Management Organization

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Anne Drumaux Management § Organization

Solvay Business School 1

Management § Organization

Introduction

• A short story

• A first lecture of organizational stakes

• Quiz

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“From Brussels to Hanoi”

The organizational story of a missed

plane

– Brussels- CDG Paris : AF 7184

– CDG Paris-Hanoi : VN 534

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“From Brussels to Hanoi”

Decision-making

– Timing

– Available information

– Partnership Rail-Airlines Companies

– Partnership Airlines

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“From Brussels to Hanoi”

Behavior

– Cooperation among partners

– Cooperation between agents

– Preferences of AF & VN agents

– Conflict management

“From Brussels to Hanoi”

Rationality

– AF staff person at CDG/VN staff person at

CDG

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E. Friedberg on organizational

theory

• Decision-making and organization are

linked

• Behind behavior, rationality

• Myth of rational decision making as a

representation of our intelligence

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Chap 1 : Perspectives in

Organization Theories

• Management and Organization

definitions

• Organization Main Theories

• Management process

• The “Five circles” model of organization

Management definition

Many definitions… many approaches

Management is

a process in relation withresources

to reach organizationalgoals

« Management is an action, an art, a way to conduct an organization, to direct it, to plan its

development, to control it » (Thiétart,1960) Management definition is related to organization

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Management

or general policy of the enterprise

synthesis of information (marketing, production management, human resources management, finance…)

generates own process

Organization

Organization definition:

2 or more peoples working together in a structured way

to achieve goals

« an Organization is a social unity with an aim » (Litterer, 1960)

« an Organization is a response to collective action » (Crozier, 1977)

« Organization is defined like a collective action pursuing a common mission » (Mintzberg, 1989)

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Organization Human ressources Financial ressources Physical ressources Information ressources Petrofina corporation Drilling platform Executives & workers Profits Stockholder investments Refineries Office buildings Sales forecast Opec proclamation Brussels University Faculty Secratariat staff Alumni contributions Government grants Computers Campus facilities Research reports Government publications Brussels city Police officers

Municipal employees Tax revenue Government grants Sanitation equipment Municipal buildings Economic forecast Crime statistics Grocery store Grocery clerks

Bookkeeper Profits Owner investment Building Display shelving

Price list from suppliers Newspaper ads competitors

Organization theories

Evolution in relation with historical and social

times and places

Attempts and various approaches beginning at

the end of the 19th century in Europe and US

5-6 Basic « schools » of Management §

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1. Classical School

( the foundators)

• 1880-1920

• Model « one best way »

• Model focused on mass production and

on scale economies

• Mecanist conception of organization

• Max Weber (1864-1920)

The Theory of Social and Economic Organization (1924)

Why people obey to orders?

Distinction between power and authority Organization Typology :

charismatic legitimacy traditional legitimacy rational legal legitimacy

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Bureaucracy as the ideal organization whose activities and objectives were rationally thought Bureaucracy as an ideal type based on

principles:

Norms by mutual agreement

Clear hierarchy with functions and jobs Each job has a sphere of legal competence Hierarchy related to the function and not to the

person

Selection on qualification ( examinations) Career : promotion by superiors

• Henri Fayol (1841-1925)

Administration industrielle et générale(1916)

identifies principles and skills of effective management : Division of labor

Authority and responsibility

Discipline from good leadership,

Unity of command, Unity of Direction,

Degree of decentralization of authority, Subordination to common good, Equity,

Stability of staff, Initiative...

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• Frederic W.Taylor (1856 - 1915)

Principes of Scientific management(1911)

Principles :

Scientific study of work by specialists Scientific selection and training of staff

Scientific study and scientific selection of the worker Cooperation between managers and workers Hierarchy is not enough to ensure effective

coordination

Best methods for performing any tasks (« one best way »), selecting, training and motivating workers

Differential rate system :

payment of higher wages to more efficient workers + : production « miracle » with increasing productivity - : emphasis on productivity and profitability led to

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2. The behavioral school

(Human Relations)

• 1930-1970

• Research in association among big

enterprises and academics

• Role of human factors in the functioning

of enterprises

• Role of motivation

Elton Mayo (1880-1949)

