ORGANISATIONS

Why Organizations???
“To get things done”
 Organizations do things that individuals
cannot do by themselves.
 Organizations are a dominant component
of society.
 Organizations have the capacity to do
great good or great evil.
 Organizations have outcomes
(intentional or unintentional).
 Scope
 To increase Specialization and
division of labour.
 To use large scale technology.
 To manage the external environment.
 To economize on transaction cost.
 To exert power and control.
DEFINITION
“An Organization is a
consciously coordinated
social entity, with a relatively
identifiable boundary, that
functions on a relatively
continuous basis to achieve a
common goal or set of
goals.”
 Consciously coordinated
 Social entity

 Relatively identifiable boundary

 Continuing bond

 Goals
“An organization is a collectivity with a relatively
identifiable boundary, a normative order (rules),
ranks of authority (hierarchy), communication
systems, and membership coordinating systems
(procedure); this collectively exists on a relatively
continuous basis, in environments, and engages in
activities that are usually related to a set of goals;
the activities have outcomes for organizational
members, for the organization itself and the
society”.
“An organization is a tool used
by people to coordinate their
actions to obtain something
they desire or value”.
Overview of various
components
 Organizations and individuals.
 Organizations and community.
 Societal outcomes.
 Organizations and social change.
 Multinational organizations.
 Voluntary organizations.
Organizational Structure
“Organizational Structure is the
formal system of task and
authority relationships that
control how people coordinate
their actions and use resources to
achieve organizational goals.”
By organizational structure we
mean “the distributions, along
various lines, of people along
various lines, of people among
social positions that influence
the role relations among these
people”

-BLAU
Variables used to define structural
dimensions:

 Administrative component the number

of line supervisors, managers, and
staff personnel relative to the total
number of employees.
 Autonomy the extent to which top
management has to refer certain
typical decisions to a higher level
authority.
 Centralization the proportion of jobs
whose occupant participate in decision
making and a number of power
arrangements.
 Complexity the number of occupational
specialties, the professional activity
and the professional training of
employees.
 Delegation of Authority the ratio of specific
management decisions the chief
executive has delegated to the number
he/she has the authority to make.
 Differentiation the number of specialty
represented in a firm or the difference
in cognitive and emotional orientation
among managers in different
departments.
 Formulation the extent to which an
employee’s role is defined by formal
documentation.
 Integration the quality of the state of
collaboration that exists among
departments that are required to
achieve unity of effort.
 Professionalization the degree to which
employees use a professional
organization as a major reference,
belief in service to the public, belief in
self regulation, dedication in ones
field, and autonomy.

 Span of control the number of

subordinates that an individual
manager can and should supervise.
 Specialization the number of
occupational specialties and the
length of training required by each or
the degree to which highly specialized
requirements are spelled out in formal
ob descriptions for various functions.
 Standardization the range of variation
that is tolerated within the rules
defining the job.
 Vertical span the number of levels in the
authority hierarchy from the bottom to
the top.
Evaluation of
Organizational theory
 The current state of organizational
theory is the result of an evolutionary
process.
 There are few major pre-twentieth-
century milestones.
 There are 2 dimensions in the evaluation
of organization theory with different
perspectives. (organization as a system &
organization as a structure)
Type-1
 The early approaches to organization
theory in this century conceived of
organizations as mechanical devices to
achieve goals. Attention focused on
achieving efficiency in internal
functions of the organization.
Type-2
 These theorists operated under close
system assumptions but emphasized the
informal relations and non economic
motives operating in the organizations.
Management could not design formal
relationships, rules and like, but there
were
Type-3
 Theorists saw organization as a
vehicle for achieving goals. They
concentrated on size, technology, and
environmental uncertainty as the major
contingency variables that determined
what the right structure for an
organization should be.
Type-4
 The social perspective has made a come
back but in an open system frame work. The
result is the view that structure is not the
rational effort by managers to create the
most effective structure but rather the
outcome of the political struggles among
coalitions within the organization for
control.
 Type -1 Theory
 Fredrick Taylor and Scientific Management.
 Henry Fayol and Principles of organization.
 Max Webber and Bureaucracy.
 Ralph Davis and Rational Planning.
Fredrick Taylor and Scientific
Management.
Frederick Winslow Taylor is considered to
be the father of scientific management.
During his career, he published many papers
and books and all his contribution are were
compiled in his book called “Scientific
Management”.

