Summary of Classical Organization Theory

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1/6/2010
ORGANIZATIONAL
THEORY
SUMMARY OF CLASSICS
Reviewd by:
Prof. Dr. İlhan Atilla DİCLE
Prep. by:
İlhan ÇİFTÇİ
Classics of Organization Theory
Bahçeşehir University
Page 1
Contents
Change in the Organization Structure .................................................................................................... 4
Chapter 1: Classical Organizational Theory ............................................................................................. 4
Major Contributions of Classical School .............................................................................................. 5
Adam Smith - (1723 –1790)............................................................................................................. 5
Daniel C. McCallum (1815 – 1878) .................................................................................................. 5
Henry R. Towne (1844 – 1924) ........................................................................................................ 5
Henry Fayol (1841 -1925) ................................................................................................................ 6
Frederick Taylor ............................................................................................................................... 7
Max Weber (1864 – 1920)............................................................................................................... 7
Luther Gulick (1892 – 1992) ............................................................................................................ 9
Summary of Classical Organization Theory ....................................................................................... 10
Chapter 2: Neoclassical Organizational Theroy..................................................................................... 10
Major Contributions of NeoClassical School ..................................................................................... 11
Chester I. Barnard (1938) .............................................................................................................. 11
Robert K. Merton (1957) ............................................................................................................... 12
Herbet A. Simon (1946) ................................................................................................................ 12
Philip Selznick (1948) ..................................................................................................................... 13
Richard M. Cyert & James G. March (1959) .................................................................................. 13
Chapter 3: Human Resource Theory, or the Organizational Behavior .................................................. 14
Major Contributions of Human Resource Theory School ................................................................ 14
Mary Parker Follett (1926) ............................................................................................................ 14
Fritz J. Roethlisberger (1941)......................................................................................................... 15
Abraham H. Maslow (1943)........................................................................................................... 15
Douglas Murray Mc Gregor (1957),............................................................................................... 16
Chapter 4: “Modern” Structural Organization Theory .......................................................................... 17
Major Contributions of Modern Structural Organization Theory School......................................... 17
Tom Burns & G.M.Stalker (1961) .................................................................................................. 18
Peter M. Blau & W.Richard Scott (1962) ....................................................................................... 19
Arthur H. Walker & Jay W. Lorsch ................................................................................................. 19
Henry Mintzberg (1979) ................................................................................................................ 20
Richard M. Button & Borge Obel (1998) ....................................................................................... 21
Chapter 5: Organizational Economics Theory ....................................................................................... 21
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Major Contributions of Organizational Economics Theory ............................................................... 22
Chapter 6: Power and Politics Organization Theory ............................................................................. 22
Major Contributions of Power and Politics Organization Theory ..................................................... 23
Jeffrey Pfeffer (1981)..................................................................................................................... 23
Robert Michels .............................................................................................................................. 23
John R. P. French Jr. & Bertram Raven (1959)............................................................................... 24
James G. March (1966) .................................................................................................................. 25
Henry Mintzberg (1983) ................................................................................................................ 25
Rosabeth Moss Kanter (1979) ....................................................................................................... 26
Chapter 7: Organizational Culture Theory ............................................................................................ 26
Edgar H.Schein (1993) ................................................................................................................... 27
Scott D.N. Cook,Dvora Yanow (1993) ............................................................................................ 27
Harrison M.Trice & Janice M.Beyer (1993), .................................................................................. 28
Joanne Martin (2002) .................................................................................................................... 28
Chapter 8: Reform Through Changes in Organizational Culture ........................................................... 29
The Z Organization ............................................................................................................................ 29
System Thinking: ........................................................................................................................... 30
Personnel Mastery ........................................................................................................................ 30
Building Shared Vision ................................................................................................................... 31
Team Learning ............................................................................................................................... 31
Gendering Organizational Theory ..................................................................................................... 31
Creating a Goverment That Works Better & Costs Less: Report of The National Performance
Review ............................................................................................................................................... 31
Problems of National Goverment: ................................................................................................ 32
Creating the Multicultural Organization: The Challenge of Managing Diversity .............................. 33
Chapter 9: Theories of Organizations and Environments ..................................................................... 34
Daniel Katz & Robert L. Kahn (1966) ............................................................................................. 34
James D. Thompson (1967) ........................................................................................................... 35
John W. Meyer and Brain Rowan (1977)....................................................................................... 35
Jeffrey Pfeffer & Gerald R. Salancik (1978) ................................................................................... 35
Geln R. Carroll and Michael T. Hannan (2000) .............................................................................. 36
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Change in the Organization Structure
The structure of the organizations has been affected by the economical, social and the political
enviroment. Managements have formed in accordanceto changing organizatiıons. The shape of the
changing organization structure is represented below:
There has been two types of organization structure: Classical and Comtemporary. According to this
two basic types of organizational structure, variety of organizations comprised. These are listed
below.




