Organization theory - 30153
Overview of the classical Organizational Theories: learn from the past to understand the
present
Four in uential schools (and an american bias):
• Scienti c Management (early twenty century)
• Human Relations Management (1920 – 1950)
• Theory of Bureaucracy (1950 – 1970)
• Contingency-based Theory (1970 – today)
SCIENTIFIC MANAGEMENT (early 1920s): this theory was created by Frederick W. Taylor during
a time in which the Industrial Revolution caused a widespread replacement of manual labor by
machines that began in Britain with the introduction of the steam powered machinery. Taylor’s
approach was based on two core assumptions:
Assumption 1: In contrast to ideas prevalent at the time, Taylor maintained that the workers'
output could be increased by standardizing tasks and working conditions, with high pay for
success and loss in case of failure.
Assumption 2: He controversially suggested that almost every act of the worker would have to be
preceded by one or more preparatory acts of management, thus separating the planning of an act
from its execution (Ex –ante organizational design).
Taylor Approach
• Sampling a large number of empirical modalities practiced by exceptionally skilled people
• Work breakdown (role) in tasks and elementary movements
• Determining with the stopwatch the optimal time required to make each movement to obtain the
fastest process, also by eliminating unnecessary movements
• Determining the time spent on the job by summing the elementary times of the fastest
procedures
• Study equipment with the same logic
• Assignment to every worker a precisely de ned daily task
• Provision of standardized conditions and tools to enable the worker to perform his / her task
• Recognizing a high pay in case of success
• Progressive punishment in case of failure
• Establish a "programming o ce" for:
o arrange the work in the smallest detail
o take care of all non-executive activities, subtracting them from the work of the workers
This ultimately led to a form of industrial organization in which every task was separated from the
others and had to be executed in a certain amount of time by the worker, over and over again.
The principles of scienti c management are:
1. Study the ways jobs are performed now and determine new ways to do them.
• Gather detailed time and motion information by studying “ rst class worker”.
• Try di erent methods to see which is best.
2. Codify the new methods into rules.
• Teach to all workers the new method.
3. Select workers whose skills match the rules.
4. Clear vertical division of the labor: managers and executors
5. Establish fair levels of performance and pay a premium for higher performance.
- Workers should bene t from higher output.
This approach is still used in many industries around the globe.
1
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, The merits of scienti c management are:
- creating a smarter way of working
- task standards
- productivity increases
- decision left to management
- foundation of how business should run
- Worker should concentrate on day-to-day tasks
Critics
- Excessive parcelization leads to alienation and to lower quality
- Functional for massive production while unsuitable for customized production
- Lack of motivation
- Depersonalization of practices
- Procedures over people
- Average salary reduction due to increasing productivity goals
- Impoverishment of social relations
SM: organizational implications
• Organization is closed system
• Objective rationality (technique)
• E cacy and e ciency are obtained simultaneously
• Task specialization
• Process and production standardization
• Direct supervision
• Pay per performance
Is Taylor really against workers?
Testimony before Special House Commission (1911)
Taylor aimed at reducing con ict between managers and workers by using scienti c thought to
develop new principles and mechanisms of management.
Taylor aimed at changing also the role of management.
The conclusion is that the activities of both managers and workers had to be streamlined, both
equally subject to the science system..
HUMAN RELATIONS MANAGEMENT (late 1920s-1950): created by John Elton Mayo, also this
theory approached production with the intent of improving e ciency, but with a focus on social
values rather than on technical ones. Human relations management is based on two di erent
experiments:
• Lighting experiment :this experiment tried to prove a correlation between e ciency and the level
of brightness in the working space. No correlation was proven, but it was noted that the tested
workers showed above-average e ciency levels→This happened due to the increased attention
workers felt on them during the experiment, thus leading them to work harder to demonstrate
their skills.
• Relay assembly experiment: this experiment proved that groups created under free-will showed
higher levels of productivity, and that people self-imposed limits on productivity coming from
social constructs → workplaces are social environments in which people are motivated by more
than just wages, and productivity is not directly dependent on work conditions, but is strongly
in uenced by groups.
Therefore there are 2 main implication from these experiments:
- Methodological → awareness that the act of observation in itself can a ect the behavior
- Managerial → care, communication and interaction with and between workers could lead to
greater pro tability
According to the Human Relations approach, in order to reach full productivity workers must be
part of a stimulant group and feel that their work has signi cance. Thanks to Mayo experiment the
HR department was introduced
2
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, What we can take away from Taylor & Mayo
State main similarities and di erences between Taylor and Mayo’ theory.
