Amity School of Business Management Foundation Module-I By Neeti Saxena Assistant Professor, ASB

Amity Business School Classical Organization Theory: bureaucracy theory+ administrative theory The Theory had 2 major purpose. To develop principles that could guide the design , creation and maintenance of large organizations. To identify the basic functions of managing organizations. 2 of the most influential figures in Classical Organization Theory are Max Weber and Henri Fayol. Weber introduced Theory of Bureaucracy and Administrative theory "emphasized management functions and attempted to generate broad administrative principles that would serve as guidelines for the rationalization of organizational activities" Early influencers were Henri Fayol (1949 trans.), Mooney and Reiley (1939) and Gulick and Urwick (1937). While Taylor reorganized from "bottom up", administrative theorists looked at productivity improvements from the "top down". Administrative theorists developed general guidelines of how to formalize organizational structures and relationships. They viewed the job as antecedent to the worker. Primarily these principles were broad guidelines for decision making.

CLASSICAL ORGANIZATION THEORY SCHOOL Amity Business School CLASSICAL ORGANIZATION THEORY SCHOOL Theory of Bureaucracy : Organisation as a Bureaucracy contributed by Max Weber (1864-1920 ) Administrative Theory : Emphasized management functions and attempted to generate broad administrative principles that would serve as guidelines for organizational activities. Contributors Henri Fayol (1949 trans.), Mooney and Reiley (1939) and Gulick and Urwick (1937)

Bureaucracy 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

Amity Business School Max Weber The Bureaucracy Theory - An Efficient Organization should be based on 5 principles. A managers’s formal authority should be derived from the position held within the organization. People should occupy positions in an organization based on their performance / Qualifications and not social standing or personal contact. Each Position’s authority , task responsibility and working relationship should be clearly specified. Reporting relationships should be clear and Organization’s hierarchy should enable effective Authority. To control behavior , manager’s must create a wel dfined system of ruls , SOP’s and norms. 3. The Role in an organization should be specified . 4. SOP’s – specific written instructions about how to perform certain tasks. Weber hoped that this theory would reduce politics at work place , Promotion based on merit would create better opportunities for competent managers. Also TQM, process sp comecialization and competency testing are modern ideas that derive from weber’s theory . Drawbacks : Specialization of task leads to isolation , no horizontal movement . Tall organizational hierarchies can lead to slowing down of internal processes as there are multiple decision makers .

Bureaucracy Organizations 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

Bureaucracy : A Formal System Amity Business School Bureaucracy : A Formal System Max Weber Developed the principles of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness

Administrative Principles Contributors: Henri Fayol, Mary Parker, and Chester I. Barnard Focus: Organization rather than the individual Described the management functions of planning, organizing, commanding, coordinating, and controlling

Administrative Principles Amity Business School Administrative Principles Henry Fayol (1841-1925) : Divided the manager’s job into five functions: Planning, organizing, staffing, commanding, coordination, and control. Developed 14 universal principles of management. Fayol divided general and industrial management into following six groups Technical activities (production, manufacture, adaptation). Commercial activities (buying, selling and exchange). Financial activities (search for and optimum use of capital). Security activities (protection of property and persons). Accounting activities (stock taking, balance sheet, cost, and statistics). Managerial activities (planning, organising, command, coordination and control) In America early focus was worker productivity; in France, the focus was organization and its administration by engineer Henri Fayol, director of Comambault, the French mining company. B. 1918,  Industrial and General Administration - translated into English in 1930's to impact US management in Classical organization theory. C. "Fourteen principles” of organization identified general rules that successful organizations ought to follow: Division of work – work and tasks should be perform by people specialized in the work and similar tasks should be organized as a unit or department. Authority – delegated persons ought to have the right to give orders and expect that they be followed. Discipline – workers should be obedient and respectful of the organization Unity of command – employees should receive orders from only one person with authority Unity of direction – the organization and employees are dedicated to one plan of action or set of objectives. Subordination of individual interests to the general interest – organizational conflict should be limited by the dominance of one objective. Remuneration – although Fayol provides no guidance on pay, the organization must recognize the economic value of employees and that their economic interests are important. Centralization – whether an organization should be centralized or decentralized depends upon such factors as communications and the importance of who should make the decision. Scalar chain – authority in an organization moves in a continuous chain of command from top to bottom. Order – everything, people and resources, has a place that it belongs. Equity – fairness is important in management-employee relations Stability of tenure of personnel – turnover is disruptive; shared experience is important  Initiative – Workers are exhorted to be productive and motivated. Esprit de corps – there is a need for harmony and unity within the organization

Henri Fayol 1841-1925 Division of labor Authority Discipline 14 General Principles of Management Division of labor Authority Discipline Unity of command Unity of direction Subordination of individual interest Remuneration Centralization Scalar chain Order Equity Stability and tenure of staff Initiative Esprit de corps

Amity Business School Fayol’s Contribution He gave overall concepts of general management and suggested the basic functions of management. He recommended the selection and training of workers and managers. He also advocated the use of organisation charts. He suggested certain qualities of manager’s winch include physical, mental, moral, educational technical and experience. Fayol’s theory of management was the first complete theory of management as we understand today. It incorporated proven principles, elements, procedures and techniques based on his practical experience. Henry Fayol came to be recognised as the founder of modern management theory.