Classciacal Organizational Structure
Neo Classical Organizational Structure
Modern Organizational Structure
Post Modern Organizational Structure
Chapter 1: Classical Organizational Theory
Classiscal organziational theroy was the first organizational theory taking place in business and
administration era. Structure of this theory was mechanic and rigid. This organization comprised with
three approach defined below:
 Scientific Management Approach
 Administrative Management Approach
 Bureaucracy Approach
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Major Contributions of Classical School
Classical Organizational Theory contributions are occured with respect to the three management
approach. Most of the essantial contributions are firstly Fredirick W. Taylor, Henry Fayol and Max
Weber. Rest of the important contributions were Adam Smith, Daniel C. McCallum, Henry R. Towne,
Luther Gulick.
Adam Smith - (1723 –1790)
Most important contribution on Organizational theory was Division of Labor Theory. This was the
framework of Classical Organizational Theory Specialization model. In accordance to this theory ,
Production stages are seperated and employees specialize some part of the production.
Specialization on the job descriptions provide:
 To Increase in product
 To Increase in efficiency with a dexterity
 Saving time
 Invention of a great number of machines
Division of labor theory implemented on Pin Factory. Personnel effciency and output were increased.
Most important study of Adam Smith was Wealth of the Nations Other contributions to economy and
the business adminitration were: Competitive Market, Capital, Invisible Hand, Labor, and Wage.
Daniel C. McCallum (1815 – 1878)
Daniel McCallum was an engineer. He was the railroad engineer and manager. Contribution to
Classical Organizational Theory was Organization Chart. He was early proponent of the organization
chart
Henry R. Towne (1844 – 1924)
He was the Draftsman at the Port Richmond Iron Works. He was one of the first engineers to see
management as a new social role for engineers and that the development of management
techniques was important for the development of the engineering profession. He laid out his ideas
about the management role for the engineer in his "The Engineer as Economist."
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Henry Fayol (1841 -1925)
Henry Fayol contribution to Classical Organizational Theory was General Principles of Management.
Related to his idea, Fundamental roles performed by all managers are comprised 5 management
functions: Planning, Organizing, Commanding, Coordinating, and Controlling.
Additionally Fayol recognizes fourteen principles that should guide the management of
organizations.
Fayol’s 14 Principles:
1.
Division of Work —improves efficiency through a reduction of waste, increased output,
and simplification of job training
2.
Authority and Responsibility—authority: the right to give orders and the power to
extract obedience – responsibility: the obligation to carry out assigned duties
3.
Discipline—respect for the rules that govern the organization
4.
Unity of Command—an employee should receive orders from one superior only
5.
Unity of Direction—grouping of similar activities that are directed to a single goal under
one manager
6.
Subordination of Individual Interests to the General Interest—interests of individuals
and groups should not take precedence over the interests of the organization as a whole.
7.
Remuneration of Personnel—payment should be fair and satisfactory for employees and
the organization
8.
Centralization—managers retain final responsibility – subordinates maintain enough
responsibility to accomplish their tasks
9.
Scalar Chain (Line of Authority)—the chain of command from the ultimate authority to
the lowest
10.
Order—people and supplies should be in the right place at the right time
11.
Equity—managers should treat employees fairly and equally
12.
Stability of Tenure of Personnel—managerial practices that encourage long-term
commitment from employees create a stable workforce and therefore a successful
organization
13.
Initiative—employees should be encouraged to develop and carry out improvement
plans
14.
Esprit de Corps—managers should foster and maintain teamwork, team spirit, and a
sense of unity among employees
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Frederick Taylor
Frederick Taylor played a major role for development of Classical Organizational Theory with his
studying was The Principles of Scientific Management. The importance of this was:
Scientific Job Analysis – observation, data gathering, and careful measurement determine “the one
best way” to perform each job
Selection of Personnel – scientifically select and then train, teach, and develop workers
Management Cooperation – managers should cooperate with workers to ensure that all work is
done in accordance with the principles of the science that developed the plan
Functional Supervising – managers assume planning, organizing, and decision-making activities, and
workers perform jobs
Ingenuity and Accomplishments
 Creates systems to gain maximum efficiency from workers and machines in the factory.
 Focuses on time and motion studies to learn how to complete a task in the least amount of
time.
 Becomes consulting engineer for many other companies
Max Weber (1864 – 1920)
According to Max Weber an ideal form of organizational structure was Bureaucracy. He defines
bureaucratic administration as the exercise of control on the basis of knowledge. He states, “Power is
principally exemplified within organizations by the process of control”
Weber classifies organizations according to the legitimacy of their power and uses three basic
classifications:
 Charismatic Authority: based on the sacred or outstanding characteristic of the individual.
 Traditional Authority: essentially a respect for customs.
 Rational Legal Authority: based on a code or set of rules.
Weber recognizes that rational legal authority is used in the most efficient form of organization
because:
 A legal code can be established which can claim obedience from members of the
organization
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 The law is a system of abstract rules which are applied to particular cases; and administration
looks after the interests of the organization within the limits of that law.
 The manager or the authority additionally follows the impersonal order
 Membership is key to law obedience
 Obedience is derived not from the person administering the law, but rather to the
impersonal order that installed the person’s authority
Weber outlined his ideal bureaucracy as defined by the following parameters:
 A continuous system of authorized jobs maintained by regulations
 Specialization: encompasses a defined “sphere of competence,” based on its divisions of
labor
 A stated chain of command of offices: a consistent organization of supervision based on
distinctive levels of authority
 Rules: an all encompassing system of directives which govern behavior: rules may require
training to comprehend and manage
 Impersonality: no partiality, either for or against, clients, workers, or administrators
 Free selection of appointed officials: equal opportunity based on education and professional
qualification
 Full-time paid officials: only or major employment; paid on the basis of position
 Career officials: promotion based on seniority and merit; designated by supervisors
 Private/Public split: separates business and private life
 The finances and interests of the two should be kept firmly apart: the resources of the
organization are quite distinct from those of the members as private individuals.
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Fayol & Taylor&Weber Comparison
Fayol
Taylor
Weber
Origin
French
US
German
Management Type
General
Managament
Production
Management
General
Managament
Effects
Limite bcs of to
late translation
Widespread
Less than Taylor
Chain of Coomand



Division of Labor



Standartization



Close Entity



Centralized Management
System



Hierarchy



Human Behavior
x
x
x
Luther Gulick (1892 – 1992)
Notes on the Theory of Organization
Gulick works with the Institute of Public Administration, professor of municipal science and
administration at Columbia, and serves on Franklin D. Roosevelt’s Committee of Government
Administration
Expands Fayol’s five management functions into seven functions: It was identified POSDCRB.
Planning - developing an outline of the things that must be accomplished and the methods for
accomplishing them
Organizing - establishes the formal structure of authority through which work subdivisions are
arranged, defined, and coordinated to implement the plan
Staffing - selecting, training, and developing the staff and maintaining favorable working conditions
Directing - the continuous task of making decisions, communicating and implementing decisions, and
evaluating subordinates properly
Coordinating - all activities and efforts needed to bind together the organization in order to achieve a
common goal
Reporting - verifies progress through records, research, and inspection; ensures that things happen
according to plan; takes any corrective action when necessary; and keeps those to whom the chief
executive is responsible informed
Budgeting - all activities that accompany budgeting, including fiscal planning, accounting, and control
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Fayol & Gullick Comparison
Fayol
Gullick
Planning


