THEORIES AND
CONCEPTS
OF ORGANIZATION
NEOCLASSICAL THEORY OF
ORGANIZATION
Presented by
MUHAMMAD YAHYA AHMAD
CEdAP STUDENT OF PCU MANILA
The Appearance of Neoclassical
Organizational Theories
• The human relations movement evolved as a reaction to the
tough, authoritarian structure of classical theory.
• It is addressed many of the problems inherent in classical
theory
• Neoclassical theories of organization state that classical
organizational theories created over-conformity and rigidity,
thus squelching creativity, individual growth, and motivation.
• Neoclassical theory displayed genuine concern for human
needs
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 satisfying.
– Programmed and unprogrammed decision-making.
– Management information systems.
Neoclassical Organization Theory
• It is an attempt to improve classical organizational
theory that argues employee satisfaction as well as
economic effectiveness are the goals of
organizational structure
• The impact of sociology.
– Philip Selznick – Organizations are made up of
individuals whose goals and aspirations may not
coincide with the organization’s.
Neoclassical Organization Theory
• Herbert Simon
– 1960- Decisions
– Studied decision-making within
organizations
– Programmed vs. un-programmed
– Developed the “science” of improved
organizational decision-making through
quantitative methods such as operations
research and computer technology
Neoclassical Organization Theory
• Herbert Simon (1946-7 through 1990s)
– First Neoclassicalist to seriously challenge the tenets of
Classical Organizational Theory
– Criticized the “General Principles of Management” (see
Fayol) approach
– They were inconsistent, conflicting, & inapplicable to many
administrative situations facing managers
– Said that “so-called principles” could, with equal logic, be
applied in diametrically opposed ways to the same set of
circumstances.
– “so-called principles” really were proverbs
Classical vs Neoclassical
• Before World War ll
• Derived intellectually
• Universally applicable
scientific principles
• The starting point of
organisational theory, its
birth.
• After World War ll
• Derived empirically
• Anti theory, critical to the
classical organisational
theory, but not really a
theory of its own.
• The early evolution of
organisational theory, its
youth.
Classical vs Neoclassical
• Individuals needed to be
structured in order to create
an organisation.
• A number of positions for
the management to control.
• A formal goal for the entire
organisation that everyone
naturally work towards.
• Individuals in need for
cooperation holds an
organisation together.
• A number of individuals
with aspirations of there
own to manage.
• Individuals with different
goals, not always in line
with the formal goal of the
organisation.
Classical vs Neoclassical
Classical Organizational Theory: The approach that assumes
that there is a single best way to design organizations.
– This approach assumes that managers need to have close
control over their subordinates and calls for designing
organizations with tall hierarchies and a narrow span of
control.
Neoclassical Organizational Theory: An attempt to improve on
the classical organizational theory that argues that not only
economic effectiveness, but also employee satisfaction, should
be goals of an industrial organization.
– This approach assumes that managers do not have to
carefully monitor their subordinates and calls for designing
organizations with flat hierarchies and a wide span of
control.
Classical vs Neoclassical
• Neoclassical organizational theory is a
criticism of classical theory; attempt to
humanize the rigid structure
– Follows workflow and productivity of
classical, but meets employee needs
• According to neoclassical organizational
theory, effective organizations are designed
with flat hierarchical structures and a high
degree of decentralization
Human Relations Theory
• The human relations theory was developed by Elton
Mayo and his associates from 1924 to 1932 at the
Hawthrone plant of Western Electric Company.
• the Hawthorne effect, where people feel the pride of
belonging to a group.
• The Hawthorne experiments brought about the
conclusions that the business organization also
includes social and psychological factors. It considered
organization as a social process where feelings,
sentiments and attitudes were given due importance.
• Human relations theory concentrates on morale and
productivity,.
Behavioral Science Theory
• Behavioral science theory lays emphasis on
inter-personal roles and relationships
• McGregor, Arguris and Likert believed that
self-actualized man would contribute to the
development of management
• Develop new insights and brings about a
congenial environment in the factory whereby
new thinking and new techniques put forward
by employees are welcome.
Contribution of Neoclassical Theories
• Individual Behavior: respective feelings,
perception, learning and personality.
• Group Behavior: group inter-relationships,
group objectives, group systematic approach
to work, cultural and social backgrounds of
employees have a significant role to play in
management.
• Task: coordinated activities, coordinated
efforts and achievement.
Contribution of Neoclassical Theories
• Participative Management:
– employees have the right to take part in management
decisions,
– recognition of human values increase productivity and
efficiency.
• Motivation: self-motivation and job satisfaction,
management has been honest and helpful, monetary
and non-monetary incentives
• Communication: effective communication, two-way
communication, formal and informal communications,
group communication, team spirit, man-to-man
relations and group harmony