NATURE OF ORGANIZATIONS:Flat Organization, Neoclassical Organization Theory

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Organizational Psychology (PSY510)

LESSON 07

NATURE OF ORGANIZATIONS

An organization is a deliberate arrangement of people to accomplish some specific purpose. Your university

is an organization. So are government agencies, banks, insurance companies and your neighborhood

departmental store, the fire department and the hospital. These are all organizations because they share

three common characteristics which are:

· First, each organization has a distinct purpose. This purpose is typically expressed in terms of a goal

or a set of goals that the organization hopes to accomplish

· Second, each organization is composed of people. One person working alone is not an

organization, and it takes people to perform the work that is necessary for the organization to

achieve its goals.

· Third, all organizations develop some deliberate structure so that their members can do their work.

That structure may be open and flexible, with no clear and precise delineation of job duties or strict

adherence to explicit job arrangements.

Organizational structure may be defined as the way in which the interrelated groups of an organization are

constructed. From a managerial point of view the main concerns are ensuring effective communication and

coordination.

Classical management theorists asserted that for a group of people to work toward a particular goal there

really was only one way to structure the organization with each person with his or her assigned functions.

Today with the ebb and flow of economic factors, rapid pace of change in the demand for and the

development of new technology, there is no one structure that works for all organizations.

There is much more to understanding an organization than how it is structured on "paper." Most

organizational members will confirm that while organizational structure often dictates lines of authority,

responsibility, and function, there often are other equally (or more) important lines of communication and

power and influence. Ethnographic and organizational behavioral studies have demonstrated individual

organizations may appear to be similar, but upon close examination exhibit their own unique culture: rules

for behavior, communication, celebration, ethics, etc. To be effective managers it is essential to understand

the complexity of the nature of organizations and their various structures.

The classical management thinkers viewed organizations as stable structures, almost always arranged in

hierarchical fashion, with the power and vision flowing in an orderly fashion from the individuals at the top

of the organization to those below.

World War II changed that concept some, because massive organizations were needed for the war effort. A

highly centralized management structure no longer worked because decision making had to be pushed

down into the organization. Today everything is "team organization" but Peter Drucker says, "By now, it

should be clear that there is no such thing as the one right organization ... It is not an absolute ... it is a tone

for making people productive in working together. As such a given organizational structure fits certain tasks

in certain conditions at certain times." He also adds that one hears a great deal today about "the end of

hierarchy." This, he views as blatant nonsense. In any institution, there has to be a final authority, that is a

boss, someone, who can make the final decision and expect to be obeyed in a situation of common peril

(like a ship at sea). However, sometimes the team approach is the right approach.

Vertical Organization

Hierarchically structured organization where all management activities are controlled by a centralized

management staff. This traditional type of organization often develops strong bureaucratic control over all

organizational activities.

Flat Organization

Flat organization (also known as horizontal organization) refers to an organizational structure with few or no

levels of intervening management between staff and managers. The idea is that well-trained workers will be

more productive when they are more directly involved in the decision making process, rather than closely

supervised by many layers of management

Classical Organization Theory

Classical organization theory evolved during the first half of this century. It represents the merger of

scientific management, bureaucratic theory, and administrative theory.

Organizational Psychology (PSY510)

Frederick Taylor (1917) developed scientific management theory (often called "Taylorism") at the beginning

of this century. His theory had four basic principles: 1) find the one "best way" to perform each task, 2)

carefully match each worker to each task, 3) closely supervise workers, and use reward and punishment as

motivators, and 4) the task of management is planning and control.

Max Weber (1947) expanded on Taylor's theories, and stressed the need to reduce diversity and ambiguity

in organizations. The focus was on establishing clear lines of authority and control. Weber's bureaucratic theory

emphasized the need for a hierarchical structure of power. It recognized the importance of division of labor

and specialization. A formal set of rules was bound into the hierarchy structure to insure stability and

uniformity. Weber also put forth the notion that organizational behavior is a network of human

interactions, where all behavior could be understood by looking at cause and effect.

Classical management theory was rigid and mechanistic. The shortcomings of classical organization theory

quickly became apparent. Its major deficiency was that it attempted to explain peoples' motivation to work

strictly as a function of economic reward.

Neoclassical Organization Theory

The human relations movement evolved as a reaction to the tough, authoritarian structure of classical

theory. It addressed many of the problems inherent in classical theory. The most serious objections to

classical theory are that it created over-conformity and rigidity, thus squelching creativity, individual growth,

and motivation. Neoclassical theory displayed genuine concern for human needs.

