Organisational Theory

This essay explores the different approaches to organisational theory, including classical and neoclassical approaches. It discusses the principles and contributors of the classical approach and the focus on social and psychological factors in the neoclassical approach. The essay also examines the factors that shape organisational structure, both internal and external. Find study material and essays on organisational theory at Desklib.

ORGANISATIONAL
THEORY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
An organisation is a composition of people who work together for a purpose or goal to
generate revenue and earn profits. It states the responsibilities and duties of personnel employed
in the business so that they can perform their assigned functions effectively. There are many
organisational theories developed to study the behaviour of organisation and the environment
under which it operates (Yasir and Majid, 2017). There are also many approaches to these
organisational theories that states the results of the research conducted by experts about the
reaction and action of employees in respect of their work environment. This essay will cover the
classical and neoclassical approaches to organisational theory and further it will deal with forces
that helps in shaping the organisation and its structure in future.
MAIN BODY
There are many approaches to the organisational theories that has developed with the
time to understand the organisational behaviour of the employees towards the success of the
company. The first approach was developed in 19th century, known as classical approach which
was supported on the belief that the efficiency of employees and organisation has increased
according to the management practice. The three classical approaches are scientific,
administrative and bureaucratic management. The neoclassical approach was developed to
modify the classical approach with changing time which is a human oriented approach which
focuses on the attitude and behaviour of employees .
The classical approach is based on four principles which includes the division of labour,
structured line and staff, span of control and scalar and functional process. The main contributors
of this approach are Henri Fayol, Frederick Taylor and Max Weber. The three classical
approaches are-
Scientific management is a theory that is based on improving the labour productivity.
This approach was developed by Frederick Taylor who emphasized on change of management
which can be determined only through scientific study and through this approach the scientific

management term was evolved. He focused on 'production first and people second' which
resulted in decreased production, dissatisfaction of work and loss of pride of organisation
(Tourish, 2020). This approach was successful in industries but was a massive failure in modern
companies. The focal point of this theory is to analyse the management scientifically to bring out
the most efficient method to complete the job, that is, “one best way” to complete the job.
General management theory was developed by Henry Fayol. It focuses more on
manager than the worker and emphasized on administrative feature of the company. Further he
sorted the activities of the industries into six categories, which includes technical, commercial,
security, financial, managerial and accounting. Fayol provided main administrative and universal
functions of management which included planning, organising, commanding, coordinating and
controlling. This approach focused on clear authority and control for higher performance with
utilising fourteen management principles provided by Henry Fayol.
Bureaucratic management approach was developed by Max Weber who was a follower
of Henry's General administrative theory which emphasizes on rational authority where
employees must be loyal towards a single person so that resources are utilised to fulfil the
individual desire. According to him, the ideal bureaucracy includes division of labour, decision
in writing, separation of management and ownership , employee selection on the basis technical
qualification, managers are subject to impersonal rules which are uniformally applied to
workforce and positions in organisation is organised in hierarchy. It focuses on making the
organisation highly efficient as it states the standard of dealing with the workforce with equal
treatment (Raziq and et. al., 2020).
The neoclassical approach is a modification of classical approach which study the
behaviour of motive, groups and supervision of individuals. It focuses on co-operation of people
so that there is effective coordination of activities. It provides the people oriented structure of
organisation where the focus of management must be on the employees so that they can perform
organisational functions effectively rather than on production, technology or quality. In order to
bring out the efficiency of workers, the managers must concentrate on the social needs of the
workforce so that their skills and creativity is brought for the higher performance. The three
neoclassical approaches are-
Human Relation approach states the importance of psychological and social factors in
deciding the satisfaction and productivity of workers. It was developed by Elton Mayo who

contributed to develop the democratic and participative style of leadership with employee-
centric approach. It provides that the executive or boss has a duty to design a communication
system which helps in making friendly relationship among employees and managers. The
communication must flow down, up and across so that specific answers may come from middle
and general answers may come from top level management (Kuznetsov and et. al., 2019).
Behavioural Science is a matured version of the human relation approach. It emphasizes
on the behaviour of managers as to how to motivate the employees and encourage them to work
at higher levels so that they stay committed to achieving the goals and objectives of the
organisation. It high spot the group relationships to judge the behaviour of group members in the
company. It is an inter disciplinary approach which recognizes the conflicts in goals and
recommends the reconciliation to workforce and organisation so its efficiency and effectiveness
is increased.
Hawthorne studies reveals the social factors which must be considered by managers. It
provides that if any manager failed to consider the social needs of the workforce, it will result in
low performance and resistance. It focuses on lighting the atmosphere of organisation to increase
the productivity of employees. It emphasizes on informal organisation of employees which has
great influence and productivity (Horch, 2018).
These neoclassical approaches are the element of social system which focuses on
importance of psychological and social factors to increase the job satisfaction and productivity of
workers whereas classical approach is an impersonal and mechanistic structure. Social, technical
and leadership skills are necessary for the welfare of the workers in neoclassical whereas
autocratic and strict rule is necessary in classical approach. Economic demand of workforce is
more important in classical whereas neoclassical focus on human and emotional qualities of
employees.
An organisational structure is designed to serve many motives and functions of the
company. An efficient structure not only alleviates communication but also results in bringing
efficiency in the business. It outlines the order in which information will be flow between
different levels of company to achieve the goals of the company (Davidse, 2019). There are
many factors that shape the organisational structure of any company which can be internal or
external. Some internals factors that affects the organisation and its structure are-

