CONTEMPORARY THEORIES OF ORGANIZATION

Although the classical theories of organization had major flaws, they paved the way for the development of contemporary theories of organization, those that have influenced managerial thinking in recent decades.

These more recent theories of organization include:

  1. The systems approach, 
  2. The behavioural approach and 
  3. The contingency approach.
1. SYSTEMS APPROACH: The 1960s saw a theoretic development that helped in integrating and synthesizing some of the divergent views coming from traditional, behavioural and management science sources. This was general systems theory, a way of thinking about any phenomenon that concentrates on identifying a common set of interdependent elements, the whole that they represent, and the relationship among the parts (elements) that determined the unique Characteristics of the whole. Systems theory, in simple terms, is the big picture that overcomes the common weakness of viewing things in too narrow perspective.

The emphasis is on the whole person and the total organization. Just as the ripple effect of throwing a rock into a quite pond extends a long way in all directions, so most phenomena are inter-related with much broader range of factors than we normally assume. System theory attempts to view the organization as a unified purposeful entity composed of inter-related parts. Rather than dealing separately with the various parts of an organization, the systems theory gives managers a way of looking at an organization as a whole and a part of the larger, external environment. In so doing, systems theory tells us that the activity of any part of an organization affects the activity of every other part.

The job of a manager is to ensure that all parts of the organization are co-ordinated internally so that the organization’s goal can be achieved. A systems view of management for instance, would recognize that, regardless of how efficient the production department might be, if the marketing department does not anticipate changes in consumer taste and work with the product development department in creating what consumers want, the organization’s overall performance will be hampered.

SOME KEY CONCEPTS: Many of the concepts of systems theory are finding their way into the language of management in recent year. In order to keep pace with current developments it would be necessary for us to discuss the systems vocabulary here.
1. SUB-SYSTEMS: The parts that make up a whole of a system are called sub-systems. And each system in turn may be a sub-system of a still larger whole.
(a) Goal Sub-System: People working together in organizations will have common purposes that bind their efforts together. Group goal and objectives define a sub-system essential for total system effectiveness.
(b) Technical Sub-System: The collective knowledge of individuals using techniques, equipment, and tools establish a sub-system of technical processes. This system may include facilities, methods of work and elements of skill.
(c) Structural  Sub-System: Individuals and groups with inter-related activities illustrate obvious structural sub-systems. Less obvious interdependent relationships exist that also form part of the system. These may include, for example, the inter-dependence of purchasing and production scheduling activities.
(d) Managerial Sub-System: Managers provide links throughout their organizations to co-ordinate other sub-systems and to plan, organize, lead and control organizational processes.
(e) Psychological Sub-System: Psychological factors influence group behaviour as well as behaviour of individuals within the groups. The social aspect of people working in a close proximity influences group activities. These two dimensions are important factors that affect other sub-systems, and in turn they are influenced by other sub-systems.
2. SYNERGY: Synergy means that the whole is greater than the sum of its parts. A watch that is disassembled has the same number of parts as one that is properly assembled. However, the assembled watch has a phenomenon that the disassembled one lacks-it keeps time (synergy). When the parts of an organization are properly inter-related (such as an assembly line), the output is much greater than it would otherwise be. Synergy represents one of the basic challenges of management getting all of the elements of an organization functioning together so that output is optimal.
3. OPEN AND CLOSED SYSTEMS: A system is considered an open system if it interacts with its environment: It is considered closed system if it does not. Clearly, all organizations must interact with and are dependent on their environment. An organization that is not adaptive and responsive to its environment would not survive or grow over any extended period of time. It has to be responsive to demands placed on it by both its internal and external environments.
4.         STEM BOUNDARIES: Every system has boundaries that rate it from other systems and from its environments. In a closed system, the system boundaries are more flexible. Identifying appropriate system boundaries is a skill that can differentiate effective from ineffective managers.
5.         INPUT-TRANSFORMATION-OUTPUT MODEL: An open system receives inputs from its environment which it transforms into
output in interaction with environmental variables. For a business firm, input would be material, labour and capital. The transformations
process would turn these inputs into finished products or services. The system’s success depends on successful interactions with its environment: that is, those groups or institutions upon which it is dependent. These might include suppliers, unions, financial institutions, government agencies and customers. The sale of outputs generate revenue, which can be used to pay wages and taxes, buy inputs, repay loans, and generate profit for shareholders. If revenues are not large enough to satisfy environmental demands, the organization shrinks or dies. Thus, a system has flows of information, materials and energy, These enter the system from the environment as inputs, undergo transformation process within the system and exit the system as outputs.

