HCM 381

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HCM 381

• Weekend Two

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• Weve been discussing, thus far, organizations
  and organizational theory, how strategy impacts
  organizational design and effectiveness, various
  fundamentals of organizational structure, the
  external environment, inter-organizational
  relationships, and various other elements (such
  as organization size) that might influence
  organizational structure.

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• The text does not provide a lot of information on
  hospital structure or how structure in other
  health care organizations is determined.
• Some detail on that, from other sources, would be
  of interest.

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The acute care hospital

• It would be far less complex if it fit the usual
  organizational pyramid. Its management structure
  differs substantially from the bureaucratic model
  of other types of large organizations.
• These differences are caused by the unusual
  relationships between the formal authority of
  position represented by the managerial hierarchy
  and the authority of knowledge possessed by
  members of the professional staff.

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• In the typical community hospital, the
  professional staff members do not fit into the
  pyramid as do staff who work for and are paid by
  the hospital.
• As a result, the organizational pattern is a dual
  pyramid with the managerial hierarchy and the
  medical staff hierarchy existing side by side.
• Note that some acute care hospitals integrate the
  professional staff into the organization
  structure, which means its members are likely to
  be salaried Dept. of Veterans Affairs hospitals
  and military hospitals are examples.

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• Thus, a dual pyramid- two lines of authority-
  violates the management principle of unity of
  command, which contravenes a postulate of the
  classicist Henri Fayol. One line extends from the
  Governing Board to the CEO and from there into
  the managerial structure and hierarchy. The other
  extends from the Governing Board to the
  professional staff.

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• These two intersect in departments such as
  nursing, in which activities are both managerial
  and clinical, forming a matrix set of
  relationships. The complexity of this structure
  is illustrated by the fact that many hospital
  staff often have move than one immediate
  superior. (next slide)

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• For example, the work of nurses in clinical areas
  is directed by a head nurse, who is a first-level
  manager in a functional department (nursing), as
  well as by members of the professional staff,
  usually physicians, in terms of specific orders
  for a patient. These directions may be
  contradictory because each group interprets
  objectives and the means of attaining them in
  terms of its own value systems and requirements.

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Thus

• A dual hierarchy can exist. The medical staff can
  be shown as separate from the hospital, and there
  may be no clear line or reporting relationship
  between it and the CEO. The professional staff,
  in turn, my be accountable to a medical
  director.

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Put another way

• Mintzberg believed that almost all organizations
  or systems could be included in one of five basic
  designs based on configurations of the strategic
  apex, operating core, middle line, the
  techno-structure, and support staff. He labeled
  these design alternatives as the simple
  structure, the machine bureaucracy, the
  professional bureaucracy, the divisionalized
  form, and the adhocracy.

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The simple structure

• It represents the simplest organization design.
  It has a strategic apex, which may be one person,
  such as the owner and/or a physician in private
  practice, or the director of a small ambulatory
  care center. In addition, it has an operating
  core consisting of a group of workers. The middle
  line, techno-structure, and support staff
  components are very small or missing.

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The machine bureaucracy

• This design is characterized by a large,
  well-developed techno-structure and support staff
  because there is a great emphasis on work
  standardization and a focus on marketing and
  financial and operational control systems.

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• Major decisions are made in the strategic apex,
  which features rigid patterns of authority. Spans
  of control are narrow, decision making is
  centralized, and the organization is functionally
  departmentalized . This design typifies
  manufacturing organizations, although some
  hospitals also exhibit elements of this design.

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The professional bureaucracy

• More typical, hospitals and other large HSOs, as
  well as universities and other professionally
  dominated organizations such as public accounting
  firms, are organized as professional
  bureaucracies. This form is characterized by an
  operating core that is composed primarily of
  professionals and that forms the heart of the
  organization authority is decentralized to it.

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• The techno-structure is underdeveloped because
  work is done largely by professionals who do not
  need- indeed, do not permit- others to do their
  work.
• In larger professional bureaucracies, such as
  hospitals, support staff may be highly developed
  and diverse. This staff is needed to support the
  professionalized operating core.

