Organizational Theory
Lothar Fuhr
21.07.2015
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Organizational Theory in 4 steps
Learning Experience
Clear Terms & Background
History
Outlook
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...
Lothar.Fuhr@web.de
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What is „Organization Theory“?
What are „Organizations“?
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What Is Organization Theory?
A proposition or set of propositions that attempts to
explain or predict how groups and individuals behave
in differing organizational arrangements.
Organization theory is characterized by vogues,
heterogeneity, claims and counterclaims, and even
greater differentiation in theory and practice have
developed since then.
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What Is Organization Theory?
Classic organizational theory:
Organizations exist to accomplish productionrelated and economic goals.
There is one best way to organize for production,
and that way can be found through systematic,
scientific inquiry.
Production is maximized through specialization
and division of labor.
People and organizations act in accordance with
rational economic principles.
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Share your experience ...
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Road Map of Organizational Theory
Behavior
Approach
Fundamentals of
Organisational Theory
Classic approach of
Organisational Theory
Psycho-Technic
Behaviorismus
„Modern“ approach of
Organisational Theory
„Institiutionalistisch“
Human Relations
Neoclassical
Perspective
Economical
Systemic
Approach
Situative
Approach
...
Bureaucratical Approach
Scientific Management
Ressource Based
Approach
Theory of Evolution
Administrational
Approach
1900
1920
1940
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Time
History of Organizational Theory
Scientific Management
Representative:
F. Taylor
Key Question:
How could we optimize our performance by using
our ressources in a best way!
(maximise output with the least amount of input)
Focus:
Divide work between managers and workers
Provide incentive system (based on performance)
Create a science for each individual‘s resp.
Make sure work is done on time/efficiently
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History of Organizational Theory
Bureaucracy Approach
Representative:
M. Weber
Key Question:
Focus:
How do we realise authority within an organisation
Definition of „ideals“ (great man theory)
Rules are stable and can be learned
The management of the modern office is based
upon written rule, which are preserved in
original form
Office of hierarchy
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History of Organizational Theory
Administrative Approach
Representative:
H. Fayol; Mary Parker Follet
Key Question:
How could we optimize our performance by using
our ressources in a best way!
Focus:
Administration & Management
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History of Organizational Theory
Systemic Approach
Representative:
L. v Bertalanffy; C. Barnard; N. Luhmann;
F. Malik
Key Question:
How do the elements of an organization interact
Focus:
elements, relations, ...
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History of Organizational Theory
Theory of Evolution
Representative:
H.E. Aldrich; McKelvey; M.T. Hannan, J. Freeman
Key Question:
Transfer from biological findings to the
organisational perspective
Focus:
fact oriented management is not possible
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A simple question ...
12 / 68 / 20
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Why do we have all the problems?
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Peter‘s Principle ... a typical problem!
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Why do we have all the problems?
„Mistakes are the result of habit!“
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An additional perspective …
Don Beck: Spyral Dynamics
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©Institut Innere Form
Why Have a Structure?
.
.
.
All businesses have to organise what they do!
A clear structure makes it easier to see which part of
the business does what!
There are many ways to structure a business!
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Some Key Terms
Flat or tall structure
Span of control
Chain of command
Hierarchy
Delegation
Empowerment
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Ways to Structure a Business
.
.
.
By function:
arranging the business according to what each section
or department does
By product or activity:
organising according to the different products made
By area:
geographical or regional structure
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Ways to Structure a Business
By customer:
where different customer groups have different needs
.
By process:
where products have to go through stages as they are
made
.
.
What are the advantages/disadvantages of different
types of business structure?
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Functional Structure
Advantages
.
.
.
Disadvantages
Specialisation – each
department focuses on its
own work
Accountability – someone
is responsible for the
section
Clarity – know your and
others’ roles
.
.
.
.
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Closed communication
could lead to lack
of focus
Departments can become
resistant
to change
Coordination
may take too long
Gap between top and
bottom
Organisation by Product/Activity
Advantages
.
.
.
Disadvantages
Clear focus on market
segment helps meet
customers’ needs
Positive competition
between divisions
Better control as each
division can act as
separate profit centre
.
.
.
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Duplication of functions
(e.g. different sales force
for each division)
Negative effects of
competition
Lack of central control
over each separate
division
Organisation by Area
Disadvantages
Advantages
.
.
.
Serve local needs better
Positive competition
More effective
communication between firm
and local customers
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.
.
Conflict between local and
central management
Duplication of resources and
functions
Other Organisational Structures
.
.
By Customer:
Similar effects to structuring
by product
By Process:
Similar to structuring by function
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Holistic view – made by St. Gallen (CH)
Communication
5
Tasks for
Effective Management
Communication
6
Principles for
Effective Management
Communication
Tools for
Effective Management
Communication
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7
Effective Management
6
Principles for
Effective Management
1. Result-Orientation
2. Contributing to the Whole
3. Concentrating on the Essentials
4. Utilizing Strengths
5. Trust
6. Positive Thinking
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Results-Orientation
The focus should not be on working as hard as possible, but on achieving the best possible
results. Within their position, employees should be capable of attaining results and also
have an opportunity to see these results. This contributes significantly to motivation.
Management is concerned with effectuation or achieving results.
Result orientation is a management principle and should not be taken as a general life principle.
Results can only be evaluated in terms of the organizational goal.
Results can be related to individuals or to money.
The work itself doesn‘t bring happiness, but rather the results.
...
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Contributing to the Whole
Good managers make it easier for their employees to perceive their contribution to the
whole and to recognize the purpose of their job.
A good manager sees the big picture and views his purpose in contributing to the whole, regardless
of position or area of spezialisation.
