Organization Theory

CNAM – International Institute of Management

Master in International Management

Master 1

Organization Theory

Eric Hertzler

Senior Tenured Lecturer

Université Paris-Est Créteil

[email protected]

Introduction to Organizations

What DO YOU KNOW about Organization?

What is an organization?

What is NOT an organization?

Hospitals Families Schools

Professional associations, non profit organizations …

Businesses Social movements…

Stores Friendship cliques…

Companies Isolated individuals….

FactoriesStreet gangs…

What is an Organization?

A simple working definition:

Organizations are autonomous groups whose members coordinate their behavior in order to accomplish shared goals or to put out a product.

Examples Qualities

Organizations Companies, Schools, voluntary associations, Political parties

Roles, rules, goals, recurring behaviors, boundaries

Not Organizations Random collections of persons, isolated individuals

No rules, roles, goals, pattern of recurrence, or boundary

Ambiguous cases Street gangs, friendship groups, social movements

Less clear roles, rules, and goals, porous boundaries and fluid participants

What is an Organization?

• Defining an Organization…

• Which of the following is REQUIRED in order to have an organization?

☐Multiple people ☐A product that can be purchased

☐ Coordinated behavior ☐ An official name/logo

☐ A shared physical space

☐ A common goal or purpose

What is an Organization?

Defining an Organization…

Which of the following is REQUIRED in order to have an organization?

 Multiple people ☐A product that can be purchased

 Coordinated behavior  An official name/logo

☐ A shared physical space

 A commmon goal or purpose

What is an Organization?

Organizations vary greatly.

• Size

• Market sector

• Social structure

• Environmental context

Organizational Problems and Reforms

• They are everywhere and complex => problems arise

• We feel compelled to reform organizations…

• But what shall we change?

Organizational Problems and Reforms

List of educational reforms at the IAE School of Management in 2015

1. Merging two master degrees in marketing

2. Developing AACSB accreditation

3. Developing Harvard Business School case studies

4. Generalizing the evaluation of teaching

5. Merging with the University of Marne-la-Vallée

6. Creating a governing board

7. Developing ‘aprenticeship’ in all master degrees

8. Developing a balance score-card of quality

9. Evaluating the research performance of professors

10. Developing on-line programs

11. Gaining autonomy from the Faculty of Economics and Management

12. Sharing all course materials between professors in management

Organizational Problems and Reforms

Which of the following best describes the issue of change in organizations (select all that apply)

☐It is rare for an individual, group or society to attempt to change an organization in meaningful ways. Once organizations are established, they remain essentially the same unless they are shut down

☐Organizations are usually fluid and flexible, and respond easily at change and improvement

☐ It is not uncommon for individuals, groups, or society to try to change an organization in order to make it better. Implementing reforms, however, is fraught with challenges and complications

☐ Attempts to change an organization may fail because the environment in which a reform was tested is different from the environment in which it is being implemented

CNAM – International Institute of Management

Master in International Management

Master 1

Organization Theory - Syllabus

Eric Hertzler

Senior Tenured Lecturer

Université Paris-Est Créteil

[email protected]

Course Objectives

What’s the utility of this course to master’s students ? Why should you care ?

 Organizations are everywhere!

 You’ll better understand issues faced by Organizations

 Goals, Tasks, coordination/implementation, input, output participants, environment fit

 This course exposes you to a variety of actual CASES of organizations and THEORIES of organizations and THEORIES that help make sense of what you have observed

In summary…

Nothing more practical than a good theory

That your interpretations of organizational life are derived from theories, but…

• Different people have different accounts for the same phenomenon

• It is not enough to apply one perspective on one phenomenon

• Confronted to new problems or new situations, generalizing previous conclusions/solutions… does not apply

Course Content

The course explains and illustrates organizational phenomena and their dynamics.

Organization Theory (OT) is a set of diverse approaches and models that are at times

incommensurate with one another.

We first focus on macro theory initially rooted in sociology and social psychology that

takes the organization as the level of analysis.

Then we turn to micro theory (or Organization behaviour), drawing on

microeconomics and cognitive psychology, which tackle Organizations from the

perspective of small groups or individual decision-making.

Course Content - Organization Theory (OT)

• Theory is a system of ideas explaining something, based on general principles and on a set of assumptions.

• There are many OTs. The diversity of OT will teach us flexibility, which can help in those times of complexity and rapid change.

• The various theories of Organization can guide our actions by giving us abstract images of:

What an Organization is

How it functions,

How its members and other interested parties (who) interact with and within it.

• Knowing OT will help to understand how Organization works and to diagnose its problems.

Course content - Organization behavior (OB) can be challenging

Human behaviors are impossible to predict (can OB be a science?)

OB course: generalizations are possible !

Everyone makes ‘value judgments’ about peoples’ behavior

OB course: understanding the behaviors instead of judging them

There is a natural tendency to look for solutions before understanding problems

OB course: identifying ‘real’ problems before trying to fix them

Course Outline

1. Analytics Features of Organizations

2. OT: Classical Approach

3. Organization Sociology

4. Organization and Environment: Contingency theory

5. Case study: Patterns of structural change and design

6. Costs, outcomes and risks: Organizational Economics

7. Organizations as open systems: Evolutionary Theories

8. Cultures and Group Dynamics

9. Perceptions

10. Motivations

11. Decision-making Theories

12. Configurations, Power and Conflict

13. Leadership and Authority

Course Method

In-depth analysis of some major theory on OB rather than a collection of a wide range of theories

Learn management (Groups, decision-making, power, change) through readings, case studies, and YOUR work experience

What students value is ‘feed-back’ => professor-student reverse role, e.g. YOU will work in class, I will work outside class on your projects

Assignments, Guidelines and Assessments

1. Case Studies to be performed before the class by a team of 3 students (approximately 10

slides, 20 minutes)

20% (total score) – each semester

2. Readings (Biography, Papers) to be performed before the class by a team of 3 students

(approximately 5 slides, 10 minutes)

20% (total score) – each semester

3. Participation in class 10%

+

Mid term Exam #1 (45 min.) on an individual basis (Quiz): 20% (total score) – Semester 1

Final Exam #2 "Design the ideal organization. Use course concepts to defend your answer." –

30% final score Semester 2

The student’s work is assessed on a 20 points mark basis.

Readings Alchian, A. A. and Demsetz, H. (1972) Production, Information Costs, and Economic organization. The American Economic Review, Dec., 62, 5, 777-795

Chandler, A. D. Jr. (1977) The visible hand: The managerial revolution in American business. Cambridge, MA: Belknap Press

Coase, R. H. (1937) The Nature of the Firm. Economica, New Series, Nov., 4, 16, 386-405: Blackwell

Drucker P. F. (1973) What can we learn from Japanese Management?, Harvard Business Review

Morel, C. (2001), “Absurd Decisions”, Minutes of the Conference of the ‘Association des Amis de l’Ecole de Paris du Management, December 7th, 2001, Paris

Campbell, A., Whitehead, J., Finkelstein, S. (2009), “Why Good Leaders Make Bad Decisions”, Harvard Business Review, p. 60-66

Eisenhardt, K., Kahwaji, J.-L, Bourgeois L.J. (1997), How Can Management Teams Can Have a Good Fight, Harvard Business Review, July, p. 77-85

Courpasson, D. (2000), Managerial Strategies of Domination. Power in Soft Bureaucracies, Organization Studies, 21/1, p. 141-146

Weick, K. (1993). “The collapse of sensemaking in organizations: the Mann Gulch disaster.” Administrative Science Quarterly, 38(4): pp.628-652

Financial Times, Wall Street Journal, NYT, The Economist Harvard Business Review, Inc., Fast Company, Aeon should be regularly consulted

For next class! Presentations on early models of organizations and their current values

Saint Simon, Bentham, Fourier, Jean Baptiste André Godin, Fayol, Mary Parker Follett

1. ANALYTIC FEATURES OF ORGANIZATIONS

Organizational Elements

goals

participants

technology

social structure

ORGANIZATION

Organizational Elements: Participants

PARTICIPANTS : Organizational participants that make contributions to and derive from the organization

goalstechnology

social structures

ORGANIZATION

participants

1.1. What is an organization?

Definition 1: Groups of people acting together in order to achieve a common aim

1.2. What is an organization?

Different organizations, but same issues…

They may not have a ‘common’ aim

There may be conflicts within them

There may be problems of coordination/control

…

In an hospital: think about the managers, physicians&nurses

In a football team: think about the players & the coach

In a religious community: think about the conflicts between collective values & individual objectives

2.1. What is an organization?

Definition 2: Groups of people acting together… despite various aims, values, motivations, cultures…

So, what is OB for?

Instrumental view: assumes a single set of values within the organization, OB to help managers manage more effectively

Conflict view: assumes values are irreconcilable, normally as between managers and workers, and OB is to help expose, explore and perhaps participate in this conflict

Pluralist view: assumes a varied set of values, including but not limited to managers, and OB is to help all parties to understand organizations better

CONCLUSION An Organization is: • A set of people • A goal (a reason to be) • A structure (of activities) • A “boundary” (in an environment)

Organization (O) is the combination of: A structure (S) and a group of human beings (H) O = S x H

To organize is to set rules (structure) helping people to live and work together.

Scott (1987)

• An organization is a human entity, which aims at conducting collective action.

• The definition of an Organization encapsulates 3 aspects:

- Its nature (What kind of entity?) and functions (Why?);

- its structure (Which design?) and choices (How?) ;

- its environnement (construction et interpretation) and the interaction of its actors (Who?).

‘Organization’ is an ambiguous concept, which proves difficult to distinguish from the concept of institution.

Organizations structures are diverse

• Pyramid (administrative chart based on hierarchy):

Military design

Functional design

• Network (decentralized interdependant links):

Matrix design

(e.g. forum, mailing list)

• Team spirit (control over scarce resources):

Corporate body or public body

(e.g. engineers, civil servants)

Organizations need co-ordination and co-operation

• organizations gather and combine resources (production factors including human capital

or competences) and co-ordinate their use in order to realize specific tasks.

• Co-ordination is designed and planned by the authority, according to rules and

procedures, and relies on the division of labor.

• Co-operation (i.e. division of labor) among individuals brings in economic performance as

well as potential conflict, which induces waste or losses.

• Co-ordination must reduce waste due to co-operation.

• Economies of scale enable to reduce costs and reach higher efficiency. However, they do

not define the optimal size of a given organization neither do they mark the boundaries

of its activity.

Organizations need to be efficient

Effectiveness Efficiency

(decided by the client) (measured by the management) Quality (asked) Quality (decided) Quality (perceived) Quality (realised) Price Cost Time limit Time cycle (to produce) Personal touch Flexibility

Efficiency and dynamics

Efficiency is not a stable attribute, for organization change overtime:

• The lifecycle model [Kotter, 1978] emphasizes the process which drives the Organization from birth to death, although decline may be avoided.