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The divisionalized form

• The divisionalized form of organization design
  has independent units that are joined by a shared
  administrative overlay. In contrast to other
  designs this form is characterized by a large,
  well-developed middle line because division
  managers are responsible for their divisions and
  may be given considerable decision-making
  latitude.

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• Examples of divisionlized forms include
  corporations such as IBM, federal and large state
  governments, and health systems, which may evolve
  from mergers and consolidations within the health
  care industry.

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Adhocracies

• The adhocracy, the fifth of Mintzbergs
  organization designs, is the most difficult of
  the five to describe or understand. It is both
  complex and non-standardized. This form
  contradicts much of what the classical design
  concepts described earlier dictate- hierarchical
  authority and control, standardization of work
  and workers, and strategic direction from the top
  level of the organization.

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• Instead, adhocracies have a tremendously fluid
  structure in which power is constantly shifting
  and coordination and control are by mutual
  adjustment through the informal communication and
  interaction of competent experts.
• The adhocracy often takes the form of a matrix
  structure or project teams with emphasis on
  activities in both the operating core and
  technostructure.

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• The power in adhocracies shifts between
  professionals and technical experts. This design
  can be a free-form structure with frequently
  changing job descriptions and a flexible concept
  of authority.
• HSOs might use adhocracy in multi-discplinary
  programs for elderly or chronically ill people or
  women, or in the research-oriented departments
  (e.g., oncology, genetics) in academic health
  centers.

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Choosing an Organization Design

• Typical HSOs have many different designs embedded
  in them as various parts try to match structure
  to objectives, management philosophies, the
  preference of their workers, and environmental
  pressures.

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• In a large and complex HSO, such as a teaching
  hospital, the dental clinic may have a simple
  structure, the clinical laboratory may be
  structured as a machine bureaucracy, and the
  medical and surgical nursing units may be
  professional bureaucracies. The hospital might be
  one of several hospitals that form a health
  system, with the system using the divisonalized
  form.

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• Simultaneously, the hospital could have a project
  team of administrative experts in strategic
  management, marketing, finance, and information
  systems that, parallel to the team members
  regular staff positions and structured as an
  adhocracy, operates as a consulting firm selling
  expertise to clients such as smaller hospitals
  and physician groups.

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• Peter Drucker suggested that managers selecting
  an organization design evaluate the options
  against the following criteria
• Clarity, as opposed to simplicity (A modern
  office building is exceedingly simple in design,
  but it is very easy to get lost in one. A Gothic
  cathedral is not a simple design, but your
  position inside it is clear you know where to
  stand and where to go.)

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More from Drucker

• Economy of effort to maintain control and
  minimize friction
• Direction of vision toward the product rather
  than the process, the result rather than the
  effort
• Understanding by each individual of his or her
  own task, as well as that of the organization as
  a whole

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And still more from Drucker

• Decision making that focuses on the right issues,
  is action oriented, and is carried out as the
  lowest possible level of management
• Stability, as opposed to rigidity, to survive
  turmoil, and adaptability to learn from it
• Perpetuation and self-renewal, which requires
  that an organization be able to product
  tomorrows leaders from within, helping each
  person develop continuously the structure also
  must be open to new ideas.

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Ch. 6 - Designing Organizations for the
International Environment

• Organizations are increasingly reducing
  boundaries and increasing collaboration between
  companies.
• Opportunities have been enhanced because of rapid
  improvements in technology, communications, and
  transportation.
• Also, competitive forces have required many
  companies to move from a domestic to a global
  focus.

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The importance of the global economy

• Fortune magazines list of the Global 500, the
  worlds 500 largest companies, indicates that
  economic clout is being diffused across a broad
  global scale.
• In Exhibit 6.1, each circle represents the total
  revenues of all Global 500 companies in each
  country. Although the U.S. accounts for a
  majority of the Global 500 revenues, a number of
  smaller and less developed countries are growing
  stronger.

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3 factors motivate companies to expand
internationally

• 1. Economies of Scale.
• 2. Economies of Scope.
• 3. Low-Cost Production Factors.

