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INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY ORGANIZATIONS AND ORGANIZATIONAL CHANGE PSYCHOLOGY APPLIED TO WORK 8th Edition AUTHOR: Paul M. Muchinsky TRANSCRIBED BY: MEYNAR...

INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY ORGANIZATIONS AND ORGANIZATIONAL CHANGE PSYCHOLOGY APPLIED TO WORK 8th Edition AUTHOR: Paul M. Muchinsky TRANSCRIBED BY: MEYNARD P. OSTRIA THREE THEORIES OF ORGANIZATION Organization - A coordinated group of people who perform tasks to produce goods or services, colloquially referred to as companies. 1. Classical Theory developed in the early 20th century focuses mainly on structural relationships in organizations begins with a statement of the basic 2. Scalar principle - The concept that organizations ingredients of any organization and then are structured by a chain of command that addresses how the organization should best grows with increasing levels of authority be structured to accomplish its objectives Each subordinate should be accountable to only one superior, a tenet referred to as the 4 basic components to any organization unity of command 3. Line/staff principle - The concept of 1. A system of differentiated activities. All differentiating organizational work into line and organizations are composed of the activities and staff functions functions performed in them and the Line functions have the primary responsibility relationships among these activities and for meeting the major goals of the organization, functions. A formal organization emerges when like the production department in a these activities are linked together. manufacturing organization. 2. People. Although organizations are composed of Staff functions support the line’s activities but activities and functions, people perform tasks and are regarded as subsidiary in overall importance exercise authority. to line functions. 3. Cooperation toward a goal. Cooperation must 4. Span-of-control principle - The concept that exist among the people performing their various refers to the number of subordinates a manager activities to achieve a unity of purpose in pursuit is responsible for supervising. of their common goals Small span of control (2 subordinates) 4. Authority is established through superior– subordinate relationships, and such authority is Produces tall organization needed to ensure cooperation among people Large span of control (15 Subordinates) pursuing their goals. Produces flat organization 4 major structural principles are the hallmarks in the history of organizational theory 1. Functional Principle - The concept that organizations should be divided into units that perform similar functions accounts for the grouping of work functions into such units as production, sales, engineering, finance, and so on Classical theory is credited with providing the structural functional principle relates to the horizontal anatomy of organizations. growth of the organization was the first major attempt to articulate the form and to produce, but if it does not sell what it substance of organizations in a comprehensive fashion. produces, the company cannot survive. What, then, is the sales function—a major none of the classical organizational theorists were line function or an ancillary staff function? psychologists. The neoclassicists illustrated that many staff its four principles are deeply ingrained in the real-life functions are critical to the success of the structure of organizations. Problems of line/staff organization, so the value of the distinction relationships, number of organizational levels, division of between line and staff is not so great as labor, coordination, and spans of control are still of originally proposed major concern today. Finally, determining a satisfactory span of control seems far more complex than Further thinking about organizations occurred because picking a number. The neoclassicists noted it organizations were more complex than the four classical depends on such issues as the supervisor’s principles suggested. This desire to add richness and managerial ability (poor managers cannot realism to organizational theory gave rise to neoclassical supervise many subordinates) and the theory. intensity of the needed supervision (one 2. Neoclassical Theory could effectively manage many more was born in the 1950s, but its origins go back subordinates who do not require much to the findings from the Hawthorne studies. direction than those who do require the name neoclassical connotes a intensive direction). That is, such modernization or updating of the original psychological factors as leadership style and (classical) theory, while still acknowledging capacity greatly influence the determination its contributions of effective spans of control It is a misnomer to call neoclassical theory a The primary contribution of neoclassical theory “theory” because there really is no formal theory. Rather, it is a recognition of reveal that the principles proposed by psychological and behavioral issues that classical theory were not as universally question the rigidity with which the classical applicable and simple as originally principles were originally stated. formulated. The neoclassicists noted that while division The neoclassicists drew heavily on of labor causes functional interdependence behavioral research that revealed the among work activities, it also depersonalizes importance of individual differences. They these activities so that the individual finds did not overtly reject classical theory. Rather little meaning in them. That is, people than attempting to change the theory, they develop a sense of alienation from highly tried to make it fit the realities of human repetitive work, which ultimately results in behavior in organizations. However, the dissatisfaction with their