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Summary Organization Theory, - H 3-8

Organizational Structure (Rijksuniversiteit Groningen)

StudeerSnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit

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Organizational structure Midterm 1 2013

Organization Theory, Robbins & Barnwell, 5th edition Summary chapters 3-8

Chapter 3: Organisational effectiveness

“The degree to which an organisation attains its short- and long-term goals, the selection of which
reflects strategic constituencies, the self-interest of the evaluator and the life stage of the
organisation”

Approaches to organisational effectiveness (4 of them, there are many different approaches)

1. The goal-attainment approach

Effectiveness is measured by whether or not goals are achieved. Goals express the company’s aims.
Effectiveness is assessed on whether the organisation accomplishes its ends while tending to
downplay its means.
Assumptions
This approach assumes that organisations are deliberate, rational goal-seeking entities.
Organisations must have a manageable amount of goals which are easy to understand with a
generally agreement on them. Progress must be measurable with a time limit attached.
Making goals operative
- Key decision-makers identify goals
- They develop measures to determine the extent to which they are being met.
Problems
- Goal-setting requires rationality and evaluation that is rarely met in practice.
- The key decision makers are difficult to define.
- Official goals can be different from actual goals, and make no contribution to the companies’
accomplishments.
- The short-term goals are sometimes competing with long-term goals.
- Multiple goals can compete with each other, goals must be compatible.
- Organisations may act first, and later create a ‘goal’ to justify their actions.
Value to managers
Managers can obtain valid information for the organisation’s effectiveness if goals are measurable
and relevant.

2. The systems approach

Evaluates effectiveness by its ability to acquire inputs, process them, channel the outputs and
maintain stability and balance (increase long-term survival). Repetitive cycles of activities.
Assumptions
Organisations exist of interrelated subparts. If a subpart performs poorly, it negatively affects the
system. Effectiveness requires maintaining good relations with the environmental
constituencies/shareholders and a steady replenishment of resources to improve stability.
Making goals operative
The management measures the effectiveness by comparing to competitors and industry standards,
and creates different systems to maintain the survivability. They need a surplus to supply more
inputs>turn them into outputs. Needs clear connection between inputs/outputs.
Problems
- Some process variables are difficult to measure (innovation, quality)
- Environments may change very quickly
- This approach focuses on the means necessary to achieve effectiveness for the system
(surplus and big amount of products), instead of the organisation itself = good for managers.
Value to managers
Managers are less inclined to look for immediate results and make decisions that benefit survival.
They are aware of the need for continuous improvement, the interdependence of organisational
activities and are able to handle unexpected environmental threads.

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3A. the strategic- constituencies approach

Determines effectiveness by how successfully an organisation satisfies the demands of those
constituencies in its environment from which it requires support for its continued existence.
=SURVIVAL. Controlling resources to satisfy environmental constituencies who support the
company’s existence.
3B. the stakeholder approach
The stakeholder approach considers that an organisation is effective only if it takes into account the
wider community that has an interest in the decisions of the organisation (the stakeholders that are
involved).
Problems: When applying the strategic-constituencies approach it is difficult to define strategic
constituencies. The rapid change of the importance of constituencies makes it difficult as well.
This approach presumes that the basic goal is survival. But this is not always the intention.
Value to managers: Which constituencies are important and strategic? Power relationships.

4. The balanced scorecard approach

Attempts to view performance in several areas simultaneously and identify not just results but how
the results were achieved. Integrate previous approaches. Effectiveness is measured by looking at
four different components.
1. Financial Perspective: Financial measures enable an organisation to determine how profitable it is
and its rate of return on assets, it can also be used by charities to identify how successful they are at
raising funds or government departments in accessing budget increases.
2. Customer Perspective: Effectiveness is measured by looking at customer satisfaction,
products/services create value for customers. (Market share as well)
3. Internal Perspective: These measurers concentrate on what the company must do internally to
meet customers’ expectations.
4. Innovation and learning perspective: Effectiveness here is measured by the rate of value creating,
improvements and innovation.
Management can set up goals for each perspective, but not too much per perspective.

