M.Com.

Semester-I

PAPER - MCCC105
ORGANIZATIONAL BEHAVIOUR
Study Material : Unit-I

SCHOOL OF OPEN LEARNING

University of Delhi

Department of Commerce
 CONTENT

UNIT-I : ORGANIZATIONAL BEHAVIOUR

Lesson-1 : Management and Organizational Behaviour

Lesson-2 : Theories of Organization
Lesson-3 : Neo-Classical Theory of Organization
Lesson-4 : Modern Organization Theory

Edited by: Written by:

Dr. Sneh Chawla Dr. Virender Kaushal
Ms. Ritika Sharma

SCHOOL OF OPEN LEARNING

University of Delhi
5, Cavalry Lane, Delhi-110007
 Organizational Behaviour

LESSON 1
MANAGEMENT AND ORGANIZATIONAL
BEHAVIOUR
Dr. Virender Kaushal

STRUCTURE
1.1 Learning Objectives
1.2 Introduction to Management
1.2.1 Nature of Management
1.2.2 Evolution of Management Concept and Theory
1.2.2.1 The Classical Theory
1.2.2.2 The Neo-Classical Theory
1.2.2.3 The Bureaucracy Model
1.2.2.4 Modern Theory of Management
1.2.3 Need of Management
1.2.4 Functions of Management
1.2.5 Levels of Management
1.2.6 Skills of a Manager
1.3 Organisational Behaviour
1.3.1 Scope of Organizational Behaviour
1.3.2 Nature of organizational Behaviour
1.3.3 Characteristics of Organizational Behaviour
1.3.4 Levels of Organizational Behaviour
1.3.5 Models of Organizational Behaviour
1.3.6 Goals of Organizational Behaviour
1.3.7 Elements of Organizational Behaviour
1.3.8 Factors Affecting Organizational Behaviour
1.3.9 Techniques for Managing Organizational Behaviour

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1.3.10 Limitations of Organizational Behaviour

1.3.11 Limitations of Organizational Behaviour
1.3.11 Future of Organizational Behaviour
1.4 Summary
1.5 Glossary
1.6 Answers to In-Text Questions
1.7 Self-Assessment Questions
1.8 References

1.1 LEARNING OBJECTIVES

After studying this chapter student should be able to understand the: -
• Meaning, nature, evolution of management concepts and theories.
• The need, functions, levels of management and skills of a manager.
• The meaning, scope, nature and characteristics of organizational behaviour
• The levels, models, goals, elements and factors affecting organizational behaviour.
• The techniques for managing, opportunities, challenges, limitations and future of
orbitational behaviour.

1.2 INTRODUCTION

Management is the process of organizing and directing work, operations, and employees to
meet company goals. The main goal of management is to make a place where people can
work quickly and effectively. Managers are in charge of putting in place and evaluating
structures that help workers know what to do and what their work should be about. The
various tasks performed by the managers are including but not limited to establishing targets
with the end goals of boosting performance, productivity, and efficiency; checking that all
corporate policies and industry standards are being followed; keeping tabs on budgets,
productivity levels, and efficiency; and handling customer complaints.
1.2.1 Nature of Management
Management is an ancient concept that has been around since the beginning of the human
race. It is important to take proper precautions to protect family resources, plan where to go
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 Organizational Behaviour

fishing and hunting, and organize groups into chiefs and hunting and fishing bands. Over
time, organizations have evolved to become more sophisticated and complex, with
technological innovations. The Egyptian pyramids and India's early civilization attests to
organized living. Management is an essential part of an organized society and an integral part
of life. Organizational management is an important concept that has been around since
ancient times. It is critical for the success of any organization, as it is the main resource for
developed nations and the most needed resource for developing nations. Managers are
responsible for motivating, implementing, reaching a consensus, making the right decisions at
the right time with the right people, and leading the organization to achieve its goals. Despite
not giving managers much credit, they are entitled to the same professional status as more
traditional fields of knowledge.
1.2.2 Evolution of Management Concept and Theory
The beginning of human history marked the beginning of the evolution of management
thought, which was driven by the need to live together in communities and organize people
according to physical and mental capabilities. It has been used since ancient times, but the
industrial revolution brought about significant shifts in society, leading to the development of
a broader and more formal management theory.
The industrial revolution had a major impact on management in the 18th century, changing
the way individuals and businesses raised capital and the manner in which labor and
production of goods were organized. Entrepreneurs were able to get their hands on all of the
factors of production, including land, labor, and capital, and it was their responsibility to
make an effort to bring them together in order to achieve a predetermined objective.
However, notable figures who contributed to the change in management suggested practical
ideas and methods that provided a direction that was clear and well received by all. The
following are some of them:
• Charles Babbage (1729-1871), a British professor of mathematics at Cambridge
University, argued that manufacturers should use mathematics and science instead of
guesswork and suggestions to improve accuracy and output.
• Robert Owens (1771-1858), born in the United Kingdom, is known as the "father" of
personnel management. He advocated for the education of workers' children, the
installation of canteens, and the reduction of the number of hours workers were
required to put in. He also pioneered cooperation and labor unions.
Henry Robson Towne from the United States, James Watt Junior from the United Kingdom,
and Seebohm Rowntree from the United Kingdom are the other contributors.
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1.2.2.1 The Classical Theory

Management thought during the classical period centred on job content, standardisation, and
division of labour, and had a close connection to the industrial revolution and the growth of
large-scale businesses. The 19th century saw the beginning of the science of management,
with notable figures such as Prof. Babbage, Robert Owens, Emerson, F.W. Taylor, and H.L.
Grant instrumental in laying the way for the development of scientific management.
Management thought during the classical period focused on job content, standardisation,
labour division, and taking a scientific approach to the organisation. It was also connected to
the industrial revolution and the growth of large-scale businesses. The theories evolved under
classical aspects are as under:
• Scientific Management: Fredrick Taylor was an engineer who established the ideas
of Scientific Management and founded the Taylorism school of management theory.
His scientific approach to productivity led to the idea that efficient management
requires established processes backed by research.
• Administrative Management: Henry Fayol proposed Fayol’s, which consists of five
functions and 14 principles of management, giving managers autonomy to make
decisions.
1.2.2.2 The Neo-Classical Theory
Neoclassical management theory focused on job content, while classical theory focused on
relationships between employees and coworkers. The development of management thought
marked an advancement on traditional management theory, which focused on job content and
relationships between employees and coworkers. Management thought advanced, introducing
a new approach to management that placed a greater emphasis on job content and
relationships between employees and coworkers. This was an expansion and modification of
classical theory, which focused on physical resources and employee relationships. The stage
in management thought marked an advancement of traditional management theory, which
focused on job content and relationships between employees and coworkers. The
management theories evolved are as:
• Human Relations Management: Elton Mayo's Human Relations Theory of
Management focused on employee morale and satisfaction, in response to classical
management theories which focused less on intangibles.
• Behavioral Management: Abraham Maslow's hierarchy of needs to organize a
company's commitment to its workers promotes positive interpersonal dynamics and
creates a welcoming environment for employees.

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 Organizational Behaviour

1.2.2.3 The Bureaucracy Model

Max Weber proposed a model of rules, functional specialization, legal authority and power,
and the placement of employees according to technical competence. It includes a division of
labor, hierarchy of authority in an organization.
The writings of numerous authors have contributed to the development of management
theory-supporting literature. The Art of War by Sun Tzu and Chanakya's Natyashastra are
two books that laid the foundation for the management of organizations. Sun served as a
commander in the Chinese army and his writings applied to management by making the point
that success can be achieved by taking advantage of the organization's strengths to weaken
competitors. As a result, current management theories and ideas have been enhanced and
refined, allowing one's process expertise to be better able to use management principles to
improve the organization. Management began as a result of civilization, leading to the
development of current management theories and ideas. It is important to understand how this
transition took place, as it increases process expertise and enables people to use management
principles to improve the organization.
1.2.2.4 Modern Theory of Management
The theories emerged are given as:
• System Approach: Systemic organizational theory combines biology and systems
science to view organizations as interconnected webs of people, processes and
endeavors, allowing us to understand how all aspects of a company are interconnected
and influenced by one another. This has departed from the mechanistic perspective of
classical management theory.
• Contingency Approach: The Contingency Management Theory states that there is
no one best way to structure a business, as success or failure is determined by factors
both within and beyond its control.
Management has shifted focus from formal structures and authoritative figures to individuals,
allowing for the implementation of ideas from different management philosophies in today's
workplaces. This has helped businesses to thrive and strengthen their relationships with
employees, regardless of cultural change.
1.2.3 Need of Management
Management is necessary for businesses and other types of organizations since it entails
planning, organizing, taking the initiative, and selecting the best options. Also, it is vital for
the lives of each one of us individually. As a result of the availability of multiple levels of
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management to oversee and control the numerous operations carried out within the company,
approval procedures have been reduced.
Management is critical not only for companies and other types of organizations, but also for
one's personal life and daily activities. It necessitates prior planning and organization, as well
as taking the initiative and selecting the best options. Additionally, it is necessary for the lives
of each one of us individually. There are multiple levels of management available to oversee
and control the operations carried out within the company, and this contributes to the
development of procedures for approval that are more streamlined.
Management is essential for all types of organizations, including businesses, because it
entails planning, organizing, taking the lead, and making decisions about what options are
best. It is also necessary for each of our individual lives to have multiple levels of
management, split the responsibilities among them, and expand the number of people
working for us. This contributes to the development of streamlined approval procedures and
helps to ensure that different levels of management review each other's work prior to the
release of a product.
1.2.4 Functions of Management
The five major functions of management are planning, organizing, staffing, directing, and
controlling; coordinating, reporting, and budgeting are all part of the controlling function.
The basic functions of management are given as follows:
• Planning: Planning is a systematic approach to making decisions that shape the future
of an organization, considering external and internal factors.
• Organizing: Organizing is the process of defining, arranging, and coordinating work
sub-divisions to achieve company goals.
• Staffing: Recruiting, training, developing, compensating, and evaluating employees is
essential for motivating and motivating them. It is important to hire the right people
based on their intelligence, knowledge, skills, experience, physical condition, age, and
attitudes, as well as understand the sociological and psychological structure of the
workforce.
• Directing: The directing function is responsible for leading, communication,
motivation, and supervision to ensure employees perform their tasks efficiently and
receive desired goals.
• Controlling: Setting standards, measuring performance, comparing performance,
identifying deviations, and taking corrective action to ensure enterprise objectives are
met.

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Management functions are interdependent and unrecognizable, so it is necessary to focus on

and address each function separately.
1.2.5 Levels of Management
There are three levels of management in an organization: top, middle, and bottom. Small
enterprises may have managers at various levels, but big organizations may have different
managers at each level of management.
• Top: Top-level management is responsible for making decisions that have an impact
on the organization, often holding the position of CEO or being a member of the
board of directors.
• Middle: Executive positions are held by individuals who work with supervisors and
upper-level management to support employees in achieving goals and increase
productivity.
• Bottom: Supervisory functions are the last level of management that collaborate with
individuals and groups to achieve objectives set by higher management. They have
less influence over business policy but more interaction with employees.
1.2.6 Skills of a Manager
The skills must be possessed by a manager are as follows:
• Technical skills: These skills help managers with the knowledge and ability to
implement strategies to achieve their goals, such as operating machines and software,
production tools, and equipment, as well as increasing sales, designing products and
services.
• Conceptual Skills: Managers possess knowledge, abstract thought, and creativity to
comprehend, analyze, and solve problems. They are able to anticipate challenges
encountered by their department or company.
• Interpersonal Skills: Interpersonal skills are essential for managers to interact, work
and relate to people in an effective manner, allowing them to maximize their
employees and the company.

ACTIVITY
Discuss in the class about the necessity of management concepts and theories for
managing an organisation.

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In-Text Questions
1. According to Charles Babbage a manufacturer should use which of the
following to improve accuracy and output?
a) Guesswork b) Suggestions
c) Both (a) and (b) d) None (a) and (b)
2. Management is the process of
a) Organising and directing the work,
b) Operations of organisation and
c) Employees to meet company goals.
d) All of the Above
3. Who gave the fourteen principles of management?
a) Henry Fayol b) Fredrick Taylor
c) Elton Mayo d) Max Weber
4. Who among the following propounded Human Relations Theory of
Management?
a) Abraham Maslow b) Elton Mayo
c) Henry Fayol d) Fredrick Taylor
5. Which among the following are the essential functions of the
management?
a) Planning, Organising, Staffing, Directing and Controlling
b) Procurement, Recruitment, Development, Communication and
Coordination
c) Planning, Empowerment, Screening, Training and Retrenchment
d) All of the Above
6. Which of the following skills are essential for managers?
a) Technical, Communication and Interpersonal
b) Technical, Conceptual and International Relations
c) Technical, Conceptual and Intrapersonal
d) Technical, Conceptual and Interpersonal

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1.3 ORGANIZATIONAL BEHAVIOUR

It is the study of the behavior of individuals in isolation, in groups, and as members of an

organization. It is influenced by personality, perception, learning, attitude, family history,
education, motivation, job satisfaction, performance evaluation, leadership effectiveness,
norms, values, and ethics. Organizational Behavior (OB) is an essential field of study since it
relates to the expected conduct of individuals within an organization. It is essential to
comprehend a person's credentials, background, social context, educational status, impact of
social groups, and other situational influences on conduct. For anticipating human behavior,
preventative measures must be done. The relationship between cause and effect has a
significant influence in an individual's propensity to react in a given scenario and its effect on
productivity. An effective organizational culture can alter individual behavior. The
management's commitment should be constant and progressive in nature.
1.3.1 Scope of Organizational Behavior
The scope of organization behavior is described as follows:
• Organizational behavior is studied by collecting data and interpreting findings to
guide behavior in the desired direction.
• The success of an organization is measured by how well employees perform their jobs
and are satisfied with their work.
• Firms need to focus on productivity to ensure quality and quantity of goods produced
while maintaining quality with zero errors, not absenteeism or turnover.
• Employees who are content in their jobs are more likely to be productive and
contribute to the development of an organization's work culture.
• Individuals can contribute to the success of an organization by working on their own
or joining forces to form a team, but departments must work together in a coordinated
manner to achieve the corporate goal.
• Managers must establish an appropriate culture in the workplace and use authority,
transfer of powers, division of work, and effective communication to ensure effective
leadership.
• Organizations must consider elements such as benchmarking, re-engineering, job re-
design, and empowerment to operate properly. This includes organizations involved
in manufacturing, services, and social work.
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1.3.2 Nature of Organizational Behavior

The features of the organizational behavior are as given:
• Independent: It is an independent field of study, not just a discipline, as it is multi-
and interdisciplinary in its orientation, and does not rely on a particular theoretical
foundation.
• Multidisciplinary: It is the study of human behavior in relation to the workplace,
using relevant knowledge from psychology, sociology, and anthropology.
• Focused: It is the primary focus of research projects to address organizational issues
related to human behavior, while pure science places more emphasis on fundamental
research. Both are used to implement findings and analyses data, and can be
considered to be divided into both art and science.
• Normative Science: It is a normative science that prescribes how applied researches
to socially acceptable goals, in contrast to positive science which only discusses the
relationship between causes and effects. OB is concerned with what members of an
organization and the society they belong to accept, and is normative in nature, being
driven home by the abundance of management theories.
• Human Approach: It is based on the idea that people have a natural urge for
autonomy, creative expression, and productive endeavors, and that the environment
can have an impact on their performance.
• System Approach: The systems approach is a method developed by behavioral
scientists to analyses human behavior in light of their socio-psychological framework.
It seeks to investigate the complexity of the human being and identify potential
solutions to it, taking into account all the variables that affect the functioning of the
organization.
1.3.3 Characteristics of Organizational Behavior
The following are some of the most important aspects of organizational behavior:
• Logical: It is a logical way of thinking about people, focusing on doing tasks and
getting things done, rather than feeling about them emotionally.
• Balancing Needs: It seeks to balance people's needs and business's needs without
hurting employees' dignity, growth, or happiness.

