Organizations and Organization

Theory-Outlines
• Introduction
• Definition
• Organization theories-different Schools
• Classical, Neo-classical and Modern
• Classical School-Taylor, Fayol and Max Weber
• Neo-classical-Elton Mayo, Chester Barnard
and Others
• Modern-Systems and Contingency Theory
Organizations and Organization Theory:
Introduction
• Ours is an organizational society. Organizations are a
cardinal characteristic modern society.
• The literature on organization has very largely been focused
on the subject of management or administration.
• Management itself cannot be fully understood without a
knowledge of the conceptual framework within which it
works, namely, organization.
• Thus writers on management have frequently made essays
into the theory of organization.
• There appears to be little agreement among writers on the
concept of organization.
Organizations and Organization Theory:
Definition
• Three contrasting sets of definitions of organizations are
presented here
• Each is associated with one of the three perspectives on
organizations: the rational, the natural and the open
systems perspectives
• The first definition views organizations as highly formalized
collectivities oriented to the pursuit of specific goals
• The second definitions views organizations as social
systems forged by consensus or conflicts but seeking to
survive
• The third definition views organizations as coalitions of
participants with varying interests highly influenced by their
environments
Organizations and Organization Theory:
Definition
Rational System Definition
• Most definitions of organizations emphasize the
distinctive features of organizations. A number of
influencial definitions in this category are given
below
• Chester Barnard‘s definition of ‘formal organization’
is ‘a system of consciously coordinated activities or
forces of two or more persons.
• J.D.Mooney’s definition of organization is :
‘Organization is the form of every human association
for the attainment of a common purpose.’
Organizations and Organization Theory:
Definition
Rational System Definition
• Mary Parker Follet’s ‘four fundamental principles of
organization are as follows: (I) Co-ordination as the
reciprocal relating all the functions in a situation. (2) Co-
ordination by direct contact of the responsible people
concerned. (3) Co-ordination in the early stages. (4) Co-
ordination as a continuing process. These four principles
show the basis of control, show the process of control, show
that control is a process.
• Three definitions above illustrate the lack of clarity and the
disagreements in terminology. According to the definitions of
Mooney and Barnard, co-ordination is fused with
organization ; while Mary Parker Follet’s is a composite
concept of organization, co-ordination and control.
Organizations and Organization Theory:
Definition
Rational System Definition
• What seems to be broadly agreed in the three definitions quoted
above is that organization is concerned with creating a system or
order in human activities. Non-organized activities relate to no
order. A queue is an organization in contrast with a stampede.
• Thus organization as a concept is, we think, static rather than
dynamic.
• Organization by itself does nothing; it is the staff making up the
organization who do the work. Their relationship to the
organization is through the posts which they fill to work the
organization-a system. The staff cannot be said to be the
organization. They belong to a ‘human association’.
• From the foregoing analysis we arrive at the first definition:
• Organizations are collectivities oriented to the pursuit of relatively
specific goals and exhibiting relatively highly formalized social
structures.
Organizations and Organization Theory:
Definition
• The classical theorists (Taylor, Fayol, Weber,
Gullick, Urwick) are interested in defining every
single important factor in organization (what one
might consider as ‘micro-organization’ theory).
• Their writings analyze static models and have
illuminated the basic elements of organization.
They, however, do not examine the factors which
come into play when an organization is activated.
• The dynamics of an organization is mainly
concerned with the relationships and interactions of
the personnel. It is this dynamic situation which
attracts the interest of the behavioral theorists.
Organizations and Organization Theory:
Definition
A second definition of organizations useful for
viewing them natural system is:
• Organizations are collectivities whose
participants are pursuing multiple interests both
disparate and common, but recognize the value
of perpetuating the organization as an important
resource.
• The informal structure of the relations that
develops among participants provide a more
informative and accurate guide to understanding
organizational behavior than formal
Organizations and Organization Theory:
Definition
A third definition of organizations useful for
viewing them open system is:
Organizations are system of interdependent
activities linking shifting coalitions of
participants; the systems are embedded
in-dependent on continuing exchanges
with and constituted by-the environment
in which they operate
 Organization Theory: F.W. Taylor (1856-
1915)
• Taylor is the father of Scientific Management
• Instinct, superstition represented by rule of thumb should be
banished from workplace replaced by precise quantification
and written record keeping of science
• There will be few mistakes, fewer false start and less time for
training
• Different between mgt and workers will be minimal
• SM reduces conflict, unionization and exploitation of labor,
stops systematic soldiering (conceal productivity and set
own pace of work)
• Result into increased prosperity for mgt and worker
Organization Theory: F.W. Taylor (1856-
1915)
F.W. Taylor: Principles of Scientific Management
• In ‘The Principles of Scientific Management’ Taylor stated
that scientific management is not single element but a
combination
• The Development of True Science of work
• Scientific selection, training and development of workers
• Equal division of work between management and workers
• Intimate and friendly cooperation between management and
workers
• Maximum outputs in place of restricted output
• The development of each man to his greatest efficiency and
prosperity
F.W. Taylor: Principles of Scientific Management
• Time and Motion study-Use of stopwatch/One best way to
do things
• Differential Piece Rate System
• First class man
• Functional Foremanship-one worker has to work under the
director of 8 bosses at two levels-planning and performance
• Mental Revolution- it is complete mentionable revolution on
the part of mgt and worker as to their duties towards their
employees, fellow workers and daily problems
• Their mutual interest is not antagonistic and mutual
prosperity is possible only through mutual cooperation
F.W. Taylor: Principles of Scientific Management

