Organizational Theory

What is an organisation?

An ‘organisation’ is a group of individuals working together to achieve one or more objectives. Although organisations have been defined differently by different theorists, virtually all definitions refer to five common features:

• they are composed of individuals and groups of individuals
• they are oriented towards achieving collective goals
• they consist of different functions
• the functions need to be coordinated
• they exist independently of individual members who may come and go.

Organizations are a complex phenomenon that are rather vague and abstract in nature. Mooney and Riley (1939), along with Keith Davis (1977), emphasize on the human aspect of organizations, by defining organizations as a ‘group of individuals, along with all inter relations and interactions, who work to attain a common objective under effective leadership.’

In contrast, Richard Daft, in his book, ‘Organisation Theory and Design’, along with Jonathan Murphy and Hugh Willmott, defines organizations as, ‘social entities, that are goal-directed, are designed as deliberately structured and coordinated activity systems, and are linked to the external environment’ (2010, p. 10). Therefore, following Daft et al., the concepts of structure and organisation are closely related and thus, cannot be separated. Organizations implicitly possess structuring, as the term organisation itself implies a planned and systemized set of activities.

Louis Allen says Organization is the process of identifying and grouping work to be performed, defining and delegating responsibility and authority, and establishing relationships so that employees are able to work effectively together in accomplishing objectives.” An organization helps achieve organizational goals. The work of each and every person is defined and authority and responsibility is fixed for accomplishing the same.

Organizational development refers to processes that are used to continually attain organizational goals and objectives.

Standardization

The number and control of repeatable processes vary from organisation to another.

In the classic manufacturing assembly plant there is much which is standardised

Professional organisations such as consultancies will have less control Organisations that that work flexibility will have less standardisation.

Mintzberg’s five components of organisation

Mintzberg (1979, p. 24) suggested that all organisations consist of five components:

1. Strategic apex is at the top of the organisation. The purpose is to ensure the organisation follows its mission and manages its relationship with its environment.
   The individuals comprising the apex, for example the Chief Executive Officer (CEO), are responsible to owners, government agencies, unions, communities and so on, these can be referred to as Stakeholders.

   Below the apex are:

2. Middle line – a group of managers who are concerned with converting the objectives and broad plans of the Strategic apex into operational plans that can be carried out by the workers.

3. Technostructure – As organisations grow and become more complex, they usually develop a separate group of people (analysts) who are concerned with the best way of doing a job, specifying output criteria (e.g., quality standards) and ensuring that personnel have appropriate skills (e.g. by organising training programmes).

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4. Support staff – The organisation also adds other administrative functions that provide services to itself, e.g. legal advice, public relations, mailroom, cafeteria etc.

   And finally, the bottom of the organisation:

5. Operating core. These are the people who do the basic work of producing the products or delivering the services.

Flexibility in Organisations

What is Flexible working?

Flexible working’ describes a type of working arrangement which gives a degree of flexibility on how long, where, when and at what times employees work (CIPD Definition)

Flexible working practices include

• Part-time working: work is generally considered part-time when employers are contracted to work anything less than full-time hours.
• Term-time working: a worker remains on a permanent contract but can take paid/unpaid leave during school holidays.
• Job-sharing: a form of part-time working where two (or occasionally more) people share the responsibility for a job between them.
• Flexitime: allows employees to choose, within certain set limits, when to begin and end work
• Compressed hours: compressed working weeks (or fortnights) don’t necessarily involve a reduction in total hours or any extension in individual choice over which hours are worked. The central feature is reallocation of work into fewer and longer blocks during the week.
• Annual hours: the total number of hours to be worked over the year is fixed but there is variation over the year in the length of the working day and week.
• Employees may or may not have an element of choice over working patterns.
• Working from home on a regular basis: workers regularly spend time working from home.
• Mobile working/teleworking: this permits employees to work all or part of their working week at a location remote from the employer’s workplace.
• Career breaks: career breaks, or sabbaticals, are extended periods of leave – normally unpaid – of up to five years or more.
• Commissioned outcomes: there are no fixed hours, but only an output target that an individual is working towards.
• Zero-hours contracts: an individual has no guarantee of a minimum number of working hours, so they can be called upon as and when required and paid just for the hours they work.

Benefits to business of flexible working

Flexible working leads to direct and indirect business benefits.

The direct business benefits are associated with:

• Savings on the real estate, for example, facilitated by the technological advances that allow remote working and hot desking arrangements
• A better match of business resources with the demand for services, for example, to deliver service to customers on a 24/7 basis
• multi-skilling, free-lance and part-time working, and alternative shift patterns can be aimed at increasing efficiency and are sometimes referred to as ’agile’ working’.
• Flexible structures can be the best way for speeding up the learning process

Indirect business benefits are achieved through an improved employee psychological contract.

