organization theories

Definitions for Organization

•        Organization as Group of people

•        Organization as Structure – prescribes the relationships among individuals and positions they hold.

•        Organization as Process

Elements

1.     Departmentation

 Creating departments

       Identify activities to achieve the objective

       Activities should be synchronized and co ordinate

2.    Linking Departments

Link departments to operate in a co ordinate manner

3.    Defining Authority and Responsibility

·       Responsibility- Assign activities to an individual or group

·       Authority – People do the job if they get command from the higher authority

4.    Prescribing Authority Relationships

Give an idea about the authority structure

Define Organization Theory

“A set of concepts, definitions and propositions (suggestions) that attempts to predict how individuals, groups behave in differing organizational situations/arrangements.”

3 Organization theories exist

1.    Classical Organization Theory

2.    Neo Classical Organization Theory

3.    Modern theory- Systems theory

1.    Classical Organization Theory(Machine/structural/physiological

                                                        theory)

Classical- traditionally accepted, established

Figure

Organization as a machine, human beings different components of    

that machine

Focus on i/p o/p ratio of machine

Doesn’t consider human feelings/problems.

Not get affected by external environment variables

Contributions from Henri Fayol, Taylor,Weber etc.

4 major pillars of classical theory

1.    Division of labor/work specialization

2.    Scalar and functional processes

Scalar process refers to growth of chain of command, delegation of authority,unity of command,obligation to report.

Provides a scale for measuring the duties according to authority and responsibility.

Output is superior-subordinate relationship.

Functional process refers to division of organization in to different units (Marketing,finance etc).

Each unit is functionally different from others.

Five basic components of Scalar and functional processes

a)    Departmentation

Division of work/work specialization achieved through Departmentation

Bases of Departmentation

                                                                          i.          Function(activities)

Example: marketing, finance, production, personnel

                                                                         ii.          Product

Example: Car Division, Truck Division, Bus Division

                                                                       iii.          Territory(geographic location)

Trivandrum unit, Ernakulum unit

                                                                       iv.          Customer

Wholesale, retail, export

b)    Co ordination by hierarchy

Work is being divided, some sort of co ordination is necessary.

Done thru chain of command

A Superior for every subordinate

c)     Unity of Command

d)    Delegation of Authority

A person has been given some duties to perform (Responsibility).

He needs some decision making power, handover this power.

e)    Line and staff relationships

Line relationship exist between superior and subordinate.

Giving directions, orders.

Staff relationship means people at same level.

All the HOD’s are at same level they will give advices.

3.    Structure

It is the frame work of formal relationships among various tasks, activities and people in the organization.

Examples: SDLC life cycle, organization structure in an organization

2 types of Organization structure

a)    Centralized

b)    De-centralized

4.    Span of control

It refers to the number of sub ordinates which can be effectively managed by a superior.

Limited bcz of limited amount of knowledge and capacity of manager.

2 types – wide span, narrow span

Controlling difficult

Criticisms of Classical Theory.

1.    Closed System Assumptions

Organization is a closed system

Doesn’t interact with environment.

Organization structure, design doesn’t change with technology, size etc.

Human beings treated like a machine

They can always be rational (intelligent)

2.    Static view of organization

Organization structure/design doesn’t change according to technology, size, and people.

3.    Too much reliance on classical pillars

Can’t rely on pillars, becz now a day’s organization structure is tailor made and not based on these pillars.

Based on the user requirements we should build a new one.

4.    Lack of universality

5.    Lack of empirical research

All the principles (Fayol, Taylor etc) are from their personal experience; do not have a scientific explanation.

Neo classical theory

Propositions of Neo classical theory

1.    Organization is a social system.

2.    It is affected by environment variables

3.    Informal organization is created

4.    Human being cannot always be rational bcz he is affected by changes in environment variables.

5.    If get motivated people perform well

6.    Communication between employees needed to exchange their feelings

7.    Team work is essential for co operation among people.

Three pillars of Neo classical Theory

1.    Flat structure

Tall structure--- communication problem, differentiation between decision makers and implementers.

Lack of motivation, expensive bcz of too many levels

Flat structure- people at same level, wide span of control

2.    Decentralization( gives importance to sub ordinate)

3.    Informal organization

In classical organization we follow formal organization.

It has some problems.

