Patterns of Business Organization (RLE: Organizations)

John O'Shaughnessy

• Publisher: Routledge
• Year: 2013
• Print ISBN:
  9780415824743
• eBook ISBN:
  9781135960735
• Topic: Business
• Subtopic: Business General
• Index: Business

This book is a successor to the earlier and widely-used Business Organization. In this book the author helps the student to develop his or her own critical and conceptual understanding of the subject. As the author reviews the various approaches – classical, human relations, behavioural science, systems and contingency theories – he shows that none of them offers a simple progression from error to truth, but that all of them combine to contribute to a broader view of the field. The final chapter summarizes the author's viewpoint, applying the different approaches to a particular case study.

Chapter 1

Introduction

APPROACHES TO ORGANIZATION

When managers refer to ‘organization’ they are apt to think in terms of the company organization chart, schedules of responsibility and other structural factors involved in organization. However, organization as an academic subject tends to take a somewhat wider area for study than structures though structure remains of central interest. As Pugh says:

‘More specifically organization theory can be defined as the study of the structure, functioning and performance of organizations and the behaviour of groups and individuals within them’.

A more denotative definition of the subject would list issues such as the following:

( 1 Grouping tasks to form individual jobs.

2 Grouping jobs into sections, departments and higher administrative units such as divisions.

3 Delegating authority, allocating responsibility and determining the number of levels in the managerial hierarchy.

4 Providing an organizational climate so that people are motivated to give of their best in accomplishing organizational objectives.

5 Designing communication systems for effective decision-making, control and co-ordination.

6 Building an overall organization that is innovative, responsive and adaptive to relevant environmental changes.)

The first three above focus on the traditional structural issues while the last three reflect more the current concern with structure, functioning and performance. In any case, these issues become problems for those seeking to build an effective organization. Where wrong choices are made, then deficiencies in organization occur, which in turn, give rise to a number of inefficiencies:

1 Decisions may be too slow and poor in quality if:

(a) the decision makers are overloaded;

(b) the information required for decision-making is not readily available;

(c) the decisions are being made at the wrong place or level;

(d) the organizational climate does not encourage high performance.

2 Functions may not be administered on a consistent basis throughout the company, giving rise to anomalies and grievances. For example, a uniform policy on recruitment and wages may be lacking.

3 There may be a failure to co-ordinate inter-unit activities if there is:

(a) Lack of Consistency in Goals. Lack of co-ordination may mean people are working at cross purposes to each other. Priorities may differ and conflicting action taken. A classical example is that of the transport manager who lays down that the cost per mile of making deliveries to any area should never exceed a particular sum; deliveries being delayed until full loads can be sent. This policy may make the transport section appear efficient but the loss, from diminished sales through poor customer service, may be far higher than any savings on transport costs.

(b) Non-Synchronized Timing. The actions of individuals may not be synchronized or properly scheduled so that hold-ups and delays occur. For example, a computer installed before the necessary programs are ready is useless. An advertising campaign which is not reinforced in the salesman's sales appeals might dilute its effectiveness.

(c) Poor Specification of Duties. Necessary activities may not be carried out because each person in the team believes it is the responsibility of others. At a simple level, the quality control section may lay down standards and assume the works manager will inform production of the revised standards. Similarly, the works manager may assume that quality control has done the notifying. At a higher level there is often vagueness as to whose job it is to think about new ventures, product deletions and changes in company direction.

(d) Lack of Economy in Means for Achieving Co-ordination. Co-ordination is implemented through personal supervision, meetings, liaison personnel, memoranda, goals, formal schedules and procedures. All these means are facilitated or made more difficult and expensive by the organization structure as this affects the number to be consulted and their accessibility. Hence, even when co-ordination appears satisfactory, it may still be possible to re-group activities to reduce the cost of coordination.

4 Destructive Conflict. If members of an organization are in frequent conflict with each other, unified action becomes more or less impossible. What we seek is an organizational climate where debate is vigorous and sharp but where polarization and rancour are rare.

5 Sluggishness in response to technological and environmental changes. An organization to be effective must not only have objectives to give it direction; resources commensurate with the job to be done; mechanisms for achieving a co-ordinated and unified focus of resources on objectives, but must also have the ability to adapt to change if it is to survive. We are all familiar with the error of applying old solutions to new problems because of the failure of the organization to recognize that the problem has changed, or to mobilize the resources and ‘will to do’ what needs to be done.

There are many distinct contributions to the study of organizations, each of which might be regarded as a separate approach in its own right. However, we will distinguish only the following major categories for extensive discussion while reference will be made in the text to other approaches as and when appropriate.

1 The classical approach is the first to be considered. With its emphasis on structural factors and the functions or activities necessary to achieve objectives, it still dominates much of the thinking of industrial consultants. Once activities are identified, they are grouped to form individual jobs, sections and higher administrative units, the aim being to get efficient specialization and co-ordination without physically overloading supervisors or managers. Co-ordination is further facilitated by linking people together in a chain of command and by ensuring that each person knows where his responsibilities end and another's begins. The approach attempts to establish rules (the so-called ‘principles’ of organization) to act as criteria in developing an organization.

2 The human relations approach as well as the less ideological, more scientifically demanding behavioural science approach, studies motives, supervision, group and inter-group behaviour. From such studies the behavioural consequences of various organizational arrangements are deduced leading to recommendations on developing management actions, policies, organizational climate and structure that stimulate people to co-operate in achieving the aims of the business. In general, there can be no effective co-ordination of activities unless people are willing to co-operate, and such co-operation is not achieved automatically but may be evoked by the organization.

