ORGANIZATIONAL THEORY

Lesson Objectives:
1. define the term ‘organization’
2. Explain the need for a theory to examine organizations
3. Explain classical and neoclassical theory of organization

What are organizations and why are they an important subject of study?
Organizations are universal- they are present all over the world. They affect nearly all aspects of
human life: birth, growth, development, education, work, social relations, healthy and even death
(Hodge, Anthony, & Gales, 2003). Indeed, one of the largest organizations that we must all
conform to and live by its aspirations is the government; often established by a constitution
which is the supreme law of the land. Yet, very often our understanding of complexities of
organizations and organizational life is limited.

Organizational theory aims to achieve three important goals:

 build a basis for understanding organizations
 provide a foundation for working successfully in organizations and
  for participating in or initiating efforts to change and adapt organizations to new
conditions.

Defining the term ‘Organization’

An organization is made up of two or more people working together co-operatively within
identifiable boundaries to accomplish a common goal or objective (Hodge et al., 2003)

Four important aspects of organizations emerge from this definition:

1. Organizations are made up of people - the human component is therefore important
because of its complexity nature of social relationships, variability and diversity.
2. When people work together, various things become necessary. For example, the division of
labor among people and the need for specialized knowledge
3. Organizations have identifiable boundaries such as people and membership and where
certain activities take place.
4. Organizations are purposeful, goal seeking work arrangements. That is organizations
exist to pursue commonly held goals (Hodge et al., 2003)

Modern organizational challengesAccording to Hodge et al. (2003),

Modern organizations face several key challenges as further explained:
1. Managing organizations in a global environment – virtually all businesses are affected in
one way or another by a host of global issues – pandemic, export import restrictions,
e-commerce,terrorism
2. Designing and structuring (or restructuring) organizations- For example, cutting back
onpersonnel and evolving new organizations
3. Improving quality, empowering organization members, and enhancing competitiveness-
a total quality management concept is now placed on the fore front with emphasis on
maximizing productivity and minimizing costs
4. Reducing complexity, increasing speed, and reacting to environmental changes –
highspeed, high capacity computing, advanced telecommunications; and worldwide electronic
media coverage have increased the speed with which information is transmitted
5. Providing ethical and moral management of the organizations – Pessimists argue
that business ethics is an oxymoron - has contradictory connotations. Increasingly however
there is a heightened demand for ethical behavior and traditional business objectives and
operations to be consistent. Society no longer accepts any business that is purely run for selfish
gains.
Why do we need a theory to examine organizations?
A theory is necessary to provide a systematic explanation of any study. A theory can be defined
as an explanation of some phenomenon, consisting of principles that state relationships observed
in association with that phenomenon (Hodge et al., 2003).

Organization theory can therefore be perceived as a set of related concepts, principles and
hypotheses about organizations that explain components of organizations and how they relate to
each other.
The purpose of these theory is to ‘explain and predict’ , explain and observe organization
behavior.. predict future organizational behaviour and influence future organizational behavior.

The classical School (Organization Centered)

Organization and management theories in this category perceive organization issues

from different directions. We have two main proponents in this school: 1. Fredrick
Winslow Taylor(1856-1915) and Henri Fayol (1841-1925).

Taylor focused on rationalizing jobs beginning from the lowest level of the organization.
Fayol concentrated on providing a rational model for top management of an organization
(Hodge et al., 2003). Taylor attempted to develop the principles of scientific management which
some theorists in later years considered them to be ‘dehumanizing’ and ‘exploitive of workers’
(Hodge et al., 2003). He emphasized the need to attain efficiency and how management
could maximize its return on labor by employing his principles.

According to Henri Fayol, the management functions of co-ordination and specialization

are extremely important; and co-ordination is best achieved using four of his principles:

1. Division of Labor
Greater efficiency can be attained through the division and specialization of labor Adam
Smith (1723-1790). He based his principle on a factory case in which through specialization and
division of labor among workers, 10 people could produce as many as 48,000 pins per day (Hodge
et al., 2003).

2. The Scalar Chain

Deal with the vertical and horizontal growth of the organization, respectively. The scalar
process refers to the growth of the chain of command, the delegation of authority and
responsibility, unity of command and the obligation to report.For example, in an organization
there are employees A, B, C, D, E, F, G, H, I, at various posts. If employee 'C' has to
communicate with employee 'G' using the scalar chain, the route should be like C-B-A-F-G.
Thus there will be four steps for the information to reach from employee 'C' to the
employee 'G'

3. Unit of Command
Fayol wrote that "an employee should receive orders from one supervisor only." Otherwise,
authority, discipline, order, and stability are threatened. ..
Under the principles of war, unity of command means that all the forces fall under one
responsible commander. It requires a single commander with the requisite authority to direct all
forces in pursuit of a unified purpose. Simply put, it means one mission, one boss.
4. Span of Control
This is about actual numbers of subordinates looking downwards.
It refers to the number of subordinates controlled directly by a superior. The bigger the
number of the subordinates a manager controls, the broader is her/his span of control.

The human relations school/ Neoclassical Theory of Organization (Employee Centered)

The neoclassical theory of organization embarked on the task of compensating for some of the
deficiencies in classical doctrine. Generally, the neoclassical approach takes the postulates of the
classical school, regarding the pillars of organization as given. But these postulates are regarded
as modified by people, acting independently or within the context of the informal organization.
This explored the role of groups and social processes within an organization.

Several researchers contributed to the development of this theory, however the most significant is
Elton Mayo and his Hawthorne studies (Hodge et al., 2003) The studies questioned the
rational, efficiency-oriented views of scientific management principles. That, these were
inadequate in so far as addressing the human side of enterprise is concerned. More objectively,
the Hawthorne studies found out that, workers were more responsive to group involvement and
managerial attention than to financial incentives. Therefore, group interactions and social climate
are important to job performance.This school emphasized that, organizations were
composed of people, who had roles and responsibilities beyond their work organizations.
Accordingly, effective social interactions and relationships are a valuable asset to them and to
the organization as a whole (Hodge et al., 2003).

Contemporary theorists adopting aspects of this school, emphasize such features like:

1. Informal structureSocial group within the organization

2. Power and political behavior in organization

organization use their power to satisfy their common needs or get what they want. While Groups
or organizations use power and politics to control their members and employees for obtain and
maintain to achieve their goals.