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Redeveloped Division Initiated Self-Learning Module

Department of Education
i – Division of Palawan
 Organization and
Management 11 Organization Theories for
Second Quarter Effective Business Management
Week 1

MELC: Apply organizational theories for effective business management

Objective/s:
1. To identify the different organizational theories for effective
business management;
2. To apply the principles of the different organizational theories in
solving business cases; and
3. To reflect on the importance of organizational theories in
addressing organizational relationships for an effective working
environment.

What I Know
Directions: Choose the letter of the best answer and write it on your answer
sheet.

1. A Filipino values “Padrino System” is explicitly avoided regarding employee

selection and promotion by what organization management approach?
a. Bureaucratic management approach
b. Contingency approach
c. Scientific management approach
d. Neoclassical approach

2. He believes that when workloads are properly assigned according to

employees’ skills and expertise, it would improve productivity and achieve
what the company desired. Who is he?
a. Henry L. Gantt c. Abraham Maslow
b. Henri Fayol d. Douglas McGregor

1
3. To ensure a better flow of communication at all levels and guarantees
effective control is a practice done by what organization management
theory?
a) Classical organization theory
b) Neoclassical organization theory
c) Modern structural organization theory
d) None of these

4. Which of the following is NOT a feature of the Bureaucratic management

approach?
a. Selection and promotion c. Written Documents
b. Hierarchy of Authority d. Planning and coordinating

5. Which of the following statements is true about the scientific management

approach?
a. This approach considers that organization is part of a broader society.
b. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All the choices

6. Which of the following statements is true about Weber’s bureaucratic

approach?
a. This approach considers that organization is part of a broader society.
b. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All the choices

7. Which of the following is true about administrative theory?

a. This approach considers that organization is part of a broader society.
b. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All the choices

8. Which of these is/are considered as principle/s of Weber’s bureaucratic

approach?
a. Rationality c. Specialization
b. Structure d. All the choices

2
9. Which of the following statements best describes neoclassical theory?
a. It emphasizes individual or group behavior and human relations in
determining productivity.
b. This is based on the concept that the organization is an adaptive system
that must adjust to changes in its environment.
c. This considers the organization as a system composed of a set of inter-
related- and thus mutually dependent-sub-systems.
d. It recognizes that organizational systems are interrelated with their
environment and that different environments require different
organizational relationships for the effective working of the
organization.

10. There is one best way to organize for the production, and that way can be
found through systematic, scientific inquiry. This concept is attributed to
which theory?
a. Neoclassical Organization Theory
b. Modern Structural Organization Theory
c. Classical Organization Theory
d. All the choices

11. Which of these is true about the socio-technical approach?

Statement I: it believes that an organization consists of another mutually
dependent sub-system.
Statement II: it considers the organization composed of a social system,
technical system, and environment.

a. Statement I is true, statement II is false

b. Statement I is false, statement II is true
c. Both statements are true
d. Both statements are false

12. After six months of rendering exceptional services, Mr. JN Adolfo, a sales
representative from Abot-Kamay Merchandising, was promoted because
of his scholastic records gained during his under and post-graduate studies.
What do you think is the reason for his promotion if the scientific
management approach is being considered?
a. Mr. JN Adolfo is overqualified from his previous position, which is why he
must be placed in the right job.
b. Mr. JN Adolfo is not suited for his previous position, and it is not what he
deserved.

3
 c. Mr. JN Adolfo demanded a huge salary that would fit his standards.
d. Mr. JN Adolfo is a relative of a company manager.

13. Why do you think the division of labor was being considered and
emphasized in the administrative theory of management?
a. To prevent competition between employees
b. To create a differentiated workforce
c. To match employees’ skills from specific workloads to improve
productivity.
d. To produce multiple outputs and attain the desired results.

14. The manager of ROM Company sometimes gives monetary rewards to

employees to give appreciation for their work accomplishments and
motivate them to work a little harder for the company. This reward system
is attributed to which organization management theory?
a. Classical organization theory
b. Neoclassical organization theory
c. Modern structural organization theory
d. B.F Skinner Behavioral theory of motivation

15. Suppose you are a bureaucratic type of manager. How would you
manage a situation like when two of your subordinates are competing with
the vacant higher position in your company, considering that these two
are competent enough and qualified for the desired position?
a. Conduct employee performance evaluation.
b. Assess employee’s expertise and potential to carry out activities.
c. Discover employee’s motives for the company.
d. Investigate the life background of an employee.

