Organization theory – definition and meaning

Organization Theory or Organizational Theory looks at the relationships between organizations and their environment. It also examines the effects of those relationships on how organizations function. It is the study of organizational structures and designs, as well as the behavior of technocrats and managers in organizations. Organization theory also suggests how organizations might be able to cope with rapid change.

Put simply; Organization Theory is everything related to organizations. In organization theory, the aim is to understand organizations and improve them.

There are several different organization theories, including Division of Labor, Bureaucratic Theory, and Rational System Perspective. Contingent Theory is also an organization theory.

According to SmallBusiness.Chron.com:

“Organizational theories all address several main questions about how a company works. They assume an organization has structure, goals, and members but focus on the efficiency of the organizations.”

We can use the theories that match an organization’s goals, its personnel, as well as its business environment.

Classical Organization Theory

Classical Organization Theory emerged at the end of the 19th century. It emerged in the private sector and also in the need for better public administration in the public sector.

Both efforts centered on efficiency theories. Efficiency is all about getting the most out of the resources that are available.

Organization Theory - explanation of meaning and what it examines
Organization theory is all about examining organizations and making them better.

Max Weber (1864-1920) profoundly influenced social theory and social research during the first quarter of the 20th century. Weber was a German philosopher, jurist, sociologist, and political economist.

In fact, many say Weber was one of the founders of sociology, alongside Karl Marx and Émile Durkheim.

Classical Theory represents the merger of Administrative Theory, Bureaucratic Theory, and Scientific Management Theory.

Frederick Taylor (1856-1959) developed scientific management theory at the beginning of the 20th century. In fact, many people refer to it as ‘Taylorism.’

Taylor’s theory had four principles:

1. Find the best way to do something. In other words, the best way to carry out each task.

2. Match each employee to each task carefully.

3. Supervise the workers closely. You should use punishment and reward as motivators.

4. Management’s task is planning and control.

Taylor was an American mechanical engineer who sought ways to improve industrial efficiency. He was one of the world’s first management consultants.

Initially, Classical Theory was extremely popular. However, over time, a growing number of critics complained that it was too authoritative and rigid.

Put simply; Classical Organizational Theory focused too much on structure and economic rewards. It also ignored individual freedom and the working environment, critics argued.

Rational System Perspective

Th Rational System describes organizations with set goals and formal rules. It concentrates on the normative structure of organizations. ‘Normative’ means relating to an evaluative standard, i.e., if something is normative we can evaluate it.

In an article in the Case Studies Journal, Dr. Sirajul Haque wrote that according to the rational system perspective:

“Organizations are collectives oriented to the pursuit of relatively specific goals and exhibiting high formalized social structures.”

Division of Labor

The Division of Labor is an Organization Theory. It involves the separation of tasks so that people can specialize.  In fact, not only people specialize, but also groups, companies, and much larger entities.

People, organizations, and even whole countries are either naturally specialized or acquire specialized capabilities.

An organization may have equipment that allows it to specialize. A country, on the other hand, might have natural resources as well as skills and training.

The division of labor is the main reason for trade between nations. It is, in fact, the source of economic interdependence.