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Historical Perspectives on Organizational Theory

Organizational theorists attempt to provide people with ways to understand, predict, and influence behavior in organizations by adapting flexible frameworks that can explain dynamic organizations in dynamic environments.

For as long as we have been around, humans have organized to survive, accomplish goals, build societies, and win battles. Even though organizations played an increasingly definitive role in human activity as history advanced, organizational theory did not emerge as a field of inquiry until the mid twentieth century. Since then a confusing array of disparate perspectives have emerged to compete for attention in a fractious field. Some of these competing views seem to prove partially valid in some situations, but most have failed to meet the demands of empirical analysis and increasingly dynamic environments (David & Marquis, 2005). Today, organizational theorists attempt to provide people with ways to understand, predict, and influence behavior in organizations (McShane & Von Glinow, 2005) by adapting flexible frameworks that can explain dynamic organizations in dynamic environments. This article will explore the historical foundations of organizational theory, highlighting the various perspectives and central debates that have guided the field, summarizing integrative approaches to these perspectives, and reviewing emerging trends that may influence the field.

Ancient history

The field of organizational studies emerged in the 1940s  (Scott & Davis, 2007), but has roots that likely span human existence. Anthropologists and archeologists explore evidence of human organizing activity that pre-dates recorded history. Prehistoric clans built stone and dirt monoliths, like Stonehenge and the Mississippi mounds. In 3500 B.C., the Egyptians were organizing the actions of many people to build cities and societies. Workers organized guilds in ancient Egypt, Greece, and Rome. Chinese factories developed the capacity to produce 125,000 tons of iron a year  (McShane & Von Glinow, 2005). Around 500 B.C., Sun Tzu provided directives for organizing to conquer and control populations; Sun Tzu’s treatise emphasized that humans had always organized to wage battles (Giles, 1910). In the third century, B.C., Plato wrote about leadership, while Aristotle wrote about persuasive communication. In the 16th century, Nicolò Machiavelli (1505) disclosed how a prince can control his realm. In the late eighteenth century, Adam Smith advocated organizing by divisions of labor. In the 18th century, Karl Marx proposed a worker’s paradise to revolutionize the increasing industrialization of western society, inadvertently creating an organizational system that governments would use to oppress populations, and a “critical radical humanism” that capitalists would use to encourage competition, efficiency, and innovation in workers (Aktouf, 1992). Meanwhile, Max Weber wrote about bureaucratic organizations and leadership. Shortly after, Taylor focused on motivating employees with goal setting and rewards  (Kreitner & Kinicki, 2007).

Classical foundations

Even with the long history or organizing, organizations were not conducive to scientific theorizing because the abstractness of organizations prevents scientists from analyzing organizations in a laboratory. Sociology provided a solution for this constraint by providing a macro-level perspective that turned the organization into a laboratory to explore how humans work interdependently to accomplish common purposes (Jex, 2002, p. 373). Scott and Davis (2007) credit the birth of organizational studies to the 1946 publication of Max Weber’s treatise on rational organizations and authority. Robert K. Merton built on Weber’s essays on sociology by compiling research on organizations to build a framework for a new field. Meanwhile, Herbert Simon gathered a group of political scientists, economists, engineers, and psychologists to build “a behaviorally oriented science of administration” that emphasized “decision making and choice within organizations” (Scott & Davis, 2007, p. 9). The patron saints of organizational studies became Machiavelli, Saint-Simon, Marx, Weber, Taylor, Barnard, Mayo, Fallet, and the Gilbreths (Scott & Davis, 2007).

Perspectives

Forced to apply indirect methods of study, theorists adapted metaphors to understand organizations. Common metaphors compare organizations to machines, biological organisms, and social structures (Jex, 2002).

Organizations as machines

As a machine, an organization coordinates its parts (people and processes) to transform inputs from the environment into outputs to the environment. To make sure the components of the machine perform properly, the organization must design jobs and process, select and motivate people, and appraise and change people to maximize the productive capabilities of the organization.

Organizations as organisms

As a biological organism, an organization constantly interacts with and adapts to an environment in order to survive. The organization consists of subsystems that must work together for optimum functionality. To assure survival the organization continuously attempts to understand and influence the external environment, while aligning its internal subsystems to meet the demands of the external environment.

