Organisational Theories
• As organisation are evolved over time, many
think experimented as to what is best
• Origin of mgt is as old as human Civilization -
present day mgt as we see was not same in earlier
times - mgt experts expressed diff views from time
to time on which various theories developed
• Organisation theory refers to socio-technical
analysis of knowing or best understanding –
o how organisation are formed
o how they can be made better
o how they work
• It is preposition that attempts to explain & predict
how groups and individuals work or behave in diff
organisational mgt
Applications of Organisational Theories
 Strategy formulation
 Hierarchy set up
 Communication
 Human resource
 Operations
 Feedback mechanism
Various Theories
Classical Theories
• The word classical refers to long established &
practiced theories acting as foundation of further
thought
• These presents systematic study of human beings
Assumptions
 Mgt is a process consisting of
interrelated functions performed to
achieve desired goals
 Managers can be developed through
education and training
 People are motivated mainly by
incentives & penalties
 There should be no conflict of interest
b/w org & employees - if it is, then org
prevails
1. Bureaucratic Model
• Max Weber - German sociologist -
analyse formation & administration of
public bureaucracies which happened to
be oldest form of org
• he developed in ideal type of
Bureaucracy as a conceptual model for
analytical purposes
Features -
• Clear separation b/w superior &
subordinate
• Division of labour based upon
competence & functional specialisation
• Clear divorce b/w personal & official
matters
• System of rules, regulations &
procedures
• Hierarchy in positions based on legal
authority & power
Acc to Weber, there are 3 types of
legitimate authority -
• Traditional authority -
o Authority which a person acquires
because he or she belongs to a
particular class or by tradition
o Ex - member of a royal family
o Irrational & illogical
• Rational-Legal authority -
o Authority vested in legally established positions
or rank within org's hierarchy
o Ex - CEO of a company
o Rational & efficient
• Charismatic authority -
o People obey a person due to their belief that
person has a special power or appeal
o Irrational & illogical
Advantages –
• Specialisation as every member is assigned
special task
• Division of work - no overlapping of work
• Hierarchy of authority - authority is equal to
responsibility
• rules & regulations - unbiased working
• Impersonal conduct - logical work
• Democracy - selection & promotion based on
competence
• Continuity in work - one person replace other
without any difficulty
Disadvantages
• Red tapism & paperwork
• Employees do not develop belongingness to org
• Excessive Reliance on rules & regulations
hindrances innovative growth of individuals &
company
• Employees becomes resistant to change &
introduction of new technology in work
2. Scientific Management
• FW Taylor - father of scientific management
• Scientific management is art of knowing exactly
what you want your men to do & seeing that they
do it in the best & cheapest way
• He advocated a Revolutionary way of thought
based working
• He attacked rule of thumb or unthoughtful
manner of human working & advocating for
adopting one best way of doing work
through scientific study of work
• Central theme of his total work is -
maximum prosperity for employer + max
prosperity for each employee
• for him there is no inherent conflict b/w
interest of workers, employees &
consumers
• result of higher productivity should be
shared by all
Principles of scientific management -
• Science not rule of thumb - Develop a
true science for each element of a worker's
job to replace old rule of thumb method
• Job specialisation & division of labour
should be a part of each job
• Scientific selection, training &
development of workers
• Cooperation not individualism – Close
cooperation b/w mgt & workers
o Maximum output in place of restricted
output
o Harmony in group action rather than
discord
o Development of each to its greatest
efficiency
o Maximum prosperity of both
Mental revolution
• MR refers to realisation by mgt &
workers that mutual interests are not
contradictory
• Mutual prosperity is possible through
cooperation
• Both party should keep their eyes off
from distribution of surplus rather than
stressing upon increasing it until it
becomes so large that how to divide aspect
becomes necessary
• Both should work shoulder to shoulder
in same direction
• Core elements of mental revolution -
o Creation of spirit of mutual trust and
cooperation
o All-out efforts for increase in production
o Inculcating & developing scientific attitude
towards problems
Techniques of Scientific Management
1) Time study
• Establish Standard Time required to complete job
• Recording time taking in completing each
element and avoid guesswork
2) Motion study
• Systematic & critical study of movt of both
workers & machines so as to eliminate
unnecessary & wasteful movement
3) Scientific task planning
• Technique of forecasting & picturing ahead every
step in long series of operations
• Each step to be taken in right place, of right
degree & at right time
4) Standardization & Simplification
• Pre-determined standards are laid down
regarding task, material, method, time, quality,
cost which ensures uniformity in operations
5) Differential piece rate system
• Direct links should be created b/w remuneration
& productivity
• Ex - 2 piece-rates set up
6) Functional foremanship
• Workers & factory executives should be free
from burden of planning & designing
• Extension to principle of specialisation
Advantages -
• Efficiency & effectiveness
• Mental revolution
• Specialisation
3.Process/Administrative/Functional
Management
• Henry Fayol - father of modern
management - presented an overall
understanding or philosophy of mgt
• He rejected idea of distinction b/w
administration & mgt
• He tried to identify functions of manager
with emphasis on coordination of
resources towards achievements of stated
objectives
• He divided all activities of business into
6 categories -
• Technical - manufacturing
• Commercial - trade
• Financial - capital use
• Accounting - statistics
• Security - protection of property &
persons
• Managerial
Disadvantages -
• Extreme specialisation is unrealistic
• Mechanistic approach - ignores human
element
• Average workers & less efficient suffer
under garb of low efficiency - tough
competition
• Specialisation leads to repetitive &
monotonous work
• Separate workers & managers
• Focus more on factory mgt than general
mgt like planning, controlling,
coordinating etc
Functions of Management -
 Planning - to foresee.& provide means
for future
 Organising - provide business
everything useful for functioning
 Commanding - maintaining activities
among personnel
  Coordinating - unifying & harmonizing all 9) Scalar Chain
activities
 Controlling - ensures everything occurs in
conformity with established rules & procedures
Principles of Management
1) Division of labour
for more & better work with same effort or
specialisation
2) Authority & Responsibility
• parity or enough authority to be given to carried
out responsibility
• Responsibility is a natural consequence of & is
corollary to authority
• Chain of superiors from top to lowest
ranks
10) Order or Placement
• Each employee should occupy job
wherein he or she can render best & most
effective services
• Also include right arrangement of things
11) Equity
• combination of kindness & justice in
managers while dealing with subordinates

