PROBLEM 1
Organizational Theory and Design (Ch.13) – Jex and Britt
• Organizational theory à conceptual ideas about the nature of organizations – how
they work and interact with their outside environment
• Organizational design à plans that are made when theorizing about the organization
o Macro-level issues – not usually researched by psychologists. A problem
because:
§ Employees are influenced by the organizational structure (maybe
indirectly) e.g. how departments are grouped in a university has
implications for resource allocation and how much the different
departments communicate
ORGANIZATIONAL THEORY
• Sociology is the lead theorizer in organizational theory
• Organizational theory = the study of the best wat to organize work organizations
• It is difficult to measure organizational theories as orgs. Cannot be easily subjected to
investigation à therefore they use ‘metaphors’ to describe and understand org.
structure
Major Organizational Theories
Classical Organizational Theories (1940s)
• Based on classical conditioning à believes that humans will not work unless they are
given a reason to + they lack creativity and initiative to define their own roles in the
org.
• Scientific Management:
o Description:
§ Those that design the work should be separate from those who
perform it
§ Work should be divided into small and simple components
o Tangible implications:
§ There should be hierarchical differences between employees à those
that design the work should be at a higher hierarchical position
§ Employees should be grouped according to how similar their tasks are
+ departmental structure can be created (seen in textiles and car
companies)
• Therefore, an organization designed with scientific
management will have a lot of departments
o Less Tangible Implications
§ Scientific organization = more rules + procedures to follow
• Ideal Bureaucracy
o Made by Max Weber during the industrial revolution when businesses moved
from being family run to more industrial ones
§ Old organizational models couldn’t be used in large organizations
anymore
o Primary assumptions:
§ Rewards should be based on the contributions to the organization (not
familiar connections like it was done before)
§ Strong reliance on old rules and procedures = not good in novel
situations
, o Important Principles
§ Very close supervision of employees à manager only supervises a
small group of people (small span of control) which allows to keep a
close eye on all
• Also means that they can meet the needs of their subordinates
+ can easily train them
§ Unity of command à in a bureaucratic structure, employees have only
1 direct supervisor
• Can be beneficial for employees as they don’t worry about
meeting different expectations = less role conflict (seen in
modern orgs)
§ Unity of direction à information within the bureaucratic org. flows in
one direction (usually from top levels to lower)
• Benefit: increases predictability and stability + top managers
can better control the information that reaches the lower levels
o Possible to combine it with other org. forms
• Administrative Management – Henri Fayol
o Tried developing a universal set of organizing principles for managers to apply
in org.
o Management functions à most important behaviors and activities of managers
§ Planning, organizing, commanding, coordination, and controlling
§ Fayol proposed principles that would help managers achieve these
functions
§ Many of the principles overlap with Ideal Bureaucracy (e.g. unity of
direction)
o Examples of unique principles (not similar to I.B.):
§ Stability of personnel, encouraging people to take initiative, and having
a high level of cohesion among employees
o Major criticism: treats employees as ‘cogs in a machine’ that can easily be
replaced
Humanistic Organizational Theories (1960s)
• Theory XY
o There are 2 types of managers:
§ Theory X managers = believe that people don’t like working and
therefore need to be monitored closely and coerced to reach the goals
of the org
• Also believe that employees have little ambition, aren’t self-
directed and value security over all else
§ Theory Y managers = believe that work is a natural part of everyone’s
life and people seek to find meaning in it. Ppl are capable of self-
control and will strive towards org. goals
• Under the right conditions, employees will seek out
responsibility and use creativity to solve org. problems
• Believes that orgs are designed in a way that limits the
employee’s skills and talents
o These theories are for managers but can be extended to an organizational
level:
, § Theory X org. = narrow span of control, strict lines of authority, a lot of
rules and procedures (standardized work process9
§ Theory Y org. = wide spans of control, flexible lines of authority, limited
rules
• Leads to more psychologically fulfilling jobs for employees bcs
it can lead to personal growth
• Downside: since lines of authority are blurred = more role
conflict
• Human Organization – Likert
o Organizations can be classified into 4 types
o System 1= exploitive authoritarian type à like Theory X, little trust in
employees, little communication with management, centralized decision
making, control is ‘top-down’
§ Leads to dissatisfied employees and low levels of org. performance
o System 2 = benevolent authoritative à like System 1 BUT a bit more trust in
employees + communication. It’s very authoritative but they are nicer to
employees
§ Leads to moderate levels of satisfaction in work and fair org.
performance
o System 3 = consultative à a lot more trust in employees so their ideas are used
more. More communication (from bottom up). Decision making is still
centralized BUT how authority is exerted is different from system 1 and 2
§ Top level makes board policies, lower levels can make more specific
operational decisions (boundaries are given by managers and workers
make decisions within those boundaries)
o System 4 = participative group à opposite of system 1. Managers have
complete trust in employees, seek their input before making decisions,
communication is free-flowing in all directions, teamwork is encouraged,
decision making made at all levels
§ Likert believed that this is the only one capable of ‘excellent’
performance
• J.G. Likert and Araki à further developed the 4 systems and added a 5th
o System 5 à similar to system 4 BUT emphasizes the absence of bosses e.g.
universities where departments are self-managed
• Problem with all these theories: they assume that there is a ‘best’ way to lead an
organization
Contingency Organizational Theories
• Developed because scientists realized that there isn’t a singular set of traits or
behaviors that distinguish good from bad leaders
• Congruence perspective – Huber
o Organizations should be designed so that they are congruent with the
organization’s strategy and factors like: characteristics of the employees, type
of work etc.
