Theories of organization A Classical

are based on traditional thinking. - first propounded in the beginning of 19th century and incorporated original and initial ideas of management. - devoted mainly to the superiors authority, objectives, rules and economic activities. - broadly divided into Bureaucracy, Scientific management and Process management

B- Neoclassical
The classical organization theories concentrated on discipline and the economic well-being of people. They ignored their morale and desires. Neoclassical organization theories while accepting the merits of classical theories have given more importance to human relations and behavioral sciences. The neoclassical organization theories modified, added and extended the classical theories by realizing the fact that management exists in a social system wherein human factors have cognizant roles to perform. Employees can play crucial roles in the decision-making process. Human Relations and Behavioral Science have become two important approaches of neoclassical theories. 1. Human Relations Theory The human relations theory was developed by Elton Mayo and his associates from 1924 to 1932 at the Hawthrone plant of Western Electric Company. They experimented in four phases: Illumination experiment, relay assembly test, interviewing programs and the bank wiring observations room experiments. Illumination experiments revealed that light had no significant impact on the productivity of workers. The intensity of light did not influence the productivity of telephone relays. The relay assembly test provided several facilities to telephone relay assemblers wherein it was observed the special attention and treatment caused employees to increase their productivity. It was termed as the Hawthorne effect, where people feel the pride of belonging to a group. The interviewing program was tested on human relations rather that on favorable physical conditions. It revealed that employees are unwilling to answer direct questions. They gave important clues towards the management style when asked indirectly. The bank wiring room experiment gave sufficient freedom to an informal group. It revealed that employees were not only economic beings but social and psychological beings as well. Their productivity is influenced by sentiments, beliefs and

C- Modern
Modern organizational behavior has become complex. It synthesizes the classical and neoclassical theories of organization, while incorporating technological development. Modern organization theories are classified into quantitative theory, system theory and contingency theory.

1- Bureaucracy (German Sociologist, Max Weber) Developed because some people wanted to dominate others in business and other activities. They organized men and materials for achieving objectives for their personal benefits. Max Weber believed that bureaucracy was an ideal weapon to harness human and physical resources. It is a formative model of organization characterized by a large and complex atmosphere with impersonal detachment from human resources. Rules, regulations, rigid hierarchy and specialized functions are important feature of bureaucracy. It is the epitome of structural relationship to control.

1. Quantitative Theory The quantitative theory includes operation research and quantification of the problem. It analyses the problems from quantifiable angles and provides solutions to complex problems only with the help of statistical and mathematical models such as linear and non-linear programming, game theory, decision tree, simulation and probability. Computers are used to solve management problems whereas mathematical models were previously used for the purpose. A large number of problems are solved with the use of simulation equations and computers. The development of equations requires specialized skills and advance knowledge of mathematics, statistics, economics and behavioral sciences. Models are tested while the context of the real world and use of operation research. Operation research is conducted by diverse specialists and management experts. It is useful from the levels of planning for organizing, actuating and control. It is known that mathematical models do not provide the

the group behavior of employees. The Hawthrone experiments brought about the conclusions that the business organization also includes social and psychological factors. It considered organization as a social process where feelings, sentiments and attitudes were given due importance. Mayo and Roethlisberger of Harvard Business School postulated that efficiency and productivity could increase if the attitudes of employees were well regarded.

ultimate solutions. If they are used in a given environment with real assumptions, they can suggest appropriate measures which can be used for solving problems. The quantitative approach is merely a tool for finding a suitable solution, but is not a solution in itself. It has become a valuable supplement rather than a substitute for management and organization. The role of human skills and behavior cannot be ignored for the purpose of management. Even in highly computerized systems, the human element cannot be ignored. The use of computers has economized and facilitated many problems. The management does not need to resort to monotonous cumbersome processes but can easily and swiftly find the real problem or can diagnose the problem with real solutions. Computers have helped managements and people arrive at correct decisions which would not be possible without the use of quantitative techniques. This precise and prompt approach has also prevented other problems. The cost of communication and maintenance of huge files has been considerably reduced by the computerized management technique. 2. System Theory A system is a set of interconnected and inter-related elements of management activity. It is an arrangement of components of activities performed for achieving certain objectives. Thus, a system has three components: arrangement, objectives and a plan. The arrangement is designed and planned in an effective manner to achieve the objective. Men, materials and money are planned to achieve the objectives of the organization. Recently, it has been agreed that the organization is a

2. Scientific Management The scientific management theory was propounded by F.W. Taylor and was carried out by Frank and Lillian Gilbreth, Henry L. Gantt and Emerson. Taylor postulated that management was haphazard and inefficient at the time. The management was based purely on individuals capacity. The personal talent of the manager guided the workers who were motivated by bonus and monetary benefits. F.W. Taylor therefore tried to find out the basic principles of management by using time and work study, detailed analysis, investigation and planning of work allocation. It is known as scientific management because systematized knowledge is used for work allocation and assignment of specific jobs. The salary, wages, etc. are to be decided as

