Organizational Theories (PSM109) PDF

ORGANIZATIONAL THEORIES PSM109 Industrial Psychology ORGANIZATIONAL THEORIES Industrial-Organizational (I/O) Psychology blends principles of psychology with workplace needs to improve organizational performance and employee well-being. It has two primary components: the *Industrial* side...

ORGANIZATIONAL THEORIES PSM109 Industrial Psychology ORGANIZATIONAL THEORIES Industrial-Organizational (I/O) Psychology blends principles of psychology with workplace needs to improve organizational performance and employee well-being. It has two primary components: the *Industrial* side and the *Organizational* side, each with unique focuses but a shared goal of optimizing work environments.  ORGANIZATIONAL THEORIES Industrial Component: The industrial side is also known as "personnel psychology." It focuses on: - Job Analysis: Determining job roles, responsibilities, and necessary skills to create accurate job descriptions and recruitment processes. - Recruitment and Selection: Developing selection methods (e.g., interviews, psychometric tests) to ensure candidates fit the job and organizational culture. - Performance Appraisal: Creating assessment tools to evaluate employee performance, set objectives, and guide career development. - Training and Development: Designing and implementing training programs to upskill employees and prepare them for future roles within the organization.  ORGANIZATIONAL THEORIES Organizational Component: The organizational side is often called "organizational psychology." It focuses on: - Workplace Motivation and Attitudes: Studying what drives employees to perform well, including factors like job satisfaction, employee engagement, and morale. - Leadership and Management: Analyzing different leadership styles and their impacts on teams, helping develop effective leaders within the organization. - Organizational Development: Facilitating structural and cultural changes to improve organizational efficiency and adaptability. - Work-Life Balance and Employee Well-being: Promoting policies and practices that support the mental health and overall well-being of employees, including stress management and work-life integration. ORGANIZATIONAL THEORIES Why study in IOP? ORGANIZATIONAL THEORIES Why study in IOP? Organizational theories are a cornerstone in Industrial- Organizational (I/O) Psychology because they provide a structured framework to understand, analyze, and improve workplace dynamics.  ORGANIZATIONAL THEORIES Why study in IOP? 1. Understanding Organizational Behavior and Structure Organizational theories help I/O psychologists and professionals understand how people behave within different organizational structures and cultures. Theories like bureaucracy, human relations, and contingency provide models for how organizations function, which aids in: - Analyzing Behavior Patterns: Knowing why employees behave a certain way under specific conditions. - Identifying Influencing Factors: Recognizing structural influences on communication, decision-making, and workflow within an organization.  ORGANIZATIONAL THEORIES Why study in IOP? 2. Improving Workplace Efficiency and Productivity One of the primary goals of I/O Psychology is to improve organizational efficiency. Organizational theories provide insights into how work can be structured to maximize productivity: - Task Structuring: Classical theories, like Taylorism (Scientific Management), guide the optimization of task allocation, minimizing redundancy, and reducing inefficiency. - Hierarchy and Authority: Theories related to hierarchical structures (e.g., Weber's Bureaucracy) offer principles for effective role delineation and leadership alignment.  ORGANIZATIONAL THEORIES Why study in IOP? 3. Enhancing Employee Satisfaction and Motivation Employee motivation is critical to organizational success, and organizational theories offer models to understand and address employee needs. - Human Relations Movement: Elton Mayo’s work in this area shows the importance of employee morale, highlighting that social factors and recognition play a vital role in motivation. - Needs and Rewards: Maslow’s hierarchy and Herzberg’s Two-Factor Theory inform organizations about employee needs, helping to design incentive structures that boost motivation and engagement.  ORGANIZATIONAL THEORIES Why study in IOP? 4. Guiding Leadership and Management Practices Organizational theories offer frameworks for effective leadership and management. Different theories can guide managers in developing leadership styles that best suit their teams. - Contingency Theory: This theory suggests that there is no single best way to lead or manage; instead, leadership should be adapted to the situation and organizational context. - Transformational Leadership: This approach emphasizes vision, inspiration, and consideration for employees’ individual needs, aligning leadership with organizational goals and values.  ORGANIZATIONAL THEORIES Why study in IOP? 5. Supporting Organizational Change and Adaptability Change management is a crucial aspect of organizational growth. Organizational theories provide principles to understand and manage change within organizations. - Lewin’s Change Model: This model introduces unfreezing, changing, and refreezing stages, offering a systematic way to implement and solidify change. - Organizational Development: This area draws on multiple theories to guide interventions that enhance organizational health and adaptability, especially relevant in today’s rapidly changing work environment.  ORGANIZATIONAL THEORIES Why study in IOP? 6. Building a Positive Organizational Culture Organizational theories are instrumental in shaping and maintaining a positive workplace culture that reflects shared values, beliefs, and practices. - Schein’s Model of Organizational Culture: This theory helps organizations identify and nurture cultural layers, from visible artifacts to underlying assumptions. - Social Identity Theory: By understanding how employees view themselves in relation to their organization, managers can foster a sense of belonging and loyalty.  