1. What is the definition of organization? Explain each part of the definition.
Organizations can be defined as “social entities that are goal-directed, deliberately structured activity systems with an identifiable boundary” (Burton et al, 2006). Organization is a structure comprising of individuals having specific goals and objectives that are shared by most of its members and its activities are aimed at achieving these goals and targets. It is a social entity that functions through individuals that assist the organization in achieving its purpose. These social entities perform economic activities to generate revenue for the firm and support its operations. One important characteristic of the organization is its boundary within which it operates. The internal environment of the organization constitutes of individuals working together towards the organizational goals and managerial policies that guide the work process and departmental functions. The external environment that includes clients, suppliers, and other economic forces driving the market demand and supply largely influences it.
The organizations are formed deliberately to attain specific goals and earn revenue through defined market operations. These activities are targeted towards buying and selling of goods or services to customers that in turn generates income for the individuals working within the organization. Organizations emerge when the cooperation and specialization cannot be obtained through a market and price system but activities have to occur within an organization” (Burton, et al, 2006). The organization benefits from the cooperation of the individuals that in turn supports the individuals in the form of monetary compensation. The society benefits from the exchange of goods and services in lieu of money. Organizations thus help in bringing together resources to achieve desired goals and objectives, produce finished goods and services, and employ innovation to enhance productivity and profits through the use of modern manufacturing and information technologies, (Thomson Learning, 2004).
2. Describe an open system (input, processes, output), and evaluate the different parts of an open system and its subsystem.
Organizations are open systems that work in close coordination with the external environment within which it operates. The organization in order to be efficient must understand the dynamics of the environment that it operates and adjust its strategies to accommodate the changes or anticipated changes. The open system receives inputs from the environment in which it operates. These inputs are including raw materials for processing, people for carrying out various activities, information resources to assist decision-making process and financial resources to facilitate and support organizational activities. These inputs are processed or transformed into finished goods and services that are sold to the customers existing in the external environment in which it operates.
“Open systems theory assumes that all large organizations are made up of subsystems, each of which receives inputs from other subsystems and turns them into outputs for use by other subsystems of the organization” (Borkowski, 2008). The subsystems within the organization are interdependent and interrelated to facilitate smooth execution of departmental operations and functions. Efficient operations require a proper balance between the various functions and operations of the subsystems. The different parts of an open system or the subsystem of the organization include production, maintenance, managerial, adaptive subsystems and boundary spanning. Production subsystems are responsible for transforming inputs into outputs. This is one of the primary subsystems of the organization since all activities and resources are directed towards this operation. Maintenance subsystems provide the organizational entities with increased levels of motivation through adequate compensation and meeting employee needs. Managerial subsystem directs the activities of the organization through goal establishment, resource allocation, and formulating policies and regulations. Adaptive subsystems are concerned with collecting information about the market forces and external parameters that have direct impact on the organizational performance. Boundary spanning is related to the exchange of information and resources across the external and internal boundaries of the organization.
3. Evaluate the major stakeholder groups and what they expect.
“A stakeholder is any group within or outside the organization that has a stake in the organization’s performance. Each stakeholder has different criterion of responsiveness, because it has different interest in the organization” (Daft, 2008). The different categories of stakeholders within an organization include customers, regulatory authorities, stockholders, employees, suppliers, creditors, and investors. The primary stakeholders consist of investors, shareholders, employees, customers, and suppliers. Among other stakeholders that impact the organizational functions and operations are government and the community that it serves, trade associations, consumer groups and professional associations.
The primary stakeholders of the organization are concerned with company profits and organizational efficiency that has a direct impact on the revenues and market share. The efficient utilization of resources will drive profits and increase the scope for operational expansion. Managerial groups are concerned with devising strategies and operations to achieve growth and improve organizational work environment. Employees expect a good working environment that facilitates their personal growth and development and increase work satisfaction, ensure adequate monetary compensation and effective management practices. Customers expect high quality goods and services, efficient customer service, and easy availability of goods and services. When the expectations of the primary stakeholders are not met there is increased dissatisfaction and it threatens the smooth functioning of the organization.
4. Describe differentiation and integration. In what type of environmental uncertainty will differentiation and integration be greatest? Least?