2-Behavioral Science Theory The behavioral science theory believes in inter-personal relations. While human relations concentrate on morale and productivity, behavioral science lays emphasis on interpersonal roles and relationships. F. Herryberg and V. Vroom suggested motivational models after Abraham Maslow who developed the need hierarchy model. Sociologists and psychologists contributed significantly to the area of behavioral science for treating the human element as a social system. Group behavior was given more importance. McGregor, Arguris and Likert believed that self-actualized man would contribute to the development of management. They emphasized democratic values and human motivation. The task itself is the primary source of satisfaction and self-

per the work performance of individuals. It revolutionized the entire shop or plant management. Industrial engineering and management was promoted by Taylor. He said that scientific management tries to perform the job in the best way.

motivation. Unlike the beliefs of the classical theory, behavioral science believes that human beings like work but it should not be super-imposed and should instead be selfrealized. They enjoy work and believe in self-discretion and self-control. They are interested in their own jobs and creativity in a healthy, safe, comfortable and congenial environment. People consider themselves to be important persons and like to be treated as important people by their superiors. The behavioral science theory tries to develop new insights and brings about a congenial environment in the factory whereby new thinking and new techniques put forward by employees are welcome.

system wherein operation, marketing, finance, etc. are subsystems. The modern organization theory believes in the General Systems Theory (GST) which is applicable to all scientific phenomena. Kenneth and Boulding have contributed a systems theory to establish to single, self-contained and generalized theory for particular disciplines. The system approach believes in a static structure and a dynamic and cybernetic system. It has increased mobility, technological behavior, selfawareness and the goal-directed approach. The system is an organization wherein the various components are subsystems which are managed and mobilized for attaining the organizational goals. It is an interconnected, interdependent and interacting arrangement of men and materials. For example, business is a social technical system, a plant is a botanical system, and a car is a mechanical system and so on. Characteristics of the System Theory A business or industrial organization has a system approach towards individuals, formal and informal organizations status and role, process, resources and goals which are interlinked to attain objectives through a synergistic effect. The system approach is divided into closed and open systems. The open system consists of the input transformation process, output, feedback and environment. An organization is considered an open system because it continuously interacts with the external environment for survival. The closed system believes in internal management. It is like a closed loop which is autonomous and independent. It believes that the environment will not pose problems. Management of internal factors is basically useful for

an organization. However, the closed system is not perpetual. It breaks down when the environment influences the working conditions. Modern Open Theory (MOT) discounts the environment effect. The open system is ready to be exposed to a spectrum of complex changes and challenges of the environment. It is well known as the modern open theory which is dynamic, adaptive, multilevel, multidimensional and multidisciplinary. It incorporates the elements of motivation which are important moving forces in an organization. The open system is multidisciplinary because it incorporates different disciplines in the organization. It depends on sociology, psychology, engineering, anthropology and son for managing different activities of corporate units. It is the base of formulating organizational structure, and has the capacity for adaptation to change. The informal organization and environmental conditions are giving due weight age under the open system. The modern open theory is empirical, analytical and systematic. It is an integrating theory having the characteristics of a subsystem, dynamism, multivariate, adaptive probabilistic multi-motivation and multidisciplinary and process setting. The theory has gained prominence because it has given due importance to interdependence, has synergism, wholesome boundaries, feedback and cybernetics. The open theory commonly used as a system approach believes in analytical detection of deviation from normal behavior and taking necessary and corrective action to eliminate the error. It is management by objectives. The system is self-regulatory and self-corrective through reception, controlling and affecting the process. Use of System Theory in an Organization An organization is considered a dynamic system which evaluates acts and interacts with the environment. It is open and incorporates all the changes and challenges

of the social set up. The organization consists of interacting and interdependent subsystems. Each subsystem is defined with its objectives, structure, processes and promises. The interdependence of subsystems is so great that the success or failure of a subsystem will certainly influence other systems. The success of an organization depends on the process of each subsystem and proper evaluation of the elements of the environment, namely men, materials, money and other factors. A technical subsystem, social subsystem, psychological subsystem and structural subsystem are considered in the organization. Technical subsystem. A technical subsystem is related to production functions. Job design, job description and job classification are involved in the technical subsystem. Technological development, mechanization, scientific management and rationalization are considered for the effective management of the organization. A technical subsystem is highly related to the social and social and psychological subsystem. If the employees behavior is satisfactory, the technical subsystem will work satisfactorily. The communication, decision-making process and other factors are important considerations under the technical subsystem. The technical subsystem includes all functional areas, viz. marketing, production, finance and personnel, which are properly structured, and employees are assigned jobs in any of these areas. Social and psychological subsystem. The employees behavior is influenced by their social backgrounds, education and work environment. Human relations and group dynamics are developed in the organization. The informal organization plays a significant role in the development of the organization. Satisfaction of human needs and motivation are essentially decided under the social and psychological subsystems. The sentiments, interests and attitudes of employees are the important factors to influence the