• The evolutionary model [Nelson & Winter, 1982] emphasizes the dual nature of Organizations, which is grounded on routines and prospects, the former being very efficient.

Organizations need to be managed strategically

• From “program, command, organize, co-ordinate, control”

to “vision, project, implication, client orientation, quality leadership”:

• The strategist is “a vision negotiator, with a capacity to attract people’s support, and a communicator”.

A difficult balance of responsibility

• Management: Strategy design and decision making

• Organization: Men and Structure

• Administration: Pilot and performance

Organization: Structure and people

Functions (jobs, positions, status): A static vision Structure Process (continuous, value added): A dynamic vision

Projects (changes, steps, adjustment): A flexible vision

Professional (craft, personal development): Recognition People

Personality (emotions, communication): Complexity

Administration

Optimizing the capital resources (investments) is the role of the pilot

with a “dashboard” (performance indicators) A pilot

and action levers (management chart)

Organizations need to perform

What constitutes performance or how it should be measured?

• Efficiency in production?

• Market share?

• Strategic effectiveness?

• Quality?

• Social responsibility?

• Environmental impact?

• Financial gain?

Goals / Resources / Results: The magic triangle

Effectiveness

Consistence/relevance Productivity

Goals need to be specific, measurable and set in time.

7 Morgan’s Metaphores (1989)

Organization as …

…machine

…living organism

…brain

…culture

…political system

…psychic space

… domination’s instrument

Added Value to the vision on Organizations

Useful et efficiency Predicbility

Open on Environment and Adaptabilty

Importance of Information Management

Importance of standards, rules and values

Governance, power and leadership

Space of pleasure and pain

Power distribution Power and Society

Management Concepts

Profit, control, managing and leading

System, retroaction, regulation, connection,

Information Systems, Decisions

Culture, identity, social link, myths, behaviors

Powers, actors, strategy, influence, coalition

Stress, motivation, inconscient, psychological contracts

Control, domination

Evolution of Organization Theories

Mechanistic Approach

Social Approach

Organization as a Closed System

Organization as an Open System

Directive Management

Human Relations

Contingency and

Planification

Collaborative Management

L’ordre régi

par la règle

L’organisation

façonnée par

des forces

exogènes

Groupe, moral

et conditions

de travail

Complexité,

changement

et adhocratie

2. Organizational Theory: Classical Approaches

2.1. The Study of Bureaucracy

2.2. The Scientific Management

2.3. The Human Relation Theory

2.1. The Study of Bureaucracy

The Study of Bureaucracy

The concept of authority and its relation to organizations

The ‘ideal-type’ of bureaucracy

The virtues of bureaucracy

Max Weber

1864 - 1920

Three types of Authority

Authority is the right to obedience and is different to power because it is legitimate

Charismatic – right to obedience based on personality (of leader)

Jesus’s disciples, religious cults

Traditional – right to obedience based on custom or habit

Household: family hierarchy

Vassals: feudal lords who swear loyalty to monarch

Rational-Legal – right to obedience based on a system of rules

Ideal-type bureaucracy

Weber’s thesis: The rational-legal authority is gaining importance in the modern economic organization, the bureaucracy

Bureaucracy: the ‘ideal-type’ rational-legal organization

Authority comes from ‘office’ or position

Work performed as official duties

Paid, full-time, career structure

Hierarchy and reporting structure

Division of labor

Employment based on qualifications and experience

Uniformity and impersonality in treatment of staff and customers

The virtues of Bureaucracy

Hierarchy: A chain of command and responsibility, officials are ‘accountable’ to their immediate superior for their conduct

Impersonality: The bureaucrat performs duties in a ‘spirit of formalistic impersonality…without hatred or passion’

System of rules: A ‘consistent system of abstract rules’ defines limits to authority and specific procedures for task performance

– Calculability, precision, discipline, predictability

=> Rules provide predictability and protect from risks

=> Rules provide equal treatment thanks to impersonal rules (for ex. everyone can climb the career-ladder)

But what is rationality?

• Substantive rationality vs formal rationality

• Substantive: the end is in itself ‘rational’

• Formal: the best means to achieve a given end

So,

• ‘doing the thing right’ (formal) or ‘doing the right thing’ (substantive) ?

http://www.youtube.com/watch?v=TbD6j_1-kSk&feature=related

Bureaucratic dysfunctions - Weber’s legacy

• American organizational sociologists

• Gouldner: The issue of unintended consequences: even if the intended ends

of the organization are rational, its actual effects may not be (ex. “French

public policy of 35h”)

• Blau: ‘work to rule’ – efficiency depends upon not following rules

• French organizational sociologist

• Crozier: the myth of impersonality – bureaucracies do not in fact protect from

power relations

2.2. The Scientific Management

Context of SM and Taylor’s problem

• Context: 19th century large-scale industry

• 1878: factory worker in a steel-factory at Midvale

• His production numbers are excellent, he is appointed as team manager

• He observes:

– Obstruction and laziness

– Gap between management and workers

• After 3 years, failure: he finds no means to convince the workers to increase

productivity

Frederick Taylor

1856 - 1915

• Taylor invents a solution: paychecks on the basis of the effective production

• An ideal to reconcile workers and managers interests

• Necessity to measure the production capacity of each worker

• To achieve this, a « one best way », scientific management

Context of SM and Taylor’s problem

The Solution: 4 Principles of Scientific Management

• A science for each element of work (time and motion studies)

• Scientific selection and training of workers

• Co-operation between managers and workers

• Division of responsibility between managers and workers (‘conception’ and ‘execution’)

The legacy of SM

• In the management of organizations. Despite early resistance, it was widely

adopted and continues to define much present practice

– In the industry, it led to the ‘Fordist’ system of the moving assembly line

– In the management, H. Fayol

– In the service sector, Mc Donaldization

– The Quality Management Systems are also legacies of SM

• In the study of management. Taylor’s SM is the first attempt to ‘study’

work&workers (originates the industrial sociology)

 SM is intimately linked to the provision of affordable goods and rising living

standards, but also to persistent problems of working conditions and their

social effects

 A poor vision of work:

Concerns about the human body but what about the human

psychology?  reduced to economic motivations

A man at work much isolated

Usual criticisms of SM

2.3. The Human Relation Theory

Human Relations Theory: Outline

• The Hawthorne experiments

• Implications of Hawthorne experiments

• Problems with Hawthorne experiments

• Relationship to scientific management

• The legacy of HRT

What were the Hawthorne experiments?

• Conducted at the Hawthorne works (Chicago), part of the Western Electric

Company of AT&T between 1924 and 1932

• Findings were analysed by Mayo, Roethlisberger & Dickson and Whitehead

• Gave rise to Human Relations Theory (HRT) which transformed the theory and

practice of organizations and management through to the present day

Elton Mayo

The Hawthorne experiments (1/3)

• Illumination experiment: the effect of varying lighting levels

• Relay assembly room experiment: the effect of varying conditions of work

Hawthorne Plant c. 1932 Working at Hawthorne

The Hawthorne experiments (2/3)

• 1st experience at the Relay assembly room experiment: the effect of varying

illumination in the assembly room (1924)

• 2 groups of workers were chosen:

• One where illumination is improved

• One where illumination remains in initial condition

• After several weeks of observation,

• The productivity in the first group increases

• The productivity in the second group also increases

• 2nd experience at the Relay assembly room experiment: the effect of varying

conditions of work (1927-1932)

• 2 women asked to choose 4 co-workers and work in a separate room

• In five years, many changes in the working conditions:

• changing the pay rules so that the group was paid for overall group production, not

individual production

• giving two 5-minute breaks (after a discussion with them on the best length of time), and

then changing to two 10-minute breaks

• providing food during the breaks

• shortening the day by 30 minutes (output went up); shortening it more (output per hour

went up, but overall output decreased)

• Then, returning to the initial conditions

• Output of the room regularly measured & discussed with a supervisor and observed

by the researchers

• Again, output increases !!!

The Hawthorne experiments (3/3)

Analytical implications of Hawthorne

• The ‘Hawthorne effect’ is one of the classic results in social science. It tells us that

human behaviour changes as a consequence of being studied and observed

• People in organizations do not act like parts in a machine – they have other needs

e.g. for involvement in a group, recognition of leadership, participation in change

• There is an ‘informal’ set of social relations in organizations with its own norms,

ruled, leaders etc.

Managerial implications of Hawthorne

• Work is a social as well as an economic activity, and needs to be structured and

motivated accordingly

• Managers should interest themselves in the social well-being and morale of

workers

• Managers must establish systems to communicate, consult and support the

workforce

• The ‘informal organization’ needs to be managed

• Bank wiring room experiments

The study was conducted between 1931 and 1932 on a group of 14 men who put together

telephone switching equipment. The purpose of the study was to find out how payment

incentives would affect group productivity.

. The researchers found that although the workers were paid according to individual

productivity, productivity did not go up because the men were afraid that the company

would lower the base rate.

The surprising result was that it contradicted the Hawthorne effect: Although the workers

were receiving special attention, it didn’t affect their behavior or productivity. However,

the informal group dynamics studied were a new milestone in organizational behavior.

Detailed observation between the men revealed the existence of informal groups or 'cliques'

within the formal groups. These cliques developed informal rules of behaviour as well as

mechanisms to enforce them. The cliques served to control group members and to

manage bosses; when bosses asked questions, clique members gave the same responses,

even if they were untrue.

These results show that workers were more responsive to the social force of their peer

groups than to the control and incentives of management. Hence it is in managers'

interest to collaborate with these informal groups to increase cohesion for the company's

benefit...

Summary of Mayo's beliefs

• Individual workers cannot be treated in isolation, but must be seen as members of a

group.

• Monetary incentives and working conditions are less important to the individual than

the need to belong to a group.

• Informal groups formed at work have a strong influence on the behavior of those

workers in a group.

• Work performance is dependent on both social issues and job content.

• There is a tension between workers' 'logic of sentiment' and managers' 'logic of cost and

efficiency' which can lead to conflict within organizations.

• Managers must be aware of the 'social needs' and cater for them to ensure that

employees collaborate with the official organization rather than work againstit.

Legacy: Reconciling Taylor and HRT?

