Organizational theory design and change gareth jones multiple choice questions

Organizational Theory, Design, and Change

seventh edition

Gareth R. Jones Texas A&M University

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Library of Congress Cataloging-in-Publication Data Jones, Gareth R.

Organizational theory, design, and change / Gareth R. Jones.—7th ed. p. cm.

ISBN-13: 978-0-13-272994-9 ISBN-10: 0-13-272994-6 1. Organizational behavior. 2. Organizational behavior—Case studies. I. Title.

HD58.7.J62 2013 302.3’5—dc23

2011036274

ISBN 10: 0-13-272994-6 ISBN 13: 978-0-13-272994-9

10 9 8 7 6 5 4

For Nicholas and Julia

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Brief Contents

Preface xvii

Part 1 The Organization and Its Environment 1 Chapter 1 Organizations and Organizational Effectiveness 1 Chapter 2 Stakeholders, Managers, and Ethics 28 Chapter 3 Organizing in a Changing Global Environment 59

Part 2 Organizational Design 92 Chapter 4 Basic Challenges of Organizational Design 92 Chapter 5 Designing Organizational Structure: Authority

and Control 121 Chapter 6 Designing Organizational Structure: Specialization

and Coordination 148 Chapter 7 Creating and Managing Organizational Culture 179 Chapter 8 Organizational Design and Strategy in a Changing Global

Environment 207 Chapter 9 Organizational Design, Competences, and Technology 240

Part 3 Organizational Change 273 Chapter 10 Types and Forms of Organizational Change 273 Chapter 11 Organizational Transformations: Birth, Growth, Decline,

and Death 305 Chapter 12 Decision Making, Learning, Knowledge Management,

and Information Technology 334 Chapter 13 Innovation, Intrapreneurship, and Creativity 366 Chapter 14 Managing Conflict, Power, and Politics 391

Case Studies 417 Company Index 480 Name Index 483 Subject Index 485

v

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Contents

Preface xvii

Part 1 The Organization and Its Environment 1

Chapter 1 Organizations and Organizational Effectiveness 1 What Is an Organization? 1

How Does an Organization Create Value? 3

Why Do Organizations Exist? 5 To Increase Specialization and the Division of Labor 5 To Use Large-Scale Technology 6 To Manage the Organizational Environment 6 To Economize on Transaction Costs 6 To Exert Power and Control 7

Organizational Theory, Design, and Change 8 Organizational Structure 8 Organizational Culture 9 Organizational Design and Change 9 The Importance of Organizational Design and Change 11 Dealing with Contingencies 11 Gaining Competitive Advantage 12 Managing Diversity 14 The Consequences of Poor Organizational Design 14

How Do Managers Measure Organizational Effectiveness? 16 The External Resource Approach: Control 17 The Internal Systems Approach: Innovation 17 The Technical Approach: Efficiency 18 Measuring Effectiveness: Organizational Goals 19

The Plan of This Book 20 Organizational Design 22 Organizational Change 22

Summary 23 • Discussion Questions 23 Organizational Theory in Action: Practicing Organizational Theory 24

Open Systems Dynamics 24 The Ethical Dimension #1 24 Making the Connection #1 24 Analyzing the Organization: Design Module #1 24 Assignment 25

Chapter 2 Stakeholders, Managers, and Ethics 28 Organizational Stakeholders 28

Inside Stakeholders 28 Outside Stakeholders 30

Organizational Effectiveness: Satisfying Stakeholders’ Goals and Interests 34

Competing Goals 35 Allocating Rewards 36

vii

Top Managers and Organizational Authority 37 The Chief Executive Officer 39 The Top-Management Team 40 Other Managers 41

An Agency Theory Perspective 41 The Moral Hazard Problem 41 Solving the Agency Problem 42

Top Managers and Organizational Ethics 43 Ethics and the Law 44 Ethics and Organizational Stakeholders 45 Sources of Organizational Ethics 47 Why Do Ethical Rules Develop? 49 Why Does Unethical Behavior Occur? 51

Creating an Ethical Organization 52 Designing an Ethical Structure and Control System 53 Creating an Ethical Culture 53 Supporting the Interests of Stakeholder Groups 53

Summary 54 • Discussion Questions 55 • Organizational Theory in Action: Practicing Organizational Theory 55

Creating a Code of Ethics 55 The Ethical Dimension #2 55 Making the Connection #2 55 Analyzing the Organization: Design Module #2 55 Assignment 55

Chapter 3 Organizing in a Changing Global Environment 59 What Is the Organizational Environment? 59

The Specific Environment 61 The General Environment 63 Sources of Uncertainty in the Organizational Environment 65

Resource Dependence Theory 69 Interorganizational Strategies for Managing Resource Dependencies 70 Strategies for Managing Symbiotic Resource Interdependencies 71

Developing a Good Reputation 71 Cooptation 72 Strategic Alliances 72 Joint Venture 75 Merger and Takeover 76

