Chapter Two

Organization Theory and Approach

Evolution of Organization Theory

Period 1 : Period 2 : Pre Scientific Management (1880) Classical Management (1880-1930) Classical Organizational Theory

Scientific Management Theory

Period 3 :

Behavioral Management (1930-1950)

System Aproach

Management Science

Contingency Management (1950 to present)

Evolution of Organization Theory

Pre Scientific Management
The model for organization Roman Empire The Feudal System

Evolution of Organization Theory

Scientific Management Theory
Frederick W. Tailor (1856-1915) :Efficiency is Everything.
All job can be observed and analyzed The best person for the job can be trained. One best way is followed by training people and paying them on an incentive basis Put manager in charge of planning, preparing and inspecting work. The worker simply carries out the manager direction.
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Evolution of Organization Theory

Scientific Management Theory
Frederick W. Tailor (1856-1915)
Tailor put the right person on the job with the correct tools and equipment, follow instruction exactly, and motivated the worker with an economic incentive Tailor achieved consistent productivity improvement in the range of 200 percent or more.

Evolution of Organization Theory

Classical Organizational Theory
Henry Fayol (1841-1925)
Proposed fourteen principles of management :
Division of work Specilaization increases output productivity by making employees more efficient Authority Managers must be able to give orders and authority gives them this right Disciplin Employees must obey and respect the rules that govern the organization.

Evolution of Organization Theory

Classical Organizational Theory
Henry Fayol (1841-1925)
Proposed fourteen principles of management :
Unity of command Every employee should receive orders from only one superior Unity of direction The organization should have a single plan of action to guide managers and workers Subordination of individual interests to the general interest The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole
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Evolution of Organization Theory

Classical Organizational Theory
Henry Fayol (1841-1925)
Proposed fourteen principles of management :
Remuneration Workers must be paid a fair wage for their service Centralization This term refers to the degree to which subordinates are involved in decision making Scalar chain The line of authority from top mangement to the lowest ranks is scalar chain.
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Evolution of Organization Theory

Classical Organizational Theory
Henry Fayol (1841-1925)
Proposed fourteen principles of management :
Order People and materials should be in the right place at the right time Equity Managers should be kind and fair to their subordinates Stability of tenure of personnel Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies (kekosongan).

Evolution of Organization Theory

Classical Organizational Theory
Henry Fayol (1841-1925)
Proposed fourteen principles of management :
Initiative Employees who are allowed to originate and carry out plans will exert (use) high levels of effort Esprit de corps (semangant korps) Promoting team spirit will build harmony and unity within the organization

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Evolution of Organization Theory

Behavioural Management Theory
Elton Mayo (1880-1949)
His research showed that when special attention is given to workers by management, productivity is likely to increase or The positive treatment of employees improved their motivation and productivity (Hawthorne effect)

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Evolution of Organization Theory

Behavioural Management Theory
Douglas McGregor (1901-1964)
Theory X
Most people must be controlled, directed and threatened with punishment to get them to do an adequate job.

Theory Y
People are motivated best by satisfying their higher order needs for achievement.

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Evolution of Organization Theory

Management Science
Management science or operation research It is an approach often used for problem solving Mathematical models and computers are frequently used in the analysis of the problem

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Evolution of Organization Theory

Systems approach
Is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. Two basic types of systems :
Closed systems : are influenced by and do not interact with their environment Open systems : are influenced by and do interact with their environment

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Evolution of Organization Theory

An example of systems approach
The marketing department better anticipate change in customer tastes The marketing department work with the product development department n creating products customer want. Always attention to external environment
Government regulation Supplier relations, etc
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Figure Changing Consumer Needs

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An Open System
Environment
Raw Materials People Information resources Financial resources
Transformation

Input
Process
Boundary Spanning

Output

Products and Services

Boundary Spanning

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Evolution of Organization Theory

Contingency Management Theory
Attempts to integrate various existing management theories in order to find the best approach for a particular situation
Manager Sub ordinate Task Organization Environment Timing

Situation

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Evolution of Organization Theory

Contingency Management Theory
Contingency approach says that organizations are different, face different situations, and require different ways of managing Organization should design its structure to fit its environment.

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Contingency approach (If-then)

Sukanto Reksohadiprodjo (1988:108)
Jika nilai-nilai sosial yang dianut para karyawan tidak materialistik, mereka merupakan karyawan profesional dalam operasi berteknologi tinggi, maka gaya kepemimpinan partisipatif dan terbuka paling efektif untuk pencapaian tujuan. Sebaliknya, jika nilai-nilai sosial yang dianut adalah materialistik dan para karyawan organisasi merupakan personalia yang berketrampilan rendah dan melaksanakan pekerjaan-pekerjaan rutin, maka gaya kepemimpinan otokratis dan ketat adalah paling efektif
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Fit Between the Organization and Its Environment

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An Organizations Environment
(a) Competitors, industry size and competitiveness, related issues (b) Suppliers, manufacturers, real estate, services (i) (c) Labor market, Sociocultural Sector employment agencies, universities, training schools, employees (h) in other companies, Government unionization Sector (d) Stock markets, banks, savings and (g) loans, private Economic Conditions investors Sector (e) Customers, clients, potential users of products and services (f) Techniques of production, science, computers, information technology (g) Recession, unemployment rate, inflation rate, rate of investment, (j) (a) economics, growth International Industry (h) City, state, federal laws Sector Sector and regulations, taxes, (b) services, court system, DOMAIN Raw Materials political processes Sector (i) Age, values, beliefs, education, religion, (c) work ethic, consumer Human Resources and green ORGANIZATION Sector movements (j) Competition from (d) Financial and acquisition by Resources foreign firms, Sector entry into overseas (e) (f) Market markets, foreign Technology Sector Sector customs, regulations, exchange rates
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The Competitive Environment

Kinds of Markets

Competitor Analysis Key Concepts in the Competitive Environment

Competitive Rivals

Competitive Barriers

Information on Competitors
4-6
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The Economic Environment

Global Economy Rapid Change

Key Economic Forces

Interest Rates
4-7
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The Cultural and Social Environment

Time Poverty

Economic Power

Career Opportunity

Cultural Trend: The Changing Roles of Women

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4-11

Framework for Assessing Environmental Uncertainty

Simple + Stable = Low Uncertainty 1. Small number of external elements and elements are similar 2. Elements remain the same of change slowly Examples: soft drink bottlers, beer distributors, container manufacturers, food processors Simple + Unstable = High-Moderate Uncertainty 1. Small number of external elements and elements are similar 2. Elements change frequently and unpredictably Examples: E-commerce, fashion clothing, music industry, toy manufacturers Complex + Stable = Low-Moderate Uncertainty 1. Large number of external elements and elements are dissimilar 2. Elements remain the same or change slowly Examples: Universities and insurance

STABLE

ENVIRONMENTAL CHANGE

UNSTABLE

Complex + Unstable = High Uncertainty 1. Large number of external elements and elements are dissimilar 2. Elements change frequently and unpredictably Examples: Computer firms, aerospace firms, telecommunications, airlines

SIMPLE

ENVIRONMENTAL COMPLEXITY

COMPLEX
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Organazational Theory and Organizational Behaviour

Organizational Theory Is a macro examination of organization because it analyzes the whole organization as a unit Is concerned with people agregated into departments and organizations and with difference structure and behavior at the organization level of analysis Organizational Behavior Is the micro approach to organizations because it focused on the individuals within organizations as the relevant unit of analysis Examines concept such as motivation, leadership style, and personality and is concerned with cognitive and emotional differences among people with in organization

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