Size of the company- In medium and small sized organisations, the owner is responsible
for the structure of the business while in large companies, there is a need for elaborative structure
to manage the affairs of the business effectively. Different managers are needed to supervise the
employees so that organisational goals are achieved efficiently. While looking at the future goals
of the company, organisational structure must be reshaped so that there is balance of
communication and goals between superiors and subordinates.
Business strategies- The organisational structure of the company must be flexible so that
the managers can develop the structure according to the business strategies to attain higher
growth and success. Every business strategy demands different structure so that information and
decision making power can be easy and effective.
Inadequate administrative process- There are different set of rules and ethics under
which a company function. An ineffective rule or policy can force the organisation to adapt a
different structure so that administrative inadequacy does not harm the success of the company.
Change in managerial staff- With increase in specialization and professionalism, the
new and talented managers replace the old and orthodox managers which brings in the
innovative and creative ideas which helps in achieving the goals and objectives of the business.
They not only bring in ideas but also reshape the structure to bring more transparency and free
flow of communication for the profit of the company.
Resources constraints- There are many resources that collectively help the organisation
in achieving goals and objectives. Resources include man, money machinery, information
technology, etc. Any deficiency in the resources will require the management to reshape the
structure of the organisation so that the objects are achieved with available resources and the
deficient resources are regained for effective functioning of the business (Chión, Charles and
Morales, 2019).
The external forces which shapes the organisation and its structure are-
Political- The government has a major influence on the organisations because there is
time to time change in the rules, regulations and policies which may require the organisation to
change its structure with new rules coming in enforcement so that changes are adopted easily.
Environment- There are basically two types of environment, stable and dynamic. The
stable environment does not require the company to reshape the organisational structure but the
dynamic environment requires the firms to change the structure with the changing needs of the

customers. The consumers frequently change the demands in dynamic environment due to which
it is important for the companies to adapt changes with the changing needs of the consumers.
Technological- The innovation and technology advancement has led to rapidly adapt the
change for the firms. The information technology has helps in taking the strategic decisions and
contribute to overall planning which requires the companies to reshape their structure so that the
success of the organisation is ensured. The use of computer has brought the revolution in
functioning of the business by assisting new ways in developing the possibility for managers to
respond to challenges due to technology forces.
Competitive pressure- Competition is the major challenge for the companies nowadays.
The increase in the competition has forced the companies to change their style of working so that
competitive advantage can be achieved. The pressure from competitors forces the organisations
to reshape their organisational structure so that there is free flow of information and decision
making process which helps in working the companies efficiently for the goals of the
organisation.
Social – The rapid increase in education levels, knowledge and literacy rates has resulted
in social changes and equality which pressurizes the management to cope up the challenges of
inequality and discrimination. This directs the management of the firms to change its structure to
democratic or participative so that there is freedom to speak in the company so that new and
fresh ideas are welcomed which will help in increasing the efficiency of the organisation
(Bernhard-Skala, 2019).
All these factors force the companies to change their organisational structure so that they
can overcome the hurdles which have arisen due to the above mentioned factors. All these have
severe consequences on the functioning of the business so it is important for the management to
ascertain these factors early so that there are no hardships faced by the companies.
CONCLUSION
It is summarized from the above essay that an organisation is a group of people who work
collectively toward the goal of the company. There are many many approaches to the
organisational theory that helps in effective management of the company's affairs. There are
three types of classical and neoclassical approaches discussed in the essay which provides that
how workforce of an organisation is essential for the success of the business. The classical
approach focuses on impersonal relation between the workers whereas the neoclassical approach

focuses on emotional and social needs of the employees so that they feel motivated and
confident in performing the organisational task. The neoclassical approach is a modified version
of the classical which was developed after 1920's (Baum and et. al., 2020). Further it is
concluded that the organisational structure is a major part of the business. There are many factors
that results in reshaping the structure of the company so that it can adapt the changing needs of
the external and internal environment.
REFERENCES
Baum and et. al., 2020. Organisational Emergence–Interdisciplinary Perspectives against the
Backdrop of the Digital Transformation. mrev management revue. 31(1). pp.31-54.
Bernhard-Skala, C., 2019. Organisational perspectives on the digital transformation of adult and
continuing education: A literature review from a German-speaking perspective. Journal
of Adult and Continuing Education. 25(2). pp.178-197.
Chión, S.J., Charles, V. and Morales, J., 2019. The impact of organisational culture,
organisational structure and technological infrastructure on process improvement through
knowledge sharing. Business Process Management Journal.
Davidse, M., 2019. Designing Organisational Revolution: Exploring the role of design in the
quest for progressive organisations.
Horch, H.D., 2018. The intermediary organisational structure of voluntary associations.
Voluntary Sector Review. 9(1). pp.55-72.
Kuznetsov and et. al., 2019. Re-engineering the business process of sales in view of life cycle
stage and the company organisational structure. International Journal of Trade and
Global Markets. 12(3-4). pp.412-423.
Raziq and et. al., 2020. Organisational Structure and Project Success: The Mediating Role of
Knowledge Sharing. Journal of Information & Knowledge Management. p.2050007.
Tourish, D., 2020. Towards an organisational theory of hubris: Symptoms, behaviours and social
fields within finance and banking. Organization. 27(1). pp.88-109.

Yasir, M. and Majid, A., 2017. Relationship between determinants of organisational structure
and knowledge sharing. International Journal of Business Excellence. 12(3). pp.294-
307.