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P A R T

Business organisationsI

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C H A P T E R

Organisations andorganisational theories

1

Learning objectives

After studying this chapter, students should be able to describe:

■ what an organisation is;■ the ways in which organisational theories differ;■ the organisational and management ideas of the classical

thinkers;■ the development and principles of scientific management;■ the concept of bureaucracy;■ the human relations’ theories and the work of Elton Mayo;■ the essentials of systems thinking as it pertains to organisations;■ what is meant by contingency theory and how it relates to

organisations.

1.1 What is an organisation?

The origins of organisations can be traced back to ancient civilisationswhere various groupings of individuals, such as armies and civic admin-istrations, were designed as social structures that would facilitate col-laborative activities to achieve the desired goals.

The industrial revolution in the nineteenth century triggered rapideconomic and manufacturing growth, with emerging businesses radic-ally altering the pattern of working life from individual or family runcottage industries. New methods of running businesses were required


4 Business organisations Part I

and, although all organisations can exhibit similar characteristics, theevolutionary path for individual businesses is determined by such fac-tors as size, diversity, ownership, nature of the business and the com-plexity of the business environment.

Talcott Parsons (1960)1 described the development of organisationsas the principal mechanism by which things get done in a highly dif-ferentiated society and that goals can be achieved that are beyond thereach of individuals.

In studying the nature and functions of organisations, it is worthstarting with a working definition and Buchanan and Huczynski (2003)2

suggested the following:

‘Organisations are social arrangements for the controlled performanceof collective goals.’2

This definition, concise though it is, shows us the two most importantfeatures of organisations: they are social arrangements and they exist toperform. We can say the following general things about the organisations:

■ They all contain people (although it may be argued that some nat-ural groupings of animals in the wild may also be organisations).

■ The people in the organisation perform a role and their con-tinued membership of the organisation is dependent uponsuch performance.

■ The organisation has a collective goal to which all members subscribe.

■ All of the roles, taken together, help the organisation achieveits collective goal.

■ Different tasks according to their expertise, interest or specialism.

■ There is a clearly defined hierarchy of authority so that each mem-ber of the organisation is aware of where he or she ‘fits in’.

■ The limits or borders of an organisation are usually clearly defined.This means that there is usually no doubt whether a particularperson is ‘inside’ or ‘outside’ of the organisation.

Question 1.1According to the definition discussed above, decide whether the following collectivesare organisations or not:

■ The United Nations■ Chartered Management Institute


1.2 Why do organisations exist?

Why is it that people form themselves into organisations in order to carryout business activities? Why do they not simply act alone to fulfil their indi-vidual objectives? The answer is that the format of an organisation offersmany advantages over the other option which is many people acting alone.

Firstly, organisations facilitate synergy. Synergy refers to the benefits thatcan be gained when people work together rather than apart. Somethingcan be said to be synergistic when the whole is greater than the sum of theparts. More popularly, synergy can be expressed as ‘2 � 2 � 5’. On a sim-ple level, two people together lifting heavy logs onto a lorry can achievefar more work than two people lifting logs separately. A rally team oftwo enables the team to win a race if they work together with one driv-ing and one navigating. If the two were to work separately, then eachperson would have to drive and navigate at the same time.

Secondly, organisations facilitate the division of labour. Our two work-ers lifting logs are both performing the same task, but the rally team isdivided into two separate but complementary jobs – a division of labour.It is quite possible, and may be even preferable, for the navigator to noteven hold a driving licence, but if he or she is a good mapreader, therally team is greatly strengthened. Similarly, the driver does not needto know how to read maps, provided he or she can take instructionsfrom the navigator and drive well. The two specialists working togetherdo not only produce synergy, but they also enable a task to be accom-plished that neither member could accomplish alone.

Thirdly, adopting the format of an organisation enables increasedperformance owing to the establishment of formal systems of responsibilityand authority. When such systems are implemented, they enable all mem-bers to fully understand how roles are divided, and to accept and respectboth responsibility and authority. They facilitate synergy and an effectivedivision of labour by co-ordinating activities so that individuals act inconcert to the overall benefit of the organisation.

Chapter 1 Organisations and organisational theories 5

■ Robbie Williams Fan Club■ IBM Ltd■ Caledonian Business School■ Royal Navy■ Nationwide Building Society■ National Union of Students■ A school of whales.



1.3 An overview of organisational theories

Now that we have come to broad understanding of what an organisa-tion is, we turn to a discussion of the various theories that have beenput forward to analyse organisations and explain how and why organ-isations ‘work’.

