Organizational Theory, Design, and Change - Essay Example

Assignment: Organizational Theory, Design, and change How do organizations create value? What is the role of entrepreneurship in this process? Creating value in an organization involving the activities aimed at ensuring ultimate or absolute satisfaction to the stakeholders. These include most importantly the employees and the customers. Companies and various organizations are therefore forced to embark on strategies which will ensure the ultimate satisfaction of these classes of people. The methods used by the companies are either of immediate economic significance or social significance regardless of whether the organization is non-profit making or for profit. As such, it is common for organizations to improve their operations by minimizing production or operational costs for non-profit organizations. Such organizations are known to be efficient and will therefore charge low amount for their goods or services due to the low costs of production. The customers are also able to get quality services at affordable rates. Moreover, through motivation of employees, the company is able to retain loyal and efficient employees, which improves its social image within the community where it operates. Through proper social responsibility strategies, the government is able to associate with the organization and this will further enhance its image. A properly managed organization will consider an approach that will lay emphasis on initial impetus, focus, alignment, proper planning and adaptation so as to ensure value to the consumers. It is clear that entrepreneurship will set the foundation for creating value in an organization since the entrepreneur defines the goals and the tradition of the organization. They provide the initial leadership in the organization by setting the objectives and acquiring the necessary resources. The entrepreneur also establishes the management of the organization. Entrepreneurship helps to decide on the best strategies for creating value in the organization. It is the will of the entrepreneurs that will determine the rate of implementing strategies. 2. What is agency problem? What steps can be taken to solve it? Agency problem refers to a conflict of serious implication to the operation of the organization which will always pit the various stakeholders on the opposite sides of the conflict divide. It could therefore be a conflict between the management and the investors or the management and the employees or even all employees against the investors. These conflicts could include difference in management ideologies between the management and other stakeholders, difference in targets set by different quarters of the organization and expected remuneration or reward for various achievements. In most organizations, agency problems normally occur when the management misuse the authority bestowed upon them by the other stakeholders. This is in such acts as using that authority for their own benefit at the expense of the company goals. The agency problems can be generalised as adverse selection where the investor doubts the capability of the management to promote his interest and moral hazard, where behaviour of the representative is deemed to be capable of causing harm to the organization. It is important to note that agency problem is mainly caused by mistrust and in some cases, negligence. Sadly though, the problem exists in every organization in one way or the other. Several efforts or actions are taken towards solving agency problems and they include: screening processes to reduce misbehaviour, offering incentives to the employees and management for positive results and achievements, well defined punishments for poor behaviour such as suspension and unpaid leaves to ensure strict adherence to the company’s principles. The company may even be forced to employ supervisors who are charged with the responsibility of checking such compliance. This method could be referred to as watchdog police. Other modes of solving agency problem are through internal and external audit as well as ensuring a balance score card between performance and reward. 3. What are the major sources of uncertainty in an environment? Discuss how these sources of uncertainty affect a small biotechnology company and a large carmaker. Uncertainty in a business environment refers to the unpredictable factors and changes that will affect the business operations. Since they are unpredictable, their effects on the business are always enormous and generally negative. They are caused by various occurrences in the business surrounding. The major reason for the uncertainty is in the nature of the business environment which is always complex in nature, very dynamic and rich with various issues. Complexity results from the number of interconnected forces which affect the operations of a business. It also involves the level of difficulty in overcoming the negative forces and thus affects the organization. For a company which does not major in one line production, it is faced with the difficulty of producing various products and therefore is affected by the uncertainty due to the production of each product. A rich environment does not have high level of uncertainty compared to a poor environment. In the case of a small biotechnology firm, the uncertainty faced includes climatic changes but will not be affected by the volume of operations. The other uncertainty to the company is the number of end products involved whose consumption and demand in the market will determine the level of uncertainty on the company. The market is not very complex but the requirements could be overwhelming when they have to produce more the one product. The environment could be rich with raw materials due to their size of operation. The large car maker will face various challenges and uncertainty due to global changes. This is because they are faced with the challenge of making various car models for various markets whose demand are always changing. There is the case of the unexpected changes in the energy costs from time to and more changes in the strategies employed by competitors. 