work. In turn, this neoclassicists were limited by basing their dissatisfaction can result in decreased conceptualization about organizations on efficiency caused by lowered productivity the classical perspective. and increased absence. By the mid-1960s, it became apparent that The scalar principle was questioned on the an entirely new approach to thinking about grounds that other systems operate on organizations was necessary. Organizations people in organizations besides those were more complex than even the imposed by formal superior–subordinate neoclassicists portrayed them; this led to the relationships. formation of a radically different school of The line/staff principle was perhaps the thought called systems theory easiest for neoclassicists to challenge. The black-and-white theoretical distinction 3. Systems Theory between line and staff functions is not A theory developed in the 1970s that always so clear in practice. Take, for described organizations in terms of example, the sales function. A interdependent components that form a manufacturing company’s purpose is indeed system  “It is impossible to understand individual functions are accomplished through behavior or the activities of small groups communication and decision making; they apart from the social system in which they permit the various parts of the system to “talk” interact. to each other. A complex organization is a social system; systems theory instructs us that the parts and the various discrete segments and functions interactions of a system do not exist for in it do not behave as isolated elements. All themselves. Rather, they exist to meet the parts affect all other parts system’s larger goals, which are stability, growth, and adaptability. Systems theory asserts that an organizational system is Systems theory offers a radical departure from composed of these five parts: the classical and neoclassical schools of thought. 1. Individuals. Individuals bring their own Systems theory views organizations as any other personalities, abilities, and attitudes with them form of living organism to the organization, which influence what they The purpose of an organization is to reach hope to attain by participating in the system stability, to grow, and to adapt, as all living 2. Formal organization. The formal organization is organisms must do to survive. Note the the interrelated pattern of jobs that provides the abstractness of systems theory. There are no structure of the system. direct references to anything quite as simple as 3. Small groups. Individuals do not work in a span of control, for example. This abstractness isolation but become members of small groups is deliberate because only at some degree of as a way to facilitate their own adaptability generality can one attempt to equate such within the system diverse entities as organizations, plants, and 4. Status and role. Status and role differences exist animals among jobs within an organization and define Modern organizational theorists believe that an the behavior of individuals within the system understanding of something as complex as an 5. Physical setting. This is the external physical organization requires the type of environment and the degree of technology that conceptualizations offered by systems theory. A characterizes the organization systems perspective of organizations permits us to understand phenomena of organizational life that earlier theories would not permit Despite the distinctiveness of the three schools of thought on organizations, each school offered critical concepts that are of great relevance today. That is, these schools are more than historical mile markers in the evolution of organizational theory. In particular, the concept of small groups from systems theory has been greatly amplified to provide a primary focal point of interest, the work team. ORGANIZATIONAL STRUCTURE Mintzberg (1983) - offered a comprehensive and lucid explanation of how organizations evolve to reach a certain form and shape. Individuals interact to form small groups, refer to these characteristics as the members of the groups are differentiated by “structure” or formal component of an status and roles, the physical environment organization. affects the behavior of individuals and groups, and all exist within the framework provided by Structure The arrangement of work functions within an the formal organization. organization designed to achieve efficiency and control. it is necessary to have a means to provide coordination and linkage among them. Such Coordinating Mechanisms required to perform the work. In this case coordination is achieved before the work is Mintzberg (1983) defined the structure of an undertaken. Organizations institute training organization as “the sum total of the ways in which its programs for employees to standardize the skills labor is divided into distinct tasks and then its needed to perform work, thereby controlling coordination is achieved among these tasks and coordinating the work. For example, there is Five Coordinating Mechanism rarely communication between an anesthesiologist and a surgeon while removing 1. Mutual adjustment. “Mutual adjustment an appendix in an operating room. As a result of achieves the coordination of work by the simple standardized medical training, the two medical process of informal communication” among specialists do not need to engage in much employees. As the term implies, it is the process communication during the course of the surgical by which employees coordinate their efforts to operation. produce an outcome. Mintzberg cited two people paddling a canoe as an example of the According to Mintzberg (1983), these five coordinating mutual adjustment between individuals needed mechanisms manifest themselves in a rough order. to propel the canoe through water Mutual adjustment