3) Discipline 12)Stability of tenure

• obedience of standing agreements of T&C of • suitable condition should be created to
employment minimise turnover of employees
• this ensures smooth functioning • instability is cause & effect of bad mgt

4) Unity of Command 13)Initiative

• for any action, any employee should have only
one boss or superior
5) Unity of direction
• one head & one plan for each activity or one type
of activity
6) Subordination of individual interest to general
interest
• efforts should be made to reconcile individual int
with common int
• In conflict, interest of org should prevail
7) Remuneration of personnel
• should provide max possible satisfaction to both
employees & employer
8) Centralisation
• degree of centralisation & decentralization in
matter of finding optimum degree of a particular
concern
• manager should sacrifice personal vanity
to permit subordinates to exercise
judgement in formulation & execution of
plans
• It develops interest in doing work &
provides satisfaction
• powerful motivator & source of keenest
satisfaction
14)Espirit De Corps
• Unity of efforts through harmony of
interest
• Source of organisation strength
• Communication is needed for team work
Advantages -
 14 functional truth or principles rather
than rules
 Max satisfaction of both
 Allows level jumping - purposive
violation of hierarchy principle - gang
plank

Disadvantages -
Advantages of Classical Theories
• Offers convenient Framework for education &
training of managers
• Observational method of case study helpful in
drawing principles best suited to org
• Highlight Universal nature of mgt
• Provide starting point to researchers to validate &
improve applicability of mgt knowledge
• Provide science on which entire mgt can be built up
Disadvantages of Classical Theories
• Offer mechanistic framework that undermines
role of human factor
• Lack of dynamism as they offer roadmap to static
picture rather than a flexible way out to problems
• Close system view without any consideration of
external envt of business
• Too much Reliance on past experiences can be
dangerous
• Some concepts are weak & not properly
defined - ex - principle of division did not
define method to be used to divide work
• Based on personal experiences & limited
observations - lack empirical evidences
• Does not pay proper attention to workers
needs
• Impractical assumptions such as uniform
needs, homogenous workers, line & staff
org
• Anti-democratic working as org goals
are superior
Neo-Classical Theories
• Deals with human factor which was
ignored by classical theories
• Jobs became narrow & workers began to
resist formal & impersonal treatment
overlooking their social & psychological
needs - this resistance & need to secure
willing cooperation let to dev of
neoclassical concept
1. Human Relations Theory
• Elton Mayo & Associates propounded it
through Hawthorne experiments
conducted at a plant b/w 1924-32 in USA
• Their test concluded working of human/social
aspect at workplace
• These studies conducted to determine effect of
better physical facilities on worker's output
Hawthorne experiment -
• Illumination experiment - No negative impact
effect of reduction in light for productivity
• Relay assembly test - Positive impact of
voluntary rest, hot lunches, friendly atmosphere
• Mass Interview program - Most of worker's
complaints were base less - real problem may not
be there but listening subordinate is essential
• Bank wiring observation - Workers est their own
standards of output besides formal one & enforce
them through various methods of social pressures
Hawthorne Conclusion -
• Work group is not merely a techno-economic unit
- it is also a social system with a culture of its own
• Workers are not merely rational economic beings
motivated by money but they are also socio-
psychological beings
• Socio-Psycho needs exercise greater influence on
employee behaviour & performance than physical
conditions of work
• Workers act or react not as an individual but as a
member of group
• Complaints & criticism by employees are
manifestation or symptoms of deeper satisfaction
• Free expression resulted into worker satisfaction
even though conditions didn't change
2. Behavioural Science Approach
• Also known as Human behaviour approach or
human resources approach
• It is further refinement of human relations
movement
• It covered wider aspects in inter-personal roles &
responsibilities
• It laid emphasis on application of methods &
findings of general & social psychology &
sociology understanding of organisational
behaviour
Impt aspects -
• Motivation of employees for improving