4. When does an organization need to use complex integrating mechanisms? Why? Integration is a method of developing a more efficient and significant working unit from previously insignificant subunits. It helps reduce wastage idleness and will always make employees feel responsible for their kind of duty. The employee takes charge of a wide spectrum of the process and will therefore understand most of the process. This will serve to increase efficiency and know how in the organization. Complex integrating mechanisms are always aimed at creating the necessary chain of command or channel for the effective completion of a process. It normally results into excessive bureaucracy for the employees but it gives an avenue for checking the process of production. Integration therefore improves coordination of the process as well as improves coordination at various levels of production. Complex integration will involve scenarios where teams are coordinated by different functional managers, where one person or manager coordinates more than one division or function say production and where departments are integrated under one function. When complex integration mechanisms are employed by the organizations, a lot of benefits accrue. The production is done by such level of supervision of a more trustable individual and will therefore ensure quality and efficiency in the production of the end product. Employees are always sure of their work being supervised by a senior person who has charged them with the specific responsibilities. Complex integration is beneficial to an organization when the company is able to minimize on the cost of individual supervisors at various levels. Wastage is also reduced since the operations of the various departments are synchronised. Overly, such integration can be effected through a department where closely related operations are considered for integration to enhance efficiency and reduce operational costs. 5. In what ways can the informal organization and the norms and values of its culture affect the shape of an organization? The informal organization is the interconnected social configuration that directs the operations of people in an enterprise. It combines the actions, customs, and connections both personal and professional by which work is undertaken and the understanding built among those who share organizational associations. An organization is shaped by its structures, policies and value system. Members of an organization through their cultural affiliations, have an effect on the shape of the firm by their continuous contributions of diversity in norms and cultural practices. The informal organization helps in blending with the enterprise’s formal system to achieve the set objectives this has the benefit of lightening management workload by fostering cooperation between staff and the management. With the element of cooperation in place, delegation and maximum support of management becomes part of the organizational way of life and this in the end determines what an organization becomes. The level of service delivery, employee commitment, inter-departmental cooperation and the human relationships within an enterprise are what constitute the firm’s identity. The informal organization, therefore, is at the core of shaping the identity of an organization which in the end determines its ultimate success in both the short and long run. 6. As organizations grow and differentiate, what problems can arise with a functional structure? As organizations get bigger, problems of coordination between the various divisions do arise. When an organization creates multidivisional structures as a result of its growth, then the problem of competition for resources among the divisions arise and this makes coordination much harder. This has the effect of stagnating an organization’s performance since innovation and free sharing of knowledge among divisions is not done. Being the functional structures, divisions further face problems relating to transfer pricing with each division aiming at maximizing its return on investment. Other than competition among divisions, there is the problem of cost. The multifunctional structures brought about by growth incur huge bureaucratic costs that range from research and development to duplication costs that are inherent within divisions. There is also the problem of communication. As an organization grows in size, so is information distorted along its hierarchal structures. This is common in multidivisional structures that have the widest gap between head office and corporate centre to divisions. 7. In what ways can organizational culture increase organizational effectiveness? Why is it important to obtain the right fit between organizational structure and culture? Organizational culture is defined as the shared actions of individuals that are part of an organization together with its value systems, beliefs and vision. An organizational structure is a representation of the sequence and flow of both authority and activities aimed at achieving the set objectives. Structure is more of a formal layout of how operations within an enterprise, to implement and achieve the set objectives however, the organization’s culture must play a central role. It is organizational culture and not the structure, which, give the human touch to services within a firm and therefore, intended results, cannot be achieved if there is a conflict between the structure and culture of an organization. A structure that compliments culture encourages cooperation between management and employees, improve management practices by encouraging an all inclusive system where employees contribute to key decisions and therefore feel part of the organization and foster understanding making it easier to deal with environmental challenges should a crisis arise. In organizations where structures and culture are compatible, harmony and goal motivation is exhibited by all. The end result therefore, becomes better service delivery, enhanced cooperation, acceptances of change and ultimate profitability. This is however not the case for an organization that has a conflict between structure and culture where rebellion between staff and management is the norm and any changes are resisted by employees. To create harmony between structure and culture, it should be the duty of management to build an organizational culture around the existing structures and make changes to incompatible structures from the start since cultural identities are better defined from the beginning to set the right tone for an organization’s future operations. 