• Douglas McGregor – Theory X and Theory Y

• These are both influential attempts to combine the insights of HRT and SM into a

single framework

McGregor 1906 - 1964

•McGregor distinguished two theories of management

• Theory X

•People basically don’t like working

•They are only motivated by money

•They must be closely directed and supervised if they are to contribute

to the organization

Theory X - Theory Y

• Theory Y

•Work is a natural part of human experience

•People will exercise self-direction and self-control to serve goals that

they believe in

•People seek rewards other than economic rewards, including intrinsic

satisfaction of their work

•People enjoy autonomy and self-control

•Most workers’ potential is only partially utilized

Theory X - Theory Y

Evaluating McGregor

• This is a ‘contingency approach’ to management, which moves away from the

idea that there is a single formula for managing

• Both theories are ‘true’ in practice => management has to use ‘carrots & sticks’

alternately

3. Beyond Classical Approaches:

Organizational Sociology

Starting point: a critique of the previous theories

• Scientific management & Bureaucracy: if the rules and structures are well defined,

all organizational problems (conflicts, laziness,…) will be solved

• Human Relation Theory: taking care of the people in organizations will abolish all

organizational problems

• Organizational sociology: Studies of bureaucracies show

that :

•“structures” (or rules) do not dictate behaviors

•psychological well-being not enough to secure individual participation to

organizational goals

Starting point: A case study of a French

Bureaucracy (2)

The case of the « Tobacco industry » in France

•A monopolistic company

• A taylorian model of work organization

• Bureaucratic modes of employees management

Plant manager

Manager

Engineer

Maintenance men Foremen

Specialitst workers

Maintenance men

Foremen

Specialist workers « Insincere »

« Bossy » Indifferent

Stay in the background Agressive

Judgemental

 In all organizations, even tightly ruled (bureaucratic), power relations may

develop, parallel to the formal organization

 Individuals’ behaviors are related to their position into these power relations

 This INFORMAL organization is the REAL organization... And it is difficult to

change

 A generalization of these findings was developed by M. Crozier et E. Friedberg

in the book: Actors and Systems, the Politics of Collective Action, 1980

Learning from this case study: A new theory called

“Strategic Analysis of Organizations”

“Strategic Analysis of Organizations”: POWER

• Definition: capacity to make individuals adopt behaviors that they wouldnot

have adopted spontaneously

 (!) In this theory, power is an asymetric relation (ex. of the relation between a

professor and his/her students)

 You hold power when you control a zone of uncertainty that other actors do not

control

“Strategic Analysis of Organizations”: ZONE OF UNCERTAINTY

• Definition: ‘fuzzy zones’ that are controlled by a few individuals in the organization

• Some uncertainties in organizations

 Knowledge, know-how

 Information

 Rules

 Relations

 Activism

• When you control a ZU, you hold power:

 People depend on you

 You can be unpredictable Power leads to negotiations

Power thus leads to negotiations

“Strategic Analysis of Organizations”: ACTORS

• Why “Actors” and not “Agents”?

• Two important postulates:

• Individuals are never entirely passive (dominated by the structures and/or the

other individuals)

• Individuals have objectives (limited rationality)

• For organizational sociologists, individuals at work are not only a hand, or a heart,

but a head!

“Strategic Analysis of Organizations”: STRATEGY

• If actors have objectives, they will then develop a strategy to attain these goals

• Definition: a range of behaviours adopted in order to attain individual goals

• Strategy may be conscious or unconscious

• Strategy is not expressed by the actors, it is constructed by the analyst (discovering

the ‘rationality’ of actors)

“Strategic Analysis of Organizations”: STRATEGY

• Examples of strategies:

• Aggressiveness: a means to keep the other members at distance

• Good will: a means to obtain a favour

• Bad will: a means to manifest angriness/ lack of power

Apparently passive behaviours may be analyzed as a strategy (ex. Students of that class)

CONCLUSION:

Which of the following are reasons why organizational theories are

important ?

They afford perspectives beyond your own individual experience

They allow you to better understand and interpret complex phenomena

They provide generalizable knowledge that can be useful in a variety of familiar and

unfamiliar contexts, rather that particular knowledge that is relevant only to a single

situation or organization

They can help you be a better manager

☐They explain everything that goes on in every organization in a way that makes

things clear and simple

The Analysis of a Personal Experience with the

ORGANIZATIONAL SOCIOLOGY TOOL-BOX

Learning objectives

• Apply a theoretical frame to a concrete case study – the organizational sociology

as a ‘tool-kit’ for understanding organizations

• Develop a capacity of empathy & analytical distance

• Present clearly an organizational situation that looks complex at first

• A comprehensive versus normative approach

• Understanding problems first and foremost, before inventing solutions

Schedule

TODAY

1/ Select a partner

2/ Decide which situation/organization you will study

3/ The methodology of the case analysis, step by step

How to select your case-study?

One or several organizational situations that look paradoxical or raise questions

Examples of situations: strange individual behaviors, decision-making processes that seem irrational, inter-personal conflicts, etc.

Transform those observations into a set of questions

• Why nobody communicate in an open space?

• Why is there a recurrent tension between the front and back offices?

• Why people always circumvent organizational rules?

ANALYZING THE CASE STUDIES:

A 4-STEPS METHODOLOGY

1. IDENTIFYING the actors involved in your

organization –

2. DESCRIBING - Make the actors “talk” about their work, problems and relations

3. ANALYZING – 2 tools

• Diagram of relations

• Summarize actors’objectives/

constraints/ressources/strategies

4. INTERPRETING

1 - IDENTIFYING the actors involved in your organization

Draw a organization chart (with chain of command)

 Actors can be individuals or collective actors

 Actors are not necessarily members of the organization (clients, suppliers)

 Actors are not necessarily physically present (ex. the CEO)

(!) In the course of the analysis, you may discover actors that were not identified at the very beginning of the study

2 – DESCRIBING - Make the actors “talk” about their work, problems and relations

 Take each actor and describe: Their concrete day-to-day work Their objectives set up by the organization (production rates, sales targets, etc.)

 Describe what they said about: their concrete problems to do their work the other actors with whom they work

 Take concrete situations and describe their behaviors (aggressive, passive at work, cooperative, fully committed, etc.)

(!) At this step, do not try to explain/interpret, just describe with empathy

3 – ANALYZING, the diagram of relations (1/2)

Acteur C

Acteur D

Acteur B

Acteur A

-

-

- -

+

+ for relations of cooperation (spontaneous exchange of informations, reciprocal help, arrangements, etc.) -for tense relations (refusal to cooperate, relation of dependance, bad will, reluctance to convey information, etc.) = for neutral relations, or absence of relations

3 – ANALYZING, the diagram of relations (2/2)

 Important: during the elaboration of the diagram, you have to make decisions on the nature of the relation

 The diagram has two functions:

A simple visualization of the informal relations

A heuristic tool, e.-g. helps to raise questions (ex. why such actor has – relations with everyone?)

3- ANALYZING

Establish a table that summarizes your findings

Individual objectives

Constraints Resources Actors’ strategies

Actor A (ex. maintenanc e men)

Being

autonomous

Officially under

the responsability

of the the

foremen

Expertise to

repair the

machines

Director outside

the factory

Aggressive with

the foremen

Shambling with

the workers

Actor B

Actor C

4 - INTERPRETING

 Interpret individual behaviors: to what extent such behavior is consistent with the actor’s individual objective in his (her) given context?

 Interpret the structure of power relations in the organization

 Establish causal relations between concrete organizational facts (behaviors, relations, organization rules…)

A (very) simple example Relations The sales have a good relation with the sales manager The sales are in conflict with the after-sales service department Behaviors/Attitudes The after-sales department often receives clients’ complaints about product quality The sales manager never organizes meetings to discuss the ‘quality issue’ Organizational rules Bonuses of the sales department based on the sales numbers What causal relations between all those elements?

4. Organization and Environment – Contigency Theory

4.1. Corporation: an economic organization

Introduction: Historic Roots A.D. Chandler

4.1.1. From Family Workshop to Modern Corporation

4.1.2. Structures according A.D. Chandler

4.1.3. From Market Mechanisms to Administrative Mechanisms

88

A.D. Chandler

 (1918-2007)

 Teaches History at MIT, then chair de

« Business history » @ Harvard Business School.

Main books :

 Strategy and Structure [1962]

 The visible hand [1977] (réf. à Smith)

 Scale and Scope [1990] (économies d’échelle et de diversification)

Research:

 « Business Theory »

 No political affiliation

 Study the appareance and development of corporation since second industrial

revolution in the USA

89

©Harvard Business School

Introduction: Historic Roots with A.D. Chandler

18th Century (GB) 1st Industrial Revolution: new industrial, organizational and

technological issues:

 Improving complex technological system

 Financial issues (capitalistic intensity)

 Structuring and motivating large groups of people

 Adressing large and international markets (Need for infrastructure)

 Cost control, measuring profitability

Local and limited answers, then general principles and rise of management («

Administration »)

90

4.1.1. From Family Workshop to Modern Corporation

4.1.1.1. Historical developments

1/ Family Workshop under supervision of a « master »

2/ Manufacture Workforce / Assembly / Division of labor/ Payroll / Hierarchy

3/ Industrial Workshop Machines/ Higher productivity / Less resistance and know- how

La machine « réussit enfin à briser la résistance que le travailleur mâle opposait encore

dans la manufacture au despotisme du capital » (K.MARX [1867], Le Capital, livre 1er,

IVème section, chap. XV)

4/ Factory: Standardization / Knowledge management / Discipline

5/ Modern Firm: Modern Management/Mergers/ Networking /Increasing weight of

management/ Recrutement of skillful managers 91

4.1.1.2 – Modern Firm

Produce, distribute, organize

The Modern Firm according Chandler has 3 type of investments

 Technical facilities

 Development of marketing, sales, distribution des services marketing, commercial, distribution

 Management: recrutement and training

« Human Resource Management is vital for exploiting full potential of new technological processes » (A.D. Chandler, Scale and Scope, vol. I)

92

4.1.2. Structures according Chandler

4.1.2.1. Findings

1 – Modern Firm is a complex institution based on a hierarchical structure

2 – Each strategic move led big US corporation to change their structure

93

4.1.2.2. Strategy/Structure : 4 stages

1- Initial Stage

 Mono-activity non structured

 Growth in scale (volume)

2- Geographic expansion in main activity

 Multiplication of production sites

 Need for coordination

3- Vertical Integration

 Internalisation of some activies

 Centralized Organization, departement functions (functional)

4- Growth through diversification

 Multi-activity

 Autonomous large division (divisional) 94

From Market Mechanisms to Administrative Mechanisms

According Chandler[1990]

 Modern Divisional Firm replaced the traditional small corporation

when the administrative coordination allowed better results than the

market coordination

 Modern Firm: hierarchy of middle and top manager who supervise and

coordinate the units

 Manager’s hierarchy is a source of power, growth and development for

the firm itself.

95

Conclusion

The Visible Hand of Managers replaced the Invisible

Hand of the Market

96

Organization is also about organizing – about setting structures

Organizing:

How to allocate tasks and authority?

Centralization or decentralization?

Why and how coordinate?

Differenciation or integration?

How odes the environment impact structure?

To which extend should we standardize?