We can all readily appreciate that organisations differ. Some are bigand ‘bureaucratic’ whilst others are small, ‘lean and mean’. Furthermore,the way that organisations are managed also varies widely. Some man-agement styles are highly regimented within formal structures whilstothers are laissez faire and ‘laid back’.

These differences have led to a diversity of individuals’ experience atwork. Academics have sought to help explain the reasons for these dif-ferences in management style and how organisations work, through theuse of organisational theories. It is impossible to say that ‘good man-agement is …’ or that ‘an organisation should be managed in this way’.It all depends upon the context of the organisation, its purpose and thetype of people that work in it. Over the course of the past century, aca-demics have evolved theories which aid our understanding and henceour ability to explain, how organisations ‘work’.

The theories can be grouped under four broad convenient headings.They are presented in chronological order and we will examine eachin turn:

■ classical theories,■ human relations’ theories,■ systems theories,■ contingency theories.

1.4 Classical theories

Definition

We use the word classical in various ways during normal conversation. For example, it can be used to describe the study of ancient Greek orRoman culture or to denote widely acknowledged works of lasting sig-nificance and excellence, such as music by Beethoven or paintings by Van Gogh.

The principles that underpin classical scholarly activities wereadopted by the earliest theorists of management in organisations at thestart of the twentieth century and their influence continues to the


present day. The classical management thinkers emphasised the pur-pose of organisations and viewed them as formal structures throughwhich a hierarchy of management could achieve organisational goalsand objectives. They believed that effective management could be dis-tilled down into rules, guidelines or principles, which, within limits,would be transferable to all managerial contexts.

Broadly speaking, classical theorists focused on an organisation’soutput and productivity rather than the individuals in the organisation.Thus, many were concerned with the methods by which the humanresources could deliver the greatest output at least cost.

An underlying assumption of classical theories is that the humanbeing, as a social and working being is relatively predictable in his or herresponses to given situations. This assumption of predictability underliesthe work of all of the classical theorists. Put simply, it states that if a cer-tain managerial style or set of conditions is applied to the working envi-ronment, then individuals will respond in a predictable way. The theorieswe consider later in this chapter make the assumption that man is some-what a more complex being than the classical thinkers realised.

‘Classical’ as a title, conceals a broad range of theories. Within this cat-egory, there are many important thinkers who have advanced differingtechniques and philosophies for managing organisations. We will exam-ine the contributions of the most important thinkers, dividing our dis-cussion into three categories: the work of Henri Fayol, the ScientificManagement school and the concept of the Bureaucratic organisation.

Henri Fayol

Fayol (1841–1925) was a French industrialist who spent his entire work-ing life with a coal mining company. His main contribution to organ-isational theory was his attempt to break down the management jobinto its component parts. He defined management as follows:

‘To manage is to forecast and plan, to organise, to command, to co-ordinate and to control.’

His work is best remembered for his ‘six activities’ and his ‘fourteen prin-ciples’ (Table 1.1). He developed these from his own experiences as amanager and he worked them out in his own working life, with benefi-cial effects.




Fayol’s ‘six activities’ are those he considered to be the principalareas of concern to an organisation:

■ technical activities,■ commercial activities,■ financial activities,■ security activities,■ accounting activities,■ managerial and administrative activities.

The tribute to the influence of Fayol’s work is that his activitiesroughly describe the duties of the modern board of directors. We woulduse different names today, but the tasks are essentially as Fayol described.

Table 1.1Fayol’s fourteen principles of management

Principle Meaning

Division of work One man, one job; specialise work

Authority Manager must be able to give orders and be sure they will be carried out

Discipline Respect and order throughout the workplace

Unity of command Remove confusion by having one employee report to only one boss

Unity of direction One boss is responsible for the planning and direction

Subordination of individual Employees should be prepared to put the interests to the general company firstgood of the company

Fair pay Pay should be fair to the employee and acceptable to the organisation

Centralisation Management authority and responsibility ultimately rests with the centre

Scalar chain The observance of an orderly hierarchy line of authority from bottom to the top

Order Housekeeping, tidiness, order in the work environment

Equity Fairness and a sense of justice

Stability of tenure As far as possible, provide job security

Initiative Staff should be encouraged to show initiative

Esprit de corps Encourage and develop teams and a friendly working environment


Fayol established ‘fourteen principles’ that, in his opinion, providedthe elements of good organisational management. He himself appliedthem and found them to work.