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 Organizational Behaviour

• Behavioral Science: Behavioral sciences are essential for understanding

organizational behavior, with ideas from social psychology, sociology, and
anthropology.
• Science as well as Art: It is both a science and an art, and is empirical, interpretive,
and critical. It is a science that tries to understand what things mean and how they
work.
• Modern Science: It is a way of looking at events, a way of life, and a point of view
with real facts, interesting ways, and strong models. Science can't predict
relationships between variables on a large scale, so it is more like art than science.
• Interaction: It occurs at three levels such as the individual, group, and organization's
systems, which interact with each other. Individual behavior affects group behavior,
while group behavior affects organizational phenomena.
• Environmental Analysis: Organizations must consider the technical side of their
organization, such as the nature of their work and technology, as well as the work
environment, in order to ensure behavior remains stable. This is not like a vacuum, as
organizations must be aware of the changing market and product dynamics.
1.3.4 Levels in Organizational Behavior
The levels in the organizational behavior are explained as follows:
• Individual Level: The most important idea is that individual notions are unique to the
individual level, with perception, personality, learning, motivation, and attitude being
the foundation of an individual's beliefs.
• Group Level: The group-level concepts at the group level focus on how to create
effective teams, enhance group activities, and motivate employees. These concepts
include team, conflict, leadership, power, and politics.
• Organizational level: At the organizational level, change management and
organizational culture are two important topics to discuss, as they explore the
concepts of organization, its effects and execution, and the working circumstances
and stress management.
1.3.5 Models of Organisational Behaviour
The major models of organisational behaviour are as under:

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• Authoritarianism: Authoritarianism is based on the concept of power and a

managerial view of authority, while employees are focused on submission and
dependence on the supervisor, resulting in a poor performance.
• Supervisory: It is a model that focuses on the management of monetary resources,
prioritising employee safety and benefits. It ensures that staff members are satisfied
and the performance of the organisation is rewarded with cooperative passivity.
• Supportive: The most important details of this model of leadership are that it
emphasizes managerial support and performance, and that employees are focused on
their performance and participation in the job. This leads to improved performance,
providing employees with status and recognition, while also resulting in increased
drives.
• Cooperative: Teamwork is the key to a cooperative model, where employees are
taught to be responsible and exercise self-discipline. The self-actualization of the
worker is the need that is satisfied, and the end result shows only a few enthusiasms.
The industrial revolution has led to the development of autocratic managerial decisions,
which are based on McGregor's Theory X. Three models have been developed over the
course of their respective histories, each with its own strengths and disadvantages. The
cooperative model should not be thought of as the final or best model, but rather as the
beginning of a new model or paradigm.
1.3.6 Goals of Organisational Behaviour
The goals of organisational behaviour are as follows:
• To investigate a variety of viewpoints and possibilities in order to initiate and foster
the growth of ethical ideals inside an organisation,
• To perform an investigation into the possibilities about the ways and means to
conduct and organise the organisational development systems, methods, and
approaches within an organisation.
• To know about the possibilities of developing processes, methods, and approaches of
formal and informal organisational and social patterns;
• To develop ethical standards in an organisation by making perspective strategies and
processes of successful communication, and

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• To conduct an analysis of the individual and collective interests that overlap. The idea
that "people need organisations, and organisations need people" is symbolic of the
mutually beneficial relationships that exist between the two groups.
• To do an analysis and evaluation of the function played by various essential aspects
such as people, structure, technology, interactive behaviour, and the environment,
among other things.
• To assess the behavioural techniques that are utilised in the organisation. In light of
the fact that each one of them is founded on both "Art" and "Science,"
• To conduct an analysis of the various characteristics of the working environment that,
in appropriate ways, influence the behavioural patterns and attitudes of individuals.
1.3.7 Elements of Organisational Behaviour
The following are the elements of the organisational behaviour:
• People: People are essential for any organization's interactive and behavioural
platform, and their roles and behaviours help identify, acknowledge, and cultivate
behavioural attitudes.
• Process Design: Organisations are determined by formal relationships between
members, with managerial and organisational levels being differentiated by job and
responsibilities.
• Technology refers to the resources used and how they affect performance, with direct
correlation with degree of improvement.
• Relationship: Organisational behaviour is shaped by interactions between individuals
and groups, formal and informal ways of relating, and the identification, existence and
interactive role of people in any organisation.
• Surroundings: Organisations are all affected by internal and external environmental
factors, including structural design, work performance, mutual relations, and
behavioural patterns.
1.3.8 Factors Affecting Organisational Behaviour
The factors which have their impact on the organisations and affects the organisational
behaviour are described as follows:
• Human Resource: It is concerned with the study of individuals, interpersonal forces,
and individuals in the context of organisations. Research can be conducted to
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understand, comprehend, anticipate, and control the behaviour of its members.

Personality, attitude, learning, perception, values, ethics, norms, motivation, culture,
thought process, and other aspects of one's family history all play a role in the
organisational behaviour.
• Team Members: Organisations are composed of two or more people who work
together to achieve predetermined goals. Research efforts are focused on examining
how individuals behave when part of a team, which is affected by factors such as
communication, team/group processes, team/group decision making, comparative
values, and cross-cultural attitudes.
• Organisational Structure: Organisational structure is a complex concept that
involves the division of labour, the establishment of departments, hierarchies, and
coordination of efforts. It is impacted by power dynamics, decentralisation, reporting
protocols, and operational procedures. Once an effective organisational design is in
place, it is easier to encourage employees to perform the behaviours that are desired,
leading to greater motivation and satisfaction.
• Process and Procedures: Employees' successful completion of work responsibilities
is essential for the organization to achieve its goals. Technology and equipment are
used to help with the work, and if employees are satisfied with their choice of
technology, they are more likely to complete their tasks in a timely and effective
manner. This can have a positive influence on both employers and employees.
• Business Environment: The business environment is the context of a company's
operations, while the external environment is composed of aspects of the environment
that differ from sector to sector. External factors, such as social, technological,
political, and economic factors, as well as customers, suppliers, and competitors, can
have an impact on the behaviour of staff members. This influence is also investigated
in the field of OB.
1.3.9 Techniques for Managing Organisational Behaviour
The various techniques have been used by the managers in order to manage the behaviour of
the employees in an organisation. Some of the techniques are as given as follows:
• Leadership Style: Organisational behaviour is an important factor in the success of a
management organisation. According to McGregor's analysis, the assumptions made
in accordance with Theories X and Y are nearly diametrically opposed to one another.
The managerial leadership style refers to the general pattern of behaviour that

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managers exhibit while attempting to carry out their managerial responsibilities.

Productivity and employee satisfaction are both impacted by the leadership style used,
which can be either focused on production or employee satisfaction. A production-
cantered approach can lead to increased productivity while maintaining employee
satisfaction, while a democratic and participatory leadership style can help to ensure
that human values are not compromised.
• Desired Behaviour: Management recognises and comers positive employee
behaviour while working to stamp out activities and behaviours that are not desirable
for the workplace. Rewards are an effective way to encourage positive behaviour and
performance feedback is given for failure. Rewards can be used to change behaviour
through a premeditated plan for reinforcement of positive behaviour.
• Talent Management: There is a strong correlation between having a better job and
having better attitudes, as well as greater willingness to cooperate and perform duties
with enthusiasm and zeal. Job enlargement and enrichment can create the most
positive employee behaviour and action, and they can also integrate the goals of the
individual with those of the organisation. Job enrichment involves adding meaningful,
enjoyable, and fulfilling responsibilities to the organisation structure. The current
trend favours job enlargement, job rotation, and job enrichment as methods to
motivate employee behaviour without sacrificing employee satisfaction and welfare.
• Organisational Development: It is an approach that can be taken to modify and
integrate organisational behaviour. It involves the development of interpersonal skills,
methods for resolving conflicts, as well as openness and trust between participants.
Open communication and a focus on the organization's larger objectives are the two
primary purposes of OD. It enables members of an organisation to collaborate with
one another in an environment of trust and openness, free from unhealthy competition
and conflict.
1.3.10 Opportunities and Challenges for Organisational Behaviour
The organisations have to responds positively to meet the challenges and opportunities for
improving their productivity, performance and goals achievement. The business environment
is dynamic in nature and changing rapidly. Therefore, the opportunities and challenges faced
are as:
• Globalization: Organisations must conform to global factors to be efficient, but may
face challenges due to globalisation. It may be necessary for individual employees to
participate in international projects or work with people from different cultural
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backgrounds. Cultural differences between organisations can lead to mergers and

acquisitions, resulting in problems.
• Managing Diversity: Effective management of a diverse workforce requires a wide
variety of strategies to resolve conflicts and approaches too problem-solving. It can be
challenging due to differences in values, beliefs, attitudes, and behaviours, but can
lead to beneficial outcomes such as access to new ideas and abilities.
• Employee Management: Employees must maintain and improve their technical and
interpersonal skills, need training and development tailored to the latest developments
to remain competitive in an ever-evolving economic, political and technological
climate. Training and development must be provided to help employees improve their
technical and interpersonal skills.
• Process Modifications: Organisations must modify their policies, regulations,
processes and procedures to conform to the standards currently in place. Resistance
from employees can be overcome, leading to positive changes and increased
productivity.
• Work-Life-Balance: Employees often face difficulties in balancing their personal
and social lives due to demanding work schedules and challenging jobs. To help them
balance this, they may have to implement ideas such as working from home or having
flexible work hours.
• Employee Empowerment: Managers should give lower-level employees more
authority and responsibility, allowing them to make their own decisions regarding
work schedules, operations, procedures, and the approach to resolving work-related
issues. Self-managed teams are being implemented by companies, freeing employees
from reporting to a direct supervisor. The relationship between managers and
employees is being reshaped as a result of empowerment concepts.
• Customer Care Improvement: OB can contribute to organisational performance by
demonstrating how attitudes and behaviours of employees are associated with
customer satisfaction. To ensure superior service, production should be focused on
providing services using technological opportunities such as computers and the
internet. Offering both sales and after-sales services is essential for a successful
business.

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1.3.11 Limitations of Organisational Behaviour

There are certain limitations of organisational behaviour and it is a topic that can be discussed
in organisations regarding behaviour, with cognitive, behaviouristic, and social cognitive
frameworks being the primary focus. Cognitive aspects, such as perception, attitude, emotion,
and values, can put individuals in a difficult position when making decisions, leading to a
reduction in productivity. The observation behaviour model, proposed by Ivan Pavlov and
John B. Watson's experiments, is a theoretical approach to understanding human behaviour at
work. It is based on intangible mental analysis and is known as the "Stimulus-Response"
model, or "S-R" model. It suggests that behaviouristic aspects direct the individual or group
to work in accordance with the observed behaviours, whereas the cognitive approach only
provides conceptual aspects. Skinner developed the R-S Model, which suggests that an
individual's actions are shaped by the environmental consequences they face.
Skinner developed the R-S Model, which suggests that an individual's actions are shaped by
the environmental consequences they face. Recent thinkers and researchers have argued that
cognitive and behavioural approaches are mechanistic and deterministic respectively, and that
an interdisciplinary strategy was the best way to comprehend behaviour. They advocated for
the idea of "social learning" as an essential component of an individual's conduct, which is
based on the observation and emulating of others' actions. Social cognitive theory,
popularized by Bandura and other researchers, focuses on cognitive models that act as guides
for future actions. It takes into account fundamental human capabilities such as
"symbolising", "forethought", and "observational" to determine how strongly employees can
accomplish tasks in the future.
OB is the only approach that can be taken in a particular circumstance, as it is primarily
directed by the mental processes of the person and the social system. It cannot be
standardised and must be adapted whenever the circumstances call for it.
1.3.11 Future of Organisational Behaviour
It is a relatively new field of study, but has remained a part of organisations ever since they
began operating for business objectives. It is only recently that behavioural aspects of
organisations have been identified, taking cognitive aspects and the social systems that
organisations function within into consideration. OB is widely recognised as a significant
contributor to the achievements of those organisations. The Human Resources Management
(HRM) is playing an important role in the development of the organisation (OD). Technology
is gradually replacing the need for human labour in workplaces and organisations, and
organizations may implement highly advanced technologies such as information technology.

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However, the human factor alone should operate this technology, and behavioural aspects
remain present. Understanding behavioural aspects requires drawing on the expertise of a
wide range of academic fields, which allows for the creation and modification of methods
and procedures that are appropriate to the findings. Human factor is more effective in
organisations that are not technically oriented, and the introduction of new technologies
inevitably results in shifts in the patterns of behaviour associated with the human factor and
its aspects are timeless.

ACTIVITY
Organise a class seminar on the topic, “Importance of management in
organisational Behaviour.” Prepare an assignment on the same topic and submit it
with the class teacher.

CASE STUDY
Organisational Behaviour: A Study of Coca Cola
Introduction
The Coca-Cola Company is the largest beverage company in the world and produces and
markets the softest drinks. Its success is based on five pillars: a well-known brand, high-
quality products, effective marketing, wide distribution, and cutting-edge innovation. It
has a flexible organisational structure that emphasises product, marketing, financial
distribution, and fosters teamwork. It also has a corporate culture that outlines the
standards and principles the organisation upholds in its interactions with both internal and
external subordinates. The company offers a variety of channels for communication, such
as departmental team meetings, leadership teams, consultative groups, and surveys. Open,
honest communication is essential for preserving culture.
Process of Organisation Decision Making
The board members of the Coca-Cola Company are responsible for safeguarding their
interests and ensuring the company's success. They act as the company's ultimate business
decision-making body, and senior officers are under their supervision. When making
decisions, they must use their absolute judgement and act in the company's and
shareholders' best interests.

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Conclusion
The Coca-Cola Company has an organised structure that encourages employee
involvement in decision-making and encourages creativity when presenting
recommendations. It operates on a decentralised model with rotating directors and an
"open door" strategy to encourage employees to advise and consider more options for
solutions.
Source:
https://www.academia.edu/8516165/Organisational_Behaviour_A_case_study_of_Co
ca_Cola_Company

In-Text Questions
8. Organizational behaviour is the study of the behaviour on individuals in:
a) Isolation
b) Groups
c) As members
d) All of the Above
9. Which of the following are the essential features of organizational
behaviour?
a) Independent
b) Multidisciplinary
c) Focused
d) All of the Above
10. The authoritarian model of organizational behaviour results in which of the
following?
a) Poor Performance
b) Mediocre Performance
c) High Level Performance
d) Extra Ordinary Performance

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1.4 SUMMARY

Individuals, groups, and organisations are all the subject of study in the field of organisational
behaviour. Individual differences in traits like personality, perception, learning, attitude,
family background, education, motivation, job satisfaction, performance evaluation,
leadership ability, values, and ethics all play a role in the study of organisational behaviour.
Personal and team culture, as well as organisational factors, can all have an impact on group
behaviour. Understanding how individuals respond in various settings calls for knowledge
from numerous disciplines such as psychology, sociology, social psychology, politics, and
anthropology.

1.5 GLOSSARY

• Bureaucratic theory: It emphasizes the importance of established lines of authority

and subordinates should do as they are told without asking questions.
• Classical theory: It assumes that every complex notion has a classical analysis,
which specifies the necessary and sufficient conditions for its existence.
• Neo-classical theory: According to this a company's level of investment should
depend on the value it places on its marginal Tobin's q, which measures the
attractiveness of potential investment opportunities.