• Frederick Winslow Taylor is perhaps the most

popular bogeyman of modern management thinkers.
• One of the first people to study work systematically,
Taylor argued that the productivity of physical labor
could be increased greatly by measuring in minute
detail the activities of workers, and then
standardizing and accelerating their tasks.
• He called this "scientific management". Expounded
in a book published in 1911, his methods were
widely applied as mass production spread.
F.W. Taylor: Principles of Scientific Management
• But workers always resented Taylor's ideas, and they came
to despise the white-coated engineers, stop-watch and
clipboard in hand, who wandered around factories dissecting
their every movement.
• "Taylorism" is now vilified as the epitome of a hierarchical,
authoritarian style of management which caused decades of
labor strife. No right-thinking manager today would describe
himself as a disciple of Taylor
• Man was treated as machine, money was the only motivator,
no union was tolerated
• One worker has to work under 8 bosses
• Overlooked law of diminishing return
• He avoided the participation of worker in planning and
decision-making
 Organization Theory: Henri Fayol
(1841-1925)
• Henri Fayol, the French industrialist and
management thinker of the early twentieth century,
has long been acknowledged as a founding father of
the classical management school of thought.
• One of his major work is General and Industrial
Management(1916)
• Without doubt, Fayol is best remembered for a three-
fold contribution to management thought.
Organization Theory: Henri Fayol
• First, Fayol is credited with the belief that organizational and
business life was an amalgam of six activities. These activities
technical; commercial; financial; security; accounting; and
management.
• Second, Fayol is said to have identified five key functions or
elements that comprised managerial activity. These functions
managerial activity are forecasting and planning; organizing;
coordination; command; and control.
• Lastly, Fayol is said to have advocated fourteen principles
designed to guide the successful manager
Henri Fayol: Six Managerial Activities
Technical Activities Production, manufacture, adaptation

Commercial Activities Buying, selling exchange

Financial Activities Search for and optimum use of capital

Security activities Protection of property and persons

Accounting Activities Stock-taking, balance sheet, costs,

statistics
Managerial Activities Planning, organizing, commanding,
coordinating and controlling
Henri Fayol: Elements of Management
Planning Endows forethought to the operation of an
organization. Unity, continuity, flexibility,
precision are features of GP
Organizing Material organization and human organization
(leadership, organizational structure)

Commanding Rests on certain personal qualities and

knowledge of general management
Coordinating Coordinating by integrating subordinates and
keeping balance between material, social and
functional parts
Controlling Verifying whether activities take place in
conformity with the plan adopted, instructions
issued and principles established
Fayol’s Fourteen Principles of Management
1. Division of Work must be divided. Specialization of work and labor produces
work more and better work with the same effort
2. Authority The right to give orders. Should not be considered without reference
to responsibility.
3. Discipline Obedience should be observed in accordance with formal or informal
agreements between a firm and its employees
Unity of comm One man [sic] one superior!

5. Unity of One head and one plan for a group of activities with the same
direction objective
Subordination The interests of one individual or one group should not prevail over
of II to GI the general good

Remuneration Pay should be fair to both the employee and the firm.
Fayol’s Fourteen Principles of Management
Centralization Is always present to a greater or lesser extent, depending on the size
of the company and the quality of its managers.

Scalar chain The line of authority from top to bottom of the organization. Fayol’s
Bridge or Gang Plank
Order A place for everything and everything in its place; the right man in the
right place.
Equity A combination of kindness and justice towards employees.

