The development of organizational theory in system perspective

The industrial revolution and the resulting technological, economical and social development initiated a great interest in organizational questions. But first at the foregoing turn of the century, different organizational schools had been established. The advancement of organizational theory cannot be separated from contemporary scientific and social development. Scientific management and bureaucratic design were brain-childs of dominating broad social trends involving the mechanization of life generally.

The school of scientific management — or the movement for improved efficiency — was introduced by the American engineer Frederik Taylor (1856-1915), and got great influence in the first part of the new century. By that time, American industry grappled with great problems. The working tasks had been more and more specialized and mechanized. Supervision and coordination of work had been increasingly difficult and working quality and moral tended to deteriorate. No real training of the workforce existed and the individual worker had to learn his task by asking and copying his colleagues. The productivity was very low.

When Taylor begun to analyze the problems, he come to the following conclusions:

  • The used method in production were built on old habits instead of systematical studies.
  • A rigid hierarchical structure managed the production with implacable discipline and individual worker skill was not utilized.
  • No measures existed regarding individual working performance or the average achievement per day for a standard worker.
  • Workers opposed every attempt to increase productivity as this was a threat to their own employment and position.

Taylor soon realized the connection between man-machine-material and begun a close investigation of the critical factors. Process charts regarding body movements, working methods and machine speeds in connection with different kind of raw materials were worked out. This new production analysis was called working studies and later on resulted in what become the well-known industrial MTM-system (method, time, measurement). To motivate and enhance working performance, new settings of wage rates was introduced, the piecework contract. Here the pay was set according to a standard achievement. Achievements above this standard implied better pay and below less.

In his rationalization of production management, Taylor recommended four measures.

  • Every task should be studied according to scientific methods, not heuristics.
  • A good cooperation between management and workforce must be established in order to facilitate and develop scientific methods in production.
  • The most skilled worker should be selected for every specific task and thereafter be trained and developed for this very task.
  • Assignments and responsibility should be shared between management and workers according to the idea of the functional organization.

The functional organization should replace the old more hierarchical one. It implied that planning and paper-work should be  moved  away from the shop floor to a planning department. Supervisors should take a more direct role in the production and be responsible for a few specialized functions. The workers strength and swiftness should be rewarded, rather than his ability of thinking. He should have  the  best allotment of work and rest and have the best available tools, all in order to bring about maximum productivity.

The school of scientific management has been accused of being authoritarian and a promoter of a mechanistic view of man. Its main orientation was to make humans fit the requirements of the organization. Workers were expected to behave as predictable, reliable, and efficient as the machines they were attached to. Thinking was reserved for management and doing for the worker. He was regarded as another cog in the industrial machinery and mainly understood as a technical problem. The principles of scientific management sometimes brought about a very negative attitude among the workers although the productivity was increased dramatically. Alienation and uneasiness were common consequences.

Factors influencing working life and productivity were, however, also studied from a psychological and sociological perspective. The American sociologist Elton Mayo (1880-1949) become well-known for his laboratory studies of monotony, tiredness and exhaustion and established the school of Human relations. This school is a reaction upon the mechanistic view of man in working life and mainly associated with what has been called the Hawthorne-experiments.

The Hawthorne plants were situated in Chicago and owned by Western Electric Company during the 1920s. They were frequently hit by strikes and an extensive dissatisfaction over the working conditions prevailed. Engineers trained in working studies according to Taylor were consulted but with no success. The owners then turned to the academic world which for the first time became involved in problems regarding industrial production. Among the scientific studies were illumination experiments. One hypothesis said that more and better illumination of working places influenced the production output. But one soon discovered that every change of the illumination, both positive and negative, brought about beneficial effects.

Other changes were also undertaken. Working periods were shortened, free refreshments were introduced, pauses were prolonged and curtailed etc. What was done brought about better production which was considered mysterious. It was finally explained under the name of the Hawthorne-effect. This effect was generated when the working force met with every kind of interest directed towards it. They appreciated that the management took interest in their working situation and responded with better production.

The main findings of the human relations school was the importance of group-standards and informal managership. They are summed up in the following points.

