Industrial Psychology Board Review
Organizational Theory and the Foundations of Organizations
Organization: Defined as collectivities of parts that cannot accomplish goals effectively if they operate separately. It is a tool used by people to coordinate actions to obtain something valued and achieve goals. It is a social entity made up of people agreeing on and working toward common objectives. Organizations create value through a cycle involving: Environment (Customers, Suppliers) > Input (Raw Materials, IT, HR) > Process (Machines, Computers, KSAOs) > Output (Products, Services). Organizations must create value or they effectively "die."
Organizational Theory: A set of propositions that explains or predicts how groups and individuals behave within varying organizational structures and circumstances.
Classical Organizational Theory and Principles
Classical Organizational Theory: Built on the premise that organizations exist for economic reasons and to accomplish productivity goals. It assumes there is one "right" structure and one best configuration to accomplish objectives, identifiable through scientific analysis. Both people and organizations act according to rational economic principles.
Basic Ingredients of Organization:
System of differentiated activities: Linked activities forming a whole.
People: Perform tasks and exercise authority.
Cooperation toward a goal: Unity of purpose.
Authority: Ensures cooperation among people pursuing goals.
Major Principles of Classical Theory:
Functional Principle: The concept behind the division of labor; organizations should be divided into specialized units.
Scalar Principle: Deals with vertical growth and the chain of command. Levels added to the organization increase this scale. Under this, "Unity of Command" dictates that each subordinate is accountable to only one superior.
Line/Staff Principle:
Line Functions: Primary responsibility for meeting major organizational goals (e.g., production).
Staff Functions: Support line activities but are considered subsidiary in importance.
Span-of-Control Principle: The number of subordinates a manager supervises. Large spans produce flat organizations; small spans produce taller organizations.
Major Classical Approaches: Taylor, Weber, and Fayol
Scientific Management by Frederick Taylor: Views the organization as a pragmatic machine focused on efficiency. Principles include planning of work, standardization, specialization, and simplification. Taylor believed the traditional boss concept (doing both planning and execution) should be eliminated: managers handle planning, while employees handle execution.
Taylorism: The premise that there is "one best way" to get a job done.
Key components: Management gathers data from workers, scientific selection and training of workers, scientific selection of work, and cooperation between management and labor.
Time and motion studies: Analyzed conditions like temperature and illumination to see their effects on productivity.
Bureaucracy by Max Weber: Defined as the ideal form of efficient organization characterized by formal hierarchy, division of labor, and clear operating procedures.
Characteristics: Specialization of labor, well-defined authority hierarchy, formal rules, impersonality (logical reasoning over emotion), merit-based employment, and emphasis on written records.
Delegation of Authority: Approach where supervisors assign tasks and hold employees responsible.
Principles of Scientific Approach to Bureaucracy: Structure (top-down), Specialization (functional), Predictability/Stability (rules), Rationality (no bias), and Democracy (ability to vote).
Administrative Management by Henri Fayol: Focuses on synchronizing internal processes through specific management functions (Planning, Organizing, Staffing, Coordinating, Directing, Reporting, Budgeting) and fourteen principles:
Division of Specialization: Workers become proficient in limited activities.
Employed: Working in chosen field.
Underemployed: Working outside chosen field.
Unemployed: No work.
Authority and Responsibility: Command authority paired with responsibility for work.
Discipline: Obedience to instructions.
Unity of Command: Instructions from only one executive.
Unity of Direction: Singular plan for each workgroup guided by one supervisor.
Subordination of Individual Interest: Group interest prevails over individual interest.
Remuneration of Personnel: Compensation to incentivize performance.
Centralization: Decision-making location depends on worker competency and organization type.
Scalar Chain: Hierarchy of authority from top to bottom.
Order: Designed rules for work environment.
Equity: Principles of fairness.
Stability of Tenure: Minimizing turnover to allow skill development and loyalty. Uses Progressive Discipline (graduated steps for conduct issues).
Initiative: Allowing employees to create and carry out plans.
