INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY

ORGANIZATIONS AND ORGANIZATIONAL CHANGE

PSYCHOLOGY APPLIED TO WORK 8th Edition
AUTHOR: Paul M. Muchinsky
TRANSCRIBED BY: MEYNARD P. OSTRIA

THREE THEORIES OF ORGANIZATION

Organization - A coordinated group of people who

perform tasks to produce goods or services, colloquially
referred to as companies.

1. Classical Theory
• developed in the early 20th century
• focuses mainly on structural relationships in
organizations
• begins with a statement of the basic 2. Scalar principle - The concept that organizations
ingredients of any organization and then are structured by a chain of command that
addresses how the organization should best grows with increasing levels of authority
be structured to accomplish its objectives • Each subordinate should be accountable to
only one superior, a tenet referred to as the
4 basic components to any organization unity of command
3. Line/staff principle - The concept of
1. A system of differentiated activities. All
differentiating organizational work into line and
organizations are composed of the activities and
staff functions
functions performed in them and the
Line functions have the primary responsibility
relationships among these activities and
for meeting the major goals of the organization,
functions. A formal organization emerges when
like the production department in a
these activities are linked together.
manufacturing organization.
2. People. Although organizations are composed of
Staff functions support the line’s activities but
activities and functions, people perform tasks and
are regarded as subsidiary in overall importance
exercise authority.
to line functions.
3. Cooperation toward a goal. Cooperation must
4. Span-of-control principle - The concept that
exist among the people performing their various
refers to the number of subordinates a manager
activities to achieve a unity of purpose in pursuit
is responsible for supervising.
of their common goals
• Small span of control (2 subordinates)
4. Authority is established through superior–
subordinate relationships, and such authority is • Produces tall organization
needed to ensure cooperation among people • Large span of control (15 Subordinates)
pursuing their goals. • Produces flat organization