Organizing


x



Reporting
x

Budgeting
x

Controlling

x
Commanding

x
Directing
Coordinating
Summary of Classical Organization Theory
Classical principles of formal organization may lead to a work environment in which:
 Employees have minimal power over their jobs and working conditions
 Subordination, passivity and dependence are expected
 work to a short term perspective
 Employees are lead to mediocrity
 Working conditions produce to psychological failure as a result of the belief that they are
lower class employees performing menial tasks
 Theorist of the Classical period thought that organizations should be based on universally
applicable scientific principles.
Chapter 2: Neoclassical Organizational Theroy
There is no precise definition of neoclassical in the context of organization theory. The general
connotation is that of a theoretical perspective that revises and/or is critical of classical of
organization theory – particularly for minimizing issues related to humanness of organizational
members, the coordination needs among administrative units, the operation of internal – external
organizational relations, and the process used in decision making.
Inspite of their frequent and vigorous attacks upon the Classicalists, the Neoclassicalists did not
develop a body of theory that could adequtely replace the classical school.
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The Neoclassical scholl attempted to save classical theory by intoducing madofications based upon
research findings in the behavioral sciences. It did not have a bona fide of its own. To a great extent,
it was an antischoll.
Despite its limitations, the Neoclassical school was very important n the historical development of
organization theory. It was a transitional, somewhat reactionary school.It initiated the theoritical
movement away from the overly simplistic mechanistic views of the classical school. In the process of
chakkenging the classical school, the Neoclassicalists raised issues and initiated theories that became
central to the foundations of most of the schools that have followed.
Major Contributions of NeoClassical School
Major contributions of the Neoclassical organization Theory were: The Economy of Incentives –
Chester I. Barnard (1938), Bureaucratic Structure and Personality – Robert K . Merton (1957)- The
Proverbs of Administration – Herbert A. Simon (1946), Foundations of the Theory of Organization –
Philip Selznick (1948), A Behavioral Theory of Organizational Objectives – Richard M. Cyert & James
G. March (1959)
Chester I. Barnard (1938)
Economy of Incentives was the basic contribution to Neoclassical School.
An Essential Element of organiations is the willingness of person to contribute their individual efforts
to the cooperative system. The individual is always the basic strategic factor in organization.
Regardless of his history or his obligations he must be induced to cooperate, or there can be no
cooperation.
The net satisfactions which induce a man to contribute his efforts to an organization result from the
positive advantages as against the disadvantages which are entailed. From the viewpoint of the
organization requiring or seeking contributions from individuals, the problem of effective incentives
may be either one of finding positive incentives of or reducing or eliminating negative incentives or
burdens.
The method of incentives: Incentives distinguishes two class, and called first class spesific
inducements, the second general incentives.
Spesific inducements class, for exapmle, material inducements, personel non material opportunities,
desirable physical conditions, ideal benefactions. In addition general incentives are associational
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attractiveness, adaption of conditions to habitual methods and attitudes,the opportunity of enlarged
participation, the condition of communion.
Robert K. Merton (1957)
Bureaucratic Structure and Personality was the basic contribution to Neoclassical School.
A formal, rationally organized social structure involves clearly defined patterns of activity in which,
ideally, ever series of actions is functionally related to the purposes of the organization. In such an
organization there is integrated a series of offices, of hierarchized statuses, in which inhere a number
obligations and privileges closely defined by limited and spesific rules. Each of these offices contains
an area of imputed competence and responsiblity. Authority, the power of control which derives
from an acknowledged status, inheres in the office and not in the particular person who performs the
official role. Official action ordinarily occurs within the framework of preexisting rules of the
organization. The system of prescribed relations between the various offices involves a considerable
degree of formality and clearly defined social distance between the occupants of these positions.
Formality is manifested by means of more or less complicated social ritual which symbolizes and
supports the pecking order of the various offices. Such formality, which is integrated with the
distribution of authority within the system, serves to minimize friction by largely restricting contact
to modes which are previosuly defined by the rules pof the organization.
Like Follett, Merton argued the meaning of organization depended upon the personalities and
groupings of individuals within bureaucracy. He went further by speculating that the individual that
tried to act according to the stipulations of classic bureaucracy would have a dysfunctional
personality, especially in public service organizations.
Herbet A. Simon (1946)
The Proverb of Administration was the basic contribution to Neoclassical School.
A fact about proverbs that greatly enhances their quotability is that they almost always occur in
mutually contradictory pairs. "Look before you leapl"-but "He who hesitates is lost."
Some Accepted Administrative Principles
Among the more common "principles" that occur in the literature of administration are these:
1. Administrative efficiency is increased by a specialization of the task among the group.
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2. Administrative efficiency is increased by arranging the members of the group in a determinate
hierarchy of authority.
3. Administrative efficiency is increased bylimiting the span of control ,at any point in the hierarchy
to a small number.
4. Administrative efficiency is increased by grouping the workers, for purposes of control, according
to (a) purpose, (b) process, (c) clientele, or (d) place. (This is really an elaboration of the first principle
but deserves separate discussion).
Philip Selznick (1948)
Foundations of the Theory of Organization was the basic contribution to Neoclassical School.
The three major ideas in Selznick’s theory of organization are; organizations as cooperative, adaptive
social systems; the conflict of personal and organizational goals and needs; and controlling conflict
for the good of the organization. He was also the first to talk about co-optation, which is a method of
protecting the organization and its mission by inviting threatening elements into the policy making
process.
Richard M. Cyert & James G. March (1959)
A Behavioral Theory of Organizational Objectives was the basic contribution to Neoclassical School.
