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Published by odllab, 2019-12-20 05:05:01

BMG320/03 Organisational Theory and Design

Course Code: BMG320/03
Course adapted by : Ms. Kajari Shankar & Ms. Parimala Devi Dhivandram School of Business and Administration (SBA)

Professor Dr Zoraini Wati Abas
Content Adapters: Kajari Shankar & Parimala Devi Dhivandram
Lead Instructional and Visual Designer: Fauziyah Md Aris Instructional and Visual Designers: Norliza Mhd Rodzi and Nurain Mohd Hassan Language Editor: Arathai Din Eak
Margin Setting: Nurain Mohd Hassan
Cover Page and Content Design: Nurain Mohd Hassan
Diagram Illustrators: Budsababun Saengpurng & Pantaree Jantason
Kajari Shankar
Online Digital Learning Lab (ODL Lab)
Instructional Design for Engaging Experiences (IDeX) Wawasan Open University
First edition, December 2019
This course material was published to support the learning of students registered with Wawasan Open University. Wawasan Open University does not grant any degree, certification or credits based solely on your completion of this course material.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without prior written permission from Wawasan Open University.
© 2019 Wawasan Open University
Wawasan Open University is Malaysia’s first private not-for-profit tertiary institution dedicated to adult learners.

04 05
TABLE OF CONTENTS Part 1 | About the Course
Part 2 | Course Overview
Course Synopsis
Course Contents
Course Learning Outcomes
Study Schedule Assessment Methods
Part 3 | Course Study Guide
Unit 1 Unit 2 Unit 3 Unit 4 Unit 5
Introduction to Organisation
Organisational Purpose and Structural Design The External Environment
Internal Design Elements
Managing Dynamic Processes
Part 4 | References
Part 5 | Feedback Form

Course Type
Credit Hours
Learning Hours : 120 hours
: School of Business Administration (SBA) : Core Course
: 3 hours
Course Title : Organisational Theory and Design Course Code : BMG320/03
Course Coordinator Email
Contact No Handphone No
: Kajari Shankar
: [email protected] : 04-2180405
: 012-4832304
Core Reading Materials : Organization Theory and Design 10th Edition
No. of Hours
10 10 20 27 3
2 Attending 5 Tutorial Classes (2 hours per class)
Study Learning Materials, Learning Activities and Self- Tests
3 Participation in Online Forum Discussions
4 Completing the Course Assignments (CA1 & CA2)
5 Exam Revision
BMG320/03 Organisational Theory & Design

Organisations now face intense competition, ethical scrutiny and the need to respond quickly to changes in a digital workplace of increasing diversity. This course will help students to understand, diagnose and respond to emerging organisational needs and challenges by looking at how their organisation is designed to respond to the needs of the market.
As companies extend their operations globally, the design of their organisation will have to change to accommodate the globalisation of their business which needs to respond to the different demands of different countries.
The course will also look at how established companies that failed due to lack of innovation and did not respond to changes die while some quickly restructure their organisation in order to survive in the dynamic environment.
Course topics include:
1. Introduction to Organisation
2. Organisational Purpose and Structural Design 3. The External Environment
4. Internal Design Elements
5. Managing Dynamic Processes
BMG320/03 Organisational Theory & Design 2

By the end of this course, you should be able to:
1. Explain the basic idea of what constitutes an organisation and theories of organisation
2. Describe how managers can help the organisation attain its objectives through the design of an appropriate organisational structure and strategic management processes.
3. Evaluate open organisational systems that influence organisational structure and design including the external environment, inter-organisational relationship and the global environment
BMG320/03 Organisational Theory & Design 3