An employee survey carried out for the CIPD by Kingston University/Ipsos MORI Working life: employee attitudes and engagement 2006 found that: ‘workers on flexible contracts tend to be more emotionally engaged, more satisfied with their work, more likely to speak positively about their organisation and less likely to quit’.

Flexible working options can also be attractive for new talent, especially as employee expectations change with regard to their jobs, careers and work-life balance, and demographic changes affect employees’ needs to balance their job with other responsibilities such as caring.

Flexibility in organisations

Flexibility in organisations is necessary for providing employees a decent and conducive work environment. A flexible organisation: does not have any unwanted or unnecessary restrictions or rules that can have a negative effect on the morale of the employees aims at making work fun and enjoyable and easier for the workers – aids motivation.

The following are the kinds of flexibility in a flexible organizational structure:

• Location flexibility would enable employees to work from the location of their choice
• Skills flexibility allows the organisation to bring an employee working on a different task-work onto special projects so that their ability can prove to be useful in completing a project successfully
• Work pattern flexibility and job flexibility will help them do job at which they are good at
• Legal flexibility can make some management and structural changes which are essential for the firm’s growth
• Job flexibility

Disadvantages of Flexibility in organisations

Although there are many advantages of flexible structure, there are also some problems associated with it.

• Excessive freedom can lead to lower level of commitment and loyalty issues by the employees and some lack of discipline in work
• Many times, in a flexible structure, individual achievements get more focus in terms of importance than the success of the entire team
• This means that employees work for their own success ,and not for the team or company

Characteristics of a Flexible Organisation

Researchers suggest that in flexible organisations we can see the following trends

• Increased coordination between senior management and junior level staff
• Providing services in different geographical areas of the country Existence of special purpose teams that can be dissolved after target competition
• Improved efficiency and complete customer satisfaction

Change models and frameworks

The pace and nature of change is accelerating, which is creating a great deal of uncertainty and volatility in all spheres of life. New processes and technologies are fundamentally changing the way we do things and the underlying business models of organizations. There is only one constant in this universe and that constant is change.

Historical Context for Change

Until the 17th century, wealth was created through Agriculture. Uncontrollable factors such as bad weather, conflict & epidemics too played a major role. For most people, life was at subsistence level.

The Industrial age was characterized by numerous inventions. Supply & Demand was predictable, enabling companies to streamline their Supply Chains & Organizational Structures. Demand came from the domestic markets, & typically demand outstripped supply.

Over time, consumers became more discerning, technological improvements dramatically improved productivity, globalization gradually took place & competition increased. Organizations focused on leveraging the expertise of their people.

The current phase is dominated by the trend of Digitalization. The pace of change has increased exponentially. Traditional business models are being disrupted in various industries. Organizations are increasingly in need of high-grade, specialist staff.

Environmental Triggers Of Change

• Political uncertainty.
• Economic climate.
• Regulatory changes.
• Changing customer requirements.
• Actions by competitors.
• Advances in Technology.
• Changes in cost structure of industry.
• Growth of e-commerce.
• Competition from other countries.

External factors that influence change

Technology

• A shift from industrial to knowledge-based economies
• Global connectivity & communication
• Deconstruction of value chains
• Decreasing fixed costs in some industries
• Increasing complexity

Increased competition

• Global competition
• Moving from economies of scale to economies of scope & market niches

Social trends

• Entrepreneurship as a lifestyle choice
• Greater accountability (CSR)

Key Issues around Change

• How well do you cope with change?
• Facing an uncertain future.
• Different perspectives on change.
• Triggers and response to change.
• Change Models and Frameworks

Things to understand:

• How do the characteristics & experiences of people filter information from the environment?
• How organizational cultures influence the ways in which Managers & Employees interpret events?
• How organizational politics interprets signals from the environment.
• How did the organization develop in the past, what worked & what did not work.
• How the business sector as a whole interprets the information.
• Political ideology.
• Attitudes to trade unions.
• Demographic changes.

Change Models & Frameworks

Change can be of various kinds:

• Planned or unplanned
• Incremental or radical
• Remedial vs development
• Catastrophic or evolutionary
• Internally or externally stimulated

Here are the various Change models and frameworks

Lewin’s Change Model suggests that implementing a change requires going through the following stages – unfreezing, changing and refreezing (Lewin, 1951). Unfreezing requires considering the current system or procedure as that of urgent concern. Changing is where one moves to the new system (from the old system)and Refreezing is the act of incorporating the new change into the strategic objective of the company.

