Organization theories and

Application
Organization and Management Week 9

Organization theories and application

In parts of the domain, progress in this direction has occurred: Mintzberg has produced an
excellent synthesis of theory and research on the structuring of organizations, and Miner has
described and evaluated over thirty theories of organizational behavior from the point of view of
their scientific contribution and usefulness in the application. Through the years, management has
uncovered several theories applicable to organizations. These theories establish standardized
approaches in defining the basic structures, processes, components, objectives, and environments
of organizations.

The Various theories of organization

Classical Theory
The classical theory mainly deals with each and every part of a formal organization. The classical
theory was found by the father of scientific management, Frederick W. Taylor. Next, a systematic
approach to the organization was made by Monney and Reicey.

i. Division of Labor
▪ This theory fully depends upon the principle of division of labor. Under the division of
labor, the production of a commodity is divided into the maximum number of different
divisions.

ii. Scalar and Functional Processes

The scalar process deals with the growth of organization vertically. The functional
process deals with the growth of organization horizontally.
 iii. Structure
Specialization and co-ordination are the main issues in the design of an organizational
structure. The term specialization includes the division of labor and the usage of special
machines, tools and equipment.

Specialization is obtained when a person is requested to do a single work and it results in

the increase in productivity. The facilities or advantages of suitable training, easy allocation
of work, job scheduling and effective control are also obtained from specialization.

Co-ordination means an orderly performance in operations to achieve organizational

objectives. Normally, the business units are organized on a functional basis. The functions
are performed by different persons of different nature. It is also necessary to co-ordinate
the various functions to achieve the main objectives and at the same time a function does
not conflict with any other function

iv. Span of Control

Span of control means an effective supervision of maximum number of persons by a
supervisor. According to Brech, “Span refers to the number of persons, themselves
carrying managerial and supervisory responsibilities, for whom the senior manager
retains his over-embracing responsibility of direction and planning, co-ordination,
motivation and control.”

Neo-classical Theory
This theory is developed to fill up the gaps and deficiencies in the classical theory. It is concerned
with human relations movement. In this way, the study of organization is based on human
behaviour such as – how people behave and why they do so in a particular situation. The classical
theory was production-oriented while neo-classical theory was people- oriented.

Modern Theory
The other name of Modern Theory is Modern Organization Theory. According to one authority, it
was organized in the early 1950s. This theory composed of the ideas of different approaches to
management development. The approach is fully based on empirical research data and has an
integrating nature. The approach reflects the formal and informal structures of the organization
and due weightage are given to the status and roles of personnel in an organization.

Motivation Theory
It is concerned with the study or work motivation of employees of the organization. The works are
performed effectively if proper motivation is given to the employees. The motivation may be in
monetary and non-monetary terms. The inner talents of any person can be identified after giving
adequate motivation to employees. Maslow’s hierarchy of needs theory and Honberg’s two factor
theory are some of the examples of motivation theory.
Decision Theory

The other name of decision theory is decision making theory. This theory was given by Herbert. A.
Simon. He was awarded Nobel Prize in the year of 1978 for this theory. Simon regarded
organization as a structure of decision makers. The decisions were taken at all levels of the
organization and important decisions (policy decisions) are taken at the higher levels of
organization. Simon suggested that the organizational structure be designed through an
examination of the points at which decisions must be made and the persons from whom
information is required if decisions should be satisfactory.

Delegation
Delegation of authority allows subordinates to do tasks or responsibilities outside of their regular
work, enabling them to exercise a certain level of authority beyond their position. It involves
mutual trust's managers and trusts their employees to commit to the external task the same way
as to their regular one. In line with this, there is an implied set of instructions and protocols to be
followed by the employee concerned. It enables managers to unload some of their tasks so other
more important matters can be addressed. However, while it is the responsibility of the employee
to finish the delegated task, the accountability still rests with the manager.

There are three elements of delegation. These are the assignments of duties, grant of authority,
and creation of obligation. These elements are interdependent and essential for the proper
conduct and success of the delegated tasks.

Duty

Each employee in the organization is bound by the duties expressed in the functions and objectives
of the organization. For a manager to delegate properly, the duties should be expressed clearly in
writing. In doing so, the overlapping of duties and authority between the employee and
management is avoided.

Authority

The manager's authority over his subordinates should be clearly defined. Authority should
emanate from the official position of the manager and not from personal influence or other
informal sources of power. Managers can only act within the limits of their official function. The
nature and limitations of the managers’ authority should be expressed in writing and approved by
top management. The formal and official institution of authority on managers help subordinates
follows their superiors without hesitation.

Obligation
Delegation is made easier when subordinates express willingness to fully accept their
responsibilities. Responsible subordinates know their obligations clearly and will exert effort in
accomplishing their tasks. Managers should still recognize the subordinates have limits with
regard to their responsibilities. The tasks should be, at the very least, relevant to their regular
work or skills.
 Formal and Informal Organizations
Formal Organization
When the managers are carrying on organizing process then as a result of organizing process an
organizational structure is created to achieve systematic working and efficient utilization of
resources. This type of structure is known as formal organizational structure. Formal
organizational structure clearly spells out the job to be performed by each individual, the
authority, responsibility assigned to every individual, the superior- subordinate relationship and
the designation of every individual in the organization. This structure is created intentionally by the
managers for achievement of organizational goal.

Features of Formal Organization

The formal organizational structure is created intentionally by the process of organizing.
The purpose of formal organization structure is achievement of organizational goal.
In formal organizational structure, everyone is assigned a specific job.
In formal organization every individual is assigned a fixed authority or decision-making power.
Formal organizational structure results in creation of superior-subordinate relations.
Formal organizational structure creates a scalar chain of communication in the organization.

Informal Organization
In the formal organizational structure individuals are assigned various job positions. While
working at those job positions, the individuals interact with each other and develop some social
and friendly groups in the organization. This network of social and friendly groups forms another
structure in the organization which is called informal organizational structure. The informal
organizational structure gets created automatically and the main purpose of such structure is
getting psychological satisfaction. The existence of informal structure depends upon the formal
structure because people working at different job positions interact with each other to form
informal structure and the job positions are created in formal structure. So, if there is no formal
structure, there will be no job position, there will be no people working at job positions and there
will be no informal structure.

Features of Informal Organization

Informal organizational structure gets created automatically without any intended efforts of
managers.
Informal organizational structure is formed by the employees to get psychological satisfaction.
Informal organizational structure does not follow any fixed path of flow of authority or
communication.
Source of information cannot be known under informal structure as any person can communicate
with anyone in the organization.
The existence of informal organizational structure depends on the formal organization structure.