(Weekly topic and study activity for each unit)
Unit Week
1 1 2
3 24
6 37
9 4 10
11 12
13 14 15 16
17 18
The Evolution of Organisational Theory and Design
Organisational Configuration: Mintzberg’s Organisational Framework
Organisational Configuration: Mintzberg’s 5 Organisational Types
Key components of organisational structure
Application of the structural design
Role of strategic direction in organisational design
The Organisation’s Environment
Framework for assessing environment
Designing organisation for international environment
Manufacturing and services technologies
Impact of technology on job design
Organisational size, life cycle and decline
Organisational culture and ethical values
Decision making process
Conflict, power and politics
Conflict, power and politics
Innovation and change
Innovation and change
The development of organisation theory
Organisation Framework
Organisation Types
Organisation Structure
Organisation design
Organisation design
Task Environment General Environment
Organisational Structure for the international environment
Technologies used in manufacturing
Technology used in job designing
Organisational life cycle
Culture Decision making
Organisation conflict Organisation power, politics
Organisation change
Learning Activities/ Self-Assessment
Video on the evolution of management theories/ Summarising of key classical theories of management
Read suggested chapter in link and try the self-assessment
Read suggested chapter in link and try the self-assessment
Case analysis on different types of organisation structure
Case study on selected company on the structural design
Case analysis on one selected organisation on the design application
Read suggested chapter in link and try the self-assessment
Read suggested chapter in link and try the self-assessment
Read suggested chapter in link and try the self-assessment
Selected samples of organisation on different types of services and technologies
Video sharing on job design and the impact of technology on job design
Case analysis on an organisation on life cycle
Role play on different culture and ethical values
Group exercise on how to solve issues in organisation by applying the different type of decision making process
Case analysis on organisation conflicts Case analysis on organisation power and politics
Video sharing on innovation
Role play on how organisation apply change in different situation
BMG320/03 Organisational Theory & Design 4

Quiz, Group Work, Presentation, Proposal, Essay, Annotated Bibliography, etc.
Quiz, Group Work, Presentation, Proposal, Essay, Annotated Bibliography, etc.
The student will be assessed through the following methods:
TOTAL 100%
BMG320/03 Organisational Theory & Design

1.1 The Evolution of Organisation Theory and Design
1.2 Organisational Configuration: Mintzberg’s Organisational Framework 1.3 Organisational Configuration: Mintzberg’s Five Organisation Types
2.1 Organisational Structure
2.2 Application of the Structural Design
2.3 Role of strategic direction in organisation design
3.1 The organisation’s environment
3.2 Framework for assessing environmental uncertainty and adapting to a
changing environment
3.3 Designing organisation for the international environment
4.1 Manufacturing and Service Technologies 4.2 Impact of Technology on Job design
4.3 Organisation size, life cycle and decline
5.1 Organisational Culture and Ethical Values 5.2 Decision-Making processes
5.3 Conflict, power and politics
5.4 Innovation and change
BMG320/03 Organisational Theory & Design 6

Unit 1

1.2 1.3
1.4 1.5
The Evolution of Organisation Theory and Design
Learning Activity 1.1 Self-Check 1.1
Organisational Configuration: Mintzberg’s Organisational Framework
Learning Activity 1.2
Self-Check 1.2
Organisational Configuration: Mintzberg’s Five Organisation Types
Learning Activity 1.3
Self-Check 1.3
Summary References
BMG320/03 Organisational Theory & Design 8

Have you ever wondered how or why some organisations are able to adapt to changes while others collapse in the face of changes?
Apart from the human factors, what is vital in the organisation structure that allows companies to adapt in order not just to survive but to also to be successful. The structure that worked well for a company for the last twenty years may not serve the company well in an era of turbulent changes.
Managers, thus need to understand the importance of the structure and its design. This unit will explore some basic concept of types of organisations and other parts that contribute to the success of a company.
BMG320/03 Organisational Theory & Design 9
Please watch this video to understand more about organisation design.
Duration : 5.10 minutes

By the end of this Unit 1, you should be able to:
1. Describe the evolution of management theories as organisations adapt to the changing environment.
3. Describe how the different parts fit into the different types of organisations.
Many modern organisations are still following the hierarchical, bureaucratic organsiational structures that arose in the nineteenth century where the environment was relatively stable and rigid structures and systems ensured efficiency. However, to stay competitive, managers must change and conform to the latest standards on a nearly real-time basis. That means, managers need to shift from a mindset that is based on rigid systems to one that is more flexible.
The Industrial Revolution gave rise to the factory system which was very different from the agricultural system of production. To manage the new system of production brought about by the inventions of machinery, electricity and the management of workers, what we now call the classical perspective of management emerged. Scientific Management Theory, Administrative Principles of Management as well as the Bureaucratic system of management were the management principles that helped in the efficient running of factories and companies in the Industrial Age. These principles worked well for the needs of the Industrial Age and as the world progressed, these principles needed to be revised, adjusted or totally discarded in order to adapt to the changing environment of the 21st century.
As economies moved away from the agriculture to industrialisation, it required changes in how people and production were managed because managing farms were not the same as managing factories. Similarly, now as factories become fully automated, artificial intelligence replacing humans in many areas and the internet breaking down communication barriers, new ways of structuring and managing organisations are emerging.
2. Describe the different parts of an organisation.
BMG320/03 Organisational Theory & Design 10