SIMILARITIES (WHAT)
• Both wanted to nd the best way to manage organizations (aka ONE BEST WAY) —> PROFIT
MAXIMIZATION
DIFFERENCES (HOW)
• Taylor focus on the job and management functions • Mayo focused on people and their
motivation
BUT ALSO
• Taylor rst consultant
• Mayo rst to have done “engagement survey”
THEORY OF BUREAUCRACY (1950-1970): the creator of this theory, Max Weber, classi ed
organization according to the legitimacy of their power and uses three basic classi cations:
a) Charismatic authority: based on the sacred or outstanding characteristics of the individual
(e.g. Ghandi);
• People follow a strong personality, charisma only depends on the person, not given by the role
b) Traditional authority: based on the respect for customs and traditions (e.g. King);
• It come from the family name, last name is the source of authority, not necessary to have
charisma
c) Rational-legal (bureaucratic) authority: based on a de ned code or set of rules.
• It is the power acquired by the role you cover in an institution
• It is the main authority of the burocracy system
The Bureaucratic Management Theory
• Among them, the legal power represents for Weber the utmost expression of organizational
e ciency (i.e. Bureaucracy) and the formally more rational way of exercising power.
• This is based on the specialized knowledge and therefore on the competence that has the
utmost expression in the functioning of the administrative apparatus and in its impersonal and
formal exercise of power.
• Organizations should be managed on the base of set of rules and procedure developed to
ensure that all the employees are treated fairly.
Bureaucratic organizations are based on many principles:
1. Division of labor with clear responsibilities
2. A formal hierarchical structure – In a bureaucratic organization, each level controls the level
below it. Also, the level above it controls it. A formal hierarchy is the basis of central planning
and centralized decision-making.
3. Managers are subject to a pre-determined set of rules and procedures that will ensure reliable
and predictable behavior in any circumstance
4. Rules and regulations are applied to everything and everyone, nothing is spontaneous
5. Management is separate from the ownership
6. All the procedures and administrative acts and decisions are recorded in writing documents
7. Employees are selected and promoted based on technical quali cations
Problems with bureaucracy
• Produce a privileged group having more administrative power than before
• Rigid, in exible: too much emphasis in rules and regulations
• Low level of performance due to the iper-de nition of task
• Communication chains are faulty and slow
• Unnecessary delay in decision making
• Too much importance is given to the technical quali cations
• Internally focused
3
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, Contingency-based model (1960 - 1980) (Burns and Stalker Lawrence and Lorsch Scott)
The theory is about organizational design and organization sub- functions
Contingency refers to interdependency among «things»
There is not a single best organizational design but many solutions depending on the environment
(e.g. market, dynamism) and corporate strategy, technology, size and culture.
• Organizational t and not «one best way» to organize
Def. “Contingency approach” to management advocates for the managerial strategy and arriving
organizational design to be customized to each given situation→potentially in nite combination of
strategies and organizational structure
Mechanistic structures
• Predictable and responsible workers behavior
• Centralized power
• Constant supervision
• Well-de ned hierarchy
• Clear de nition of tasks and univocal association between task
and worker
• Hierarchical, top down communication
Organic structure
• Flexibility
• Decentralization
• Broad task de nition
• Personal development
• High integration (i.e. through task-force and team)
• Reciprocal adjustment to achieve coordination
Situational approach
• The choice between mechanistic and organic depends on the speci c contingency (e.g.
environment, technology, activity..) and on uncertainty
• Organizational design should adapt to the environment
Diversity and individual di erences at work:Personality in action
What is Diversity?
• In the organizational literature diversity is any type of individual di erence between people
working in the same organization (Ashkanasy, Härtel & Dass, 2002; Jackson, May & Whitney,
1995; Roberge, Lewicki, Hietapelto & Abdyldaeva, 2011)
Bene ts of Diversity
• Higher creativity in decision making
• Better understanding and service of customers
• More satis ed workforce
• Higher stock price
• Lower litigation expens
• Higher company performance
Challenges of Diversity
The similarity-attraction phenomenon is the tendency to be more
attracted to individuals who are similar to us.
Stereotypes are generalizations about a particular group of
people.