suffices as a coordinating mechanism 2. Direct supervision. According to Mintzberg, only if the work processes are rather routine “Direct supervision achieves coordination by As the work to be performed becomes more having one person take responsibility for the complicated, the most effective means of coordination work of others, issuing instructions to them and shifts to direct supervision monitoring their actions” As an organization outgrows its simplest state, it turns to this As work becomes still more complex, the underlying second mechanism of coordination. In effect one coordinating mechanism shifts to standardization of brain coordinates several hands, such as the work processes, then outputs, and finally skills. coxswain (stroke caller) of a six person rowing A person working alone has no need for any coordinating crew mechanisms. The addition of a second person requires 3. Standardization of work processes. Another the two individuals to adjust to each other. mechanism to achieve coordination is to standardize or specify work processes. The When the tasks are simple and routine, the organization production assembly line of a manufacturing is tempted to rely on the standardization of the work company is an example. A worker inserts a bolt processes themselves. But more complex work may into a holed piece of metal. There is only one preclude this, forcing the organization to turn to action to perform, and there is no room for standardization of the outputs—specifying the results of individual discretion in how the work is the work but leaving the choice of the process to the performed. The work is designed in such a way worker. that the same process is followed no matter who is performing the job. In very complex work, on the other hand, the outputs 4. Standardization of work output. Yet another often cannot be standardized either, and so the mechanism to achieve coordination is to organization must settle for standardizing the skills of standardize or specify the product of the work to the worker, if possible” be performed. The fast-food industry is an Classical organization theory emphasized both direct example. A hamburger ordered from a particular supervision and standardization as coordinating fast-food vendor should look and taste the same mechanisms. The concepts of span of control, line/staff whether it was purchased in the day or at night, functions, and unity of command apply to the in July or December, in Cleveland or San Diego. components of an organization’s formal structure. The work is designed in such a way that the same output is achieved irrespective of differences in organizational structure defined a set of official, time or location. standardized work relationships built around a tight 5. Standardization of skills and knowledge. Finally, system of formal authority Mintzberg stated that coordination among work However, neoclassical organizational theory revealed activities can be attained by specifying in the significance of the most primary means of attaining advance the knowledge, skills, and training coordination, mutual adjustment. That is, other activities hierarchy is created by the various levels that take place among workers that are not in line with the separate the operating core from the strategic official organizational structure. Thus the presence of apex unofficial relationships within work groups (an informal 4. Technostructure. The technostructure is those structure) established that mutual adjustment serves as employees who possess specific technical an important coordinating mechanism in all expertise that facilitates the overall operation of organizations. the organization. These employees are specialists in areas of business that influence the THE FIVE BASIC PARTS OF A ORGANIZATION organization, but these people do not perform the mainstream work of the organization (the operating core) nor are they members of top management (the strategic apex). Examples include such technical areas of expertise as accounting, human resources, information technology, and law 5. Support staff. The support staff provides services that aid the basic mission of the organization and typically includes the mailroom, switchboard, security, and janitorial services. Sometimes the members of the support staff and the technostructure are collectively regarded as meeting the “staff ” 1. Operating core. The operating core of an function of an organization (vis-à-vis the organization consists of those employees who line/staff distinction). However, there is a major are responsible for conducting the basic work distinction between the technostructure and the duties that give the organization its defining support staff. The members of the purpose. In a manufacturing organization, it is technostructure give advice to the organization, the employees who transform raw goods (e.g., while the support staff performs services. cloth) into a sellable product (e.g., apparel). In a Likewise, the technostructure and the support service organization (as a dry cleaning store), it staff rely on different coordinating mechanisms. is the employees who perform vital work The technostructure relies primarily on the functions (e.g., transform dirty clothes into clean standardization of knowledge and skills (through clothes) education and training requirements of its 2. Strategic apex. The strategic apex is responsible members), while the support staff relies for the overall success of the entire organization. primarily on the standardization of work The strategic apex is associated with the processes (as the uniform delivery of mail within executive leadership of the organization. These the organization). employees have the responsibility and authority to ensure that the larger goals of the It is not feasible for members of the strategic apex to organization are