Many managers are now re-designing their companies towards being a learning organisation where the organisation promotes communication and collaboration so that everyone is engaged in identi- fying and solving problems, enabling the organisation to innovate, improve and increase it capabili- ties in order to succeed in a dynamic environment of disruptive changes.
The diagram below shows how the change from a mechanical system to a more natural system is taking place.
Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School Press, 1995).
Figure 1.1. Two organisation design approach.
Organisations are moving away from vertical structures to more horizontal structures which make team work easier. Employees are now more empowered and there is greater sharing of information which enables employees at all levels to make better decisions. Globalisation has also given rise to greater collaboration between companies which were traditionally rivals, for example German automobile manufacturer, BMW has worked with Toyota to develop more energy efficient engines. Culturally two companies are learning to adapt as manufacturing facilities are being established all over the world.
BMG320/03 Organisational Theory & Design 11

Learning Activity 1.1
The following video will explain about the evolution of management.
Duration: 10.37 minutes
Self-Check 1.1
To recall what you have learnt in this sub topic, summarise the following key elements of:
i) Scientific Management
ii) Administrative Management
iii) Bureaucratic Management
BMG320/03 Organisational Theory & Design 12

What makes up an organisation’s parts and how do the parts fit together? According to Henry Mintzberg, every organsiation has five parts which are the technical core, top management, middle management, technical support and the administrative support as shown in the diagram below. Brief explanations of these parts are provided below.
Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N.J.: Prentice-Hall, 1979), 215–297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (January-February 1981), 103–116.
Figure 1.2.Five basic parts of an organisation.
Technical Core Technical Support
• The technical support function helps the organisation adapt to the environment.
• Technical support is responsible for creating innovations and helping the organisation change and adapt.
• The technical core includes people who do the basic work of the organisation.
• This part actually produces the product and service outputs of the organisation.
• This is where the primary transformation from inputs to outputs takes place.
BMG320/03 Organisational Theory & Design

Administrative Support
• The administrative support function is responsible for the smooth operation and upkeep of the organisation.
• This includes human resource activities as well as maintenance activities such as cleaning of buildings and service and repair of machines.
• Management is a distinct function, responsible for directing and coordinating other parts of the organisation.
• Top management provides direction, planning, strategy, goals, and policies for the entire organisation or major divisions.
• Middle management is responsible for implementation and coordination at the departmental level. In traditional organisations, middle managers are responsible for mediating between top management and the technical core.
Learning Activity 1.2
For a comprehensive explanation of this sub topic, please read Unit 1, pg. 26-27 on Introduction to Organisations.
Self-Check 1.2
Explain with examples the following parts in Mintzberg’s Organisational Framework:
• Technical core
• Technical Support
• Administrative Support
BMG320/03 Organisational Theory & Design

Mintzberg proposed that the five parts mentioned above could fit together in five basic types of organisations such as entrepreneurial structure, machine bureaucracy, professional bureaucracy, diversified form and adhocracy. Brief explanations of the basic types of organisations are provided below:
Source: Mintzberg, Henry, Structuring of Organizations, 1st, © 1979. Electronically reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey.
Figure 1.3.Mintzberg’s five organisation types.
BMG320/03 Organisational Theory & Design 15

Entrepreneurial structure
• A new, small start-up company
• It consists mainly of a top manager and workers in the technical core
• The organisation is managed and coordinated by direct supervision from the top
• Few support staff are needed
• The primary goal of the organisation is to survive and become established in its industry
There is little formalisation or specialisation
• Suited to a dynamic environment
Machine bureaucracy
• Very large and mature organisation
• Often oriented to mass production
• This form reflects extensive formalisation and specialisation
• Primary goal of efficiency
• Suited to a simple, stable environment
Professional bureaucracy
• The size and power of the technical core, which is made up of highly skilled professionals, professionals make up the bulk of the organisation.
• A large administrative support staff is needed to support the professionals
• The primary goals are quality and effectiveness.
• Professional organisations typically provide services rather than tangible goods.
BMG320/03 Organisational Theory & Design 16

