Organizational Behavior and Control Mechanisms in New Venture Creation

1. Organizational Behavior and Control Mechanisms in New Venture Creation Prof. Alexander Settles

2. Introduction to OB • Define organizations of differing types and differing objectives. Normative and positive theories. • Division of labor, specialization, productivity, economies of scale and the problem of co-ordination (motivations/incentives and information). • Markets and organizations as alternative coordinating mechanisms. Contrasting market and employment contracts (incentives, risk sharing and information assets).

3. Introduction to OB • The market organizational contractual continuum. • Competitive markets, ‘real’ markets, long term contracts (fixed cost to cost plus), joint ventures, alliances, informal networks, franchising etc. • Coordination and role of: motivation/incentives, communication/ information/knowledge, bargaining power and authority, culture/ norms/trust/commitment, democratic process. • Introduction to the nature of Hierarchical organizations. • Vertical boundaries (make-buy) • Horizontal boundaries (Divisional, conglomerates etc). • Hierarchical structures (size, span, depth). • Ownership/governance.

4. Theories of boundaries • Transaction costs; assumptions, bounded rationality, opportunism, incomplete contracts; transactional characteristics, asset specificity, uncertainty, complexity, frequency. • Property rights theory. • Monopoly power, information knowledge and rents, competitive advantage. • Role of managerial objectives/motivation. • Role of legislation (national variations). • Ideology.

5. The evolution of organizations • Evolution of contracts. • Evolution of organizational types: peer groups, multifunctional; multi-divisional, conglomerates, Alliances, networks, long term (relational), contacting. • Centralized v decentralized organization (discretion).

6. Studying organizations • Organization, group and individual levels of study and their inter-relationship. • Contribution of statistical models and case studies. • Contribution of elementary game theory (one-shot and repeated). • Contribution of network (graph theoretic) models.

7. Game Theory

8. Organizations as contractuallycoordinated mechanisms • Taylor, standardization, rationalization and scientific management; “Fordism”. • Theories and critiques of bureaucracy. • Centralization, decentralization and discretion/incomplete contracts. • Organization as an algorithm. • Control loss, coordination loss.

9. Organizations as Incentive/Motivationally coordinated mechanisms • Introduction to principal agent theory. • Team production and externalities. • Psychological models of motivation: Human relations; Human resource management; Group and team context (production); Motivational reactions to organizational design.

10. Organizations as authority/power/coordinated mechanisms • Nature of power. Authority and influence. • Bargaining power. • Sources of power. • Power and participation/ decentralization.

11. Organizations as Information/ Knowledge distributively coordinated mechanisms • Coordination and information (games). • Theory of teams. • Hidden information/action. • Demand for information and participation.

12. Organizations as ‘Culturally’coordinated mechanisms • Nature of culture. • Trust, leadership, sacrifice and commitment. • Social capital. • Corporate culture/ambient cultures. • National business systems.

13. Determinants of hierarchal structures (shape). • Contingency theory. • Population ecology/institutional theory. • Hierarchy (or hybrid organization) as an optimal mechanism – given operating environment - for combining: rules/contracts, incentives, authority, information, culture.

14. Corporate Governance • Ownership and control; participation and organizational democracy.

15. What is Organizational Behavior? • Organizational behavior (OB) is the study of: • Human behavior in organizational settings • The interface between human behavior and the organization • The organization itself

16. The Nature of Organizational Behavior

17. The Importance of Organizational Behavior • Organizations can have a powerful influence on our lives: • Most people are born and educated in organizations • Most people acquire most of their material possessions from organizations • Most people die as members of organizations • Many of our activities are regulated by governmental organizations • Most people spend most of their lives in organizations

18. Why Study OB? • Studying organizational behavior can clarify factors that affect how managers manage by: • Describing the complex human context of organizations • Defining the associated opportunities, problems, challenges, and issues • Isolating important aspects of the manager’s job • Offering specific perspectives on the human side of management

19. Why Study OB? (cont’d) • Studying OB helps managers understand: • The behaviors of others in the organization • Personal needs, motives, behaviors, feelings and career dynamics • Attitudinal processes, individual differences, group dynamics, inter group dynamics, organization culture, power, and political behavior • Interactions with people outside of the organization and other organizations • The environment, technology, and global issues