3 The systems approach, with its emphasis on interdependencies and studying the firm as a total system, can be distinguished from the previous two approaches. Yet there is no one single systems approach since different writers have taken different sub-systems for study. Some have taken functions and others activities while still others have taken the appropriate sub-systems to be the various roles making up the organization. In this book we have taken the relevant sub-systems to be the decisions that must be made to achieve objectives; the organization being thus designed to facilitate decision-making. Decision-making, rather than activities, is chosen for study because it is through the process of decision-making that policies are laid down and actions taken that are relevant to the future success of the company. But since decisions require information and information has to be communicated, the approach seeks to study not only the decision process itself but also information needs and communication channels. In general, without communication of information, there can be neither co-operation nor co-ordination.

This is admittedly a narrow approach since many systems writers would argue that there is a need to draw extensively from the other approaches. But it may be defended on the ground that it facilitates understanding of the role of information and communication channels in achieving organizational effectiveness. Also a number of those other systems approaches that both consider sub-systems other than decisions and draw on the other approaches are dealt with separately under the heading of ‘contingency theories of organization’.

4 These various contingency theories of organization do tend to have a system orientation but their emphasis on the need to adapt the organization to the demands of the technology (however variously defined), the need for innovation, or the demands emanating from environmental and decision-making uncertainty makes these approaches sufficiently distinctive and important to be considered separately.

BUSINESS OBJECTIVES AND STRATEGY: A FIRST STEP IN BUSINESS ORGANIZATION

Although setting objectives for a company or each separate business of that company is not generally considered a problem of organization, a brief discussion on the subject is advisable since management organizes to achieve objectives. If we were to seek improvement of an organization without first clarifying objectives we run the risk of thinking of better ways of organizing unnecessary functions or, alternatively, of proposing better ways to achieve unsatisfactory end-results.

Importance of Objectives

Objectives are the aims and expectations as to the future state desired. As far as management is concerned every function or activity within the company derives its significance from the contribution made to objectives. Objectives form the criteria for judging the appropriateness of some proposed course of action; the standard against which to judge future performance and constitute a common focus for the business as a whole.

Objectives refer to future expectations; some are designed to cover the immediate future, say, the next six months. These can usually be specified clearly in terms of time and degree so that they are often referred to as ‘proximate goals’. Such goals need to be qualified by the longer term objectives which aim to cover, say, from one to five years. These, in turn, may be linked to still longer term objectives, say from five to twenty years. All need to be related to each other so that conflict between the short term and long term can be resolved. For example, high profit may be achieved during the short period by lowering quality, but this may be at the expense of the long-term profit position.

Objectives are based on assumptions about the future. Hence their validity depends on the extent to which future conditions can be forecast. The further ahead the period considered, the greater the uncertainty about the future and the more the objectives have to be stated in general terms.

A company may make no explicit statement of its objectives. They may be implicit, or people within the company may agree on the action to be taken without agreeing on the purposes served by the action. However, there are advantages in formally setting out objectives.

(i)	Where objectives are absent or misunderstood there is a danger that action will be taken in pursuit of ends which no longer contribute to objectives. Setting them out formally facilitates their communication within the company and such communication lessens the risk of misunderstanding.
(ii)	If objectives are made explicit, any conflicts among them are more likely to be discovered, with consequent attempts at reconciliation.
(iii)	Explicit criteria for judging overall company performance are provided, unless the formal statement of objectives is merely for ‘propaganda’ purposes and conceals the true ones.

Profit: The Primary Objective

The primary objective of a company is to make a steady profit. Social objectives, such as standards of employee welfare, do not stem directly from this profit motive but usually have to be accommodated within some specific range of profit. Similarly, businesses have to be sensitive to national priorities and society welfare and these may act as constraints.

Profit is then the primary objective of any company in a free enterprise economy. It is sometimes denied that this is so and that other goals may be equal or more important. Chamberlain points out that top company executives have contributed to this belief by claiming multiple responsibilities-not only to shareholders but to the community, suppliers, employees, customers, and acknowledging that the interests of all these parties are not equally served by the pursuit of profit. However, top executives seldom explain a low profit position by acknowledging the priority of other goals except when these other goals have been forced upon them, as when BOAC (now British Airways) claimed that its losses arose mainly from being compelled by the Government to stake millions of pounds ‘unseen’ on new British aircraft, and to being required to run services (‘carry the flag’) along unprofitable routes.

Directors of a public company do not enjoy an easy life if they make relatively low profits. They are subject to criticism from financial commentators since profit is the criterion used in assessing whether the effort put into producing and selling is worth more than the expense of doing so. They may also have difficulty in raising capital; additionally they run the risk of a take-over and finding them-selves jobless. In any case, profit improvement in many companies is almost ‘institutionalized’.

Units are set up whose sole function is to improve the profit position of the company and budgeting procedures are established which emphasize cost reduction and profit. Profit may thus become the primary objective even if top management regard profit as merely one among a number of equally important objectives.

Problems with Objectives

Every business decision is meant to be a solution to a problem and the correct solution to a problem is that which contributes most to objectives. Without objectives we have no problems and without problems we have no need of decisions. The fact that the job of management is to make decisions and decision-making is management's day-to-day activity means managers always have implicit if not explicit objectives. Given that this is so why is there all this talk about management by objectives when there is no other way to manage than by objectives? The reason is apparent. All too often there is a failure to clearly think out what we are trying to accomplish. Ye...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Contents
• 1 Introduction
• Part I The Classical Approach
• Part II The Human Relations and the Behavioural Science Approaches
• Part III The Systems Approach
• Part IV Contingency Theories of Organization
• Part V Organizational Change and Conclusion
• Appendix: Decision Schedule
• Books and Articles Referred to
• Discussion Questions
• Index