Mullins L.J. Management and organisational behaviour, Seventh edition

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Group relationships and norms of behaviour exist outside the official structure and the

informal organisation may, therefore, be in conflict with the aims of the formal organi-

sation. A summary of differences between the formal and the informal organisation is

given in Table 4.2.

Functions of the informal organisation

The informal organisation can serve a number of important functions.

■ It provides satisfaction of members’ social needs, and a sense of personal identity

and belonging.

■ It provides for additional channels of communication – for example, through the

‘grapevine’ information of importance to particular members is communicated

quickly.

■ It provides a means of motivation – for example, through status, social interaction,

variety in routine or tedious jobs, and informal methods of work.

■ It provides a feeling of stability and security, and through informal ‘norms’ of

behaviour can exercise a form of control over members.

■ It provides a means of highlighting deficiencies or weaknesses in the formal organ-

isation – for example, areas of duties or responsibilities not covered in job

descriptions or outdated systems and procedures. The informal organisation may

also be used when formal methods would take too long, or not be appropriate, to

deal with an unusual or unforeseen situation.

CHAPTER 4 THE NATURE OF ORGANISATIONS

135

Figure 4.9 Formal and informal organisation

(Reproduced with permission from Kenneth Lysons, ‘Organisational Analysis’, Supplement to the British Journal of Administrative

Management, no. 18, March/April 1997.)

The informal organisation, therefore, has an important influence on the morale, moti-

vation, job satisfaction and performance of staff. It can provide members with greater

opportunity to use their initiative and creativity in both personal and organisational

development. Covert and informal activities may also have economic consequences for

the organisation in terms of added values and/or costs that escape ordinary accounting

procedures.

The importance and nature of groups, and reasons why people form into groups,

both formal and informal, are discussed in Chapter 13. At this stage, however, we are

concerned with consideration of the formal organisation (although in practice it is not

always possible to distinguish clearly between formal and informal organisations). We

are not concerned with what is sometimes referred to as the social organisation. Social

organisations are groups or institutions, such as family or friends, where human behav-

iour is socially organised and where members share common beliefs or interests. Social

organisations arise from the interaction of individuals. There are no specially defined

hierarchical structures and no explicit organisational goals.

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PART 2 THE ORGANISATIONAL SETTING

Characteristic Formal organisation Informal organisation

1 Structure

A Origin Planned Spontaneous

B Rationale Rational Emotional

C Characteristics Stable Dynamic

2 Position terminology Job Role

3 Goals Profitability or service Member satisfaction

to society

4 Influence

A Base Position Personality

B Type Authority Power

C Flow Top-down Bottom-up

5 Control mechanisms Threat of firing, demotion Physical or social

sanctions (norms)

6 Communication

A Channels Formal channels Grapevine

B Networks Well defined, follow Poorly defined, cut

formal lines across regular channels

C Speed Slow Fast

D Accuracy High Low

7 Charting the organisation Organisation chart Sociogram

8 Miscellaneous

A Individuals included All individuals in work group Only those ‘acceptable’

B Interpersonal relations Prescribed by job description Arise spontaneously

C Leadership role Assigned by organisation Result of membership

agreement

D Basis for interaction Functional duties or position Personal characteristics,

ethnic background, status

E Basis for attachment Loyalty Cohesiveness

Table 4.2 Comparison of formal and informal organisation

(Source: Adapted from J. L. Gray and F. A. Starke Organizational Behavior: Concepts and Applications, Fourth edition, Merrill Publishing

Company, an imprint of Macmillan Publishing Company (1988) p. 432. Reproduced with permission from Pearson Education Inc., Upper

Saddle River, NJ.)

We have looked at the nature and type of organisations, and their components. It is,

however, important to remember that organisations are living organisms and evolving

constantly. The changing nature of work organisations and the social context discussed

in earlier chapters has led to a climate of constant change and the need for greater

organisational flexibility. Managers need to be aware of new psychological contracts

and to adopt alternative styles of management.

As Chowdhury, for example, points out: ‘The organization of the 21st century will be

characterized by unprecedented complexity and will require a different breed of leader.’

And Ulrich also suggests that with the changing and dynamic contextual factors:

the essence of organizations has shifted and will continue to shift from focusing on structure to

capability. Capability represents what the organization is able to do and how it does it rather

than the more visible picture of who reports to whom and which rules govern work …

Organizations will operate in the future to identify and nurture a handful of critical capabilities.