Democracy and Freedom( 1929) The human problems of an industrial civilization(1933)

Organization is people

Understanding of the workers themselves as opposed to an understanding of the work Hawthorne effect : (Western Electric 1927-1932)

studies on the effect of work conditions (lighting, pauses, productivity primes…)

shows the possibility that workers who receive special attention will perform better simply because they receive that attention

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Abraham Maslow (1908-1970)

Motivation and Personality (1954)

hierarchy of the needs (physical and safety, …, ego needs) emphasizes the fact that when

lower-level needs are satisfied, most people are motived more by higher-level needs

a satisfied need is not anymore a factor of motivation

Physiologic needs Security needs

Social needs Estime & respect

Ego needs

3. The Cognition School

James March (1928) & Herbert Simon (1916-2001)

Organizations (1958)

analyse patterns of behaviors

show that individuals stay in an organization as long as retributions ( salary, status, ego needs…) are superior in their view to their contribution (work, effort, subordination…) cognition : people function in the organization

with a certain type of rationality: a bounded rationality

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• Douglas Mc Gregor (1906-1964)

– The human side of the enterprise (1960)

management decision-making is based upon assumptions about human nature

Theory X ( people are lazy, do not accept responsibility, necessity to constraint) versus Theory Y ( people enjoy working, seek challenge, able

to direct himself, ordinary man is able to learn, intellectual potential is rarely used )

4. Structural contingency

approach (1930 -1970)

≠one best way

Influence of variables : size, age, strategy, technical system of production, environment impact)

management technique that best contributes to the attainment of organizational goals might vary in different types of situations

the manager ’s task is to identify which technique will, in a particular situation, under particular circumstances, and at a particular time, best

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• Charles Perrow

Organizational Analysis: a sociological view (1970)

Introduces a typology of technical systems of production which explain the structure of the organization

2 types of influences:

Nature and repetitively( unity, mass production, continued)

complexity

• Arthur Chandler

Strategy and Structure (1962) Study between 1909-1959 of big US Enterprises (GM,

Du Pont, Standart Oil, Sears§ Roebuck)

Structure is determined by strategic choices: Enterprises offering limited quantity and scope of

products are often centralized

When size, market are growing, structure of enterprises were modified to match with growth strategy:

Vertical integration for volume strategy Divisionalization for diversification strategy

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Theories of contingency approach

Organizational structures are influenced by Organizational structures are influenced by Internal Variables External Variables (environment) age size technology strategy variability turbulence relativity national culture coordination Labor division

Starbuck, Greiner, Stinchcombe Dale, Blau, Aldrich

Woodward, Perrow Chandler, Child Burns et Stalker Emery et Trist Laurence et Lorsch Hofstede Mintzberg

5. Power and rationality limits

( organization sociology) (1945-1980)

– 1945-1980

– Focus on power in organizations

– Focus on decision process

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• Richard M. Cyert § James March

A behavioral theory of the firm (1963)

Organization is a coalition of members with different goals; consensus only on general aims; conflicts solved by local rationality and by sequential treatment of problems

Uncertainty is eliminated step by step without anticipation

Problematic search Sliding rules and goals

• Chester Barnard (1886-1961)

• believes that individual and organizational purposes can be kept in balance; he introduces the concept of « zone of indifference » that is what the employee would accept to do without questioning the manager ’s authority

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• Michel Crozier

(1922-With G. Friedberg, L’acteur et le système(1977)

Organization as a place of collective action is composed of actors

Organization is never totally controlled ; incertitude zones exist ;one may pursue own goals

Power as a way to master incertitude Actors inside the organization may control

incertitude's zones : particular competence, link with an environnemental segment, communication, information, rules application...

