- Organization size: is bigger better?

- Pressures for growth

o Consensus used to be small business was more flexible/responsive, but success of giants
like Toyota, GE, CP rail, etc. still exists
o Mega-corp era for sure; mergers like DaimlerChrysler, Citigroup, etc.
o “To stop growing is to stagnate”
- Large vs small organization
o Large
 Huge resources and economies of scale needed to compete globally
 Org has resources to exert economic and social forces
 EX: govt evacuating citizens
 Can get back to business quicker given an emergency
 Standardized, complex
 Good HR mechanisms, good employee benefits and chances for promotion
o Small
 Responsiveness/flexibility
 Flat structure, encourages innovation and entrepreneurship
 More personal involvement, people identify with company more
 Usually serves more of a niche while large serves a general area
 Most times M&A doesn’t work out
o Hybrid
 Small companies can become victims when shifting large
 EX: mechanistic structure spawns, hierarchies
 Combine large corporation resources and reach with small company simplicity
 Divisional structure can be changed; reorganize into groups of smaller
companies can give mindset/advantage of small business
- Organizational life cycle
o Suggests organizations are born, grow older, eventually die
o Entrepreneurial stage
 Emphasis on creating product/service
 Full devotion to technical aspects like design and marketing
 Nimble structure, informal
o Crisis leadership stage
 As growth occurs, more employees cause more problems
 Owners confronted with issues but tend to ignore and focus on technical aspects
 Must either adjust structure to deal with growth or fail
 EX: apple appoints new leader as business grows
o Collectivity stage
 Organization grows into a more elaborate design
 Department hierarchies established, labour divisions created
 Employees collectively identify with org, work hard for success
o Crisis delegation control stage
 Lower-level employees now feel restricted from top-down
  Autonomy crisis occurs when top management doesn’t want to give up positions
after leading firm to present success
 Want to “directly control” everything, org needs to split things up
o Formalization stage
 Bureaucracies form
 Strategy more important to top management
 Formal communication, etc.
o Crisis red tape stage
 Bureaucracies create too much red tape
 Innovation restricted
o Elaboration stage
 Design becomes flexible to compensate for above
 Teams formed across functions or divisions
o Crisis need for revitalization stage
 At maturity, tends to enter decline
 Shifts out of alignment with environment, too slow in management structure to
adapt to change
- General insights
o 84% orgs that make it past first year still fail within 5 years
o Don’t transition from the entrepreneurial stage well enough
- Organizational characteristics during the life cycle

- Organization bureaucracy and control

o With growth, bureaucratic structure usually comes
o What is bureaucracy
 Rules and standard procedures enable activities to be performed predictably
and routinely
 Hierarchy provides sensible mechanism for supervision and control
 Helped combat favouritism, family connections, etc. in promotion and hiring
- Characteristics of bureaucracy
o Formalization
 Rules, procedures, etc. which prescribe duties of employees
 Large organized more formalized, as they need to rely on standardization across
large employees and departments
o Centralization
 Level of hierarchy with authority to make decisions
 Decisions made at the top in centralized organizations
 In some ways, larger organizations need more decentralization
 I.E. seniors at top get overloaded with decisions
 o Personnel ratios
 Ratio of top admin to total employees is smaller in large organizations
 As orgs grow, experience consolidates at top
 Clerical and professional support staff ratios increase relative to organization size
 More communication and reporting needed, more professional staff
needed for organization skills as it grows, etc.


