Kay 235: Introduction to Management

Lecture 4

Subject: Fundamentals of Organization Theory

Reading: Grene, p. 122-136.

Two Options for Midterm 1 Option 1

Date: November 8, Monday

Time: Class Time Location: D13 Only Questions: All

Classic Essays, No Multiple choice or fill in the blanks

Exam Begins @: 09:30

Option 2 Date: November 12,

Friday Time: Afternoon Location: Two

classes Questions: Multiple

choice and fill in the blanks, in addition to essays

Exam Begins @: 13:30 or 14:00

Organization

Greek Organon: meaning a tool or instrument. So, organizations are tools or

instruments to meet goals, objectives, to carry out tasks.

Kaynak: Gail Johnson, OT, 2003.

Organizations They are

The structure/context in which PA works One of the principal focuses of PA

Definitions Complex, goal-seeking units Systems of consciously coordinated

activities Contain people Include division of labor & specialization

Organizations: DefinitionImplicit in the definition are four concepts: Organizations are made up of people. The necessity of the division of labor Organizations have identifiable

boundaries. Organizations are purposeful, goal

seeking work arrangements.

Kaynak: Wasti, 2010.

What is Organizational Theory? Organizational Theory (OT)

Studies Everything that is associated with organizations

Aims To understand organizations and to improve them

Examines Organizational Design Motivation Organizational Culture Managerial Styles Group Behavior Leadership Communication

Operational Level

Top Level

Middle (Mid) Level

Organizational Levels Different levels of

organization have different priorities in organizing.

Who: Top managersWhat: Evaluating organizational data,

Planning aheadAim: Organizational strategy and planning

Operational Level

Top Level

Middle Level

Who: Middle Level ManagersWhat: Control of operational activitiesAim: Organizational Efficiency

Operational Level

Top Level

Middle Level

Who: Workers-Street Level BureaucratsTheir Supervisors

What: Redundant and repetitive jobsAim: Increasing organizational efficiency

Operational Level

Top Level

Middle Level

Classical Theory of Organizations Industrial Revolution

Large scale organizations and mass production New patterns of relationships between workers

and factory owners & managers Emphasis on the formal structure Notion of “economic man”

Emphasis on material rewards Strictly define and control the work

processes “Employees are lazy and unreliable” Theory X versus Theory Y

Key Pillars of the Classical Theory

Division of labor Scalar and functional processes

Vertical and horizontal growth of the organization Delegation of power and authority

Line and staff Blue-collar and white-collar Line: Initiators of key organizaitonal activities Staff does not direct, it advises and serves

Reservoir of expert knowledge (A limited) Span of control

The number of subordinates a manager can effectively supervise (5-6)

Frederick Taylor, 1856-1915

“Frederick Taylor’s ideas may well be the most powerful, as well as the most lasting contribution America has made to Western thought since the Federalist Papers.”

Peter Drucker, 1954

“Founder of Scientific Management”

“Father of Industrial Engineering”

Kaynak: Wasti, 2010.

Scientific Management

– Time Studies – workers timed with stopwatches to identify “appropriate” time for specific tasks

– Motion Studies – workers observed to identify “one best way” of completing a task• Frank Gilbreth credited with origins of

Motion Studies

Scientific Management Simple Method of Management

Break job into efficient parts – Division of Labor, Workers/Managers

Hire the right worker for the job Give worker appropriate training –

everyone is trainable Introduce incentive pay plans –

assumption workers are only motivated by money.

Huge productivity gains, allowed for Mass Production

Scientific Management

Scientific Management: Management method by which systems are broken down into individual components and each studied independently and optimized using scientific methods.

Man Against the Machine

Scientific Management

Simplify Work “one best way”

Scientific Selection

Separate Planning from Doing

Incentive Pay

Scientific TrainingIndividual

Productivity

Share Wealth and Cooperation

Fordism

Meticulous time and motion study, perfection of each worker movement, specialized machines, conveyor belts.

Identifying work tasks and then making that method the standard, together with emphasis on inspection.

From Craft to Assembly Line Production at Ford’s Highland Park Plant

Pre-1912 20-30 per day

1913 100 per day

1914 1000 per day

1915 3000 per day

Model-T Production (Highland Park:1910)

Minutes of Effort to Assemble:

Late Craft

Fall, 1913

Ass’y Line

Spring 1914

% Reduced

Engine 594 226 62

Axle 150 26.5 83

Complete Vehicle

750 93 88

Fayol’s (1841-1925) Administrative Theory

Broad administrative principles to serve as guidelines for rationalization. “Top down” approach compared to Taylor.

Coordination: Scalar principle: Hierarchical organizational

form in which all participants are linked to a single pyramidal structure of control relations

Unity of command principle: No organizational participants should receive orders from more than one superior.

Fayol’s Administrative Theory (cont.)

Span of control principle: No superior should have more subordinates than can be effectively overseen.

Specialization: How various activities are to be distributed among organizational positions and how such positions can most effectively be grouped into work units/departments.

Fayol’s Administrative Theory (cont.)

Line and staff principle: All activities directly concerned with achieving organizational goals are line functions. Staff activities consist of advice, service, support. Staff units are to be segregated from the scalar organization of power and made responsible and subordinate to appropriate line units.

Max Weber, German Sociologist (1864-1920)

“The purely bureaucratic form of administrative organization […] is, as regards the precision, constancy, stringency, and reliability of its operations, superior to all other forms of administrative organization.”