productivity
• Organisation as a social system
•Leadership study of managerial behaviur
• Communication for better understanding
in org
• Employees development - upgrading of
employee & managerial skills
Abraham Maslow propounded Need
Hierarchy theory - Human needs can be
classified into diff categories
• Human needs can be arranged into
hierarchy
• These needs motivate them to work
Michael E Porter propounded 5 forces
model to corporate strategy - a strategic
manager must analyse these forces &
proposes a program in order to
influencing or defending against them -
• Threat of New entrants
• Threat of new substitutes
• Bargaining power of consumers
• Bargaining power of suppliers
• Rivalry among existing competitors

Implications of Neo-Classical Theories
Decentralized structure - more autonomy to
workers
• Informal organisation - ensures efficiency
• Flat structure - reduce distance b/w employer &
employee
• Freedom of expression
• Dynamic structures
• Open, adjustive, sharing work culture
Contribution-satisfaction equilibrium -
• Develop by Chester Bernard to explain individual
motivation
• Contribution - individual efforts &
activity undertaken in pursuance of
organisational goals
• Satisfaction - incentives or benefits
provided by org towards individual in
exchange of contribution
• Individual motivation = satisfaction >
contribution
• Equilibrium refers to balance in system
i.e. contribution towards organisational
goals
• Inducement - factor provided by org to
individual to induce them to work
Limitations of Neo- Classical Theories
• Short-sighted perspective
• Lack of integration of many facets of
human behaviour
• Cynical Puppeteering -
• Cynical - having or showing a deep
distrust of human beings & their motives
• Puppet - one that is or can be used to
further the purposes of another
• Believes that human conduct is
motivated wholly by self-interests
• Lying, putting on a false face, taking
advantage of others are fundamental to
human character
 Modern organisational theory (MOT)
• Also known as modern envt theory or
organisational envt theory or modern mgt theory
• These theories focus on both micro & macro
aspects affecting business envt which classical &
neo-classical theory fail to do
• It focuses on -
o Open system of org
o Dynamism & adaptation
o Probabilistic & integrated approach
1. System Approach
• This approach views an org as an interrelated
parts with a unified purpose - surviving & thriving
in its envt
• Main Thrust is an interdependence &
interrelatedness of various subsystems from point
of view of effectiveness of larger system
• Features -
• Org is an unified & purposeful system consisting
of several interconnected & interacting
subsystems
• Each subsystem influences other & systems as a
whole
• Collective contribution of these sub-systems is
greater than aggregation of individual
contributions
• Every system has a boundary that separate it from
its envt - this boundary determines internal &
external factor to business
• focuses on open system of OB view of org -
which continuously interact with envt
• Feedback is useful in evaluating & improving
functioning of system
Contributions -
Examines interrelationship & interdependence
among various parts of org ~
Acknowledges envtal influences on org - a org has
to work hard & continuous adaptive to
its dynamic envt
• Laid emphasis on analysis of problems
for business as a whole & avoid isolated
solutions
• Focused on adaptability in linkage with
envt
• Limitations -
• Lack of unified theory which can be
applied to all
• Too abstract & vague
• Provides limited phase of external envt
• Cannot be easily applicable to practical
issues
2. Contingency Approach
• It is an extension to system approach
with more open view
• Basic idea behind it to non-existence of
any particular managerial style or
organisational design which may be
suitable for all organisational goals,
situations
• It is based on belief that there is no one
best way to tackle problems of mgt
• What manager do in practice depends
upon a given set of circumstances
• Manager should develop variable
methods, tools or action plans as per
specific situation or contingency
• It rejects universality concept & appeals
to common sense
• Features -
• Mgt is entirely situational - conditions of
situation will determine which technique
& control systems should be designed to
fit a particular situation
• Mgt policies & procedures should
respond to ental conditions - various
techniques should be designed to fit a
particular situation
• Mgt should match or fit it approach to
requirements of particular situation