4.2. Mainstream Structures

4.2.1. – Functional Centralized Structure

 Vertical separation between direction / units

 Departements are specialized through functions

4.2.2 – Divisional Decentralized Structure

 Autonomous division based on products or markets

 Each division (« quasi-firme ») has its own structure and management

4.2.3 - Matrix Organizational Structure

98

4.2.1. Centralized Functional Structure

Basic Functional Structure

99

Managing Director

Sales Operations Finances Staff/Human Ressources

R & D Administration

Functional structure at FedEx: This organizational chart shows a broad functional structure at FedEx. Each

different functions (e.g., HR, finance, marketing) is managed from the top down via functional heads (the CFO, the

CIO, various VPs, etc.).

1.2. Divisional Structure

Headquarters

4.2.3. Matrix Organizational Structure

A customer unhappy with a product suggests that a change be made.

A salesman who finds the interesting suggestion passes it on to his

sales manager.

The sales manager passes it on to the Marketing Director, etc. Then the

latter to the Management Committee .... The director order a study to

the operational research department (constitution of a working group).

The results are forwarded to the management committee, which

decides and refers to the operations the newly decided decisions.

18 months later, the salesman makes a decision: return to his client

with a new offer.

Exercise – Draw the chart and

present alternatives

4.3. Contingency Theory

What’s the best structure/ organization?

« Contingency »: something might happen or not.

According Chandler:

 Strategy impacts Structure

 Structure impacts Strategy

Other sources of contigency:

 Age and size

 Technology (J.Woodward)

 Environment (Burns et Stalker ; Lawrence et Lorsch)

105

Age, size and structure

Age

 Start up: small scale, no structure, nostandardization

 Max Weber (1864-1920) : the older a company the more standardized/organized it is

Size

 The bigger a company is, the bigger is the need to divide labor, coordinate it throught hierarchical supervision

106

Technology and structure

Joan Woodward (1916-1971),  53-57 : Study of an hundred of british corporation

 Findings: different technology may explain different structures.

107

Process-Technology Structure

« Project »

Single product customized for a client, (building)

Simple: small hierarchy, strong collaboration étroite, mutual ajustment

« Mass Production »

Standardized products, large quantity

Very formalized, : important hierarchy, less skilled workforce , less managers

« Continuous Production »

Single product manufactured (i.e;. chemistry, steel)

Large automation, skilled workforce (control and maintenance). Huge Hierarchy

No « best structure »

Environment and structure

Impact of environment?

 Burns and Stalker [1963] : study on 20 british corporation

 Two dimensions: Complexity/ Frequency of Change

 Two model of system

• Stable Environnement: Mechanistic Systems

• Disruptive Environnement: Organic System

108

Mechanistic System suitable for stable condition

 Divisions of problems and tasks bewteen specialists

 Direct upervision by a manager

 Knowledge / Information of all issues centralized at the headquarters

 Vertical communication

 Loyalty and obedience

109

Organic System is suitable for unstable condition (new issues):

 Tasks are constantly changed

 Workers go beyond their responsibilities and duties

 Knowledge and information is localised everywhere

 Horizontal communications, crossfunctional

110

Environment and Structure Burns and Stalker The management of innovation [1966]

111

Dimensions Importance

Hierarchy

Centralization

Division of labor

Rules

Process

Individuals

Fort

Mechanistic SystemOrganic System

Les

s

Organic

System

Mechanistic

System

Mo

re

Conclusion

Several issues: Structures, efficiency, contingency, motivations…

Study Paul Lawrence and Jay Lorsch, USA

 Organization and Environment [1967] « Contingence Theory »

 Two findings:

1- None best structure

2- Some structure are more efficient than others

See Mintzberg

112

4.4. Structural Configurations (H. Mintzberg)

Assumptions:

An organization is a set of variables that are linked together in order to achieve a

« harmonious whole »

The is only a limited number of configurations that are able to survive (1983)

Mintzberg’s typology of configurations

The organization is defined through:

Its various parts

(Operational centre, Top hierarchy, Hierarchy line, Technostructure, Line staff)

Its co-ordination mechanisms

(mutual adjustement, direct supervision; standardized processes, outcomes, qualifications, norms

and behaviors)

The organization is constrained by:

- External pressure (environment, external coalitions)

- Internal pressure (size, age, technical system, internal coalitions)

6 configurations [Mintzberg 1983]

Context Design parameters Examples

Configuration Environment Internal characteristics Key part Key process

Simple Dynamic Simple

Hostile

Small size

Young

Simple tasks

Control: Owner

Top hierarchy Direct

supervision

SMEs

start-ups

Mechanistic

Bureaucracy

Stable

Simple

Large size (U form)

Ageing

Standardized tasks

Control: Technostructure

Process, rules,

technostructure

Planning and

control

Basic products

and services

Professional

Bureaucracy

Stable

Complex

Complex but

repeating tasks

Operational

Centre

Planning

Social process

Hospital

University

Divisionalized Simple, dynamic

Diverse

Large size (M form)

Ageing

Heterogenous tasks

Control: Hierarchy

Hierarchy Line Performance

goals

Multi

national

Adhocracy Dynamic complex

Young

Complex tasks

Innovative

Control: Experts

Line staff

support

Social

process

Tailored

services

Missionnaire Stable Simple

Simple systems

Control: Beliefs

Ideology Social

process

NGOs

4.5. The Need for Flexibility and Collaborative Management

https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2017/organization-of-the-future.html

4.5.1. Network Structures

4.5.2. Agile Structures (for punctual or long term costly projects)

4.5.1. Network Structures (H&M https://advergize.com/business/network- organizational-structure-examples-definition-advantages-disadvantages/ )

Control of satellites by center

(Market/ Bureaucracy/Teams)

4.4.2. Agile or Scrum (Project-based) Structures fostering a collaborative management

Spotify and its agile culture https://labs.spotify.com/2014/03/27/spotify-

engineering-culture-part-1/

Conclusion:

The organization is constrained by:

-External pressure (environment, external coalitions)

-Internal pressure (size, age, technical system, internal coalitions)

Organization Structures are bound to the Organization strategy and vice

versa

Do not underestimate:

- Methodological flaws

- Shortage of pilots or actors

- Personal Issues and strategies

- Resistance to changes

- Problems of social relations and informal structure

- Difficulties in evaluating the results

5. Case study: Pattern of Structural Change and Design

5.1. Pharmaceutical Company

5.2. Petzl Company

5.3. General Motors Company

6. Costs, outcomes and risks: organizational Economics

6.1. The Neo-Classic School

6.2. Transaction costs (Coase, North and Williamson)

6.3. Information and cooperation (Alchian and Demsetz)

6.4. Agency issues (Jensen and Meckling)

6.1. The Neo-Classic School : Maximization of profit and consequences

When we consider (in chronological order), the succession of the different schools:

productivist, behaviorist, mathematic, and psycho-sociological, we are struck by the

growing elaboration (increasing complexity) of concepts and tools.

Educated under Taylor and Fayol, of a body of principles which are stamped with

common sense and accessible to any manager, “the science of organization” became

little by little a highly formalised field, with a university jargon, inaccessible to the non

initiated in that field.

It is in reaction against this divorce between practice and theory, or between the

manager and the specialists (experts), that the “empirics” or “neo-classics” (Sloan,

Chandler, Drucker) rose up.

As the name indicates, the Neo-classic school comes up firmly within the framework which

was defined by the classics:

 On the one hand, its approach is empirical and clearly asserts the autonomy of the field

in comparison with related sciences of organization.

 It is oriented towards practical action and efficiency.

 On the other hand, it has a normative attitude and tries to define action rules, which

are explicit with Drucker, and implicit with Chandler.

 It proposes clear, simple, applicable principles, valuable in any organization.

The Neo- classic school premises

• Profit maximisation

• Decentralisation of responsibilities and decisions

• Widening of subordination range

• Management By Objectives (MBO)

• Control by exception “self management principles of the autonomous units”

• Motivation by competition

Profit maximisation

• Profit is above all a guarantee of survival and security.

• The employees of the company get benefits from growth, and higher salaries and

promotion as well.

The whole organization must strive towards maximisation; hence:

• Structure efficiency measurement with a battery of ratios

• Detection of elements contributing to the productivity or penalizing it.

• Implementation of any means able to improve actual or potential earnings

• The principle of maximisation served as a base for “the profit centre concept” (Sloan)

Decentralisation

• To maximize profits, implies the decision making process to be decentralized to the

lowest level as possible, and some product specialization (departments).

• The “lowest level” in decision making is the one compatible with information collection.

• Employees have to “take risks”, because they do not have all the information necessary

for a decision. They also have to be “trained” to make decisions.

Subordination range

• This is a core concept of the Neo-Classic school.

• As soon as the manager is discharged with “small decision making” (decentralization), he

can embrace, at one glance, a lot of different and various activities.

• So the span is wider and the structure can spread.

Management By Objectives (MBO)

• Increase of the managers’ (executives and officers) sense of responsibilities.

• Worthy reinforcement of the integration links.

• To integrate means:

• to make and have each individual accept the main objectives which are imposed in the

general interest,

and

• make accept the permanent arbitration from the highest level of management, which is

the only one having an overview to elaborate the main objectives.

See Peter F. Drucker/ Mc Manara

Competitiveness and motivation

In the Productivity School, motivations were limited by:

Fear of sanctions, lure of gain, job security

The Human Resources School added the need of integration to the group and social

coherence/ fairness (Mc Gregor, Herzberg, Maslow, Mayo, J. Adams, Vroom, Mc Clelland)

http://www.worldstarhiphop.com/videos/video.php?v=wshhzkLmz0alrRH9neMq

The Neo-classic school insists on positive needs, to have the individuals and the groups

surpassing themselves.

Main motivations that strive men to improve their work:

• The interest to do it,

• The right to widen constantly the field of their responsibilities.

The creation of these motivations requires:

• The participation of the workers to the tasks definitions which are assigned to them,

• clear objectives and interesting job,

• sanctions in case of failure, within a tolerance margin (to make a mistake once but not

the same one twice)

The two main positive motivations are:

• Personal interest for a work we are responsible for,

• Ambition and need of accomplishment and fulfilment.

The negative motivations are:

• Fear of failure

• Anxiety resulting from competition and rivalry.

Incentives and motivations

Incentives are mechanisms whereby the contribution (information, effort), which is

requested by the management from the participants is fulfilled. [Barnard, 1938]

They are often limited to the payroll that does not match the participants’ motivations,

which may be the search of prestige. [March & Simon, 1958; Akerlof, 1982]

Motivations are the reasons that drive the participants to provide the contribution

requested by the management

They are measurable to a certain extent in terms of mobility (turnover or sick leave) that

form X-efficiency [Leibenstein, 1976].

The contribution/reward model [March & Simon, 1958]

The internal coherence of the organization requires that incentives and motivations

interact, but they do not necessarly match.

The organization as a

coalition of interests

Stake

holders Firm

Contribution: Labor, capital, goods and services.