Diversified form
• Mature firms that are extremely large and are subdivided into product or market groups
• There is a larger administrative support staff to support the divisions
• The diversified form helps to solve the problem of inflexibility experienced by a too-large
machine bureaucracy by dividing it into smaller parts
• The adhocracy develops in a complex, rapidly changing environment
• The design goal is frequent innovation and meeting continually changing needs
• The main structure consists of many overlapping teams rather than a vertical hierarchy
Adhocracies are usually young or middle-aged organisations
• Employees are engaged in the administration and support of their own teams
Learning Activity 1.3
For a better understanding of this unit, please read Unit 1, pg. 28-29 on Introduction to Organisations.
Self-Check 1.3
Do you think that a small entrepreneurial company can maintain it structure as its business grows?
BMG320/03 Organisational Theory & Design 17

Managers can understand organisations better by gaining a historical perspective and by understanding basic organisational configurations. Five parts of the organisation are the
technical core, top management, middle management, technical support, and administrative support. Different configurations of these parts result in five basic organisation types: entrepreneurial structure, machine bureaucracy, professional bureaucracy, diversified form, and adhocracy.
Challenges in today’s environment are leading to changes in organisation design and management practices. The trend is moving away from highly structured systems based on a mechanical model toward looser, more flexible systems based on a natural, biological model. Many managers are redesigning companies toward the learning organisation, which is characterised by a horizontal structure, empowered employees, shared information, collaborative strategy, and an adaptive culture.
Now that you have completed Unit 1, you should be able to:
1. LO1: Describe the evolution of management theories as organisations adapt to the changing
2. LO2: Describe the different parts of an organisation
3. LO3: Describe how the different parts fit into the different types of organisations.
Daft, R. (2016). Organization theory and design (12th ed.). Australia : South-Western Cengage Learning.
Daft, R. (2008). Organization theory and design (10th ed.). Australia : South-Western Cengage Learning.
Greatvideoresources. (2013, Feb 26). Evolution of management. [Video file]. Retrieved from
BMG320/03 Organisational Theory & Design 18

Unit 2

2.4 2.5
Organisational Structure
Learning Activity 2.1 Self-Check 2.1
Application of the Structural Design
Learning Activity 2.2 Self-Check 2.2
Role of Strategic Direction in Organisation Design
Learning Activity 2.3 Self-Check 2.3
Summary References
BMG320/03 Organisational Theory & Design 21

As companies grow and the challenges in the external environment become more complex, business processes, structures, designs and systems that once worked become barriers to efficiency. To enhance the organisation’s level of competency it is important to renew the answer to these traditional question, “why is a formal structure and design important to an organization?”
By the end of this Unit 2, you should be able to:
1. Describe the key components of organisational structure
2. Describe the applications of the structural design
3. Describe the role of strategic direction in organisation design
There are three key components in the definition of organisation structure:
1. Organisation structure designates formal reporting relationships, including the number of
levels in the hierarchy and the span of control of managers and supervisors.
2. Organisation structure identifies the grouping together of individuals into departments and of departments into the total organisation.
3. Organisation structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.
These three elements of structure pertain to both vertical and horizontal aspects of organising. For example, the first two elements are the structural framework, which is the vertical hierarchy. The third element pertains to the pattern of interactions among organizational employees. An ideal structure encourages employees to provide horizontal information and coordination where and when it is needed.
BMG320/03 Organisational Theory & Design 22

Organisation structure is reflected in the organisation chart. It is not possible to see the internal structure of an organisation the way we might see its manufacturing tools, offices, or products. Although we might see employees going about their duties, performing different tasks, and working in different locations, the only way to actually see the structure underlying all this activity is through the organisation chart.
The organisation chart is the visual representation of a whole set of underlying activities and processes in an organisation. Figure 2.1 shows a simple organisation chart for traditional organisation. The organisation chart can be quite useful in understanding how a company works. It shows the various parts of an organisation, how they are interrelated, and how each position and department fits into the whole.
Vice President Manufacturing
Plant Superintendant
Vice President Finance
Chief Accountant
Figure 2.1. Organisation chart sample.
Vice President Human Resource
Training Specialist
BMG320/03 Organisational Theory & Design