Organizations make decisions. They make decisions in the same sense in which individuals make
decisions. The organization as a whole behaves as though there existed a central coordination and
control system capable of directing the behavior of the members of the organization sufficiently to
allow the meaningful imputation of purpose to the total system. Because the central nervous system
of most organizations appears to be somewhat different from that of the individual system, we are
understandbly cautious about viewing organization decision making in quite the same terms as those
applied to individual choice. Nevertheless, organizational choice is a legitimate and important focus
of research attention.
the prevailing theory about the firm is based on the two rational assumptions:
 Firms seek to maximize profits
 Firms operate with perfect knowledge.
Acc. To Cyert and March; organizational goals being set by a negotiation process that occurs among
members of the dominant coalition.
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Chapter 3: Human Resource Theory, or the Organizational Behavior
Human resource theory draws on a body of research and theory built around the following
assumptions:
 Organizations exist to serve human needs (rather tahn the reverse).
 Organizations and people need each other. (Organizations need ideas, energy, and talent;
people need careers, salaries, and work opportunities.)
 When the fit between the individual and the organization is poor, one or both will suffer:
individuals will be exploited, or will seek to exploit the organization, or both.
 A good fit between individual and organization benefits both: human beings find meaningful
and satisfying work, and organizations get the human talent and energy that they need.
No other perspective of organizations has ever had such a wealth ıf research findings and methods at
its disposal.
According to this theory, the organization is not the independent variable to the manipulated in
order to change behavior (as a dependent variable), even though organizations pay employees to
help them achieve organizational goal.
Major Contributions of Human Resource Theory School
Major contributions of the Neoclassical organization Theory were: The Giving of Orders – Mary
Parker Follett (1926), The Hawthorne Experiments – Fritz J. Roethlisberger (1941), A Theory of
Human Motivation – Abraham H. Maslow (1943), The Human Side of Enterprise – Douglas Murray
Mc Gregor (1957), Groupthink : The Desperate Drive for Consensus at any Cost – Irving L. Janis
(1971)
Mary Parker Follett (1926)
The Giving of Orders was the basic contribution to Human Resource Theory.
The importance of her work was the emphasis on the reciprocating reality of giving and taking orders
between bosses and subordinates. Unlike the assumption of Weber that rules and role description
determined subordinate compliance, Follett argued for a form of participation to insure acceptance.
The personalization of the relationship in the giving of orders also challenged the Taylor assertions of
manger led teams.
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Fritz J. Roethlisberger (1941)
The Hawthorne Experiments was the basic contribution to Human Resource Theory.
The Hawthorne effect is a psychological phenomenon that produces an improvement in human
behavior or performance as a result of increased attention from superiors, clients or colleagues. In a
collaborative effort, the effect can enhance results by creating a sense of teamwork and common
purpose. In social networking, the effect may operate like peer pressure to improve the behavior of
participants.
The Hawthorne effect was first seen in the 1920s at the Western Electric Company's Hawthorne
Works, from which the term derives. The Hawthorne studies were designed to find ways to increase
worker productivity. An increase in the level of workplace illumination had a measurable positive
effect on employee productivity. However, the researchers also found that when they lowered the
lighting levels, productivity still increased. In fact, for a limited period after any change in the
illumination level, the workers' average output increased. The researchers concluded that the
specific conditions tested for had nothing to do with the productivity increases.
Fritz J. Roethlisberger documented the results of the Hawthorne Studies in 1939 in Management and
the Worker. The conclusions about worker productivity were in sharp contrast to the common
perceptions of that time. Financial reward was found to be much less conducive to worker
productivity than expected. Instead, greater productivity resulted when management made workers
feel valued and aware that their concerns were taken seriously.
Abraham H. Maslow (1943)
Human Motivation was the basic contribution to Human Resource Theory.
There are at least five sets of goals, which we may call basic needs. These are briefly physiological,
safety, love, 'esteem, and self-actualization. In addition, we are motivated by the desire to achieve or
maintain the various conditions upon which these basic satisfactions rest and by certain more
intellectual desires.
These basic goals are related to each other, being arranged in a hierarchy of prepotency. This means
that the most prepotent goal will monopolize consciousness and will tend of itself to organize the
recruitment of the various capacities of the organism. The less prepotent needs are [p. 395]
minimized, even forgotten or denied. But when a need is fairly well satisfied, the next prepotent
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('higher') need emerges, in turn to dominate the conscious life and to serve as the center of
organization of behavior, since gratified needs are not active motivators.
Thus man is a perpetually wanting animal. Ordinarily the satisfaction of these wants is not altogether
mutually exclusive, but only tends to be. The average member of our society is most often partially
satisfied and partially unsatisfied in all of his wants. The hierarchy principle is usually empirically
observed in terms of increasing percentages of non-satisfaction as we go up the hierarchy. Reversals
of the average order of the hierarchy are sometimes observed. Also it has been observed that an
individual may permanently lose the higher wants in the hierarchy under special conditions. There
are not only ordinarily multiple motivations for usual behavior, but in addition many determinants
other than motives.
Any thwarting or possibility of thwarting of these basic human goals, or danger to the defenses which
protect them, or to the conditions upon which they rest, is considered to be a psychological threat.
With a few exceptions, all psychopathology may be partially traced to such threats. A basically
thwarted man may actually be defined as a 'sick' man, if we wish.
It is such basic threats which bring about the general emergency reactions.
Douglas Murray Mc Gregor (1957),
The Human Side of Enterprise was the basic contribution to Human Resource Theory.
Douglas McGregor in his book, "The Human Side of Enterprise" published in 1960 has examined
theories on behavior of individuals at work, and he has formulated two models which he calls Theory
X and Theory Y.
Theory X Assumptions
The average human being has an inherent dislike of work and will avoid it if he can.