  • The working man on the plant floor claims gratitude and safety. His behaviour is influenced by non-monetary rewards and punishments. The effect of economical incitement should not be overestimated.
  • The group standards of the working force are stronger than prevailing standards of the company. The worker is in the first hand, a member of his group, only secondary one of the company’s employees. If the difference between the two standards is small, individual resistance towards changes is small.
  • Social standards together with technical and physical prerequisite define production output. Therefore, in practice, the working group determines the output and not labour management.
  • Every company has both a formal and an informal organization working in It is often contra-productive to counteract the informal connections which are built on personal contacts and preferences. The best is to induce the informal structure to support the goals of the company. The formal leader states minimum performance while the informal states maximum performance.

The human relation mentality has been accused of smoothing over the conflict of interests which always exists between employees and employer. Another weakness is that it exclusively works from a sociological and psychological point of view. The implicit values of the participating researcher are also said to have influenced the obtained results.

When Taylor saw things from ‘bottom up’, his contemporary colleague Henry Fayol (1841-1925) saw organizational problems from above and become a prominent name of what has been called the administrative school. This school is particularly associated with systematically organized management. In certain respects it is based upon Fayol’s view of man who he considered indolent, responsibility avoiding and authority inclined.

For Fayol’s six management functions were the basis for a well functioning industrial production. They were:

  • administrative
  • accountative
  • securitative
  • financial
  • commercial
  • technical

These functions or activities could then be divided into the following subactivities: planning, organization, giving orders, coordination and control. He also recommended fourteen principles for a good administration. However, they should be followed with a certain care. The  most important among them were:

  • authority and responsibility should go hand in hand
  • order and method should always prevail
  • the wholeness is more important than the parts
  • every employee should only have one superior
  • information should flow though official channels
  • all persons working in the organization must show discipline
  • division of labour and specialization is necessary

In contrast to the school of human relations, Fayol emphasizes the significance of the formal organization and gives many hints how to solve practical, managerial problems. He is the father of concepts like standard command, staff specialists, organizational chart etc. Fayol’s predecessors worked within the boundaries of the school when they introduced the line staff concept. This states three existing formal phenomena in every corporation, namely, line, function and staff relation. With them, job descriptions were associated.

Like scientific management, the administrative school has been accused of a mechanistic understanding of man. It is naive to believe that high productivity can be administrated without consideration of psychological values.

According to Max Weber (1864-1920), the well-known German sociologist and university professor, bureaucracy was the most efficient way to take advantage of human resources. Bureaucracies arise and persist out of a basic human need for security and regularity. The main goal of bureaucracy is to standardize procedures to reduce ambiguity and variation. In organizations which demand stable functioning, like the military and the church, decentralization leads to disorganization or chaos and inefficient work of the whole. Improving some parts reduces effectiveness of other parts.

As founder of the bureaucratic school, Weber took the aim to formulate general theories relevant for all kinds of organizations. Weber defined the organization in a sociological sense as ‘a system of human activities continuously aimed at a specific goal’. The specific goals were easily recognizable in stable, traditionally organizational structures like the church, the military, public administration, heavy industry etc. Typically, they were designed for most efficient allocation and coordination of their activity by principles of bureaucracy.

The most significant with the traditional and stable organization was the structure of its authority relations which were examined by Weber.

Here he differentiated between power and authority. Power has a man who can force others to obedience. A person with authority is, however, obeyed voluntarily. Authority is a form of domination which subordinates consider to be legitimate. It does not necessarily imply any sense of rationality, right, or natural justice. It is rather the willingness of the subordinates to believe in the claims of the dominant which is important (and of course that the domination is bearable and not worth challenging). Authority can be legitimated in three ways.

  • In traditional organizations by inheritance and custom.
  • In bureaucratic organizations by formal rules and position.
  • By energetic or charismatic personal attributes.

