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OrganizationalTheoryandBehavior ©1993,DavidS.Walonick,Ph.D. ClassicalOrganizationTheory Classicalorganizationtheoryevolvedduringthefirsthalfofthiscentury.Itrepresents themergerofscientificmanagement,bureaucratictheory,andadministrativetheory. FrederickTaylor(1917)developedscientificmanagementtheory(oftencalled "Taylorism")atthebeginningofthiscentury.Histheoryhadfourbasicprinciples:1)find theone"bestway"toperformeachtask,2)carefullymatcheachworkertoeachtask, 3)closelysuperviseworkers,anduserewardandpunishmentasmotivators,and4) thetaskofmanagementisplanningandcontrol. Initially,Taylorwasverysuccessfulatimprovingproduction.Hismethodsinvolved gettingthebestequipmentandpeople,andthencarefullyscrutinizingeachcomponent oftheproductionprocess.Byanalyzingeachtaskindividually,Taylorwasabletofind therightcombinationsoffactorsthatyieldedlargeincreasesinproduction. WhileTaylor'sscientificmanagementtheoryprovedsuccessfulinthesimple industrializedcompaniesattheturnofthecentury,ithasnotfairedwellinmodern companies.Thephilosophyof"productionfirst,peoplesecond"hasleftalegacyof decliningproductionandquality,dissatisfactionwithwork,lossofpridein workmanship,andanearcompletelossoforganizationalpride. MaxWeber(1947)expandedonTaylor'stheories,andstressedtheneedtoreduce diversityandambiguityinorganizations.Thefocuswasonestablishingclearlinesof authorityandcontrol.Weber'sbureaucratictheoryemphasizedtheneedfora hierarchicalstructureofpower.Itrecognizedtheimportanceofdivisionoflaborand specialization.Aformalsetofruleswasboundintothehierarchystructuretoinsure stabilityanduniformity.Weberalsoputforththenotionthatorganizationalbehaviorisa networkofhumaninteractions,whereallbehaviorcouldbeunderstoodbylookingat causeandeffect. Administrativetheory(i.e.,principlesofmanagement)wasformalizedinthe1930'sby MooneyandReiley(1931).Theemphasiswasonestablishingauniversalsetof managementprinciplesthatcouldbeappliedtoallorganizations. Classicalmanagementtheorywasrigidandmechanistic.Theshortcomingsofclassical organizationtheoryquicklybecameapparent.Itsmajordeficiencywasthatitattempted toexplainpeoples'motivationtoworkstrictlyasafunctionofeconomicreward. NeoclassicalOrganizationTheory Thehumanrelationsmovementevolvedasareactiontothetough,authoritarian structureofclassicaltheory.Itaddressedmanyoftheproblemsinherentinclassical theory.Themostseriousobjectionstoclassicaltheoryarethatitcreated overconformityandrigidity,thussquelchingcreativity,individualgrowth,andmotivation. Neoclassicaltheorydisplayedgenuineconcernforhumanneeds. OneofthefirstexperimentsthatchallengedtheclassicalviewwasconductedbyMayo andRoethlisbergerinthelate1920'sattheWesternElectricplantinHawthorne,Illinois (Mayo,1933).Whilemanipulatingconditionsintheworkenvironment(e.g.,intensityof lighting),theyfoundthatanychangehadapositiveimpactonproductivity.Theactof payingattentiontoemployeesinafriendlyandnonthreateningwaywassufficientby itselftoincreaseoutput.Uris(1986)referredtothisasthe"wart"theoryofproductivity.