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Economies of Scale

• Building a global presence expands an
  organizations scale of operations, enabling it
  to realize economies of scale.
• Note that economies of scale also enable
  companies to obtain volume discounts from
  suppliers, lowering the organizations cost of
  production.

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Economies of Scope

• Economies of Scope, where scope refers to the
  number and variety of products and services a
  company offers, as well as the number and variety
  of regions, countries, and markets it serves.
• Having a presence in multiple countries
  provides marketing power and synergy.
• Consider McDonalds, who does not have to
  deal with individual suppliers
• in each country.

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Low-Cost Production Factors

• One of the earliest, and still one of the most
  powerful, motivations for U.S. companies to
  invest abroad is the opportunity to obtain raw
  materials and other resources (labor) at the
  lowest possible cost.

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• No company can become a global giant overnight.
  Managers have to adopt a strategy for global
  development and growth.
• Various stages of development span the move from
  domestic to a global presence.
• The domestic stage
• The international stage
• The multinational stage
• The global stage

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The domestic stage (stage 1)

• The company is domestically oriented, but
  managers are aware of the global environment and
  may want to consider initial foreign involvement
  to expand production volume and realize economies
  of scale. Market potential is limited to
  primarily the home country.

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The international stage (stage 2)

• The company takes exports seriously and begins to
  think multi-domestically. Multi-domestic means
  competitive issues in each country are
  independent of other countries the company deals
  with each country individually.
• Multiple countries are identified as a potential
  market, and the Co. maintains contracts with
  independent sales firms in the various countries.

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The multi-national stage (stage 3)

• Now the company has extensive experience in a
  number of international markets and has
  established marketing, manufacturing, or research
  and development facilities in several foreign
  countries. A large percentage of revenue comes
  from sales outside the home country.
• Think Sony of Japan or Coca-Cola of the U.S.

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The global stage (stage 4)

• Now the country transcends any single country.
• Global companies truly act in a global fashion,
  and the entire world is their marketplace.
• Global companies such as Nestle, Royal
  Dutch/Shell, and Unilever are examples of global
  companies.

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• One of the most popular ways companies get
  involved in international operations is through
  international strategic alliances. The average
  large U.S. corporation, which had no alliances in
  the early 90s, now has more than thirty, many of
  those with international firms.
• Typical alliances include licensing, joint
  ventures, and consortia.

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Joint ventures

• A joint venture is a separate entity created with
  two or more active firms as sponsors. This is a
  popular approach to sharing development and
  production costs and penetrating new markets.
• Joint ventures may be with either customers or
  competitors.
• Sprint, Deutsche Telecom, and Telecom France.

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Consortia

• Consortia, or groups of independent companies,
  including suppliers, customers, and even
  competitors, that join together to share skills,
  resources, costs, and access to one anothers
  markets.
• Airbus Industrie, for example, is a consortium
  made up of French, British, and German aerospace
  companies.

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Designing Structure to Fit Global Strategy

• One dilemma that managers face is choosing
  whether to emphasize global standardization
  versus national responsiveness.
• They must decide whether they want each global
  affiliate to act autonomously or whether
  activities should be standardized across
  countries. (Its the choice between globalization
  versus a multi-domestic global strategy. See next
  slide.)

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• The globalization strategy means that product
  design, manufacturing, and marketing strategy are
  standardized throughout the world.
• However, economic and social changes, including a
  backlash against huge global corporations, have
  prompted consumers to be less interested in
  global brands and more in favor of products that
  have a local feel.

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• A multi-domestic strategy means that competition
  in each country is handled independently of
  competition in other countries. Thus, a
  multi-domestic strategy would encourage product
  design, assembly, and marketing tailored to the
  specific needs of each country.
• Dominos Pizza knows that the basics of crust,
  sauce, and cheese work for a pizza everywhere,
  but beyond that , there are no hard and fast
  rules.

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• As indicated in Exhibit 6.3, when forces for both
  global standardization and national
  responsiveness in many countries are low, simply
  using an international division within the
  domestic structure is an appropriate way to
  handle international business.
• However

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• When technological, social, or economic forces
  may create a situation in which selling
  standardized products worldwide provides a basis
  for competitive advantage, a global product
  structure is appropriate.
• This structure provides product managers with
  authority to handle their product lines on a
  global basis and enables the company to take
  advantage of a unified global marketplace.