1.6 ANSWERS TO IN-TEXT QUESTIONS

1. (d), All of the Above 6. (d), Technical, Conceptual and

2. (d), None (a) and (b) Interpersonal

3. (a), Henry Fayol 7. (d), All of the Above

4. (b) Elton Mayo 8. (d), All of the Above

5. (a), Planning, Organising, Staffing, 9. (d), All of the Above

Directing and Controlling 10. (a), Poor Performance

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1.7 SELF-ASSESMENT QUESTIONS

1. What do you mean by management? Discuss its nature and scope.

2. Describe the process of evolution of management concepts and theories in your own
words.
3. What are the basic functions of management? Discuss with the help of suitable
example.
4. What skills have been needed for an individual to become a good manager? Describe
5. What do you understand by organizational behaviour? Discuss its nature, scope and
characteristics.
6. Describe the different models of organisational behaviour.
7. What are the basic goals of organisational behaviour? Why as a manager you have to
consider these goals? Discuss.
8. Describe the factors affecting organisational behaviour?
9. What techniques have been used by the management for managing the organisational
behaviour?
10. Describe the opportunities, challenges and limitations of organisational behaviour.

1.8 REFERENCES

• Aswathappa, K. (2014). Organizational Behavior. Himalaya Publishing House. Pp. 1-

101.
• Aswathappa, K. (2016). Organizational Behavior. Himalaya Publishing House. Pp. 1-
88.
• Prasad, L. M. (2011). Organization Behavior. Sultan Chand & Sons. Pp. 32-43.

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LESSON 2
THEORIES OF ORGANIZATION
Ms. Kushboo Garg
Dr. Virender Kaushal

STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.2.1 Importance of Organization Theory
2.2.2 Framework of Analysis
2.3 Classification of Organizational Theories
2.3.1 Classical Organizational Theories
2.3.2 Appraisal of Scientific Management
2.3.3 Administrative Management Theories
2.3.4 Criticism of Management Process or Functional Approach
2.3.5 Difference between Scientific Management and Administrative Management
2.4 Bureaucracy
2.4.1 Characteristics of Bureaucracy
2.4.2 Appraisal of Bureaucracy
2.5 Appraisal of Classical Theory
2.6 Summary
2.7 Glossary
2.8 Answers to In-Text Questions
2.9 Self-Assessment Questions
2.10 References
2.11 Suggested Readings

2.1 LEARNING OBJECTIVES

After studying this chapter student should be able to understand the: -

• Meaning, importance, classification of organizational theories.

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• The meaning, appraisal of scientific management.

• The difference between scientific management and administrative management.
• The meaning, characteristics and appraisal of bureaucracy.
• The appraisal of classical theory.

2.2 INTRODUCTION

According to Joe Kelly, “Organisation theory is a set of interrelated concepts, definitions and
propositions that present a systematic view of behaviour of individuals, groups and subgroups
interacting in some relatively patterned sequence of activity, the intent of which is goal-
directed.”
There is a considerable body of knowledge and literature called organizational theories
developed over years reflecting what goes on in organizations. Organizational theories are a
set of propositions which seek to explain how individuals and groups behave in different
organizational structures and environment.
A central part of the study of organisation and management is the development of
management thinking and what might be termed management theory. The application of
theory brings about change in actual behaviour. Managers reading the work of leading writers
on the subject might see in their ideas and conclusions a message about how they should
behave. This will influence their attitudes towards management practice.
2.2.1 Importance of Organizational Theory
The study of organizational theory is important for the following reasons:
• It helps to view the interrelationships between the development of theory, behaviour
in organizations and management practice.
• An understanding of the development of management thinking helps in understanding
principles underlying the process of management.
• Knowledge of the history helps in understanding the nature of management and
organizational behaviour and reasons for the attention given to main topic areas.
• Many of the earlier ideas are of continuing importance to the manager and later ideas
on management tend to incorporate earlier ideas and conclusions.
• Management theories are interpretive and evolve in line with changes in the
organizational environment.

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As McGregor puts it:

Every managerial act rest on assumptions, generalizations, and hypotheses – that is to say,
on theory. Our assumptions are frequently implicit, sometimes quite unconscious, often
conflicting; nevertheless, they determine our predictions that if we do a, b will occur. Theory
and practice are inseparable.
Miner makes the point that the more that is known about organizations and their methods of
operation, the better the chances of dealing effectively with them. Understanding may be
more advanced than prediction, but both provide the opportunity to influence or to manage
the future. Theory provides a sound basis for action. However, if action is to be effective, the
theory must be adequate and appropriate to the task and to improved organizational
performance. It must be a ‘good’ theory.
However, the systematic development of management thinking is viewed, generally, as
dating from the end of the nineteenth century with the emergence of large industrial
organizations and the ensuing problems associated with their structure and management.6 In
order to help identify main trends in the development of organizational behaviour and
management theory, it is usual to categorize the work of writers into various ‘approaches’,
based on their views of organizations, their structure and management. Although a rather
simplistic process, it does provide a framework in which to help direct study and focus
attention on the progression of ideas concerned with improving organizational performance.
2.2.2 Framework of Analysis
There are, however, many ways of categorizing these various approaches. For example,
Skipton attempts a classification of 11 main schools of management theory. Whatever form of
categorization is adopted, it is possible to identify a number of other approaches, or at least
sub-divisions of approaches, and cross-grouping among the various approaches. The choice
of a particular categorization is therefore largely at the discretion of the observer.
We here will be describing following four approaches in detail:
a) Classical including scientific management, administrative management and
bureaucracy
b) Human relations including neo-human relations
c) Systems approach
d) Contingency approach
Attention is also drawn to other approaches, including: Decision-making; Social action and
post-modernism.

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2.3 CLASSIFICATION OF ORGANIZATIONAL THEORIES

The important organizational theories are given as follows:

2.3.1 Classical Organizational Theories
The classical theory represents the traditionally accepted views about organizations. It is said
to be the oldest school of thought about organization and its management. These can be
traced historically to the 19th century prototype industrial and military organizations. Several
writers namely such as Taylor, Fayol, Weber, Luther, Gullick, Urwick, Mooney and Reiley
and many others have contributed to the classical thought. These writers have placed
emphasis on planning of the work, the technical requirements of the organization, principles
of management, and the assumption of rational and logical behavior. Organization here is
treated like a machine and its efficiency can be increased by making each individual working
in the organization efficient. Classical approach of management is the first studies of
management, which emphasized rationality and making organizations and workers as
efficient as possible. It offers a convenient framework for the education and training of future
managers. According to Batrol, the classical school is characterized by highly structured,
with emphasis on the formal organization with clearly defined functions and detailed rules,
autocratic leadership. The three greatest proponents of classical theory were Taylor, Fayol,
and Weber. Each identifies detailed principles and methods through which this kind of
organization could be achieved. The classical thought can be studied under three streams,
namely,
a) Scientific Management or Lower-Level Management analysis.
b) Administrative Management or Comprehensive analysis of management.
c) Bureaucratic Management.
All the three concentrated on the structure of organization for greater efficiency. All these
theorists were concerned with the structure of organizations and that is why their approach is
also called as “Structural Theory of Organisation.”
2.3.2 Scientific Management
F.W Taylor was the first person who insisted on the introduction of scientific methods in
management. He launched a new movement during the last decade of 19th century which is
known as “Scientific Management”. That is why Taylor is regarded as the Father of
Scientific Management. Although the techniques of scientific management could
conceivably be applied to management at all levels, the research, research applications and

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illustrations relate mostly to lower-level managers. Therefore, theory is also referred to

lower-level management analysis.
Scientific management consists primarily of the work of Frederick W. Taylor, Frank and
Lilian Gilbreth, and Henry L. Gantt. Frederick W Taylor (1856-1915) is commonly called the
father of scientific management because of the significance of his contribution. He started his
career as an apprentice in a small shop in Philadelphia (USA) in 1875.Taylor witnessed much
inefficiency. He sought to create a mental revolution among both workers and managers by
defining clear guidelines for improving production efficiency. He argued that the four
principles of management would result in prosperity for both workers and managers.
Scientific management means application of scientific methods to the problems of
management. He advocated scientific task setting based on time and motion study,
standardization of materials, tools and working conditions, scientific selection and training of
workers and so on. He laid emphasis on the following principles:
• Science. Not rule of thumb: Develop a science for each element of a man’s
work, which replaces the old ‘rule of thumb’ method.
• Harmony in group action, rather than discord.
• Maximum output in place of restricted output.
• Scientific selection, training and placement of the workers.
• Almost equal division of work and responsibility between workers and
managers.
The basic idea behind above stated principles was to change the mental attitudes of the
workers and the management towards each other. Taylor called it ‘Mental Revolution’ which
has three implications:
i. All out efforts for increase in production;
ii. Creation of the spirit of mutual trust and confidence;
iii. Including and developing the scientific attitude towards problems.
Taylor’s thinking was confined to organization at the shop level. However, he demonstrated
the possibility and significance of the scientific analysis of various aspects of management.
To put the philosophy of scientific management into practice, Taylor and his associates
suggested the following techniques:
i. Scientific task setting to determine a fair day’s work.
ii. Work study to simplify work and increase efficiency. It includes method
study, time study and motion study.

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iii. Standardization of materials, tools, equipment, costing system, etc.

iv. Scientific selection and training of workers.
v. Differential piece-wage plan to reward the highly efficient workers.
vi. Specialization in planning and operations through ‘functional foremanship’.
Foremen in the planning department include such as route clerk, instruction card
clerk, time and cost clerk and shop disciplinarian and those in operations department
include: gang boss, speed boss, repair boss and inspector.
vii. Elimination of wastes and rationalization of system of control.
Other than Taylor, Frank Gilbreth (1868-1924) and Lilian Gilbreth (1878-1972) were also
significant contributors to the scientific method. As a point of interest, the Gilbreths focused
on handicapped as well as normal workers. Like other contributors to the scientific method,
they subscribed to the idea of finding and using the best way to perform a job. The primary
investigative tools in the Gilbreths research were motion study, which consist of reducing
each job to the most basic movements possible. Motion analysis is used today primarily to
establish job performance standards.
Henry L. Gantt (1861-1919) too, was interested in increasing worker efficiency. Gantt
attributed unsatisfactory or ineffective tasks and piece rates (incentive pay for each product
piece an individual produces) primarily to the fact that these tasks rate were set according to
what had been done by workers in the past or on somebody’s opinion of what workers could
do.
Mooney and Reiley set out a number of common principles which relate to all types of
organizations. They place particular attention on:
• The principle of co-ordination – The need for people to act together with unity of
action, the exercise of authority and the need for discipline
• The scalar principle – the hierarchy of organisation, the grading of duties and the
process of delegation
• The functional principle – Specialisation and the distinction between different kinds
of duties.
Brech attempts to provide a practical approach to organisation structure based on tried
general principles as opposed to the concentration on specific cases or complex
generalizations of little value to the practicing manager. He sets out the various functions in
the organisation and the definition of formal organizational relationships. Although clearly a
strong supporter of the formal approach in some of his views such as, for example, on the

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principle of span of control, Brech is less definite than other classical writers and recognizes a
degree of flexibility according to the particular situation.
Brech does place great emphasis, however, on the need for written definition of
responsibilities and the value of job descriptions as an aid to effective organisation and
delegation. This work builds on the ideas of earlier writers, such as Urwick, and therefore
provides a comprehensive view of the classical approach to organisation and management.
2.3.3 Appraisal of Scientific Management
Taylor’s scientific management was associated with many benefits to the industry. The main
benefit of scientific management is “conservation and savings, making an adequate use of
everyone’s energy of any type that is expended”. Following are the benefits related to
scientific management:
• It had replaced the traditional rule of thumb by making the use of scientific techniques
for each element of man’s work.
• It involved proper selection and training of workers.
• It established a harmonious relationship between workers and management.
• Due to scientific management, equal division of responsibilities between workers and
management became possible.
• Standardization of tools, equipment, materials and work method.
• Detailed instructions and constant guidance of workers.
Apart from the above discussed long listed benefits Taylor’s theory of Scientific management
was highly criticized by the workers, managers, psychologists and even by the general public
on the following grounds:
• The use of word ‘Scientific’ before ‘Management’ was highly objected because what
it actually meant by scientific management is nothing but a scientific approach to
management.
• It was said that most of the principles of scientific management relates only to
production management and certain essential aspects of management i.e., finance,
marketing, personnel and accounting etc were ignored.
• The concept of Functional Foremanship that aims at bringing specialization in the
organization advocated by Taylor was also criticized because in actual practice it is
not feasible for one worker to carry out instructions from eight foreman.

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• This part of classical theory is truly production cantered as it concentrates too much
on technical aspects of work and undermines human factor in industry. It resulted in
monotony of job, loss of initiative, wage reductions, job insecurity, etc.
• Scientific management theory simply ignores the social and psychological needs of
workers. Here workers were treated as ‘rational economic beings. Human resources
were referred to as mere extensions of machines devoid of any feelings and emotions.
Only monetary incentives and exercise of authority were considered as ways to make
them work.
• Trade unionists criticized this theory and regarded it as the means to exploit labour
because the wages of workers were not increased in direct proportion to productivity
increase.
Many of the above-mentioned criticisms were later remedied by the other contributors to
scientific management like Henri L. Gantt, Frank Gilberth, Lilian Gilberth and Harrington
Emerson. It can be said that Taylor introduced scientific reasoning to the disciplines was
management.
2.3.4 Administrative Management Theory
The advocates of this school undertook management as a process involving certain functions
like planning, organizing, directing and controlling. This is why it is called as the ‘functional’
approach. Henri Fayol is regarded as the Father of general management. Organization here
is defined in terms of certain functions where fourteen principles of management have
universal applicability. Fayol, Gulick, Sheldon, Mooney and Reiley and Urwick have
contributed to this stream of thought and gave functions of managers and propounded the
principles of sound organization and management that are said above.
Fayol initiated by classifying all operations in business organizations under six categories:
i. Technical (production)
ii. Commercial (purchase and sale)
iii. Financial (funding and controlling capital)
iv. Security (protection)
v. Accounting (balance sheet; costing records)
vi. Administrative or managerial (planning, organizing, commanding, coordinating and
controlling).
According to Fayol managerial activity deserved more attention. In his view management is
the process composed of five functions: planning, organizing, commanding, coordinating and
controlling where:
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a. Planning means to study the future and arrange the plan of operations;
b. Organizing means to build up the material and human organization of the business;
c. Commanding means to make the staff do their work;
d. Coordinating means to unite all the activities;
e. Controlling means to see that everything is done as per the standards that have been
laid down and the instructions given.
Fayol insisted that in order to be effective, management should be based on fourteen
principles:
• Division of work: A firm’s work should be divided into specialized, simplified tasks.
Matching task demands with workforce skills and abilities will improve productivity. The
management of work should be separated from its performance.
• Authority and responsibility: Authority is the right to give orders, and responsibility is the
obligation to accept the consequences of using authority. No one should possess one without
having the other as well.
• Discipline: Discipline is performing a task with obedience and dedication. It can be expected
only when a firm’s managers and subordinates agree on the specific behaviors that
subordinates will perform.
• Unity of command: Each subordinate should receive orders from only one hierarchical
superior. The confusion created by having two or more superiors will undermine authority,
discipline, order, and stability.
• Unity of direction: Each group of activities directed toward the same objective should have
only one manager and only one plan.
• Subordination of individual interest to general interest: The interests of individuals
and the whole organization must be treated with equal respect. Neither should be allowed to
supersede the other.
• Remuneration of Personnel: the pay received by employees must be fair and satisfactory to
employees as well as organization. Pay should be distributed in proportion to personal
performance, but employees’ general welfare must not be threatened by unfair incentive-
payment schemes.

• Centralization: centralization is the retention of authority by managers, to be used

when managers desire greater control. Decentralization should be used if
subordinates’ opinion and experience are needed.

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• Scalar chain: The scalar chain is a hierarchical string extending from the uppermost
manager to the lowest subordinate. The line of authority follows this chain and is the proper
route for organizational communications
• Order: Order, or “everything in its place,” should be instilled whenever possible because it
reduces wasted materials and efforts. Jobs should be designed and staffed with order in mind.
• Equity: Equity means enforcing established rules with a sense of fair play, kindliness, and
justice. It should be guaranteed by management, as it increases members’ loyalty, devotion,
and satisfaction.