Advantages: This approach identifies most importance measures and involves

managers/stakeholders to determine what is important for the organisation. Recognizing and correct
unwise decisions. Easy to use for complex organization with demanding environment.
Disadvantages/problems: It is hard to choose what should be measured. Identification and ranking
of goals by importance is not an easy process.
Compare the 4: “Each, in its own way, provides useful insight, and may be of benefit when applied
under appropriate circumstances.” FIGURES 3.1-3.4 +3.1a/3.1b

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Chapter 4: Dimensions of organization structure

Complexity: The degree of horizontal, vertical and spatial differentiation in an organization.
1. Horizontal differentiation: Degree of differentiation among units based on orientation of
members, nature of tasks they perform and their education/training. As specialization increases, so
does the amount of departments and the complexity. Job specialization divides employees in
departments. A lot of units = difficult communication/coordination.
2. Vertical differentiation: Number of hierarchical levels between top management and operatives.
- High vert. diff. = difficult communication/coordination, more complex, administrative bottlenecks.
Span of control: Number of subordinates that a manager can supervise effectively. Wide span
corresponds with a wide and flat organization. A narrow span corresponds with a narrow and tall
organization. Three main areas: Top, middle and lower level management.
3. Spatial dispersion: degree to which the location of an organisation’s facilities and personnel is
dispersed geographically. High level of SD leads to more complexity, because of physical separation.

Formalization: the degree to which jobs and procedures are standardized.

Standardizing behavior with rules/procedures or equality in thinking of organizational members.
Benefits high form: reduce variability, increase efficiency (low wages) or manage risks.
Common formalization techniques:
1. Selection: looking at the ability of a person to fit into the organization and do the job
2. Role requirements: set up explicit task requirements and expectations of an employee’s behavior.
3. Rules, procedures and policies: explicit statements, series of interrelated sequential steps and
statements that guide employees in decision-making.
4. Socialization: adapting the norms, values and expected behavior patterns.
5. Training: Internal or external training to improve job skills/attitudes/knowledge.
6. Rituals: Proving loyalty by rituals of predetermined behavior and responses.

Centralization: The degree to which decision making is concentrated at a single point in the
organization (top-management). Pros: When making strategic decisions, the organization is under
threat, certain activities are done more efficiently.
Decentralization: Decision-making is widely dispersed within the organization.
Pros: Information can be processed quickly, decisions have input of specialists and/or employees,
motivates employees, avoid exceeding manager’s capacities and creates training opportunities.

Coordination: The process of integrating the objectives and activities of the separate units of an
organization in order to achieve organizational goals effectively. The larger/more complex the
organization, the more important coordination is. No coordination = no efficiency.

Configuration: arrangement of cohesive organizations in groups.

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Henry Mintzberg’s common elements in organizations: (figure 4.2, page 120)

• Simple structure: low complexity, low formalization and authority is centralized in one single
person. (small business) dominant = Strategic apex (4.3)
• Machine bureaucracy: routines and formalized operating tasks, rules and regulations
(standardization!!), highly centralized. Dominant = Technostructure(4.5)
• Divisional structure: structure characterized by a set of self-contained, autonomous units
coordinated by a central headquarter. Dominant = Middle management(4.7)
• Professional bureaucracy: structural form, skilled professionals, high complexity,
decentralization and uses internalized professional standards. Dominant=Operating core(4.9
• Adhocracy: high horizontal and low vertical differentiation, low formalization, intensive
coordination and great flexibility and responsiveness. Dominant = support staff (4.11)
(Table 4.1, overview)
Another way to describe organizations, is to use metaphors (informal). We use something that is
familiar to us to describe the organization. Although it is powerful, it does not describe precisely and
detailed how the organization is organized.

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Chapter 5 - Strategy
Early day’s assumptions of strategy: Nowadays changed by globalization and technologic innovation.
• The organization has goals towards which it strives.
• It moves towards its goals in a ‘rational’ manner.
• The organization transforms inputs to outputs.
• The organization’s environment is stable and rarely changes.