4
 What is It

According to a book definition, “Getting things done through people”

that’s how the term management is defined. It implies that people working
together and contributing each expertise in an organization are why the
desired goals are being realized. It simply means that employees play a vital
role in the success of a business!
This module will help you learn the different organizational theories and
their underlying principles applicable to effective business management. You
will also understand the importance of these organizational theories in solving
various business cases like what we normally observe and see in real-life
situations, watch from the drama series on television, hear over the radio
program, and read from various articles in the newspaper. With these, you are
also being challenged to explore out-of-the-box ideas on doing different
activities provided in this module.

What is Organization Theory?

 It is a product of the systematic study of combining a person's point of
view and personal perspective to generate a concept or principles in
structuring an organization, including the behavior of certain individuals
belonging and working in it.
 It is a set of ideas that help explain how an organizational structure is
formed and how management practices and approaches change
from time to time to improve its effectiveness.
Three Broad Classification of Organization Theory

1. Classical Organization Theory

 In this theory, people and organizations act by rational economic
principles. It uses a systematic and scientific method of inquiry to
accomplish production-related and economic goals. It likewise
maximizes production through specialization and division of labor.

1.1 Approaches of Classical Organization Theory

1.1.1 Scientific Management Approach
➢ Conceptualized by an American engineer Frederick Winslow
Taylor.
➢ It is an approach wherein all the responsibility in an organization
is assigned to managers rather than workers. Managers should

5
 do all the scientific and technical-related activities such as
planning and work design and leave workers a task to carry out.
➢ It uses scientific methods in determining outstanding employees.
Managers at this part should screen their employees well before
giving them tasks to work on. Workloads and assignments must
be parallel with the employees’ expertise and provide them
specific standard methods of completing the tasks correctly.
➢ Proper staffing has emphasized this approach wherein
managers are matching every employee's abilities to the
demand of each job.
➢ The managers, however, are training their employees to
enhance their skills and work performances for them to meet the
standard methods devised for their specific jobs.
➢ Monitoring of employee’s work performance is also given
importance to ensure that needed procedures are correctly
followed and that the desired results are met.

1.1.2 Administrative Theory

➢ Henri Fayol propounded it based on several principles of
management. This management is considered as a set of
planning, organizing, commanding, coordinating, and
supervising functions.
➢ It believes that matching workforce skills will improve
productivity and that a firm’s work should be divided into
specialized and simplified tasks. Fayol termed this concept as
the division of work.
➢ This approach also emphasizes the importance of applying
authority and responsibility, discipline, unity of command, unity
of direction, individual versus general interests, remuneration,
centralization, scalar chain, order, equity, the stability of tenure,
initiative, and esprit de corps towards effective organizational
management particularly in solving business cases.

1.1.3 Weber’s Bureaucratic Approach

➢ This approach is considered rigid, impersonal, self-perpetuating,
and empire-building.
➢ It considers the organization as a part of the broader society.
This organization is based on the principles of:
o Structure
o Specializations
o Predictability and stability
o Rationality; and
o Democracy

6
 Features of Bureaucratic Organizations
 Employee’s expertise is the fundamental consideration in
selection and promotion. Padrino system and favoritism are
explicitly avoided.
 As to the hierarchy of authority, the superiors have the authority to
direct subordinate’s actions and ensure that these actions serve
the bureaucracy’s best interests.
 Rules and Regulations must be stable and unchanging to enable
members consistent with the management system they follow.
 Bureaucratic organizations likewise consider the division of labor
for the efficiency and effectiveness of the output produced.
 Written Documents. Records provide consistency and a basis for
evaluating bureaucratic procedures.
 Separate Ownership. Members cannot gain an unfair or
undeserved advantage through ownership.

2. Neoclassical Organization Theory

➢ It is a social system consisting of various inter-acting sub-systems that
emphasizes participative management aside from individual or group
works. It believes that the social environment on the job affects people
and is likewise affected by the people.
➢ A theory with high regard to behavioral approach in achieving
cooperation and higher productivity wherein monetary rewards to
employees serve as one of its motivators but not considered the sole.

2.1 Principles of Neoclassical Approach

2.1.1 Individual
2.1.2 Work Group
2.1.3 Participative Management

3. Modern Structural Organization Theory

➢ It is based on the concept that the organization is an adaptive system
that must adjust to its environment.
➢ It considers the organization as a system that consists of managerial,
technical, and social sub-systems.
➢ It believes that individuals working in an organization can be motivated
in a multitude of ways.
➢ It ensures a better flow of communication at all levels and guarantees
effective control.

3.1 Characteristics of Modern Approaches to the Organization

3.1.1 Systems Approach
➢ It considers the organization as a system composed of a set of inter-
related- and thus mutually dependent sub-systems.

