THEORIES AND
CONCEPTS
OF ORGANIZATION
MODERN THEORY OF ORGANIZATION
Presented by
MUHAMMAD YAHYA AHMAD
CEdAP STUDENT OF PCU MANILA
MODERN THEORY OF ORGANIZATION
• Modern theories organization synthesizes
the classical and neoclassical theories of
organization, together with technological
development.
• Modern theories of organization are
classified into quantitative theory,
system theory and contingency theory.
Quantitative Theory
• The quantitative theory includes operation
research and quantification of the problem.
• It analyses the problems from quantifiable
angles and provides solutions to complex
problems only with the help of statistical
and mathematical models such as linear and
non-linear programming, game theory,
decision tree, simulation and probability
Quantitative Theory
• The quantitative approach is merely a tool
for finding a suitable solution, but is not a
solution in itself. It has become a valuable
supplement rather than a substitute for
management and organization
– Mathematical models
– Operation research
Quantitative Theory
• Statistical and mathematical models: linear
and non-linear programming, game theory,
decision tree, simulation and probability
• Operation research is conducted by diverse
specialists and management experts. It is
useful from the levels of planning for
organizing, actuating and control.
System Theory
• The system approach believes in a static
structure and a dynamic and cybernetic system
is divided into closed and open systems
• The General Systems Theory (GST):
Organization is a system wherein operation,
marketing, finance, etc. are subsystems are
managed and mobilized for attaining the
organizational goals.
• It is an interconnected, interdependent and
interacting arrangement of men and materials.
System Theory
• The closed system believes in internal management, the
closed system is not perpetual
• The open system consists of the input transformation
process, output, feedback and environment
• The modern open theory (MOT) which is dynamic,
adaptive, multilevel, multidimensional and
multidisciplinary
• The open theory commonly used as a system approach
believes in analytical detection of deviation from normal
behavior and taking necessary and corrective action to
eliminate the error.
System Theory
• The System consists of technical subsystem, social
subsystem, psychological subsystem and structural
subsystem are considered in the organization
– The technical subsystem includes all functional areas,
viz. marketing, production, finance and personnel,
which are properly structured, and employees are
assigned jobs in any of these areas
– The Social and psychological subsystem includes
employee’s behavior, sentiments, interests and attitudes
of employees
– Structural subsystem includes the structure, power
(formal and informal), and authority
Contingency Theory
• Developed in the 1960s by Tom Burns and G. M.
Stalker in Britain and Paul Lawrence and Jay
Lorsch in the United States
• It is the idea that the organizational structures and
control systems that managers choose depend on
(i.e. are contingent on) characteristics of the
external environment in which the organization
operates
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Contingency Theory
• Burns and Stalker (1968) Management of Innovation
– Organizational systems should vary based on the level of stability
in the environment
– Two different types of management systems
• Mechanistic systems - appropriate for stable environment
• Organic systems - required in changing environments (unstable
conditions)
– Management is the Dependent Variable
• Variations in environmental factors lead to management
• Lawrence and Lorsch (1969)
– Key Issue is environmental uncertainty and information flow
– Focus on exploring and improving the organization’s relationship
with the environment
– Environment is characterized along a certainty-uncertainty
continuum
Contingency Theory
• The characteristics of the external environment affect an
organization’s ability to obtain resources
• To maximize the likelihood of gaining access to scarce
resources, managers must allow an organization ’ s
departments to organize and control their activities in
ways most likely to allow them to obtain those resources
• Examples of characteristics of the external environment
include (but are not limited to):
– changes in the environment;
– the entry of new competitors;
– unstable economic conditions.
Contingency Theory
• Burns & Stalker (drawing on Weber’s and Fayol’s
principles of organization and management) proposed 2
basic ways in which managers can organize and control an
organization’s activities in response to its external
environment:
– A mechanistic structure for organizations in stable
environments (typically resting on Theory X
assumptions); or
– An organic structure for organizations in changing
environments (typically resting on Theory Y
assumptions)
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Contingency Theory
• The contingency theory is an extension of the open system,
its considered adaptable approach which is applicable to
all situations
• The contingency theory is a situational theory which
changes its approach according to the requirements of the
situation, and environmental variables with empirical
support
• The basic tenets of the theory are the relationships
between various organizational subsystems
• The contingency approach considers the management
activities to be flexible and adaptable to meet situational
requirements
Contingency Theory
• Organizational structure and management methods can be
identified as being most effective under specific situational
contingencies.
• Three basic propositions underlie the contingency
approach to organizational behavior in schools:
– There is no one best universal way to organize and administer
school districts or schools.
– Not all ways of organizing and administering are equally effective in
a given situation: effectiveness is contingent upon appropriateness
of the design or style to the situation.
– The selection of organizational design and administrative style
should be based on careful analysis of significant contingencies in
the situation.
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Contingency Theory
• Organizations that deal successfully with uncertain
environments tend to differentiate internally more than
less successful organizations do; yet they are able to
maintain high levels of integration between the various
subunits.
• New technological developments, typically developed
externally, of every description tend to alter the
contingencies that affect the internal arrangements of the
school.
• The school system or school, as a sociotechnical system, is
in constant dynamic interaction with the larger external
environment in which it exists.
Copyright © Allyn & Bacon 2007
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Contingency Theory
• Contingency Approach
– A research effort to determine which
managerial practices and techniques are
appropriate in specific situations.
• Different situations require different managerial
responses.
• Can deal with intercultural feelings in which custom
and habits cannot be taken for granted.