ORGANIZATIONAL THEORIES Why study in IOP? 7. Influencing Policy and Ethical Practices Organizational theories also have ethical implications, influencing how policies are created and applied within an organization. - Equity Theory: This theory, which centers on fairness in reward allocation, guides policies that foster fairness and equity, reducing conflicts and resentment. - Stakeholder Theory: Highlighting the importance of considering various stakeholders (employees, clients, community), this theory informs policies that balance profitability with social responsibility.  ORGANIZATIONAL THEORIES Why study in IOP? 8. Advancing I/O Psychology as a Science Finally, the study and discussion of organizational theories are vital for the progression of I/O Psychology itself. Theories provide hypotheses that can be tested through research, advancing scientific understanding in the field. - Evidence-Based Practice: Using established theories allows I/O psychologists to design interventions grounded in research, ensuring that practices are not only theoretically sound but also empirically validated. - Innovation and Theory Development: Discussing existing theories encourages new insights and modifications, leading to the evolution of I/O psychology as a field. INTRODUCTION  Organizational theory attempts to explain the workings of organizations to produce understanding and appreciation of organizations.  Organizational theory draws from various bodies of knowledge and disciplines.  Organization theory explains how organization structures are built.  It also suggests how organization can be designed to improve their effectiveness. DEFINITION Organization theory is a set of concepts, and principles that provide framework for systematic study of structure, functioning and performance of organization and of the behavior of individuals and groups working in them. CLASSIFICATION The theory of organization can be classified into three broad categories: Classical Organization theory Neoclassical Organization theory Modern Organization theory CLASSICAL ORGANIZATIONAL THEORY  Classical organization theory evolved during the first half of this century.  The classical theory viewed organization as a machine and human beings as components of that machine.  They were of the view that efficiency of the organization can be increased by making human beings efficient.  Their emphasis was on specialization and co-ordination of activities.  Most of the writers gave emphasis on efficiency at the top level and few at lower levels of organization.  Three main theories Scientific management theory Administrative management theory Behavioral theory. SCIENTIFIC MANAGEMENT THEORY  Arouse because of the need to increase productivity and efficiency  How to increase the output of the average worker  How to improve the efficiency of management.  Major contributors: Frederick Taylor, Henry Gantt, and Frank and Lillian Gilbreth PRINCIPLES OF SCIENTIFIC MANAGEMENT THEORY 1) Work, equipment and processes should be standardized. 2) Time and task study should be used to determine the standards for workers. 3) Selection, training and developing workers instead of allowing them to choose their own tasks and train themselves. 4) Cooperate fully with the workers to ensure they use the proper method. 5) Divide work and responsibility so management is responsible for planning work methods using scientific principles and workers are responsible for executing the work accordingly. ADMINISTRATIVE MANAGEMENT THEORY  Focused on total organization.  Emphasis was on the development of managerial principles rather than work methods.  Major Contributors: Henry Fayol, Max Weber, Mary Parker Follet WEBER’S THEORY  Disliked organizations managed on personal family like basis.  Employees loyal to individual supervisors rather than organization.  According to Weber: Management should be managed impersonally. Formal organization structure, where specific rules are followed is important. Authority should be something that was part of a person’s job and passed from individual to individual as one person left and another took over. FAYOL’S PRINCIPLES OF MANAGEMENT 1) Division of work 8) Centralization 2) Authority and responsibility 9) Scalar chain 3) Discipline 10) Order 4) Unity of command. 11) Equity 5) Unity of direction 12) Stability of tenure 6) Remuneration 13) Esprit de corps 7) Subordination of personal interest 14) Initiative to general interest BEHAVIORAL THEORIES OF MANAGEMENT  Successful organization depends largely on a manager’s ability to understand and work with people.  Addresses human dimensions of work: motivation, leadership, trust, teamwork and conflict management.  Major contributions : Hawthorne Experiment Maslow’s Need Hierarchy Theory Mc Gregor Theory of X & Y Herzberg’s Motivation Hygiene Theory HAWTHORNE EXPERIMENT  Organization is a social system not just techno-economic system.  Employers can be motivated by psychological and social wants because their behavior is also influenced by feelings, emotions and attitudes.  Economic incentives are not the only method to motivate people.  Management must learn to develop co-operative attitudes and not rely merely on command. MASLOW’S NEED HIERARCHY THEORY  Theory of motivation  Considerations on five groups of human needs Assumptions  Human needs are never completely satisfied  Human behavior is purposeful and is motivated by the need for satisfaction  Needs can be classified according to a hierarchical structure of importance, from the lowest to highest MC GREGOR’S THEORY X AND Y  Dichotomy about the assumptions managers make about the workers and how these assumptions affect behavior.  