Organizational theory is a series of interrelated concepts that involve the sociological study of the structures and operations of formal social organizations. It also seeks to explain how interrelated units of organization either connect or do not connect with each other. Organizational theory also concerns understanding how groups of individuals behave, which may differ from the behavior of an individual, often with a focus on goal-directed behaviour. Organizational theory covers both intra- and inter-organizational fields of study.
In the early 20th century, theories of organizations initially took a rational perspective and have since become more diverse. A rational organization system has two significant parts: Specificity of Goals and Formalization. The division of labour is the specialization of individual labor roles, associated with increasing output and trade. Modernization theorist Frank Dobbin wrote that "modern institutions are transparently purposive and that we are in the midst of an extraordinary progression towards more efficiency". Max Weber's conception of bureaucracy is characterized by the presence of impersonal positions that are earned and not inherited, rule-governed decision-making, professionalism, chain of command, defined responsibility, and bounded authority. Contingency theory holds that an organization must try to maximize performance by minimizing the effects of various environmental and internal constraints, and that the ability to navigate this requisite variety may depend upon the development of a range of response mechanisms.
Dwight Waldo in 1978 wrote that "[o]rganization theory is characterized by vogues, heterogeneity, claims and counterclaims".Waldo, Dwight. 1978. "Organization Theory: Revisiting the Elephant." Public Administration Review 38(November/December). p. 597 Organization theory cannot be described as an orderly progression of ideas or a unified body of knowledge in which each development builds carefully on and extends the one before it. Rather, developments in theory and descriptions for practice show disagreement about the purposes and uses of a theory of organization, the issues to which it should address itself (such as supervisory style and organizational culture), and the concepts and variables that should enter into such a theory. Suggestions to view organizations as a series of logical relationships between its participants have found its way into the theoretical relationships between diverging organizational theories as well, as explains the interdisciplinary nature of the field.
Background Rise of organizations
In 1820, about 20% of the United States population depended on a wage income. That percentage increased to 90% by 1950. Generally, by 1950, farmers and craftsmen were the only people not dependent on working for someone else. Prior to that time, most people were able to survive by hunting and farming their own food, making their own supplies, and remaining almost fully self-sufficient. As transportation became more efficient and technologies developed, self-sufficiency became an economically poor choice. As in the Lowell textile mills, various machines and processes were developed for each step of the production process, thus making mass production a cheaper and faster alternative to individual production. In addition, as the population grew and transportation improved, the pre-organizational system struggled to support the needs of the market. These conditions made for a wage-dependent population that sought out jobs in growing organizations, leading to a shift away from individual and family production.
In addition to a shift to wage dependence, externalities from industrialization also created a perfect opportunity for the rise of organizations. Various negative effects such as pollution, workplace accidents, crowded cities, and unemployment became rising concerns. Rather than small groups such as families and churches being able to control these problems as they had in the past, new organizations and systems were required. These organizations were less personal, more distant, and more centralized, but what they lacked in locality they made up for in efficiency.
Along with wage dependency and externalities, the growth of industry also played a large role in the development of organizations. Markets that were quickly growing needed workers urgently, so a need developed for organizational structures to guide and support those new workers. Some of the first New England factories initially relied on the daughters of farmers; later, as the economy changed, they began to gain workers from the former farming classes, and finally, from European immigrants. Many Europeans left their homes for the promises of US industry, and about 60% of those immigrants stayed in the country. They became a permanent class of workers in the economy, which allowed factories to increase production and produce more than they had before. With this large growth came the need for organizations and for leadership that was not previously needed in small businesses and firms.
Overall, the historical and social context in which organizations arose in the United States allowed not only for the development of organizations, but also for their spread and growth. Wage dependency, externalities, and growth of industries all played into the change from individual, family, and small-group production and regulation to large organizations and structure.
Developments in theory As people implemented organizations over time, many researchers have experimented as to which organizational theory fits them best. The theories of organizations include bureaucracy, rationalization (scientific management), and the division of labor. Each theory provides distinct advantages and disadvantages when applied.
The classical perspective emerges from the Industrial Revolution in the private sector and the need for improved public administration in the public sector. Both efforts center on theories of efficiency. Classical works have seasoned and have been elaborated upon in depth. There are at least two subtopics under the classical perspective: the scientific management and bureaucracy theory.Daft, R. L., and A. Armstrong. 2009. Organization Theory and Design. Toronto: Nelson.