20. Management Functions Planning Organizing Leading Controlling Resources Used by Managers Human Financial Physical Information Organizational Behavior and the Management Process

21. Functions of Management

22. Basic Managerial Functions

23. Important Managerial Roles

24. Critical Managerial Skills

25. Figure 1.3Managerial Skills at Different Organizational Levels

26. Contemporary Organizational Behavior • Characteristics of the Field • Interdisciplinary in focus • Descriptive in nature • Basic Concepts of the Field • Individual processes • Interpersonal processes • Organizational processes/characteristics

27. Contextual Perspectives on Organizational Behavior Systems Perspective Situational Perspective Contingency Interactional Contemporary Organizational Behavior

28. The Systems Perspective • System • An interrelated set of elements that function as a whole—inputs are combined/transformed by managers into outputs from the system. • Value of the Systems Perspective • Underscores the importance of an organization’s environment • Conceptualizes the flow and interaction of various elements of the organization.

29. The Situational Perspective • The Situational Perspective • Recognizes that most organizational situations and outcomes are influenced by other variables • The Universal Model • Presumes a direct cause-and-effect linkage between variables • Complexities of human behavior and organizational settings make universal conclusions virtually impossible

30. The Systems Approach to Organizations

31. Universal Versus Situational Approach

32. Interactionalism: People and Situations • Interactionalist Perspective • Focuses on how individuals and situations interact continuously to determine individuals’ behavior • Attempts to explain how people select, interpret, and change various situations.

33. The Interactionalist Perspective on Behavior in Organizations

34. Managing for Effectiveness • Managers work toward accomplishing the various goals (outcomes) that exist at specific levels in an organization: • Individual-level outcomes • Group-level outcomes • Organizational-level outcomes

35. Managing for Effectiveness

36. The Nature of Organization Structure • Organization • A goal-directed social entity with deliberate processes and systems • Organizational Goals • Objectives that management seeks to achieve in pursuing the firm’s purpose • Strategies • Specific action plans that enable the organization to achieve its goals and thus its purpose

37. The Nature of Organization Structure (cont’d) • Organization Structure • The system of task, reporting, and authority relationships within which an organization does its work • Purpose of structure is to order and coordinate the actions of employees to achieve organizational goals • “Structure follows strategy”

38. The Nature of Organization Structure (cont’d) • Organized Effort Premise • People can accomplish more by working together than they can separately • Proper coordination is needed to realize the potential gains from collective efforts • Analysis of Organizational Structures • Configuration (organization chart) • Operational characteristics • Responsibility and authority

39. Structural Configuration • Organization Chart • Describes the structure of an organization • Shows all people, positions, reporting relationships, and lines of formal communication • Depicts reporting relationships and work group memberships • Shows how positions and small work groups are combined into departments which make up the shape (configuration) of the organization • Basic Requirements of Structure • Division of labor • Coordination of divided tasks

40. Examples of Organization Charts

41. Structural Configuration (cont’d) • Division of Labor (Specialization) • The way the organization’s work is divided into different jobs to be done by different people • Organizations, in order to be successful, must have highly trained specialists who know their specific jobs very well • Coordinating the Divided Tasks • Mechanisms to help coordinate the divided tasks • Departmentalization • Span of control • Administrative hierarchy

42. Structural Configuration (cont’d) • Departmentalization • The manner in which divided tasks are combined and allocated to work groups • A consequence of the division of labor • Ways to departmentalize tasks: • Business function • Process • Product or service • Customer • Geography

43. Advantages and Disadvantages of Division of Labor

44. Structural Configuration (cont’d) • Departmentalization (cont’d) • Span of control (also span of management) • The number of people who report to a manager • The smaller the span of control the more a manager can maintain close control over workers and stay in contact with daily operations • Size is inversely related to the span of control

45. Structural Configuration (cont’d) • Departmentalization (cont’d) • Span of control (also span of management) • The number of people who report to a manager • The smaller the span of control the more a manager can maintain close control over workers and stay in contact with daily operations • Size is inversely related to the span of control

46. Departmentalization by Business Function and by Process

47. Departmentalization by Customer

48. Departmentalization by Customer and by Geographic Region

49. Mixed Departmentalization