ORGANISATIONAL DESIGN AND DEVELOPMENT [COHR4203]

LECTURER MR B.D. MPOFU

ORGANISATIONAL THEORIES AND PERSPECTIVES

History of organisational theories and perspectives by Richard L. Daft

Evolution of organization theory and design.

Organization theory
A way of thinking about organizations. It’s a way to see and analyze
organizations more accurately and deeply than one otherwise could. There are
general patterns and insights into organizational functioning.

Historical perspectives
Classical perspective is associated with the development of hierarchy and
bureaucratic organizations and remains the basis of much of modern
management theory and practice.
(Mechanical System Design)

Efficiency is everything i.e Scientific management should be based on precise,

standard procedures for doing each job. Management role is to maintain
stability and efficiency, with top managers doing the thinking and workers
doing what they’re told. (1900)
INTRODUCTION
Organizational Theories as elaborated by Shafritz, Ott, & Jang are as follows;
Classical organizational theory
Neo classical organizational
Human resources
Modern structural organization
Organizational economics
Power and politics
Organizational culture and Change
Theories of the organization and environment

They were implemented around the year 1900 and have since been adjusted and
collaborated to other scholars to suite the current environment which people live in.
editions to these theories have been made and still continue to be made to suite
today’s world. Many scholars have come into play and each scholar has his/ her
own perception about these theories
Classical Organization Theory
Was essentially introduced with the origins of
commerce, largely shaped the industrial
revolution, “dominated organization theory into
the 1930s and remains highly influential today

Organizations exist to accomplish production

related and economic goals through
systematic, scientific inquiry.
Production is highly concerned with
specialization and division of labor.(Theorist
Adam Smith – Of the Division of Labour
e.g Ingwebu breweries, there are people who
wash the beer containers, those who fill them
up and those who do the sealing.
Strengths and Weaknesses
Strengths
Theory has a narrow focus on improving
production related economic goals
It utilizes systematic, scientific inquiry.
Assisted in creation of division of labor, time
and movement studies, and organized planning
models (i.e POSDCORB Planning, Organising,
Staffing, Directing Coordinating, Reporting &
Budgeting) By Luther Gulick Division of labour &
Henri Fayol for administration.
Attempted to address, and further,
organizational functions when few resources
existed.
Weaknesses
Is a closed-system
Too much focus is on production and reduces
the human component to simply fleshy machines.
(Freidrieck Taylor)
Helped invent the industrial revolution, which
led to deterioration of individual craftsmanship.
Promotes capitalist economies.
Classical theory is largely derived intellectually
rather than empirically
Primarily concerned with anatomy/structure
rather than individual needs and potentials.
Did not take into account large-scale changes
in environments.
Human Resource Theory

Believed that organizations exist to serve human needs

(not the reverse).
Organizations and people rely on each other
(Organizations need ideas, energy, and
talent; people need careers, salaries, and work
opportunities). In order to be successful
3. When the fit between the individual and the
organization is poor, one or both will
suffer. Individuals will be exploited, or will seek to exploit
the organization, or both.
•
Human Resource Theory examples

e.g PSMAS saga the organisation failed to cater for the

employees hence leading to poor service delivery
A good fit between individual and organization benefits
both. Humans find meaningful and satisfying work, and
organizations get the human talent and energy that they
need.

e.g Econet caters for its employees well hence they

perform to maximum satisfaction leading to continued
success of the organization
Organizational Behavior Perspective pertaining to
the Human Resource Theory

Behavioral scientists focused attention on

seeking to answer questions such as how
organizations could and should allow and
encourage their people to grow and
develop
From this perspective, it is assumed that
organizational creativity, flexibility, and
prosperity flow naturally from employee
growth and development (theorists like
Elton Mayo and Abraham Maslow
supported the perspective.)
Organizational Behavior Perspective Human
Resource Theory cont…..

