learning organ.

From vertical to horizontal structures from silos to collaborationacross functions.

Routine tasks to empowered roles degree of formal structure andcontrol on employees.

From formal control systems to shared info. formality &bureaucracy when the orgn is larger.

Competitive to collaborative strategy top mgnt prepare their ownvision and mission and thrust on those below.

From rigid to adaptive culture For a healthy orgn its culture mustencourage adaptation to the external envm; encourage openness;equality; continuous improvement and change.

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STRATEGY, ORGNIZATIONDESIGN & EFFECTIVENESS

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Strategy direction in orgn

CASE : 3M Corporation

Top executives decide on the end purpose the orgn will strive for andthe direction it will take to accomplish it.

This purpose and direction shapes how the orgn is designed andmanaged.

Middle mgrs do the same for major divisions & depts.

Direction setting process begins with an assessment of SWOT inclthe amount of change, uncertainty, resource availablility

Also assess internal strengths & weakness to define cos distinctivecompetence compared to other firms.

Orgn design is the admin and execution of the strategic plans.

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Strategy direction in orgn.

Orgn direction, implemented through decisions about structuralforms, including:

- Designed for learning or an efficiency orientation

- Choices about information and control system.

- Type of production technology; human resources policy; culture;inter-organizational linkages.

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Organizational purpose

Orgns are created and continued to accomplish something:

- Goals and mission

- The orgns reason for existence.

Official goal statements define business operations, focus on values,markets, customers that distinguish the orgn.

Mission statement communicates the current and prospectiveemployees, customers, investors, suppliers and competitors whatthe orgn stands for and trying to achieve enable others to identify

with the culture and join it. Operating goals explain what the orgnis trying to do: pertain

typically to the primary tasks an orgn must perform.

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Organizational purpose

a. Overall performance: profitability, growth, volume of sale.

b. Resources: acquisition of needed material and financial resourcesfrom the environment, professionals, etc.

c. Market: market share, market standing desired by the orgn.

d. Employee development: training, performance, safety and growthof employees.

e. Innovation and change: internal flexibility and readiness to adapt tounexpected changes in the environment.

f. Productivity: amount of output achieved from available resources.Amount of resource inputs required to achieve a desired output.

g. Today we are looking also into sustainability and the triple BottomLine.

CASE: Marriott Hotels

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Assessing organizational

effectiveness A first step to understanding orgn effectiveness is to understand

orgn goals and strategies as well as fitting design to variouscontingencies.

Effective evaluates the extent to which multiple goals are attained.

Efficiency: limited and pertain to the internal workings of the orgn.Ratio of the output to input.

CASE: Nortel

CASE: Chrysler corporation.

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FUNDAMENTALS OFORGANIZATIONAL STRUCTURES

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Organization Structure

CASE: Cunningham Motors

3 key components in the definition of an orgn structure:

1. Orgn structure designates formal reporting relationships, incl theno. of levels in the hierarchy, and the span of control of managersand supervision.

2. Orgn structure identifies the grouping together of individuals intodepartments and of departments into the total orgn.

3. Orgn structure includes the design of systems to ensure effective

communication, coordination and integration of efforts acrossdepartments and divisions.

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Organization structure

The first two elements are the structural framework , which is thevertical hierarchy.

The third element pertains to the pattern of interaction among orgnemployees.

- An ideal structure encourages employees to provide horizontalinformation and coordination where and when it is needed.

The orgn structure is reflected in the orgn chart.

Orgn chart is the visual representation of a whole set of underlying

activities and processes in the orgn.- It shows the various parts of an orgn and how they are interrelated

and how each position and dept fits into the whole.

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Structure: Info. Processing

perspective. Orgn to be designed to provide both vertical and horizontal info flow

as necessary to accomplish orgn goals.

Inherent tension between vertical and horizontal mechanisms:

- Vertical linkages are designed primarily for control

- Horizontal linkages designed for coordination and collaboration,which usually means reducing control.

- Vertical linkages focus on efficient orgn

- Horizontal linkages focus on learning orgn

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Vertical Orgns

Designed for efficiency

Specialized tasks

Strict hierarchy, many roles

Vertical communication and reporting systems Centralized decision making

Problems and decisions are funneled to the top levels of hierarchyfor resolution.

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Horizontal orgns.

Designed for learning

Shared tasks, empowerment

Relaxed hierarchy, few rules

Horizontal communication, face to face Many teams and task forces

Decentralized decision making: decision making authority is pusheddown to lower levels in the hierarchy.

Orgns may have to experiment to find the correct degree of

centralization or decentralization to meet their needs.

CASE: Oracle Corporation.

CASE: Nissan

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Orgn design alternatives

Overall design of orgn structure indicates 3 things:

- Required work activities

- Reporting relationships

- Departmental groupings- Options here include: functional, divisional, multifocused, horizontal

and modular groupings

a) Functional groupings places employees together who performsimilar functions or work processes or who bring similar knowledge

and skills to bear.b) Divisional groupings mean people are organized according to what

the orgn produces.

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Orgn design alternatives

c) Multi focused groupings: orgn embraces two structural alternativessimultaneously; Matrix or Hybrid.

d) Horizontal groupings: means employees are organized around corework processes, the end-to-end work, information and material

flows that provide value directly to the customer.

e) Modular groupings: orgn is a loosely connected cluster of separatecomponents; departments are separate orgns that areelectronically connected for sharing of information and completionof tasks.

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Functional structures

Strengths & Weaknesses

CASE: Bell Ceramics

Very few successful organizations can maintain a strictly functionalorganization structure.

Orgns compensate for vertical functional hierarchy by installinghorizontal linkages.

- Use information systems, direct contact between depts, full-timeintegrators (project managers), task forces, teams.

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Divisional structure (product,

SBUs) Strengths and weaknesses

Organized according to individual products, services, productgroups, projects, divisions, business or profit centers.

Groupings based on organizational outputs

CASE: Microsoft

Geographical structures

- Based on organizations users or customers and locations.

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Matrix structure

Strengths and weaknesses.

When we need to be multi-focused in that both product & functionor product & geography and emphasized.

CASE: World wide steel

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Horizontal structure

Strengths & weaknesses

Organizes employees around core processes

After re-engineering, redesign of vertical orgn along its horizontalworkflows & processes.

Structure created around cross-functional core processes ratherthan tasks, functions or geography.

Self-directed teams, not individuals, basis of orgn design and perf.

Process owners have responsibility for each core process entirely

Individuals given skills, tools, motivation & authority to makedecisions

Teams have freedom to think creatively and respond flexibly to newchallenges that arise

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Horizontal structure

Customers drive horizontal corpn

Effectiveness is measured by end-of-process performanceobjectives, as well as customer satisfaction, employee satisfactionand financial contribution

Culture is one of openness, trust and collaboration, focused oncontinuous improvement.

CASE: G.E. Salisbury

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Modular structure

Strengths & weaknesses.

With modular structure, the firm subcontracts many or most of itsmajor processes to separate companies and coordinates activitiesfrom a small headquarters orgn.

A central hub surrounded by a network of outside specialists.

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Hybrid structures

Examples

Many structures in the real world do not exist in their pure form.

Orgns often use a hybrid structure that combines characteristics ofvarious approaches tailored to specific strategic needs.

