3.

Evolution of Organisational Theory (170 marks)

2023 (1b) Describe the main propositions of neo-classical organisational theory. (10 marks)
2022 (1d) Write a brief note on 'systems approach' in the context of the evolution of organisation theory. (10
marks)
2020 (1b) Explain- Social systems approach of management. (10 marks)
2019 (2c) What are the main features of Neo-classical organisational theory? Explain the implications of this
theory for organisational design. (20 marks)
2018 (1e) Explain- Red Tapism. (10 marks)
2018 (2a) How does a learning organisation differ from a traditional organisation? What impact do these
differences have on the way people are managed? (20 marks)
2018 (4c) Examine the attributes of virtual organisation. Also assess their implications in the Indian Corporate
Sector. (10 marks)
2017 (1e) Explain- Cynical Puppeteering of People. (10 marks)
2017 (1c) Explain- Empowered Organisation (10 marks)
2017 (2a) The critics of the organisational theory are of the view that modern theory of organisation is like an
old wine in the new bottle. Explain the statement. (20 marks)
2017 (2c) Virtual organisation emphasises vitality and growth of an organisation. Elucidate. (10 marks)
2016 (2b) The criticism of Neo-classical theory ranges from 'human relations as a tool for cynical puppeteering
of people' to 'human relations no more than a trifling body of empirical descriptive information'.
Throw light on this statement. (20 Marks)
2015 (2c) What is meant by empowered organisation? Suggest steps to foster an empowered organisation. (10
marks)
2014 (1a) Explain- Cybernetics aspect of System Theory (10 marks)
2014 (1c) Explain- Fishnet Organisation (10 marks)
2014 (2c) What is virtual organisation? Do you visualise it in Indian scenario? Examine its merits and limitations.
(10 marks)

Chapter Outline
• Introduction
• Classification of Organisational Theories
1. Classical Organisation Theory
1. Bureaucratic Theory by Max Weber
2. Scientific Management by F.W. Taylor
3. Administrative Management by Henry Fayol
□ Gullick and Urwick's Administrative Management Theory
2. Neo-Classical Theory
1. Human Relations Approach
2. Behavioural Theory/Approach
3. Social Systems Approach
3. Modern Organisational Theory
1. Systems Approach
2. Contingency Approach
• Modern Concepts of OT-
1. Learning Organisation
2. Network Structure
3. Boundary-less Organisation
4. Virtual Enterprise
5. Virtual Team
6. Modular Organisation
7. Self-managed Team

Organisational Theory Page 1

 7. Self-managed Team
8. Self-organising Systems
9. Self-designing Organisation
10. Fractal Organisation
11. Amoeba Organisation
12. Process Organisation
13. Cybernetics
14. Fishnet Organisation
• Organisational Manual
• Red tapism

• Organisation Theory is socio-technical analysis of knowing or best understanding of how organisations are
formed, how they work and how they can be made better. OT refers to a preposition or set of propositions
that attempt to explain or predict how groups and individuals work or behave in differing organisational
framework.
• The role of organisation theory is to provide a means of classifying significant and pertinent knowledge
about organisations. It is essential to develop a proper understanding about organisation because their
effectiveness is influenced by the people in the organisation and specific characteristics of the basic
elements in the organisations and the way they adapt themselves to the environment.
• Some applications of OT-
○ Strategy/Finance: Those who want to improve the value of the company need to know how to
organise to achieve organisational goals, those who want to monitor and control performance will
need to understand how to achieve results by structuring activities and designing organisational
processes.
○ Marketing: A thorough understanding of what an organisation is and how it operates will make their
endeavours to align the organisation and its brand strategy more feasible and productive.
○ Information Technology: The way information flows through the organisation affects work
processes and outcomes. So, knowing organisation theory can help IT specialists identify, understand
and serve the organisation's informational needs as they design and promote the use of their
information system.
○ Operations: Value Chain Management has created a need for operating managers to interconnect
their organising processes with those of suppliers, distributors and customers. OT not only supports
the technical aspect of operations an systems integration, but explains their socio-cultural aspects as
well.
○ Human Resources: Nearly everything HR specialists do from recruiting to compensation has
organisational ramifications and hence benefits from knowledge provided by OT.
○ Communication: Corporate communication specialists must understand the interpretive process of
organisational stakeholders and need to address the many ways in which different parts of
organisation interact with each other and the environment, in order to design communication system
that are effective or to diagnose ways existing systems are misaligned with the organisational needs.
• Classification of Organisational Theories
1. Classical Organisation Theory
1. Bureaucratic Theory by Max Weber
2. Scientific Management by F.W. Taylor
3. Administrative Management by Henry Fayol
2. Neo-Classical Theory
1. Human Relations Approach
2. Behavioural Theory/Approach
3. Social Systems Approach
3. Modern Organisational Theory
1. Systems Approach
2. Contingency Approach
Classical Organisation Theory
• The classical theory represents the traditionally accepted views about organisations. The classical theorists
concentrated on organisation structure for the achievement of organisational goals and also develop certain
principles of management.
The classical thought can be studied under three streams:

Organisational Theory Page 2

• The classical thought can be studied under three streams:
a. Bureaucracy,
b. Scientific Management and
c. Administrative Management or Management Process
• Common Aspects of Classical Thought:
○ Structure: All three stress upon formal relations based upon tasks, activities and people.
○ Division of Work: Segregation of total organisational work into meaningful and simple activities to
ensure efficiency.
○ Span of Control and Scalar Chain.
○ Coordination: To ensure hurdle free and non-contradictory functioning, coordination is stressed upon.
• Positive Aspects of Classical Thought:
○ Structural Contribution.
○ Aimed at high level of specialisation.
○ Rationality in total organisational working.
• Negatives/Criticisms:
○ Dehumanisation: Elton Mayo proved significance of informal organisation as against formal by classical
thinkers.
○ Lack of Dynamism: Classical theories presents roadmap as a static picture rather than flexible way out
for all possibilities.
○ Closed system view: All the three thinkers didn't see organisation as open entity. Narrow aspects are
not compatible with boundlessly working marketing economy.
○ Impractical Assumptions and Principles: such as workers are homogeneous, economic beings, one best
way of doing things, working of line and staff simultaneously or static span of control are not practical
one.
○ Anti-democratic working.
• Conclusion: Role of founding work done by classical thinkers can't be underestimated. Whether neo-classical
theory or modern organisational theory, basis is classical principles and concepts. Without classical or basic
understanding to organisations, further understanding or development is not possible.

1. Bureaucratic Theory by Max Weber-

○ Weber conceptualised bureaucracy as an abstract system that would rationally solve problems
without the frictions caused by human errors.
○ It was Weber's contention that there are 3 types of legitimate authority which are as follows-
 Rational-Legal Authority: Obedience is owed to legally established position or rank within the
hierarchy of a business, military unit, government and so on.
 Traditional Authority: People obey a person because he belongs to a certain class or occupies a
position traditionally recognised as possessing authority, such as royal family.
 Charismatic Authority: Obedience is based on the follower's belief that a person has some
special power or appeal.
○ Weber's theory recognises rational-legal authority as the most important type in organisations.
Under traditional authority, leaders are not chosen for their competence, and charismatic authority is
too emotional and irrational.
○ Characteristics of Bureaucracy:
 Division of Work: High degree of division of work at both operative and administrative levels
bring specialisation of work.
 Hierarchy of Authority: Each lower position is under the control of a higher one. Thus, there is
unity of command. The bureaucratic structure is hierarchical in nature. It's like a pyramid in
which quantity of authority increases as one moves up the ladder in the organisation.
 Rules and Regulations: The rules, regulations and procedures are clearly laid down by the top
administration. They standardise the decision, serve as receptacles of past learning and protect
the incumbents and ensure equality of treatment.
 Impersonal Conduct: The decisions are entirely guided by rules and regulations and are totally
impersonal. There is no room for emotions and sentiments. The essence of bureaucracy is total
de-personalisation.
 Staffing: The personnel are employed by a contractual relationship. The tenure of service is
governed by rules and regulations of the organisation. Each employee gets salary on the basis
of job he handles and length of service.

