Theory and Behavior
David S. Walonick, Ph.D.
Classical Organization Theory
Classical organization theory evolved during the first
half of this century. It represents the merger of
scientific management, bureaucratic theory, and
Frederick Taylor (1917) developed scientific
management theory (often called "Taylorism") at
the beginning of this century. His theory had four basic
principles: 1) find the one "best way" to
perform each task, 2) carefully match each worker to each
task, 3) closely supervise workers, and use reward and
punishment as motivators, and 4) the task of management
is planning and control.
Initially, Taylor was very successful at improving
production. His methods involved getting the best
equipment and people, and then carefully scrutinizing
each component of the production process. By analyzing
each task individually, Taylor was able to find the right
combinations of factors that yielded large increases in
While Taylor's scientific management theory
proved successful in the simple industrialized companies
at the turn of the century, it has not faired well in
modern companies. The philosophy of "production
first, people second" has left a legacy of declining
production and quality, dissatisfaction with work, loss
of pride in workmanship, and a near complete loss of
Max Weber (1947) expanded on Taylor's theories, and
stressed the need to reduce diversity and ambiguity in
organizations. The focus was on establishing clear lines
of authority and control. Weber's bureaucratic theory
emphasized the need for a hierarchical structure of
power. It recognized the importance of division of labor
and specialization. A formal set of rules was bound into
the hierarchy structure to insure stability and
uniformity. Weber also put forth the notion that
organizational behavior is a network of human
interactions, where all behavior could be understood by
looking at cause and effect.
Administrative theory (i.e., principles of
management) was formalized in the 1930's by Mooney and
Reiley (1931). The emphasis was on establishing a
universal set of management principles that could be
applied to all organizations.
Classical management theory was rigid and mechanistic.
The shortcomings of classical organization theory quickly
became apparent. Its major deficiency was that it
attempted to explain peoples' motivation to work strictly
as a function of economic reward.
Neoclassical Organization Theory
The human relations movement evolved as a reaction to
the tough, authoritarian structure of classical theory.
It addressed many of the problems inherent in classical
theory. The most serious objections to classical theory
are that it created overconformity and rigidity, thus
squelching creativity, individual growth, and motivation.
Neoclassical theory displayed genuine concern for human
One of the first experiments that challenged the
classical view was conducted by Mayo and Roethlisberger
in the late 1920's at the Western Electric plant in
Hawthorne, Illinois (Mayo, 1933). While manipulating
conditions in the work environment (e.g., intensity of
lighting), they found that any change had a positive
impact on productivity. The act of paying attention to
employees in a friendly and nonthreatening way was
sufficient by itself to increase output. Uris (1986)
referred to this as the "wart" theory of
productivity. Nearly any treatment can make a wart go
away--nearly anything will improve productivity.
"The implication is plain: intelligent action often
delivers results" (Uris, 1986, p. 225).
The Hawthorne experiment is quite disturbing because
it cast doubts on our ability to evaluate the efficacy of
new management theories. An organization might
continually involve itself in the latest management fads
to produce a continuous string of Hawthorne effects.
"The result is usually a lot of wheel spinning and
cynicism" (Pascale, 1990, p. 103). Pascale believes
that the Hawthorne effect is often misinterpreted. It is
a "parable about researchers (and managers)
manipulating and 'playing tricks' on employees." (p.
103) Erroneous conclusions are drawn because it
represents a controlling and manipulative attitude toward
Writing in 1939, Barnard (1968) proposed one of the
first modern theories of organization by defining
organization as a system of consciously coordinated
activities. He stressed in role of the executive in
creating an atmosphere where there is coherence of values
and purpose. Organizational success was linked to the
ability of a leader to create a cohesive environment. He
proposed that a manager's authority is derived from
subordinates' acceptance, instead of the hierarchical
power structure of the organization. Barnard's theory
contains elements of both classical and neoclassical
approaches. Since there is no consensus among scholars,
it might be most appropriate to think of Barnard as a
Simon (1945) made an important contribution to the
study of organizations when he proposed a model of
"limited rationality" to explain the Hawthorne
experiments. The theory stated that workers could respond
unpredictably to managerial attention. The most important
aspect of Simon's work was the rigorous application of
the scientific method. Reductionism, quantification, and
deductive logic were legitimized as the methods of
Taylor, Weber, Barnard, Mayo, Roethlisberger, and
Simon shared the belief that the goal of management was
to maintain equilibrium. The emphasis was on being able
to control and manipulate workers and their environment.
Classical and neoclassical theorists viewed conflict
as something to be avoided because it interfered with
equilibrium. Contingency theorists view conflict as
inescapable, but manageable.