• Stability: Properly selected employees should be given the time needed to learn and adjust
to their jobs. The absence of such stability undermines organizational performance.
• Initiative: Staff members should be given the opportunity to think for themselves. This
approach improves the distribution of information and adds to the organization’s pool of
talent.

• Esprit de corps (union is strength): Managers should harmonize the interests of

members by resisting the urge to split up successful teams. They should rely on face-to-face
communication to detect and correct misunderstandings immediately.
Fayol thought that these principles would be useful to all types of group activity. However,
he did not consider these principles as immutable laws. The word principle is just used for
convenience. His theory of management completely revolutionized the thinking of managers
as throughout his treatise, there exists an understanding of the universality of the principles.
2.3.5 Criticism of Management Process or Functional Approach
Although the management process approach has made significant contribution to the
development of thought, their work still has been criticized on the following grounds:
• There is no single classification of managerial functions acceptable to all the
functional theorists.
• There exists lack of unanimity about the various terms such as management and
administration, commanding and directing, etc.
• The functionalists have considered their principles to be universal in nature but many
of the principles have failed to deliver the desired results in certain situations.
• In this theory theorists have not considered the external environment of business.
• Fayol has over- emphasized on the intellectual side of management. He thought that
management should be formally taught, but he did not elaborate the nature and
contents of management education.

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2.3.6 Difference between Scientific Management and Administrative Management

Taylor (Scientific Management) Fayol (Administrative Management)
More attention was paid to shop and factory More attention was paid on the functions of
management. managers and the management process as a
whole.
He worked from bottom to top level. His He worked from top to bottom level laying
centre of study was the operator at the shop stress on unity of command, unity of
level. direction, coordination, espirit de corps.
His approach was a kind of efficiency He had a wider perspective. His scheme was
movement. Thus, he had a narrow to evolve principles which could be applied
perspective. to administration in different spheres.
He gave stress on increasing productivity He showed regard for the human element by
rather than on human resources. advocating principles such as initiative,
stability of service and spirit of cooperation.
He is also known as Father of Scientific He is also known as Father of Administrative
Management. Management.

2.4 BUREUCRACY

Bureaucratic management is a stream of classical theory of management. It is “a formal

system of organization that is based on clearly defined hierarchical levels and roles in order
to maintain efficiency and effectiveness.” This theory was developed by Max Weber and is
widely used in the management of both public and private sector organizations. According to
the bureaucratic management approach, organizations are usually divided into hierarchies.
These divisions help in creating “strong lines of authority and control within the organization.
Max Weber (1864-1924) was the first of management theorists who developed a theory of
authority structures and relations based on an ideal type of organization he called a
bureaucracy – a form of organization characterized by division of labour, a clearly defined
hierarchy, detailed rules and regulations, and impersonal relationships. Bureaucratic
management depends upon administration devices. Max Weber presents the ideal
organization structure. According to Weber the bureaucratic management approach is based
on four principles -Hierarchical positions, rules of system, division of labour for
specialization, and impersonal relationship. Max Weber contributed to the organization
theory by introducing bureaucracy as an ideal form of organization. His primary contribution
includes his theory of authority structure and his description of organization based on the
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nature of authority relations within them. Weber’s ideas about organization design were
influenced by:
a. The amazing growth of industrial organizations,
b. His military experience,
c. Lack of trust in human judgment and emotions.
It was Weber’s belief that there are three types of legitimate authority:
a. Rational-legal authority: Obedience is owned to a legally established position or
rank within the hierarchy of a business, military unit, government, and so on.
b. Traditional authority: Here people obey a person because he belongs to certain class
or occupies a position traditionally recognized as possessing authority such as a royal
family.
c. Charismatic authority: Obedience here is based on the follower’s belief that is
person has some special power or appeal.
As per Weber’s theory of bureaucracy rational-legal authority is the most important type of
authority in the organization because in traditional authority, leaders are not chosen on the
basis of their capabilities and charismatic authority is too emotional and irrational.
2.4.1 Characteristics of Bureaucracy
The characteristics of bureaucracy are given as under:
• Division of work: In bureaucracy, the degree of division of work is very high at both
the operative and administrative levels which results in specialization of work.
• Hierarchy of Positions: In a bureaucratic organisation, there is a well-defined
hierarchy of authority wherein each lower position is under the control of a higher
one. Thus, there exists, Unity of command. Quantity of authority in such an
organization increases as one move towards the upper level in the organization.
• Rules and regulations: There exist a very well-defined set of rules and regulations in
a bureaucratic organization that are laid down by the top administrators that assures
standardized operations and decisions, protect the human resources and ensure
equality of treatment.
• Impersonal Conduct: in such organization there exists impersonality of relationships
among the organizational members. There is no room for emotions and sentiments in
bureaucratic structures and all decisions and rules and regulations framed are highly
impersonal.

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• Staffing: the employees are employed on contractual basis where in tenure of service
is based on the rules and regulations laid down by the top management. Each
employee gets a salary every month that is based on the job he handles and also on the
length of service.
• Technical Competence: Every selection in such organization is on the basis of
technical competence of bureaucrats. Promotions are also based on technical
qualifications and performance.
• Official Records: This organizational structure follows an efficient system of record
keeping. All the decisions and activities are formally recorded and preserved safely
for future reference. This is made possible by extensive filing system.
2.4.2 Appraisal of Bureaucracy
Bureaucracy is an administrative device that can help in achieving following advantages:
• There exists proper delegation of authority where every individual gets work on the
basis of their past performance as well as their capabilities.
• Well defined set of rules and regulations assure consistent actions.
• Employee’s behaviour is rational and predictable because decision taken are bound to
the rules and regulations and not affected by emotions.
• It leads to efficiency in the organization that result in specialization due to proper
division of work.
Just like any other theory there has been some criticisms by other theorists in regards to
bureaucracy. They are discussed as follow:
• The rules laid may be followed in paper and not in reality. The strict rules or
guidelines can instead assure inefficiency. The rules may be misunderstood or
misused by the person concerned that may result in red tapism and technicism.
• Individuals cannot take any initiative on their own because they are supposed to
follow the defined code of conduct and rules.
• Bureaucracy does not place any emphasis on individual goals.
• Such organization does not consider informal organizational and inter-personal
relations.
• In such organization innovation is highly discouraged because every member of the
organization is supposed to behave in certain manner.
• Since bureaucratic structures are very tall consisting of several layers of executives
communicating with top level can be difficult for the lower level.

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• Such organizational structure is not effective under dynamic environment because it

cannot undergo the changes that are demanded by the fast-changing environment.

2.5 APPRAISAL OF CLASSICAL THEORY

Classical approach made a significant contribution to the development of management
theories. This perspective had three primary thrusts. Scientific management focused on
employees within organizations and on ways to improve their productivity. Administrative
theory focused on the total organization and on way to make it more efficient. Bureaucratic
management focused on eliminating managerial inconsistencies that means it emphasized the
position rather than person and organization continues even when individual leave. Classical
approach highlighted the universal character of management principles. It made a clear
distinction between operative activities and managerial activities. It also identified the
application of scientific method to the problems of management and highlighted the need for
mutual cooperation between employers and employees.
The classical theory was highly criticized by the neo-classical and modern theorists. The neo-
classical writers attacked this theory on the basis of treatment given to human beings. Modern
theorists also criticized it on the basis of narrow view they have assumed for the organization
by ignoring the external environment of the organization. The classical writers have been
criticized generally for not taking sufficient account of personality factors and for creating an
organisation structure in which people can exercise only limited control over their work
environment. The idea of sets of principles to guide managerial action has also been subject
to much criticism. For example, Simon writes:
Organisational design is not unlike architectural design. It involves creating large, complex
systems having multiple goals. It is illusory to suppose that good designs can be created by
using the so-called principles of classical organisation theory.
Research studies have also expressed doubt about the effectiveness of these principles when
applied in practice. However, the classical approach prompted the start of a more systematic
view of management and attempted to provide some common principles applicable to all
organizations. These principles are still of relevance in that they offer a useful starting point
in attempting to analyse the effectiveness of the design of organisation structure. The
application of these principles must take full account of:
a) the particular situational variables of each individual organisation,
b) the psychological and social factors relating to members of the organisation.
The other objections against classical theory are:
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• Narrow view of Organisation: the classical writes have ignored human relations
aspect completely. They have stressed only on the formal organization, impersonal
decision making etc. informal groups, interplay of individual personalities, individual
goals are all neglected. It is said that the focus of this theory is on ‘organization without
people’.
• Assumption of closed system: An organisation is an open system that interacts with the
external environment. But in this theory organizational interaction with external
environment is not given any importance and is assumed that organization is a closed
system.
• Static view of organization: The classical theorists have viewed organization as static
while organization is a dynamic system. The organization can instantly respond to
changes in the environment and adapt accordingly. The environment influences the
organization and is influenced by it too. Thus, the best organizational pattern should
meet the external and internal requirements and these requirements are ever-changing
and dynamic.
• Unrealistic assumption about human behaviour: Here in this theory certain unreal
assumptions have been made by human beings. They assumed human beings as an inert
machine that perform tasks assigned to them and ignore their social, psychological and
motivational aspects of human behaviour. Human behaviour is the most unpredictable
and complex. This assumption of classical writers led the workers to frustration,
conflict and failure and thus made man subordinate to the organization.
• Economic reward as the main motivators: They have assumed that money and
monetary incentives are the only means to make people work in an organization
whereas this is highly unreal. Non- monetary incentives like job enrichment, praise,
respect, recognition, a pat on the back also plays an important role and can work as real
motivators.
• Lack of Empirical Verification: All the principles stated above were based on
personal judgments and experiences of the practitioners. The principles lack precision
and comprehensive framework for analysis. Moreover, it is also not clear whether these
principles are action recommendations or simply statements.
• Neglect of Decision-Making: Decision making plays a vital role in an organization but
classical theorists have paid little attention to decision making process.
• Hierarchical Structure: Classical theorists have attempted to define the ‘right’
organizational structure. But they did not explore why certain forms of organizational
structure are more effective than others.

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ACTIVITY
Being a management trainee how you relate the contribution of Fayol, Taylor and
Weber with the working environment of your organisation? Prepare an
assignment in your own words and submit the same with the course teacher.

In-Text Questions
1. Which among the following defines that, “Organisation theory is a set of
interrelated concepts, definitions and propositions that present a systematic
view of behaviour of individuals, groups and subgroups interacting in some
relatively patterned sequence of activity, the intent of which is goal-
directed.”
a) Joe Kelly b) F. W. Tayor
c) Max Weber d) Elton Mayo
2. Which of the following is correct for, “Action is to be effective; the theory
must be………………….”
a) Inadequate and appropriate
b) Adequate and Inappropriate
c) Adequate and Appropriate
d) Inadequate and Inappropriate
3. Who among the following belongs to classical school of thoughts about
organization and its management?
a) F. W. Taylor b) Henry Fayol
c) Max Weber d) All of these

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In-Text Questions
4. Who is known as, “Father of Scientific Management”?
a) F. W. Taylor b) Max Weber
c) Elton Mayo d) Henry Fayol
5. Which of the following term means, “Application of scientific methods to
the problems of management.”?
a) Scientific Management b) Bureaucracy
c) Administrative Management d) None of These
6. Who is known as, “Father of General Management”?
a) Henry Fayol b) F. W. Taylor
c) Elton Mayo d) Mooney and Reilley
7. Esprit de Corps means:
a) Division of Labour b) Rules and Regulations
c) Retrenchment Strategy d) Union is Strength
8. Who among the following enacted the essential 14 principles of
management?
a) F. W. Taylor b) Elton Mayo
c) Max Weber d) None of These
9. Which of the following personality introduced the concept of
Bureaucracy?
a) Max Weber b) F. W. Taylor
c) Elton Mayo d) Mooney
10. Human Behaviour is:
a) Predictable and Complex
b) Unpredictable and complex
c) Unpredictable and Simple
d) Predictable and Simple

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2.6 SUMMARY

Organizational theory is a set of interrelated concepts, definitions and propositions that

attempt to explain how individuals and groups behave in different organizational structures
and environments. It is a central part of the study of organisation and management and
involves the development of management thinking and management theory, which can bring
about change in actual behaviour. Managers reading the work of leading writers on the
subject can gain insight into how to behave and influence their attitudes towards management
practice.

2.7 GLOSSARY

• Bureaucracy: Organisations are seen as systems with hierarchical chains of

command and control, with subordinates blindly following orders from superiors.
• Classical theory: It defines the necessary conditions for an idea to be present in all
possible worlds.
• Functional approach: It considers how language enables us to communicate, inquiry,
attitude expression, entertainment, argumentation, need satisfaction, reflection,
concept formation, experience organisation, and meaning making.

2.8 ANSWERS TO IN-TEXT QUESTIONS

1. (a), Joe Kelly 6. (a), Henry Fayol

2. (c), Adequate and Appropriate 7. (d), Union is Strength
3. (d), All of These 8. (d), None of these
4. (a), F. W. Taylor 9. (a), Max Weber
5. (a), Scientific Management 10. (b), Unpredictable and Complex

2.9 SELF-ASSESMENT QUESTIONS

1. Discuss the importance of organizational theories in detail.

2. What do you mean by organisation? Discuss the concept of scientific management in
the growth and development of an organisation.

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3. Enumerate the role of scientific management in managing an organisation and also

describe the contribution of different writers od old school of thoughts.
4. What is the difference between scientific management and administrative
management? Discuss
5. Is it necessary to follow the concept of bureaucracy to manage an organisation? Give
your comments and describe the essential characteristics of this theory.
6. Critically evaluate the contribution of classical theory of management.

2.10 REFERENCES

• Kondalkar, V. G. (2007). Organizational Behaviour. New Age International (P)

Limited, Publishers. Pp. 15-41.
• OpenStax (2019). Organizational Behaviour. Rice University, Houston, Texas. Pp.
7/26

2.11 SUGGESTED READINGS

• Luthans, Fred. (2002). The need for and meaning of Positive Organizational
Behaviour. Journal of Organizational Behaviour. 23. 695-706
• Paul, R. Lawrence (1987). Historical Development in OB in Chapter 1, Handbook of
OB by Jaw W Lorsch (ed) Englewood Cliffs, NJ : Prentice-Hall, 1-10

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LESSON 3
NEO-CLASSICAL THEORY OF ORGANIZATION
Ms. Kushboo Garg
Dr. Virender Kaushal

STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.2.1 Hawthorne Experiments
3.2.2 Human Relations Movement
3.2.3 Features of Neo-Classical Theory
3.2.4 Factors Affecting Human Relations
3.2.5 Contribution of Human Relations Approach
3.2.6 Contributors of Neo-Human Relations Approach
3.2.7 Criticism of Human Relations Approach
3.2.8 Comparison among Classical and Neo-Classical Theory
3.2.9 Classical and Neo-Classical: Concluding Remarks
3.2.10 Behavioural Science Approach
3.2.11 Quantitative or Management Science Approach
3.3 Summary
3.4 Glossary
3.5 Answers to In-Text Questions
3.6 Self-Assessment Questions
3.7 References

3.1 LEARNING OBJECTIVES

After studying this chapter student should be able to understand the: -
• Meaning, features, and factors affecting human relations approach.

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• The contribution and contributors of Human Relations approach.

• The comparison among classical and neo-classical theory.
• The behavioural science approach and quantitative approach.
• The techniques for managing, opportunities, challenges, limitations and future of
orbitational behaviour.