Organisational Theory Page 3

 of job he handles and length of service.
 Technical Competence: The bureaucrats are appointed through selection (not election or
inheritance) and the basis of selection is their technical competence. Promotion in
bureaucracies are also based on technical qualifications and performance.
 Official Records: The administration of a bureaucratic organisation is supported by an efficient
system of record-keeping. The decisions and activities of the organisation are formally
recorded and preserved safely for future reference. This is made possible by extensive filing
system which make the organisation independent of individuals by serving as the memory of
the organisation.
○ Advantages of Bureaucracy:
 Proper delegation of authority as people are given task according to their competence.
 Consistency of actions and rational and predictable employee behaviour because of rules and
regulations.
 Efficiency because division of work leads to specialisation.
○ Criticisms:
 Questioning the rationality: Rules and hierarchy may lead to dysfunctional consequences.
Division of labour may result in conflicts.
 Changing environment: Static rules and regulations may not be supported by changed
circumstances.
 Negative effect on efficiency: Goal displacement through rules and regulations brings
inefficiency.
 Loss of mutual trust: due to stress upon just rules. Harm to team building.
 No allowance for personal growth. Mature people have their goals and needs which may
conflict with the organisational goals. The bureaucracy doesn't place any emphasis on goals of
individuals.
 Doesn't consider informal organisation and inter-personal difficulties.
 Communication from top level to the lowest level will take a very long time.
2. Scientific Management by F.W. Taylor-
○ Taylor is regarded as 'Father of Scientific Management'. Taylor's contribution has two dimensions-
 On the Mechanical side, Taylor introduced time and motion studies, standardisation of tools,
methods of working conditions, differential piece rate for the payment of wages, etc.
 On the Philosophical side, he tried to develop the science of management based on scientific
investigation and experiment.
○ The scientific management is based on the following principles:
1. Science, not rule of thumb: Develop a science for each element of a man's work which replaces
the old 'rule of thumb' method.
2. Scientific Selection and Development of Workmen: Scientifically select and then train, teach
and develop the workman, whereas in the past he chose his work and trained himself as best
as he could. Ensuring right man at right job.
3. Bringing together science of work and scientifically selected and trained men: Heartily
cooperate with the men so as to ensure all of the work being done in accordance with the
principle of the science which has been developed.
4. Division of work and bearing of responsibility: An almost equal division of work and
responsibility between management and workmen. The management take over all the work for
which they're better fitted than the workmen, while in past almost all of the work and the
greater part of responsibility were thrown upon the workmen.
○ For him, there is no inherent conflict between interests of workers, employers and consumers. Results
of higher productivity should be shared by all. Taylor wanted to bring 'mental revolution' on the part
of the workers and the management. It refers to the realisation by management and workers that
mutual interests are not contradictory. Both the parties should stress upon increasing the surplus
rather than its distribution. The mental revolution has three aspects-
1. All out efforts for increase in production;
2. Creation of the spirit of mutual trust and confidence; and
3. Inculcating and developing the scientific attitude towards problems.
○ Taylor's Functional Foremanship at supervisory level: Taylor doubted and said that line or military
form is not suitable for efficiency. Workers are not used properly. Hence, he suggested 8 area experts
at supervisory level-
 In Planning-

Organisational Theory Page 4

 form is not suitable for efficiency. Workers are not used properly. Hence, he suggested 8 area experts
at supervisory level-
 In Planning-
1. Task & Routine Clerk,
2. Instruction card Clerk,
3. Cost Clerk,
4. Shop Disciplinarian
 Execution Level-
5. Gang Boss,
6. Speed Boss,
7. Repair Boss, and
8. Inspector.
○ Positives of Scientific Management:
 Replacement of traditional rule of thumb method by scientific techniques for each element of
man's work.
 Proper selection and training of workers.
 Establishment of harmonious relationship between workers and the management.
 Achievement of equal division of responsibilities between workers and management.
 Standardisation of tools, equipment, materials and work methods.
 Detailed instructions and constant guidance of workers.
○ Negatives:
 Lack of human orientation: Stress on economic motivation. Workers are treated as imperfect
psychological machines or cogs.
 Working of Diminishing law of returns.
 Exploitation: Unhealthy pressure for performance, strong control, non-acceptance of informal
organisation and piece rate system are just tools of exploitation.
 Unnecessarily fabricated techniques: Executive judgement is replaced by fabricated techniques
like work study, time study, motion study. These may not prove to be useful at all times and
situations.
 Shop management techniques: General aspects have been ignored and workshop level
management presented.
○ Conclusion: Despite limited consideration of human aspect, significance of Taylor's contribution
can't be underscored. He was first person to initiate quest for better performance and apply
quantitative techniques to the study of industrial management. Operations research, time study,
method study, system analysis, management by exception, etc. are Taylor's heritage. He offered
scientific management for human good. He stresses upon prosperity for all. Mental Revolution can
be mantra of today's joint organisations. For young and imaginative engineers, he offered mission
and need for work commitment.
3. Administrative Management Theory by Henry Fayol:
○ This school of thought is also known as 'universalist' because it believed that management principles
are applicable to all kinds of group activities.
○ Henry Fayol is regarded father of this school. He argued that managerial ability can be acquired as
any other technical ability. He recommended formal teaching in management. He rejected the idea
of distinction between management and administration. He advocated that administration applies to
every entity that conducts Planning, Organising, Commanding, Coordinating and Controlling
(POCCC).
○ Principal features of administrative theory:
 Organisation is an abstract entity, a closed system.
 Organisations perform 6 main activities, their sub-activities including 5 sub-activities of
managing. These are to be performed in the light of 14 principals to bring effectiveness and
efficiency.
○ Fayol presented a broader concept of administrative science. Administration includes not just public
services but enterprise of every size, nature, form and purpose. All need management i.e. POCCC and
some general principles to function properly. Type of activity based division between administration
and management is not tenable.
○ He divided business/industrial activities into 6 parts:
1. Technical Activities: most necessary for progress and goal attainment. Includes production,
manufacturing and adaptation.

