Organization Theory

Overview and Definition
An organization is defined as a network of interdependent relationship, so we can focus on the three ways;
1. Focus on the underlying structure that generates and guides the relationship
2. Focus on the people who actually do the relating
3. Focus on how the various relationships contribute to the organization as a whole?

These three ways examine the organizational relationships by representing the essence of the three major schools of organizational thought and theory.

1. The classical theory of organization is concerned almost entirely with the structure of the formal organization and also asks such questions;
• How is the work divided?
• How is the labor force divided?
• How many levels of authority and control are there?
• How many people are there at each level?
• What are the specific job functions of each person?

2. The human relations school of thought studies work groups of people and asks such questions;
• What roles do people assume in the organization?
• What status relationships result from the various roles?
• What are the morale and attitudes of the people?
• What social and psychological needs do the people have?
• What informal groups are there within the organization?

3. The third school of thought is concerned with social systems and emphasizes the relationship of the parts to the whole organization. Questions commonly asked in order to approach these:
• What are the key parts of the organization?
• How do they relate interdependently to each other?
• What processes in the organization facilitate these interdependent relationships?
• What are the main goals of the organization?
• What is the relationship between the organization and its environment?

Example: in the investigation of White House in The Watergrate Scandal, the senate using the Classical approach, with examined and evaluates the existing hierarchical organizational structure.

The Classical School
The classical theory of organization is concerned almost entirely with the design and structure of organizations, not with people. The chief tool is the organization chart. Around World War I, classical theory evolved from the scientific management movement in which man was described as a rational, economic being who can best be motivated to work by such carrot and stick techniques as piecework systems, bonus systems, time-and-motion studies, and cost figuring systems.

Scientific managements in practice concern the managers which believed that the workers will produce at peak efficiency and effective if they are motivated sufficiently “by money” with involved in clerical work, and calculate the time to work. Given the nature of the times, it was easy to motivate workers by appealing to their most basic human needs- needs heavily dependent upon money for fulfillment.

What is considered now, however, the classical theory of organizing workers is developed to meet the needs of scientific managers. Two foremost scholars of the classical school were Henri Fayol and Max Weber. Others were James Mooney and Alan Reiley, Luther Gulick, Lyndall Urwick, and Chester Barnard.

Among the recommended principles of management, Fayol included the following;
1. Division of work (specialization)
2. Authority and responsibility (power)
3. Discipline (obedience)
4. Unity of command (one boss)
5. Unity of direction (one plan)
6. Subordination of individual interest to general interest (concern for the organizational first)
7. Remuneration of personnel (fair pay)
8. Centralization (consolidation)
9. Scalar chain (chain of command)
10. Order (everyone has unique position)
11. Equity (firm but fair)
12. Stability of tenure of personnel (low turnover)
13. Initiative (thinking out of plan)
14. Esprit de corps (high morale)

Max Weber took issue with Fayol’s view of classical organization theory, distinguishing between inherent authorities (traditional power, which may have been illegitimate) and the legitimate authority (earned, respected, and established by norms, rational and legal). Legitimate authority provided the foundation for what Weber called “bureaucracy”. According to him, a bureaucracy is an organization having the following characteristic:
1. Continuity dependent upon adherence to rules
2. Areas of competence in which workers share the work and work toward specific goals under predetermined leaders.
3. Scalar (hierarchical) principals.
4. Rules that are either norms or technical principles.
5. Separation of administrative staff and ownership of production devices.
6. Separation of private belongings and the organization’s equipment.
7. Resources free from outside control.
8. Structure in which no administrator can monopolize personnel positions.
9. All administrative acts, rules, politics, etc... Stated in writing.

Keith Davis has advised that members of a bureaucracy will probably maintain job security as long as they follow rules and do not rock the boat. Davis summarized the four key ingredients in a bureaucracy as high specialization, rigid hierarchy of authority, elaborate rules and controls, and impersonality. One of the best examples of bureaucracy is the federal government.

Scott’s definition of a formal organization: “a system of coordinated activities of a group of a people working cooperatively toward a common goal under authority and leadership.” Scott also identifies four key components of classical organization theory; division of labor, scalar and functional processes, structure, and span of control.