3.2 INTRODUCTION

The classical writers Taylor, Fayol, Weber ignored the human relations aspect within an
organization. The neo-classical approach developed as a reaction to the classical principles
but it did not abandon them altogether.
Neo-classical approach is the extended form of classical approach of management. It builds
on Classical approach, but broadens and expands it; it does not totally divorce itself from its
predecessor. Rather, neoclassical theory adds a more human element to the science of
organization and management. The neo-classical writers have focused on human aspect of the
industry. They modified the classical theory by emphasizing on the fact that organization is a
social system and the human factor is the most important element within it. They conducted
some experiments known as Hawthorne Experiments and investigated informal groupings,
informal relationships, patterns of communication, patterns of informal leadership, etc. Elton
Mayo is generally recognized as the father of the Human Relations School. Other
contributors include: Roethlisberger, Dickson, Dewey, Lewin, Simon, Smithburg, Thompson
etc.
The human relations approach is concerned with the recognition of the importance of human
element in organizations. It revealed the importance of social and psychological factors in
determining workers’ productivity and satisfaction. According to them an organization
cannot achieve its objectives without the cooperation of people and such cooperation cannot
be secured or ordered. It has to be consciously achieved. Neo-classical approach concentrates
on people-oriented organization where both formal and informal organizations integrate.
Neo-classical approach is based on two main points:
• Organizational situation should be viewed in social as well as in economic and
technical terms.
• The social process of group behaviour can be understood in terms of clinical method
analogous to the doctor’s diagnosis of human organism.
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There are mainly three elements of neoclassical theory of management. They are Hawthorne
Experiment, Human Relation Movement, and Organizational Behaviour.
3.2.1 Hawthorne Experiments
The Hawthorne studies were a series of experiments conducted at the Western Electric
Company (USA) between 1927 and 1932 that provided new insights into individual and
group behaviour (Griffin R W, 2006). The research, originally sponsored by General Electric,
was conducted by Elton Mayo and his associates. The studies focused on behaviour in the
workplace. In one experiment involving this group of workers, for example, researchers
monitored how productivity changed as a result of changes in working conditions. The
Hawthorne studies and subsequent experiments lead scientists to the conclusion that the
human element is very important in the workplace.
The Hawthorne studies were among the earliest attempts to use scientific techniques to
examine human behaviour at work. A three-stage series of experiments assessed the effects of
varying physical conditions and management practices on workplace efficiency. The first
experiment examined the effects of workplace lighting on productivity; it produced the
unexpected findings that changes in lighting had little effect but that changes in social
conditions seemed to explain significant increases in group productivity. Additional
experiments led the researchers to conclude that social factors—in particular, workers’
desires to satisfy needs for companionship and support at work-explained the results observed
across all of the Hawthorne studies. The Hawthorne experiments may be classified into four
stages: Illumination experiments, Relay assembly test room experiments, Mass interviewing
program, Bank wiring observation room study.
Stage 1: Illumination Experiment: This was conducted to establish relationship between
output and illumination. The output tended to increase every time as the intensity of light was
improved. But the output again showed an upward trend when the illumination was brought
down gradually from the normal level. Thus, it was found that there is no consistent
relationship between output of workers and illumination in the factory. There were some
other factors which influenced the productivity of workers when the intensity of light was
increased or decreased.
Stage 2: Relay assembly Room Experiment: Here, a small homogeneous work group of
girls was constituted. Several new elements were introduced in the work atmosphere of this
group. These included: job simplification, shorter work hours, rest breaks, friendly
supervision, improved physical conditions, free social interactions among the group and
changed incentive pay. Productivity and morale were maintained even if improvements in

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working conditions were withdrawn. The researchers concluded that socio-psychological

factors such as feeling of being important, recognition, attention, participation, cohesive
work-group, and non-directive supervision held the key for higher productivity.
Stage 3: Mass Interview Program: Another significant phase of the experiments was the
interviewing program. The lighting experiment and the relay assembly test room drew
attention to the form of supervision as a contributory factor to the workers’ level of
production. In an attempt to find out more about the workers’ feelings towards their
supervisors and their general conditions of work, a large interviewing program was
introduced. More than 20,000 interviews were conducted before the work was ended because
of the depression. Initially, the interviewers approached their task with a set of prepared
questions, relating mainly to how the workers felt about their jobs. However, this method
produced only limited information. The workers regarded a number of the questions as
irrelevant; also, they wanted to talk about issues other than just supervision and immediate
working conditions.
As a result, the style of interviewing was changed to become more non-directive and open-
ended. There was no set list of questions and the workers were free to talk about any aspect
of their work. The interviewers set out to be friendly and sympathetic. They adopted an
impartial, non-judgemental approach and concentrated on listening. Using this approach, the
interviewers found out far more about the workers’ true feelings and attitudes. They gained
information not just about supervision and working conditions but also about the company
itself, management, work group relations and matters outside of work such as family life and
views on society in general. Many workers appeared to welcome the opportunity to have
someone to talk to about their feelings and problems and to be able to ‘let off steam’ in a
friendly atmosphere. The interviewing program was significant in giving an impetus to
present-day human resource management and the use of counselling interviews, and
highlighting the need for management to listen to workers’ feelings and problems. Being a
good listener is arguably even more important for managers in today’s work organizations
and it is a skill which needs to be encouraged and developed.
Stage 4: Bank Wiring Observation Room Experiment: This experiment was conducted on
a group of workers under conditions which were as close as possible to normal. This group
comprised of 14 workers. After the experiment, the production records of this group were
compared with their earlier production records. There were no significant changes in the two
because of the maintenance of ‘normal conditions’. However, existence of informal cliques in
the group and informal production norms were observed by the researchers. Major
observations were:
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Each individual was restricting output.

The group had its own unofficial standards of performance.
Individual output remained fairly constant over a period of time.
Department records were distorted due to differences between actual and reported
output.
Later re-analyses of the Hawthorne experiments not only found weaknesses in the studies’
methods and techniques, but also suggested that changes in incentive pay, tasks being per-
formed, rest periods, and working hours led to the productivity improvements attributed by
researchers to the effects of social factors. Nonetheless, the Hawthorne studies raised serious
questions about the efficiency-oriented focus of the scientific management and administrative
principles perspectives. In so doing, they stimulated debate about the importance of human
satisfaction and personal development at work. The human relations perspective of
management thought that grew out of this debate redirected attention away from improving
efficiency and toward increasing employee growth, development, and satisfaction.
3.2.2 Human Relations Movement
Taking a clue from the Hawthorne Experiments several theorists conducted research in the
field of interpersonal and social relations among the members of the organization. These
relations are known as human relations. A series of studies by Abraham H. Maslow, Douglas
Mc Gregor, Frederick Herzberg, Keth Davis, Rensis Likert and others lead to what is human
relation movement (Singh, 1983). Human relation movement argued that workers respond
primarily to the social context of the workplace, including social conditioning, group norms
and interpersonal dynamics.
Several psychologists and sociologists began the study of group dynamics, Chris Argyris,
Homans Kurt Lewin, R.L. Katz, Kahn and others developed the field of organizational
behavior. It involves the study of attitudes, behaviour and performance of individuals and
groups in organizational settings. This approach came to be known as behavioural approach.
It is extended and improved version of human relations movement. It is multidimensional and
interdisciplinary the application of knowledge drawn from behavioural sciences (Psychology,
sociology, anthropology, etc) to the management problems. Therefore, it is also called
behavioural science approach.
3.2.3 Features of Neo-classical Theory
The features of neo-classical theory are as follows:
• The organization is a social system composed of several interacting parts.

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• The behaviour of an individual is dominated by the informal group of which he is a

member.
• The social environment on the job affects the workers and is also affected by them.
• The informal organization also exists within the framework of formal organization
and is affected by the formal organization.
• Monetary incentives are not the only sole motivators for an individual. Non-monetary
incentives also play a vital role in motivating employees.
• In an organization it is ultimately cooperative attitude and not the mere command
which yields result.
• There is generally a conflict between organizational and individual goals. For smooth
functioning of organization, it is necessary to integrate individual goals with the
organizational goals and vice versa.
• Morale and productivity can go hand in hand in an organization.
• Management must aim at developing social and leadership skills in addition to
technical skills. It must take interest in welfare of organization.
• Both- way communication is necessary in an organization.
3.2.4 Factors affecting Human Relations
Human relations in an organization are determined by the individual, work group, leader and
work environment.
• Individual: Behaviour of an individual is affected by his feelings, sentiments, values
and attitudes. Motivation of an individual should give due consideration to their
economic, social and psychological needs. Thus, motivation is a complex process.
• Work-Group: The work group is the centre of locus of human relations approach. It
helps in determining the attitudes and performance of individual workers. The
Hawthorne studies have shown that informal groups have a major influence over the
behavioural pattern of workers.
• Work Environment: It has been recommended by several human relationist that a
positive work environment results in achievement of not only organizational goals but
also leads to employee satisfaction.
• Leader: Leadership plays a major role in an organization. A leader must ensure full
and effective utilization of all organizational resources to achieve organizational
goals. He must be patient, strong, empathetic and should be able to adapt to various
personalities and situations. As per Hawthorne studies, a leader can contribute
substantially in increasing productivity by providing a free, happy and pleasant work
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environment where bossism is totally absent and where all members are allowed to
contribute towards decision making.
3.2.5 Contribution of Human Relations Approach
The contribution of human relations approach is described as:
• Flat structure: Neo-classical theorists have suggested a flat structure against tall
structure (as given by classical theorists) where decision making involves everyone
and is quicker and much more effective. Here communication chain is shorter and
suitable to motivate employees as much more freedom is given to the employees over
here.
• Social System: the social system defines individual roles and establishes norms that
may differ from those of formal organization. The workers follow a social norm
determined by their co-workers, which defines the proper amount of work rather than
try to achieve the targets management thinks they can achieve, even though this
would have helped them to earn as much as they physically can.
• Informal Organisation: classical theorists did not consider informal groups. Neo-
classical theorists felt that both formal and informal organization must be studied to
understand the behaviour of organizations fully. Informal groups can be used by the
management for effective and speedy communication and for overcoming resistance
on the part of workers. Thus, both formal and informal organizations are inter-
dependent.
• Decentralization of authority and Decision- making: This has allowed initiative
and autonomy at the lower levels.
• Non- economic rewards: money is not assumed to be the sole motivator for human
beings. The social and psychological needs of the workers are also very strong. So
non-economic rewards like praise, status, inter-personal relations, etc play an
important role in motivating employees. Such rewards must be integrated with wages
and fringe benefits of the employees.
• Conflicts: Conflict may arise between organizational goals and group goals. Conflicts
will harm the interest of workers if they are not handled properly. Conflicts can be
resolved through improvement of human relations in the organization.
• Group Dynamics: A group determines norms of behaviour for the group members
and exercises a powerful influence on the attitudes and performance of individual
workers. The management should deal with workers as members of work groups
rather than individuals.

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3.2.6 Contributors of Neo-Human Relations Approach

Among the best-known contributors to the neo-human relations approach are Herzberg and
McGregor. Herzberg isolated two different sets of factors affecting motivation and
satisfaction at work. One set of factors comprises those which, if absent, cause
dissatisfaction. These are ‘hygiene’ or ‘maintenance’ factors which are concerned basically
with job environment. However, to motivate workers to give of their best, proper attention
must be given to a different set of factors, the ‘motivators or ‘growth’ factors. These are
concerned with job Content.
McGregor argued that the style of management adopted is a function of the manager’s
attitudes towards human nature and behaviour at work. He put forward two suppositions
called Theory X and Theory Y which are based on popular assumptions about work and
people. Other major contributors to the neo-human relations approach are:
Likert, whose work includes research into different systems of management;
McClelland, with ideas on achievement motivation and
Argyris, who considered the effect of the formal organisation on the individual and
psychological growth in the process of self-actualisation. Argyris major contributions include
his work on organizational learning and on effective leadership.
The neo-human relations approach has generated a large amount of writing and research not
only from original propounds, but also from others seeking to establish the validity, or
otherwise, of their ideas. This has led to continuing attention being given to such matters as
organisation structuring, group dynamics, job satisfaction, communication and participation,
leadership styles and motivation. It has also led to greater attention to the importance of
interpersonal interactions, the causes of conflict and recognition of ‘employee relations’
problems.
3.2.7 Criticism of Human Relation Approach
Neoclassical theory has made significant contribution to an understanding of human
behaviour at work and in organization. It has generated awareness of the overwhelming role
of human factor in industry. This approach has given new ideas and techniques for better
understanding of human behaviour. Contributors to this approach recognize an organization
as a social system subject to the sentiments and cultural patterns of the member of the
organization, group dynamics, leadership, motivation, participation, job environmental, etc
constitute the core of the neoclassical theory. This approach changed the view that employees

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are tools and furthered the belief that employees are valuable resources. It also laid the
foundation for later development in management theory.
The human relations approach has provided modifications to classical approach and has
considered the employees as humans that was missing in the classical theory. They
understood the need of two-way communication, informal groups, non-monetary incentives
and several other aspects that led to the betterment of employees in the organization. But still
this theory suffers from certain limitations. It was found incomplete, short-sighted and lack of
integration was found among many aspects of human relations studied by it. Some of those
objections are given below:
• Limited Applicability: The various structures of organization given by neo-classical
theorists are not universal. Their application is limited. There is no particular structure
which may serve the purpose of all organizations. The relationists also overlooked
some of the environmental constraints which managers cannot ignore and this lapse
makes the applicability of this theory limited.
• Lack of Scientific Validity: most of the conclusions of this approach were drawn
from Hawthorne studies. These conclusions were based on clinical insights rather than
on scientific evidence. The groups chosen for study were not representative in
character. The findings were based upon temporary groups that cannot be applied to
groups that have continuing relationship with one another.
• Unreal Assumptions: the assumption that says that there is a solution of every
problem which satisfies everyone in the organization is unreal. Often there are
conflicts of interest among various groups in the organisation that are structural and
not merely psychological.
• Negative View of Conflict between Organisational and Individual Goals: it views
conflict between the goals of the organization and those of individuals as destructive.
The positive aspects of conflicts such as overcoming weakness and generation of
innovative ideas are ignored.
• Over-emphasis on Group: This approach has over emphasized on group and group
decision-making. But in actual practice, groups may sometimes create problems for
management and collective decision making may not lead to a rationale consensus.
• Over-stretching of Human Relations: it is assumed here that satisfied workers are
more productive whereas this may not hold true always. This approach says that all
organizational problems are subject to solutions through human relations whereas this
might not hold true always.

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• Limited focus on work: this approach throughout has only talked about humans and
human relations in an organisation. It does not come out with new and better ways to
improve productivity in an organisation. It lacks adequate focus on work. It has over
emphasized the psychological aspects at the cost o9f the structural and technical
aspects.
• Over-concern with Happiness: the Hawthorne studies suggested that happy
employees will be productive employees. This equation between happiness and job
satisfaction is unfortunate as it represents a naïve and simplistic view of the nature of
man. Studies have shown a consistent relationship between happiness or morale and
productivity. It is quite possible to have a lot of happy but unproductive workers.
3.2.8 Comparison among Classical and Neoclassical theory:
Classical and neoclassical approach to management made outstanding contribution to the
development of management thought. Under classical approach, attention was focused on job
and machine. On the other hand, neoclassical approach to management emphasizes on
increasing production through an understanding of people. According to proponents of this
theory, if managers understand their people and adapt their organizations to them,
Organization success will usually follow. However, the classical theory stresses on task and
structure while the neoclassical theory emphasizes people aspect.
Basis Classical Approach Neo classical Approach
Focus Functions and economic demand Emotions and human
of workers qualities of workers
Structure Impersonal and mechanistic Social System
Application Autocratic management and strict Democratic process
rules
Emphasis Discipline and rationality Personal security and social
demand
Work goal of workers Maximum remuneration and Attainment of organisational
reward goals
Concept about men Economic being Social being
Relation Formal Informal
Nature Mechanistic Organistic
Content Scientific management, Hawthorne experiments,
administrative management and human relation movement
bureaucratic management and organisational behaviour.

