Chapter One

Organizations and
Organization Theory

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Organization Theory in Action
b Topics
b Current Challenges
• Global competition
• Organizational turbulence
• E-commerce
• Managing knowledge and information
• Diversity
• Ethics and social responsibility
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What is an Organization?
b Definition
b Importance of Organizations
• Bring together resources to achieve desired
goals and outcomes
• Produce goods and services efficiently
• Facilitate innovation
• Use modern manufacturing and computer-
based technology
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b Importance of Organizations (cont’d)
• Adapt to and influence a changing
environment
• Create value for owners, customers and
employees
• Accommodate ongoing challenges of diversity,
ethics, and the motivation and coordination of
employees
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 An Open System
and Its Subsystems
Environment

Raw Materials Transformation

People
Information Products
resources Input Output and
Financial Services
resources
Process

Production,
Boundary Boundary
Subsystems Spanning
Maintenance,
Spanning
Adaptation,
Management
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 Five Basic Parts of an
Organization
Top
Management

Technical Middle Administrative

Support Management Support

Technical Core

Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297;
and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116.
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 Goals and
Strategy
Environment Size

Culture Technology
Structure
1. Formalization
2. Specialization
3. Hierarchy of Authority
4. Centralization
5. Professionalism
6. Personnel Ratios

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 Organization Chart Illustrating the Hierarchy of Authority
for a Community Job Training Program

Board of
Directors

Advisory Executive
Committee Committee

Level 1 Executive
Director

Level 2 Assistant Executive Director Assistant Executive Director

for Community Service for Human Services

Level 3 Director Director Director Director Director Director Director

Economic Dev. Reg. Planning Housing Criminal Justice Finance AAA CETA

Public Asst. Director Lead Lead

Info Finance Counsel Counsel
Coord.

CETA CETA CETA

CETA
Couns. Couns. Couns.
Intake
Program Contract Program Devs. Devs. Devs.
&
Housing Alcohol Spec. Fiscal Planner Title II Youth Title II D CETA
Level 4 Coord. Coord.
Account. AAA Manager AAA
Orient
ABC IV &VI&VII Planner

Records
Level 5 Secretary Clerk Secretary Adm. Asst Payroll Clerk Secretary MIS Specialist Staff Clerk Adm. Asst.

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 Characteristics of three
Organizations
100
Formalization

Specialization
50
Centralization

Configuration
(%nonworkflow 0
W.L. Gore & Wal-Mart State Arts
personnel)
Associates Agency

TECHNOLOGY Manufacturing Retailing Government

Service
SIZE (#employees) 4,200 200,000 35
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 Two Organization Design
Paradigms
Mechanical System Paradigm Natural System Paradigm

Vertical Horizontal
Structure Structure

Routine Rigid Organizational Change Adaptive

Empowered
Tasks Culture in the service of Culture
Roles
performance and
survival

Formal Competitive Shared

Collaborative
Systems Strategy Information Strategy

Stable Environment Turbulent Environment

Efficient Performance Learning Organization

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)

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Workbook
Activity

Organizational Dimensions
High Formalization 1-4 5-6 7 - 10 Low Formalization
High Specialization 1-4 5-6 7 - 10 Low Specialization
Tall Hierarchy 1-4 5-6 7 - 10 Flat Hierarchy
Product Technology 1-4 5-6 7 - 10 Service Technology
Stable Environment 1-4 5-6 7 - 10 Unstable Environment
Strong Culture 1-4 5-6 7 - 10 Weak Culture
High Professionalism 1-4 5-6 7 - 10 Low Professionalism
Well-Defined Goals 1-4 5-6 7 - 10 Poorly-Defined Goals
Small Size 1-4 5-6 7 - 10 Large Size
Modern 1-4 5-6 7 - 10 Postmodern
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Workbook
Activity IBM
Use for 1975-1990, Use for 1993-present

High Formalization 1-4 5-6 7 - 10 Low Formalization

High Specialization 1-4 5-6 7 - 10 Low Specialization
Tall Hierarchy 1-4 5-6 7 - 10 Flat Hierarchy
Product Technology 1-4 5-6 7 - 10 Service Technology
Stable Environment 1-4 5-6 7 - 10 Unstable Environment
Strong Culture 1-4 5-6 7 - 10 Weak Culture
High Professionalism 1-4 5-6 7 - 10 Low Professionalism
Well-Defined Goals 1-4 5-6 7 - 10 Poorly-Defined Goals
Small Size 1-4 5-6 7 - 10 Large Size
Modern 1-4 5-6 7 - 10 Postmodern
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 DISCUSSION QUESTIONS
1. What is the definition of Organization? Briefly explain
each part of the definition.
2. What is the difference between an open system and a
closed system? Can you give an example of a closed
system?
3. Explain how Mintzberg’s give basic parts of the
organization perform the subsystem functions shown at
the bottom of Exhibit 1.2. If an organization had to give
up one of these five parts, which one could it survive the
longest without? Discuss.
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 DISCUSSION QUESTIONS
4. Why might human organizations be considered more
complex than machine-type systems? What is the
implication of this complexity for managers?
5. What is the difference formalization and
specialization? Do you think an organization high on
one of these dimensions would also be high on the
other? Discuss.
6. What does contingency mean? What are the
implications of contingency theories for managers?

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 DISCUSSION QUESTIONS
7. What are the primary differences between an organization designed for
efficient performance and one designed for learning and change? Which
type of organization do you think would be easier to manage? Discuss.

Efficient Performance Learning Organizations

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 DISCUSSION QUESTIONS
8. Why is shared information so important in a learning
organization as compared to an efficient performance
organization? Discuss how an organization’s approach
to information-sharing might be related to other
elements of organization design, such as structure,
tasks, strategy, and culture.

9. What levels of analysis are typically studied in

organization theory? How would these contrast with
the level of analysis studied in a course in Psychology?
Sociology? Political Science?
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 DISCUSSION QUESTIONS
10. Early management theorists believed that
organizations should strive to be logical and rational,
with a place for everything and everything in its place.
Do you agree with that approach to the management of
organizations? Discuss the pros and cons of this
approach for today’s organizations.

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