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Organizational theory (OT) is "the study of organizations for the benefit of identifying common themes for the purpose of solving problems, maximizing efficiency and productivity, and meeting the needs of stakeholders." Organizational Theory contains three subtopics: classical perspective, neoclassic perspective and environmental perspective. It complements the studies of organizational behavior and human resource studies.

= Classical Perspective = The classical perspective emerges from the Industrial Revolution and centers on theories of efficiency. There are two subtopics under the classical perspective: the scientific management and bureaucracy theory.

Scientific Management
The Scientific Management theory was introduced by Frederick Winslow Taylor to encourage production efficiency and productivity. Taylor argues that inefficiencies could be controlled through managing production as a science. Taylor defines scientific management as "concerned with knowing exactly what you want men to do and then see in that they do it in the best and cheapest way." According to Taylor, scientific management affects both workers and employers, and stresses the control of the labour force by management.

The Principles of Scientific Management
Taylor identifies four inherent principles of the scientific management theory.

1) The creation of a scientific method of measurement that replaces the "rule-of-thumb" method

2) Emphasis placed on the training of workers by management

3) Co-operation between manager and workers to ensure the principles are being met

4) Equal Division of labour between managers and workers

Bureaucratic Theory
Developed in the Industrial Age, Max Weber's theory of bureaucracy centers around the theme of rationalization, rules and expertise. Developed from the Administrative Principles theory, the bureaucracy theory also focuses on efficiency and clear roles. The bureaucracy theory is implemented in Flat organization structures and is suited for larger organizations that require formalization of roles.

Criticism of the Classical Perspective
Although the classical perspective encourages efficiency, it is often criticized as ignoring the importance of human needs. This perspective rarely takes into consideration human error or the variability of work performances related to individual workers.

= Neoclassical Perspective =

The Neoclassical perspective began with the Hawthorne studies in the 1920s. This approach gave emphasis to “affective and socio-psychological aspects of human behaviours in organizations.” The Human relations movement was a movement which had the primary concerns of concentrating on topics such as morale, leadership, and mainly factors that aid in the cooperation in Organizational behavior.

Hawthorne Study
A number of sociologists and psychologists made major contributions to the study of the neoclassical perspective, which is also known as the human relations school of thought. Elton Mayo and his colleagues were the most important contributors to this study because of their famous Hawthorne study from the “Hawthorne plant of the Western Electric Company between 1927 and 1932.”

The Hawthorne study suggested the idea that employees need social and psychological needs along with economic needs in order to be motivated to complete their assigned tasks. This theory of management was a product of the strong opposition against “the Scientific and universal management process theory of Taylor and Fayol.” This theory was a response to the way employees were treated in companies and how they were deprived of their needs and ambitions.

Results from the Hawthorne Studies
The Hawthorne studies helped conclude that “a human/social element operated in the workplace and that productivity increases were as much an outgrowth of group dynamics as of managerial demands and physical factors.” The Hawthorne studies also concluded that although financial motives were important, social factors are just as important in defining the worker-productivity.

Hawthorne Effect was the improvement of productivity between the employees, it was characterized by:
 * The satisfactory interrelationships between the coworkers
 * It classifies personnel as social beings and proposes that sense of belonging in the workplace is important to increase productivity levels in the workforce.
 * An effective management understood the way people interacted and behaved within the group.
 * The management attempts to improve the interpersonal skills through motivations, leading, communication and counseling.
 * This study encourages managers to acquire minimal knowledge of behavioral sciences to be able to understand and improve the interactions between employees

Criticism of the Hawthorne study
Critics believed that Mayo gave a lot of importance to the social side of the study rather than addressing the needs of an organization. Also, they believed that the study takes advantage of employees because it influences their emotions by making it seem as if they are satisfied and content, however it is merely a tool that is being used to further advance the productivity of the organization.

= Environmental Perspective =

Contingency Theory
The Contingency Theory is a class of the behavioral theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. An organizational, leadership, or decision making style that is effective in some situations, may not be successful in other situations. The optimal organization, leadership, or decision making style depends upon various internal and external constraints (factors).

Contingency Theory factors
Some examples of such constraints (factors) include:
 * The size of the organization
 * How the firm adapts itself to its environment
 * Differences among resources and operations activities

1. Contingency Theory on the Organization
In the Contingency Theory on the Organization, it states that there is no universal or one best way to manage an organization. Secondly, the organizational design and its subsystems must "fit" with the environment and lastly, effective organizations must not only have a proper "fit" with the environment, but also between its subsystems.

2. Contingency Theory of Leadership
In the Contingency Theory of Leadership, the success of the leader is a function of various factors in the form of subordinate, task, and/ or group variables. The following theories stress using different styles of leadership appropriate to the needs created by different organizational situations. Some of these theories are:


 * The Contingency theory: The contingency model theory, developed by Fred Fiedler, explains that group performance is a result of interaction between the style of the leader and the characteristics of the environment in which the leader works.
 * The Hersey–Blanchard situational theory: This theory is an extension of Blake and Mouton's Managerial Grid and Reddin's 3-D Management style theory. This model expanded the notion of relationship and task dimensions to leadership, and readiness dimension.

3. Contingency Theory of Decision-Making
The effectiveness of a decision procedure depends upon a number of aspects of the situation:


 * The importance of the decision quality and acceptance.
 * The amount of relevant information possessed by the leader and subordinates.
 * The amount of disagreement among subordinates with respect to their alternatives.

Criticism of the Contingency theory
It has been argued that the contingency theory implies that a leader switch is the only method to correct any problems facing leadership styles in certain organizational structures. In addition, the contingency model itself has been questioned in its credibility. = See also =


 * Organizational behavior
 * Organizational design
 * Organization development
 * Organizational culture

= References =

Category:Organizational theory