Organisational Theory Page 5

 manufacturing and adaptation.
2. Commercial activities: strategically important, emphasise knowledge of markets and
competitors, long-term vision, etc. Includes buying, selling and exchange.
3. Financing: arrangement of all resources. Include search and optimum use of capital.
4. Security of plant and people against fire, theft, flood, strikes etc.
5. Accounting for accurate picture of organisation's financial health. Includes stock-taking,
balance sheets, costs and statistics.
6. Managerial function/activity: universal, discharged at all levels of management, more at top
level. Includes POCCC.
○ Five Management Activities-
 Planning provides forethought to the organisational operations.
 Organisation includes both human and material organisation. It should be consistent with
objectives and requirements. Includes selection, placement, discipline and rewards etc.
 Command means to maintain activity among the personnel through supervision and
motivation. It aims at making unity, energy, initiative and loyalty among personnel.
 Coordination refers to working together and harmonising all activities and efforts so as to
facilitate working of the organisation. It ensure that the efforts of one department are
coincident with the efforts of other department and overall aims of the organisation.
 Control signifies watch, monitor, check and audit. It includes those instruments and principles
that ensure conformity with plans. Includes identifying weakness and errors, rectifying and
preventing recurrence thereof. It must be timely and with use of sanctions.
○ Principles of Management by Fayol-
1. Division of Work- for more and better work with same effort or specialisation.
2. Authority and Responsibility- parity or enough authority to be given to carry-out assigned
responsibilities.
3. Discipline- obedience of standing agreements or terms and conditions of employment.
4. Unity of Command- for any action, any employee should have only one boss or superior.
5. Unity of Direction- one head and one plan for each activity or one type of activities.
6. Subordination of individual interest to general interest.
7. Remuneration- fair for the personnel and affordable to the firm for satisfaction of both.
8. Centralisation- There should be balance between centralisation and decentralisation
depending upon situations such as nature of work, managers, subordinates and business
conditions. Small units can have centralisation and proper decentralisation for big
organisations.
9. Scalar Chain of Hierarchy- line of authority from top to lowest ranks.
10. Order or placement- right man at right job --> most effective service.
11. Equity- kindness and justice in managers while dealing with subordinates.
12. Stability of Tenure
13. Initiative- Managers should sacrifice personal vanity to permit subordinates to exercise
initiative. It is powerful motivator and source of keenest satisfaction.
14. Esprit de corps (union is strength)- harmony and union among personnel→source of
organisational strength.
○ Advantages of Administrative Theory:
 Overall managerial philosophy is presented in abstract and definite terms. Before it,
management was not understood in such an integrated and comprehensive manner.
 Fayol's principles have clarifying and predictive role to understand and improve managerial
functions.
 In designing corporate structures, Fayolism can be used.
○ Flexibility in Fayol's Administrative Management:
 The 14 functional truths are principles rather than rules.
 Unity of Direction along with Unity of Command for job and role clarity: UoC is necessary but
to ensure working according to organisational goals, integration of jobs and roles is made
possible by UoD. Pure UoC or pure UoD in an isolated manner is harmful.
 Gang Plank (Level jumping): Purposive violation of hierarchy principle i.e. communication
cutting across hierarchy is technically known as 'Gang Plank'.
 Centralisation vs Initiative: For integrity & coordination of whole organisation, centralisation is
advocated but Fayol also advocated for thinking & execution of plans at all managerial levels
so that subordinates has an opportunity to use own initiative.

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 so that subordinates has an opportunity to use own initiative.
 Principles like balance between authority & responsibility, order, pay & equity also ensure
flexibility i.e. obedience of orders as per requirements, right people at right job, performance
tied pay etc.
○ Criticism of Fayol's Theory:
 Structuralists opine that Fayol stressed just upon functional classification of organisation: Fayol
imposed a mechanistic model of an ideal/universal organisation on living businesses. Fayol
didn't provide structure for large, complex and dynamic organisations.
 Theory base is said to be narrow.
 Contradictions and dysfunctional principles: Unity of Command vs. Unity of Direction,
Centralisation vs. Initiative etc.
 Outdated Principles: Organisation such as boundary-less or system organisation can't work on
the basis of hierarchy.
 Insufficient principles: Management can't be explained purely in terms of 14 principles about
formal structure. Actual behaviour of employees depart in many ways from planned.
 Ignores Social-Psychological or Emotional needs of the employees.
Gullick & Urwick's Administrative Management Theory:
• On the basis of machine model of Taylor and Fayol, Gullick and Urwick developed administrative
management theory. They tried to develop a science of administration based on principles. By
neglecting role of men, they attached importance of structure of administration.
• Gullick integrated administrative principles provided by Fayol, Mooney & Riley, Taylor, Fellet and
Graicunas. Thereby, he developed 29 administrative principles such as investigation, forecasting,
planning organisation, coordination, order, command, control, etc. He advocated that his principles are
framework of thought and an arrangement of ideas that would help others to synthesise out of their
own experience. He also refined his ideas an executive functions and coined new work POSDCORB
(Planning, Organising, Staffing, Directing, Coordination and Budgeting).
• Defining organisation primarily as a designing process, Urwick felt that lack of design is-
 illogical- because it is inconceivable to appoint a person and pay him wages without an idea of
the position he has likely to occupy.
 cruel- when an organisational member does not know the qualifications required for the job and
the duties assigned to him in the job situation.
 wasteful- because if jobs are not arranged properly, functional specialisation is not possible and
training new people become difficult.
 inefficient- because the supervisor has nothing to fall back except on personalities in the event
of conflict and confusion.
• Hence, Gullick and Urwick devoted their attention to the discovery of principles based on which the
structure may be designed. Ten principles of Organising are-
1. Division of Work/Specialisation
2. Departmentation on 4 basis- Purpose, Process, Person or Place.
3. Coordination through hierarchy.
4. Deliberate Coordination.
5. Coordination through Committees.
6. Decentralisation.
7. Unity of Command.
8. Staff and Line.
9. Delegation.
10. Span of Control.

Neo-Classical Theories
• It is supplement to classical theories, rather than a replacement. It pointed out the limitations of classical
approach and tried to remove the deficiencies through highlighting certain things which weren't considered
by classical writers. That is why, it's called neo-classical theory.
• Neo-classical approach is based on 2 main points-
○ Organisational situation should be viewed in social as well as in economic and technical terms.
○ The social process of group behaviour can be understood in terms of clinical methods analogous to
the doctor's diagnosis of human organism.

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 the doctor's diagnosis of human organism.
• The neo-classicists view organisation as a combination of formal and informal relationships.
• Features:
○ Organisation, in general, is a social system composed of interacting parts. The social system defines
individual roles and establishes norms that may differ from those of the formal organisation.
○ The social environment on the job affects the workers and is also affected by them. Management is not
the only variable.
○ The informal organisation also exist within the framework formal organisation and it affects and is
affected by the formal organisation.
○ There's an emergence of informal leadership as against formal leadership and that sets and enforces
group norms.
○ Both way communication— downward for the proper functioning of the organisation and transmits
upwards the feelings and sentiments of people who work in organisation.
○ Money is one of the motivators, but not the sole motivator of human behaviour.
○ There is generally a conflict between organisational and individual goals. It's necessary to achieve
integration between these goals.
○ It's necessary to relate work and organisational structure to the social needs of the employees. In this
way, by making the employee happy, the organisation would obtain their full cooperation and effort
and this increase its efficiency.
• Modifications over Classical Structure:
1. Flat Structure: Neo-Classical organisation theory suggest flat structure as against tall structure as
suggested by classical theory. In a flat structure, communication chain is shorter and is more suitable
for motivating human beings in the organisation as it is possible to give autonomy to people.
2. Decentralisation: The decentralised structure offers more advantages. It allows initiative and autonomy
at the lower levels. It also develops the people to occupy higher positions in the future.
3. Informal Organisation: Informal organisation is created to plug the loopholes of formal organisation
and to satisfy the social and psychological needs of people. Both formal and informal organisations are
inter-dependent.
4. Dynamic Structure: Besides flat structure, it also demands for structure suitable for human effort and
development. Structural hardships have also been root cause behind emergence of neo-classical
theory.
• Merits of Neo-Classical Theory:
○ It offered a humanistic view towards the people at work and emphasised the micro-analysis of human
behaviour.
○ It brought into light certain important factors which were altogether ignored by classicists such as
informal groups, informal leader, non-economic rewards, etc.
○ This school advised working with informal organisation which involves listening to opinions expressed
for the group by the informal leader, allowing group participation in decision-making, controlling the
grape-vine by prompt release of accurate information.
• Limitations of Neo-Classical Theory-
○ Unrealistic Assumptions: Like the assumption that there is a solution of every problem which satisfies
everyone in the organisation isn't true.
○ Limited Application: There is no particular structure which may serve the purpose of all organisations.
They overlooked some of the environmental constraints which managers can't ignore and this lapse
makes the practicability of theory limited.
○ Lack of Scientific Validity: The conclusion of Hawthorne Studies were based on clinical insight rather
than scientific evidence. The groups chosen for study were not representative in character. The
experiments focused on operative employees only.
○ Limited Focus on Work: It puts all the emphasis on interpersonal relations and informal group. It tend
to overemphasise the psychological aspects at the cost of structural and technical aspects.
○ Narrow View of Conflict between Organisational and Individual Goals: The positive aspects of the
conflicts such as overcoming weakness and generation of innovative ideas were ignored.
• There are 3 thoughts under Neo-Classical Theory-
○ Human Relations Approach
○ Behavioural Theory/Approach
○ Social systems Approach