Stability of tenure Suitable condition should be created to minimize employee turnover

Initiative Within the limits of authority and discipline, all levels of staff should be
encouraged to show initiative

Esprit de corps Harmony is a great strength to an organization; teamwork should be

encouraged.
 Henri Fayol: Critique
• Gave more attention to functional aspect and neglected
structural aspect
• For Peter Drucker, Fourteen principles have a great deal of
overlapping
• His theory is more applicable for manufacturing company
rather than big public organizations
• Unity of command and coordination may conflict
• For Barnard and Simon, the informal side of organization
and social-psychological or emotion needs of the employees
were ignored
 Classical Organization Theory:
Max Weber and Bureaucracy
• Shafritz(2000), Scott(1998), Hicks and Gullet(1976), Prasad
(2001)
• Max Weber, an influential German sociologist/ political
scientist was a contemporary Taylor and Fayol
• There is nothing better known in the field of organization,
• perhaps in all of the sociology than Weber’s model of
bureaucracy
• He was the first to give a systematic theory of bureaucracy
• Having acquainted with typology of authority one can better
appreciate Weber’s analysis of administrative systems
 Classical Organization Theory:
Max Weber and Bureaucracy
• Weber distinguishes three types of authority
• Traditional authority- resting on an established belief in the sanctity of
immemorial traditions and customs and the legitimacy of those
exercising under them.TA give rise to patrimonialism and its various
manifestations-patriarchalism, feudalism
• Rational-legal Authority- provides the basis for the more impersonal
and formal structures of which the most highly developed form is the
bureaucracy.
• Charismatic Authority-resting on devotion to the specific and
exceptional sanctity, heroism or exemplary character of an individual
person and of normative order ordained by him or her. Examples-
Lenin, Gandhi, Mao, Martin Luther king.
• In his conception, bureaucracy is a particular type of administrative
structure, developed in association with the rational-legal mode of
authority
 Classical Organization Theory:
Max Weber and Bureaucracy
Characteristics Description
Division of Labor Fixed official jurisdictional areas.
Hierarchy Each lower office is controlled and supervised by a higher one.
vertical division of levels
Rules/ Rules and regulations (relatively stable and exhaustive) govern
documentations officials decisions and actions. Decisions are recorded in personal
files
Professional Officials are selected on the basis of technical qualifications,
appointed to offices and compensated by salary. Performance is
measured by formal, impersonal rules

