What are the basic principles of organization theory? - Chapter 1

  Chapter 

What is organisation structure?

"An organisation is a consciously managed and coordinated social entity, with an identifiable boundary, which functions on a relatively continuous basis to achieve a common goal or set of goals."

The above definition implies that:

  • There is a management hierarchy involved in decision making in the organisation.

  • The unit is composed of people or groups of people who interact with each other.

  • Organisations have a boundary that differentiates who is and who is not a part of the organization. Organization’s boundary can be created through explicit or implicit contracts between members and their organisation (e.g. contract of employment).

  • Organisations exist to achieve something and it is reflected in the organisation’s goals.

Organisation structure defines:

  • how tasks are to be allocated

  • what the areas of responsibility and authority of each employee are

  • what are the reporting relationships

  • the formal coordinating mechanisms and interaction patterns that will be followed in the organization

Organization’s structure has three components:

  1. Complexity, which considers the extent of differentiation within the organisation. This includes:
    • the degree of specialisation or division of labour (the number of different occupations and tasks that exist within the organization)
    • the number of levels in the organization’s management hierarchy
    • the extent to which the organization’s units are dispersed geographically
  2. Formalizationwhich is the degree to which an organization relies on rules and procedures to direct the behaviour of the employees.
  3. Centralisation, which considers where the responsibility for decision-making lies.

It is important to recognise that an organization is not either centralized or decentralized. Organisations tend to be centralized or tend to be decentralized. The same applies to the concepts of complexity and formalisation.

Organization design is concerned with constructing and changing an organization’s structure to achieve the organization’s goals. Organization theory includes the study of the structure and design of organizations. Organizational behaviour is the study of the way in which individuals and teams behave in the workplace.

What are systems?

system is a set of interrelated and interdependent parts which interact to produce a unified output. A systems perspective offers important insight into how organizations operate.

Organizations can be considered to be systems – inputs go through a transformation process to emerge as outputs that are different in form to the inputs.

Systems are usually classified as either closed or open. A closed-system is a system that is self-contained – it essentially ignores the effect of the environment on the system and does not interact with it. An open system recognizes the interaction of the system with its environment and its dependence upon it.

Characteristics of an open system are:

  • Environment awareness – open systems acknowledge the interdependence between the system and its environment. In an open system it is recognized that changes in the environment affect one or more of the systems and subsystems and changes in the system affect its environment.

  • Feedback – open systems receive feedback from their environment. That is, they absorb information which helps the system to understand and adjust to environmental changes by taking corrective action to rectify deviations from its planned course.

  • Cyclical character – open systems consist of cycles of events; the repetition of the cycle is possible as a system’s outputs furnish the means for new inputs.

  • Tendency towards growth – open systems import energy from their environments and consequently they are able to repair themselves, maintain the structure, avoid death and even grow (as they can import more energy than they put out).

  • Steady state – there is generally a balance between inputs from the environment and those spent to counteract the terminating of the system. As a result, the system experiences a relatively steady state with the character of the system remaining almost unchanged over long periods of time.

  • Movement towards growth and expansion – the many subsystems within the system usually import more energy from the environment than is required for the system’s output. Consequently, the steady state is applicable to simple systems but, at more complex levels, becomes one of preserving the character of the system through growth and expansion.

  • Balance of maintenance and adaptive activities – open systems seek to achieve the balance between two sets of activities:

  • Maintenance activities are those activities which ensure that the various subsystems are in balance and that the total system conforms to its environment. This, in effect, prevents rapid changes that may unbalance the system. Examples of the maintenance activities are: the purchase, maintenance, and repair of machinery; the introduction and enforcement of rules and procedures.

  • Adaptive activities are necessary so that the system can adjust over time to variations in internal and external demands. Examples of adaptive activities are: planning, market research, and recruitment.

  • Equifinality – the concept of equifinality argues that a system can reach the same final state from differing initial conditions and by a variety of paths. In other words, an organizational system can accomplish its objectives with varied inputs and transformation processes.

What does the organisational life cycle refer to?

The organisational life cycle refers to the pattern of predictable change through which the organization moves from start-up to dissolution. It is important to be aware that:

  • there are distinct stages through which organizations proceed

  • the stages follow a consistent pattern

  • the transition from one stage to another is a predictable rather than a random occurrence

Marketers identify that products move through four stages:

  1. Birth or formation.
  2. Growth.
  3. Maturity.
  4. Decline.

An organization’s life cycle follows a five-stage model:

  1. Entrepreneurial stage – this is when the organization is in its formative years. At this stage:

    1. Goals tend to be fluid or ambiguous.

    2. Creativity and managerial input is high.

In order to progress to the next stage an organization needs to acquire and maintain a steady supply of resources (e.g. capital and labour).

  1. Collectivity stage – at this stage the organization’s mission is clarified and its chances of survival have increased. The innovation from the earlier stage continues. Communication and structure within the organization is still quite informal. The organization is generally quite small, with intensive, hands-on management.

  2. Formalization-and-control stage – at this stage the operation of the organization stabilizes (i.e. its production of goods and services becomes more established). Formal rules and procedures are introduced as predictability increases. Innovation is de-emphasized and efficiency and stability become more and more important. Decision making within the organization is clarified and established management positions emerge. At this stage, the organization exists beyond the presence of any one individual. As the roles within the organization have been clarified and defined the changes in organizational membership do not cause a threat to the organization.

  3. Elaboration-of-structure stage – at this point, the organization has reached a large size with the characteristics of a bureaucracy. Management searches for new products and growth opportunities. The organization structure becomes more complex and elaborated. Decision making is decentralized.

  4. Decline stage – as a result of competition, poor management, etc. the organization at this stage experiences falling demand for its products or services. Employee turnover is high and decision making becomes more centralized. Eventually organization ceases to exist.

What approaches are there to research?

Most important approaches to research in the organization theory field are:

  • Positivism is an assumption that the world may be known and improved by extending knowledge through research. Positivism leads to the development of normative theories. That is, researchers try to develop theories that are applicable across a wide range of situations.

  • Critical theory is an approach to studying organizations which concentrates on their perceived shortcomings and deficiencies. Critical theorists consider work in a capitalist system as inherently dehumanizing, oppressing and exploitative, particularly of minorities. They also tend to view managers not as an essential part of the organization but as an exploitative group allied with the forces of capital and management as the agent of capital against the worker. Most critical theorists seek to create conditions and organizational structures and practices that promote the emancipation of people.

  • Postmodernism theorists challenge the claim that science is objective and impartial. They think that it falsely promotes the concept that the world is capable of being known and controlled through reason. They propose that positivist approaches structure knowledge in ways that do not represent what is occurring in organizations. Postmodernists consider knowledge to be socially constructed and interpreted.

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