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Organizational Theory, Design, and Change - Seventh Edition
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Organizational Theory,
Design, and Change
seventh edition
Gareth R. Jones
Texas A&M University
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Library of Congress Cataloging-in-Publication Data
Jones, Gareth R.
Organizational theory, design, and change / Gareth R. Jones.—7th ed.
p. cm.
1. Organizational behavior. 2. Organizational behavior—Case studies. I. Title.
HD58.7.J62 2013
302.3’5—dc23
2011036274
ISBN10:0-27-376560-4
ISBN13:978-0-27-376560-8
10 9 8 7 6 5 4
For Nicholas and Julia
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Brief Contents
Preface xvii
Part 1 The Organization and Its Environment 1
Chapter 1 Organizations and Organizational Effectiveness 1
Chapter 2 Stakeholders, Managers, and Ethics 28
Chapter 3 Organizing in a Changing Global Environment 59
Part 2 Organizational Design 92
Chapter 4 Basic Challenges of Organizational Design 92
Chapter 5 Designing Organizational Structure: Authority
and Control 121
Chapter 6 Designing Organizational Structure: Specialization
and Coordination 148
Chapter 7 Creating and Managing Organizational Culture 179
Chapter 8 Organizational Design and Strategy in a Changing Global
Environment 207
Chapter 9 Organizational Design, Competences, and Technology 240
Part 3 Organizational Change 273
Chapter 10 Types and Forms of Organizational Change 273
Chapter 11 Organizational Transformations: Birth, Growth, Decline,
and Death 305
Chapter 12 Decision Making, Learning, Knowledge Management,
and Information Technology 334
Chapter 13 Innovation, Intrapreneurship, and Creativity 366
Chapter 14 Managing Conflict, Power, and Politics 391
Case Studies 417
Company Index 480
Name Index 483
Subject Index 485
v
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Contents
Preface xvii
Part 1 The Organization and Its Environment 1
Chapter 1 Organizations and Organizational Effectiveness 1
What Is an Organization? 1
How Does an Organization Create Value? 3
Why Do Organizations Exist? 5
To Increase Specialization and the Division of Labor 5
To Use Large-Scale Technology 6
To Manage the Organizational Environment 6
To Economize on Transaction Costs 6
To Exert Power and Control 7
Organizational Theory, Design, and Change 8
Organizational Structure 8
Organizational Culture 9
Organizational Design and Change 9
The Importance of Organizational Design and Change 11
Dealing with Contingencies 11
Gaining Competitive Advantage 12
Managing Diversity 14
The Consequences of Poor Organizational Design 14
How Do Managers Measure Organizational Effectiveness? 16
The External Resource Approach: Control 17
The Internal Systems Approach: Innovation 17
The Technical Approach: Efficiency 18
Measuring Effectiveness: Organizational Goals 19
The Plan of This Book 20
Organizational Design 22
Organizational Change 22
Summary 23 • Discussion Questions 23
Organizational Theory in Action: Practicing Organizational Theory 24
Open Systems Dynamics 24
The Ethical Dimension #1 24
Making the Connection #1 24
Analyzing the Organization: Design Module #1 24
Assignment 25
Chapter 2 Stakeholders, Managers, and Ethics 28
Organizational Stakeholders 28
Inside Stakeholders 28
Outside Stakeholders 30
Organizational Effectiveness: Satisfying Stakeholders’ Goals
and Interests 34
Competing Goals 35
Allocating Rewards 36
vii
Top Managers and Organizational Authority 37
The Chief Executive Officer 39
The Top-Management Team 40
Other Managers 41
An Agency Theory Perspective 41
The Moral Hazard Problem 41
Solving the Agency Problem 42
Top Managers and Organizational Ethics 43
Ethics and the Law 44
Ethics and Organizational Stakeholders 45
Sources of Organizational Ethics 47
Why Do Ethical Rules Develop? 49
Why Does Unethical Behavior Occur? 51
Creating an Ethical Organization 52
Designing an Ethical Structure and Control System 53
Creating an Ethical Culture 53