being met. Mintzberg referred make every decision pertaining to the operation of the to the strategic apex as the “brain” of the company. Not every decision requires executive input; organization thus individuals in the middle line are authorized to make 3. Middle line. The middle line represents those certain types of decisions within a defined scope. employees who have the day to-day authority Second, in a complex organizational hierarchy, with for ensuring that the overall goals set by the many levels between the bottom and top of the strategic apex are being carried out by the organization and an extended chain of command, operating core. The middle line embodies the decisions often cannot be made quickly. Some coordinating mechanism of direct supervision. organizational decisions may lend themselves to a slow They are mid-level bosses, ranging from senior process of deliberation; however, other decisions must managers down to first-level supervisors. The be made quickly. The flow of information up to the chain of command that starts at the strategic strategic apex and then back down may take too much apex and ends at the operating core runs directly time for decisions that are urgent. through the middle line. An organizational Finally, the capacity and authority for decision making employee behavior. A perceived difference among employees at lower levels of the organization are between espoused and enacted values can be a appealing to intelligent individuals. The power to make source of cynicism among employees. For such decisions is motivating, as the organization entrusts example, despite the espoused values, actual employees to act in its best interests. Learning to safety efforts may be haphazard or employees become a good decision maker is a critical skill in rising may be criticized for speaking out to higher levels in the organization. 3. Basic assumptions. Basic assumptions are unobservable and are at the core of the COMPONENTS OF SOCIAL SYSTEM organization. They frequently start out as values A social system The human components of a work but over time become so deeply ingrained that organization that influence the behavior of individuals they are taken for granted. Basic assumptions and groups. are rarely confronted or debated and are extremely difficult to change. According to Role A set of expectations about appropriate behavior in Ostroff et al., “Challenging basic assumptions a position produces anxiety and defensiveness because Norm A set of shared group expectations about they provide security through their ability to appropriate behavior define what employees should pay attention to, how they should react emotionally, and what ORGANIZATIONAL CULTURE actions they should take in various kinds of Culture is the languages, values, attitudes, beliefs, and situations”. Questioning a university about the customs of an organization. As can be inferred, it value of education in society would represent a represents a complex pattern of variables that, when challenge to a basic assumption of academic taken collectively, gives each organization its unique institutions. “flavor.” Ostroff, Kinicki, and Tamkins (2003) described the culture of an organization as having three layers. These three layers can be examined in any social collectivity, including a business organization, a social organization (e.g., a club), a church, or even a family. 1. Observable artifacts. Artifacts are the surface- level actions that can be observed from which some deeper meaning or interpretation can be drawn about the organization. Trice and Beyer (1993) identified four major categories of cultural artifacts: symbols (e.g., physical objects or locations); language (e.g., jargon, slang, gestures, humor, gossip, and rumors); narratives (e.g., stories, legends, and myths about the organization); and practices (e.g., rituals, taboos, and ceremonies). Although these artifacts are easy to observe, they are not necessarily easy to interpret or understand. 2. Espoused values. Espoused values are those beliefs or concepts that are specifically endorsed by management or the organization at large. Organizations per see do not possess values, but rather key individual leaders within the organization espouse these values. Two examples are “Safety is our top priority” and “We respect the opinions of all our employees.” Enacted values are those that are converted into  INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY ORGANIZATIONAL THEORY AND - DEVELOPMENT INDUSTRIAL/ORGANIZATIONAL PSYCHOLOGY:- UNDERSTANDING THE WORKPLACE 3rd Edition AUTHOR: Paul E. Levy - - TRANSCRIBED BY: MEYNARD P. OSTRIA implement that method. In short, Taylorism ORGANIZATIONAL THEORY maintained that factory workers would be much is defined as a set of propositions that explains or more productive if their work was designed predicts how groups and individuals behave in varying scientifically organizational structures and circumstances (Shafritz & Ott, 1996b) 4 Principles of Scientific Management st 1 management gathers data from the workers, who are in the best position to understand the job duties and tasks. CLASSICAL ORGANIZATIONAL THEORY These data are analyzed and reduced to formal study of organizational theory appears to have laws and rules, which are applied to begun when factories became popular in Great Britain workers’ jobs in the form of detailed procedures and how-to explanations in the 1700s (Shafritz & Ott, 1996a) 2nd workers are selected carefully—or, as 4 basic tenets Taylor put it, “scientifically”—and then trained so that they become more Organizations exist for economic reasons efficient than ever before. and to accomplish productivity goals. 