Organization Theory

Organization theory is the study of how organizations function and how they affect and are affected by the environment in which they operate. It is the discipline that studies the structure and design of the organizations.

Organization theory describes how organizations are actually structured and offers suggestions on how they can be constructed to improve their effectiveness. Organization theory has two aims:

  1. To understand how organizations operate so that we can control and change organizations to help them create wealth and resources.
  2. To understand conceptual tools to influence organizational situations in which you will find yourself so that you could diagnose problems and make adjustments that help the organization to achieve its goals.

Organization theory refers to both the descriptive and prescriptive aspects of the discipline. It describes how organizations are actually structured and offers suggestions on how they can be constructed to improve their effectiveness.

Stephen P. Robbins has developed a framework for analyzing organization theory that identifies explicitly the major subparts that make-up organization theory.

While the classical approach to organization theory conceived organizations as mechanical devices to achieve goals; the neo-classical theory believed that though management could design formal relationships rules and regulations, it was the informal pattern of communication, status, norms that created the social needs of organization members which needed to be nurtured for the benefit and growth of the organizations.

The aligning structure to its contingencies variables would facilitate the achievement of the organization goals. The current approach to understanding organization is the social perspective that views structure as not rational effort of managers to create the most effective structure but rather the outcome of political struggles to gain organizational control.

Formal organizations have “objectives which are explicit, limited and announced”. They are formed with a common, formal purpose and require people to enter into formal relationships that have some contractual basis.

Organizational theories are the only practical means of transferring learning from one situation to another.

They are guides for decisions, a set of explanations and statements based on experience and research, which describe different kinds of work relationships and their consequences. The stages in the development theory are:

  1. Early contributions from antiquity.
  2. The Classical School of Organization Theory
  3. The Human Relations School of Organization Theory
  4. The Contingency Approach of Organization Theory and
  5. The Political Approach to Organizational Theory.

According to the Early Contributions School of Thought Opens in new window, the origin of organization theory can be traced back to antiquity. Rulers and administrators of powerful states have always needed to adopt some organizing principles in order to accomplish their aims.

Evidence of the use of the well-recognized principles of organization theory can be found from the days of antiquity. The modern era of management theory began early in this century with the classical management perspective Opens in new window which included both scientific management and administrative principles approaches.

Scientific management, pioneered by Fredrick Taylor, claimed decisions about organization and job design should be based on precise, scientific procedures after careful study of individual situations. Administrative principles focused more on the total organization and grew from the insights of practitioners.

The work of sociologists on bureaucracy Opens in new window, beginning with Weber Opens in new window, appeared in the 1950s and 1960s and helped establish the notions of bureaucracy, which is characterized as rational, problem-solving, decision-making systems.

The contingency approach Opens in new window believes that managerial actions can be adjusted to demands of specific situations or circumstances. Organization design and managerial actions most appropriate to specific situations will have to be adopted to achieve the best possible result under the given situation.

According to the contingency approach Opens in new window, there is no one best way to organize and manage. What works in one setting may not work in another setting. There is just not one best way! Contingency theory says “it depends”.

Despite the changes in the environment, organizations are not all alike. A great many problems occur when all organizations are treated as similar, which is the case with the classical approach that tries to design all organizations alike.

Political approach to organizational theory focuses on the political nature of organizations.

The current approach to understanding organization is the social perspective that views structure as not the rational effort of managers to create the most effective structure, but rather the outcome of political struggles to gain organizational control.