Organisation Theory and Behaviour - Notes

The Concept of Organisation

• Organization is people working together for a common goal.
• It is a group of individuals with a common goal, bound by authority-responsibility relationships.
• Organization is the backbone of management.

Definitions

• Mooney and Reiley: “Organisation is defined as the form of human association for attaining common objectives.”
• Chester I Banard: “Organisation is a system of consciously coordinated activities of two or more persons.”
• Louis A. Allen: “Organisation can be defined as the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”
• Koontz and O’ Donnel: “The establishment of authority relationships with provision for coordination between them, both vertically and horizontally in the enterprise structure, is the essence of organisation.”

Characteristics of Organisation

1. Division of Work: Total work is divided into activities and functions, assigned to different persons.
2. Co-Ordination: Integrating and harmonising various activities, avoiding duplication and delays.
3. Common Objectives: All organisational structure leads to achieving enterprise goals.
4. Co-operative Relationship: Creating co-operative relationships among group members.
5. Well-Defined Authority-Responsibility Relationships: Hierarchy with defined authority and responsibility.

Types of Organization

1. Formal Organization
2. Informal Organization

Formal Organization

• Exists when people come together for a common purpose with legal & formal relationships.
• Based on posts with set rules, regulations, and policies.

Features:

1. Intentionally created.
2. Aims to achieve organisational goals.
3. Specific job assigned to each individual.
4. Fixed authority/decision-making power.
5. Superior-subordinate relations.
6. Scalar chain of communication.

Advantages:

1. Systematic working.
2. Achievement of objectives.
3. No overlapping of work.
4. Co-ordination.
5. Chain of command creation.
6. Emphasis on work.

Disadvantages:

1. Delay in action.
2. Ignores social needs.
3. Emphasis on work only.

Informal Organisation

• Social and friendly groups formed within the formal organization.
• Based on relationships.

Features:

1. Created automatically.
2. For psychological satisfaction.
3. No fixed path of authority/communication.
4. Source of information unknown.
5. Depends on the formal structure.

Advantages:

1. Fast communication.
2. Fulfills social needs.
3. Correct feedback.
4. Strategic use.

Disadvantages:

1. Spreads rumours.
2. No systematic working.
3. May bring negative results.
4. Emphasis on individual interest.

Meaning of Organization Behaviour

• Studies people's actions in an organization and their effects on performance.
• Understanding, prediction, and management of human behavior individually or in groups.
• Systematic study of individual and group behaviours in organisations

Definitions:

1. Stephens P. Robbins: Impact of individuals, groups, and structure on behavior within organizations.
2. Newstrom and Davis: Study and application of knowledge about how people act within an organization.
3. Fred Luthans: Concerned with understanding, production, and control of human behaviour in organisations.
4. Raman J. Aldag: Theories to predict, understand, and control behaviour in work organisations.
5. Callahan, Fleenor and Kudson: Subset of management activities concerned with influencing individual behaviour.

Characteristics of Organisational Behavior:

1. Science and Art
2. Human tool
3. Action & goal oriented
4. Commonality of Interest
5. Holistic Concepts
6. Behavioural Approach to Management
7. Integrating Approach
8. Cause and Effect Relationship
9. Branch of Social Sciences

Theories of Organization

1. Classical Theory (1900 – 1930)
2. Neo-Classical Theory (1930 – 1960)
3. Modern Organisation Theory (after 1960)

1. Classical Organisation Theory:

• Views organisation as a machine, humans as components.
• Emphasis on specialisation and co-ordination.
• Ignores human aspects.

Pillars of Organisation Theory:

1. Division of work
2. Scalar and functional processes
3. Structure
4. Span of control

(i) Division of Labour

Work is divided to obtain specialisation.

(ii) Scalar and Functional Process

• Scalar process: chain of command, delegation of authority.
• Functional process: division into specialized departments.

(iii) Structure

Framework of formal relationships.

(iv) Span of Control

Number of subordinates a manager can control.

Appraisal of Classical Theory:

1. Concentrated only on line and staff structures.
2. Did not emphasize decision-making processes.
3. Human behaviour was ignored.
4. The assumption that organisation in a closed system is unrealistic.

2. Neo-Classical Organisation Theory:

• Focuses on human beings in the organisation.
• Includes both formal and informal organizations.

