What is theory?

What is organization?
Chapter 1

Dr. Rasim Serdar Kurdoğlu

MAN 361 Organization Theory
Bilkent University Faculty of Business Administration
Theory
• Theory is basically an explanation!
• It explains relationships between different phenomena (individuals, events,
groups, companies, etc.).
• Why and how something happens?
• What happens? Where and when it happens? Who is responsible?
• Theory provides predictions and creates expectations.
• Theories are helpful to understand our experiences
• Each theory is a framework of ideas and thoughts.
• Theory arranges our approach to certain issues
Importance of theory
• Theory is everything for a scholarly work!
• Academics challenges existing theories, or improve them, or they
create new theories.
• Practitioners use academic theories as a valuable source.
• They also have their own informal theories out of their experiences.
• “There is nothing as practical as a good theory” (Kurt Lewin 1943)
Different forms of explanations
From weak to strong:
• Hunch (Starts by observation)
• Hypothesis (Forms by a verified observation)
• Theory (Established by a falsification attempt)
• Law (Not being challenged by an alternative theory)
What is organization?
• To organize means to coordinate a group of people and
make arrangements
• “forming a whole of interdependent parts”
• Organizations are deliberately designed orders with a
purpose.
• An organization is a managed system.
• Management involves planning, coordinating, directing,
controlling.
• An organization is different than a market order.
• How?
• Organizations are operated with an environmental structure,
possible a market structure
• For profit vs. non-profit
Organized life
Importance of organization
• Success comes with good organization as humans are often
individually helpless.
• Military, political, and business leaders rely on excellent
organization.
• “Chinggis Khan's organized units were based on the principle
of ten. He organized his people into units of ten, a hundred, a
thousand, and ten thousand.”
• “Believing that conventional management had stifled
innovation, Jobs laid off the general managers of all the
business units (in a single day), put the entire company under
one P&L, and combined the disparate functional departments
of the business units into one functional organization.”
 Importance of business organizations

 Bring together resources to achieve desired goals and

outcomes
 Produce goods and services efficiently
 Facilitate innovation
 Use modern manufacturing and information technologies
 Adapt to and influence a changing environment
 Create value for owners, customers and employees
 Accommodate ongoing challenges of diversity, ethics,
and the motivation and coordination of employees
What is organization theory?
• “Organizational theory is the study of the behaviour and nature of
organizations and their environments” (Miner 2005, p.4).
• It involves psychological, sociological and economic concerns for
organizations.
• It identifies different ways of organizing.
• Formalization, Specialization, Hierarchical relations, Vertical vs. horizontal,
Centralization
• Compare an organization with anarchy.
• Are organizations often similar to dictatorships? Why or why not?
The practicality of organization theory
• It helps to build an organizational system (structure of task and
authority relationships)
• Decision-making rules and roles
• Hierarchical responsibilities
• Routines and processes
• It helps to design and change organizations.
• It helps to establish an appropriate organizational culture.
An example: Agile organization
• Video: Transforming the pyramid to an agile organization
• https://www.youtube.com/watch?v=-tTAfrpjKvQ
Some organization theories
• Classical approaches, e.g.:
• Taylor’s scientific management: Seeing people as a part of engineering
problem of efficiency
• Weber’s bureaucratic organization: Using formal procedures to regulate
administration of people
• Modern approaches, e.g.:
• Bounded Rationality: Focusing on managerial decision-making capabilities
and boundedly rational actions
• Ecosystem approaches: Seeing an organization as a part of larger ecosystem
Current challenges in organizations
Current Challenges
 Globalization
 Ethics and Social Responsibility
 Speed of Responsiveness
 The Digital Workplace
 Diversity