Organizational Theory and Design

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BMG 320/03 Organizational Theory and Design

Question 1 As organisations need to have the right fit between internal structure and the external environment in order to succeed, determine how you can adapt your business to deal with the changes. (30 marks) Adapting a restaurant business to changes in the external environment, such as the increased demand for take-out and online orders during and after the pandemic, involves a process of innovation and organizational change. Let's explore how we can adapt these changes using the stages of innovation. Figure 2: Sequence of Elements of Successful Change The first element adapt business to deal with the changes is Ideas . Change is the lifeblood of any successful organization, and for your restaurant business, embracing innovative ideas is pivotal in adapting to the changing landscape. In an evolving environment where take- out and online orders are gaining prominence, creativity becomes a valuable asset. One approach is to nurture internal creativity. Consider forming a dedicated team within your restaurant whose primary task is to brainstorm innovative solutions that cater to the shifting customer demands. This team can explore new dishes that not only maintain their quality but also travel well and remain delicious when delivered to customers' doorsteps (Daft, 2021) . For instance, they might experiment with packaging, portion sizes, or special preparation techniques to enhance the take- out experience. In addition to internal creativity, external sources of inspiration can be a

goldmine. Look beyond your restaurant's walls to gather insights. Keep a close eye on successful practices in other industries, as well as what your competitors are doing. For example, if you notice a similar restaurant implementing an efficient online ordering system or a creative marketing strategy, consider adapting these external ideas to suit your business. Benchmarking against industry leaders can provide valuable lessons and inspiration for your own adaptation efforts. The second element adapt business to deal with the changes is Need . The impetus for organizational change is often rooted in the recognition of a need, and your restaurant is no exception (Daft, 2021) . In this case, the increased demand for take-out and online orders clearly indicates the need to reevaluate and adjust your business model. The urgency for change is further amplified by the ongoing pandemic. This global crisis has magnified the importance of safety for both your customers and staff. The need to minimize physical contact and reduce the risk of virus transmission has led to a surge in customer preference for take-out and delivery options. It's critical to communicate this need for change effectively to your restaurant team. Ensuring that your staff understands the urgency of adapting to the new normal will help gain their support. Clear and transparent communication is key in fostering a sense of shared purpose and commitment to implementing the necessary changes. This will align your entire organization with the goal of meeting the increased demand for take-out and online orders while ensuring the safety and satisfaction of both customers and staff. The third element adapt business to deal with the changes is Decision to Adopt . After generating innovative ideas and recognizing the need for change in your restaurant business, the critical step is making the decision to adopt these ideas. This decision isn't unilateral; it requires alignment among key managers and employees. The success of these changes depends on the commitment and support of your entire team. In a restaurant context, this decision-making process involves evaluating the potential ideas and selecting the most promising ones. It's essential to involve various stakeholders, including kitchen staff, waitstaff, and the management team, in these evaluations (Daft, 2021) . For instance, if one of the proposed ideas is to streamline the online ordering process, it's crucial to engage your IT team and front-of-house staff in the decision-making process. Their insights and expertise can contribute to a successful implementation. Building consensus and obtaining buy-in from all relevant parties is essential to

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ensure that the changes are well-received and effectively executed. Open and transparent communication is instrumental in this phase to ensure that everyone understands the rationale behind the proposed changes and is motivated to support them. The fourth element adapt business to deal with the changes is Implementation . Implementation is the practical execution of the selected ideas. This phase involves acquiring the necessary materials, training staff, and putting the planned changes into action. In the context of your restaurant, implementing changes might include setting up a seamless online ordering system, reconfiguring the kitchen layout to optimize take-out preparation, and providing training to staff members on new processes (Daft, 2021) . As an example, consider the implementation of a contactless delivery system. This would require acquiring delivery vehicles, equipping them with necessary safety measures (such as contactless payment systems, hand sanitizers, and protective gear), and training your delivery team on the new safety protocols. Additionally, you might need to update your website or app to accommodate contactless ordering and payment. Implementation is often the most challenging phase, as it requires careful planning, resource allocation, and the commitment of your team. Without successful implementation, the earlier stages of idea generation, need recognition, and decision to adopt remain incomplete. The fifth element adapt business to deal with the changes is Resources . Successful innovation and organizational change depend on the allocation of resources, including human effort, time, and funding. Employees need to invest time and energy in developing and implementing new ideas. In many cases, these innovations require financial resources beyond ordinary budget allocations. To ensure the success of your changes, consider creating a specific budget dedicated to the implementation of these ideas. Allocate funds for marketing campaigns to promote your new take-out and online ordering services. These campaigns can help inform your customers about the changes and attract new ones. Additionally, invest in technology, such as point-of-sale (POS) systems and online ordering platforms, to facilitate the changes effectively. Some organizations establish special funds or task forces to focus resources on innovation and change. These can be instrumental in driving and supporting the changes in your restaurant business (Daft, 2021) . For example, you might create a dedicated team responsible for overseeing the implementation of the changes and allocating resources where they are needed