Strategy: The determination of the basic long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out these goals.
We consider strategy as being an imperative to structure. (Figure 5.2)

Strategy considers both means and ends, Goals only focus on ends.
Strategic decisions establish the general purpose and direction of the enterprise and the method by
which they will be achieved.

How an organization determines its strategy:

• Planning mode (strategy as an explicit and systematic set of guidelines developed in
advance.)
• Evolutionary mode (a strategy that evolves over time as a pattern of significant decisions)
Strategic decision makers face bounded rationality.

Levels of strategy
Corporate-level strategy: determines the roles that each business in the organization plays. Is used if
an organization is in more than one line of business.

Business-level strategy: those strategies adapted by business units of the organization. Is used to
determine how the company should compete in each of its business units.

The beginnings: Chandler’s strategy-structure thesis.

He concluded that changes in strategy lead to changes in an organization’s structure.
Efficient structure for single-product organization: high centralization, low form, low complex.
Company expands product line (strategy change) > need divisionalised structure (=structure change).

Criticism: Chandler only looked at very large & successful business firms with high technology, and at
growth strategy to measure effectiveness. (Not at survival or profitability)

Contemporary Strategy - Miles and Snow’s four strategies (table 5.1&figure5.5)

(Based on the rate at which firm’s environments or products change, uncertainty)

Defenders: Obtain and maintain stability and efficiency. Limited set of products directed at a narrow
market segment. Strive to prevent competitors from market share. Organizations are highly
formalized and centralized.

Prospectors: Flexible in structure. Exploit new products and market opportunities.

Innovation & research is important, specialization, low form, decentralised, inefficient.

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Analysers: Use knowledge to minimize risk and maximize profit. They copy/imitate innovations after
they have been proven by others. They must maintain efficient, can achieve economy of scale and
must respond to prospectors. Flexibility and stability are important.

Reactors: Residual strategy, they respond inappropriately, perform poorly and they don’t want to
make a clear strategy for the future.

Porter’s competitive strategy

Gaining a competitive advantage by choosing one strategy, management can choose from:
1. Cost-leadership strategy: This applies when a company sets out to be the low-cost producer
in its industry. The product they serve must be comparable to rivals. To achieve this they
need efficiency, economies of scale, low cost labor and access to low cost materials.
2. Differentiation strategy: Is the strategy where a firm wants to be unique in its industry. They
can achieve this by for example high quality/service/status. Flexibility is needed, low
complexity, low formalisation, decentralized decisions
3. Focus strategy: aims at a cost advantage or differentiation advantage in a narrow segment.
The goal is to exploit a narrow segment in the market by for example tailor made goods.

Porter uses the term ‘stuck in the middle’ for companies that are unable to gain a competitive
advantage by one of various strategies. (Structural requirements Porter’s strategy: table 5.2)

Strategy & globalization

Bartlett and Ghoshal proposed a theory linking global strategy and structure. (Figure 5.6)
Strategy depends on the interrelation between the pressure to reduce costs and the pressure for
local responsiveness.
1. International strategy: transfer valuable skills and product knowledge to overseas markets.
2. Multidomestic strategy: aims to achieve maximum local responsiveness with products
customized to meet local conditions.
3. Global strategy: is adopted where a product can be sold in most markets with very little
modification.
4. Transnational strategy: attempts to achieve maximum local responsiveness while achieving
worldwide economies of scale. Rare strategy, incompatible aims. (Figure 5.3)

B&G/M&S have in common: If strategy is determined it will be ineffective without a fitting structure.

How can strategy follow structure?

- Structure may determine strategy. Structure may limit strategic choices as well as channeling
it in certain directions.
- Strategies may change to adapt to emerging circumstances, but structure can lag because of
political considerations.
- Legacy systems, as a result strategy becomes a projection of past actions based on what the
organisation can structurally achieve. (fig 5.7, structure>strategy)
- Controversial: To determine structure strategy is not important?