Kotter’s change model: This model emphasizes the need to adopt a more holistic approach to incoporate changes. Various steps required to bring about change include creating a sense of urgency, forming coalitions, developing and communicating a vision, removing obstacles, empowering employees, creating short-term wins, consolidating gains, brining change in the culture. (Kotter, 1996).

McKinsey’s 7s Model suggests the various areas of changes to be grouped into two categories: the soft and the hard areas. The hard areas inlcudes the system, strategy and structure while the soft system areas include skills, style, staff and shared values which are usually difficult to manage but are important source of sustainable competitive advantage (Peters and Waterman, 1982).

References

KOTTER, J. P. (1996). Leading change. Boston, Mass, Harvard Business School Press.

Lewin, K., 1951. Field theory in social science: selected theoretical papers (Edited by Dorwin Cartwright.).

Peters, T.J. & Waterman, R.H. (1982). In search of excellence: Lessons from America’s best run companies. London: Harper and Row.

Questions and Answers

Read the following case carefully and answer the questions.

CASE:

Client: The Danish subsidiary of a UK parent company (which is itself a subsidiary of a major multinational corporation).
Business: A computer equipment manufacturer.
Location: Copenhagen, Denmark

Background: The employee attitude survey was commissioned by the UK parent company of a Danish subsidiary. The Danish subsidiary had been acquired by the UK company two years earlier. Prior to the acquisition, the subsidiary was a privately held exclusive distributor of the parents products in the Danish and broader Scandinavian markets. The subsidiary‟s customers were dealers, not end users. The former owners of the subsidiary had remained in the company in the capacity of Directors for a transition period. Subsequently, the former owners had been replaced by a British Managing Director (who was not fluent in the Danish language) and his senior team. The official operating language of the company worldwide is English. Management is required to be fluent in English, whatever their nationality and mother tongue. It had been identified by the company previously that the Danish staff and, to a somewhat lesser extent the Danish customers perceived the senior management team to be ignorant of Danish business culture, practices, and the nature of the Danish domestic market. Reportedly, it was felt locally also that the UK parent was “remote, unsupportive, and generally unsympathetic to the needs of its subsidiary.”

Whether real or not, these perceptions had taken on a „life of their own‟ and seemed linked to the presence of friction and lessened company performance. The Danish company was ailing financially anyway and these issues did not help the parents objective of turning its subsidiary around. The UK parent had reached the point of considering the closure of its Danish subsidiary company. The UK Board of the parent company decided though to adopt a completely open mind and to fully explore its options before reaching any decision. They decided to find out what the „real issues‟ were. Hence, the UK Board commissioned this study (together with a psychological audit of the capabilities and style of the management, alongside an internal commercial audit of the business).

i) Identify and discuss the reasons for resistance to change as highlighted in the above case study. (ii)Suggest tactics that the Management should be employing to overcome the resistance in each case.

Question: Explain the Action Research Model of change with illustrations and correlate it with any organization as well.

Question: You have been invited by a reputed company dealing with white good to provide them with consultation on team motivation and performance. Outline the procedure you will adopt.

Question: Discuss work designs that optimize technology quoting relevant examples for each group.

What are the contingencies that need to be kept in mind at the time of devising OD interventions?

Question: Write short notes on the following along with the practical examples (i)Management by Objectives and its relevance as an OD intervention (ii)Use of 360 degree as an appraisal method and as an intervention tool.

Question: Reflect on the growth and relevance of Organizational Development as a discipline with special focus on the major trend of globalization and managerial innovation.

Question: Trace the contribution of Normative Approach stem to the evolution of Organizational Development. Justify your answer with the help of two applications as well.

Q. Mario always wanted to establish his own retail company. He had all the financial and physical resources required to begin but he was not aware of the key fundamental elements of an organization. Why do you think these are important? As an HR specialist, help him with this task by designing the main organizational elements. Also, align these with his retail business.

Q. As project leaders, while Julia believes in enhancing each team member’s effectiveness, George believes in focusing on enhancing the overall organizational effectiveness. This difference of opinion always confuses their team members. Now, the senior management has realized that it is high time to get the issue sorted. So, the HR Manager, John Cooper has been assigned the task to devise a standardized and holistic process of measuring organizational effectiveness. Along with this, the management has also asked him to come up with a contemporary effectiveness approach that will replace the traditional approaches. Keeping the above scenario in mind,
Explain how John Cooper will devise a holistic process of measuring organizational effectiveness.
b. Explain which, one, contemporary approach will John choose and why?