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Organization theory

The study of organizations draws on a number of disciplines:-


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.

Systems theory

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 outside world.
  • 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

Organization Theory: Selected Classic Readings

Organization Theory: Selected Classic Readings
by Derek Pugh
  This book spans seventy years of theory from Max Weber's seminal writings on bureaucratic organization to the latest management thinking represented by Handy, Peters and Waterman. Covering three main areas of interest, those of the structure of organizations, management and decision making, as well as that of organizational behaviour, this thoroughly revised and updated edition contains a vast amount of new contributions.
  More information and prices from: - US dollars - Canadian dollars - British pounds - Euros - Euros



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