Different Theories of Organisation


Meaning of Organisation theory

According to DS. Pugh, “Organisation theory is the study of functioning and performance of organ sations and of the behaviour of groups and individuals working in them.” It is a set of interrelated concepts definitions, and propositions which provide a systematic view of the behaviour of individuals and groups in some relatively patterned sequence of activity.

Organisation theory is predominantly descriptive and predictive in nature. It describes what an organisation is and what will occur under certain types of structural designs. It also describes interactions between an organisation and its environment. It furnishes information about the state of affairs, rather than prescribing what.

Different Theories of Organisation

The different theories of organisation may be divided into four broad categories:

1. Classical organisation theory,
2. Neo-classical or Behavioural theory,
3. Systems organisation theory (Modern organisation Theory) and
4. Contingency theory

Classical Organisation Theory

The classical theory is the beginning of a systematic study of organisations. This theory has dealt mainly with the anatomy of formal organisations. The organisation is viewed as a machine and human beings as different components of that machine. Therefore, efficiency can be increased by making each individual working in organisation efficient. For example, F.W. Taylor stressed upon the division of labour, standardisation of tasks, analysis and measurement of jobs, etc., to make effective use of human beings in industrial organisations. That is why Taylor’s Scientific Management is often called ‘physiological organisation theory’ or ‘machine theory’. Taylor and his associates gave a rigid and static machine model of organisations.

Features of Classical Organisation Theory

Division of labour

Division of work is the pivot around which the classical theory revolves It implies that work must be divided to obtain a clear-cut specialisation with a view to improve the performance of workers. It is based on the assumption that the more a particular job is broken down into its simplest component parts, the more specialised a worker can become in carrying out his part of the job. The more specialised a worker becomes in his particular job, the more efficient the whole organisation will be. Division of work requires identification and differentiation of tasks and their division into sub-tasks.


Division of work is followed by assignment of work to individuals responsible for its performance. This requires grouping of various activities and jobs into departments so as to minimise costs and to facilitate administrative control. This is known as departmentation. Gullick and Urwick have suggested five alternative bases for departmentation: purpose, process, clientele, place and time.


The classical theory pointed out that the division of work should be balanced by unity of control. There should be a single centre of authority and control in the organisation so that various jobs leading to the final product can be coordinated. Each individual in the organisation is related with others and his functions affect other functions. Therefore, orderly arrangement of group effort is necessary to provide unity of action in pursuit of common purpose. There should be harmony among diverse functions.

Neo-classical organisation theory

The neo-classical organisation theory is commonly identified with the human relations movement pioneered by Elton Mayo. The foundations of this theory were laid down by the Hawthorne Experiments conducted by Mayo and his associates. These experiments revealed that informal organisation and socio-psychological factors exercise much greater influence on human behaviour than physiological variables. These findings, focused attention on human beings and their behaviour in organisations. Therefore, Neo-classical theory is popularly known as Behavioural theory of organisation’ or Human relations approach.

Features of Neo-Classical Organisation Theory

  • The organisation, in general, is a social system composed of several interacting parts.
  • Within a formal organisation, there exists an informal organisation. The two affect each other.
  • Human beings are interdependent. Their behaviour can be predicted in terms of social and psychological factors at work.
  • Motivation is a complex process. Many socio-psychological factors operate to motivate people at work.
  • Human beings do not always act rationally. They often behave irrationally in terms of the rewards they seek from the work.
  • A conflict between organisational and individual goals often exists. There is, therefore, a need to reconcile the goals of the individual with those of the organisation.
  • Teamwork is essential for the efficient functioning of organisations But this is not automatic and has to be achieved.

systems organisation theory

The systems organisation theory is of recent origin having developed in the early sixties. It has a conceptual, analytical base and places great reliance on empirical research data. It considers organisations as a system. A system is defined as an organised or complex whole; an assemblage or combination of thíngs or parts forming a complex unitary whole. Parts of a system are known as sub-systems. The various subsystems are interrelated and they are arranged according to some scheme so that whole is more than the sum of the parts. This is done to ensure the efficient functioning of the system as a whole. A system has a boundary which maintains the proper relationship between the system and its environment.

Features of Systems Organisation Theory


Individual and his personality structure is the basic part of the system. The motives and attitudes of an individual decide wh he expects to achieve by participating in the organisation system.

Formal organisation

It is the inter-related pattern of jobs designed to regulate the actions of individuals and other resources in the organisation. It requires the individual to perform his job and the individual demands fulfilment of his expectations by performing the job. There is often an incongruency between the goals of the organisation and those of its members.

Informal organisation

There is significant interaction between the individual and the informal group to which he belongs. The; informal group demands the individual to conform to the behaviour patterns laid down by it. The individual, in turn, seeks to accomplish his goals by associating with the informal group. Both these sets of expectations interact resulting in modifying the behaviour of each other.

Status and roles

Every organisation has a prescribed pattern of roles the individuals are expected to play. These roles determine their status. When the demands on an individual made by the formal and informal organisations are contradictory, a role conflict arises. A fusion between the two roles becomes necessary. The fusion process is a force which acts to wield divergent elements together in order to preserve the organisational integrity.

Contingency Theory

The contingency theory is an extension of the systems theory of organisation. The basic idea of the contingency theory is that there is no particular managerial action or organisational design that is appropriate for all situations. Rather the design and managerial action depend on the situation. It is contingent on the situation and circumstances Therefore, contingency theory is also known as situational theory.

contingency theory is a contemporary theory of organisation yet it has some empirical evidence. The empirical support to the theory is provided by the famous Woodward Studies, Burns and Stalker studies, Lawrence and Lorsch studies, etc. Contingency theory is a happy marriage between theory and practice. It has wide applicability due to its micro-character. It provides a basis for organisational change and a conceptual framework for managers.