He concentrated mainly on two concepts

 Wastage of material.

 How to utilize man power.

Definition
Taylor defined Scientific management as

“Scientific Management is concerned with

knowing exactly what you want men to do
and then see in that they do it in the best
and cheapest way”
 Taylor’s Contribution can be studied
in two parts:

1. Elements and tools of scientific

management.
2. Principles of scientific management.
Elements of Scientific Management:
1. Separation of planning and doing
2. Functional foremanship
3. Job Analysis
4. Standardization
5. Scientific selection & training of workers
6. Financial incentives
7. Economy
8. Mental Revolution
1.Separation of planning and doing
 Supervisors – planning
 Workers – Execution/Doing of
work
2.Functional Foremanship

Planning : Execution/doing

 Route Clerk  Speed Boss

 Instruction card  Inspector
clerk  Maintenance
 time and cost clerk foreman
 Disciplinarian  Gang boss
3.Job Analysis
 The best way of doing the thing is
one which requires least movement,
Consequently less time and cost.
 This best way of doing work is
determined by taking up – Time
Study
- Motion Study
- Fatigue Study
4.Standerdisation
 Instruments & Tools
 Period of work
 Amount of work
 Working Condition
 Cost of Production etc
Need to be standardized.
5.Scientific Selection And training of
workers
 Taylor has suggested that workers
should be selected on scientific basis
and trained physically and technically.
6.Financial Incentives
 Taylor advised to follow differential
piece rate system.
 He suggested that wages should be
based on individual performance and
not on the position which he
occupies.
7.Economy
 While applying Scientific
management ,not only
scientific and technical aspects
should be considered but also
adequate consideration should
be given to economy & profit.
8.Mental Revolution
 Efforts to increase Production
 There should be mutual trust &
confidence
 Developing Scientific attitude towards
solving problem
 Principles of scientific
management.
 Replacement of Rule of thumb.
 Scientific selection and training of
workers.
 Cooperation of management and labour to
accomplish work objectives.
 Equal division of responsibility between
managers and workers.
Henry Fayol and Principles of
organization.
Henry Fayol is regarded as “Father of
Administrative management theory”
Fayol started his career as a mining engineer in
1860 in colliery company in France. He was
appointed as manager for 22 years and then
when the company’s financial position was
critical, he was appointed as General
Manager ,He held this position for 30 years
at that time the company had become one of
the biggest coal company’s in France.
According to Fayol ,Activities of business can
be divided into 6 groups.

Business Operations

Technical Commercial Financial Security Accounting Managerial

Activities Activities Activities Activities Activities Activities
1. Technical – related to production.
2. Commercial – Buying & Selling .
3. Financial – Raising capital & its
optimal use.
4. Security – Protection of person and
property.
5. Accounting – Balance Sheets ,Cost
sheet ,Statistics.
6. Managerial - ? ? ? ? !
 Fayol’s Fourteen Principles of management.
1. Division Of work
2. Authority and responsibility.
3. Discipline.
4. Unity of command.
5. Unity of direction.
6. Subordination of individual to general interests.
7. Remuneration of personnel.
8. Centralisation.
9. Scalar Chain.
10. Order
11. Equity.
12. Stability of tenure of personnel.
13. Initiative
14. Esprit de Corps.
1.Division Of work.
 It refers to division of work among various
individuals in the organisation to bring
about specialisation in every activity.
 He believed that , the more people
specialize, the more efficiently they can
perform their work.
 Division of work can be applied to all levels
of activity.
 Advantages Disadvantages
 It increases efficiency  It takes longer time
of workers & to specialize.
management.  It creates monotony
 It avoids wastage of & boredom.
time & cost.
 It brings
Specialisation.
 2.Authority & responsibility
Authority -Right to give order and power to get
obedience from subordinate
Formal
Authority
2 types of authority
Personal Authority

Formal authority is derived from his /her official position held by

them.
Personal power is the result of intelligence ,experience moral worth
,ability to lead,
past service .
Responsibility - it is the duty which
subordinates is expected to perform.