1. Human Relations Approach-

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1. Human Relations Approach-
○ The human relationists focused on human aspect neglected by classical theorists. They emphasised
the role of communication, participation and leadership.
○ Elton Mayo and his associates propounded it. Harvard associates conducted experiments at
Hawthorne between 1924-32. Their tests concluded working of human/social aspect at work place.
○ Elton Mayo is generally recognised as the father of Human Relations School. Mayo and his associates
discovered that-
 The amount of work carried out by a worker is not determined by his physical capacity but by
his social capacity.
 Non-economic rewards play a crucial role in determining the motivation and happiness of
workers.
 The highest specialisation is by no means the most efficient form of division of labour.
 Workers do not react to management and its norms & awards as individuals but as members
of groups.
○ Behaviourists didn't prescribe any one form of organisation structure but proposed that it can
be improved-
 by modifying it in accordance with informal structure through narrow specialisation and less
emphasis on hierarchy,
 by encouraging participation in decision-making at lower-levels, and
 by a more people-oriented approach by managers at all levels.
○ Basic Elements of HR approach are-
 the individual,
 work group,
 positive work environment,
 leadership.
○ Hawthorne Experiments-
1. In first test i.e. 'Illumination process', Mayo was surprised by no negative effect of reduction in
light over productivity. It promoted for further tests.
2. In 'relay assembly test', he found positive impact of voluntary rest, hot lunches and friendly
atmosphere.
3. In 'interviewing programme', it was found that most of worker's complaints were baseless and
concluded that listening to subordinate is essential. Real problem may not be there.
4. Bank wiring observation found that workers establish own standards of output besides formal
one and enforce them through various methods of social pressures.
○ Hawthorne Conclusions-
 External factors like illumination, individual incentive system have no effective role in making
worker productive. Productivity was influenced by human and social side of workers.
 Human factor, adequate upwards communication is necessary in work situations. No formal
system can do that.
 Free expression resulted into workers' satisfaction, even though conditions in environment
didn't change.
 Listening to complaints gave a feeling to workers that work conditions were changed. "Let off
steam" made workers feel better.
 Cooperation can be generated in organisation spontaneously to achieve organisational goals
without breakdown.
 Work satisfaction depends, to a large extent, on the informal pattern of working group.
○ Demerits of Human Relations Approach-
 Workplace was converted into un-thoughtful place of comfort. Insincerity became acceptable.
 Short-sighted: it stressed upon happiness, informal relationships and instant psychological
satisfaction by disregarding long-term economic dimension of organisational goals.
 Scientific validity is also put under question: Allegations of clinical bias are attached. Mayo's
observations are said to be purposive constructs known to be the workers subject research. It is
alleged that group was selected to prove pre-decided hypothesis.
 Lack of universal application.
 Un-thoughtful group-decisions: Superiority of group decisions over individual decision in an
unrestricted manner is clearly against management's sovereign right to manage. Group
thought may be conflicting as well as inconclusive.
Conclusion: Presently, it is not a dominant thought, but partially relevant. Organisations can't be

Organisational Theory Page 9

 ○ Conclusion: Presently, it is not a dominant thought, but partially relevant. Organisations can't be
expected to work with disregard of human element, its socio-psychological aspect. It has come under
ambit of organisational behaviour. No manager can miss the human aspect of organisation while
emphasising technical and social aspects.
2. Behavioural Science Approach/Human Behaviour Approach/Human Resources Approach:
○ This approach advocates for scientific understanding, explanation and prediction of human
behaviour by using the knowledge drawn from behavioural sciences, namely psychology, sociology
and anthropology. Hence, this approach is inter-disciplinary and thus calls for an organisation as a
socio-technical system.
○ It is normative as well as prescriptive, meaning thereby it provides understanding as well as
suggestions to improve human productivity.
○ It focuses on human behaviour in organisations and seeks to promote verifiable prepositions for
scientific understanding of human behaviour in organisations.
○ The proponents of human behavioural science approach made the following prepositions:
 An organisation is socio-technical system.
 Individuals differ with regard to attitudes, perceptions and value system. As a result, they
behave differently to different stimuli under different conditions.
 People working in organisation have their needs and goals which may differ from the
organisational goals. Attempts should be made to achieve fusion between organisation goals
and human needs.
 A wide range of factors influence inter-personal and group behaviour of people in the
organisations.
○ Features of Behavioural Science Approach:
 Inter-disciplinary Approach: integrates knowledge drawn from different disciplines
(psychology, sociology, anthropology, economics, political science etc.) for study of human
behaviour.
 Applied Science: It's an applied science with objective to apply various researches to solve the
organisational problems.
 Normative Science: It's a normative science which not only suggests cause and effect
relationship but also prescribes ways and means to solve organisational problems and effect
results.
 Humanistic: It focuses attention on people from humanistic point of view.
 Recognises Goal Conflicts: It recognises goal conflicts in the organisation and suggests
reconciliation of goals of individuals and organisation for better organisational climate and
greater organisational effectiveness.
Human Relations Approach vs. Behavioural science Approach
Basis Human Relations Approach Behavioural Science Approach
Focus Emphasis on individual, his needs and Emphasis on groups and group-
behaviour behaviour
Relationship Focus on inter-personal relationships. Focus on group relationships.
Scope Based on Hawthorne Experiments and so It refined Human Relations Approach
its scope is limited. and has a wide scope. It's much more
systematic study of human behaviour
in organisation.
Emphasis It laid emphasis on informal groups, job It studied group dynamics, informal
satisfaction and morale. organisation and motivation.
Areas of Working conditions, inter-personal Job enrichment, group dynamics,
interest relations, employee-oriented leadership, participative leadership, organisational
informal organisation, informal change etc.
communication, employee morale, etc.

3. Social Systems Approach:

○ Chester I. Barnard is regarded as founding father of social system school.
○ The social system school believes that organisation theory rests on understanding the interaction of
social groups.