Impersonality Authority is impersonal and it rests with ranks and positions of a

office holder rather than persons
Careerism An official is a full-time employee and looks forward to a lifelong
career in the agency. Tenure and position is protected against
arbitrary dismissal
 Classical Organization Theory:
Bureaucracy and Its Consequences
• Weber, Max (1947) in his book titled The Theory of
Social and Economic Organization mentioned that
bureaucratic control would lead to a number of
social consequences:
1. a tendency to a leveling of the social classes by
allowing a wide range of recruits with technical
competence to be taken by any organization;
2. plutocracy, because of the time required to achieve
the necessary technical training;
3. greater degree of social equality due to the
dominance of the spirit of impersonality or
objectivity.
 Classical Organization Theory:
Max Weber and Bureaupathology
• A sickness found in government organizations that reduces
their effectiveness in meeting policy and program in an
efficient yet responsive manner (dysfunctional bureaucracy)
• Several laws of bureaucracy draw attention to dysfunctional
such as Parkinson’s Law and Peter Principles
• Parkinson’s Law- ‘work expands so as to fill the time
available for its completion’. Individuals seem to make their
own choices as to how fast a job could be done specially in
meeting deadlines
• Peter’s principles- ‘employees tend to be promoted to their
levels of incompetence’.promotion based on current
position,l ine-staff position, lateral promotion-computer to
mgt, hierarchy in org. is characterized by incompetence and
inefficiency
 Classical Organization Theory:
Max Weber and Bureaupathology
• According to Robert Merton(1940), strict adherence to rules
can cause goal displacement. Rules produces bureaucratic
rigidity, red-tape and resistance to change
• Victor Thompson(1961), as bureaucrats stress impartiality
and impersonality, bureaucrats may also adopt an arrogant,
harsh and domineering attitudes towards people
• Empire Building-bureaucrats clearly recognize the
importance of an office. Bureaucrats are thought to seek
budget growth, to expand the number of subordinates and
control information flow to improve individual and
organizational power and prestige. By adding more people,
more space, more budget and more facilities, an empire can
be built
 Classical Organization Theory:
Max Weber and Bureaupathology
• Veblen’s notion of "trained incapacity" applies to a
person who has been so thoroughly trained for one
occupational setting that he finds it impossible to
operate effectively in a different situation; the very
effectiveness of his training in the past leads to
inappropriate behavior in the present.
• Ralph Hummel describes the bureaucrats as a
truncated personality who is able to understand life
only in structured terms of hierarchy and technical
competence.humanistic values are absent in one’s
personal and professional life
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Human relation theory is also known as informal
approach/organic theory of organization
• Elton Mayo (along with his colleagues)is the pioneer of this
school. He analyzed human relations from two point of view:
Interpersonal communication and collective decision-making
• Two assumptions of human relations approach
• There is a direct correlation between the level of satisfaction
in an organization and the level of efficiency and productivity
achieved
• Productivity is also affected by the extent to which the work
and the organization's structure are successful in
accommodating the social needs of the employees.
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Hawthorne Studies- experiments were conducted from 1927-
1932 at the Western Electric Hawthorne Works in Chicago
where Harvard Business school professor Elton Mayo
Examined productivity and work conditions
• The great Illumination (1924-27)
• Human Attitudes and Sentiments(1928-31)
• social organization(1931-32)
• The studies grew out of preliminary experiments at the
plants on the effects of light on productivity. Experiments
showed no connection between productivity and the amount
of illumination
Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Relay Assembly
• Two girls selected for their second series of experiments and
asked them to chose another four thus making a small group
of six
• The group assembled telephone relays-small instrument
composed of forty parts
• An observer sat with the girls
• Under normal conditions with forty eight hour week including
Saturdays and no rest pauses, the girls produced 2400
relays a week each
• They were put on piece work for eight weeks-outputs went
up
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Two five minutes rest pauses, morning and afternoon were
introduced for a period of five weeks, output went up once
more
• The rest pauses were lengthened to ten minutes each-output
went up sharply
• Six five minutes pauses were introduced and the girls
complained that their work rhythm were broken by the
frequent pauses, output fell slightly
• Return to two rest pauses, the first with a hot meal supplied
by the company free of charge, output went up
• The girls were dismissed at 4.30 pm instead of 5.00 pm-
output went up
• They were dismissed at 4.00 pm, output remained the same
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Finally, all improvements were taken away and the girls went
back to the physical conditions of the beginning of the
experiment: work on Saturday, 48 hours week , no rest
pauses, no piece work and no free meal
• Output was the highest ever recorded averaging 3000 relays
a week
• Six individuals became a team, cooperation was
spontaneous
• Participation and happiness were ensured
• Work under less pressure and with out coercion, they made
variation
• They had freedom, developed responsibility
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• Work is a group activity
• The need for recognition, security and sense of belonging is more
important in determining workers’ morale and productivity than the
physical conditions under which he works
• The worker is a person whose attitudes and effectiveness are
conditioned by social demands from both inside and outside the
organization
• Informal groups within the organization exercise strong social control
over the work habits of individual worker
• The significance of Hawthorne investigation was in discovering the
informal organization which exists in all organizations.
• The importance of group affecting the behavior of workers at work was
brilliantly analyzed thorough these experiments
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• At the social psychological level, the Hawthorne studies
pointed to a more complex model of worker motivation based
on a social psychological rather than an economic
conception of the individual.
• Individual workers do not behave as rational economic
actors but as complex beings with multiple motives and
values; they are driven as much as by feelings and
sentiments as by facts and interests and they do not behave
as individual, isolated actors but as members of social
groups exhibiting commitments and loyalties stronger than
their individualistic self-interests.
• Human relations analysts emphasized the great variability of
individual characteristics and behaviors and insisted on the
relevance of these differences in understanding
organizational behavior
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• At the structural level, the study discovered and
demonstrated the importance of informal
organization
• From the human relations perspective, leadership is
conceived primarily as a mechanism for influencing
the behavior of individual participants.
• It has also given rise to much effort directed at
changing organizations-modifying and improving
them as social environments. Stressing the positive
relation between worker satisfaction and productivity,
they sought techniques to improve the adjustment
and morale of individual workers.
 Neo-Classical Organization Theory:
Human Relations of Elton Mayo
• One approach involved in the introduction of a set of
personnel counselors, distinct from the line hierarchy, whose
task was to listen sympathetically to workers’ complaints.
The interviewing techniques devised for this program
contributed to the development of nondirective counseling
techniques now in widely use.
• It also stressed the importance of supervisory skills in
promoting worker morale. Supervisors required special
training if they were to become more sensitive to the
psychological and social needs of the workers.
• Job enlargerment and job rotation
• Worker participation in decision making is essential.