Senior High School

Organization and Management

Module 9:
Organization Theories for Effective
Business Management

AIRs - LM
LU_Organization and Management_Module 9
ABM - ORGANIZATION AND MANAGEMENT
Module 9: Organization Theories for Effective Business Management
Second Edition, 2021

Copyright © 2021
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form without
written permission from the copyright owners.

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Author: Louise Katreen V. Nimer

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Office Address: Flores St. Catbangen, San Fernando City, La Union
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 Senior High School

Organization and Management

Module 9:
Organization Theories for Effective
Business Management
Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear
learners, can continue your studies and learn while at home. Activities,
questions, directions, exercises, and discussions are carefully stated for you
to understand each lesson.

Each SLM is composed of different parts. Each part shall guide you
step-by-step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge on lessons in

each SLM. This will tell you if you need to proceed on completing this module
or if you need to ask your facilitator or your teacher’s assistance for better
understanding of the lesson. At the end of each module, you need to answer
the post-test to self-check your learning. Answer keys are provided for each
activity and test. We trust that you will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are
also provided to our facilitators and parents for strategies and reminders on
how they can best help you on your home-based learning.

Please use this module with care. Do not put unnecessary marks on
any part of this SLM. Use a separate sheet of paper in answering the exercises
and tests. And read the instructions carefully before performing each task.

If you have any questions in using this SLM or any difficulty in

answering the tasks in this module, do not hesitate to consult your teacher
or facilitator.

Thank you.
 Target

Running a business requires a lot of hard work, patience, enthusiasm and

dedication. More so, one must have an unprecedented ideas and creativity to make
the business productive, profitable and successful. However, not all businesses are
successful simply because of managerial skills issues and the like. But of course, to
make it work, one must employ different business management theories and skills.
Truly, a lot of business organizations employ organizational theories addressing all
questions on how a business firms will work, develop and grow.

An organization theory pertains to the organization’s structure, aims, and how

the business environment affects its operations and how it surpasses the challenges
posed by outside forces.

In your previous lesson, you’ve learned about the nature of organization,

various types of organization structure, and the role of the firm in determining the
appropriate hierarchical structure to accomplish set goals.

This learning material will provide you with information and activities that will
help you comprehend the different organization theories.

After going through this module, you are expected to:

1. Apply organization theories for effective business management. ABM_AOM11-Ih-

j17

To be able to realize the above mentioned MELC, it is important to perform the

following sub-tasks:

1. identify the different organizational theories and its application in business

management
2. define important terms and determine the importance of the different
organizational theories and;
3. create a comic strip illustrating the five organization theories for effective
business management.

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 Jumpstart

Activity 1: Read Me! Understand Me!

Direction: Read intently the various organization theories and their descriptions
then answer the questions that follow by writing your answers on a separate sheet
of paper.

Organization theories speak about the set of interconnected concepts,

definitions that explain the behavior of individuals or groups, who interact with each
other to perform the activities intended towards the accomplishment of a common
goal. The activities are not only limited to the identification of solutions when
problems arise, but it implies how to maximize efficiency and productivity.

These include:

1. The Classical Theory. Traditional theory wherein the emphasis is on the

organization rather than the employees working therein. According to this
theory, the organization is considered as a machine and the employees as
different components of that machine.
2. The Decision-making Theory. The organization is a structure of decision-
makers. In an organization, decisions are made at all levels, and significant
decisions tend to be made at higher levels.
3. The Systems Theory. It focuses on the arrangement of and relations
between the parts which connect them into a whole. A particular
organization is an open social system that must interact with the
environment.
4. Weber’s Ideal of Bureaucracy. According to this theory, bureaucracy is
the basis for the systematic formation of any organization and is designed
to ensure efficiency and economic effectiveness. A bureaucracy refers to an
organization that is complex with multilayered systems and processes.
5. Modern Theory. It is the integration of the concepts of the classical models
with the social and behavioral sciences. This theory suggests that an
organization is a system that changes with the change in its environment,
both internal and external.
6. Neo-classical Perspective. The extended version of the classical theory
wherein the behavioral sciences gets included into the management. The
organization is the social system, and its performance gets affected by
human actions. It is often referred to as the behavioral theory of
organization or human relations approach.
7. Contingency Theory. This theory assumes that organizations adapt to
their environments in the absence of formal structures. There is no
particular managerial action or organizational design that is appropriate
for all situations.