E.g. combine functional and divisional when the orgn grows large.

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THE EXTERNAL ENVIRONMENT

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Orgn environment

CASE: Guiltless Gourmet

Orgn environment: defined as all elements that exist outside theboundary of the orgn and have the potential to affect all or part ofthe orgn.

An orgns domain is the chosen environmental field of action:

- It is the territory an orgn states out for itself with respect toproducts, services and markets served.

- Domain defines the orgns niche and defines those external sectors

with which the orgn will interact to accomplish its goals.- The environment comprises several sectors or subdivisions of the

external environment that contain similar elements.

- An orgns environment: (handout)

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Orgns environment

The above sectors can be further subdivided into the taskenvironment and general environment:

Task environment: includes the sectors with which the orgn interactsdirectly and that have a direct impact on the orgns ability to achieve

goals: the industry, raw materials, market and sector, HR andinternational.

General environment: Includes the sector that might not have adirect impact on the daily operation of a firm but will indirectlyinfluence it: government, socio-cultural, economic condition,

technology, financial resources.

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International context

Even if you stay in your hometown, your company may bepurchased tomorrow by an American, British, Korean, etc. company

- Ford owns Swedens Volvo

- Tatas own British Tetly; Jaguar, etc.

- Companies involved in various alliances with orgns around theworld: Arcelor Mittal,

Thus, the environment for all orgns becomes extremely complex andextremely competitive.

CASE: Ford Motor company

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Environmental uncertainty

Patterns and events occurring in the environment can be describedalong several dimensions: stable unstable; homogeneous heterogeneous; concentrated dispersed; simple complex; extentof turbulence; amount of resources available to support the orgn.

Envm influences the orgn in two ways:- The need for info about the envm

- The need for resources from the envm.

The envm conditions of complexity and change create a greater

need to gather info and respond based on that info. Orgn also concerned with scarce material and financial resources

and with the need to ensure availability of the resources.

The total amount of uncertainty felt by the orgn is the uncertaintyaccumulated across environmental sectors.

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Environmental uncertainty

Uncertainty means that decision makers do not have sufficientinformation about environmental factors and they have a difficulttime predicting external changes.

Orgns facing uncertainty generally have a more horizontal structure

that encourages cross-functional communication and collaborationto help the company adapt to changes in the environment.

As complexity in the envm increases, so does the no of positions anddepts within the orgn.

- Each section in the external envm requires an employee or dept todeal with it.

- Buffering roles to absorb uncertainty from the envm: e.g. purchasemaintain inventory of received goods.

- However, opening the orgn to envm makes it more fluid and

adaptable.

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Environmental uncertainty

Boundary spanning roles: link and coordinate an orgn with keyelements in the external environment:

- Primarily concerned with exchange of info.

- To detect and bring into the orgn info about changes in the envm.

- Send info into the envm that presents the orgn in a favourable light.

CASE: Tommy Hilfinger

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Environmental uncertainty

Organic vs Mechanistic mgnt processes.

Another response to envm uncertainty is the amount of formalstructures & control imposed on employees.

When external envm was stable, internal orgn was characterized by

rules, procedures and a clear hierarchy of authority. Orgns wereformalized and centralized a mechanistic structure.

In a rapidly changing envm, the internal orgn was much looser, freeflowing and adaptive. an organic structure.

Mechanistic & Organic forms a comparison.CASE: Rowe Furniture Company

Resource dependence means that orgns depend on the envm butstrive to acquire control over resources to minimize theirdependence.

CASE: Nokia Corporation

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Establishing Inter-

organizational linkagesa) Ownership: Companies use ownership to establish linkages when

they buy a part of or a controlling interest in another company.Gives access to tech, products or other resources it does not have.

b) Formal strategic alliances: When there is a high level of

complimentarity, between business lines, geographical positions orskills. contracts come in the form of license agreements (right touse an asset for a specific time) ;

- Supplier agreement that contract for the sale of one firms outputto another ties customers and suppliers to specific prices & rates.

- Joint ventures: new orgns independent of parents with less control

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Establishing Inter-

organizational linkagesc. Cooption, Interlocking directorates: occurs when the leaders from

imp. Sectors of the envm are made part of the orgn.

- Influential customers / suppliers made part of the board.

d) Executive recruitment: transferring or exchanging executives,

hiring retired govt servants to get influence.

e) Advertising and public relations: Influence the taste of thecustomer.

- Public relations

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INTER-ORGANIZATIONALRELATIONSHIP

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Inter organizational

relationships Orgns rethinking how to do business in response to todays chaotic

envm.

Inter-organizational relationships relatively enduring resourcetransactions, flows and linkages occurring between two orgns.

An orgns ecosystem is a system formed by interaction of acommunity of orgns and its environment.

No co can go it alone under constant onslought of internationalcompetitors, changing technology & new regulations.

- Orgns worldwide embedded in complex networks of confusingnetworks.

- Collaborating in some markets competing fiercely in others.

- Large part of new alliances recently are between competitors.

- These alliances influence orgns competitive behaviour varidly.

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Inter organizational

relationships Market shares can crumble overnight and no industry immune from

almost instant obsolescence.

In an orgn ecosystem, conflict and cooperation frequently exists atthe same time.

By enforcing ordered uniformity, you miss opportunities for new andenduring external relationships.

- Important initiatives are not just top down; can cut across theboundaries separating orgn units.

- Suppliers and customers now become part of the team. Mgrs learn to see & appreciate rich envm of opportunities from

cooperative relationships with others I the ecosystem.

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Inter organizational

relationships Reasons for interorganizational collaborations include: sharing risks

when entering new markets, mounting expensive new programs andreducing costs; and enhancing orgn profile in selected industries ortechnology.

- Cooperation is a prerequisite for greater innovation, problem solvingand performance

- Also the major avenue for entering global markets.

- Pfizer collaborates with more than 400 companies for researchprojects.

CASE: Bombardier

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Inter organizational

relationships Established orgns have a hard time adapting to a rapidly changing

envm.

- Many limitations on the orgns ability to change.

- E.g. heavy investment in plant, eqpt & specialized personnel; limited

information; established view points of decision makers; orgns ownsuccessful history that justifies current procedures; difficulty ofchanging corporate culture.

- True transformation is a rare and unlikely event in the face of allthese barriers.

- Individual orgns suffer from structural inertia; find it difficult tochange to environmental changes.

CASE: Starbucks coffee

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DESIGNING ORGNS FOR THEINTERNATIONAL ENVIRONMENT

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The global arena

CASE: Starbucks

As recently as 25 years companies could well ignore the internationalenvm.

Today, companies must think globally or be left behind.

- The world is becoming a unified global field

Primary factors motivating companies to expand internationally:

- Economies of scale

- Economies of scope

- Cheaper production factors

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Economies of scale

Building a global presence expands an orgns scale of operations,enabling it to realize economies of scale.

You could achieve the lowest possible cost per unit of production.

Also domestic markets are not big enough to absorb the produces.

You can also obtain volume discounts from the suppliers.

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Economies of scope

Scope refers to the number and variety of products and services acompany offers, as well as the no and variety of regions, countriesand markets it serves.

Having a presence in multiple countries provide marketing power

and synergy. E.g. suppliers serving MacDonalds Having an idea of the various markets the co is in can give an

opportunity to look for new products and services to provide.

