HBC 2108: ORGANIZATIONAL THEORY AND DEVELOPMENT

Prerequisite: HBC 2105: Principles of Management

Course purpose

Enable students develop theory in organizing firms, appropriate organizational designs and
structures and decision- making processes with regards to the changing nature of the
environment..

Course objectives

At the end of the course the students should be able to;

1. Understand organizational theories.

2. Understand social interactions and decision-making processes in organizations today.
3. Identify appropriate organizational structure to manage the environmental change
4. Effect of power, politics and conflict management in organizations

Course Outline

Week 1: Definition of Terms – Organization, a Theory and Development

- Types of organization
- Organization theories;
- Classical Theories
Week 2: Neoclassical modern theories;
- systems and contingency theories;
Week 3: Organization as a social system;
- Individual and group behavior
- individual and group differences
Week 4: Groups and Group dynamics
- Definition of key concepts
- Types of Groups
- Roles of groups in organization
- Formation of groups
Week 5: CAT 1
Week 6: Organization structure
- types of organizational structure
- importance of good structure
Week 7: Organization culture
- Culture defined
- Types of organizational culture
- Factors that shape up culture
- Importance of culture
Week 8: Power and politics;
- Define power and politics
- Types of power in organizations
- Ways to cope with organizational politics
Week 9: Presentations

Week 10: Leadership and conflict management

- What is leadership
- Types of leadership
- What is Conflict
- Types of conflicts
- Causes of conflict in organizations
Week 11: CAT 2
Week 12: Change management
- Forms of organizational change
- Forces of organizational change
- Resistance to change
Week 13: Organization dynamics. – individual assignment
- Trends in organization
Week 14: Decision making process
- Determining the decision making level
- The process of decision making

Teaching Methodology

Lectures, Case Analyses, Group discussions and Guest speakers

Instructional Materials:

These will include: Tablet, Smartboard, LCD projector & Computers, Flipcharts, televisions,
videos

Course Evaluation

CATs/Assignment/Presentation 30 %
Final Examination 70 %
Total 100%
Course textbooks

Hatch, Mary and Cunliff, Ann, (2006). Organization Theory: Modern, Symbolic & Postmoderm
Perspectives: Oxford University Press.

Tsoukas Haridimos & Knudsen Christian, (2005), The oxford Handbook of organization Theory
Meta-theoretical perspectives, Oxford University Press.
Itodge, B.J., Willian, A. and Gales, L. W, (2007). Organization Theory: A Strategic Approach,
6th Ed.

Reference Text books

Bradford, D.L. & Burke, W.W. eds, (2005). Organization Development. San Francisco: Pfeiffer.

French, W. L. and Bell, C. (2007). Organization Development: Behavioral Science Interventions

for Organization Improvement, Englewood Cliffs, N.J.: Prentice-Hall.

Michael, D. H. and Speh, T. W. (2001), Business Marketing Management, a strategic view of

Industrial and Organizational Markets, 7th Ed. Dawson Bookstore.

Senge, P., Kleiner, A., Roberts, C., Ross, R., Roth, G. and Smith, B. (1999). The Dance of
Change: The Challenges of Sustaining Momentum in Learning Organizations, New York:
Doubleday/Currency).

Pieters, G. W. and Young, D. W. (1999). The Ever-Changing Organization: Creating the

Capacity for Continuous Change, Learning and Improvement, St Lucie.

Course Journals
Journal of Organizational Behaviour Management by Taylor & Francis
Journal of Organizational Behaviour by Wiley Online Library
International journal of the academy of Organizational behavior management (IJAOBM) by
International Academy of Organizational Behavior Management

Reference Journals

International Journal of Organization Theory and Behavior by PrAcademic Press

International journal of organization theory and behavior by John Hopkins University Libraries
 INTRODUCTION

Definition of terms

An Organization

An organization is an entity that enables society to pursue accomplishments that cannot be

achieved by an individual alone. It comprises of two or more people engaged in a
systematic and coordinated effort, persistently over a period of time in pursuit of goals.
Organizations pursue goals and objectives that can be achieved more effectively by the concerted
action of individuals and groups. Organizations are essential to the way our society operates e.g.
organizations have created impressive gains in our standards of living by organizations in
industrial development, health care, education, etc.

