2. INTRODUCTION
Organizational theory attempts to explain the workings of organizations to
produce understanding and appreciation of organizations.
Organizational theory draws from various bodies of knowledge and
disciplines.
Organization theory explains how organization structures are built.
It also suggests how organization can be designed to improve their
effectiveness.
3. DEFINITION
Organization theory is a set of concepts, and principles that
provide framework for systematic study of structure, functioning
and performance of organization and of the behavior of
individuals and groups working in them.
4. CLASSIFICATION
The theory of organization can be classified into three broad
categories:
Classical Organization theory
Neoclassical Organization theory
Modern Organization theory
5. CLASSICAL ORGANIZATIONAL THEORY
Classical organization theory evolved during the first half of this century.
The classical theory viewed organisation as a machine and human beings as components of that
machine.
They were of the view that efficiency of the organisation can be increased by making human beings
efficient.
Their emphasis was on specialisation and co-ordination of activities.
Most of the writers gave emphasis on efficiency at the top level and few at lower levels of organisation.
Three main theories • Scientific management theory • Administrative management theory •
Behavioural theory.
6. SCIENTIFIC MANAGEMENT THEORY
Aroused because of the need to increase productivity and efficiency
How to increase the output of the average worker
How to improve the efficiency of management.
Major contributors:-
Frederick Taylor,
Henry Gantt, and Frank and
Lillian Gilbreth
7. PRINCIPLES OF SCIENTIFIC MANAGEMENT THEORY
1) Work, equipment and processes should be standardized.
2) Time and task study should be used to determine the standards for workers.
3) Selection, training and developing workers instead of allowing them to
choose their own tasks and train themselves.
4) Cooperate fully with the workers to ensure they use the proper method.
5) Divide work and responsibility so management is responsible for planning
work methods using scientific principles and workers are responsible for
executing the work accordingly.
8. ADMINISTRATIVE MANAGEMENT THEORY
Focused on total organization.
Emphasis was on the development of managerial principles rather than work
methods.
Major Contributors:-
Henry Fayol,
Max Weber,
Mary Parker Follet
9. WEBER’S THEORY
Disliked organizations managed on personal family like basis.
Employees loyal to individual supervisors rather than organization.
According to Weber:-
Management should be managed impersonally.
Formal organization structure, where specific rules are followed is
important.
Authority should be something that was part of a person’s job and passed
from individual to individual as one person left and another took over.
10. FAYOL’S PRINCIPLES OF MANAGEMENT
1) Division of work
2) Authority and responsibility
3) Discipline
4) Unity of command .
5) Unity of direction
6) Remuneration
7) Subordination of personal interest to general interest
8) Centralization
9) Scalar chain
10) Order
11) Equity
12) Stability of tenure
13) Esprit de corps
14) Initiative
11. BEHAVIOURAL THEORIES OF MANAGEMENT
Successful organization depends largely on a manager’s ability to understand and work
with people.
Addresses human dimensions of work: motivation, leadership, trust, teamwork and
conflict management.
Major contributions :-
Hawthrone Experiement
Maslow’s Need Hierarchy Theory
Mc Gregor Theory of X & Y
Herzberg’s Motivation Hygiene Theory
12. HAWTHRONE EXPERIMENT
Organization is a social system not just techno-economic system.
Employers can be motivate by psychological and social wants because their
behaviour is also influenced by feelings, emotions and attitudes.
Economic incentives are not the only method to motivate people.
Management must learn to develop co-operative attitudes and not rely
merely on command.
13. MASLOW’S NEED HIERARCHY THEORY
Theory of motivation
Considerations on five groups of human needs Assumptions
Human needs are never completely satisfied
Human behaviour is purposeful and is motivated by the need for satisfaction
Needs can be classified according to a hierarchical structure of importance,
from the lowest to highest
14. MC GREGOR’S THEORY X AND Y
Dichotomy about the assumptions managers make about the workers and
how these assumptions affect behaviour.
Two basic kinds of manager exists
Theory X manager
Theory Y manager
Hard guy, soft guy approach of managing people in the organization.
15. THEORY X
Negative assumptions about employee.
Assumes that average person has an inherent dislike for work and will avoid if
they can.
Employees are lazy, untrustworthy and incapable for assuming responsibilities.
They must be coerced, controlled, directed and threatened with punishment to get
them put forth adequate efforts towards achievement of organization objectives.
Average employee prefer to be directed. They wish to avoid responsibility and
have little ambition. They are interested only in security.