Nearlyanytreatmentcanmakeawartgoawaynearlyanythingwillimprove productivity."Theimplicationisplain:intelligentactionoftendeliversresults"(Uris, 1986,p.225). TheHawthorneexperimentisquitedisturbingbecauseitcastdoubtsonourabilityto evaluatetheefficacyofnewmanagementtheories.Anorganizationmightcontinually involveitselfinthelatestmanagementfadstoproduceacontinuousstringof Hawthorneeffects."Theresultisusuallyalotofwheelspinningandcynicism" (Pascale,1990,p.103).PascalebelievesthattheHawthorneeffectisoften misinterpreted.Itisa"parableaboutresearchers(andmanagers)manipulatingand 'playingtricks'onemployees."(p.103)Erroneousconclusionsaredrawnbecauseit representsacontrollingandmanipulativeattitudetowardworkers. Writingin1939,Barnard(1968)proposedoneofthefirstmoderntheoriesof organizationbydefiningorganizationasasystemofconsciouslycoordinatedactivities. Hestressedinroleoftheexecutiveincreatinganatmospherewherethereis coherenceofvaluesandpurpose.Organizationalsuccesswaslinkedtotheabilityofa leadertocreateacohesiveenvironment.Heproposedthatamanager'sauthorityis derivedfromsubordinates'acceptance,insteadofthehierarchicalpowerstructureof theorganization.Barnard'stheorycontainselementsofbothclassicalandneoclassical approaches.Sincethereisnoconsensusamongscholars,itmightbemostappropriate tothinkofBarnardasatransitiontheorist. Simon(1945)madeanimportantcontributiontothestudyoforganizationswhenhe proposedamodelof"limitedrationality"toexplaintheHawthorneexperiments.The theorystatedthatworkerscouldrespondunpredictablytomanagerialattention.The mostimportantaspectofSimon'sworkwastherigorousapplicationofthescientific method.Reductionism,quantification,anddeductivelogicwerelegitimizedasthe methodsofstudyingorganizations. Taylor,Weber,Barnard,Mayo,Roethlisberger,andSimonsharedthebeliefthatthe goalofmanagementwastomaintainequilibrium.Theemphasiswasonbeingableto controlandmanipulateworkersandtheirenvironment. ContingencyTheory Classicalandneoclassicaltheoristsviewedconflictassomethingtobeavoided becauseitinterferedwithequilibrium.Contingencytheoristsviewconflictas inescapable,butmanageable. Chandler(1962)studiedfourlargeUnitedStatescorporationsandproposedthatan organizationwouldnaturallyevolvetomeettheneedsofitsstrategythatformfollows function.ImplicitinChandler'sideaswasthatorganizationswouldactinarational, sequential,andlinearmannertoadapttochangesintheenvironment.Effectiveness wasafunctionofmanagement'sabilitytoadapttoenvironmentalchanges. LawrenceandLorsch(1969)alsostudiedhoworganizationsadjustedtofittheir environment.Inhighlyvolatileindustries,theynotedtheimportanceofgivingmanagers atalllevelstheauthoritytomakedecisionsovertheirdomain.Managerswouldbefree tomakedecisionscontingentonthecurrentsituation. SystemsTheory SystemstheorywasoriginallyproposedbyHungarianbiologistLudwigvonBertalanffy in1928,althoughithasnotbeenappliedtoorganizationsuntilrecently(Kastand Rosenzweig,1972;Scott,1981).Thefoundationofsystemstheoryisthatallthe componentsofanorganizationareinterrelated,andthatchangingonevariablemight impactmanyothers.Organizationsareviewedasopensystems,continuallyinteracting withtheirenvironment.Theyareinastateofdynamicequilibriumastheyadaptto environmentalchanges. Senge(1990)describessystemsthinkingas:

understandinghowouractionsshapeourreality.IfIbelievethatmy currentstatewascreatedbysomebodyelse,orbyforcesoutsidemy control,whyshouldIholdavision?Thecentralpremisebehindholdinga visionisthatsomehowIcanshapemyfuture,Systemsthinkinghelpsus seehowourownactionshaveshapedourcurrentreality,therebygiving usconfidencethatwecancreateadifferentrealityinthefuture.(p.136) Acentralthemeofsystemstheoryisthatnonlinearrelationshipsmightexistbetween variables.Smallchangesinonevariablecancausehugechangesinanother,and largechangesinavariablemighthaveonlyanominaleffectonanother.Theconcept ofnonlinearityaddsenormouscomplexitytoourunderstandingoforganizations.In fact,oneofthemostsalientargumentagainstsystemstheoryisthatthecomplexity introducedbynonlinearitymakesitdifficultorimpossibletofullyunderstandthe relationshipsbetweenvariables. OrganizationalStructure Untilrecently,nearlyallorganizationsfollowedWeber'sconceptofbureaucratic structures.Theincreasedcomplexityofmultinationalorganizationscreatedthe necessityofanewstructurethatDruckercalled(1974)"federaldecentralization".In federaldecentralization,acompanyisorganizedsothatthereareanumberof independentunitsoperatingsimultaneously."Eachunithasitsownmanagement which,ineffect,runsitsownautonomousbusiness."(p.572)Thisstructurehas resultedinlargeconglomerateswhichhavediversifiedintomanydifferentfieldsin ordertominimizerisk. Theprojectmanagementorganizationalstructurehasbeenusedeffectivelyinhighly dynamicandtechnologicalenvironments(French,KastandRosenzweig,1985).The projectmanagerbecomesthefocalpointforinformationandactivitiesrelatedtoa specificproject.Thegoalistoprovideeffectiveintegrationofanorganization's resourcestowardsthecompletionofaspecificproject.Impementingaproject managementapproachofteninvolvesdramaticchangesintherelationshipsof authorityandresponsibility. Thematrixorganizationalstructureevolvedfromtheprojectmanagementform (Kolodny,1979).Itrepresentsacompromisebetweenthetraditionalbureuacratic approachandtheautonomousprojectmanagementapproach.Amatrixorganization haspermanentlyestablisheddepartmentsthatprovideintegrationforproject management.Thematrixformissuperimposedonthehierarchicalstructure,resulting indualauthorityandresponsibilities.Permanentfunctionalitydepartmentsallocate resourcestobesharedamongdepartmentsandmanagers. Systemstheoryviewsorganizationalstructureasthe"establishedpatternof relationshipsamongthepartsoftheorganization"(French,Kast,andRosenzweig, 1985,p.348).Ofparticularimportancearethepatternsinrelationshipsandduties. Theseincludethemesof1)integration(thewayactivitiesarecoordinated),2) differentiation(thewaytasksaredivided),3)thestructureofthehierarchical relationships(authoritysystems),and4)theformalizedpolicies,procedures,and controlsthatguidetheorganization(administrativesystems). Therelationshipbetweentheenvironmentandorganizationalstructureisespecially important.Organizationsareopensystemsanddependontheirenvironmentfor support.Generally,morecomplexenvironmentsleadtogreaterdifferentiation.The trendinorganizationsiscurrentlyawayfromstable(mechanistic)structurestomore adaptive(organic)structures.Theadvantageisthatorganizationsbecomemore dynamicandflexible.Thedisadvantageisthatintegrationandcoordinationofactivities requiremoretimeandeffort. Therelationshipbetweenanorganizationanditsenvironmentischaracterizedbya twowayflowofinformationandenergy.Mostorganizationsattempttoinfluencetheir environment.Advertisingcampaignsandlobbyingeffortsaretwoexamples.Some theoristsbelievethat"...environmentsarelargelyinventedbyorganizations themselves.Organizationsselecttheirenvironmentsfromrangesofalternatives,then

