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OT - CH1 - Note

Organizations exist to allow people to coordinate their actions and achieve goals. Organizational theory studies how organizations function and interact with their environment. An organization's effectiveness depends on its ability to control resources, innovate, and operate efficiently. Managers measure effectiveness through goals like controlling resources, innovation, and efficiency. Organizational design and change help organizations adapt to contingencies, gain competitive advantages, and promote diversity, speed and innovation.

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Yagiz Karsli
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28 views

OT - CH1 - Note

Organizations exist to allow people to coordinate their actions and achieve goals. Organizational theory studies how organizations function and interact with their environment. An organization's effectiveness depends on its ability to control resources, innovate, and operate efficiently. Managers measure effectiveness through goals like controlling resources, innovation, and efficiency. Organizational design and change help organizations adapt to contingencies, gain competitive advantages, and promote diversity, speed and innovation.

Uploaded by

Yagiz Karsli
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Organizational Theory - Organizations and Organizational Effectiveness - Chapter 1 - Page 1

What is an Organization ?
-Organization: A tool people use to coordinate their actions to obtain something they desire or value
-Entrepreneurship: The process by which people recognize opportunities to satisfy needs and then
gather and use resources to meet those needs

Organizations are Credited With


-Bringing together resources to achieve desired goals and outcomes
-Producing goods and services
-Facilitating innovation
-Harnessing modern manufacturing, service and information technologies
-Adapting to and influencing a changing environment
-Creating value
-Accommodating ongoing challenges of diversity, ethics, and the motivation and coordination of
employees

How Does an Organization Create Value


-Value creation takes place at three stages: Input, Conversion, Output
-Each stage is affected by the environment in which the organization operates
/Organizational Environment: The set of forces and conditions that operate beyond an organization’s
boundaries but affect its ability to acquire and use resources to create value

Organization’s Inputs
-Organizations obtains inputs from its environment
-Raw materials, money and capital, human resources, information and knowledge, customer of
service organizations

Organization’s Conversion Process


-Organization transforms inputs and adds value to them
-Machinery, computers, human skills and abilities

Organization’s Outputs
-Organization releases outputs to its environment
-Finished goods, services, dividends, salaries, value for stakeholders

Organization’s Environment
-Sales of outputs allow organization to obtain new supplies of inputs
-Customers, shareholders, suppliers, distributors, government, competitors

Why Do Organizations Exist ?


-To increase specialization and the division of labor
/Division of labor allows specialization
/Specialization allows individuals to become experts at their job
-To use large scale technology
/Economies of Scale: Cost savings that result when goods and services are produced in large volume
on automated production lines
/Economies of Scope: Cost savings that result when an organization is able to use underutilized
resources more effectively because they can be shared across different production or tasks

Organizational Theory - Organizations and Organizational Effectiveness - Chapter 1 - Page 2


Why Do Organizations Exist ?
-To manage the organizational environment
/An organization’s environment is the source of valuable input resources and is the marketplace into
which it releases outputs
/It is the source of economic, social, and political pressures that affect an organization’s ability to
obtain these resources
-To economize on transaction costs
/Transaction Cost: The cost associated with negotiating, monitoring, and governing exchanges
between people
-To exert power and control
/Organizations can exert great pressure on individuals to conform to task and production requirements
in order to increase production efficiency
-The five factors help explain why more value can be created when people work in together,
coordinating their actions in an organized setting, than when they work alone
-At page 14 there is a table

Organizational Theory, Design, and Change


-Organizational Theory: The study of how organizations function and how they affect and are affected
by the environment in which they operate
-Organizational Structure: The formal system of task and authority relationships that control how
people coordinate their actions and use resources to achieve organizational goals
-Organizational Culture: The set of shared values and norms that control organizational members’
interactions with each other and with suppliers, customers, and other people outside the organization
-Organizational Design: The process by which managers select and manage aspects of structure and
culture so that an organization can control the activities necessary to achieve its goals
-Organizational Change: The process by which organizations redesign their structures and cultures to
move from their present state to some desired future state to increase their effectiveness
-There is a table at page 19

Importance of Organizational Design and Change


-Dealing with contingencies
/Contingency: An event that might occur and must be planned fore
/The design of an organization determines how effectively an organization is able to respond to
various pressures in its environment and so obtain scarce resources
/Challenges organizations must be ready to face: Globalization, Changing technology
-Gaining competitive advantage
/Competitive advantage: The ability of one company to outperform another because its managers are
able to create more value from the resources at their disposal
/Core Competences: Managers’ skills and abilities in value creating activities
/Strategy: The specific pattern of decisions and actions that managers take to use core competencies
to achieve a competitive advantage and outperform competitors
-Managing diversity
/Differences in the race, gender, and national origin of organizational members have important
implications for organizational culture and effectiveness
/Learning how to effectively utilize a diverse workforce can result in better decision making and more
effective workforce
-Promoting efficiency, speed, and innovation
/The better an organization functions, the more value it creates
/The correct organizational design can lead to faster innovation and quickly get new products to
market

Organizational Theory - Organizations and Organizational Effectiveness - Chapter 1 - Page 3


The Consequences of Poor Organizational Design
-Decline of the organization
-Talented employees leave to take positions in growing organizations
-Resources become harder to acquire
-The process of value creation slows down

How Do Managers Measure Organizational Effectiveness ?


-Control: Having control over the external environment and having the ability to attract resources and
customers
-Innovation: Developing an organization’s skills and capabilities so the organization can discover new
products and process
-Efficiency: Means developing modern production facilities using new information technologies that
can produce and distribute a company’s products in a timely and cost effective manner

Measuring Effectiveness: Organizational Goals


-Official Goals: Guiding principles that the organization formally states in its annual report and in other
public documents
-Mission: Goals that explain why the organization exists and what it should be doing
-Operative Goals: Specific long term and short term goals that guide managers and employees as
they perform the work of the organization

Summary
-Organizations are a tool people use to achieve their goals
-Organizational theory is the study of how organizations function and how they affect and are affected
by their environment
-Organizational effectiveness must be monitored by managers

Dimensions of Structure
-Formalization → Specialization → Hierarchy of Authority → Centralization → Professionalism → Personnel
Ratios
-The Organization: Culture, Environment, Goals and Strategy, Size, Technology

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