Because of their dislike for work, most people must be controlled and threatened before
they will work hard enough.
 The average human prefers to be directed, dislikes responsibility, is unambiguous, and
desires security above everything.
 These assumptions lie behind most organizational principles today, and give rise both to
"tough" management with punishments and tight controls, and "soft" management which
aims at harmony at work.
 Both these are "wrong" because man needs more than financial rewards at work, he also
needs some deeper higher order motivation - the opportunity to fulfill himself.
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
Theory X managers do not give their staff this opportunity so that the employees behave in
the expected fashion.
Theory Y Assumptions






The expenditure of physical and mental effort in work is as natural as play or rest.
Control and punishment are not the only ways to make people work, man will direct himself
if he is committed to the aims of the organization.
If a job is satisfying, then the result will be commitment to the organization.
The average man learns, under proper conditions, not only to accept but to seek
responsibility.
Imagination, creativity, and ingenuity can be used to solve work problems by a large number
of employees.
Under the conditions of modern industrial life, the intellectual potentialities of the average
man are only partially utilized.
McGregor sees these two theories as two quite separate attitudes. Theory Y is difficult to put into
practice on the shop floor in large mass production operations, but it can be used initially in the
managing of managers and professionals.
The Human Relations era acknowledged the social or people focused features of organization and
worker productivity. The management counsel to invite participation and seek cooperation of
workers inside bureaucratic organizations coupled with the growing sense of workers as collective
members of unions that would bargain with management.
Chapter 4: “Modern” Structural Organization Theory
Modern Organization Theory was consisted of two parts: Systems Theory and Contingency Theory.
System Theory looks like the human body. Part of the human bodies - cells, organs, systems – can not
be meaningful alone. The importance of parts can be understood whenever they are working
together. Organizations parts are not significant without working together.
Organizations and its management working conditions are affected from the enviromental change.
Contingency Theory provides the entity’s working situations with respect to the changing
enviroment.
Major Contributions of Modern Structural Organization Theory School
Major contributions of the Modern Structural Organization Theory were: Mechanistic and Organic
Systems – Tom Burns & G.M.Stalker (1961), The Concept of Formal Organization - Peter M. Blau &
W.Richard Scott (1962), Organizational Choice: Product Versus Function - Arthur H. Walker & Jay W.
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Lorsch, The Five Basic Parts of The Organization - Henry Mintzberg (1979), In Praise of Hierarchy Elliot Jaques (1990), Technology as a Contingency Factor - Richard M. Button & Borge Obel (1998)
Tom Burns & G.M.Stalker (1961)
Mechanistic and Organic Systems was the basic contribution to Modern Structural Organization
Theory.
Origin: Merchanistic and organic systems are interested external enviroment conditions on
organization strutures and management applications.
Result: Organization structures are changing in accordance to enviromental conditions. Organic
organizations are suitable for quickly changed cEnviroment and mechanic organizations are suitable
for traditional enviroments.
Planning
Mechanic
Organic
Objectives
Spesific
General
Standarts
rigid
Flexible
Principles and Methods
More and Spesific
Less and Wide
Plans
Detailed and less
flexible
General and flexible
Estimations
Historic Trend
Qualitative and
Forecast
Decision Making
Management
Science Techniqes
Creation and intuition
Organization
Mechanic
Organic
Chain of Command
Definite – No
Deviation
Wide – Deviation is
possible
Separation of
Departments
Specialized units
Expanded units
Devolution of authority
Less
More
Control Field
Narrow
Wide
Coordination
Provided with chain
of command
Special coordinators
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Peter M. Blau & W.Richard Scott (1962)
The Concept of Formal Organization was the basic contribution to Modern Structural Organization
Theory.
What is the spesific and differentiating criterion implicit in our intuitive distinction of organizations
from other kinds of social groupings or institutions?
Social Organization: It refers to the ways in which human conduct become socially organized, that is,
to the observed regularities in the behavior of people that due to social conditions in which they find
themselves rather than to their physiological psychlogical characteristics as individuals.
The fact that an organization has been formally established, however, does not mean that all
activities and intersactions of its members conform strictly to the official blueprint.
In every formal organization there arise informal organization.
It is impossible to understand the nature of a formal organization without investigating the networks
of informal relations and the unofficial norms as well as the formal hierarchy of authority and the
official body of rules, since the formally instituted and the informally emerging patterns are
inextricable intertwinwed.
The distinction between the formal and informal aspects of organizational life is only an analtytical
one and should not be reified: there is only one actual organization.
Small group society informal relations are more than large scale of groups.
Arthur H. Walker & Jay W. Lorsch
Organizational Choice: Product vs Function was the basic contribution to Modern Structural
Organization Theory.
Origin: In accordance to most of the managers, It is difficult to select organization activities form
product or function. Lorsch and lawrance investigated organization succes in accordance to variety of
enviroment.
Result: The best organization form should be changed with respect to the enviroment. Appropriate
level between the org. and the enviroment determines the best organization.
Three important factors used about specialization and coordination:
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Differentiation: Difference im behavior and thought patterns that develop among different specialists
in relation to their respective tasks. Differentiation is necessary for functional specialists to perform
their jobs effectively.
Integration: Colloboration between specialized units or individuals.
Recent studies have demonstrated that there is an inverse relationship between differentiation and
integration.
Well – developed: Achievment of both differentiation and integration is possible.
Henry Mintzberg (1979)
The Five Basic Parts of The Organization
was the basic contribution to Modern Structural
Organization Theory.
Organizations were described in terms of coordinating mechanims. Conceptual description is shown
with right side and this logo is operating core, where in the operators carry out the basic work of the
organization – the input, processing, output, and direct support tasks associated with producing the
products or services.
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Richard M. Button & Borge Obel (1998)
In Praise of Hierarchy - Elliot Jaques (1990), Technology as a Contingency Factor was the basic
contribution to Modern Structural Organization Theory.
The bodies that govern companies, unions, clubs, and nations all employ people to do work, and they
all organize these employees in managerial hierarchies, systems that allow organizations to hold
people accountable for getting assigned work done
Managerial hierarchy is and will remain the only way to structure unified working systems with
hundreds, thousands, or tens of thousands of employees, for very good reason that managerial
hierarchy is the expression of two fundamental characteristics of real work.
First, the tasks we carry out are not only more or less complex but they also become more complex
as they separate out into discrete categories or types of complexity.
Second, the same is true of the mental work that people do on the job, for as this work grows more
complex, it too separates out into distinct categories or types of mental activity.
Managerial hierarchy is and will remain the only way to structure unified working systems with
hundreds, thousands, or tens of thousands of employees, for very good reason that managerial
hierarchy is the expression of two fundamental characteristics of real work.
First, the tasks we carry out are not only more or less complex but they also become more complex
as they separate out into discrete categories or types of complexity.
Second, the same is true of the mental work that people do on the job, for as this work grows more
complex, it too separates out into distinct categories or types of mental activity.
Chapter 5: Organizational Economics Theory
Organizational economists use concepts and tools from the field of economics to study the internal
process and structures of the firm. They ask questions such as “why do organizations exists?” “ What
determines the size, scope, and structure of a firm?” “ why are some workers paid hourly rates while
others receive salaries?” and “what factors determine organizational survival and growth?” Most of
the serious developments in this field occured in the second half of the 20 th century, including the
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introduction of important ideas associated with, for example, agency theory, behavirol theory,