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 8. Motivation Theory. It is concerned with the study or work motivation of
employees of the organization. Employees become productive when proper
motivation is given.
9. Administrative Theory. An early form of organization theory which is
concerned mainly with achieving the most rational organization for
coordinating tasks specified within a complex division of labor.
10. Scientific Management Theory. A theory of management that analyzes
and synthesizes workflows. Its main objective is improving economic
efficiency, especially labor productivity. It is also known as Taylorism after
its founder, Frederick Winslow Taylor.

Direction: Read the questions below and choose the letter of your answer from the
given choices. Write your answer on a separate sheet of paper.

1. What theory implies that an organization is a system that changes with the
change in its environment whether internal or external?
A. Administrative theory B. Modern theory
C. Contingency theory D. Neoclassical theory

2. Tasks are being coordinated within a complex division of labor by the most
rational organization. What organization theory is most likely taking place?
A. Administrative theory B. Decision-making theory
C.Bureaucracy D. Systems theory

3. Every situation requires different managerial action.

A. Contingency theory B. Motivation theory
C.Decision-making theory D. Scientific Management theory

4. What theory describes the organization as a social system that can be affected
by human actions?
A. Contingency theory B. Neoclassical theory
C.Motivation theory D. Systems theory

5. According to this theory, the organization is considered as a machine and the

employees as different components of that machine.
A. Administrative theory B. Neoclassical theory
C.Classical theory D. Scientific Management theory

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 Discover

Organization Theories and Application

1. The Classical Theory. The classical or traditional theory focuses on the

formal structure of organization and leaves the human aspect of organization
to personnel specialists. They have been concerned with the best way of
dividing up the tasks to be done, with how to group these tasks together into
departments, and how to deal with the problems of coordination. They have
paid particular attention to organizational relationships between line and
staff. They have stressed the need for a clear definition of responsibilities and
authority. The chief contribution of the classical theory is the definition and
analysis of the tasks that must be considered in building up an organization.
The emphasis is on structural framework in which grouped activities are
assigned to people, authority relations are established, individual efforts are
properly coordinated, and responsibilities fixed. The structure is built to help
accomplish enterprise goals more effectively.

2. The Decision-making Theory. Herbert A. Simon (who was awarded in the

year 1978, the Nobel Prize mainly because of this theory) favors organization
as a structure of decision makers. In an organization, decisions are made at
all levels, and important decisions tend to be made at higher levels. The
decision-making approach to organization accepts the hierarchical form of
organization. Simon suggested that the organization structure be designed
through an examination of the points at which decisions must be made and
the persons from whom information must be required if decisions are to be
satisfactory.

3. The Systems Theory. The systems approach looks at the organization as a

total system comprising several interacting variables. This approach
highlights that we should not deal with problems in isolation but consider
their interactions. In fact, the word system means a regularly interacting or
interdependent group of items forming a “unified whole”. Thus, the systems
approach is concerned with the interaction between the different aspect of the
organization, people, technology, formal structure, the physical setting, and
environment.

4. Weber’s Ideal of Bureaucracy. Max Weber, a German scientist, defines

bureaucracy as a highly structured, formalized, and an impersonal organization.
He also instituted the belief that an organization must have a defined
hierarchical structure and clear rules, regulations, and lines of authority which
govern it.

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 Max Weber bureaucracy ideally has the following characteristics:
 Specialization of labor
 A formal set of rules and regulations
 Well-defined hierarchy within the organization
 Impersonality in the application of rules

5. Modern Theory. The modern theory considers the organization as an open

system. This means an organization consistently interacts with its
environment, to sustain and grow in the market. Since, the organization
adopts the open system several elements such as input, transformation,
process, output, feedback, and environment exist. Thus, this theory differs
from the classical theory where the organization is considered as a closed
system.

