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.