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3.2.9 Classical and Neo-classical: Concluding Remarks

Classical and neoclassical approaches made a crucial role in the advancement of management
theories and practices. The adopted management approaches are important due to the facts
that determine the efficiency and congenial environment with which managerial activities are
performed. In this era of rapid economic development and industrial expansion of different
nations, classical and neoclassical theorists made an undeniable role by developing different
techniques of production and it enabled every nation to be involved in this global market.
Though classical theory is now treated to be outdated, it is important because it introduced
the concept of management as a subject for intellectual analysis and provided a basis of ideas
that have been developed by subsequent schools of management thought. Neoclassical
approach put overemphasis on human variables and symbolic rewards which may not be
appreciated by the recipient’s significant others”. It serves as the “backbone” to many current
management theories. So, it is clear that the field of management have some remarkable and
pertinent theories which are underpinned by pragmatic study evidence. This development
holds a rather brighter future for the study, research, and practice of management.
3.2.10 Behavioural Science Approach
Under behavioural science approach, the knowledge drawn from behavioural sciences,
namely, psychology, sociology and anthropology, is applied to explain and predict human
behaviour. It focuses on human behaviour in organisations and seeks to promote verifiable
propositions for scientific understanding of human behaviour in organisations. It lays
emphasis on the study of motivation, leadership, communication, group dynamics,
participative management, etc. it believes that it is difficult to understand the sociology of a
group separate from the psychology of the individual comprising it and the anthropology of
the culture within which it exists. Thus, the behavioural sciences are transactional; they are
concerned with all relevant aspects of human behaviour including the interactions among all
important factors.
Data is objectively collected and analysed by the social scientists to study various aspects of
human behaviour. The pioneers of this school reasoned that in as much as managing involves
getting things done with and thought people, the study of management must be centred
around people and their interpersonal relations.
3.2.11 Quantitative or Management Science Approach
The quantitative or mathematical approach uses pertinent scientific tools for providing a
quantitative basis for managerial decisions. The abiding belief of this approach is that
management problems can be expressed in terms of mathematical symbols and relationships.
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The basic approach is the construction of a model because it is through this device that the
problem is expressed in its basic relationships and in terms of selected objectives. The users
of such models are known as management scientists.
The technique commonly used for managerial decision-making include Linear Programming,
Critical Path Method (CPM), Program Evaluation Review Technique (PERT), Games
Theory, queuing Theory and Break-Even Analysis. The application of such techniques helps
in solving several problems of management such as inventory control, production control,
price determination, etc.

ACTIVITY
In the class discuss about the impact of Hawthorne experiment on the
performance of employees working in the tobacco industry and try to create
virtual working environment of the same industry while discussing about the
experiment.

In-Text Questions
1. Who among the following is known as the, Father of Human Relations
Approach”?
a) Elton Mayo b) F.W. Taylor
c) Henry Fayol d) Max Weber
2. Which approach is concerned with the recognition of the importance of
human elements in organisations?
a) Human Relations Approach b) Classical Approach
c) Scientific Approach d) Human Resource Approach
3. Which of the following term involves in the study of attitudes, behaviour and
performance of individuals and groups in organizational settings?
a) Individual Behaviour b) Organizational Behaviour
c) Human Behaviour c) Interpersonal Behaviour
4. Who among the following determine human relations in an organization?
a) Individual & Work group b) Leader
c) Work environment d) All of these

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In-Text Questions
5. Who among the following are the major contributor (s) of the Neo-Human
Relations Approach?
a) Herzberg & McGregor b) Fayol & Taylor
c) Weber & Mooney d) Taylor & Weber

3.3 SUMMARY

Neo-classical approach is a classical approach of management that emphasizes social and

psychological factors in determining worker productivity and satisfaction, and focuses on
people-oriented organizations. It is based on two main points: organizational situation should
be viewed in social and economic terms, and the social process of group behaviour should be
understood in terms of clinical method. Three elements of neoclassical theory of management
are Hawthorne Experiment, Human Relation Movement, and Organizational Behaviour.

3.4 GLOSSARY

• Hawthorne Experiment: study found that when lighting improved, productivity

increased, but also decreased when lighting decreased.
• Neo-Human Relations Approach: Abraham Maslow and Frederick Herzberg founded
Neo-Human Relations School in the 1950s, which focused on employee emotional
needs and proposed a theory of five levels of needs that needed to be met in work.

3.5 ANSWERS TO IN-TEXT QUESTIONS

1. (a), Elton Mayo 4. (d), All of these

2. (a), Human Relations Approach 5. (a), Herzberg & McGregor
3. (b), Organizational Behaviour

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3.6 SELF-ASSESMENT QUESTIONS

1. Discuss the concept of human relations approach.

2. Elaborate the contribution of Elton Mayo in Human relations approach.
3. Describe the factors affecting human behaviour. Elaborate your answer with the help
of example.
4. What do you understand by neo-human relations approach? Discuss its significance
and contribution in the field of organizational behaviour.
5. Critically evaluate the contribution of human relations approach in OB.

3.7 REFERENCES

• Hassard, J. (2012). Rethinking the Hawthorne Studies: The Western Electric research
in its social, political, and historical context. Human Relations. 65 (11): 1431-1461.
• Luthans, F. (2011). Organizational Behaviour-An Evidence Based Approach. Tata
McGraw Hill. Pp. 5-30.
• Prasad, L. M. (2006). Organisation Behaviour. Sultan Chand & Sons. Pp. 44-64.

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LESSON 4
MODERN ORGANIZATION THEORY
Ms. Kushboo Garg
Dr. Virender Kaushal

STRUCTURE
4.1 Learning Objectives
4.2 Introduction
4.2.1 Systems Approach
4.2.2 Features of Organizational System
4.2.3 Open System Concept
4.2.4 Long-Wall-Coal Study
4.2.5 The Socio-Technical System
4.2.6 Technology Determinism
4.2.7 Scott Model: Analysis of organization System
4.2.8 Parts of the System
4.2.9 Cybernetics
4.2.10 Goals of the System
4.2.11 Features of the System Approach
4.2.12 Limitations of System Approach
4.3 Contingency Approach
4.3.1 Variables Constituted by Contingency Theory-Building Process
4.3.2 Stable Mechanistic Organizational Design
4.3.4 Contingency Approaches in Organizational Behaviour
4.3.5 Appraisal of Contingency Approach
4.3.6 Merits of Contingency Approach
4.3.7 Demerits of Contingency Approach
4.3.8 Difference between Contingency and Systems Approach
4.3.9 Other Organizational Approaches
4.4 Positive Organizational Behaviour
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4.4.1 Techniques for Creating Positive organizational Behaviour

4.4.2 Suggestions to Create Positive Organizational Behaviour
4.5 Summary
4.6 Glossary
4.7 Answers to In-Text Questions
4.8 Self-Assessment Questions
4.9 References
4.10 Suggested Readings

4.1 LEARNING OBJECTIVES

After studying this chapter student should be able to understand the: -
• Meaning of system approach, features of organizational system.
• The open system concept, the socio-technical system, Scott model, cybernetics.
• The parts, goals, features and limitations of system approach.
• The meaning, variables, appraisal, merits and demerits of contingency approach.
• The meaning, techniques and questions about positive organizational behaviour.

4.2 INTRODUCTION

The modern management thinkers define organisation as a system and also consider the
impact of environment on the effectiveness of the organisation. This theory treats
organisation as a system of mutually dependent variables. This theory has been developed on
a strong conceptual analytical base and is based on empirical research data. The modern
organisation theory has been evolved on the pattern of General System Theory (GST). The
General System Theory studies the various parts of a system and interaction between them in
an integrated manner an also considers the interaction of the system with the external
environment. The modern organisation theory uses the concepts of GST and facilitates the
analysis of any organisation.
4.2.1 Systems Approach
The classical theories of organization were, in the first place, interested in the material and
financial aspects of the organization, and the human relations and human resources theories
in the psychological aspects of the organization.

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The system method of treatment is relating to the investigating into the component part of the
organizational systems in the multidirectional connections between the causes and effects in
the organization. It is conceived of the feed forward and feedback information. With a system
approach we deal with the organization as a system whole consisting of the mutually
connected parts. The system approach means dealing with these parts in their mutual
connection as a part of the whole. A no system approach in the investigating into the
organization, however, means dealing with the parts of a whole, irrespective of the mutual
connection. It is just for this reason that the no system dealing with the organization is only a
partial one and cannot explain the organizational phenomena in their totality. The totality of
the organization and of its phenomena can be explained only by the system approach.
According to Kats and Rosenzweig, “A system is an organized, unitary whole composed of
two or more independent parts, components or sub-systems and delineated by identifiable
boundaries from its environmental supra system.” It is simply an assemblage or combination
of things or parts, forming a complex whole.
4.2.2 Features of Organizational system
The features of organizational system are as:
i. A system is goal-oriented.
ii. A system consists of several sub-systems that are interdependent and inter-related.
iii. A system is engaged in processing or transformation of inputs into outputs.
iv. An organization is an open and dynamic system. It has continuous interaction with the
environment. It is sensitive to its environment such as government policies,
competition in the market, change in tastes and preferences of people, etc.
v. A system has a boundary which separates it from other systems.
4.2.3 Open system Concept
With the emergence in the 1960s of the open systems perspective, human relations concerns
related to employee satisfaction and development broadened to include a focus on
organizational growth and survival. According to the open systems perspective, every
organization is a system unified structure of interrelated subsystems and it is open subject to
the influence of the surrounding environment. Together, these two ideas form the essence of
the open systems approach, which states that organizations whose subsystems can cope with
the surrounding environment can continue to do business, whereas organizations whose
subsystems cannot cope will not survive. The systems approach views the organization as a

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whole and involves the study of the organization in terms of the relationship between
technical and social variables within the system. Changes in one part, technical or social, will
affect other parts and thus the whole system.
4.2.4 Long-wall coal-mining study
The idea of socio-technical systems arose from the work of Trist and others, of the Tavistock
Institute of Human Relations, in their study of the effects of changing technology in the coal-
mining industry in the 1940s.
The increasing use of mechanization and the introduction of coal-cutters and mechanical
conveyors enabled coal to be extracted on a ‘long-wall’ method. Shift working was
introduced, with each shift specializing in one stage of the operation – preparation, cutting or
loading. However, the new method meant a change in the previous system of working where
a small, self-selecting group of miners worked together, as an independent team, on one part
of the coalface – the ‘single place’ or ‘short-wall’ method. Technological change had brought
about changes in the social groupings of the miners. It disrupted the integration of small
groups and the psychological and sociological properties of the old method of working. There
was a lack of co-operation between different shifts and within each shift, an increase in
absenteeism and signs of greater social stress. The ‘long-wall’ method was socially disruptive
and did not prove as economically efficient as it could have been with the new technology.
The researchers saw the need for a socio-technical approach in which an appropriate social
system could be developed in keeping with the new technical system. The result was the
‘composite long-wall’ method with more responsibility to the team as a whole and shifts
carrying out composite tasks, the reintroduction of multi-skilled roles and a reduction in
specialization. The composite method was psychologically and socially more rewarding and
economically more efficient than the ‘long-wall’ method.
4.2.5 The socio-technical system
The concept of the organisation as a ‘socio-technical’ system directs attention to the
transformation or conversion process itself, to the series of activities through which the
organisation attempts to achieve its objectives. The socio-technical system is concerned with
the interactions between the psychological and social factors and the needs and demands of
the human part of the organisation, and its structural and technological requirements.
Recognition of the socio-technical approach is of particular importance today. People must be
considered as at least an equal priority along with investment in technology. For example,
Lane et al. point out that major technological change has brought about dramatic changes in

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worker behaviour and requirements. It is people who unlock the benefits and opportunities of
information communication technology.
4.2.6 Technology determinism
The concept of socio-technical systems provides a link between the systems approach and a
sub-division, sometimes adopted – the technology approach. Writers under the technology
heading attempt to restrict generalizations about organizations and management and
emphasize the effects of varying technologies on organisation structure, work groups and
individual performance and job satisfaction. This is in contrast with the socio-technical
approach which did not regard technology, per se, as a determinant of behaviour. Under the
heading of the technology approach could be included the work of such writers as Walker
and Guest (effects of the assembly line production method on employee behaviour);
Sayles (relationship between technology and the nature of work groups); and Blauner
(problems of ‘alienation’ in relation to different work technologies).
In one of the seminal works on the open systems perspective, Daniel Katz and Robert Kahn
identified the process shown in Figure as essential to organizational growth and survival.
This process consists of the following sequence of events:
a. Every organization import inputs, such as raw materials, production equipment,
human resources, and technical know-how, from the surrounding environment. For
instance, Shell Oil Company hires employees and, from sources around the world,
acquires unrefined oil, refinery equipment, and knowledge about how to refine
petroleum products.
b. Some of the inputs are used to transform other inputs during a process of throughput.
At Shell, employees use refinery equipment and their own know-how to transform
unrefined oil into petroleum products such as gasoline, kerosene, and diesel fuel.
c. The transformed resources are exported as outputs—saleable goods or services—to
the environment. Petroleum products from Shell’s refineries are loaded into tankers
and transported to service stations throughout North America.
d. Outputs are exchanged for new inputs, and the cycle repeats. Shell sells its products
and uses the resulting revenues to pay its employees and purchase additional oil,
equipment, and know-how.

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Fig. The Open System Perspective

Source: Katz and Kahn, 1966

According to Katz and Kahn, organizations will continue to grow and survive only as long as
they import more material and energy from the environment than they expend in producing
the outputs exported back to the environment. Information inputs that signal how the
environment and organization are functioning can help determine whether the organization
will continue to survive. Negative feedback indicates a potential for failure and the need to
change the way things are being done.
An open system obtains inputs such as raw materials, labour, capital, technology and
information from the environment. Operations are performed upon the inputs and combined
with the managerial process to produce desirable outputs which are supplied back to the
environment i.e., customers. Through a feedback process, the environment’s evaluation of the
output becomes part of the inputs for further organizational activity. If the environment is
satisfied with the output, business operations continue. If it is not, changes are initiated within
the business system so that the requirements of the customers are fully met. This is how an
open system responds to the forces of change in the environment.
After noting that every organization’s environment is itself composed of a collection of more
or less interconnected organizations supplier companies, competitors, and customer firms.
Emery and Trist proposed the existence of four basic kinds of environments.
a. The first kind, which they labelled the placid random environment, is loosely
interconnected and relatively unchanging. Organizations in such environments
operate independently of one another, and one firm’s decision to change the way it
does business has little effect on its rivals. These organizations are usually small for
example, landscape maintenance companies, construction firms, and industrial job

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shops and can usually ignore each other and still stay in business by catering to local
customers.
b. Placid clustered environments are more tightly interconnected. Under these
conditions, firms are grouped together into stable industries. Environments of this sort
require organizations to cope with the actions of a market fairly constant group of
suppliers, competitors, and customers. As a result, companies in placid clustered
environments develop strategic moves and countermoves that correspond to
competitors’ actions. Grocery stores in the same geographic region often do business
in this type of environment, using coupon discounts, in-store specials, and similar
promotions to lure customers away from other stores.
c. Disturbed reactive environments are as tightly interconnected as placid clustered
environments, but are considerably less stable. Changes that occur in the environment
itself have forceful effects on every organization. For instance, new competitors from
overseas, by increasing automation and changing consumer tastes in the U.S.
automobile market, revolutionized the domestic auto industry in the 1970s and 1980s.
In response, GM and Ford had to change their way of doing business, Chrysler
ultimately merged with Germany’s Daimler-Benz to become Daimler-Chrysler, and a
fourth long-time manufacturer, American Motors, ceased to exist. In such
circumstances, organizations must respond not only to competitors’ actions but also to
changes in the environment itself. Owing to their unpredictable ability, it is difficult to
plan how to respond to these changes.
d. Turbulent fields are extremely complex and dynamic environments. Companies
operate in multiple markets. Public and governmental actions can alter the nature of
an industry virtually overnight. Technologies advance at lightning speed. The amount
of information needed to stay abreast of industrial trends is overwhelming. As a
result, it is virtually impossible for organizations to do business in any consistent way.
Instead, they must remain flexible in the face of such uncertainty, staying poised to
adapt themselves to whatever circumstances unfold. Today’s computer and
communications industries exemplify such sort of environment. Technological change
and corporate mergers are creating and destroying entire categories of companies at
ever-increasing rates.
Emery and Trist suggested that organizations must respond in different ways to different
environmental conditions. Tighter environmental interconnections require greater awareness
about environmental conditions, and more sweeping environmental change necessitates
greater flexibility and adaptability. Other open systems theorists, including Paul Lawrence,
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Robert Duncan, and Jay Galbraith, have similarly stressed the need for organizations to adjust
to their environments.
4.2.7 Scott Model: Analysis of Organisation System
According to W.G. Scott, the systems theory asks a range of interrelated questions which are
not seriously considered by the classical and neo-classical theories. The important questions
are:
• What are the strategic parts of the system?
• What is the nature of their mutual dependency?
• What are the main processes in the system which link the parts together, and facilitate
their adjustment to each other?
• What are the goals sought by the system?
4.2.8 Parts of the System
Scott has discussed five parts of the system:
• Individual: Individual and his personality structure (motives and attitudes) is a basic
part of the system.
• Formal Organisation: it is interrelated pattern of jobs which make up the structure of
a system. There is generally an incongruency between the goals of the organisation
and those of organisational members. Modern organisational theory has given
considerable attention to this aspect of inter-action of organisational and individual
demands.
• Informal Organisation: it comes into existence along with the formal organisation
automatically. Individuals have expectations from the informal organisation and the
informal organisation also demands same type of behaviour from the individuals.
Both these sets of expectations interact resulting in modifying the behaviour of one
another.
• Fusion Process: it is a force which acts to weld divergent elements together for the
preservation of organisational integrity. It may be noted that a part of modern
organisational theory rests on research findings in social psychology relative to
reciprocal patterns of behaviour stemming from role demands generated by both
formal and informal organisation, role perceptions peculiar to the individual.