	Formal organization	Informal organization
Design	Top management to fulfill the organizations objectives	Not designed and planned, natural outcome, personal satisfaction is the objective
Bases	Division of labor, efficiency in operation	Similarities in age,sex,reigion,caste,place of origin
Coordination and control	Rules and regulations of organization	Group norms

Advantages of Neo classical theory

1.    Informal organization

2.    Informal leader

3.    Group norms

4.    Non economic motivation(personal satisfaction)

5.    Irrational behavior

Disadvantages

1.    Not a new one, modified classical theory

2.    Not applicable to all situations.

FIRST ASSIGNMENT

Henri Fayols 14 Principles of Management

HENRI FAYOL’S 14 Principles of Management

There are 14 Principles of Management described by Henri Fayol.

1. Division of Labor
1. Henry Fayol has stressed on the specialization of jobs.
2. He recommended that work of all kinds must be divided & subdivided and allotted to various persons according to their expertise in a particular area.
3. Subdivision of work makes it simpler and results in efficiency.
4. It also helps the individual in acquiring speed, accuracy in his performance.
5. Specialization leads to efficiency & economy in spheres of business.
2. Party of Authority & Responsibility
1. Authority & responsibility are co-existing.
2. If authority is given to a person, he should also be made responsible.
3. In a same way, if anyone is made responsible for any job, he should also have concerned authority.
4. Authority refers to the right of superiors to get exactness from their sub-ordinates whereas responsibility means obligation for the performance of the job assigned.
5. There should be a balance between the two i.e. they must go hand in hand.
6. Authority without responsibility leads to irresponsible behavior whereas responsibility without authority makes the person ineffective.
3. Principle of One Boss
1. A sub-ordinate should receive orders and be accountable to one and only one boss at a time.
2. In other words, a sub-ordinate should not receive instructions from more than one person because -

-  It undermines authority
-  Weakens discipline
-  Divides loyalty
-  Creates confusion
-  Delays and chaos
-  Escaping responsibilities
-  Duplication of work
-  Overlapping of efforts

3. Therefore, dual sub-ordination should be avoided unless and until it is absolutely essential.
4. Unity of command provides the enterprise a disciplined, stable & orderly existence.
5. It creates harmonious relationship between superiors and sub-ordinates.
3. Unity of Direction
1. Fayol advocates one head one plan which means that there should be one plan for a group of activities having similar objectives.
2. Related activities should be grouped together. There should be one plan of action for them and they should be under the charge of a particular manager.
3. According to this principle, efforts of all the members of the organization should be directed towards common goal.
4. Without unity of direction, unity of action cannot be achieved.
5. In fact, unity of command is not possible without unity of direction.

Basis	Unity of command	Unity of direction
Meaning	It implies that a sub-ordinate should receive orders & instructions from only one boss.	It means one head, one plan for a group of activities having similar objectives.
Nature	It is related to the functioning of personnel’s.	It is related to the functioning of departments, or organization as a whole.
Necessity	It is necessary for fixing responsibility of each subordinates.	It is necessary for sound organization.
Advantage	It avoids conflicts, confusion & chaos.	It avoids duplication of efforts and wastage of resources.
Result	It leads to better superior sub-ordinate relationship.	It leads to smooth running of the enterprise.

Therefore it is obvious that they are different from each other but they are dependent on each other i.e. unity of direction is a pre-requisite for unity of command. But it does not automatically comes from the unity of direction.

5. Equity
1. Equity means combination of fairness, kindness & justice.
2. The employees should be treated with kindness & equity if devotion is expected of them.
3. It implies that managers should be fair and impartial while dealing with the subordinates.
4. They should give similar treatment to people of similar position.
5. They should not discriminate with respect to age, caste, sex, religion, relation etc.
6. Equity is essential to create and maintain cordial relations between the managers and sub-ordinate.
7. But equity does not mean total absence of harshness.
8. Fayol was of opinion that, “at times force and harshness might become necessary for the sake of equity”.
6. Order
1. This principle is concerned with proper & systematic arrangement of things and people.
2. Arrangement of things is called material order and placement of people is called social order.
3. Material order- There should be safe, appropriate and specific place for every article and every place to be effectively used for specific activity and commodity.
4. Social order- Selection and appointment of most suitable person on the suitable job. There should be a specific place for every one and everyone should have a specific place so that they can easily be contacted whenever need arises.
7. Discipline
1. According to Fayol, “Discipline means sincerity, obedience, respect of authority & observance of rules and regulations of the enterprise”.
2. This principle applies that subordinate should respect their superiors and obey their order.
3. It is an important requisite for smooth running of the enterprise.
4. Discipline is not only required on path of subordinates but also on the part of management.
5. Discipline can be enforced if -

-  There are good superiors at all levels.
-  There are clear & fair agreements with workers.
-  Sanctions (punishments) are judiciously applied.