What is Development

A multitude of meanings is attached to the idea of development; the term is complex, contested,
ambiguous, and elusive. However, development can be defined as bringing about social change
that allows people to achieve their human potential. Development has a range of meanings that
depend on the context in which the term is used, and it may also be used to reflect and to justify a
variety of different agendas held by different people or organizations.

What is a theory?

A set of assumptions, propositions or accepted facts that attempts to provide a plausible or

rational explanation of cause-and-effect (causal) relationships among a group of observed
phenomenon.

Organization theory

Organizational Theory refers to the set of interrelated concepts, definitions that explain the
behavior of individuals or groups or subgroups, who interacts with each other to perform the
activities intended towards the accomplishment of a common goal.
Organization Theory or Organizational Theory looks at the relationships between
organizations and their environment. It also examines the effects of those relationships on how
organizations function. It is the study of organizational structures and designs, as well as the
behavior of technocrats and managers in organizations. Organization theory also suggests how
organizations might be able to cope with rapid change.

 Explain how organisational structures affect employee motivation, communication and

performance
 Discuss factors influencing the degree of centralisation and decentralisation
 Discuss the development of more flexible organizational structures
 Apply the theories of writers such as Mintzberg and Peters
 Analyze the reasons behind , and the effects of moving some human resource functions to
external organizations located nationally or globally
 Evaluate whether firms will benefit from outsourcing, offshoring and the migration of
human resource functions

Types of organizations

Formal and informal organization

With a small family business, it is unnecessary to have a formal structure. After all everybody
should know each other and their individual roles and responsibilities. The business can be run
relatively informally, without clearly laid down rules and procedures. The family probably have
clear goals which are communicated both at work and outside.
However, as the business grows in size and the number of managers and employees increases,
the common goals may begin to be diluted and unclear. At a certain growth point, it becomes
necessary to make the organization of the business more formal. This process will include:

 Structuring activities
 Allocating roles and positions and identifying responsibility and authority for each role
 Establishing rules, procedures and systems
 The separation of functions and the coordination of business activities

For large organizations, it is necessary to break down the structure into manageable and discrete
groups, departments or functions. It is vital to coordinate activities to ensure that the goals of the
business are achieved. However, it is also be necessary to allocate specific roles to individuals
within these departments and delegate responsibility to them so they can focus on their specific
function.

Henri Fayol (1841 - 1925)

Many of the ideas behind the formal organization were the result of the work of Henri Fayol,
who was one of the most influential contributors to modern concepts of management. He is
largely responsible for introducing the concept of the organization chart as well as span of
control and chain of command.

Fayol identified 5 managerial functions:

 Planning
 Organizing
 Commanding
 Coordinating
 Controlling

Fayol laid out organizational duties of a manager including:

 Ensuring that human and material structures are consistent with organizational objectives,
resources and operating policies
 Harmonizing activities and coordinating efforts
 Establishing a single guiding authority and lines of communication through the
organization
 Defining duties clearly
 Maintaining discipline
 Paying special attention to the authority of command
 Having everything under control
 Formulating clear, distinct and precise decisions

This strict, rigid structure ensured tight management control, but as organizations grew ever
larger so did the number of authority levels and the top-down process became unwieldy. Despite
Fayol's desire to fight excess regulation and paperwork, bureaucracy inevitably increased and
organisations became increasingly inflexible, resistant to change and unsuited to modern
competitive markets.

Since the 1980s, firms have sought to reduce levels of authority and rigid functional structures.
Management theorists such as Henry Mintzberg developed concepts of 'emergent' strategies
based on more creative and less formal management systems.

Theories

Classical organization theories

(Taylor, 1947; Weber, 1947; Fayol, 1949) deals with the formal organization and concepts to
increase management efficiency. Taylor presented scientific management concepts, Weber gave
the bureaucratic approach, and Fayol developed the administrative theory of the organization.
They all contributed significantly to the development of classical organization theory.