4 major structural principles are the hallmarks in the

history of organizational theory

1. Functional Principle - The concept that

organizations should be divided into units that
perform similar functions
• accounts for the grouping of work functions
into such units as production, sales,
engineering, finance, and so on Classical theory is credited with providing the structural
• functional principle relates to the horizontal anatomy of organizations.
growth of the organization
was the first major attempt to articulate the form and
substance of organizations in a comprehensive fashion.
none of the classical organizational theorists were
psychologists.
its four principles are deeply ingrained in the real-life
structure of organizations. Problems of line/staff
relationships, number of organizational levels, division of
labor, coordination, and spans of control are still of
major concern today.
Further thinking about organizations occurred because
organizations were more complex than the four classical
principles suggested. This desire to add richness and
realism to organizational theory gave rise to neoclassical
theory.
2. Neoclassical Theory
• was born in the 1950s, but its origins go back
to the findings from the Hawthorne studies.
• the name neoclassical connotes a
modernization or updating of the original
(classical) theory, while still acknowledging
its contributions
• It is a misnomer to call neoclassical theory a
“theory” because there really is no formal
theory. Rather, it is a recognition of
psychological and behavioral issues that
question the rigidity with which the classical
principles were originally stated.
• The neoclassicists noted that while division
of labor causes functional interdependence
among work activities, it also depersonalizes
these activities so that the individual finds
little meaning in them. That is, people
develop a sense of alienation from highly
repetitive work, which ultimately results in
dissatisfaction with their work. In turn, this
dissatisfaction can result in decreased
efficiency caused by lowered productivity
and increased absence.
• The scalar principle was questioned on the
grounds that other systems operate on
people in organizations besides those
imposed by formal superior–subordinate
relationships.
• The line/staff principle was perhaps the
easiest for neoclassicists to challenge. The
black-and-white theoretical distinction
between line and staff functions is not
always so clear in practice. Take, for
example, the sales function. A interdependent components that form a
manufacturing company’s purpose is indeed
to produce, but if it does not sell what it
produces, the company cannot survive.
What, then, is the sales function—a major
line function or an ancillary staff function?
The neoclassicists illustrated that many staff
functions are critical to the success of the
organization, so the value of the distinction
between line and staff is not so great as
originally proposed
• Finally, determining a satisfactory span of
control seems far more complex than
picking a number. The neoclassicists noted it
depends on such issues as the supervisor’s
managerial ability (poor managers cannot
supervise many subordinates) and the
intensity of the needed supervision (one
could effectively manage many more
subordinates who do not require much
direction than those who do require
intensive direction). That is, such
psychological factors as leadership style and
capacity greatly influence the determination
of effective spans of control
The primary contribution of neoclassical theory
• reveal that the principles proposed by
classical theory were not as universally
applicable and simple as originally
formulated.
• The neoclassicists drew heavily on
behavioral research that revealed the
importance of individual differences. They
did not overtly reject classical theory. Rather
than attempting to change the theory, they
tried to make it fit the realities of human
behavior in organizations. However, the
neoclassicists were limited by basing their
conceptualization about organizations on
the classical perspective.
• By the mid-1960s, it became apparent that
an entirely new approach to thinking about
organizations was necessary. Organizations
were more complex than even the
neoclassicists portrayed them; this led to the
formation of a radically different school of
thought called systems theory
3. Systems Theory
• A theory developed in the 1970s that
described organizations in terms of
system
 • “It is impossible to understand individual
behavior or the activities of small groups
apart from the social system in which they
interact.
• A complex organization is a social system;
the various discrete segments and functions
in it do not behave as isolated elements. All
parts affect all other parts
Systems theory asserts that an organizational system is
composed of these five parts:
1. Individuals. Individuals bring their own
personalities, abilities, and attitudes with them
to the organization, which influence what they
hope to attain by participating in the system
2. Formal organization. The formal organization is
the interrelated pattern of jobs that provides the
structure of the system.
3. Small groups. Individuals do not work in
isolation but become members of small groups
as a way to facilitate their own adaptability
within the system
4. Status and role. Status and role differences exist
among jobs within an organization and define
the behavior of individuals within the system
5. Physical setting. This is the external physical
environment and the degree of technology that
characterizes the organization
• Individuals interact to form small groups,
members of the groups are differentiated by
status and roles, the physical environment
affects the behavior of individuals and groups,
and all exist within the framework provided by
the formal organization.
• it is necessary to have a means to provide
coordination and linkage among them. Such
functions are accomplished through
communication and decision making; they
permit the various parts of the system to “talk”
to each other.
