Essential of management Chapter Organising

Organisation Theory

Organisation theory is the study of how organizations function, how they are structured, and how they interact with their environment. It has evolved through three major phases: Classical, Neoclassical, and Modern.

1. Classical Theory (Late 19th - Early 20th Century)

The classical approach views the organization as a machine and human beings as cogs within that machine. It emphasizes structure, order, and economic incentives.

• Scientific Management (Frederick Taylor):
  Focused on the "one best way" to perform a task. Taylor emphasized time-and-motion studies, standardizing tools, and using piece-rate pay to motivate workers.The core idea is maximizing operational efficiency at the shop-floor level.

• Administrative Management (Henri Fayol):
  Shifted focus from the worker to the manager. Fayol proposed 14 Principles of Management (including unity of command, division of work, and scalar chain) that form the foundation of formal organizational structuring.

• Bureaucratic Management (Max Weber):
  Proposed bureaucracy as the ideal, most rational form of organization. It relies on a clear hierarchy, rigid rules, impersonal relationships, and promotion based strictly on technical competence.

2. Neoclassical Theory (1930s - 1950s)

The neoclassical approach, often called the Human Relations Movement, emerged as a reaction to the rigid, mechanical view of the classical school.

• The Hawthorne Studies (Elton Mayo):
  A series of experiments at the Western Electric Company revealed that workers are not motivated solely by money. Social dynamics, group norms, and feeling valued by management profoundly impact productivity (known as the Hawthorne Effect).

• Key Shift:
  This theory introduced the concept of the informal organization—the natural social networks that form among employees, which often override formal bureaucratic structures. It emphasized motivation, leadership, and group dynamics.

3. Modern Organisation Theory (1960s - Present)

Modern theories view organizations as complex, dynamic entities that must constantly adapt to survive.

• Systems Approach:
  Treats the organization as an open system consisting of interrelated subsystems (departments, teams). It takes inputs from the environment (resources, information), transforms them, and releases outputs (products, services).
  A failure in one subsystem (e.g., supply chain) directly impacts the whole system.

• Contingency (Situational) Approach:
  Rejects the "one best way" philosophy of the classical school. It argues that the optimal organizational structure depends on specific internal and external contingencies—such as technology, market volatility, and organizational size.
  For example, a rigid bureaucracy might work for a government tax office, but a highly flexible, decentralized structure is required for a tech startup.

Design of Organisation Structure

Organizational design is the process of constructing and adjusting an organization's structure to achieve its goals. A well-designed structure clarifies "who does what" and "who reports to whom."