The importance of people in the organisation

Lynda Gratton emphasises the importance of putting people at the heart of corporate

purpose. We are part of organisations stamped by technology that has created the

patents, ideas and innovations that bought success. However, while this past has been

essential to our success it will not bring sustainable competitive advantage for the

future unless we build the potential of people and human capital in our organisations.

This requires a new agenda, a new set of challenges for leaders and a redefined set of

managerial capabilities that includes an understanding of the reality of the organisa-

tion. Gratton suggests that you should build a model for your organisation around

what causes high levels of trust and inspiration and to consider the organisation

against these key influences:

■ Do people understand the context in which they operate and the competitive

threats and challenges the business faces?

■ Are employees confident about the ability of the organisation to adapt?

■ Are they involved in decisions about themselves and the organisation?

It is also important to understand the complexity of the organisation and the changes

necessary to move from the present to the future.

Cloke and Goldsmith refer to the rise of organisational democracy. There is a demand

for alternative organisational practices and a far-reaching transformation has already

begun, based on the idea that management as a system fails to open the heart or free

the spirit. The age of management is coming to an end and the real push for the future

is for more authentic human relationships and the humanisation of organisations as

crucibles for personal growth and development.

Whatever the form and structure of the transformation or conversion process, the

activities of an organisation are directed towards some end, some organisational goal.

A goal is a future expectation: it is something the organisation is striving to accom-

plish. The goals of an organisation will determine the nature of its outputs and the

series of activities through which those outputs are achieved. Organisational goals and

objectives are discussed in Chapter 5.

CHAPTER 4 THE NATURE OF ORGANISATIONS

THE ORGANISATION OF THE FUTURE

ORGANISATIONAL GOALS

137

■ The process of management and applications of organisational behaviour take

place not in a vacuum but within the context of an organisational setting. There are

many different types of organisations set up to serve different purposes. Organisations

come in all forms, shapes and sizes. However, despite the differences among various

organisations there are at least three common factors in any organisation: people,

objectives and structure. To which can be added a fourth factor – management. The

qualities of these factors determine organisational effectiveness.

■ There are many different types of organisations set up to serve a variety of needs.

Organisations can, traditionally, be distinguished in terms of two generic groups: pri-

vate enterprise and public sector. The increasing rate of privatisation has led, however,

to a blurring of commercial interests and service to the community. Another major dis-

tinction is arguably between production and service organisations. In order to relate

the study of management and organisational behaviour to one particular type of

organisation as distinct from another, it is necessary to group similar types of organisa-

tions together.

■ The structure, management and functioning of organisations will differ according

to their nature and type, aims and objectives, and the behaviour of people who work

in them. Organisations differ in many important respects but they also share common

features. Business organisations can be viewed as open systems in continual interaction

with the external environment of which they are part. Within the organisation as a

whole there are a number of sub-systems interrelating to and interacting with each

138

PART 2 THE ORGANISATIONAL SETTING

CRITICAL REFLECTIONS

‘If the process of management takes place within an organisational setting and no two organisa-

tions are the same, then what use are generalised models of organisation theory? I am only

concerned with what happens in my own organisation’ …

‘Yes, but so too is every other student – hence the need for generalised models. And remember

you may move to a different organisation.’

What are your own views?

External influences are almost infinite in number and variety and no study could hope to consider

them all. For students of business and for managers alike, the requirement is to recognise the

complexity of the external environment and to paygreater attention to those influences which

appear the most pertinent and pressing for the organisation in question, rather than to attempt to

consider all possible contingencies.

Worthington, I. and Britton, C. The Business Environment, Fourth edition, Financial Times Prentice Hall (2003), p. 12.

How would you identify the specific, most pertinent and pressing environment

influences for your own organisation or university/college?

‘Management models are a crude representation of our organisational existence which dull our

awareness of the richness of our environment and prevent us from finding new ways of looking

at the world of work.’

Debate.

SYNOPSIS

other. Contingency models of organisation draw attention to interrelationships among

technology, structure, methods of operation and environmental influences.

■ The nature of technology can influence the behaviour of people at work in many

ways. The impact of technical change has been highlighted by recent developments in

information technology and automation. It is important to maintain the balance of

the socio-technical system. This calls for effective management of human resources

and a style of managerial behaviour which helps to minimise problems of technical

change. The organisation of the future will be characterised by complexity and the

essence will continue to shift from structure to capability.

