MINOR PROJECT REPORT ON ORGANISATIONAL THEORIES

Submitted in partial fulfillment of the requirements for the award of the degree of

BACHELOR OF BUSINESS ADMINISTRATION

to

Guru Gobind Singh Indraprastha University, Delhi

Under the Guidance of: Dr. Rajesh Bajaj Professor Submitted by: Anshul Saxena BBA III Sem. (E) Enrollment No. 02621301709

Session 2009 - 10

TECNIA INSTITUTE OF ADVANCED STUDIES

Approved by AICTE, Ministry of HRD, Govt. of India Affiliated To Guru Gobind Singh Indraprastha University, Delhi

INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085 E-Mail: director.tecniaindia@ gmail.com, Website: www.tecnia.in Fax No: 27555120, Tel: 27555121-24

Institute is rated as A Category Best Business School by latest AIMA - Business Standard & Business India Publications Surveys & included in Top 100 B Schools & IT -Schools by Dalal Street Investment Journal

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ACKNOWLEDGEMENT
I express my sincere gratitude to my Project Guide Prof. Rajesh Bajaj for valuable Guidance & Encouragement extended to me. In spite of his busy schedule, he has spared his valuable time to advice me on this project. I am also thankful to my Parents & Friends who extended their cooperation & support for Analysis & Data Collection. I also express my gratitude to faculty & staff of TIAS who have provided information, assistance & cooperation for the project.

(Anshul Saxena)

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CONTENTS

Serial No.
1.

Topic
INTRODUCTION

Page No.
5-8

2.

CLASSICAL THEORY

8 - 21

4.

NEO CLASSICAL THEORY

22 - 26

5.

BEHAVIOURAL SCIENCE APPROACH

27 - 32

6. SYSTEMS APPROACH

32 - 36

7.

CONTINGENCY APPROACH

36 - 37

8.

BIBLIOGRAPHY

38

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LIST OF TABLES
TABLE NO. 1. TITLE Approaches to Classical Management PAGE NO. 9

LIST OF FIGURES

FIGURE NO. 1. 2. 3.

TITLE Human Relations in Action Maslows Hierarchical Needs Open System. View of Organization

PAGE NO. 25 30 33

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1. INTRODUCTION
1.1. Organizational Theories studies encompasses the study of organizations from multiple viewpoints, methods, and levels of analysis. For instance, one textbook divides these multiple viewpoints into three perspectives: modern, symbolic, and postmodern. Another traditional distinction, present especially in American academia, is between the study of "micro" organizational behavior -- which refers to individual and group dynamics in an organizational setting -- and "macro" organizational theory which studies whole organizations, how they adapt, and the strategies and structures that guide them. To this distinction, some scholars have added an interest in "meso" -- primarily interested in power, culture, and the networks of individuals and units in organizations -- and "field" level analysis which study how whole populations of organizations interact. In Europe these distinctions do exist as well, but are more rarely reflected in departmental divisions.

1.2. Whenever people interact in organizations, many factors come into play. Modern organizational studies attempt to understand and model these factors. Like all modernist social sciences, organizational studies seek to control, predict, and explain. There is some controversy over the ethics of controlling workers' behaviour. As such, organizational behaviour or OB (and its cousin,Industrial psychology) have at times been accused of being the scientific tool of the powerful. Those accusations notwithstanding, OB can play a major role in organizational developmentand success. One of the main goals of organizational theorists is, according to Simms (1994) "to revitalize organizational theory and develop a better conceptualization of organizational life." An organizational theorist should carefully consider levels assumptions being made in theory, and is concerned to help managers and administrators.

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1.3. NATURE OF ORGANIZATION : A learning organization exhibits five main characteristics: systems thinking, personal mastery, mental models, a shared vision, and team learning.

a) Systems thinking. The idea of the learning organization developed from a body of work
called systems thinking. This is a conceptual framework that allows people to thinking when assessing their company and have information systems that measure the performance of the organization as a whole and of its various components. Systems thinking states that all the characteristics must be apparent at once in an organization for it to be a learning organization. If some of these characteristics is missing then the organization will fall short of its goal. However OKeeffe believes that the characteristics of a learning organization are factors that are gradually acquired, rather than developed simultaneously.

b) Personal mastery. The commitment by an individual to the process of learning is

known as personal mastery. There is a competitive advantage for an organisation whose workforce can learn quicker than the workforce of other organisations. Individual learning is acquired through staff training and development, however learning cannot be forced upon an individual who is not receptive to learning. Research shows that most learning in the workplace is incidental, rather than the product of formal training, therefore it is important to develop a culture where personal mastery is practiced in daily life. A learning organization has been described as the sum of individual learning, but there must be mechanisms for individual learning to be transferred into organizational learning.