Supporting the Interests of Stakeholder Groups 53
Summary 54 • Discussion Questions 55 • Organizational Theory
in Action: Practicing Organizational Theory 55
Creating a Code of Ethics 55
The Ethical Dimension #2 55
Making the Connection #2 55
Analyzing the Organization: Design Module #2 55
Assignment 55
Chapter 3 Organizing in a Changing Global Environment 59
What Is the Organizational Environment? 59
The Specific Environment 61
The General Environment 63
Sources of Uncertainty in the Organizational Environment 65
Resource Dependence Theory 69
Interorganizational Strategies for Managing Resource Dependencies 70
Strategies for Managing Symbiotic Resource Interdependencies 71
Developing a Good Reputation 71
Cooptation 72
Strategic Alliances 72
Joint Venture 75
Merger and Takeover 76
Strategies for Managing Competitive Resource Interdependencies 76
Collusion and Cartels 77
Third-Party Linkage Mechanisms 78
Strategic Alliances 78
Merger and Takeover 78
Transaction Cost Theory 79
Sources of Transaction Costs 80
Transaction Costs and Linkage Mechanisms 81
Bureaucratic Costs 82
Using Transaction Cost Theory to Choose an Interorganizational Strategy 82
Summary 86 • Discussion Questions 87 • Organizational Theory
in Action: Practicing Organizational Theory 87
Protecting Your Domain 87
The Ethical Dimension #3 87
Making the Connection #3 88
Analyzing the Organization: Design Module #3 88
Assignment 88
viii CONTENTS
Part 2 Organizational Design 92
Chapter 4 Basic Challenges of Organizational Design 92
Differentiation 92
Organizational Roles 94
Subunits: Functions and Divisions 95
Differentiation at the B.A.R. and Grille 96
Vertical and Horizontal Differentiation 97
Organizational Design Challenges 97
Balancing Differentiation and Integration 99
Integration and Integrating Mechanisms 99
Differentiation versus Integration 102
Balancing Centralization and Decentralization 103
Centralization versus Decentralization of Authority 103
Balancing Standardization and Mutual Adjustment 106
Formalization: Written Rules 106
Socialization: Understood Norms 107
Standardization versus Mutual Adjustment 108
Mechanistic and Organic Organizational Structures 109
Mechanistic Structures 110
Organic Structures 110
The Contingency Approach to Organizational Design 112
Lawrence and Lorsch on Differentiation, Integration,
and the Environment 112
Burns and Stalker on Organic versus Mechanistic Structures
and the Environment 115
Summary 116 • Discussion Questions 117 • Organizational Theory
in Action: Practicing Organizational Theory 117
Growing Pains 117
Making the Connection #4 117
The Ethical Dimension #4 117
Analyzing the Organization: Design Module #4 117
Assignment 118
Chapter 5 Designing Organizational Structure: Authority
and Control 121
Authority: How and Why Vertical Differentiation Occurs 121
The Emergence of the Hierarchy 121
Size and Height Limitations 122
Problems with Tall Hierarchies 124
The Parkinson’s Law Problem 127
The Ideal Number of Hierarchical Levels: The Minimum Chain of Command 127
Span of Control 128
Control: Factors Affecting the Shape of the Hierarchy 130
Horizontal Differentiation 130
Centralization 132
Standardization 133
The Principles of Bureaucracy 134
The Advantages of Bureaucracy 137
Management by Objectives 139
The Influence of the Informal Organization 140
IT, Empowerment, and Self-Managed Teams 141
Summary 143 • Discussion Questions 143 • Organizational Theory
in Action: Practicing Organizational Theory 144
How to Design a Hierarchy 144
The Ethical Dimension #5 144
CONTENTS ix
Making the Connection #5 144
Analyzing the Organization: Design Module #5 144
Assignment 144
Chapter 6 Designing Organizational Structure: Specialization
and Coordination 148
Functional Structure 148
Advantages of a Functional Structure 150
Control Problems in a Functional Structure 150
Solving Control Problems in a Functional Structure 151
From Functional Structure to Divisional Structure 152
Moving to a Divisional Structure 154