Organizational activities are governed by market driving forces that identify the consumer needs and demands creating opportunities for businesses to generate revenue. The decision to process inputs into desired consumer goods or services is undertaken after researching market conditions and analyzing consumer needs. The current business environment encompasses global influences owing to the process of globalization and liberalization policies adopted by economies. However market dynamics differ from one region to another. “All organizations have to find ways of breaking overall tasks into smaller elements and, then, of tying them together again. This is the problem of differentiation and integration” (Morgan, 2006). The various departments within an organization develop their distinctive styles of operation and management “They manage to differentiate in a way that allows them to meet the challenges and demands of their environment, and yet find ways of overcoming the fragmentation that this differentiation typically creates” (Morgan, 2006). The operational and managerial differentiation is necessary to sustain and achieve department specific goals and objectives. However, these departments need to interact and integrate on various fronts to sustain organizational goals and targets. Integration of units and functions are essential to gain operational efficiency and enhance productivity. This however is not an easy task since each of these units supports distinctive beliefs, goals and values. The organization and managerial styles need to focus on maintaining a healthy balance between differentiation and integration strategies. The organization must strive “to create the kind of balance and integration that will hold everything together in appropriate way, without hampering the organization’s overall ability to meet the challenges of the wider environment, and the key tasks on which its survival ultimately depends” (Morgan, 2006).
5. Describe Environmental uncertainty through the Framework. How to adapt to a new level of environmental uncertainty?
Organizations are controlled to a large extent by the operating environment in which it operates. A stable operating environment provides the organization with increased opportunity to operate efficiently. However, an unstable environment tends to emphasize the relevance and significance of managerial strategies that drive organizational efficiency and performance. The complexity of the operating environment today has made it a challenging task for managers to balance the functions of various departments using differentiation and integration strategies.
A key factor to adapt to the new level of environmental uncertainty is learning and development. “Learning organizations promote communication and collaboration so that everyone is engaged in identifying and solving problems, enabling the organization to continuously experiment, improve and increase its capability” (Daft, 2008). An efficient organization lays emphasis on integrating various channels of information and resource allocation to direct the flow of information and data for processing. Organizations being open systems must interact closely with the operating environment and fully understand the business dynamics. A complete understanding of the operating environment is essential to devise and re-engineer managerial strategies to meet new and anticipated market challenges.
6. What is an organic organization? A mechanistic organization? How does the environment influence organic and mechanistic structures?
Organic organizations are organizational structures that are characterized by flat structures, low level of specialization and decentralized decision-making process. Communications within an organic organization structure is horizontal and practices increased level of employee participation in the decision making process. This kind of organizations is more complex in nature and is difficult to form in comparison to other organization structure. These structures are more adaptable, flexible and increasingly appropriate for meeting challenges in a rapidly changing business environment.
A mechanistic organization on the other hand supports a hierarchical structure that has centralized authority and specialized functional units catering to distinctive activity or process. These organizational forms have low levels of adaptability to changing business environment. Mechanistic systems are “suitable to stable conditions and characterized by repetitive tasks, clear hierarchy of control, vertical communication, and standardized technologies,” while organic systems are more appropriate for “changing conditions that introduce new problems and requirements for action” (Borkowski, 2007).
7. Discuss the process of Ecological change.
“A business ecosystem describes the structure and behavior of a network of high-tech organizations that share a key technological platform and the ways individual firms can flourish in such an environment”(provenmodels, 2009). Businesses are affected largely by the operating environment comprising of external economic forces such as market demographics and geographical factors affecting the demand and supply of goods and services. Business ecosystem is a relatively new concept that has its roots in the biological ecosystem. It is targeted towards the smooth functioning of various organizational departments and optimizing resources to maximize profits and revenues.
8. The concept of business ecosystem implies that organizations are more interdependent than ever before. From personal experience, do you agree? Explain.
A business ecosystem is a network of various organizations operating within similar environment. These networks can be highly instrumental in opening new opportunities and increasing business potential. Companies within the ecosystem can exploit the potentials offered by the immediate operating environment to serve their consumers in a far more effective manner thereby increasing market shares and meeting consumer needs and expectations. The research and development activities carried out by each organization can serve to provide increasing benefits and utilities to the consumers. The various product development activities can be synergies to produce cost effective and efficient models that can drive market demand in favor of the companies within the ecosystem. Among other parameters that this process involves is the awareness and implementation of business ethics that prevents companies from malpractices and works together towards the benefit of the community.
The banking and financial institutions have incorporated massive changes in the way they operate and service their customers. The business ecosystem in which they operate has provided them with the basic framework to achieve customer service excellence through an in-depth analysis of customer needs and preferences. The whole banking system has been automated and innovative technology has been applied to serve the customers instantly and more effectively.
