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Organizational Management

1. Core premises of classical and neoclassical theories of organizational management There are several core premises each for both the classical and neoclassical perspectives of organizational management – with similarities and differences between the two schools of thought.

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The classical perspective is characterized by its key assumptions that a) Organizations’ purpose is to achieve output-related and financial goals, b) The scientific method is the means to discovering the best organizational structure for the aforementioned goals, c) Job specialization and division of labor maximize production, and d) Rational economic principles dictate how people and organizations act (Jang, Ott, Shafritz 2005:28). The quintessential classical theorists include Max Weber, Henri Fayol, Fredrick Taylor, and Luther Gulick.

Weber described bureaucracy as the ideal organizational structure for rationality and efficiency with the characteristics of clearly defined rules, impersonality, hierarchy/levels of authority, and training of employees (Jang, Ott, Shafritz 2005:73-74). Fayol articulated general principles of management – characteristics under which the ideal organization operates which include division of labor, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interest to general interest, and remuneration of personnel (Jang, Ott, Shafritz 2005:48-52).

Taylor (1915) championed what he called “scientific management”, a philosophy in which the scientific method applies to the management of an organization and the workers therein to increase productivity. So meticulous was Taylor in his concept of applying scientific evidence to factory jobs, that he conducted “time studies” in which a stopwatch was used to time a worker’s motions – the idea being there is one best method for performing any physical task. NetMBA 2002-2010) Perhaps less radically, Taylor also advocated for careful selection and training of workers by management, as well as the familiar classical principle of dividing work according to specialization. Gulick (1937) considered the merits of building an organization from the top-down and the bottom-up; and contributed his idea of organizing the executive according to his acronym “POSDCORB”: Planning, Organizing, Staffing, Directing, Coordinating, Reporting, and Budgeting (Jang, Ott, Shafritz 2005:86).

Gulick described the functions of this acronym as ideally being subdividing among the executive – wherein the executive is not just the chief executive, but other offices and departments including the chief executive’s private secretary (Jang, Ott, Shafritz 2005:86). The neoclassical theory of organizational management accepts the basic tenets of classical theory but adds several points to challenge and expand upon it.

These points are a) The human factor in organizations: How people in the organization will cooperate with each other in an organization and how much they will be committed to organizational values and goals – particularly in the mechanistic, bureaucratic organizational model Weber constructed, b) The importance of internal-external organizational relations, and c) Decision-making processes (Jang, Ott, Shafritz 2005:88). The human factor in organizations was explored by Barnard (1938), who emphasized the importance of motivating workers properly to work within a cooperative organizational system.

Barnard articulated a method of incentives that gave more consideration to motivating factors such as opportunity for power, position, and prestige, beneficial social relationships at work, greater participation in decision-making, than to monetary compensation. Underlying assumptions about human nature of classical and neoclassical theory The classical school assumes that organizations are primarily concerned with tangible, economic rewards (profits), and that organizations should be constructed according to the general and/or scientific management principles outlined earlier in order to maximize organizational productivity and efficiency.

People are motivated primarily by money; other motivating factors such as sense of accomplishment and relationships with coworkers are relatively unimportant. Classical theory assumes that each part of an organization (leadership/management and workers) must have clearly defined roles that must be adhered to, and cooperation between each of these segments is important in making sure the organizational goals are being reached. Neoclassical theory agrees with classical theory insofar that conomic/financial rewards are indeed a big motivator for organizations, their leaders, and their production workers – but exposes the classical theorists’ explanation (or lack thereof) of the importance of human relations and group dynamics in the organizational setting. Neoclassical theory considers to a degree the effects of organization on individuals – particularly worker cooperation and motivation, as well as coordination among leaders and administrative units.

One such neoclassical theorist, Robert Merton (1957, 1985), argued that bureaucracies inhibit individual freedom and creativity and cites Thorstein Veblen’s idea of “trained incapacity”, John Dewey’s idea of “occupational psychosis”, and Daniel Warnotte’s theory of “professional deformation” to illustrate his point (Jang, Ott, Shafritz 2005:104). Another point of disagreement between classical and neoclassical theorists comes from the concept of rules and procedures in organizations.