Strategies for Managing Competitive Resource Interdependencies 76 Collusion and Cartels 77 Third-Party Linkage Mechanisms 78 Strategic Alliances 78 Merger and Takeover 78

Transaction Cost Theory 79 Sources of Transaction Costs 80 Transaction Costs and Linkage Mechanisms 81 Bureaucratic Costs 82 Using Transaction Cost Theory to Choose an Interorganizational Strategy 82

Summary 86 • Discussion Questions 87 • Organizational Theory in Action: Practicing Organizational Theory 87

Protecting Your Domain 87 The Ethical Dimension #3 87 Making the Connection #3 88 Analyzing the Organization: Design Module #3 88 Assignment 88

viii CONTENTS

Part 2 Organizational Design 92

Chapter 4 Basic Challenges of Organizational Design 92 Differentiation 92

Organizational Roles 94 Subunits: Functions and Divisions 95 Differentiation at the B.A.R. and Grille 96 Vertical and Horizontal Differentiation 97 Organizational Design Challenges 97

Balancing Differentiation and Integration 99 Integration and Integrating Mechanisms 99 Differentiation versus Integration 102

Balancing Centralization and Decentralization 103 Centralization versus Decentralization of Authority 103

Balancing Standardization and Mutual Adjustment 106 Formalization: Written Rules 106 Socialization: Understood Norms 107 Standardization versus Mutual Adjustment 108

Mechanistic and Organic Organizational Structures 109 Mechanistic Structures 110 Organic Structures 110 The Contingency Approach to Organizational Design 112 Lawrence and Lorsch on Differentiation, Integration, and the Environment 112 Burns and Stalker on Organic versus Mechanistic Structures and the Environment 115

Summary 116 • Discussion Questions 117 • Organizational Theory in Action: Practicing Organizational Theory 117

Growing Pains 117 Making the Connection #4 117 The Ethical Dimension #4 117 Analyzing the Organization: Design Module #4 117 Assignment 118

Chapter 5 Designing Organizational Structure: Authority and Control 121 Authority: How and Why Vertical Differentiation Occurs 121

The Emergence of the Hierarchy 121 Size and Height Limitations 122 Problems with Tall Hierarchies 124 The Parkinson’s Law Problem 127 The Ideal Number of Hierarchical Levels: The Minimum Chain of Command 127 Span of Control 128

Control: Factors Affecting the Shape of the Hierarchy 130 Horizontal Differentiation 130 Centralization 132 Standardization 133

The Principles of Bureaucracy 134 The Advantages of Bureaucracy 137 Management by Objectives 139

The Influence of the Informal Organization 140 IT, Empowerment, and Self-Managed Teams 141 Summary 143 • Discussion Questions 143 • Organizational Theory in Action: Practicing Organizational Theory 144

How to Design a Hierarchy 144 The Ethical Dimension #5 144

CONTENTS ix

Making the Connection #5 144 Analyzing the Organization: Design Module #5 144 Assignment 144

Chapter 6 Designing Organizational Structure: Specialization and Coordination 148 Functional Structure 148

Advantages of a Functional Structure 150 Control Problems in a Functional Structure 150 Solving Control Problems in a Functional Structure 151

From Functional Structure to Divisional Structure 152 Moving to a Divisional Structure 154

Divisional Structure I: Three Kinds of Product Structure 154 Product Division Structure 154 Multidivisional Structure 156 Product Team Structure 161

Divisional Structure II: Geographic Structure 163 Divisional Structure III: Market Structure 164 Matrix Structure 166

Advantages of a Matrix Structure 167 Disadvantages of a Matrix Structure 167 The Multidivisional Matrix Structure 168 Hybrid Structure 170

Network Structure and the Boundaryless Organization 171 Advantages of Network Structures 171 Disadvantages of Network Structures 172 The Boundaryless Organization 172 E-Commerce 173

Summary 174 • Discussion Questions 175 • Organizational Theory in Action: Practicing Organizational Theory 175

Which New Organizational Structure? 175 The Ethical Dimension #6 175 Making the Connection #6 175 Analyzing the Organization: Design Module #6 175 Assignment 175

Chapter 7 Creating and Managing Organizational Culture 179 What Is Organizational Culture? 179

Differences in Global Values and Norms 182

How Is an Organization’s Culture Transmitted to Its Members? 184 Socialization and Socialization Tactics 184 Stories, Ceremonies, and Organizational Language 187

Where Does Organizational Culture Come From? 189 Characteristics of People within the Organization 189 Organizational Ethics 191 Property Rights 193 Organizational Structure 196

Can Organizational Culture Be Managed? 197 Social Responsibility 199

Approaches to Social Responsibility 199 Why Be Socially Responsible? 200

Summary 202 • Discussion Questions 203 • Organizational Theory in Action: Practicing Organizational Theory 203

Developing a Service Culture 203 The Ethical Dimension #7 203

x CONTENTS

Making the Connection #7 204 Analyzing the Organization: Design Module #7 204 Assignment 204