Taylor's scientific management approach

The scientific management approach developed by Taylor is based on the concept of planning of
work to achieve efficiency, standardization, specialization and simplification. Acknowledging
that the approach to increased productivity was through mutual trust between management and
workers, Taylor suggested that, to increase this level of trust,

· the advantages of productivity improvement should go to workers,

· physical stress and anxiety should be eliminated as much as possible,
· capabilities of workers should be developed through training, and
· the traditional 'boss' concept should be eliminated.

Taylor developed the following four principles of scientific management for improving
productivity:

1. Science, not rule-of-thumb Old rules-of-thumb should be supplanted by a scientific

approach to each element of a person's work.
 2. Scientific selection of the worker Organizational members should be selected based on
some analysis, and then trained, taught and developed.
3. Management and labour cooperation rather than conflict Management should collaborate
with all organizational members so that all work can be done in conformity with the
scientific principles developed.
4. Scientific training of the worker Workers should be trained by experts, using scientific
methods.

Weber's bureaucratic approach

Considering the organization as a segment of broader society, Weber (1947) based the concept of
the formal organization on the following principles:

i. Structure In the organization, positions should be arranged in a hierarchy, each with a

particular, established amount of responsibility and authority.
ii. Specialization Tasks should be distinguished on a functional basis, and then separated
according to specialization, each having a separate chain of command.
iii. Predictability and stability The organization should operate according to a system of
procedures consisting of formal rules and regulations.
iv. Rationality Recruitment and selection of personnel should be impartial.
v. Democracy Responsibility and authority should be recognized by designations and not
by persons.

Weber's theory is infirm on account of dysfunctions (Hicks and Gullett, 1975) such as rigidity,
impersonality, displacement of objectives, limitation of categorization, self-perpetuation and
empire building, cost of controls, and anxiety to improve status.

Administrative theory
The elements of administrative theory (Fayol, 1949) relate to accomplishment of tasks, and
include principles of management, the concept of line and staff, committees and functions of
management.

1) Division of work or specialization This increases productivity in both technical and

managerial work.
2) Authority and responsibility These are imperative for an organizational member to
accomplish the organizational objectives.
3) Discipline Members of the organization should honour the objectives of the
organization. They should also comply with the rules and regulations of the organization.
4) Unity of command This means taking orders from and being responsible to only one
superior.
5) Unity of direction Members of the organization should jointly work toward the same
goals.
6) Subordination of individual interest to general interest The interest of the organization
should not become subservient to individual interests or the interest of a group of
employees.
7) Remuneration of personnel This can be based on diverse factors such as time, job, piece
rates, bonuses, profit-sharing or non-financial rewards.
8) Centralization Management should use an appropriate blend of both centralization and
de-centralization of authority and decision making.
9) Scalar chain If two members who are on the same level of hierarchy have to work
together to accomplish a project, they need not follow the hierarchy level, but can
interact with each other on a 'gang plank' if acceptable to the higher officials.
10) Order The organization has a place for everything and everyone who ought to be so
engaged.
11) Equity Fairness, justice and equity should prevail in the organization.
12) Stability of tenure of personnel Job security improves performance. An employee
requires some time to get used to new work and do it well.
13) Initiative This should be encouraged and stimulated.
 14) Esprit de corps Pride, allegiance and a sense of belonging are essential for good
performance. Union is strength.
The concept of line and staff is relevant in organizations which are large and require
specialization of skill to achieve organizational goals. Line personnel are those who work
directly to achieve organizational goals. Staff personnel include those whose basic function is to
support and help line personnel.

Committees

Committees are part of the organization. Members from the same or different hierarchical levels
from different departments can form committees around a common goal. They can be given
different functions, such as managerial, decision making, recommending or policy formulation.
Committees can take diverse forms, such as boards, commissions, task groups or ad hoc
committees. Committees can be further divided according to their functions. In agricultural
research organizations, committees are formed for research, staff evaluation or even allocation of
land for experiments.

