MSc in EFM – Management Week 1 Introduction to Organisation Theory

What is an organisation? “A tool used by people to coordinate their actions to obtain something they want or value” “Organisations are: (1) social entities that (2) are goal directed, (3) are designed as deliberate structured and coordinated activity systems, (4) are linked to the external environment” “An organisation is an interplay of technology, social structure, culture and physical structure embedded in and contributing to the environment”

What is organisation theory? “ ‘Theory’ is an attempt to explain a segment of experience in the world” Theory attempts to explain ‘the phenomenon of interest’ Organisation theory attempts to explain organisations What they are like, how they work (or don’t) How they are structured, and why Relationships between different parts How they change etc, etc

Behind theory! Theory is based on assumptions Different assumptions will lead to different theories Assumptions are not always made explicit A set of related assumptions and theories often termed ‘a paradigm’ – a ‘mindset’; a way of thinking Burrell and Morgan developed 4 paradigms found within Organisation theory, based on 2 sets of assumptions

1. Assumptions about the nature of social science ‘Ontology’ – The nature of being, what is reality? Epistemology – The theory of knowledge; how we know something; validity of knowledge Methodology – Ways of investigating or finding knowledge Human Nature – what are humans like, how do they react, behave

Subjective - Objective Dimension ontology Realism Nominalism epistemology Positivism Anti-positivism methodology Ideographic Nomothetic human nature Determinism Voluntarism

Ontology Ontology ontology Realism Nominalism Realism – the world is ‘concrete’ and separate from an individual’s perception. The social world has ‘objective reality’, it is ‘out there’. Nominalism – does not accept a ‘real’ structure to the world. The world only exists in the mind and perceptions of an individual. It is ‘in the mind’, not ‘out there’

Epistemology epistemology Anti-positivism Positivism Positivism “seeks to explain and predict what happens in the social world by searching for regularities and causal relationships between its constituent elements ‘Verficationists’ and ‘falsificationists’ Anti-positivism assumes the world is essentially relativistic and can only be understood by those directly involved. Rejects the concept of ‘objective observer’

Methodology methodology Ideographic Nomothetic Nomothetic methods emphasise systematic techniques, testing hypotheses, ‘scientific rigour’, quantitative data, statistics, etc. Ideographic methods assume only first-hand knowledge will give true knowledge. Thus need to be close to the subject of study, alongside, ‘getting inside the situation’

Human Nature human nature Voluntarism Determinism Determinism assumes humans are moulded almost completely by their genes and the environment in which exist and have existed Voluntarism assumes that humans are basically free agents who have free-will and can make choices that overcome the influence of the environment

Summary by Morgan and Smircich See table in Handout Not a dichotomy between subjective and objective Continuum with many possible positions

2. Assumptions about Society ‘Regulation’ v ‘Radical Change’ Regulation assumption is “primarily designed to provide explanations of society which emphasise its underlying unity and coherence” Radical Change assumption views society as having at its heart, “radical change, deep-seated structural conflict, modes of domination and structural contradictions”

Regulation v Radical Change Regulation assumption concerned with: Radical Change assumption concerned with: a. The status quo a. Radical Change b. Social order b. Structural conflict c. Consensus c. Modes of domination d. Social integration & cohesion d. Contradiction e. Solidarity e. Emancipation f. Need satisfaction f. Deprivation g. Actuality Potentiality

Four paradigms of Burrell and Morgan Radical change Radical Humanist Radical structuralist Objective subjective Interpretive Functionalist Regulation

Radical Humanist paradigm Views humans as being alienated from their true selves, by imposed ideologies Theories stress ideas such as releasing humans, critiques of the status quo, human consciousness, individuality, choice. Radical ‘green’ theories ‘Anti-organisation theory’ Theories of craft production, non-urban life-styles, integrating humans with nature Technology is a negative force in society

Radical Structuralist paradigm Theories relating to structural change and power relations Usually begins with a critique of Functionalist theory! Frequently based on a thorough understanding of Weber and Marx Concept of ‘class’ is very important Often Action Research – theory and practice are developed together

Interpretive paradigm The world is an emergent social process which is created by the individuals concerned Two schools of thought have been dominant Phenomenology ‘The phenomenon is that which immediately manifests itself in consciousness’ Rejects objective or detached viewpoint Investigates the meanings of events in the consciousness of those involved Organisations do not exist as tangible entities

Ethnomethodology Theory based around a methodology Grounded in the detailed study of everyday life Particular interest in ‘taken for granted’ assumptions which characterise social relations Organisations seen as common-sense constructs; hierarchy is challenged

Functionalist paradigm Objective and regulation are key assumptions Does not challenge the status quo – seeks to explain Change is not radical but evolutionary By far the dominant paradigm in economics, and organisation theory Next section is brief overview of the development of functionalist theory in 20th century