Main proposals:

1. Organisation is a social system.
2. Informal organisations exist within the formal organisation.
3. Human behaviour can be predicted.
4. Motivation is complex.
5. Conflict exists between organisational/individual goals.
6. Team-work is essential.
7. Man’s approach is not always rational.
8. Communication is necessary.

Improvements over Classical Theory:

1. Flat structure
2. Decentralization
3. Informal organisations

Criticisms:

1. Assumptions are not always true.
2. No structure suits all organisations.
3. Modification of classical theory, suffers from same drawbacks.

Difference between Classical and Neoclassical Approach

3. Modern Organisation Theory:

• Developed in the early 1960’s.
• Overcomes drawbacks of earlier theories.
• Conceptual analytical base.
• Integrating nature.
• Systems approach
• Contingency approach

Systems Approach:

• Studies the organisation in its totality.
• Analyzes dependent variables.
• Includes internal and external variables.

Contingency Approach:

• Organisational design that suits a particular unit.

Main proposals:

1. Open system.
2. Adaptive nature.
3. Dynamic.
4. Probabilistic.
5. Multilevel and multidimensional.
6. Multi-variable.

Organizational Goals

• Strategic objectives set by management.

Types of organizational goals

1. Strategic goals
2. Tactical goals
3. Operational goals

Levels of goals within an organization form a hierarchy

• lower-level goals forming a means-end chain with the next level of goals.

Importance of Organizational goals

1. Provide Guidance and Direction.
2. Intensely Planning and Actions
3. Motivate.
4. Help in Control.

Goal Displacement

• Resources used for a purpose other than the organization's existence.
• Original goals are replaced.

Reasons for Goal Displacement

1. Goal Conflict
2. Abstract goals
3. Employee attitude
4. Goal Substitution

Goal Distortion

• Misunderstanding/misapplication of organisational goals.

Organization structure

• Framework that prescribes relationships among activities and positions.

Determinants of Organisation Structure

1. Nature of the Objectives
2. Operative Activities
3. Technology
4. Sequence of Tasks
5. Limitations of Skill and Working Capacity
6. Managerial Functions
7. Size and Scope
8. People

Importance of Organisational Structure

1. Clear definition of authority.
2. Facilitates communication.
3. Coordinates activities.
4. Helps in growth and diversification.
5. Increases worker participation.
6. Easier implementation of policies.
7. Prevents duplication.

Designing of Organisational Structure

1. Environment
2. Technology
3. Size of the organisation
4. Strategy

Types of Organisational Structures

1. Line Organisational Structure
2. Line and Staff Organisational Structure
3. Hybrid Organisational Structure
4. Matrix Organisation

1. Line Organisational Structure:

• Direct, vertical relationships between different levels in the firm.
• Only line departments.
• Authority follows the chain of command.

Advantages:

1. Simplifies responsibility, authority relationships.
2. Promotes fast decision making.
3. Greater closeness between managements and employees.

Dis-advantages:

1. Becomes ineffective as the firm grows.
2. Lack of specialized knowledge.
3. Managers become experts in too many fields.
4. Overly dependent on key people.

2. Line and Staff Organisational Structure:

• Functional specialists added to the line.
• Staff is advisory, with no command authority.

Advantages:

1. Line officers concentrate on doing, staff on planning/investigation.
2. Specialisation provides expert advice.
3. Easy decisions.
4. Complete factual data to line officers.
5. Opportunity for worker advancement.
6. Training ground for positions.
7. Flexibility for new activities.
8. Staff specialists are conceptually oriented.

Disadvantages:

1. Confusion and conflict between line and staff.
2. Staffs often feel powerless.
3. Too much reliance on staff officers.
4. Line makes the final decisions
5. Staff officers are much educated .so high payment is expensive
6. The staff are unable to carry out its plan or recommendations

3. Hybrid Organisational Structure:

• Used by multinational companies.
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Advantages:

1. Alignment of corporate and divisional goals.
2. Functional expertise and efficiency.
3. Adaptability and flexibility in divisions.

Disadvantages:

1. Conflicts between corporate departments and units.
2. Excessive administration overhead.
3. Slow response to exceptional situations.

4. Matrix Organisation

• Multiple command system.

Advantages of Matrix Organisation:

1. increases the co-ordination
2. available resources will be used fully.
3. focuses the organisational resources
4. is highly flexible
5. employees are effectively motivated

Disadvantages of Matrix Organisation:

1. causes confusion and conflicts
2. increases paper work and costs
3. It is difficult to achieve a balance below on the projects technical and administrative aspects.