CHAPTER 2 Organization Theory and Management Thought © 2008 Thomson/South-Western All rights reserved.

Organization Theory William G.Scott Classical Organization Theory Neoclassical Organization Theory Modern Organization Theory © 2008 Thomson/South-Western. All rights reserved.

Classical Organization Theory Four key pillars The division of labor Structure The Scalar and functional process The span of control © 2008 Thomson/South-Western. All rights reserved.

Classical Perspective Rational, scientific approach to management – make organizations efficient operating machines Scientific Management Bureaucratic Organizations Administrative Principles © 2008 Thomson/South-Western. All rights reserved.

Scientific Management Fredrick Winslow Taylor The “father” of scientific management Published Principles of Scientific Management (1911) The theory of scientific management Using scientific methods to define the “one best way” for a job to be done: Putting the right person on the job with the correct tools and equipment. Having a standardized method of doing the job. Providing an economic incentive to the worker. © 2008 Thomson/South-Western. All rights reserved.

Exhibit 2–2 Taylor’s Four Principles of Management Develop a science for each element of an individual’s work, which will replace the old rule-of-thumb method. Scientifically select and then train, teach, and develop the worker. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed. Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers. © 2008 Thomson/South-Western. All rights reserved.

Bureaucratic Organizations Bureaucratic Organizations Max Weber 1864-1920 Prior to Bureaucracy Organizations European employees were loyal to a single individual rather than to the organization or its mission Resources used to realize individual desires rather than organizational goals Systematic approach –looked at organization as a whole © 2008 Thomson/South-Western. All rights reserved.

Characteristics of Weberian Bureaucracy Characteristics of Weberian Bureaucracy Division of labor with Clear definitions of authority and responsibility Personnel are selected and promoted based on technical qualifications Positions organized in a hierarchy of authority Managers subject to Rules and procedures that will ensure reliable predictable behavior Administrative acts and decisions recorded in writing Management separate from the ownership of the organization Exhibit 2.3 © 2008 Thomson/South-Western. All rights reserved.

Classical Administrative School Henri Fayol Believed specific management skills could be learned and taught Developed 14 principles that form the foundation for modern management practice and sound administrative structure. © 2008 Thomson/South-Western. All rights reserved.

Figure 2.2 Henri Fayol’s general principles of management Division of Work Authority Discipline Unity of Command Unity of Direction Subordination of the Individual to the General Interest Remuneration of Personnel Centralization Scalar Chain Order Equity Stability of Tenure of Personnel Initiative Esprit de Corps Source: Adapted from General Principles of Management by Henri Fayol. Copyright 1949 by Pitman Learning, Inc., 6 Davis Drive, Belmont, CA 94002. © 2008 Thomson/South-Western. All rights reserved.

Neoclassical Organization Theory Embarked on the task of compensating for some of the deficiencies in classical doctrine 1. Fatigue and monotony caused by the specialization of the work 2. Human behavior thwarts the cleanness of the logical relationships 3. Overlapping of authority often causes clashes; and, gaps in authority cause failures in getting jobs done, with one party blaming the other for shortcomings in performance. 4. Universally applicable ratio of span of control is silly. © 2008 Thomson/South-Western. All rights reserved.

Hawthorne Studies Started in 1895 Hawthorne Studies Started in 1895 Four experimental & three control groups Five different tests Test pointed to factors other than illumination for productivity 1st Relay Assembly Test Room experiment, was controversial, test lasted 6 years Interpretation, money not cause of increased output Factor that increased output, Human Relations © 2008 Thomson/South-Western. All rights reserved.

Modern organization Theory Modern organization Theory Systems Theory Contingency View © 2008 Thomson/South-Western. All rights reserved.

The Systems Approach System Defined Basic Types of Systems A set of interrelated and interdependent parts arranged in a manner that produces a unified whole. Basic Types of Systems Closed systems Are not influenced by and do not interact with their environment (all system input and output is internal). Open systems Dynamically interact to their environments by taking in inputs and transforming them into outputs that are distributed into their environments. © 2008 Thomson/South-Western. All rights reserved.

Exhibit 2–6 The Organization as an Open System © 2008 Thomson/South-Western. All rights reserved.

Implications of the Systems Approach Coordination of the organization’s parts is essential for proper functioning of the entire organization. Decisions and actions taken in one area of the organization will have an effect in other areas of the organization. Organizations are not self-contained and, therefore, must adapt to changes in their external environment. © 2008 Thomson/South-Western. All rights reserved.

The Contingency Approach Contingency Approach Defined Also sometimes called the situational approach. There is no one universally applicable set of management principles (rules) by which to manage organizations. Organizations are individually different, face different situations (contingency variables), and require different ways of managing. © 2008 Thomson/South-Western. All rights reserved.

Exhibit 2–7 Popular Contingency Variables Organization size As size increases, so do the problems of coordination. Routineness of task technology Routine technologies require organizational structures, leadership styles, and control systems that differ from those required by customized or nonroutine technologies. Environmental uncertainty What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment. Individual differences Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectations. © 2008 Thomson/South-Western. All rights reserved.

Contingency View of Management Contingency View of Management Exhibit 2.6 © 2008 Thomson/South-Western. All rights reserved.

TQM Focuses on managing the total organization to deliver quality to customers. Four significant elements are Employee involvement Focus on the customer Benchmarking Continuous improvement © 2008 Thomson/South-Western. All rights reserved.

The learning Organization As one in which everyone is engaged in identifying and solving problems, enabling the organization to continuously experiment, change, and improve, thus increasing in its capacity to grow, learn, and achieve its purpose © 2008 Thomson/South-Western. All rights reserved.

Elements of a Learning Organization Elements of a Learning Organization Horizontal Structure Leadership Emergent Strategy Learning Organization Empowered Employees Open Information Exhibit 2.7 Strong Culture © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 1. Leadership The traditional view of leaders who set goals, make decisions ,and direct the troops reflects an individualistic view In learning organization, leaders need the ability to build a shared vision, help people see whole system, work together, design horizontal structure, initiate change, expand the capacity of people to shape the future. © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 2. Horizontal Structure New organization structure represent a revolution in management thinking. The team is more important than the individual, and teams are given major responsibilities, such as producing a product and service, making decision about work and pay. © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 3. Employee empowerment Giving employees the power, freedom, knowledge, and skills to make decisions and perform effectively © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 4. Open communication To identify needs and solve problems, people have to aware of what’s going on They must understand the whole organization as well as their part in it. Formal data about budgets, profits, and departmental expenses are available to everyone. © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 5. Emergent strategy Strategy emerges from discussions among employees. Emergent strategy relies on an experiment mind-set. Employees are in touch with the environment, providing data about external changes in technology and customer needs. They are the ones to identify needs and solutions , passing these ideas into the organization for discussion. © 2008 Thomson/South-Western. All rights reserved.

The learning Organization 6. Strong culture The whole is more important than the part, and boundaries among parts are minimized. The culture is egalitarian. The culture values improvement and adaptation. © 2008 Thomson/South-Western. All rights reserved.