7
 1.1.2 Socio-technical Approach
➢ Considers the organization as composed of a social system, technical
system, and its environment. These interact among themselves, and
it is necessary to balance them appropriately for the effective
functioning of the organization.

1.1.3 Contingency or Situational Approach

➢ Recognizes that organizational systems are interrelated with their
environments, and different environments require different
organizational relationships for effective working in the organization.

What I Can Do

Activity 1. Read-Understand-Group.

Directions: Fill in the blank shape of the key terminologies that best describes
the term written on the core part of the sun graphic organizer. Key answers
can be found in the clue box. Read and understand well each term for you to
group them correctly. Only one correct answer per oval is required.

Principles Leading
Ideas Teamwork
Unity of Command Concepts
Degree of Centralization Belief
Planning Scalar Chain
Philosophy Market Competition
Authority and Responsibility Stability of Tenure of Personnel
Growth and Sustainability Employee Relations

8
 Organi Manag
zation ement

Theory

Activity 2: Please Know Me!

Directions: Find out which organization theory is being referred to in each

statement. Write your answer in the space before the number.
1. It is based on the concept that the organization is an
adaptive system that has to adjust to its environment.
2. It believes that the social environment on the job affects
people and is likewise affected by the people.
3. It uses a systematic and scientific method of inquiry to
accomplish production-related and economic goals.
4. It believes that matching workforce skills will improve
productivity and that a firm’s work should be divided into
specialized and simplified tasks.
5. This approach is considered rigid, impersonal, self-
perpetuating, and empire-building.

9
 What’s More
Activity 3. Hired or Not Qualified? Please Decide!
Directions: Make a list of five job vacancies in your restaurant. Recruit five
applicants from your family members or friends nearby and ask them which
among the five positions they would like to work in and list down their
skills/qualifications as your basis for hiring. On the remarks column, put a hired
or not qualified mark aligned with the applicant’s name, which signifies your
decision.
Reminder: Put a label in place of their real names to uphold utmost information
confidentiality. Be honest with the data you get from your applicants.

Vacant Position Applicants Skills/Qualification Remarks

Rubrics for Activity 3: Hired or Not Qualified? Please Decide!

Score
Category
2 1
Job vacancy The listed job is following the
needs of the company/
-
business assumed to
operate
Remarks The decision made is The decision made is only
based on the qualification based on the qualification
of the applicant and the of the applicant and does
position he or she wants to not include the position he
work in or she wants to work in.

10
Activity 4. Organizational Chart
Directions: Now that you have already completed your workforce, you are
asked to prepare an organizational chart of your business to know the flow of
communication at all levels and how you as a manager guarantee effective
control based on the concept of modern structural management theory. Be
guided with the following positions/designations written on the box.
Designations listed on the box are some of the positions that make up a small
restaurant.

Owner Floor Manager Cooks

Bar Manager General Manager Bartenders
Bookkeeper/Cashier Kitchen Manager Servers

Rubrics for Rating Activity 4

Score Description
3 The students properly prepared the required organizational chart
where positions are properly identified and charted.
2 The students prepared the required organizational chart where
some of the positions are improperly identified and charted.
1 The students prepared the required organizational chart where
many of the positions are improperly identified and charted.

11
 What I Have Learned
Activity 5. Fill in the Blanks!

Directions: Fill in the blanks with the correct word or phrase. Write your answer
on your answer sheet.

Organization Theory is a (1) ____________________ that help explain how

organization structure are formed and how do management practices and
approaches change from time to time to (2) ____________________.

In classical organization theory, people and organizations act in

accordance with (3) __________________ uses systematic and scientific method
of inquiry to accomplish production-related and economic goals. It likewise
maximizes production through (4) ___________________ and division of labor.

Scientific Management approach is an approach wherein all the

responsibility in an organization is assigned to managers rather than (5)
_________________. Managers should do all the scientific and (6)
_____________________ such as planning and work design and leave workers a
task to carry out.

Administrative Management Theory was propounded by (7)

__________________ based on several principles of management. This
management is considered as a set of planning, organizing, commanding,
coordinating and (8) _____________________. However, bureaucratic
management approach considers organization as a part of (9)
_______________.

Neoclassical Organization Theory is a social system consisting of various

interacting sub-systems that gives emphasis on (10) ________________ aside
from individual or group works. It believes that the social environment on the
job affects people and is likewise affected by the people. A theory which has
high regards to behavioral approach in achieving cooperation and higher
productivity wherein (11) ______________________ to employees serves as one
of its motivators but not considered as the sole.

Modern Structural Organization Theory is based on the concept that the

organization is a (12) ____________________ which must adjust in its environment.

