Organization Theory & Design

Organization Theory & Design

Week I Chapter 1 – Organizations and Organizational Effectiveness What is an organization? Organization Theory & Design An organization is a tool people use to coordinate their actions to obtain something they desire or value. And that is to achieve their goals. An organization is a response to and a means of satisfying some human need. Who creates the organizations that arise to satisfy people’s needs? Sometimes an individual or a few people believe they possess the necessary skills and knowledge and set up an organization to produce goods and services. Entrepeneurship is the term used to describe the process by which people recognize opportunities to satisfy needs and then gather and use resources to meet those needs. The IT revolution is improving the way organizations operate and create value today. How does an organization create value? Value creation takes place at three stages: input, conversion, and output. Each stage is affected by the environment in which the organization operates. The organizational environment is the set of forces and conditions that operate beyond an organization’s boundaries but affect its ability to acquire and use resources to create value. The way an organization chooses and obtains from its environment the inputs it needs determines how much value the organization creates at the input stage. The way the organization uses human resources and technology to transform inputs into outputs determines how much value is created at the conversion stage. The result of the conversion process is an output of finished goods and services that the organization releases into its environment. An organization that continues to satisfy people’s needs will be able to obtain increasing amounts of resources over time and will be able to create more value. Why do organizations exist? Production of goods and services most often takes place in an organizational setting because people working together usually can create more value. To increase specialization and the division of labor The collective nature of organizations allows individuals to focus on a narrow area of expertise, which allows them to become more skilled or specialized at what they do. To use large-scale technology Economies of scale are cost savings that result when goods and services are produced in large volume on automated production lines. Economies of scope are cost savings that result when an organization is able to use underutilized resources more effectively because they can be shared across several different products or tasks. To manage the organizational environment Pressures form the organizational environment also make organizations the favored mode for transforming inputs into outputs. An organization’s environment is the source of valuable input resources and is the marketplace into which it releases outputs. It is also the source of economic, social, and political pressures that affect an organization’s ability to obtain these resources. An organization has the resources to develop specialists to lOMoAR cPSD|4169525 anticipate or attempt to influence the many pressures from the environment. This specialization allows the organization to create more value.