It is believed that the relationship between organizations

and people is redefined from dependence to co-
dependence hence they are considered to be as important
as or more important than the organization itself
Organizational behavior perspective places a very high
values mostly humans as individuals and believes that
things typically are done openly, including providing
employees with information they need to make informed
decisions with free will about their future (hence the open
system perspective.)
Organizations influence human behavior in as much as
behavior shapes the organization. It is the most optimistic
of all perspectives or schools of organization theory and
contains a promise for humankind i.e people and
organizations will grow and prosper together
Strengths and Weaknesses:
Strengths
Helps address issues of leadership, motivation,
teamwork, workplace environment, effects of power and
influence, and other related topics.
Expands the definition and role of leadership, and its
effects.
Stresses the importance of relationships,
cohesiveness, and interdependency.
Theory is centered on “fit” between individual and
organization, employee development, and the resulting
benefits to both agency and employee.
It is an optimistic theory, not focused on conflict
between individuals and organizations (as other
theories often do).
Weaknesses
Perhaps places too much importance on
consideration for the employee.
Considers productivity through the lens
of employee behavior, not the other way
round.
Critics claim some aspects, including
Maslow’s contributions, are not supported
empirically and under estimates the
complex structure of human needs and
motivations
Other theories
Modern Structural Organization Theory eludes that organizations are
rational institutions whose primary purpose is to accomplish established
objectives; rational organizational behavior is achieved best through systems
of defined rules and formal authority. Organizational control and coordination
are key for maintaining organizational rationality

There is a best structure for any organization, or at least a most appropriate

structure that suits its given objectives, the environmental conditions
surrounding, the nature of its products and/or services, and the technology of
the production process etc e.g employees in a retail supermarket will not have
the same structure as those in a coffin manufacturing factory
Also believe in specialization and the division of labour which increases the
quality and quantity of production especially in highly skilled operations and
professions
Eludes that problems in an organization result from structural flaws and can
be solved by changing the structure
Modern structuralists are concerned with similar issues as the classical
structuralists i.e they believe in
Organizational efficiency
Organizational rationality
Increase the production of wealth in terms of real goods and services
Strengths and Weaknesses:
Strengths
• it is very focused compared to classical theory especially
on goals and achievement.
• Acknowledges the existence of both formal and informal
elements.
• Still a very rational model, but not as closed of a system
as classical.
• Stressed formal authority and responsibility.
• Expanded the understanding of specialization and the
division of labor.
It is more flexible than classical theory (such as
organizational structure options: product vs. function).
• Synthesized much of the various schools of thought.
• it is well acknowledged, to some extent, the existence of
external environments, especially technology.
Weaknesses
Still a very rational theory.
Does not completely address the
potential of external influences.
Relies on control rather than
empowerment.
Still considers structure the main tool
for making improvements.
Organizational Economics Theory

Uses concepts and tools from the field of economics to

study the internal processes and structures of the
organization.
Includes the categories of agency theory, behavioral
theory, incomplete contract theory, transaction cost
economics, and game theory.
In a nutshell, organizational economics deals with
fundamental and universal problems within organizations
i.e how to induce managers and other employees to act
in the best interests of those who control ownership or, in
the case of government agencies and non profit
organizations, those who have the authority to control
policy and resource allocation decisions
Transactional Cost Theory
Transactional cost theory provides a general framework
for understanding the origin of organizations as
mechanisms to reduce transaction costs and to support
management decisions under conditions of high
uncertainty and opportunism.

This model assumes that organizations are superior to

markets in managing complex and uncertain exchanges
because they reduce the cost of transactions

Agency Theory
Defines managers and other employees as ‘agents’ of
owners who must delegate some authority to agents out
of necessity
Price Theory
Is concerned with how to structure organizations for the
free interplay of markets among agents and principals
It falls short ‘since the interests of the principal and agent
are inclined to diverge, the delegation of authority from the
principal to the agent allows a degree of under-fulfillment
of the wishes of the principal by the agent

Agency theory thus examines the use of price theory

mechanisms and hierarchy mechanisms (e.g, monitoring)
by principals ‘to limit the aberrant activities of the agent

Theory of Property Rights

Looks at the allocation of costs and rewards among the
participants in an organization and, e.g how ‘claims on the
assets and cash flows of the organizations can generally
be sold without permission of the other contracting
individuals.
Strengths and Weaknesses

Strengths
Incorporated fields within economics.