Industry-structure relationships
Unique characteristics of an industry in which an organization operates determines the structure. For
example if an organization needs many resources they would most likely come to the decision to
decentralize. (Figure 5.8)

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The power of combinations

Networks: Groups of companies that pool their resources in various ways. (Figure 5.10)

Clusters: No direction or control, each company concentrates on what it is good at. (Figure 5.11)

Strategic alliance: Two or more companies which cooperate in a venture by each contributing their
distinctive skill while maintaining their independence.

Chapter 6
Defining organisation size
- The organisation size is defined as the total number of employees.
- However, you have to consider full/part time employees and seasonal businesses.

Advocates of the size imperative

1. Peter Blau
"Size is the most important condition affecting the strcture of organisations"
- His findings are based on studies of govermental agencies.
- Increases in the size of an organisation pushes the differentiation at a decreasing rate
- The rate is decreasing, because at a certain number the rate of increase demounts
--> There is a limit of organisational complexity
2. Research at the University of Aston
- Increased size causes greater specialisation and formalisation --> standardisation arises
3. Meyer
- Size effects can be seen in the whole company

Critics
There are multiple critics on the advocates theories.
1. Independent studies have shown, that there is only a size based impact in organisations that
are managed by professional managers.
2. Argyris states that traditional management theories lead to bureaucratic administration -->
more complicated structure --> "size may be related to structure, but you cannot say that it
causes it"
3. Aldrich found "several alternative and equally plausable interpretations"
- size is the result and not the reason for organisational structure
- technology defines the structure and structure rates the size
---> according to him, companies with a huge specialisation/formalisation HAVE to employ more
workers, than less structures firms
4. Hall and his research partners announced that "neither complexity nor formalization can be
implied from organizational size"

Conclusion
Size does not dictate all of an organization’s structure, but is important in predicting some
dimensions of structure which have widespread applicability.

Size and complexity

The impact of size on complexity is at a decreasing rate in government organizations, for firms this is
questionable. Size has impact on horizontal/vertical/spatial differentiation, so impact on structure.

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Size and formalisation

There appears to be a clear correlation that size affects formalization. One cannot ignore whether
the organization is independent or is subsidiary. Thus, formalization increases with size.
- Managements try to control the behaviour of their employees, by high formalisation or surveillance.

Size and centralisation

With an increasing size of a company, it gets harder to control the company from the top. The
correlation between size and centralization is not significantly different from zero.
- A large company is high in complexity, high in formalization and decentralised.

When does an organisation become large?

- Large companies: approximately +2000 employees
- Small companies: approximately lower than 1500 employees
Adding more employees after 2000 has minimal impact on structure, adding to small company will
have a much bigger impact.

Special issues relating to organization size

The problems of large size
1. The growth of bureaucracy. A bigger company has more rules and regulations and it is harder
for top managers to keep direct contact with employees and customers.
2. Turning information to knowledge. Large companies acquire a lot of data, they need to find a
way to manage this and process this.
3. Adapt to changing technologies. A large company has to keep adapting their technology and
products in order to remain at the top.
4. Long time frames for actions. It may take time before management realizes the necessity of
something and when they do it will take a long time before their actions take effect.
5. Need for accurate costing information. It is hard to pinpoint where exactly all the costs or
profits are made.
6. Managing over a wide geographic spread. It is hard to maintain control over an operation
that is worldwide spread. (Spatial differentiation)
7. Bounded rationality. Impossible for one person to understand such a large operation.

With all these difficulties how can a company’s structure contribute to the efficient management of
large operations? The following structural solutions can be used to tackle the above stated
difficulties:

1. Divisionalisation. Divide company in divisions that have their own management and goals.
2. Outsourcing. Hire services of external companies.
3. Decentralization. Companies need to find a balance between decent- and centralization.
4. Structuring to facilitate change. The company should be more flexible to reduce bureaucracy.
5. Allocating responsibilities. When people are responsible they will make sure it gets done
right.
6. Physically separate the different types of work. Different areas of the company need different
approaches. By physically separating workplaces, optimum work and management
conditions may be applied. (Table 6.1)

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There is a large set of structural options available to large companies and it is important for
companies to determine which the right one is. It is often best for large companies to become small-
that is, by dividing themselves intro units of such a size as to enable managers to understand their
operations of their area and to respond accordingly.