Reward: Wages, dividend, goods and services.

Shareholders

Staff

Customers

Suppliers

Sales

Others

Conclusion on the Neo-Classic school

 No other school has obtained as good results as the Neo-Classic one did, at the level of

individual efficiency.

 It’s strongly stamped with a typical American ethic, which emphasizes individual

ambition qualities, group and team spirit, exclusively based on results.

 The “everyday language” and “common sense” are not sufficient anymore to progress in

the knowledge of the organizations.

6.2.1. The Nature of firm introduction

6.2.2. The economic system and The Price Mechanism

6.2.3. Emergence of a firm

6.2.4. The size of firm

6.2.5. Conclusion

6.2. Transaction Coast - Ronald Coase

He formed the ideas during his undergraduate years in London in 1932, but the paper was later published in 1937.

In 1991 he was awarded Nobel Prize for Economics for his work on transaction cost.

1910 – 2013

Ronald Coase

6.2.1. The nature of firm introduction

1. Economic system,

The price mechanism: an economic term that refers to the manner in which the

prices of commodities affect the demand and supply of goods and services .

2. Why do the firms emerge?

3. How various factors like the division of labor affect the size of a firm.

4. Cost of size enlargement of a firm

Definition

▪ Adam Smith, one of the Founding Fathers of economics described the “Invisible hand of the price mechanism”

▪ Price mechanism occurs in Perfect Competition Market

✓ Price manipulation

✓ Transparency information

✓ No barriers to entry more and more firm ➔ Large numbers

6.2.2. The Economic System and the Price Mechanism

The function of Price Mechanism

▪ The direction of resources is dependent directly on the price mechanism

• Signaling function

➢ Demonstrate where resources are directed

• Transmission of preferences

➢ Information to producers about the changing nature of needs and

wants

• Rationing function

➢ As a rationing device to equate demand with supply

Economic system

Limited resource Price mechanism effect

➔ Free market in Perfect competition condition

Market

Feature of the Market

COMPETITIVE SYSTEM

▪ Prices as a coordination mechanism.

▪ Balancing the resource in distribution and control of the supply.

▪ Produce exchanges and the devised technique for minimizing costs.

✓ Maximizing the revenues and profits

✓ Determine the right detailed information in the market.

The limitation of the Price Mechanism

ECONOMIC SYSTEM " Works itself“

▪ Being used to allocate resources ➔ Scare resource allocated

▪ No vertical integration

▪ No incentive to produce or possibility for invention.

▪ Consumption manipulation

▪ Costly to compete

▪ No employment

6.2.3. Emergence of a firm

1. High Market Cost

2. Complexity of contract in the market due to uncertainty.

3. External factors as government and other regulatory powers treat transaction

differently

4. As a result of formal relation

● Some people prefer to work under the direction of another

● "Being ones own boss" a person can decide to pay another to work for them.

● The relationship of choosing what is known, a purchaser prefers a commodity

produce by a firm rather than what is not produced.

6.2.4. The size of firm

Why firms get bigger in size and scope?

1. Additional transaction organized by an entrepreneur

2. Vertical integration and combination will cause a firm to increase in size

3. Dissimilarity in transaction in the market

4. Changes which improve managerial techniques will increase the size of a firm

Other things being equal, a firm tends to be larger when

❖ Certainty of low organization costs.

❖ Confidence in managerial efficiency.

❖ Lower supply price.

Cost of enlargement

As a firm gets larger, the costs of organizing transactions within the firm may

rise.

"Diminishing management return" : The efficient and effective allocation of

factors of productions becomes a rising concern.

As a firm gets larger, the supply price of one or more of the factors of

production may rise.

6.2.5. Conclusion

A firm consist of a system of relationship which comes into existence when the

direction of resources is dependent on the entrepreneur

Using transaction cost to describe firm the nature of a firm; three categories of

transaction

. Cost of discovering the relevant price

. Cost of negotiating a contract Coordinated cost

. Cost of concluding a contract Managerial cost

❑ There will always be constant experimenting of more or less transaction by businessmen giving the theory of moving equilibrium.

❑ The interplay of marginal cost as it relates to marginal revenue in describing the cost curve of a firm.

❑ Clarification that management function is influenced by marketing cost, which help to state what is meant by “marginal product”

6.3. Information and cooperation (Alchian and Demsetz) to be presented

Alchian, A. A. and Demsetz, H. (1972) Production,

Information Costs, and Economic organization. The

American Economic Review, Dec., 62, 5, 777-795

1. Biographies of Authors

2. Theory of the firm

3. Team Production

4. Solutions

5. Conclusion

Harold Demsetz

 studied engineering, forestry and philosophy in four universities before being awarded a BA (1953) in economics in university of Illinois, an MBA (1954) and PhD (1959)from North Western University.

 A major figure in industrial organization through his writings on the theory of the firm, antitrust policy and business regulation.

 His principal influences include Frank Knight, Ronald Coase, Aaron Director, George Stigler and Armen Alchian.

Armen Alchian:

 obtained his BA (1936) at Stanford University. He was a statistician with the U.S Army Air Forces from 1942 to 1946 and he joined the Economics Department in UCLA where he spent the rest of his career.

 Alchian and Demsetz 1972 article was selected as one of the twenty most important articles published in first century of the American Economic Review.

What is a firm?

Employs factors of production

Produces goods and services

Sells to customers, other firms or the government

We work for and buy from firms.

The theory of the firm consists of a number of economic theories that describes, explains and predicts the nature of the firm. This includes its existence, behavior, structure and relationship to the market.

Alchian and Demsetz: cooperation as an explanation of the firm.

– Productivity increases through cooperative, team based production

– Demand for organizations to facilitate that cooperation

– More detailed picture than Coase sought to explaining the conditions when cooperative specialization benefited from organization or market.

They argued that Coase overstated power of hierarchy over market; thus:

– Firms do not own all of their resources

– Power to discipline

– Cooperative activities(team)are difficult and costly to manage.

Team production

“Resource owners increase productivity through cooperative specialization”

The members of the team can produce more working cooperatively with one another

than separately increasing the productivity

3 characters of team production

 Several types of resources are used and

 The product is not a sum of separable outputs of each cooperating resource

 Not all resources used in team production belong to one person

The economic organization, through which input owners cooperate, will make better use

of their comparative advantages to the extent that it facilitates the payment of rewards

in accord with input productivity

Two key demands placed on an economic organization

Metering input productivity

Metering rewards

“In team production, marginal products of cooperative team members are not so directly

and separably observable”.

Team production will be used if it yields an output enough larger than the sum of

separable productions to cover the costs of organizing and disciplining team members

Monitoring

o It’s will measure output performance, apportion rewards observe input behavior

as mean of detecting the marginal productivity.

o (Managing or examining the ways to which inputs are used in team production is a

method of metering the marginal productivity of individual inputs to the team’s

output)

Profit sharing plan

o This refers to various incentives plans introduced by businesses that provide

direct(salary) or indirect payments(accommodation, insurance, nurseries,

subscription for transport, canteen etc.) to employees that depend on company’s

profitability in addition to employee’s regular salary and bonuses.

How to reduce shirking in the company/ How to improve productivity?

Team Spirit and loyalty

o The true marginal costs and values could be equated to achieve more preferred positions

o Team spirit and loyalty promotes “a closer approximation to the employees’ potentially available true rates of substitution between production and leisure and enables each team member to achieve a more preferred situation.”

o Instilling team spirit and sense of loyalty may also reduces shirking, and changes the team members’ valuation of productive activity vs. leisure

Financial Incentives

o Efficiency wage models like Shapiro and Stiglitz (1984) suggest wages in rent as addition monitoring since this gives employees an incentive not to shirk. This can be a form of detection.

o Williamson, Watcher and Harris (1975) suggested promotion incentives within the firm as an alternative to moral damaging monitoring. This promotion can be based on measurable performance.

o Stock option: In some condition, employees can receive or buy shares of the company. This can be done in two ways; by increasing the capital of the company and also by motivating employees.

Cooperation/ Inclusiveness /Legitimacy?

CONCLUSION ON ALCHIAN AND DEMSETZ

 The classical firm is a contractual structure between input owners (employees) and central agent (employer).

 Alchian and Demsetz's analysis of team production is an extension and clarification of earlier work by Coase.

 According to Alchian and Demsetz the firm emerges because extra output is provided by team production, but that the success of this depends on being able to manage the team

 It is possible to increase production through team effort. When there is a team effort, it is hard to tell who is shirking.

 It is possible to meter each input’s (employees’) marginal contribution, either by observation or specification of the inputs

6.4. Agency issues (Jensen and Meckling) to be presented

Eisenhardt, K., Kahwaji, J.-L, Bourgeois L.J. (1997), How Can Management Teams Can Have a Good Fight, Harvard Business Review, July, p. 77-85

One person or entity (the "agent") is able to make decisions on behalf of, or that impact,

another person or entity: the "principal".

This dilemma exists in circumstances where agents are motivated to act in their own best

interests, which are contrary to those of their principals, and is an example of moral

hazard

Corporate management (agent) and shareholders (principal), politicians (agent) and

voters (principal), or brokers (agent) and markets (buyers and sellers, principals), or

employers (agent) and employees (principal)

7. Organizations as Open Systems: Evolutionary Theories

Beyond the classic Approach of Organization

Structure as a “response” to elementary, pre-determined functions of the organization

The input-output model (Katz and Kahn, 1966)

TECHNICAL NUCLEUS

ADJUSTMENT

MAINTAINANCE

Support Support OUTPUTS INPUTS

Organization as a socio-technical system composed of sub-systems

(Emery and Trist, 1960)

The technical sub-system ensures feedback and adjustment to external environment

The social sub-system ensures individual actions and relationships between individuals that have to optimize simultaneously.

There is no deterministic link between the technical sub-system and the social sub- system.

organizations as complex systems - The Systemic Approach - System Theory (Ludwig van Bertalanfy, 1950; Boulding, 1956)

System theory is an approach to the study of management that emphasizes the interdependent parts of an organization and its components.

“In order to understand an entity, one must thoroughly understand each interdependent part”.

In using the systems approach, the manager can perceive the relationships and interdependencies of the various subtasks in a total operation.

The origin of this approach occurred when it became important to master complexity.

What is a system?

• “A system is a set of elements, in dynamic interaction, organized to reach a goal”

• A system is a whole, non reducible to its elements

• A system has a goal

• A system has an organized structure

Examples:

• A human body is a system of organs in interactions

• An accounting department is a system: Several people, several machines and documents

(...) whose goal is to realize the accounts of a company.