This perceived ultimate supremacy of formal rules and procedures was challenged by Merton, who argued that formal rules and procedures lead to overconformity: Formalism, even ritualism, ensues with an unchallenged insistence upon punctilious adherence to formalized procedures. This may be exaggerated to the point where primary concern with conformity to the rules interferes with the achievement of the purposes of the organization… An extreme product of this process of displacement of goals is the bureaucratic virtuoso, who never forgets a single rule binding his action and hence is unable to assist many of his clients. Merton via Jang, Ott, Shafritz 2005:106) Thus, neoclassical theory gives credence to human adaptability according to situation, warning that rules and procedures often disallow people in organizational settings from exercising their best judgment. To reinforce this point, this is in stark contrast to the classical view that rules, procedures, and roles in an organization according to work specialization dictate, or at least constantly guide, the behaviors and interactions of people in the organization.

In essence, neoclassical theory puts more faith in individual judgment and discretion than does classical theory, while placing less emphasis on the importance of rational goals like money to organizations and valuing more value-oriented organizational goals and actions. The same holds true for people: Classical theory implies that people are really only in it for the money while neoclassical theory says money is just one motivating factor – there are also incentives such as pride, social relationships at work, and augmented responsibility and decision-making power that are powerful motivators for working people.

Accuracy of assumptions and adequacy in explaining contemporary organizational dynamics and effective management Both the classical theory and neoclassical theory are adequate in some respects while inadequate in others, and some of each is both shared and exclusive between the two respective viewpoints. The classical principles of division of work and specialization of labor as means to maximize productivity and efficiency were innovative at the time and still largely hold true today.

Many companies today divide their workforce by skill/qualification into different roles/departments within the company. For example, nearly every vehicle manufacturing company today uses the assembly line manufacturing system, in which assembly workers each have a task or a specific set of tasks, and they are (both the workers and their tasks) are sequentially ordered.

In the case of the typical automobile assembly line, the chassis is made first, then the body is added to the chassis, and then the interior is defined with seating, electronics, etc. Obviously, these are broad steps that contain smaller tasks within, and factory machinery helps efficiency a great deal (especially given how much technology has advanced over the past century), but separation of labor is still alive and well today. Taylor’s theory of scientific management was highly influential in its own time and still is today.

In Taylor’s time, Henry Ford adopted scientific management as described by Taylor in his factories (the assembly line being the most notable manifestation of Taylor’s principles in action), and even families started to carry out their household chores based on the results of time and motion studies (NetMBA. com 2002-2010). Taylor’s principles can be seen in action today, particularly in the fast food service industry where achieving efficiency is vital to meet customer expectations. A glaring inadequacy of classical theory, in this case Taylor’s scientific management, is that it treats workers as tools instead of human beings.

As stated before, there is a noticeable lack of consideration of employee morale and motivation beyond salary, and organizational culture as well as organizational goals and values beyond maximize efficiency and profits are neglected by much of classical organization theory. Another flaw of classical theory is one that neoclassical theorist Herbert Simon (1946) raised, which relates go the general principles of management as described by both Fayol and Gulick. Simon exposed flaws in the logic of several of the principles, arguing that they are confusing, conflicting, and unrealistic:

The principle of unity of command is perhaps more defensible if narrowed down to the following: In case two authoritative commands conflict, there should be a single determinate person whom the subordinate is expected to obey; and the sanctions of authority should be applied against the subordinate only to enforce his obedience to that one person… it [unity of command principle] also solves fewer problems… it no longer requires, except for settling conflicts of authority, a single hierarchy of authority. Jang, Ott, Shafritz 2005:114) Neoclassical theory is more adequate than classical theory when applied to current organizations and effective ones because it takes more factors into account – namely the factors of individual motivation and Phillip Selznick’s (1949) notion of “cooptation”, which asserts that organizations introduce and absorb new elements from the outside into the organization in order to prevent those elements from “coming back to bite them”, so to speak (Jang, Ott, Shafritz 2005:90).

At the same time, the overarching classical view that rational goals such as productivity, quality, and efficiency are the most vital of all goals has never been wholly rejected by any other theory – neoclassical included – and many organizations today maintain a structure and culture in which these goals are valued most. Since neoclassical theory does not reject these values, but instead tweaks and adds some values of its own to them, it is more relevant to contemporary organizational dynamics and effective management. . The question of whether organizations should be hierarchical or whether they should offer employees broad autonomy/discretion is based largely on misunderstanding between the two supposed “sides”. I will dispel any notion that these principles are separate and exclusive from each other, and argue instead that both organizational hierarchy and employee discretion and the balance of the two principles offer a path for organizational success. First, what do the terms hierarchy, autonomy, and discretion mean?