Organizations as social structures

As a social structure, an organization consists of complex relationships among individuals and groups interacting within the processes and structure of an organization to pursue goals (Scott & Davis, 2007; Jex, 2002). Through the social structure perspective, the participants must maintain the organization by defining objectives, developing membership, inducing members to contribute, coordinating contributions, gathering resources, dispensing produces or services, and accommodating stakeholders (Scott & Davis, 2007).

Definitions

To better understand the concept of organizations, Scott and Davis (2007) offer three definitions from competing perspectives, rational systems theory, natural systems theory, and open systems theory.

Rational systems theory

Rational systems theories define organizations as “collectivities oriented to the pursuit of relatively specific goals and exhibiting relatively highly formalized social structures” (p. 29). In other words, the rational systems perspective views organizations as formal collectives built to pursue specific goals. The dominant perspective in the field, the rational systems perspective guides most organizational scholars and is embraced by real-world organizational managers (Scott & Davis, 2007).

Key classical theorists under the rational systems perspective include the following: Weber proposed a theory of an ideal bureaucracy that developed efficient operations while effectively using talent (Jex, 2002). Taylor used empirical research to determine the most efficient way to complete tasks and introduced scientific management, which broke down organizations into highly specialized departments, using a hierarchy by status and function. Fayol’s administrative theory defined functions of management—planning, organizing, commanding, coordination, and controlling—and proposed a set of general principles of organizing for managers. Simon proposed a theory of administrative behavior, arguing that “people engage in bounded rationality because they process limited and imperfect information and rarely select the best choice” (McShane & Von Glinow, 2005, p. 240).

Leaders of the Human Relations movement, like Douglas McGregor and Rensis Likert, criticized the rational systems perspective as dehumanizing. Emphasizing order and control, the rational perspective assumed employees must be prodded to work, and that they lack the creativity and initiative to define their own roles (Jex, 2002, p. 378)

Natural systems theory

The natural systems definition states that “organizations are collectivities whose participants are pursuing multiple interests, both disparate and common, but who recognize the value of perpetuating the organization as an important resource” (Scott & Davis, 2007, p. 30). In other words, organizations are social systems that seek to survive.

While natural systems theorists acknowledge the formal rules, roles, and goals of an organization, they assert these serve as a front that conceals the informal and interpersonal structures that explain and predict human behavior in an organization. Organizations share common attributes with all collectives and are subject to the forces that affect such social systems. Scott and Davis (2007) identify two competing perspectives of natural systems theory: social consensus and social conflict. Durkheim, Parsons, Barnard, and Mayo were each influential in developing the social consensus version of the natural systems perspective, proposing that “cooperative behaviors and shared norms and values” drive social order and organizational stability (p. 30). Marx, Coser, Gouldner, Bendix, and Collins originated the social conflict version of natural systems theory, proposing that social order results not from consensus but from force when a powerful group dominates or exploits a weaker group (Scott & Davis, 2007).

Open systems theory

The open systems definition states that “organizations are collectivities of interdependent flows and activities linking shifting coalitions of participants embedded in wider material-resource and institutional environments” (Scott & Davis, 2007, p. 30). In other words, organizations are activities that involve groups of individuals with varying interests working together in an environment.

Where rational and natural systems theories tend to view organizations as closed systems that are separate from their environments, open systems theory recognizes that the organization exists in an environment, which continually shapes, supports, and infiltrates the organization. McShane and VonGlinow (2005) say that organizations are open systems because they take resources from the environment and transform those resources into outputs that the organization returns to the environment in the form of finished goods. In this perspective, the organization’s survival depends on the ability of its people to adapt to the environment. However, the complex and variable nature of an organization makes it difficult to coordinate and control the organization and its parts. Open systems theorists recognize that individual participants “have multiple loyalties and identities” and may not share commitments to organizational survival. Rather than formal or informal structures, the open systems perspective sees an organization as “interdependent activities” that must be constantly motivated for the organization to survive (Scott & Davis, 2007, p. 31)

Key open systems theorists include: Boundling, who offered a system for classifying organizations by their level of complexity; Lawrence and Lorsch, who coined “contingency theory”, arguing that different situations place different requirements on organizations, and; Weick, who proposed that individuals organize to reduce personal uncertainty.