• systems theory instructs us that the parts and
interactions of a system do not exist for
themselves. Rather, they exist to meet the
system’s larger goals, which are stability,
growth, and adaptability.
• Systems theory offers a radical departure from
the classical and neoclassical schools of thought.
Systems theory views organizations as any other
form of living organism
• The purpose of an organization is to reach
stability, to grow, and to adapt, as all living
organisms must do to survive. Note the
abstractness of systems theory. There are no
direct references to anything quite as simple as
a span of control, for example. This abstractness
is deliberate because only at some degree of
generality can one attempt to equate such
diverse entities as organizations, plants, and
animals
• Modern organizational theorists believe that an
understanding of something as complex as an
organization requires the type of
conceptualizations offered by systems theory. A
systems perspective of organizations permits us
to understand phenomena of organizational life
that earlier theories would not permit
• Despite the distinctiveness of the three schools
of thought on organizations, each school offered
critical concepts that are of great relevance
today. That is, these schools are more than
historical mile markers in the evolution of
organizational theory. In particular, the concept
of small groups from systems theory has been
greatly amplified to provide a primary focal point
of interest, the work team.
ORGANIZATIONAL STRUCTURE
Mintzberg (1983) - offered a comprehensive and lucid
explanation of how organizations evolve to reach a
certain form and shape.
• refer to these characteristics as the
“structure” or formal component of an
organization.
Structure The arrangement of work functions within an
organization designed to achieve efficiency and control.
Coordinating Mechanisms
Mintzberg (1983) defined the structure of an
organization as “the sum total of the ways in which its
labor is divided into distinct tasks and then its
coordination is achieved among these tasks
Five Coordinating Mechanism
1. Mutual adjustment. “Mutual adjustment
achieves the coordination of work by the simple
process of informal communication” among
employees. As the term implies, it is the process
by which employees coordinate their efforts to
produce an outcome. Mintzberg cited two
people paddling a canoe as an example of the
mutual adjustment between individuals needed
to propel the canoe through water
2. Direct supervision. According to Mintzberg,
“Direct supervision achieves coordination by
having one person take responsibility for the
work of others, issuing instructions to them and
monitoring their actions” As an organization
outgrows its simplest state, it turns to this
second mechanism of coordination. In effect one
brain coordinates several hands, such as the
coxswain (stroke caller) of a six person rowing
crew
3. Standardization of work processes. Another
mechanism to achieve coordination is to
standardize or specify work processes. The
production assembly line of a manufacturing
company is an example. A worker inserts a bolt
into a holed piece of metal. There is only one
action to perform, and there is no room for
individual discretion in how the work is
performed. The work is designed in such a way
that the same process is followed no matter who
is performing the job.
4. Standardization of work output. Yet another
mechanism to achieve coordination is to
standardize or specify the product of the work to
be performed. The fast-food industry is an
example. A hamburger ordered from a particular
fast-food vendor should look and taste the same
whether it was purchased in the day or at night,
in July or December, in Cleveland or San Diego.
The work is designed in such a way that the same
output is achieved irrespective of differences in
time or location.
5. Standardization of skills and knowledge. Finally,
Mintzberg stated that coordination among work
activities can be attained by specifying in
advance the knowledge, skills, and training
required to perform the work. In this case
coordination is achieved before the work is
undertaken. Organizations institute training
programs for employees to standardize the skills
needed to perform work, thereby controlling
and coordinating the work. For example, there is
rarely communication between an
anesthesiologist and a surgeon while removing
an appendix in an operating room. As a result of
standardized medical training, the two medical
specialists do not need to engage in much
communication during the course of the surgical
operation.
According to Mintzberg (1983), these five coordinating
mechanisms manifest themselves in a rough order.
Mutual adjustment suffices as a coordinating mechanism
only if the work processes are rather routine
As the work to be performed becomes more
complicated, the most effective means of coordination
shifts to direct supervision
As work becomes still more complex, the underlying
coordinating mechanism shifts to standardization of
work processes, then outputs, and finally skills.
A person working alone has no need for any coordinating
mechanisms. The addition of a second person requires
the two individuals to adjust to each other.
When the tasks are simple and routine, the organization
is tempted to rely on the standardization of the work
processes themselves. But more complex work may
preclude this, forcing the organization to turn to
standardization of the outputs—specifying the results of
the work but leaving the choice of the process to the
worker.
In very complex work, on the other hand, the outputs
often cannot be standardized either, and so the
organization must settle for standardizing the skills of
the worker, if possible”
Classical organization theory emphasized both direct
supervision and standardization as coordinating
mechanisms. The concepts of span of control, line/staff
functions, and unity of command apply to the
components of an organization’s formal structure.
organizational structure defined a set of official,