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Low cost production factors

Opportunity to obtain raw materials and resources at the lowestcost possible.

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Stages of International dev.

No company can become a global giant overnight.

- The shift from domestic to global usually occurs through stages ofdevelopment.

In Stage 1: the domestic stage: Company is domestically oriented,

but managers are aware of the global environment and may want toconsider initial foreign involvement to expand production volumeand realize economies of scale.

- Initial sales handled through an export dept.

- Details of freight forwarding, customs problems and foreignexchange are handled by outsiders.

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Stages of international dev.

In stage 2: the international stage: Company takes export seriouslyand begins to think multi-dimensionally: companies deal with eachcountry independently.

- Concern is with international competitive positioning compared

with other firms in the industry.- An international division has replaced the export dept; specialists

hired to handle sales, services & warehousing abroad.

In Stage 3: The multi-national stage: Companies has extensiveexperiences in international markets; established mkt, manf., or

R&D facilities in a no of foreign countries.

- Orgn has large % of sales outside the home country.

- Co has business units scattered around the world; along withsuppliers, manufacturers and distributors.

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Stages of international dev.

In Stage 4: the Global stage: the company transcends any singlecountry.

- The business is not merely a collection of domestic industries

- Subsidiaries are interlinked to the point where competitive position

in one country significantly influences activities in another country.

- Truly global countries do not think of themselves as having a singlehome country called stateless corporations.

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Strategic alliances

One of the most common ways companies involved in internationaloperations is through strategic alliances.

Typical alliances include licensing, joint ventures and consortia.

- Licensing: Companies like Merck, Eli Lilly, Pfizer and Werner

Lambert cross license their newest drugs to each other to supportindustry wide innovation and marketing and offset the high fixedcosts of research and distribution.

- Joint venture is a separate entity created with two or more activefirms or sponsors.

May be with customer or competitor

- Consortia: group of independent companies including suppliers,and even competition that join together to share skills, resources,tasks and access to one anothers markets. Airbus; Keiritsu in Japan

CASE: ST Microelectronics.

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Designing structure to fit

global strategy Managers must decide whether they want each global affiliate to act

autonomously or whether activities should be standardized acrosscountries.

Globalization strategy means the product design, manf, and mkt

strategy are standardized throughout the world:- Japanese companies TQM ; Coca Cola

- Can help companies reap economy of scale, efficiencies

- Large production facilities that use common suppliers.

Multi domestic strategy means the competition in each country ishandled independently of competition in other countries.

- Encourage product design, assembly, and marketing tailored to thespecific needs of each country.

CASE: Colgate Palmolive.

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MANUFACTURING & SERVICETECHNOLOGIES

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Core Manufacturing technology

CASE: French Rags

An orgns core technology is the work process that is directly relatedto the orgns mission, such as teaching in the high school, medicalservices in a health clinic, or manufacturing at GM.

For a manufacturing firm the core process is the transformationprocess in manufacture of goods.

Non-core process includes HR, Accounting, R&D, marketing.

Manufacturing technologies include traditional manufacturingprocesses and new flexible manufacturing systems.

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Classification of Manf Firms

Group 1: Small batch and unit production: these firms tend to be jobshop operations that manufacture and assemble small orders tomeet specific needs of customers. They rely heavily on the operator;is not highly mechanized.

Group 2: Large batch production: Is a manf process characterized bylong production runs of standardized parts. Output often goes intoinventory from which orders are filled, because customers do nothave special needs.

Group 3: In continuous process production, the entire process is

mechanical. There is no starting and stopping. Automated machinescontrol the continuous process, and outcomes are highlypredictable. e.g. chemical plants, refineries.

CASE: Printronix

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Flexible Manufacturing

New manf technologies include robots, Numerical Control (NC)machines, computerized software for product design, engineeringanalysis and remote control of machines.

FMS Flexible Manufacturing Systems ultimate automated

factories: also called computer integrated manufacturing, smartfactories, advanced manufacturing technologies, agile manf orfactory of the future.

- FMS links together manf components that previously stood alone.

Enables large factories to deliver a wide range of custom-made

products at low mass production costs.

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FMS result of 3 components:

1. Computer aided design (CAD):

- Computers assist in drafting, design and engineering of new parts.Hundreds of design alternatives can be explored.

2. Computer Aided manufacture (CAM):

- Computer controlled machines in material handling, fabrication,production and assembly. Allows prodn line to shift rapidly fromproduct to product.

- Helps to quickly honour customer requests for change in productdesign and product mix.

3. Lean manufacturing: uses highly trained employees of every stageof prodn processes, who take a painstaking approach to details andproblem solving to cut waste and improve quality.

- To think lean employees attack waste and strive for continuous

improvement in all areas.

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TPS Toyota Production System

TPS combines technique:

- Just in time

- Continuous flow production

- Quick changeover of assemble lines

- Continuous improvement

- Preventive maintenance

- Management systems that encourage employee involvement andproblem solving.

Integration of FMS with flexible work processes have paved the wayfor mass customization: mass production of products designed toexact customer specifications.

CASE: Dell Computers

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Service Firms

Most imp difference: service technology produces an intangible output:consists of knowledge and ideas , not a physical product.

Impact of customer contact on the orgn structure is reflected in the use ofboundary roles and structural disaggregation.

- Boundary roles used in manf orgn to handle customers & reduce disruptionto technical core.

- In service firms, used less as service is intangible and cannot be passed alongby boundary spanner.

- Service customers must interact directly with tech employees such asdoctors, brokers, service enginners.

A service firm deals with info and intangible outputs and does not need tobe larger.

Greatest economies achieved through disaggregation into small unitslocated close to customers.

CASE: Pret a Manager

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INFORMATION TECHNOLOGY &CONTROL

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IT Evolution

CASE: Progressive Insurance

Goal: to reduce labour costs.

Transaction processing systems (TPS): which automate orgnsroutine day-to-day business transactions.

Data warehousing: use huge databases that combine all of acompanys data and allow users to access the data directly, createreports, and obtain responses to what-if questions.

Data mining: helps users make sense of all this data. Usesophisticated decision making processes to search raw data forpatterns and relationships that may be significant.

With sophisticated computer-based systems, managers have toolsto improve performance of depts and the orgn.

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Orgn decision making system

MIS is a computer based system that provides info and support formanagerial decision making.

Info. Reporting systems provide mid-level managers with reportsthat summarizes data and support day-to-day decision making.

Executive info systems: higher-level mgnt applications canconverge large amounts of complex data into pertinent informationand provide timely info in timely fashion.

Decision Support Systems (DSS): Helps users pose a series of what-ifquestions to test possible alternatives.

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Mgnt control systems

Formal routines, reports, and procedures that use info to maintain oralter patterns in orgn activities.

The control systems include formalized info. Based activities forplanning, budgeting, perf. Evaluation, resource allocation and

employee rewards. Targets are set in advance, outcomes compared to targets and

variance reported to managers for corrective action.

Other systems include: budgets, P&L accounts, Balance sheet, etc.

Mgrs use periodical statistical reports to evaluate and monitor non-financial performance like customer satisfaction, employeeperformance or rate of staff turnover.

In e-commerce include stickiness conversion rate, etc.

CASE: TNT UK

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Quality systems

Set targets for employee participation, establish benchmarkingguidelines, assign and measure six sigma goals.

