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Chapter10.OrganizationSizeLifeCycleandDecline.pptx

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Chapter 10 Organization Size, Life Cycle, and Decline

Organization Theory and Design

Thirteenth Edition

Richard L. Daft

Chapter

Learning Objectives

Explain the advantages and disadvantages of large organization size.

Describe how an organization progresses through four stages of the organizational life cycle.

Define the characteristics of bureaucracy.

Compare large organizations and small organizations along the dimensions of formalization, centralization, and personnel ratios.

Identify approaches to reducing bureaucracy in large organizations.

Contrast market and clan control with bureaucratic control.

Describe the model of decline stages.

Organization Size: Is Bigger Better?

Pressures for Growth

Industry consolidation, global expansion, and diversification have made firms grow

Organizations strive for growth to acquire the size and resources needed for global competition, to invest in new technology, and to control distribution channels

Dilemmas of Large Size

Large organizations are better able to weather economic downturns and can get back to business more quickly following a disaster

Small companies are flexible and responsive, with a flat structure and an organic, free-flowing management style

Big-company/small-company hybrids” combine a large corporation’s resources and reach with a small company’s simplicity and flexibility

Differences Between Large and Small Organizations

Stages of Life Cycle Development

Entrepreneurial Stage: Creation of the company

Crisis: Need for leadership

Collectivity Stage: Identification with the mission

Crisis: Need for delegation

Formalization Stage: Installation and use of rules and procedures

Crisis: Too much red tape

Elaboration Stage: Collaboration and teamwork

Crisis: Need for revitalization

Organizational Life Cycle

Organization Characteristics During Four Stages of Life Cycle

	1. Entrepreneurial	2. Collectivity	3. Formalization	4. Elaboration
Characteristic	Nonbureaucratic	Pre-bureaucratic	Bureaucratic	Very Bureaucratic
Structure	Informal, one-person show	Mostly informal, some procedures	Formal procedures, division of labor, new specialties added	Teamwork within bureaucracy, small-company thinking
Products or services	Single product or service	Major product or service, with variations	Line of products or services	Multiple product or service lines
Reward and control systems	Personal, paternalistic	Personal, contribution to success	Impersonal, formalized systems	Extensive, tailored to product and department
Innovation	By owner-manager	By employees and managers	By separate innovation group	By institutionalized R&D department
Goal	Survival	Growth	Internal stability, market expansion	Reputation, complete organization
Top management style	Individualistic, entrepreneurial	Charismatic, direction-giving	Delegation with control	Team approach, attack bureaucracy

What is Bureaucracy?

Sociologist Max Weber defined bureaucracy as a threat to personal liberties but the most efficient possible system for organizing

Bureaucracy includes:

Rules and standard procedures

Specialization and division of labor

Hierarchy of authority

Technically qualified personnel

Weber’s Dimensions of Bureaucracy

Size and Structural Control

Formalization refers to rules, procedures, and written documentation

Centralization is level of hierarchy with authority to make decisions

Personnel ratios are the clerical and professional support staff ratios

Percentage of Personnel Allocated to Administrative and Support Activities

Bureaucracy in a Changing World

Bureaucracy worked for the industrial age

The system does not always work for today’s challenges because organizations need to respond quickly

Over-bureaucratization is evident in the inefficiencies of large U.S. government organizations

Narrowly defined jobs and rules limit creativity, flexibility, and rapid response

Some organizations, such as police and fire departments, use temporary structures for crises

Other Approaches to Busting Bureaucracy

Steps that organizations can take to reduce bureaucracy include:

Cutting layers of the hierarchy

Keeping headquarters staff small

Giving lower-level employees greater freedom to make decisions without excessive rules and regulations

Leveraging their employees’ professionalism (formal training and experience)

Providing on-going training to employees

Bureaucracy and Other Forms of Control

Three control strategies that organizations can adopt are bureaucratic control, market control, and clan control

Each form of control uses different types of information, but all three types may appear simultaneously in an organization

Three Organizational Control Strategies

Type	Requirements
Bureaucratic	Rules, standards, hierarchy, legitimate authority
Market	Prices, competition, exchange relationship
Clan	Tradition, shared values and beliefs, trust

Examples of Rules at a Yacht Club

Employees shall maintain a clean and well-dressed appearance at work.

The summer uniform is green shorts, black or brown belt, white shirt tucked in, and boat shoes. Frayed clothing is not allowed at the club.

Employees should arrive at work at or before the agreed-upon shift time.

Employees shall not smoke or consume alcohol on club property at any time.

Employees are required to be polite and helpful to members at all times.

Employees should remain a respectful distance from members and should not accept social invitations from members.

Employees should not be on club property when they are not working.

Employees are not permitted to use the club phones to make or receive personal calls.

Instructors must provide their own manuals and radio.

Maintenance employees must provide and use their own tools.

Organizational Decline

Organizational decline is the decrease of an organization’s resources over time and is caused by:

Organizational atrophy

Vulnerability

Environmental decline or competition

A Model of Decline Stages

If not managed properly, decline can move through five stages and result in the dissolution of the organization:

Blinded stage

Inaction stage

Faulty action stage (including downsizing)

Crisis stage

Dissolution stage

Stages of Decline and the Widening Performance Gap

Organizational Design Essentials (slide 1 of 2)

Organizations experience many pressures to grow, and large size is crucial to economic health in some industries.

Organizations evolve through distinct life-cycle stages as they grow and mature.

As organizations progress through the life cycle and grow larger and more complex, they generally take on bureaucratic characteristics.

Organizational Design Essentials (slide 2 of 2)

In many large organizations, bureaucracy has come under attack with attempts to decentralize authority, flatten organization structure, reduce rules and written procedures, and create a small-company mindset.

All organizations, large and small, need systems for control, and managers may use a combination of control approaches to meet the organization’s needs.

It is the responsibility of managers to detect the signs of decline, implement necessary action, and reverse course.