ORGANISATIONAL THEORY
DEFINITION OF ORGANISATIONAL THEORY?
The Organizational Theory refers
to the set of interrelated concepts, definitions that explain the behavior of
individuals or groups or subgroups, who interacts with each other to perform
the activities intended towards the accomplishment of a common goal.
In other words, the organizational theory studies the effect of
social relationships between the individuals within the organization along with
their actions on the organization as a whole. Also, it studies the effects of
internal and external business environment such as political, legal, cultural,
etc. on the organization.
The term
organization refers to the group of individuals who come together to perform a
set of tasks with the intent to accomplish the common objectives. The
organization is based on the concept of synergy, which means, a group can do
more work than an individual working alone.
CONCEPT OF ORGANISATIONAL THEORY:-
An organisation theory furnishes a
general frame of reference for explaining understanding behaviour patterns in
organisations. It also furnishes a scientific base for managerial actions for
predicting, controlling and influencing behaviour with a view to increase efficiency
of the organisation. It also encompasses the study of structure, functioning
and performance of organisations and of the behaviour of groups and individuals
working in organisations.
According to Joe Kelly
“Organisation theory is a set of interrelated concepts, definitions and
propositions that present a systematic view of behaviour Organisation theory is
a set of propositions which seeks to of individuals, groups and subgroups
interacting in some relatively patterned explain how individuals and sequence
of activity, the intent of which is goal directed.”
Organisation theory is a macro
analysis of an organisation, that is, how the organisation structure is
designed to integrate people with organisation. It is descriptive and
predictive about a particular state of affair in the organisation.
In simple words,
organisation theory is a body of considerable knowledge and literature
developed over the years reflecting what goes on in organisations. It is a set
of propositions which seeks to explain how individuals and groups behave in
different organisational structures and environment.
CLASSIFICATION OF ORGANISATIONAL THEORY:-
The
evolution of organisation and management can be divided into five broad
classifications as follows:-
1. Classical Organisation Theory:
The
classical theory represents the traditionally accepted views about
organisations i.e. organisation was viewed as machine and human beings as
components of that machine. The classical theory is the beginning of the
systematic study of the organisations.
The
classical theorists concentrated on organisation structure for the achievement
of organisational goals, thus, focusing on input-output mediators and giving
less or no attention to facilitating and constraining factors in the external
environment. Many of the classical concepts and principles hold good even
today. The writers in this thought have dwelt on human behaviour only in
rudimentary manner. The classical theory can be identified into three streams
of thoughts.
These are:
(a)
Scientific Management Theory introduced by F.W. Taylor
(b) Administrative
Theory introduced by Henry Fayol.
(c)
Bureaucratic model introduced by Max Weber.
The
scientific management group was mainly concerned with the tasks to be performed
at the operative levels.
Henry
Fayol studied for the first time the principles and functions of management.
Max Weber introduced bureaucracy as a form of rational organisation.
The detail
is given below:-
(a) Scientific Management Theory:
Scientific management theory of F.W. Taylor mainly gave importance
to shop level employees of the organisation. Taylor developed many ideas in
scientific management due to his early experience in a Steel Company. He was
working as an ordinary employee at Medieval Steel Company in Philadelphia
during 1878.
He later became the Chief Engineer of the company due to his sheer
efforts. His scientific management theory focused attention on performance of
job only. He showed how a worker can be made to work efficiently and increase
the production.
The critics of Taylor argued that his specialization principle of
work, as per scientific management was ineffective and also it could not make
the employees achieve their maximum efficiency at work.
(b) Administrative Theory:
Henry Fayol is one of the famous names to be attributed to this
theory. This theory made its contribution on the managerial aspect of an
organisation.
The theory is very much associated with the proper understanding
of the task of management. It provides directions or principles how to activate
management effectively. The guidelines enumerated by the theory on management
principles, objectives and the functions of management were also under
criticism.
Henry Fayol stressed effective management principles from his past
experience as a businessman. He separated technical and administrative
activities of management to distinguish them as two separate activities.
i. Division of work
ii. Authority and responsibility
iii. Discipline
iv. Unity of command
v. Unity of direction
vi. Subordination of individual to general interest
vii. Remuneration
viii. Centralisation
ix. Scalar chain
x. Order
xi. Equity
xii. Stability of tenure
xiii. Initiative, and
xiv. Team work.
These principles also could not make the desired effect in
organisational approach.
He put forward the management principles.