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• In many instances, companies will need to respond
  to both global and local opportunities
  simultaneously, in which case the global matrix
  structure can be used.
• We wont get into this, but more detail on this
  structure is discussed beginning on Page 218.

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• As companies begin to explore international
  opportunities, they typically start with an
  export department that grows into an
  international division.
• This division is challenged by greater complexity
  and differentiation needs, the need for
  integration (of services and functions), and the
  problem of transferring knowledge and innovation
  across a global firm.

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• Regarding increased complexity and
  differentiation, companies have to create a
  structure to operate in numerous countries that
  differ in economic development, language,
  political systems and government regulations,
  cultural norms and values, and infrastructure
  such as transportation and communication
  facilities.

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• Regarding need for integration, with multiple
  products, divisions, departments, and positions
  scattered across numerous countries, managers
  face a tremendous integration challenge.
• As described in Chapter 4, integration refers to
  the quality of collaboration across
  organizational units.

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• With regard to transfer of knowledge and
  innovation, the diversity of the international
  environment offers extraordinary opportunities
  for learning and the development of diverse
  capabilities.
• Most organizations tap only a fraction of the
  potential that is available from the
  cross-boarder transfer of knowledge and
  innovation.

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Global Coordination Mechanisms

• Coordination can be enhanced by the use of global
  teams (cross-border work groups), headquarters
  planning (get headquarters involved in planning,
  scheduling and control), and have expanded
  coordination roles (by creating specific
  organizational roles or positions for
  coordination).

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• At the same time, organizations must find ways to
  effectively achieve coordination and
  collaboration among far-flung units and
  facilitate the development and transfer of
  organizational knowledge and innovation for
  global learning.

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• Just as social and cultural values differ from
  country to country, the management values and
  organizational norms of international companies
  tend to vary depending on the organizations home
  country.

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• Studies have attempted to determine how national
  value systems influence management and
  organizations.
• Two dimensions in particular have a strong impact
  on how organizations operate.
• Power distance
• Uncertainty avoidance

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• Power distance or the degree to which people
  accept inequality in power among institutions,
  organizations, and people. Low power distance
  means that people expect equality in power high
  means people accept inequality in power among
  institutions, organizations, and people.

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• With regard to uncertainty avoidance, if you are
  high in this, you feel uncomfortable with
  uncertainty and ambiguity and thus support
  beliefs that promise certainty and conformity.
  Low uncertainty avoidance means that people have
  a high tolerance for the unstructured, the
  unclear, and the unpredictable.

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Finally,

• There are three different national approaches to
  coordination and control (the Japanese, American
  and European models).
• Japanese companies have centralized coordination,
  where top managers at headquarters actively
  direct and control overseas operations.
• European Firms have a decentralized approach,
  where international units tend to have a high
  level of independence and decision-making
  autonomy.

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• And the American model of coordination through
  formalization.
• In our approach organizations have delegated
  responsibility to international divisions, yet
  retained overall control of the enterprise
  through the use of sophisticated management
  control systems and the development of specialist
  headquarters staff.

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• Lastly, the transnational model of organization
  represents the most advanced kind of
  international organization. The transnational
  model creates an integrated network of individual
  operations that are linked together to achieve
  the multi-dimentional goals of the overall
  organization.

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• In this model, structures are flexible and
  ever-changing. Subsidiary managers initiate
  strategy and innovations that might become
  strategy for the corporation as a whole.
  Coordination is achieved through corporate
  culture, shared vision and values, and management
  style, rather than through structures and systems.

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Ch. 7 Manufacturing And Service Technologies

• This chapter explores service and manufacturing
  technologies and how technology is related to
  organizational structure.
• Technology refers to the tools, techniques,
  machines, and actions used to transform
  organizational inputs (materials, information and
  ideas) into outputs (products and services).
• Technology is an organizations production
  process and includes work procedures as well as
  machinery.

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Again...

