9.1 Organizational theory and management cybernetics

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  Teori Dasar Sistem [IS1223]

ORGANIZATIONAL THEORY AND MANAGEMENT CYBERNETICS Organization “In public service the organization’s money is the means and operations are the goal. In private corporations money is the goal and business the means”

   Organizations are the product of the surrounding society whose needs they serve.

   Organizations are creation of man, established with the sole aim to realize goals that individually acting persons scarcely can Organization [2]

   organization:

  The distinctive mark of the human

   It represents certain preferences regarded as a unit.

   It makes decisions and tries to implement and optimize them.

   It determines its own internal structure and the aims of the subsystems.

   It has internal control system.


The origin of modern trading



To solve large-scale problems of different

kind has always implied the compiling and combining of resources with labour.


The trading corporation soon grew in size

with its practices of using partnership.

   Problem: 

  The possibility to raise enough capital for large projects.

   Each partner was responsible for all the other

and if one of them died the partnership was


The origin of modern trading

corporation [2] The demands to be satisfied by well-

   working corporation: 

  The accumulation of large sums of capital should be enhanced.

   The life span of the corporation should outlast the life span or interest of its owner.

   Risks and liabilities of those participating in the corporation should be limited.

   It should be possible to participate without involvement in daily management.

Organizational Stakeholders

   Shareholders

   Lenders

   Suppliers

   Customers

   State and community

   Competitors

   Management

   Employees The development of organizational theory Frederik Taylor (1856 -1915)

   Conclusion the problem:


The used method in production were built on old habits instead of systematical studies. A rigid hierarchical structure managed the production with implacable discipline and individual worker skill was not utilized. No measures existed regarding individual working performance or the average achievement per day for a standard worker. Workers opposed every attempt to increase productivity as this was a threat to their own The development of organizational theory [2] Taylor recommended four measure:

   Every task should be studied according to scientific methods, not heuristics. A good corporations between management and workforce must be established in order to facilitate and develop scientific methods in production.

The most skilled worker should be selected for every specific task and thereafter be trained and developed for this very task. Assignments and responsibility should be shared between management and workers according to the idea of the functional organization. The development of organizational theory [3]

   

The working man on the plant floor

claims gratitude and safety.

  Elton Mayo (1880-1949)


The group standards of the working

force are stronger than prevailing standards of the company.

   Social standards together with technical and physical prerequisite define production output.

   Every company has both a formal and The development of organizational theory [4] Max Weber (1841-1925)

    Authority and responsibility should go hand in hand

   Order and method should always prevail

   The wholeness is more important than the parts

   Every employee should only have one superior

   Information should flow through official channels


All persons working in the organization must

show discipline

   Division of labour and specialization is necessary. The development of organizational theory [5]

   Henry Fayol (1841-1925) 

  Hierarchical structure 

  Rigid organization 

  High formalization 

  Departmentalization  Specialization and division of labor. 

  Strict distribution of responsibility 

  Vertical chain of command 

  Well defined internal relations and clear lines command  The development of organizational theory [6] Henry Fayol (1841-1925)

   Official reporting is used for coordination. The superior has the right to command the subordinate. Program management A system of authority which is impersonal and belongs to the position rather than individual. Position awarded on the basis of formal competence. A system is responsibility and accountability Safe employment and regulated system of promotion with possibility to earn one’s living Distinct separation of members’ organizational and personal lives The development of organizational theory [7]

    Normative Power (symbolic means like prestige, appreciation, devotion)

  Amitai Etzioni


Benefit Power (founded in material

benefit like food, clothing, money)

   Compulsive power (violence, physical punishment) The development of

organizational theory [6]

   Philip Selznick

   Creative leadership

   Responsible leadership

   Institutionalizing


Clinical organizational analysis

   Distinctive competence The development of

organizational theory [7]

   Contingency Theory [1970]

   Organizational strategy

   Organizational size

   Organizational technology

   Organizational strategy

The non-avoidable hierarchy

   organizations will continue to exist, because leaders exist. Concept hierarchy is basic part of

  Hierarchical design of various kind of

   man’s mental world. People want to know who is in

   charge, who represent them, and take charge of their interest.

Organizational Design

   design  the balance between

centralization and decentralization.

Centralization  decision taken in

  General problem in organizational

   higher levels of organization. Decentralization  decision-making

   is transferred to lower level employees. Organizational Design [2]

   No matter how the structure is arranged, qualities of an organization:

Some of its components are living variables (human


  The responsibility for choice between possible alternatives of action in a specific situation are shared by one or more individuals and/or groups.

  Decisions can be related after function, geographical position, time.

  Functionally distinguished groups are conscious about each other’s actions by communication or by observation.