■ Whatever the type or nature of an organisation or its formal structure, an informal

organisation will always be present. The informal organisation arises from the interac-

tions of people and their psychological and social needs. It serves a number of

important functions and has an influence on the morale, motivation, job satisfaction

and performance of staff. Organisations of the future will be characterised by technol-

ogy and complexity. It is important to emphasise the importance of people and the

need for authentic human relationships, and the humanisation of organisations.

CHAPTER 4 THE NATURE OF ORGANISATIONS

139

1 What is an organisation and why do organisations exist? What are the common factors in

any organisation?

2 Explain the basic components of a work organisation. Support your answer with ex-

amples from your own organisation.

3 Contrast various organisations, including your own, in terms of classifications based on:

(i) prime beneficiary and (ii) primary activity.

4 Discuss critically the extent to which differences among various organisations limit the

value of the study of management and organisational behaviour.

5 Explain the organisation as an open system. What is meant by organisational sub-

systems and how might they be identified? Illustrate each of these sub-systems by

reference to your own organisation.

6 Assess the practical value to both the student and the manager of adopting an open sys-

tems view of organisational analysis.

7 Discuss the importance of technology in the structure, management and functioning of

work organisations. Give practical examples of how the nature of technology can influence

the systems nature of organisations.

8 Distinguish between the formal and the informal organisation, and explain their main char-

acteristics. What functions are served by the informal organisation?

9 Give your own critical views on how you see the organisation of the future and the humanisa-

tion of organisations.

REVIEW AND DISCUSSION QUESTIONS

140

PART 2 THE ORGANISATIONAL SETTING

OVERVIEW

Undoubtedly, you have had recent experiences with numerous organisations. Ten to fifteen min-

utes of reflective thinking should result in a fairly large list of organisations. Don’t be misled by

thinking that only large organisations, such as your college or General Motors, are relevant for

consideration. How about the clinic with the doctor(s), nurse(s) and secretary/bookkeeper? Or

the corner garage or service station? The local tavern, McDonald’s and the neighbourhood the-

atre are all organisations. You should not have any difficulty in listing a number of organisations

with which you have had recent contact.

The second part of the exercise, however, gets tougher. You are asked to describe several of the

key characteristics of the organisations that you have listed. One of the major issues in studying

and describing organisations is deciding what characteristics or factors are important. Some of

the more common characteristics considered in the analysis of organisations are:

1 size (small to very large);

2 degree of formality (informal to highly structured);

3 degree of complexity (simple to complex);

4 nature of goals (what the organisation is trying to accomplish);

5 major activities (what tasks are performed);

6 types of people involved (age, skills, educational background, etc.);

7 location of activities (number of units and their geographic location).

You should be able to develop a list of characteristics that you think are relevant for each of

your organisations.

Now, to the third, final, and most difficult task. Think about what is involved in the manage-

ment of these organisations. For example, what kinds of functions do their managers

perform? How does one learn the skills necessary to be an effective manager? Would you

want to be a manager in any of these organisations?

In effect, in this exercise you are asked to think specifically about organisations you have

been associated with recently, develop your own conceptual model for looking at their char-

acteristics, and think more specifically about the managerial functions in each of these

organisations. You probably already know a great deal more about organisations and their

management than you think. This exercise should be useful in getting your thoughts together.

PROCEDURE

Step 1

Prior to class, list up to ten organisations (e.g., work, living group, club) in which you have

been involved or with which you have had recent contact.

Step 2

Enter five organisations from your list on the form ‘Profile of Organisations’.

a List the organisation.

b Briefly outline the characteristics that you consider most significant.

c Describe the managerial functions in each of these organisations.

ASSIGNMENT 1

CHAPTER 4 THE NATURE OF ORGANISATIONS

141

Step 3

During the class period, meet in groups of five or six to discuss your list of organisations, the

characteristics you consider important, and your descriptions of their management. Look for

significant similarities and differences across organisations.

Step 4

Basing your selections on this group discussion, develop a list entitled ‘What We Would Like

to Know about Organisations and Their Management’. Be prepared to write this list on the

board and to share your list with other groups in the class.

PROFILE OF ORGANISATIONS

Organisation Key characteristics Managerial functions

ASSIGNMENT 2

Think of any organisation with which you are familiar and be prepared to give a descriptive

account to your colleagues on:

■ the unusual, strange, interesting or ‘quirky’ features of, and people in, the organisation; and

■ how things actually happen and work in practice.