standardized work relationships built around a tight
system of formal authority
However, neoclassical organizational theory revealed
the significance of the most primary means of attaining
coordination, mutual adjustment. That is, other activities
take place among workers that are not in line with the
official organizational structure. Thus the presence of
unofficial relationships within work groups (an informal
structure) established that mutual adjustment serves as
an important coordinating mechanism in all
organizations.
THE FIVE BASIC PARTS OF A ORGANIZATION
1. Operating core. The operating core of an
organization consists of those employees who
are responsible for conducting the basic work
duties that give the organization its defining
purpose. In a manufacturing organization, it is
the employees who transform raw goods (e.g.,
cloth) into a sellable product (e.g., apparel). In a
service organization (as a dry cleaning store), it
is the employees who perform vital work
functions (e.g., transform dirty clothes into clean
clothes)
2. Strategic apex. The strategic apex is responsible
for the overall success of the entire organization.
The strategic apex is associated with the
executive leadership of the organization. These
employees have the responsibility and authority
to ensure that the larger goals of the
organization are being met. Mintzberg referred
to the strategic apex as the “brain” of the
organization
3. Middle line. The middle line represents those
employees who have the day to-day authority
for ensuring that the overall goals set by the
strategic apex are being carried out by the
operating core. The middle line embodies the
coordinating mechanism of direct supervision.
They are mid-level bosses, ranging from senior
managers down to first-level supervisors. The
chain of command that starts at the strategic
apex and ends at the operating core runs directly
through the middle line. An organizational
hierarchy is created by the various levels that
separate the operating core from the strategic
apex
4. Technostructure. The technostructure is those
employees who possess specific technical
expertise that facilitates the overall operation of
the organization. These employees are
specialists in areas of business that influence the
organization, but these people do not perform
the mainstream work of the organization (the
operating core) nor are they members of top
management (the strategic apex). Examples
include such technical areas of expertise as
accounting, human resources, information
technology, and law
5. Support staff. The support staff provides
services that aid the basic mission of the
organization and typically includes the
mailroom, switchboard, security, and janitorial
services. Sometimes the members of the
support staff and the technostructure are
collectively regarded as meeting the “staff ”
function of an organization (vis-à-vis the
line/staff distinction). However, there is a major
distinction between the technostructure and the
support staff. The members of the
technostructure give advice to the organization,
while the support staff performs services.
Likewise, the technostructure and the support
staff rely on different coordinating mechanisms.
The technostructure relies primarily on the
standardization of knowledge and skills (through
education and training requirements of its
members), while the support staff relies
primarily on the standardization of work
processes (as the uniform delivery of mail within
the organization).
It is not feasible for members of the strategic apex to
make every decision pertaining to the operation of the
company. Not every decision requires executive input;
thus individuals in the middle line are authorized to make
certain types of decisions within a defined scope.
Second, in a complex organizational hierarchy, with
many levels between the bottom and top of the
organization and an extended chain of command,
decisions often cannot be made quickly. Some
organizational decisions may lend themselves to a slow
process of deliberation; however, other decisions must
be made quickly. The flow of information up to the
strategic apex and then back down may take too much
time for decisions that are urgent.
Finally, the capacity and authority for decision making
among employees at lower levels of the organization are
appealing to intelligent individuals. The power to make
such decisions is motivating, as the organization entrusts
employees to act in its best interests. Learning to
become a good decision maker is a critical skill in rising
to higher levels in the organization.
COMPONENTS OF SOCIAL SYSTEM
A social system The human components of a work
organization that influence the behavior of individuals
and groups.
Role A set of expectations about appropriate behavior in
a position
Norm A set of shared group expectations about
appropriate behavior
ORGANIZATIONAL CULTURE
Culture is the languages, values, attitudes, beliefs, and
customs of an organization. As can be inferred, it
represents a complex pattern of variables that, when
taken collectively, gives each organization its unique
“flavor.”
employee behavior. A perceived difference
between espoused and enacted values can be a
source of cynicism among employees. For
example, despite the espoused values, actual
safety efforts may be haphazard or employees
may be criticized for speaking out
3. Basic assumptions. Basic assumptions are
unobservable and are at the core of the
organization. They frequently start out as values
but over time become so deeply ingrained that
they are taken for granted. Basic assumptions
are rarely confronted or debated and are
extremely difficult to change. According to
Ostroff et al., “Challenging basic assumptions
produces anxiety and defensiveness because
they provide security through their ability to
define what employees should pay attention to,
how they should react emotionally, and what
actions they should take in various kinds of
situations”. Questioning a university about the
value of education in society would represent a
challenge to a basic assumption of academic
institutions.