Integrative perspectives

While rational, natural, and open systems perspectives may seem mutually exclusive, each provides accurate insights into how organizations work. Scott and Davis (2007) say that the rational and natural perspectives have been “combined with open systems approaches in multiple ways to create a wide variety of new theories varying in emphasis and in level of analysis” (p. 107). For example, in their contingency model, Lawrence and Lorsch argue that the environment will determine the form of the organization. The more stable the environment, the more the organization will take a rational or mechanical form. As an environment becomes increasingly dynamic, an organization must adapt by taking on an organic or natural form. In other words, Lawrence and Lorsch view the open systems perspective as a framework that houses the rational and natural systems (Scott & Davis, 2007).

Thompson argued that the rational, natural, and open systems perspectives are not only all correct, but can also exist at different levels within the organization, as follows: the technical level takes a rational system perspective; the managerial level takes a natural perspective, and; the executive level takes an open systems perspective (Scott & Davis, 2007).

Challenges

Reed (1996)argues that disparate perspectives in organizational theory have created a field that is fragmented, discontinuous, and struggling for acceptance. Further, whether mutually exclusive or integrated, most organizational theories do not stand up to empirical analysis (David & Marquis, 2005). David and Marquis argue that the dynamic nature of evolving markets requires organizations to adapt constantly, making it virtually impossible to predict and control organizational outcomes. David and Marquis propose that organizational theorists shift from a theory-driven focus on organizations to a problem-driven focus on institutions. By focusing on institutions, theorists can provide a framework that more rapidly adapts to the dynamic context in which organizations operate.

From a more practical perspective, after spending 10 years examining more than 200 management practices in 160 organizations, Harvard researchers Nohria, Joyce, and Roberson  (2003)concluded that most management practices have “no direct causal relationship” to superior performance in organizations. The key to superior performance was simply “having a strong grasp” on organizational basics. Nohria, et al. identified the primary practices of superior organizations as strategy, structure, culture, and execution. The secondary practices for superior organizational performance are talent, leadership, innovation, and mergers and partnerships. Using profitability as a key measurement of performance, Nohria et al. found that organizations that mastered all four primary practices plus two of the secondary practices produced results that were four to ten times higher than organizations that did not (pp. 42-52).

Conclusion

This paper explored the historical foundations of organizational studies, finding that organizations have significantly influenced the development of human history by providing people a means to coordinate activities toward achieving a purpose. Formalized as a field of scientific inquiry in the mid-twentieth century, organizational theory has become a fractious field that views organizations through divergent lenses, the main perspectives being rational, natural, and open systems theories. No one theory has proven to be correct; in fact, few organizational theories have stood up to empirical analysis and the dynamic nature of organizations in their environments. In other words, scientists can explore and explain what has already occurred in an organization, but no theory seems to predict the correct course for any organization. However, both disparate theories and integrative perspectives have provided a better understanding of the nature of organizations, and research has provided sound practices for effectively managing organizations. Emerging from a period of “remarkable growth” (Scott & Davis, 2007, p. 390) in its field and of its subject, the field of organizational studies has provided an opportunity to build understanding about how organizations dynamically interact with individuals, groups, and processes within an environment.


Works Cited

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Giles, L. (1910). Sun Tzu on the art of war: The oldest military treatise in the world. Retrieved December 2, 2007, from Chinapage.com: http://www.chinapage.com/sunzi-e.html

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Machiavelli, N. (1505). The Prince, Translated by W. K. Marriott (1908). Retrieved December 2, 2007, from The Constitution Society: http://www.constitution.org/mac/prince00.htm

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Nohria, N., Joyce, W., & Roberson, B. (2003). What really works: Must-have management practices that produce superior results. Harvard Business Review , 42-52.

Reed, M. (1996). Organizational theorizing: A historically contested terrain. Handbook of Organizational Studies , 31-56.

Scott, W. R., & Davis, G. F. (2007). Organizations and organizing: Rational, natural, and open system perspectives. New Jersey: Pearson Prentice Hall.