8. Initiative
1. Workers should be encouraged to take initiative in the work assigned to them.
2. It means eagerness to initiate actions without being asked to do so.
3. Fayol advised that management should provide opportunity to its employees to suggest ideas, experiences& new method of work.
4. It helps in developing an atmosphere of trust and understanding.
5. People then enjoy working in the organization because it adds to their zeal and energy.
6. To suggest improvement in formulation & implementation of place.
7. They can be encouraged with the help of monetary & non-monetary incentives.
9. Fair Remuneration
1. The quantum and method of remuneration to be paid to the workers should be fair, reasonable, satisfactory & rewarding of the efforts.
2. As far as possible it should accord satisfaction to both employer and the employees.
3. Wages should be determined on the basis of cost of living, work assigned, financial position of the business, wage rate prevailing etc.
4. Logical & appropriate wage rates and methods of their payment reduce tension & differences between workers & management creates harmonious relationship and pleasing atmosphere of work.
5. Fayol also recommended provision of other benefits such as free education, medical & residential facilities to workers.
10. Stability of Tenure
1. Fayol emphasized that employees should not be moved frequently from one job position to another i.e. the period of service in a job should be fixed.
2. Therefore employees should be appointed after keeping in view principles of recruitment & selection but once they are appointed their services should be served.
3. According to Fayol. “Time is required for an employee to get used to a new work & succeed to doing it well but if he is removed before that he will not be able to render worthwhile services”.
4. As a result, the time, effort and money spent on training the worker will go waste.
5. Stability of job creates team spirit and a sense of belongingness among workers which ultimately increase the quality as well as quantity of work.
11. Scalar Chain
1. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate authority to the lowest”.
2. Every orders, instructions, messages, requests, explanation etc. has to pass through Scalar chain.
3. But, for the sake of convenience & urgency, this path can be cut shirt and this short cut is known as Gang Plank.
4. A Gang Plank is a temporary arrangement between two different points to facilitate quick & easy communication as explained below:
12.  Sub-Ordination of Individual Interest to General Interest

1. An organization is much bigger than the individual it constitutes therefore interest of the undertaking should prevail in all circumstances.
2. As far as possible, reconciliation should be achieved between individual and group interests.
3. But in case of conflict, individual must sacrifice for bigger interests.
4. In order to achieve this attitude, it is essential that -

-  Employees should be honest & sincere.
-  Proper & regular supervision of work.
-  Reconciliation of mutual differences and clashes by mutual agreement. For example, for change of location of plant, for change of profit sharing ratio, etc.

13. Espirit De’ Corps (can be achieved through unity of command)
1. It refers to team spirit i.e. harmony in the work groups and mutual understanding among the members.
2. Spirit De’ Corps inspires workers to work harder.
3. Fayol cautioned the managers against dividing the employees into competing groups because it might damage the moral of the workers and interest of the undertaking in the long run.
4. To inculcate Espirit De’ Corps following steps should be undertaken -

§ There should be proper co-ordination of work at all levels

§ Subordinates should be encouraged to develop informal relations among themselves.

§ Efforts should be made to create enthusiasm and keenness among subordinates so that they can work to the maximum ability.

§ Efficient employees should be rewarded and those who are not up to the mark should be given a chance to improve their performance.

§ Subordinates should be made conscious of that whatever they are doing is of great importance to the business & society.

5. He also cautioned against the more use of Britain communication to the subordinates i.e. face to face communication should be developed. The managers should infuse team spirit & belongingness. There should be no place for misunderstanding. People then enjoy working in the organization & offer their best towards the organization.
13. Centralization & De-Centralization
1. Centralization means concentration of authority at the top level. In other words, centralization is a situation in which top management retains most of the decision making authority.
2. Decentralization means disposal of decision making authority to all the levels of the organization. In other words, sharing authority downwards is decentralization.
3. According to Fayol, “Degree of centralization or decentralization depends on no. of factors like size of business, experience of superiors, dependability & ability of subordinates etc.
4. Anything which increases the role of subordinate is decentralization & anything which decreases it is centralization.
5. Fayol suggested that absolute centralization or decentralization is not feasible. An organization should strike to achieve a lot between the two.