Holistic thinking means always meintaining an overview of the complete organizational organism.
The goal is translation potential into benefit.
Contributions to the whole are based on the efficient use of knowledge, skills and experience to
benefit company performance.
...
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Concentration on the Essentials
Management should ensure that individuals within a company concentrate on a small
number of carefully choosen items, so as not to dissipate their energies. Concentration is
the key to positive results.
Concentration is the key to results.
It is important to concentrate on a small number of items; however, these should be the most
important ones.
Success is enabled by carefully selecting a specific focus and concentrating on it.
The world is not short on ideas, but is short on realized ideas, which again require concentration.
...
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Positive Thinking
Recognizing and utilizing opportunities is considerably more important than simply
overcoming issues. When issues areise, people should look at the potentially positive sides
and determine if there are hidden opportunities within this issue. Positive thinking also
includes the discipline of self motivation. Closely related to this is the principle that people
always try to use everything at their disposal to make the best of a particular situation.
Good managers think positively and constructively.
It is important not to cocentrate on the problems within the oragnization, but rather on the
opportunities.
Positive thinking leads to the utilization of opportunities and to self motivation.
...
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Utilizing Strengths
Individuals should be engaged in the tasks they are suited for and where their strengths lie.
Human resource development should be based on strengths. Weaknesses should only be
minimized to the degree that they impede upon the complete utilization of strengths.
It is important to make use of already existing strengths and not to concentrate on weaknesses.
It is a managers job to recognize the strengths of his/her employees and then align tasks with the
strengths of the respective individuals.
Overcoming weaknesses frequently leads quickly to physical or mental exhaustion.
...
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Trust
To create a good corporate culture and good working climate, it is key to gain the trust of
employees. This creates a stable management situation that holds up solidly in the face
of the management mistakes that will inevitably occur.
Try to put as much trust as you can into individuals; extend it to the limits.
Ensure that it is clear what happens if there is a breach of trust, what the penalties are for such actions
and react firmly.
Fundamental to the principle of trust is that the trust must be real. Feigned trust has a
counterproductive effect.
...
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Effective Management
5
Tasks for
Effective Management
1. Setting Goals
2. Organization
3. Making Decisions
4. Controlling
5. Human Ressource Development
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Effective Management
7
Tools for
Effective Management
1. The Meeting
2. The Report
3. Job Design and Assignment Control
4. Personal Work Methods
5. Budget and Budgeting
6. Evaluating Performance
7. Systematic Waste Disposal
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Back-Up
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Models of Organizational Practice Include
.
.
.
.
.
.
.
.
Theory X. Control, discipline, and sanctions are needed to force people to do their
work.
Theory Y. Management can take action so that employees will become motivated to
do their work. All workers are to be regarded as goal-oriented and as having potential
to further develop their own talents and skills.
Contingency Theory – Employees are motivated by different things, but need to
achieve a sense of competency. Therefore the manager must provide appropriate
incentives to motivate individual employees.
Human Relations Approach. To maximize performance, staff members need
autonomy, involvement in management decisions, and appropriate rewards. People
react as group members.
Theory Z – focuses on quality of production, collective accountability and loyalty.
Decisions are made by consensus.
Participatory Management – Staff involvement in organizational decision-making
increases job satisfaction and productivity; decreases staff turnover.
Feminist Management - Fights oppression; creates “management partnerships”
among participants; assumes women manage differently then men, focusing on
interpersonal relationships rather than traditional approaches to power & authority.
Decisions are made by consensus & cooperation.
Total Quality Management – Management produces an organizational culture
based on product quality, consumer satisfaction, standardization of production, and
employee empowerment.
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The Origins of Scientific Management
The influence of Frederick W. Taylor (1911):
Father of the scientific management movement.
Scientific management principles.
Replacing
traditional, rule of thumb methods of work
accomplishment with systematic, more scientific
methods of measuring and managing individual work
elements;
The scientific study of the selection and sequential
development of workers to ensure optimal placement of
works into work roles;
Obtaining the cooperation of workers to ensure full
application of scientific principles; And.
Establishing logical divisions within work roles and
responsibilities between workers and management.
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The Origins of Scientific Management
Henri Fayol’s general theory of management
(six principles, 1916, 1949).
Technical (production of goods)
Commercial (buying, selling, exchange).
Financial (raising and using capital).
Security (protection of property and people).
Accounting.
Managerial (coordination, control, organization,
planning and command of people).
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The Origins of Scientific Management
Fayol (contd.).
Dominant principle was management
Division
of work.
Authority and responsibility.
Discipline.
Unity of command.
Unity of direction.
Subordination of individual interest to general interest.
Remuneration of personnel.
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The Origins of Scientific Management
Fayol (contd.)
Dominant principle was management (contd.)
Centralization.
Scalar
chains (supervisors).
Order.
Equity.
Stability
of personnel tenure.
Initiative, and.
Esprit de corps.
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Neoclassical Organization Theory
.
The neoclassical theorists gained their
reputation by attacking the classical theories.
Important source of the power and politics,
organizational culture, and systems theory.
.
Herbert Simon.
Bounded rationality and satisficing.
Programmed and unprogrammed decisionmaking.
Management information systems.
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Systems Theory
Systems theory views an organization as a complex
set of dynamically intertwined and interconnected
elements, including inputs, processes, outputs,
feedback loops, and the environment. Any change in
one element causes changes in other elements.
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Systems Theory
Cybernetics – Norbert Wiener (1948).
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Systems Theory
The learning organization.
Built on the doctrines of participation
Maslow’s hierarchy of needs.
New component technologies (the five
disciplines).
Personal
mastery.
Mental models.
Building shared vision.
Team learning.
Systems thinking.
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