week 3 Organizational Theories week 3 Organizational Theories

week 3 Organizational Theories

1. Organizational theories and Types of organizations

2. In this chapter we will discuss 🔹 Introduction : Why theories are needed to understand organizations. Classical Theories Scientific Management (Frederick Taylor) Administrative Theory (Henri Fayol – principles of management) Neo-Classical Theories Human Relations Approach (Elton Mayo) Behavioral Approach (focus on motivation, leadership, communication) Modern Theories Systems Theory (organization as open system – input, process, output) Contingency Theory (management depends on situation/environment) Types of Organizations 🔹 Classification from different perspectives: (A ) Based on Structure (B) Based on formality

3. Introduction Organizations are complex systems where people, technology, resources, and goals interact. To understand how they work, we need theories. A theory provides a framework or “map” that helps managers, researchers, and students explain, predict, and improve organizational behavior. Provide Understanding – Theories explain how organizations work and why things happen in a certain way . Guide Managers – They give managers ideas and principles to make better decisions (e.g., how to structure work, motivate employees ). Predict Behavior – Theories help us guess what will happen if we apply certain practices (e.g., good communication → higher teamwork ). Learn from Past Experience – Theories are built on past research and practices, so we can avoid mistakes and improve methods.

4. Organizational Theories Classical Theories (Early 1900s, Europe & USA ): Developed during the industrial revolution when factories needed efficiency and discipline. Main contributors were F.W. Taylor (USA, Scientific Management, 1911) , Henri Fayol (France, Administrative Theory, 1916) , and Max Weber (Germany, Bureaucracy, 1920s) . They focused on structure, rules, and efficiency, treating organizations like machines. Neo-Classical Theories (1930s–1950s, USA ): Emerged when managers realized workers are not just motivated by money but also by social and psychological needs. The famous Elton Mayo’s Hawthorne Studies (USA, 1924–1932) led to the Human Relations Approach . Later, behavioral scientists like Maslow, Herzberg, and McGregor (1940s–50s) added theories of motivation and leadership. These theories saw the organization as a social system . Modern Theories (1960s onwards, Global): Developed after World War II when organizations became larger and environments more complex. Systems Theory (Katz & Kahn, 1966) explained organizations as open systems with input, process, output, and feedback. Contingency Theory (Fiedler, Burns & Stalker, 1960s) argued that there is no one best way to manage—management depends on the situation. Modern theories stress flexibility and adaptation to environment.

5. Classical Theories Scientific Management (Frederick Taylor) Frederick Winslow Taylor (1856–1915) is known as the “Father of Scientific Management .” He introduced new ideas to improve efficiency and productivity in factories during the early 20th century . His famous book: “Principles of Scientific Management” (1911).

6. Principles of Scientific Management Taylor gave four key principles: Science, Not Rule of Thumb Replace traditional methods with scientific study of each job. Example: Find the “one best way” to do a task. Harmony, Not Discord Promote cooperation between workers and managers, instead of conflicts. Example: Workers and managers should see themselves as partners.

7. 3. Mental Revolution Both workers and management should change their attitude: Workers should do their best. Managers should provide fair wages and good conditions. 4. Maximum Output, Not Restricted Output Focus on achieving high productivity for benefit of both employer and employee.

8. Classical Theories Administrative Theory (Henri Fayol ) Henri Fayol , a French industrialist, is now recognized as the Father of Modern Management. In the year 1916 Fayol wrote a book entitled "Industrial and General Administration". In this book, he gave the 14 Principles of Management .

9. Henri Fayol - Principles of management Division of Work: Specialization increase output by making employees more efficient. Authority : Manager must be able to give orders and authority gives them this right. Discipline : Employee must obey and respect the rules that govern the organization. Unity of command: Every employee should receive orders from only one superior. Unity of direction: The organization should have a single plan of action to guide managers and workers.