Ostroff, Kinicki, and Tamkins (2003) described the

culture of an organization as having three layers. These
three layers can be examined in any social collectivity,
including a business organization, a social organization
(e.g., a club), a church, or even a family.

1. Observable artifacts. Artifacts are the surface-

level actions that can be observed from which
some deeper meaning or interpretation can be
drawn about the organization. Trice and Beyer
(1993) identified four major categories of
cultural artifacts: symbols (e.g., physical objects
or locations); language (e.g., jargon, slang,
gestures, humor, gossip, and rumors); narratives
(e.g., stories, legends, and myths about the
organization); and practices (e.g., rituals, taboos,
and ceremonies). Although these artifacts are
easy to observe, they are not necessarily easy to
interpret or understand.
2. Espoused values. Espoused values are those
beliefs or concepts that are specifically endorsed
by management or the organization at large.
Organizations per see do not possess values, but
rather key individual leaders within the
organization espouse these values. Two
examples are “Safety is our top priority” and
“We respect the opinions of all our employees.”
Enacted values are those that are converted into
 INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY
ORGANIZATIONAL THEORY AND
- DEVELOPMENT
INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY:- UNDERSTANDING THE WORKPLACE 3rd Edition
AUTHOR: Paul E. Levy
ORGANIZATIONAL THEORY
is defined as a set of propositions that explains or
predicts how groups and individuals behave in varying
organizational structures and circumstances (Shafritz &
Ott, 1996b)
CLASSICAL ORGANIZATIONAL THEORY
formal study of organizational theory appears to have
begun when factories became popular in Great Britain
in the 1700s (Shafritz & Ott, 1996a)
4 basic tenets
• Organizations exist for economic reasons
and to accomplish productivity goals.
• Scientific analysis will identify the one best
way to organize for production.
• Specialization and the division of labor
maximize production.
• Both people and organizations act in
accordance with rational economic
principles.
a common argument was that organizations should work
like machines, with people and technology as their
components. The four preceding tenets helped maintain
this focus.
2 particular developments occurred within classical
organizational theory: scientific management and
bureaucracy
SCIENTIFIC MANAGEMENT
Frederick Winslow Taylor
- Mastermind of the idea of scientific
management.
- The Scientific Management school conducted
time and motion studies and analyzed
temperature, illumination, and other conditions
of work, all the while looking at the effects of
these conditions on productivity and efficiency
- Conduct studies that gather data indicating what
the fastest and most efficient method is, then
-
- TRANSCRIBED BY: MEYNARD P. OSTRIA
implement that method. In short, Taylorism
maintained that factory workers would be much
more productive if their work was designed
scientifically
4 Principles of Scientific Management
st
1 management gathers data from the
workers, who are in the best position to
understand the job duties and tasks.
These data are analyzed and reduced to
laws and rules, which are applied to
workers’ jobs in the form of detailed
procedures and how-to explanations
2nd workers are selected carefully—or, as
Taylor put it, “scientifically”—and then
trained so that they become more
efficient than ever before.
3 rd
scientific selection, data collection, and
training are combined to enhance
efficiency. Taylor argued that these
processes must be brought together
because science and workers are not a
“natural combination.”
4th the work itself is redistributed, with
management taking over tasks
previously left to subordinates (e.g.,
factory workers). Taylor emphasized
that cooperation and genuine sharing
of the labor were important if the
overall process was to work
BUREAUCRACY
Max Weber
- a German sociologist who studied organizations
in the late 1800s and early 1900s.
- he analyzed historically large and efficient
organizations such as the Egyptian empire, the
Prussian army, and the Roman Catholic Church.
- Bureaucracy described the structure,
organization, and operation of many efficient
organizations.
4 Major Features of a Bureaucracy
1. Division of labor - a simple approach in which
employees are narrowly trained to do only the
particular tasks and duties assigned to their jobs.
❖ Dividing up tasks in this manner allows the
organization to take advantage of individuals’
particular strengths, thus avoiding the problems
that result from asking people to perform tasks
requiring skills they don’t have.
❖ one potential difficulty in bureaucracies involves
the coordination of various tasks handled by
various employees. In other words, it is good
that each employee has his or her particular task
to do, but it can be difficult to coordinate the
many tasks done by all employees while at the
same time ensuring a particular outcome or end
product for the organization.