For Weber, the ideal organization is a rule-bases phenomenon established according to bureaucratic principles with a personal hierarchy as a control system. Individual status and power is legitimized with position in the structure — not with formal qualification or talent. The ideal organization has:

  • Hierarchical structure
  • Rigid organization
  • High formalization
  • Departmentalization
  • Specialization and division of labour
  • Strict distribution of responsibility
  • Vertical chain of command (each subordinate one superior only)
  • Well-defined internal relations and clear lines of command
  • Impersonal relations and The written report is standard
  • Official reporting is used for The employee only communicates with levels just above or below himself
  • The superior has the right to command the subordinate, the subordinate has the duty to obey the command
  • Program management, g. specified norms and rules for the behaviour
  • A system of authority which is impersonal and belongs to the position rather than the individual
  • Positions awarded on the basis of formal Personnel are not chosen as in political bodies
  • A system of responsibility and accountability, that is, obligation to carry out the task according to policy and standards
  • Safe employment and regulated system of promotion with possibility to earn one’s living (bribes and extras unnecessary)
  • Distinct separation of members’ organizational and personal lives

The existing world-view of the bureaucratic school takes it for granted that the individual is willing to regard himself like a cog in a big machinery. If not, several disadvantages must be associated with bureaucratic management. The main weakness has always been that rules and regulations not only define unacceptable behaviours but also define minimum levels of acceptable performance.

The structure-functionalists (or modem bureaucrats) has taken as their task to explain the functional consequences of the formal classical organization. Their investigations is directed towards both desirable as well as non-desirable effects of such organizations. A starting point for the organizational researcher Amitai Etzioni was that a condition of tension always exists between the need of the organization and that of the individual. To be a subordinate always means an encroachment of personal integrity and a source of conflict.

A condition of tension prevails between formal and informal relations and between management and directed persons. Also, a tension exists between rational and irrational behaviour and between discipline and independence. Such tensions can be decreased but never completely eliminated just as the phenomenon of alienation which sometimes is desirable.

Why do people in an organization obey orders and follow instructions? According to Etzioni, the answer was engagement and formal guidelines. These must, however, be based upon some kind of power. Etzioni differs between the following kinds of power:

  • normative power (symbolic means like prestige, appreciation, devotion);
  • benefit power (founded in material benefits like food, clothing, money);
  • compulsive power (violence, physical punishment).

Another well-known structure-functionalist is Philip Selznick. He prefers to talk about responsible and creative leadership instead of organizational efficiency. He has introduced five important, management concepts.

  • Creative leadership. Interpreted as the importance of creating a myth of the organization and its products.
  • Responsible leadership. To be engaged, understand his task and be in touch with the environment.
  • Institutionalizing. To create an image of the organization as very important and difficult to replace.
  • Clinical organizational analysis. The instrument to be used in creating the institution.
  • Distinctive competence. If an organization transforms into an ‘institution’, it has developed a special, needed competence.

The starting point for contingency theory, the dominating manage- ment school during the 1970s, is that organizations are open systems. As such, the exchange with the environment is of basic importance when understanding them. This theory presumes that organizational structures are neither freely chosen, nor incidental. Instead they are developed under the influence of external demands, size and,  above all, technology. The aim of contingency theory is to show that under given assumptions, certain types of organizational design are more efficient than others and give better adaptability. Designing parameters or contingencies of great importance (also called classic contingency variables) are:

  • organizational strategy
  • organizational size
  • organizational technology
  • organizational environment

The organizations need to adapt their structure to these contingency factors. The situational imperative states that in reality there is no strategic choice. Relationships between the contingency of strategy and the structure of divisionalization, between size and bureaucratization, between environmental uncertainty and organic structure, are generally valid. The general theory also relates organizational size and overall standardization and formalization positively. Formalization is the extend to which the specific structure seeks to regulate employee behaviour. This is done through written job definitions, manuals of procedure, written communications and written records of role performance.

Organizational challenges and demands are often conflicting and it is not possible to satisfy all of them. A common solution is to compromise, something which is not especially inspiring for the involved parties but many times gives rise to stable solutions.

After the contingency theory, organizational thinking entered the era of countless management ideas. More or less brilliant scientist and practitioners have built a huge edifice of management abstractions. Popular concepts have been included which no doubt fall outside the scope of this book. A good summary of contemporary thinking has, however, been edited by Auden Uris (1986) in his book 101 of the Greatest Ideas in Management.

Source: Skyttner Lars (2006), General Systems Theory: Problems, Perspectives, Practice, Wspc, 2nd Edition.

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