Esprit De Corps: Sense of unity and belonging.
Structural and Modern Organizational Theories
Structural Theory (Harry Mintzberg): Viewed structure as an adaptive mechanism letting organizations function in surroundings. Proposed seven basic parts of an organization:
Operating Core: Conducts basic work duty (e.g., transforming raw goods).
Strategic Apex: Executive leadership for overall success.
Middle Line: Ensures strategic goals are carried out by the core.
Technostructure: Technical experts (IT, HR, Accounting, Law).
Support Staff: Aid the basic mission (Janitorial, Security, Mailroom).
Ideology: Belief system compelling commitment to a mission.
Politics: Divisive use of power that is not formally authorized.
Modern Organization Theory: Views the organization as a system that must adapt to environmental changes.
Systems Approach:
Subsystems: Interrelated parts.
Open vs. Closed: Interaction vs. no interaction with the environment.
Elements: Components, Linking Processes (Communication, Balance, Decision Analysis), and Goals (Growth, Stability).
Socio-Technical Approach: Equilibrium between the social system (people), technical system (tools/knowledge), and environment.
Joint Optimization: Designing social and technical systems to fit each other.
Unit Control of Variance: Who handles work problems when they arise.
Open System Theory (Katz & Kahn): Organizations change due to internal and external forces.
Negative Entropy: The movement toward disorganization/death that organizations must avoid.
Feedback Loop: Information allowed for course correction.
Equifinality: Reaching the same end state in different ways (no "one best way").
Contingency Approach: Based on "it depends." No universal guidelines; behavior must fit specific circumstances.
Joan Woodward's Model: Matched structure to technology. Small-batch (moderate span/short chain), Mass production (large span/long chain), Continuous process (largest span).
Lawrence and Lorsch: Differentiation (complexity of units) vs. Integration (collaboration). Stable environments favor Mechanistic Organizations (rules, tall hierarchy); unstable ones favor Organic Organizations (wide span, decentralized).
Neoclassical and Humanistic Theory
Neoclassical Theory (Behavioral/Human Relations): Recognizes importance of group behavior and human relations. Productivity results from high morale and personal attention.
Hawthorne Experiment (Elton Mayo): Study at Western Electric showed workers were more productive when interest was shown in them (Hawthorne Effect).
Chester Barnard: Focused on purpose, moral codes, and formal/informal communication.
Herbert Simon: Applied classical theories to modern situations (Decision Theory).
Humanistic Theory: Focuses on motivation and interpersonal relationships.
Theory X/Theory Y (McGregor):
Theory X: Belief that employees are lazy, selfish, and need control. Leads to apathy.
Theory Y: Humanistic view that employees are inherently good with potential. Management's role is nurturing.
Argyris' Growth Perspective: Passive to active organism development; organizations must acknowledge growth to prosper.
Individual Differences and Work Motivation
Motivation: Internal force driving action and external factors encouraging it.
Self-Esteem: Consistency Theory suggests high self-esteem leads to better performance.
Chronic: Overall feeling.
Situational: Feeling in a specific context.
Socially Influenced: Based on expectations of others.
Performance Effects:
Galatea Effect: Relationship between self-expectations and performance.
Pygmalion/Rosenthal Effect: Manager confidence leads to employee self-esteem increase.
Golem Effect: Negative manager expectations lead to decreased performance.
Intrinsic vs. Extrinsic: Intrinsic seekers enjoy tasks; extrinsic seekers focus on rewards or avoiding consequences.
Needs for Achievement, Affiliation, and Power (McClelland):
Achievement: Motivated by challenge and control.
Affiliation: Motivated by helping and working with others.
Power: Motivated by influencing others (Personal vs. Institutional).
Job Characteristics Theory (Hackman & Oldham): Core characteristics leading to meaningfulness and motivation:
Skill Variety: Different talents used.
Task Identity: Completing a whole piece of work.
Task Significance: Impact on society/org.
Autonomy: Freedom in scheduling/procedures.