Again, when we consider the list, we will see that many of them arestill considered today to form the basis of good management practice.Fayol’s ‘general tenets of management’ can be summarised as follows:

■ specialisation promotes efficiency,■ low employee turnover promotes efficiency,■ good morale increases productivity,■ employees should be treated equitably,■ unified goals � co-ordinated efforts,■ authority carries responsibility.


Question 1.2Find out the composition of a typical board of executive directors in a modern company.You will probably arrive at five or six ‘job titles’. To start you off, one of them will prob-ably be the marketing director.

Scientific management

Scientific management is so called, not because it is used for managingscientific activities, but rather that it assumes a scientific model of manworking in organisations. If quantitative methods are employed to aidmanagement processes, then, it is argued, efficiency gains can be made.For a given work input, more output can be gained when work is organ-ised using measurement, feedback and refinement.

Among the earliest records of attempts to timework and establishstandard times for production are the attempts of a Frenchman calledJean Radolphe Perronet who studied the manufacture of pins to improveefficiency of their manufacture. By the start of the twentieth century,with the industrial revolution in full swing, we can see the impact ofRobert Owen’s work on layout and method at the New Lanark Millsrunning in concert with his pioneering work on social and welfare con-ditions for employees. He is credited with being the first to recognisethat fatigue and the working environment could have adverse affects onworkers’ productivity. By raising the living standards of his workers, viahousing, medical care and schooling for children, he was able to attractand retain better employees than his competitors.



We can now look at the pioneering contributors to the school of sci-entific management: Frederick Winslow Taylor, Frank and Lilian Gilbreth,Henry Gantt and Charles Bedaux.

Frederick Winslow Taylor

Frederick Winslow Taylor (1856–1917) was one of the earliest of all theorganisational management theorists. He worked for the BethlehemSteel Company in the USA, and it was here that he developed his the-ories of scientific management. In 1909, he published his Principles ofScientific Management – a treatise on this subject arising from his ownexperience as an industrialist and the outcomes of his early research.He was the first to propound the idea of applying quantitative methodsto management problems. This evolved into ‘work study’ – the analysis ofwork methods and the rate of work. His theories were quite revolution-ary in a day when it was believed that increased productivity arose fromsimply taking on more people and making them work harder.

Taylor introduced the idea of comparing employee performanceagainst a standard. This involved finding the optimum way for a givenjob to be done and determining the expected ‘standard’ times forelements of the job. He also emphasised the need to ensure that theworkplace ergonomics (i.e. the man–machine interface, layout andlighting) were best suited for the tasks to be performed. The term ‘timestudy’ can be attributed to him as observations of worker performancewere made with the use of a stopwatch, measure actual performanceagainst the expected standard. In this way rewards or punishment wouldbe determined by management via a system known as ‘piece-rates’ – in crude terms the more produced by workers, the more earned or vice versa.

In one notable piece of research, Taylor demonstrated his principlesby showing the relationship between work output and the size oflabourers’ shovels. In a study at the Bethlehem Steel plant in the USA,it is reported that he used a man who was reputed to be a good workerand who placed a high value on monetary reward. The initial size ofshovel was capable of carrying an average load of 38 pounds and thisresulted in the labourer shifting 25 tonnes of pig iron in a day. When asmaller shovel size was used, the daily load rose to 30 tonnes. A 25pounds shovel produced even higher daily loads. The worker, in add-ition enjoying the praise of his observers, was also promised extra-financial reward as an incentive to move more pig iron per shift. Theend result was that the work that was formerly done by 500 men couldbe achieved by just 140 and labourer’s wages rose by as much as 60%.


The principles of scientific management can be summarised as follows:

■ development of optimum organisation structure via time andmotion study and ergonomic design;

■ development of scientific methods to replace the old ‘rule ofthumb’ practices;

■ scientific selection and training of employees;■ motivation by money.

It should be noted that some criticisms can be made of scientific man-agement techniques and what has been termed ‘Taylorism’:

■ it ignores the psychological needs of workers,■ the subjective side of work is neglected,■ there is an assumption that money is the only motivator,■ adopting a simplistic view of productivity,■ group processes are ignored,■ collective bargaining and trade unions do not have a role.

However, Taylor’s legacy lies in the development of work design, workmeasurement and production control which changed the nature of industrywith the creation of such functions as work study, personnel, maintenanceand quality control.

Frank and Lillian Gilbreth

Frank and Lillian Gilbreth were associates of Taylor but, with experienceof unionised organisations, they demonstrated less enthusiasm for tim-ing jobs and developed laws of human motion from which developedthe principles of motion economy. In Frank’s early career he was interested instandardisation and ‘method study’, and an example of his work stemmedfrom his observations of the variety of methods employed by differentbricklayers on construction sites where he worked. He set about estab-lishing a standard work method with a resultant increase in output from1000 to 2700 bricks per day.