Six sigma specifies a goals of 3 to 4 defects per million.

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Balanced Score Card

A comprehensive mgnt control system that balances traditionalfinancial measures with operational measures relating to acompanys critical success factors.

The four major parspectives include: Financial performance;

customer service; internal business processes; orgns capacity forlearning and growth.

- Financial perspectives: Reflects a concern that orgn activitiescontribute to improve short& long term financial perf.

- Customer service indicator: measure how customers view orgn as

well as customer retention & satisfaction.

- Business process indicators: focus on prodn and operationsstatistics: order fulfillment, cost per order.

- Potential for learning and growth: focus on how well humanresources are managed for the companys future.

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Info tech tools

3 primary info tech tools for internal coordination:

1. Intranets: Private companywide info systems that uses thecommunication protocol and standards of the internet and worldwide web. However it is accessible only to people within the

company.2. Enterprise Resource Planning (ERP): The system collects, process,

and provide info about a companys entire enterprise, incl. orderprocessing, product design, purchasing, inventory, distribution, HR,manf. receipts of payment s and forecasting of future demands.

3. Knowledge management: A new way to think about organizing andsharing an orgns intellectual and creative resources. Systematicallyfind, organize and make available an orgns intellectual capital andfoster a culture of continuous learning.

CASE: DPR Constructions Inc.

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The integrated enterprise

An orgn that uses advanced info tech to enable close coordinationwithin the company as well as with suppliers, customers andpartners.

CASE: Corrugated supplies.

An important aspect is supply chain management.

- Managing the sequence of suppliers and purchasers covering allstages of processing from obtaining raw materials to distributingfinished goods to customers.

- To operate efficiently and provide high quality items that satisfycustomer needs, the co must have reliable deliveries of high quality,reasonably priced supplies and materials.

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The integrated enterprise

- It must also require an efficient and reliable system for distributingfinished products, making them readily available to customers.

Two important requirements are:

- Information linkages between orgn and key partners for sharing and

exchange of data.

- Horizontal relationships: the purpose of integrating the supply chainis for everyone to work closely together, moving in lockstep to meetcustomers product and time demands.

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E-business orgn design

Defined as any business that takes place by business processes overa computer network rather in physical space.

Most commonly refers to electronic linkages over the internet withcustomers, partners, suppliers, employees or other key constituents.

Managers need to make a decision about how best to integratebricks and clicks.

CASE: Tesco.com

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Setting up internet operation

Some strategies include:

1. In-house division: Offer tight integration between the internetoperation and the orgns traditional operation.

- Orgn creates a separate unit within the companys function

2. Spin-off: to give the internet operation greater organizationautonomy, flexibility, focus, create a separate spin-off company.

- Advantage include faster decision making, increased flexibility andresponsiveness to changing market conditions; and entrepreneuralculture; totally on-line focused management.

3. Strategic partnership: Partnering with an established e-commercecompany like Amazon.com.

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IT impact on orgn design

Some specific implications of these advances for orgn design:

1. Smaller orgns: Some internet based orgns almost entirely exist incyberspace. One or a few people maintain site from home.

2. Decentralized orgn structure: Advanced info tech enables orgn to

reduce layers of mgnt and decentralize decision making. Infoavailable to take decisions down the levels.

3. Improved horizontal coordination: Intranets and other networkscan connect people even when their offices and factories or storesare scattered around the world.

4. Improved inter-organizational relationships: with external parties;using extranets link with contract manfs, outsourcers, etc.

5. Enhanced modular structures: High level of inter organizationalcollaboration; outsourcing tie companies into a seamless flow.

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ORGANIZATION SIZE

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Pressure for growth

CASE: Interpol

Dream: to be among the Fortune 500 companies.

- Grow fast and grow large; sometimes more imp than making goodproducts or show the greatest profits.

- Companies in all industries strive for growth, to acquire the size andresources to compete on a global stage, to invent new technology,control distribution channels and to guarantee access to markets.

- To stop growing is to stagnate.

- To be stable customers may not have their demand met fully orcompetitors will expand at your request.

- Scale crucial to economic health in mkt intensive orgns like Coke.

- Growing orgns are vibrant, exciting places to work, enablescompanies to attract and keep quality employees.

il f l i

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Dilemmas of large size

Compulsion to grow: how much? How large?

Huge resources and economies of scale reqd by many orgns tocompete globally.

- Only large orgns can build a pipeline in Alaska, only Boeing can build

a 747, and only a large airline can buy that plane.- Only large orgns can be supportive economic and social force in

difficult times. Can get back to business quickly, give employees asense of security, belongingness in uncertain times.

- Large orgns are standardized, mechanically run and complex.

- Large orgns, once established, can be a presence that stabilizes amarket for years.

ll i

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Small size

Critical reqm in a global economy are responsiveness and flexibilityin fast changing markets.

One reqm large companies sometimes fail is that top leaders get toofar from the nuts and bolts of running the business.

The economic vitality of most countries is tied to small and mid-sized business.

Growth of the internet and other information technologies making iteasier for small companies to act big.

Small companies have a flat structure and an organic free flowingmgnt style that encourages entrepreneurship and innovation.

i / ll

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Big company/small company

hybrid Small companies can become victims of their own success as they

grow large, shifting to a mechanistic structure emphasizing verticalhierarchy and spawning orgn men rather than entrepreneurs.

Giant companies are built for optimization, not innovation.

Big companies become committed to their existing products andtechnologies have a hard time supporting innovation for the future.

A big company / small company hybrid combines a large corpnsresources and reach with a small companys simplicity and flexibility.

GE and J&J reorganize into groups of small companies to capture themindset and advantage of smallness.

- J&J is actually a group of 180 separate companies. When a newproduct is created in one of J&Js 56 labs, a new company is createdalong with it.

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ORGANIZATION LIFE CYCLE

C t

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Concepts

Orgns are born, grow older and eventually die.

Orgn structure, leadership style and administration systems follow afairly predictable pattern through stages in the life cycle.

Stages are sequential in nature and follow a natural progression.

HANDOUT: Orgn life cycle.

Four major stages characterize orgn development.

1 E t i l t

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1. Entrepreneurial stage

When an orgn is born emphasis is on creating a product andsurviving in the market place.

Founders are entrepreneurs and devote full energy in technologyactivities of production and marketing.

Orgn informal and non-bureaucratic Control based on owners personal supervision.

Growth is from a creative product or services.

Crisis: need for leadership:

With growth, larger no of employees cause problems.

Owners look at tech and mkt issues, not mgnt issues.

Entrepreneure must either adjust structure of the orgn toaccommodate growth or bring in strong mgrs who can do.

2 C ll ti it t

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2. Collectivity stage:

If leadership crisis is resolved, strong leadership is obtained; orgnbegins to develop clear goals & direction.

Depts established with clear hierarchy, job assignments, etc.

Employees identify with the mission of the orgn and spend long

hours helping the orgn to succeed.Crisis: Need for delegation with control:

Lower level mgrs begin to acquire confidence in their own functionalareas and want more discretion.

Autonomy crisis: Successful senior managers dont want to give offcontrol.

Orgns need to find mechanisms to control and coordinate deptswithout direct supervision from the top.

