Organizational Theories: Classical, Neo-Classical and Future Structure

This report delves into the classical and neo-classical approaches to organizational theories, highlighting their core principles, strengths, and weaknesses. The classical approach, encompassing bureaucratic, scientific, and administrative methods, emphasizes structure, specialization, and efficiency, while the neo-classical approach builds upon this by incorporating human relations and behavioral science perspectives. The report examines the key differences between these two approaches, including their focus on mechanistic versus organic structures and economic versus social aspects of employee motivation. Furthermore, it analyzes the external and internal forces that shape organizational structure, such as organizational size, life cycle, strategy, and the surrounding environment. It also explains the impact of factors like economic, social-cultural, political, technological, legal, and environmental considerations on business operations and organizational design. In conclusion, the report underscores the importance of understanding these theories and factors for effective leadership and management in shaping organizations for future success.

Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
Demonstrate an understanding related with the classical and neo-classical approaches to
organisation theories...............................................................................................................3
Assess the forces which shapes organisation and their structure for future...........................5
CONCLUSION................................................................................................................................8
REFERENCE...................................................................................................................................9

INTRODUCTION
In early period organisation theories was considered as some discrete practices &
experiences not only the real theories. In which the classical is the first that was studied in
management. It mainly emphasis on rationality and decision making of organisation and
employees as efficient as possible. Neoclassical is the appraisal of classical approach. These
theories help companies in order to shape the structure of company. Additionally, there are
various factors which may affects the function & overall performance of company. In relevance
to this the present report is going to explore all these aspects related with the management
theories and the factors which shapes organisation as well as structure of company for the future.
Demonstrate an understanding related with the classical and neo-classical approaches to
organisation theories.
With relevance to current situation, there are several theories which explains the
organisation along with their structure. In which the classical theory comprises Weber's
bureaucratic approach, the scientific management approach, and the administrative approach.
The classical approach mainly emphasis on structural factors along with functions in order to
gain objective of company. It stresses on specialization and co-ordination along with chain of
command as that facilities the coordination and communication. In relevance to this, it consists
basically four pillars i.e. labour’s division, scalar & functional course like unity’s command,
chain’s command, authority’s allocation, describing responsibility and accountability, structure
line along with staff & span of control are the four pillars of such approach.
Classical theory has relevant insights towards nature of company. It primarily focusses
on formal structure of organisation by mitigating the interaction of separate personality, informal
and intra organisational clashes (Erbaş, 2018). This theory interprets company like structure
which revolves around work not individuals. It outlooks peoples like being economic that gives
outcomes as a carrot & stick approach towards motivation. This approach believes in
authoritarian and autocratic managerial styles. This theory has some disadvantages also and that
it avoids human behaviour along with human relation as there is no free and quick channels of
communication as well there is discounting of innovation, initiatives and changes, lack of
flexibility & adaptability, absences of intrinsic rewards.

Neoclassical approach- This approach reflects movement of human relation along with
behavioural science approach. This theory studies about motivation, supervision and intergroup
behaviours. It represents the effectiveness of co-ordination that without co-operation of people
within a company, it is not possible to achieve objective or goal of firm. It propagates
organisational structure related with people & that include informal and formal organisation.
This is also known as theory -Y and the two concepts of this approach are individual and group
work. The interpersonal relations and needs for shared communication within firm demanded
special attention in order to develop improved organisational structure (Omona, 2019). Under
classical approach, attention was focused on jobs & machines by which employees of companies
after some time resist to this approach as it does not provide social & psychological satisfaction.
In order to shift the attention towards human side of management, George Elton Mayo proposed
this neo- classical approach.
It has made significant contribution in order to understand the human behaviour at
workplace. It has created awareness of irresistible roles of human factor in the industry. In order
to understand human behaviour, it provides new ideas and techniques. Contributors towards this
tactic represents company as a social system towards sentiments & cultural patterns of company
members, dynamics of group, participation, leadership, job environmental and many more. This
changes the view that personnel of company act as a tools and further belief that they are the
valuable resources of company.
Difference in classical and Neoclassical approach-
In development of different management ideas, there are two approaches named classical
& neoclassical who have exceptionally contributed well. Specific job focus & appropriate
machinery to complete the job role came under classical approach to management. This is a
traditional theory that mainly focuses on structure of work & task completion. On the another
hand, Neoclassical approach is a unique way of bringing a rise in current production through
people enhancement. Understanding people and helping them adapt to the new business
environment is the key aspect. The theory focuses on empowerment of employees as good
performance leads to effective production & profitability of organisation. Classical theory may
be applied by those organisations who want to exercise autocratic control in managing business
functions. Also the key objective of employees working under such approach is getting financial
benefits in form of incentives & remuneration. Whereas, neoclassical aims at the skills &

