OER for a Post Graduate Programme in HRM

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Module 1 :
Principles of Management

Module Content Map

Topic 5 : What is organization?

Organization Theories | Informal Organization | Key points & Activity |

Back to Topic 4 : Policy Development | Go to Topic 6: Designing the organization

Organization Theories

Classical Organization Theory

The early management thinkers viewed the organization as a machine and human beings as different parts of the machine. In the early thoughts organization was a closed system. The emphasis was more on increasing the production. The organizations had given too much faith on division of labour, line of authority, a sense of duty to the organization and rules and regulations. The human factors and the influence or the environment were ignored.

The Classical Theory held the view that an Organization is a static concept. It was believed that once the structure is created it will work for ever. The emphasis was more on stability of operations rather than need for changes.

Neoclassical Organization Theory

The Neoclassical thinkers were highly obsessed with economic effectiveness and as a result the need of employee satisfaction was neglected. Still the Neoclassical Theory attempted to rectify some defects of the classical theory. The Neoclassicists had established that in every organization, in addition to the mechanical system, there exists a social system. Other important propositions of the Neoclassical Organization Theory are:

  • along with the formal organization structure there also exists an informal organization.
  • human beings have diverse motivational patterns and try to fulfill different types of needs.
  • there exists a conflict between individual and institutional objectives. These two has to be integrated.

The initial thrust in this regard was provided by the Hawthorne studies of Elton Mayo.

Modern approach to organization

Modern approaches to organization take into account the business environment (both internal and external), technology and people. The modern management thoughts endorse that the organizational structures have to be designed in such a way that it matches with the environment. The structures have to be more organic in nature, that is, receptive to changes.

Along with the environment and the technology, the attitudes and aspirations of the people also need to be considered. Accordingly, the organizational structures have to be created in a way that provide individuals with freedom, autonomy and satisfaction. The objective of these kinds of structural changes would be to identify and encourage creative people.

The modern thinkers also underline that, in a competitive world, it is the quality of human resource which makes a difference when all other things are equal.