8. How and why do bureaucratic costs increase as a company goes from a multi-domestic to an international to a global to a transnational strategy? As a company grows, divisional structures are created to increase functionality; these divisions grow bigger as the organization crosses borders. Setting up departments is one way costs increase, another way is through the checks and balances created to oversee the functionality of these created departments. As a company implements it global growth strategies, mergers and acquisitions take place which involve huge cost in their wake. These are just a few ways of how growth comes with costs. Structures have the objective of self reliance in the operation of an organization. They form integral part of an organizations operations as it grows, setting these up however, involve several costs both in assets and overheads as they need not only machines but also people to effectively deliver services. They should therefore form part of an organization’s expansion strategy with the objective of making them lean and accountable to eliminate redundancy in activities that come with huge costs and inefficiency. 9. Why is technical complexity greatest with continuous-process technology? How does technical complexity affect organizational structure?  Technical complexity is the level of control, programming and forecast in the procedures that transform inputs into final products. It is technical complexity that through its dimensions, distinguishes one technology from the next. There are two levels of technical complexity: High technical complexity is exhibited when processes are programmed and entirely automated in advance to the point that operations are standardised and predictable. Low technical complexity is where the processes of conversion are dependent on individual skills and inputs without the involvement of machines. It brings inconsistency in quality. The two levels of complexity function with three types of technology; small-batch and unit technology where production is in little quantities and even a unit at a time, large-batch and mass-production technology where large amounts of goods are produced at a time, and continuous-process technology where production never stops (Jones, p200). Technical Complexity and Organizational Structure Since technology has an effect on structure, a model has been developed that matches an appropriate structure for different types of technology. Small batch technology requires fist line supervision with fairly narrow span of control to bring the supervision function much closer to the process. Mass and continuous technologies have a wide span for supervisory function. Small batch technology therefore requires three levelled hierarchical system that has decision making function and a narrow span of control to the supervisory function with decisions made as the need arises and adjustments mutual undertaken. A mass production technology is wider and with four levels as well as a centralized decision making function. First line supervisors have a wider span of control because of the predictability of procedures that have systems helping in the coordination process. Continuous-process technology employs programmable activities and a foreseeable work process, but because of the possibility of a breakdown, close monitoring is required to minimise disasters and therefore necessitates a hierarchical system with eight levels. Supervisors are allowed a narrow span of control and make mutual adjustments. Because there is need for quick responses, an organic organic structure is relevant to a continuous-process. 10. How do evolutionary change and revolutionary change differ? In the course of their operations, organizations are often forced to adopt changes that will ensure they continue to provide value and become more effective and efficient in providing services to their customers. These changes can always be gradual or rapid and it is based on this that the organizations will declare the changes as evolutionary or revolutionary. Evolutionary change takes place over a long period of time and is usually necessitated by the daily operations and occurrences of the company. Normally, it is caused due to external factors or pressure or the urge to achieve a given incentive which may only result when the change is embraced. For example, when healthcare providing organizations realize a positive incentive in electronic record keeping, all such organizations evolve towards the electronic healthcare records to obtain the financial incentive associated with it. The key value of evolutionary change is that it tries to keep everyone in the field of play as it enhances competitiveness. Revolutionary changes on the hand are very radical and do not depend on external pressure but organizational decisions. When the management decides to make changes so as it improve the value of its products with the aim of being ahead of the rest of the competitors, it will not depend on incentives or external market pressure. In this scenario, the organization will focus and anticipate market changes before they occur so as to deal with them as actual business challenges. A potential new market is a challenge since they may necessitate advertisement and increased production to keep pace with the growth. An anticipated energy crisis for a manufacturing firm is a challenge which actually requires a radical change to be able to keep up with the pace and be able to retain market share or acquire more market share. Therefore, whereas evolutionary change takes longer time, is very slow and with a massive effect, revolutionary change could be said to be unexpected, sudden and within the shortest duration. 11. Why do organizations grow? What major crisis isan organization likely to encounter as it grows? Growth in organizations refers to an increase in the scale of operation or production. This will obviously imply that there will be an increase in the number of employees, raw materials used, departmental duties and probably, increased profits. Organisations grow due to various factors and reasons and will always depend on the entrepreneur, the management and the level of motivation for the employees. In order to encounter growth, the company or organization must develop strategies towards positioning, spreading and operating. These may include merging with other related firms, acquiring other firms and adopting various technologies as may be required by the objectives of the organization. The objectives of the organization determine the level of growth the organization wish to attain whether lateral or vertical hence the three strategies. The capital reserve of the organization is also a critical factor as it decides whether the organization can pursue the theoretical goals or not.Organizations grow due increase in capital and returns which will give the organization the will to invest more. As the capital base increases, the management will always decide to employ the increased capital as a form of investment to gain more returns. The markets may at times require that an organization grow when there is more demand of the products of the organization with little or no supply. Organizations may also grow due to increased government incentives for investing in the specific field. It is also necessary for companies to comply with technological changes which at times require high volume production and thus will necessitate growth. Despite growth being a positive step in an organization, the company will always find itself in various challenging situations related to the growth. These include dealing with the increased number of personal, complying with labour laws, demand for more raw materials, environmental legislations and increased costs. 