6. Neo-classical Perspective. This theory is developed to fill up the gaps and

deficiencies in the classical theory. It is concerned with human relations
movement. In this way, the study of organization is based on human behavior
such as – how people behave and why they do so in a particular situation. The
neo-classical scholars used classical theory as the basis for their study and
modified some of the principles for the study. The main contribution of this
theory climaxes the importance of the committee management and better
communication. Besides, this theory emphasized that the workers should be
encouraged and motivated to display active participation in the production
process. The feelings and sentiments of the workers should be considered and
respected before any change is introduced in the organization.

7. Contingency Theory. It is an important theory of management developed in

the recent past to evolve practical solutions to situations. This is an approach
based on situation. Critics of scientific and administrative management could
not give a proper guideline, how to evolve a proper management theory.
Contingency theory emphasizes the structural factors of management. It
makes management responsible to make appropriate decision to the need of
the situation. Structure of organization is prone to outside constraints.
Therefore, it is necessary to have a formal and informal organizational system
of management to tackle various problems of contingencies.

8. Motivation Theory. It is concerned with the study or work motivation of

employees of the organization. The works are performed effectively if proper
motivation is given to the employees. The motivation may be in monetary and
non-monetary terms. The inner talents of any person can be identified after
giving adequate motivation to employees.

9. Administrative Theory. Henry Fayol is one of the famous names to be

attributed to this theory. This theory made its contribution on the managerial
aspect of an organization. The theory is very much associated with the proper
understanding of the task of management. It provides directions or principles

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 how to activate management effectively. It is based on the concept of
departmentalization, which means the different activities to be performed for
achieving the common purpose of the organization should be identified and be
classified into different groups or departments, such that the task can be
accomplished effectively.

10. Scientific Management Theory. A theory which is well known for its
application of engineering science at the production floor or the operating
levels. The major contributor of this theory is Fredrick Winslow Taylor, and
that’s why the scientific management is often called as “Taylorism”. The
scientific management theory focused on improving the efficiency of each
individual in the organization. The major emphasis is on increasing the
production through the use of intensive technology, and the human beings
are just considered as adjuncts to machines in the performance of routine
tasks.

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 Explore

ASSESSMENT NO. 1

Directions: Answer the questions below in not more than 5 sentences. Write your
answers on a separate sheet of paper. The scoring rubric on the next page will be
your guide to assess your output.

1. How does Neo-classical perspective fill in the gaps of the classical theory?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________
2. Do you agree that in an organization, decisions are made at all levels and the
most important decisions tend to be made at higher levels? Explain your answer.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
3. Do you think monetary motivation is important in an organization? Explain your
answer.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
4. What is the impact of the different organization theories to the business
environment?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________
5. Why is it relevant for an organization to employ different organization theories?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________

Rubric for Scoring the Essay

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 Excellent Satisfactory Fair Poor
10 8 6 4
Answers are Answers are Answers are Answers are
correct, detailed, correct and inaccurate, lack inappropriate.
and accurate. It accurate. details and don’t
shows really answer the
understanding of questions.
the questions.
Ideas are clearly Ideas are stated Ideas are stated Ideas are not
stated supported with supporting but not supported related to the
with details. details. with details. questions.
Grammar There are minor There are many Sentences are
mechanics are issues in sentence errors in sentence erroneous.
appropriately used constructions, construction,
and followed. spelling and misspelled words
punctuation and wrong usage
marks. of punctuations.

Deepen

Activity 1: COMIC STRIP MAKING

Create a comic strip that best illustrates the application of five organization theories
for effective business management. The scoring rubric on the next page will be used
in assessing your output.
What you need

Short bond paper, pencil/pen, coloring material

Organization Theories

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 Rubrics for Scoring the Output

Criteria Excellent(5) Good(3) Poor(1)

Choice of Scenes Five organization Three to four One to two

theories are organization organization
thoroughly depicted. theories are theories are
depicted. depicted.

Captions Captions are related Captions are related Captions do not

to the scenes and to the scenes, but relate well to the
are easily the connections are scenes. There seems
understood. less obvious. to be no connection
at all.

Characters The main characters The main characters The main characters
are clearly identified, are clearly are identified but
and their actions identified, and their not well developed
and dialogue are actions and dialogue and their actions
well-matched to match most of the and dialogue are too
each other. time. general.

Landscape and Landscape and Landscape and Landscape and

Props props are directly props are generally props are not
related to the theme related to the theme related to the theme
or purpose of the or purpose of the or purpose of the
comic and enhance comic. comic.
understanding of
the scene.