Organisational Theory Page 10

 social groups.
○ The approach considers organisation as a cooperative system. As such, organising depends upon
interaction among the social groups. According to Barnard, formal organisation is a cooperative
system in which there are persons able to communicate with each other and are willing to contribute
towards common purpose.
○ As such, it is primary duty of the manager to stimulate people to high level of effort. Organisational
success depends on the manager's ability to obtain cooperation from the organisational members.
○ Classical theorists emphasised upon formal mechanism for success of organisation. But Bernard
emphasised cooperation. He identifies the following functions of an executive:
1. Maintenance of organisational communication: It translates purpose into action. It's necessary
for cooperation. For Bernard, mere membership is not organisation. Organisation is a system of
consciously coordinated efforts/energy/activity of two or more people.
2. Securing essential services from individuals in organisation: It makes the whole greater than
the sum of its parts. Nothing works in isolation. On the other hand, as per classical theorists,
employees have specific role which might be unrelated to another person. As per social
systems school, each part is related to some other part in some significant way.
3. Formulating and defining the purpose: The common purpose is non-personal. It is for the
group. It is objective and external to individuals. It must be accepted by all who have to
contribute their efforts. Otherwise, it will not incite cooperative action among people. (On the
other hand, classical theorists believed in management determined and imposed goals).
○ By performing these functions, the executive can achieve good human relations in the organisation.
○ Barnard also developed a new concept of authority known as acceptance authority. He suggests
that a person will accept the communication as authoritative only when 4 conditions are satisfied-
1. He can understand the conversation.
2. He believes that it's consistent with organisational purpose.
3. He believes it to be compatible with his own personal interests.
4. He's mentally and physically able to comply with it.
○ Contribution-Satisfaction Equilibrium:
 Bernard agreed with personal, internal and subjective individual motives. To fulfil individual
goals and motivate individuals, he advocated for Contribution-Satisfaction Equilibrium. Here,
satisfaction can't be just economic, unlike classicists. Economic rewards are ineffective beyond
subsistence level. Hence, Barnard mentioned 4 inducements/incentives for worker satisfaction-
1. Material (Money)
2. Personal (Opportunity, Prestige and Personal Power)
3. Physical (Conditions of work)
4. Ideal Benefactions (Patriotism, Loyalty and Pride of workmanship)
 Inducement also depend upon situations, time and individuals. Arrangement of inducements is
a dynamic process requiring experience and imagination.
 Bernard suggests that there needs to be a balance or equilibrium between an individual's
contributions and the satisfaction they derive from their work. If the level of satisfaction
exceeds the perceived value of their contributions, individuals may become disengaged or
dissatisfied. Conversely, if the perceived value of their contributions exceeds the level of
satisfaction, individuals may feel underutilised or unfulfilled.
 According to Bernard, maintaining the contribution-satisfaction equilibrium is crucial for
sustaining individuals' motivation and engagement in their work.
 When individuals perceive that their contributions are valued and that their work contributes to
the overall success of the organisation, they are more likely to remain motivated, satisfied, and
committed.
 By understanding and maintaining this equilibrium, organisations can foster a positive work
environment, enhance employee engagement, and improve overall organisational
performance. It highlights the reciprocal relationship between individuals and the organisation,
where both parties benefit from a mutually satisfying and fulfilling work experience.
○ Informal Organisation as per Barnard-
 Bernard advocated that one can't understand an organisation by organisational chart, rules,
structure or by observing the personal. It is also necessary to understand 'Organisational
Ropes'.
 Bernard accepted 'social instinct' and 'personal desire' of people. Thereby, he said that people
interact in organisations on the basis of their personal relations rather than organisational

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 interact in organisations on the basis of their personal relations rather than organisational
purposes. On account of continuous interactions, such relations becomes systematised, called
Informal Organisation. Barnard defined informal organisation as the aggregate of personal
contacts, interactions and the associated grouping of people.
 Such organisations are indefinite, structure-less and shapeless mass of varying densities.
Informal organisation play 3 functions-
1. communication,
2. maintaining cohesiveness among people, and
3. maintaining feeling of personal integrity, self-respect and independent choice.
 Every formal organisation must establish informal organisation as means of communication
and for protection of individuals from domination of formal organisation. Even informal
organisation can't sustain without formal organisation. There can't be one without another.

Organisation Environment Theory/Modern Organisation Theory (MOT)

• Classical and neo-classical models proved to be either narrow or unsuitable to work with internal and
external environment in an integrative manner. For this purpose, the MOT has been evolved on the pattern
of General Systems Theory (GST).
• Modern Organisation Theory stresses upon both macro and micro understanding of organisation.
• GST studies the various parts of a system and interactions between them in an integrated manner and also
considers the interaction of system with the external environment. The MOT uses concepts of GST and
facilitates the analysis of any organisation.
• Features of MOT:
○ Open system: Organisation are established, grown and developed in an open environment and in an
open manner. It has continuous interaction with the environment.
○ Dynamism and adaption: Organisation is an open system; its survival and growth in a dynamic
environment demands an adaptive system which can continuously adjust to changing environment.
Thus, MOT advocates for an organisation which adjusts itself and respond to emerging internal and
external opportunities, challenges and other social-technical developments.
○ Multi-level analysis: The MOT has both macro and micro aspects. At the macro level, it can be applied
to whole industry or the national economic system. At the micro level, it can be applied to an
organisation and even to a sub-system of organisation. It helps real understanding of organisation as
part of supra system and a system having sub-systems.
○ Probabilistic: It's probabilistic rather than deterministic. It doesn't predict outcomes of any action
because of high degree of uncertainty in the environment.
○ Integrative Approach: The classical theory focused on formal organisation whereas neo-classical theory
concentrated more on informal organisation. MOT considers both formal and informal organisation
and tries to integrate these with concepts drawn from behavioural and quantitative approaches. Every
subsystem is analysed not as an independent entity, but as a part of large system.
• MOT has two approaches:
1. Systems Approach, and
2. Contingency Approach

1. Systems Approach:
○ The systems approach is based on the generalisation that an organisation is a system and its
components are inter-related and inter-dependent.
○ A system is composed of related and dependent elements which when interact, form a unitary whole.
Though each part performs its own functions, yet they work towards a common goal. The behaviour
of entity is a joint function of the individual parts of their interactions.
○ An organisation as a system has the following features-
 A system is goal-oriented.
 A system is engaged in processing or transformation of inputs into output.
 A system consists of several subsystems which are inter-dependent and inter-related.
 A system has a boundary which separates it from other systems.
 An organisation is an open and dynamic system.
○ Open System Concept-
 A system may be closed or open.
A closed system is self-dependent as in case of physical and mechanical systems. It

