BSc Agricultural Economics and Agribusiness

EE 207: Agricultural Administration and

Management

TOPIC 2: Organization Theory and Design

(Prepared by Deogratias F. Rutatora)
SUA-CoA-DAECD
Iltant
Outline
1. The Concept of an Organization

2. Functions of Organization

3. Characteristics of Organization

4. How Organizations Function?

5. Classical organization theory and design

6. Modern organization theory

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 1.The Concept of an Organization
1. Meaning and Definition of Organization
 Foundation for administration and management
 An identified group of people contributing their
efforts towards the attainment of goals
 Structure of relationship among positions and jobs
created to achieve certain objectives and goals

 What is organizing?: The establishing of effective

behavioural relationships among persons so that
they may work together effectively and gain personal
satisfaction in doing certain tasks under certain
conditions 3
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 2. Functions of Organization

Determination of activities
Grouping of activities
Assignment of duties to specified persons
Delegation of authority
Defining relationships
Coordination of various activities
3. Characteristics of Organization
 Division of labour- Work assigned to a person
who is specialized in that particular work
 Co-ordination- the process of organizing
people or groups so that they work together
harmoniously
 Objectives – of organization must be SMART
 Authority-Responsibility structure
 Communication--Effective

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 4. How Organizations Function
 Structure (framework for getting things done)
and processes (e.g group behaviour, teamwork,
leadership, power, politics and conflict, interaction
and networking and communications) that
operate within it (in relation to its internal and
external environment)
 The culture people develop, that is, the values
and norms that affect behaviour
 Theories

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 5. Organization Theory and
Design
 Organizational theory explains the structure,
functioning and performance of organization;
and the behaviour of individual and groups
within it
 Classical theory--signifies the beginning of the
systematic study of management organization.
Traced back to 19th Century with key theorists
as: (1) Taylor’s Scientific Management (2) Fayol’s
Administrative Management; and (3) Weber’s Ideal
Bureaucracy (an organization based on rules and
regulations, formal relations, specialization, etc.).
 All the three concentrated on the structure of
organization for greater efficiency.
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 5. Organization Theory and
Design/Classical…
 The classical approach is underpinned by the
bureaucratic model entailing concepts of
centralization/ decentralization, flat/tall,
departmentation, and line/staff.

 The Bureaucratic model

 Bureaucratic theory and design are
attributed to Max Weber;
 To Weber an ideal organization
structure was referred to as a
bureaucracy with several major
characteristics:
 Specialization and division of labour;
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 5. Organization Theory and
Design/Classical…
 Positions arranged in a hierarchy (i.e. each lower
office is under the control and supervision of a higher
one);

 A system of abstract rules but rational to ensure

uniformity and coordination of effort. To Weber a
well understood system of regulations also provides
the continuity and stability.
 Impersonal relationships – an official should be
dominated by “a spirit of formalistic impersonality,
without hatred or passion, and hence without affection or
enthusiasm”;
 5. Organization Theory and
Design/ClassicalClassical…

 Employment should be based on technical

qualification (appointment based on merit);

 Promotions based on seniority/achievement;

 The bureaucrat is protected against arbitrary dismissal.

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 5. Organizational Theory and
Design/Classical…
1. Classical theory– (see Frederick W. Taylor)
based on following principles:
1. Division of labour and specialization
2. Scalar and functional processes- Scalar-
vertical organizational growth (superior –
subordinate) while functional- horizontal
organizational growth
3. Structure- underpinned by specialization,
coordination and span of control (defines the
effective supervision of maximum number of
employees by the supervisor)

 Concentrated on the anatomy of formal

organization.

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 5. Organizational Theory and
Design/Classical..
 Taylor laid emphasis on the following
principles:

1) Emphasis on science, not rule of thumb.

2) Harmony in group action, rather than discord.

3) Maximum output in place of restricted output.

4) Scientific selection, training and placement of the

workers.

5) Almost equal division of work and responsibility

between workers and managers.
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 5. Organizational Theory and
Design /Classical..
 Drawbacks of Classical Approach

1) Based on authoritarian approach

2) One way communication
3) No human side of the enterprise
4) Neglects the importance of informal groups in
the organization
5) Ignores the influence of external factors on
individual behaviour

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6. OTD/Modern Organization Theory
 Rose because of dissatisfaction with classical
organization theory as it was too descriptive and
superficial (See Chester Barnard in “the Functions of
the Executive”)-theory of COOPERATION and
ORGANIZATION;
 He was dissatisfied with a view that authority should
come from the top down.
 Used the analytical approach and maintained that
authority really comes from the bottom up
underpinned by cooperative aspects of organizations –
emphasizing the importance of human resource,
participation and communication.
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 6. OTD/Modern Organization
Theory…
 Modern organization theory views the organization as a
system made up of interacting parts while dynamic --
that changes with the change in its environment, both
internal and external.
 Integrates valuable concepts of the classical models with
the social and behavioral sciences.
 Emphasized the importance of communication and
integration of individual and organizational interest as
prerequisites for the smooth functioning of the
organization.