3 F li ti t

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3. Formalization stage

Involves the installation of rules, procedures, and control systems.

Communication less frequent and more formal.

Experts in HR, engg. And other staff may be added.

Top mgnt leave operations to middle mgnt.

Crisis: Too much red tape:

Proliferation of systems & programs may begin to strangle middlelevel executives.

Orgn seems bureaucratized.

Innovation may be restricted.

Complexity may be increased.

4 El b ti t

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4. Elaboration stage:

Solution to red tape is a new sense of collaboration and team work.

Mgrs develop skills for confronting problems and working together.

Social control & discipline reduce need for additional formal control.

Formal systems simplified& replaced by teams & task forces.

Orgns may be split into divisions to maintain small co philosophy.

Crisis: Need for revitilization:

After reaching maturity may enter periods of temporary decline.

A need for renewal may occur every 10 or 20 years.

Orgns shifts out of alignment with environment, or become slowmoving & over bureaucratized, and must go through a stage ofstreamlining and innovation.

CASE: Yahoo

O h t i ti d i

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Orgn characteristics during

life cycle As orgns evolve through the 4 stages of the life cycle, changes take

place in structure, control systems, innovation and goals.

1. Entrepreneurial:

- Initially, orgn is small, non-bureaucratic & one person show.

- The top managers provide the structure and control system.

- Orgn energy devoted to survival & prodn of single product/service.

2. Collectivity:

- Growth is rapid; employees excited & committed to orgn mission.

- Structure still mostly informal, same procedures emerges.

- Strong charismatic leaders provide direction & goals for the orgn

- Continued growth is a major goal

Orgn characteristics d ring

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Orgn characteristics during

growth cycle3. Formalization:

- Orgn entering midlife; Bureaucratic characteristics emerge.

- Orgn adds support staff, formalizes procedures & establishes aclear hierarchy and division of labour.

- Innovation through a separate R&D dept.

- Major goals internal stability & mkt expansion

- Formal control systems implemented.

4. Elaboration:

- Mature orgn, large, bureaucratic; control systems, rules, procedure

- Mgrs attempt team orientation to reduce bureaucracy.

- Innovation institutionalized through R&D

- Mgnt may attack bureaucracy and streamline it.

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BUREAUCRACY

Concept

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Concept

Bureaucracy has the ability to ensure more efficient functioning oforgns in both business and government settings.

Rules and standard procedures enabled orgn activities to beperformed in a predictable, routine manner.

Specialized duties meant that each employee had a clear task toperform.

Hierarchy of authority provided a sensible mechanism forsupervision and control.

Technical competence was the basis for hiring people.

Separation of position from the position holder: individuals did notown or have right to job, which promoted efficiency.

Written records provided an organizational memory and continuityover time.

CASE: United Parcel Service

Large & Small orgns

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Large & Small orgns

Large orgns are different from small orgns along several dimensionsof bureaucratic structure:

1. Formalization: refers to rules, procedures and written documentssuch as policy manuals & job description.

- Large orgns rely on rules, procedure and paperwork to achievestandardization & control across large no of employees and dept.

- Top mgrs use personal observations to control a small orgn

2. Centralization: Refers to the level of hierarchy with authority tomake decisions:

- Decisions tend to be made at the top

- In large orgns sr. mgrs could be overloaded.

Large and small orgns

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Large and small orgns

3. Personal ratios:

- Most frequently studied ratio is the administration ratio:

- Ratio of top admin to total employees smaller in large orgns orgns experience admin economies as they become bigger

- Second is the clerical and professional support staff These grouptends to increase in proportion to orgn size.

Bureaucracy some positives

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Bureaucracy some positives

By establishing a hierarchy of authority and specific rules &procedures, provides a effective way to bring order to a large groupof people and prevent abuse of power.

Impersonal relationships based on roles rather than people reduced

favouritism, nepotism characteristics of many pre industrial orgns Provided for systematic and rational ways to organize management

tasks too complex to be understood & handled by few individuals

However:

- The world is changing very rapidly

- Need to reduce formalization and bureaucracy

- Narrowly defined job descriptions tend to limit creativity, flexibilityand rapid response needed in knowledge based orgn ideas.

Reducing bureaucracy some

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Reducing bureaucracy some

structural solutions Incident command system:

- Used to have to respond rapidly to emergency or crisis situations.

- Used to maintain the efficiency and control benefits of bureaucracyyet prevent problem of slow response to crisis.

- During emergency, loosen the lines of command and enable workacross depts and hierarchical lines. (e.g. on the deck of a nuclearaircraft carrier).

- Despite the free flowing and flexible nature of crisis response,someone is always in charge.

- System is based on trust that lower level workers have a clearunderstanding of the mission and will take decisions and actionswithin guidelines that will support orgn goals.

Reducing bureaucracy

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Reducing bureaucracy

Other approaches:

- Cut layers of hierarchy

- Keep HQ staff small

- Give lower level workers greater freedom to take decisions.

- Professionalism helps get highly trained employees who act asneeded; provide ongoing training to employees

- Professional partnership: Medical, Law, Mgnt practicing firms:Branches have substantial autonomy and decentralized authority to

make necessary decisions.CASE: THE Salvation Army

Orgn control strategies

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Orgn control strategies

Every orgn needs systems for guiding & controlling the orgn:

Three primary strategies:

1. Bureaucratic control:

- Use of rules, policies, hierarchy of authority, written

documentation, standardization, etc. to standardize behaviour andassess performance.

- The primary purpose of bureaucratic rules and procedures is tostandardize and control employee behaviour.

-To make this control work, mgrs must have the authority tomaintain control over the orgn. legitimate, rational authoritygranted to role.

Orgn control strategies

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Orgn control strategies

2. Marketing control:

- Occurs when price control is used to evaluate the output andproductivity of an orgn.

- Mgrs compare prices and profits to evaluate the efficiency of their

corporations.- Profit & loss statements used to compare perf of previous years.

- Competition should coexist or price will not accurately reflectinternal efficiency.

- Use competition with external agencies for internal services too.

- Mkt control can only be used when output of a co., dividion, or deptcan be assigned a rupee price and there is competition.

CASE: Imperial Oil Company

Orgn control strategies

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Orgn control strategies

3. Clan Control:

- Is the use of social characteristics such as corporate culture, sharedvalues, commitment, traditions, and beliefs to control behaviour.

- Orgns using clan control requires shared values & trust among

employees.- Is imp when ambiguity and uncertainty is high.

- High uncertainty implies orgn cannot put a price on its services;things change so fast that rules and regulations not able to specifyevery correct behaviour.

- People hired because they are committed to orgn purpose.

- New employees subjected to long period of socialization.

- Often used in small organizations.

CASE: Columbus Mills

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ORGN DECLINE & DOWNSIZING

Concept

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Concept

Reality that for some companies continual growth and expansionmay not be possible.

Orgn decline: the term used to define a condition in which asubstantial, absolute decrease in an orgns resource base occurs over

a period of time. Often associated with environmental decline:

- An orgns domain experiences either: a reduction in size (shrinkagein customer demand); or a reduction in shape ( such as a shift incustomer demand).

3 factors considered to cause orgn decline:

Orgn atrophy; Vulnerability; environmental decline or competition.

1 Orgn atrophy

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1. Orgn atrophy

Atrophy occurs when orgn grow older, become inefficient and overlybureaucratized, and lose muscle tone.