Mary Parker Follett 1868-1933 Importance of common super-ordinate goals for reducing conflict in organizations Follett defined management as: "the art of getting things done through people". Her ideas are contradictory to the idea ofscientific management, as she believed that managers and subordinates should fully collaborate. Power is central to her ideas. Power is created and organized by organizations, and according to her it is legitimate and inevitable. Regarding to power Follett used the term "integration," to refer to noncoercive power-sharing based on the use of her concept of "power with" rather than "power over.“

Mary Parker Follett continued… Her ideas were formulated in three principles: 1. Functions are specific task areas within organizations. The appropriate degree of authority and responsibility should be allocated to them so tasks can be accomplished. 2. Responsibility is expressed in terms of an empirical duty: People should manage their responsibility on the basis of evidence and should integrate this effectively with the functions of others. 3. Authority flows from an entitlement to exercise power, which is based upon legitimate authority.  Leadership – importance of people vs. engineering techniques Ethics - Power - Empowerment

Chester Barnard 1886-1961 Informal Organization Naturally occurring social groupings Acceptance Theory of Authority Free will Can choose to follow management orders

NEO CLASSICAL THEORY

Humanistic Perspective Emphasized understanding human behavior, needs, and attitudes in the workplace Human Relations Movement Human Resources Perspective Behavioral Sciences Approach The focus is on “People “ who staff for, and manage the organisation rather than just the Organisation as an Entity.

Early Advocates of OB E Amity Business School Copyright © 2005 Prentice Hall, Inc. All rights reserved. 2–17

Human Relations Movement The Human Relations Movement An effort to make managers more sensitive to their employees’ needs. Arose out the influences of the threat of unionization. the Hawthorne studies. the philosophy of industrial humanism. Emphasized satisfaction of employees’ basic needs as the key to increased worker productivity

The Human Relations Movement Pyramid

Human Resource Perspective Suggests jobs should be designed to meet higher-level needs by allowing workers to use their full potential

The Philosophy of Industrial Humanism Amity Business School The Philosophy of Industrial Humanism Elton Mayo Believed emotional factors were more important determinants of productive efficiency than were physical and logical factors. Mary Parker Follett Advocated that managers become aware of how complex each employee is and how to motivate employees to cooperate rather than to demand performance from them. Douglas McGregor Developed Theory X and Theory Y Theory X: management’s traditionally negative view of employees as unmotivated and unwilling workers. Theory Y: the positive view of employees as energetic, creative, and willing workers.

Mary Parker Follett 1868-1933 Importance of common super-ordinate goals for reducing conflict in organizations Leadership – importance of people vs. engineering techniques

Based on needs satisfaction Abraham Maslow’s Hierarchy of Needs 1908-1970 Self-actualization Esteem Belongingness Safety Physiological Based on needs satisfaction

Theory X and Theory Y Douglas McGregor (1906-1964) Articulated basic principles of human relations theory The Human Side of Enterprise (1960, 1985) To understand human behavior, one must discover the theoretical assumptions upon which behavior is based Especially interested in the behavior of managers toward workers “Every managerial act rests on assumptions, generalizations, and hypotheses--that is to say, on theory . . . Theory and practice are inseparable.” Two Objectives: Predict and control behavior Tap Unrealized potential Theory X - Classical Theory Theory Y - Human Relations Theory FOCUS: Manager’s assumptions about HUMAN NATURE

Douglas McGregor Theory X & Y 1906-1964 Theory X Assumptions Theory Y Assumptions Dislike work –will avoid it Must be coerced, controlled, directed, or threatened with punishment Prefer direction, avoid responsibility, little ambition, want security Do not dislike work Self direction and self control Seek responsibility Imagination, creativity widely distributed Intellectual potential only partially utilized

X&Y

The Emergence of Communication Chester Barnard Considered a bridge between classical and human relations theories The Functions of the Executive (1938) Argues for . . . strict lines of communication - classical theory a “human-based system of organization” The potential of every worker and the centrality of communication to the organizing process Six Issues Relevant to Organizational Communication Formal vs. Informal Organization Cooperation Communication Incentives Authority Zone of Indifference

Six Issues Relevant to Organizational Communication Formal vs. Informal Organization Formal Organization - a system of consciously coordinated activities or forces of two or more persons. (definite, structured, common purpose) Persons are able to communicate with one another Willing to contribute action To accomplish a common purpose Informal Organization - based on myriad interactions that take place thourghout an organization’s history. Indefinite Structureless No definite subdivisions of personnel Results: customs, mores, folklore, institutions, social norms, ideals -- may lead to formal organization Cooperation Necessary component of formal organization The expression of the net satisfactions or dissatisfactions experienced or anticipated by each individual in comparison with those experienced or anticipated through alternative opportunities Communication Critical to cooperation The most universal form of human cooperation, and perhaps the most complex, is speech The most likely reason for the success of cooperation and the reason for its failure System of communication: known, formal channels which are as direct (short) as possible, where the complete line of communication is used, the supervisory heads must be competent, the line of communication should not be interrupted, and every communication should be authenticated. Barnard’s system lacks relationship formation and maintenance mechanisms

Six Issues Relevant to Organizational Communication Incentives Should be available Not discussed in detail Authority Associated with securing cooperation for organizational members The interrelationship among the originator of the communication, the communication itself, and the receiver Authority of position OVER Authority of Leadership (knowledge & ability). Zone of Indifference - orders followed Marks the boundaries of what employees will consider doing without question, based on expectations developed on entering the organization. Barnard drew attention away from formal organizational structures toward communication, cooperation, and the informal organization. His work was integrated by other theorists in the human relations movement.

Behavioral Approach Lessons from the Behavioral Approach People are the key to productivity. Success depends on motivated and skilled individuals committed to the organization. Managerial sensitivity to employees is necessary to foster the cooperation needed for high productivity.