Weber’s Theory of Bureaucracy

Three types of authority: Traditional: Rests on established belief in

the sanctity of immemorial traditions and the legitimacy of those exercising authority under them

Charismatic: Rests on devotion to the specific and exceptional sanctity, heroism, or exemplary character of a person

Legal- Rational : Rests on a belief in the legality of patterns of normative rules and the right of those elevated to authority under such rules to issue commands

Weber’s Theory of Bureaucracy (cont.)

Only traditional and rational-legal authority relations are sufficiently stable as basis of permanent administrative structures.

Charismatic forms arise in periods of instability and crisis.

Weber’s Theory of Bureaucracy (cont.)

Bureaucratization increases subdivision of the functions which the owner-managers of the early enterprises had performed personally.

Jurisdictional areas are clearly specified. Regular activities required of personnel are distributed in a fixed way as official duties.

Organization of offices follows the principle of hierarchy. Each lower office controlled and supervised by a higher one. Scope of authority over subordinates is circumscribed. Lower offices have a right to appeal.

Criticisms of Classical Principles

Division of labor Repetitive work causes industrial fatigue and

monotony Scalar and functional processes

Too much or insufficient delegation of authority Span of control

No single answer, depends on the organization and work

Neoclassical Theory of Organization

This school does not reject the principles of classical theory, It criticizes them

Introduction of behavioral sciences to the study of organizations Studies on motivation, coordination and

leadership

The Human Relations School

Explored the role of groups and social processes in organizations.

Viewed organizations as open systems and began to emphasize organization context.

Notable works: Mayo & Roethlisberger`s Hawthorne

Studies, Barnard’s Functions of the Executive, McGregor’s The Human Side of Enterprise.

Hawthorne Studies (1924-1932)

– Scientific Management study at Western Electric Hawthorne plant:• Question: How does workplace illumination affect

worker productivity?• Results: Productivity went up when illumination

was increased… productivity went up when illumination was decreased.

• Research team shifted to examine other variables, always finding a greater productivity in group under study..

Hawthorne Effect: Productivity increased as a result of the attention received by workers under study.

Neoclassical Theory

Human relations movement Hawthorne studies (1927- 1932)

Effects of changes in physical environment on output of workers

Temperature, hours of sleep, humidity, etc. Importance of social systems, friendliness,

etc. Importance of “informal organization” Natural groupings of people in work, a social need

Worker satisfaction- increased output

Human Relations –Elton Mayo

Analysis of the Hawthorne Studies: Work is a group activity – man is a

social creature

Need for Recognition, Security, and Sense of Belonging is more important in determining morale and productivity than physical working conditions.

Informal groups within the workplace exercise strong social controls over people’s work habits and attitudes.

Human RelationsOpportunities for Social Interaction

Employee Input

Sensitive Supervision

TeamProductivity

SatisfiedWorkers

Theory X and Theory Y Theory X

childlike passive lazy resists work want to be led bare minimum

Theory Y adults desire to

achieve committed to

work responsible lead, control

their work want to do a

good job

Kaynak: Gail Johnson, OT, 2003.

Theory X and Theory Y Theory X rests on four assumptions that an

administrator holds about people in the organization. They dislike work, must be supervised closely, will shirk

responsibility and seek formal direction, and have little ambition.

Theory Y embraces four very different assumptions administrators hold about the nature of people at work.

They view work as satisfying, exercise initiative and self direction if committed to the organization, learn to accept responsibility and seek it, and have the ability to make good decisions.

Theory Z

William Ouchi (1974) Theory Z

1. Lifetime employment2. Promotion based on seniority3. Cross-training of workers4. Collective decision-making process

Created after observing Japanese working culture

Pattern A & Pattern B Behavior Chris Argyris explains how Theory X views give

rise to Behavior Pattern A in leaders: Pattern A, Hard: characterized by no-nonsense,

strongly directive leadership, tight controls, and close supervision.

Pattern A, Soft: involves a good deal of persuading, “buying” compliance from subordinates, benevolent paternalism, or so-called good (that is, manipulative) human relations.

Maslow’s Need Hiearchy

Physiological

Safety / Security

Self-Esteem / Ego

Self- Actualization

Social Approval

Pro

gres

sing

Nee

d

Sat

isfa

ctio

n

Regressing N

eed

Satisfaction

Modern Theories of Organization

More than a synthesis of classical & neoclassical theories

Organization as a complex unit Various types of social groups interact Conflicts between

Management and workers Formal and informal organizations

Organizations as systems Environmental factors

Systems Approach to Organizations

Development of Systems Approach

Borrowed from Biology (Norbert Wiener) Increasing division of labor and expertise Every branch of science examining abstract

areas Weakening of links between these branches Difficulty of understanding and solving

complex problems Search for an integrating theory

Types of Systems

Closed systems Not affected by

external stimuli Exists only in theoryExample: Electric

circuit Open systems

Interacts with the environment

Example: Every living creature

Environment

OutputsInputs

Environment

Goals Culture

Behaviors Processes

TechnologyStructure

Kaynak: Gail Johnson, OT, 2003.

Features of Open Systems

1. Input- Receiving energy► Interpretation of stimuli► Conforming to the environment,

decision-making

2. Using energy► Transformation

3. Output► A good, service or a decision

4. Control/ Feedback► Positive or negative► Adaptation to changing conditions

5. Isomorphism► Fit between the parts of the system