It was Gilbreth who coined the term ‘motion study’ to cover their field ofresearch and as a way of distinguishing from those involved in ‘time study’.

Henry Gantt

Henry Gantt is best remembered for his development of the ‘Ganttchart’. He argued that time could be used more effectively if tasks in anoperation were carefully planned in sequence and resources were appor-tioned accordingly. This would have the advantage of management




having more control over events and it would prevent time ‘leaking’ infruitless or unnecessary jobs. Gantt charts are used today in a wide varietyof planning and control processes.

The Gantt chart is a project planning tool which helps plan the use ofresources within a limited time period. It is constructed with consecutiveactivities plotted in a horizontal direction with time along the x-axis. Itoffers the advantage that the project manager can see at any one timewhat should be going on and which activities will follow on from com-pleted activities. With a simple modification, the chart can be made tohighlight which activities, if any, are critical. Critical activities are thosewhich directly influence the finishing time of the overall project.

Charles Bedaux

Charles Bedaux introduced the concept of ‘rating assessment’ in timingwork. He adhered to Gilbreth’s introduction of a rest allowance toallow recovery from fatigue. Although crude and poorly received atfirst, his range of techniques proved significant in the development ofwork study, particularly that of value analysis.

Production assembly line

Rapid developments in technology, machinery and the improvementof materials in the early twentieth century paved the way for the arrival of‘the moving assembly line’. In particular the internal combustion enginehad been invented, leading to the development of the motorcar.Streamlined production was required to meet demand and the firstassembly line method of manufacture can probably be attributed to Searsand Roebuck in the USA. A famous example of the change to modernassembly line techniques can be found in Henry Ford’s introduction of ‘themoving assembly line’. Before the changes the productivity measure wasthat of a car chassis assembled by one man taking about 13 hours, but 8months later, following the application of standardisation and division oflabour the total labour time had been reduced to 93 minutes per car.

Max Weber

Bureaucracy

The words bureaucracy and bureaucratic have, over recent years, becomeunderstood as being synonymous with ‘red tape’, ‘officialdom’ and the


general impersonality of large and inefficient organisations. Such aconception of bureaucracy, whilst understandable, is a rather cynicaldescription of some of the negative features of this otherwise highlyeffective method of organisational management.

The concept of bureaucracy was first put forward by the German aca-demic and sociologist, Max Weber (1864–1920). His research, which wastranslated into English in 1947, sought to establish the reasons why indi-viduals acted in certain ways in organisations and why they obeyed thosein authority over them. Put simply, Weber found that people obeyedthose in authority over them because of the influence of three types ofauthority:

■ Traditional authority is that which subordinates respond tobecause of their traditions or customs;

■ Charismatic authority occurs when subordinates respond to thepersonal qualities of a charismatic (‘gifted’) leader;

■ Rational–legal authority is authority brought about solely by amanager’s position in an organisation. Implicit in rational–legalauthority is that subordinates obey a superior because the super-ior is in seniority over them in the organisational hierarchy.

Weber, whilst recognising the importance of the first two in someareas of life, was primarily concerned with rational–legal authority in hisstudy of organisations. This form of obedience is the prominent formin modern organisations: Weber termed this bureaucracy. He continuedto argue that the authority structures in bureaucracies could be ahighly efficient organisational form, and that a proliferation of bureau-cracies could result in gains in efficiency for organisations and in thecountry as a whole.


Question 1.3In which contexts might we encounter traditional and charismatic authority?

According to Weber, bureaucracies could be described by certain char-acteristics. Underlying these characteristics were the dual themes ofadministration based on expertise (‘rules of experts’) and administra-tion based on discipline (‘rules of officials’). Laurie Mullins explainsthese characteristics as follows:3

■ Tasks of the organisation are allocated as official duties amongthe various positions.



■ There is an implied clear-cut division of labour and a high levelof specialisation.

■ A hierarchical authority applies to the organisation of officesand positions.

■ Uniformity of decisions and actions is achieved through for-mally established systems of rules and regulations. Together witha structure of authority this enables the co-ordination of vari-ous activities within the organisation.

■ An impersonal orientation is expected from officials in their deal-ings with clients and other officials. This is designed to resultin rational judgements by officials in the performance of theirduties.

■ Employment by the organisation is based on technical qualifi-cations and constitutes a lifelong career for the officials.