6. FEEDBACK: According to J.F. Stoner, feedback is the key to system controls. As operations of the system proceed, information is feedback to the appropriate people or perhaps to a computer so that the work can be accessed and, if necessary, corrected. Feedback provides warning signals regarding impending dangers, for example, complaints from customers provide negative feedback calling attention production improvements and so on.
EVALUATION: The practical implications of systems theory for managers are enormous. Most effective managers operate with a systems mentality even though they may not be consciously aware of it. As a matter of course, executives ask what effect a decision will have on others. They think before they act, implying a process of evaluating the impact their actions will have.
A conscious commitment to systems thinking requires explicit responsibility for forming decisions in terms of how the entire organization will be affected. With a systems perspective, general managers can more easily maintain a balance between the needs of .the various parts of the enterprise and goals of the firm as a whole.
2. CONTINGENCY APPROACH: The problem with universal principles management as advocated by early theorists is that few principles are universal. Research has shown that management methods used in one circumstance seldom work the same way in others. Some employees are most often motivated by economic gains while others have greater need for challenging work. Still others  care only about protecting their egos. The same individual may he motivated by different things in a variety of situations. Contingency theory is based on the premise that situations dictate managerial action that is, different situations call for different approaches. No single way of solving problems is best for all situations. This is because tasks and people in organizations differ. The advocates of this theory are Selznik Burns, Stalker and Woodward.
3.BEHAVIOURAL APPROACH: The Behavioural Approach applies the knowledge of the behaviour sciences - psychology, sociology, and anthropology - to managing people. We have seen that human relationists believed that people are social beings who are motivated by social interactions, that their job performance will increase when the job gives them opportunities to socialized. Behavioural scientists felt this to be an oversimplified model of human motivation and began to undertake serious investigations. A number of behavioural scientists have contributed to the development of this approach. Among the forerunners was Abram Maslow, who developed a hierarchy of human needs, which became the basis for explaining work motivation in organizations. According to Maslow people generally have five basic needs (physiological, safety, social self-esteem and self-actualization) and they satisfy these needs in order of importance. Behaviour scientists believe that people will be productive if they are given opportunities to use their abilities and creative skills. Building On Maslow’s theory of human needs, many behavioural scientists (Chris Argris, Douglas Mc Gregor, Rnesis Likert) argued that existing jobs and managerial practices should be redesigned and restructured to give employees an opportunity to satisfy their higher- order needs, although working independently, they proposed a common theme: People are basically good and, in order to stimulate their performance, management should humanize work.. They argued,, for instance, for increased participation by employees in those decisions that affect them, demonstration by management of greater trust and confidence in people, increased emphasis be given to integrating individuals and organizational goals and allowing employees to self- monitor their own activities in place of external control measures. These behavioural writers introduced a strong humanist orientation to the manager’s job.


Contributions: The outpouring of behavioural research in the 1960s and 1970s tremendously increased knowledge about how people behave in organizations. The advancement in behavoural science has made significant contribution to the development of Human Resource Management, which emphasizes the effective utilization of human resource in organization. The concept of job enrichment (making job interesting), management by objectives (a goal setting process conducted jointly by employees and their superiors) and positive reinforcement (rewarding good performance) were results of behavioual science approach.
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