10. Subordination of individual interest to the general interest. Remuneration : Workers must be paid a fair wage for their services. Centralization : This term refers to the degree to which subordinates are involved in decision making . Scalar Chain: The line of authority from top management to the lowest cranks is the scalar chain Order : People and materials should be in the right place at the right time. Equity : Managers should be kind and fair to their subordinates. Stability of tenure of personnel: Management should provide orderly planning and ensure that replacements are available to fill vacancies. Initiative : Employees who are allowed originate and carry out plans will exert high levels of efforts. Esprit de corps : Promoting team spirit will build harmony and unity.

11. Neo-Classical Theories 1 . Human Relations Approach (Elton Mayo) He found that workers are not only motivated by money , but also by attention, friendship, and feeling valued . Workers need social belonging (friends, teamwork ). If managers give attention , workers perform better (Hawthorne Effect ). Informal groups inside the organisation affect behaviour (workers listen to their group ). Good communication between workers and managers increases trust. e.g , If a teacher encourages students and makes them feel important, they study harder. Same with workers.

12. Neo-Classical Theories 2. Behavioral Approach Focused on understanding human behavior deeply (psychology and sociology). Motivation – Why do people work hard? Maslow’s Hierarchy of Needs (basic → love → respect → growth ). Leadership – Managers must lead in the right way. Communication – Clear and open communication reduces problems . Teamwork (Group Behavior) – People work better in cooperative teams.

13. Modern Theories of Organization Systems Theory An organization works like a living system that takes in inputs, changes them, and gives outputs. It is open → meaning it interacts with its environment (society, economy, customers, technology ). Input → Resources enter (people, money, raw material, information). Process → Work is done inside (manufacturing, teaching, services). Output → Final result (products, services, profit, graduates). Feedback → Response from environment (customer satisfaction, exam results, market demand ).

14. Example: A hospital: Input = doctors, nurses, patients, medicine. Process = treatment. Output = healthy patients. Feedback = patient satisfaction, health statistics.

15. Modern Theories of Organization Contingency Theory Contingency Theory explains that there is no single best way to manage an organization. The right management style or structure always depends on the situation and environment. Unlike classical theories, which suggested fixed rules and principles, contingency theory says that managers must be flexible and adjust according to circumstances. For example , in a stable environment, such as a small bakery, simple rules and structure may work well. But in a fast-changing environment, like an IT company, management must be flexible, creative, and team-oriented.

16. Types Of Organizations: An organization is a collection of people who work together to attain the specified objectives. 🔹 Classification from different perspectives : Based on Structure Line Organization Line and Staff Organization Matrix Organization Project Organization Based on Formality Formal Organizations (official, rules-based) Informal Organizations (social groups, networks inside organization)

17. Based on Structure Line Organization Oldest and simplest form . Authority flows from top to bottom in a straight line . Very clear roles, easy to understand, quick decisions . Limitation: Very rigid, little flexibility, workload is high on top managers . Example : Small family-owned businesses.

18. Based on Structure Line and Staff Organization A combination of line managers (who make decisions and give orders) and staff specialists (who provide advice ). Line managers hold authority, staff experts support them with knowledge . Brings expertise in decision-making, reduces errors, improves quality . Example: A production manager (line) taking guidance from HR or finance experts (staff)

19. Based on Structure Functional Organization Work is divided according to specialization (marketing, finance, HR, production ). Each specialist controls his function . Example : A company with separate finance, HR, and marketing departments .

20. Based on Structure Project Organization Temporary structure made to complete a specific project . After the project is completed, the organization may dissolve . Example : Organizations formed for building a dam, highway, or launching a new product.

21. Based on Structure Matrix Organization A Matrix Organization is more modern and flexible because it combines both functional departments and project teams. Here, employees have two bosses—one functional manager and one project manager—which improves coordination but can also cause confusion.

22. Based on Formality A formal organization is officially created by management and is based on written rules, regulations, and hierarchy. It clearly defines authority, responsibilities, and communication channels. Examples include schools, banks, and government departments where work is performed according to official procedures. In contrast, an informal organization is not officially planned but develops naturally through personal relationships, friendships, and social networks among employees inside the organization. For example, colleagues who form a lunch group or workers who share ideas informally. While formal organizations ensure order and discipline, informal organizations promote cooperation, trust, and better communication among members.