theysubjectivelyperceivetheenvironmentstheyinhabit"(Starbuck,1976,p.1069). Strategicdecisionsregardingproductlinesanddistributionchannelscontributetothe selectionoftheorganizationalstructureandtheenvironment. Itisacommonlyheldtenantthatpeoplearelesssatisfiedwiththeirworkinhighly structuredorganizations.Manyresearchstudieshavebeenconductedtoexaminethe relationshipbetweenorganizationalstructureandemployeebehavior(e.g., satisfaction,performance,andturnover).However,theresultsofthesestudiesare contradictory(Dalton,etal.,1980).Structuraldeficienciescanresultinlowmotivation andmorale,decisionslackingintimelinessorquality,lackofcoordinationandconflict, inefficientuseofresources,andaninabilitytorespondeffectivelytochangesinthe environment(French,Kast,andRosenzweig,1885). Oneenduringandcontroversialdebateaboutorganizationalstructureiswhetherornot thereisamaximumdesirablesizeforanorganization,afterwhichtherewillbe decliningeffectiveness.Doesanorganizationbecomeincreasinglydysfunctionalasit exceedsits"ideal"size?Severalresearchershavehypothesizedthatorganizational growthisbeneficialonlyuptoapoint(Hedberg,Nystrom,andStarbuck,1976;Meyer, 1977;Perrow,1979).Mostresearcherssupportacurvilineargrowththeory.Pfefferand Salancik(1978)foundthatprofitabilityincreaseswithsizeandthentapersoff.Warwick (1975)reportedthatthegrowthintheU.S.StateDepartmentresultedindecreased flexibilityandresponsiveness,eventhoughspecificstepshadbeentakentoabate theseproblems.Thereareseveraltheoriestoexplainthesefindings.Themost commonexplanationisbasedonthefactthatanorganization'ssizeisusually positivelycorrelatedwithage.Older(i.e.,larger)organizationshavebecomemorerigid intheirwaysandtheyarelessabletoadapttochange.Anotherpopulartheoryisthat inlargerorganizations,workers'jobsbecomemorespecialized.Thelackofvariety createsalessmotivatingenvironment.Othertheorieshaveproposedthatexcessive sizecreatescripplingcoordinationproblems(FilleyandAldag,1980;ZaldandAsh, 1966). OrganizationalBirthandGrowth Clearly,oneofthemostdominantthemesintheliteraturehasbeentodefine organizationsfromtheperspectiveoftheirpositiononagrowthcurve.Cameronand Whetten(1983)reviewedthirtylifecyclemodelsfromtheorganizationaldevelopment literature.Theysummarizedthestudiesintoanaggregatemodelcontainingfour stages.Thefirststageis"entrepreneurial",characterizedbyearlyinnovation,niche formationandhighcreativity.Thisisfollowedbyastageof"collectivity",wherethereis highcohesionandcommitmentamongthemembers.Thenextstageisoneof "formalizationandcontrol",wherethegoalsarestabilityandinstitutionalization.The laststageisoneof"elaboration",characterizedbydomainexpansionand decentralization.Thestrikingfeatureoftheselifecyclemodelsisthattheydidnot includeanynotionoforganizationaldecline.Theycoveredbirth,growth,andmaturity, butnoneincludeddeclineordeath.TheclassicScurvetypifiestheselifecycle models.Whetten(1987)pointsoutthatthesetheoriesareareflectionofthe1960sand 1970s,twohighlygrowthorienteddecades. LandandJarman(1992)haveattemptedtoredefinethetraditionalScurvethatdefines birth,growth,andmaturity.Thefirstphaseinorganizationalgrowthisthe entrepreneurialstage.Theentrepreneurisconvincedthattheirideaforaproductor serviceisneededandwantedinthemarketplace.Thecommoncharacteristicofall entrepreneursandnewbusinessesisthedesiretofindapatternofoperationthatwill surviveinthemarketplace.Nearlyallnewbusinessesfailwithinthefirstfiveyears. LandandJarman(1992)arguethatthisis"natural",andthateveninnature,cell mutationsdonotusuallysurvive.ThisphaseisthebeginningoftheScurve. Thesecondphaseinorganizationalgrowthischaracterizedbyacompletereversalin strategy.Wheretheentrepreneurialstageinvolvesaseriesoftrialanderrorendeavors, thenextstageisthestandardizationofrulesthatdefinehowtheorganizationalsystem operatesandinteractswiththeenvironment.Thechaoticmethodsoftheentrepreneur arereplacedwithstructuredpatternsofoperation.Internalprocessesareregulated anduniformityissought.Duringthisphase,growthactuallyoccursbylimitingdiversity.