most. This focused approach can ensure that your resources are effectively channeled into making the necessary adaptations to your business model. In conclusion, adapting your restaurant business to the changing external environment involves innovation and organizational change. Following the stages of innovation, from generating ideas to allocating resources, will help you successfully transition to a business model that accommodates the increased demand for take-out and online orders. By aligning your internal structure with the external environment, your restaurant can thrive in this evolving landscape.

Question 2 (a) Describe with the help of a diagram the stages of the Organisational Life Cycle. (40 marks) An effective framework for understanding organizational development and transformation is the notion of an organizational life cycle, which posits that organizations go through stages of inception, maturation, and final decline. The organization's structure, leadership style, and administrative processes exhibit a somewhat predictable pattern as they go through different phases in their life cycle. Stages are consecutive and adhere to their inherent sequence. Studies on organizational life cycle indicate that organizational growth may be classified into four distinct phases. The four phases include the entrepreneurial stage, collectivity stage, formalization stage, and elaboration stage. Figure 1 depicts the four phases and the challenges linked to transitioning to each step (Daft, 2021) .

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Figure 1: Organizational Life Cycle The first stage is “Entrepreneurial Stage” . When an entrepreneur takes the reins, a company is born. The focus is squarely on making something new and selling it at a profit in a cutthroat industry. At this point, the company's founders or entrepreneurs are deeply involved in the operational and strategic aspects of making and selling their product. The work environment is casual and non-bureaucratic, but the hours are long and the proprietors keep a close eye on everything. As the organization starts to grow, it faces a crisis related to the need for leadership. Inventive and technically savvy entrepreneurs may have trouble focusing on management challenges, preferring instead to develop and market goods and services. Business owners are at a crossroads, having to decide whether to reorganize internally to allow rapid expansion or hire seasoned executives to oversee the process. For instance, Dennis Crowley and Naveen Selvadurai, founders of Foursquare, entered the entrepreneurial phase by focusing on creating a

novel mobile networking service. They debuted the service in 2009, and, as Apple did in its early years, they saw explosive growth (Crowley, 2017) . The second stage is “ Collectivity Stage” . When an organization reaches the Collectivity Stage, it has established authoritative leadership and is beginning to articulate its mission and values. Departments are established, and with them come formalized lines of authority, specific tasks, and responsibilities. People start to feel like they belong in the company, and everyone is working toward the same goals. Both forms of communication and management are mostly unstructured at now, but more formal structures are slowly but surely making their way into the picture. In collectivity stage, there is crisis of need for delegation. Employees at lower levels want greater independence as they achieve competence in their roles. since of this, there is a crisis of autonomy since top managers, who have succeeded owing to their leadership and vision, are hesitant to delegate tasks. Without top-down micromanagement, the company's departments will not be able to work together effectively. During its explosive expansion from 1978 to 1981, Apple was a model of the collectivity phase of organizational development. A. C. Markkula took over management, although Steve Jobs stayed on as CEO. The dedication of the staff was a major factor in the company's success. Delegation and independence, however, proved to be difficult (Daft, 2021) . The third stage is “ Formalization Stage” . In the formalization stage, structures like policies and procedures are put in place and put to use. During this time, interactions are less frequent and more formal, often reflecting the established order of power. It's possible that the company may begin hiring engineers, human resources professionals, and other roles. When upper management starts to delegate day-to-day tasks to middle management, it's because they want to devote more attention to the big picture. It's possible to improve coordination by establishing decentralized units or product groups. Managers may be incentivized to work toward the company's goals by creating a profit-based incentive scheme (Daft, 2021) . In formalization stage, there is crisis of too much red tape. When things become too formal, bureaucracy may become a problem. It's possible that the company would seem too bureaucratic to middle-level executives as a result of the proliferation of systems and programs. This may be a source of complication and stifle creativity. Finding efficient solutions to the