Growing complexity of systems (Boulding, 1956)

Level 1 framework classification (static) e.g. geography, anatomy

Level 2 mechanics cycles (repetition) e.g. astronomy, machines

Level 3 control regulation (feed back) e.g thermostat

Level 4 open energy (reproduction) cell

Level 5 genetic division of labour

Level 6 animal mobility (structure of knowledge)

Level 7 human emotions (symbolic interpretation)

Level 8 social values (significance) firm, organization government

Level 1< Level 2 < …< Level 8

Two types of systems: Closed systems and open systems

• Closed systems do not adapt to, nor interact with, their environment.

• Closed system thinking can be exemplified by the “one best way” Scientific

Management School of thought based upon the belief that it is possible to scientifically

determine various aspects of organization. Today, the skillful and forward-looking

manager would rarely see management systems as closed.

• An open system is constantly interacting with its environment: The good manager must

have the set of mind, or the point of view, that quickly controls the variable interplay of

all the activities and people required to achieve its goals.

• An open system is defined in its environment; the boundary is the separation between

the elements of the system and its environment.

Characteristics of open systems

• The main quality of a system is its capacity to adapt to the changes in the environment.

• These adaptations imply a feed-back of information between the elements of the

environment and some elements of the system.

• To control the system is to compare information on the outcome to information on the

income.

• In the systemic theory, information and information networks play a great role.

• Any change or modification of the system is due to exchange of information

• A system is able to learn if it knows how to use the information on the past situations to

modify its behavior so as to better adapt to the environment in the future: The system

needs a memory.

A model is a representation of a system

• System theory approach tends to describe reality with a model.

• The use of a model (which is a simplification of the “real thing”) is useful:

• To improve and transmit knowledge on the system (by comparison with other systems)

• To act upon the system (by simulation, by modification of one input to check the impact

on the output...)

• Systems can be useful, but they are not the all-inclusive method of unifying the other

parts into a whole: The unifying factor is the intelligence and discretion of the manager.

• organizations are not only technical systems, they are also social systems: A manager

has to deal with interactions between the two systems.

Organization as an information system

• Shannon’s circuit variables (constraints on transaction) – operations (relationships

between participants)

• Chaining relationships and constraints – both technical and economic – in order to

address objectives

The variables-operations circuit

(Marschak from Shannon)

Transmission

Decisions

Uncoding

Objectives

Investigation

Costs

Reception

Signals

Actions

Signals

Events

Data

Variable Operation

Coding

Impact of Systems Theory

• The main impact of system theory on organizations is that it is dynamic and global.

• Global: It helps to handle more variables (social, technical, environmental...) than any

other approach.

• Dynamic: It tends to consider organizations as a set of actions and so:

• To show that any decision making has a goal which is action

• To insist on flows in the organization and interactions between them

• To consider that organization is in permanent evolution

170

Origins and premises of evolutionary economics (EE)

• It can be traced back to Alfred Marshall (1907), who insisted on both the core concept of

equilibrium (related to Newtonian dynamics) and the biological conceptions of

economic change.

• Economists consider individuals and organizations as entities that search and learn.

• Economic world is complex.

• EE is an analysis of long run and continuing economic change of the human patterns of

cooperation, coordination and social behavior.

• The process of evolution is path dependent and there is no unique selection

equilibrium. Any optimization must be understood as local and myopic.

• Evolutionary game theory develops.

• The main purpose of EE is to explain change over time in terms of path analysis that is

expressly dynamic.

• The explanation involves both random factors, which generate or renew some variation

in the variables and mechanisms that systematically winnow on extant variation. There

are inertial forces that provide continuity of what survives the winnowing.

• Characteristics of EE: Individual learning, organizational adaptation and environmental

selection of organizations.

Richard R. Nelson (1930-), American economist, professor at Columbia University, is one of

the leading authors in evolutionary economics.

Richard R. Nelson and Sidney G. Winter, An Evolutionary Theory of Economic Change (1982)

Evolution in Biology

• Two populations: Genotypes (the genetic inheritance of living creatures) and

phenotypes (a set of variables that influence the fitness of each living creature).

• A variety of learning experiences which shape the behavior of phenotype.

• The genes get carried to their offspring providing the continuity of the evolutionary

system.

• Mutations also create new genotypes and selection win nows through reproduction by

phenotypes.

• Phenotypes are not uniquely determined by genotypes.

• Optimization takes place through the “survival of the fittest”.

• Equilibrium is strongly path dependent and local.

Evolution in Sociobiology, social behavior and industries

The animal behavior involves modes of interaction with fellow members of one’s species

Social behavior patterns: The learned behavior can be passed from generation to generation

but the particular capabilities to learn and to genes and learning does not progress from

one generation to another.

The paths of cumulative evolution taken by cultural structures like science, technology, the

law, standard forms of business organization grasp the dynamics of change in modern

industrial societies and the aspects of the process of long run economic change in

modern industrial societies.

The Evolution of Science and Technology

Science evolves and this process generates progress

New scientific theories are blind and like mutations in that some cases will succeed and be

incorporated into the body of science (replacing older theories or correcting them in

some aspects or adding to them), and others will not succeed. “Selection mechanism”

that determines theories cannot be falsified (i.e. subject to tests according to Popper).

Technology evolves facing a number of problems, challenges and opportunities.

It follows a path considered as progress. Uncertainty is prominent and that uncertainty is

resolved only through ex post competition are the hallmark of evolutionary theories.

Fitness is defined in terms of solving better particular technological problems

What determines whether one solution is better than an other one may be the market.

Business Organization

• The ability to adapt to the changing enviroment including the competitive capacity

• Technology capacity and business organization

• Possibility to be highly productive and profitable

• Organizational innovations

• Fitness criterion, economic efficiency

• Large multinational corporation

• A firm to operate at lower costs with greater scale and scope and with greater

profitability

Business Organization

• The processes that generate new elements or modify old ones are to some extent

blind.

• Selection mechanism provides a large share of explanatory power.

• The mutation or innovation mechanisms have directed elements as well as random.

• The ability to specify fitness is important.

• Market profit is an important measure of fitness.

• Selection environment and hence survivals are also defined by non-market forces

• Efficiency is important for the evolution of organizational structures.

Routines of the Firm

• Firms as carriers of technologies and other practices that determine what they do and

how productively: “Routines”

• “Routines” are processes that involve profit-oriented learning and selection.

• The concept of routines is analytically similar to the genes in biological theory.

• Routines are analogous to genes, firms are analogous to phenotypes, or particular

organisms, in biological evolutionary theory.

• Unlike genes, firms do not have a natural life span, and not ultimately die.

• Firms are not stuck with their routines.

‘Standard operating procedures’ determine how and how much a firm produces under

various circumstances, given its capital stock and other constraints on its actions that are

fixed in the short run.

Routines determining the investment behavior of the firm.

The deliberative processes of the firm, those that involve searching for better way of

doing things.

The profitability of any firm is determined by what it is doing, and what its competitors

do, given the environment.

Economic Change and Development

• Firms are the key actors.

• Economic growth is viewed as the moving equilibrium of a market economy.

• Technical advance is an essential element, the increase in the productivity, the growth of capital stock and labor inputs, the rise in real wages.

Organizations before evolution:

In the early stages of an industry, firms tend to be small, entry was quite easy. The industry consisted in a number of smallish firms, but a lot of entry and exit.

Organizations after evolution:

Technology causes a particular pattern of evolution of firm and industry structure. That makes the quality of products improve, the market grows, so do the number of firms active in industry. As a dominant design emerges, specialized production processes are developed, barriers to entry begin to rise as the scale and capital needed for competitive production grows. Rapid product innovation, profitable extant firms grow and invest more in process innovation, entry barriers rise.

Some different kinds of organizations: private companies, public companies, interntational organizations, multinational organizations, etc.

The role of managers in organizational evolution

• Technology, market, and environment are always changing, managers must find ways

which is significant adjustment to change organization’s strategies accordingly to the

changed environmental conditions.

• Managers are comprehensive decisions makers, adapting to the changing routines of

organizations.

• Managers are those who have strategic management to manage organization evolve

according to the environmental selection.

8. Cultures and Group Dynamics

3.1. National Culture and Corporate Culture

3.1.1. National culture

A set of shared attitudes, values, goals, and practices that

characterizes a nation. An integrated national pattern of

human knowledge, belief, and behavior that depends upon

the capacity for symbolic thought and social learning

fostered by a nation state.

182

 National culture includes system of values

e.g. Charity in same company (In New York each one gives what he wants

/ In Paris each group consult with superior to give the same sum)

 National culture is learned : interaction/ elicit reward and avoid

punishment / negotiate what you want/ cause, avoid, resolve conflict

e.g. Korean use of “our”/ social skills at school in US / Elders in Asia

 National culture is convenient: smaller group difficult to identify / larger

groups too vague

Hofstede and Trompenaars Analysis

 National territory and national group not always homogeneous

3.1.2. Corporate/ Organizational Culture

A set of shared attitudes, values, goals, and practices that characterizes a corporation

An integrated pattern of human knowledge, belief, and behavior that depends upon the

capacity for symbolic thought and social learning fostered by the management of a

corporation.

e.g. Googleers https://www.google.com/about/philosophy.html

https://www.forbes.com/sites/rachelmontanez/2018/12/13/the-best-companies-for-

corporate-culture-in-2018/#64c46e1e3ee4

185

-

186

Organizational Culture Elements

Values

Heroes

Rituals

Symbols

Myths

Cultural Network

• Headquarter v. subsidiary culture/ department culture

• Professional culture v. corporate culture

• Others factors:

Values - assumptions shared by members

Beliefs and actions – open door policy

Religion – Protestantism/ Buddhism / Hinduism / Confucianism / Islamism

Political system – Google v. China / Tik Tok

Technology – same technology, different uses

Seven Organizational Culture Dimensions (Robbins et Judge, 2006)

Attention to details

Goal oriented

People oriented

Group Oriented

Agressiveness

Stability

Culture and performance (Peters et Waterman, 1982)

 Some cultural traits will lead to more performance

 Corporate Culture should aim to 8 pillars

Action Customer Proximity

Autonomy and

Entrepreneur ship

Productivity based on

Individuals

Value Oriented

Lean Management

Mix between loose and tights ties

Centered on its core

competences

Typology of Organizational Culture (Deshpande, 1993)

TYPE : CLAN

Dominant Attributes: cohesion,

participation, teamwork, family

values

Leadership Style: paternalism, mentor

Links : Loyalty, tradition

TYPE : ADHOCRATy

Dominant Attributes: entrepreneurship,

creativity

Leadership Style: Entrepreneur,

innovator

Links : Flexibility, entrepreurnshipTYPE : HIERARCHY

Dominant Attributes: order, rules, uniformity

Leadership Style: Coordinator,

administrator

Links : Rules, processes

TYPE : MARKET

Dominant Attributes: competitivene

targets,

Leadership Style: Decision Makers

Links : Objectives, decisions

Mechanistic Process

Organic Process

External OrientationInternal

Orientat

ion Fear and

Trembling

https://www.youtube

.com/watch?v=-

F7yxk9PHT0

Organizational Culture and Uniformity

 Culture is not a monobloc and everywhere in the organization

 Culture is subjective as being the result of fights, dissenssions, distortions

Different level of culture within an organization:

– Dominant Culture: fundamental cultures shared by all

– Sub-Cultures : located in unit, department, projects

3 majors problems:

 Hard to predict success based on Culture (e.g. Apple versus Samsung)

 Identity : Major barrier during merger (e.g. Compaq versus HP) - https://hbr.org/2011/07/the-soft-things-that-

make-merg / https://www.sfgate.com/bayarea/article/HP-moves-to-soothe-culture-clash-fallout-of-2847215.php

 Crash individuals (Disney; Domino’s Pizza, Amazon)

Conclusion – Organizational Culture?