incomplete contract theory of teams, transaction cost economics, and game theory.
Major Contributions of Organizational Economics Theory
Major contributions of the Organizational Economics were: Markets and Hierarchies: Understanding
the Employment Relation – Oliver E. Williamson(1975), Theory of Firm: Managerial Behavior, Agency
Costs and Ownership Structure, Michael C. Jensen & William H. Meckling (1976), Learning from
Organizational Economics – Jay B. Barney & William G. Ouchi (1986), Managing Business Transactions
– Paul H. Rubin (1990)
“Understanding the Employment Relation” from Williamson’s book, Markets and Hierarchies,
assesses organizational decisions to produce goods and services internally versus externally by
analyzing the applicability of various types of economic contracts and market models to employment
relations.
Agency theory defines managers and other employees as “agents” of owners (“principals”) who out
of necessity must delegate some authority to agents. Price Theory has been concerned with how to
structure organizations for the free interplay of markets among agents and principals.
The Theory of Property Rights adresses the allocation of costs and rewards among the participants in
an organization and, for example, how “claims on the assets and cash flows individuals”
Rubin’s underlying principles of business transactions are: “first, people are self – interested and
opportunistic. Second, it is impossible to write complete contracts which take account of any and all
possibleevents and which eliminate all forms of opportunism of cheating”.
Chapter 6: Power and Politics Organization Theory
The power and politics school rejects the assumptions about organizations as being naive and
unrealistic, and therefore of minimal practical value. Instead, organizations are viewed as complex
systems of individuals and coalitions, each having its own interests, beliefs, values, preferences,
perspectives, and perceptions. The coalitions continuously compete with each other for scare
organizational resources. Conflict is inevitable. Influence – as weel as the power and political
activities through which influence is acquired and maintained – is primary “weapon “ for use in
competition and conflicts. Thus, power, politics, and influence are essential and permanent facts of
organizational life.
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Major Contributions of Power and Politics Organization Theory
Major contributions of the Power and Politics Organization Theory were:Understanding the Role of
Power in Decision Making – Jeffrey Pfeffer (1981), Democracy and the Iron Law of Oligarchy – Robert
Michels, The Bases of Social Power – John R. P. French Jr. & Bertram Raven (1959), The Power of
Power – James G. March (1966), The Power Game and the Players – Henry Mintzberg (1983), Power
Failure in Management Circuits – Rosabeth Moss Kanter (1979)
Jeffrey Pfeffer (1981)
Understanding the Role of Power in Decision Making was the basic contribution to Power and Politics
Organization Theory.
“Power is the ability to get things done the way one wants them done; it is the latent ability to
influence people.” This definition offers several advantages for understanding organizations.
First, it emphasizes the relativity of power. As Pfeffer points out, “power is context or relationship
specific. A person is not powerful or powerless in general, but only with respect to other social actors
in a specific relationship.”
Second, the phrase “ the way one want them done” is a potent reminder that conflict and the use of
power often are over the choice of methods, means, approaches, and/or “turf.” They are not limited
to battles about outcomes. This point is important because power is primarily a structural
phenomenon, a consequence of the division of labor and specialization.
Robert Michels
Democracy and the Iron Law of Oligarchy was the basic contribution to Power and Politics
Organization Theory.
Argue power in organizations from a political perspective. “Organization implies the tendency to
oligarchy. In every organization ... the aristocratic tendency manifests itself very clearly. The
mechanism of the organization, while conferring a solidity of structure, induces serious changes in
the organized mass, completely inverting the respective position of the leaders and the led. As a
result of organization, every political party or professional union becomes divided into a minority of
directors and a majority of the directed.
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Organizations are oligarchic by their nature because majorities in organizations are not able to rule
themselves.
The mechanism of the organization induces serious changes in the organized mass, completely
inverting the respective position of leaders and the led. As a result, every party or union becomes
divided into a minority of directors and a majority of directed.
According to Marxist theory;
The capitalist’s mode of production transforms the great majority of the population into proletarians,
and so digs its own grave.
As soon as it attains maturity, the proletariat will seize political power and will immediately
transform private property into state property.
John R. P. French Jr. & Bertram Raven (1959)
The Bases of Social Power was the basic contribution to Power and Politics Organization Theory.
Identifies the major types of power and define them systematically.
Power, Influence and Change
Psychological Change: is defined as any alteration of the state of the state of behaviour, opinion,
attitude, goal, need, value, etc. over time.
Social Influence: influence on a person by a social agent (person, role, norms, group, or a part of a
group)
Social Power: The strength of power of a social agent in a person’s system is defined as maximum
potential ability to influence.
The Bases of Power
Reward power: power whose basis is the ability to reward.
Coercive power: power whose basis is the ability to punish.
Legitimate power: legitimized power by cultural values, acceptance of social norms, and designation
by a legitimate agent.
Referent Power: attractiveness of a social agent (influencer) to the person (being influenced)
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Expert power: extent of the knowledge or perception which person attributes to the social agent.
French and Raven examines the effects of power derived from these 5 different bases of attaraction
and resistance to the use of power. They conclude that the use of power from the different bases has
different consequences.
James G. March (1966)
The Power of Power was the basic contribution to Power and Politics Organization Theory.
“ The power of power” is not limited to power inside of organizations. March reviews alternative
definitions, concepts, and approaches for emprically studing social power in organizations and
communities. His observations about “community power” are more than tangentially germane to
organization theory because of the current enthusiasm for “boundaryless organizations,” “virtual
organizations” and networks.
March discusses the advantages and limitations of three approaches to the study of power:
experimental studies, community studies, and institutional studies. In addtion six models of social
choice existed: Chance Models, Force Activation Models, Force Depletion Models, Basic Force
Models, Force Conditioning Models, Process Models.
He concludes: “Although power and influence are useful concepts for many kinds of situations, they
have not greatly helped us to understand many of the natural social – choice mechanisms to which
they have traditionally been apllied.
Henry Mintzberg (1983)
The Power Game and the Players was the basic contribution to Power and Politics Organization
Theory.
He stresses that, organizational behavior is viewed as a power game. The players are influencers with
varying personal needs who attempt to control organizational decisions and actions. Thus to
understand the behavior of organization, it is necessary to understand which influencers are present,
what needs each seeks to fulfill in the organization, and how each is able to exercise power to fulfill
them.
General Bases of Power are:
Dependency, Non-substitutable, Concentrated (short supply), Formal
Power, Derives from access to those who can rely on all 4
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Types of Influencers
External Coalition
Internal Coalition
Owners
Top Management
Associates
Operators
Employee associations Line managers
Public
Support staff
Directors
Analysts of techno-structure
Ideology
Rosabeth Moss Kanter (1979)
Power Failure in Management Circuits was the basic contribution to Power and Politics Organization
Theory.
Chapter 7: Organizational Culture Theory
Organizational culture is the culture that exists in an organization, something akin to a societal
culture. It is composed of many
intangible phenomena, such as values, beliefs, assumptions,
perceptions, behavioral norms, artifacts, and patterns of behavior. It is the unseen and unobservable
force that is always behind the organizational activities that can be seen and observed. Y
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The primary questions of organization theory thus involve how best to design and manage
organizations so that they acheive their declared purposes effectively and efficiently.
Edgar H.Schein (1993)
Defining Organizational Culture was the basic contribution to Organizational CultureTheory.
According to Edgar Schein, cultural analysis is especially valuable for dealing with aspects of
organizations that seem irrational, frustrating, and intractable. He writes, "The bottom line for
leaders is that if they do not become conscious of the cultures in which they are embedded, those