142

PART 2 THE ORGANISATIONAL SETTING

OBJECTIVES

Completing this exercise should help you to enhance the following skills:

 Demonstrate your ability to analyse an organisation in terms of an open systems model.

 Identify and analyse the transformation or conversion process in terms of main inter-

related sub-systems.

EXERCISE

You are required to:

1 With the aid of a diagram, depict your own or some other organisation well known to you

in terms of its:

– main aims and objectives;

– inputs;

– nature of the transformation or conversion process;

– outputs;

– measurement of effectiveness in achieving organisational goals.

2 Provide specific examples of ways in which the structure, management and functioning of

the organisation are affected by external environmental influences.

DISCUSSION

■ How effective are the interactions and interrelationships among the sub-systems? Give

practical examples to support your view.

■ Comment critically on the effectiveness of management in co-ordinating the sub-systems

and directing the activities of the organisation as a unified whole towards the accomplish-

ment of its goals and objectives.

PERSONAL AWARENESS AND SKILLS EXERCISE

Visit our website www.booksites.net/mullins for further questions, annotated weblinks,

case material and Internet research material.

For an account of developments in organisations see:

Peters, G. ‘Creating the Modern Organization’, in Crainer,

S. and Dearlove, D. (eds) Financial Times Handbook of

Management, Second edition, Financial Times Prentice

Hall (2001), pp. 24–45.

2. Farnham, D. and Horton, S. (eds) Managing the New

Public Services, Second edition, Macmillan (1996), p. 26.

3. Schneider, S. C. and Barsoux, J. Managing Across Cultures,

Second edition, Financial Times Prentice Hall (2003).

4. Watson, T. J. Management Organisation and Employment

Strategy, Routledge and Kegan Paul (1986).

5. Schein, E. H. Organizational Psychology, Third edition,

Prentice-Hall (1988), p. 15.

6. Cyert, R. M. and March, J. G. A Behavioral Theory of the

Firm, Second edition, Blackwell (1992).

7. Mintzberg, H. The Structuring of Organizations, Prentice-

Hall (1979).

8. See, for example: Dodds, O. ‘Implications of Change

for Local Government Managers’, Professional Manager,

November 1995, pp. 15–17.

9. Gibson, J. M. B. ‘Changing Views of Privatisation’,

Management Today, May 1997, p. 5.

10. Arnott, J. ‘Cause and Ethics’, Chartered Secretary,

December 2002, pp. 22–4.

11.

Smith, D. ‘Crossing the Private–Public Divide’,

Management Today, August 1998, pp. 26–30.

12. Rose, A. and Lawton, A. Public Services Management,

Financial Times Prentice Hall (1999), p. 74.

13. Wright, Sir David ‘In My Opinion’, Management Today,

March 2003, p. 14.

14. Fitzsimmons, J. A. and Sullivan, R. S. Service Operations

Management, McGraw-Hill (1982).

15. Levitt, T. ‘Production-Line Approach to Service’, Harvard

Business Review, September–October 1972, p. 41.

16. Macdonald, J. ‘Service Is Different’, The TQM Magazine,

vol. 6, no. 1, 1994, p. 5.

17.

For a discussion on the nature of service industries, see

for example: Mullins, L. J. Hospitality Management and

Organisational Behaviour, Fourth edition, Longman (2001).

18. Weber, M. The Theory of Social and Economic Organization,

Collier Macmillan (1964).

19. Etzioni, A. Modern Organizations, Prentice-Hall (1964),

p. 14.

20. Blau, P. M. and Scott, W. R. Formal Organizations,

Routledge and Kegan Paul (1966).

21. Katz, D. and Khan, R. L. The Social Psychology of

Organizations, Second edition, Wiley (1978).

22.

A summary of the systems view of organisations, and its

value in distinguishing between private and public organ-

isations, is given in: Mullins, L. J. ‘The Organisation – A

Systems View’, Professional Administration, vol. 11, no. 2,

February 1981, pp. 20–2.

23. See, for example: Mullins, L. J. ‘The Hotel and the

Open Systems Model of Organisational Analysis’, The

Services Industry Journal, vol. 13, no. 1, January 1993,

pp. 1–16.

24. For a more detailed discussion of environmental influ-

ences, see, for example: Worthington, I. and Britton, C.

Business Environment, Fourth edition, Financial Times

Prentice Hall (2003).

25. Lynch, R. Corporate Strategy, Third edition, Financial

Times Prentice Hall (2003).