Classical Management theory Developed as ‘Scientific Management’ by Frederick Taylor in early 1900s Engineering view of Organisations. People were adjuncts to machines, and could be treated in similar manner There was always ‘one best way’ to carry out any task Job broken down into small tasks and rewards and punishments used to ensure each task done well The task of management was scientific – discovering best method Very controversial then – even more so later

Classical Management Theory - 2 Henri Fayol developed a similar theory independently at about the same time, BUT Fayol dealt with office work not factory tasks “Theory of Administration” – Henri Fayol CMT most objective of all organisation theory

Industrial Psychology Developed at same time as CMT, but totally different perspective Aim was to understand workers and conditions of work, such that management could create a working environment that would maximise performance Long tradition and still exists in modified form

“The Hawthorne Studies” Critically important series of studies conducted by Harvard researchers in 1930s Initial objective was to demonstrate the validity of Scientific Management and Ind Psychology approach – emphasis was on physical work conditions and employee performance Results in opposition to the theories being tested New hypotheses developed that stressed the importance of social systems in organisations

Effect of Hawthorne Studies With hindsight these studies are open to serious criticism Detail not important The ‘great leap forward’ was shift away from highly objectivist theory based on ‘mechanical humans’, towards a theory based on ‘Social humans’ “The impact of these studies on organisation theory can hardly be exaggerated.”

Equilibrium Theories These based within economics Key writers Henry Simon, Cyert & March Known as ‘behavioural economists Seminal book was “Administrative Behaviour” by Simon in 1945 Key concepts included: Human behaviour ‘satisfices’ not optimises Bounded rationality ‘Administrative Man’, not ‘Economic Man’

Structural Functionalists Philip Selznick – 1948 “although organisations are formally rational, in actual practice they are greatly influenced by the informal and social aspects of organisations” His theories examined the relationships between: Formal and informal organisations Mechanistic and organic management Individual and organisational goals Organisational change Organisations had the following features: goal-directed; self-maintaining internally and with respect to the environment; purposive rationality

Open Systems Theory Mid 1950s Ludwig von Bertalanffy developed General Systems Theory including the more particular ‘Open Systems Theory’ Based on a Biological metaphor GST has been developed in vast range of disciplines Morgan in ‘Images of Organisation’ states there are three key issue: Environment Sub-systems Improvement to the system

OST - Environment Early OT treated organisation as if separate from its environment OST defines ‘task environment’ – the direct interactions with environment through customers, competitors, suppliers etc. And ‘contextual environment’ – the more general environment in which organisation operates, such economic, cultural conditions etc. Environment has been an extremely significant shift in focus and is highly influential

OST – Sub-Systems Model is of system made of subsystems – e.g. a human body is a system but contains: blood system, nerve system, skeleton, muscles etc Katz & Kahn – 1966 developed this in ‘The Social Psychology of Organisation’ – advocating 5 generic sub-systems: Production or technical sub-systems Supportive sub-systems Maintenance sub-systems Adaptive sub-systems Managerial sub-systems Production – obvious Supportive – rest of value chain – dealing with suppliers customers etc Maintenance attracting and holding people in their fuctional roles Adaptive – org change Managerial - obvious

OST – Improvement to system Notion of improved organisational effectiveness Appropriate matching internally of sub-systems, and externally with environment Major Problem for OST!! Although a very elegant theory it has proved almost impossible to operationalise and there is little empirical evidence in its support

Empirical Studies Began in earnest in 1950s – Some key examples Joan Woodward – 1958 & 1965 Large study of companies on Essex – detailed data Showed production technology, organisation structure and business effectiveness were correlated Aston Studies – 1960s and early 1970s Multivariate analysis of organisation structure and context Context included: history, size, ownership, technology, location, control Particularly showed relation of size and technology on structure

Contingency Theory This is a framework that synthesises the key features of OST with the key results from later empirical research Seminal work was “Organisation and Environment” by Lawrence and Lorsch, 1967 E.g. “In a more diverse and dynamic industry, such as plastics, effective organisations have to be highly differentiated and highly integrated. In a more stable and less diverse industry, such as containers, effective organisations have to be less differentiated, but they must still achieve a high level of integration. “There is no one best way” – direct contrast to early theories The next few lectures expand Contingency Theory

Action Frame of Reference David Silverman, 1970s; border with interpretive Some key features are: Concepts from natural sciences are not necessarily appropriate for social sciences Social sciences concerned with understanding actions not observed behaviours Meanings are given to people by their society – shared meanings eventually become social facts While society defines man, man in turn defines society Through interactions people modify, change and transform social meanings

Nature of Theory Good theory has Internal consistency – internal logic External consistency – empirical investigation Able to be operationalised Generalisable Scientific parsimony

Nature of Theory -2 Dimensions of theory Deductive v Inductive Deductive emphasises logic flow from general to specific (from certain relations others can be deduced) Inductive theory is primarily developed from empirical events Normative v Positive theory (descriptive v prescriptive