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c) Mental models. The assumptions held by individuals and organizations are

called mental models. To become a learning organization, these models must be challenged. Individuals tend to espouse theories, which are what they intend to follow, and theories-in-use, which are what they actually do. Similarly, organisations tend to have memories which preserve certain behaviours, norms and values. In creating a learning environment it is important to replace confrontational attitudes with an open culture that promotes inquiry and trust. To achieve this, the learning organization needs mechanisms for locating and assessing organizational theories of action. Unwanted values need to be discarded in a process called unlearning. Wang and Ahmed refer to this as triple loop learning.

d) Shared vision. The development of a shared vision is important in motivating the staff
to learn, as it creates a common identity that provides focus and energy for learning . The most successful visions build on the individual visions of the employees at all levels of the organisation, thus the creation of a shared vision can be hindered by traditional structures where the company vision is imposed from above. Therefore, learning organizations tend to have flat, decentralised organisational structures. The shared vision is often to succeed against a competitor, however Senge states that these are transitory goals and suggests that there should also be long term goals that are intrinsic within the company.

e) Team learning. The accumulation of individual learning constitutes Team learning .

The benefit of team or shared learning is that staff grow more quickly and the problem solving capacity of the organization is improved through better access to knowledge and expertis. Learning organizations have structures that facilitate team learning with features

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such as boundary crossing and openness. Team learning requires individuals to engage in dialogue and discussion; therefore team members must develop open communication, shared meaning, and shared understanding. Learning organizations typically have excellent knowledge management structures, allowing creation, acquisition, dissemination, and implementation of this knowledge in the organisation.

2. Classification of Organizatoinal Theories 2.1. CLASSICAL THEORY

2.1.1. The classical theory signifies the begening of the systematic study of management. It is often called the traditional theory. It can be traced historically to the 19th century prototype industrial & military organizations. Several writers contributed to the classical thought in the early years of 20th century. They include Taylor, Fayol, Weber, Luther, Gulick, Urwick, Mooney & Reiley and many others. All these writers concentrared on finding sound principles of organization. That is why, classical theory is also known as Structural Theory of Organisation. 2.1.2. The classical writers thought of the organisation in terms of its purpose and formal structure. They placed emphasis on the planning of work, the technical requirements of the organization, principles of management & the assumptions of rational & logical behavior. Thus, the classical theorists dealt almost exclusively with the anatomy of formal organization i.e., analysis of the organization structure. The classical theory incorporates 3 view points :

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A. Scientific Management, B. Administrative Management & C. Bureaucracy

Tab 3.1.1. : APPROACHES TO CLASSICAL MANAGEMENT

APPRAOCH

ECONOMIST

Scientific Management Approach

F.W. Taylor

Administrative, Functional or Process Approach

Henri Fayol

Bureaucratic Approach

Max Weber

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2.1.3. Features of Classical Theory The salient features of classical approach are as follows : a) The classical theory laid emphasis on division of labour & specialization, structure, scalar, & functional processes & span of control. Thus, they concentrated on the anatomy of formal organization. b) The classical theorist emphasised organization structure for coordination of various activities. They ignored the role of human element. c) The classical theory ignored the impact of external environment on the working of the organization. Thus, it treated organization as closed systems. d) The efficiency of the organization can be increased by making each individual efficient. e) There is no conflict between the individuals & the organization. In case of any conflict, the interest of the organization should prevail. f) The people at work could be motivated by the economic rewards as they were supposed to be rational economic persons.

2.1.4. Merits of Classical Theory The merits of classical theory are as follows : a) It provides principles of management which can be applied in different types of situations. Thus, it highlighted the universal nature of management.

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b) Management principles are flexible in nature. Managers can modify them to suit the given situation. c) Classical approach focused on the functions of managers in different types of organizations. d) It emphasized the role of money or financial incentives in motivating the workers. e) It gave supreme importance to the organization & its objectives. People are supposed to following organizational policies & procedures & obey orders of their superiors to achieve organizational objectives. 2.1.5. Critism of Classical Theory The fundamental objections against the classical theory are discussed below : a) Narrow view of Organisation. The value of classical theory is limited by its narrow concentration on the anatomy of formal organization. It is said that the focus of classical theory is on organisation without people. b) Assumptions of Closed System. Classical theorists viewed organization as a closed system, i.e., having no interaction with environment. This assumption is totally unrealistic. A modern organization as an open system which has continuous interaction with the environment through the exchange of inputs & outputs & various types of information. c) Assumption about Human Behaviour. The human beings were treated like any other factor of production. They were supposed to obey their superiors. The classical writers ignored the social, psychological & motivational aspects of human behavior.