Functions of management Fayol (1949) considered management as a set of planning, organizing,

training, commanding and coordinating functions. Gulick and Urwick (1937) also considered
organization in terms of management functions such as planning, organizing, staffing, directing,
coordinating, reporting and budgeting.

NEOCLASSICAL THEORIES

The neoclassical theorists gained their reputation by attacking the classical theories. Neoclassical
theorists recognized the importance of individual or group behaviour and emphasized human
relations. Based on the Hawthorne experiments, the neoclassical approach emphasized social or
human relationships among the operators, researchers and supervisors (Roethlisberger and
Dickson, 1943). It was argued that these considerations were more consequential in determining
productivity than mere changes in working conditions. Productivity increases were achieved as a
result of high morale, which was influenced by the amount of individual, personal and intimate
attention workers received.

Principles of the neoclassical approach

The classical approach stressed the formal organization. It was mechanistic and ignored major
aspects of human nature. In contrast, the neoclassical approach introduced an informal
organization structure and emphasized the following principles:

• The individual - An individual is not a mechanical tool but a distinct social being, with
aspirations beyond mere fulfilment of a few economic and security works. Individuals differ
from each other in pursuing these desires. Thus, an individual should be recognized as
interacting with social and economic factors.

• The work group - The neoclassical approach highlighted the social facets of work groups or
informal organizations that operate within a formal organization. The concept of 'group' and its
synergistic benefits were considered important.

• Participative management - Participative management or decision making permits workers

to participate in the decision making process. This was a new form of management to ensure
increases in productivity.

Note the difference between Taylor's 'scientific management' - which focuses on work - and the
neoclassical approach - which focuses on workers.

Modern theories
Important source of the power and politics, organizational culture, and systems theory.

Neoclassical organizational theories concentrated on discipline and the economic well-being of

people. They ignored their morale and desires. Neoclassical organization theories while
accepting the merits of classical theories have given more importance to human relations and
behavioral sciences. The neoclassical theories of organization modified, added and extended the
classical theories by realizing the fact that management exists in a social system wherein human
factors have cognizant roles to perform. Employees can play crucial roles in the decision-making
process.

Approaches of Neoclassical Theories of Organization

Human Relations and Behavioral Science have become two important approaches of neoclassical
theories.

1. Human Relations Theory

The human relations theory was developed by Elton Mayo and his associates from 1924 to 1932
at the Hawthrone plant of Western Electric Company. They experimented in four phases:
Illumination experiment, relay assembly test, interviewing programs and the bank wiring
observations room experiments.

Illumination experiments revealed that light had no significant impact on the productivity of
workers. The intensity of light did not influence the productivity of telephone relays. The relay
assembly test provided several facilities to telephone relay assemblers wherein it was observed
the special attention and treatment caused employees to increase their productivity. It was
termed as the Hawthorne effect, where people feel the pride of belonging to a group. The
interviewing program was tested on human relations rather than on favorable physical
conditions. It revealed that employees are unwilling to answer direct questions. They gave
important clues towards the management style when asked indirectly. The bank wiring room
experiment gave sufficient freedom to an informal group. It revealed that employees were not
only economic beings but social and psychological beings as well. Their productivity is
influenced by sentiments, beliefs and the group behavior of employees. The Hawthrone
experiments brought about the conclusions that the business organization also includes social and
psychological factors. It considered organization as a social process where feelings, sentiments
and attitudes were given due importance. Mayo and Roethlisberger of Harvard Business School
postulated that efficiency and productivity could increase if the attitudes of employees were well
regarded.