"Managementprocedures,processes,andcontrolsaregearedtomaintainorderand predictability"(LandandJarman,1992).ThisphaseistherapidriseontheScurve. Organizationalgrowthdoesnotcontinueindefinitely.Anupperasymptopiclimitcanbe imposedbyanumberoffactors.LandandJarman(1992,p.258)identifythemost commonreasonswhyorganizationsreachuppergrowthlimits: ·Rapidlyincreasinginternalandmarketplacecomplexityinsuchareasa productproliferationandmarketdivisions ·Internalcompetitionforresources ·Increasingcostofmanufacturingandsales ·Diminishingreturns ·Decliningshareofthemarket ·Decreasingproductivitygains ·Growingexternalpressuresfromregulatorsandinfluencegroups ·Increasingimpactofnewtechnologies ·Newandunexpectedcompetitors Thetransitiontothethirdphaseinvolvesanotherradicalchangeinanorganization. Mostorganizationsarenotabletomakethesechanges,andtheydonotsurvive."The organizationmustopenuptopermitwhatwasneverallowedintobecomeapartofthe system,notonlybydoingthingsdifferently,butbydoingdifferentthings"(Landand Jarman,1992,p.257).Theorganizationneedstocontinueitscorebusiness,whileat thesametimeengagingininventingnewbusiness.Thisbifurcationisnecessary becausetheentrepreneurialenvironment(ofinventingbusiness)isincompatiblewith thecontrollingenvironmentofthecorebusiness. Thegoalisacontinuingintegrationofthenewinventionsintothemainstream business,wherearecreatedorganizationemerges.Thecorebusinessischangedby theinventionsitassimilates,andtheorganizationtakesonanewform.Landand Jarman(1992)believethatthegreatestchallengefacingtoday'sorganizationsisthe transitionfromphasetwotophasethree."Organizationsdefeattheirbestintentionsby continuingtooperatewithessentialbeliefsthatautomaticallyperpetuatethesecond phase."(p.264) Thereareseveralfactorsthatcontributetoorganizationalgrowth(ChildandKieser, 1981).Themostobviousisthatgrowthisabyproductofanothersuccessfulstrategy. Asecondfactoristhatgrowthisdeliberatelysoughtbecauseitfacilitatesmanagement goals.Forexample,itprovidesincreasedpotentialforpromotion,greaterchallenge, prestige,andearningpotential.Athirdfactoristhatgrowthmakesanorganizationless vulnerabletoenvironmentalconsequences.Largerorganizationstendtobemore stableandlesslikelytogooutofbusiness(Caves,1970;MarrisandWood,1971; Singh,1971).Increasedresourcesmakediversificationfeasible,therebyaddingtothe securityoftheorganization. ChildandKieser(1981)suggestfourdistinctoperationalmodelsfororganizational growth.1)Growthcanoccurwithinanorganization'sexistingdomain.Thisisoften manifestasastrivingfordominancewithinitsfield.2)Growthcanoccurthrough diversificationintonewdomains.Diversificationisacommonstrategyforlowering overallrisk,andnewdomainsoftenprovidefertilenewmarkets.3)Technological advancementscanstimulategrowthbyprovidingmoreeffectivemethodsofproduction. 4)Improvedmanagerialtechniquescanfacilitateanatmospherethatpromotesgrowth. However,asWhetten(1987)pointsout,itisdifficulttoestablishcauseandeffectin thesemodels.Dotechnologicaladvancementsstimulategrowth,ordoesgrowth

stimulatethedevelopmentoftechnologicalbreakthroughs?Withthelackofcontrolled experiments,itisdifficulttochoosebetweenthechickenandtheegg. OrganizationalDecline Untilrecently,mosttheoriesaboutorganizationdevelopmentvieweddeclineasa symptomofineffectiveperformance.Wellmanagedorganizationswereexpectedto growyearafteryear.Implicitinthesetheorieswastheideathatorganizationalgrowth issynonymouswithexpansion.Thesetheoriesreflectedwhatscholarsobservedinthe businessworld.Organizationalgrowthwasanindicatorofsuccessfulmanagement. KennethBoulding(1950)proposedabiologicalmodelofeconomics,characterizedby birth,maturation,decline,anddeath.Hearguedthatinallorganisms,thereisan "inexorableandirreversiblemovementtowardstheequilibriumofdeath."(p.38)Many organizationaltheoriststookstrongexceptiontoBoulding'sbiologicaldeterminism theory.Theymaintainedthatorganizationsarenotconstrainedbyadefinedlife...