ARE 112 – Winter 2017 Comment Notes #1a – Introduction to Organizational Behavior
I. Comment Notes
Comment notes are provided after the related lectures to provide additional explanations and
examples of topics from the class. The notes follow the outline format for the referenced class
notes. They are available for selected lectures only.
II. Some General Comments on Organizations and Management
A. Why do we have organizations? Lesson: Organizations exist to achieve a goal or achieve a set of
goals.
1.
This achievement can be to optimize the goal(s)
2.
This achievement can be to satisfice the goal(s)
http://www.economist.com/node/13350892
Herbert Simon (1916-2001) is most famous for what is known to
economists as the theory of bounded rationality, a theory about
economic decision-making that Simon himself preferred to call
“satisficing”, a combination of two words: “satisfy” and “suffice”.
Contrary to the tenets of classical economics, Simon maintained that
individuals (Added for ARE 112 – organizations) do not seek to
maximize their benefit from a particular course of action (since they cannot assimilate and digest all
the information that would be needed to do such a thing). Not only can they not get access to all the
information required, but even if they could, their minds would be unable to process it properly.
The human mind necessarily restricts itself. It is, as Simon put it, bounded by “cognitive limits”.
Hence people, in many different situations, seek something that is “good enough”, something that is
satisfactory. Humans, for example, when in shopping mode, aspire to something that they find
acceptable, although that may not necessarily be optimal. They look through things in sequence and
when they come across an item that meets their aspiration level they go for it. This real-world
behavior is what Simon called satisficing.
He applied the idea to organizations as well as to individuals. Managers do much the same thing as
shoppers in a mall. “Whereas economic man maximizes, selects the best alternative from among all
those available to him,” he wrote, “his cousin, administrative man, satisfices, looks for a course of
action that is satisfactory or ‘good enough'.” He went on to say: “Because he treats the world as
rather empty and ignores the interrelatedness of all things (so stupefying to thought and action),
administrative man can make decisions with relatively simple rules of thumb that do not make
impossible demands upon his capacity for thought.”
B. An example from economics: You can find the link for the Oliver Williamson interview on
SmartSite – under the resources tab – we will go over this material the third week of the term
C. A sophisticated look at the organization: let’s list ten significant innovations since World War II:
Lesson: The majority of these innovations came from large organization and others came from
small, entrepreneurial organizations. What organizations can do is:
1. Acquire, marshal, and allocate resources (money and people)
2. Then organize and harness the ingenuity people
3. Then the organization will respond to commercial and social environments – some
form of a market where various types of exchanges will occur
4. And finally coordinate the challenges of producing and distributing goods and
providing services, all on a local to a global scale
So one of the great innovations since World War II was the organizational structure
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ARE 112 – Winter 2017 Comment Notes #1a – Introduction to Organizational Behavior
III. An Organizational Design Framework This is our first view of organizational architecture – and it
is in this architecture that we find the elements that make up the organization. The diagram
below is just one of many “lenses” to see the organization. It is important to look at the
organizational architecture as it is in this framework that we can then see “organizational
behavior.”
Buy-Side
Sell-Side
Strategy
People
Culture
Tasks
Structures
Systems
1. Strategy – to be covered later in the class in more detail – is the chosen direction of the firm:
“What is our business and how do we compete?”
2. The Buy-Side: This is where the organization acquires resources. It is a setting that is often
characterized as predictable, professional, and consistent. Generally there are not a great
number of elements on the buy-side. We will discuss the buy-sided later in the class.
3. The Sell-Side: This is where the organization meets its customers and is often characterized as a
chaotic setting where information is incomplete and uncertain and there a large number of
elements (many customers with varying preferences).
4. The buy-side and the sell-side are often referred to as the external environment of the
organization.
5. Structure refers to the formal and informal system of tasks and reporting relationships that
control and coordinate employees so they can cooperate to achieve organizational goals.
Examples are organizational charts, specializations, and rights to make decisions.
6. Systems are the processes and policies that complement the structures such as human resources
policies, budgeting, and how we communicate.
7. Tasks (often referred to as critical tasks) are the jobs and role requirements that make the
systems work within the organizational structure.
8. People are – and this may seem impersonal but it is not as we will see later – often defined by the
skills, knowledge, and abilities ~ the “SKA’s” that we will discuss later in the class ~ that are
needed to achieve organizational goals.
9. Culture – again, we will discuss this at length – are the core values, norms, and beliefs that guide
and direct they ways people in the organization interact with themselves, their customers, their
suppliers, and other stakeholders. Remember the part of the IBM book we discussed in class:
Page 182 second full paragraph: “I came to see, in my time at IBM, culture isn’t just one aspect
of the game – it is the game.”
One of the results of this architecture is to have a type of “fit” of the organization structures to
get close to optimizing the strategic goals or objectives of the organization. This is call the
external fit and is not a topic of organizational behavior. It is more of a topic for organizational
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ARE 112 – Winter 2017 Comment Notes #1a – Introduction to Organizational Behavior
strategist and marketing. The external fit addresses the question of how well the organizational
responds to its environment – the buy-side and the sell-side.
Another result of this architecture is called the internal fit: how well the components of the
organization. There are three questions or points to be considered when we look at the internal
fit and organizational behavior:
1. Do the components of the organization – in our diagram above including the arrows that
represent the interfaces of the components – allow for effective implementation of the
strategy?
2. Do the components of the organization allow for effective and efficient use of organizational
resources to achieve the strategic goals?
3. Are the components of the organizational model consistent with the organizational culture? In
organizational behavior speak this is often stated as: “Is there a consistent message?”
Remember the quote from the IBM book (we read this book after the first exam): “…culture
isn’t just one aspect of the game it is the game.” (page 182).
IV. Additional Comments on Organizations
No additional comments
V. General Historical Phases of “Modern Management” of the Organization
A principal factor for the development of the classical school of management was the industrial
revolution in the late 1800’s that needed an efficient manufacturing process with a trained labor
force.
VI. Reminder: Why do we have organizations?
No additional comments
VII. Back to General Historical Phases of “Modern Management”
The success of the classical school is one of the principal reasons for the start of the behavioral
school. The population centers (cities) were now providing for education and socialization of
workers who wanted more than a subsistence level of their lives and particularly for their
children.
VIII. Value Proposition
Here is an excerpt from the
Starbucks book and the “too tall
espresso machines” that is an
example of the lack of alignment
between operations and strategy.
This book is for the last third of
the class and not the first exam.
This is what he wanted.
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