The four main features of bureaucracy are summarised as follows:4

■ Specialisation applies primarily to the job rather than the jobholder. The specialisation of roles ‘belongs to’ the organisationso that the specialisation can continue if any given specialistsleave the employment of the organisation.

■ Hierarchy of authority stresses a strict demarcation between man-agement and workers. Within each strata of the organisation,there should be clearly defined levels of authority and seniority.

■ System of rules is intended to engender an efficient and imper-sonal operation in the organisation. The system of rules shouldnormally be stable and continuous, and changes in the rulesshould be in exceptional circumstances only.

■ Impersonality means that the exercise of authority and theextension of privileges should be carried out strictly in accord-ance with the laid down system of rules. No partiality shouldbe given to any individual on personal grounds.

Critics of bureaucracy argue that rigid hierarchical structures and con-trols can stifle initiative and actually reduce effectiveness in the drive forefficiency.

Question 1.4In what ways might bureaucracy be advantageous to an organisation and in what waysmight it be disadvantageous?


1.5 Human relations’ theory

Human relations’ theory

The objectives of the classical and human relations’ theorists are essen-tially the same – to achieve the maximum organisational efficiency. Thedifference can be seen in the modus operandi by which they propose tobring this about. We saw previously that the classical theorists proposeda rational model that assumes a high degree of human predictability.The human relations’ theories proposed that because organisations arecomposed of humans, focusing on human needs and motivation is theway to bring about optimal organisational output.

Central to human relations’ theory is the belief that people are thekey resources of an organisation. Harnessing and cultivating their poten-tial and eliciting their willing contribution are therefore the most effect-ive ways of increasing organisational efficiency.

Critics of the human relations’ theory claim that it tends to promoteemployee satisfaction over organisational goals and encourages a softor paternalistic style of management.

Elton Mayo

The work of Elton Mayo (1880–1949) and his experiments at theHawthorne plant of the Western Electric Company in Chicago are gen-erally thought of as the principal foundations for human relations’ the-ories of management in organisations. Mayo, a Harvard Universityprofessor, was primarily concerned with people’s experience at workand accordingly, his researches at the Hawthorne plant between 1927and 1932 focused on the worker rather than on the work itself (whichis in contrast to the work of Taylor).

The Hawthorne studies centred on the study of individuals and theirsocial relationships at work. Divided into several stages, Mayo and his colleagues varied the conditions under which workers operated andthen studied output to analyse the correlation between the two. Socialarrangements in the workplace were varied – the numbers of peoplewho worked together, their seating arrangements, etc. – and the work out-put was measured as each variable in working condition was changed.

The findings suggested that individuals at work produced a higheroutput when management took into account their social relationships.They found that a feature of people at work is that they form groups. Itseemed that people felt more comfortable in groups and this could beused by the organisation to produce greater productivity.




Hawthorne findings

In summary, the findings of the Hawthorne experiments were as follows:

■ An individual’s identity is strongly associated with his or hergroup. They should be considered less as individuals and moreas members of the group.

■ An individual’s affiliation and sense of belonging to the groupcan be more important to him or her than monetary rewardsand other working conditions.

■ Groups can be formal (set up by the organisation) or informal(chance social groupings). Both can exercise a strong influ-ence over the behaviour of individuals at work.

■ Managers and supervisors would do well to take this groupbehaviour into account when seeking to extract the maximumamount of work from their subordinates.

The lasting influence of Mayo can readily be seen in most of today’sorganisations. Most employees are organised into teams, groups, taskforces, etc. More modern developments have included briefing groups,quality circles and ‘buzz’ groups. Management have, over the interven-ing years, made attempts to influence the norms of groups in order tomake them act in accordance with the general objectives of the organ-isation. When this can be achieved, groups can become ‘self-policing’and when a high degree of cohesion is achieved; a lower level of super-vision will be needed.

Question 1.5Do you know what briefing groups and quality circles are? If not, find out. You shouldfind them in any good quality management or operations management textbook.

One way in which group thinking has been found to enhance outputover recent years is to reconfigure production lines specifically toincrease an individual’s opportunity for social interaction. Figures 1.1and 1.2 show one such example of this. In Figure 1.1, the person sittingat station C on the production line has the opportunity to interactmeaningfully with only two people: the people at stations B and D.When the line is ‘bent round’, however (Figure 1.2), the same personhas his or her potential interactions increased from two people (B andD) to five people (B, D, H, G and F).



Work stations

Flow of work

A B C D E F G H I

Figure 1.1Straight production

line.