A number of sociologists and psychologists made major contributions to the study of the neoclassical perspective, which is also known as the human relations school of thought. The human relations movement was a movement which had the primary concerns of concentrating on topics such as morale, leadership. This perspective began in the 1920s with the Hawthorne studies, which gave emphasis to "affective and socio-psychological aspects of human behavior in organizations." The study, taking place at the "Hawthorne plant of the Western Electric Company between 1927 and 1932," would make Elton Mayo and his colleagues the most important contributors to the neoclassical perspective.The Wisest. 15 July 2011. "Neo-Classical School of Management Thought." Idea Today's. Retrieved from
There was a wave of scholarly attention to organizational theory in the 1950s, which from some viewpoints held the field to still be in its infancy. A 1959 symposium held by the Foundation for Research on Human Behavior in Ann Arbor, Michigan, was published as Modern Organization Theory. Among a group of eminent organizational theorists active during this decade were E. Wight Bakke, Chris Argyris, James G. March, Rensis Likert, Jacob Marschak, Anatol Rapoport, and William Foote Whyte.
Weberian bureaucracy
The scholar most closely associated with a theory of bureaucracy is Max Weber. In Economy and Society, his seminal book published in 1922, Weber describes its features. Bureaucracy, as characterized in Weber's terminology of ideal types, is marked by the presence of positions that are earned and not inherited. Rules govern decision-making. Those in positions of authority demonstrate professionalism. There is a chain of command and position-defined responsibility. Authority is bounded.
Weber begins his discussion of bureaucracy by introducing the concept of jurisdictional areas: institutions governed by a specific set of rules or laws.Weber, Max. 1968. "Bureaucracy." Pp. 956–969 in Economy and Society: An Outline of Interpretive Sociology. Berkeley: University of California Press. In a jurisdictional area, regular activities are assigned as official duties. The authority to assign duties is governed by a set of rules. Duties are fulfilled continuously by qualified individuals. These elements make up a bureaucratic agency in the case of the state and bureaucratic enterprises in the private sector.
There are several additional features that make up a Weberian bureaucracy: It is possible to find the utilization of hierarchical subordination in all bureaucratic structures. This means that higher-level offices supervise lower-level offices. In bureaucracies, personal possessions are kept separate from the monies of the agency or the enterprise. People who work within a bureaucracy are usually trained in the appropriate field of specialization. Bureaucratic officials are expected to contribute their full working capacity to the organization. Positions within a bureaucratic organization must follow a specific set of general rules.
Weber argued that in a bureaucracy, taking on a position or office signifies an assumption of specific duties necessary for the smooth running of the organization. This conception is distinct from historical working relationships in which a worker served a specific ruler, not an institution.
The hierarchical nature of bureaucracies allows employees to demonstrate achieved social status. When an officeholder is elected instead of appointed, that person is no longer a purely bureaucratic figure. He derives his power "from below" instead of "from above." When a high-ranking officer selects officials, they are more likely to be chosen for reasons related to the benefit of the superior than the competency of the new hire. When high-skilled employees are necessary for the bureaucracy and public opinion shapes decision-making, competent officers are more likely to be selected.
According to Weber, if 'tenure for life' is legally guaranteed, an office becomes perceived as less prestigious than a position that can be replaced at any time. If 'tenure for life' or a 'right to the office' develops, there is a decrease in career opportunities for ambitious new hires and overall technical efficiency becomes less guaranteed. In a bureaucracy, salaries are provided to officials. The amount is determined on the basis of rank and helps to signify the desirability of a position. Bureaucratic positions also exist as part of stable career tracks that reward office-holders for seniority.
Weber argues that the development of a money economy is the "normal precondition for the unchanged survival, if not the establishment, of pure bureaucratic administrations." Since bureaucracy requires sustained revenues from taxation or private profits in order to be maintained, a money economy is the most rational way to ensure its continued existence.
Weber posits that officials in a bureaucracy have a property right to their office and attempt at exploitation by a superior means the abandonment of bureaucratic principles. He articulates that providing a status incentive to inferior officers helps them to maintain self-respect and fully participate in hierarchical frameworks. Michel Crozier reexamined Weber's theory in 1964 and determined that bureaucracy is flawed because hierarchy causes officers to engage in selfish power struggles that damage the efficiency of the organization.Crozier, Michel. 2010. The Bureaucratic Phenomenon, with a new introduction by Erhard Friedberg. New Brunswick and London: Transactions Publishers.
Summary of characteristics of Weberian bureaucracy