3 rd scientific selection, data collection, and Scientific analysis will identify the one best training are combined to enhance way to organize for production. efficiency. Taylor argued that these Specialization and the division of labor processes must be brought together maximize production. because science and workers are not a Both people and organizations act in “natural combination.” 4th the work itself is redistributed, with accordance with rational economic management taking over tasks principles. previously left to subordinates (e.g., a common argument was that organizations should work factory workers). Taylor emphasized like machines, with people and technology as their that cooperation and genuine sharing components. The four preceding tenets helped maintain of the labor were important if the this focus. overall process was to work 2 particular developments occurred within classical BUREAUCRACY organizational theory: scientific management and Max Weber bureaucracy - a German sociologist who studied organizations in the late 1800s and early 1900s. SCIENTIFIC MANAGEMENT - he analyzed historically large and efficient Frederick Winslow Taylor organizations such as the Egyptian empire, the - Mastermind of the idea of scientific Prussian army, and the Roman Catholic Church. management. - Bureaucracy described the structure, - The Scientific Management school conducted organization, and operation of many efficient time and motion studies and analyzed organizations. temperature, illumination, and other conditions of work, all the while looking at the effects of 4 Major Features of a Bureaucracy these conditions on productivity and efficiency 1. Division of labor - a simple approach in which - Conduct studies that gather data indicating what employees are narrowly trained to do only the the fastest and most efficient method is, then particular tasks and duties assigned to their jobs. ❖ Dividing up tasks in this manner allows the A comparison of the top and bottom panels in Figure organization to take advantage of individuals’ 14.2 shows what happens to the span of control when particular strengths, thus avoiding the problems layoffs or organizational restructuring results in the that result from asking people to perform tasks reduction of middle-level management, as happened requiring skills they don’t have. dramatically in the United States during the 1990s and ❖ one potential difficulty in bureaucracies involves may happen again today with the recession of 2009. the coordination of various tasks handled by Daniel Katz and Robert Kahn various employees. In other words, it is good that each employee has his or her particular task emphasize two additional issues that are to do, but it can be difficult to coordinate the important to Weberian bureaucracy: many tasks done by all employees while at the standardization of tasks and centralized same time ensuring a particular outcome or end decision making. product for the organization. 1. Task standardization is analogous to Taylor’s 2. Top-Down Pyramidal Organizations - At every notion of the “one best way” to get a job done, level of the organization (except for the very in that it pertains to the training of employees top), employees report to a person one level up toward that end. in the chain of command. 2. Centralized Decision Making - Related to the ❖ this hierarchical system of supervision is notion of a chain of command is the idea that necessary if the division of labor is to be decision making should be centralized. beneficial. Scientific Management and bureaucracies were 3. Delegation of authority - an approach whereby developed to provide these directionless supervisors, rather than trying to do everything organizations with formal, orderly, and efficient themselves, assign particular tasks to separate functioning. employees and hold them responsible for In more modern times, however, theorists have completing these tasks. begun to argue that bureaucratic structures are ❖ micro-managers—try to take charge of ineffective for organizations operating in rapidly everything that goes on in the organization changing environments, such as the high-tech rather than holding employees responsible for industry (Schellenberg & Miller, 1998). individual tasks. In fact, Weber himself warned that work in a 4. Span of Control- related to the chain-of- bureaucracy can be so simplified and command idea, refers to the number of unchallenging that workers might become subordinates who report to a given supervisor. dissatisfied and unmotivated, resulting in lower ❖ If the span of control is too large, supervisors are productivity overall (Wagner & Hollenbeck, unable to manage so many subordinates; if it is 1998) too small, there is an overabundance of supervisors managing too few employees. ADMINISTRATIVE THEORY OF MANAGEMENT ❖ Historically, the optimal span of control has Henri Fayol varied considerably across companies, but the - A French Mining Engineer who Recorded his trend in the late 20th and early 21st centuries industry methods has been toward larger spans of control as a 1. Fayol’s 14 Principles of Management (1888) result of smaller numbers of middle-level and Administration Industrielle et Generale managers (1916) 2. Considered the Father of Administrative Management Theory, often called Process Theory or Structural Theory Administrative Theory of Management focused on organization and structure or work tasks; looked specifically and how management and workers are organized within a business to allow for the completion of tasks Administrative management theory is in contrast to the scientific approach to  management , which posited that can include both financial and worker efficiency would lead to greater non-financial forms of managerial efficiency. The compensation. administrative Theory of Management Centralization Decision Making should be focused on what managers do. either centralized (management makes all Followed a top-down approach to decisions) or