cultures will manage them." (Schein 375) It is significant that Schein uses the plural "cultures." Using
open-systems concepts, we know that members of a group culture may also belong to subcultures
within an organization. Since organizations do have a shared history, there will normally be at least a
few values or assumptions common to the system as a whole. But sometimes, as in many orchestra
organizations, the subcultures have had different experiences over time, and their group learning has
produced very different sets of basic assumptions.
Organization members interpret the behavior and language of others through their own cultural
biases. Each member’s (or subsystem’s) set of beliefs, values, and assumptions becomes their
unquestioned "reality"; they then perceive behavior inconsistent with their own biases as irrational,
or even malevolent. The organizational culture model suggests reinterpreting such conflict as a
product of different sets of experiences. Instead of looking at conflict as "right" versus "wrong," this
approach suggests that subsystems examine the assumptions underlying their behavior, honor the
experiences and learning that led to those assumptions, and then investigate whether those
assumptions still work well in the present.
Scott D.N. Cook,Dvora Yanow (1993)
Culture and Organizational Learning was the basic contribution to Organizational CultureTheory.
Traditionally, theories of organizational learning have taken one of two approaches that share a
common characterization of learning but differ in focus. One approach focuses on learning by
individuals in organizational contexts; the other, on individual learning as a model for organizational
action. Both base their understanding of organizational learning on the cognitive activity of individual
learning. However, there is something organizations do that may be called organizational learning,
that is neither individuals learning in organizations nor organizations employing processes akin to
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learning by individuals. This form of organizational learning can be seen in the case of three small
workshops that make "the finest flutes in the world." This essay proposes a perspective on
organizational learning, drawing on the concept of organizational culture, that can be useful in
understanding the case. This perspective provides a fruitful basis for exploring the above distinctions
in both theory and practice.
Harrison M.Trice & Janice M.Beyer (1993),
Changing Organizational Culture was the basic contribution to Organizational CultureTheory.
Although there is general recognition that leadership is important for organizational cultures, the
issue of how leadership affects culture has received only scattered attention. Existing analyses have
tended to focus on how leaders create or change cultures, ignoring the role that leadership plays in
maintaining cultures. This paper focuses on how cultural leadership that innovates, by either creating
or changing organizational cultures, is likely to differ from that which maintains organizational
cultures. Hypothesized linkages are advanced between nine elements of cultural leadership—drawn
from the literature on charisma—and its consequences. The predictions made are derived from a
synthesis of existing theory and insights gained from descriptions of leadership in the scholarly and
popular literatures. Both descriptions and theoretical considerations suggest that, while cultural
innovation and maintenance leadership differs in some ways, the behaviors of effective cultural
leaders do not. Cultural leadership apparently has some generic characteristics. Two variants of each
of the basic types are identified and linked to extant conceptualizations of leadership. Implications
discussed include the risks and advantages of organizations' having multiple cultural leaders at the
same time.
Joanne Martin (2002)
Organizational Culture:Pieces of Puzzle was the basic contribution to Organizational CultureTheory.
Many researchers define the culture in approximately the same way- in terms of cultural
manifestations that are shared by most cultural members, it is so often defined unique about a
context.
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All the different definitions are to be made but we have to pay attention how researchers are
operationalizing them.
Chapter 8: Reform Through Changes in Organizational Culture
The change in enviroment, increase in the deregulation movements and reduction of transportation
and communication costs lead to change in organizations structure. Related to this change,
employees are more participate the entity’s decisions. Motivation and team working are very
important also.
The Z Organization
The origin of the William Ouchi was Japan and affected by American management system. Thats, why
The Organizaition is an amalgam of Japan and American management system.
13 step must be implemented for successful Z Organization
Step 1: To understand Z organization structure
Step 2: To determine organization philosophy
Step 3: To determine adopted and expected management philosophy
Step 4: To set organization to new management idea occur
Step 5 : To improve employees skills and abilities
Step 6: To control implemented management philosophy and management
Step 7: To develop coorperation with trade unions
13 step must be implemented for successful Z Organization (cnt’d)
Step 8: To set and appply stable decisions for employment structure
Step 9: To think going concern and to provide development and progress of the organization
Step 10: To provide employees career opportunities
Step 11: To change in organization must be started the top. (Top – down)
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Step 12: To participate employees comments and suggestions for decision making process
Step 13: To integrate all level of employees.
Organization Types
Comparison
The Z
Organization
The A
Organization
The J
Organization
Origin
USA & Japan
USA
Japan
Employee Term
Long Term
Short Term
Lifelong
Decision Making
Collective
Individual
Collective
Responsibilty
Individual
Individual
Group
Slow
Fast
Slow
Continued
outside of the
work
Limited with
work placa
Continued
outside of the
work
Promotion
Employee Concern
The Fifth Discipline: A shift of Mind
The Fifth Discipline is an essential struture of Learning Organization. These discipline are:
 Systems Thinking
 Personal Mastery
 Mental Models
 Building Shared Vision
 Team Learning
System Thinking:
Due to the organizational environment is to complex, decisions for entity’s system should be taken
wholly. Decisions which are taken in accordance to part of the organization can not be added benefit.
Personnel Mastery
People have personel mastery, to show all attention and care on their job.
The leraning desire of an organization can not be more than a profession.
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Building Shared Vision
The organization objective should be accepted by all of the employees. This means, everyone wants
to reach common target provides with belief.
Team Learning
Team oriented working results pass the individual outcomes mostly. The democratic and fair
environment is the way of team successful.
Gendering Organizational Theory
Genders refers to patterned, socially produced distinctions beyween female and male, feminine and
masculine.
Gendered process and practices may be open and overt, as when managers choose only men or only
women for certain positions or when sexual jokes denigrating women are part of the work culture.
On the other hand, gender may be deeply hidden in organizational process and decisions that appear
to have nothing to do with gender.
Elements in a Theory of Gendered Organizations
It is comprised 4 steps
 Production of Gender Division
 The creation of symbols, images and forms of consiousness that explicate, justify, and more
rarely oppose gender divisions.
 To reproduce gendered organizations are interactions between individuals, women and men,
women and women, men and men, in the multiplicity of forms that enact dominance and
subordination and create alliances and exclusions
 Gendering organizations is the internal mental work of individuals as they consciously
construct their understandings of the organization’s gendered structure of work and
opportunity and the demands for gender appropriate behaviors and attitudes.
Creating a Goverment That Works Better & Costs Less: Report of The
National Performance Review
Our goal is to make the entire federal goverment bothh less expensive more efficent, and to change
the culture of our netional bureaucracy away from complacency and entitlement toward initiative
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and empowerment. We inted to redesign, to reinvent, to reinvigorate the entire national
goverment.
President Bill Clinton
March 3, 1993
Problems of National Goverment:
 Ineffective spendings of resources
 Ineffective regulation of the financial industry brought the savings and loan debacle
 Ineffective education and training programs jeopardize competitive edge
 Ineffective welfare and housing program undermine families and cities
Some of the examples related to Washington’s failures
President Clinton created National Performance Review Report to abolish unequilibrium. In this
report hundred of recomendations were taken, some of them were:
 To reduce waste eliminate unneeded bureaucrarcy,
 To improve service to taxpayers
 To create a leaner but more productive goverment
Some of these proposals can be enacted. The improvement of this report success depend upon:
 A Cure Worse than the disease
 The Root Problem Industrial Era Bureaucracies in an Information Age
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 The Solution: Creating Entrepreneurial Organizations

