Organizational Theory and Design
An organization is a collection of people working together under a
defined structure for the purpose of achieving predetermined outcomes through
the use of financial, human, and material resources. There are a number of
approaches to the structure and management of organizations.
Classical or Scientific Theory
The oldest theory of management
has a focus on efficiency and production. Evolved into classical
organizational theory with the principals of chain of command, unity of command,
span of control, specialization,
and the use of a scalar chain or vertical levels of authority.The organizational
design is bureaucracy.
Work is divided into specialized tasks and standardized. The
hierarchy of authority ( the right to direct ) and responsibility ( the
obligation to perform ) is the chain of command. Line authority is linear and
derived from position, staff authority is an advisory relationship.
The arrangement of the work group or organizational structure is
based on departmentalization.
Span of control refers to how many employees a manager can
Characteristics of Bureaucratic Structures
Authority and communication flow downward through a rigid chain of
The vertical growth represents many levels of supervision and
indicates a one person one boss philosophy(unity of command)
The number of people supervised is small(span of control).
Bureaucracy results in a line structure, so called because it is a
chain of command or leader-follower relationship. It is also called a machine
This type of structure facilitates large scale administration by
coordinating the work of many personnel.
Highly structured, formal entities with uniform rules, policies
People placed in functional specialty areas with standard pay
structures,roles and responsibilities.
Authority clearly designated and centralized=a tall structure
Less complex organizations have flat structures where authority is
decentralized and the span of control is wider.
Other Classical Designs
Simple structure consists of a strategic apex ( executive- level
management ) and an operating core ( the individuals responsible for the
organizational work ). An example is a private physician’s office.
A professional bureaucracy consists of an operating core of
professionals with decentralized decision making and a well developed support
staff. The technostructure ( individuals who standardize and improve the work,
such as accountants ) is underdeveloped.Most hospitals are professional
A divisionalized form is characterized by a number of independent
divisions with one administration such as an integrated system.
Adhocracy is a fluid structure using shifting teams of management,
staff, and experts.
Human Relations Era
Concern for profit and production along with the human or social
elements of an organization.
Fosters cooperation between labor and management and strives for
worker autonomy and growth.
Focus on the informal organization with its rewards of attention
Neoclassical or Humanistic Theory
Less formal, less control.More participation in decision making
with decision authority at the point of service.
Results in a flat structure developed along horizontal lines with
fewer levels of management.
Communication is enhanced, but managers can be overburdened.
Seeks to validate aspects of human behavior in organizations
through research; the Hawthorne study.
Views managers as coaches, not as authority figures.
Concerned with employee motivation, satisfaction, creativity.
Authority works with willing participants.
A system is a set of interrelated parts arranged in a unified
Productivity is viewed as a function of the interplay among
people, structure, and the environment.
The organization is a complex social and technical open system
that requires human, financial, and material resources.
Influenced by systems theory, learning organizations are
characterized by five disciplines: systems thinking, personal mastery, mental
models, shared vision, and team learning.
Participation, in these organizations, is the basis of learning.
The organizational design is a systems model based on the rapid
sharing of information through computer technology. This design can be applied
to both bureaucracies and organic structures.
The organization’s structure must be matched to its environment
to enhance performance.
The optimal form of an organization is contingent on the
circumstances faced by that organization including patients, third-party payers,
regulators, and personnel.
Based upon the belief in the uncertainty and unpredictability of
the environment, chaos theory asserts that organizations are living,
self-organizing systems that are complex and self-adaptive.
The system moves between order and chaos and is only stable
Health Care Organizations
Health care organizations differ in ownership which can be either
private or government, voluntary (not-for profit) or investor owned
(for-profit), and sectarian or nonsectarian.
Health care organizations also differ in role, activity, and size.
Hospitals are classified by length of stay and type of service.
Most are acute care facilities in which the average length of stay is less than
30 days; chronic or long-term hospitals have longer lengths of stay. The
services offered may be general or special care such as pediatric or
Long Term Care Facilities
Long term care facilities provide skilled nursing or
Nursing facilities provide daily care.
Residential facilities are sheltered environments in which no
skilled care is provided.
Ambulatory Care Centers
Physicians’ offices, birthing centers, surgical centers, and
imaging centers are examples of ambulatory care.
Home Health Care Agencies
Home health care is the temporary delivery of health care in the
home by nurses, therapists, or aids. Some agencies also provide durable medical
Temporary Service Agencies
These agencies provide nurses and other health care workers to
hospitals and individual patients in a variety of settings.
Managed Health Care Organizations
Health maintenance organizations(HMO’s)-prepaid group practice
plans in which a group of providers is responsible for managing health care.
Preferred Provider Organizations(PPO’s)-health care contracts
with various groups.
Point of Service Plans (POS).
Health Maintenance Organizations
Staff Model-Physicians are HMO employees and salaried.
Independent Practice Association-Physicians have a private
practice but contract with HMO’s.
Group and Network Models-The HMO contracts with a specialty group
to provide capitated services to enrollees.
Horizontal integration refers to arrangements between or among
organizations that provide similar services.
Vertical integration refers to an arrangement between or among
dissimilar but related organizations to provide a continuum of services.
Diversification is the expansion of an organization into different
arenas either by complementing existing services or by moving into areas that
differ from the original product or service.
Mergers-organizations combining assets to ensure profits and
Acquisitions-buy out usually of a smaller facility.