Self-Check 2.1
Learning Activity 2.1
Develop organisation charts that describe task responsibilities, reporting relationships, and the grouping of individuals into departments. Provide sufficient documentation so that all people within the organisation know to whom they report and how they fit into the total organisation picture.
BMG320/03 Organisational Theory & Design 24
Please watch the following video on organisational structure. Duration: 2.27 minutes

Each type of structure is applied in different situations and meets different needs. In describing the various structures, we touched briefly on conditions such as environmental stability or change and organisational size that are related to structure. Each form of structure functional, divisional, matrix, horizontal, network, hybrid represents a tool that can help managers make an organisation more effective, depending on the demands of its situation.
Ultimately, the most important decision that managers make about structural design is to find the right balance between vertical control and horizontal coordination, depending on the needs of the organisation. Vertical control is associated with goals of efficiency and stability, while horizontal coordination is associated with learning, innovation, and flexibility. The functional structure is appropriate when the organisation needs to be coordinated through the vertical hierarchy and when efficiency is important for meeting organisational goals. The functional structure uses task specialisation and a strict chain of command to gain efficient use of scarce resources, but it does not enable the organisation to be flexible or innovative.
At the opposite end of the scale, the horizontal structure is appropriate when the organisation has a high need for coordination among functions to achieve innovation and promote learning. The horizontal structure enables organisations to differentiate themselves and respond quickly to changes, but at the expense of efficient resource use. The virtual network structure offers even greater flexibility and potential for rapid response by allowing the organisation to add or subtract pieces as needed to adapt and meet changing needs from the environment and marketplace. In addition, as described in the chapter, many organisations use a hybrid structure to combine characteristics of various structural types.
Learning Activity 2.2
Please read the case for analysis: C & C Grocery Stores Inc in the online text book, (pg. 151).
Self-Check 2.2
Answer the following questions:
1. What is the definition of organization structure? Does organisation structure appear
on the organisation chart? Explain.
2. What are the primary differences between a traditional organisation designed for efficiency and a more contemporary organization designed for learning?
BMG320/03 Organisational Theory & Design 25

An organisational goal is a desired state of affairs that the organisation attempts to reach. A goal represents a result or end point toward which organisational efforts are directed. The choice of goals and strategy influences how the organisation should be designed. Top executives decide the end purpose the organisation will strive for and determine the direction it will take to accomplish it. It is this purpose and direction that shapes how the organisation is designed and managed.
Indeed, the primary responsibility of top management is to determine an organisation’s goals, strategy, and design, therein adapting the organisation to a changing environment. Middle managers do much the same thing for major departments within the guidelines provided by top management. The direction-setting process typically begins with an assessment of the opportunities and threats in the external environment, including the amount of change, uncertainty, and resource availability. Top managers also assess internal strengths and weaknesses to define the company’s distinctive competence compared with other firms in the industry. This competitive analysis of the internal and external environments is one of the central concepts in strategic management.
The next step is to define and articulate the organisation’s strategic intent. This includes defining an overall mission and official goals based on the correct fit between external opportunities and internal strengths. Leaders then formulate specific operational goals and strategies that define how the organisation is to accomplish its overall mission. Organisation design is the administration and execution of the strategic plan. Organisation direction is implemented through decisions about structural form, including whether the organisation will be designed for a learning or an efficiency orientation.
The role of top management is important because managers can interpret the environment differently and develop different goals. For example, a new CEO at Borders Group believed the book retailer was missing an opportunity by emphasizing its bricks and mortar stores while paying little attention to the online world of book retailing. When George Jones took over as CEO, he quickly saw e-commerce as “a necessary component of our business.” Borders ended its alliance with Amazon. com and reopened its own branded website. This gave Borders Rewards members the chance to earn benefits online, which they were not able to do through Amazon. Aiming to become a force in online bookselling, Borders abandoned its strategy of expanding the book superstore concept, selling off most of its overseas stores and closing numerous stores in the United States.
BMG320/03 Organisational Theory & Design 26