2. Top-Down Pyramidal Organizations - At every
level of the organization (except for the very
top), employees report to a person one level up
in the chain of command.
❖ this hierarchical system of supervision is
necessary if the division of labor is to be
beneficial.
3. Delegation of authority - an approach whereby
supervisors, rather than trying to do everything
themselves, assign particular tasks to separate
employees and hold them responsible for
completing these tasks.
❖ micro-managers—try to take charge of
everything that goes on in the organization
rather than holding employees responsible for
individual tasks.
4. Span of Control- related to the chain-of-
command idea, refers to the number of
subordinates who report to a given supervisor.
❖ If the span of control is too large, supervisors are
unable to manage so many subordinates; if it is
too small, there is an overabundance of
supervisors managing too few employees.
❖ Historically, the optimal span of control has
varied considerably across companies, but the
trend in the late 20th and early 21st centuries
has been toward larger spans of control as a
result of smaller numbers of middle-level
managers
A comparison of the top and bottom panels in Figure
14.2 shows what happens to the span of control when
layoffs or organizational restructuring results in the
reduction of middle-level management, as happened
dramatically in the United States during the 1990s and
may happen again today with the recession of 2009.
Daniel Katz and Robert Kahn
emphasize two additional issues that are
important to Weberian bureaucracy:
standardization of tasks and centralized
decision making.
1. Task standardization is analogous to Taylor’s
notion of the “one best way” to get a job done,
in that it pertains to the training of employees
toward that end.
2. Centralized Decision Making - Related to the
notion of a chain of command is the idea that
decision making should be centralized.
Scientific Management and bureaucracies were
developed to provide these directionless
organizations with formal, orderly, and efficient
functioning.
In more modern times, however, theorists have
begun to argue that bureaucratic structures are
ineffective for organizations operating in rapidly
changing environments, such as the high-tech
industry (Schellenberg & Miller, 1998).
In fact, Weber himself warned that work in a
bureaucracy can be so simplified and
unchallenging that workers might become
dissatisfied and unmotivated, resulting in lower
productivity overall (Wagner & Hollenbeck,
1998)
ADMINISTRATIVE THEORY OF MANAGEMENT
Henri Fayol
- A French Mining Engineer who Recorded his
industry methods
1. Fayol’s 14 Principles of Management (1888)
and Administration Industrielle et Generale
(1916)
2. Considered the Father of Administrative
Management Theory, often called Process
Theory or Structural Theory
• Administrative Theory of Management
focused on organization and structure
or work tasks; looked specifically and
how management and workers are
organized within a business to allow for
the completion of tasks
• Administrative management theory is in
contrast to the scientific approach to
 management , which posited that can include both financial and
worker efficiency would lead to greater non-financial forms of
managerial efficiency. The compensation.
administrative Theory of Management Centralization Decision Making should be
focused on what managers do. either centralized
(management makes all
• Followed a top-down approach to
decisions) or decentralized
organizational efficiency, emphasized a
(employees also make decision)
rational authority structure for depending upon the
organization. characteristics of the
• Departmentalization Principle- the organization and worker
creation of work groups and functional competency.
departments where distinct activities Line of Authority There must be a hierarchy of
are performed; similar tasks or functions (scalar chain) authority that places workers
should be grouped within the same below managers in the
department or unit. reporting structure. The degree
• Fayol’s 14 Principles of Management of authority is higher at each
provided specific guidance on the stage of the organizational
hierarchy. The organizational
necessary organizational elements
hierarchy should be well
necessary for effective management
understood throughout.
and demonstrate the Administrative Order There must be well-defined
Management Approach rules and standards for the
work environment and work
Division of Labor Allows for specialization. responsibilities. A safe and
Individuals can become more orderly environment leads to
proficient in the greater coordination.
accomplishment of a limited Equity The organization must be based
set of activities-thus improving on principles of fairness.
their output Employees should be treated
Authority Managers must have the with a combination of
authority to issue commands, kindliness and justice.
but with that authority comes Stability of Tenure Organizations need low
the responsibility to ensure that turnover. This allows