16. THEORY Y
Work is as natural as play or rest if the conditions are favorable.
Employees are not only trustworthy and capable of assuming
responsibility, but also have high levels of motivation.
People will exercise self-direction and self-control to achieve
organizational objectives to which they are committed.
17. CHARACTERISTICS OF CLASSICAL
ORGANIZATION THEORY
It is based on organization as a machine and individuals working in it as
different components of this machine.
It believed that efficiency of organization can be increased by making each
individual more efficient.
It deals with formal organization structures.
It focuses on objectives and tasks and not on the human beings performing the
tasks.
It aims at maximizing control.
It emphasizes on the direction on the detection of errors occurred and then
correction.
18. PILLARS OF ORGANISATION THEORY
The organisation theory is built around four key pillars:-
Division of Labour Scalar and Functional
Process
Structure Span of Control
19. (I) DIVISION OF LABOUR:
Division of labour implies that work must be divided to obtain specialisation with a view
to improve the performance of workers.
The classical theory rests on the assumption that more a particular job is broken into its
simplest component parts, the more specialised a worker can become in carrying out his
part of the job.
The specialisation in workers will make the organisation efficient.
Various activities of a job are specified and subdivided into different components so that
these may be assigned to different persons.
The workers will go on repeating their work under division of labour.
The performance of same work will help workers to improve their efficiency and the
organisation as a whole is benefitted by this exercise.
20. (II) SCALAR AND FUNCTIONAL PROCESS:
The scalar process refers to the growth of chain of command, delegation
of authority, unity of command and obligation to report.
It is called scalar process because it provides a scale or grading of duties
according to the degree of authority and responsibility.
It generates superior- subordinate relationship in the organisation.
The functional process deals with the division of organisation into
specialised parts or departments and regrouping of the parts into
compatible units.
21. (III) STRUCTURE:
It is the framework of formal relationships among various tasks, activities
and people in the organisation.
The basic structural element in the classical theory is position.
Each position is assigned a specific task and authority is delegated for its
accomplishment.
The efficiency with which these tasks will be accomplished will
determine the effectiveness of the organisation.
22. (IV) SPAN OF CONTROL:
The span of control means the number of subordinates a manager can control.
Classical thinkers specified numbers at different levels which can be effectively
supervised by a superior.
A manager cannot exercise proper control if the number of subordinates
increases beyond a certain figure, on the other hand if the number is less then
his capacity and knowledge cannot be fully utilised.
23. DRAWBACKS OF CLASSICAL ORGANIZATION
THEORY
It ignores human aspect and views human beings as components of the organization machine.
It believes that people at work can be motivated solely through monetary incentives.
It is an authoritarian theory.
It is based on certain principles which are based mainly on experience and not tested by
scientific researches.
It takes static view instead of dynamic view of the organization.
It regards organization as a closed system instead of open system..
Thus it ignores the influence of external factors on organization and its members
24. NEO-CLASSICAL ORGANISATION THEORY:
The classical theory of organisation focussed main attention on physiological and
mechanical variables of organisational functioning.
These studies focussed attention on human beings in the organisation.
Neoclassical organizational theory is a reaction to the authoritarian structure of classical
theory.
The neoclassical approach emphasizes the human needs of employees to be happy in the
workplace,
This allows creativity, individual growth and motivation, which increases productivity
and profits.
Managers utilizing the neoclassical approach manipulate the work environment to
produce positive results.
25. CHARACTERISTICS OF NEO-CLASSICAL
ORGANIZATION THEORY
1) The organisation in general is a social system composed of numerous
interacting parts.
2) Informal organisations exist within the formal organisation. Both are
affected by and affect each other.
3) Human being is independent and his behaviour can be predicted in terms
of social factors at work.
4) Motivation is a complex process. Many socio- psychological factors
operate to motivate human beings at work.
26. Contd:-
5) A conflict between organisational and individual goals often exists.
There is a need to reconcile the goals of the individual with those of the
organisation.
6) Team-work is essential for higher productivity.
7) Man’s approach is not always rational. Often, he behaves non- logically
in terms of rewards which he seeks from his work.
8) Communication is necessary as it carries information for the functioning
of the organisation and the feelings of the people at work.
27. IMPROVEMENTS OVER CLASSICAL THEORY:
Neo-classical theory offers modifications and improvements over
classical theory in some aspects such as:
1) Flat structure,
2) Decentralisation,
3) Informal organisations.