Organisational Theory Page 12

  A closed system is self-dependent as in case of physical and mechanical systems. It
concentrates completely on internal relationships. Because of lack of interaction with
environment, it has difficulty in monitoring changes occurring in the environment.
 An open system has interaction with the environment through the exchange of inputs and
outputs. The primary advantage of the open system view is that it responds to change. Under
this approach, organisational entity as a system takes input from environment and provides
output in the form of goods and services after processing thereof.
 To ensure efficiency at input, at processing and at output levels, understanding of mechanism
of organisation as a system is necessary.
○ Kast and Rosenzweig Integrative System Model: An organisation is open, socio-technical system
composed of number of sub-systems. Kast and Rosenzweig talk of integration of following five sub-
systems:
1. Goals and Values Subsystems: The organisation takes many of its values from the broader
socio-cultural environment. Organisation is a part of the society and so it must accomplish
goals determined by the environmental supra-system. The organisation must conform to the
social requirements if it wants assured supply of inputs from the society.
2. Technical Subsystem: Technical sub-system influences the organisation structure as well as the
psychological system. The technology differs from firm depending on operations involved.
3. Psycho-social Subsystem: The psycho-social system consists of the components of individual
behaviour, motivational aspects and group dynamics. It's influenced by the emotions, attitudes,
sentiments, expectations and aspirations of the employees in organisation. It's also affected by
external environment forces. Kast and Rosenzweig contend that the climate produced by
interaction between the individuals and groups is different in different organisation.
4. Structural Subsystem: Structure refers to the ways in which the tasks are divided and
coordinated in the organisation. It is primarily concerned with the establishment of authority,
relationship, communication networks and flow of work. Structural sub-system provides for
formalisation of relationships between the technical and psycho subsystems.
5. Managerial Subsystem: It encompasses the managerial activities in an organisation. Setting the
goals, developing comprehensive and strategic plans, establishing controls are the primary
managerial functions performed through this subsystem. It's the management that relates the
organisation to the environment.
○ Cargo & Yonouzas:
 Presented more comprehensive, compact and well-defined format of sub-systems. Three
specific subsystems are-
1. Technical Subsystem stresses upon knowledge and job aspects, formal organisational
rules and procedures which govern and design human behaviour. But it's not the final
answer to organisational working. It must be supported by social subsystem.
2. Social Subsystem stress upon individual worker, worker's group, informal organisation
and its status, role, values and norms.
3. Power Subsystem provides shape to human behaviour by directing it towards goal
attainment. It refers to the influence and dominance system that brings actions,
compliance and even politics in the organisation.
 These 3 subsystems can't work in isolation. They interact and affect each other. Due to
interaction and inter-affect, combined or real behaviour, technically known as emergent
behaviour, may be different. But usually, it is 'purposive and orderly' from formal behaviour. It
may be shown as follows-

Organisational Theory Page 13

 

 In order to ensure efficiency and effectiveness, interlinking among subsystems is necessary so

that overlapping, disequilibrium, conflict, work gap may be avoided. Primarily, communication,
decision-making and balancing are used for interlinking. Likert has also provided linking pin
model for such an integration.
○ Positives of Systems Approach:
 The systems approach acknowledges environmental influences which were ignored by classical
theory. It emphasises adaptability as well as efficiency. Hence, rigid rules and regulations can't
deal with uncertain and uncontrollable events.
 The systems approach represents a balanced thinking on organisation and management. It
stresses that managers should avoid analysing problems in isolation and rather develop the
ability for integrated thinking. It provides a unified focus to organisational efforts.
 It stresses upon 'universality of situation' rather than 'universality of principles'. Organisation
have to adopt working concepts rather than all time principles.
 Systems Approach is multi-dimensional. Just one-dimensional aspects like rules or one best
way or compartmentalised activities or just human touch can't ensure organisational success.
○ Negatives of Systems Approach:
 Lack of Unification: The system approach can't be considered a unified theory of organisation.
Each researcher has his own emphasis when considers the system.
 Abstract Analysis: It's too abstract to be of much use to practising managers. It fails to indicate
the precise relationship among sub-systems.
 Limited Applications: It doesn't provide action framework applicable to all types of
organisations.
○ Implications of Systems Approach:
 Matrix and Project structures are result of systems approach to organising. Project Structure
has no pre-decided size and coverage of activities. Primary purpose is coping with
environmental dynamics with ease.
 Horizontal development of organisation: Horizontal and lateral relations suggest that minimum
hierarchical hurdles that enhance efficiency i.e. flat and horizontal structures emerge.
 Working of cybernetics: In highly dynamic environment, complex and probabilistic and self-
regulatory organisation can be established on the basis of MOT, so that automatic
communication and control system provide input-based and environmentally-desired outputs.
 Systems approach provides overall understanding and designs of organisations i.e. balanced
and integrated thought. It's based upon sound logic and environmental realities. Systems
Approach has opened scope for analysis and development of further organisational patterns
such as project, matrix and free-form organisations.
○ Various Systems Prospectives:
1. Static Organisation: Organisations having stable inside goals, stable structure, stable culture, no
dynamic interaction with external environment. It is not a practical situation.
2. Open System Perspective: Organisation maintains a constant interaction and interdependence
for inputs and supply of outputs. Organisation adapts and grows for survival. Katz and Kahn
defined organisation as an open dynamic system. They gave 10 characteristics of organisation
as an open system:
1. Import of energy from environment such as people and material resources.

Organisational Theory Page 14

 1. Import of energy from environment such as people and material resources.
2. Throughput or transformational process.
3. Output i.e. export of goods, services and other value additions or resources.
4. Cyclicality— means repetition of operations mentioned above.
5. Negative Entropy— means protecting organisation against degradation or decay by
using energy or resources (Mergers & Acquisitions, Insurances, Structural Changes etc.)
6. Maintaining stability through information input and negative feedback.
7. Dynamic Homeostasis— adapting with environment.
8. Differentiation and specialisation.
9. Integration and coordination among sub-parts or differentiates elements.
10. Equifinality- Reaching the goal or serving value by following any or different plans.
3. Scott's Organisation System Model: W.G. Scott provided analytical model of organisation as a
system. They advocated that there are 5 sub-systems in the organisation that are
interconnected. These are People, Formal Organisation, Informal Organisation, Fusion Process
(Integration among individual and organisational needs) and Physical Settings. The goals of
organisation system are stability, growth and interactions. His model aims at providing a
comprehensive view of elements, inter-relations and goals of organisation system.
4. Socio-Technical Systems Approach: The term 'socio-technical' was coined in 1960s by Eric Trist
and Fred Emery. The socio-technical systems approach is about harnessing the people aspects
and technical aspects (of organisation structure and process) to achieve joint optimisation with
focused emphasis on achieving excellence in both the technical performance and the quality in
people's work. As per this approach, attainment of optimum conditions in any one dimension
doesn't necessarily result in success of organisation. The optimisation of the whole tends to
require a less than optimum state for each separate dimension. Better integration among
people and technology are more essential.
5. Kast and Rosenzweig's Integrative Systems Model.
2. Contingency Approach-
○ It's an improvement over the systems and other approaches. Basic idea behind contingency approach
to organisations is non-existence of any particular managerial style or organisational design, which
may be suitable for all organisational goals, organisations and situations.
○ Contingency theory suggests that managerial actions and organisational design must be appropriate
to the given situation. Even classicists stressed upon situations.
○ Contingency theorists opine that systems approach doesn't adequately spell out precise relationship
between environmental elements and organisation itself.
○ Input requirements, process aspects as well as organisation products can't be pre-decided and pre
inter-related. These three aspects work in an environment, which is almost not certain. Contingency
Approach answer organisational requirements across time and functions. It is also known as
'situational approach'.
○ Contingency approach is action-oriented as it is directed towards the application of systems concepts
and the knowledge gained from other approaches.
○ The contingency view seeks to understand the inter-relationships within and among subsystems as
well as between the organisation and its environment and to define patterns of relationships or
configurations of variables.
○ It emphasises the multivariate nature of organisation and attempts to understand how organisation
operate under varying conditions and in specific circumstances.
○ This approach is both analytical and situational with the purpose of developing a practical answer to
the question at hand.
○ Implications of Contingency Approach:
 Stress upon analytical and diagnostic managerial talent. Adoption of adaptive and flexible
organisation structure, adoption of flexible budgeting and operational policies are its
important contributions.
 Contingency approach theory is under development. It has to be refined and enriched with
more technical aspects. It'll be suitable only if it'll prescribe probable situations and prototype
managerial response thereto. In military organisation and modern marketing competition,
contingency approach is becoming significant.
○ Lawrence and Lorsch's If-Then Theory/Differentiation-Integration Model of Contingency:
 For different demands of the environment, individual departments may need and develop
different method/structure and integrating mechanisms.