Divisional Structure I: Three Kinds of Product Structure 154
Product Division Structure 154
Multidivisional Structure 156
Product Team Structure 161
Divisional Structure II: Geographic Structure 163
Divisional Structure III: Market Structure 164
Matrix Structure 166
Advantages of a Matrix Structure 167
Disadvantages of a Matrix Structure 167
The Multidivisional Matrix Structure 168
Hybrid Structure 170
Network Structure and the Boundaryless Organization 171
Advantages of Network Structures 171
Disadvantages of Network Structures 172
The Boundaryless Organization 172
E-Commerce 173
Summary 174 • Discussion Questions 175 • Organizational Theory
in Action: Practicing Organizational Theory 175
Which New Organizational Structure? 175
The Ethical Dimension #6 175
Making the Connection #6 175
Analyzing the Organization: Design Module #6 175
Assignment 175
Chapter 7 Creating and Managing Organizational Culture 179
What Is Organizational Culture? 179
Differences in Global Values and Norms 182
How Is an Organization’s Culture Transmitted to Its Members? 184
Socialization and Socialization Tactics 184
Stories, Ceremonies, and Organizational Language 187
Where Does Organizational Culture Come From? 189
Characteristics of People within the Organization 189
Organizational Ethics 191
Property Rights 193
Organizational Structure 196
Can Organizational Culture Be Managed? 197
Social Responsibility 199
Approaches to Social Responsibility 199
Why Be Socially Responsible? 200
Summary 202 • Discussion Questions 203 • Organizational Theory
in Action: Practicing Organizational Theory 203
Developing a Service Culture 203
The Ethical Dimension #7 203
x CONTENTS
Making the Connection #7 204
Analyzing the Organization: Design Module #7 204
Assignment 204
Chapter 8 Organizational Design and Strategy in a Changing Global
Environment 207
Strategy and the Environment 207
Sources of Core Competences 208
Global Expansion and Core Competences 210
Four Levels of Strategy 211
Functional-Level Strategy 213
Strategies to Lower Costs or Differentiate Products 213
Functional-Level Strategy and Structure 215
Functional-Level Strategy and Culture 216
Business-Level Strategy 217
Strategies to Lower Costs or Differentiate Products 218
Focus Strategy 219
Business-Level Strategy and Structure 219
Business-Level Strategy and Culture 222
Corporate-Level Strategy 224
Vertical Integration 225
Related Diversification 226
Unrelated Diversification 226
Corporate-Level Strategy and Structure 227
Corporate-Level Strategy and Culture 229
Implementing Strategy across Countries 230
Implementing a Multidomestic Strategy 232
Implementing International Strategy 232
Implementing Global Strategy 233
Implementing Transnational Strategy 234
Summary 235 • Discussion Questions 236 • Organizational Theory
in Action: Practicing Organizational Theory 236
What Kind of Supermarket? 236
The Ethical Dimension #8 236
Making the Connection #8 236
Analyzing the Organization: Design Module #8 237
Assignment 237
Chapter 9 Organizational Design, Competences, and Technology 240
What Is Technology? 240
Technology and Organizational Effectiveness 242
Technical Complexity: The Theory of Joan Woodward 244
Small-Batch and Unit Technology 244
Large-Batch and Mass Production Technology 247
Continuous-Process Technology 248
Technical Complexity and Organizational Structure 248
The Technological Imperative 250
Routine Tasks and Complex Tasks: The Theory of Charles Perrow 250
Task Variability and Task Analyzability 251
Four Types of Technology 252
Routine Technology and Organizational Structure 253
Nonroutine Technology and Organizational Structure 255
Task Interdependence: The Theory of James D. Thompson 255
Mediating Technology and Pooled Interdependence 256
Long-Linked Technology and Sequential Interdependence 258
Intensive Technology and Reciprocal Interdependence 259
CONTENTS xi
From Mass Production to Advanced Manufacturing Technology 261
Advanced Manufacturing Technology: Innovations in Materials
