THEORIES AND CONCEPTS

OF ORGANIZATION

NEOCLASSICAL THEORY OF ORGANIZATIONPresented by

MUHAMMAD YAHYA AHMADCEdAP STUDENT OF PCU MANILA

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

• It is addressed many of the problems inherent in classical theory

• Neoclassical theories of organization state that classical organizational theories created over-conformity and rigidity, thus squelching creativity, individual growth, and motivation.

• Neoclassical theory displayed genuine concern for human needs

The Appearance of Neoclassical Organizational Theories

Neoclassical Organization Theory

• The neoclassical theorists gained their reputation by attacking the classical theories.– Important source of the power and politics, organizational

culture, and systems theory.

• Herbert Simon.– Bounded rationality and satisfying.– Programmed and unprogrammed decision-making.– Management information systems.

• It is an attempt to improve classical organizational theory that argues employee satisfaction as well as economic effectiveness are the goals of organizational structure

• The impact of sociology.– Philip Selznick – Organizations are made up of

individuals whose goals and aspirations may not coincide with the organization’s.

Neoclassical Organization Theory

Neoclassical Organization Theory

• Herbert Simon – 1960- Decisions

–Studied decision-making within organizations–Programmed vs. un-programmed

–Developed the “science” of improved organizational decision-making through quantitative methods such as operations research and computer technology

Neoclassical Organization Theory

• Herbert Simon (1946-7 through 1990s)– First Neoclassicalist to seriously challenge the tenets of

Classical Organizational Theory– Criticized the “General Principles of Management” (see

Fayol) approach– They were inconsistent, conflicting, & inapplicable to many

administrative situations facing managers– Said that “so-called principles” could, with equal logic, be

applied in diametrically opposed ways to the same set of circumstances.

– “so-called principles” really were proverbs

Classical vs Neoclassical

• Before World War ll• Derived intellectually• Universally applicable scientific principles• The starting point of organisational theory, its birth.

• After World War ll• Derived empirically• Anti theory, critical to the classical organisational theory, but

not really a theory of its own.• The early evolution of organisational theory, its youth.

Classical vs Neoclassical

• Individuals needed to be structured in order to create an organisation.

• A number of positions for the management to control.• A formal goal for the entire organisation that everyone

naturally work towards.

• Individuals in need for cooperation holds an organisation together.

• A number of individuals with aspirations of there own to manage.

• Individuals with different goals, not always in line with the formal goal of the organisation.

Classical Organizational Theory: The approach that assumes that there is a single best way to design organizations.– This approach assumes that managers need to have close

control over their subordinates and calls for designing organizations with tall hierarchies and a narrow span of control.

Neoclassical Organizational Theory: An attempt to improve on the classical organizational theory that argues that not only economic effectiveness, but also employee satisfaction, should be goals of an industrial organization.– This approach assumes that managers do not have to

carefully monitor their subordinates and calls for designing organizations with flat hierarchies and a wide span of control.

Classical vs Neoclassical

• Neoclassical organizational theory is a criticism of classical theory; attempt to humanize the rigid structure–Follows workflow and productivity of

classical, but meets employee needs• According to neoclassical organizational

theory, effective organizations are designed with flat hierarchical structures and a high degree of decentralization

Classical vs Neoclassical

Human Relations Theory

• The human relations theory was developed by Elton Mayo and his associates from 1924 to 1932 at the Hawthrone plant of Western Electric Company.

• the Hawthorne effect, where people feel the pride of belonging to a group.

• The Hawthorne experiments brought about the conclusions that the business organization also includes social and psychological factors. It considered organization as a social process where feelings, sentiments and attitudes were given due importance.

• Human relations theory concentrates on morale and productivity,.

Behavioral Science Theory

• Behavioral science theory lays emphasis on inter-personal roles and relationships

• McGregor, Arguris and Likert believed that self-actualized man would contribute to the development of management

• Develop new insights and brings about a congenial environment in the factory whereby new thinking and new techniques put forward by employees are welcome.

Contribution of Neoclassical Theories

• Individual Behavior: respective feelings, perception, learning and personality.

• Group Behavior: group inter-relationships, group objectives, group systematic approach to work, cultural and social backgrounds of employees have a significant role to play in management.

• Task: coordinated activities, coordinated efforts and achievement.

• Participative Management: – employees have the right to take part in management decisions, – recognition of human values increase productivity and

efficiency. • Motivation: self-motivation and job satisfaction,

management has been honest and helpful, monetary and non-monetary incentives

• Communication: effective communication, two-way communication, formal and informal communications, group communication, team spirit, man-to-man relations and group harmony

Contribution of Neoclassical Theories