CHAPTER 1: ORGANIZATIONS AND ORGANIZATIONAL EFFECTIVENESS

LEARNING OBJECTIVES

1. Explain why organizations exist and the purposes they serve.
2. Describe the relationship between organizational theory and organizational design and change, and differentiate between organizational structure and culture.
3. Understand how managers can utilize the principles of organizational theory to design and change their organizations to increase organizational effectiveness.
4. Identify the three principal ways in which managers assess and measure organizational effectiveness.
5. Appreciate the way in which several contingency factors influence the design of organizations.

CHAPTER SUMMARY

This chapter discusses organizations, organizational theory, and the importance of organizational design. An organization is a tool that people use to coordinate their actions to obtain something they desire or value—to achieve their goals. Organizational theory is the study of how organizations function and how they affect and are affected by the environment in which they operate. Organizational structure is the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve an organization’s goals. Organizational culture is the set of shared values and norms that control organizational members’ interactions with each other and with suppliers, customers, and other people outside the organization.

Organizations are value-creation systems that take inputs from the environment and use skills and knowledge to transform these inputs into finished goods and services. The use of an organization allows people jointly to increase specialization and division of labor, use large-scale technology, manage the organizational environment, economize on transaction costs, and exert power and control—all of which increase the value the organization can create.

Organizational design is the process by which managers select and

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