  Certain freedom of choice exists regarding means as

Organizational Design [3]

   Classical Organization

   Functional Organization

   Product/division Organization

   Matrix Organization

   Project Organization

   Virtual Organization

Classical Organization

   Tells nothing about the ever-existing

  “Who is the boss’s boss”

   informal relation in the organization. The size of hierarchy depends of the

   size of the organization. Strong leader give rise to strong

   hierarchies.

Functional Organization

   for problem-solving and a homogenous background with the same terminology and description model. Disadvantages: inclination toward self-isolation


The main value: specialization in procedures

   of the various functional departments and a tendency to get into conflict with each other. Power, coordination, and critical information is

   concentrated to the highest boss who normally has a superior overview of what is going on.

Product/division Organizational

   there are clearly separated groups of products or services. The central management or concern


A design which is particularly useful when

   management nominates and dismisses the boss of each division, stipulate expected results, approve the budget and so on. The concern management also reserves

   the right to make decision which are considered common for more divisions. Matrix Organization

   where no particular person has a total, responsibility for what is going on. Gives the possibilities both to protect

  Has a double profit responsibility

   desirable dissimilarities between different business areas and take advantage of existing dependencies. Problem: unclear responsibility,

   Project/ ad hoc Organization

   Handle problems which overstep the borders between various internal function.

   The project director normally has total command over the participating specialist.

   Advantages: Freedom to act in a better way More solid and well thought out solutions Instructive and inspiring for the participators Creates new pattern of cooperation Creates influence on the organizational development


Project/ ad hoc Organization [2]

   Phases of Project

   Project formulation

   Planning

   Execution

   Coordination

   Documentation

   Implementation


Project/ ad hoc Organization [3]

   Critical Success Factor: Aims

  Project goals are clearly defined Organization

  Resources are sufficient Control mechanisms are in place and used Project has support of top management Communication channels are adequate Feedback exists Contractors are responsive to clients People

  Project manager is competent

Virtual Organization

   situation in which organizations exploit opportunities and take advantage of shared expertise, market access, and the sharing of costs and risks.

  Take advantage of an entrepreneurial Virtual Organization [2] Permanent Virtual Organization

Virtual Teams

Temporary Virtual Organization Virtual Project Involvem ent Across organization Internal to an organizational function or departmental

  Members unit Across organization Across functions and organizations hip Typically smaller, but scalable Small, local Typically larger Indeterminate Mission All functions and full functionality as a working organization Teams on specific ongoing tasks Multiple functions responding to a market opportunity Multiple organizational representative s working on specific projects

  Length of Project Permanent Membership varies, form is permanent Temporary Temporary Uses of IT Channel for Connectivity, Shared Repository of

Multiple perspectives of management cybernetics

   Organizations as organisms

   Organizations as control systems

   Organizations as brains

   Organizations as machines

   Organizations as cultures

   Organizations as political systems

   Organizations as theatres

   Organizations as instruments of dominations

   Organizations as information systems

Life-cycle stages of organizations

   The entrepreneurial stage

   The collective stage

   Formalization/control stage

   Structure-elaboration stage

   Declining stage Life-cycle stages of organizations Phas Evolutionary Phase Revolutionary e 1 Growth through Leadership crisis Phase 2 Growth through direction Autonomy crisis creativity

4 Growth through Staff crisis

  3 Growth through Control crisis delegation 5 Growth through Unknown crisis coordination collaboration Organization = cybernetics control system

   Organization are strongly influenced by their environment and therefore must be able to control it in order to survive. Organization must assume a

   measuring device giving information. Negative or positive feedback should

   be applied in order to reach goal.


Organization = cybernetics control system [2]

   Keynumber is data which has been aggregated and transformed into information and communicated throughout the organization.

   “Balanced Scorecard”  a number of keynumbers which make clear the balance between different organizational perspectives. Financial from the keynumber profit-margin The customer’s from the keynumber satisfied customer Process-oriented from the keynumber stock-turnover

   velocity Human-oriented from the keynumber personal-turnover

Renewal and development-oriented from the keynumber educational cost per employee Organization = brain Organization as integrated information,

   communication, and decision making systems capable of learning how to learn. Holographic qualities  the parts reflect the

   nature of the whole. Each nerve cell is connected with millions of others, creating the total effect of a brain being both generalized and specialized at the same time.

  Employee interact in networks of personal computers and audiovisual facilities.

  Holographic organization = information 

System Approach in ten points

   that take place on its own organizational level. The organizational environment is both natural


Organizations change according to processes

   and social.

   The organization is the result of both human interaction and conscious design. The organization is not reducible to to the sum

   or their parts.

Systems on higher levels of organizations are

   initially always simpler than the subsystems which compose their main components.


System Approach in ten points [2]


Organizations evolve by developing progressively

higher organizational level through convergence. The organization is operated by human beings

   but are not entirely under control of any individual. The organization’s component may also

   compose parts of other organizations which integrate them. The organization is a self-determined system

   which evolution cannot be predicted.

The organization is a system where the parts are

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