Authority & responsibility is inter-

related.
3.Discipline.
 Employees must obey & respect the rules of the
organisation.
 According to Fayol “Discipline means obedience,
application ,energy & outward mark of respect “
 Best means of maintaining discipline are:
1. Good supervision at all levels.
2. Clear understanding between workers &
management.
3. Application of penalties.
 4.Unity of command.
This principle States that each employee should
receive instruction from only one superior.

Advantages Disadvantages
 It clarifies authority &  Subordinates cannot
responsibility carry on orders.
relationship.  Scope for conflict.
 It helps in delegation
of authority
 It makes management
simple & effective
 it avoids conflict.
5.Unity of Direction.
“One head ,one plan”
Means group of activities having the
same objective should come under one
head & one plan.
6.Subordination of individual
interest to common goal.
 In a business concern ,an individual is
always interested in maximizing his own
satisfaction through more money,
recognition ,status .
 Hence they need to subordinate
individual interest to general interest.
7.Remuneration of personnel.
 Compensation for the work done should
be fair.
 It should satisfy both labour &
management.
 It should be based on Cost of living
,general business condition, productivity
of the employees ,capacity of the firm to
pay.
8.Centralisation.
Concentration of authority at one level of
management.

Fayol believed that managers should retain

final responsibility.
9.Scalar Chain.
 Scalar chain means the hierarchy of
authority from highest executive to lowest
one for the purpose of communication.
 Chain of superiors arranging from top
level to lower level of management.
10.Order
Means “Place for everything & everything
in its place”
That means material & people should be
in the right place at the right time.
11.Equity
Means equality of fair treatment.
 Equity results from justice & kindness.

Employees expect management to treat

everybody equally.
there should be prejudices ,personal
likes and dislikes.
12.Stability of tenure of
personnel.

In order to motivate workers to do more

& better work ,it is necessary that there
should be assured security of job .if
they have fear of insecurity of job
,their morale will be low.
13. Initiative
Initiative means freedom to think and
execute the plan.
 Fayol advised managers to give them

sufficient scope to show their initiative

14.Esprit de Corps
This means “Union is strength”.
The management should create harmony
and team spirit among employees.
 Contributions
 There should be a clear line of authority ,as in
the military ,from the top management.
 The authority & responsibility of each
employee should be communicated in writing.
 Each individual should perform one function
only
 The span of control of managers should not
exceed six
 Criticism
 Authority can be delegated but not
responsibility,
 Unity of command & division of
work , both principles cannot be
followed at a time.
 following all these principles will
lead to mechanistic organisation
culture which are insensitive to
employees self actualization.
MAX WEBER AND
BUREAUCRACY
MAX WEBER AND BUREAUCRACY
“ideal- type” organization structure

Max Weber developed a structural

model, which was most efficient
for organization for achieving
their ends. It was called
“BUREAUCRACY”.
Bureaucracy
Bureaucracy is an
administrative system
designed to accomplish large-
scale administrative tasks by
systematically coordinating
the work of many individuals.
It was characterized by:
 Division of labour

 A clear authority hierarchy

 Formal selection procedures

 Detailed rules and regulations

 Impersonal relationships

 Official record

“today’s large organization”

Ralph Davis and
Rational Planning
Ralph Davis and Rational Planning

Rational planning proposed that

structure was the logical outcome of
organization's objectives.
 Primary objective of a business

firm is Economic service.

 Business cannot survive without

providing Economic value.

 Economic values generate
through activities of
organizations-products or
services.
 It is the objective of the
management to group these
activities together in such a way
as to form the structure of the
organization.
Type -2 Theory
 Elton Mayo and Hawthrone
studies
 Chester Barnard and cooperative
Systems
 Dougles McGregor and Theory X-
Theory Y
 Warren Bennis and Death of
Bureaucracy
 Elton Mayo and
Hawthrone studies
Hawthorne Experiment.
Elton Mayo is regarded as the “Father of
Human Relation Approach”
The real inspiration for this movement
came from the Hawthorne experiment
which was done by Prof ,Elton Mayo and
his colleagues at the western electric
company in USA .The plant employed
30,000 workers to manufacture telephone
parts & equipments.
Phases of experiment.
 Phase-1 : Illumination Experiment.
 Phase-2 : Relay Assembly Test

Group.
 Phase-3 : Interviewing Programme.