One of the first experiments that challenged the classical view was conducted by Mayo and Roethlisberger

in the late 1920's at the Western Electric plant in Hawthorne, Illinois (Mayo, 1933). While manipulating

conditions in the work environment (e.g., intensity of lighting), they found that any change had a positive

impact on productivity. The act of paying attention to employees in a friendly and non-threatening way was

sufficient by itself to increase output.

The Hawthorne experiment is quite disturbing because it cast doubts on our ability to evaluate the efficacy

of new management theories. An organization might continually involve itself in the latest management fads

to produce a continuous string of Hawthorne effects.

Modern Organizational Theories

Modern theories tend to be based on the concept that the organization is a system which has to adapt to

changes in its environment. In modern theory, an organization is defined as a designed and structured

process in which individuals interact for objectives (Hicks and Gullet, 1975). The contemporary approach

to the organization is multidisciplinary, as many scientists from different fields have contributed to its

development, emphasizing the dynamic nature of communication and importance of integration of

individual and organizational interests. These were subsequently re-emphasized by Bernard (1938) who gave

the first modern and comprehensive view of management. Subsequently, conclusions on systems control

gave insight into application of cybernetics. The operation research approach was suggested in 1940. It

utilized the contributions of several disciplines in problem solving. Von Bertalanffy (1951) made a

significant contribution by suggesting a component of general systems theory which is accepted as a basic

premise of modern theory.

Modern understandings of the organization can be broadly classified into:

· The systems approach

· Socio-technical theory, and

· A contingency or situational approach.

Systems Theory

Systems theory was originally proposed by Hungarian biologist Ludwig von Bertalanffy in 1928, although it

has not been applied to organizations until recently (Kast and Rosenzweig, 1972; Scott, 1981). The

foundation of systems theory is that all the components of an organization are interrelated, and that

changing one variable might impact many others. Organizations are viewed as open systems, continually

interacting with their environment. They are in a state of dynamic equilibrium as they adapt to

environmental changes. Senge (1990) describes systems thinking as: "understanding how our actions shape

our reality.

A central theme of systems theory is that nonlinear relationships might exist between variables. Small

changes in one variable can cause huge changes in another, and large changes in a variable might have only a

nominal effect on another. The concept of nonlinearity adds enormous complexity to our understanding of

Organizational Psychology (PSY510)

organizations. In fact, one of the most salient argument against systems theory is that the complexity

introduced by nonlinearity makes it difficult or impossible to fully understand the relationships between

variables.

Socio-Technical Approach

It is not just job enlargement and enrichment which is important, but also transforming technology into a

meaningful tool in the hands of the users. The socio-technical systems approach is based on the premise

that every organization consists of the people, the technical system and the environment (Pasmore, 1988).

People (the social system) use tools, techniques and knowledge (the technical system) to produce goods or

services valued by consumers or users (who are part of the organization's external environment). Therefore,

an equilibrium among the social system, the technical system and the environment is necessary to make the

organization more effective.

Contingency Theory

Classical and neoclassical theorists viewed conflict as something to be avoided because it interfered with

equilibrium. Contingency theorists view conflict as inescapable, but manageable.

Chandler (1962) studied four large United States corporations and proposed that an organization would

naturally evolve to meet the needs of its strategy -- that form follows function. Implicit in Chandler's ideas

was that organizations would act in a rational, sequential, and linear manner to adapt to changes in the

environment. Effectiveness was a function of management's ability to adapt to environmental changes.

In highly volatile industries, it was noted that the importance of giving managers at all levels the authority to

make decisions over their domain. Managers would be free to make decisions contingent on the current

situation.

Organizational Structure

Until recently, nearly all organizations followed Weber's concept of bureaucratic structures. The increased

complexity of multinational organizations created the necessity of a new structure that Drucker called

(1974) "federal decentralization". In federal decentralization, a company is organized so that there are a

number of independent units operating simultaneously. "Each unit has its own management which, in

effect, runs its own autonomous business." (p. 572) This structure has resulted in large conglomerates which

have diversified into many different fields in order to minimize risk.

The project management organizational structure has been used effectively in highly dynamic and

technological environments (French, Kast and Rosenzweig, 1985). The project manager becomes the focal

point for information and activities related to a specific project. The goal is to provide effective integration

of an organization's resources towards the completion of a specific project. Impementing a project

management approach often involves dramatic changes in the relationships of authority and responsibility.

The matrix organizational structure evolved from the project management form (Kolodny, 1979). It

represents a compromise between the traditional bureuacratic approach and the autonomous project

management approach. A matrix organization has permanently established departments that provide

integration for project management. The matrix form is superimposed on the hierarchical structure,

resulting in dual authority and responsibilities. Permanent functionality departments allocate resources to be

shared among departments and managers.

