Chapter One

Organizations and
Organization Theory

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e

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Case: IBM

Built in 1911
Mid 1960s, IBM introduced mainframe computers
5 new factories and thousands of new jobs.
too bureaucratic (workforce: 407,000)
IBMs mistake:
- not taking advantage of a new technology
IBM invented in 1970s (microprocessor for PC)
- no-layoffs policy was no longer working
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Case: IBM (contd)

Failure to respond to customers, suppliers, and
competitors in the fast-paced external environment.
Inability to coordinate departments and design control
systems that promoted efficiency
Slow decision making
Outmoded corporate culture
Resulting:
More than 140,000 workers lost their jobs
IBM stock fell from $176 to $40
Gave up its no-layoffs policy

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Case: IBM (contd)

IBM today
- CEO: Louis V. Gerstner, Jr. created a culture that
accommodate opportunities, minimize bureaucracy,
he isnt afraid of change. If the organization doesnt
work right one way, well change it.
- Products: PCs, mainframes, midsize computers
- Profit doubled, share prices recovered

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Organization Theory in Action

Current Challenges

Global competition
Organizational renewal
Strategic Advantage
Employee Relationship
Diversity
Ethics and social responsibility
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Two Organization Design

Paradigms
Natural System Paradigm

Mechanical System Paradigm

Horizontal
Structure

Vertical
Structure

Routine
Tasks

Formal
Systems

Rigid
Culture

Organizational Change
in the service of
performance and
survival

Empowered
Roles

Shared
Information

Competitive
Strategy

Stable Environment
Efficient Performance

Adaptive
Culture

Collaborative
Strategy

Turbulent Environment
Learning Organization

Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School)

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What is an Organization?

Definition
Organizations are (1) social entities that
(2) are goal directed, (3) are designed
as
deliberately structured and coordinated
activity systems, and (4)
are linked to the
external environment.

Elemen kunci: orang dan hubungannya

satu dengan yang lain.
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Importance of Organizations
Bring together resources to achieve desired
goals and outcomes
Produce goods and services efficiently
Facilitate innovation
Use modern manufacturing and computerbased technology
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Importance of Organizations (contd)

Adapt to and influence a changing
environment
Create value for owners, customers and
employees
Accommodate ongoing challenges of diversity,
ethics, and the motivation and coordination of
employees
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Organizations as Systems
Untuk memahami organisasi secara
keseluruhan, organisasi perlu dipandang
sebagai sebuah sistem.
A system is a set of interacting elements
that acquires inputs from the environment,
transforms them, and discharges outputs
to the external environment.

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An Open System
and Its Subsystems
Environment
Transformation

Raw Materials
People
Information
resources
Financial
resources

Input

Subsystems

Boundary
Spanning

Output

Products
and
Services

Process
Production,
Maintenance,
Adaptation,
Management

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Boundary
Spanning

Note: Boundary
spanning handles
input and output
transactions, they are
responsible for
exchanges with the
environment.

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Dimensions of
Organization Design

Dimensi struktural: menggambarkan

karakteristik internal suatu organisasi

Dimensi kontekstual: menggambarkan

setting organisasional yang
mempengaruhi dan membentuk dimensi
struktural
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Dimensions of
Organization Design

Structural Dimensions
1. Formalization
2. Specialization
3. Standardization
4. Hierarchy of authority
5. Complexity
6. Centralization
7. Professionalism
8. Personnel ratios

Contextual dimensions
1. Size
2. Technology
3. Environment
4. Goals and Strategy
5. Culture
* Ketigabelas dimensi saling
tergantung satu sama lain

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Environment

Culture

Goals and
Strategy

Structure

Size

Technology

1. Formalization
2. Specialization
3. Standardization
4. Hierarchy of authority
5. Complexity
6. Centralization
7. Professionalism
8. Personnel ratios

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Organization Chart Illustrating the Hierarchy of Authority

for a Community Job Training Program

Board of
Directors
Advisory
Committee

Executive
Committee

Level 1

Executive
Director
Assistant Executive Director
for Community Service

Level 2
Level 3

Assistant Executive Director

for Human Services

Director

Director

Director

Director

Director

Director

Director

Economic Dev.

Reg. Planning

Housing

Criminal Justice

Finance

AAA

CETA

Public
Info
Coord.

