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Introduction to

Organisation
Theory and Design

Ho Sooi Hock
Outline
 What is an organisation
 Importance of organisations
 Organisation design – what and why
 Dimensions of organisational design
 Organisation theory – what and why
 Historical perspectives
 Organisational strategies
 Contemporary organisation design
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What is an Organisation?
 Organisations are social entities that are
goal directed, are designed as
deliberately structured and coordinated
activity systems, and are linked to
external environment.”
 “Organisations are made up of people
and their relationships with one
another.”

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Importance of Organisations
 Bring together resources to achieve desired goals
and outcomes.
 Produce goods and services efficiently.
 Facilitate innovation.
 Use of modern manufacturing and information
technologies.
 Adapt to and influence a changing environment.
 Create value for owners, customers and
employees.
 Accommodate ongoing challenges of diversity,
ethics, social responsibility, and the motivation
and coordination of employees.
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Perspectives on Organisations
Two views of organisations:
 Open Systems
 Early organisation studies focused on closed
internal systems, based on assumptions that
environment is stable and predictable.
 Organisational Configuration
 Balance the five basic parts of an
organisation to perform the subsystem
functions effectively.

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

People Products
Raw
materials Transformation and
Input Output Services
Information Process
Financial
resources
Boundary Production, maintenance, Boundary
spanning adoption, management spanning

01/20/09 Source: Organization Theory and Design, Richard L. Daft 7


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

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Five Basic Parts of an
Organisation
Top
Management

Technical 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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Organisation Design

 Emphasies the management side of


organisation theory
 Concerned with constructing and
changing an organisation’s structure and
traits to achieve the organisation’s goals

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Dimensions of Organisation
Design
Organisation traits are described by:
 Structural Dimensions
 Describes internal characteristics of an
organisation.
 Contextual Dimensions
 Characterises the whole organisation,
including its size, technology, environment
and goals.
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Structural Dimensions
 Formalisation
 The amount of written documentation.
 Specialisation
 The degree to which organisational tasks are
subdivided into separate jobs.
 Hierarchy of Authority
 Span of control of the managers.
 Centralisation
 Hierarchical level of authority for decision making.
 Professionalism
 Level of formal education and training of employees.
 Personnel ratios
 People deployed to each functions and departments.
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Contextual Dimensions
 Size
 Number of employees.
 Organisational Technology
 Tools, techniques and actions used to transform
inputs into outputs.
 Goals and Strategy
 Purpose and competitive techniques that set it apart
from other organisations.
 Environment
 All elements outside the organisational boundary.
 Culture
 Shared key values, beliefs, understandings and
norms.
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Interacting Contextual and Structural
Dimensions

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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Organisation Theory
 Discipline that studies the structure and design
of organisations
 Organisation theories are interdisciplinary,
based on knowledge from the fields of
psychology, political science, economics,
anthropology and sociology
 Organisation theory is a macro examination of
organisations – analyses the whole organisation
as a unit; while organisation behaviour is the
micro approach to organisations – focuses on
the individuals within organisation
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Organisation Challenges
 Globalisation
 Ethics and Social Responsibility
 Speed of Responsiveness
 The Digital Workplace
 Diversity

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

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Classical Theories
How to Get Organised
 Max Weber
 Bureaucratic approach
 Clear division of labour
 Hierarchical structure in the organisation
 Predictability and stability
 Rationality
 Impersonal relationship
 Characteristics for most of today’s large
organisations

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

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

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Contingency Theory
Don’t Forget the Environment
 All organisations are not alike.
 The scientific management and administrative
principles approaches attempted to design all
organisation in the same manner.
 Contingency Theory – there is no one best way
for organisation design
 “Contingency means that one thing depends on
other things, and for organisations to be
effective, there must be a goodness of fit
between their structure and conditions in their
external environment.”
 Contingency means it depends.
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Organisational Strategies
 Defined as the determination of the basic
long-term goals and objectives of an
enterprise, and the adoption of courses
of action and the allocation of resources
necessary for carrying out these goals
 Two models
 Porter model
 Miles and Snow model

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Porter’s Competitive Strategies
 No firm can successfully perform at an
above-average level by trying to be all
things to all people
 Low-cost leadership
 Differentiation

 Focus

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Miles and Snow’s Strategies
 Classify organisations into one of four
strategic types based on the rate at
which they change their products or
markets
 Defenders
 Prospectors

 Analysers

 Reactors

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Contingency Factors Affecting
Organisation Design
Envir Size/
onme Life C
n t Technology ycle
Cul
tur
y e
at eg
Str

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors

Source: “Organization Theory and Design”, Richard L. Daft


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Discussions
 Discuss how the following organisational
strategies affect organisation design
 Low-cost leadership
 Differentiation

 Defenders

 Prospectors

 Analysers

 Reactors

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

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Two Organisation Design
Approaches
Mechanical System Design Natural System Design

Vertical Horizontal
Structure Structure

Routine Rigid Organizational Change Empowered Adaptive


Tasks Culture in the Service of Roles Culture
Performance

Formal Competitive Shared


Collaborative
Systems Strategy Information Strategy

Stable Environment Turbulent Environment


Efficient Performance Learning Organization

The slide adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Harvard Business School)

Original source : “Organization Theory and Design”, Richard L. Daft

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Vertical to Horizontal Structure
 Traditionally the activities were grouped
together by common work from bottom to the
top of the organisation, little collaboration
occurs across functional departments.
 In a fast changing environment the vertical
structure becomes overloaded.
 In the learning organisation, structure is
created around horizontal workflows or
processes rather than departmental functions.
 “Self-directed teams are the fundamental work
unit in the learning organisation.”
 Boundaries between functions are eliminated.
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Routine Tasks to
Empowered Roles
 The scientific management precisely define each
job and how it should be done.
 “In traditional organisations, tasks are broken down
into specialized, separate parts, as in a machine.
Knowledge and control of tasks are centralized.”
 In learning organisations, employees are assigned
roles – with discretion and responsibility - in the
team or department which are continuously
redefined or adjusted.
 Employees are encouraged to take care of
problems by working with each other and with
customers.
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Formal Control to
Shared Information
 “Formal systems are often implemented to manage
the growing amount of complex information and to
detect deviations from established standard and
goals.”
 In the learning organisation ideas and information
are shared throughout the organisation.
 Managers find ways to open channels of
communication so that ideas flow freely in all
directions.
 Learning organisations communicate with
customers, suppliers, and even competitors to
enhance learning capability.
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Competitive to
Collaborative Strategy
 Strategy in traditional organisations is
formulated by top managers and imposed on
the organisation.
 In the learning organisations the accumulated
actions of an informed and empowered
workforce contribute to strategy development.
 Partnerships with suppliers, customers and
competitors to find the best way to learn and
adapt, forming modular or virtual organisations
that are connected electronically.

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

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

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

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