Organizational Theory

Organizational theory is the study of how organizations (groups of people who work toward a shared goal) form, operate, and change. The first organizational theories dealt with bringing structure to many previously unregulated businesses and other organizations. Later theories emphasized the human elements of organizations, taking steps to ensure that workers were supported and motivated. The main theories include classical theory, neoclassical theory, modern systems theory, contingency (or decision) theory, and chaos theory.

Development

Hundreds of years ago, most people were self-supporting. They grew their own food and handcrafted many of the objects essential to daily life. As a result, businesses and other organizations were unnecessary. Starting with the Industrial Revolution that began in the late eighteenth century, however, organizations became much more common. They soon became a major part of world societies.

An organization is a group of people who work cooperatively with a shared purpose, usually to produce some good or service. There are many types of organizations and many approaches to understanding, designing, and managing them. These considerations fall under the umbrella term "organizational theory." Starting in the early twentieth century, when organizations began rapidly growing in size, scope, and importance, organizational theory became an important facet of sociological and economic studies.

At first, organizational theory focused on structure. Prior to the twentieth century, most businesses and organizations made their own internal decisions with little regard for convention. Lack of study and regulation led to much arbitrary management behavior, ranging from the inefficient to the abusive. Theorists hoped that adopting more standardized business structures would help both employers and employees find motivation and develop more effective practices.

In time, succeeding generations of analysts revised these ideas and added more flexibility and a greater focus on humanistic elements. Their aim was to make businesses not only economically successful but also more personally fulfilling for managers and laborers alike. Throughout the twentieth century and beyond, a number of important organizational theories reflected these changing mindsets.

Classical Theory

The first main organizational theory, classical theory (also known as scientific theory or Taylorism, after one of its proponents), was developed during the first half of the twentieth century. Classical theory was based on the idea that the primary goal of an organization was the efficient production of goods and services; the well-being of the organization's workers was a secondary consideration. It also framed business for the first time as a science that could be studied, controlled, and manipulated to increase efficiency.

The scientific aspect of classical theory stressed that each task had a particular method. Managers had to understand these methods and choose the best workers to handle them. Managers and workers alike needed training for their specialized tasks, and managers had to closely supervise and control the workers to ensure the task was performed properly.

Managerial power in the classical system was upheld by a bureaucratic structure, a centralized hierarchy in which a primary leader empowers a small group of secondary leaders to manage different groups of workers. In this kind of hierarchy, authority flows down along a chain of command from the most powerful to the least powerful. The average worker has little, if any, say in management decision-making.

Among the key proponents of classical theory were Frederick Winslow Taylor, who stressed the importance of well-trained managers to organizational success (and who lent his name to the term "Taylorism"), and Max Weber, who examined ways in which organizations are affected by the cultures in which they exist. These and other classical theorists helped revolutionize the study and improvement of businesses. However, their principles soon faced serious criticism by reformers who viewed the classical system as too strict in its prioritizing of economic benefits over the freedom and happiness of workers.

Neoclassical Theory

Reformers who thought the classical theory was too harsh began proposing new and revised theories of organization. These theories fall under several names but most often are known as neoclassical theory or human relations theory. These schools of thought borrow some elements of classical theory but add important elements of humanism and various social elements of organizations.

Neoclassical theorists acknowledged that workers, as humans, differ from one another. They have not only different skills and abilities but also different motivations and work habits. By paying attention to workers' wants and needs, neoclassical managers could customize some aspects of the work experience to better suit them. This could lead to fresh ideas, increase productivity, and develop cooperation between workers and managers—all benefits to the organization.

Managers under the neoclassical system served as coaches, helping workers find the best methods for them and fostering their potential, rather than simply as authoritarian lawmakers or enforcers. This method proved successful in increasing many organizations' outputs and worker morale. Later, some theorists added new employee-centered elements to create a revised organizational principle called human resources theory.

Other Modern Theories

Several other organizational theories arose in the later twentieth century to build on the classical and neoclassical foundations. These theories include systems theories (including general systems theory and modern system theory), the contingency theory (also called decision theory), and chaos theory. All take different stances on important organizational principles but have in common an emphasis on the organization's role in the ever-changing conditions that exist both inside and outside the organization.

Systems theories hold that organizations are dynamic, almost living systems that must change constantly to adapt not only to internal developments but also to external ones. Organizations are profoundly impacted by their environments, including cultural norms, social changes, technological advancements, and government actions and policies. Far from being a detriment, this dynamic is seen by modern systems theorists as a positive interplay that can be used to increase productivity.

Contingency theory also deals with environmental changes and organizational adaptations, but it focuses on conflicts and means of managing conflicts. Theorists of this school believe that all managers must be perceptive and durable to make strong decisions. Chaos theory posits that the environmental factor adds unpredictability to an organization and that forces tend to move toward disorder. In this theory, a manager must constantly innovate and communicate to maneuver an organization through uncertainty, treating the organization as though it is a chaotic system.

Bibliography

Hatch, Mary Jo. Organization Theory: Modern, Symbolic and Postmodern Perspectives. With Ann L. Cunliffe, 3rd ed., Oxford UP, 2013.

Jones, Gareth R. Organizational Theory, Design, and Change. 7th ed., Pearson, 2013.

Markgraf, Bert. "What Are Organizational Theories?" Chron, 15 Dec. 2021, smallbusiness.chron.com/organizational-theories-61457.html. Accessed 22 July 2024.

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"Principles of Organizational Theory." Chron, 28 Apr. 2021, smallbusiness.chron.com/principles-organizational-theory-75374.html. Accessed 22 July 2024.