ORGANIZATION

THEORIES FOR
EFFECTIVE BUSINESS
MANAGEMENT
WHY STUDY ORGANIZATIONAL
THEORY?
•Organizational theory studies
organizations to identify how they
solve problems and how they
maximize efficiency and productivity.
 ORGANIZATIONAL THEORY
•It uses patterns to formulate
normative theories of how
organizations function.
•It can be used to learn the best
ways to run an organization.
 ORGANIZATIONAL THEORY
•The study of the structure,
functioning and performance of
organization and the behavior
of individual and groups within
it.
DIFFERENT ORGANIZATIONAL THEORIES

•The Classical Theory

•Neo-Classical Organization Theory
•Contingency Theory
•Systems Theory
 THE CLASSICAL THEORY
• It focuses primarily on efficiency and productivity
and does not consider behavioral attributes of
employees.
• Classical organizational theory combines aspects
of scientific management, bureaucratic theory,
and administrative theory.
 NEO-CLASSICAL ORGANIZATION THEORY
• A reaction to the authoritarian structure of classical theory.
• The neo-classical approach emphasizes the human needs of
employees to be happy in the workplace.
• This allows creativity, individual growth, and motivation, which
increases productivity and profits.
• This approach is often referred to as “behavioral theory of
organization” or “human relations” approach in organizations.
• The primary focused of Neo-Classical theory in the organization
is the human beings.
 CONTINGENCY THEORY
• It accepts that there is no universally ideal leadership style because
organization faces unique circumstances internally and externally.
• Productivity is a function of a manager’s ability to adapt to
environmental changes.
• Managerial authority is important for highly volatile industries.
• This allows managers the freedom to make decisions based on
current situations.
• It reveals situations that require more intense focus and take
account of unique circumstances.
 SYSTEMS THEORY
• All organizational components are interrelated
• It views organizations as open systems in a state of dynamic
equilibrium, which are continually changing and adapting
to environment and circumstance.
• The view of organizations as open social systems that must
interact with their environments to survive.
• The basic idea behind system theory is “The whole is
greater than the sum of its parts”.