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d) Economic Rewards as Main Motivators. The assumption that people at work can be motivated solely through economic rewards is also wrong. Several researchers in human behaviour have contradicted this assumption. Non Monetary factors like better status & job enrichment can also motivate the workers. 2.1.6. SCIENTIFIC MANAGEMENGT APPROACH : The impetus for the scientific management approach came from the first industrial revolution. The main contributors to scientific management were Frederick Taylor, Henry L. Gantt, Frank Gilbreth, Lillian Gilbreth & Harrington Emerson. 2.1.7. Frederick W. Taylor was the first person who insisted on the introduction of scientific methods in management & it was he who, alongwith his associates, made the first systematic study of management. He launched a new movement in 1910 which is known as Scientific Management. That is why, Taylor is regarded as the father of scientific management. 2.1.8. Acc. To Taylor, Scientific Management is the substitution of exact scientific investigations & knowledgs for the old individual judgement or opinion an all matters relating to the work done in the shop. It aims at replacement of traditional techniques by scientific techniques. 2.1.9. Principles of Scientific Management : The scientific management is base on five principles which are discussed below : a) Replacement of old rule of thumb method. Scientific investigation should be used for taking managerial decisions instead of basing decisions on opinion, intuition or rule of thumb.
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b) Scientific selection & training of workers. Every organisation should follow a scientific system of selection. The selected workers are to be trained to avoid wrong methods of work. Management is responsible for their education & training. c) Co-operation between labour & management. There should be cooperation between the management & the workers. This requires change of mental attitudes of the workers & the management towards each other. Taylor called it Mental Revolution. d) Maximum output. The management & the workers should try to achieve maximum output in place of restricted output. This will be beneficial to both the parties. Maximum output will also be in the interest of the society. e) Equal division of responsibility. There must be equal division of responsibility between the managers & the workers. The management should be responsible for planning & organising the work whereas the workers should be responsible for the execution of work as per instructions of the management. 2.1.10. Techniques of Scientific Management : Taylor suggested the following techniques : a) Scientific Task Setting. It is essential to set the standard task which average worker should do during a working day. Taylor called it a fair days work. b) Work Study. Work study implies an organised, objective, systematic, analytical & critical assessment of the efficiency of various operations in an enterprise. It includes the following techniques : i. Method Study. This study is connected to know the best method of doing a particular job. It helps in reducing the distance travelled by materials & brings

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improvements in handling, transporting, inspection & storage of raw materials & goods. ii. Motion Study. It is the study of the movement of an operator or a machine. Its purpose is to eliminate useless motions & find out the best method of doing a particular job. iii. Time Study. This study is the technique of observing & recording the time required to do each element of an industrial operation. It help in fixing the standard time required to do a particular job. iv. Fatigue Study. Fatigue, physical or mental, has an adverse effect on workers health & his efficiency. Fatigue study helps in reducing fatigue among the workers. c) Planning the Task. Taylor emphasised the need for planning work. He advocated that planning function should be separated from executive function. The

detailed planning should be done by the planning department. The planning department should prepare detailed instructions for the workers as to the type, quality & quantity of the product to be produced. d) Standardisation. Taylor advocated the standardisation of tools & equipments, cost system & several other items. Efforts should be made to provide standardised working environment & methods of production of the workers. e) Differential Piece Wage Plan. This plan was suggested by Taylor to attract highly efficient workers. Under this plan, there are two piece work rates, one is lower & another is higher. The standard of efficiency is determined either in terms of time or output based on motion & time study.

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2.1.11. Benefits of Scientific Management : Scientific Management leads to the following benefits : a) Replacement of traditional rule of thumb method by scientific techniques for each element of a mans work. b) Proper selection & training of workers. c) Establishment of harmonious relationship between the workers & the management. d) Achievement of equal division of responsibilities between the workers & the management. e) Detailed instructions & constant guidance of the workers. f) g) Elimination of wastes & rationalization of system of control. Satisfaction of the needs of the customers by providing higher quality products at lower prices. 2.1.12. Criticism of Scientific Management a) The use of word Scientific before Management was objected because what is actually meant by scientific management is nothing but a scientific approach to managemen. b) It was argued that the principles of scientific management as advocated by Taylor was confined mostly to production management. He ignored certain other essentials aspects of management like finance, marketing, accounting & personnel.

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c) Taylor advocated the concept of functional foremanship to bring about specialization in the organisation. But this is not feasible in practice as it violates the principle of unity of command. d) Scientific management undermined the human factor in industry. It resulted in monotony of jobs, loss of initiative, overspeeding workers, wage reductions, job insecurity, etc

2.1.13. ADMINISTRATIVE MANAGEMENT : Administrative management focuses

on the management process and principles of management. In contrast to scientific management, which deals largely with jobs and work at the individual level of analysis, administrative management provides a more general theory of management. Henri Fayol is the major contributor to this school of management thought.

2.1.14. Fayol was a management practitioner who brought his experience to bear on the subject of management functions and principles. He argued that management was a universal process consisting of functions, which he termed planning, organizing, commanding, coordinating, and controlling. Fayol believed that all managers performed these functions and that the functions distinguished management as a separate discipline of study apart from accounting, finance, and production. Fayol also presented fourteen principles of management, which included maxims related to the division of work, authority and responsibility, unity of command and direction, centralization, subordinate initiative, and team spirit.

2.1.15. Although administrative management has been criticized as being rigid and inflexible and the validity of the functional approach to management has been questioned, this school of thought still influences management theory and practice. The functional approach to

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management is still the dominant way of organizing management knowledge, and many of Fayol's principles of management, when applied with the flexibility that he advocated, are still considered relevant.

2.1.16. Fayol completed his theory by stating that to be effective, management should be based on the following Principles of Management :

i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv.

Division of Work Authority & Responsibility Discipline Unity of Command Unity of Direction Subordination of individual interest to the general interest Remuneration Centralisation Scalar Chain Order Equity Stability Initiative & Esprit de corps (Union is Strength).

