An organization can be perceived as a machine with many cogs involved in its day to day activities to ensure its effectiveness. Systems put on place to coordinate activities, handle contingencies, allocate resources, and provide positive aggregation through the years. An organization's functioning process involves the reception of inputs such as raw materials form the external environment; to the production of value-added outputs such as paper that solves a problem in the external environment or meets specific goals. An organization is impacted by and impacts the external environment. The understanding of how an organization functions and how it impacts and affects the external environment can be defined as organizational theory (Aquinas, 2008). In the running of an organization, an organization structure is essential to the effectiveness and success of the organization. The system in which the hierarchy in an organization is defined is known as an organizational structure. Organizational structures include a functional structure or matrix structure.
The organizational design includes how management handles contingencies and problems arising to the success of the organization. Organization design skills are critical to hired managers as they will be the personnel to implement solutions to any arising contingencies in the organization as well as agents of change in the firm. Organizational design is crucial for all organizations in all industries; for instance, the managers of Hyundai turned the Korean auto manufacturing company from the production of inexpensive frills by continuously focusing on customer satisfaction, quality, and cost control (Daft and Lewin, 1993). Organizational design and change are mutually inclusive. The change in organizations' processes and procedures to meet goals such as customer satisfaction go hand in hand. Effective risk management is essential for organizational effectiveness.
Organizations are complex structures that function according to the goals of its stakeholders. A firm's ability to create wealth and value for its stakeholders is one of the main objectives of a firm. Organizational stakeholders are made up of inside stakeholders, such as shareholders and managers and outside shareholders. Organizational effectiveness ensures that the needs of most shareholder groups are met. Satisfying the desires of all organization shareholders is a daunting task and managers to choose which stakeholders need to satisfy and how to allocate resources and rewards to all stakeholders to achieve the firm's objectives. Top management officials are therefore given a mandate to organizational resources and their practical use. Agency problems occur when management decides to act in their self-interest and not to meet the primary goal of shareholders' wealth maximization; therefore, solutions such as mandatory disclosure should be put in place to ensure the profitability of the organization. Ethics are moral values designated to showcase the right way a group of stakeholders should deal with another. Organizational ethics are mostly professionally designed by top management as well as shareholders to build an ethical working culture in the organization.
Managing the organization's environment is an essential task in every organization that requires knowledge of changing dynamics of the environment while considering the globalization of the industry. An organization's environment can be defined as a set of factors affecting the functioning of an organization. The management of an organization's environment is to make sure the resources needed for production are available. For example, expanding into new markets with untapped potential such as the expansion of Starbucks and McDonalds all over the world, setting an organizational domain which is the range of goods and services provided by the organization in its market operation. New ways of establishing an organization's domain are arising by the conceptualization of the use of sustainable resources that have held great significance in managing organization environments (Post and Altma, 1994). Environmental forces such as demographics, international, and political forces cause uncertainty in the functioning of n organization. Managers are expected to overcome these uncertainties for the firm to operate. An organization's strategy is to reduce the dependency on other organizations to produce resources hence finding a way to make funds available. Interorganizational plans to reduce resource dependency involves strategic alliances to manage the two types of dependencies, symbiotic, and competitive. Measure taken to achieve the interdependency are hostile takeovers, mergers and acquisitions, and cartels.
The costs incurred in negotiation and governing exchanges are transaction costs. Transaction costs can be incurred from uncertainty, opportunism, and specific assets and risks. Transaction cost theory states that an organization's goal is to minimize transaction costs outside the organization and manage them inside the organization. Organizations, therefore, implement inter-organizational strategies that lead to a reduction in transaction costs. Organizations are complex structures and have a complex functioning structure to achieve both its long term and short-term goals.
Aquinas, P. G. (2008). Organization Structure and Design. Excel Books India.
Daft, R. L., & Lewin, A. Y. (1993). Where are the Theories for the" New" Organizational Forms? An Editorial Essay. Organization Science, i-vi.
Post, J. E., & Altma, B. W. (1994). Managing the Environmental Change Process: Barriers and Opportunities. Journal of Organizational Change Management, 7(4), 64-81. http://www.academia.edu/download/46783072/BARRIERS_TO_CHANGE.pdf
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