Organizational theory attempts to explain the workings of organizations to produce understanding and appreciation of organizations. Organizational theory draws from various bodies of knowledge and disciplines. Some types of organizational theories include classical, neoclassical, contingency, systems and organizational structure. These variations on organizational theory draw from multiple perspectives, including modern and postmodern views.
The classical perspective of management originated during the Industrial Revolution. It focuses primarily on efficiency and productivity and does not take into account behavioral attributes of employees. Classical organizational theory combines aspects of scientific management, bureaucratic theory and administrative theory. Scientific management involves obtaining optimal equipment and personnel and then carefully scrutinizing each component of the production process, states StatPac Inc, an international software development and research company. Bureaucratic theory places importance on establishing a hierarchical structure of power. Administrative theory strives to establish universal management principles relevant to all organizations.
Neoclassical organizational theory is a reaction to the authoritarian structure of classical theory. The neoclassical approach emphasizes the human needs of employees to be happy in the workplace, cited StatPac Inc. This allows creativity, individual growth and motivation, which increases productivity and profits. Managers utilizing the neoclassical approach manipulate the work environment to produce positive results.
Contingency theory accepts that there is no universally ideal leadership style because each organization faces unique circumstances internally and externally. In contingency theory, productivity is a function of a manager’s ability to adapt to environmental changes. Managerial authority is especially important for highly volatile industries. This allows managers the freedom to make decisions based on current situations. The contingency theory reveals situations that require more intense focus and takes account of unique circumstances.
Systems theorists believe all organizational components are interrelated. Changes in one component may affect all other components, according to StatPac. Systems theory views organizations as open systems in a state of dynamic equilibrium, which are continually changing and adapting to environment and circumstance. Nonlinear relationships between organizational components create a complex understanding of organizations in systems theory.
Organizational structure became an important aspect of organizational theory due to the increasing complexities of multinational organizations and the need to more quickly and efficiently reach the market. Project-focused structures enable a greater responsiveness to market demands than purely functional or bureaucratic structures. Projectized organizational structures focus on the project manager or project management office for information and activities related to business projects. The matrix organizational structure features vertical hierarchies of functional departments that facilitate projects along a horizontal axis. The continual exchange of information and energy characterizes the relationship between organizational structure and environment.