2.1.17. BUREAUCRATIC APPROACH : Bureaucratic management focuses on the ideal form of organization. Max Weber was the major contributor to bureaucratic management. Based on observation, Weber concluded that many early organizations were inefficiently managed,

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with decisions based on personal relationships and loyalty. He proposed that a form of organization, called a bureaucracy, characterized by division of labor, hierarchy, formalized rules, impersonality, and the selection and promotion of employees based on ability, would lead to more efficient management. Weber also contended that managers' authority in an organization should be based not on tradition or charisma but on the position held by managers in the organizational hierarchy.

2.1.18 Bureaucracy has come to stand for inflexibility and waste, but Weber did not advocate or favor the excesses found in many bureaucratic organizations today. Weber's ideas formed the basis for modern organization theory and are still descriptive of some organizations.

2.1.19. Bureaucratic administration means fundamentally the exercise of control on the basis of knowledge (Weber, 1947). For the sociologist, power is principally exemplified within organizations by the process of control. Max Weber distinguished between authority and power by defining the latter as any relationship within which one person could impose his will, regardless of any resistance from the other, whereas authority existed when there was a belief in the legitimacy of that power. Weber classified organizations according to the nature of that legitimacy:

a) Charismatic authority, based on the sacred or outstanding characteristic of the individual. b) Traditional authority: essentially a respect for custom; c) .Rational legal authority, which was based on a code or set of rules.

2.1.20. The latter is the predominant form of authority today, replacing the crude use of naked power and historical practices. According to Weber rational legal authority is attained through

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the most efficient form of organization: bureaucracy. He argued that managers should not rule through arbitrary personal whim but by a formal system of rules. He listed the beliefs which underlie rational legal authority:

a) a legal code can be established which can claim obedience from members of the organization; b) the law is a system of abstract rules which are applied to particular cases; and administration looks after the interests of the organization within the limits of that law; c) the person exercising authority also obeys this impersonal order; d) only through being a member does the member obey the law; e) obedience is due not to the person who holds the authority but to the impersonal order which has granted him this position.

2.1.21. Weber is usually described as having believed that bureaucracy is the most efficient form of organization. In fact, Weber believed bureaucracy to be the most formally rational form of organization. As such, Weber conceived of bureaucracy as being more effective than alternative forms. In his day administration was based on written documents. This tended to make the office (bureau) the focus of organization. He did not share the modern conception of a bureaucratic organization as being slow, rigid and inefficient. His primary concern was to establish ways of behaving which avoided the corruption, unfairness and nepotism characterizing most 19th century organizations. Based on his ideas concerning the legitimacy of power, Weber outlined the characteristics of bureaucracy in its purest form. Such an organization is Charaterised by:

a) Division of Work: There is high degree of division of work at both the operative & administrative levels. This leads to specialization of work.

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b) Specialization: Each office has a defined sphere of competence, involving division of labour. The tasks of the organization are divided into distinct functions given to separate offices. These functions are clearly specified so that the staff know exactly what is expected of them. Job-holders are given the authority necessary to carry out their roles; c) A clearly defined hierarchy of offices: a firm system of supervision based on clear levels of authority. Each official knows whom to report to with specified rights of control and complaint procedures; d) Rules: A stable, comprehensive system of conduct which can be learned and may require technical qualifications to understand and administer; e) Impersonality: No hatred or passion with equality of treatment for all clients of the organization. Staff members are free of any external responsibilities and constraints. They are able to attend to their duties in a fair and objective way; f) Free selection of appointed officials: selected that is on the basis of professional qualifications, with proof shown by a diploma gained through examinations. They are appointed rather than elected so that there is no question of bias or favour; g) Full-time paid officials: Usually paid on the basis of hierarchical rank, the office being their sole or major concern. Officials are appointed on the basis of a contract. They have a monetary salary, and usually pension rights. The salary is graded according to the position in the hierarchy. The officers can leave their posts, and under certain circumstances employment can be terminated; h) Career officials: There is a career structure and a system of promotion based on seniority or merit based on the judgment of superiors;

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i)

Private/public split: Separates business and private life. The official works in a detached fashion from the ownership of the organization. The finances and interests of the two should be kept firmly apart: the resources of the organization are quite distinct from those of the members as private individuals. Officials may appropriate neither posts nor the resources which go with them. A radical notion at a time when bribery was the norm and officials regularly took a cut of any fee or payment due to their office;

j) There is a strict, systematic discipline and control of the official's work.

