Organizational Theory

1. Business Psychology
Organizational Theory
SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 1

2. Organizational Theory
Organizational theories describe the structure and function
of organizations, considering issues such as the
distinguishing characteristics of organizations, the
structure of organizations, the interrelationships among
people, and the interactions among people and technology.
1.Descriptive theories explain how existing organizations
work. A good one provides an accurate picture of how
organizations are structured and how they operate.
2.Prescriptive theories indicate how organizations should
operate. A good one leads to an effective and efficient
organization.
In practice, theories are often both descriptive and
prescriptive.
SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 2

3. Bureaucracy
 Bureaucracy theory is a theory of the structure of an organization.
 Will discuss four of the principles; the concepts are useful for describing most
organizations.
 1. Division of labor refers to the creation of specialized job positions, each
responsible for different tasks.
 2. Delegation of authority is assigning authority (and responsibility) for tasks to
subordinates, who in turn give their own subordinates authority for subtasks, etc.
 3. Span of control is the number of subordinates who report to each supervisor.
a. Skill of subordinates; skilled subordinates require less supervision.
b. Supervisory style; participative style gives subordinates more autonomy and thus
takes less time than a directive style.
 4. Line vs. staff distinguishes personnel by their roles.
a. A line position is directly involved with the organization’s major purpose; includes
all the levels of supervision above these personnel. In an elementary school, would
include teachers and the principal.
b. A staff position supports the activities of a line position. In an elementary school,
cafeteria workers and the school counselor.
SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 3

4. Theory X/Theory Y
McGregor’s (1960) Theory X/Theory Y concerns the interaction
between supervisors and subordinates.
It assumes that an organization’s management approach is
determined by supervisors’ attitudes and beliefs about
subordinates; this management approach, in turn, affects how
subordinates behave.
Theory X
 Belief that employees are lazy and will avoid work unless watched
 Basic incompatibility of worker & organization
 Extrinsic motivation approach
 Control via rewards and punishments
Theory Y
 Belief that employees seek challenge & responsibility
 Worker & organization goals made compatible through meaningful
work
 Intrinsic motivation approach
 Control via challenge, responsibility & trustSMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 4

5. Open System Theory
 Katz and Kahn’s (1978) open system theory assumes it is useful to look at
an organization as a type of open system, a natural sciences concept used
to characterize biological organisms.
 They describe ten characteristics of open systems:
a. Import energy: Hire, buy raw materials.
b. Transform energy: Produce goods and services.
c. Output products: Deliver products to customers.
d. Cycles of events: Fiscal years, weekly schedules, shifts.
e. Escape entropy: Stay profitable.
f. Input information: Do market surveys.
g. Homeostasis: Maintain equipment, retain enough employees.
h. Specialization: When expanding, create departments.
i. Coordination and integration: Supervise employees.
j. Equifinality: Many effective ways to run an organization.
 Open system theory is a descriptive theory that provides a framework to
understand the characteristics of organizations; it does not provide
insights into how an organization should be run.
SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 5

6. Sociotechnical Systems Theory
 Sociotechnical systems theory looks at the interrelations between people and
technology in an organizational environment.
a. People include employees and their relationships with one another.
b. Technology includes equipment, materials, tools, and other nonhuman objects
in the organization.
c. The environment is the physical and social conditions in which the organization
must function.
 Deals with how people affect technology and how technology affects people.
 It is a prescriptive theory providing principles of good organizational design.
 The theory has several important principles.
a. Joint optimization: social and technological systems should be designed to fit as
well as possible.
i. Machines and equipment should be easy to use.
ii. Technology should guide the design of the human side of organizations, so that
machines and equipment can function well.
b. Unit control of variances: concerns who handles work problems when they
arise. SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 6

7. Sociotechnical Systems Theory
 Sociotechnical systems theory looks at the interrelations between people and
technology in an organizational environment.
a. People include employees and their relationships with one another.
b. Technology includes equipment, materials, tools, and other nonhuman objects
in the organization.
c. The environment is the physical and social conditions in which the organization
must function.
 Deals with how people affect technology and how technology affects people.
 It is a prescriptive theory providing principles of good organizational design.
 The theory has several important principles.
a. Joint optimization: social and technological systems should be designed to fit as
well as possible.
i. Machines and equipment should be easy to use.
ii. Technology should guide the design of the human side of organizations, so that
machines and equipment can function well.
b. Unit control of variances: concerns who handles work problems when they
arise. SMS Kabir, smskabir@psy.jnu.ac.bd;
smskabir218@gmail.com 6