26. For an interesting collection of readings on the systems

view of organisations, see: Lockett, M. and Spear, R. (eds)

Organizations as Systems, Open University Press (1980).

27. Trist, E. L.

et al. Organizational Choice, Tavistock

Publications (1963).

28. Kast, F. E. and Rosenzweig, J. E. Organization and

Management, Fourth edition, McGraw-Hill (1985).

29.

Hersey, P. and Blanchard, K. Management of Organizational

Behavior, Sixth edition, Prentice-Hall (1993).

30. Leavitt, H. J. Managerial Psychology, Fourth edition,

University of Chicago Press (1978).

31. For a fuller discussion on the meaning of technology,

see: Kast, F. E. and Rosenzweig, J. E. Organization and

Management, Fourth edition, McGraw-Hill (1985).

32. See, for example: Davies, I. K. The Management of

Learning, McGraw-Hill (1971).

33. Johnson, G. and Scholes, K. Exploring Corporate Strategy,

Sixth edition, Financial Times Prentice Hall (2002).

34. Developed from French, W. L., Kast, F. E. and

Rosenzweig, J. E. Understanding Human Behavior in

Organizations, Harper & Row (1985), pp. 321–2.

35. See, for example: Lynch, R. Corporate Strategy, Third

edition, Financial Times Prentice Hall (2003).

36. See also, Earl, M. ‘IT Strategy in The New Economy’, in

Pickford, J. (ed.) Financial Times Mastering Management

2.0, Financial Times Prentice Hall (2001), pp. 109–13.

37. Law, S. ‘Future Networking’, Professional Manager,

March 2003, p. 21.

38. See, for example: Wilson, B. ‘The Challenge of

Change’, Industrial Management and Data Systems,

November/December 1987, pp. 19–22.

39. Lane, T., Snow, D. and Labrow, P. ‘Learning to Succeed

with ICT’, The British Journal of Administrative

Management, May/June 2000, pp. 14–15.

40. For a detailed account of the nature and function of

the informal organisation, see: Gray, J. L. and Starke, F.

A. Organizational Behavior: Concepts and Applications,

Fourth edition, Charles E. Merrill (1988).

41. Egan, G. ‘The Shadow Side’, Management Today,

September 1993, pp. 33–8.

42. Chowdhury, S. Management 21C, Financial Times

Prentice Hall (2000), p. 205.

43. Ulrich, D. ‘Context, Capability and Response’, in

Chowdhury, S. Management 21C, Financial Times

Prentice Hall (2000), p. 240.

44. Gratton, L. Living Strategy: Putting People at the Heart of

Corporate Purpose, Financial Times Prentice Hall (2000).

45. Cloke, K. and Goldsmith, J. The End of Management and

the Rise of Organizational Democracy, Jossey-Bass (2002).

CHAPTER 4 THE NATURE OF ORGANISATIONS

NOTES AND REFERENCES

143

Use the Financial Times to enhance your understanding of the context and practice of management and

organisational behaviour. Refer to articles 3, 4 and 6 in the BUSINESS PRESS section at the end of the

book for relevant reports on the issues explored in this chapter.

The impact of management’s decision on society

is not just ‘public’ responsibility but it is

inextricably interwoven with management’s

responsibility to the enterprise. Still, there is a

responsibility of management to the public

interest as such. This is based on the fact that the

enterprise is an organ of society, and that its

actions have a decisive impact on the social

scene.

Peter Drucker

The Practice of Management, Heinemann (1955)

ORGANISATIONAL

GOALS, STRATEGY AND

RESPONSIBILITIES

The activities of a work organisation and the

management of people are directed towards a

variety of goals which are not mutually

exclusive and which may conflict with each

other. Goals are translated into strategy in

order to provide corporate guidelines for the

structure and operations of the organisation.

The power and influence of a business

organisation must also be tempered by its

social responsibilities. Goals, strategy and

responsibilities are important features in the

study of management and organisational

behaviour.

LEARNING OUTCOMES

After completing this chapter you should be able to:

 explain the nature of, and functions served by,

organisational goals;

 assess the importance of organisational ideologies

and principles;

 examine the need for objectives and policy, and

the importance of the profit objective to business

organisations;

 evaluate the need for corporate strategy and explain

the basis for decision-making and problem-solving;

 examine the concept of social responsibilities of

management;

 explore approaches to the consideration of values and

ethics in organisations;

 review the importance of organisational goals,

objectives and policy for the effective management of a

work organisation.

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