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• Physical Setting: the physical setting in which a job is performed is also very
important. Interactions present in the complex man-machine system need to be
carefully studied. The human engineer cannot approach this problem in a purely
technical fashion. He has to take the help of social theorists like psychologists and
sociologists.
The various parts of a system are interwoven or interlinked. The interconnection is achieved
by three linking processes, namely, communication, balance and decision-making.
• Communication: communication is viewed as the method by which action is evoked
from the parts of the system. Communication acts as stimuli resulting into action, and
as a control and coordination mechanism linking the decision centres in the system in
a synchronized pattern.
• Balance: Balance refers to an equilibrating mechanism whereby the various parts of
the system are maintained in a harmoniously structured relationship to one another.
Balance appears in two varieties: quasi-automatic and innovative. Both acts to ensure
system integrity in the face of changing environment. By quasi-automatic balance we
mean that the system has built in propensities to maintain steady states. If human
organisations are open, self-maintaining systems, then control and regulatory
processes are necessary. Adaptation by a system is generally automatic when changes
are minor in nature. The need for innovative balancing efforts arises when adaptation
to a change is outside the scope of the existing programs designed for the purpose of
keeping the system in balance. New programs have to be found out in order to
maintain the integrity of the system.
• Decision-Making: Decisions refers to the problem-solving activity. Two types of
decisions are important, viz., decisions to produce and decisions to participate in the
system. Decisions to produce are largely a result of interaction between individual
attitudes and the demands of organisation. Motivation analysis has become central to
studying the nature and results of the interactions. Individual decision to participate in
the system reflect on such issues as the relationship between organisational rewards
versus the demands made by the organisation. Whatever may be the kind of decision,
decisions are internal variables in an organisation dependent upon jobs, individual
expectations and motivations, and or5ganisational structure.
4.2.9 Cybernetics
It is a crucial aspect of the systems approach as it is related to both communication and
control. It integrates the linking processes discussed above and creates self-regulatory
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systems of flow of information. Cybernetics makes a deep and comprehensive study of

controlled and controllable systems to determine principles governing the organisation and
structure of control systems. It studies the common properties of different control systems
and also the properties which are quite independent of their material basis.
The control process generally involves the transmission, accumulation, storage and
processing of information about the controlled object, process, environment conditions, work
program, etc. the nature of information carried varies widely from system to system. Another
characteristic feature of the whole diversity of such systems is the feedback. Through it they
receive information on the effects or results of their control operations.
The purpose of cybernetics is to maintain system stability in face of change. Cybernetics
can’t be studied without considering communication networks, information flow and some
kind of balancing processes aimed at preserving the integrity of the system. A thorough
knowledge of cybernetics can be used to synthesise the process of communication and
balance. It is quite common that the organisation using sophisticated management
information systems adopt cybernetics models as an integral part of their mode of operation.
4.2.10 Goals of the System
To the system analysis, goals of an organisation are growth, stability and interaction. The last
goal refers to systems which provide a medium for association of members with others.
These goals seem to apply to different forms of organisation at varying levels of complexity.
4.2.11 Features of Systems Approach
The features of system approach are given as under:
• Open System view of Organisation: As per classical theory organisation was a
closed system. But modern theory considers organisation as an open system which
has continuous interaction with the environment. It gets various resources from the
environment and transforms them into outputs desired by the environment. Due
weight age has to be given to the environmental factors affecting the management of
an organisation.
• Adaptive to dynamic environment: An organisation operates in an environment
which is dynamic in nature so a system that is adaptive to such dynamism is needed.
Management tends to bring changes in the sub-systems of the organisation to cope up
with the challenges of environmental forces.

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• Whole Organisation: This approach looks at the organisation as a whole that is

greater than the sum of its parts. The emphasis is given on the summation of various
sub-systems of the organisation to ensure overall effectiveness of the system.
• Multi-Level Analysis: Systems approach has both macro and micro aspects. At the
macro level, it can be applied to the whole industry or the national economic system.
At the micro level, it can be applied to an organisation and even to a sub-system of the
organisation.
• Multi-variety analysis: It takes into account many variables simultaneously. This
means that there is no single variable responsible for something to happen rather it
may be the result of many variables that may be interrelated or interdependent. This
interrelatedness and interdependence make managing quite a complex process.
• Synergy: the output of a system is always more than the combined output of its parts.
This is called the Law of synergy. The parts of a system become more productive
when they interact with each other than when they act in isolation.
• Multi-disciplinary: Modern theory of Management is enriched by contributions
from various disciplines like psychology, sociology, economics, anthropology,
mathematics, operations, research and so on.
• Probabilistic: modern organisation theory is probabilistic rather than deterministic. It
does not predict the outcome of any action because of a high degree of uncertainty in
the environment. Being probabilistic, it only points out the probability and never the
certainty of performance and consequent results.
• It represents a balanced thinking on organisation and management, and provides a
unified focus to organizational efforts.
4.2.12 Limitations of Systems Approach
The limitations are described as follows:
• Lack of unification: this approach cannot be considered as a unified theory of
organisation. It cannot be applied to all types of organisations.
• Abstract Analysis: the systems theory is too abstract to be of much use to the
practicing managers. It indicates that various parts of the organisation are interrelated
and its interrelationship is dynamic. But it has failed to spell out the precise
relationship between various sub-systems.

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• Limited View of Organisation-Environment Interface: The systems approach has

failed to specify the nature of interactions and interdependencies between an
organisation and its external environment.
• Limited Application: It has limited applications. It does not provide action
framework applicable to all types of organizations. Most of the concepts used here
cannot be applied in small organizational structures.

4.3 CONTINGENCY APPROACH

The classical approach suggested one best form of structure and placed emphasis on general
sets of principles while the human relations approach gave little attention at all to structure. In
contrast, the contingency approach showed renewed concern with the importance of
structure as a significant influence on organizational performance. The contingency approach,
which can be seen as an extension of the systems approach, highlights possible means of
differentiating among alternative forms of organisation structures and systems of
management. There is no one optimum state.
For example, the structure of the organisation and its ‘successes are dependent, that is
contingent upon, the nature of tasks with which it is designed to deal and the nature of
environmental influences.
The most appropriate structure and system of management is therefore dependent upon the
contingencies of the situation for each particular organisation. The contingency approach
implies that organisation theory should not seek to suggest one best way to structure or
manage organizations but should provide insights into the situational and contextual factors
which influence management decisions.
It is an improvement over the systems and other approaches. The contingency approach to
management has its roots in general systems theory and the open systems perspective, as well
as in the Simon-March-Cyert stream of theory and research. Thompson recognized the
intersection of these traditions and extended them in a landmark work that represents a
cornerstone of contingency approach.
The term contingency as used in contingency theory is similar to its use in direct practice. A
contingency is a relationship between two phenomena. If one phenomenon exists, then a
conclusion can be drawn about another phenomenon. For example, if a job is highly
structured, then a person with a freewheeling disposition will have problems with the job.
Contingencies can sometimes be considered conditions.

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It suggests that managerial actions and organizational design must be appropriate to given
situation. The latest approach to management which integrates the various approaches to
management is known as “Contingency” or “Situational” approach. It is not new. Pagers and
Myers propagated this approach in the area of personnel management in 1950. However, the
work of Joan Woodward in the 1950s marked the beginning of the contingency approach to
organisation and management. Other contributors include Tom Burns, G.W. Stalker, Paul
Lawrence, Jay Borsch and James Thompson. They analysed the relationship between the
structure of organisation and the environment. Thus, contingency approach incorporates
external environment and attempts to bridge the theory-practice gap. In simple words,
contingency approach also regards organisation as an open and dynamic system which has
continuous interaction with the environment.
As per the contingency approach, the task of managers is to try to identify which technique or
method will be more suitable for achieving the management objectives under the available
situation. Managers have to develop a sort of situational sensitivity in order to deal with their
managerial problems as they develop from time to time.
Contingency approach views are applicable in designing organisational structure and in
deciding the degree of decentralization in establishing communication and control systems
and also in deciding motivational and leadership approaches. In brief, it is applicable to
different areas of organisation and management it is an attempt to integrate various
viewpoints and to synthesize various fragmented approaches to management.
Contingency theory attempts to relate research on many management variables, for example,
research on professionalism and centralized decision making or worker education and task
complexity. It allows you to analyse a situation and determine what variables influence the
decision with which you are concerned.
This approach is based upon the fact that there is no one best way to handle any of the
management problems. The application of management principles and practices should be
contingent upon the existing circumstances. Functional, behavioural, quantitative and systems
tools of management should be applied situation ally. There are three major parts of the
overall conceptual framework for contingency management:
i. Management concepts,
ii. Principle and techniques;
iii. Contingent relationship between the above two.

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Contingency theory attempts to analyse and understand interrelationships with a view

towards taking the specific managerial actions necessary to deal with the issue. This approach
is both analytical and situational with the purpose of developing a practical answer to the
questions in hand.
It has rejected universality of management principles and it appeals to common sense. It
requires the ability to analyse and diagnose a managerial situation correctly and act
accordingly. Use of contingency approach is not possible without the ability to match the
management knowledge and skills as per the management situation.
It is action-oriented as it directs towards the integrated application of systems concepts and
the knowledge gained from other approaches.
As per contingency approach managers should develop situational sensitivity and practical
selectivity. Adoption of these two traits can prove to be useful in formulating strategies,
designing effective organizations, planning information systems, establishing communication
and control systems, shaping motivational and leadership approach, resolving conflicts,
managing change, etc.
This approach says that there should be congruence between the organisation and its
environment and among the various sub-systems. The appropriate fit between the
organisation and its environment and the appropriate internal organizational design will lead
to greater effectiveness, efficiency and participant satisfaction. Thus, there is no standard
design that could be applied to all organizations under all situations. Managers have to apply
different ideas to different situations to cope with them and ensure effectiveness and
efficiency in decision making.
The open systems perspective views the complex organisation as a set of interdependent parts
that, together, constitute a whole which, in turn, is interdependent with some larger
environment. The interactive nature of the elements within the organisation - and between the
organisation and the environment - result in at least two open system characteristics that are
central to the contingency approach: adaptation and equip-finality. First, the principle of
adaptation asserts that the elements within the system adapt to one another to preserve the
basic character of the system. Second, the principle of equi-finality holds that a system can
reach the same final state from differing initial conditions and by a variety of paths.
The Simon-March-Cyert stream of work adds to the open systems perspective the view that
organisations are problem-facing and problem-solving entities. The organisation develops
processes for searching, learning and deciding — processes that attempt to achieve a
satisfactory level of performance under norms of bounded rationality. Organisational
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decision-makers undertake rational decision processes designed to cope with the complexity
and uncertainty of their situations, all of which result in deliberate decisions by using a
satisfying criterion for performance.
As derived from these conceptual antecedents, the essential premise of the contingency
approach is that effectiveness, broadly defined as organisational adaptation and survival [26],
can be achieved in more than one way. For example, management theorists and researchers
have recognized more than one way to organize effectively, more than one strategy that
maximizes profitability and market position, and more than one leadership style that achieves
organisational goals.
Each way is not equally effective under all conditions; certain organisational actions or
responses are more appropriate than others, depending on the situation. The contingency
approach suggests, therefore, that we can observe wide variations in effectiveness, but that
these variations are not random. Effectiveness depends on the appropriate matching of
contingency factors with internal organisational designs that can allow appropriate responses
to the environment. Theoretical and practical contributions are achieved through:
• Identifying important contingency variables that distinguish between contexts;
• Grouping similar contexts based on these contingency variables, and
• Determining the most effective internal organisational designs or responses in each
major group.
4.3.1 Variables constituted by contingency theory-building process
These contingency theory-building steps involve three types of variables;
• Contingency variables: They represent situational characteristics are usually
exogenous to the organisation or manager. In most instances the opportunity to
control or manipulate these variables is, at best, limited and indirect.
• Response variables: They are the organisational or managerial actions taken in
response to current or anticipated contingency factors.
• Performance Variables: They are the dependent measures and represent specific
aspects of effectiveness that are appropriate to evaluate the fit between contingency
variables and response variables for the situation under consideration.
These steps typically result in contingency theories that focus primarily on outcome or
content issues, rather than on processes. They attempt to determine the organisation structure,

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strategy or leadership style to be used in a particular situation, but do not emphasise on the
dynamics of the process by which an organisation adapts or a leader becomes effective.
Usually IF-THEN approach is followed where in If means environment that is an
independent variable and then means management variable dependent factors. Whenever
anything happens in the environment then all the possible effects of this happening are
studied on management variable and then the most effective solution is selected.
Kats and Rosenzweig have analysed the suitability of two kinds of structures under different
types of environments. These are:
4.3.2 Stable-mechanistic organizational design
It is used under following situations.
a) When environment is relatively stable and certain
b) Organizational goals are well-defined and enduring
c) Technology used is relatively stable and uniform
d) Productivity is of utmost importance
e) Routine activities take place
f) Decision making is programmable and coordination and control processes tend to
make tightly structured, hierarchical system possible.
4.3.3 Adaptive-organic organisational design
It is used in the following situations.
a) When environment is relatively uncertain and turbulent
b) Organizational goals are diverse and changing
c) Technology is complex and dynamic
d) There are many non-routine activities in which creativity and innovation hold extreme
importance
e) Innovative decision-making processes are utilized and coordination and control occur
through reciprocal adjustments. The system is more flexible and less hierarchical.
4.3.4 Contingency Approaches in Organisational Behaviour
Within the organisational behaviour literature, the contingency approach has made its most
significant contribution in the area of leadership theory and research. Contingency
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approaches to leadership tie the leader's effectiveness to the nature of the situation and
acknowledge that worker’s needs and problems vary, requiring that leadership style match
the types of individuals involved and the characteristics of their work situation.
While the situational approach has been used to study leadership since the 1950s House
proposed a theory of leadership that clearly illustrates the contingency approach. He contends
that the functions of a leader vary depending on the needs of subordinates and the type of
work to be accomplished. According to House's theory, a leader obtains good performance
from his/her work unit by increasing subordinates' personal rewards from goal attainment and
by making the path to these rewards easier to follow (e.g., by instructing, reducing roadblocks
and pitfalls, and increasing the opportunities for personal satisfaction along the way). To be
effective, the leader must tailor his/her style and approach to individual subordinates and
situations. In ambiguous situations (and with subordinates to whom ambiguity can be
frustrating), effectiveness is achieved when the leadership provides structure. In routine
situations, on the other hand, the additional structure provided may be viewed as redundant
and insulting by subordinates, who may consequently become dissatisfied. In essence, the
theory holds that the level of leader structure depends on the ambiguity of the task, and the
level of leader consideration depends on the intrinsic satisfaction of the task. The theory has
been elaborated and tested since it was proposed.
4.3.5 Appraisal of Contingency Approach
It is an improvement over systems approach. It can be easily applicable in all types of
organizations for all type of decision making. It holds a great promise for future development
of management theories. It rejects the notion of one best way of doing things. It believes in
flexible and adaptive methods to be used to solve management related issues. But still a lot
more is needed to be explored in this context. Contingency approach is not supported by
much literature.
4.3.6 Merits of Contingency Approach
The merits are:
• It is pragmatic and open minded. It discounts preconceived notions, and universal
validity of principles.
• It relives managers from dogmas and set principles. It provides freedom to choose,
manage and judge the external environment and use the most suitable management
techniques. Here, importance is given to the judgement of the situation and not the use
of specific principles.