challenges posed by the organization's growth and complexity is a major obstacle. As an example, amid its rapid development, Uber entered what is known as the "early formalization stage." However, difficulties arose as a result of problems with corporate culture, management, and leadership. New CEO Dara Khosrowshahi and the board responded to these pressures by laying the groundwork for a set of formalized rules and procedures to govern the corporation and provide oversight (Kolhatkar, 2018) . The fourth and final stage is “ Elaboration Stage ”. The Elaboration Stage signifies a period of cooperation and collective effort. Managers throughout the business cultivate problem- solving abilities and collaborate efficiently. The extent of bureaucracy may have been maximized, and there is a focus on regulating society and promoting personal restraint, hence diminishing the need for more official regulations. Managers acquire the ability to operate within the established bureaucracy without introducing additional levels of intricacy. Formal systems may be streamlined or substituted by collaborative management teams and task groups. In elaboration stage, there is crisis of need for revitalization. There may be a transient drop after maturity for organizations in the elaboration stage. This might happen if one is out of sync with their surroundings or if they become too bureaucratic and slow. Refreshing or innovating the company sometimes necessitates the removal and replacement of senior executives. As an example, Apple had a phase of reinvention after struggling and losing market share in the '80s and '90s. In 1997, after a brief absence, Steve Jobs took over as CEO again, reorganizing the firm and getting rid of inefficiencies so that Apple could once again concentrate on creating groundbreaking devices like the iPod and iPhone (CBS-News, 2011). Long-term success followed the company's launch, demonstrating the need of periodic reinvention for established businesses. In Conclusion, the Organizational Life Cycle offers a comprehensive framework to understand an organization's growth and development. It progresses through four distinct stages: entrepreneurial, collectivity, formalization, and elaboration. Each stage presents unique challenges and requires adaptive strategies. From the initial creative surge of the entrepreneurial stage to the need for structured rules in the formalization stage, organizations evolve. The elaboration stage emphasizes collaboration and self-discipline, but also highlights the necessity for periodic revitalization.

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(b) Based on the Organisational Life Cycle, identify the stage your company is now at and what you could do manage your business well. Based on the Organizational Life Cycle framework, it seems that our start-up company has advanced to the Formalization Stage. This stage often occurs when a corporation has substantial development and expansion, resulting in the implementation of formal regulations, processes, and monitoring mechanisms. Although expansion is indicative of progress, it often entails a multitude of difficulties associated with handling heightened intricacy and bureaucracy. This post aims to examine the attributes of the Formalization period, the difficulties it entails, and provide approaches to efficiently oversee your organization throughout this period. The Formalization Stage is a crucial step in the life of an organization. At this point, the firm reaches a stage of maturity and development, which requires a transition towards more organized and official procedures. This shift is a result of the increasing intricacy and magnitude of processes. This stage is characterized by the implementation of defined norms and procedures, a decrease in casual communication, and a more prominent hierarchy of power. As a result, middle management takes on a more significant position in day-to-day activities, enabling top management to concentrate on strategic matters and long-term planning (Dewar, 1987) . Despite the advantages of formalization, several challenges surface during this phase of organizational development. The problem of bureaucracy is the first challenge . Companies run the threat of becoming too bureaucratic when they institute additional regulations and processes to handle their expansion. An overly bureaucratic organization is less likely to be creative, efficient, or quick to make decisions (Briggs, 2006). Take, for example, a startup company working on software development as it enters the Formalization Phase. Bureaucratic delays in making essential changes caused by the implementation of formal change request procedures and paperwork may have a negative impact on the company's responsiveness to quickly changing client needs. Second , it's easy to feel overwhelmed by all the tools available to handle your company's many functions. As a company grows, the interaction between its numerous divisions and roles may become more complex, making it harder to coordinate efforts and maintain efficiency. To accommodate expanding orders and suppliers, a web-based retailer may use an Enterprise Resource Planning (ERP) system, even if it has previously maintained its stock