Two basic kinds of manager exists Theory X manager Theory Y manager  Hard guy, soft guy approach of managing people in the organization. THEORY X  Negative assumptions about employee.  Assumes that average person has an inherent dislike for work and will avoid if they can.  Employees are lazy, untrustworthy and incapable for assuming responsibilities.  They must be coerced, controlled, directed and threatened with punishment to get them put forth adequate efforts towards achievement of organization objectives.  Average employee prefer to be directed. They wish to avoid responsibility and have little ambition. They are interested only in security. THEORY Y  Work is as natural as play or rest if the conditions are favorable.  Employees are not only trustworthy and capable of assuming responsibility, but also have high levels of motivation.  People will exercise self-direction and self-control to achieve organizational objectives to which they are committed.  CHARACTERISTICS OF CLASSICAL ORGANIZATION THEORY  It is based on organization as a machine and individuals working in it as different components of this machine.  It believed that efficiency of organization can be increased by making each individual more efficient.  It deals with formal organization structures.  It focuses on objectives and tasks and not on the human beings performing the tasks.  It aims at maximizing control.  It emphasizes on the direction on the detection of errors occurred and then correction.  PILLARS OF ORGANISATION THEORY The organization theory is built around four key pillars:- Scalar and Functional Division of Labour Process Structure Span of Control (I) DIVISION OF LABOUR:  Division of labor implies that work must be divided to obtain specialization with a view to improve the performance of workers.  The classical theory rests on the assumption that more a particular job is broken into its simplest component parts, the more specialized a worker can become in carrying out his part of the job.  The specialization in workers will make the organization efficient.  Various activities of a job are specified and subdivided into different components so that these may be assigned to different persons.  The workers will go on repeating their work under division of labor.  The performance of same work will help workers to improve their efficiency and the organization as a whole is benefitted by this exercise. (II) SCALAR AND FUNCTIONAL PROCESS:  The scalar process refers to the growth of chain of command, delegation of authority, unity of command and obligation to report.  It is called scalar process because it provides a scale or grading of duties according to the degree of authority and responsibility.  It generates superior- subordinate relationship in the organization.  The functional process deals with the division of organization into specialized parts or departments and regrouping of the parts into compatible units. (III) STRUCTURE:  It is the framework of formal relationships among various tasks, activities and people in the organization.  The basic structural element in the classical theory is position.  Each position is assigned a specific task and authority is delegated for its accomplishment.  The efficiency with which these tasks will be accomplished will determine the effectiveness of the organization. (IV) SPAN OF CONTROL:  The span of control means the number of subordinates a manager can control.  Classical thinkers specified numbers at different levels which can be effectively supervised by a superior.  A manager cannot exercise proper control if the number of subordinates increases beyond a certain figure, on the other hand if the number is less then his capacity and knowledge cannot be fully utilised.  DRAWBACKS OF CLASSICAL ORGANIZATION THEORY  It ignores human aspect and views human beings as components of the organization machine.  It believes that people at work can be motivated solely through monetary incentives.  It is an authoritarian theory.  It is based on certain principles which are based mainly on experience and not tested by scientific researches.  It takes static view instead of dynamic view of the organization.  It regards organization as a closed system instead of open system..  Thus it ignores the influence of external factors on organization and its members NEO-CLASSICAL ORGANISATION THEORY:  The classical theory of organization focused main attention on physiological and mechanical variables of organizational functioning.  These studies focused attention on human beings in the organization.  Neoclassical organizational theory is a reaction to the authoritarian structure of classical theory.  The neoclassical approach emphasizes the human needs of employees to be happy in the workplace,  This allows creativity, individual growth and motivation, which increases productivity and profits.  Managers utilizing the neoclassical approach manipulate the work environment to produce positive results.  CHARACTERISTICS OF NEO-CLASSICAL ORGANIZATION THEORY 1) The organization in general is a social system composed of numerous interacting parts. 2) Informal organizations exist within the formal organization. Both are affected by and affect each other. 3) Human being is independent and his behavior can be predicted in terms of social factors at work. 4) Motivation is a complex process. Many socio- psychological factors operate to motivate human beings at work. Cont. 5) A conflict between organisational and individual goals often exists. There is a need to reconcile the goals of the individual with those of the organisation. 6) Team-work is essential for higher productivity. 