4
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Overview of the classical Organizational Theories: learn from the past to understand the
present
Four in uential schools (and an american bias):
• Scienti c Management (early twenty century)
• Human Relations Management (1920 – 1950)
• Theory of Bureaucracy (1950 – 1970)
• Contingency-based Theory (1970 – today)
SCIENTIFIC MANAGEMENT (early 1920s): this theory was created by Frederick W. Taylor during
a time in which the Industrial Revolution caused a widespread replacement of manual labor by
machines that began in Britain with the introduction of the steam powered machinery. Taylor’s
approach was based on two core assumptions:
Assumption 1: In contrast to ideas prevalent at the time, Taylor maintained that the workers'
output could be increased by standardizing tasks and working conditions, with high pay for
success and loss in case of failure.
Assumption 2: He controversially suggested that almost every act of the worker would have to be
preceded by one or more preparatory acts of management, thus separating the planning of an act
from its execution (Ex –ante organizational design).
Taylor Approach
• Sampling a large number of empirical modalities practiced by exceptionally skilled people
• Work breakdown (role) in tasks and elementary movements
• Determining with the stopwatch the optimal time required to make each movement to obtain the
fastest process, also by eliminating unnecessary movements
• Determining the time spent on the job by summing the elementary times of the fastest
procedures
• Study equipment with the same logic
• Assignment to every worker a precisely de ned daily task
• Provision of standardized conditions and tools to enable the worker to perform his / her task
• Recognizing a high pay in case of success
• Progressive punishment in case of failure
• Establish a "programming o ce" for:
o arrange the work in the smallest detail
o take care of all non-executive activities, subtracting them from the work of the workers
This ultimately led to a form of industrial organization in which every task was separated from the
others and had to be executed in a certain amount of time by the worker, over and over again.
The principles of scienti c management are:
1. Study the ways jobs are performed now and determine new ways to do them.
• Gather detailed time and motion information by studying “ rst class worker”.
• Try di erent methods to see which is best.
2. Codify the new methods into rules.
• Teach to all workers the new method.
3. Select workers whose skills match the rules.
4. Clear vertical division of the labor: managers and executors
5. Establish fair levels of performance and pay a premium for higher performance.
- Workers should bene t from higher output.
This approach is still used in many industries around the globe.
1
ff
fifl fifi ffi fi fi
, The merits of scienti c management are:
- creating a smarter way of working
- task standards
- productivity increases
- decision left to management
- foundation of how business should run
- Worker should concentrate on day-to-day tasks
Critics
- Excessive parcelization leads to alienation and to lower quality
- Functional for massive production while unsuitable for customized production
- Lack of motivation
- Depersonalization of practices
- Procedures over people
- Average salary reduction due to increasing productivity goals
- Impoverishment of social relations
SM: organizational implications
• Organization is closed system
• Objective rationality (technique)
• E cacy and e ciency are obtained simultaneously
• Task specialization
• Process and production standardization
• Direct supervision
• Pay per performance
Is Taylor really against workers?
Testimony before Special House Commission (1911)
Taylor aimed at reducing con ict between managers and workers by using scienti c thought to
develop new principles and mechanisms of management.
Taylor aimed at changing also the role of management.
The conclusion is that the activities of both managers and workers had to be streamlined, both
equally subject to the science system..
HUMAN RELATIONS MANAGEMENT (late 1920s-1950): created by John Elton Mayo, also this
theory approached production with the intent of improving e ciency, but with a focus on social
values rather than on technical ones. Human relations management is based on two di erent
experiments:
• Lighting experiment :this experiment tried to prove a correlation between e ciency and the level
of brightness in the working space. No correlation was proven, but it was noted that the tested
workers showed above-average e ciency levels→This happened due to the increased attention
workers felt on them during the experiment, thus leading them to work harder to demonstrate
their skills.
• Relay assembly experiment: this experiment proved that groups created under free-will showed
higher levels of productivity, and that people self-imposed limits on productivity coming from
social constructs → workplaces are social environments in which people are motivated by more
than just wages, and productivity is not directly dependent on work conditions, but is strongly
in uenced by groups.
Therefore there are 2 main implication from these experiments:
- Methodological → awareness that the act of observation in itself can a ect the behavior
- Managerial → care, communication and interaction with and between workers could lead to
greater pro tability
According to the Human Relations approach, in order to reach full productivity workers must be
part of a stimulant group and feel that their work has signi cance. Thanks to Mayo experiment the
HR department was introduced
2
ffi
fl fi ffi fi fl ffi fi ffi ff ffi fi ff
, What we can take away from Taylor & Mayo
State main similarities and di erences between Taylor and Mayo’ theory.
