What is Organizational Theory? Understanding Meaning, Types, and Differences

Definition

Organizational theory encompasses the examination of corporate frameworks and arrangements, as well as the behaviors of both individuals and groups within the organization. This includes exploring how these parties interact with one another to achieve predetermined objectives.

The study of organizational theory is crucial in identifying solutions to any issues that may arise within an organization. It provides valuable insights on how to effectively manage rapid or unexpected changes, meet the needs of all stakeholders, and optimize productivity and efficiency.

Meaning of Organizational theory

Organizational theory offers a framework to understand how an organization behaves. By examining the interplay between an organization and its environment, including cultural, legal, and political factors, organizational theory seeks to identify the impact of these external and internal influences on the organization's operations. Ultimately, the application of organizational theory can lead to improved economic outcomes for society.

Organizational theories are essential in understanding the inner workings of an organization. These theories are based on the premise that an organization has goals, a structure, and members, but their primary focus is on the efficiency of the organization. By selecting the appropriate organizational theory that aligns with their goals and business environment, businesses can enhance their functionality and overall efficiency.

Types of Organizational theory

Some of the essential Organizational theories are

1. Classical Organizational theory

The emergence of classical Organizational theory in the late 19th century was a pivotal moment in the development of traditional Organizational approaches. This theory places the primary focus on the organization as a whole, rather than individual employees. According to this theory, the organization is likened to a machine, with employees serving as its various working parts.

The characteristics of the classical Organizational theory are

The classical theory is built on an accounting model

It has put the focus on finding issues after they have been made and then solving them

The theory is about outputs and not input by employees

The labour is not divided based on the jobs that are performed in the organisation

Labour is considered stable and not subjected to change in the organisation

The classical theory is in favour of an integrated and centralised system where the authority lies with the central figure

The advantages of the traditional Organizational theory are

It has a clear structure for management in an organisation

It can increase efficiency and productivity

It creates better working conditions

It helps to create bonds between workers and managers

The theory helps to increase the wages of the workers

 The disadvantages of the classical Organizational theory are

The classical Organizational theory establishes a burden of work on the employees

It is made for simple structures and not complex ones

The theory creates frustration and disheartened attitude as it does not encourage creativity in the workers

2. Administrative Organizational theory

The emphasis of this theory is on corporate management and the human and behavioural aspects of the management process. It proposes departmentalisation as a means to identify and classify activities in order to achieve tasks more efficiently. Administrative Organizational theory concentrates on the structure of management and the organization of employees to ensure effective task completion. Initially, the theory aims to enhance management efficiency by standardizing processes before moving to the operational level where individuals are informed about the changes and encouraged to implement them in their daily routines.

The principles of the administrative, Organizational theory are

The division of work should be based on specialisations for the effective accomplishment of the given tasks

Authority and responsibility are interlinked hence the authority figure is accountable for every decision that goes wrong

The emphasis is on behaviour and obedience of employees towards each other

Employees should receive orders from a single supervising authority, ensuring a unity of command. Additionally, a unity of direction should be established to motivate all employees to work towards a common goal.

The advantages of the administrative Organizational theory are

A well-organized organization requires a structured arrangement of both personnel and materials. This involves ensuring that each individual is assigned to their appropriate role and that all necessary resources are stored in their designated location.

It is a comprehensive theory to deal with management techniques

It covers all the topics related to the management position to ensure success

The disadvantages of the administrative Organizational approach are

It is based on human application

There is too much reliance on experience

Many of the assumptions of the administrative Organizational theory are untested and thus not viable

3. Scientific management Organizational theory

The Organizational theory of scientific management views human beings as a part of the machinery, tasked with performing repetitive tasks. Its focus is on improving the efficiency of each employee and reducing task completion time. This approach incorporates engineering principles to increase production output by optimizing worker efficiency, which is believed to ultimately benefit management.

The principles of scientific management Organizational theory are

It separates planning from implementation

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Rewritten:

The guidance of supervisors is crucial in imparting their expertise to their subordinates in their area of work. The workload assigned to every employee is determined based on factors like fatigue, movement, and time.