Developping an Organizational Culture

 Key Role of Leadership (taille réduite du groupe et imprégnation de la culture)

 Leader or CEO’s personal character may color the whole organization culture (Dyson, Musk, Jobs, Mulliez , Riboud &

Faber, Trump?, Larry Ellison?, Mark Benioff and Salesforce…)

Maintaining an Organizational Culture

 Leader Attitude

 Evaluation Performance Indicators

 Selection Process, Training & professional development

 Promotion & Socialization processes

Changing the CEO = Changing Organization Culture?

UBER case: BEFORE and AFTER / MICROSOFT case : Steve Ballmer vs Satya Nadella / APPLE case : Steve Jobs vs. Tim Cook

3.2. Group Dynamics

-

194

Kurt Lewin’s Concept (1943)

• Group: setting where start and develop phenomeon, mechanism, processes linked to the group (coalition)

• Limited influences on individuals:

– Questions

• Does the group helps the individuals to perform or not?

• Does the group makes better decisions than the individuals?

• Does the group fosters passivity and lack of responsibility or ambition and competitiveness?

– Factors:

• Nature of the task (creative, repetitive)

• Organizational Culture (ambition, innovative corporation, …)

• Manager

 Risk of Manipulation of Group Dynamics

Analyze Ash Experiment: http://www.youtube.com/watch?v=7AyM2PH3_Qk

Elevator : https://www.koreus.com/video/experience-ascenseur.html

-

195

 Group Presssure:

– Uniformity : individuals integrate the group norms

– Conformity : individuals tune to the group norms

– Deviance : change related to the group norms

 Submission to Authority:

– WWII Experiments

– Milgram Experiment

 Resistance to Change:

– Bartelby https://vimeo.com/149818542

– Jan Palach https://www.youtube.com/watch?v=RIEnLzbVu3A

How do would you deal with it?

Group Dynamics

Conclusion: Going Further?

196

Systemic Approach of « Open » Organizations

Sub-Technical System

Sub- Structural

System

Sub-Cultural System

Sub- Strategic System

Sub- Manage

ment System

Inputs: Human, Material, Information Resources,

Outputs: Production of Goods and Services

Environment

al

Supra-

system

197

9. Perceptions

Introduction - Organization…a Living Organism made with Human Beings

Organization :

« sociotechnical» system:

can’t limit itself to its

efficiency in terms of output

199

How do we perceive? How do we judge?

Perception

1. the ability to see, hear, or become

aware of something through the

senses.

2. the way in which something is

regarded, understood, or interpreted in

an environment (or context)

What do you see?

What do you see?

Perception Factors

Target

- Nouveauté

- Mouvement

- Bruit

- Taille

- Proximité

- Ressemblance

Situation

- Moment

- Cadre professionnel

- Cadre privé Observor

- Attitudes

- Motivations

- Centres d’intérêt

- Expériences passées

- Attentes

Perception

• Selective Approach • On perçoit les éléments en fonction de

ses centres d’intérêt, de son éducation, expérience et attitudes

• Halo Effect • L’impression générale est constituée à

partir d’une unique caractéristique

• Comparison • La perception est valorisée ou

dévalorisée par la comparaison avec d’autres individus rencontrés récemment

• Stereotypes • La perception est conditionnée par des

stéréotypes • « les femmes refusent les offres de

mobilité », « les chinois sont travailleurs et consciencieux », « les séniors de peuvent acquérir de nouvelles compétences », …

• Self Projection • La perception d’autrui est modifiée en

lui attribuant ses caractéristiques personnelles

Cognitive and Perception Biases

Sujet (

Sujet (master Histoire de L’art) :

Analysez le tableau représenté ci-

contre

10. Motivation

Introduction - Organization…a Living Organism made with Human Beings

Organization :

« sociotechnical» system:

can’t limit itself to its

efficiency in terms of output

209

Reminder - Mainstream Assumptions on Motivation

In the Mechanistic School, motivations were limited by:

Fear of sanctions, lure of gain, job security

The Human Resources School added the need of integration to the group and social coherence/ fairness (Mc

Gregor, Herzberg, Maslow, Mayo, J. Adams, Vroom, Mc Clelland)

The Neo-classic (mainstream) school insists on positive needs, to have the individuals and the groups surpassing

themselves.

Main motivations that strive men to improve their work:

• The interest to do it,

• The right to widen constantly the field of their responsibilities.

The creation of these motivations requires:

• The participation of the workers to the tasks definitions which are assigned to them,

• clear objectives and interesting job,

• sanctions in case of failure, within a tolerance margin (to make a mistake once but not the same one twice)

The two main positive motivations are:

• Personal interest for a work we are responsible for,

• Ambition and need of accomplishment and fulfilment.

The negative motivations are:

• Fear of failure

• Anxiety resulting from competition and rivalry.

Incentives and motivations

Incentives are mechanisms whereby the contribution (information, effort), which is requested by

the management from the participants is fulfilled. [Barnard, 1938]

They are often limited to the payroll that does not match the participants’ motivations, which

may be the search of prestige. [March & Simon, 1958; Akerlof, 1982]

Motivations are the reasons that drive the participants to provide the contribution requested by

the management

They are measurable to a certain extent in terms of mobility (turnover or sick leave) that form X-

efficiency [Leibenstein, 1976].

The contribution/reward model [March & Simon, 1958]

The internal coherence of the organization requires that incentives and motivations interact, but

they do not necessarly match.

The organization as a

coalition of interests

Stake

holders Firm

Contribution: Labor, capital, goods and services.

Reward: Wages, dividend, goods and services.

Shareholders

Staff

Customers

Suppliers

Sales

Others

10.1. Human Relations School

Mary Parker Follett 1868 - 1933

Management is « the art of getting things done through people »

Pioneer of community organizing –

need of community organizing as school of democracy

Pioneer in cross organizational processes and conflict resolution – pragmatist approach to management / conflict is part

of every organization (depersonalizing orders through identifying and obeying the “law of the situation” and balancing

supervision with worker autonomy. It is the situation that determines what needs to be done not managers alone

Pioneer in Corporate Social Responsibility and Business Ethics (stakeholder theory)

214

Summary of Mayo's beliefs

 Individual workers cannot be treated in isolation, but must be seen as members of a group.

 Monetary incentives and working conditions are less important to the individual than the need to belong to a

group.

 Informal groups formed at work have a strong influence on the behavior of those workers in a group.

 Work performance is dependent on both social issues and job content.

 There is a tension between workers' 'logic of sentiment' and managers' 'logic of cost and efficiency' which can

lead to conflict within organizations.

 Managers must be aware of the 'social needs' and cater for them to ensure that employees collaborate with

the official organization rather than work against it.

10.2. Motivations Theories

Motivation Theories

Through Satisfaction

Hierarchy of Needs

X/Y

Through Processes

Expectations Equity

10.2.1. A. Maslow – Hierarchy of Needs - 1944

/ 1967

https://qz.com/work/1588491/maslow-didnt-make-the-pyramid-that-changed-management-

history/

• These are both influential attempts to combine the insights of HRT and SM into a

single framework.

If you have to manage a team that shows a lack of motivation, laziness, what would

you do?

McGregor 1906 - 1964

10.2.2. D. McGregor – Theory X and Theory Y

•McGregor distinguished two theories of management

• Theory X

• People basically don’t like working

• They are only motivated by money

• They must be closely directed and supervised if they are to

contribute to the organization

Theory X - Theory Y

• Theory Y

• Work is a natural part of human experience

• People will exercise self-direction and self-control to serve goals that

they believe in

• People seek rewards other than economic rewards, including

intrinsic satisfaction of their work

• People enjoy autonomy and self-control

• Most workers’ potential is only partially utilized

Theory X - Theory Y

Evaluating McGregor

• This is a ‘contingency approach’ to management, which moves away from the

idea that there is a single formula for managing

• Both theories are ‘true’ in practice => management has to use ‘carrots & sticks’

alternately

10.2.3. V.H. Vroom – Expectations https://wikispaces.psu.edu/display/PSYCH484/4.+Expectancy+Theory

10.2.4. J. Adams - Equity - 1963

Individual Contribution

Compensation (salary, promotion, benefits

...)

Equity or

Inequity perceived

http://www.worldstarhiphop.com/videos/video.php?v=ws

hhzkLmz0alrRH9neMq

11. Decision-Making Theories

11.1. Premises

11.2. An overview of Simon’s contribution: Rationality and uncertainty

11.3. The IMC model and the project mode

11.4. Rational, incremental and garbage can models

(Simon, March, Cyert)

8.1. Premises of the Social System Theory

 The Social Systems School is interested in the understanding of the informal and

psychological features of real life situations.

 This school is interested in decision making and communication processes

 Decision making is central to organizational structure.

 If we accept that decision making is about making choices and taking action then this activity is at the centre of all managerial work.

 Decision making has analytical, judgmental, political and inspirational aspects to it: an important part of the skill of managing is to combine these four processes.

 Unit of command: A little different from the Staff and Line structure, Simon suggests that an employee can receive orders from several persons, but in case of a conflict he must have only one referent (his designated “boss”).

 Span of control: Its size depends only on competencies and trust among personnel.

 Decentralization: Centralized decision making contributes to coordination but decreases motivation, decentralised decision making helps responsibility and competency development.

Decision making

 Management tools for optimization under

certain and uncertain environments all

use variables that are quantified under

rational points of view.

 Herbert Simon suggests that decisions are

too complex to allow individuals to be

totally rational; consequently, they should

be satisfied with decisions that are only

« reasonably rational ».

 Social Systems Theory is interested in

psycho and decisional factors which help

organization to reach mutual adjustment

and conformity between personal and

institutional goals.

Communication process

 Communication must be as short as

possible (to prevent modification in

the meaning of the message)

 Communication line (hierarchy line)

must be used completely (in totality)

 Every information must be originated

(“It comes from...”)