Level 4
Level 5

Secretary

Housing
Coord.

Alcohol
Account.
Coord.

Records
Clerk

Secretary

Asst. Director
Finance

Program Contract
Spec.
Fiscal
AAA
Manager

Adm. Asst

Payroll Clerk

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Lead
Counsel

Program
Planner
AAA

Secretary

CETA
Intake
&
Orient

CETA
Couns.
Devs.
Title II
ABC

CETA
Couns.
Devs.
Youth
IV

MIS Specialist

Lead
Counsel
CETA
Couns.
Devs.
Title II D CETA
&VI&VII Planner

Staff Clerk

Adm. Asst.

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Characteristics of three
Organizations
Formalization

100

Specialization
50
Centralization
Configuration
(%nonworkflow
personnel)

TECHNOLOGY
SIZE (#employees)

W.L. Gore &

Associates

Wal-Mart

State Arts
Agency

Manufacturing

Retailing

Government
Service

4,200

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200,000

35

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What is Organization Theory?

A way of thinking about organizations
A way to see and analyze organizations
more accurately and deeply, based on
patterns and regularities in organizational
design and behavior (Daft, 1998, p.21)

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What Organization Theory Can Do

For organization managers: OT provides significant

insight and understanding to help them become
better managers. OT identifies variables and
provides models so managers know how to diagnose
and explain what is happening around them and thus
can organize for greater effectiveness.
OT can make a manager more competent and
more influential
For those who will not be managers: to appreciate
and understand more about the world around them
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Levels of Analysis
External environment
(interorganizational
set/community
Organization level of
analysis
Group level of
analysis
Individual level of
analysis

Organization
B

Organization
C

Organization
A

Organization
D

Department A

Department B

Department C

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Levels of Analysis (contd)

Organization theory focuses on the organizational

level of analysis but with concern for groups and
the environment (a macro approach)

Organizational behavior focuses on the

individuals within organizations as the relevant
units of analysis (a micro approach)
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Framework
Part 1 Introduction to Organizations
Organizations and Organization Theory

Part 2 The Open System

Strategic Management and Organizational Effectiveness
The External Environment

Part 3 Organization Structure and Design

Technology
Organization size, life cycle, and decline
Fundamentals of Organization Structure
Contemporary Designs for Global Competition

Part 4 Organization Design Process

Innovation and Change
Information Technology and Organizational Control
Organizational Culture and Ethical Values

Part 5 Managing Dynamic Processes

Decision-Making Processes
Power and Politics
Interdepartmental Relations and Conflict

Part 6 Strategy and Structure for the Future

Interorganizational Relationships
Toward the Learning Organization

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Five Basic Parts of an

Organization
Top
Management

Technical
Support

Middle
Management

Administrative
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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Workbook
Activity

Organizational Dimensions
High Formalization

1-4

5-6

7 - 10

Low Formalization

High Specialization

1-4

5-6

7 - 10

Low Specialization

Tall Hierarchy

1-4

5-6

7 - 10

Flat Hierarchy

Product Technology

1-4

5-6

7 - 10

Service Technology

Stable Environment

1-4

5-6

7 - 10

Unstable Environment

Strong Culture

1-4

5-6

7 - 10

Weak Culture

High Professionalism

1-4

5-6

7 - 10

Low Professionalism

Well-Defined Goals

1-4

5-6

7 - 10

Poorly-Defined Goals

Small Size

1-4

5-6

7 - 10

Large Size

Modern

1-4

5-6

7 - 10

Postmodern

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IBM

Workbook
Activity

Use

for 1975-1990, Use

for 1993-present

High Formalization

1-4

5-6

7 - 10

Low Formalization

High Specialization

1-4

5-6

7 - 10

Low Specialization

Tall Hierarchy

1-4

5-6

7 - 10

Flat Hierarchy

Product Technology

1-4

5-6

7 - 10

Service Technology

Stable Environment

1-4

5-6

7 - 10

Unstable Environment

Strong Culture

1-4

5-6

7 - 10

Weak Culture

High Professionalism

1-4

5-6

7 - 10

Low Professionalism

Well-Defined Goals

1-4

5-6

7 - 10

Poorly-Defined Goals

Small Size

1-4

5-6

7 - 10

Large Size

Modern

1-4

5-6

7 - 10

Postmodern

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