competencies of staff members who get a sense of security & freedom while working in a social
business environment (Ramsundarsingh and Shier, 2017). The key objective here is fulfilment of
organisational goals through ways of motivation & enthusiasm to work.
Basis Classical approaches Neoclassical approach
Focus Mainly concentrated on
function and economic
demands of employees.
Whereas it focuses on
emotions & human qualities of
employees.
Structure Impersonal & mechanistic
structure.
structure related with Social
system
Use Autocratic management with
stern rules.
Democratic process.
Relies Chastisement & rationality Personal safety along with
community claims.
Working objective of
employees
Extreme remuneration and
reward
Accomplishment of
organisational objective.
Men’s cpncept Being economic Being social
Nature Mechanistic Organistic
Relation Formal Informal
Assess the forces which shapes organisation and their structure for future.
On the basis of current scenario there are various factors which shapes an organisation
along with their structure for future. In which some of the factors are size, life cycle, strategy
environment and the technology. All these factors are as follows:
Size of organisation: Company which is in lager size have more complex organisational
structure. Whereas small size organisation such as single retail store, a two person consulting
firm and a small restaurants have simple organisational structure as well as they may not take a
formal structure (Kontinen, 2018). Instead of following char related with organisation or specific
job function the individual of company performs task according to their likes, dislikes, ability or
need. In which rules, guidelines may not be existing in order to make any decision. Such types of

company follow organic systems. On the other hand, large organisation follows formal structure
and these firm are highly specific with task, rules, regulation in order to devised strategies and
for taking decision. Intergenerational basically follows the flow of primarily from superior to
subordinates with hierarchical relationships. This creates ability to operate function effectively
and smoothly.
Organisation life cycle- Companies like human tends to progress with the help of various
stages known as life cycle. Most of the companies goes through basic four stages i.e. birth,
youth, midlife and the maturity. Each factors build the structure of company for future.
Birth- It refers to beginning of company. A company at this stage does not have any
formal structure. In a young organisation there is not much allocation of roles & responsibility.
Youth- At this stage companies seeks to growth & development. Emphasis of this stage is
to become larger company (Kontinen, 2018). In which companies shifts its attention from wishes
of founder to consumers. Companies become more organic in structure at this stage. Occurrence
of authority along with formal structure is carried out during this phase.
Midlife- This phase occurs when companies reaches to height or achieving success. A
company in midlife tends to larger company with more complex in organisational structure as
well if companies become older then it became more mechanistic in structure.
Maturity- once company reaches to maturity stage, it tends to become less innovative,
less interested in expanding whereas concentrated to maintained itself in stable in secure
environment. Entities of company during this phase emphasis to enhance profitability as well as
to advance efficiency, the organisation often leads to become less innovative. Stale product tends
to decrement in sales and profitability.
Strategy- In order to position itself an organisation tends to build a strategy in terms of
product. In context of this they decide to become on the leading company at marketplace by
influencing more consumers towards their offering of new and best products with the help of
differentiation strategy or may be decided by using more cost effective. All these strategies
require a structure that helps entities in order to reach objective (Metcalfe, 2018). Companies
which wishes to become the first in market by launching newest and best product probably
follows organic structure as it permits company to responds quickly and make them flexible with
the changes.

