Organisational Theory and Structure Notes

Organisational Theory and Structure

Learning Objectives

• Understand the foundational concepts of organisation theory.
• Classify different types of organisation theories.
• Recognize the determinants influencing organisational structure.
• Explore common organisational structures and explain variations.

What is Organisation Theory?

• Definition: A systematic view explaining the behaviour of individuals, groups, and subgroups in organisations.
• Focus on goal-directed activity patterns.

Classification of Organisation Theory

1. Classical Theory
2. Neo-Classical Theory
3. Modern Theory

Classical Theory Characteristics

• Assumptions:

• Organisation viewed as a machine with humans as components.

• Emphasizes input-output management.

• Main Features:

• Built on an accounting model.

• Maximizes control, aiming for neatness.

• Error correction occurs after they happen (extra pair of hands concept).

• Employees viewed as relatively homogeneous and unmodifiable.

• Centralized authority ensures minimisation of change.

Two Streams of Classical Theory

1. Scientific Management Principles:

• Separation of planning from execution.
• Functional supervision approach.
• Job analysis for fair workload distribution.
• Standardisation of work, tools, conditions, and costs.
• Scientific selection and training, financial incentives to motivate.

1. Administrative Management:

• Key activities include:
  • Division of work
  • Authority & Responsibility
  • Discipline
  • Unity of Command
  • Common interest prioritization
  • Centralization and Scalar Chain principles.

Main Contributions of Classical Theory

• Division of work
• Departmentalization
• Coordination
• Insights into human behaviour in organisations.

Neo-Classical Theory

• Main Propositions:
• Organisation as a social system.
• Acknowledges both formal and informal organisations.
• Individual and organisational goal integration is crucial, despite potential conflicts.
• Employee behaviour influenced by social/psychological factors and diverse motivations.
• Importance of communication for conveying information and sentiments.

Contributions of Neo-Classical Theory

• Advocate for flat structures.
• Emphasizes decentralization and highlights informal organisation contexts.

Modern Organisation Theory (MOT)

• An integration of classical models with social and behavioral sciences.
• Contributions from General Systems Theory (GST):
• Focus on parts of a system and their interaction with the environment.

Features of MOT

• Open systems perspective
• Adaptive and dynamic nature
• Emphasizes multilevel interactions
• Integrated approach with multiple variables.

Two Approaches of MOT

1. Systems Approach:

• Views organisations as complex systems made of interrelated parts.
• Importance of arrangements and boundaries (open vs closed systems).

1. Contingency Approach:

• Acknowledges no one-size-fits-all management solutions; designs must consider environments, technology, size, and people.

Organisation and Its Environment

• Influences on organisational design and effectiveness include permeability, knowledge sharing, and information flow.

Six Elements of Organisational Structure

1. Work Specialisation
2. Departmentalisation
3. Chain of Command
4. Span of Control
5. Centralisation and Decentralisation
6. Formalisation

Common Organisational Designs

• Simple Structure
• Mechanistic Structure
• Matrix Structure
• New Design Options:
• Teams and Virtual Organisations.

Matrix Structure

• Definition: A hybrid structure assigning specialists from functional departments to projects under a project manager.

Why Structures Differ?

• Influenced by:
• Strategy
• Organisation size
• Technology
• Environment conditions.

Determinants and Outcomes of Structures

• Causes: Strategy, size, technology, environment.
• Results: Complexity, formalisation, centralisation leading to various designs:
• Mechanistic, professional bureaucracy, divisional forms, organic structures, adhocracy, and simple structures.
• Moderators: Individual preferences and perceptions affecting performance and satisfaction.