Report on Classical and Neoclassical Organisation Theory

This report delves into the core concepts of organisation theory, examining the classical and neoclassical approaches. The classical approach, focusing on efficiency and viewed organisations as machines, is contrasted with the neoclassical approach, which incorporates behavioral science and considers the human element. The report explores scientific management, Henri Fayol's principles, and Max Weber's bureaucratic theory within the classical framework. It then transitions to the neoclassical perspective, highlighting the human relations and contingency approaches. Furthermore, the report analyses the forces shaping modern organisations, including technological advancements, marketing shifts, the culture-excellence approach, the Japanese approach, and organisational learning. The conclusion emphasizes the evolution of organisational theories in response to technological and societal changes, underscoring the importance of adapting organisational structures and strategies to achieve goals effectively and efficiently.

Organisation
Theory

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Classical Approach .....................................................................................................................3
Emergence of Neoclassical Approach .......................................................................................6
Forces that will shape the organisations and their structure.......................................................6
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Organisation Theory consider as a set of associated and interrelated concepts that mainly
determine the behaviour of individuals and group members of the organisations. Through
classical and neo-classical approach organisation can get more success. Classical approach
mainly focus on the work and economic need of the employees and this approach viewed
organisation like a machine and employees as a components of that machine (Bratton and Gold,
2017). Neoclassical approach is a extended version of classical approach in which behavioural
science included. On the basis of this approach, organisation is a social system and its
performance affected by the each and every human actions. This approach also known as “
behavioural theory of organisation” or “Human Relation Approach” (Storey, 2016).
Organisational structure is a systematic outline that control all the organisational activities and to
apply a effective organisational structure is necessary for the future growth (Sandhu and Kulik,
2019). The main motive of this report is to cover classical, Neo-classical approach and
organisation can shape their structure so that organisation can take more advantage in future.
MAIN BODY
Classical Approach
The organisation refer to the group of people working together to achieve the common
goals. There are various organisational theories designed which explain the organisation and its
structure, functions, operations and individual and group behaviour. In early twentieth century,
the classical theory have emerged with development of the industry. The Classical theorist
considered the organisation as machine and the workforce as its components. The were in view
that efficiency of the organisation is directly dependent on the efficiency and performance level
of members of an organisation. Their emphasis was on division of specialisation and
coordination of activities.
Scientific Management
The Frederick W. Taylor developed the scientific theory of management approach which
emphasised on improving the efficiency of each individual in the organisation. The main
objective was to increase the economic efficiency and increase the productivity of workforce.
According to this theory, the production processes being done by workers are repetitive in nature
and workers performing the same activity on daily basis becoming specialised in performing

specific task. The duties so performed by them requires no complex problem solving task it just
require the specific ability to perform that task. The focus needs to be given more on
standardisation of work methods. The scientific theory focused more on the technical aspect of
task rather than the holistic development of the workers (Waring, 2016).
The Henri Fayol, is considered as Father of Modern Management in 1916 gave 14
principles of management with this he gave new direction to management field. He introduced
the general principles which are applicable to management and every department in an
organisation. The purpose was to create the managerial efficiency by regulating the internal
activities of the organisation.
Illustration 1: Henri Fayol's 14 Principles of Management, 2019
Max Webber, propounded the Bureaucratic theory of management, according to him
bureaucracy is the basis for the systematic management in any organisation which is designed to
to ensure the efficiency and effectiveness of organisation. He emphasized that an organisation
should have clear and defined lines of authority and hierarchy of management. The major benefit

with this theory was that large organisations with complex hierarchy became more structured and
manageable. It precisely established the rules and regulations which resulted in high efficiency
and consistent performance among workforce.
These all theories focused on the treating the workforce as an component rather than
developing them. The classical theories completely ignores the human aspects of organisation
and deals with the formal structure of organisation. There main focus was to calculate the time
taken by workers to complete the task the very much importance was given to standardisation of
task they completely ignored the emotions and behavioural aspect of workers. As, it was
unrealistic to standardise the task of workers the need of the emotions and needs to encompassed
while delegating the task to workers (Nicotera, 2019).

