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Organizational theories evolved with F.W.Tailors scientific approach to management (1917). His principal was accepted in that period; but later it was criticized for its weaknesses. It had several weaknesses inherent with it. It overemphasized on monetary rewards and dehumanization of workers. It assumes human as the economic rational one. So job became much board and dull. And also de skilling of employees is also considered and criticized. In 1914s fords modern model of mass production with moving average come to existence. It focuses on division of labor and increased mechanical processes. These two organizational theories were similar in nature.
With the failures of these theories max Webbers bureaucratic theory started to attract organizations. He gave more emphasis on rational legal structure of authority utilizing a bureaucratic structure. This is the first stage of having a proper organizational structure with having clear authorities and powers. It has certain formal rules and regulations and other principals of scientific management. Then administrative theory tries to stick with certain management principal. The main weakness of these theories is that they failed to recognize the human and their motivational factors. First time in neoclassical organizational theory Mayo recognized the important of human behaviour and their needs.
This assignment focuses on a modern organizational theory which is system theory. Modern organizational theories say organizations as systems and they should adapt to environmental changes.
Systems theory was introduced by Ludwig von Bertalanffy. The system theory says that all the components of an organization are interrelated, and making changes in one variable might impact other variables including organizational performance. Organizations are viewed as open systems and interact continuously with environment. So it views organizational structure as the "established pattern of relationships among the parts of the organization. There are certain components of system theory. They are individual, formal and informal organizations, role comprehension of the individual, patterns of behavior emerging from role demands of the organization and the physical environment in which individuals work. And also it focuses on linking processes within the components of the organization. They include communication, decision analysis.
Finally it focused on goal setting of the organization. Goals of the organization may be growth, stability etc. system theory focused to achieve these goals by the interaction of its components. Interaction between employees always will lead to group thinking and team working.
Organizational structure [Refer Figure 3.1] shows how the operations are performed within the organization by the employees and their authorities. In the initial stages of the organization they followed bureaucratic organizational structure. But they are unable to follow the same structure because the environment is such, which is so volatile, complex, and dynamic. So other organizational structures started to emerge.
Figure 3.1: Organisation Structure
For small size organizations entrepreneurial structure would be useful to achieve its objectives. But when the organization is getting bigger and bigger it needs some other structures which should be interrelated with each other. One such structure is functional organization. In this structure, organizations main activities and functions are separated via structure. So there will be high interaction between the members of each function. Further individual members quality of work will be improved through its functional specialist. Further there will be possibilities to enhance the carrier in the same division and it will make communication easier between its members. This would motivate the employees of the organization. But it will be sometimes difficult to go ahead with this structure. As mentioned in the system theory the total integration will be required between variables of the organization. In the case of non routine and interdepartmental conflicts situations organizations will need to focus on other structures. Divisional structure too has similar drawbacks.
So the other structures such as matrix structure are started to evolve. This structure allowed more interaction between employees in all levels and divisions. So this structure encourages internal coordination and communication and removed the formal control by contact. But this structure too has certain weaknesses no clear responsibility, specific functions losing its direct control over its employees etc.
As system theory of organization states the modern organizations are so complex and dynamic. So proper structure should be developed in order to manage the organization well. So Flexible structure of organization will be very useful in handling these kinds of complex organizations. Rather than sticking purely on to formal structure of organization. Where Minzbergs states simple structure to be followed by small organizations. Where decisions will be made by the owner of the organization. And he prefers machine bureaucracy for organizations operating in highly standardize environment the decisions of this structure will be standardized. And there will groups and specialist who will seek for improvement in efficiency.
The next flexible organizational structure is professional bureaucracy. It will be practiced by organizations which are run by professionals such as hospitals, law firms etc. Its structure is more decentralized than the above structure. This is practiced in by many modern day professional organizations which are following system theory of organization. This also encourage the group and team works by its decentralization principal.
The next organizational structure discussed by mintzberg is Divisional form. As discussed in system theory organizations will require high interaction between every components of the organization. There are large scale multifunctional organizations operating in modern times. So it is important for management to manage its functions, improve integrations and motivate its employees working in whatever the division or activity of the organization. So the divisional form will help in finding solutions for these problems. Where it will allow separate units of the business to operate independently. But top management will always be focused on their activities. So this will motivate the members of the separate divisions.
The final of the flexible organization is adhocracy. This is also more suits the modern system theory of organization. Because in adhocracy allows innovative and decentralized structure. This will help in complex and rapidly changing environment, where changes would occur from anywhere in it.
And another form of structure followed by modern organizations is the network organization. This seeks the interaction of other organization to its operation. As per the system theory we discussed earlier a small change in one variable would make large difference to the entire business. So it is important to select the proper structure which suits the organizations. Further according to how throne experiment Maya found about the group work, their norms etc. so it is important for these structures to allow team working and group thinking within the organizational settings. So that the performance of the organizations would be improved.
In the above two sections I discussed about the system theory, and the relationship between the system theory and organizational structure. Here I would like to address about the organizational culture and its relationship with system theory and structure. Organizational culture [Refer figure 4.1] is the set of important understandings, such as norms, values, attitudes and beliefs shared by organizational members and transmitted by one generation to another.
So when drafting organizational structures based on system theory one canââ‚¬â„¢t ignore the culture of the organization. According to McKinsey culture is determined by systems, structure, style, strategy, staff, skills, and shared values. So from this we shall identify the importance of structure and system in culture of the organization. And the main characteristics of a strong culture are it will strengthen the regularities and norms among the members of the organization, and there will not be much personal differences among the members etc. so the group norms and team working through the culture should be considered when developing structures for the organization based on system theory.
Further system theory states about the interaction between variables particularly with environment. When having interactions with environment it should focus on culture such as norms, dominant values, and organizational climate etc. so the relationship between organizational theory, structure and culture are so strong. Further managers can control the evolution of culture but they canââ‚¬â„¢t influence on that. So identifying culture is very much important.
Certain cultures are outcome oriented, team oriented, people oriented and some other are innovative oriented. These are highly relates to organizational theories. These cultures evolved with certain principals in the system theory as well. So it is important to be aware of these cultures before making decisions of the organization.
Figure 4.1 Organisation Culture Profile
Team working also should be considered in making decisions with regard to organizations. This will help in developing new ideas within the organization. This would come through shared experience within the organization. These shared developments and learning will help in speed up the organizations productivity. These factors will also lead to new product development and innovations within the organization.
Finally System theories of organization, organizational structure and culture have strong relationship among them. So in this dynamic business environment it is very much important to focus on all these factors to succeed in business.