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Organizational Theory

Lothar Fuhr

21.07.2015

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Organizational Theory in 4 steps

� Learning Experience

� Clear Terms & Background

� History

� Outlook

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...

Lothar.Fuhr@web.de

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What is „Organization Theory“?

What are „Organizations“?

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What Is Organization Theory?

A proposition or set of propositions that attempts to explain or predict how groups and individuals behave

in differing organizational arrangements.

Organization theory is characterized by vogues, heterogeneity, claims and counterclaims, and even greater differentiation in theory and practice have

developed since then.

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What Is Organization Theory?

Classic organizational theory:� Organizations exist to accomplish production-

related and economic goals.� There is one best way to organize for production,

and that way can be found through systematic, scientific inquiry.

� Production is maximized through specialization and division of labor.

� People and organizations act in accordance with rational economic principles.

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Share your experience ...

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Road Map of Organizational Theory

Fundamentals ofOrganisational Theory

Classic approach ofOrganisational Theory

„Modern“ approach ofOrganisational Theory

Eco

nom

ical

B

ehav

ior

1900 1920 � 1940

Psycho-Technic

Human Relations

Scientific Management

Bureaucratical Approach

Administrational Approach

Behaviorismus

SystemicApproach

SituativeApproach

Ressource BasedApproach

Theory of Evolution

„Institiutionalistisch“

...

Approach

Time

NeoclassicalPerspective

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Scientific Management

Representative: F. Taylor

Key Question: How could we optimize our performance by usingour ressources in a best way!(maximise output with the least amount of input)

Focus: Divide work between managers and workersProvide incentive system (based on performance)Create a science for each individual‘s resp.Make sure work is done on time/efficiently

History of Organizational Theory

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Bureaucracy Approach

Representative: M. Weber

Key Question: How do we realise authority within an organisationFocus: Definition of „ideals“ (great man theory)

Rules are stable and can be learnedThe management of the modern office is based

upon written rule, which are preserved inoriginal form

Office of hierarchy

History of Organizational Theory

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Administrative Approach

Representative: H. Fayol; Mary Parker Follet

Key Question: How could we optimize our performance by usingour ressources in a best way!

Focus: Administration & Management

History of Organizational Theory

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Systemic Approach

Representative: L. v Bertalanffy; C. Barnard; N. Luhmann;F. Malik

Key Question: How do the elements of an organization interact

Focus: elements, relations, ...

History of Organizational Theory

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Theory of Evolution

Representative: H.E. Aldrich; McKelvey; M.T. Hannan, J. Freeman

Key Question: Transfer from biological findings to theorganisational perspective

Focus: fact oriented management is not possible

History of Organizational Theory

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12 / 68 / 20

A simple question ...

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Why do we have all the problems?

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Peter‘s Principle ... a typical problem!

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„Mistakes are the result of habit!“

Why do we have all the problems?

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An additional perspective …

Don Beck: Spyral Dynamics

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Why Have a Structure?

. All businesses have to organise what they do!

. A clear structure makes it easier to see which part of the business does what!

. There are many ways to structure a business!

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Some Key Terms

� Flat or tall structure� Span of control� Chain of command� Hierarchy� Delegation� Empowerment

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Ways to Structure a Business

. By function: � arranging the business according to what each section

or department does

. By product or activity: � organising according to the different products made

. By area: � geographical or regional structure

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Ways to Structure a Business

. By customer: � where different customer groups have different needs

. By process:� where products have to go through stages as they are

made

. What are the advantages/disadvantages of different types of business structure?

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Functional Structure

Advantages. Specialisation – each

department focuses on its own work

. Accountability – someone is responsible for the section

. Clarity – know your and others’ roles

Disadvantages. Closed communication

could lead to lack of focus

. Departments can become resistant to change

. Coordination may take too long

. Gap between top and bottom

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Organisation by Product/Activity

Advantages. Clear focus on market

segment helps meet customers’ needs

. Positive competition between divisions

. Better control as each division can act as separate profit centre

Disadvantages. Duplication of functions

(e.g. different sales force for each division)

. Negative effects of competition

. Lack of central control over each separate division

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Organisation by Area

Advantages

. Serve local needs better

. Positive competition

. More effective communication between firm and local customers

Disadvantages

. Conflict between local and central management

. Duplication of resources and functions

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Other Organisational Structures

. By Customer:Similar effects to structuring by product

. By Process:Similar to structuring by function

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Holistic view – made by St. Gallen (CH)

Principles forEffective Management

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5

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Tasks forEffective Management

Tools forEffective Management

Communication

Communication

Communication

Communication

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Effective Management

Principles forEffective Management

1. Result-Orientation2. Contributing to the Whole3. Concentrating on the Essentials4. Utilizing Strengths5. Trust6. Positive Thinking

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Results-Orientation

The focus should not be on working as hard as possi ble, but on achieving the best possible results. Within their position, employees should be capable of attaining results and also have an opportunity to see these results. This cont ributes significantly to motivation.

� Management is concerned with effectuation or achieving results.

� Result orientation is a management principle and should not be taken as a general life principle.

� Results can only be evaluated in terms of the organizational goal.

� Results can be related to individuals or to money.

� The work itself doesn‘t bring happiness, but rather the results.

� ...

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Contributing to the Whole

Good managers make it easier for their employees to perceive their contribution to the whole and to recognize the purpose of their job.

� A good manager sees the big picture and views his purpose in contributing to the whole, regardlessof position or area of spezialisation.

� Holistic thinking means always meintaining an overview of the complete organizational organism.

� The goal is translation potential into benefit.