the work get done. employees time to learn their
Discipline There must be a clear line of jobs, develop skills, and acquire
authority. Subordinates must loyalty
fully obey instructions from Initiative Managers must promote
superiors. Managers must have initiative by allowing
the ability to instill discipline employees to create plans and
through punishment. carry them out.
Unity of Command There should be only one boss Esprit de Corps Establishing a sense of
from whom a worker receives belonging within the
instructions. organization create a sense of
Unity of Direction Each workgroup or department unity and morale.
is working under a singular plan
that coordinates efforts. Work • The objective of Fayol’s Principle was to guide
efforts should be guided by one managers to efficiently organize and interact
supervisor. with employees.
Subordination of The interests of individuals are
• The individual functions of a manager may vary
Individual Interest subordinate to the general
widely depending on the type of manager and
interests of the group or
department or company the nature of the manager’s responsibilities.
Remuneration Compensation is used to Categorizing the functions of a manager helps
incentivize worker understand what are the responsibilities of a
performance. Remuneration manager.
• Henri Fayol’s Administration Industrielle et
Generale categorization of managerial
functions:
Planning – flexible in nature to allow for
contingencies that arise in the process.
- Forecasting future conditions,
- Setting objectives, and
- Developing means to attain objectives
Organizing – structuring activities and organizing
individuals within the firm.
- Includes recruiting, equipping, and
training individuals
Commanding – commanding as a managerial
function concerned the:
- Direct supervision of employees, and
- Motivating their efforts toward a
common objective.
Controlling – constant supervision of activities to
identify accomplishments or goals and
objectives. Derivation from the identified plan
allows the manager to take corrective action.
Coordinating – identifying, arranging, and
scheduling all activities carried out by
subordinates. This coordination allows for the
collective accomplishments of plans.
• The functions of commanding and controlling
have generally been collapsed under the
function LEADING. The result is the modern day
P-O-L-C framework of managerial functions
NEOCLASSICAL/HUMANISTIC THEORY
• A theory developed in the 1950’s that described
psychological or behavioral issues associated
with organizations.
• Human relations movement resulted, in part
from a reaction to the rigidity of classical
organizational theory
• Origins go back to the findings from the
Hawthorne Studies
• The name neoclassical connotes a
modernization or updating of the original
(classical) theory, while still acknowledging its
contributions.
• The relationship between supervisor and
subordinate has been especially important in the
humanistic theory of organizations, which
explain organizational success in terms of
employee motivation and the interpersonal
relationship that emerge within the
organization.
• Factors that were not even remotely associated
with the classical approach to organizations-
such as employees’ motives goal, and aspirations
– were emphasized by those in the human
relations movement (Katz & Kahn, 1978)
THEORY OF X AND THEORY Y
D.M McGregor
• Argued that managers’ beliefs and assumptions
about their employees determine how they
behave toward those employees.
o Managers’ behaviors affect employees’
attitudes and behaviors, which in turn affect
managers’ attitudes, beliefs and behaviors.
o Self-fulfilling Prophecy: employees over time,
learn to act and believe in ways consistent with
how managers think they act and believe – even
if this wasn’t the case initially.
Theory of X
✓ This theory believes that employees are
extrinsically motivated or NOT innately
motivated to do their work.
✓ Employees are lazy and they only satisfy their
lower order needs
✓ Managers are authoritarian
✓ Based on Scientific Management
Theory of Y
✓ This theory believes that employees are
intrinsically motivated or innately motivated to
do their work.
✓ Employees love their work and they satisfy their
higher order needs.
✓ Managers are participative.
✓ Based on human approach.
 THEORY OF X significance of factors such as morals, attitudes,
1. Management is responsible for the economic values, and humane treatment of workers.
well-being of the organization.
2. Management of employees requires OPEN SYSTEMS THEORY
directing, controlling, motivating, and • The three key elements of open-system theory
modifying their behavior to fit the needs of are inputs, throughputs, and outputs. Inputs are
the organization.
transformed during the throughputs stage into
3. Without active intervention by management,
outputs, which in turn are brought back into the
employees would be passive and resistant to
organizational needs process as additional inputs—and thus the
4. The average employee is lazy, works as little process continues.