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 6. OTD/Modern Organization
Theory…
 Embraces the systems (a group of interacting, 
interdependent parts that form a complex whole) and
contingency theories
 The Systems Theory was developed in the early 1960s
(see e.g Bertalanffy, 1968; and Talcott Parsons, 1951)
and attaches a great significance on empirical research
data
 There are two types of systems:
 Open
 Closed

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 6. OTD/Modern Organizational
Theory…/Systems
 Open Systems – interact with their environment. All
living systems are open systems
 Are much more relevant and meaningful as they
recognize the external environment as a source of
significant input (Focus on social, legal, technical,
economic and political).
 At the heart of open systems are the processes and
operations which transform inputs into output

 Closed Systems – which have no interaction with their

environment. Also, all non-living systems are closed
systems.

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6. OTD/Modern Organizational
Theory…/Systems

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 6. OTD/Modern Organizational
Theory/Contingency Theory…
 The contingency theory is simply an extension of the
systems organizational theory. Argues that there is no
particular managerial action or organizational design
that is appropriate for all situations. No best way to
organize the corporation.
 Thus, the design, as well as the managerial decision, is
contingent on the situation and circumstances. It is also
referred to as a situational theory.

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 7. On Classical and Modern
Organizational Designs
 Classical Designs/Structures
 In a simple centralized organizational structure, power,
decision making authority and responsibility for goal
setting are vested in one person at the top; usually found in
small and single-person-owned organizations with only
one or two functions, and a few people who are specialists.
 The Bureaucratic Organization---in large
organizations and under well defined conditions ..
these are characterized by
 the use of standard methods and procedures for
performing work; and
 a high degree of control to ensure standard
performance.

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Figure 1: A bureaucratic
organizational structure

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 7. Modern organization designs

 Modern approaches to organizational design include

project, matrix and adhocracy types.
 Project design
 Also called the team or task force type; and used to
coordinate across departments for temporary, specific
and complex problems which cannot be handled by a
single department.
 Members from different departments and functional
areas constitute a team, in which every member
provides expertise in their area of specialization. See
Fig. 2

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Fig. 2: Modern Organization Design

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 7. Modern organization designs..

 Matrix Organization
 blends two different types of designs, namely project and
functional organizational designs (Kolodny, 1979)
 Given the instability nature of the project type, the matrix
attempts to provide permanent management structures by
combining project and functional structures
 balances both technical and project goals and allocates
specific responsibilities to both.
 Matrix organizations need more human resources,
particularly during initial periods
 Responsibility and jurisdiction are not clearly defined in
matrix organizations

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Figure 3. Matrix organizational
structure

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Figure 4. Adhocratic organizational structure

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 7. Modern organization designs..
 Adhocracy
 Also called ‘free form’ or organic organization
structures
 Stresses managerial styles which do not depend upon
formal structures
 Well suited for complex and non-standard work and
rely on informal structures.
 An adhocratic structure is flexible, adaptive and
organized around special problems to be solved by a
group consisting of experts with diverse professional
skills (Robbins, 1989)
 Experts have decision making authority and other
powers
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8. Types of Organizations
1. Line Organization:
i. The simplest and the earliest form of organization.
Also known as "Military", "traditional", "Scalar" or
"Hierarchical" where decision making flows from
top to bottom.
ii. The line of authority flows vertically downward from
top to bottom throughout the organization. All major
decisions and orders are made by the executives at
the top and are handed down to their immediate
subordinates who in turn break up the orders into
specific instructions for the purpose of their execution
by another set of subordinates.
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Types of Org.: Line Organization:
 Characteristics

i. Consists of vertical relationships

ii. Authority flows from top to bottom level

iii. Departmental heads are given full freedom to

control their departments

iv. Operation of this system is very easy

v. Each member has direct command over his

subordinate

vi. The superior takes decisions within the scope of

his authority. 29
Types of Org.: Line Organization..
 Advantages

i. Simplicity

ii. Division of authority and control

iii. Unity of control

iv. Discipline

v. Flexibility

vi. Direct communication

vii. Coordination
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Types of Org.: Line Organization..