(c) Bureaucracy:
Max Weber’s bureaucracy is one of the accepted theories of
organisation. He stressed that organisation is a part of the social system. He
gave due importance to bureaucracy and its usefulness for effective functioning
of an organisation. He also made proper rules and procedures to regulate the
behaviour of personnel in an organisation.
Weber was of the opinion that bureaucracy would show greater
stability in the organisation in due course of time, as it could bring desired
results in organisational behaviour. His bureaucratic model of management is
well-known for its organisational structure. Weber’s contribution to management
authority structure and its sound relation of hierarchy are significant aspects
of his theory.
Max Weber, the German Sociologist is famous for his forms of
organisational structure. The bureaucracy advocated by him is much relevant today
for organisational design for the efficient functioning of an organisation. The
‘Red tape’ (formal channel of movement of files/ documents in offices leading
to inordinate delay in decision making) was under severe criticism.
2. Neo-Classical Organisation Theory:
The
classical theory of organisation focused its main attention on physiological
and mechanical variables of organisational functioning. The testing of these
variables does not show positive results. The Neo-classical writers tried to remove
the deficiencies of the classical school.
This theory consists of two schools of thought viz:
(a) Human
Relations propounded by Elton Mayo and Roethlisberges
(b)
Behavioural Science Approach introduced by A. Maslow, D. McGregor, F. Herzberg
and V. Vroom.
The
Hawthorne studies conducted by Elton Mayo and associates discovered that real
cause of human behaviour was somewhat more than mere physiological variables.
These studies revealed the importance of social and psychological factors in
determining workers’ productivity and satisfaction.
The pioneers of Behavioural Approach reasoned
that in as much as managing involves getting things done with and through
people the study of management must be centered around people and their
inter-personal relations. The advocates of this theory concentrated on
motivation, individual drives, group relations, leadership, group dynamics and
so forth.
3. Modern Organisation Theory:
Modern
organisation theory is of recent origin, having developed in early 1960s. This
theory has tried to overcome the drawbacks of earlier theories.
They theory may be understood in two approaches:
(a)
Systems Approach.
(b)
Contingency Approach.
The
systems approach studies the organisation in its totality. The mutually
dependent variables are properly analyzed. Both internal and external variables
are studied in analyzing the nature of organisation.
The contingency approach suggests that there
is no best way to handle all of the management problems and there is no
organisational structure to suit all the situations. A structure will be
suitable only if it is trailer made for an enterprise. This approach suggests
that needs, requirements, situations of a particular concern should be
considered while designing an organisational structure. The influence of both
internal and external factors should be considered in this context.
4. Motivation
Theory:
It is concerned with the study
or work motivation of employees of the organisation. The works are performed
effectively if proper motivation is given to the employees. The motivation may
be in monetary and non-monetary terms. The inner talents of any person can be
identified after giving adequate motivation to employees. Maslow’s hierarchy of
needs theory and Honberg’s two factor theory are some of the examples of
motivation theory.
5. Decision Theory:
The other name of decision
theory is decision making theory. This theory was given by Herbert. A. Simon.
He was awarded Nobel Prize in the year of 1978 for this theory. He regarded
organisation as a structure of decision makers. The decisions were taken at all
levels of the organisation and important decisions (policy decisions) are taken
at the higher levels of organisation. Simon suggested that the organisational
structure be designed through an examination of the points at which decisions
must be made and the persons from whom information is required if decisions
should be satisfactory.
CONCEPT
OF ORGANISATIONAL STRUCTURE:-
Meaning of Organisational Structure:
Organisational
structure means a developed enterprise being operated to achieve the given
goals. It involves the structure of relationships among positions and jobs with
the object of accomplishment of enterprise objectives.
It is a
systematic combination of people, functions and facilities. It may take the
form of line staff and line and staff. As a function it refers to establishing
relationship between activities and authority pertaining to an enterprise.
An organisational structure is defined as the
pattern or network of relationships that exist among various positions. It is a
pattern of relationships that has been generated through a conscious planning
process. Key executives typically decide upon the basic pattern of structure
that in their opinion will be most appropriate for themselves, their work, and
organisation goals.
According to Peter Drucker, organisational
structure is an indispensable means, and a wrong structure will seriously
impair business performance and may even destroy it. Organisational structure
must be so designed as to make possible the attainment of the objectives of the
business for five, ten or fifteen years hence.
