9.1 Organizational theory and management cybernetics

ORGANIZATIONAL THEORY AND

MANAGEMENT CYBERNETICS

Organization

“In public service the organization’s

money is the means and operations are the goal. In private corporations money is the goal and business the means”

 _{Organizations are the product of the}

surrounding society whose needs they serve.  _{Organizations are creation of man,}

Organization [2]

 _{The distinctive mark of the human}

organization:

 _{It represents certain preferences}

regarded as a unit.

 _{It makes decisions and tries to}

implement and optimize them.

 _{It determines its own internal structure}

and the aims of the subsystems.

The origin of modern trading

corporation

 _{To solve large-scale problems of different} kind has always implied the compiling and combining of resources with labour.

 _{The trading corporation soon grew in size} with its practices of using partnership.

 _Problem:

 _{The possibility to raise enough capital for large}

projects.

 _{Each partner was responsible for all the other}

The origin of modern trading

corporation [2]

 _{The demands to be satisfied by}

well-working corporation:

 _{The accumulation of large sums of capital}

should be enhanced.

 _{The life span of the corporation should}

outlast the life span or interest of its owner.

 _{Risks and liabilities of those participating in}

the corporation should be limited.

 _{It should be possible to participate without}

Organizational Stakeholders

 _Shareholders  _Lenders

 _Suppliers  _Customers

 _{State and community}  _Competitors

The development of

organizational theory

 _{Frederik Taylor (1856 -1915)}  _{Conclusion the problem:}

 _{The used method in production were built on old}

habits instead of systematical studies.

 _{A rigid hierarchical structure managed the}

production with implacable discipline and individual worker skill was not utilized.

 _{No measures existed regarding individual working}

performance or the average achievement per day for a standard worker.

 _{Workers opposed every attempt to increase}

The development of

organizational theory [2]

 _{Taylor recommended four measure:}

 _{Every task should be studied according to}

scientific methods, not heuristics.

 _{A good corporations between management and}

workforce must be established in order to facilitate and develop scientific methods in production.

 _{The most skilled worker should be selected for}

every specific task and thereafter be trained and developed for this very task.

 _{Assignments and responsibility should be shared}

The development of

organizational theory [3]

 _{Elton Mayo (1880-1949)}

 _{The working man on the plant floor}

claims gratitude and safety.

 _{The group standards of the working}

force are stronger than prevailing standards of the company.

 _{Social standards together with technical}

and physical prerequisite define production output.

 _{Every company has both a formal and}

The development of

organizational theory [4]

 _{Max Weber (1841-1925)}

 _{Authority and responsibility should go hand in}

hand

 _{Order and method should always prevail}

 _{The wholeness is more important than the parts}  _{Every employee should only have one superior}  _{Information should flow through official channels}  _{All persons working in the organization must}

show discipline

The development of

organizational theory [5]

 _{Henry Fayol (1841-1925)}  _{Hierarchical structure}

 _{Rigid organization}  _{High formalization}  _{Departmentalization}

 _{Specialization and division of labor.}  _{Strict distribution of responsibility}  _{Vertical chain of command}

 _{Well defined internal relations and clear lines}

command

The development of

organizational theory [6]

 _{Henry Fayol (1841-1925)}

 _{Official reporting is used for coordination.}  _{The superior has the right to command the}

subordinate.

 _{Program management}

 _{A system of authority which is impersonal and belongs}

to the position rather than individual.

 _{Position awarded on the basis of formal competence.}  _{A system is responsibility and accountability}

 _{Safe employment and regulated system of promotion}

with possibility to earn one’s living

 _{Distinct separation of members’ organizational and}

The development of

organizational theory [7]

 _{Amitai Etzioni}

 _{Normative Power (symbolic means like}

prestige, appreciation, devotion)

 _{Benefit Power (founded in material}

benefit like food, clothing, money)

 _{Compulsive power (violence, physical}

The development of

organizational theory [6]

 _{Philip Selznick}

 _{Creative leadership}

 _{Responsible leadership}  _{Institutionalizing}

The development of

organizational theory [7]

 _{Contingency Theory [1970]}

 _{Organizational strategy}  _{Organizational size}

The non-avoidable hierarchy

 _{Hierarchical design of various kind of}

organizations will continue to exist, because leaders exist.

 _{Concept hierarchy is basic part of}

man’s mental world.

 _{People want to know who is in}

Organizational Design

 _{General problem in organizational}

design  the balance between

centralization and decentralization.

 _{Centralization  decision taken in}

higher levels of organization.

 _{Decentralization  decision-making}

Organizational Design [2]

 _{No matter how the structure is arranged, qualities}

of an organization:

 _{Some of its components are living variables (human} being).

 _{The responsibility for choice between possible}

alternatives of action in a specific situation are shared by one or more individuals and/or groups.

 _{Decisions can be related after function, geographical} position, time.

 _{Functionally distinguished groups are conscious about} each other’s actions by communication or by

observation.