 Phase-4 : Bank writing test room.

Illumination Experiment
Illumination experiment were undertaken to
find out how varying level of illumination
(amount of light at the workplace , a
physical factors) affected the productivity.

The hypothesis is higher illumination,

Increased Productivity.
For this experiment ,workers were divided into
2 groups.

One group was exposed to varying

intensity of illumination –
Experimental group.

Second group continued working

under constant intensities of
illumination.-Control Group.
Outcome
 The researchers found that as they increased the
illumination in the experimental group, both
groups increased production.
 When the intensity of illumination decreased, the
production continued to increase.
 The production in experimental group decreased
only when the illumination was decreased to
below the normal level.
thus it was concluded that illumination did not
have any effect on productivity.
Relay Assembly test room.
A small group of workers was placed in a separate
room and a number of variables were altered.
 Wages were increased

 Rest period of varying lengths were introduced,

 Workday and work week were shortened.

 Own decision making.

Outcome : Productivity increased

but not consistently.
Interviewing Programme
During this phase ,Mayo initiated a three year long
interviewing programme for about 21000
employees. His intention was to determine
 Employees attitude towards Company.

 Supervision.

 Insurance plans , Promotion & wages etc.

“Method of interviewing was direct questioning.”

Outcome
 This study revealed that the workers social
relations inside the organisation had an
unmistakable influence on their attitude
and behaviour.
 The importance of the informal group was
recognized.
Bank wiring test room
In this experiment,14 male workers were formed
into a work group and intensively observed for
seven months in the wiring room
The employees were paid individual wages and a
bonus based on group effort.
The hypothesis was that ,in order to earn more,
workers would produce more and in order to take
group bonus, they would help each other to
produce more.
Outcome
 Workers decided the target for themselves
which was lower than the company’s
target.
Reasons for lower output:
 Fear of unemployment

 Fear of raising standards

 Protection of slower workers

 Contributions
 Business organization is not merely a techno
economic system. But, it is also a social system.
Hence it is important to provide social
satisfaction for workers.
 There is no correlation between improved
working condition and high production.
 A worker does not work for money only.
 Employee- centered democratic and participative
style of supervisory leadership is more effective
than task centered leadership.
 The informal are beneficial.
 Criticisms
 It is incomplete with out scientific and
administrative management.
 It is not always possible to find a solution as
to what satisfies everybody.
 This approach provides an unrealistic
picture about informal groups by describing
them as a major source of satisfaction.
Chester Barnard and
cooperative Systems
Chester Barnard and cooperative Systems

Chester Barnard developed the

theory on the basic framework of
classical school, but introduced
many new elements in the area of
human relation and
organizational structure.
According to Barnard (1886-1961),people
work together to achieve organizational
goals as individually they are not able to
accomplish and at the same time they
must also satisfy their individual goals.
The central thesis of Barnard is that an
organization should balance its goals
with the needs and aims of employees for
Contributions
The notion that organization is a cooperative
system is generally credited to Chester
Barnard. He presented his ideas in ‘The
Function of the Executive’, in which he drew
upon his years of experience. His argument was
that authority should be defined in terms of
response of the subordinate. He introduced the
role of informal organization to organization
theory. He proposed that manager’s major roles
were to facilitate communication and to
stimulate subordinates to high levels of efforts.
Warren Bennis
and Death of
Bureaucracy
Warren Bennis and Death of
Bureaucracy
Warren Bennis claimed that
Bureaucracy’s centralized
decision making, impersonal
submission to authority, and
narrow division of labour was
being replaced by decentralized
and democratic structures
organized around flexible groups.
Type -3 Theory
“ contingency approach”