Feedback: Clear info on performance.
Maslow's Need Hierarchy: Physiological > Safety > Belongingness/Social > Ego > Self-Actualization.
ERG Theory (Alderfer): Existence, Relatedness, Growth. Multiple needs can motivate simultaneously.
Two-Factor Theory (Herzberg):
Motivators: Relate to work content (Responsibility, achievement). Affect satisfaction.
Hygiene Factors: Context of work (Salary, security, policies). Lack causes dissatisfaction.
Reinforcement Theory: Drawn from operant conditioning. Behavior is motivated by consequences.
Premack Principle: Using a preferred activity to reinforce a less preferred one.
Schedules: Fixed Interval (salary), Fixed Ratio (sales commission), Variable Interval, Variable Ratio (slot machine).
Goal Setting Theory (Locke): Specific, Measurable, Attainable, Relevant, Time-Bound (SMART) goals results in higher motivation.
Equity Theory (Adams): Motivation based on perceived fairness in Input/Output ratios compared to others.
Expectancy Theory (Vroom): Force = Expectancy (effort-performance link) \times Instrumentality (performance-outcome link) \times Valence (value of outcome).
MARS Model of Individual Behavior: Performance is a result of Motivation, Ability, Role Perception, and Situational Factors.
Personality and Leadership
Five-Factor Model of Personality (Costa & McCrae):
Conscientiousness: Best predictor of task performance (organized, dependable).
Agreeableness: Trusting, flexible.
Neuroticism: Anxious, insecure.
Openness to Experience: Creative, curious.
Extraversion: Outgoing, assertive.
IMPACT Theory: Leadership styles based on group climate:
Informational (Climate: Ignorance)
Magnetic (Climate: Despair)
Position (Climate: Instability)
Affiliation (Climate: Anxiety)
Coercive (Climate: Crisis)
Tactical (Climate: Disorganization)
Path-Goal Theory: Leader adopts styles (Instrumental, Supportive, Participative, Achievement-Oriented) to clear the path for subordinates.
Situational Leadership Theory: Based on subordinate readiness:
Delegating: Willing and able.
Directing: Unwilling and unable.
Coaching: Willing but unable.
Supporting: Unwilling but able.
Leader-Member Exchange (LMX) Theory: Leaders develop high-quality relationships (In-Group) or low-quality relationships (Out-Group) with subordinates.
Transformational Leadership: Focuses on charisma, intellectual stimulation, and vision to change goals and values.
Transactional Leadership: Focuses on task-oriented exchange and goal attainment.
Organizational Design and Structure
Elements of Structure:
Chain of Command: Authority levels.
Span of Control: Subordinates per manager.
Centralization vs. Decentralization: Concentration of decision power.
Formalization: Standardization through rules.
Structural Models:
Simple: Few people, minimal hierarchy.
Functional: Grouped by knowledge/resource.
Divisional: Grouped by geography, client, or product.
Matrix: Overlay of functional and product structures (Reporting to two bosses).
Network: Alliance of organizations to build product/service.
Types of Organizations:
Traditional: Bureaucratic, stable, resistant to change.
Nontraditional: Organic, team-based (Avenger-like project task forces), matrix.
Downsizing, Outsourcing, and Offshoring:
Downsizing: Cutting jobs (Horizontal = within dept; Vertical = whole dept elimination).
Outsourcing: External employees for internal functions.
Offshoring: Exporting work to cheaper overseas labor markets.
Mergers and Acquisitions:
Merger: Equal status marriage.
Acquisition: Procurement (Hostile Takeover involves an unwilling partner).
Human Resource Development (HRD) and Management (HRM)
HRM: Focus on present needs, acquiring, training, appraising, and compensating.
HRD: Focus on future needs, developing skills, knowledge, and abilities for future roles.
Manpower/Workforce Planning: Estimating required people and matching supply/demand.
Forecasting techniques: Trend analysis, Ratio analysis, Scatter plots, Markov analysis (internal supply).