Organization theory and small businesses

The influence of the owner

A small business is often a reflection of the owner’s personality and management style. In these
small businesses roles and responsibilities are not clearly defined, but the decision making, including
the day-to-day decisions, is highly centralized. There is a close relationship between the management
and the ownership in a small business.

Issues of reduced importance

Much of the same structural problems of large companies also apply to small companies, but to a
much lesser extent. All the structural variables are less important to the small-business manager,
because the range of variation in small businesses is typically limited. Small organizations often
completely centralized. There are also fewer barriers in communication. As a result of this combined
with centralization, there is better coordination and fewer delays. Small companies are easier to
change.

Issues of increased importance

Issues that are more important to small businesses include control, accountability, economies of
scale and environmental dependence. Less important are: innovation, managing and structure.

Downsizing
Downsizing may be defined as the planned elimination of jobs.

Reasons leading to downsizing:

1. Increased competition. Create lower labor costs.

2. Computerization and automation. Computers can do the same work for a lower price.
3. Technological obsolescence. Employees who work with outdated technology.
4. Declining profitability. Declining profitability and return on assets leads management to
consider shedding staff.
5. Changing roles of middle management. Due to more IT technology.
6. Limitation of size advantages. Managers realize that size does not equal success.
7. Changes of strategy. Reducing the business to a few core skills instead of diversifying.
8. Changes in structure. As a result of point 7 the office role has been largely dispensed.
9. Rise of outsourcing. It is often more efficient to hire specialist companies to do certain jobs.

The following six reasons have been proposed as the benefits companies seek from downsizing:

1. Lowered overheads. Less employees, less costs.

2. Less bureaucracy. Fewer employees, fewer complications and less need for paper processing.
3. Faster decision making. Fewer management layers means that decisions can be made by a
smaller number of people
4. Smoother communications. Fewer employees, less possible barriers in communication.

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5. Greater entrepreneurship. More decentralization, which should lead to more innovative

behavior.
6. Increased productivity. Same amount of work for less people. (Table 6.2)

The effects of downsizing

Downsizing rarely achieves all of the benefits attributed to it. Downsizing often has less job security,
a drop of morale and less productivity as a result. (‘Survivor’s syndrome’) Further problems
downsizing causes are that the skill of those remaining often cannot replace the ones that have left.
Ineffective downsizing practices (Table 6.3)

Chapter 7: Technology
Technology refers to the information, equipment, techniques and processes required to transform
inputs into outputs in an organization. This influences an organization’s structure. No precise,
universal and generalized measure of technology.

How technology affects structure; four studies

The initial thrust: Woodward’s research

- Only applicable to manufacturing industries, only English firms, lacks generalizability.
- Categorised into 3 types of technological complexity:
1. Unit production: non-routine work, custom-made products
2. Mass “: large batches, mass-production
3. Process “: standardized processing technology (oil, etc.)
- Concluded that firms that most nearly approximated the typical structure for their
technology were the most effective (fit between technology and structure)

Knowledge-based technology: Perrow’s contribution

- Applies to all organisations, focuses on knowledge
technology. (Figure 7.1, table 7.2)
- Technology: the action that an individual performs
upon an object in order to make some change in it.
- Two dimensions of knowledge technology: task
variability and problem analysability (well defined – ill
defined). This results in 4 types of technology --->
- Companies with routine technologies tend to have
greater formalisation and centralisation than do their
counterparts with non-routine technologies.
- Structural aspects to be modified to technology:
Discretion, power, interdependence and coordination.