Flow of work

A B C D

E

FGHI

Figure 1.2‘Bent’ production

line to facilitatemore socialinteraction.

Input OutputConversion

Figure 1.3An open system.

1.6 Systems theories

Definition

The distinguishing feature of systems’ theories is that whereas classicaltheories see organisations in essentially scientific terms, and humanrelations’ theorists view them in terms of the individuals working inthem, systems theorists contend that the most realistic view is to see anorganisation as a total system. This view, they contend, transcends bothof the former theories and takes into account the more holistic contextboth inside and outside an organisation.

An organisation is an example of what has been termed an open system.An open system is one which must necessarily have a high degree of inter-action with its environment (Figure 1.3). This is in contrast to a closed sys-tem – one in which there is no interaction with the external environment(a diver’s underwater breathing apparatus, e.g. approximates to a closedsystem). An open system of any sort has three stages: inputs, conversionand outputs. All three are essential for the normal workings of the system.



As such the model includes inputs from the environment, the con-version or transformation of inputs to finished goods, and the outputof those finished goods into the environment. This involves an inter-related set of elements functioning as a whole. Interdependent sub-systems, like finance and personnel, work toward synergy in an attemptto accomplish an organisational goal that could not otherwise beaccomplished by a single sub-system.

Organisations and organisms

The organisation as a body

It may aid our understanding of this concept to consider a simple example. The human body is an example of an open system. It requiresseveral essential inputs, such as air, food, heat, shelter and water. Thebody converts these in its normal functioning and then produces itsoutputs, such as energy, work, exhaled air products and excretions. Thebody is utterly dependent upon its environment – it would not take longfor a lack of air to have a profound effect on the body. A further cate-gory of system quickly becomes apparent in this example – that of sub-systems in the body. The reasons why the total system of the body canperform the conversions in question are because it contains a nervoussystem, a renal system, a biochemical respiratory system and many oth-ers. Each of these sub-systems has its own inputs, conversions and out-puts. They are equally interactive with their own respective environments.

It was the analogy between the biological body and the body corporatewhich first gave rise to a systems understanding of organisations. The con-cept that both types of bodies contained a number of interrelated andinterdependent sub-systems was noticed in 1951 by the biologist Ludwigvon Bertalanffy. His General Systems Theory5 was further explored and devel-oped by Miller and Rice, also both biologists, who likened corporate bodiesto biological organisms.6 The complexity of both biological and corpo-rate bodies, and their interrelationships with their environments sug-gested that management of such systems required an understanding thatall parts of the body were essential to normal and productive functioning.

Socio-technical systems

The systems theorists, in the light of their comparing of organisationsto organisms, rejected the simplistic views of the classical and human


relations’ theorists. Classical theories, they argued, emphasised the technical requirements of the organisation and its productivity needs –‘organisations without people’. In contrast, human relations’ theoriesfocused too much on the psychology and interaction of people – ‘peo-ple without organisations’.

In reality, organisations comprise both the technical features of such things as work study (classical theories) and the human inputemphasised by Mayo. Systems theory thus holds that organisations aresocio-technical systems. In a socio-technical system, it cannot be said thatpeople are more important than an organisation’s technology, struc-ture, work methods or any other visible or tangible feature. Both areequally necessary and, importantly, both are subject to influence fromthe organisation’s external environment (in the context of an open sys-tem). A failure of any sub-system in the organisation, be it a human ora technical failure, will harm the normal working of the organisation.

The pursuit of thought in this area led later writers in systems theory(adopting a holistic view of organisations) to devise a list of four key vari-ables which, it was suggested, were the major determinants of output:

■ people and social groups,■ technology,■ organisational structure,■ external environment.

Readers should note that this list includes both ‘social’ and ‘technical’determinants of organisational performance.

Social groups and technology

The relationships between social groups and their employment of tech-nology were also studied by the systems theorists. The implicit suggestionof classical theories is that technology, if properly applied, is the source ofincreased productivity and conversely, the human relations’ theoristswould have said that output is essentially a function of social groupings.

The Tavistock Institute of Human Relations in London, working in the1940s and later, conducted research which showed the difficulties oflinking output to just technology or social arrangements. One of themost important researches in this regard was the ‘long-wall’ study.

Prior to the introduction of mechanisation in British coal mines inthe 1940s, miners worked in small teams in a localised area of the seam.The teams developed a high degree of interpersonal cohesion over theyears. They worked together on shifts – possibly going for hours without




encountering other teams. Members shared out jobs and this resultedin individuals becoming multi-skilled but non-specialised (‘jack of alltrades, master of none’). As the teams worked on only a small part ofthe coalface at any one time, this method of working was termed the‘short-wall’ approach.