Chapter 8 Organizational Design and Strategy in a Changing Global Environment 207 Strategy and the Environment 207

Sources of Core Competences 208 Global Expansion and Core Competences 210 Four Levels of Strategy 211

Functional-Level Strategy 213 Strategies to Lower Costs or Differentiate Products 213 Functional-Level Strategy and Structure 215 Functional-Level Strategy and Culture 216

Business-Level Strategy 217 Strategies to Lower Costs or Differentiate Products 218 Focus Strategy 219 Business-Level Strategy and Structure 219 Business-Level Strategy and Culture 222

Corporate-Level Strategy 224 Vertical Integration 225 Related Diversification 226 Unrelated Diversification 226 Corporate-Level Strategy and Structure 227 Corporate-Level Strategy and Culture 229

Implementing Strategy across Countries 230 Implementing a Multidomestic Strategy 232 Implementing International Strategy 232 Implementing Global Strategy 233 Implementing Transnational Strategy 234

Summary 235 • Discussion Questions 236 • Organizational Theory in Action: Practicing Organizational Theory 236

What Kind of Supermarket? 236 The Ethical Dimension #8 236 Making the Connection #8 236 Analyzing the Organization: Design Module #8 237 Assignment 237

Chapter 9 Organizational Design, Competences, and Technology 240 What Is Technology? 240 Technology and Organizational Effectiveness 242 Technical Complexity: The Theory of Joan Woodward 244

Small-Batch and Unit Technology 244 Large-Batch and Mass Production Technology 247 Continuous-Process Technology 248 Technical Complexity and Organizational Structure 248 The Technological Imperative 250

Routine Tasks and Complex Tasks: The Theory of Charles Perrow 250 Task Variability and Task Analyzability 251 Four Types of Technology 252 Routine Technology and Organizational Structure 253 Nonroutine Technology and Organizational Structure 255

Task Interdependence: The Theory of James D. Thompson 255 Mediating Technology and Pooled Interdependence 256 Long-Linked Technology and Sequential Interdependence 258 Intensive Technology and Reciprocal Interdependence 259

CONTENTS xi

From Mass Production to Advanced Manufacturing Technology 261 Advanced Manufacturing Technology: Innovations in Materials Technology 263

Computer-Aided Design 264 Computer-Aided Materials Management 264 Just-in-Time Inventory Systems 265 Flexible Manufacturing Technology and Computer-Integrated Manufacturing 266

Summary 267 • Discussion Questions 268 • Organizational Theory in Action: Practicing Organizational Theory 268

Choosing a Technology 268 The Ethical Dimension #9 269 Making the Connection #9 269 Analyzing the Organization: Design Module #9 269 Assignment 269

Part 3 Organizational Change 273

Chapter 10 Types and Forms of Organizational Change 273 What Is Organizational Change? 273

Targets of Change 274

Forces for and Resistance to Organizational Change 275 Forces for Change 275 Resistances to Change 278 Organization-Level Resistance to Change 278 Group-Level Resistance to Change 279 Individual-Level Resistance to Change 280 Lewin’s Force-Field Theory of Change 280

Evolutionary and Revolutionary Change in Organizations 281 Developments in Evolutionary Change: Sociotechnical Systems Theory 281 Total Quality Management 282 Flexible Workers and Flexible Work Teams 285 Developments in Revolutionary Change: Reengineering 285 E-Engineering 290 Restructuring 290 Innovation 291

Managing Change: Action Research 291 Diagnosing the Organization 292 Determining the Desired Future State 292 Implementing Action 293 Evaluating the Action 294 Institutionalizing Action Research 294

Organizational Development 295 OD Techniques to Deal with Resistance to Change 295 OD Techniques to Promote Change 297

Summary 299 • Discussion Questions 300 • Organizational Theory in Action: Practicing Organizational Theory 300

Managing Change 300 Making the Connection #10 301 The Ethical Dimension #10 301 Analyzing the Organization: Design Module #10 301

Chapter 11 Organizational Transformations: Birth, Growth, Decline, and Death 305 The Organizational Life Cycle 305 Organizational Birth 306

Developing a Plan for a New Business 307

xii CONTENTS

A Population Ecology Model of Organizational Birth 309 Number of Births 310 Survival Strategies 311 The Process of Natural Selection 312

The Institutional Theory of Organizational Growth 314 Organizational Isomorphism 315 Disadvantages of Isomorphism 316

Greiner’s Model of Organizational Growth 316 Stage 1: Growth through Creativity 317 Stage 2: Growth through Direction 318 Stage 3: Growth through Delegation 318 Stage 4: Growth through Coordination 319 Stage 5: Growth through Collaboration 320

Organizational Decline and Death 321 Effectiveness and Profitability 321 Organizational Inertia 323 Changes in the Environment 324 Weitzel and Jonsson’s Model of Organizational Decline 325