The choices top managers make about goals, strategies, and organisation design have a tremendous impact on organisational effectiveness. Remember that goals and strategy are not fixed or taken for granted. Top managers and middle managers must select goals for their respective units, and the ability to make good choices largely determines firm success. Organisation design is used to implement goals and strategy and also determines organisation success.
Learning Activity 2.3
A company’s strategic intent or direction reflects managers’ systematic analysis of organisational and environmental factors.
Based on your understanding of this topic, analyse the statement above in relation to the role of strategic direction in organisation design..
Self-Check 2.3
If you were to evaluate the effectiveness of the police department in a medium-sized community. Where would you begin, and how would you proceed? What effectiveness approach would you prefer?
BMG320/03 Organisational Theory & Design 27

Now that you have completed Unit 2, you should be able to:
LO1: Describe the key components of organisational structure LO2: Describe the applications of the structural design
LO3: Describe the role of strategic direction in organisation design
BusinessDictionary. (2016, Feb 11). What is organizational structure? [Video file]. Retrieved from
Daft, R. (2016). Organization theory and design (12th ed.). Australia : South-Western Cengage Learning
BMG320/03 Organisational Theory & Design 28

Unit 3

3.4 3.5
The Organisation’s Environment
Learning Activity 3.1 Self-Check 3.1
Framework for Assessing Environmental Uncertainty and
Adapting to a Changing Environment
Learning Activity 3.2 Self-Check 3.2
Designing Organisation for the International Environment
Learning Activity 3.3 Self-Check 3.3
Summary References
BMG320/03 Organisational Theory & Design 31

Have you ever wondered how multinational companies like McDonald’s, Starbucks or Dell organise their global operations? and how technology is changing the way companies operate? This unit will introduce you to the external environment in which all businesses operate in and have to adapt to in order to succeed.
Think of how Tesco, a multinational hypermarket has included online sales and delivery as it competes with smaller stores that can deliver directly to their customers or how the recent increase in sugar tax impacts business in the food and beverage industry.
This will give you an idea of how external environmental factors affects and influences organisations.
By the end of this Unit 3, you should be able to:
1. Evaluate the environment where the organisation’s is operating in
2. Explain the several ways how organisations can adapt to a changing
3. Describe the different ways to structure organsations for the international
BMG320/03 Organisational Theory & Design 32

Source: Based on Richard L. Daft, Organization Theory and Design, Tenth Edition (South-Western Cengage Learning, O.H: Cengage Learning, 2008), 141.
Figure 1.1.An organisation’s environment.
BMG320/03 Organisational Theory & Design 33

The environment includes everything outside the organisation and organisational environment is defined as all elements that exist outside the organisation and have the potential to affect the organisation.
Domain defines the organisation’s niche and defines the external sectors with which the organisation will interact to accomplish its goals. The environment comprises sectors such as the industry, raw materials, human resources, financial resources, market, technology, economic conditions, government, sociocultural and the international sector.
These sectors can be further subdivided into the task environment and the general environment.
The task environment includes sectors with which the organisation interacts directly such as the industry, raw materials, market sectors, human resources and the international sectors. An example of how these sectors can affect the organisation is the retail industry where online retailers are challenging the traditional brick and mortar retail outlets and how the retail industry responds to the changes.
The general environment includes sectors that may not have direct impact on the organisation such as the government sector, sociocultural sector, economic conditions, technology and financial sectors. For example, technological advancement in manufacturing has resulted in greater automation of production which leads to faster production of goods and delivery to customers.
The international environment affects most organisation which have international operations. For example, Starbucks which sources its Arabica coffee beans from Latin America, Africa and Asia Pacific will have its operations affected if adverse weather conditions affect the production of coffee beans in any one of these countries.
BMG320/03 Organisational Theory & Design 34

Learning Activity 3.1
For a better understanding of this topic, read Unit 3, pg 140-143 on ‘Open System Design Elements’. You may also want to read the article on ‘Food delivery companies in Malaysia at:
Please watch the following video on how online retailers are challenging traditional retailers.
Duration: 2.56 minutes
Self-Check 3.1
After you have finished reading the module and article, explain how mobile technology has affected the restaurant industry in Malaysia.
BMG320/03 Organisational Theory & Design 35