3. Process Management This theory was propounded by Henry Fayol, wherein technical, commercial, financial security, accounting and managerial activities are well-defined. Henry Fayol describes administration as the main component of management, having special features of the deductive theory closed

productivity and efficiency of the organization. While performing their jobs, the employees try to get satisfaction. The informal and formal organization work together with great success. Men carry out functions according to sentiments, beliefs and interests. They are social creatures and expect social recognition. Structural subsystem. The structural set up of an organization is the backbone of management. The structure provides power which may be formal and informal. The authority hierarchy is decided based on the structural system. Authority gives power which is used for transforming a decision into action. The structural subsystem is very important for the development and proper functioning of an organization. tivation are essentially decided under the social and psychological subsystems. The sentiments, interests and attitudes of employees are the important factors to influence the productivity and efficiency of the organization. While performing their jobs, the employees try to get satisfaction. The informal and formal organization work together with great success. Men carry out functions according to sentiments, beliefs and interests. They are social creatures and expect social recognition. Structural subsystem. The structural set up of an organization is the backbone of management. The structure provides power which may be formal and informal. The authority hierarchy is decided based on the structural system. Authority gives power which is used for transforming a decision into action. The structural subsystem is very important for the development and proper functioning of an organization. 3. Contingency Theory The contingency theory is an extension of the open system. It has an adaptable approach which is applicable to all situations. Organizing a business based on changing situations and the environment has

system, hierarchy, formal organization, organized groups and the universal principle of management. He said that the manager has the right to disseminate managerial functions and can exercise his discretion for getting thins done through and with people. The employees are directed and controlled by managers. Process management was propagated by H. Simon, L.F. Luwich, L. Gulick, G. Terry and several others who pointed out that planning, organizing, motivating, coordinating and controlling are important functions of management.

its own quality and advantages. It is ready to cope with the increasing needs of the company and society. The contingency theory is a situational theory which changes its approach according to the requirements of the situation. It is away from the angle of different theories of management, although it cannot claim that the valuable theories of management are not applied for solving the problem. It is an attempt to provide something more contributory for the help of practicing managers. The basic tenets of the theory are the relationships between various organizational subsystems. Supra-systems are established after focusing on the external and internal factors of environment. There is no prescribed managerial action or organizational design for management action. The best organization to be followed depends on the situation. It deals with a variety of organizational and environmental variables with empirical support. Organization environment relationship The environment plays a significant role in the management decision. It decides the interrelationship within and among subsystems and supra-systems. Since the external environment is a major variable influencing management decisions, the organization structure, operation and behavior is molded according to that. It is essential to study empirically the impact of environmental factors on human behavior and institutional activities to develop an appropriate casual relationship between the organization and environment variables. Man and environment are closely related. Man is a part of the subsystem in a system of organization. He may influence the system and environment, which may also have a direct impact on the behavior of human beings. Man is a social being. He is influenced by the social set up which is visible in employee dissatisfaction and consumer disappointment. Social costs are not included in the balance sheet and profit and loss account, although

they influence business activities significantly. Social accounting and social auditing are developed depending on the impact of the social system on the organization. The contingency approach considers the management activities to be flexible and adaptable to meet situational requirements. It integrates the diverse specialists and management experts for management functions. Innovation and creativity are recognized for management development. Management was considered to be the universal and everlasting truth but it is now recognized that management is not to be rigid. It has to be changed as per the requirements of the situation. All managerial actions depend upon the prevailing circumstances and situational factors. Management has to be adapted to meet changing conditions. The functions of planning, organizing, directing and controlling are molded to meet changing requirements. Organization technology relationship - Technological development has a wide influence on organization. Many authors have empirically tested the organizationtechnology relationship. Burns and Stalker have pointed out that a slow rate of technological changes is used for adaptable policies and procedures. Dynamic and flexible organizations are sensitive to technology. They immediately accept the technology for the improvement of management activities. The mechanic structure is routing and highly centralized. It lays emphasis on formal authority and communication. The organic structure believes in decentralization with flexibility for innovation and technological development. Woodwand has pointed out technological complexities with controllable and predictable processes. He has established the relationship between technology and structure as well as structure and the success or organization. The contingency theory is developed in the current

unpredictable and uncertain environment. Each and every business or industrial unit is a victim of circumstances and risk. No business can develop unless the management knows how to manage the units within uncertainties. It has become certain that organizations have to fact complexities and risk. The contingency theory comes to their rescue. It is a comprehensive theory because it can be used for understanding the entire organization. Management is a situational analysis and decision-making process. It is useful because problem solving puzzles are a unique transactional management process. However, it requires expert and experienced managers to handle the situation with the contingency theory. A competent manage can guide and direct employees effectively and efficiently.