3.

Organizations
An organization is a group created and maintained to achieve specific objectives. A hospital with objectives dealing with human care. A local authority with objectives concerned with providing services to the local community. A commercial company with objectives including earning profits, providing a return for shareholders and so on. Features that describe organizations would be accepted by most people. Goal oriented i.e. people with a purpose. Social systems i.e. people working in groups. Technical systems i.e. people using knowledge, techniques and machines. The integration of structured activities i.e. people co-coordinating their efforts. 3.1 Organizational theories Organizational theory is the body of knowledge relating to the philosophical basis of the structure, functioning and performance of organizations. Such theory is derived from historical schools of thought stating the point of view of a number of early pioneers of management. A broad chronological sequence of the three main schools of thought which have contributed to an understanding of the nature of organizations and management is shown in the figure below:
Classical or traditional approach Emphasis on structure and search for universal concepts

Behavioural/Human Relations Approach Emphasis on people, motivation and relationships.

Systems/Contingency Approach Emphasis on individual circumstances with a situational approach to management.

Classical or Empirical Approach Also known as the traditional approach. The classical or management process approach to management was evolved in the early part of the 20th century. This theory is based on contributions from a number of sources including: Scientific management (from Taylor, Gant, Gilbert and others) Administrative Management Theorists (Fayol, Urwick, Brech and others)

Bureaucracy / Academics (notably from Weber)

Whilst not completely ignoring the behavioural aspects of organization, the traditional emphasis was on the structure of organizations, the management of structures and control of production methods. All organizations were treated similarly and there was a search for universal principles, which could be applied to any organization and on the whole took a relatively mechanistic view of organizations with a tendency to treat them as closed systems. (i) Scientific management or Taylorism In the late 1890s, Fredrick Taylor introduced the concept of scientific management. Taylors approach focused on the effective use of human beings in organizations; it is a rational engineering approach of work based on time and motion studies. His pioneering work was refined and developed by other workers. There are four main principles to scientific management: a) Develop the best or ideal method of doing a task and determine a standard scientifically. The worker should be paid an incentive for exceeding this standard. b) Select the best person for the job and train him or her in the way to accomplish the task. c) Combine the scientific method with well selected and trained people (workers will not resist improved method, since they receive more money because of them). d) Take all responsibility for planning and give it to the management. The worker is only responsible for the actual job performance. Scientific management and intensive study of the activities of individual employees answered many questions on human engineering. Benefits and drawbacks of scientific management Benefits a) The improvement in working methods resulted in enormous gains in productivity. b) The measurement and analysis of tasks provided factual information on which to base improvements in methods and equipment. c) It provided a rational basis for piecework and incentive schemes, which became more widely used. d) There were considerable improvements in working conditions. e) Management became more involved with production activities and was thus encouraged to show positive leadership. Drawbacks a) Jobs became more boring and repetitive. b) Planning, design and control became divorced from performance thus de-skilling tasks. c) Workers become more virtual adjuncts to machines with management having a monopoly of knowledge and control. d) De-skilling, excessive specialization, repetition and so on, causes workers to become alienated and frustrated.

(ii) Departmental Approach A number of theorists, including Gulick, Urwick and Fayol have described organizations based on groupings of various activities into departments. These theorists looked at the organization as divided into departments. These theorists looked at the organization as a giant machine and tried to develop principles or universal laws that govern the machines activities. The general problem addressed in their writing is that given an organization, how do you identify the unit tasks and how do you organize these tasks into the individual jobs? Then how are the jobs organized into administrative units, and finally how are top-level departments established? The result of this analysis is the structuring of departments within the organization, each department contains a set of tasks to be performed by workers in that department. Example: Finance department: For providing funds and ensuring effective use. Production department: Provides and maintains equipment to convert raw materials into finished products and control of the production process. Marketing department Supply department Research and development department

(iii) Webers Bureaucratic Organization Unlike other contributors to the classical view of organizations, Weber was not a practicing manager, but an academic sociologist. He is the one who first coined the term bureaucracy to describe a particular organizational form, which exists to some extent in every large enterprise whether in public or private sector. In Webers view the bureaucratic organization was a logical rational organization which was technically superior to all other forms. The key elements in the ideal bureaucratic organization were as follows: A well defined hierarchy of legitimate authority. A division of labour based on functional specialization. A clear statement of the rights and duties of personnel. Rules and procedures in writing should exist to deal with all decisions to be made and situations to be handled. Promotion and selection based on technical competence.