Technology 263
Computer-Aided Design 264
Computer-Aided Materials Management 264
Just-in-Time Inventory Systems 265
Flexible Manufacturing Technology and Computer-Integrated Manufacturing 266
Summary 267 • Discussion Questions 268 • Organizational Theory
in Action: Practicing Organizational Theory 268
Choosing a Technology 268
The Ethical Dimension #9 269
Making the Connection #9 269
Analyzing the Organization: Design Module #9 269
Assignment 269
Part 3 Organizational Change 273
Chapter 10 Types and Forms of Organizational Change 273
What Is Organizational Change? 273
Targets of Change 274
Forces for and Resistance to Organizational Change 275
Forces for Change 275
Resistances to Change 278
Organization-Level Resistance to Change 278
Group-Level Resistance to Change 279
Individual-Level Resistance to Change 280
Lewin’s Force-Field Theory of Change 280
Evolutionary and Revolutionary Change in Organizations 281
Developments in Evolutionary Change: Sociotechnical Systems Theory 281
Total Quality Management 282
Flexible Workers and Flexible Work Teams 285
Developments in Revolutionary Change: Reengineering 285
E-Engineering 290
Restructuring 290
Innovation 291
Managing Change: Action Research 291
Diagnosing the Organization 292
Determining the Desired Future State 292
Implementing Action 293
Evaluating the Action 294
Institutionalizing Action Research 294
Organizational Development 295
OD Techniques to Deal with Resistance to Change 295
OD Techniques to Promote Change 297
Summary 299 • Discussion Questions 300 • Organizational Theory
in Action: Practicing Organizational Theory 300
Managing Change 300
Making the Connection #10 301
The Ethical Dimension #10 301
Analyzing the Organization: Design Module #10 301
Chapter 11 Organizational Transformations: Birth, Growth,
Decline, and Death 305
The Organizational Life Cycle 305
Organizational Birth 306
Developing a Plan for a New Business 307
xii CONTENTS
A Population Ecology Model of Organizational Birth 309
Number of Births 310
Survival Strategies 311
The Process of Natural Selection 312
The Institutional Theory of Organizational Growth 314
Organizational Isomorphism 315
Disadvantages of Isomorphism 316
Greiner’s Model of Organizational Growth 316
Stage 1: Growth through Creativity 317
Stage 2: Growth through Direction 318
Stage 3: Growth through Delegation 318
Stage 4: Growth through Coordination 319
Stage 5: Growth through Collaboration 320
Organizational Decline and Death 321
Effectiveness and Profitability 321
Organizational Inertia 323
Changes in the Environment 324
Weitzel and Jonsson’s Model of Organizational Decline 325
Summary 328 • Discussion Questions 329 • Organizational Theory
in Action: Practicing Organizational Theory 329
Growing Pains 329
Making the Connection #11 329
The Ethical Dimension #11 329
Analyzing the Organization: Design Module #11 330
Assignment 330
Chapter 12 Decision Making, Learning, Knowledge Management,
and Information Technology 334
Organizational Decision Making 334
Models of Organizational Decision Making 335
The Rational Model 335
The Carnegie Model 337
The Incrementalist Model 339
The Unstructured Model 339
The Garbage-Can Model 340
The Nature of Organizational Learning 342
Types of Organizational Learning 342
Levels of Organizational Learning 343
Knowledge Management and Information Technology 347
Factors Affecting Organizational Learning 349
Organizational Learning and Cognitive Structures 350
Types of Cognitive Biases 350
Cognitive Dissonance 350
Illusion of Control 351
Frequency and Representativeness 351
Projection and Ego-Defensiveness 352
Escalation of Commitment 352
Improving Decision Making and Learning 353
Strategies for Organizational Learning 353
Using Game Theory 354
Nature of the Top-Management Team 356
Devil’s Advocacy and Dialectical Inquiry 357
Collateral Organizational Structure 358
Summary 359 • Discussion Questions 360 • Organizational Theory
in Action: Practicing Organizational Theory 360
CONTENTS xiii