9. Explain the stages of International Development (Domestic, International, Multinational, and Global).
Typically an organization goes through various stages or phases of evolution. Initially an organization serves the local customers. The growth of an economy is dependent on the growth of business activities within the community. A thriving business environment forms the base of a thriving economy. In order to be successful, entrepreneurs need to tap potential or existing consumer needs and allocate resources to meet these requirements. Success in the domestic markets paves the way for further operational expansion and this leads to establishing an international presence with the company seeking new geographic boundaries to expand its operations and increase market shares.
10. Evaluate the global organizational challenge (Complexity and differentiation, need for Integration, transfer of knowledge and innovation).
Business is a dynamic process governed by the economic, political and social environment in which it operates. Due to rapid changes in the operating environment entrepreneurs need to dynamic in their approach to devising and implementing strategies for growth and development. Businesses create opportunities within the community to grow and prosper. It enhances the living standards of the global community providing people to become wealthy. Growing complexities within the business environment has created greater need for knowledge and understanding of the operating environment that affects the profitability and growth of the organization.
11. What is a functional Structure? What are advantages and disadvantages of functional structure?
When the organization is at the startup stage, the business is steady, and we want the top management to have the full control over strategy and finance from a single point then functional structure is preferred.
If the need of the organization is not customer centric, the size of each functional team is small and we do not want the organizational structural cost to be very high then functional structure is preferred over the divisional structure.
When an organization is dealing with fewer products and not very diversified, has been operating in a limited boundary area, and the organization is not requiring the separate strategies for cross cultural or cross geographical area, then functional structured is preferred over the divisional structure.
When the organizational strategy is process and functions and not new product and R&D then functional structure is best suited rather than divisional structure.
Let us understand with an example of a company that produces aromatic and essential oil and has one factory. The procurement of raw materials is done centrally. The Marketing and Sales are managed centrally. The functional structure is best suited for this organization. The company has a Chairman and Managing Director (CMD). There is one Factory Managers located at the factory who reports to the CMD. There is one Procurement and Production department headed by GM-Production who reports to the factory manager. There is one Accounts and Finance department headed by Manager Accounts-Finance who reports to the CMD directly. There is one Central warehouse department headed by Manager-ware house that reports to the factory manager. There is one Marketing and Sales department headed by Manager –Marketing-Sales who reports to the DMD directly. The above company will go for a functional structure for their organization. The companies who have a single product line, single promoter but operating in multiple countries / geographical area will prefer to have a functional structure rather than divisional structure.
12. What is a divisional Structure? What are advantages and disadvantages of divisional structure?
An organizational structure created based on Geographical are of the region / country or world is called Geographical structure. Each geographical area is self-contained and is headed by a Regional head.
Advantages:
Best suited for the companies operating in multinational / Global areas.
Different strategy and game plan can be specially made to implement easily for each different Geographical area involving different local, cultural and environmental atmosphere.
It is a decentralized setup of the group hence local management level profit center / loss center is made
Economies of the operations are independent based on local structure for strategy of the organization
Within each of the Geographical structure at the second level onwards we can implement either Functional or Divisional or a hybrid of the two depending on the local domestic requirements to achieve maximum efficiency and cost effectiveness
Disadvantages:
Another layer of high-level management gets created,
Keeping the consistency in the image of the organization on a global scale is difficult
Scaling for geographic standardization is not an easy task and mostly it never gets up to the satisfactory scale
13. What is a Geographical Structure? What are advantages and disadvantages of functional Geographical?
A geographical structure refers to an organizational structure where each division of the organizations works like a separate business. It is most applied to the organizations that have varied products, have operations cutting across many areas and customers
Advantages:
The advantage of this type of structure is that it can be modeled with either bureaucratic or non- bureaucratic for the decision making process
The acceptability and flexibility by staffs in responding to environment changes are very fast
This type of structure can also be modeled to accommodate centralized as well as decentralized decision-making process,
Restructuring the organization is easy
Divisional structure is best suited for an organization who have diversified business
The corporate manager does the job of developing and exploiting synergy among the various divisions
The divisions have clear mandate to directly do the delivery and client handling, hence better performance with respect to customer satisfaction
Each head of the divisions are given some level of functional control and some level of financial controls
Disadvantages:
Scale of economy may reduce,
Scattered skill and proficiency
Sometime this kind of structures creates damaging competition among divisions
Many duplication of resource deployment and efforts across the divisions hence increase in cost
Sometime Divisional goals conflicts with the organizational
14. When is a functional structure preferable to a divisional structure?
In a functional structure the employees are grouped based on the functional work in the organization. For example in a transport company the groups will be Fleet operation, Accounts, Repair and Maintenance, Marketing and so on.