SIMILARITIES (WHAT)
• Both wanted to nd the best way to manage organizations (aka ONE BEST WAY) —> PROFIT
MAXIMIZATION
DIFFERENCES (HOW)
• Taylor focus on the job and management functions • Mayo focused on people and their
motivation
BUT ALSO
• Taylor rst consultant
• Mayo rst to have done “engagement survey”
THEORY OF BUREAUCRACY (1950-1970): the creator of this theory, Max Weber, classi ed
organization according to the legitimacy of their power and uses three basic classi cations:
a) Charismatic authority: based on the sacred or outstanding characteristics of the individual
(e.g. Ghandi);
• People follow a strong personality, charisma only depends on the person, not given by the role
b) Traditional authority: based on the respect for customs and traditions (e.g. King);
• It come from the family name, last name is the source of authority, not necessary to have
charisma
c) Rational-legal (bureaucratic) authority: based on a de ned code or set of rules.
• It is the power acquired by the role you cover in an institution
• It is the main authority of the burocracy system
The Bureaucratic Management Theory
• Among them, the legal power represents for Weber the utmost expression of organizational
e ciency (i.e. Bureaucracy) and the formally more rational way of exercising power.
• This is based on the specialized knowledge and therefore on the competence that has the
utmost expression in the functioning of the administrative apparatus and in its impersonal and
formal exercise of power.
• Organizations should be managed on the base of set of rules and procedure developed to
ensure that all the employees are treated fairly.
Bureaucratic organizations are based on many principles:
1. Division of labor with clear responsibilities
2. A formal hierarchical structure – In a bureaucratic organization, each level controls the level
below it. Also, the level above it controls it. A formal hierarchy is the basis of central planning
and centralized decision-making.
3. Managers are subject to a pre-determined set of rules and procedures that will ensure reliable
and predictable behavior in any circumstance
4. Rules and regulations are applied to everything and everyone, nothing is spontaneous
5. Management is separate from the ownership
6. All the procedures and administrative acts and decisions are recorded in writing documents
7. Employees are selected and promoted based on technical quali cations
Problems with bureaucracy
• Produce a privileged group having more administrative power than before
• Rigid, in exible: too much emphasis in rules and regulations
• Low level of performance due to the iper-de nition of task
• Communication chains are faulty and slow
• Unnecessary delay in decision making
• Too much importance is given to the technical quali cations
• Internally focused
3
ffi fififl fi ff fi fi fi fi fi fi
, Contingency-based model (1960 - 1980) (Burns and Stalker Lawrence and Lorsch Scott)
The theory is about organizational design and organization sub- functions
Contingency refers to interdependency among «things»
There is not a single best organizational design but many solutions depending on the environment
(e.g. market, dynamism) and corporate strategy, technology, size and culture.
• Organizational t and not «one best way» to organize
Def. “Contingency approach” to management advocates for the managerial strategy and arriving
organizational design to be customized to each given situation→potentially in nite combination of
strategies and organizational structure
Mechanistic structures
• Predictable and responsible workers behavior
• Centralized power
• Constant supervision
• Well-de ned hierarchy
• Clear de nition of tasks and univocal association between task
and worker
• Hierarchical, top down communication
Organic structure
• Flexibility
• Decentralization
• Broad task de nition
• Personal development
• High integration (i.e. through task-force and team)
• Reciprocal adjustment to achieve coordination
Situational approach
• The choice between mechanistic and organic depends on the speci c contingency (e.g.
environment, technology, activity..) and on uncertainty
• Organizational design should adapt to the environment
Diversity and individual di erences at work:Personality in action
What is Diversity?
• In the organizational literature diversity is any type of individual di erence between people
working in the same organization (Ashkanasy, Härtel & Dass, 2002; Jackson, May & Whitney,
1995; Roberge, Lewicki, Hietapelto & Abdyldaeva, 2011)
Bene ts of Diversity
• Higher creativity in decision making
• Better understanding and service of customers
• More satis ed workforce
• Higher stock price
• Lower litigation expens
• Higher company performance
Challenges of Diversity
The similarity-attraction phenomenon is the tendency to be more
attracted to individuals who are similar to us.
Stereotypes are generalizations about a particular group of
people.
4
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