2.1.22. Despite being based on the idea of formal rationality, Weber's concepts were idealistic. He believed that bureaucratic control would lead to a number of social consequences (Weber, 1947):

a) A tendency to a levelling of the social classes by allowing a wide range of recruits with technical competence to be taken by any organization; b) Plutocracy, because of the time required to achieve the necessary technical training; c) Greater degree of social equality due to the dominance of the spirit of impersonality or objectivity

2.2. NEO CLASSICAL THEORY

2.2.1. The neoclassical theory, also referred to as the human relations school of thought reflects a modification to and improvement over the classical theories. While classical theories focused more on structure and physical aspects of work (notwithstanding Taylors concern for mental revolution), the neoclassical theory recognizes the primacy of psychological and social aspects of the worker as an individual and his relations within and among groups and the organisation.
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Though neoclassical philosophy could be traced to ancient times, it gained currency only after the World War I, particularly in the wake of the Hawthrone experiments at Western Electric Company by Elton Mayo during 1924 to 1932. 2.2.2. The initial experiments carried out cover a period of three years sought to determine the effects of different levels of illumination on workers productivity in the test groups, productivity raised irrespective of variations in illumination at indifferent experiments. In the second set of experiments which began in 1927 a smaller group of six female telephone operators was put under close observation and controls. Frequent changes were made in working conditions such as hours of work, lunches, rest periods, etc. Still, over a period of time as the experiments continued with such changes, productivity continued to rise. It was concluded that the social or human relationships among the operators, researchers, and supervisors influenced productivity more decisively than changes in working conditions. 2.2.3.The human relations movement evolved as a reaction to the tough, authoritarian structure of
classical theory. It addressed many of the problems inherent in classical theory. The most serious objections to classical theory are that it created overconformity and rigidity, thus squelching creativity, individual growth, and motivation. Neoclassical theory displayed genuine concern for human needs. 2.2.4. One of the first experiments that challenged the classical view was conducted by Mayo and Roethlisberger in the late 1920's at the Western Electric plant in Hawthorne, Illinois (Mayo, 1933). While manipulating conditions in the work environment (e.g., intensity of lighting), they found that any change had a positive impact on productivity. The act of paying attention to employees in a friendly and nonthreatening way was sufficient by itself to increase output. Uris (1986) referred to this as the "wart" theory of productivity. Nearly any treatment can make a wart go away--nearly anything will improve productivity. "The implication is plain: intelligent action often delivers results" (Uris, 1986, p. 225).

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2.2.5. The Hawthorne experiment is quite disturbing because it cast doubts on our ability to evaluate the efficacy of new management theories. An organization might continually involve itself in the latest management fads to produce a continuous string of Hawthorne effects. "The result is usually a lot of wheel spinning and cynicism" (Pascale, 1990, p. 103). Pascale believes that the Hawthorne effect is often misinterpreted. It is a "parable about researchers (and managers) manipulating and 'playing tricks' on employees." (p. 103) Erroneous conclusions are drawn because it represents a controlling and manipulative attitude toward workers. 2.2.6. Writing in 1939, Barnard (1968) proposed one of the first modern theories of organization by defining organization as a system of consciously coordinated activities. He stressed in role of the executive in creating an atmosphere where there is coherence of values and purpose. Organizational success was linked to the ability of a leader to create a cohesive environment. He proposed that a manager's authority is derived from subordinates' acceptance, instead of the hierarchical power structure of the organization. Barnard's theory contains elements of both classical and neoclassical approaches. Since there is no consensus among scholars, it might be most appropriate to think of Barnard as a transition theorist. 2.2.7. Simon (1945) made an important contribution to the study of organizations when he proposed a model of "limited rationality" to explain the Hawthorne experiments. The theory stated that workers could respond unpredictably to managerial attention. The most important aspect of Simon's work was the rigorous application of the scientific method. Reductionism, quantification, and deductive logic were legitimized as the methods of studying organizations. 2.2.8. Taylor, Weber, Barnard, Mayo, Roethlisberger, and Simon shared the belief that the goal of management was to maintain equilibrium. The emphasis was on being able to control and manipulate workers and their environment.

2.2.9. HUMAN RELATIONS. : The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of researchers participated in the studies, including Clair

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Turner, Fritz J. Roethlisberger, and Elton Mayo, whose respective books on the studies are perhaps the best known. One of the major conclusions of the Hawthorne studies was that workers' attitudes are associated with productivity. Another was that the workplace is a social system and informal group influence could exert a powerful effect on individual behavior. A third was that the style of supervision is an important factor in increasing workers' job satisfaction. The studies also found that organizations should take steps to assist employees in adjusting to organizational life by fostering collaborative systems between labor and management. Such conclusions sparked increasing interest in the human element at work; today, the Hawthorne studies are generally credited as the impetus for the human relations school

Factors Affecting Human Relations

Fig 2.2.1. : Human Relations in Action

2.2.10. According to the human relations school, the manager should possess skills for diagnosing the causes of human behavior at work, interpersonal communication, and motivating and leading workers. The focus became satisfying worker needs. If worker needs were satisfied,

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wisdom held, the workers would in turn be more productive. Thus, the human relations school focuses on issues of communication, leadership, motivation, and group behavior. The individuals who contributed to the school are too numerous to mention, but some of the best-known contributors include Mary Parker Follett, Chester Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human relations school of thought still influences management theory and practice, as contemporary management focuses much attention on human resource management, organizational behavior, and applied psychology in the workplace.

