MGT504 - Organization Theory and Design - Lecture Handout 22

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ORGANIZATION BUREAUCRACY AND CONTROL

As organizations progress through the life cycle, they usually take on bureaucratic characteristics as they grow larger a more complex. The systematic study for bureaucracy was launched by Max Weber, a sociologist who studied government organizations in Europe and developed a frame work of administrative characteristics that that would make large organizations rational and efficient. Weber wanted to understand how organization could be designed to play a positive role in the larger society.

WHAT IS BUREAUCRACY?

Although Weber perceived bureaucracy as a threat to basic personal liberties, he also recognized it as the most efficient possible system of organizing. He predicted the triumph of bureaucracy because of its ability to ensure more efficient functioning of organization in both business and government settings. Weber identified a set of organizational characteristics, listed below, that could be found in successful bureaucratic organization. Rules and standard procedures enabled organizational activities to be performed in a predictable, routine manner specialized duties meant that each

Weber’ Dimension of Bureaucracy and Bases of Organizational Authority

Bureaucracy Legitimate Bases of Authority
Rules and procedures Rational –legal
Specialization and division of labor Traditional
Hierarchy of authority Charismatic
Technically qualified personnel  
Written communication and records  

Employees had a clear task to perform. Hierarchy of authority provided a sensible mechanism for supervision and control. Technical competence was the basis by which people were hired rather than friendship, family ties, and favoritism that dramatically reduced work performance. The separation of the position from the position holder meant that individuals did not own or have an inherent right to the job, thus promoting efficiency, Written records provided an organizational memory and continuity over time.

Although bureaucratic characteristics carried to an extreme are widely criticized today, the rational control introduced by Weber was a significant idea and a new form of organization. Bureaucracy provided many advantages over organization forms based upon favoritism, social status, family connections, or graft, which are often unfair, for example, in Mexico, a retired American lawyer had to pay a $ 500 bribe to purchase a telephone, and then discovered that a government official had sold hi telephone number to another family. In china, the tradition of giving government posts to relatives is widespread even under communism. China’s emerging class of educated people doesn’t like seeing the best jobs going to children and relatives of officials. By comparison, the logical and rational form of organization described by Weber allows work to be conduced efficiently and according to established rules.

SIZE AND STRUCTURAL CONTROL

In the filed of organization theory, organization size has been described as an important variable that influences structural design and methods of control. Should an organization become more bureaucratic as it grow larger? In what size organizations are bureaucratic characteristic most appropriate? More than one hundred studies have attempted to answer these questions. Most of these studies indicated that large organization is different from small organization along several dimensions of bureaucratic structure, including formalization, centralization, and personnel rations.

Formalization and Centralization: Formalization refers to rules, procedures, and written documentation, such as policy manuals and job description that prescribed the rights and duties of employees. The evidence supports the conclusion that large organizations are more formalized. The reason is that large organizations rely on rules, procedures, and paperwork to achieve standardization and control across their large numbers of employees and departments, whereas top managers can use personal observation to control a small organization.

Centralization refers to the level of hierarchy with authority to make decision. In centralized organizations, decision, tends to be made at the top, in decentralized originations, similar decisions would be made at lower level. Decentralization represents a paradox because, in the perfect bureaucracy, all decision would be made by the top administrator, who would have perfect control. However, as an organization grows larger and has more people and departments, decision cannot be passed to the top, or senior manager would be overloaded. Thus, the research on organization size indicates that larger organization permit greater decentralization. Hewlett-Packard decentralization almost every aspect of its business to speed up decision making in small startup organizations, on the other hand, the founder or top executive is often involved in every decisions, large and small.

Personnel Ratios: Another characteristic of bureaucracy is personnel ratio for administrative, clerical, and professional support staff. The most frequently studied ratio is the administrative ratio. Two patterns have emerged. The first is that the ratio of top administration to total employees actually smaller in large organizations, indicating the organizations experience administrative economies as they grow larger. The second pattern concern clerical and professional support staff ratios. These groups tend to increase in proportion to organization size. The clerical ratio increases because of the greater communication and reporting requirements needed as organization grow larger. The professional staff ratio increases because of the greater need for specialized skills in larger, complex organizations.

As organization increase in size, the administrative ratio declines and the ratios for other support groups increase. The net effect for direct workers is that they decline as percentage of total employees. In summary, while top administrators do not make up a disproportionate number of employees in large organizations, the idea that proportionately greater overhead is required in large organization is supported. Although large organizations reduced overhead during the difficult economic years of the 1980s, recent studies indicate that over head costs for many American corporations began creeping back up again as revenues soared during the late 1990s, keeping costs for administrative, clerical, and professional support staff low represents an ongoing challenge for today’s large organizations.

BUREAUCRACY IN A CHANGING WORLD

Weber’s Prediction of the triumph of bureaucracy proved accurate. Bureaucratic characteristics have many advantaged and have worker extremely well for many of the needs of the industrial age. By establishing a hierarchy of authority and specific rules and procedures, bureaucracy provided an effective way to bring order to large groups of people and prevent abuses of power. Impersonal relationships based on roles rather than people reduced the favoritism and nepotism characteristic of much preindustrial organization. Bureaucracy also provided for systematic and rational ways to organize and mange tasks too complex to be understood and handled by a few individuals, thus greatly improving the efficiency and effectiveness of large organization.

The world is rapidly changing, however, and machinelike bureaucratic systems of the industrial age no longer work so well as organizations face new challenges. With global competition and uncertain environment, many organizations are fighting against increasing formalization and professional staff ratios. The problems caused by large bureaucracies have perhaps nowhere been more evident than in U.S. government. From the bureaucratic obstacles to providing emergency relief following Hurricane Andrew to the bungling by U.S. Marshal’s Service that put a convicted drug kingpin back on the streets, such action by federal government agencies show how excessive bureaucracy and impede the effectiveness and productivity of organizations.

Today, large organization are cutting layers of the hierarchy, keeping headquarters staff small, and giving lower – level workers greater freedom to make decisions rather than burdening them with excessive rules and regulations. At Nucor Corp, Headquarters is staffed by only twenty – three people. Nucor’s plant managers handle everything from marketing to personnel to production. Centex corporation, which has annual revenues of about $3.8 billions, is run from a modest headquarter in Dallas by a staff of fewer than one hundred. Centrex decentralizes authority and responsibility to the operating divisions. The point is to not overload headquarters with lawyers, accountants, and financial analysts who will overload inhibit the flexibility and autonomy of divisions. Of course, many companies must be large to have sufficient resources and complexity to produce products for a global environment, but companies such as Johnson & Johnson, Wal-Mart, 3M, Coca –Cola, Emerson Electric, and Heinz are striving toward

DYNAMIC CONTROL SYSTEMS

  1. Bureaucratic Control:
    – Rules, standards, hierarchy, legitimate authority
  2. Market Control:
    – Prices, competition
  3. Clan Control:
    – Tradition, shared values, trust

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