 Disadvantages
i. Lack of specialization
ii. Lack of initiatives
iii. Dictatorial
iv. Scope of favouritism
v. Instability
vi. With growth, the line organization
makes the superiors too overloaded
with work

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 Types of Org.: Functional
Organization
 Key proponent is Frederick W. Taylor. Intended to
overcome the limitations of line organization

 Characteristics of Functional Organization

i. The work is divided according to the specified
functions

ii. Authority is given to the specialist to give orders to a

specific function

iii. Functional authority can give orders throughout the

line with reference to the specified area

iv. The decisions are taken in consultation with the

functional authority 32
 Types of Org.: Functional
Organization …
 Advantages

1) Benefits of specialization

2) Efficiency

3) Adequate supervision

4) Reduce the workload

5) Cooperation

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 Types of Org.: Functional
Organization ..
 Disadvantages
1) Complex relationship
2) Centralization
3) Ineffective coordination
4) Increase overhead expenses as a
large number of specialists are
required to be appointed
5) Lack of responsibility. Difficult for
the management to fix responsibility
for unsatisfactory results.
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 Types of Org.: Line and Staff
Organization
 Makes use of the merits of line and functional
organizations to overcome their demerits
 In line and staff organization, the line authority
remains the same as it does in the line
organization and authority flows from top to
bottom. Line officers have authority
 The main difference is that specialists are
attached to line officers/managers to advise
them on important matters like polices and
plans. That is, do not have power but provide
expert advice to line officers.

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 Types of Org.: Line and Staff
Organization
 The combination of line organization with this
expert staff constitutes the type of organization
known as line and staff organization. The 'line'
maintains discipline and stability; the 'staff'
provides expert information.
 The staff carries on the research, planning,
scheduling, establishing of standards and recording
of performance.
 Overall decision-making rests with the line staff

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 Types of Org.: Line and Staff
Organization
 Types of Staff that support line managers

1) Personal Staff: The staff official is attached as

a personal assistant or adviser to the line
manager. E.g assistant to MD

2) Specialized Staff: e.g R&D, personnel/HR and

accounting

3) General Staff: These constitute a set of

experts in different areas who are meant to
advise and assist the top management on
matters called for expertise. E.g Financial
advisor, technical advisor or CTA etc
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Types of Org.: Line and Staff
Organization
Features of Line and Staff Organization

1)Line officers who have authority and command

over the subordinates and are accountable for
the tasks entrusted to them. The staff officers are
specialists who offer expert advice to the line
officers

2)The staff officers prepare the plans and give

advise to the line officers and the line officers
execute the plan with the help of workers.

3)The line and staff organization is based on the

principle of specialization.
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 Types of Org.: Line and
Staff Organization
Advantages or Merits of Line and Staff Organization

1)Itbrings expert knowledge to bear upon

management and operating problems. Hence,
promotes efficient working of line officers

2)Promotes balanced or informed decisions

3)The expert advice and guidance provided

benefit the entire organization

4)It is based upon planned specialization

5)Unity of action
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Types of Org.: Line and Staff
Organization
Disadvantages or Demerits of Line and Staff
Organisation

1)There may be line and staff conflicts unless the

duties and responsibilities of the staff members
are clearly indicated by charts and manuals

2)In case of communication gap betn line and

staff officers the degree of cooperation among
them decreases

3)There is no such authority with staff officers

which can compel line officers to accept their
decisions.
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Types of Org.: Matrix Organizations

 Defined as any organization that employs a

multiple command structure but also relates
support mechanisms and an organizational
culture and behaviour pattern
 These are characterized by:
1) Projects manager reports to more than one superior
like Functional Managers Chief Project Manager

2) Need for an agreement betn managers regarding the

authority utilizing available resources

3) Need for common willingness among the authority

holders to face the conflicts with a view to resolve them
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Types of Org.: Matrix Organizations..
Advantages of Matrix Organization

1)Achievement of objectives

2)Best utilization of resources

3)Appropriate structure

4)Flexibility

5)Motivation

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 Types of Org.: Matrix
Organizations.
Disadvantages of Matrix Organization

1)Complex relationship

2)Struggle for power

3)Excessive emphasis on group decision making

4)Heterogeneous

5)Arising conflict resolution

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 9. Summary and SAQ
1) What is the rationale of having a better
understanding of organizations?

2) State the key functions of the organization

3) What are the basic tenets of organizational

theory?

4) Distinguish between line and functional

organization

5) State the relevance of motivational theories in

an organization?

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 10. Suggested Readings
1) Dawson, T. (1993) Principles and Practice of Modern
Management. Tudor: Hodder and Stoughton Ltd.

2) Verma H.N. et al (2013). Principles of Management,

Universal Training Solutions Private Limited, Bavdhan
Pune

3) Luthans, F. (1995) Organizational Behaviour. N.Y.

McGraw-Hill.

4) Stoner, J.A.F. & Wankel, C. (1998) Management. New

Delhi Prentice Hall of India

5) Lovely Professional University (2011). Principles and

Practices of Management. Excel Books Private Limited

6) Robbins, S. (1997). Organizational Behaviour

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THANK YOU FOR LISTENING

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