Chandler (1962) studied four large United States
corporations and proposed that an organization would
naturally evolve to meet the needs of its strategy --
that form follows function. Implicit in Chandler's ideas
was that organizations would act in a rational,
sequential, and linear manner to adapt to changes in the
environment. Effectiveness was a function of management's
ability to adapt to environmental changes.
Lawrence and Lorsch (1969) also studied how
organizations adjusted to fit their environment. In
highly volatile industries, they noted the importance of
giving managers at all levels the authority to make
decisions over their domain. Managers would be free to
make decisions contingent on the current situation.
Systems theory was originally proposed by Hungarian
biologist Ludwig von Bertalanffy in 1928, although it has
not been applied to organizations until recently (Kast
and Rosenzweig, 1972; Scott, 1981). The foundation of
systems theory is that all the components of an
organization are interrelated, and that changing one
variable might impact many others. Organizations are
viewed as open systems, continually interacting with
their environment. They are in a state of dynamic
equilibrium as they adapt to environmental changes.
Senge (1990) describes systems thinking as:
understanding how our actions shape our reality.
If I believe that my current state was created by
somebody else, or by forces outside my control, why
should I hold a vision? The central premise behind
holding a vision is that somehow I can shape my
future, Systems thinking helps us see how our own
actions have shaped our current reality, thereby
giving us confidence that we can create a different
reality in the future. (p. 136)
A central theme of systems theory is that nonlinear
relationships might exist between variables. Small
changes in one variable can cause huge changes in
another, and large changes in a variable might have only
a nominal effect on another. The concept of nonlinearity
adds enormous complexity to our understanding of
organizations. In fact, one of the most salient argument
against systems theory is that the complexity introduced
by nonlinearity makes it difficult or impossible to fully
understand the relationships between variables.
Until recently, nearly all organizations followed
Weber's concept of bureaucratic structures. The increased
complexity of multinational organizations created the
necessity of a new structure that Drucker called (1974)
"federal decentralization". In federal
decentralization, a company is organized so that there
are a number of independent units operating
simultaneously. "Each unit has its own management
which, in effect, runs its own autonomous business."
(p. 572) This structure has resulted in large
conglomerates which have diversified into many different
fields in order to minimize risk.
The project management organizational structure has
been used effectively in highly dynamic and technological
environments (French, Kast and Rosenzweig, 1985). The
project manager becomes the focal point for information
and activities related to a specific project. The goal is
to provide effective integration of an organization's
resources towards the completion of a specific project.
Impementing a project management approach often involves
dramatic changes in the relationships of authority and
The matrix organizational structure evolved from the
project management form (Kolodny, 1979). It represents a
compromise between the traditional bureuacratic approach
and the autonomous project management approach. A matrix
organization has permanently established departments that
provide integration for project management. The matrix
form is superimposed on the hierarchical structure,
resulting in dual authority and responsibilities.
Permanent functionality departments allocate resources to
be shared among departments and managers.
Systems theory views organizational structure as the
"established pattern of relationships among the
parts of the organization" (French, Kast, and
Rosenzweig, 1985, p. 348). Of particular importance are
the patterns in relationships and duties. These include
themes of 1) integration (the way activities are
coordinated), 2) differentiation (the way tasks are
divided), 3) the structure of the hierarchical
relationships (authority systems), and 4) the formalized
policies, procedures, and controls that guide the
organization (administrative systems).
The relationship between the environment and
organizational structure is especially important.
Organizations are open systems and depend on their
environment for support. Generally, more complex
environments lead to greater differentiation. The trend
in organizations is currently away from stable
(mechanistic) structures to more adaptive (organic)
structures. The advantage is that organizations become
more dynamic and flexible. The disadvantage is that
integration and coordination of activities require more
time and effort.
The relationship between an organization and its
environment is characterized by a two-way flow of
information and energy. Most organizations attempt to
influence their environment. Advertising campaigns and
lobbying efforts are two examples. Some theorists believe
that ". . . environments are largely invented by
organizations themselves. Organizations select their
environments from ranges of alternatives, then they
subjectively perceive the environments they inhabit"
(Starbuck, 1976, p. 1069). Strategic decisions regarding
product lines and distribution channels contribute to the
selection of the organizational structure and the
It is a commonly held tenant that people are less
satisfied with their work in highly structured
organizations. Many research studies have been conducted
to examine the relationship between organizational
structure and employee behavior (e.g., satisfaction,
performance, and turnover). However, the results of these
studies are contradictory (Dalton, et al., 1980).