An organisational
structure should be designed to clarify who is to do what takes and who is
responsible for what results, to remove obstacles to performance caused by
confusion and uncertainty of assignment, and to furnish decision-making and
communications networks reflecting and supporting enterprise objectives.
FOUR
BASIC TYPES OF ORGANISATIONAL STRUCTURE:-
1. Functional Structures
Basing your structure on employee functions is an simple
concept for organizing the company. Different functions such as marketing,
finance, human resources and Internet Technology each have their own department
and each department focuses exclusively on that function. The drawback is that
a department may fixate on its own function, its own budget and its own goals
with no thought for the company as a whole. Even when problems require
solutions from multiple departments, they may not cooperate.
2. Divisional Structure
Divisions are mini-companies built around particular
products or regions. A car company could have one division for SUVs, one for
luxury cars, and another for economy vehicles, for example. Each division
contains all the functions necessary to handle business for that region or
product line. Because everyone in the division shares a common goal, such as
boosting sales for their products, there's more cross-function cooperation,
according to Lumen Learning.). The downside is
that every division duplicates the same functions – sales, marketing and
manufacturing – which is often wasteful.
3. Process Structure
The process structure divides up the organization around
processes, such as research, manufacturing and sales. Unlike a purely
functional structure, a process-based organization considers how the different
processes relate to each other and the customer. The sales process doesn't
begin until the manufacturing process produces something to sell;
manufacturing, in turn, waits on research and development to create the
product. Process-based structures are geared to satisfying the customer – the
end result of all the processes – but they only work if managers understand how
the different processes interact.
4. Matrix Structure
The matrix structure is often overlaid on top of a
company's functional structure to tackle projects that involve multiple
departments. Project managers recruit staff for their teams from different
departments so that all the necessary functions work on it together. This
offers companies flexibility and a better use of resources than a purely
functional model, according to Indeed. The downside is
that authority and the chain of command become more confused, as team members
answer to both the project manager and their department supervisor.
IMPORTANCE OF ORGANISATIONAL STRUCTURE:-
1. Clear
definition of authority, responsibility relationship facilities better
understanding of the objectives and the policies of the enterprise.
2.
Organisational structure lays down both channels and the patterns of
communication. It facilitates proper administration.
3. It
helps to coordinate activities of the component parts in order to facilitate
the realisation of the goals of the organisation.
4. It
helps in growth and diversification of the activities of an organisation.
5.
Workers, participation in organisation increases their cooperation and improves
their will to work. It stimulates initiation and creative thinking.
6.
Implementation of policies and the achievement of the goals become easier.
7. It prevents duplication of
functions and makes it possible to achieve maximum production with minimum
efforts.
FORMS OF ORGANISATIONAL CULTURE:-
1. 1.The
Clan Culture: This culture is
rooted in collaboration. Members share commonalities and see themselves are
part of one big family who are active and involved. Leadership takes the form
of mentorship, and the organization is bound by commitments and traditions. The
main values are rooted in teamwork, communication and consensus. A prominent
clan culture is Tom’s of Maine, the maker of all-natural hygiene products. To
build the brand, founder Tom Chappell focused on building respectful
relationships with employees, customers, suppliers and the environment itself.
- The
Adhocracy Culture:
This culture is based on energy and creativity. Employees are encouraged
to take risks, and leaders are seen as innovators or entrepreneurs. The
organization is held together by experimentation, with an emphasis on
individual ingenuity and freedom. The core values are based on change and agility.
Facebook can be seen as a prototypical adhocracy organization, based on
CEO Mark Zuckerberg’s famous admonition to, “Move fast and break things –
unless you are breaking stuff, you are not moving fast enough.”
- The
Market Culture: This culture is built upon
the dynamics of competition and achieving concrete results. The focus is
goal-oriented, with leaders who are tough and demanding. The organization
is united by a common goal to succeed and beat all rivals. The main value
drivers are market share and profitability. General Electric under ex-CEO
Jack Welch is a good example of this culture. Welch vowed that every G.E.
business unit must rank first or second in its respective market or face
being sold off. Another example of the market culture is software giant
Oracle under hard-driving Executive Chairman Larry Ellison.
- The Hierarchy Culture: This culture is founded on structure and control. The work environment is formal, with strict institutional procedures in place for guidance. Leadership is based on organized coordination and monitoring, with a culture emphasizing efficiency and predictability. The values include consistency and uniformity. Think of stereotypical large, bureaucratic organizations such as McDonald’s, the military, or the Department of Motor Vehicles.