Standardises the cost of production, the period of employment and tools and thus improves the working conditions

The theory emphasises on scientific selection and training of labours

It divides work between manager and workers

Financial incentives are necessary and must be provided to the workforce to motivate them and boost their productivity

The advantages of the scientific Organizational theory are

It is responsible for enhanced production

The managers have reasonable control over the production

It decreases the chance of inaccuracy

The cost of production is reduced

The disadvantages of the scientific Organizational theory are

It requires huge capital investment

The management takes complete control, and there is no chance to develop creativity

The approach seems de-motivating to the employees

4. Bureaucratic Organizational theory

Rewritten: Bureaucracy refers to the systems, procedures, policies, and guidelines implemented in an organization to simplify its operations. This approach prioritizes standardized practices, skilled staff, trained administrative personnel, and a clear hierarchy of authority. The bureaucratic theory emphasizes the administrative structure and processes of an organization, with a focus on efficiency and an impersonal approach to power dynamics.

The characteristics of the bureaucratic Organizational theory are

To ensure efficiency and clarity, tasks within the organization are categorized according to specialization and competencies. As a result, each employee has a clear understanding of their responsibilities and what is expected of them. This division of labor benefits the organization as a whole. It is important that employees do not take on tasks outside of their designated scope.

The managers within the hierarchical structure are responsible for overseeing the performance of their staff. This structure is designed to ensure that each layer is held accountable for their actions, with those at the bottom subject to supervision from those above them. The selection of employees is based on their competencies and technical skills, with salary being determined by their position within the organization. However, employees do not have any ownership stake in the organization.

The official law defines every administrative process and ensures uniformity through a set of formal rules. These rules are predictable, making it clear for employees to understand what is expected from them. The impersonal relationships in bureaucracy stem from these precise requirements and regulations. This approach eliminates bias and nepotism as decisions are based on rational factors rather than personal ones.

The employees are hired based on their qualification and expertise. Deployment of the right people in the correct position creates a perfect fit that is healthy for a company.

The advantages of the bureaucratic Organizational theory are

Large organisations with numerous hierarchical layers can be appropriately structured so that they can work effectively

The set rules assist in the consistent execution of work by every employee

It is easy for management to make adjustments and maintain control if necessary

 The disadvantages of the bureaucratic Organizational theory are

The bureaucratic system is all about red tape and paperwork and the hierarchial layers slow down critical processes

Employee loyalty is in question because there is a distance between the employees

Lack of innovative ideas as creative thinking is not encouraged in a bureaucratic organisation

5. Neo-Classical Organizational theory

In accordance with the Neo-Classical Organizational theory, an organisation is considered a social system that is directly influenced by human actions. As a result, this theory places significant emphasis on the role of individuals within the organisation.

The characteristics of the neo-classical Organizational theory are

In this theory, behavioural science is included in the management

It takes a human relations approach in the organisation

It considers that both formal and informal structure exists in the organisation

and desires. This can lead to conflicts with the goals and objectives of the organization. However, it is important to understand that the informal structure of social interactions among employees can also have a significant impact on the formal structure. By recognizing this relationship and finding ways to integrate individual and organizational interests, common goals can be achieved. This requires a balance between satisfying the needs of individuals and achieving the overall objectives of the organization.

Teamwork is considered essential for the smooth functioning of an organization according to the Neo-Classical Organizational theory. This is achieved through a behavioral approach, which focuses on how individuals interact and respond to each other.

The limitations of neo-classical Organizational theory are

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The organization's emphasis is solely on its internal operations and interactions with individuals, disregarding external factors.

It presupposes that a singular approach to managing the organization will be effective in all environments.

6. Modern Organizational theory

Modern Organizational theory posits that an organization is a system that is constantly influenced by changes in both its external and internal environment. This concept represents an integration of classical, behavioral, and social science models.

The contemporary understanding of organizations views them as open systems that continuously engage with the external environment to evolve, thrive, and expand in the marketplace. This perspective acknowledges the presence of crucial components, such as the environment, feedback, process, output, transformation, and input.

The essentials of the modern Organizational theory are

of the industry. This approach takes into account various factors such as social, economic, technological, environmental, and legal aspects that influence the functioning of an organisation. It also considers the internal capabilities, resources, and culture of the organisation that affect its performance. By adopting this approach, organisations can effectively navigate through the challenges and opportunities presented by the dynamic business environment.

It considers the organisation as a dynamic system

In modern theory, results are uncertain and dependent on the chance of occurrence

It is multivariable and shows that the events can be the result of numerous variables that can be either interdependent or interrelated

The criticism of the modern Organizational theory is

The theory deals only in questions and not suitable answers

It is based on mathematical, social and behavioural methods which are management theories in themselves

Absence of unified knowledge