epgb6113+mgmt+theory+practice+lecture1

1. Management Theory and Practice: An Overview EPGB 6113 Feb 2012

Organizations are social entities that are goal-oriented; are designed as deliberately structured and coordinated activity systems, and are linked to the external environment ( Daft, 2004) .

An organization (hierarchy) is a system of consciously coordinated activities or forces of two or more persons.

Organizations are social systems, hence complex.

Public organizations (bureaucracies) are the states agents for public collective action.

Studying public organizations goes to the heart of governance and corruption issues:

public organizations deliver public services with more or less efficiency, equity, honesty, and accountability.

Three management mechanisms for public administrations;

public finances: how the money is controlled;

civil service: how people are managed;

organization: how activities are coordinated.

Theory is: a plan or scheme existing in the mind only, but based on principles verifiable by experiment or observation (Funk & Wagnalls page 1302)

Theories describe the distribution of power & resources in organizations, how organizations function, how people interact in organizations, and how organization systems maintain themselves.

Theories must be empirically tested and verified.

Independent and dependent variables must be identified in order to test a theory.

Therefore theories contain assumptions about cause and effect relationships

Organization theory: is the set of propositions (body of knowledge) stemming from a definable field of study which can be termedorganizations science (Kast&Rosenzweig1970) .

The study of organizations: is an applied science because the resulting knowledge is relevent to problem solving or decision making in ongoing enterprises or institutions(Kast&Rosenzweig1970) .

Two things:

Knowledge

Knowledge generated by practical experience and scientific research

Solving problems & managing resources(Kast&Rosenzweig1970) .

Organization theory has blossomed since the 1930s.

It primarily covers the private sphere and the North Atlantic.

Organization theory has many competing schools of thought.

There is not a dominant paradigm.

But there is a generally held view of organizations, in effect, as living, evolving social systems.

Sociology and politics, rather than engineering and economics, have driven OT.

Organizations have the characteristics of living, evolving systems.

There is a great variety of types of organization, responding to different and changing needs and environments.

The external authorizing environment i.e. who influences what the organization does and provides its resources is important and complex.

Rationality is bounded progress is often by trial and error.

Worker motivation is complex, extending beyond economic incentives into their social and personal needs.

The formal trappings of organizations stated goals and rules are only part of the story. Organizations also have a non-formal life an organizational culture which is vital in determining the actual tasks undertaken, the sense of mission, and organizational effectiveness.

Management technology stems from organization theory and even more applied in the sense that it focuses on the practice of management in ongoing organizations(Kast&Rosenzweig1970) .

Throughout history most managers operated strictly on a trial-and-error basis

The management profession as we know it today is relatively new

wide swings in management approaches over the last 100 years

parts of each approach have survived and been incorporated into modern perspectives on management

Industrial revolution

minor improvements in management tactics produced impressive increases in production quantity and quality

economies of scale- reductions in the average cost of a unit of production as the total volume produced increases

opportunities for mass production created by the industrial revolution spawned intense and systematic thought about management problems and issues

efficiency

production processes

cost savings

Bureaucratic structures can eliminate the variability that results when managers in the same organization have different skills, experiences, and goals

Allows large organizations to perform the many routine activities necessary for their survival

People should be treated in unbiased manner

Personalities

Max Weber

Structured network of relationships among specialized positions

Rules and regulations standardize behavior

Jobs staffed by trained specialists who follow rules

Hierarchy defines the relationship among jobs

Promotes efficient performance of routine operations

Eliminates subjective judgment by employees and management

Emphasizes position rather than the person

Limited organizational flexibility and slowed decision making

Ignores the importance of people and interpersonal relationships

Rules may become ends in themselves

Organizations are open systems

affected by, and in turn affect, their external environments

External environment

all relevant forces outside a firms boundaries

relevant- factors to which managers must pay attention

two elements comprise the external environment

competitive environment- immediate environment surrounding a firm

macroenvironment - fundamental factors that generally affect all organizations

The macroenvironment

most general elements in the external environment that can potentially influence strategic decisions

all organizations are affected by the general components of the macroenvironment

Laws and regulations

impose strategic constraints and provide opportunities

regulators- specific government organizations in a firms more immediate task environment

have the power to investigate company practices and take legal action to ensure compliance with the laws

The economy

created by complex interconnections among economies of different countries

important elements include interest rates, inflation rates, unemployment rates, and the stock market

economic conditions change and are difficult to predict

Technology

creates new products, advanced production techniques, and improved methods of managing and communicating

strategies that ignore or lag behind competitors in considering technology lead to obsolescence and extinction

Demographics

measures of various characteristics of the people comprising groups or other social units

age, gender, family size, income, education, occupation

workforce demographics must be considered in formulating human resources strategies

population growth influences the size and composition of the labor force

immigration also is a significant factor

increasing diversity of the labor force has both advantages and disadvantages

must assure equal employment opportunity

Social issues and the natural environment

management must be aware of how people think and behave

the role of women in the workplace

providing benefits for domestic partners of employees

protection of the natural environment

Competitive environment

comprises the specific organizations with which the organization interacts

Michael Porter- defined the competitive environment

successful managers:

react to the competitive environment; and

act in ways that actually shape or change the competitive environment

Competitors

competitors within an industry must deal with one another

organizations must:

identify their competitors

analyze how competitors compete

react to and anticipate competitors actions

competition is most intense:

where there are many competitors

when industry growth is slow

when the product or service cannot be differentiated

Threat of new entrants

barriers to entry- influence the degree of threat

conditions that prevent new companies from entering an industry

include government policy, capital requirements, and brand identification, cost disadvantages, and distribution channels