12
 Systems Approach Considers the organization as a system composed of
a set of inter-related- and thus (13) __________________ sub-systems. Moreover,
Socio-technical Approach considers the organization as composed of a social
system, (14) __________________ and its environment. They interact and it is
necessary to balance them appropriately for effective functioning of the
organization. However, Contingency or Situational Approach recognizes that
organizational systems are inter-related with their environments and different
environments require different (15) __________________ for effective working in
the organization.

Assessment
Directions: Choose the letter of the best answer and write the chosen letter on
your workbook.

1. Mr. JN Adolfo- a sales representative from Abot-Kamay Merchandising,

was promoted after six months of rendering exceptional services because
of the scholastic records he has gained during his under and post-graduate
studies. What do you think is the reason for his promotion if the scientific
management approach is being considered?
a. Mr. JN Adolfo is overqualified from his previous position, which is why he
must be placed in the right job.
b. Mr. JN Adolfo is not suited for his previous position, and it is not what he
deserved.
c. Mr. JN Adolfo demanded a huge salary that would fit his standards.
d. Mr. JN Adolfo is a relative of a company manager.

13
2. A Filipino values “Padrino System” is explicitly avoided in terms of employee
selection and promotion by what organization management approach?
a. Bureaucratic management approach
b. Contingency approach
c. Scientific management approach
d. Neoclassical approach

3. The manager of ROM Company sometimes gives monetary rewards to

employees to give appreciation for their work accomplishments and
motivate them to work a little harder for the company. This reward system
is attributed to which organization management theory?
a. Classical organization theory
b. Neoclassical organization theory
c. Modern structural organization theory
d. B.F Skinner Behavioral theory of motivation

4. He believes that when workloads are properly assigned according to

employees’ skills and expertise, would improve productivity and achieve
what the company desired. Who is he?
a. Henry L. Gantt c. Douglas McGregor
b. Abraham Maslow d. Henri Fayol

5. To ensure a better flow of communication at all levels and guarantees

effective control is a practice done by what organization management
theory?
a. Modern structural organization theory
b. Classical organization theory
c. Neoclassical organization theory
d. None of these

6. Which of the following is NOT a feature of the Bureaucratic management

approach?
a. Selection and promotion c. Planning and coordinating
b. Hierarchy of Authority d. Written Documents

7. Which of the following statements is true about the scientific management

approach?
a. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
b. This approach considers that organization is part of a broader society.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All the choices

14
8. Which of the following statements is TRUE about the bureaucratic
approach?
a. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
b. This approach considers that organization is part of a broader society.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All of the choices

9. Which of the following is true about administrative theory?

a. This approach considers that organization is part of a broader society.
b. This is based on the concept of planning to achieve efficiency,
standardization, and specialization.
c. This theory is based on Henri Fayol’s 14 principles of management.
d. All of the choices

10. Which of the following is considered as principle/s of Weber’s bureaucratic

approach?
a. Rationality c. Specialization
b. Structure d. All of the choices

11. Which of the following statements BEST describes neoclassical theory?

a. This is based on the concept that the organization is an adaptive system
that must adjust to changes in its environment.
b. This considers the organization as a system composed of a set of inter-
related- and thus mutually dependent-sub-systems.
c. It recognizes that organizational systems are interrelated with their
environment and that different environments require different
organizational relationships for the effective working of the
organization.
d. It emphasizes individual or group behavior and human relations in
determining productivity.

12. There is one best way to organize for the production, and that way can be
found through systematic, scientific inquiry. This concept is attributed to:
a. Neoclassical Organization Theory
b. Classical Organization Theory
c. Modern Structural Organization Theory
d. All of the choices

15
13. Which of these is true about the socio-technical approach?
Statement I: it believes that an organization consists of another mutually
dependent sub-system.
Statement II: it considers the organization composed of a social system,
technical system, and environment.

a. Statement I is true, statement II is false

b. Statement I is false, statement II is true
c. Both statements are true
d. Both statements are false

14. Why do you think the division of labor was being considered and
emphasized in the administrative theory of management?
a. To prevent competition between employees
b. To create a differentiated workforce
c. To produce multiple outputs and attain the desired results.
d. To match employees’ skills from specific workloads to improve
productivity.

15. Suppose you are a bureaucratic type of manager. How would you
manage a situation like when two of your subordinates are competing with
the vacant higher position in your company, considering that these two
are competent enough and qualified for the desired position?
a. Conduct employee performance evaluation.
b. Discover employee’s motives for the company.
c. Investigate the life background of an employee.
d. Assess employee’s expertise and potential to carry out activities.

16