Structural deficiencies can result in low motivation and
morale, decisions lacking in timeliness or quality, lack
of coordination and conflict, inefficient use of
resources, and an inability to respond effectively to
changes in the environment (French, Kast, and Rosenzweig,
One enduring and controversial debate about
organizational structure is whether or not there is a
maximum desirable size for an organization, after which
there will be declining effectiveness. Does an
organization become increasingly dysfunctional as it
exceeds its "ideal" size? Several researchers
have hypothesized that organizational growth is
beneficial only up to a point (Hedberg, Nystrom, and
Starbuck, 1976; Meyer, 1977; Perrow, 1979). Most
researchers support a curvilinear growth theory. Pfeffer
and Salancik (1978) found that profitability increases
with size and then tapers off. Warwick (1975) reported
that the growth in the U.S. State Department resulted in
decreased flexibility and responsiveness, even though
specific steps had been taken to abate these problems.
There are several theories to explain these findings. The
most common explanation is based on the fact that an
organization's size is usually positively correlated with
age. Older (i.e., larger) organizations have become more
rigid in their ways and they are less able to adapt to
change. Another popular theory is that in larger
organizations, workers' jobs become more specialized. The
lack of variety creates a less motivating environment.
Other theories have proposed that excessive size creates
crippling coordination problems (Filley and Aldag, 1980;
Zald and Ash, 1966).
Organizational Birth and Growth
Clearly, one of the most dominant themes in the
literature has been to define organizations from the
perspective of their position on a growth curve. Cameron
and Whetten (1983) reviewed thirty life-cycle models from
the organizational development literature. They
summarized the studies into an aggregate model containing
four stages. The first stage is
"entrepreneurial", characterized by early
innovation, niche formation and high creativity. This is
followed by a stage of "collectivity", where
there is high cohesion and commitment among the members.
The next stage is one of "formalization and
control", where the goals are stability and
institutionalization. The last stage is one of
"elaboration", characterized by domain
expansion and decentralization. The striking feature of
these life-cycle models is that they did not include any
notion of organizational decline. They covered birth,
growth, and maturity, but none included decline or death.
The classic S-curve typifies these life-cycle models.
Whetten (1987) points out that these theories are a
reflection of the 1960s and 1970s, two highly growth
Land and Jarman (1992) have attempted to redefine the
traditional S-curve that defines birth, growth, and
maturity. The first phase in organizational growth is the
entrepreneurial stage. The entrepreneur is convinced that
their idea for a product or service is needed and wanted
in the marketplace. The common characteristic of all
entrepreneurs and new businesses is the desire to find a
pattern of operation that will survive in the
marketplace. Nearly all new businesses fail within the
first five years. Land and Jarman (1992) argue that this
is "natural", and that even in nature, cell
mutations do not usually survive. This phase is the
beginning of the S-curve.
The second phase in organizational growth is
characterized by a complete reversal in strategy. Where
the entrepreneurial stage involves a series of trial and
error endeavors, the next stage is the standardization of
rules that define how the organizational system operates
and interacts with the environment. The chaotic methods
of the entrepreneur are replaced with structured patterns
of operation. Internal processes are regulated and
uniformity is sought. During this phase, growth actually
occurs by limiting diversity. "Management
procedures, processes, and controls are geared to
maintain order and predictability" (Land and Jarman,
1992). This phase is the rapid rise on the S-curve.
Organizational growth does not continue indefinitely.
An upper asymptopic limit can be imposed by a number of
factors. Land and Jarman (1992, p. 258) identify the most
common reasons why organizations reach upper growth
· Rapidly increasing internal and market place
complexity in such areas a product proliferation and
· Internal competition for resources
· Increasing cost of manufacturing and sales
· Diminishing returns
· Declining share of the market
· Decreasing productivity gains
· Growing external pressures from regulators and
· Increasing impact of new technologies
· New and unexpected competitors
The transition to the third phase involves another
radical change in an organization. Most organizations are
not able to make these changes, and they do not survive.
"The organization must open up to permit what was
never allowed in to become a part of the system, not only
by doing things differently, but by doing different
things" (Land and Jarman, 1992, p. 257). The
organization needs to continue its core business, while
at the same time engaging in inventing new business. This
bifurcation is necessary because the entrepreneurial
environment (of inventing business) is incompatible with
the controlling environment of the core business.