2.2.11. Hawthorne studies The experiments which inspired Elton Mayo and others to develop the Human Relations Movement. From 1924 the Western Electric Company of Chicago, influenced by scientific management theories, measured the impact of different working conditions (such as levels of lighting, payment systems, and hours of work) on output. The researchers, Fritz Roethlisberger and William J. Dickson, concluded that variations in output were not caused by changing physical conditions or material rewards but partly by the experiments themselves. The special treatment required by experimental participation convinced workers that management had a particular interest in them. This raised morale and led to increased productivity. The term Hawthorne effect is now widely used to refer to the behaviour-modifying effects of being the subject of social investigation, regardless of the context of the investigation. More generally, the researchers concluded that supervisory style greatly affected worker productivity. 2.2.12. Later work, involving covert observation of working practices, showed how the pace and organization of work is regulated by informal social norms and organization among workers. These studies led Mayo to claim that workers are not primarily motivated by economic factors but by management styles and informal work organization. Enhanced productivity therefore

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depends on management sensitivity to, and manipulation of, the human relations of production. Critics point to methodological defects in the Hawthorne experiments and question the key conclusion drawn from themthat economic factors are less important in determining productivity than the degree of psychological satisfaction which work provides. The best discussion of the studies is still to be found in John Madge's The Origins of Scientific Sociology(1963).

2.3. BEHAVIOURAL SCIENCE APPROACH

2.3.1 Behavioral science and the study of organizational behavior emerged in the 1950s and 1960s. The behavioral science school was a natural progression of the human relations movement. It focused on applying conceptual and analytical tools to the problem of understanding and predicting behavior in the workplace. However, the study of behavioral science and organizational behavior was also a result of criticism of the human relations approach as simplistic and manipulative in its assumptions about the relationship between worker attitudes and productivity. The study of behavioral science in business schools was given increased credence by the 1959 Gordon and Howell report on higher education, which emphasized the importance to management practitioners of understanding human behavior.

2.3.2. The behavioral science school has contributed to the study of management through its focus on personality, attitudes, values, motivation, group behavior, leadership, communication, and conflict, among other issues. Some of the major contributors to this school include Douglas McGregor, Chris Argyris, Frederick Herzberg, Renais Likert, and Ralph Stogdill, although there are many others.

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2.3.3. Necessity for the behavioral science approach to management. There are many views of management, or schools of management thought, that have devolved over the years. The classical school of management thought emerged throughout the late 1800s as a result of the Industrial Revolution. The Industrial Revolution emphasized the importance of better management as organizations grew larger and more complex. Classical management theorists assumed that people could make logical and rational decisions while trying to maximize personal gains from their work situations. It was because the classical management theorists were so machine-oriented that the behavioralists began to develop their thinking. The behavioral managers began to view management from a social and psychological perspective. These managers were concerned about the well-being of the workers and wanted them to be treated as people, not as a part of the machines. 2.3.4. Introduction to the behavioral science approach : Advocates of the human relations movement believed that if managers focused on employees rather than on mechanistic production, then workers would become more satisfied and thus, more productive. They supported the notion that managers should be paternalistic and nurturing in order to build work groups that could be productive and satisfied. The behavioral science movement stressed the need for scientific studies of the human element of organizations. This model for management emphasized the need for employees to grow and develop in order to maintain a high level of self-respect and remain productive workers. 2.3.5. Some of the early behavioral theorists were Robert Owen, Hugo Munsterberg, Walter Dill Scott and Mary Parker Follett. Other advocates of the behavioral science movement were

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Abraham Maslow, who developed Maslow's hierarchy of needs, and Douglas McGregor, who developed Theory X and Theory Y. The behavioral approach focuses on the psychological and
sociological processes (attitude, motivations, group dynamics) that influence employee performance. While the classical approach focuses on the job of workers, the behavioral approach focuses on the workers in these jobs. Workers desisted the formal and impersonal approach of classical writers. Behavioural approach started in 1930. This gave rise to the Behavioural approach. Two branches contributed to the Behavioural approach.

2.3.6. Human relations movements: Hawthorne expressed it.Development of organisational behaviour: pioneers of the human relation movement stressed inter-personal relations and neglected the group behaviour patterns. This led to the development of field of organisational behaviour. It respects a more. Interdisciplinary and multi-dimensional approach to worker behaviour organisation behaviour involves the study of the attitudes, behaviour patterns and performance of individuals and group in an organisational setting. It says that:

(a) Man is not a social individual, he is a complex individual.

(b) The role and contribution of organisation behaviour in workers.

(c) It discussed the psychological variables like motivations, leading etc.

(d) Man is a self-actualizing being.

2.3.7. Classification of human needs by Maslow as under:

a) Physiological needs: these needs are related to the survival and maintenance of life. These include food, clothing, shelter etc.

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b) Safety needs: these consist of safety against murder, fire, accident, security against unemployment etc. c) Social needs: these needs include need for love, affection, belonging or association with family, friends and other social groups. d) Ego or esteem needs: these are the needs derived from recognition status, achievement, power, prestige etc. e) Self-fulfillment: it is the need to fulfill what a person considers to be his real mission of life.

Fig 2.3.1. : Maslows Hierarchical Needs

Maslow is of the opinion that these needs have a hierarchy and are satisfied one by one. When first needs are satisfied then person moves to second and so on.