When mechanisation was introduced, a change in working practiceswas necessitated wherein:

■ a much longer area of the coal seam could be worked on atany one time (the long-wall method of working);

■ the earlier small teams were disbanded and replaced in a shiftwith a much larger group, all working together on the long wall;

■ shifts became specialised in that, on a three shift system, oneshift would work the face, another would clear up the debrisand move the coal away from the face and the third wouldmove the wall along the seam to an unworked area;

■ shifts, because they involved many more workers together,were supervised.

To the surprise of the pit management, it was found that the introduc-tion of mechanisation and the long-wall methods actually caused areduction in output. Furthermore, conflicts arose within and betweenshifts. Absenteeism increased, morale noticeably decreased and shiftsfrequently blamed others for poor work.

These findings led Trist, et al.7 of the Tavistock Institute to concludethat effective work arose from an interdependence of social conditionsand technology. It involved taking into account the technology used, itslayout, ease of use, etc. and the fact that individuals seemed to producemore work in groups in which they felt comfortable.

The problems at the coalface were eventually overcome when the com-posite long-wall method was introduced. This was an arrangement whichallowed small groups to work together and still make efficient use of thenew technologies of the time. The long-wall study is seen as a vindicationof the socio-technical systems approach taken by systems theorists.

1.7 Contingency theories

Definition

The contingency approach to organisational management had itsroots firmly in the systems theory, and in most respects, the two are


arguably indistinguishable. The essence of the contingency approachis that the manner in which an organisation should be managed dependsupon the wide range of variables which may apply to that organisationat any point in time. We can readily appreciate that the environmentalconditions, the types of technology employed and the level of humanmotivation varies over time, according to organisational context. Thisapproach suggests that it is impossible to prescribe any one type ofmanagement in all internal and external conditions. It rejects an abso-lutist approach to behaviour and management and puts forward, in itsplace, a relativist proposal (we may describe Taylor, Fayol and Mayo asessentially absolutist). The contingency theorists did not reject earlierideas, in fact they recognised the utility of the philosophies, but only incertain circumstances. Scientific management and the human relations’theories each have their place when the environmental conditionswere conducive to their use.

Contingency theory argues that organisational design, managementand control structures should be tailored to fit the needs of individualorganisations. Factors in organisational design will be dependent uponownership, the environment, size, technology and the particular natureof the work.

Burns and Stalker

The study by Burns and Stalker8 centred around 20 British companies inwhat they considered to be five broad environmental conditions, ran-ging from ‘stable’ to ‘least predictable’. Among this sample of organi-sations, they also identified two extremes of management practice inthe organisations: mechanistic and organic practice. It was suggested thatboth of these approaches are equally correct and rational in theirappropriate environmental and organisational circumstances.

Mechanistic management systems are rigid in nature. The study showedthat these work best in organisations that experience stable environ-mental conditions. Mullins contends that

■ the characteristics of mechanistic management are similar tothose of bureaucracy;

■ tasks are specialised;■ clearly defined duties and procedures;■ clear hierarchical structure;■ knowledge and expertise centred at the top of the organisation;



■ clear instructions and decisions from superiors as methods ofcontrol over organisational activity;

■ insistence on loyalty of employees to the organisation and totheir superiors.

Conversely, it was suggested that organic organisations were mostappropriate in changeable environmental conditions. The ‘surprises’inherent to a changeable business environment necessitated a moreflexible and less rigid organisational philosophy than that provided bythe inflexibility of a mechanistic organisation. Organic organisationshave the following characteristics:

■ The importance of special knowledge, skills and experienceto the success of the organisation.

■ A continual redefinition of tasks as the environment changes.■ A network, rather than a hierarchical structure of control and

authority (characterised by an increased importance of cross-functional rather than hierarchical relationships).

■ Superior knowledge is not necessarily related to a person’sauthority in the organisation.

■ Communication is more lateral than up-and-down, reflect-ing an emphasis on information rather than instructions andcommands.

■ A widespread commitment of employees to the overall tasksand goals of the organisation.

■ An emphasis on the contribution of individuals within theorganisation.

Burns and Stalker contended that organic organisations were best suitedto a changeable business environment, which is of course in contrast tothe roles of the mechanistic organisation. It is important to appreciatethat there are shades-of-grey between the two mechanistic and organicextremes, and that which is best depends, or is contingent upon the envir-onmental conditions.

