Unit 5

1. Unit 5 Determine the Focus and Direction of Improvement

2. Unit Objectives: • To discuss several approaches to determine the focus and direction of improvement. • To discuss relevant classical management theories to implement improvement; and • To introduce emerging strategies of improvement.

3. Approaches to determine focus & direction of improvement • There are several approaches that may be used to determine the focus and direction of improvement in organization. • The approaches include (a) the key organizational components approach (Leavitt, H,.J,, 1964) and (b) the systems theory approach (Bartol, K.M. and Martin, D.C., 1994).

4. Other approaches: The classical Management Theories • The classical management theories include: • bureaucratic theory, • human relations theory, and • contingency theory. • Theory Z

5. Emerging Strategies of Improvement • Emerging strategies of improvement such as: • customer-oriented/driven strategy, and • process-oriented Strategy • These two will be dealt in details in separate units.

6. Key Organizational Components Approach • According to Leavitt (1964), significant changes and innovations usually involve alterations in one or more of these key components: • structure, • technology, • human resources and • culture (see exhibit 1).

7. Key Organizational Components Approach (Exhibit 1)

8. Interrelated components • Since these components are somewhat interrelated, a change in one may create the need for adjustments or adaptations in others.

9. Structural Components • Organization structure is the pattern interactions and coordination designed by management to link the tasks of individuals and groups in achieving organizational goals. • Structure determines how division of work, responsibility, cooperation, consultation and decision levels need to be created in organizations.

10. Structural Components • Structure includes such factors as the way jobs are defined and clustered into work units and the various mechanisms used to facilitate vertical and horizontal communication (e.g., delegation and the use of interdepartmental teams). • Structure must be adapted as circumstances change, reorganization are common and results in continuous restructuring.

11. Structural Components • Reorganizations influence change by altering the pattern of interactions and coordination. • Research suggests that reorganizations representing a quantum change – a change that is both concerted and dramatic – tend to be more frequently associated with subsequent high performance than do piecemeal and incremental reorganization.

12. Technology Components • Technology involves • the knowledge, • tools, • machines, • equipment, and • work technique, used by an organization in delivering its products or services.

13. Technology Components • Changes in technology are reflected both in major new products and services and in frequent improvements in current products and services. • Technological change is an important factor in international competition.

14. Technology Components • Technological innovations are also altering the work methods in organizations. • Technological changes often affect the number of employees required and the types of skills they need.

15. Human Resources Components • Bringing about improvement or change in individuals in the workplace is typically aimed at altering • the knowledge, • skills, • perceptions, and • behaviors needed to do the job more effectively and efficiently.

16. Human Resources Components • Changing individual relies on training and development activities, supplemented by performance appraisal and reward systems that reinforce the needed behaviors. • Frequently, recruitment and selection systems must be adjusted to reflect the needs for individuals with differing skills.

17. Human Resources Components • Having individuals who possess the knowledge and skills required to handle changing circumstances takes careful planning. • Improvement/change in human resource systems are necessary to enhance the effectiveness of alterations made in other organizational components, such as structure and technology.

18. Culture Components • Organizational culture is a system of • shared values, • assumptions, • beliefs and • norms that unite members of the organization.

19. Culture Components • A number of organizations attribute their success partly to distinctive cultures that are rooted in values articulated by strong founders and reinforced by subsequent leaders. • Some have made cultural changes based on such factors as visions of their leaders or threats to survival. For example from money-losing, little concern for customers, costs, or productivity to one that emphasizes customer focus, productivity, and initiatives

20. Culture Components • The change in culture may be part of the major changes that help the transformation. • Major organizational changes often require alterations in organizational culture. • A major change in one component tends to have implications for the others.

21. The Systems Theory Approach • The systems theory approach is based on the notion that organizations can be visualized as systems. • A system is a set of interrelated parts that operate as a whole in pursuit of common goals.

22. According to the systems approach, an organizational system has three major components: input, process and output (see exhibit 2). Exhibit 2: The Classic Systems Approach

23. The Contemporary Systems Approach • However according to Bartol and Martin (1994) the expanded version of systems approach has four main components as follow: • inputs, • transformation processes, • outputs and • feedback (see Exhibit 3).

24. Exhibit 3: The Contemporary Systems Approach

25. The Advantages of Systems Approach • The systems approach has a number of advantages: • First, it can analyze systems at different levels (individual, group, organization, society and supranational level). • Second, the systems view provides a framework for evaluating how well the various parts or components of an organization interacts to achieve a common goal.

26. The Advantages of Systems Approach • Third, it emphasizes that a change in one part of the system may affect other parts. • Fourth, the systems approach considers how a organization interacts with its environment – the factors outside the organization that can affect its operations. In order to consider the environment adequately, an organization needs to operate as an open system.