- Bureaucracy in a changing world
o Hierarchy has worked for businesses
o Effective way to bring large people together and unify them
o Not perfect though; most global orgs facing high formalization and high professional
staff ratios, over bureaucracy
- Organizing temporary systems for flexibility and innovation
o Incident command system
 Developed to maintain efficiency of bureaucracy but prevent slow responses to
crises
 Used by fire departments, police, etc.
 Hierarchical side helps maintain control to understand well-understood
problems
 In times of uncertainty though, structure loosens so people can work across
departments and anticipate/avoid expected problems
 EX: Aircraft carrier
 Lots of procedures, chain of command, etc.
 When launching planes though or war, command not as strong; sailors
and officers work together to achieve whatever is needed
 People know the best procedure to use at the time
 “Incident commander” is always in charge, responsible for all activities
  In crisis time, decision making is dispersed to individuals who best understand
situation
- Reducing bureaucracy
o Give low level workers freedom, smaller headquarters, etc.
o Decentralization, more worker authority, etc.
o Increasing professionalism of employees also reduces bureaucracy
 Highly educated people already have a high standard of behavior, formalization
not needed as much as people know how to expect
o Group training encourages all individuals to be “the same”, loosens barriers
- Organization control strategies
o

o Bureaucratic control
 Use of policies, hierarchies, rules to standardize behavior and assess
performance
 Managers need to have authority to maintain control, different types of
authority can be present
 Rational-legal authority
 Employee belief that rules from above are actually “legal” or their
willingness to follow them
 Traditional authority
 Belief in traditions and legitimacy based on status of people
o EX: religions, monarchies, etc.
 Charismatic authority
 Based on devotion to leader or heroism of an individual
o EX: military general, Steve Jobs
o Market control
 Occurs when price competition used to evaluate an organization
 I.E., organization controlled based on “price and profits”
 EX: social enterprise enters market through social purpose business that
integrates both financial and social bottom lines
 EX: network organization; different companies compete on price to
provide services required by the “hub” organization
o Clan control
 Use of social characteristics to control behavior
 Requires shared values and employee trust
 Best used in uncertain times; you can’t “put a price” on things, people need to
stick together and are committed to organization purpose
 EX: Labatt
  Training program so that people fall into company values
 Self-control system
 Company tries to induce change by encouraging individuals to meet
individual goals and values
 Individual employee goals are tried to be “tied” to organizations, force
them to see eye-to-eye
- Organizational decline/downsizing
o Organizational atrophy
 When organizations become overly bureaucratic and inefficient
 Cannot adapt to environment
 EX: Blockbuster having trouble adapting to new competitors like Netflix
 Can’t always stick to your old strategy from the past, need to innovate
eventually
o Vulnerability
 Organizations inability to prosper in its environment
 Often happens to small organizations who aren’t established
 EX: small e-commerce companies failed when tech bubble declined
 Also may be vulnerable to poor strategy-environment fit, etc.
o Environmental decline/competition
 Reduced energy and resources available to support an organization
 Either needs to scale down or shut down
 EX: North American manufacturing decline due to China
- Decline model stages
o Blinded stage
 Internal/external change threatens long-term survival
 Organization often misses signals of decline
 If they find problems, can “save” the decline
o Inaction stage
 Denial occurs despite falling performance
o Faulty action stage
 Serious problems exist, can’t be ignored
 Leaders are forced to change based on circumstances
o Crisis stage
 Hasn’t dealt with decline better in earlier stages
 Social fabric eroding, dramatic actions such as replacement of top management
is occurring, downsizing, etc.
o Dissolution
 Irreversible damage done
 Loss of market, reputation, best staff, etc.
 o
- Downsizing implementation
o Common since recession
o Outsourcing, re-engineering of projects, and global competition all major factors
o Steps to downsize well:
o Communicate more, not less
 Provide notice as advanced as possible
 EX: 3m warned employees months ahead that layoffs would be coming,
then held meetings why layoffs were occurring, then gave proper notice
to employees laid off and severance
 Provide assistance to displaced workers
 Provide training, severance, etc.
 Allow employees to leave with dignity, say goodbye to others, etc.
 Help survivors cope
 Leaders need to remember that emotions are running high
 Others in organization feel guilt that they should have been laid off, etc.
 Acknowledge the feelings, help adapt to job changes/responsibilities,
etc.