• How should the organizational structure be
  designed to accommodate and facilitate the
  production process is the issue being addressed.
• An early study completed by Joan Woodward in the
  1950s may give us insight.
• Woodward developed a scale and organized the
  firms in the study according to technical
  complexity of the manufacturing process.

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Woodwards three basic categories of technical
complexity

• Group I Small-batch and unit production
• Custom work, i.e. Steinway and Sons
• Group II Large-batch and mass production
• Production runs of standardized parts, i.e. auto
  assembly lines.
• Group III Continuous process production
• There is no starting and stopping. This
  represents mechanization and standardization one
  step beyond those in an assembly line, i.e.
  chemical and nuclear power plants, etc.

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In response to technology complexity...

• The number of management levels and the
  manager/total personnel ratio increase as
  technology complexity increases from unit
  production to the continuous process.
• Put another way, greater management intensity is
  needed to manage complex technology.
• Woodward also discovered that successful firms
  tended to be those that had complementary
  structures and technologies.
• Thus, strategy, structure, and technology need to
  be aligned in a changing competitive environment.

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Since Woodward and the 70s...

• New developments have occurred in manufacturing
  technology, to include robots, numerically
  controlled machine tools, and computerized
  software for product design, engineering
  analysis, and remote control of machinery.
• The ultimate technology is called
  computer-integrated manufacturing where mass
  customization is possible.

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Regarding service firms and tech.

• Whereas manufacturing organizations achieve their
  primary purpose through the production of
  products, service organizations accomplish their
  primary purpose through the production and
  provision of services, such as education, health
  care, transportation, etc.
• The characteristics of service technology are
  outlined in Exhibit 7.7 on page 260 and in the
  following slide.

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Differences Between Manufacturing and Service
Technologies
Sources Based on F. F. Reichheld and W. E.
Sasser, Jr., Zero Defections Quality Comes to
Services, Harvard Business Review 68
(September-October 1990) 105-11 and David E.
Bowen, Caren Siehl, and Benjamin Schneider, A
Framework for Analyzing Customer Service
Orientations in Manufacturing, Academy of
Management Review 14 (1989) 75-95.
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Service Technology characteristics

• intangible output (vs. tangible product)
• production and consumption take place at the same
  time
• labor and knowledge intensive (vs. capital asset
  intensive)
• the human element is very important (vs. little
  direct customer interaction).

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More service tech. characteristics

• quality is perceived and difficult to measure
• rapid response time is usually necessary (vs.
  longer response time being acceptable)
• site of the facility is extremely important.

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Re Departmental Technology...

• Charles Perrow described two dimensions of
  departmental activities that were relevant to
  organizational structure and process.
• The first was the number of exceptions in the
  work, or the variety of the work.
• The second concerned the analyzability of work
  activities. When the work is analyzable, it can
  be reduced to mechanical steps.

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More on Perrow...

• His dimensions of variety and analyzability form
  the basis for four major categories of
  technology
• routine technology (little task variety)
• craft technology (tasks require extensive
  training and experience)
• engineering technology (complex with substantial
  varieties in the tasks performed)
• non-routine technology (high task variety and the
  conversion process is not analyzable).

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• Once the nature of a departments technology has
  been identified, then the appropriate structure
  can be determined.
• Such things as formalization, decentralization,
  worker skill level, span of control, and
  communication and coordination, will be affected
  by a departments technology.

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• Specifically, for non-routine tasks, the
  structure can be less formal and less
  standardized.
• In routine technologies, most decision making
  about task activities is centralized to
  management.
• Work staff in routine technologies typically
  require little education or experience, which is
  congruent with repetitious work activities.
• The span of control is smaller when the work
  tasks are more complex and non-routine.
• Lastly, the communication activity and frequency
  increase as task variety increases.

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Thus far we have examined how org. and dept.
technologies influence structural design.

• This chapter also examines how technology
  influences structure in terms of interdependence.
  