Advantages:
Functional structure is the most appropriate for the single and prevalent business organizations
The organization can have specialized groups and can prevail the specialized task
The supervision by the managers is very high hence the performance and result are very good,
The staffs are of the same functional group working together hence task assignment, incorporating skill training and change management is easy and most effective,
This type of organizational structure can work and cope with the limitation of information processing by the owner / managers.
Disadvantages:
This type of organizational structure sometime poses risk of conflicts between narrow minded and prejudiced functional heads
It works only with smaller organization with few products and
Poor / minimal interactions and co-ordination with staffs of other functional departments hence effecting delivery of product and services
Over a period of time the members of each functions becomes over confident, develops narrow viewpoints and overall organizational system perspective are lost
Extending support and communicating to other functional departments fails mostly and it affects the performance of the company,
Resolution of such situation needs contacting hierarchical higher management
The staffs have similar nature of skills hence motivating them is difficult.
15. What is a rational approach? Evaluate the eight steps in this approach.
Taking a balanced approach where we analyze the problem, evaluate all possible criteria’s of planning, create a list of all alternatives of solutions and then take the final decision.
A decision maker taking the rational approach is considered to be a smart decision maker. In this approach the decision maker is well informed, has searched for all possible information so that he/she is in command of the situation, and has evaluated all the possible options of the solution. Based on these he/she then chose the best action and then proceeds for authorization and implementation.
Following are the eight stages or steps if taken sequentially and systematic can make the best decision in the rational approach (Mintzberg et al. 1976)):
Recognition: We keep ourselves well informed about the situation. The steps can be Information collection through surveys, data gathering through reports and through informal sources. This will keep you constantly alert about a specific problem or requirement.
Diagnosis: We as a decision maker do the analysis of the problem and define it to fit the Objectives of the decision-making and the specific situation.
Search: We seek information to match possible solutions for the specific problem or issue.
Design: We create the possible solutions to solve the specific problem.
Evaluation: each solution is thoroughly assessed to sort out the best solution.
Choice: The optimal solution is selected according to the objective and the requirement of the specific situation.
Authorization: We take the approval from the higher level of the management to get it authorized so that overall organizational objective is co-ordinate better.
Implementation: Sine the best possible choice has been selected for making the decision thus we ensure that it is implemented.
16. How do you handle conflicts? Change from win-lose situation to a win-win situation.
A conflict always arises when two individual or organization or two groups have difference of opinion or clash of interest or has dispute over an issue. In these situations if one is not able to accommodate the other then thee is a conflict. Sometime due to differences an outcome has come up where one feel that he/she is going down and needs to accommodate the other but is not interested in the adjustment.
To resolve a conflict it is important that the communication is on between the conflicting parties. At no point of time one should feel that the other is ignoring or is arrogant. Be a good listener, acknowledge and respect the other side. Be the one to take the first step towards resolving the conflict.
In an organization as a manager we need to address the issue of conflict between parties as soon as possible. Lingering a conflict for a long time may affect the organizational performance.
First and foremost is to identify and understand the sources of the conflict and drill down on the core issue to focus on. It can be a struggle for power; it can be due to lack of clarity, resource crunch or may be conflict of interest.
We need to focus on the issue,
Open all line of communication,
Listen to both the parties and gain confidence,
Make note of the problems and then segregate points of common interest on which agreement is easy,
Pacify the parties to segregate the points that is not agreeable immediately and conclude on points that are good to both the parties,
Then handle the points that were conflicting and not agreeable
In this way we can bring a win-win situation,
In some cases you may need to involve a third person, who understands the conflicting parties and is neutral in attitude.
17. What is bureaucracy? Explain what is good AND bad about bureaucracy.
The system in which an activity or work is controlled, dictated and executed through set of pre-defined procedures, pre-defined hierarchical organizational structures, authorities and powers. The powers, rules and procedures are dictated through the rule-based procedures.
Bureaucracy is an organizational system that is in use for centuries.
Good about bureaucracy is that it is systematic, better structured has better control over what is happening. Bureaucracy system is a must for a large organization. Bureaucracy system can accommodate large organizational structures. The authority is assigned through delegation of power in hierarchical manner from top to bottom. It provides division of labor, chain of command and specialization. Bureaucracy system is capable of preventing prejudice hence the fairness and treatment is not personal. It has more job security and do not have work related excessive stress and anxiety on the employees.