as possible, lacks ambition, and dislikes • For example, a car manufacturer that uses
responsibility. production processes to transform raw materials
5. The average employee is self-centered, into automobiles is, in effect, using throughputs
indifferent to organizational needs, and, by to transform inputs into outputs. The outputs
nature, resistant to change. (automobiles) are then sold for money, which is
6. The average employee is gullible and not very reinvested as inputs into the system—and
bright. transformation or production continues.
THEORY OF Y
1. Management is responsible for the economic
well-being of the organization.
2. Employees have become passive and resistant
only as a result of their experience in
organizations.
3. Motivation, potential for development,
capacity for assuming responsibility, and
readiness to work toward organizational goals
are inherent in employees.
4. It is management’s job to allow employees to • Katz and Kahn (1978) point out that
recognize and develop the characteristics organizations thrive only as long as there is a
listed above. continuous flow of energy from the external
5. The chief job of management is to arrange environment into the system and a continuous
organizational conditions so that employees export of products out of the system.
can achieve their own goals by directing their
• This simple principle is at the heart of several
own efforts.
disciplines, including economics, psychology,
and biology. And, indeed, Katz and Kahn
HAWTHORNE STUDIES
developed their theory based on the principles
Elton Mayo
of biology that define all living things as open
• Western Eletric Hawthorne Works was
systems.
conducted from 1927 to 1932 under the
• Plants and animals, for instance, both give to and
leadership of psychologist and sociologist, Elton
take from the environment in which they exist—
Mayo.
and well-run organizations operate in a very
o This is what we know now as Hawthorne
similar way. In our car manufacturer scenario,
Studies
for example, the organization would be headed
• The initial experiment revealed that illumination
toward eventual death if the automobiles
intensity did not relate directly to worker
stopped bringing in money and production was
productivity, while follow-up experiments
negatively affected.
showed that productivity is directly related to
• Entropy is a principle in many branches of
group pressure and acceptance.
science positing that all forms of organization
• Hawthorne Effect : the tendency of individuals
move toward disorganization or death.
to perform better simply because of being
• Information input and negative feedback are
singled out and made to feel important.
also important parts of the open-system cycle. In
• It emphasized the psychological characteristics
an organizational context, the negative feedback
of workers and managers, stressing the
loop provides information about where and how
 the organization is getting off-course. For economic needs, but also considers needs like job
instance, if outputs are not bringing in sufficient satisfaction and carrier development.
resources to enable continual production of
those outputs, changes need to be made at the
input or throughput stage.
• equifinality, the notion that a system can reach
the same end state in different ways. In other
words, there isn’t just one way to achieve a
particular outcome. Note that this is inconsistent
with the basic premise of Scientific Management
that there is “one best way” to do everything.

10 CHARACTERISTICS OF OPEN SYSTEMS

Importation of energy Energy is brought in from
the external environment
for use by the system.
The throughput That energy is
transformed.
The output A product or service is
exported.
Systems as cycles The pattern of
importation of energy
The key difference between system theory and
and exportation of
contingency theory is that the system theory focuses on
products and services
continues. the internal dynamics of an organization’s structure and
Negative entropy The tendency of all behavior, whereas the contingency theory focuses on
systems to move the external factors of the organization’s behavior and
eventually toward death structure. Moreover, contingency theory looks at the
is reversed. relationship between an organization and its external
Information input and Information input and environment and activities to fill critical gaps of the
negative feedback negative feedback allow systems theory. In other words, it is an addition to
the system to correct or system theory.
adjust its course.
The steady state Surviving open systems
are characterized by a
balance in energy
exchange.
Differentiation Open systems move
toward more specialized
functions.
Integration and Bringing the system
coordination together as a unified
process is necessary for
the system to continue.
Equifinality There are many ways
within the system to get
to the same conclusion or
end point

The key difference between Classical and neo classical

theory is that the classical theory only considers physical
and economic needs to satisfy an employee, whereas the
neo classical theory, not only considers physical,