2. Behavioral Science Theory

The behavioral science theory believes in inter-personal relations. While human relations
concentrate on morale and productivity, behavioral science lays emphasis on inter-personal roles
and relationships. F. Herryberg and V. Vroom suggested motivational models after Abraham
Maslow who developed the need hierarchy model. Sociologists and psychologists contributed
significantly to the area of behavioral science for treating the human element as a social system.
Group behavior was given more importance. McGregor, Arguris and Likert believed that self-
actualized man would contribute to the development of management. They emphasized
democratic values and human motivation. The task itself is the primary source of satisfaction
and self-motivation. Unlike the beliefs of the classical theory, behavioral science believes that
human beings like work but it should not be super-imposed and should instead be self-realized.
They enjoy work and believe in self-discretion and self-control. They are interested in their own
jobs and creativity in a healthy, safe, comfortable and congenial environment. People consider
themselves to be important persons and like to be treated as important people by their superiors.
The behavioral science theory tries to develop new insights and brings about a congenial
environment in the factory whereby new thinking and new techniques put forward by employees
are welcome.

Contribution of Neoclassical Theories

The neoclassical theories of organization have contributed significantly to organizational

behavior in the following fields.

Individual Behavior – Behavior of individual employees has been considered important in the
field of management. Individual work behavior is influenced by their respective feelings,
perception, learning and personality. People view jobs as per their attitudes, beliefs, and the
social set up, technical and managerial skills. Inner feelings, crazes and sentiments have more
influence on work behavior which ultimately shapes the efficiency and productivity. Human
relations based on individual behavior, economic and social factors are considered important
factors for the success of management.

Group Behavior – It was rightly postulated by sociologists and psychologists that the cultural
and social backgrounds of employees have a significant role to play in management. People
work together to accomplish the corporate objective, i.e., group objectives. There is need for
cooperative and purposeful group inter-relationships. The influence of informal organization has
been well regarded in this context because the workers are not isolated and unrelated individuals.
Workers are social beings and should be regarded as such. Sociocultural organizations have a
great influence on the behavior of individual employees. The group has a systematic approach to
work. Group dynamics and industrial psychology are developed on the basis of informal
organization.

Task – The neoclassical theorists have not ignored the tasks to be performed. The classical and
neoclassical people think alike about design and performance of jobs. The neoclassical theories
laid emphasis on coordinated activities, while division of work was preferred for getting
specialization. They have developed processes for identifying and grouping the work.
Technological development has also given due importance to the effective performance of a task,
while giving due importance to coordinated efforts and achievement.

Participative Management – The theory has given birth to participative management wherein
employees have the right to take part in management decisions. Giving opportunities to labor in
the management process will help increase productivity and efficiency. The recognition of
human values and human behavior is for increasing productivity. If they are separated, they will
be meaningless. Productivity and satisfaction have therefore to be achieved by the behavioral
approach. The techno-economic system mixed with social system has developed people and
production.
Motivation – Neoclassical theories were propagated for self-motivation and job satisfaction.
According to them, the management should learn development of co-operative attitudes. While a
democratic set up is more useful, the authoritarian approach may not be totally discarded,
because when people have developed an attitude against the management while the management
has been honest and helpful to them, the authoritarian approach would be more effective for
managerial success. The authoritarian approach as developed by classical theorists needs to be
modified and remolded for selective use. Monetary and non-monetary incentives should be used
for motivating people. Employees development and worker satisfaction contribute significantly
to production.

Communication – The neoclassical theories of organization have given more importance to

effective communication. Two-way communication is essential to establish a common flow of
understanding in any organization. Formal and informal communications are exercised for
managing people, although informal communication has more impact on management success.
Group communication, team spirit, man-to-man relations and group harmony have been realized
by new classical theorists. Coordination, co efforts, co workmanship and communication have
been considered the key factors of organizational behavior.

Modern Theories

The systems approach

Socio-technical approach
The contingency or situational approach

Modern theories tend to be based on the concept that the organization is a system which has to
adapt to changes in its environment. In modern theory, an organization is defined as a designed
and structured process in which individuals interact for objectives (Hicks and Gullet, 1975). The
contemporary approach to the organization is multidisciplinary, as many scientists from different
fields have contributed to its development, emphasizing the dynamic nature of communication
and importance of integration of individual and organizational interests. These were
subsequently re-emphasized by Bernard (1938) who gave the first modern and comprehensive
view of management. Subsequently, conclusions on systems control gave insight into application
of cybernetics. The operation research approach was suggested in 1940. It utilized the
contributions of several disciplines in problem solving. Von Bertalanffy (1951) made a
significant contribution by suggesting a component of general systems theory which is accepted
as a basic premise of modern theory.