manually. On the other hand, ERP's complexity may at first cause confusion and inefficiency in the workplace. Third , the need of good coordination grows with the introduction of explicit rules and the growth in complexity. Inadequate communication and coordination across departments might result in fragmented efforts that don't contribute to the organization's goals (Briggs, 2006). In the Formalization Phase, an expanding restaurant chain can implement new policies for handling stock. However, overstocking or understocking concerns may arise if these practices are not successfully communicated and coordinated amongst different locations of the same restaurant. To address these challenges and effectively manage our company in the Formalization Stage, the following strategies are crucial. The first step is to reduce complexity and improve efficiency. Reviewing the current rules and processes is essential for finding overlaps and simplifying the system. Streamlining procedures helps cut down on red tape and boosts productivity. Second, provide more authority to intermediate managers. Recognize the importance of independence and responsibility. Providing middle managers with decision- making authority in their areas of competence promotes a culture of ownership and quick thinking. Third, improve interaction. Although formal communication is required, it should not be used to the detriment of the free exchange of ideas. Prohibit the development of silos by encouraging honest and open dialogue. Fourth, make sure everyone knows their exact duties. Each team member and department must know their specific tasks. This aids in minimizing duplication and makes sure everyone knows their role. Create multidisciplinary groups as a fifth strategy. Creating cross-departmental teams to tackle projects is one solution to the coordination issues that arise. Collaboration and problem-solving are both aided by the formation of such teams. Sixth, invest on modern tools. The use of technology to simplify procedures and boost productivity is essential. Investing in unified software solutions that can automate mundane operations and provide real-time data to aid in making decisions is something to think about. Seventh, establish performance indicators. Create KPIs for tracking the progress of individual processes and departments. This data-driven strategy is useful for pinpointing problem areas and gauging the success of implemented fixes. As a last point, foster originality. In a more structured setting, it is nevertheless important to foster a creative spirit. Create new departments or start a program that encourages innovative thinking on how to solve problems and enhance existing offerings. Updates and checks at regular intervals are the ninth vital component. It's important to

examine our company's framework, policies, and practices on a regular basis. Be flexible and prepared to make changes as the business grows and faces new obstacles. Tenth, set aside funds for future leaders. This will guarantee that our company's leadership is equipped to handle the challenges of expanding operations. Eleventh, keep the identity of our business intact. It's important to hold on to the core beliefs and practices that made our company successful in the first place as it grows and changes. The company's culture should continue to serve as a compass for making important decisions. Lastly, we must think about consulting an outside source for advice. When adapting the difficulties of the Formalization Stage, advice from outside experts or hired advisers who have dealt with comparable organizational issues may be beneficial (Daft, 2021) . In conclusion, during the transition of our start-up company into the Formalization Stage, it is crucial to achieve a suitable equilibrium between structure and flexibility. To effectively manage our company at this level, we may optimize procedures, delegate authority to middle managers, improve communication, and cultivate an innovative culture. This will strategically position our company for sustained growth and achievement in the always changing commercial landscape. References Briggs, N. M. (2006). The Life Cycle of Family Advocacy Organizations. Administration in Social Work, 20 (4), 23-42.

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CBS-News. (2011). End of an era: Steve Jobs resigns as Apple CEO . Retrieved from CBS News: https://www.cbsnews.com/news/end-of-an-era-steve-jobs-resigns-as-apple-ceo/ Crowley, D. (2017). Learning Not to Lead. (P. Marinova, Interviewer) Fortune. Daft, R. L. (2021). Organization Theory & Design (13 ed.). CENGAGE. Dewar, J. P. (1987). Formalization and the Organizational Life Cycle. Journal of Management Studies , 215–231. Kolhatkar, S. (2018, March 30). At Uber, a New C.E.O. Shifts Gears . Retrieved from https://www.newyorker.com/magazine/2018/04/09/at-uber-a-new-ceo-shifts-gears Streitfeld, D. (2013, Feburary 28). Groupon Dismisses Chief After a Dismal Quarter . Retrieved from The New York Times: https://www.nytimes.com/2013/03/01/technology/groupon- dismisses-its-chief-andrew-mason.html?_r=0

Organizational Theory and Design

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