Orgns ability to adapt to its environment deteriorates.

Often follows a long period of success; orgn takes success for

granted, attached to practices which had worked in the past, notnow.

Warning signs: excess staff personnel, cumbersome adminprocedures, lack of effective communication and coordination andoutdated orgn structure.

2 Vulnerability

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2. Vulnerability

Reflects the orgns strategic inability to prosper in its environment.

Happens to small orgns that are not yet fully established.

Some orgns unable to define the correct strategy to fit theenvironment.

Vulnerable orgns typically need to redefine their environmentdomain to enter new industries or market.

3 Environmental decline or

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3. Environmental decline or

competition Refers to reduced energy & resources available to support an orgn.

When the environment has less capacity to support the orgn, theorgn has to either scale down operations or shift to another domain.

In a recession, advertisement should be cut first.

Model of decline stages

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Model of decline stages

decline, if not managed properly, can move through five stages,resulting in orgn dissolution:

1. Blinded stage:

- First stage of decline is the internal & external change that

threatens long-term survival and might require the orgn to tightenup.

- Excess personnel, cumbersome procedures, or a lack of harmonywith customers.

- Leaders often miss signals; need to develop effective scanning &

control systems.

2. Inaction stage:

- Denial occurs despite signs of deteriorating performance.

- Leaders may persuade employees that all is well.

Model of decline stages

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Model of decline stages

2. Inaction stage (contd.):

- Creative accounting may make things look fine during that period.

- Acknowledge decline and take prompt action

3. Faulty action stage:

- Orgn facing serious problems and indications of poor perf cannotbe ignored.

- Failure to adjust to declining spiral lead to orgn failure.

- Leader forced to consider major changes

- Actions may involve retrenchment, downsizing personnel

- Reduce uncertainty by communicating to employees.

Model of decline stages

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Model of decline stages

4. Crisis stage:

- Orgn is facing panic

- May experience chaos, efforts to go back to basics, sharp changesand anger.

- Only soln. major reorganization.

- Social fabric eroding; dramatic actions like replacing top leaders,revolutionary change in structures, strategy and culture needed.

- Workforce downsizing may be severe.

Model of decline stage

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Model of decline stage

5. Dissolution stage:

- The stage of decline is irreversible.

- Orgn suffering loss of market and reputation

- Losses in best personnel and capital depletion

- Only available strategy is to cut down orgn in an orderly fashion;reduces separation trauma of employees.

CASE: Arthur Andersen

Downsizing implementation

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Downsizing implementation

Downsizing is not always an effective option

Reengineering projects, mergers and acquisitions, globalcompetition, and trend towards outsourcing have all led to jobreduction.

Massive downsizing could even harm orgns than give benefits. A number of techniques can help smooth the downsizing process

and ease tension for employees who leave, as well as those whoremain.

1. Communicate more, not less

2. Provide assistance to displaced workers

3. Help the survivors thrive.

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ORGN CULTURE

Orgn Culture

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Orgn Culture

CASE: PSS World

Negative culturral norms can damage a company just as powerfullyas positive ones can strengthen it.

e.g. Enron Corp.: culture that supported pushing everything to the

limits: business practices, rules, personal behaviour, laws. Social capital: consists of the embedded trust, mutual

understandings and shared norms & values that enable members ofan orgn to cooperate and coordinate their activities to achieve goals.

- One way to think of social capital is goodwill.

- It is based on honesty, trust and respect.

- High levels of social capital enables frictionless social interactionsand exchanges, helping smooth orgn functioning.

Orgn culture

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Orgn culture

Culture: is the set of values, norms and guiding beliefs andunderstanding that is shared by members of an orgn and taught tonew members as current.

- It represents the unwritten feelings part of the orgn.

Everyone participates in culture, but culture generally goesunnoticed.

Only when orgns try to implement new strategies or process thatgoes against basic culture norms & values that they come face toface with the power of culture.

Orgn culture exists at two levels:

- On the surface are visible artifacts and observable behaviour; theway people dress and act and the symbols, stories and ceremoniesorgn members share.

Orgn culture

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Orgn culture

Below the surface are the underlying values, assumptions, beliefsand thought processes that demonstrate the true culture.

The attributes of culture demonstrate themselves in many ways buttypically evolve into a patterned set of activities carried out throughsocial interactions.

Culture provides members with a sense of orgn identity andgenerates a commitment to beliefs and values that are larger thanthemselves.

The culture generally starts with the founder.

Orgn culture

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Orgn culture

Culture serves 2 critical functions in the orgn:

- To integrate members so that they know how to relate to oneanother; and to help orgn adapt to the external environment.

Internal integration: means that members develop a collective

identity and know how to work together effectively. It is the culture that guides day-to-day working relationships and

determines how people communicate within the orgn; whatbehaviour is acceptable or not acceptable, and how power andstatus are allocated.

External adaptation: refers to how orgns meet goals and deals withoutsiders.

Orgn culture also guides employees decision making in the absenceof written rules or policies.

Orgn design and culture

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O g des g a d cu tu e

Corporate culture should reinforce the strategy & structural designthat the orgn needs to be effective in its environment.

e.g. if the external envm require flexibility & responsiveness theculture should encourage adaptability.

The correct relationships among cultural values, orgn strategy andstructure, and the envm can enhance orgn performance.

Culture can be assessed among many dimensiong, such as theextent of collaboration versus isolation among people anddepartments, the importance of control, where control is

concentrated,,or, whether the orgns time orientation is short orlong term.

There are 4 kinds of culture:

1. Adaptability culture

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p y

Culture is characterized by strategic focus on the externalenvironment through flexibility and change to meet customerneeds.

Culture encourages entrepreneurial values, norms and beliefs thatsupport the capacity of the orgn to detect, intepret and translatesignals from the environment into new behaviour responses.

Such a company also actively creates change.

Innovation, creativity and risk taking are valued and rewarded.

e.g. 3M: values promote individual initiative and entrepreneurship.

2. Mission culture

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The orgn concerned with servicing specific customers in the externalenvironment, but without the need for rapid change.

Characterized by an emphasis on a clear vision of the orgns purposeand on the achievement of goals.

Individual employees made resp for a specified level of performanceand orgn promises specified rewards in return.

Managers shape behaviours by envisioning and communicating adesired future state for their orgn.

Generally a stable environment.

e.g. Pepsi Co.

3. Clan culture

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Primary focus on the involvement and participation of the orgnsmembers and on rapidly changing expectations from the externalenvironment.

Culture focuses on the needs of employees as the route to highperformance.

Involvement and participation create a sense of resp and ownership,hence greater commitment to the orgn.

Important value is taking care of employees and making sure theyhave whatever they need to help them be satisfied as well as

productive.e.g. fashion business

CASE: MTW Corp.

4. Bureaucratic culture

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It has an internal focus and a consistency orientation for a stableenvironment.

Orgn has a culture that supports a methodical approach for doingbusiness.

Symbols, heros and ceremonies support cooperation, tradition andfollowing established policies and practices as ways to achieve goals

Personal involvement is low, but outweighed by a high level ofconsistency, conformity, and collaboration among its members.

Orgn succeeds by being highly integrated and efficient.

Culture strength

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g

Refers to the degree of agreement among members of an orgnabout the importance of specific values.