Organisations need to cope with and manage uncertainty to be effective. Uncertainty means that decision makers do not have sufficient information about environmental factors and have difficulty predicting external changes.
A complex environment is one in which the organisation interacts with and is influenced by many external elements while in a simple environment, the organisation interacts and is influenced by only a few external elements.
An environmental domain is stable if it remain the same over a long period of time. An unstable environment is where there are frequent changes in environmental elements.
Simple + Stable = Low Uncertainty
1. Small number of external elements, and elements are similar
2. Elements remain the same or change slowly
Eg: Soft drink bottlers, beer distributors, container manufacturers, food processors
Complex + Stable = Low - Moderate Uncertainty
1. Large number of external elements, and elements are dissimilar
2. Elements remain the same or change slowly
Eg: Universities, appliance manufacturers, chemical companies, insurance companies
Simple + Unstable = Moderate - High Uncertainty
1. Small number of external elements, and elements are similar
2. Elements change frequently and unpredictably
Eg: E-commerce, fashion clothing, music industry, toy manufacturers
Complex + Unstable = High Uncertainty
1. Large number of external elements, and elements are dissimilar
2. Elements change frequently and unpredictably
Eg: Computer firms, aerospace firms, telecommunication firms, airlines
Figure 1.2. Framework for assessing environmental uncertainty.
BMG320/03 Organisational Theory & Design 36
c ty

The simple–complex and stable–unstable dimensions are combined into a framework
for assessing environmental uncertainty in the table above In the simple, stable environment, uncertainty is low. There are only a few external elements to contend with, and they tend to remain stable. The complex, stable environment represents somewhat greater uncertainty. A large number of elements have to be scanned, analysed, and acted upon for the organisation to perform well. External elements do not change rapidly or unexpectedly in this environment.
Even greater uncertainty is felt in the simple, unstable environment. Rapid change creates uncertainty for managers. Even though the organisation has few external elements, those elements are hard to predict, and they react unexpectedly to organisational initiatives. The greatest uncertainty for an organisation occurs in the complex, unstable environment. A large number of elements impinge upon the organisation, and they shift frequently or react strongly to organisational initiatives. When several sectors change simultaneously, the environment becomes turbulent.
Organisations can adapt to a changing environment in several ways by:
• Adding positions and departments- for example, a company can create a new department to handle online sales; or
• Building Relationships – exposing the technical core who directly deal with customers and suppliers to the uncertain environment to find out customer or supplier concerns; or
• Differentiation and integration- differentiation refers to the different orientation among managers in different functional departments and integration involves collaboration among departments with integrating personnel such as co-ordinators or project managers helping to integrate the activities of the different departments; or
• Organic versus Mechanistic management processes – in a stable environment the internal organisation is characterised by rules, procedures and formal authority and is referred to as a mechanistic system while in a dynamic environment, the internal organisation is less formal, greater flexibility and is known as an organic system.
BMG320/03 Organisational Theory & Design 37

Learning Activity 3.2
Please read the online text, Part 3, Open System Design Elements, chapter 4, pages 145-154.
Self-Check 3.2
Using the organisation that you are working in, assess whether:
a) b) c)
It is operating in a simple or complex environment It is operating in a stable or unstable environment
It is operating in a high or low uncertainty environment
BMG320/03 Organisational Theory & Design 38

As organisations expand their operations internationally, their organisation structure need to change to take into consideration the challenges of managing a global operation. Possible structures include:
• International divisional structure
• Global Product division structure
• Global Geographic division structure
• Global Matrix structure
Source: Based on Richard L. Daft, Organization Theory and Design, Tenth Edition (South-Western Cengage Learning, O.H: Cengage Learning, 2008), 220.
Figure 1.3. Domestic hybrid structure with international division.
BMG320/03 Organisational Theory & Design 39

Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp., 1981).
Figure 1.4. Partial global product structure used by Eaton Corporation.
Source: Based on Robert J. Kramer, Organizing for Global Competitiveness: The Geographic Design (New York: The Conference Board, 1993), 30.
Figure 1.5. Global geographic structure of Colgate-Palmolive company.
BMG320/03 Organisational Theory & Design 40