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 Creativity The illustrations Some illustrations Few illustrations
reflect an reflect an reflect an
exceptional degree of exceptional degree exceptional degree
student creativity. of student creativity. of student creativity.
There is great
attention to detail.

Spelling, There are no There are 1-3 There are more than
Punctuation, and spelling, spelling, 3 spelling,
Grammar punctuation, or punctuation, or punctuation, and
grammatical errors. grammatical errors. grammatical errors.

Gauge

PART I: MULTIPLE CHOICE

Directions: Read each item carefully. Use a separate sheet for your
answers. Write the letter of the best answer for each test item.
1. What theory is concerned with the interaction between the different aspect of
the organization, people, technology, formal structure, the physical setting,
and environment?
A. Classical theory B. Scientific Management theory
C. Decision-making theory D. Systems theory

2. Who is the main proponent of scientific management theory?

A. Fredrick Taylor B. Herbert Simon
C. Henry Fayol D. Max Weber

3. What theory of organization is based on human behavior?

A. Behaviorism theory B. Motivation theory
C. Classical theory D. Neo-classical theory

4. Which is defined as a highly structured, formalized, and also an impersonal

organization?
A. Business firm B. Government
C. Bureaucracy D. All of the above

5. Which theory is concerned with the best way of dividing up the tasks to be
done, with how to group these tasks together into departments, and how to
deal with the problems of coordination?
A. Classical theory B. Modern theory

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 C. Motivation theory D. Taylorism

6. ArtLife Company provides compensation benefits and bonuses to employees

for them to be more productive. Which theory is being applied in this
situation?
A. Classical theory B. Modern theory
C. Contingency theory D. Motivation theory

7. What theory highly suggests division of labor among employees?

A. Administrative theory B. Scientific Management theory
C. Bureaucracy D. Systems theory

8. Bureaucracy has the following characteristics EXCEPT:

A. A formal set of rules and regulations
B. Personality in the application of rules
C. Specialization of labor
D. Well-defined hierarchy within the organization

9. It is the integration of the concepts of the classical models with the social
and behavioral sciences.
A. Behaviorism theory B. Classical theory
C. Motivation theory D. Neo-classical theory

10. What theory assumes that organizations adapt to their environments in the
absence of formal structures?
A. Classical theory B. Modern theory
C. Contingency theory D. Motivation theory

PART II: TRUE OR FALSE

Direction: Write T if the statement is TRUE otherwise write F.

11. It is necessary to have a formal and informal organizational system of

management to tackle various problems of contingencies.
12. In an organization, decisions are made only at higher levels.
13. Max Weber defines bureaucracy as a highly structured organization.
14. The administrative theory is associated with the proper understanding of the
task of management.
15. The systems approach is concerned with the interaction between the
different aspect of the organization, people, technology, formal structure, the
physical setting, and environment.

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LU_Organization and Management_Module 9
12
Jumpstart:
1. C
2. A
3. A
4. C
5. B
Gauge:
1. D 11. T
2. A 12. F
3. A 13. T
4. D 14. T
5. B 15. T
6. A
7. D
8. A
9. B
10. D
11. B
Answer Key
References

Books

 Cabrera, H. F., Altarejos, A. D., & Benjamin, R. (2016). Organization and

Management. Vibal Group, Inc.
 Enriquez, E. G. (2016). Organization and Management. JFS PUBLISHING
SERVICES.

Websites

 https://www.economicsdiscussion.net/organisational-
structure/organizational-theories/
 https://bizfluent.com/info-8120176-organizational-theories.html
 https://businessjargons.com/organizational-theory.html
 https://www.toppr.com/guides/fundamentals-of-economics-and-
management/evolution-of-management-thought/classic-organization-
theory/
 http://www.fao.org/3/w7503e/w7503e03.htm

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 For inquiries or feedback, please write or call:

Department of Education – SDO La Union

Curriculum Implementation Division
Learning Resource Management Section
Flores St. Catbangen, San Fernando City La Union 2500
Telephone: (072) 607 - 8127
Telefax: (072) 205 - 0046
Email Address:
[email protected]
[email protected]

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