Lawrence and Lorsch

Lawrence and Lorsch, worked from Harvard University in the 1960s.They were concerned with two key variables in organisations: structure(of the organisation) and environment. Their study involved examiningorganisations in relatively unstable, or changeable environments andothers in stable ones. Within these organisations, they sought to see



which managerial practices were different and which were the same inthe two types of environments. They borrowed terms from mathemat-ics to describe differences in management practice.

Differentiation

Differentiation refers to the degree to which management practices,attitudes and behaviour vary (or differ) from manager to managerwithin the organisation. In particular, the differences refer to:

■ the varying orientation to certain organisational goals (e.g. costreduction is felt more keenly by accountants and productionmanagers than sales people and engineers);

■ the varying time perspectives and time orientations (e.g.research and development (R&D) people tend to work onmuch longer time scales than sales and administrative people);

■ the varying degrees of interpersonal orientation (e.g. salespeople tend to be more relationship oriented than produc-tion people);

■ the varying formality of functional department structuresacross the organisation (e.g. production departments tend tohave ‘taller’ and more complex structures when compared tothe relative informality of R&D departments).

Integration

Integration refers to the degree to which management attitudes andpractices are common among managers in an organisation and theextent of collaboration that exists between managers. This is the oppos-ite of differentiation.

Conclusions

The Lawrence and Lorsch study analysed the sample of organisationsfor the degree of integration and differentiation that makes for suc-cessful business performance in the different business environments.They arrived at a number of conclusions:

■ Companies in highly changeable business environments per-form better when there is a high degree of both integrationand differentiation in the organisation.




■ Companies in relatively stable business environments per-form better when there is a lesser degree of differentiationbut a high degree of integration.

■ One drawback of differentiation is that it is harder to resolveconflict in a highly differentiated organisations.

■ Conflict resolution is done better in well-performing com-panies than in their poorly performing competitors.

■ In unstable and uncertain environments, integration is morecommon among mid- and lower levels of management. In morestable environments, the senior levels exhibit more integration.

Again we see that the most appropriate management practices for anorganisation depend upon its environment. Both differentiation andintegration ‘work’ in their respective contexts.

AssignmentChoose one of the following statements and discuss its merits with reference to man-agement and organisational theory:

■ Good management is about whipping subordinates into submission.■ If you want people to work harder, you have to be nice to them.■ Strict rules, lavish rewards and swift punishments are the key to organisational

success.

References

1 Parsons, T. (1960). Structure and Process in Modern Societies. Glencoe, IL:Free Press.

2 Buchanan, D.A. and Huczynski, A.A. (2003). Organisational Behaviour AnIntroductory Text, 5th edn. London: Prentice Hall.

3 Mullins, L.J. (2004). Management and Organisational Behaviour, 7th edn.London: FT Prentice Hall.

4 Stewart, R. (1986). The Reality of Management. Pan Books.5 von Bertalanffy, L. (1951). Problems of general systems theory: a new

approach to the unity of science. Human Biology 23(4): 302–312.6 Miller, E.J. and Rice, A.K. (1967). Systems of Organisation. Tavistock

Publications.7 Trist, E.L., et al. (1963). Organisational Choice. Tavistock Publications.8 Burns, T. and Stalker, G.M. (1966). The Management of Innovation.

Tavistock Publications.


Further reading

Buchanan, D.A. and Huczynski, A.A. (2003). Organisational Behaviour AnIntroductory Text, 5th edn. London: Prentice Hall.

Clegg, S.R., et al. (2004). Managing and Organizations: An Introduction to Theoryand Practice. London: Sage Publications Ltd.

Cole, G.A. (2003). Management Theory and Practice, 6th edn. London:Thomson Learning.

Dawson, S. (1996). Analysing Organisations. Macmillan Press.Dixon, R. (1991). Management Theory and Practice. Oxford: Butterworth

Heinemann.Johns, G. (1996). Organisational Behaviour. Understanding and Managing Life at

Work, 4th edn. Harper Collins.Lawrence, P.R. and Lorsch J.W. (1969). Organisation and Environment. Irwin.Mullins, L.J. (2004). Management and Organisational Behaviour, 7th edn.

London: FT Prentice Hall.Naylor, J. (2004). Management, 2nd edn. Harlow: FT Prentice Hall.Pettinger, R. (1996). An Introduction to Organisational Behaviour. London:

Macmillan Press.Taylor, F.W. (1998). The Principles of Scientific Management. Toronto: General

Publishing Company Ltd.Worthington, I. and Britton, C. (2004). The Business Environment, 4th edn.

Harlow: FT Prentice Hall.



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