Organization Theory

An organization, by its most basic definition, is an assembly of people working together to achieve common objectives through a division of labor. An organization provides a means of using individual strengths within a group to achieve more than can be accomplished by the aggregate efforts of group members working individually. Business organizations are formed to deliver goods or services to consumers in such a manner that they can realize a profit at the conclusion of the transaction. Over the years, business analysts, economists, and academic researchers have pondered several theories that attempt to explain the dynamics of business organizations, including the ways in which they make decisions, distribute power and control, resolve conflict, and promote or resist organizational change. As Jeffrey Pfeffer summarized in New Directions for Organization Theory, organizational theory studies provide "an interdisciplinary focus on a) the effect of social organizations on the behavior and attitudes of individuals within them, b) the effects of individual characteristics and action on organization,'¦ c) the performance, success, and survival of organizations, d) the mutual effects of environments, including resource and task, political, and cultural environments on organizations and vice versa, and e) concerns with both the epistemology and methodology that undergird research on each of these topics."

Of the various organizational theories that have been studied in this realm, the open-systems theory has emerged as perhaps the most widely known, but others have their proponents as well. Indeed, some researchers into organizational theory propound a blending of various theories, arguing that an enterprise will embrace different organizational strategies in reaction to changes in its competitive circumstances, structural design, and experiences.

BACKGROUND

Modern organization theory is rooted in concepts developed during the beginnings of the Industrial Revolution in the late 1800s and early 1900s. Of considerable import during that period was the research done by of German sociologist Max Weber (1864—1920). Weber believed that bureaucracies, staffed by bureaucrats, represented the ideal organizational form. Weber based his model bureaucracy on legal and absolute authority, logic, and order. In Weber's idealized organizational structure, responsibilities for workers are clearly defined and behavior is tightly controlled by rules, policies, and procedures.

Weber's theories of organizations, like others of the period, reflected an impersonal attitude toward the people in the organization. Indeed, the work force, with its personal frailties and imperfections, was regarded as a potential detriment to the efficiency of any system. Although his theories are now considered mechanistic and outdated, Weber's views on bureaucracy provided important insight into the era's conceptions of process efficiency, division of labor, and authority.

Another important contributor to organization theory in the early 1900s was Henri Fayol. He is credited with identifying strategic planning, staff recruitment, employee motivation, and employee guidance (via policies and procedures) as important management functions in creating and nourishing a successful organization.

Weber's and Fayol's theories found broad application in the early and mid-1900s, in part because of the influence of Frederick W. Taylor (1856—1915). In a 1911 book entitled Principles of Scientific Management, Taylor outlined his theories and eventually implemented them on American factory floors. He is credited with helping to define the role of training, wage incentives, employee selection, and work standards in organizational performance.

Researchers began to adopt a less mechanical view of organizations and to pay more attention to human influences in the 1930s. This development was motivated by several studies that shed light on the function of human fulfillment in organizations. The best known of these was probably the so-called Hawthorn Studies. These studies, conducted primarily under the direction of Harvard University researcher Elton Mayo, were conducted in the mid-1920s and 1930s at a Western Electric Company plant known as the Hawthorn Works. The company wanted to determine the degree to which working conditions affected output.

Surprisingly, the studies failed to show any significant positive correlation between workplace conditions and productivity. In one study, for example, worker productivity escalated when lighting was increased, but it also increased when illumination was decreased. The results of the studies demonstrated that innate forces of human behavior may have a greater influence on organizations than do mechanistic incentive systems. The legacy of the Hawthorn studies and other organizational research efforts of that period was an emphasis on the importance of individual and group interaction, humanistic management skills, and social relationships in the workplace.

The focus on human influences in organizations was reflected most noticeably by the integration of Abraham Maslow's "hierarchy of human needs" into organization theory. Maslow's theories introduced two important implications into organization theory. The first was that people have different needs and therefore need to be motivated by different incentives to achieve organizational objectives. The second of Maslow's theories held that people's needs change over time, meaning that as the needs of people lower in the hierarchy are met, new needs arise. These assumptions led to the recognition, for example, that assembly-line workers could be more productive if more of their personal needs were met, whereas past theories suggested that monetary rewards were the sole, or primary, motivators.

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