• Interdependence means the extent to which
  departments depend on each other for resources or
  materials to accomplish their tasks.
• James Thompson defined three types of
  interdependence that influence organization
  structure pooled sequential and reciprocal

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Pooled Interdependence

• Lowest form of interdependence among departments.
• Work does not flow between units.
• McDonalds Restaurants or branch banks are
  examples of pooled interdependence.
• Pooled interdependence exists in firms with
  mediating technologies.
• Banks, brokerage firms, and real estate offices
  all mediate between buyers and sellers, but the
  offices work independently within the org.

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Sequential Interdependence

• This occurs when parts produced in one department
  become inputs to another department.
• Sequential interdependence occurs in what
  Thompson calls long-linked technology.
• Large orgs. that use assembly line production,
  such as in the auto industry, use long-linked
  technologies and are characterized by sequential
  interdependence.

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Reciprocal Interdependence

• The highest level of interdependence.
• Exists when the output of operation A is the
  input to operation B, and the output of operation
  B is the input back again to operation A.
• Occurs in orgs. with what Thompson called
  intensive technologies.
• Hospitals are an example, where a patient may
  move back and forth between different depts.

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How does technology affect job design?

• Job design includes the assignment of goals and
  tasks to be accomplished by employees.
• Job rotation (moving workers from job to job to
  give them more variety), job simplification
  (reducing the variety and difficulty of tasks
  performed by a single person), job enrichment
  (greater responsibility, recognition, etc),
  and/or job enlargement (expansion of tasks
  performed) may be ways to improve productivity or
  motivation.

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The sociotechnical systems approach...

• In addition to job design, this approach
  recognizes the importance of human needs.
• The socio portion of the approach refers to the
  people and groups who work in organizations and
  how work is organized and coordinated. The
  technical portion refers to the materials, tools,
  machines, and processes used to transform
  organizational inputs into outputs.
• Joint optimization, then, means that the org.
  functions best when the social and technical
  systems fit the needs of one another.

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Ch. 8 - Information Technology and Control

• This chapter reviews the importance of
  information technology and knowledge management.
• It is estimated that managers spend up to 80 of
  their time actively exchanging information.
• Note that first line supervisors deal with
  problems about operational issues and past
  events, while top mgt. deals with uncertain,
  ambiguous issues, such as strategy and planning.

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• Initially computers were used to improve
  efficiency, i.e. reducing labor costs by having
  computers take over some tasks.
• Known as transaction processing systems (TPS)
• Now computers are used in data warehousing (use
  of huge databases that allow users to access data
  directly) and in data mining (looking for
  patterns of data to aid in decision making).

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Data mining is similar to MIS

• A management information system is a
  computer-based system that provides information
  and support for managerial decision making.
• The MIS is supported by the organizations
  transaction processing systems and by
  organizational databases.
• Related concepts include the EIS (executive
  information system) and the DSS (decision support
  system).

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• In the past, most organizations relied on
  financial accounting measures as the primary
  basis for measuring performance.
• Today most companies realize that a balanced view
  of both financial and operational measures is
  needed for successful organizational control, and
  as a means to evaluate effectiveness. See Ex. 8.5

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Major Perspectives of the Balanced Scorecard
Financial Do actions
contribute to improving financial performance?
Examples of measures profits, return on
investment
Internal Business Processes Does the chain of
internal activities and processes add value for
customers and shareholders? Examples of measures
order-rate fulfillment, cost-per-order
Customers How well do we serve
our customers? Examples of measures customer
satisfaction, customer loyalty
Mission Strategy Goals
Learning and Growth Are we learning and
changing? Examples of measures continuous
process improvement, employee retention, new
product introductions
Sources Based on Robert S. Kaplan and David P.
Norton, Using The Balanced Scorecard as a
Strategic Management System, Harvard Business
Review, January-February 1996, 71-79 Chee W.
Chow, Kamal M. Haddad, and James E. Williamson,
Applying the Balanced Scorecard to Small
Companies, Management Accounting 79, No. 2
(August 1997), 21-27 and Cathy Lazere, All
Together Now, CFO, February 1998, 28-36.
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Info. technology as a strategic weapon...

• Using information technology as a strategic
  weapon is the highest level of application.
• Information technology can build and enhance
  strategy by providing better data and information
  within the org. as well as help redefine and
  support external relationships.

