The study of organizations draws on a number of
Classical economics viewed the firm as a single decision-unit engaged in maximizing profits.
It ignored the possibility of conflict between owners, managers and employees. The obsession
with competition failed to take into account the other goals which may take precedence in organizations.
Organization theory partly owes its existence to a reaction against such simplistic ideas.
It became necessary to understand behaviour which seemed - in classical terms - to be irrational.
Psychology is a wide-ranging subject. Early psychologists provided an insight into individual behaviour within organizations
particularly on aspects of motivation and leadership. The Hawthorne studies led to a
realization of the importance of social phenomena, such as the informal groups, group norms and
conformity. Valuable as these micro-level studies were, they suffered from the problem of
reductionism, making it difficult understand the link between the behaviour of individuals
and the structure of the organization in which they worked.
Organizational sociologists took a wider perspective, setting the organization within its
environmental framework - specifically in relation to society and its institutions. Some
sociologists have examined formal organizational structures, particularly in relation to
technology (for example, Burns and Stalker, 1961). Morgan (1986) provides a (by now) classical
interpretation of organizations as a series of metaphors. Dating from Weber's early work on
bureaucracy, sociologists have taken a particular interest in non-profit making organizations.
Organizations are not merely physical, they are also social and technological systems: they are
multi-dimensional, with aspects which are unmeasurable. Drawn from physical and engineering
models, systems theory considers organizations as systems with boundaries which make exchanges
with the environment and must adapt to environmental changes in order to survive. Organizations
are open systems which interact directly with the environment. They have:
- Inputs. For example, taking in raw materials, finance and recruits from the
- Outputs. They provide products and services, and pay wages and dividends.
Technology and human resources transform inputs into outputs.
The systems approach has become popular with the advance of information technology.
Computers and telecommunications are increasingly important, integrating organizations in
the same way that the nervous system controls and coordinates the human body. Organizations
are changing in line with new technical possibilities, yet organizations cannot be viewed
simply as communications networks - the human dimension cannot be forgotten.
Organization theory has attracted critical attention. Thompson and McHugh, for example, have
argued that there is a tendency for a narrow 'management plus psychology' perspective which
has little to do with real-life enterprises. In an attempt to produce a science of
organizations, the main focus has been on identifying generalizations about behaviour in work
situations and applying them to all organizations, regardless of their nature. In particular,
theorists have paid scant attention to the differences between organizations which are subject
to market forces and those which are not. Thompson and McHugh contend that it is not meaningful
to treat organizations as diverse as scout troops and transnational companies within the same
analytical framework. This has resulted in a massive - but vague and over-theoretical - body of
literature with little practical value.
Classical organization theory