Source: Based on Richard L. Daft, Organization Theory and Design, Tenth Edition (South-Western Cengage Learning, O.H: Cengage Learning, 2008), 225.
Figure 1.6. Global matrix structure.
Learning Activity 3.3
Please read the online text, Part 3, Open System Design Elements, chapter 4, pages 219-221.
Self-Check 3.3
Explain the circumstances under which organisations will consider the following structures:
a) Global Product Division Structure
b) Global Geographic Division Structure
c) Global Matrix Structure
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Organisations try to succeed and achieve efficiencies in a world characterised by uncertainty and scarcity. This unit provides frameworks for understanding how the environment influences the structure and functioning of an organisation and how they can learn and adapt to the environment in order to succeed.
As organisations expand their operations globally, the organisation structure that they use in their domestic operation may no longer be able to serve them well and they would need to consider re-structuring the design of their organisation based on the environment they operate in globally.
Now that you have completed Unit 3, you should be able to:
1. 2. 3.
Evaluate the environment the organisation’s is operating in
Explain the several ways how organisations can adapt to a changing environment
Describe the different ways to structure organsations for the international environment.
Daft, R. (2016). Organization theory and design (12th ed.). Australia : South-Western Cengage Learning.
Daft, R. (2008). Organization theory and design (10th ed.). Australia : South-Western Cengage Learning.
Randle, J. (2012, Dec 17). E-commerce challenges traditional stores [Video file]. Retrieved from
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Unit 4

4.4 4.5
Manufacturing and Service Technologies
Learning Activity 4.1 Self-Check 4.1
Impact of Technology on Job Design
Learning Activity 4.2 Self-Check 4.2
Organisation Size, Lifecycle and Decline
Learning Activity 4.3 Self-Check 4.3
Summary References
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An auto parts factory sends engineers around the world to learn about new production methods. A team of airline employees studies the pit stop techniques used by NASCAR racing crews. A small clothing manufacturer in New York invests in a computerised German-made knitting machine. What do all these organisations have in common? They are looking for ways to provide goods and services more efficiently and effectively.
This chapter explores both service and manufacturing technologies. Technology refers to the work processes, techniques, machines, and actions used to transform organisational inputs (materials, information, ideas) into outputs (products and services). Technology is an organisation’s production process and includes work procedures as well as machinery.
By the end of this Unit 4, you should be able to:
1. Describe what are the manufacturing and service technologies 2. Describe the impact of technology on job design
3. Describe the organisation size, life cycle and decline
Manufacturing technologies include traditional manufacturing processes and contemporary applications, such as flexible manufacturing and lean manufacturing. The first and most influential study of manufacturing technology was conducted by Joan Woodward, a British industrial sociologist. Her research began as a field study of management principles in south Essex. The prevailing management wisdom at the time (1950s) was contained in what were known as universal principles of management. These principles were “one best way” prescriptions that effective organisations were expected to adopt.
Today’s increased global competition means more volatile markets, shorter product life cycles, and
more sophisticated and knowledgeable consumers; and flexibility to meet these new demands has
become a strategic imperative for many companies.
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Manufacturing companies can adopt new technologies to support the strategy of flexibility. However, organisation structures and management processes must also be realigned, as a highly mechanistic structure hampers flexibility and prevents the company from reaping the benefits of the new technology. Managers should always remember that the technological and human systems of an organisation are intertwined.
Whereas manufacturing organisations achieve their primary purpose through the production of products, service organisations accomplish their primary purpose through the production and provision of services, such as education, health care, transportation, banking, and hospitality. Studies of service organisations have focused on the unique dimensions of service technologies.
The most obvious difference is that service technology produces an intangible output, rather than a tangible product, such as a refrigerator produced by a manufacturing firm. A service is abstract and often consists of knowledge and ideas rather than a physical product. Thus, whereas manufacturers’ products can be inventoried for later sale, services are characterised by simultaneous production and consumption. A client meets with a doctor or attorney, for example, and students and teachers come together in the classroom or over the Internet. A service is an intangible product that does not exist until it is requested by the customer. It cannot be stored, inventoried, or viewed as a finished good. If a service is not consumed immediately upon production, it disappear.
Learning Activity 4.1
To better understand this topic, watch the video on ‘manufacturing technologies in trend’.
Duration: 2.09 minutes
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