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Examples of internal applications

• Networking- links people and departments.
• Intranets-a network- a private company wide
  information system.
• ERPs (Enterprise Resource Planning) systems which
  collect, process, and provide information about a
  companys entire enterprise, including order
  processing, product design, purchasing,
  inventory, etc.

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External applications...

• Extranets- gives access to key partners,
  suppliers, or customers.
• E-commerce-essentially augments or replaces the
  swapping of products or money with the exchange
  of information between computer systems. This is
  business to business purchasing online.

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Recall low-cost leadership and differentiation as
competitive strategies...

• Information technology can lower cost through
  operational efficiency gains.
• The use of ERP systems can automatically control
  operations ranging from the procurement of
  supplies to shop floor manufacturing.
• A way to differentiate a company is to lock in
  customers with information technology.
• Things such as improving customer service can
  differentiate a company from competitors.

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Info. Technologies impact on Org. design

• May lead to smaller organizations due to
  outsourcing of many functions and thus less need
  for in-house resources.
• May lead to decentralized organizations due to
  reduced layers of management and ease of
  communication.
• May lead to improved internal and external
  coordination.
• May lead to hiring of additional staff to use and
  maintain the system.
• May lead to greater employee participation.

90
IT may also be used in knowledge management.

• It may be desirable to systematically find,
  organize, and make available a companys
  intellectual capital as well as to foster a
  culture of continuous learning and knowledge
  sharing- build on what is already known.

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• Note that knowledge is not the same thing as
  data. Data are simple, absolute facts and figures
  that in and of themselves are not necessarily
  useful.
• Information, though, is data that has been linked
  to other data and converted into a useful
  context.
• Knowledge goes a step further it takes
  information, connects it to other information,
  and from that makes decisions.

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Explicit vs. tacit knowledge

• Explicit knowledge is formal, systematic
  knowledge that can be codified, written down, and
  passed on to others in documents or general
  instructions.
• Tacit knowledge is based on personal experience,
  rules of thumb, intuition, and judgement. It
  includes professional know-how and expertise,
  individual insight and experience, and creative
  solutions that are often difficult to communicate
  and pass on to others.

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• Explicit knowledge may be equated with knowing
  about whereas tacit knowledge is equated with
  knowing how.
• Data warehousing and data mining, knowledge
  mapping (where knowledge is located in the
  organization), and electronic libraries are ways
  to manage explicit knowledge.
• Dialogue, learning histories (through
  storytelling), and communities of practice are
  ways to manage tacit knowledge.

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Ch.9- Org. Size, Life Cycle, and Decline

• This chapter examines large vs. small firms and
  how size is related to structure and control
• The chapter also examines a firms life cycle and
  structural characteristics at each stage.
• This chapter also examines bureaucracy.

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Large vs. small

• Organizations feel compelled to grow.
• Advantages to a large organization may include
  economies of scale, a global reach, a vertical
  hierarchy and standardization, stabilization of a
  market, and job security.
• Advantages of a small firm include the fact that
  they may be more responsive and flexible, have a
  regional reach, have a flatter structure, be
  simpler, and encourage entrepreneurship.

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Note a paradox

• The advantages of small companies enable them to
  succeed, and hence, grow large.
• As a result a small company may become a victim
  of its own success, shifting to a mechanistic
  structure emphasizing vertical hierarchies and
  spawning organization men vs. entrepreneurs.

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Solutions to becoming too big

• Big company / small company hybrid, where you try
  to combine a big companys resources and reach
  with a small companys simplicity and flexibility
  (the divisional structure).
• Front / back approach, where the company is
  divided into different units with different
  roles. The back part of the org. focuses on
  creating and producing products and services,
  while the front focuses on integrating and
  delivering products and services to customers.

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Org. life cycle

• Entrepreneurial Stage- the emphasis is on
  creating a product and surviving in the
  marketplace.
• Problems include the need for leadership.
• Collectivity Stage-departments are established
  along with a hierarchy of authority, job
  assignments, and a beginning division of labor.
• Problems include the need for delegation.

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More on life cycle...