Hierarchy is a structure/system in which there is at least one dominant-subordinate relationship. Autonomy and discretion are synonymous, meaning the power to act according to one’s own judgment, or freedom of choice. Considering these definitions, they are seemingly complete opposites – and exclusive ones at that. After all, how can there be a dominate-subordinate relationship and employee power to work and act as he/she pleases? But upon further review of the terms and the literature, these principles actually are meant to be together and cooperate.

Hierarchy and discretion can and should act as checks and balances towards each other. The hierarchical organization structure serves to control discretion but not eliminate it – just as discretion prevents the hierarchical structure from becoming overbearing and thus not giving the employee(s) the necessary flexibility and freedom to do the job the way it should be done. It is order and liberty: Ordered liberty if you will (though granted, the familiar concept of ordered liberty as applied to constitutional law has a very different meaning). Why is hierarchy desirable?

Because it holds people accountable, by means of authority. In other words, employees are held accountable for the work they do and how they do it by their manager(s)/supervisor(s). If there were no managers to hold employees accountable, there would undoubtedly be a decrease in productivity and increases in delinquency and absenteeism in many organizations. In his article “In Praise of Hierarchy”, Elliot Jacques (1990) acknowledged the merits of the hierarchical structure: “The reason we have a hierarchical organization of work is not only that tasks occur in ower and higher degrees of complexity – which is obvious – but also that there are sharp discontinuities in complexity that separate tasks… The same discontinuities occur with respect to mental work and to the breadth and duration of accountability. ” (Jang, Ott, Shafritz 2005:231). The organizational structure most often associated with hierarchy is and has been bureaucracy, but in reality, hierarchy exists in almost every organizational model and in virtually every organization today.

Businesses have chairmen, CEOs, and other top executives; governments include the President at the federal level (governors at the state level) and even charity organizations have their chief organizers and administrators. These are the top officials in these respective organizations; everybody else in the given organization is subordinate in terms of function and/or rank. Therefore, hierarchy exists in each of these examples. Perhaps more obviously, autonomy for employees is also desirable in organizations.

There is evidence to suggest autonomy at work increases employee job satisfaction and commitment. According to the National Educational Longitudinal Study (1988-2000), job autonomy is a highly significant factor in five distinct areas of job satisfaction: Salary, fringe benefits, promotion prospects, job security, and relevance of work (Bradley, Nguyen, Taylor 2003). It is also a much more flexible and efficient policy of problem solving than would exist in a bureaucratic structure, where there would be stricter supervision as well as SOP’s.

In the bureaucratic model, an employee tasked with solving a customer’s problem, the solution to which is not defined in any SOP or is not part of company norms, would require the employee to scale the chain of command for the appropriate superior who could solve the problem. This is because employees have narrow span of controls and are bound by defined rules and procedures in a bureaucratic structured organization. The bureaucracy is considered a mechanistic model of organization by Tom Burns and G.

M. Stalker (1961) of the Tavistock Institute in London. Burns and Stalker divided organizations into two broad types: Mechanistic systems, and organic systems. They describe mechanistic systems as having layered hierarchy or a chain of command and formal rules of procedures, and organic systems as offering more participation, horizontal communication, and more autonomy and discretion to employees (Jang, Ott, Shafritz 2005:194).

As they explained it, the mechanistic system is more hierarchy-oriented, whereas the organic system is more autonomy-oriented, and they suggested that the mechanistic system is more suitable for a static, stable environment while an organic system is better for a dynamic, changing environment (Jang, Ott, Shafritz2005: 194). But where does the authority come from in the non-hierarchical, organic system? “The location of authority is settled by consensus”, explained Burns and Stalker (Jang, Ott, Shafritz 2005:199).

The idea of group consensus having authority in organizations seems beneficial, until it becomes denigrated into groupthink. Groupthink is, as Irving L. Janis defined it, “… the mode of thinking that persons engage in when concurrence-seeking becomes so dominant in a cohesive ingroup that it tends to override realistic appraisal of alternative courses of action” (Jang, Ott, Shafritz 2005:186). Hierarchy, as inflexible as it can be, still protects against groupthink to a large degree.