12. How do cognitive biases affect organizational learning and the quality of decision making? What can be done to reduce their negative impact? Cognitive biases refer to an inclined reasoning due to pre-existing assumptions or knowledge. It is always observed in various fields such as statistical, social and memory reasoning where people or managers presume the the validity of a previous statistical report to true in every successive scenario. They tend to assume the previous scenario is universal and so applies to all the other similar circumstances without giving each situation its deserved critical analysis. Cognitive biases can be described bandwagon effect where the manager or organization tends to go with the majority and the expense of any other critical view or opinion by the minority which could be the most appropriate. The other bias is when the organization avoids losses and only prefers to acquire gains when that is only possible in an ideal situation not frequently witnessed in a business world. This will affect the operation of the organization as it will always consider losses as the failure of employees and not the ultimate. This will in effect stiffen the relationship between the shareholders, management and the employees. This bias is frequently referred to as loss aversion. The management of an organization may also rely on expectations in their perception of ideas. This may only be perception on a specific reasoning and as such is called selective perception. This does not give room for the other unanticipated scenarios and thus will reducing the effect of any contingency plan. When the management relies on one source or piece of information for decision making, they anchor their decision on it. This prevents the possibility of reviewing other available sources of information to reach the most reliable decision. This cognitive bias is referred to as anchoring and will always result in negative outcome since every situation as specific factors influencing it. To reduce the effect of cognitive bias, the organization needs to adopt open end management where views and information are accepted from all the sources and each situation dealt with specifically. 13. What is the relationship between quantum and incremental technological change?    Quantum technological change is a fundamental alteration that changes how products are made while incremental technological change is an enhancement of the core technology. The two are related and shape a product’s life cycle. Success of an organization is dependent on the level of innovation among the employees and management. ‘Intrapreneurs’ are innovative employee entrepreneurs within an organization. They have the ability to identify and execute either quantum or incremental product enhancements that help an organization stay competitive. Quantum technological changes provide products that can be improved through incremental technological changes to achieve ideal, truly unique, competitive and profitable products that give enterprises a competitive edge above the rest. To see quantum changes within an organization, there should be a structure and culture that supports and encourages innovation. Organization ‘intraprenuership’ can only be witnessed if members of staff feel part of the firm through support provided and the culture of all inclusiveness that appreciates the ideas and opinions of all. Incremental changes in technology can only be effected after the products have been a quantum innovative process yet to achieve truly competitive products, new products must undergo an improvement exercise to raise the new products to the prevailing market trends and expectations. The two activities are therefore correlated and play a significant role in keeping an organization both competitive and relevant. An example is the floppy diskettes that were invented by IBM and later improved in size and capacity to conform to the reducing size of computers. This idea led to the innovation of Compact Disk that was in line with the changing technological trends in computing. 14. Why and under what conditions can conflict be good or bad for an organization? Would you expect a higher level of conflict in a mechanistic or an organic structure? Why? Politics that cause organizational conflicts arise from issues of control and relating to promotion and budgets. Outstanding benefit of conflict in an organization is the balance and checks it creates, due to conflict, the various participants in an organization become their own checkers and always attempt to unearth one another’s flaws in the belief that the faults will be to their benefits. It therefore encourages caution and accountability. It however has the shortcoming of creating animosity, lack of trust and coordination among team members which is a hindrance to achieving an organizations set objectives. Because of conflict, cooperation will not be possible in an organization which is a major element in achieving results. A mechanistic/ organic structure definitely has higher conflict because of the human involvement in processes in supervisory roles. Because of close supervision involved, conflict is part of this system unlike other automated systems that require minimal human input and sources of faults are easily traceable. Reason for high conflict is an organic system is misunderstanding among the people involved that usually arise from personality and opinion differences on the right path in dealing with operational issues. Work Cited Jones, Gareth R. Organizational theory, design, and change Canadian ed. Toronto: Pearson Prentice Hall, 2006. Print. Read More