If wide spread consensus exists about the importance of thesevalues, the culture is cohesive and strong.

If little agreement exists, the culture is weak. Culture is not always uniform throughout the orgn:

- Sub cultures develop to reflect the common problems, goals, andexperiences that members of a team, dept, or other unit share.

e.g. a branch of a bank physically separated from the main office.

Culture & learning orgn

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g g

One of the primary characteristic of a learning orgn is that it has astrong organizational culture.

Also, the culture encourages change and adaptation.

A danger for may successful orgns is that the culture becomes set

and the company fails to adapt as the environment changes. When orgns are successful, the values, ideas and practices that

helped attain success become institutionalized.

As the environment changes, these values may become detrimentalto future performance.

Learning orgn defining

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g g g

characteristics1. A strong adaptive culture that incorporates the following values:

- The whole is more important than the parts and boundariesbetween the parts are minimized

- People aware of the whole system and how the parts fit together

- Free flow of people, ideas and info allows coordinated action andcontinuous learning.

- Everyones primary attitudes and behaviours reflect the orgnsdominant culture.

2. Equality and trust are primary value

3. The culture encourages risk taking, change and improvement.

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ETHICAL VALUES

Ethical values in orgns

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g

Wide spread corporate accounting scandals; top managers makingpersonal use of company funds; charges of insider trading.

Top managers are under scrutiny from the public as never before.

Strict ethical standards are becoming part of the formal policies and

informal cultures of many orgns. Ethics is the code of moral principles and values that govern the

behaviours of a person or group with respect to what is right orwrong.

Ethical values set standards as to what is good or bad in conduct and

decision making.

Ethics goes far beyond behaviour governed by law.

Ethical values in orgn.

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g

The rule of law arises from a set of codified principles andregulations that describe how people are required to act, aregenerally accepted in society, and are enforceable in the courts.

Managerial ethics are principles that guide the decisions andbehaviours of managers with regard to whether they are right orwrong in a moral sense.

Social resp: refers to managements obligation to make choices andtake action so that the orgn contribute to the welfare and interest ofsociety as well as to itself.

CASE: Commerce Bank

Sources of ethical behaviour

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The standard for ethical or socially responsible conduct areembedded within each employee as well as within the orgn itself.

In addition, external stakeholders can influence standard of what isethical and socially responsible.

1. Personal ethics:- Every individual brings a set of personal beliefs and values into the

workplace.

- The family backgrounds and spiritual values of managers providesprinciples by which they carry out business.

- In addition, people go through stages of moral development thataffect their ability to translate values into behaviour.

- At the highest level of moral development are people who developan internal set of standards.

Sources of ethical behaviour

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2. Organizational culture:

- Because business practices reflect the values, attitudes, andbehaviour patterns of an orgns culture, ethics is as much an orgnissue as a personal one.

- To promote ethical behaviour in the workplace, companies shouldmake ethics an integral part of the orgns culture.

- Orgns culture helps to guide employees in making daily decisions

- When the culture supports wrong doing it is easier for theemployees to go along.

3. Organizational systems:

- This includes the basic architecture, such as whether ethical valuesare incorporated into policies and rules.

Sources of ethical behaviour

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- Whether an explicit code of conduct is available and issued to itsmembers.

- Whether orgn rewards, including praise, attention, and promotionare linked to ethical behaviour.

- Whether ethics is a consideration in the selection and training of itsemployees.

4. External stakeholders:

- Ethical and socially resp decision making recognizes the the orgn ispart of a larger community and considers the impact of a decision

or action on all stake holders.- Cos must operate within the limits of certain govt regulations, such

as safety laws, envm protection regulations and others.

- The concept of sustainable development; Triple Bottom Lines.

How leaders shape culture &

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ethics Top mgnt must provide commitment, leadership & examples for

ethical values.

The CEO and other top mgrs must be committed to specific values &provide constant leadership in tending & renewing these values.

Values can be communicated in a no of ways: speeches, companypublications, policy statements and personal actions.

Top mgs must take the lead.

Leaders have a relationship with followers which is based on shared,strongly internalized values that are advocated and acted upon by

the leader. Employees learn about values, beliefs and goals from watching

managers.

CASE: Kingston Technologies

Formal structure & systems

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Mgr can assign resp for ethical values to a specific position or to anethics committee.

Ethics offices also sometimes work as counselling centers to helpemployees resolve difficult ethical dileammas.

Function is more on helping employees make the right decisionsthan on disciplining wrong doers.

Many have confidential ethical hotlines that employees can use toseek guidance as well as report questionable behaviour.

Establish supportive policies and procedures to support whistle

blowers. Have a code of ethics.

Have employee trg programmes on ethical behaviours.

CASE: Holt Companies

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INNOVATION & CHANGE

Concepts

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CASE: Procter & Gamble

Orgns must run fast to keep up with the changes taking placearound them.

Large orgns must find ways to act like small, flexible orgns.

Manf firms need to reach out to new, flexible manf technology andservice firms for new info. Tech.

Need innovation only to survive.

Many orgns respond to global threats by adapting self-directedteams; horizontal structures that enhance communication &

collaboration; streamlining supply and distribution channels andovercoming barriers of time and place through e-business.

Others get involved in joint ventures or consortia to exploitopportunities and extend operations and markets internationally.

Concepts

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Some adopt structural innovations such as modular approach tofocus on their core areas, while outside specialists handle all otheractivities.

Change, rather than stability is the order of the day.

Incremental vs Radical change

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Change used to adapt to the environment can be evaluatedaccording to scope the extent to which the changes areincremental or radical.

Incremental change represents a series of continual progressionsthat maintain the orgns general equilibrium and often affect onlyone orgn part.

Radical change breaks the frame of reference for the orgn, oftentransforming the orgn.

Most part incremental change occurs through the established

structure and mgnt processes, may include technical improvementsor product improvement.

Incremental vs Radical change

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Radical change involves the creation of a new structure and newmanagement processes:

- Technology is likely to be breakthrough, and new products therebycreated will establish new markets.

- Lou Gerstners transformation of IBM- Major turnarounds involve changes in all areas of the orgn incl.

structures, management systems, culture, technology and productsand services.

Strategic types of changes

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Managers can focus on 4 types of change within orgns to achievestrategic advantage:

1. Technology changes: are changes in the orgns processes, inclknowledge and skill base; they enable distinctive competence:

- These changes are designed to make production more efficient orto product grester volume.

2. Product or service changes: Pertain to the product or serviceoutputs of an orgn.

- Could be adaptations to existing products or entirely new product

lines.

Strategic types of changes

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3. Strategy and structure changes: Pertain to the administrationdomain in an orgn involves supervision and management of theorgn.

- Include changes in the orgn structure, strategic management,policies, rewards, labour relations, MIS and accounting & budgetingsystem.

4. Culture changes: Refer to changes in the values, attitudes,expectations, beliefs, abilities and behaviour of employees.

- Pertain in changes in how employees think

- These are changes in the mindsets of people. The four types of changes are interdependent.

Elements of successful change

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Regardless of type or scope of change, there are identifiable stagesof innovation:

- Occurs as a consequence of events.

- Orgn change: adaptation of a new idea or behaviour by an orgn.