Organizational Design [3]

 _{Classical Organization}  _{Functional Organization}

 _{Product/division Organization}  _{Matrix Organization}

Classical Organization

 _{“Who is the boss’s boss”}

 _{Tells nothing about the ever-existing}

informal relation in the organization.

 _{The size of hierarchy depends of the}

size of the organization.

 _{Strong leader give rise to strong}

Functional Organization

 _{The main value: specialization in procedures}

for problem-solving and a homogenous

background with the same terminology and description model.

 _{Disadvantages: inclination toward self-isolation}

of the various functional departments and a tendency to get into conflict with each other.

 _{Power, coordination, and critical information is}

Product/division Organizational

 _{A design which is particularly useful when} there are clearly separated groups of

products or services.

 _{The central management or concern}

management nominates and dismisses the boss of each division, stipulate expected results, approve the budget and so on.  _{The concern management also reserves}

Matrix Organization

 _{Has a double profit responsibility}

where no particular person has a

total, responsibility for what is going on.

 _{Gives the possibilities both to protect}

desirable dissimilarities between different business areas and take

advantage of existing dependencies.

 _{Problem: unclear responsibility,}

Project/

ad hoc

Organization

 _{Handle problems which overstep the borders} between various internal function.

 _{The project director normally has total command} over the participating specialist.

 _Advantages:

 _{Freedom to act in a better way}

 _{More solid and well thought out solutions}

 _{Instructive and inspiring for the participators}  _{Creates new pattern of cooperation}

Project/

ad hoc

Organization [2]

 _{Phases of Project}

 _{Project formulation}  _Planning

 _Execution

 _Coordination

Project/

ad hoc

Organization [3]

 _{Critical Success Factor:}

 _Aims

 _{Project goals are clearly defined}

 _Organization

 _{Resources are sufficient}

 _{Control mechanisms are in place and used}  _{Project has support of top management}  _{Communication channels are adequate}  _{Feedback exists}

 Contractors are responsive to clients

 _People

Virtual Organization

 _{Take advantage of an entrepreneurial}

situation in which organizations exploit opportunities and take advantage of shared expertise,

Virtual Organization [2]

Permanent Virtual

Organization Virtual Teams

Temporary

ent Across organization Internal to an organizational function or departmental unit

Across

organization Across functions and organizations

Members

hip Typically smaller, but scalable Small, local Typically larger Indeterminate

Mission All functions and full functionality as a working organization

Teams on

specific ongoing tasks

Multiple functions

responding to a market

Project Permanent Membership varies, form is permanent

Temporary Temporary

Uses of IT Channel for marketing and distribution

Multiple perspectives of

management cybernetics

 _{Organizations as organisms}

 _{Organizations as control systems}  _{Organizations as brains}

 _{Organizations as machines}  _{Organizations as cultures}

 _{Organizations as political systems}  _{Organizations as theatres}

Life-cycle stages of

organizations

 _{The entrepreneurial stage}  _{The collective stage}

Life-cycle stages of

organizations

Phas

e Evolutionary Phase Revolutionary Phase

1 Growth through creativity

Leadership crisis

2 Growth through direction Autonomy crisis 3 Growth through

delegation Control crisis

4 Growth through collaboration

Staff crisis

5 Growth through

Organization = cybernetics control system

 _{Organization are strongly influenced}

by their environment and therefore must be able to control it in order to survive.

 _{Organization must assume a}

measuring device giving information.

 _{Negative or positive feedback should}

Organization = cybernetics control system [2]

 _{Keynumber is data which has been aggregated and}

transformed into information and communicated throughout the organization.

 _{“Balanced Scorecard”  a number of keynumbers}

which make clear the balance between different organizational perspectives.

 _{Financial from the keynumber profit-margin}

 _{The customer’s from the keynumber satisfied customer}  _{Process-oriented from the keynumber stock-turnover}

velocity

 _{Human-oriented from the keynumber personal-turnover}  _{Renewal and development-oriented from the keynumber}

Organization = brain

 _{Organization as integrated information,}

communication, and decision making systems capable of learning how to learn.

 _{Holographic qualities  the parts reflect the}

nature of the whole.

 _{Each nerve cell is connected with millions of others,}

creating the total effect of a brain being both generalized and specialized at the same time.

 _{Employee interact in networks of personal}

computers and audiovisual facilities.

 _{Holographic organization = information}

System Approach in ten points

 _{Organizations change according to processes}

that take place on its own organizational level.

 _{The organizational environment is both natural}

and social.

 _{The organization is the result of both human}

interaction and conscious design.

 _{The organization is not reducible to to the sum}

or their parts.

 _{Systems on higher levels of organizations are}

System Approach in ten points [2]

 _{Organizations evolve by developing progressively} higher organizational level through convergence.  _{The organization is operated by human beings}

but are not entirely under control of any individual.

 _{The organization’s component may also}

compose parts of other organizations which integrate them.

 _{The organization is a self-determined system} which evolution cannot be predicted.