Cutting Red Tape

Putting Customers First

Empowering Employees to Get Result

Cutting Back Basics: Producing Better Goverment for Less
 Our Commitment : A Long Term Investment in Change
Creating the Multicultural Organization: The Challenge of Managing
Diversity
Human capital has taken center stage in the business strategies of enlightened organizations in the
21 century.
Attracting, retaining, and effectively using people are increasingly the top priorities of leaders in all
kinds of organizations, from high – tech firms to universities, from goverment agencies to heavy
manufacturing firms.
The creating of multicultural organization provides with DIVERSITY such as:
 Gender population
 Differential birth rates,
 Work groups
 National origin etc
 Dıversity: It is the variation of social and cultural identites among people existing together in
a defined employment or market setting.
 Social and cultural identity refers to the personnel affiliations such as: gender, race, national
origin, religion, age, cohort, and work specialization.
Problems and Opportunities of Diversity
 Diversity is a Potential Performance Barrier
 Diversity as Value – Added Activity
 Creativity and Innovation
 Organizational Flexibility
 Human Talnet
 Marketing Strategy
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Chapter 9: Theories of Organizations and Environments
Theoretical models of organizations underwent a major change starting during the decade of the
1960s when the “open systems perspective” gained support and essentially displaced the “closed
system models”. The primary focus of research and theory building shifted from the internal
characteristics of organizations to the external dynamics of organizational competition, interaction,
and interdependency. The organizations as open system perspective views organizations as system
of independent activities embedded in and dependent on wider environments. Organizations not
only acquire material, financial, and human resources from their environment, they also gain social
support and legitimacy. Thus the focus of theory and research from the open systems perspective
inevitably moved to interactions and interdependencies among organizations and their
environments.
Daniel Katz & Robert L. Kahn (1966)
Organizations and the System Concept was the basic contribution to Theories of Organizations and
Enviroments.
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James D. Thompson (1967)
Organizations in Action were the basic contribution to Theories of Organizations and Environments.
Thompson writes that the creation of a model of human resources management would be impossible
if the planner attempted to take into full consideration the whole range of possibilities for human
behaviour: "Neither we nor organizations have the data or the calculus to understand organization
members in their full complexity, and the requirements of complicated technologies in complicated
task environments cannot be met if the full range of human variations comes into play within the
organization".
Therefore, the "conceptual framework" is crucial for the establishment of a model of human
resources management because it limits consideration of human variations."
John W. Meyer and Brain Rowan (1977)
Institutionalized Organizations: Formal Structure as Myth and Ceremony was the basic contribution
to Theories of Organizations and Environments.
Many formal organizational structures arise as reflections of rationalized institutional rules. The
elaboration of such rules in modern states and societies accounts in part for the expansion and
increased complexity of formal organizational structures. Institutional rules function as myths which
organizations incorporate, gaining legitimacy, resources, stability, and enhanced survival prospects.
Organizations whose structures become isomorphic with the myths of the institutional
environment—in contrast with those primarily structured by the demands of technical production
and exchange—decrease internal coordination and control in order to maintain legitimacy.
Structures are decoupled from each other and from ongoing activities. In place of coordination,
inspection, and evaluation, logic of confidence and good faith is employed.
Jeffrey Pfeffer & Gerald R. Salancik (1978)
External Control of Organizations: A Resource Dependence Perspective was the basic contribution to
Theories of Organizations and Enviroments.
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Resource dependence theory: all organizations exchange resources with their environment as a
condition for survival.
One cannot understand the structure and behaviour of an organization without understanding the
context within which it operates.
No organizations are self sufficient, and so they must engage in exchanges with their environment in
order to survive.
Organizations need to acquire resources from their environment, and the importance and scarcity of
these resources determine the extent of organizational dependency in and on their environment.
Information is a resource organizations need to reduce uncertainty and dependency, so,
organizations seek information to survive.
Geln R. Carroll and Michael T. Hannan (2000)
Demography of Corporations and Identities was the basic contribution to Theories of Organizations
and Enviroments.
Organizations do not adapt to their changing environments by making decisions; the environment
selects the fittest among different organizational forms.
The organizational ecology approach differs from other open system theories as it focuses on
populations of organizations rather than individual organizational units.
It attempts to explain why certain types or species of organizations survive and multiply whereas
others languish and die.
Environments differentially select organizations for survival on the basis of the fit between
organization forms and environmental characteristics.
The general factors leading to higher mortality rates among organizations are; the liability of
newness, liability of smallness and the density of dependence.
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