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Technological uncertainty: Thompson’s contribution

“Technology determines the selection of a strategy for reducing uncertainty”
Effectiveness varies with the type of technology used. Theory has shortage on data.
1. Long-linked technology: a fixed sequence of connected steps (=moderate
complexity/formalisation, sequential interdependence)
2. Mediating technology: the process of linking together different clients in need of each
other’s services. (= low complex/high formalisation, pooled interdependence) Increasing the
number of clients>reduces risk.
3. Intensive technology: the utilisation of a wide range of customised responses, depending on
the nature and variety of the problems. (= high complexity and low formalisation, reciprocal
interdependence)

Task uncertainty: Galbraith’s contribution:

Uncertainty is defined as “…The amount of missing information required to perform a task.
Organizations become more complex by the need of information required. Technology is defined as
“how organizations deal with uncertainty”. (Figure 7.3)
- The amount and the way information is processed is the major determinant of the structure
of the organisation
- Goals are used as “guides” for complex tasks
- Considers the effect of routineness on the structure of the organisation as a whole

Conclusion
Technology can have a major influence on an organisation’s structure, especially in small
organizations. In larger organisations the impact of technology is not that concentrated. Nonetheless
those organisation units closest to the operating core are more likely to be influenced by technology.
There is a correlation between size and technology, an organisation has to reach a specific size to
choose between certain technology options. (7.4)
The processes/methods that transform inputs into outputs differ by degree of routineness.
- To get meaningful results from technological research you have to separate the
organizational level and the work-unit level.

Special issues in organisational technology

Manufacturing and service technology; service industries differ: (Figure 7.5)
- Increasing number of the workforce in manufacturing organisations are involved in providing
services
- Simultaneous production and consumption, Output is almost always intangible Services are
labour-intensive
- Decision-making is more decentralised s because of customer interaction
- Manufacturing industries have “boundary spanners” to let work proceed without
interruptions.

Technology and information processing:

- Information technology (IT): computerised information-processing techniques to
organisational operations.
- Information efficiencies are cost and time savings resulting from using IT.

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- Information synergies emerge when subunits are communicating as a result of IT.

- Day-to-day operations, communication improvement, control of systems, support decisions,
codify knowledge, promote innovation, create interorganisational system.

The influence of IT on structure >>>>TABLE 7.4!!!

- IT is an enabling technology, creates possibilities for organizations.
- Supports primarily lower-level routine decision making
- Reduces the cost of coordination and integration
- Furthers decentralised decision making
- Increases formalisation on the one hand but simplifies the way information is stored and
retrieved on the other hand
- Makes the transmission of large amount of information possible
- IT departments tend to be outsourced due to lower costs

Introducing new IT programs may lead to changes in organizational structure. (Follows IT)
IT moderates the relationship between organizational functions and outcomes. (Moderator)

Computerisation and manufacturing systems; structural changes (Table 7.5)

- Computer-integrated manufacturing: a manufacturing process is controlled by computers
- Improves the innovation of products and reduces production time.
- Enables organisations to respond flexible to changing demands/market conditions
- Less job specialization and more computer-skilled employees.

Does IT cause structure or does structure cause IT?

IT reinforces the existing structure, but allows new structures to evolve as well. IT is often
implemented to make existing structures work better.

Technology and structure

- More routine technology is related to low complexity and vice versa.
- More routine technology leads to high formalization.
- Routine technology will lead to centralisation, only if formalisation is low.

Chapter 8 Environment
Environment: everything outside an organization’s boundaries.
General environment: conditions that may have an impact on the organisation, but their relevance is
not particularly clear.
Specific environment: the part of the environment that is directly relevant to the organisation in
achieving its goals.
Domain, an organisation’s claim that it has staked out for itself with respect to products or services
offered and markets served.
The domain determines the company’s specific environment.
The enacted environment, the process in which the actual and perceived environments interact in
relation to environmental uncertainty. (> Stable or dynamic environment)

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Influences of environments on organizations

Burns and Stalker
The type of structure that exists in rapidly changing and dynamic environments is significantly
different from that in organisations with stable environments. (Table 8.1)

Mechanistic structures: high complexity, formalisation and centralisation, information and

communication is vertical. Emphasis is placed upon knowledge of internal processes rather than
general knowledge of the environment.