Utility =
• Provide clear view of realities of managerial job
• Avoids organics stand & exhorts managerial
judgement in light of envt
• Widens horizons of manager & make them alert
& adaptive
• Promotes analytical, critical & multidimensional
thinking to analyse situation
• Stresses need of comparative study & choose the
best
• No definite prescription & elastic approach
• Degree of fit & congruence b/w org & envt
determines level of success
Learning Organisation
• which can create, acquire, transfer knowledge for
modifying work behaviour of its members
• Needed to remain effective & competitive
• Encourages excellence, creativity, innovation &
sense of achievement among its members
Network Organisation
• Cluster of diff org whose actions are coordinated
by contract & agreements
• Based upon on outsourcing of inputs, processes,
outputs
Boundaryless Organisation
• Absence of vertical & horizontal boundaries with
org
• Breaking cultural, geographical & organisational
barriers to enable business create greater value
Virtual Organisation
• Consists of individuals working. out of physically
dispersed work places or even individuals working
from mobile devices & not tied to any particular
workspace
• ICT is a backbone of virtual organisation -
members are linked by ICT & detached physically
• Managers coordinates & controls
external relations with help of computer
network links
• Characteristics -
• Flat organisation
• Multi-disciplinary teams - ability to
connect worldwide
• Ease of work — work from home
• Absence of apparent structure
• Staffed by knowledge workers
• Less capital intensive
• No geographical boundaries of operation
Advantages -
Saves time, travel expenses
• virtual org can be organised whether or
not members are in proximity with each
other
• Use of outside expertise with ease
• Employees can be assigned multiple,
concurrent teams
• Employees can accommodate both
personal & professional life
• Allows firms to hire a best talent without
having any locational hindrances
Disadvantages -
• Lack of synergies from face to face
interactions
• Lack of bondage b/w members
sometimes communication become
hindrance due to non-use of non-verbal
cues
• Lack of control & discipline
Self-managed teams -
• Group of individual that is responsible &
accountable for all aspects of producing a
product or delivering a servic
• Consists of independent &
interdependent members
• Works best where product or service is a very
complex nature or customisation is required
Modular organisation -
• Virtual organisation which outsources certain
specialised functions & works upon
core capabilities
Fishnet Organisation -
• Organisation with dynamic hierarchies in
linkages with exigencies of time
• Continuausy changing role of members creating
new & destroying
• Fair opportunity to all to be part of leadership
Organisational manual -
• list explaining structure properly
• Written source of authority-relationships
• Adopted in large organisations
& then eliminating those steps that are not
productive
• Create the flow - ensure steps which
creates value take place in perfect
sequence so that product reaches customer
smoothly
• Establish pull - once flow is initiated,
customers pull value from next level
activity
• Seek perfection - process is started again
& continue till perfection state is arrived

Cybernetics
• Improvement over contingency approach to
responding to envt
• Way where org works by influencing & getting
influenced by envt
• Both feedback & feedforward strategies are used
to deal with envt
• Ex - Microsoft offers operating system beyond
expectations & continuously make changes on
basis of feedbacks received

Lean Management
Min wastage
• Coined by Toyota Production System
• Technique developed with aim of minimising
process waste & maximising value to customer
without compromising quality

Steps -
• Identify value - from view point of ultimate
consumer
• Map the value stream - ascertain all steps
involved in value stream for each product family