This supports the general idea that no system is perfect as well as Burns and Stalker’s assertion that the effectiveness of hierarchy and autonomy, respectively, depends on the organizational environment and situation. My opinion is that in many organizations, a balance or equilibrium between the two values (hierarchy and autonomy) is the most desirable, and Burns/Stalker acknowledge that this is possible: “Finally, the two forms of systems represent a polarity, not a dichotomy; there are, as we have tried to show, intermediate stages between the extremities empirically known to us. ” (Jang, Ott, Shafritz 2005:199)

So how can an employee have a manager who is dominant, – that is, higher up on the organizational ladder – yet also have the autonomy/discretion to do his/her job as he/she sees fit? How can this tension be resolved? The answer is guided discretion. I propose two forms of guided discretion that keeps both principles of hierarchy and autonomy. The first form of guided discretion I propose is what I call “complete guided discretion”. This form of guided discretion allows the subordinate employee complete freedom about how to do the job/assignment/task/etc. , on the one mitigating condition that the employee accomplishes it.

The supervisor/manager of that employee’s job is simply to check on the employee to make sure the work is getting done, and to collect and/or verify it once the work is done. The manager may apply time-specific deadlines for the assignment to be completed if the nature of the position consists of time-oriented tasks, but if the job is more fluid and not based on specific projects/assignments, then the good manager would check on the underling employee periodically – not only to monitor job effectiveness but to address any questions, requests, or concerns that employee might have.

Furthermore, if the subordinate employee has multiple options as far as task selection goes, he/she would have the discretion to choose which task(s) to do if only a certain number were required to be completed, and/or the order in which he/she wishes to do the assignments required ones notwithstanding.

I akin this type of discretion to the relationships between students and professors at college; the student often has a wide range of options as far as how to do an assignment (although this is truer in the social sciences than in more technical fields of study), the only stipulations being that the assignment is completed and turned in on-time and no cheating/plagiarizing was involved. This is the type of conditional working relationship that would characterize guided discretion as I see it.

The second type of guided discretion I offer limits employee discretion on the basis of fairness and ethics. This type I call “limited guided discretion”. To elaborate, an employee may do his/her job according to his/her own best judgment as long as he/she does not act in opposition to accepted company values and norms. Company values and norms are typically customer related, usually emphasizing putting the customer above all else and exemplified by the familiar business cliche “the customer is always right”.

Nevertheless, if such action considered outside of company ideals and ethics were to occur, it would be the responsibility of his/her manager to discipline him/her, which may call for a punishment up to and including termination of employment. Depending on the severity and extent of the infraction(s) however, the more appropriate sanction could be to return the employee to the less desirable strict hierarchical relationship in which the employee is more closely supervised and standard operating procedures may apply.

Certainly the manager of that offending employee would ensure that said employee would exercise company-sponsored values and ethics henceforth. Of course, the employee would be given fair counsel beforehand of the wisdom to essentially ask him/herself “Am I acting in agreement with company values? ” Because the employee is a representative of the company, he/she should represent company values. I have argued that it is necessary and desirable for organizations to maintain a balance between organizational hierarchy and employee autonomy/discretion.

I will add that organizations need not have an equal balance of hierarchy and autonomy; an organization can effectively be either more hierarchy-oriented or more autonomy-oriented (and many organizations fall into one of these two camps). But to have both principles in action in an organization is desirable because it minimizes the negative effects of either principle, while maximizing the positive ones.

They check and balance each other; hierarchy provides better accountability and prevents groupthink, while autonomy gives the organization flexibility to handle a wide range of problems and contributes to employee motivation and job satisfaction. By considering my ideas of complete guided discretion or limited guided discretion, organizations have at least an interesting idea about a healthy balance between organizational hierarchy and employee autonomy could be achieved. References Bradley, Steve, Jim Taylor and Anh Ngoc Nguyen, 2003. Job autonomy and job satisfaction: new evidence,” Working Papers 000192, Lancaster University Management School, Economics Department. Accessed 14 November 2010. http://ideas. repec. org/p/lan/wpaper/000192. html Jang, Yong Suk, Steven J. Ott, and Jay M. Shafritz. 2005. Classics of Organization Theory: Sixth Edition. Belmont, CA: Thomson Wadsworth. NetMBA Business Knowledge Center. 2002-2010. “Frederick Taylor & Scientific Management”. NetMBA. com, Internet Center for Management and Business Administration, Inc. Accessed 12 November 2010. http://www. netmba. com/mgmt/scientific/


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