Emergence of Neoclassical Approach
The shift to neoclassical theory was based on the criticism of mental and emotional health
of workers in classical theories. The neoclassical theories was an attempt to incorporate the
behavioural science into management. The Neoclassical theory was build on the premise which
focused on motivating and satisfying the employees within the organisation. This theory
recognised the importance of employee psychological and social well being on the employee
performance thus impacting positively on organisation efficiency. The need for intrinsic
motivation was needed by an employee in their job to perform efficiently. By just placing the
employee on job is not sufficient the social interactions were needed to be excel at highly
structure job. The major shifts in the neoclassical approach were – Human Relations approach
and Contingency Approach.
The Human Relations approach was result of the Elton Mayo and Hawthorne studies, it
revealed the importance of social and psychological factor in determining the workers
satisfaction. It was characterised by informal grouping, communication, rest periods and concept
of the industrial interactions. This approach considered the organisation as social enterprise
where the group norms and interactions major role. This theory marked its importance by
focusing on importance of needs of recognition, self affiliation etc. needs. It understood the
importance of informal groups existing in formal structure of organisation. This approach was
gave birth to due importance of people management skills and from thereon the focus was
shifted to the mental health of employees. Later on, with the developments the contingency
approach was developed. According, to this approach it is task of manger or leader to identify
the style of managing and leading pertaining to the current situation. It is role of manager to
identify the technique which in particular situation at particular time best suit to circumstance
and follower which results in attainment of the management goal. The application of the
management practice and style will be based on the situational basis (Warner and Busse, 2017).
The contingency approach is developed to proactively manage the employees as depending on
the need and situation of the event. This is an holistic approach and endears development of
follower as the style depends on the situation this results in better handling of situations.
Forces that will shape the organisations and their structure
The change is an inevitable force that drives the organisation to constantly change its
structure. In an era of constant developments, new technological innovations is disrupting the

traditional business model and forcing to change and adjust with new tide of technological
advancements in order to achieve the objectives efficiently. With this the business model is
constantly changing and will continue to change as the innovation continues to emerge. One such
change is in marketing concept.
The contemporary marketing orientation refers to the theories and practices that gives
due importance to the customer satisfaction versus the traditional market orientation. These are
the strategies designed that gives the customers power and increased base for their satisfaction.
The product range so offered are made according to the target market desires rather than what
company wants to have. As, the consumers are more educated about their rights and know the
business ethics in all way this gave rise to the contemporary marketing. The Co-creation is the
principle which aims to bridge the gap between the organisation and consumers. This is
addressed through two way communication rather than eliminating the one way communication
where only brands were talking but now customers and brands both dialect with each other. The
example of this is the social media marketing, blogs, targetted advertising to customers using the
AI and Big Data in process. This enacted more personalised and customised content for the
consumers. The Shared value is the added approach that allows the business to penetrate market
by following the values which enable communication from whole industry and customers. The
companies by enabling the shared value adds the incentives in the existing industry. The
organisations by enabling the co-creation and shared values with the contemporary marketing
strategy, flourished more and gained the competitive edge (Brennen and Kreiss, 2016).
The culture-excellence approach is the approach of setting the culture of excellence to
enable the added capability of organisation. The shift of transition from traditional status quo to
achieve the set target is the culture of excellence. Excellence is the way of going beyond the
mediocrity and act on commitment and differential thinking patterns. By activating the culture of
excellence it allows the organisations to be forward looking rather than just reacting and
following one. This culture work well when whole organisation members are willing to support
and invest in it the competitive edge will be gained. The process of building the culture of
excellence, is a environment of creating the organisational capacity which energise, engage and
empower the development of the workforce in a positive direction. The workforce so developed
constitutes positively to achieve the organisational goals and objectives (Rezaei and et. al.,
2018).