28. i. Flat Structure: The classical theory suggested tall structure whereas neo-classical theory
suggested flat structure. In tall structure there is a problem of communication because of
differentiation between decision makers and implementers, the levels of management are too
many and motivation of people is difficult. In case of flat structure the wide span of control helps
in motivation, chain of communication is shorter and it is free from hierarchical control.
ii. Decentralisation: Neo-classical theory advocates decentralised organisation which is close to
flat structure because of wider span of control. It allows autonomy and initiative at the lower
level. It also develops people to occupy higher positions in future.
iii. Informal Organisation: The neo-classical theorists advocated the need for both formal and
informal organisations. Formal organisation represents the intentions of top management for the
purpose of interactions among the people. Informal organisation is necessary to plug the loop
holes of formal organisation and to satisfy the social and psychological needs of people.
Managements use informal organisation for overcoming resistance to change on the part of
workers and also for fast communication process. Both formal and informal organisations are
interdependent upon each other.
29. DRAWBACKS OF NEO-CLASSICAL THEORY
It is not a new theory of organizations. It is merely a modification of
classical theory.
The structures of organization suggested by this theory are not suitable in
all situations.
The theory over- emphasizes on human aspect. Consequently, other
aspects remained ignored or neglected.
Certain assumptions of this theory are not true. Consequently, there are
conflicts of interests of various groups in the organization.
30. MODERN ORGANISATION THEORY:
Modern organisation theory is of recent origin, having developed in early 1960’s.
This theory has tried to overcome the drawbacks of earlier theories.
The distinctive qualities of modern organisation theory are its conceptual
analytical base, its reliance on empirical research data and, above all, its
integrating nature.
These qualities are framed in a philosophy which accepts the premise that the only
meaningful way to study organisation is to study it as a system.
This theory may be understood in two approaches: systems approach and
contingency approach.
31. SYSTEM APPROACH
This approach studies the organisation in its totality.
The mutually dependent variables are properly analysed.
Both internal and external variables are studied in analysing the nature of
organisation.
Organisation as a system can well be understood by identifying various sub-systems
within it.
Each sub-system may be identified by certain processes, roles, structures and norms
of conduct.
32. SUB-SYSTEM OF SYSTEM APPROACH
Katz and Kahu have identified five sub-systems of organisation:
1) Technical sub-system concerned with the work that gets done;
2) Supportive sub-system of procurement, disposal and institutional relations;
3) Maintenance of sub-systems for tying people into their functional roles;
4) Adaptive sub-systems concerned with organisational change; and
5) Managerial sub-systems for direction, adjudication and control of the many
sub-systems and the activities of the structure.
33. 5 ELEMENTS OF SYSTEM APPROACH
Organization as a system is composed of five elements:-
Inputs- human, finance, material, equipment, information.
Transformational processes- technological and managerial.
Outputs- products or services
Feedback- reaction from the environment.
Environment
34. CONTINGENCY THEORY
Contingency approach suggests an organisational design which suits a particular unit.
Contingency theory accepts that there is no universally ideal leadership style because
each organization faces unique circumstances internally and externally.
In contingency theory, productivity is a function of a manager’s ability to adapt to
environmental changes.
Managerial authority is especially important for highly volatile industries. This allows
managers the freedom to make decisions based on current situations.
The contingency theory reveals situations that require more intense focus and takes
account of unique circumstances.
35. CHARACTERISTICS OF MODERN ORGANIZATION
THEORY
1) It considers organization as a system composed of many subsystems such as managerial, technical, social
sub system.
2) It regards individual as complex being who can be motivated in multitude of ways.
3) It is descriptive approach of studying organizations.
4) It is multi- disciplinary theory as draws concepts and principles from several disciplines such as sociology,
psychology, economics, engineering and so on.
5) It is dynamic in interaction with the structure. It is constantly subject to change as environment changes.
Organization adapts itself suitably to the changing environment and it survives.
6) It is both macro and micro in its approach. It is micro when considered with respect to the entire nation or
industry. It is macro with respect to internal parts of the organization.
7) It ensures better flow of communication at all the levels and ensures effective control.
36. DRAWBACKS OF MODERN ORGANIZATION
THEORY
It is not a unified theory of organization but a mixture of several
theories.
It is based on past empirical studies and there is nothing new in it.
It does not identify the precise relationships among the
organization and its external system.
It is not useful for smaller organizations.