The bad about bureaucracy is that most of the time it fails during bad weather. In an instability situation that requires change, flexibility and additional local environment based actions the bureaucracy does not succeed. Due to the very inflexible nature of control mechanism in Bureaucracy, the accidental and unwanted consequences are inevitable. The human relations and communication is the key to the success in the present time. But bureaucracy do not have inbuilt system which can take the benefit of one-to-one relationship or communication. In a bureaucracy system the power is vested in position and not in the individual hence the system is less capable of rewarding an individual for a good work. Bureaucracy is based on Impersonality hence individual’s capability is ignored.
18. What is Life Cycle Development? Explain the different stages of Life Cycle Development.
The process of evolving, creating, altering and developing various stage of the organizational growth is called Life Cycle Development in an organization. An organization always goes through different phases of growth. It can be compared exactly to the life cycle development in a biological organism. In a Life Cycle of an organization we always make a model where various stages of the organization development are pre-determined.
Each stage and phase of the life cycle has difficulties and hurdles that the organization has to go through. There are many positive outcomes of the life cycle that helps the organization to grow and there are many negative outcomes that damage the organizational growth. The balancing and properly managing these outcomes is the key to the organizational growth in the right perspective.
Organizational Life Cycle Development broadly comprises of the following 4-stages:
1. Entrepreneurial stage -> Crisis: Need for leadership
2. Collectivity stage -> Crisis: Need for delegation
3. Formalization stage -> Crisis: Too much red tape
4. Elaboration stage -> Crisis: Need for revitalization
Entrepreneurial stage (i.e. Inception (startup) phase): In this the emphasis is on action, the goal is to stay in business. The minds of the people involved in the organization are most positive and fewer conflicts, they are fully involved and are willing to work together. In this phase the organizational structure will be minimal and less formal. The promoters and management will take whatever decisions to stay in business. During this phase of the organizational development the leadership and visionary attitude of the promoter/s are most important to keep the sustainable self-esteem and commitment of the other individual members of the organization. This phase of the life cycle becomes the consequential and creates the base for organizational core, organizational culture, organizational philosophy and organizational ethics.
Collectivity stage (i.e. Growth phase): The growth phase comprises of early growth phase, prime growth phase and maturity phase). In this phase the organizational structure gets formalized, the control starts decentralizing; the highest emphasis is given to the commercial growth. By the pass of time during this phase of the life cycle people starts maturing and gives emphasis for early planning and formalizations. The organizational wisdom grows that is used to take future growth related decisions. In these stages all kind of suggestions, advices and plan starts flowing from all the members of the organization. The leader needs to start sharing control, assign and fix responsibilities for various stages. This stage also brings somewhat medium level of bureaucratic procedures, extensive procedures, high and strongest level of management teams.
Formalization stage i.e. the prime phase): This is the uppermost side of the Growth phase. The organizations excel and thrive in this phase. Fairly established stage of the life cycle. System, procedures and formalization are working at its maximum efficiency during this phase of the life cycle. Highest degree of sense of achievement in the leadership, somewhat leadership becomes arrogant in this stage of the life cycle. Sometime management thinks that the organization can be put to auto-run mode. A little imbalance in management may trigger the start of decline or death phase.
Elaboration stage (i.e. Decline or crisis phase):
This phase is comes in the life cycle of every organization. The pre-defined systems and procedures start to fail, the discipline in the organization starts to degrade, the profit starts declining, the debt starts growing, and the morale is low. The management is adamant for changes. But this phase can be avoided or can be reversed by the strong leadership of the management, strong and thorough transformation in the leadership.
References:
Burton, Richard M., DeSanctis, Gerardine., Obel, Borge. 2006. Organizational design: a step by step approach. Cambridge University Press.
Daft, Richard L., Lane, Patricia G. 2008. Cengage Learning EMEA. 2nd edition.
Thomson Learning. 2004. Fundamentals of organization structure. http://www.ccunix.ccu.edu.tw/~lchuang/course/class_notes/OT%20Graduate%20CH03.ppt
Borkowski, Nancy. 2008. Organizational behavior, theory and design in health care. Jones and Bartlett publishers.
Morgan, Gareth. 1989. Creative organization theory: a resource book. Sage. 2nd edition.
Proven Models. 2009. Organization design and theory. http://www.provenmodels.com
Mintzberg, Henry. 1976. Organizational structure and topology. http://www.csdl.tamu.edu/~pyungah/671/slide/A%20Typology%20of%20Organizational%20Structure%5B1%5D.ppt