decentralized organizational efficiency, emphasized a (employees also make decision) rational authority structure for depending upon the organization. characteristics of the Departmentalization Principle- the organization and worker creation of work groups and functional competency. departments where distinct activities Line of Authority There must be a hierarchy of are performed; similar tasks or functions (scalar chain) authority that places workers should be grouped within the same below managers in the department or unit. reporting structure. The degree Fayol’s 14 Principles of Management of authority is higher at each provided specific guidance on the stage of the organizational hierarchy. The organizational necessary organizational elements hierarchy should be well necessary for effective management understood throughout. and demonstrate the Administrative Order There must be well-defined Management Approach rules and standards for the work environment and work Division of Labor Allows for specialization. responsibilities. A safe and Individuals can become more orderly environment leads to proficient in the greater coordination. accomplishment of a limited Equity The organization must be based set of activities-thus improving on principles of fairness. their output Employees should be treated Authority Managers must have the with a combination of authority to issue commands, kindliness and justice. but with that authority comes Stability of Tenure Organizations need low the responsibility to ensure that turnover. This allows the work get done. employees time to learn their Discipline There must be a clear line of jobs, develop skills, and acquire authority. Subordinates must loyalty fully obey instructions from Initiative Managers must promote superiors. Managers must have initiative by allowing the ability to instill discipline employees to create plans and through punishment. carry them out. Unity of Command There should be only one boss Esprit de Corps Establishing a sense of from whom a worker receives belonging within the instructions. organization create a sense of Unity of Direction Each workgroup or department unity and morale. is working under a singular plan that coordinates efforts. Work The objective of Fayol’s Principle was to guide efforts should be guided by one managers to efficiently organize and interact supervisor. with employees. Subordination of The interests of individuals are The individual functions of a manager may vary Individual Interest subordinate to the general widely depending on the type of manager and interests of the group or department or company the nature of the manager’s responsibilities. Remuneration Compensation is used to Categorizing the functions of a manager helps incentivize worker understand what are the responsibilities of a performance. Remuneration manager.  Henri Fayol’s Administration Industrielle et Origins go back to the findings from the Generale categorization of managerial Hawthorne Studies functions: The name neoclassical connotes a Planning – flexible in nature to allow for modernization or updating of the original contingencies that arise in the process. (classical) theory, while still acknowledging its - Forecasting future conditions, contributions. - Setting objectives, and The relationship between supervisor and - Developing means to attain objectives subordinate has been especially important in the Organizing – structuring activities and organizing humanistic theory of organizations, which individuals within the firm. explain organizational success in terms of - Includes recruiting, equipping, and employee motivation and the interpersonal training individuals relationship that emerge within the Commanding – commanding as a managerial organization. function concerned the: Factors that were not even remotely associated - Direct supervision of employees, and with the classical approach to organizations- - Motivating their efforts toward a such as employees’ motives goal, and aspirations common objective. – were emphasized by those in the human Controlling – constant supervision of activities to relations movement (Katz & Kahn, 1978) identify accomplishments or goals and objectives. Derivation from the identified plan THEORY OF X AND THEORY Y allows the manager to take corrective action. Coordinating – identifying, arranging, and D.M McGregor scheduling all activities carried out by Argued that managers’ beliefs and assumptions subordinates. This coordination allows for the about their employees determine how they collective accomplishments of plans. behave toward those employees. The functions of commanding and controlling o Managers’ behaviors affect employees’ have generally been collapsed under the attitudes and behaviors, which in turn affect function LEADING. The result is the modern day managers’ attitudes, beliefs and behaviors. P-O-L-C framework of managerial functions o Self-fulfilling Prophecy: employees over time, learn to act and believe in ways consistent with how managers think they act and believe – even if this wasn’t the case initially. Theory of X ✓ This theory believes that employees are extrinsically motivated or NOT innately motivated to do their work. ✓ Employees are lazy and they only satisfy their lower order needs ✓ Managers are authoritarian ✓ Based on Scientific Management Theory of Y ✓ This theory believes that employees are NEOCLASSICAL/HUMANISTIC THEORY intrinsically motivated or innately motivated to do their work. A theory developed in the 1950’s that described ✓ Employees love their work and they satisfy their psychological or behavioral issues associated higher order needs. with organizations. ✓ Managers are participative. Human relations movement resulted, in part ✓ Based on human approach. from a reaction to the rigidity of classical organizational theory  THEORY OF X significance of factors such as morals, attitudes, 1. Management is responsible for the economic values, and humane treatment of workers. well-being of the organization. 