27. Open System • Open system is a system that operates in continual interaction with its environment. • Through such interaction the system takes in new inputs and learns about how its outputs are received by various important outside elements. • This open system received numerous feedback compared to a closed system.

28. Characteristics of Open System • Three major characteristics of open systems are • negative entropy, • differentiation, and • synergy.

29. Negative entropy: • It is the ability of the open systems to bring in new energy, in the forms of inputs and feedback from the environment, in order to delay or arrest decay over time (entropy).

30. Differentiation: • Is the tendency of open systems to become more complex. • The increased complexity usually stems from the addition of specialized units to handle particularly troublesome or challenging parts of the environment.

31. Synergy: • Is the ability the whole to equal more than the sum of its parts. • This means that an organization ought to be able to achieve its goal more effectively and efficiently than would be possible if the parts operated separately

32. Open System • According to the systems viewpoint, managers are likely to be more successful if they attempt to operate their units and organizations as open systems that are carefully attuned to the factors in the environment that could significantly affect them.

33. Determine the New Focus and Direction • Intended improvement strategies must be in line with its vision and purpose/mission. • In other words all improvement strategies must be aligned with its grand strategic plans. • For an organization, continuing to do the same things it has done in the pass may not help it survive, let alone be competitive in a dynamic, at time erratic and unpredictable business environment.

34. Introduction • Even trying to do the same thing harder, or fine-tuning it, may not pay off. • Things have to be done differently. Structures, processes, methods, and product technologies that were appropriate to the earlier market conditions may not be relevant to present or future markets. • These have to be replaced by new structures, processes, and methods relevant to changing times.

35. Introduction • Organizations may have to reset themselves on a different set of basic assumptions and business opportunities that relate to • customer focus, • competitive intelligence, • its knowledge and competency base, • innovativeness, • a new products/services or markets.

36. Introduction • Designing a new state is possible if organization is clear as to what the new focus and direction of improvement. • That is, it needs to be clear about its intended improvement and it should be in line or aligned with its grand strategic plans.

37. Introduction • It has to examine its • current strength and weaknesses in the context of opportunities, • threats, and • dynamism of the business environment, while identifying what should be improved or changed and how, and determining the pace of improvement or change (see Exhibit 4).

39. Possible focus and direction of improvement are: • Responsiveness to environment changes • Management process and control strategy • Human resource strategy • Structure and systems strategies • Political strategy • Outcome strategy

40. 1. Responsiveness to environment changes • – be consumer – and – market – focused (providing better value to the customer).

41. 2. Management process and control strategy • – geared to policy considerations relating to product, process and market. • It is also geared towards improving intra-organizational dynamics such as: • intra-and inter-unit coordination, • individual and group accountability, • distribution of benefits/resources, and • shaping or reorienting its information management in line with the planned strategy.

42. 3. Human resource strategy • – aimed at designing people-oriented strategiesthat involve employees and enable them to achieve the organization’s goals and objectives. • It helps them develop the knowledge, skills and behavior necessary for change implementation.

43. 4. Structure and systems strategies • – organizations may have to • redesign their structure, • reorganization tasks, positions, people, and systems for the speedy delivery of product or service which is of high customer value.

44. 5. Political strategy • – is to identify the external and internal political realities influencing the organization. • Conflicting interests, • shifts in power balance, and • coalitions/alliances among individuals/groups often accompany significant organizational changes.

45. 6. Outcome strategy • – focused on • individual, • team and • organizational effectiveness and efficiency.

46. Classical Management Theory Approach • The classical management theory includes the following theories among others: 1. Bureaucracy theory developed by Weber, 1947 2. Human relations theory developed by Likert, 1961; McGregor, 1960 and Maslow, 1954 and others. 3. Contingency theory developed by Gilbreth, 1977; Lawrence and Lorsch, 1967; Trist, 1981; and Woodward, 1965. 4. Theory Z

47. Basic Assumption of Bureaucracy Approach • Bureaucracy approach emphasizes the need for organizations to operate in a rational manner, rather than, relying on the arbitrary whims of owners and managers. • Organizations operate more fairly and efficiently if there are rules and standardized procedures governing every conceivable situation.

48. Characteristics of Bureaucracy Theory Approach to bring Improvement The following are the characteristics of bureaucracy approach: 1. Specialization of labor. 2. Formal rules and procedures. 3. Impersonality. 4. Well-defined hierarchy (well-structured). 5. Career advancement based on merit 6. Slow respond to change

49. 1. Specialization of labor • – jobs are broken down into routine well-defined tasks and members are extremely competent at their tasks.

50. 2. Formal rules and procedures • – written rules and procedures specify the behaviors desired from members facilitate coordination and ensure uniformity.