- Orgn innovation: is the adoption of an idea or behaviour that is newto the orgn, industry, market or general environment.

- Innovation typically are assimilated into the orgn through a series ofsteps or elements:

- Orgn members first become aware of a possible innovation,

evaluate its opportunities and then evaluate and choose the idea.

Elements of successful change

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For a change to be successfully implemented, managers must makesure each element occurs in the orgn.

- If even one of the element is missing, the change process will fail.

1. Ideas: No company can remain competitive without new ideas:

- Creativity is the generation of novel ideas that may meet perceivedneeds.

2. Need: Ideas are not seriously considered unless there is a perceivedneed for change when a gap between actual performance anddesired performance is perceived.

3. Adoption: When decision makers choose to go ahead with aproposed idea key managers & employees need to be inagreement to support the change.

Elements of successful change

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4. Implementation: Occurs when orgn members actually use a newidea, technique or behaviour equipment procured, employeetrained.

5. Resources: Human energy and activity are required to bring aboutchange.

CASE: Google

CASE: Nokia

CASE: Mattle

CASE: Hire Quality

CASE: EDS

Barriers to change

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Visionary leadership is crucial for change

However, resistance will be there

Barriers to change include:

- Excessive focus on oosts

- Failure to perceive benefits

- Lack of coordination and cooperation

- Uncertainty avoidance

- Fear of loss

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Concept

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CASE: Avon Products

Every orgn grows, prospers or fails as a result of decisions by itsmanagers, and decisions can be risky and uncertain, without anyguarantee of success.

Sometimes, decision making is a trial and error process. Decision making is done amid constantly changing factors, unclear

information, and conflicting points of view.

Orgn decision making is defined as the process of identifying andsolving problems.

Orgn decision making

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The process has two stages:

- In the problem identification stage, info about the environmentaland orgn conditions is monitored to determined if performance issatisfactory and to dialogue the cause of shortcomings.

- The problem solving stage is when alternative courses of action areconsidered and one alternative is selected and implemented.

Orgn decisions vary in complexity and can be categorized asprogrammed and non-programmed:

1. Programmed decisions are repetitive and well defined, and

procedures exist for solving the problem.- They are well structured because criteria for perf are normally clear;

good info is available about current perf; alternatives are easilyspecified,and there is relative certainty that the chosen alternativewill be successful.

Orgn decision making

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2. Non-programmed decisions are novel and poorly defined, and noprocedure exists for solving the problem.

- Used when an orgn has not seen a problem before and may notknow how to respond.

- Clear cut decision criteria does not exist.- Alternatives are fuzzy

- There is uncertainty whether a proposed solution will solve theproblem

- Typically, few alternatives can be developed for a non-programmed

decision, so a single solution is custom tailored to the problem.

- Particularly complex non-programmed decisions have beenreferred to as wicked decisions, because simply defining theproblem can turn into a major task.

Individual decision making

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Individual decision making by managers can be described in twoways:

First the rational approach: which suggests how managers should tryto make a decision.

Second is the bounded rationality perspective: which describes howdecisions actually have to be made under severe time and resourceconstraints.

The rational approach is how an ideal manager may work towardsbut never reach.

Rational approach

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The rational approach to individual decision making stresses theneed for systematic analysis of a problem followed by choice andimplementation in a logical step-by-step sequence.

Acc. to this approach, decision can be broken down into 8 steps:

1. Monitor the decision environment2. Define the decision problem

3. Specify decision objectives

4. Diagnose the decision objectives

5. Develop alternative solutions

6. Evaluate alternatives

7. Choose the best alternative

8. Implement the chosen alternative.

CASE: Alberta Consulting

Bounded Rationality Perspective

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When orgns are facing little competition and are dealing with well-understood issues, mgrs generally use rational procedures to makedecisions.

However:

- Decisions often have to be made quickly- Time pressure: a lot of internal and external factors affecting a

decision.

- Ill defined nature of many problems make systematic analysisvirtually impossible.

- Mgrs have only so much time and mental capacity, hence cannotevaluate every goal, problem and alternative.

- The attempt to rationalize is bounded (limited) by the enormouscomplexity of many problems.

- A manager simply selects the first alternative and attempts soln.

Bounded Rationality Perspective

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Bounded rationality perspective often associated with intuitivedecision process.

- In intuitive decision making, experience and judgment rather thansequential logic or explicit reasoning used for decision making.

- Intuition is not arbitrary or irrational as it is based on years ofpractice and hands on experience, often stored in the sub-conscious.

- In a situation of great complexity or ambiguity, previous experienceand judgment are needed to incorporate intangible elements atboth the problem identification and problem solving stages.

CASE: MotekCASE: Paramount Pictures.

Organizational Decision Making

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Decisions are not usually made by a single manager.

Problem identification and solution involve many depts, multipleviewpoints and even other orgns, beyond the scope of a single mgr.

There are four types of orgn. Decision making processes:

1. The Management Science Approach:- Similar to the rational approach

- Came into being during the second world war.

- Mathematical and statistical techniques were applied to large scalemilitary problems. E.g. firing at a ship from another.

- Need to identify relevant variables and model them usingmathematical equations.

- Excellent when problems are analyzable; when variables can beidentified and measured.

CASE: National Broadcastin com an

Organizational Decision Making

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2. Carnegie Model:

- Research in Carnegie University helped formulate the boundedrationality approach to individual decision making as well asprovide new insight about orgn decisions.

- Orgn level decisions involved many mgrs and a final choice wasbased on a coalition among those mgrs.

- When goals are ambiguous and inconsistent, mgrs disagree aboutproblem priorities.

- They must bargain about problems and build a coalition around the

question of which problems to solve.- Mgrs do not have the time, resources and mental capacity to

identify all dimensions and to process all info relevant to thedecision.

Organizational Decision Making

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- In coalition, however, decisions are made to satisfice rather than tooptimize problem solution satisfactory to all coalition members.

- Mgrs are concerned with immediate problems and short-runsolutions for which they engage in problematic search look for asolution to quickly solve the problem.

- Carnegie model says that managers typically adapt the mostsatisfactory solution that emerges.

- The model also points out that building agreement throughmanagerial coalition is a major part of orgn decision making.

CASE: Encyclopaedia Britannica

Organizational Decision making

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3. Incremental Decision Making Model:

- Approach places less emphasis on political and social factors as inthe Carnagie model, but tells more about the structured sequenceof activities undertaken from the discovery of a problem to itssolution.

- Major orgn choices are usually a series of choices that combine toproduce the major decision.

- Orgns move through several decision points and may hit barriersalong the way called decision interrupts.

- An interrupt may mean an orgn has to cycle back through aprevious decision and try something new.

- The ultimate soln may be very different from what was initiallyanticipated.

Organizational Decision Making

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The step takes place in 3 major decision phases: Identification,development, and selection.

a. Identification phase: begins with the recognition of a problem andneed to make a decision

- Recognition usually stimulated by a problem or an opportunity.- Diagnosis is done when more info is gathered if needed to define

the problem situation.

b. Development phase: a soln is shaped to solve the problem definedin the identification phase. The dev takes one of two directions:

- First, search procedures may be used to seek out alternativeswithin the orgns repertoire of skills.

- The second direction is to design a custom soln when the problemis new.

Organizational Decision Making

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c. Selection Phase: when the solution i