• Formalization Stage- involves the installation
  and use of rules, procedures, and control
  systems.
• Problems include too much red tape.
• Elaboration Stage-the solution to the red tape
  crisis is a new sense of collaboration and
  teamwork.
• Problems include the need for revitalization.

100
Note...

• 84 of businesses that make it past the first
  year still fail within five years because they
  cant make the transition from the
  entrepreneurial stage.

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Organization Characteristics During Four Stages
of Life Cycle
Sources Adapted from Larry E. Greiner,
Evolution and Revolution as Organizations Grow,
Harvard Business Review 50 (July-August 1972)
37-46 G. L. Lippitt and W. H. Schmidt, Crises
in a Developing Organization, Harvard Business
Review 45 (November-December 1967) 102-12 B.
R. Scott, The Industrial State Old Myths and
New Realities, Harvard Business Review 51
(March-April 1973) 133-48 Robert E. Quinn and
Kim Cameron Organizational Life Cycles and
Shifting Criteria of Effectiveness, Management
Science 29 (1983) 33-51.
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Org. characteristics during the various stages of
life cycle

• As the org. moves through the stages of life
  cycle, changes take place in structure, control
  systems, innovation, and goals.
• Entrepreneurial the org. is small,
  non-bureaucratic, and a one person show.
• Collectivity the org. is in its youth. Growth is
  rapid employees are excited. The structure is
  informal though procedures are emerging.

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• Formalization midlife, and bureaucratic
  characteristics emerge. Support staff are added,
  procedures are formalized, and there is a clear
  hierarchy and division of labor.
• Elaboration the mature organization that is
  large and bureaucratic, with extensive control
  systems, rules, and procedures.

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As organizations grow, they become more
bureaucratic.

• Max Weber perceived bureaucracy as a threat to
  basic personal liberties, but also recognized it
  as the most efficient possible system of
  organizing.
• Rules and standard procedures enable
  organizational activities to be performed in a
  predictable, routine manner.
• Large orgs. rely on rules, procedures, and
  paperwork to achieve standardization and control
  of large numbers of employees and departments,
  whereas top mgrs. can use personal observation to
  control a small org.

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• Bureaucracy exists in more centralized
  organizations. In centralized orgs. decisions
  tend to be made at the top, in decentralized
  orgs., decisions are made at lower levels.
• Re personnel ratios, the ratio of top
  administration to total employees is smaller in
  large organizations. However, the number of
  administrators to clerical and professional
  support staff tends to increase as the firm
  grows. Why?

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Different approaches to control

• Bureaucratic Control
• Relies on the use of rules, policies, hierarchy
  of authority, written documentation,
  standardization, etc.
• Market Control
• Occurs when price competition is used to evaluate
  the output and productivity of an organization.
• Clan Control
• The use of social characteristics, such as
  corporate culture, shared values, commitment,
  traditions, and beliefs to control behavior.

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Re bureaucratic control...

• Bases of control in this system include
• Rational-legal authority, based on employees
  belief in the legality of rules and the right of
  those elevated to positions to authority to issue
  commands.
• Traditional authority is the belief in traditions
  and in the legitimacy of the status of people
  exercising authority.
• Charismatic authority is based on devotion to the
  exemplary character or to the heroism of an ind.
  person.

108

• Organizations may use a combination of
  bureaucratic, market, and clan control to best
  meet the needs of various departments and the
  total organization.

109

• Lastly, organizational decline and downsizing
  might occur in the absence of decisive and
  appropriate management.
• Organizational atrophy occurs when organizations
  grow older and become inefficient and overly
  bureaucratized.
• Consider Blockbuster Inc., which was the king of
  the video-store industry in the 80s and 90s, and
  now has had trouble adapting to the new world of
  video-on-demand and upstarts like Netflix.

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• These organizations in decline also find
  themselves vulnerable. This can sometimes happen
  to small organizations that are not yet fully
  established, and they are vulnerable to shifts in
  consumer tastes or in the economic health of the
  larger community.

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• Lastly, environmental decline, or reduced energy
  and resources available to support an
  organization can lead to organizational decline.
• A model of decline stages will be discussed with
  the Chapter 13 material.