Studies of business have been relatively new, especially those with a more rigorous scientific approach. This article aims to explore different theories that have shaped organizations we see all around us each day. In order to have a good understanding of a modern business, it is important to examine the theoretical constructs and frameworks that have gone in to studying and developing how we think of business and its operations.
Four theoretical contributions central to understanding today’s organizations
There have been four major contributions identified as central to understanding organizations: Taylor’s school of scientific management, the Fayol school of administrative theory, Weber’s bureaucracy and organizational structure, and the Simon’s administrative behaviour (Lægaard, 2006). The common thread amongst these is the focus on task performance and a formalized structure (Lægaard, 2006). This is to ensure a rational system based on overall transparency, plasticity for enhanced output, minimization of rigidity in order to allow for organizational restructuring, minimization of in-fighting, a hierarchy of structure and control, and the development of positive emotional relationships (Lægaard, 2006). Now that the commonalities of each theoretical framework have been established, it is essential to define and differentiate between them.
Scientific management attempts to utilize as much of the scientific method (including experimentation) to enhance output and minimize resources, whilst serving a common good between employers, employees and society at large (Taneja, Pryor, & Toombs, 2011). This allowed for a system whereby managers may have their organizational powers diminished if their actions were scientifically demonstrated to be inefficient and/or ineffective (Lægaard, 2006) (Taneja, Pryor, & Toombs, 2011). This requires self-reflection and honesty on the part of the management team (Aitken, 2014), plus a team of specialists for work process optimization (Lægaard, 2006). This of course alters the traditional hierarchy of a company so that it becomes more ‘’bottom-up’’ approaches (Lægaard, 2006). Scientific management is typically found in sectors involved in industrial engineering (Taneja, Pryor, & Toombs, 2011), though today is overall les prevalent than it historically was (Lægaard, 2006).
Administrative theory was developed around the same time as scientific management (March & Simon, 1958), and from a rationalist approach rather than a logical one (Lægaard, 2006). Part of this involved the use of traditional top-down hierarchies within the organizational structure, however with the novel (for the time) idea that continuing education be part managerial duties (Pryor & Taneja, 2010). Similar to scientific management, specialization of tasks played a role in administrative theory, which could be based on things such as marketing, customer service and geographical location (Lægaard, 2006). Today, we can see Fayol’s administrative theory being prevalent in military organizations (Talbot, 2003).
The father of sociology, Max Weber (the serious looking gentleman in the picture above), was responsible for the development of the bureaucratic model of organizational theory and considered that organizations should be structured in a superior-centric view (Lægaard, 2006), (Sashkin & Sashkin, 2003). This means that the employee should see their goals as one and the same as that of their superior (Lægaard, 2006). The bureaucratic model relies on a legal and established authority-based systems, and therefore is common in sectors like civil service (Sashkin & Sashkin, 2003). It is important to note that Weber stressed the importance of neutral professionals with relevant technical qualifications in order for the system to be effective (Lægaard, 2006).
Administrative behaviour as developed by Herbert Simon came from a critique of Taylor’s scientific management, mainly the paucity of taking human psychology into account, with an over-emphasis on industrial optimization (Lægaard, 2006). This can be seen as less of a deconstruction of scientific management, but an improvement on it where the mind of staff was given a focus; important given that humans can and will pursue their own interests but may not be aware of their basic interests (Simon, 1947). This in turn, will lead to less rational actions taken which will impact detrimentally on the organization and organizational theory (Simon, 1947) (Lægaard, 2006). His solution for reconstructing rationalist ideas with empiricism was to place an individual at the centre of an organization and to then steer them towards objectives; this can be done for each individual or group within a hierarchy (Lægaard, 2006). The result is an objectives hierarchy where administrative regulation facilitates the pruning of a decision tree to develop specific, structured objectives (Lægaard, 2006).
The most influential concept
Arguably, Weber’s bureaucratic model has been one of the most important and influential concepts in the modern history of organizational theory, especially given the current global political climate (Waters & Waters, 2015). From a historical and political perspective, bureaucracy has become more centralized, especially as we look at the European Union (EU) and the United States (Allan, 2005). This has created enormous levels of economic and social benefits (particularly with respect to the EU) (Allan, 2005); however, it has also caused a degree of social dissatisfaction amongst certain social and political classes, who see the centralization of bureaucracy and power as a threat (Gifford, 2009). This in turn has been shaping nations from the city to state level up (Allan, 2005). However, Weber, whilst acknowledging concerns over individual freedoms, would argue that bureaucracy is the most rational and efficient way of organizing human society (Waters & Waters, 2015). From a management perspective, bureaucracy has been seen to cause a decrease in efficiency (Gajduschek, 2003). However, this may inversely cause an increase in effectiveness due to the levels of checks and balances in place (this of course assumes a lack of central corruption and overall transparency) (Gay, 2005). One example of this is the bureaucratic management of healthcare systems and clinical practice, where bureaucratic systems ensure a higher standard of care for patients and clinical trials with all the checks and balances provides by adequate controls, pre-patient screening and post-trial monitoring (Vijayananthan & Nawawi, 2008) (Akhondzadeh, 2016). Of course, it is vital that management must utilize an evidence-based approach towards bureaucracy so as not to create burdens on both efficiency and effectiveness (Califf, 2006).
Influence on the development of current organizational theory
There of course is not ‘perfect’ system or theory to be used homogenously by organizations, and oftentimes, an amalgamation of approaches is used. Modern organizational theory grew out of the 1950’s, where academics took scholastic aim at organizational theory, which ended up developing into the theory of polyphonic organizations. This theory was predominantly developed by Niels Anderson, who believes that modern organizations have expanded far beyond their original structures and boundaries (be it companies, or governments as previously discussed in the previous section) (Andersen , 2001). This can cause organizations to have a breakdown in communication and hierarchy (Andersen , 2001). It is interesting to briefly see how each of the four major schools of thought regarding organizational theory have impacted current practice and theory.
As previously described, scientific management (or Taylorism) had been impacted and altered by administrative behaviour, making it more humanistic which still plays a central role in current organizational theory (Melé, 2003). It has been found that organizations that implement a human-centric framework see increased employee performance and higher profits (Atmojo, 2012) (Harter & Mann, 2017). Fayol’s administrative theory likewise still plays a role in today’s organizations and organizational theory (McLean, 2011). Namely, in that it serves to help prevent the problems associated with polyphonic organizations by reinforcing hierarchy, whilst placing value on continued professional development across an organization and its specialist divisions (McLean, 2011). The ideas of polyphonic organizational theory can be argued to be directly influenced by the research into the bureaucracy of expanding organizations; as organizations grow, so too does their bureaucracy (Astley, 1985). When this occurs inefficiently, communication and hierarchy can break down, which is at the heart of modern organizational theory (Andersen , 2001). It should now be quite evident that the traditional schools of organizational theory have an intimate history with modern organizational theory and practice.
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