Environment- Environment in context of business tents to a company which operates it
business includes various condition that may affects the company function and their activity and
these factors could be economic, social- culture, legal, political & natural environment
conditions. It often describes as either constant or dynamic.
Stable environment refers to that situation, in which the demands and desire of
consumers are well understood and probably remain constant for long time. Whereas the
dynamic environment tends to continuously changing the desires of customers. This condition is
often thought of as turbulent (Biscotti, D’Amico and Monge, 2018). In relevance to this the
technology that company may uses need to update or changes in order to become success or for
mitigating the future uncertainties.
Economic factor- It includes those factors which may affects operation of business in
future so all companies need to considered this factor before operating their business. It
comprises economic growth/decline of related nation where company operates its business,
interest rate, exchanges rate, inflation, wages rate, minimum wages, working hours, cost of
living, demand & supply of product all these factors affects the function and operation of
company as well as structure the company for operating business. For instance, employment law
which are made to protect the rights of employees along with their relationship with employers.
It needs to be addressed by all companies for smooth running of business operation.
Social- culture tends to culture norms and expectation of consumers, age discrimination,
career attitudes, health & safety along with health consciousness are those factor which may
affects business function of company in future. So for combatting with all these factors.
Companies need to considered socio-culture factors.
Political factor -It comprises, tax policy, environmental regulations such as trade
restrictions & reforms; tariffs; political stability (Olsen, 2018). All these factors have power to
influence the operation and structure of company. So it become important for all business unit to
address these components for smooth running of operations.
Technological factor – Advancement in technological become necessary for all firm to
adopt to order to survive in competitive world. For which companies need to changes their
strategies and update their existing techniques and that is not an easy job.

Legal factor- Changes in legislations, such as import & export policies of government
affects the function and overall performance of company. For this company need to considered
all legal factors before implementation or devising any strategies.
Environmental factors- Increment in needs of sustainable resources along with supply
chain intelligences environmental factors may affects the business operation of company.
So all these factors can affect the business decision and strategy of company along with
overall performances and structure of company.
CONCLUSION
From above discussed report it can be concluded that there are various types of
organisational theories which shapes function and organisation structure of companies. As well
number of factors such as size of company, organisational life cycle, business strategies,
environment are those factors which shapes organisational structure along with function of
company fir the future. In which modern economic and the technologies are those factors which
majorly affects the function of company. As modern economic could nor function without
organisation. Organisation improves the living standards of consumers and offers opportunity to
employees for getting job. In addition, the advancement in technologies forces companies to
become more flexible over hierarchical with the aim of gaining success and competitive
advantages.

REFERENCE
Books & Journal
Biscotti, A. M., D’Amico, E. and Monge, F., 2018. Do environmental management systems
affect the knowledge management process? The impact on the learning evolution and the
relevance of organisational context. Journal of Knowledge Management.
Erbaş, E., 2018. Organisational ambidexterity and industrial clockspeed theories in
understanding dynamic managerial capabilities: a multiple case study. International
Journal of Business Environment. 10(2). pp.174-190.
Kontinen, T., 2018. Learning and Forgetting in Development NGOs: Insights from
Organisational Theory. Routledge.
Metcalfe, S. ed., 2018. Evolutionary theories of economic and technological change: present
status and future prospects (Vol. 44). Routledge.
Olsen, E., 2018. Influence from organisational factors on patient safety and safety behaviour
among nurses and hospital staff. International Journal of Organizational Analysis.
Omona, J., 2019. Effective Child Welfare Institutions in Uganda: prerequisite organisational and
systems attributes. Southern African Journal of Social Work and Social
Development. 31(3). pp.1-16.
Ramsundarsingh, S. and Shier, M. L., 2017. Anti-oppressive organisational dynamics in the
social services: A literature review. British Journal of Social Work. 47(8). pp.2308-2327.