 Communication is linked to influence

(search for influence)

 Informal communication links is the

structure that completes the formal

structure to help fill the gaps

8.2. An overview of Simon’s contributions

Simon (1947) Administrative Behavior

The Brain as Scarce Resource:

Attention is the chief bottleneck in organizational activity, and the bottleneck becomes narrower and narrower as we move to the tops of the organizations.

March and Simon (1958) organizations

Features of their model of organization structure

Optimizing is replaced by satisfiying;

Alternatives of action and consequences of action are discovered sequentially through search processes; and each specific action deals with a restricted range of situations and a restricted range of consequences.

Simon (1982) Models of Bounded Rationality

To encompass goal conflict and uncertainty we need to know something about perceptual

and cognitive processes in order to predict short-term behavior.

Filtering of information is not a passive process but an active process involving attention,

which is influenced by hopes and wishes.

In an information-rich world, an abundance of information means a scarcity of whatever

information consumes: The attention of its recipient.

Information systems need to listen and think more than they speak. Stating the

organization problem in this way leads to a very different system design (that deals with

information overload).

Substantive Rationality: The product of thought

Behavior appropriate to the achievement of given goals within the limits imposed by

given constraints (economics view). Rational behavior, based on deductive reasoning, is

determined entirely by the characteristics of the environment within which it takes

place.

Procedural Rationality (Simon): The process of thought

The shift from substantive rationality to procedural rationality removes the emphasis on

deductive reasoning within a tight system of axioms and puts the emphasis on detailed

empirical exploration of complex algorithms of thought.

9.3. The IMC model of decision making (Simon):

problem solving

• Intelligence: What is the question?

• Modelling: Sketch a model of reality, one « scenario » or several « scenario »

• Choice: What is the best decision?

• Implementation: Make it in operation in the environment

• Feedback and control: Measure the results and performance and compare to the original forecasts

The rational model of decision making

Definition of the problem

Elaboration and evaluation

of alternative solutions

Feedback Selection

Implementation

Monitoring

Bounded rationality (Simon)

 Information is incomplete (uncertainty) and/or imperfect (ambiguous)

 Problems are complex

 Human capacity to manage and retrieve information is limited

 Time to make decisions is scarce

 Preferences of the decision makers may conflict as regards both the objectives and the means.

Further works

See the works of Behavorial Economists such as

Daniel Kahneman, Dan Ariely and Richard Thaler (Nudge)

https://www.youtube.com/watch?v=mWaIE6u3wvw

https://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions

8.4. Decision models

Given agreement vs. disagreement between goals and methods, hierarchy and bottom- line, the process of implementation may end in 4 classes of decision models

Goals

Agreement Disagreement

Agreement Rational model Coalition model

Methods

Trial model Garbage model

Disagreement (incremental)

Conclusion - Critics of Social Systems Theory

This approach has emphasized the importance of the differences in perceptions as the

main source to conflicts

but has discarded reasons like cultural habits and language used.

12. Power and Conflict

12.1. Cooperative and non-cooperative behaviours (Miles and Snow)

12.2. Exit, voice and loyalty (Hirschman)

12.1. Types of Strategies of the firm [Miles and Snow, 1978]

Defender: A mature company in a mature industry that seeks to protect its market

Prospector: A company that seeks to exploit new opportunities, to develop new products and to create new markets.

Analyser: A company that avoids excessive risks, concentrates on a limited range of products and seeks to outperform other companies on the basis of quality enhancement.

Reactor: A company which have little control over its external environment, lacking the ability to adapt to external competition and lacking in effective internal control mechanisms.

There is no single strategy.

12.2. Strategies of stakeholders [Hirschman, 1970]

When members of an organization perceive that it is demonstrating a decrease in

quality, performance or benefit to the member, they have three choices:

1. they can leave (exit), which is a passive attitude;

2. they can oppose (voice), which is an active attitude;

3. they can keep quiet (loyalty).

1. Frustrated employees can choose to quit their unpleasant job or disgruntled

customers choose to shop elsewhere; thus, they withdraw from the relationship

(exit).

2. Employees or clients can attempt to repair or improve the relationship through

communication of the complaint, grievance or proposal for change, asking for the

manager (voice).

The greater the availability of exit, the less likely voice will be used.

However, the interplay of loyalty can affect the cost-benefit analysis of whether to use

exit or voice.

Exit implies a loss (employee’s bonus, clients’ advantages).

Voice may be risky (penalties…)

• Where there is loyalty to the organization (e.g. brand loyalty for consumers), exit may be

reduced, especially where options to exit are not so appealing (small job market).

• By understanding the relationship between exit and voice, and the interplay that loyalty

has with these choices, organizations can craft the means to better address their

members' concerns and issues, and thereby effect improvement.

• In this connection, organizations should minimize frustration by measuring the level of

quality (or the state of the situation) that corresponds to the minimum cumulative

frustration.

13. Leadership and Authority

• Growing success of the notion by the 70s & 80s in the U.S.

– Time of downsizing, shareholder sovereignty

– Managers portrayed as incompetent, if not untrustworthy by takeover

actors & shareholders activists (Economic paradigm of the “Principal-

Agent”)

– MBA graduate students: occupations in consulting or investment

banking, rather than in management positions

• American Business School had to reorient themselves  Leadership as a

way to redefine their identity & mission

1. Leadership

 2 issues arise

1. How leaders emerge?

2. What builds the efficiency of leadership?

 3 kinds of theories of Leadership

 TRAIT theories

 BEHAVIORAL theories

 SITUATIONAL theories

Trait theories

Trait Theories (« Great Man Theories »)

Look for their common characteristics (personal, social, intellectual skills)

BIG 5 T. stipulates that the Human Personality is made of 5 main dimensions:

1. Extraversion 2. Agreeableness 3. Conscientiousness 4. Emotional Stability 5. Openness to experience

Behavioral theories

 The 1st Behavioral Theories of Leadership: the Ohio State Studies 1945

 A reverse approach: instead of looking for personality traits, observation of

actors in leadership positions, and identification of their behaviors

 Identification of two main dimensions of leadership:

1. Initiation of structure: focus on formal roles, organization of tasks

2. Consideration: socio-emotional aspect of leadership

 The most famous application is the Blake & Mouton Managerial Grid 1964

 Measure your own leadership style

https://en.wikipedia.org/wiki/Managerial_grid_model

Minimal Management (1,1) A minimum effort required to

have the work done and obtain

the commitment of the members

of the organization

Country-Club (1,9)

A great deal of attention to the

people, very little to the way

tasks are performed

Team-Focus (9,9)

Strong attention to both

coordination, organization and

trust, interpersonal relations

Task Focus (9,1)

Focus on work conditions, no

attention on psychological needs

Both TRAIT & BEHAVIORAL theories are limited…

… Because they do not take into account situational/contextual factors

that may impact the leaders’ success or failure

Situational Theories

 Fielder (1967): there is no unique ideal leadership style

 Both Human Relation orientation & Task orientation may be efficient, depending on the situation

 Situation defined by three components

1. Leader-member relations (mutual trust, respect, confidence)

2. Task structure (clear and structured)

3. Leader position power (power linked to position)

• A case of authoritative management that works

• Aimé Jacquet, World Cup 1998

– Leadership focused on task

– Communication with players very directive: what they should/not do,

objectives to attain, steps to be completed, individual sanctions

> Why this leadership style may work?

Leadership: situational theories

Favorable Situation

+ Leader-member relations

+ Task structure

+ Leader position power

Unfavorable Situation

- Leader-member relations

- Task structure

- Leader position power

CONCLUSION • TASK ORIENTED leaders perform well in EXTREMELY

FAVORABLE or DEFAVORABLE CONTEXTS

• HUMAN RELATIONS ORIENTED leaders perform best in situation with INTERMEDIATE FAVORABILITY

Case 1 Moderately favorable situation: a research scientist

 Leader-member relation is good

 Task is unstructured

 Position power is weak

=> A considerate style of leadership is preferred over the task oriented

Case 2 Unfavorable situation: a natural disaster – Mann Gulch Fire - Weick

 Leader-member relation is poor

 Task unstructured

 Position power is weak

=> If the leader is too relationship oriented, he may waste so much time that things gets out of control

All in all, are Leadership theories valuable?

Some distinguished scholars doubt it:

“Leadership scholars and practitioners have no definition of Leadership to hold

on to. The scholars do not know what it is what they are studying and the

practitioners do not know what it is they are doing”

Leadership for the Twenty First Century, Rost, 1999

2. Authority

Authority is voluntary obedience to a legitimate order (either organizational or

individual)

One question: Why do people obey to orders that may be conflicting with their

values?

Stanley Milgram, professor of psychology at Yale (1962) raised the following

issue: why ‘normal’ people might commit crimes?

The conclusion: they do it not because of sadistic impulse, but because of the

strength of authority

The experiment that demonstrated this phenomenon…

• The experiment: “The professor of

Yale University recruits volunteers to

participate in an experiment upon

memory”

• 2 individuals:

– One confederate (the “student”)

– One subject (the “professor”)

• The student has to memorize a series

of 50 words associations

• When he makes a mistake, the

professor has to push a button that

administrates an electric shock of 25

volts

• http://www.youtube.com/watch?v=B

cvSNg0HZwk

Results of the experiment:

27 out of 40 participants (67,5%) administrated the full-range of shocks up to 450 Volts (death)

33% stop when the student is in coma

 What proves that individuals obey under the pressure of authority?

 More of 19 variants of the experiment were conducted:  Females: 65% administer shocks up to 450 volts  Basic building instead of university building: 45,5%  Absence of the professor: 20%  When the student asks for the shocks: 0%  When the professor plays the role of the victim: 0%  When there is a conflict between 2 professors: 0%

What leads to authority obedience?

General conclusions

 The willingness to avoid conflict with the authority

 Responsibility of the act endorsed by the authority (Division of work)

 Psychological need of action consistency

 Easier to obey when the victim is depreciated (ex. dehumanization of the Jewish

people by the Nazis propaganda)

See Courpasson article about domination in soft bureaucracies and previous

organization theories

“What then are the main lessons in My Years With General Motors, at least as I read Alfred Sloan's

intentions?

The first is that management is a profession and that the manager is -- or should be -- a professional.

Like a physician or a lawyer, the professional manager has a ''client'': the enterprise

Managers do not make decisions by opinions nor according to their preferences. They manage

through the force of facts and not through the force of personality. ‘

The job of a professional manager is not to like people. It is not to change people. It is to put their

strengths to work.’

CONCLUSION

But ''performance'' is more than the ''bottom line.'' It is also setting an example and being a

mentor. And this requires integrity.

Dissent, even conflict, is necessary, indeed desirable. Without dissent and conflict there is no

understanding. And without understanding, there are only wrong decisions.

leadership is not charisma, not public relations, not showmanship. It is performance, consistent

behavior, trustworthiness.

-the professional manager is a servant. Rank does not confer privilege or give power. It imposes

responsibility.”

Peter Drucker, 1990