� Contributions to the whole are based on the efficient use of knowledge, skills and experience tobenefit company performance.

� ...

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Concentration on the Essentials

Management should ensure that individuals within a company concentrate on a small number of carefully choosen items, so as not to dis sipate their energies. Concentration is the key to positive results.

� Concentration is the key to results.

� It is important to concentrate on a small number of items; however, these should be the mostimportant ones.

� Success is enabled by carefully selecting a specific focus and concentrating on it.

� The world is not short on ideas, but is short on realized ideas, which again require concentration.

� ...

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Positive Thinking

Recognizing and utilizing opportunities is consider ably more important than simplyovercoming issues. When issues areise, people shoul d look at the potentially positive sidesand determine if there are hidden opportunities wit hin this issue. Positive thinking also includes the discipline of self motivation. Closely related to this is the principle that people always try to use everything at their disposal to m ake the best of a particular situation.

� Good managers think positively and constructively.

� It is important not to cocentrate on the problems within the oragnization, but rather on theopportunities.

� Positive thinking leads to the utilization of opportunities and to self motivation.

� ...

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Utilizing Strengths

Individuals should be engaged in the tasks they are suited for and where their strengths lie.Human resource development should be based on stren gths. Weaknesses should only beminimized to the degree that they impede upon the c omplete utilization of strengths.

� It is important to make use of already existing strengths and not to concentrate on weaknesses.

� It is a managers job to recognize the strengths of his/her employees and then align tasks with thestrengths of the respective individuals.

� Overcoming weaknesses frequently leads quickly to physical or mental exhaustion.

� ...

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Trust

To create a good corporate culture and good working climate, it is key to gain the trust ofemployees. This creates a stable management situati on that holds up solidly in the face of the management mistakes that will inevitably occ ur.

� Try to put as much trust as you can into individuals; extend it to the limits.

� Ensure that it is clear what happens if there is a breach of trust, what the penalties are for such actionsand react firmly.

� Fundamental to the principle of trust is that the trust must be real. Feigned trust has acounterproductive effect.

� ...

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Tasks forEffective Management

1. Setting Goals2. Organization3. Making Decisions4. Controlling5. Human Ressource Development

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Effective Management

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Tools forEffective Management

1. The Meeting2. The Report3. Job Design and Assignment Control4. Personal Work Methods5. Budget and Budgeting6. Evaluating Performance7. Systematic Waste Disposal

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Effective Management

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Back-Up

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Models of Organizational Practice Include

. Theory X . Control, discipline, and sanctions are needed to force people to do their work.

. Theory Y . Management can take action so that employees will become motivated to do their work. All workers are to be regarded as goal-oriented and as having potential to further develop their own talents and skills.

. Contingency Theory – Employees are motivated by different things, but need to achieve a sense of competency. Therefore the manager must provide appropriate incentives to motivate individual employees.

. Human Relations Approach. To maximize performance, staff members need autonomy, involvement in management decisions, and appropriate rewards. People react as group members.

. Theory Z – focuses on quality of production, collective accountability and loyalty. Decisions are made by consensus.

. Participatory Management – Staff involvement in organizational decision-making increases job satisfaction and productivity; decreases staff turnover.

. Feminist Management - Fights oppression; creates “management partnerships”among participants; assumes women manage differently then men, focusing on interpersonal relationships rather than traditional approaches to power & authority. Decisions are made by consensus & cooperation.

. Total Quality Management – Management produces an organizational culture based on product quality, consumer satisfaction, standardization of production, and employee empowerment.

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The Origins of Scientific Management

The influence of Frederick W. Taylor (1911):� Father of the scientific management movement.� Scientific management principles.

� Replacing traditional, rule of thumb methods of work accomplishment with systematic, more scientific methods of measuring and managing individual work elements;

� The scientific study of the selection and sequential development of workers to ensure optimal placement of works into work roles;

� Obtaining the cooperation of workers to ensure full application of scientific principles; And.

� Establishing logical divisions within work roles and responsibilities between workers and management.

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The Origins of Scientific Management

Henri Fayol’s general theory of management (six principles, 1916, 1949).

� Technical (production of goods)� Commercial (buying, selling, exchange).� Financial (raising and using capital).� Security (protection of property and people).� Accounting.� Managerial (coordination, control, organization,

planning and command of people).

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The Origins of Scientific Management

Fayol (contd.).� Dominant principle was management

� Division of work.� Authority and responsibility.� Discipline.� Unity of command.� Unity of direction.� Subordination of individual interest to general interest.� Remuneration of personnel.

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The Origins of Scientific Management

Fayol (contd.)� Dominant principle was management (contd.)

� Centralization.� Scalar chains (supervisors).� Order.� Equity.� Stability of personnel tenure.� Initiative, and.� Esprit de corps.

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Neoclassical Organization Theory

. The neoclassical theorists gained their reputation by attacking the classical theories.� Important source of the power and politics,

organizational culture, and systems theory.

. Herbert Simon.� Bounded rationality and satisficing.� Programmed and unprogrammed decision-

making.� Management information systems.

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Systems Theory

Systems theory views an organization as a complex set of dynamically intertwined and interconnected elements, including inputs, processes, outputs,

feedback loops, and the environment. Any change in one element causes changes in other elements.

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Systems Theory

Cybernetics – Norbert Wiener (1948).

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Systems Theory

The learning organization.� Built on the doctrines of participation

� Maslow’s hierarchy of needs.� New component technologies (the five

disciplines).� Personal mastery.� Mental models.� Building shared vision.� Team learning.� Systems thinking.