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2.3.8. Contributions of Behavioural science approach: The behavioural science approach is concerned with the social and psychological aspects of human behaviour in organisation. Many of the conclusions of the Howthorne studies were reaffirmed by the subsequent research studies, but certain ideas were extended and others highlighted by the behavourial scientists. Some of the important elements of the behavourial science approach are highlighted below.

a) Individuals differ in terms of their attitudes, perception and value systems. Therefore, they react differently to the same situation. b) People working in an organisation have their needs and goals, which may differ from the organisations needs and goals. Management should achieve fusion between organisational goals and human needs. c) Individual behaviour is closely linked with the behaviour of the group to which he belongs. A person may be inclined to resist pressures to change his behaviour as an individual. But he will readily do so if the group decides to change its behaviour. With work standards laid down by the group, individuals belonging to that group will resist change more strongly. d) Informal leadership, rather than the formal authority of supervisor, is more important for setting and enforcing group standards of performance. As a leader (manger) may be more effective and acceptable to the subordinates if he adopts the democratic style of leadership. If the subordinates are encouraged to participate in establishing the goals, there will be positive effect on their attitude towards work. Changes in technology and methods of work, which are often resisted by employees, can be brought about more easily by involving the employees in planning and designing the jobs.

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e) By nature most people enjoy work and are motivated by self-control and selfdevelopment. It is for the managers to identify and provide necessary conditions for the human potential to be used in the service of the organisation. The managers attitude towards human behaviour should be positive.

2.3.9. The behavioural scientists have shown how human beings bring to their task aspects of behaviour, which the effective manager should profitably understand. After all, it is individuals and groups with which a manager is concerned and while organisational roles are designed to accomplish group purposes, people must fill these roles. Thus, the behavioural sciences have provided managers with a ore systematic understanding of one of the most critical factors in the process of managementthe human element. Insights evolving from that understanding have been used to design work situations that encourage increased productivity. It has enabled organisations to formulate programmes to more efficiently train workers and managers, and it has effects in numerous other areas of practical significance.

3. MODERN ORGANISATION THEORY

The modern organizational theories are as follows :

i. Systems Approach

ii. Contingency Approach

3.1. SYSTEMS APPROACH

3.1.1. The systems school focuses on understanding the organization as an open system that transforms inputs into outputs. This school is based on the work of a biologist, Ludwig von
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Bertalanffy, who believed that a general systems model could be used to unite science. Early contributors to this school included Kenneth Boulding, Richard Johnson, Fremont Kast, and James Rosenzweig.

3.1.2. The systems school began to have a strong impact on management thought in the 1960s as a way of thinking about managing techniques that would allow managers to relate different specialties and parts of the company to one another, as well as to external environmental factors. The systems school focuses on the organization as a whole, its interaction with the environment, and its need to achieve equilibrium. General systems theory received a great deal of attention in the 1960s, but its influence on management thought has diminished somewhat. It has been criticized as too abstract and too complex.

3.1.3.Systems theory was originally proposed by Hungarian biologist Ludwig von Bertalanffy in 1928, although it has not been applied to organizations until recently (Kast and Rosenzweig, 1972; Scott, 1981). The foundation of systems theory is that all the components of an organization are interrelated, and that changing one variable might impact many others. Organizations are viewed as open systems, continually interacting with their environment. They are in a state of dynamic equilibrium as they adapt to environmental changes.

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Fig 3.1. : Open System. View of Organisation

3.1.4. Systems theory was originally proposed by Hungarian biologist Ludwig von Bertalanffy in 1928, although it has not been applied to organizations until recently (Kast and Rosenzweig, 1972; Scott, 1981). The foundation of systems theory is that all the components of an organization are interrelated, and that changing one variable might impact many others. Organizations are viewed as open systems, continually interacting with their environment. They are in a state of dynamic equilibrium as they adapt to environmental changes.

3.1.5. Senge (1990) describes systems thinking as: Understanding how our actions shape our reality. If I believe that my current state was created by somebody else, or by forces outside my control, why should I hold a vision? The central premise behind holding a vision is that somehow I can shape my future, Systems thinking helps us see how our own actions have shaped our current reality, thereby giving us confidence that we can create a different reality in the future.

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3.1.6. A central theme of systems theory is that nonlinear relationships might exist between variables. Small changes in one variable can cause huge changes in another, and large changes in a variable might have only a nominal effect on another. The concept of nonlinearity adds enormous complexity to our understanding of organizations. In fact, one of the most salient argument against systems theory is that the complexity introduced by nonlinearity makes it difficult or impossible to fully understand the relationships between variables.

3.1.7. Systems theory has had a significant effect on management science and understanding organizations. First, lets look at what is a system? A system is a collection of part unified to accomplish an overall goal. If one part of the system is removed, the nature of the system is changed as well. For example, a pile of sand is not a system. If one removes a sand particle, youve still got a pile of sand. However, a functioning car is a system. Remove the carburetor and youve no longer got a working car. A system can be looked at as having inputs, processes, outputs and outcomes. Systems share feedback among each of these four aspects of the systems. 3.1.8. Lets look at an organization. Inputs would include resources such as raw materials, money, technologies and people. These inputs go through a process where theyre planned, organized, motivated and controlled, ultimately to meet the organizations goals. Outputs would be products or services to a market. Outcomes would be, e.g., enhanced quality of life or productivity for customers/clients, productivity. Feedback would be information from human resources carrying out the process, customers/clients using the products, etc. Feedback also comes from the larger environment of the organization, e.g., influences from government, society, economics, and technologies. This overall system framework applies to any system, including subsystems (departments, programs, etc.) in the overall organization.