2. Management of employees requires OPEN SYSTEMS THEORY directing, controlling, motivating, and The three key elements of open-system theory modifying their behavior to fit the needs of are inputs, throughputs, and outputs. Inputs are the organization. transformed during the throughputs stage into 3. Without active intervention by management, outputs, which in turn are brought back into the employees would be passive and resistant to organizational needs process as additional inputs—and thus the 4. The average employee is lazy, works as little process continues. as possible, lacks ambition, and dislikes For example, a car manufacturer that uses responsibility. production processes to transform raw materials 5. The average employee is self-centered, into automobiles is, in effect, using throughputs indifferent to organizational needs, and, by to transform inputs into outputs. The outputs nature, resistant to change. (automobiles) are then sold for money, which is 6. The average employee is gullible and not very reinvested as inputs into the system—and bright. transformation or production continues. THEORY OF Y 1. Management is responsible for the economic well-being of the organization. 2. Employees have become passive and resistant only as a result of their experience in organizations. 3. Motivation, potential for development, capacity for assuming responsibility, and readiness to work toward organizational goals are inherent in employees. 4. It is management’s job to allow employees to Katz and Kahn (1978) point out that recognize and develop the characteristics organizations thrive only as long as there is a listed above. continuous flow of energy from the external 5. The chief job of management is to arrange environment into the system and a continuous organizational conditions so that employees export of products out of the system. can achieve their own goals by directing their This simple principle is at the heart of several own efforts. disciplines, including economics, psychology, and biology. And, indeed, Katz and Kahn HAWTHORNE STUDIES developed their theory based on the principles Elton Mayo of biology that define all living things as open Western Eletric Hawthorne Works was systems. conducted from 1927 to 1932 under the Plants and animals, for instance, both give to and leadership of psychologist and sociologist, Elton take from the environment in which they exist— Mayo. and well-run organizations operate in a very o This is what we know now as Hawthorne similar way. In our car manufacturer scenario, Studies for example, the organization would be headed The initial experiment revealed that illumination toward eventual death if the automobiles intensity did not relate directly to worker stopped bringing in money and production was productivity, while follow-up experiments negatively affected. showed that productivity is directly related to Entropy is a principle in many branches of group pressure and acceptance. science positing that all forms of organization Hawthorne Effect : the tendency of individuals move toward disorganization or death. to perform better simply because of being Information input and negative feedback are singled out and made to feel important. also important parts of the open-system cycle. In It emphasized the psychological characteristics an organizational context, the negative feedback of workers and managers, stressing the loop provides information about where and how  the organization is getting off-course. For economic needs, but also considers needs like job instance, if outputs are not bringing in sufficient satisfaction and carrier development. resources to enable continual production of those outputs, changes need to be made at the input or throughput stage. equifinality, the notion that a system can reach the same end state in different ways. In other words, there isn’t just one way to achieve a particular outcome. Note that this is inconsistent with the basic premise of Scientific Management that there is “one best way” to do everything. 10 CHARACTERISTICS OF OPEN SYSTEMS Importation of energy Energy is brought in from the external environment for use by the system. The throughput That energy is transformed. The output A product or service is exported. Systems as cycles The pattern of importation of energy The key difference between system theory and and exportation of contingency theory is that the system theory focuses on products and services continues. the internal dynamics of an organization’s structure and Negative entropy The tendency of all behavior, whereas the contingency theory focuses on systems to move the external factors of the organization’s behavior and eventually toward death structure. Moreover, contingency theory looks at the is reversed. relationship between an organization and its external Information input and Information input and environment and activities to fill critical gaps of the negative feedback negative feedback allow systems theory. In other words, it is an addition to the system to correct or system theory. adjust its course. The steady state Surviving open systems are characterized by a balance in energy exchange. Differentiation Open systems move toward more specialized functions. Integration and Bringing the system coordination together as a unified process is necessary for the system to continue. Equifinality There are many ways within the system to get to the same conclusion or end point The key difference between Classical and neo classical theory is that the classical theory only considers physical and economic needs to satisfy an employee, whereas the neo classical theory, not only considers physical,