Organization Size, Life Cycle, and Control

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Organization Size, Life Cycle, and Control

• Dr. Horace Holmes Jr

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Objectives

• Advantages of Large verses Small Size
• Examine Historical Need for Bureaucracy
• Explore Organization Life-Cycle
• Examine Mechanisms for Organizational Control

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Is Bigger Better?

• Organizations often experience pressures for
  growth because of
• Organizational Goals Pushing firm to meet new
  challenges and become a more complete unit.
• Executive Advancement The larger the
  organization, the more opportunities to advance.
• Economic Health Associated with growth or
  through economies of scale that comes with size

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Large Versus Small

• Many organizations today that are small have a
  flat organic structure.
• As They grow, they shift to a mechanistic
  structure and fail to reward entrepreneurial
  approach.
• Big company/small hybrid may be a solution.
• Large or growing firms can retain flexibility and
  customer focus by decentralizing and cutting
  hierarchical layers.

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Large Versus Small

• Average size of industrial organizations is
  decreasing in united States, Britain, and Germany
• Organization Size and Bureaucracy
• Bureaucracy, as envisioned by Max Weber, is a
  logical, rational form compared to other bases
  for organizations like status, favoritism, family
  connections, or feudalism.

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Characteristics of Bureaucracy Include

• Rules and procedures.
• Specialization and division of labor.
• Hierarchy of authority
• Technically qualified personnel
• Separation of position and incumbent.
• Written Communication and records.

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Basis of Authority

1. Rational-Legal Employee believes organization
   as legitimacy and superiors have right to issue
   orders.
2. Traditional Belief in sanctity of tradition.
3. Charismatic Devotion to exemplary individual
   and willingness to follow them.

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Size and Structural Characteristics

1. Formalization Large organizations have greater
   formalization(I.e., more rules, procedures, and
   written documents.
2. Decentralization As organizations grow larger,
   decisions cannot be passed to top or senior
   managers will be overload. Thus larger
   organizations should have greater
   decentralization or authority to make decisions
   more dispersed.

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Continued

• Complexity
• Vertical Complexity (number of Levels.
• Horizontal Complexity (number of departments or
  jobs, and
• Sometimes greater spatial complexity (more
  locations) as they grow.

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Bureaucracy in a Changing World

• As Weber anticipated, bureaucracy met needs of
  industrial age well.
• With todays rapid environmental changes,
  machine-like bureaucracy may not work as well.

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Organizational Life Cycle

• When organizations enter new life cycle, a new
  set of rules emerge for how organization
  functions internally and how irt relates to its
  environment.

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Stages

• Entrepreneurial
• a. Known for creativity with control based on
  owners personal supervision.
• b. Followed by crisis from need for leadership.
• c. 84 of businesses that get by first year
  still fail within 5 years because they cannot get
  by this crisis.

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Characteristics

• Personal and paternalistic control systems.
• Innovation by owner manager.
• Top goal is survival.
• Top management style is entrepreneurial.

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2. Collectivity

• Known for development of clear goals and
  directions.
• Followed by autonomy crisis as managers want more
  freedom.

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Characteristics

• Rewards are personal and aimed at those who
  contribute to organizations success.
• Innovation comes form employees and managers.
• Goal is growth.
• Top management style is charismatic with
  direction giving.

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3. Formalization

• Known for addition of internal systems.
• Followed by crisis of needing to deal with too
  much red tape.

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Characteristics

• Rewards are imprsonal and ghrough formalized
  systems.
• Innovation by separate innovation groups.
• Goals are internal stability and market
  expansion.
• Top Management style is delegation with control.

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4. Elaboration

• Mature organizations known for development of
  teamwork through task forces and manager teams
  frequently cutting across company divisions.
• Sometimes followed by periods of temporary
  decline with a crisis of need for revitalization.

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Characteristics

• Rewards extensive and tailored to product and
  department.
• Innovation by institutionalized R D.
• Goals are for reputation.
• Top management style is on team approach with
  attacks on excessive bureaucracy.

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Three Organizational Control Strategies

• Type Requirements
• Bureaucratic Rules Standards,
  hierarchy, legitimate, Authority
• Market Prices, Competition exchange
  relationship
• Clan Tradition, shared
  values and belief, trust.

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Balanced Scorecard

• Is a comprehensive management control system that
  balances tradition financial measures with
  operational measures relating to a companys
  critical success factors.

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Four Major Perspectives

• Financial performance.
• Customer service
• Internal business processes
• The organizations capacity for learning and
  growth.