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3.1.9. Systems theory may seem quite basic. Yet, decades of management training and practices in the workplace have not followed this theory. Only recently, with tremendous changes facing organizations and how they operate, have educators and managers come to face this new way of looking at things. This interpretation has brought about a significant change (or paradigm shift) in the way management studies and approaches organizations.

3.1.10. The effect of systems theory in management is that writers, educators, consultants, etc. are helping managers to look at the organization from a broader perspective. Systems theory has brought a new perspective for managers to interpret patterns and events in the workplace. They recognize the various parts of the organization, and, in particular, the interrelations of the parts, e.g., the coordination of central administration with its programs, engineering with manufacturing, supervisors with workers, etc. This is a major development. In the past, managers typically took one part and focused on that. Then they moved all attention to another part. The problem was that an organization could, e.g., have a wonderful central administration and wonderful set of teachers, but the departments didnt synchronize at all.

3.2. CONTINGENCY APPROACH

3.2.1. Classical and neoclassical theorists viewed conflict as something to be avoided because it interfered with equilibrium. Contingency theorists view conflict as inescapable, but manageable.

3.2.2. Chandler (1962) studied four large United States corporations and proposed that an organization would naturally evolve to meet the needs of its strategy -- that form follows function. Implicit in Chandler's ideas was that organizations would act in a rational, sequential,

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and linear manner to adapt to changes in the environment. Effectiveness was a function of management's ability to adapt to environmental changes.

3.2.3.Lawrence and Lorsch (1969) also studied how organizations adjusted to fit their environment. In highly volatile industries, they noted 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.

3.2.4.Basically, contingency theory asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand. Basically, its the approach that it depends. For example, the continuing effort to identify the best leadership or management style might now conclude that the best style depends on the situation. If one is leading troops in the Persian Gulf, an autocratic style is probably best (of course, many might argue here, too). If one is leading a hospital or university, a more participative and facilitative leadership style is probably the best.

3.2.5.The contingency school focuses on applying management principles and processes as dictated by the unique characteristics of each situation. It emphasizes that there is no one best way to manage and that it depends on various situational factors, such as the external environment, technology, organizational characteristics, characteristics of the manager, and characteristics of the subordinates. Contingency theorists often implicitly or explicitly criticize the classical school for its emphasis on the universality of management principles; however, most classical writers recognized the need to consider aspects of the situation when applying management principles.

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3.2.6.The contingency school originated in the 1960s. It has been applied primarily to management issues such as organizational design, job design, motivation, and leadership style. For example, optimal organizational structure has been theorized to depend upon organizational size, technology, and environmental uncertainty; optimal leadership style, meanwhile, has been theorized to depend upon a variety of factors, including task structure, position power, characteristics of the work group, characteristics of individual subordinates, quality requirements, and problem structure, to name a few. A few of the major contributors to this school of management thought include Joan Woodward, Paul Lawrence, Jay Lorsch, and Fred Fiedler, among many others.

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BIBLIOGRAPHY
BOOKS:
A. Gupta, C.B.; Managemant Concepts & Practices, Sultan Chand & Sons, New Delhi, 2003 B. P.C. Tripathy & P.N. Reddy; Principles & Practices of Management, 2nd edition, Tata McGrawHill

URLs:
A. http://www.managementsite.com/450/The-Nature-of-Organizations.aspx B. http://www.managers-net.com/administrativemanagement.html

C. http://bustingbureaucracy.com/excerpts/management.html D. http://wiki.answers.com/Q/What_is_Neoclassical_theory_of_management

E. http://www.mbaknol.com/management-principles/the-behavioral-science-approach-tomanagement/ F. http://www.buzzle.com/articles/systems-approach-to-management.html

G. http://www.enotes.com/management-encyclopedia/contingency-approach-management H. http://www.google.co.in/imgres?imgurl=http://steves.seasidelife.com/maslow.jpg&imgre furl=http://steves.seasidelife.com/2006/03/page/2/&usg=__2MJz6dTqnA2oG44nZeGP5YCDlM=&h=397&w=570&sz=68&hl=en&start=22&tbnid=0U-Uw3NkPjYJ3

I. http://www.google.co.in/imgres?imgurl=http://upload.wikimedia.org/wikipedia/comt/ind ex.php%3Fcatid%3D%26name%3DNews%26topic%3D7&usg=__1kJ1DnWFbHVrNp6 Yvl05ibqZYR4

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CERTIFICATION
This is to certify that Anshul Saxena (E.No. 02621301709) has completed his project report on Organisational Theories in partial fulfillment of B.B.A. (Gen) programme from Tecnia Institute of Advanced Studies, affiliated to Guru Gobind Singh Indaprastha University, under my Guidance & his work is original.

Project Guide

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