• What internal and external factors do organizations need to pay attention to when
designing their organization? (next section)
Determinants of Organizational Design
• Organizational design must serve a purpose
Strategy
, • Organizational strategy = long-range goals and ways to reach these
• Different strategies in organizations influence staffing, reward systems, compensations
etc.
• Aspect of org. structure that has the largest impact on strategy implementation:
o Specializationà types and number of specialties used in the org.
§ High specialization = better performance BUT difficult when products
keep changing (doesn’t allow for quick reactions9
o Shape of the organization à how many people are in the hierarchical chain
form departments?
§ Narrow organization = a lot of levels but few individuals at
each
• More time + energy spent on communication,
supervision and decision making. Spends a lot of
time ‘running itself’ – better for companies
producing highly specialized products in markets
where demands are consistent e.g. apple?
§ Flat organization = few levels but a lot of employees at each
• Less time + energy spent on internal processes –
allow for quicker responses to consumer demands –
found in org. in new/emerging sectors of economy
e.g. google?
o Distribution of power à depends on how decisions are made:
§ Vertical distribution of decision-making power = how much are
decisions centralized or decentralized?
• Centralized = headquarters make all the decisions
• Decentralized = lower levels make decisions (workers)
§ Horizontal distribution of decision-making power = is decision making
power shifted to the department that has the best information or to top
managers?
• E.g. giving this power to employees that deal with customers
• If quick responses to market conditions need to be made, it is
better to leave the decision-making power to those closer to
customers
o Organization’s departmental structure à departments are made according to
different criteria e.g. function
§ Departmentalization by function – e.g. marketing, production and HR =
most common
• Advantage: promotes high levels of specialization = high
performance in each area
• Weaknesses: better for companies that produce a single
product/limited number (if it grows then it might overwhelm
team)
o Doesn’t promote sharing ideas across departments
(leads to very closed compartments – e.g. university
faculties don’t talk much)
• Functional strategy works best in a stable environment without
much technological change e.g. federal government agencies,
Post It
Organizational Theory and Design (Ch.13) – Jex and Britt
• Organizational theory à conceptual ideas about the nature of organizations – how
they work and interact with their outside environment
• Organizational design à plans that are made when theorizing about the organization
o Macro-level issues – not usually researched by psychologists. A problem
because:
§ Employees are influenced by the organizational structure (maybe
indirectly) e.g. how departments are grouped in a university has
implications for resource allocation and how much the different
departments communicate
ORGANIZATIONAL THEORY
• Sociology is the lead theorizer in organizational theory
• Organizational theory = the study of the best wat to organize work organizations
• It is difficult to measure organizational theories as orgs. Cannot be easily subjected to
investigation à therefore they use ‘metaphors’ to describe and understand org.
structure
Major Organizational Theories
Classical Organizational Theories (1940s)
• Based on classical conditioning à believes that humans will not work unless they are
given a reason to + they lack creativity and initiative to define their own roles in the
org.
• Scientific Management:
o Description:
§ Those that design the work should be separate from those who
perform it
§ Work should be divided into small and simple components
o Tangible implications:
§ There should be hierarchical differences between employees à those
that design the work should be at a higher hierarchical position
§ Employees should be grouped according to how similar their tasks are
+ departmental structure can be created (seen in textiles and car
companies)
• Therefore, an organization designed with scientific
management will have a lot of departments
o Less Tangible Implications
§ Scientific organization = more rules + procedures to follow
• Ideal Bureaucracy
o Made by Max Weber during the industrial revolution when businesses moved
from being family run to more industrial ones
§ Old organizational models couldn’t be used in large organizations
anymore
o Primary assumptions:
§ Rewards should be based on the contributions to the organization (not
familiar connections like it was done before)
§ Strong reliance on old rules and procedures = not good in novel
situations
, o Important Principles
§ Very close supervision of employees à manager only supervises a
small group of people (small span of control) which allows to keep a
close eye on all
• Also means that they can meet the needs of their subordinates
+ can easily train them
§ Unity of command à in a bureaucratic structure, employees have only
1 direct supervisor
• Can be beneficial for employees as they don’t worry about
meeting different expectations = less role conflict (seen in
modern orgs)
§ Unity of direction à information within the bureaucratic org. flows in
one direction (usually from top levels to lower)
• Benefit: increases predictability and stability + top managers
can better control the information that reaches the lower levels
o Possible to combine it with other org. forms
• Administrative Management – Henri Fayol
o Tried developing a universal set of organizing principles for managers to apply
in org.