In Webers view a de-personalized form of organization would minimize the effect of human unpredictability. Weber concentrated on the structural aspects of organizations and in consequence took a rather mechanistic impersonal standpoint. Weaknesses of the bureaucratic model Adaptability and change are made more difficult because of standardized rules, procedures and types of decisions. Rules tend to become important in their own right rather than as a means of promoting efficiency.

The contribution of the classical theorists can be summarized as follows: They introduced the idea that management was a suitable subject for intellectual analysis. They provided a foundation of ideas on which subsequent theorists have built. Criticism of their work has stimulated empirical studies of actual organizational behaviour. Human Relation School The human relations school of organizations studied human individuals in the organization from a psychological point of view. The approach is based on a series of experiments conducted in the 1920s at the Hawthorne Western electric plant by Mayo. The experiment revealed that an organization was more than a formal structure or arrangement of functions. The results of his research focused attention on the behavioural approach to management and he concluded that an organization is a social system, a system of cliques, grapevines, informal status systems, rituals and a mixture of logical and non-logical behaviour. Concepts of the human relations approach Some of the concepts which Mayo and other workers in the human relations field developed after studying the role of individuals, informal groups, inter-group relationships and the formal relationship with the organization are as follows: a) People are not motivated by financial factors but by a variety of social and psychological factors. b) Informal work groups have important roles in determining the attitudes and performance of individuals. c) Management requires social skills as well as technical ones. d) An organization is a social system as well as technical/economic system. e) Traditional authoritarian leadership patterns should be modified substantially to consider psychological and social factors and should become more democratic in nature. f) Participation in work organization, planning and policy formulation is an important element in organizations. This meant establishing effective communications between the various levels in the hierarchy to ensure a free flow of information. The following are some of the individuals who carried on motivation research together with their theories.

(i)

Abraham Maslow

Maslow developed the theory that people are motivated by a desire to satisfy their specific needs and that they tend to satisfy their needs progressively, starting with the basic psychological needs and moving up the hierarchy. He suggested five levels of human needs as follows: Level 1 Physiological needs e.g. self-satisfaction of sleep, hunger, thirst etc.

Level 2 Security needs: protection against threats and danger. Level 3 Affiliation needs: needs for love and acceptance by others. Level 4: Esteem needs: needs for respect, status and recognition. Level 5: Self-actualisation needs: needs for self-fulfilment and self-development. Thus according to Maslows hierarchy of needs, once a need from lower levels upwards is satisfied it ceases to be a motivator. (ii) Douglas McGregor

Maslow and the need hierarchy influenced Mcgegor when he developed his theory of management. He described theory X as the approach that governs most current thinking about work. The following is a summary of assumptions in theory X: a) Average man is inherently lazy. b) He lacks ambition, dislikes responsibility and must be led. c) He is resistant to change and is indifferent to organizational needs. d) Coercion and close control is required. If theory X is adopted, management must direct, persuade and control activities of people and management must seek to coerce and modify peoples behaviour to fit the needs of the organization. Later, McGregor rejected the assumptions of theory X and proposed an alternative called theory Y. Some elements of theory Y are as follows: a) To the average man, work is as natural as rest or play. b) Motivation, potential for development, imagination and ingenuity are present in all people given proper conditions. c) Coercion and close control are not required. d) Given proper conditions people will seek out responsibility. The implication of this theory in management if adopted is that, management tries to harness qualities of people by arranging conditions and methods of operations so that people can achieve their own goals best by directing their efforts towards organizational objectives. Cooperation rather than coercion is required. (iii) Schein

Schein has combined a number of the different models and assumptions about individuals in organizations into a model he calls complex man. His model suggests that the individual is both complex and highly variable, and has many motives that may change over time. A person

can learn new motives and will become productively involved in an organization for a number of different reasons, responding in different ways to different managerial strategies. The result of this view is that mangers need to adopt and vary their behaviour in accordance with the motivational needs of particular individuals and groups and the task in hand. (iv) Fredrick Herzberg

From his research Herzberg concluded that certain factors are helpful to job satisfaction, which he termed motivators and certain factors could lead to dissatisfaction, termed hygiene factors. The following is a summary of the major factors found in the two groups: Hygiene Factors Policies and administration Supervision Working conditions Money Job security Relationship subordinates with peers and Motivators Achievement Recognition Responsibility Growth Development and growth

Note that the motivators are related to the content of the job whilst the hygiene factors are more related to the environment of the work and not intrinsic to the job itself. The two sets of factors are not opposite. Hygiene factors do not induce job satisfaction by themselves. To promote positive satisfaction motivators are needed. For example, in production; hygiene factors maintain production while motivators increase output. (v) Rensis Likert

From his research, Likert found that successful managers built their successes on tightly knit groups of staff whose cooperation had been obtained by close attention to a range of lower and higher order motivational factors. Participation was arranged and supportive relationship within and between groups was fostered. System Contingency Approach These theories developed from two main sources: The classic school with its somewhat mechanistic emphasis on structures which could be imposed on people. Human relations school whose laudable concentration on the needs of the individual to an extent obscured study of the organization as a whole.