The Japanese approach, consider as a traditional approach that that help in quality
control that is basically administered by the investigator when production process need to be
complete. This approach help to control the over all quality and focus on the create more quality
into specific products and services in the organisation with the help of team members and proper
HR practices. There are various advantage of Japanese approach such as it can help in easy
implementation in the decision making, greater participation of employees and it is democratic in
nature (Albritton, 2016).
Organisational learning, determine the process of sharing and transferring specific
knowledge and information within an organisation. Through organisational learning, all the
appropriate skills, knowledge can be transferring to the employees so that they can easily
modified their behaviour and attitude as per job requirement and develop new skills and talent
which can help in boost their performance level also help in enhance the over all performance of
the organisation. In organisational learning, each and every individual of the organisation should
lean skills on the basis of latest market trend so that employees can evolve themselves and secure
their future to get more career opportunities. There are four traits consider in organisational
learning like constant readiness, proper implementation, continuous planning and learning
actions.
For the organisational development , The Japanese approach and Organisational learning
both are very useful. Through Japanese approach, organisation can easily maintain and control
the production process and with the help of organisational learning, every individual and group
members of the organisation should develop their personal skills and adopt appropriate technical
and practical knowledge which can help to retain the employees longer period of time in an
organisation and employees can learn new skills through advance training and development
sessions which can provided by the organisation for the welfare of employees so that there
productivity and efficiency can be improved which will also increase the organisational
performance and profit maximisation.

CONCLUSION
From the above findings it can be concluded that the development in the new
technologies will propel in development and evolution of the organisational theories. The
classical theory lacked the employee psychological and social interaction this was overcame by
the neoclassical approach. The neoclassical approach ignored other aspects of and just focused
wholly on human aspect. Then contingency approach came into play which focused on the
situational way of leading. With the continuous advancements in technology the way of
functioning of business process is also continually changing. In every aspect from marketing,
business processes, managing and leading the employees. This all set the foundation for
designing organisation system and strategy which helps in effectively and efficiently
accomplishing the organisational goals and objectives.

REFERENCES
Books and Journals
Albritton, R., 2016. A Japanese approach to stages of capitalist development. Springer.
Bello, B.A., 2018. Myths, Stereotypes and Realities of Classical Management Theories: The
Quest for Equilibrium for School Management Effectiveness. ATBU Journal of
Science, Technology and Education, .6.(1), pp.125-136.
Bratton, J. and Gold, J., 2017. Human resource management: theory and practice. Palgrave.
Brennen, J.S. and Kreiss, D., 2016. Digitalization. The international encyclopedia of
communication theory and philosophy, pp.1-11.
Nicotera, A.M., 2019. 5 Classical Management Theory. Origins and Traditions of Organizational
Communication: A Comprehensive Introduction to the Field.
Rezaei, G and et. al., 2018. Relationship between culture of excellence and organisational
performance in Iranian manufacturing companies. Total Quality Management &
Business Excellence, .29.(1-2), pp.94-115.
Sandhu, S. and Kulik, C.T., 2019. Shaping and being shaped: How organizational structure and
managerial discretion co-evolve in new managerial roles. Administrative Science
Quarterly, .64.(3), pp.619-658.
Storey, J., 2016. Human resource management. Edward Elgar Publishing Limited.
Waring, S.P., 2016. Taylorism transformed: Scientific management theory since 1945. UNC
Press Books.
Warner, M. and Busse, R., 2017. The legacy of the Hawthorne experiments: a critical analysis of
the human relations school of thought. The legacy of the Hawthorne experiments: a
critical analysis of the Human Relations School of Thought, pp.91-114.
Online Source
Traditional vs Contemporary Marketing Strategies, 2020 [Online] Available through
<https://blog.jdrgroup.co.uk/digital-prosperity-blog/traditional-vs-contemporary-
marketing-strategies/>
7 Tips for Creating a Culture of Excellence, 2021 [Online] Available through
<https://www.hrexchangenetwork.com/hr-talent-management/articles/7-tips-for-
creating-a-culture-of-excellence/>