Organic structures: flexible and adaptive, lateral communication, non-authority-based influence and
loosely defined responsibilities.

B&S: most effective structure is one that adjusts to the requirements of the environment, which
means using a mechanistic design in a stable, certain environment and an organic form in a turbulent
environment.

Lawrence and Lorsch

If a company wants to be successful it will need to align its internal environment with their external
environment.
Two dimensions of an internal environment:
- Differentiation, task segmentation and attitudinal differences related to goals held by individuals in
various departments.
- Integration, the quality of collaboration that exists among interdependent units.

Lawrence and Lorsch argue that because of different interests and attitudes of managers of each
department it is often find to be difficult to see things the same way or to agree on integrated plans
of actions. Therefore: the degree of differentiation becomes a measure of complexity and indicates
more complications and a need to process information.

They perceived that parts of organisations deal with parts of the environment. An organisation’s
internal structure can differ for every division, reflecting the characteristics of the sub-environment
which it interacts with.

- Successful organisations’ subunits meet the demands of their sub-environments.

- The key is to combine integration and differentiation between departments to deal with
specific problems. Match subunits with sub environments, create specialization
- The environment is foremost important for achieving organisational effectiveness

Duncan’s complexity and change framework

Environment classified along two dimensions:
- Rate of change of environments. (Dynamic or static)
- Environmental complexity, the more elements in an environment, the more complex.

Low uncertainty: stable environment and low complexity.

Low to moderate uncertainty: stable environment and high complexity.
High to moderate uncertainty: unstable environment and low complexity.
High uncertainty: unstable environment and high complexity.

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Organizational structure Midterm 1 2013

Organization Theory, Robbins & Barnwell, 5th edition Summary chapters 3-8

The powerful influence of environment on structure -> (Figure 8.2!)

The use of information technology in complex environments

Organisations that depend on complex environments are intense users of information technology
because it improves the communication process (the staff is better informed, the response times are
faster, information becomes more readily and widely available).

The organization and environmental uncertainty

Researchers concluded that any organization’s environment could be described according to the
following three criteria:

1. Capacity (abundant or scarce); the degree to which an environment can support growth
2. Stability (dynamic or stable); the extent in which there is change in the environment
3. Environmental Complexity (simple or complex); the degree in which an environment is
concentrated on elements. Conclusions in > (Figure 8.3)

The environmental imperative.

So, “Does the environment determine structure?”
The case for: the theories consider that environmental pressures create conditions to which firms
must respond by adopting an appropriate structure. Inputs/outputs are directly linked to the
environment, organisations cannot ignore their environment. Environments behave differently.
Reducing uncertainty is a current trend in organizational theory, IT contributes.
The case against: little or no impact on production, R&D, accounting, etc. Not all uncertainty in the
environment has impact on the organization. The environmental imperative is also not in agreement
with observed reality.

Three important views on the environment-organisation relationship

Population-ecology view, states that the environment selects certain types of organizations to
survive and others to perish, based on the fit between their structural characteristics and the
characteristics of their environment. Organizational forms must either fit their environmental niches
or fail, and survival is maintenance of an independent existence.
Survival of the fittest, explain what happens/happened, focus on groups of organizations, org
effectiveness=survival, management is not determining, carrying capacity is limited. Three stage
process of change: Variations, Selection & Retention
Institutional theory explains how forces in the environment help influence organisation’s structure
and practices, responding and adapting to economic and social demands.
Resource-dependence theory (provides information about how dependence on scarce resources
influences organizational actions to increase the chances of survival). Increases uncertainty.

When it comes to the environment-structure relationship, we should keep in mind that:

1. The environment’s influence on an organization is a function of dependence
2. A dynamic environment has more influence on structure than does a stable one
3. High environmental uncertainty tends to lead to greater complexity
(Divisionalisation/specialization)
4. Stable environments lead to high formalization (Standardization, minimal response needs)
5. The more complex the environment, the more decentralized. (Selective decentralization)

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