Organisational Theory Page 15

 different method/structure and integrating mechanisms.
□ In mechanistic structures: Rules and Procedure.
□ In organic structure: Teamwork and Mutual Cooperation.
 If environment is uncertain and heterogeneous, then
the organisation should be relatively unstructured
and have widely shared influence among the
management staff. Firm will be highly differentiated
and use of variety of integrating mechanisms for
success.
 If environment is stable and homogeneous, then a
rigid organisation is appropriate with least
differentiation. But a high degree of integration is still
required.
 If differentiation is high, then more integration is needed, irrespective type of environment. The
extent of differentiation and integration in effective organisation vary according to the
demands of the environment.
 The more diverse and dynamic the environment, the more the effective organisation will be
differentiated and highly integrated.
 Here:
□ Differentiation describes the difference among managers in different functional
departments w.r.t. goal orientation, time orientation, different aspects of environment,
interpersonal relations, formality of structure.
□ Integration describes the degree of coordination and cooperation between different
departments with interdependent tasks.
○ Neo-Contingency Theory:
 Developed by Donaldson and others during mid-1990s.
 It's micro-perspective to organisation. It focuses upon adaption of organisation to
environment. Organisation adapt to environment and technology to have a fit between
structure and contingency at any particular point of time.
 It is never ending process— Structure-Contingency 'Fit' results into performance that produce
slack resources. These are re-invested resulting into bigger organisation and wider operations.
It increases uncertainties for the organisation and moves the organisation away from fit, state
of miss-fit and poor performance. Organisation redesigns itself to re-establish 'fit'. Fit again
brings performance, resulting into above phenomenon. Hence, a loop of success, slow-down
and decline-adaptation-success is established.

Modern Concepts of OT-

1. Learning Organisation-
○ One which can create, acquire and transfer knowledge for modifying work behaviour of its members.
○ It has following features-
 Capability of thinking, learning and knowledge creation.
 Encouragement to excellence, creativity, innovation and sense of achievement among its
members.
 Development of new organisational capabilities and futuristic outlook.
 Efforts of demolishing old behaviour by new and improved one.
 In-built organisational flexibility.
Traditional Organisation vs Learning Organisation
Traditional Organisation Learning Organisation
Imposed Vision Shared and nurtured vision
Idea formation at top At all levels
use of power and hierarchy to resolve conflicts. use of collaboration and integration to
overcome conflicts
Leader rewards, punishes and controls. Leader empowers, inspires and encourages to
bring common vision, commitment and
innovation.

Organisational Theory Page 16

 innovation.
Change is resisted and risk is avoided. Members are creative and risk takers.

2. Network Structure:
○ Network structure is a cluster of different organisations whose actions are coordinated by contracts
and agreements rather than a formal hierarchy of authority.
○ It has following features:
 Dispersed units and specialised operations working through contracts, agreements and
subsidiaries. Outsourcers are independent.
 Manufacturing in the country having cheap raw materials and other input costs. Global inputs
and processing focuses upon best quality and lowest cost.
 Enforcement of quality standards strictly on the basis of breakable contracts.
 Avoidance of high bureaucratic costs of complex and big structure. Structure is small, flat and
flexible.
 Operations are adjustable as per changing circumstances by changing links, agreements and
outsourcers.
3. Boundary-less Organisation:
○ The phrase Boundary-less organisation is coined by Jack Welch at General Electric.
○ Boundary-less organisation symbolises:
 Absence of vertical and horizontal boundaries.
 Breakdown of external barriers between the organisation and its customers, suppliers and
other external forces.
○ Vertical boundaries need to be broken to bring flat structure and minimise status and rank
differential through cross hierarchical teams, participative decision-making, 360° performance
appraisal, decisions close to actions.
○ Horizontal Boundaries can be broken through cross functional teams, multi-skilling, organic structure,
grouping functions around processes, goal focus.
○ External boundaries can be broken through sharing information and expertise without individual and
enterprises.
○ But, loosening of boundaries in above manner requires open and sharing environment, development
and sharing of common vision, culture of working with new people and appropriate reward system.
4. Virtual Enterprise-
○ It is a temporary alliance of enterprises that come together to share skills, resources, core
competences and costs to take advantage of opportunities and respond to challenges. All this is
done on computer networks by making extensive use of Information Communication Technology
(ICT). It is also known as collaborative networks.
○ No new entity is created.
○ Specialisation is maintained. Participation overcomes capability gaps.
○ Open source software development utilised the concept of virtual enterprise, wherein different
professionals across globe get together online and pool together their complimentary knowledge
and experience.
5. Virtual Team:
○ A virtual team— also known as Geographically Dispersed Team (GDT)— is a group of individuals who
work across time, space and organisational boundaries. They are linked by ICT.
○ They have complementary skills and are committed to a common purpose, have interdependent
performance goals, and share an approach to work for which they hold themselves mutually
accountable.
○ Need and Utility:
 Locating best employees available anywhere in the world.
 Workers demand of personal flexibility and participation.
 A flexible, more competitive and responsive organisation.
 Productivity by working from anywhere, anytime.
 The increasing globalisation of trade and corporate activity.
 The global workday is 24 hours vs. 8 hours.
 Environment requiring inter-organisational cooperation and competition.
 Increasing role of services and knowledge. Brick and mortar work becoming automated or
secondary.
Pre-requisite of Virtual Teams:

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 ○ Pre-requisite of Virtual Teams:
 Competent, participative, assimilative, dynamic and adaptive team leaders and members.
 Ample resources to buy and support state-of-the-art and reliable ICT infrastructure; training
and learning infrastructure.
 Well-written, well-defined and clear goals, objectives, results expectations, project
specifications, skill requirements and work standard.
 Human resource policies, reward, recognition and career development systems that meet
unique needs of virtual workers.
 A high trust culture; teamwork and collaboration.
 Leaders set high performance expectations; model behaviours such as working across
boundaries and using technology effectively.
○ Challenges/Issues:
 ICT and communication dependent with high set-up and maintenance cost.
 Dynamic roles to suit respond market needs.
 Culture and personality clashes among team members belonging to different national cultural
backgrounds.
 Repetitive change of members without loosing productivity.
6. Modular Organisation:
○ It's a form of virtual organisation which outsources certain specialised functions only. It maintains and
works upon core capabilities.
○ It's a semi-network organisation. In pure network organisation, most of the operations are
outsourced whether backward or forward. But in case of modular organisation, most of functions are
done in house.
7. Self-Managed Teams:
○ These teams usually include from 5 to 15 people and are geared to produce a product or service.
○ The hallmark of a self-managed team is that members indeed manage their own group i.e. they
manage access to resources, scheduling, supervision, etc.
○ Goals are defined by a staff person outside the team (A self-directed team defines its own goals).
○ The team is self-regulating, operating with few external controls.
○ These teams are used in different work environments including manufacturing, service industries,
professional services and virtual environments.
○ Features:
 Members provide a range of the skills needed to produce the product.
 While the self-managed team is independent, the team members are inter-dependent.
 The team is granted sufficient authority and access to resources to produce their product
timely. Members determine schedules, procedures and the need to make adjustments.
 Team members develop their own process for identifying and rotating members in managerial
roles.
 Authority rests with experts or key role players.
 Often members are trained in various problem-solving techniques and team-building
techniques.
○ Suitability: These teams work best in environments where the technologies to deliver the product or
service are highly complex and the marketplace and organisation environments are continually
changing.
○ Challenges: For traditional managers, it can be extremely difficult to control self-managed team, as
empowerment poses risk of loosing the team or project itself.
8. Self-Organising Systems:
○ The term is borrowed from biological and physical sciences where self-balancing mechanism work.
○ In organisation and management, self-balancing systems have the ability to continually and
dramatically change their structure and internal processes to conform to feedback with the
environment. They exist in increasing complexity and adapt their structures and forms to
accommodate this complexity.
○ Requirements:
 A strong current goal or purpose.
 Common set of values and continuous dialogue around these values.
 Continual and shared focus on current processes and targets.
 High focus on communication and a great deal of patience and the ability to focus on
outcomes rather than outputs.