 Herbert Simon and Principles

Backlash
 Katz and Kahn's Environmental
Perspective
 The case for Technology
 The Aston Group and
Organization Size
 Herbert Simon and
Principles Backlash
The contingency movement gained its
momentum in the 1960’s. However, Herbert
Simon argued that organization theory needed
to go beyond superficial and oversimplified
principles to study of the conditions under
which competing principles were applicable.
(the then principles were simplistic principles).
It took approximately 20 years for
organization theorists to effectively respond to
Simon’s challenge.
Katz and Kahn's
Environmental Perspective
Daniel Katz and Robert Kahn’s book “The
Social Psychology of organizations”, was a
major impetus towards promoting the
open-systems perspective to the
organization theory. This mainly
emphasized on advantages of an open-
systems perspective for examining the
important relations of an organization
with its environment and need for the
organizations to adapt to a changing
environment if they are to survive.
Contributions
 Investigated numerous environment-structure
relationship.
 Various types of environments have been identified.

 Researches have been conducted as to which

organization structure suits best with various types

of environments.
“every discussion is based on the major contingency
factor, environment, influencing the preferred form
of structure.”
The case for Technology
Research in the 1960’s- John Woodward & Charles
Perrow
 Has made an impressive case for the

importance of technology in
determining the appropriate structure
for an organization.
 As with environment, no discussion of

organization theory would be complete

without the discussion of technology
and the need for managers to match
structure with technology.
The Aston Group and
Organization Size

In addition to environment and technology,

this theory includes those who advocate
organization size as an important factor
influencing structure.
Large organizations have been shown to have
many common structural components ( also
in small organizations). The evidence
suggests that certain of these components
follow an established pattern as
organizations expand in size.
Type -4 Theory
“focuses on political nature of organizations”

 March and Simon’s

Cognitive Limits to
Rationality
 Pfeffer’s Organizations as
political Arenas
 March and Simon’s Cognitive
Limits to Rationality
They argued that most decision makers selected
satisfactory alternatives- alternatives that were
good enough. Only with the exceptional cases
would they be concerned with the discovery
and selection of optimal alternatives. The
revised model would recognize the limits of
decision maker’s rationality and acknowledge
the presence of conflicting goals.
 Pfeffer’s Organizations as
political Arenas
Pfeffer proposes that organization becomes an
end rather than merely a means to rational
goals such as efficient production of output.
Organizations are coalitions composed of
varying groups and individuals with different
demands.
Pfeffer argues that if one should understand
why organizations are designed the way they
are, one need to assess the preferences and
interests of those in the organization who
have influence over the design decisions. This
view is still in vague.
ORGANIZATIONAL
THEORIES
 ORGANIZATIONAL THEORIES

Organizational theory is designed to build the

conclusion that organizational theories must
be used in combination.
The theories includes:
 The Population Ecology Model

 The Resource Dependence Model

 The Rational Contingency Model

 The Institutional Model

 The Population Ecology Model

This approach “posits that environmental

factors select those organizational
characteristics that best fit the environment.”
The population-ecology approach, also known
as natural-selection model, was a major
orientation in the consideration of
organizational change and transformation.
Contributors
 Aldrich  Mc Kelvey
 Pfeffer  Carroll
 Hannan  Aldrich
 Freeman  Kasarda
 Bidwell
Contributions
1.The Population-Ecology model
does not deal with single
organizational units but is
concerned with forms or
populations of organizations.
Organizational forms that have
the appropriate fit with the
environment are selected.
2.There are 3 stages in natural-selection
model-
 Variation occur in organizational
forms – planned or unplanned.
 Selection- organizational forms which
fit are selected over those that do
not.
 Retention- forms that are selected
are “preserved, duplicated, or
reproduced.
(retention is achieved through training
process)
 Organizational forms fill niches in
the environment.
“ Niches are distinct combinations of
resources and other constraints
that are sufficient to support an
organizational form”.- unfilled
niches are filled by the
organizational forms.
Criticisms
 The sources of original variations are
not specified
 Managerial process within the

organizations are ignored

(ultimately successful organizational
forms will survive in the long run-fit
between organization & environment is
achieved is ignored)
 In all situation perfect competition does
not exist
 Population-ecology theorists are very
careful to note that their approach is
concerned with organizational
populations rather than with individual
organizations
 The fact does not take into
consideration – institutional, cultural
and political forces