Modern theorists attempted to develop from these earlier ideas a more comprehensive view in organization. One major approach they developed is a system approach which sees the organization as a total system of interconnected and interactive subsystems. The organization was found to respond to numerous independent variables of which the following are important: People Tasks Organizational structure Environment

In contrast with earlier approaches which considered variable in isolation, system theorists study the relationship between several of them. System theorists have suggested that there is no one best way of designing organizations, and because of volatility and change the best way is dependent (or contingent) upon prevailing conditions. Thus the development of the contingency approach. Contingency Theory This is the most current school and it sees each organization as a unique system resulting from an interaction of subsystems with the environment. The motto of contingency theory is it all depends. Both system and contingency approaches recognize organizations as a complex structure with many interacting elements which must continually adapt to uncertain and changing environment. Some of the major contributors to this approach are: 1. Lawrence and Lorsch The two studied the operations of a number of firms to assess the effects on the tasks and attitudes of managers in various functions operating with different structures and environment. Some of the major contributors to this approach are: a) The more volatile and diverse the environment, the more task differentiation, and consequent integration, is required to achieve successful organization. b) More stable environment does not require much differentiation but still requires substantial integration within the functions that exist. c) It is more difficult to resolve conflict in organizations with a high degree of differentiation between the functions that exist. d) Better methods of conflict resolution result in higher performance and lead to types of differentiation and integration that suit the organizations environment. e) In a predictable environment integration is achieved through the management hierarchy, particular at higher levels and through rules, procedures, budgets etc. In an uncertain environment, integration is achieved at lower levels mainly through personal interrelationship with only a moderate use of administrative methods.

In spite of some criticism the Lawrence and Lorsch study received, it played an important role in development of organizations theory which took account of change, uncertainty and the interaction of key variables. 2. Burns and Stalker These two carried out a study of a number of electronic firms to see how they adapted to changes in their environment, particularly with regard to changes in the market and technical conditions. The result of their study was a classification of organization into mechanistic and organic systems. Properties of mechanistic systems a) b) c) d) e) Stable environment with high certainty and predictability. High functional specialization. Detailed differentiation of duties and responsibilities. Hierarchical control, authority and communications with largely vertical interactions. Authorization style with clear superior subordinate relationships and emphasis on loyalty and obedience. f) Low rate of innovation. Properties of organic systems a) Uncertain environment, low predictability. b) Low functional specialization. c) Less structured management with more adjustment and re-definition roles. d) More consultation with information and advice being communicated rather than decisions and instructions. e) High rate of innovation. Examples of mechanistic organization system Traditional industries such as steel, textiles and ship building where management controls and methods are based on well-defined rules and procedures which experience little change. Examples of organic systems Industries facing rapidly changing environment such as computers, pharmaceuticals etc. 3. Joan Woodward She carried out a study of manufacturing firms where she observed that many organizational characteristics were already related to the technology used. She categorized organization on the basis of technology as follows:

a) Small batch or individual item production. b) Large batch or mass production including assembly line production. c) Continuous process production including refinery, chemical and gas production. Based on this categorization, Woodward found that there were clear patterns relating to things like the span of control, chain of command and system of management. A summary of the various features are illustrated in the figure below, Categories of technology Types of management systems Small batch individual items Number of levels in chain command Span of control Top Management Span of control middle management Ratio of management / operatives Types of management system Few Small Large Low Mainly organic system with fewer rules and close personal interrelationship Mainly verbal with little paperwork. / Large batch / mass production Medium Medium Medium Medium Mainly mechanistic with clear-cut procedures and more rules and impersonal relationships. Mainly written with considerable paperwork. Continuous production Numerous Large Small High Mainly organic with fewer rules and close personal relationships. Mainly verbal with little paperwork.

Communication

Woodward concluded that the method of production was an important factor affecting organization structure and that there was a particular type of structure and management style suitable for each of the types of production. 4. Aston University group led by Pugh

The group continued on the work of Woodward and found that size was an important factor in determining structure as well as the technology used. As firms grow they become more formally structured and the study found that large size tends to lead to: a) More standardization b) More of structures, procedures and decision rules. c) More specialization of tasks and functions. d) Less centralization, that is, concentration of authority.