Organization Theory

A Brief Introduction to OT and main contributors

In organization theory (OT), several perspectives are grouped into “schools” that share certain assumptions. Categorization of Shafritz and Ott is useful. Their classification is:

  1. Classical OT
  2. Neo-classical OT, Human Resource or Organizational Behavior (OB) Perspective
  3. “Modern” Structuralist Theory (Contingency)
  4. Systems Theory
  5. Power and Politics
  6. Organization Culture and Reform Movements
  7. Postmodernism and Information Age

1.  Classical OT

Underlying assumptions of classical theory are:

  • There is “one best way” to organize.
  • There are “universal” principles of management.
  • Organizations are “mechanical” and “closedsystems“. They ignore human factors, cultural dimensions and external environment.
  • Organizations exist for “production related” goals, thus the emphasis is on “Internal efficiency“.
  • Structure of “formal organizations” are defined.

Three main approaches of classical OT are: (1) Scientific Management, (2) Administrative Process, and (3) Bureaucracy.

In Scientific Management, F. Taylor emphasized scientific observation and analysis, job design and standardization, time and motion studies, scientifically selecting and training workers and incentive systems to increase productivity. Other contributors of scientific management are Gantt, Frank and Lillian Gilbreths and Harrington Emerson.

Whereas Taylor proposed to rationalize the organization from “bottom-up”, H. Fayol worked to rationalize the organization from the “top-bottom”. In Administrative Process, Fayol defined major activities of an organization, considers management as a process of consisting five functions: planning, organizing, directing, coordinating and control. Fayol proposed 14 general principles of management. He believed that these principles are universally applicable to every type of organization. Gulick contributed to this approach with the famous mnemonic POSDCORB: Planning, Organizing, Staffing, Directing, Coordinating, Reporting and Budgeting.

M. Weber suggested that a Bureaucratic structure is ideal organization structure for effectiveness. Main characteristic of bureaucratic structure are division of work according to functional specialization, clearly defined hierarchical structure, principles and procedures, impersonal and formal relations, tenure and job security, selection and promotion of personnel on the basis of technical qualifications, and use of rational-legal authority.

2.  Neoclassical School, Human Resource (HR) Theory and Organizational Behavior (OB) Perspective

Neoclassical school attempted to modify classical theory based upon research findings in the behavioral sciences. The major concern of neoclassical theories is on human behaviors in organizations.

Chester Barnard sought to create a comprehensive theory on human behavior in organizations in this book “Functions of the Executive”. In his view, cooperation holds an organization together and thus the responsibility of an executive is (1) to create and maintain a sense of purpose,  (2) establish systems of formal and informal communication, and (3) to ensure the willingness of people to cooperate.

Robert Merton proclaimed that ideal bureaucracy of Weber has inhibiting dysfunctions.

Herbert Simon criticized general principles of management as being inconsistent, conflicting and inapplicable to many situations facing managers. He called them “proverbs of administration”. March and Simon coined the term “bounded rationality“.

Selznick argued that formal structures can “never succeed in conquering the nonrational dimensions of organizational behavior”. He stressed the importance of institutionalization as “the processes by which an organization takes on a special character and achieves a distinctive comptence”.

In 1957, OB perspective or HR Theory came into being. Fundamental suggestions are:

  • Organizations exist to serve human needs rather thant the reverse
  • Organizations and people need each other
  • When the fit between individual and the organization is poor one or both will suffer
  • A good fit between the individual and the organization benefits both

Major themes in HR is motivation, group behavior, leadership, work teams and empowerment. Maslow’s motivation theory (hierarchy of needs), McGregor’s Theory X and Theory Y, Mary Parker Follett’s participatory management, Hawthorne studies of Elton Mayo and Roethlisberger hold the foundation for the OB perspective.

3. “Modern” Structuralist Theory (Contingency Theory)

In 1960s “modern” structural theory become dominant. Burns and Stalker introduced mechanistic forms in stable environments and organic forms in dynamic environments. Lawrence and Lorsch coined the term contingency. They stated that organizations must achieve a balance between differentiation and integration.

Joan Woodward classified manufacturing technologies and indicated their effects on organization structure. Emery, Trist and Bamfort emphasized the importance of joint optimization of social and technical systems (socio-technical systems) and James Thompson defined three types of interdependence that influence organization structure.

4. Systems Theory

Systems Theory stems from the “General Systems Theory” of biologist Ludwig Von Betalanffy.

Systems Theory began to dominate the OT in 1966-1967 when two most influential modern works appeared: Katz and Kahn’s “The Social Psychology of Organizations” articulated organizations as open systems and James Thompson’s coherent statement of rational systems/contingency perspective of organizations in “Organization in Action”. Katz and Kahn defined common characteristics of open systems as importation of energy, throughput, output, cycle of events, negative entropy, negative feedback, dynamic homeostasis, differentiation and equifinality.

Systems theory views organization as complex set of dynamically intertwined and interconnected elements, including its inputs, process, outputs, feedback loops and the environment which it operates.

Boulding devised a classification of systems by their level of complexity. Norbert Wiener introduced the term “Cybernetics” to describe the self-regulatory property of systems.

5. Power and Politics

In both “modern” structural and systems schools, organizations are assumed to be rational institutions. However, power and politics school rejects this assumption and suggests that goals result from maneuvering and bargaining among individuals and coalitions.

Pfeffer has written extensively on “resource-dependence” theory. In “The bases of Social Power”, French and Raven identified five bases of power as legitimate, referent, expert, reward and coercive. Mintzberg viewed organizational behavior as a game.

6. Organizational Culture & Culture Reform Movement

Schein contributed heavily on the subject “corporate culture”. He identifies culture as “basic patterns of shared assumptions people learn when they engage in solving problems of internal integration and external adaptation.

Bolman and Deal talk about “symbolic management” where “the meaning or the interpretation of what is happening in organizations are more important than what is actually happening.

In 1980s, the realization that US companies had lost their competitiveness led to organizational culture reform movement. TQM of Juran, Crosby, Deming and Feigenbaum, Japanese Management of Ouchi, Pascale and Athos. “In Search of Excellence” of Peters and Waterman, “Learning Organizations” of Senge, and Reengineering of Hammer and Champy were all examples of the culture reform movement.

7. Postmodernism

Postmodernism associated with Chaos (unpredictability in nonlinear, complex and dynamic systems where cause and effect relations are either not known or do not exist) and Information Technologies. Its main tenets are there are no universal rules, principles or forms. William Bergquist’s four themes explains the sources of postmodernism:

  1. Objectivism vs. Constructivism
  2. Language is itself a reality
  3. Globalization and segmentalism
  4. Fragmented and inconsistent images

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