Classical, Neoclassical and Contingency

approaches to organizational design

practical contemplation. There are several theoretical approaches in organization

processes.

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Classical Approach
In classical theory of organizational process, main emphasis is on structural
factors and functions or activities to attain the objectives. Theorists stated that
focus is given on specialisation and co-ordination, and chain of command
facilitates co-ordination and communication. Classical theory to management is a
set of consistent ideas on the management of organizations that developed in the
late 19th century and early 20th century. This viewpoint appeared from the
industrial rebellion and centres on theories of efficiency. As at the end of the 19th
century, when factory production became persistent and there were large scale
organizations, employers and other business groups explored ways to encourage
employees and augment output. Main contributors who evolved classical
approach to organizational processes are Frederick Taylor Henri Fayol. Most of
them developed fundamental concepts for a comprehensive theory of
management (Mullins, 2015). These theorists generated management theories
such as Taylor’s Scientific Management, Fayol’s Administrative Management and
Weber’s Bureaucratic management (George, 1948).

Frederick Taylor (1917) developed scientific management theory that is known

as Taylorism at the beginning of this century. His theory had four basic principles.

a. Division of labour
b. Scalar and functional processes such as unity of command, chain of

command, delegation of authority, defining responsibility and accountability.

c. Structure-line and staff.

d. Span of control.

In the beginning, Taylor got success at improving production. His methods

involved getting the best equipment and people, and then carefully scrutinizing

each component of the production process. By analysing each task

independently, Taylor explored the right combinations of factors that helped to

increase in production. Though, Taylor's scientific management theory was

unbeaten in industrialized companies at end of the century, but could not perform

well in modern companies. The beliefs of "production first, people second" has

left an inheritance of declining production and quality, displeasure with work, loss

of pride in workmanship, and a loss of organizational pride.

management 

Henri Fayol was also major contributor of Classical Theory. Henri Fayol has

dissimilar viewpoint than Taylor and he focused on the manager rather than the

worker and he emphasized in administrative features in the organization. Fayol

established five administrative functions: (1) Planning; (2) organizing; (3)

commanding; (4) coordinating; (5) controlling. These aspects indicate that Fayol

concerned in commanding and controlling the organization towards high

performance.

Furthermore, another contributor for classical approach is Max Webber, a

German sociologist, who evolved the thought of bureaucracy. Max Weber (1947)
developed on Taylor's theories, and emphasized the need to decrease diversity

and vagueness in organizations. There was more focus on establishing clear

authority and control. Bureaucratic approach of Weber emphasized the need for

a hierarchical structure of power. It documented the importance of division of

labour and specialization. A formal set of rules was bound into the hierarchy

structure to insure stability and uniformity. Weber also put forth the notion that

organizational behaviour is a system of human interactions, where all behaviour

could be understood by looking at cause and effect. Weber believed the

bureaucratic notion was an approach to reduce the frustrations and illogicality of

big organization where the relationship between management level and workers

are based on class privilege (Owens, 1987).

Bureaucratic
Approach 
The Classical Approach of organization behaviour was best suited in the early

1900’s when the main issues in companies were related to the rising number of

employee, increasing demand, full of mechanisation, and the tasks rationalisation

in every jobs (Terry, 1975).

The classical theory has appropriate insight into the nature of the organisation.

The theory focuses on the structure of formal organisation neglecting the

interaction of individual personality, informal or social groups and intra-

organisational conflicts. The classical theory (Theory X) views organisation as a

structure which centres around work and not on persons. The classical approach

supposed to be an authoritarian and autocratic managerial style.

There are numerous disadvantages of Classical Theory:

1. This approach ignores human behaviour and human relation. There is an

absence of rapid and free channels of communication, discounting innovation,

initiative and change. It has been observed that classical theory of organization

design is lacks in flexibility and adaptability. There is tight control through force

and coercion. In this approach, there is an absence of intrinsic rewards.

Classical management theory was rigid and mechanistic. The limitations of

classical organization theory rapidly became apparent. Its major insufficiency

was that it tried to explain peoples' enthusiasm to work strictly as a function of

economic reward.
2. The Neo-classical Approach: The dogmas of neoclassical theory

developed with human-oriented approach and main focus was on time needs,

drives, behaviours and attitudes of individuals (Singh, 1983). The neoclassical

approaches recognize early classical frameworks but expand and made

significant qualification of them. The neoclassical theory integrates the

behavioural sciences into management thought in order to solve the problems

caused by classical theory practices. The principle of this enclosure was based

on the idea that the role of management is to use employees to perform

business functions in organizations. Instead of concentrating on production,

structures, or technology, the neoclassical theory was mainly associated with

the employee. Neoclassical theorists focused on replying questions related to

the best way to motivate, structure, and support employees within the

organization. It was believed that any manager who failed to account for the

social needs of his or her employees could expect to deal with resistance and

lower performance. Employees needed to find some inherent value in their

jobs, which they certainly were not getting from the job that was highly

standardized. In this approach, workers are structured in such a way that they

would regularly share tasks, information, and knowledge with one another

instead of placing employees into job roles, where they completed one

particular task all day with little to no interaction with fellow workers. The

principle was that once workers were placed into this alternate structure, their

needs for socialization would be fulfilled, and thus they would be more
 creative. There are two major groups such as human relations school and

behavioural schools emerged during 1920s and 1930s that developed the

neoclassical theory. This approach reflects human relations movement as well

as behavioural science approach. It thoroughly studies motives, supervision,

group and intergroup behaviours. It is designated that effective co-ordination of

activities is not possible without the collaboration of people. This theory

transmits people-oriented organisational structure which will incorporate

informal and formal organisations. Two concepts of Theory-Y approach are

individual and work group i.e. inter personal relations and need for two way

communication in the organisation demanded special attention in developing

humanised organisational structure.