o Management functions à most important behaviors and activities of managers
§ Planning, organizing, commanding, coordination, and controlling
§ Fayol proposed principles that would help managers achieve these
functions
§ Many of the principles overlap with Ideal Bureaucracy (e.g. unity of
direction)
o Examples of unique principles (not similar to I.B.):
§ Stability of personnel, encouraging people to take initiative, and having
a high level of cohesion among employees
o Major criticism: treats employees as ‘cogs in a machine’ that can easily be
replaced
Humanistic Organizational Theories (1960s)
• Theory XY
o There are 2 types of managers:
§ Theory X managers = believe that people don’t like working and
therefore need to be monitored closely and coerced to reach the goals
of the org
• Also believe that employees have little ambition, aren’t self-
directed and value security over all else
§ Theory Y managers = believe that work is a natural part of everyone’s
life and people seek to find meaning in it. Ppl are capable of self-
control and will strive towards org. goals
• Under the right conditions, employees will seek out
responsibility and use creativity to solve org. problems
• Believes that orgs are designed in a way that limits the
employee’s skills and talents
o These theories are for managers but can be extended to an organizational
level:
, § Theory X org. = narrow span of control, strict lines of authority, a lot of
rules and procedures (standardized work process9
§ Theory Y org. = wide spans of control, flexible lines of authority, limited
rules
• Leads to more psychologically fulfilling jobs for employees bcs
it can lead to personal growth
• Downside: since lines of authority are blurred = more role
conflict
• Human Organization – Likert
o Organizations can be classified into 4 types
o System 1= exploitive authoritarian type à like Theory X, little trust in
employees, little communication with management, centralized decision
making, control is ‘top-down’
§ Leads to dissatisfied employees and low levels of org. performance
o System 2 = benevolent authoritative à like System 1 BUT a bit more trust in
employees + communication. It’s very authoritative but they are nicer to
employees
§ Leads to moderate levels of satisfaction in work and fair org.
performance
o System 3 = consultative à a lot more trust in employees so their ideas are used
more. More communication (from bottom up). Decision making is still
centralized BUT how authority is exerted is different from system 1 and 2
§ Top level makes board policies, lower levels can make more specific
operational decisions (boundaries are given by managers and workers
make decisions within those boundaries)
o System 4 = participative group à opposite of system 1. Managers have
complete trust in employees, seek their input before making decisions,
communication is free-flowing in all directions, teamwork is encouraged,
decision making made at all levels
§ Likert believed that this is the only one capable of ‘excellent’
performance
• J.G. Likert and Araki à further developed the 4 systems and added a 5th
o System 5 à similar to system 4 BUT emphasizes the absence of bosses e.g.
universities where departments are self-managed
• Problem with all these theories: they assume that there is a ‘best’ way to lead an
organization
Contingency Organizational Theories
• Developed because scientists realized that there isn’t a singular set of traits or
behaviors that distinguish good from bad leaders
• Congruence perspective – Huber
o Organizations should be designed so that they are congruent with the
organization’s strategy and factors like: characteristics of the employees, type
of work etc.
• What internal and external factors do organizations need to pay attention to when
designing their organization? (next section)
Determinants of Organizational Design
• Organizational design must serve a purpose
Strategy
, • Organizational strategy = long-range goals and ways to reach these
• Different strategies in organizations influence staffing, reward systems, compensations
etc.
• Aspect of org. structure that has the largest impact on strategy implementation:
o Specializationà types and number of specialties used in the org.
§ High specialization = better performance BUT difficult when products
keep changing (doesn’t allow for quick reactions9
o Shape of the organization à how many people are in the hierarchical chain
form departments?
§ Narrow organization = a lot of levels but few individuals at
each
• More time + energy spent on communication,
supervision and decision making. Spends a lot of
time ‘running itself’ – better for companies
producing highly specialized products in markets
where demands are consistent e.g. apple?
§ Flat organization = few levels but a lot of employees at each
• Less time + energy spent on internal processes –
allow for quicker responses to consumer demands –
found in org. in new/emerging sectors of economy
e.g. google?
o Distribution of power à depends on how decisions are made:
§ Vertical distribution of decision-making power = how much are
decisions centralized or decentralized?
• Centralized = headquarters make all the decisions
• Decentralized = lower levels make decisions (workers)
§ Horizontal distribution of decision-making power = is decision making
power shifted to the department that has the best information or to top
managers?
• E.g. giving this power to employees that deal with customers
• If quick responses to market conditions need to be made, it is
better to leave the decision-making power to those closer to
customers
o Organization’s departmental structure à departments are made according to
different criteria e.g. function
§ Departmentalization by function – e.g. marketing, production and HR =
most common
• Advantage: promotes high levels of specialization = high
performance in each area
• Weaknesses: better for companies that produce a single
product/limited number (if it grows then it might overwhelm
team)
o Doesn’t promote sharing ideas across departments
(leads to very closed compartments – e.g. university
faculties don’t talk much)
• Functional strategy works best in a stable environment without
much technological change e.g. federal government agencies,
Post It