Explains that price theory alone does not control

behavior.

Incorporated behavior into agency theory.

Assisted in the legal foundation of “who” owns “what”

information within an organization (property rights).
Weaknesses
Complex and often technical.

Organizational structure and change through

the economic lens is very limiting,

and is based deeply within reduction of

costs.

Raises ethical/equity issues.

Power and Politics Organization Theory
Views organizations as complex systems of
individuals and coalitions, each having its own
interests, beliefs, values, preferences,
perspectives, and perceptions.

The power and politics theories view authority

as only one of the many available sources of
organizational power, and power is aimed in all
directions – not just down through the hierarchy
Strengths and Weaknesses

Strengths
Adds a lens of power and politics to
organizational function and behavior.
Emphasizes that human behavior is not
always rational.
Builds on understanding of goal setting
factors.
Attempts to identify all aspects and
players of political power and influence.
Weaknesses
Raises awareness of competition,
not necessarily solving them.

Doesn’t explain, very well, how to

increase immunity from power and
politics.

Attempts to discredit rational

schools and their benefits.
The Organizational Culture Perspective

Is a set of organization theories with its own assumptions

about organizational realities and relationships
It challenges the basic views of these more rational
perspectives (Modern structural, organizational
economics, and systems/ environment theories) about,
e.g, how organizations make decisions and how and why
organizations – and people in organizations act as they
do
The perspective assumes that many organizational
behaviors and decisions are not determined by rational
analysis. Instead, they are, in effect, predetermined by
the patterns of basic assumptions held by members of an
organization. These patterns of assumptions continue to
exist and influence behaviors in an organization because
they have repeatedly led people to make decisions that
‘worked best in the past
Theories of Organizational Culture and Change

Like societal culture, is “comprised of many

intangible phenomena, such as values, beliefs,
assumptions, perceptions, behavioral norms, artifacts,
and patterns of behavior

Lasting organizational reform requires changes in

organizational culture

Organizational cultures that reflect unwanted values,

such as hierarchy, rigidity, homogeneity, power based
on authority and associations in closed networks, and
reliance on rules, restrict flexibility and can be
formidable barriers to effecting lasting change
Strengths and Weaknesses

Strengths
• It is an open system that seeks to better
understand external environments.
• Offers many tools to understand
organizational culture.
• Diverse collection of subjects.
• Explains symbolism within organizations.
• Offers viewpoints of “how” to initiate changes
in organizational culture.
• Blends human relations aspects with other
schools of thought.
• Incorporated, and resulted in, a huge body of
organizational change tools such as (TQM,etc.).
Weaknesses
Focuses mainly on external environments.

Explains organizational culture is difficult to

identify and measure (such as the pre-
determined patterns).

Less rational.
Theories of Organizations and
Environments
focuses of research and theory building
shifted from the internal
characteristics of organizations to the
external dynamics of organizational
competition,
interaction, and interdependency.
The organization as open systems
perspective views organizations as systems
of interdependent activities embedded in
and dependent on wider environments
Resource Dependence Theory
Stresses that all organizations exchange resources with
their environment as a condition for survival.

Theorists like Daniel Katz and Robert Kahn;

Concurred and articulated the concept of organizations

as open systems which provided the intellectual basis
for merging classical, neoclassical, human relations/
behavioral, modern structural, and systems
perspectives of organizations.

These perspectives were balanced through their

concept of organizations being open systems i.e looks
at both the organization and the environment
Strengths and Weaknesses:
Strengths
An open systems approach that seeks to
account for internal and external
environments.
Attempts to address interwoven
variables.
Consists of multi-dimension approaches.
It led to institutional, resource
dependence, and other theories.
Is considered an intellectual merger of
most prior schools of thought.
Weaknesses

Focus of control is mostly external.

Looks down upon rational and

closed systems.

States that the use of closed

systems is useful only to core
technologies.
CONCLUSION

All the above theories are somehow

interlinked with each other hence
shaping the nature of organizational
design and development in today’s
world.