7) Man’s approach is not always rational. Often, he behaves non- logically in terms of rewards which he seeks from his work. 8) Communication is necessary as it carries information for the functioning of the organisation and the feelings of the people at work. IMPROVEMENTS OVER CLASSICAL THEORY: Neo-classical theory offers modifications and improvements over classical theory in some aspects such as: 1) Flat structure, 2) Decentralisation, 3) Informal organisations. i. Flat Structure: The classical theory suggested tall structure whereas neo-classical theory suggested flat structure. In tall structure there is a problem of communication because of differentiation between decision makers and implementers, the levels of management are too many and motivation of people is difficult. In case of flat structure the wide span of control helps in motivation, chain of communication is shorter and it is free from hierarchical control. ii. Decentralization: Neo-classical theory advocates decentralized organization which is close to flat structure because of wider span of control. It allows autonomy and initiative at the lower level. It also develops people to occupy higher positions in future. iii. Informal Organization: The neo-classical theorists advocated the need for both formal and informal organizations. Formal organization represents the intentions of top management for the purpose of interactions among the people. Informal organization is necessary to plug the loop holes of formal organization and to satisfy the social and psychological needs of people. Managements use informal organization for overcoming resistance to change on the part of workers and also for fast communication process. Both formal and informal organizations are interdependent upon each other. DRAWBACKS OF NEO-CLASSICAL THEORY  It is not a new theory of organizations. It is merely a modification of classical theory.  The structures of organization suggested by this theory are not suitable in all situations.  The theory over- emphasizes on human aspect. Consequently, other aspects remained ignored or neglected.  Certain assumptions of this theory are not true. Consequently, there are conflicts of interests of various groups in the organization. MODERN ORGANISATION THEORY:  Modern organization theory is of recent origin, having developed in early 1960’s.  This theory has tried to overcome the drawbacks of earlier theories.  The distinctive qualities of modern organization theory are its conceptual analytical base, its reliance on empirical research data and, above all, its integrating nature.  These qualities are framed in a philosophy which accepts the premise that the only meaningful way to study organization is to study it as a system.  This theory may be understood in two approaches: systems approach and contingency approach. SYSTEM APPROACH  This approach studies the organization in its totality.  The mutually dependent variables are properly analyzed.  Both internal and external variables are studied in analyzing the nature of organization.  Organization as a system can well be understood by identifying various sub-systems within it.  Each sub-system may be identified by certain processes, roles, structures and norms of conduct. SUB-SYSTEM OF SYSTEM APPROACH Katz and Kahu have identified five sub-systems of organization: 1) Technical sub-system concerned with the work that gets done; 2) Supportive sub-system of procurement, disposal and institutional relations; 3) Maintenance of sub-systems for tying people into their functional roles; 4) Adaptive sub-systems concerned with organizational change; and 5) Managerial sub-systems for direction, adjudication and control of the many sub-systems and the activities of the structure. 5 ELEMENTS OF SYSTEM APPROACH Organization as a system is composed of five elements:-  Inputs- human, finance, material, equipment, information.  Transformational processes- technological and managerial.  Outputs- products or services  Feedback- reaction from the environment.  Environment CONTINGENCY THEORY  Contingency approach suggests an organisational design which suits a particular unit.  Contingency theory accepts that there is no universally ideal leadership style because each organization faces unique circumstances internally and externally.  In contingency theory, productivity is a function of a manager’s ability to adapt to environmental changes.  Managerial authority is especially important for highly volatile industries. This allows managers the freedom to make decisions based on current situations.  The contingency theory reveals situations that require more intense focus and takes account of unique circumstances.  CHARACTERISTICS OF MODERN ORGANIZATION THEORY 1) It considers organization as a system composed of many subsystems such as managerial, technical, social sub system. 2) It regards individual as complex being who can be motivated in multitude of ways. 3) It is descriptive approach of studying organizations. 4) It is multi- disciplinary theory as draws concepts and principles from several disciplines such as sociology, psychology, economics, engineering and so on. 5) It is dynamic in interaction with the structure. It is constantly subject to change as environment changes. Organization adapts itself suitably to the changing environment and it survives. 6) It is both macro and micro in its approach. It is micro when considered with respect to the entire nation or industry. It is macro with respect to internal parts of the organization. 7) It ensures better flow of communication at all the levels and ensures effective control.  DRAWBACKS OF MODERN ORGANIZATION THEORY  It is not a unified theory of organization but a mixture of several theories.  It is based on past empirical studies and there is nothing new in it.  It does not identify the precise relationships among the organization and its external system.  It is not useful for smaller organizations. REFERENCE  https://bizfluent.com/list-7246182-causes-conflict-organizations-.html  https://brainmass.com/business/entrepreneurial-issues/what-are- some-examples-of-organizational-theories-255341  https://www.yourarticlelibrary.com/organization/three- organisation-theories-classical-neo-classical-and-modern/53221