Contributions: Neo classical approach emphasised the role of informal

organisations as agencies of social change (Informal Leadership). Neo classical

theory developed motivational theory and theory of co-ordination and leadership.

The Neoclassical approach basically evolved with the Hawthorne studies in the

1920s. Studies during this time, including the popular Hawthorne Studies,

showed that social factors, such as employee relationships, were an important

factor for managers to consider. It developed to overcome the limitations of the

classical theory. A three-stage series of experiments assessed the effects of

varying physical conditions and management practices on workplace efficiency.

The first experiment scrutinized the effects of workplace lighting on productivity. It

that changes in social conditions seemed to explain significant increases in group

productivity. Other experiments were also performed and the researchers

concluded that social factors in particular, workers’ desires to satisfy needs for

companionship and support at work-explained the results observed across all of

the Hawthorne studies.

Hawthorne Studies in Organizational Behavior

Classical and neoclassical approach of organization made exceptional

contribution to the development of management thought. In classical approach,

attention was more on jobs and machines. In neoclassical, emphasis was on

increasing production through an understanding of people. Many proponents of

this theory stated that if managers understand their people and adjust their
organizations to them, then organization will succeed. However, the classical

theory focuses on task and structure while the neoclassical theory emphasizes

people aspect.

Table: Distinction between classical neoclassical

approaches: 

The contingency theory: Classical and neoclassical theorists analysed conflict

as a factor that must be avoided because it hinder with stability. According to

contingency theorists, conflict is inescapable, but manageable. The contingency

theory of organizational structure currently offers a major structure for the study

of organizational design (Donaldson, 1995a, 2001). It states that the most

effective organizational structural design is where the structure fits the

contingencies. It has provided logical concept for analysis of structure of

organization. Main theoretical principles of contingency theory are that best

practices depend on the contingencies of the situation. Theorists attempt to

human service practice varies substantially, contingency theory provides a

practical approach to model. The term contingency as used in contingency theory

is alike to its use in direct practice. A contingency is an association between two

phenomena. If one phenomenon exists, then a conclusion can be drawn about

another phenomenon. Theorists explained that this theory indicates, the most

suitable organizational structure depends not only on the organizational

objectives but also on the situation, which includes the environment, the

technology employed, the rate and pace of change, the managerial style, the size

of the organization, and other dynamic forces. This approach is derived from the

leadership and organizational structures.

Numerous contingency approaches were devised concurrently in the late 1960s.

This approach emerged due to many drawbacks of the classical theories such as

Weber's bureaucracy (Weber, 1946) and Taylor's scientific management (Taylor,

1911) which were not fruitful as they ignored that management style and

organizational structure were influenced by various aspects of the environment,

the contingency factors. The contingency approach initiated by Joan Woodward

(1958), who declared that winning organizations in different industries with

different technologies were characterized by different organizational structures.

Contingency theory tries to relate research on many management variables. It

allows executives to analyse a situation and find out what variables influence the
decision with which they are concerned. Chandler (1962) proposed that an

organization would obviously develop to satisfy the needs of its strategy that form

follows function. Chandler stated that organizations would act in a rational,

chronological, and linear manner to adjust to changes in the environment.

Efficiency was a function of management's capability to adapt to environmental

changes. Lawrence and Lorsch (1969) also explored how organizations adjusted

to fit their environment. In highly unstable industries, they observed the

importance of giving managers at all levels the authority to make decisions over

their domain. Managers would be free to make decisions contingent on the

current situation. The advantage of contingency approach is that it motivates

managers to investigate individual and situational differences before deciding on

a course of action. Major shortcoming of this approach is that it is often used as

an excused for not gaining formal knowledge about management. The

contingency perspective describes that the efficiency of various managerial

practices, styles, techniques, and functions will differ according to the particular

circumstances of the situation.

view: 

To summarize, Classical and neoclassical approaches has major contribution in

the development of organizational processes. Rapid economic development and

industrial expansion of different nations, classical and neoclassical theorists who

developed different techniques of production allowed every nation to be involved

in global market. The contingency view is totally different than doing the formal

schools of management. The classical, behavioural, and management science

schools assumed a universal approach. They projected the discovery of ‘one-

best-way’ management principles that applies to every organization. However,

experienced managers identify that not all people and situations should be

handled identically. Therefore, the contingency approach developed theory that

universal solutions and principles cannot be applied to organizations. The

contingency theory proposes that what managers do in practice depends on, or

stresses on situational appropriateness rather than universal principles.