6. Strategic reactivity & participative

management

• 1980-• Economic context more turbulent ,

enterprises and academics explore flexible

organization

• Focus on adaptability

• Role of culture

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William Ouchi

A conceptual framework for the design of organizational control mechanisms (1979) Markets, Bureaucracies and Clans (1980)

Control consists to achieve cooperation among individuals who hold partially divergent objectives

3 sources of control: markets, bureaucracies, clans (possible combination)

Market control take place through competition : when organizations participate in free markets, prices and profits can be used to evaluate and control their performance Bureaucracies rely on a combination of rules, procedures,

documentation and surveillance to achieve control Cultural values, norms and expectations provide the primary

mechanisms of control to organizations that use clan control

Chronology of organizational theories (SCOTT)

Organization is a closed system Organization is an open system Individual is a rational agent Individual is a social 1900 1900 --19301930 1960 1960 --19701970

Organize for efficient production Adapt structure

Directive Management Contingency and planification

Human Relations Participating management

”Order from rules” ”Organization modeled by exogenous forces”

Max WEBER(1864-1920) Frederick TAYLOR (1856-1915) Henri FAYOL (1841-1925)

Alfred CHANDLER

Paul LAWRENCE et Jay LORSCH Johan WOODWARD Charles PERROW Elton MAYO Douglas McGREGOR Abraham MASLOW Frederick HERZBERG Karl WEICK James MARCH William OUCHI

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ENVIRONMENT

Culture Social structure Physical structure Technology

ORG

Five circles model

(Hatch, 1997)

Comparison of characteristics associated with industrialism and post-industrialism (Hatch, 1997)

• global competition

• de-concentration of capital with respect to nation state • fragmentation of markets

and international decentralization of production

• rise of consumer choice, demand for customized goods

• rise of social movements, single issue politics, service class

• pluralism, diversity, localism • nation states

regulate national economies • mass marketing • Standardization • the Welfare State Environment

Postindustrial Industrial

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Comparison of characteristics associated with industrialism and post-industrialism - continued (Hatch, 1997)

• flexible manufacturing, automation

• use of computer for design, production, and stock control

• just-in-time systems (JIT) • emphasis on speed and

innovation • service/information output • mass production along Taylorist /Fordist lines • routine • manufacturing output Technology Postindustrial Industrial

Comparison of characteristics associated with industrialism and post-industrialism – continued (Hatch, 1997)

• new organizational forms (e.g., networks, strategic alliances, virtual organization) • flatter hierarchies with

horizontal communication and devolved managerial responsibility

• outsourcing

• informal mechanisms of influence ( participation, culture, communication) •Vertical and horizontal

disintegration

• Loose boundaries between • bureaucratic • hierarchical with vertical communication emphasized • specialization • vertical and horizontal integration • focused on control Social structure Postindustrial Industrial

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Comparison of characteristics associated with industrialism and post-industrialism – continued (Hatch, 1997)

• deconcentration of people • reduction in transportation

time links distant spaces and encourages international, global orientation

• compression of temporal dimension (e.g., shortening product lifecycles) leads to simultaneity

• concentration of people in industrial towns and cities • local, nationalistic orientation • time is linear Physical structure (space-time) • celebrates uncertainty, paradox, fashion • organizational values :

quality, customer service, diversity, innovation • celebrates stability, tradition, custom • organizational values : growth, efficiency, standardization, control Culture Postindustrial Industrial

Comparison of characteristics associated with industrialism and post-industrialism – continued (Hatch, 1997)

• frenetic, complex • knowledge-based skills • cross-functional teamwork • greater emphasis on learning • more outsourcing, subcontracting, self-employment, tele-working • routine • deskilled labor • functional specialization of tasks Nature of work Postindustrial Industrial

Based on: Clegg (1990); Harvey (1990); Heydebrand (1977); Kumar (1995);

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The metaphors of organization theory

(Hatch, 1997)

an artifact who would like to be a symbol of the organization a pattern of meanings

created and maintained by human association through shared values, traditions, and customs Culture

Symbolic-interpretive

an interdependent part of an adaptive system a living system that

performs the functions necessary to survival esp. adaptation to a hostile world Organism Modern Machine Metaphor an engineer who designs builds and operates the organizational machine a machine designed and

constructed by management to achieve predefined goals Classical period Image of the manager as … Image of the organization as … Perspective

The metaphors of organization theory – continued (Hatch, 1997)

Collage

Metaphor

a theorist

the theorist is an artist an organization theory is a

collage made from bits of knowledge and

understanding brought together to form a new perspective that has reference to the past Postmodern Image of the manager as … Image of the organization as … Perspective

Management Organization