New Organizational Structures

Network Structure

This modern structure includes the linking of numerous, separate organizations to optimize their interaction

in order to accomplish a common, overall goal. An example is a joint venture to build a complex, technical

systems such as the space shuttle. Another example is a network of construction companies to build a large

structure.

Virtual Organization

This emerging form is based on organization members interacting with each other completely, or almost

completely, via telecommunications. Members may never actually meet each other. A Virtual Organization

is an organization existing as a corporate, not-for-profit, educational, or otherwise productive entity that

does not have a central geographical location and exists solely through telecommunication tools.

A Virtual Organization comprises a set of (legally) independent organizations that share resources and

skills to achieve its mission/goal, but that are not limited to an alliance of for profit enterprises. The

interaction among members of the virtual organization is mainly done through computer networks. A

Virtual Organization is a manifestation of Collaborative Networks.

Organizational Psychology (PSY510)

Learning Organizations

In an environment where environments are continually changing, it's critical that organizations detect and

quickly correct its own errors. This requires continuous feedback to, and within, the organization. Continual

feedback allows the organization to `unlearn' old beliefs and remain open to new feedback, uncolored by

long-held beliefs. Peter Senge (1990) defines learning as enhancing ones capacity to take action so learning

organizations are organizations, which are continually enhancing their capacity to create. Senge believes that

organizations are evolving from controlling to predominantly learning.

In a learning organization, managers don't direct as much as they facilitate the workers' applying new

information and learning from that experience. Managers ensure time to exchange feedback, to inquire and

reflect about the feedback, and then to gain consensus on direction.

There are two types of learning strategies used

Single Loop Learning

This occurs when errors are detected and corrected and firms continue with their present policies and goals.

According to Dodgson (1993), Single-loop learning can be equated to activities that add to the knowledge-

base or firm-specific competences or routines without altering the fundamental nature of the organization's

activities.

It has already been referred to as "Lower-Level Learning" by Fiol and Lyles.

Double Loop Learning

This occurs when, in addition to detection and correction or errors, the organization questions and modifies

its existing norms, procedures, policies and objectives. Double-loop learning involves changing the

organization's knowledge-base or firm-specific competences or routines. Double-loop learning is also called

"Higher-level learning" by Fiol and Lyles (1985), "Generative Learning" or "Learning to Expand an

Organization's Capabilities" by Senge (1990), and "Strategic Learning" by Mason (1993).

Double-loop learning is concerned with why and how to change the organization, while Single-Loop

learning is concerned with accepting change without questioning underlying assumptions and core beliefs.

REFERENCES

Salvia, Laura, (2002 December 14). Retrieved from:

http://www.ischool.utexas.edu/~i387sum/modules/two/module2u3.html

Cloed, Hemer, (2005 May 25).. Retrieved from:

http://courses.cs.vt.edu/~cs3604/lib/Copyrights.Patents/Buchholz.poster.html

Organizational Theory:

Determinants of Structure. Retrieved from:http://www.analytictech.com/mb021/orgtheory.htm

Encyclopaedia information on Organizational Theory.

Retrieved from: www.iscid.org/encyclopedia/Organizational_Theory

Baker, D.B. (1985). The study of stress at work. Annual Review of Public Health, 6: 67-81.

Breunle, P.C., Mangelsdorff, A.D., & James, J.J. (1982). Long-range planning system (LRPS): The

medical environment in the year 2000. (Report No. 82-001). Fort Sam Houston, TX: U.S. Army Health

Care Studies Division. (DTIC:AD B098015)

Fielding, J.E. (1983). Lessons from health care regulation. Annual Review of Public Health, 4: 91-130.

Fielding, J.E., & Piserchia, P.V. (1989). Frequency of worksite health promotion activities. American

Journal of Public Health, 79 (1), 16-20.

FURTHER READING

Bergman, P.G. & Editors of Encyclopaedia Britannica Online. (2005-2006). Organizational Theory.

Encyclopaedia Britannica Online. Retrieved March 13, 2006. from Encyclopedia Britannica Online on the

World Wide Web: http://www.search.eb.com/bol/topic?eu=117376&sctn=1

Hummer, David, (2001 January 15).. Retrieved from:

http://www.managementhelp.org/org_thry/new_forms.htm

Archer, J. and Gruenberg, E.M. (1982). The chronically mentally disabled and "deinstitutionalization."

http://users.idworld.net/dmangels/orgbeh.htm

Bond, M.H. and Smith, P.B. (1996). Cross-cultural social and organizational psychology. Annual Review

of Psychology, http://www.fao.org/docrep/W7503E/w7503e03.htm

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