Consolidated systems-large regional or national multi-hospital
The growth of multi-hospital systems has challenged many
principles of management and organization.
Decentralization is the trend and a challenge to nursing services.
Nursing must be able to contribute to corporate profits while
meeting market demands.
Functional structures-employees are grouped in departments by
specialty with all nursing tasks under nursing service and centralized decision
making as the norm.
Service integrated structure-all functions needed to produce a
product or service are grouped together.
Hybrid structure-both self-contained and functional units are
organized in an attempt to provide functional coordination across service or
Parallel structure-the medical staff is separate and autonomous
from the organization creating two lines of authority.
Matrix designs have a duel authority structure with both a
functional manager and a project manager.
Product and functional structures are integrated and results in a
dual organizational focus.
Shared governance, based on participatory management uses a committee structure whereby staff make either managerial or
Professional practice or self-governance allows staff to govern
themselves using specific councils with decision authority.
Participatory Management allows participation in decision making
but the power over the final decision remains with the top executive.
Other designs include project management, collegial management,
and the corporate model which has led to mergers,buyouts, etc.
The success of an organization depends on followers who view
themselves as equals of the leaders and who work for the common good.
Followers are supportive of the leader but will also challenge the
leader. They adhere to lines of communication and authority.
Key Concepts related to Organizational
Strategic and Operational Planning:Strategic planning extends 3 to
5 years into the future and involves an analysis of the internal and external
environment so as to determine the direction of the organization. Operational
planning is short range and concerned with daily activities.
Strategic planning in health care is relatively new and represents
a paradigm shift from person as customer to population as customer; from illness
care to wellness care; from revenue management to cost management; from
professional autonomy to professional interdependence.
Strategic planning gives direction to an organization and
clarifies beliefs and values. It results in a vision of the preferred future.
This vision gives rise to a mission statement which is the stated purpose for
which the organization exists, its aim and function.
Philosophy is a written statement, influenced by the mission,
which provides a statement of beliefs and values. It includes approaches to
care, beliefs about patients and workers, and level of responsiveness to the
Goals and objectives state actions for achieving the mission and
philosophy.Goals are central to the whole management process and help focus
attention on what is important.Goals are broad statements of expectations.
Objectives are specific ways to reach the goal.
Policies explain how goals will be achieved and serve as guides
that define the activities permissible for goal accomplishment.
Procedures are more specific guides to action. Procedures are a
step by step protocol that standardizes various approaches to patient care.
Rules and regulations are part of both policy and procedure
statements, they constitute the one and only one choice of action.
Organizational Climate and Culture
The climate of an organization is the perceived characteristics
including the physical plant, lines of communication, and rule structure.
The culture of an organization is the norms and traditions
Components of Organizations: Review
Organizational Charts are the visual representation or blue print
of an organizational structure showing how resources, departments, and personnel
are grouped horizontally and vertically into lines of authority, communication,
delegation, and decisions.
The chart designates areas of responsibility and areas of
Charts show only formal relationships, the framework in which the
management process takes place. The informal structure, personal and social
relationships, is not depicted on the chart.
Chain of Command
The chain of command is the formal line of authority and
communication. In bureaucratic structures or hierarchies authority and
communication flow from the top downward.
Centrality indicates the location of a position in an organization
where frequent communication occurs.It is determined by organizational distance
as depicted by the chart.
Unity of Command
Unity of command represents the managerial dictum of “ one
person, one boss “. It is represented by the vertical solid line between
positions on the organizational chart.
Span of Control
Span of control or span of management is the number of people the
manager directs.The optimal span of management is highly variable. In general,
managers in bureaucratic structures have a narrow span of control while those in
flat structures have a broader span.
Centralized versus Decentralized
Centralization refers to the area where decisions are made. In
autocratic structures decisions are made at the top and flow downward. There is
a small span of control resulting in many layers of management and a tall
structure.Decentralized structures are flat and decisions are made at the level
where they occur.
Unit Level Organization
Case Method or Total Patient Care: Each patient is assigned to a
nurse for all care while that nurse is on duty.
Functional Method: Based on scientific management, this method
emphasizes efficiency. Each staff member is assigned a task. Care is fragmented.
Team Nursing:Patients are assigned to a team of staff led by an RN
who plans, coordinates, and supervises care.
Modular or District Nursing: These are similar to team nursing
except that patients are assigned by location and the RN is more actively
involved in care.
Primary Nursing: This represents an extension of decentralization
to the unit level. In this model the RN is completely responsible for 24 hour
care of a group of patients for their entire length of stay.The RN establishes
outcome criteria and is accountable for patient care.The care plan is the basis
Case Management: This model focuses on an entire episode of
illness, including all settings in which the patient receives care. The case
manager coordinates services for the patient and family. The concern is on
managing quality, access and cost. The critical path is the analysis tool.
Collaborative Practice: This model can include interdisciplinary
teams, nurse-physician joint practice or collaboration.
Partners in Practice: A model based on collaborative practice in
which an RN and an associate work together in care. The associate is cross
Differentiated Practice: This model recognizes the competencies of
baccalaureate versus technical nurses . The professional nurse is responsible
for assessment, planning and evaluation while the technical nurse is responsible
for implementation of care.
centered care: A nursing care delivery system that is unit based. All
patient care services take place on the unit and the focus is on cost
containment, efficiency, quality, and decentralization. The R.N. is the patient