The systems approach

The systems approach views organization as a system composed of interconnected - and thus
mutually dependent sub-systems. These sub-systems can have their own sub-sub-systems. A
system can be perceived as composed of some components, functions and processes (Albrecht,
1983). Thus, the organization consists of the following three basic elements (Bakke, 1959):

1. Components - There are five basic, interdependent parts of the organizing system, namely:
• the individual,
• the formal and informal organization,
• patterns of behaviour emerging from role demands of the organization,
• role comprehension of the individual, and
• the physical environment in which individuals work.

2. Linking processes - The different components of an organization are required to operate in

an organized and correlated manner. The interaction between them is contingent upon the
linking processes, which consist of communication, balance and decision making.

a. Communication is a means for eliciting action, exerting control and effecting

coordination to link decision centres in the system in a composite form.
b. Balance is the equilibrium between different parts of the system so that they keep a
harmoniously structured relationship with one another.
c. Decision analysis is also considered to be a linking process in the systems approach.
Decisions may be to produce or participate in the system. Decision to produce depends
upon the attitude of the individual and the demands of the organization. Decision to
 participate refers to the individual's decisions to engross themselves in the organization
process. That depends on what they get and what they are expected to do in participative
decision making.
3. Goals of organization - The goals of an organization may be growth, stability and
interaction. Interaction implies how best the members of an organization can interact with
one another to their mutual advantage.

Socio-technical approach

It is not just job enlargement and enrichment which is important, but also transforming
technology into a meaningful tool in the hands of the users. The socio-technical systems
approach is based on the premise that every organization consists of the people, the technical
system and the environment (Pasmore, 1988). People (the social system) use tools, techniques
and knowledge (the technical system) to produce goods or services valued by consumers or users

(who are part of the organization's external environment). Therefore, an equilibrium among the
social system, the technical system and the environment is necessary to make the organization
more effective.

The contingency or situational approach

The situational approach (Selznick, 1949; Burns and Stalker, 1961; Woodward, 1965; Lawrence
and Lorsch, 1967) is based on the belief that there cannot be universal guidelines which are
suitable for all situations. Organizational systems are inter-related with the environment. The
contingency approach (Hellriegel and Slocum, 1973) suggests that different environments
require different organizational relationships for optimum effectiveness, taking into
consideration various social, legal, political, technical and economic factors.

An organization is a continuing system, able to distinguish and integrate human activities. The
organization utilizes, transforms and joins together a set of human, material and other resources
for problem-solving (Bakke, 1959). The main function of an organization is to satisfy specific
human needs in interaction with other sub-systems of human activities and resources in the given
environment. In a research organization, individual needs of researchers are more often in
conflict with organizational needs than in any other organization. Therefore, growth of the
organization should concurrently also promote growth of the individual.

Determining the decision-making level

A manager has to decide about the levels at which decisions are to be taken, and this would
depend upon the type, impact and values of decisions.

Deciding the span of control

Span of control refers to the number of specialized activities or personnel supervised by one
manager. There is no optimal number for a span of control and number of levels in the hierarchy.
In fact, span of control and hierarchy levels are inter-related and depend on situational factors
(Barkdull, 1963). Some of the important situational factors are:
• Similarity of functions.
• Complexity of supervised functions.
• Direction and control needed by subordinates.
• Coordination required by the manager.
• Planning required by the manager.
• Organizational help received by the manager.

Methods to improve integration

There are several ways to improve integration, the most common being through a hierarchy of
authority. For this, specialized units whose activities are inter-related could be put under one
manager.
Coordination can also be improved through
• developing rules and procedures wherever possible,
• providing professional training,
• liaison roles, and
• use of professional committees involving managers from different specialized units.
Using committees to improve coordination is more difficult than other methods, as it requires
considerable skills in group dynamics and technical knowledge on the part of the chairperson of
the committee. The person who takes this role must not be involved directly in the work, but tries
to assist managers in improving integration.