Job Analysis: The cornerstone of personnel selection. Assesses Tasks, KSAOs, Performance levels, and Workplace characteristics.
Recruitment: Attracting people. Internal (Postings, rehiring) vs. External (Ads, Search firms, Referrals, Job Fairs).
Recruitment Yield Pyramid: Gauges staffing needs.
Schneider's ASA Framework: Attraction-Selection-Attrition; people attracted to similar orgs; dissimilar ones leave.
Selection Interviews:
Structured (standardized scoring) vs. Unstructured (prone to bias, primacy, contrast effects).
Styles: One-on-one, Serial, Panel, Group.
Questions: Clarifiers, Disqualifiers, Future-focused (Situational), Past-focused (Behavioral).
Test Evaluation:
Taylor-Russell Tables: Estimate success if test is used.
Lawshe Tables: Content Validity Ratio.
Brogden-Cronbach-Gleser Utility Formula: Savings gained from using a test.
Performance Appraisal Techniques:
Graphic Rating Scale; Alternation Ranking; Paired Comparison (); Forced Distribution; Critical Incident; BARS (Behaviorally Anchored Rating Scales); MBO (Management by Objectives).
Rating Errors: Halo effect, Central tendency, Leniency, Strictness, Recency.
Training Methods:
Classroom; E-learning; Case Study; Behavior Modeling; Simulation; Role Playing; Training Games; In-basket Training; On-the-Job (OJT); Apprenticeship.
Evaluation Criteria: Reactions, Learning, Behavior Change (Transfer of Training), Results (ROI/Benchmarking).
Team Dynamics
Team vs. Group: Team requires interdependence and shared goals. Groups can just be a collection of units.
Social Effects:
Social Facilitation: Presence of others improves performance.
Social Inhibition: Presence of others impairs performance.
Social Loafing: Exerting less effort in a group (Max Ringelmann). Prevented by smaller groups and distinct tasks.
Brooks' Law: Adding people to a late project makes it later.
Team Development Stages (Tuckman): Forming, Storming, Norming, Performing, Adjourning.
Effective Member Behavior (5 C's): Cooperating, Coordinating, Communicating, Comforting, Conflict Handling.
Problems in Teams:
Groupthink: Cohesive members making poor decisions to maintain harmony. Protected by "Mindguards."
Production Blocking: Time taken to build rapport slows decisions.
Evaluation Apprehension: Reluctance to share "silly" ideas.
Conflict Resolution Styles: Avoiding (Triangling involves 3rd party), Accommodating, Forcing (Win-Lose), Collaborating (Win-Win), Compromising.
Organizational Change and Development (OD)
Organizational Change: Altering culture, technology, or infrastructure.
Evolutionary (gradual) vs. Revolutionary (drastic).
Lewin's Change Model: Unfreezing (breaking status quo) > Moving (real change) > Refreezing (stabilizing).
Kotter's 8-Stage Model: Urgency > Guiding Team > Vision > Communicate Vision > Empower Action > Short-Term Wins > Build on Wins > Embed in Culture.
Appreciative Inquiry (Positive OD): Discovery (strengths) > Dream (vision) > Design (planning) > Destiny (execution).
Resistance to Change: Technical (habit), Political (stakeholder threat), Cultural (conformity).
OD Interventions:
Human Process: Team building, confrontation meetings.
Technostructural: Reengineering, downsizing.
Human Resource: Performance management, training.
Strategic: Transformational change.
Power in Organizations
Power Bases:
Coercive: Ability to punish.
Reward: Ability to give positive reinforcement.
Legitimate: Formal authority (Legal, Traditional, or Charismatic).
Expert: Special knowledge.
Referent: Respected/liked status.
Organizational Politics: Action taken to influence others for personal goals. Tactics include Ingratiation (#sipsip), Assertiveness, Upward Appeals, and Coalition Building.
Communication Flow:
Horizontal: Between co-workers at the same level.
Downward: Higher to lower level info.
Upward: Lower to higher feedback/control."