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• It has a wide-ranging applicability and practical utility in organisations. It advocates

comparative analysis of organisations to bring suitable adjustment between
organization structure and situational peculiarities.
• It focuses attention on situational factors that affect the management strategy. The
theory combines the mechanistic and humanistic approaches to fit particular/specific
situation. It is superior to systems approach as it not only examines the relationship
between sub-systems of an organisation but also the relationship between the
organisation and its external environment.
4.3.7 Demerits of Contingency Approach
The demerits are:
• It is argued that the contingency approach lacks a theoretical base.
• Under contingency approach a manager is supposed to think through all possible
alternatives as he has no dried principals to act upon. This brings the need of more
qualities and skills on the part of managers. The responsibility of a manager increases
as he has to analyse the situation, examine the validity of principles and techniques to
the situation at hand, make right choice by matching the technique to the situation and
finally execute his choice. The areas of operation of a manager are quite extensive
under this theory.
4.3.8 Difference between Contingency and systems Approach
Points of Distinction Systems approach Contingency Approach
Emphasis Interdependencies and It identifies nature of
interactions among systems interdependencies and the
and sub-systems impact of environment on
organizational design and
managerial styles.
Focus Internal Environment and External environment of
organizational sub-systems organization
Solutions It provides deterministic It provides probabilistic and
solutions to all managerial pragmatic solutions to all
problems managerial problems.
Organisational view It views all organisations It treats all organisations as
alike. separate unique entity.

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Evolution Major contributors in Sociologists have contributed

systems approach have been to this approach. It has been
psychologists. built over systems approach.
Organisational Variables It is very broad considering It concentrates on structural
all personal, social, technical, adaptation of organisation.
structural, environmental and This approach tends to
organizational variables. predict the ultimate outcome
Therefore, managing of a disturbance of the
involves establishing organizational equilibrium by
relationships among them a change in the task
while undertaking any action. environment.
Model of Human Beings It usually employs a richer It is interested in structural
model of human beings than adaptation of organisation to
contingency model. It takes its task environment.
into account full range of Therefore, contingency
human behaviour in the theories talk mostly in terms
organisation. of structural change in the
organisation in response to a
change in environment.
It is a combination of three It combines two or more of
approaches: the classical the other approaches
approach, the behavioural depending on the given
approach and the situation.
management science
approach.

4.3.9 Other Organisational Approaches

The other organizational approaches are described in brief as follows:
a) The Decision-making Approach: The systems approach involves the isolation of
those functions most directly concerned with the achievement of objectives and the
identification of main decision areas or sub-systems. Viewing the organisation as a system
emphasizes the need for good information and channels of communication in order to assist
effective decision-making in the organisation. Recognition of the need for decision-making
and the attainment of goals draw attention to a sub-division of the systems approach, or a
separate category, that of the decision-making (decision theory) approach. Here the focus

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of attention is on managerial decision-making and how organisations process and use

information in making decisions. Successful management lies in responding to internal and
external change. This involves the clarification of objectives, the specification of problems
and the search for and implementation of solutions. The organisation is seen as an
information-processing network with numerous decision points. An understanding of how
decisions are made helps in understanding behavior in the organisation. Decision-making
writers seek to explain the mechanisms by which conflict is resolved and choices are made.
b) Contributors of the Decision-Making Approach: Leading writers on the decision-
making approach include Barnard, Simon and Cyert and March. The scope of the decision-
making approach, however, is wide and it is possible to identify contributions from engineers,
mathematicians and operational research specialists in addition to the work of economists,
psychologists and writers on management and organisation.
Barnard stressed the need for co-operative action in organisations. He believed that people’s
ability to communicate, and their commitment and contribution to the achievement of a
common purpose, were necessary for the existence of a co-operative system.
These ideas were developed further by Simon. He sees management as meaning decision-
making and his concern is with how decisions are made and how decision-making can be
improved. Simon is critical of the implication of man as completely rational and proposes a
model of ‘administrative man’ who, unlike ‘economic man’, ‘satisfices’ rather than
maximizes.
Administrative decision-making is the achievement of satisfactory rather than optimal results
in solving problems. Economic models of decision-making, based on the assumption of
rational behaviour in choosing from known alternatives in order to maximize objectives, can
be contrasted with behavioural models based not so much on maximization of objectives as
on short-term expediency where a choice is made to avoid conflict and to stay within limiting
constraints. Managers are more concerned with avoiding uncertainties than with the
prediction of uncertainties.
c) social action: Social action represents a contribution from sociologists to the study of
organizations. Social action writers attempt to view the organisation from the standpoint of
individual members (actors), who will each have their own goals and interpretation of their
work situation in terms of the satisfaction sought and the meaning that work has for them.
The goals of the individual, and the means selected and actions taken to achieve these goals
are affected by the individual’s perception of the situation. Social action looks to the
individual’s own definition of the situation as a basis for explaining behaviour. Conflict of
interests is seen as normal behaviour and part of organizational life.
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According to Silverman, ‘The action approach . . . does not, in itself, provide a theory of
organizations. It is instead best understood as a method of analysing social relations within
organizations.’
d) Action Theory: A theory of human behaviour from an ‘action approach’ is presented
by Bowey. She suggests that action theory, systems theory and contingency theory are not
necessarily incompatible approaches to the understanding of behaviour in organizations. It
would be possible to take the best parts of the different approaches and combine them into a
theory that would model empirical behaviour and also facilitate the analysis of large numbers
of people in organizations. Bowey goes on to present such a theory as a particular form of an
action theory approach. According to Bowey, action theory is not capable of dealing with the
analysis of the behaviour of a large number of people in organizations. Her theory is based,
therefore, on three essential principles of action theory, augmented by four additional
concepts taken from systems theory. The three essential principles of action theory can be
summarized as below:
• Sociology is concerned not just with behaviour but with ‘meaningful action’.
• Particular meanings persist through reaffirmation in actions.
• Actions can also lead to changes in meanings.
Bowey suggests that these three principles apply mainly to explanations of individual, or
small-scale, behaviour. She gives four additional concepts, taken from systems theory, on
which analysis of large-scale behaviour can be based. These concepts are redefined in
accordance with an action approach.
• Role – this is needed for the analysis of behaviour in organizations. It explains the
similar action of different people in similar situations within the organisation and the
expectations held by other people.
• Relationships – This is needed to explain the patterns of interaction among people
and the behaviours displayed towards one another.
• Structure – the relationships among members of an organisation give rise to patterns
of action which can be identified as a ‘transitory social structure’. The social factors,
and non-social factors such as payment systems, methods of production and physical
layout, together form the behavioural structure.
• Process – human behaviour can be analysed in terms of processes, defined as
‘continuous interdependent sequences of actions. The concept of process is necessary
to account for the manner in which organizations exhibit changes in structure.

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4.4 POSITIVE ORGANIZATIONAL BEHAVIOUR

Positive Organizational Behaviour (POB) is the study and use of positively oriented human
resource strengths and psychological capacities that can be measured, developed, and
managed effectively to improve performance in today's workplace. To be included in POB, it
must be positive, have a strong base in theory and research, and be able to be measured in a
valid way. It must also be open to change and easy to manage for better performance.
Research, measurement, development, and management of positive states that meet the POB
definitional criteria are mostly done at the individual, micro level. Positive Psychology (POB)
is a movement started by Martin Seligman in 1998 which seeks to change the focus of
psychology from dysfunctional mental illness to mental health. It is divided into three levels:
subjective, individual, and macro. Positive psychology looks at positive experiences, flow
and happiness, and hope for the future. It looks at traits like love, courage, aesthetic
sensibility, perseverance, forgiveness, spirituality, high talent, and wisdom. Research has
shown that employees who are happy at work and find meaning in it are more productive,
miss less work, and are more loyal to their company.
4.4.1 Techniques for Creating Positive Organizational Behaviour
The various suggestions for employee growth in organizations for positive organizational
behaviour are as:
• Positive psychology: It uses scientific knowledge and effective intervention to help
people achieve a satisfying quality of life. It is meant to supplement rather than
replace or ignore the more conventional branches of psychology, and is better suited
to studying how human progress can falter. This area of study raises the concern that a
person's state might only be partially and inadequately understood if attention is
limited to disorders.
• Self-efficacy: It is the degree or strength of confidence in one's own capacity to carry
out tasks and achieve objectives. It is the capacity to persevere and a person's capacity
to complete a task, and has a direct impact on how long someone would maintain a
workout routine or diet. Research in psychology has looked at it from various angles,
and it is important to consider the different routes taken in its development, self-
efficacy relationships, and how high or low one can be able to take on a difficult
activity. Self-efficacy has been shown to be successful in the workplace.
• Optimism: An optimism is a mental attitude or world view that sees conditions and
occurrences as being best (optimised)," which implies that the current situation is

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optimal for variables that may not yet be completely understood. It is often used to
show the difference between optimism and pessimism, which is usually seen as a
glass of water that has water in it halfway. Optimistic managers should prioritize
creating action plans and become preoccupied with the task at hand, while pessimists
have internal, consistent, and broad attributions, while optimists have external,
inconsistent, and narrow attributions.
• Hope is an optimistic attitude of mind based on the expectation of positive outcomes
related to events and circumstances. It is defined as having "expect with confidence"
and "to cherish a desire with anticipation". It has a positive impact on academic
achievement, athletic accomplishment, emotional health, and the ability to cope with
illness and other hardships. Frederickson argues that with great need comes from a
range of ideas, such as happiness and joy, courage, and empowerment, drawn from
four different areas of one's self.
• Resiliency: The patterns of beneficial adaptation are essential for success in the face
of adversity. Education, training, and fostering social connections can help individuals
become more resilient. Risk factors should be managed and the process of adaptation
should be improved.
• Psychological Capital (PSYCAP): These are a person's positive and developing
state, exemplified by high levels of self-efficacy, optimism, hope, and resiliency. Four
psychological capitals—Hope, Efficacy, Resilience, and Optimism—were found to fit
the POB scientific requirements. PsyCap is composed of four constructs that work
together to generate a second-order core construct that has a greater association with
performance and pleasure than any one of the four components alone.
• Organisational culture: It is composed of the mission, goals, standards, procedures,
symbols, language, presumptions, beliefs, and customs of an organisation. It is taught
by new members and is influenced by the traits of several management teams. It can
also influence employees' sense of belonging to a company.
4.4.2 Suggestions to Create Positive Organizational Behaviour
The suggestions to create a cordial and harmonious organizational behaviour are as:
• Make sure your workers are interested in what they're doing.
• Create a sense of value in their eyes.
• Provide for the requirements of your staff, both on the job and off.
• Reward Effort (Stock options, Bonus)

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• Be fair to all employees, regardless of department (E.g.: Same food court for all
employees including the management)
• Employees, even those just starting out, need to understand the impact they're having
in the grand scheme of things.
• Establish the company's identity by publicising its origin story and the struggles of its
founders.
When implemented effectively, positive organisational behaviour can broaden the scope of
employees' work and provide them more chances to put their talents to use. However, if
management fails to alleviate workers' concerns about their shifting responsibilities, the
transition to a new workplace can be a stressful experience. This is especially true for
workers who are expected to achieve objectives that are too lofty.

ACTIVITY
Analyse the significance of modern organizational theory for the smooth
functioning of your business enterprise and evaluate the impact of positive
organizational behaviour on the performance of employees and overall working
environment of your enterprise.

In-Text Questions
1. GST means:
a) Goods and Services Tax
b) General Sales and Taxes
c) General Service Terms
d) General System Theory
2. Who gave the Scott Model for analysis of organization system?
a) W. Scott b) G. W. Scott
c) G. Scott d) W. G. Scott
3. Contingency Approach is also called as:
a) Individualistic Approach b) Management Approach
c) Situation Approach d) Societal Approach

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In-Text Questions
4. Who started the Positive Organizational Behaviour (POB)?
a) Martin Seligman b) Matin Sleiman
c) Max Weber d) F. W. Taylor
5. PSYCAP means
a) Psychological Captain b) Psychological Capital
c) Psychological Capturing d) None of these

4.5 SUMMARY

Organisations are defined as systems and can be studied using GST, classical theories, and
human relations and human resources theories. System method of treatment involves
investing in component parts of the organizational systems, while no system approach
involves dealing with the parts of a whole. Positive Organizational Behaviour (POB) is the
study and use of positively oriented human resource strengths and psychological capacities to
improve performance in today's workplace. It is divided into three levels: subjective,
individual, and macro. Positive Psychology is a movement started by Martin Seligman to
change the focus of psychology from dysfunctional mental illness to mental health.

4.6 GLOSSARY

• Organizational cybernetics (OC): It examines how organisations are set up, run, and
socialized from a systems theory perspective.
• Psychological Capital (PsyCap): It is a term for positive feelings of hope, resilience,
optimism, and self-efficacy. It is made possible by leadership and organisational
behaviour that focuses on the mental health and well-being of its members.

4.7 ANSWERS TO IN-TEXT QUESTIONS

1. (c), General System Theory 4. (a), Martin Seligman

2. (d), W. G. Scott 5. (a), Psychological Capital
3. (c), Situation Approach

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4.8 SELF-ASSESMENT QUESTIONS

1. What do you mean by modern organizational theory? Discuss the significance and
features.
2. What is system approach? Describe the parts, features and limitations of system
approach.
3. How contingency approach is different from system approach? Discuss.
4. What are the pros and cons of contingency approach? Elaborate
5. What do you mean by POB? Discuss the various techniques used for the creation of
positive organizational behaviour in a business establishment.

4.9 REFERENCES

• Prasad, L. M. (2011). Organisation Behaviour. Sultan Chand & Sons. Pp. 57-64.
• Gayathri, N. & Karthikeyan (2014). Positive Organizational Behaviour and Positive
Psychology-Allegations for Individual Growth development in Firms. Psychology.
Paripex: Indian Journal of Research. 3 910): 148-149.
• Belal, A. S. (2019). A Review of Positive Organisational Behaviour: The Moderating
Role of Three Contextual Factors. International Confernece on Research in Human
Resource Management. March 7-9, 2019, London, UK. Pp. 71-83.

4.10 SUGGESTED READINGS

• Luthans, F. (2002). The Need for and meaning of Positive Organizational behaviour.
Journal of Organizational Behaviour. 23: 695-706.
• Pareek, U. & Khanna, S. Understanding Organizational Behaviour. Oxford University
Press.
• Hassard, J. (2012). Rethinking the Hawthorne Studies: The Western Electric research
in its social, political and historical context. Human Relations 65(11): 1431–1461

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