Organisational Theory Page 18

 outcomes rather than outputs.
9. Self-designing Organisation:
○ It is not a separate form of organisation. It is a feature of organisation having organic capacities.
○ Even modern organisations like project and matrix may fall short of environmental demands. Self-
designing organisation have feature of adaptive leadership and career development goals. Here,
professionals assess requirements of any particular situation or customer demand. They redesign job
contents and redefine job profiles accordingly. It requires conformity with organisation goals and
values besides exercising operational autonomy.
10. Fractal Organisation:
○ This concept was introduced by Hans Jürgen Warnecke in 1992.
○ It's an extension of divisional structure wherein sub-units are created on the basis of specific product
or process or client group. It is needed where variety of products are produced in a highly changing
environment such as fabrics, FMCG etc.
○ Centralised hierarchical control is neither desirable nor feasible.
○ Divisions or sub-units are controlled by-
 Values not regulations
 Understanding not subordination
 Inspiration not exploitation
○ Fractals are centralised with following features-
 Clearly-defined goals.
 Substantial autonomy.
 Integrity to the company.
 Flat hierarchy.
○ Fractals improve on the basis of feedback networks i.e. feedback provided by customers and workers
to the central agency and fractals. Fractals adapt to the environments as per changes and emerging
customer preferences and needs. Fractals increase, reform and even merge as per environmental
demands.
11. Amoeba Organisation:
○ It is a combination of small organisational units having features of team with limited members
ranging between 3 to 50.
○ Even though it's autonomous of hierarchy but dependent upon functional structure or other form
such as divisional structure.
○ It's adopted where organisation produces variety of products.
○ Amoebas are flexible, participative and self-organising teams.
12. Process Organisation:
○ As the name indicates, it is an approach to designing operations around a series of processes to
meet any particular target such as Product development, Product marketing or Logistics.
○ In this structure, each process is monitored and controlled by process director with his team. At
upper levels, organisation structure is lean and thin as majority of the work is done at particular
process.
○ It is needed in case of high technology products having tough competition such as automobiles. It is
also needed where precision engineering is involved and environment is highly dynamic.
13. Cybernetics:
○ It's an improvement over contingency approach to responding to the environment.
○ It refers to the way whereby organisation works by "influencing and getting influenced by"
environment. Meaning thereby, both feed-forward and feedback strategies are used to deal with
environment.
○ Cybernetics is a trans-disciplinary approach for exploring regulatory systems— their structures,
constraints, and possibilities. It is the scientific study of how humans, animals and machines control
and communicate with each other.
○ Its functioning can be represented as follows:

Organisational Theory Page 19

 ○

○ Utility of Cybernetics:
 It appreciates significance of organisational resources in combination with new knowledge
provided by environment.
 It helps understand why any particular accident happened. Thereby, weak links can be
identified and organisations can be strengthened.
14. Fishnet Organisation:
○ The concept of the fishnet organisation, invented by Johansen and Swigart, tries to combine the
modern concept of hierarchy and the usual human tendency to hierarchy and order.
○ A fisherman's net, if observed on some shore, is fully non-hierarchical (thus the name). But if one
node is taken away and lifted, a dynamically created hierarchy can be observed, where the lifted node
is on the top. In this way, nodes can be lifted and dropped at will, creating new and destroying old
hierarchies.
○ In analogy to this metaphor in a hierarchical organisation, some nodes temporarily become some
kind of manager or business coordinator. (nodes- organisational units, which in a broader context
can be people, departments or even independent organisations, according to the principle of fractal
organisation)

○ The fishnet structure methodology to organise everyday work suggests the following-
 Every member of the organisation should be able to join any project for which he/she
considers to be able to be contribute with knowledge and experience.
 Every project member should be able to create documentation, accumulate knowledge and
add meaning for the integration of the organisational knowledge.
 Every project member should be able to give and detract votes to and from other project
members respectively, with regard to their ability and knowledge in the field of a particular
project.
 The highest ranked project member becomes the project leader/manager and thus claims right
to make time-critical decisions.
 Time uncritical decisions are made through a collective integral decision-making process, a
process which consists of preparation, making, implementation and controlling of decisions.

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 process which consists of preparation, making, implementation and controlling of decisions.
• Organisational Manual-
○ Generally, organisation structure is depicted by organisation chart. But it doesn't spell the structure fully.
Job duties, responsibilities and authority are not provided by the chart except those implied by titles. For
supplementing organisation chart or explaining structure properly, organisation manual is adopted
generally by medium and large enterprises.
○ In the absence of organisational manual, workers will have to approach superiors for job guide and work
instructions time and again. It will waste time and energy of superiors. In this sense, an organisation
manual is an authoritative explanation and guide to the company's organisation. It consists of record of
top management decisions, policy matters affecting job description, standard practices and procedures
and job descriptions.
○ Utility-
 Job description for each and relationship of the job with other jobs and roles in achieving
organisational goals.
 Avoidance of jurisdictional conflicts and duplication of efforts by workers. Rather manual acts as
technique of co-ordination.
 A written source of knowing the degree and approval of authority for different workers.
 Helpful in good industrial relations on account of all above.
• Red Tapism-
○ It refers to the excessive regulation or rigid conformity to formal rules that is considered redundant and
hinders action or decision-making.
○ It includes unnecessary paperwork, obtaining licenses, having multiple people or committees approve a
decision and various low-level rules that make conducting one's affairs slower, more difficult.
○ Origins of the term- In old England, thick legal documents were bound or tied with red cloth tape. So,
when someone spoke of cutting through the red tape, they meant it in a very literal sense.
○ Pros-
 Standardisation and uniformity
 Checks and balances
 Multiple sign-offs providing oversight
 Edit for errors
 Slowing down adds time to assess
 Monitor and filter what gets released
 Accountability and compliance
○ Cons-
 Slower decision-making
 Hindrance to innovation
 Unable to pivot in projects
 Involves too many parties
 Slow progress adds to the cost
○ How to Create Better Red Tape- Red tape isn't inherently bad, but it can be used poorly. When trying to
eliminate red tape, the goal is really to remove the cons and add to the pros. This can be by first looking
over the process you're using and deciding on which side of the scale you're more heavily leaning. Then,
it's a matter of balance. For example- If process is getting in the way of your productivity, there are ways
to cut the red tape. First, remove everything that doesn't add value. You can also delegate and empower
your team to take on more responsibilities.

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