Threat of substitutes

technological advances and economic efficiencies may result in substitutes for existing products

substitutes can limit another industrys revenue potential

companies need to think about potentially viable substitutes

Suppliers

provide the resources needed for production

powerful suppliers can reduce an organizations profits

international labor unions are noteworthy suppliers

dependence on powerful suppliers is a competitive disadvantage

power of supplier determined by:

availability of other suppliers from whom to buy

the number of customers for the suppliers products

switching costs- fixed costs buyers face if they change suppliers

close supplier relationship is the new model for organizations

Customers

purchase the products or services the organization offers

final consumers- purchase products in their final form

intermediate consumers- buy raw materials or wholesale products before selling them to final consumers

customer service- giving customers what they want, the way they want it, the first time

disadvantageous to depend too heavily on powerful customers

powerful customers make large purchases and/or have other suppliers

The growth of government and the growth of the bureaucratic machine

A dramatic increase in the scope and size of government since the early Nineteenth Century has progressively exacerbated the principal-agent problem.

The call for greater efficiency and flexibility:

The costs of hierarchical organization, perceived from the beginning of the Twentieth Century.

The growth of special interests:

Continued growth in the Twentieth Century has threatened the effectiveness of government.

The growth of citizen voice:

Progressively stronger electorates, in terms of their knowledge and ability to organize, have however made the control problem potentially more soluble.

A crisis of trust and the rise of accountability

An apparent erosion of trust in recent decades has led to demands for more formal forms of accountability, and it may have undermined social capital within the public administration.

Better management, better information:

Improved management technologies, including the falling cost of information, make the control problem potentially more soluble.

Problems of poor control and inflexibility have led to a constant experimentation with new organizational techniques, including those that use economic incentives.

Performance-related pay.

Special-purpose, quasi-independent agencies (agencification).

Decentralization.

Budget reform (e.g. program budgeting).

The dilemma of reform:

The dilemma: trading off control and flexibility.

The progress: slow.

Recent, more systematic efforts to make public administrations more accountable, efficient, and responsive.

The core techniques borrow from the managerial methods of the private sector.

Privatization .

Quasi-market competition(and contractualization).

Management, relational, and personnel contracts; competition between public agencies; inter-agency fee charging; out-sourcing.

Performance orientation : changing the accountability relationship from an emphasis on inputs and legal compliance to one on outputs.

Results-oriented budgeting, full-costing of products.

Devolution of discretion . Devolution of decision making: reducing the burden of hierarchical rules and fostering greater discretion at lower points in the hierarchy.

Agencification, decentralization of personnel-management.

Specializationby splitting policy making and policy implementation, service financing and service delivery.

Executive agencies, hospital trusts.

Client-focus : reporting to and "listening" to the clients of the public sector.

Citizens Charter; e-government, participative budgeting.

Superficially, the issues look similar for more advanced and less advanced countries.

Less advanced countries have pursued similar formal arrangements: a legally-determined hierarchy of agencies, with even tighter procedural rules.

There is a similar debate on the tensions between hierarchy and efficiency (and the merits of NPM) , with similar efforts to modify rules to encourage more efficiency.

But the similarities are often superficial:

Public organizations typically perform poorly in developing countries

Proposition 1: the control (principal-agent) problem is more acute in developing countries: democratic control is often weak, even in many nominally democratic countries:

Patronage politics (and sometimes predatory-state politics) are more likely to prevail.

Kinship ties and other ties of mutual obligation tend to be stronger than professional ties.

Proposition 2: politics and ideology in today developing countries have led to over-sized, often corporatized public sectors, thus undermining organizational performance.

Origins of large public sectors in developmentalist ideologies.

Sustained in many regions by governments becoming employers-of-last-resort.

These political conditions often lead to a conflict between announced and effective rules:

Announcedrules favor a hierarchical ordering of public agencies and their rules-base operation.

Effectiverules may favor quite different objectives such as bureaucratic survival, patronage, or corruption.

This organizational informality makes it more difficult for public organizations to function effectively in the public interest.

By the same token, these conflicts make island solutions attractive for instance autonomous agencies that heads of states are better able to protect from political interference.

Results from a study on building sustainable capacity in public organizations in developing countries show the importance of organizational culture and managerial autonomy in good performance:

A broadly shared sense of mission improves performance.

Management emphasizing performance, participation, flexibility, teamwork, problem solving, and equity improves performance.

Clear signals about performance expectations (work to be accomplished, rewards and sanctions) improve performance.

Organizations with some autonomy in personnel matters are more able to set and reward performance standards.

epgb6113+mgmt+theory+practice+lecture1

Technology

management theory

organization systems

management approaches

management problems

practice of management

study of organizations

managed organization

organization hierarchy