The goal is a continuing integration of the new
inventions into the mainstream business, where a
re-created organization emerges. The core business is
changed by the inventions it assimilates, and the
organization takes on a new form. Land and Jarman (1992)
believe that the greatest challenge facing today's
organizations is the transition from phase two to phase
three. "Organizations defeat their best intentions
by continuing to operate with essential beliefs that
automatically perpetuate the second phase." (p. 264)
There are several factors that contribute to
organizational growth (Child and Kieser, 1981). The most
obvious is that growth is a by-product of another
successful strategy. A second factor is that growth is
deliberately sought because it facilitates management
goals. For example, it provides increased potential for
promotion, greater challenge, prestige, and earning
potential. A third factor is that growth makes an
organization less vulnerable to environmental
consequences. Larger organizations tend to be more stable
and less likely to go out of business (Caves, 1970;
Marris and Wood, 1971; Singh, 1971). Increased resources
make diversification feasible, thereby adding to the
security of the organization.
Child and Kieser (1981) suggest four distinct
operational models for organizational growth. 1) Growth
can occur within an organization's existing domain. This
is often manifest as a striving for dominance within its
field. 2) Growth can occur through diversification into
new domains. Diversification is a common strategy for
lowering overall risk, and new domains often provide
fertile new markets. 3) Technological advancements can
stimulate growth by providing more effective methods of
production. 4) Improved managerial techniques can
facilitate an atmosphere that promotes growth. However,
as Whetten (1987) points out, it is difficult to
establish cause and effect in these models. Do
technological advancements stimulate growth, or does
growth stimulate the development of technological
breakthroughs? With the lack of controlled experiments,
it is difficult to choose between the chicken and the
Until recently, most theories about organization
development viewed decline as a symptom of ineffective
performance. Well-managed organizations were expected to
grow year after year. Implicit in these theories was the
idea that organizational growth is synonymous with
expansion. These theories reflected what scholars
observed in the business world. Organizational growth was
an indicator of successful management.
Kenneth Boulding (1950) proposed a biological model of
economics, characterized by birth, maturation, decline,
and death. He argued that in all organisms, there is an
"inexorable and irreversible movement towards the
equilibrium of death." (p. 38) Many organizational
theorists took strong exception to Boulding's biological
determinism theory. They maintained that organizations
are not constrained by a defined life cycle, and there is
no indication that all organizations need to die.
The 1980's ushered in a new era where organizational
decline was apparent everywhere. Management strategies
involved reducing employees, salary freezes and
reductions, cutting administrative overhead, and
consolidating operations. It became clear that the
traditional S-curve model was incomplete and did not
address the issues of declining organizations.
One of the problems in the literature is that it is
difficult to agree on a precise definition of
organizational decline. Is a company in decline when it
cuts back the number of employees in order to become more
profitable? A common definition of decline is a decrease
in profit or budget. Most theorists agree that decline
negatively impacts individuals and the organization as a
whole. Cameron, Whetten, and Kim (1987) argue that
decline results in decreased morale, innovativeness,
participation, leader influence, and long-term planning.
They associate decline with, conflict, secrecy, rigidity,
centralization, formalization, scapegoating, and
Nystrom and Starbuck (1984) attribute organizational
decline to over-confidence. According to this theory, a
successful past can lure an organization to become
over-confident in its ability to prosper. This leads to a
lackadaisical attitude towards new innovations, quality,
and customer satisfaction. Another theory is that large
size promotes rigidity, which makes it cumbersome for an
organization to respond to environmental changes
In applying the biological life-cycle model to
organizations, Wilson (1980) identified two different
types of organizational decline: "k" and
""r" extinction. When an organization has
reached the upper asymptopic limit defined by carrying
capacity of its niche, it declines because of
k-extinction. The organization has exhausted its
environmental resources, or other organizations have
begun competing for limited resources. When an
organization falls short of its upper asymptopic limit,
and begins declining without reaching its maximum
potential, it is called r-extinction. Bad management or a
failure to remain competitive are the most common reasons
Bibeault (1982) proposed a four-stage model to
describe the process of turning around an organization in
decline. The key to the process was to replace the top
personnel. Bibeault argued that only way to reverse a
decline is to 1) change the management, the rationale
being that "problem causers have little credibility
as problem solvers" (Whetten, 1987, p. 37). Chaffee
(1984) also stressed the symbolic value of changing
administrative personnel. Change in management is
followed by 2) an evaluation stage, 3) implementing
emergency actions and stabilization procedures, and
finally, 4) a return to growth.
A different approach for describing organizational
turnaround was proposed by Zammuto and Cameron (1985).
Their model was based on the idea that turnaround could
be accomplished by addressing five process domains. 1)
The defense domain involves strategies for protecting the
organization from a hostile environment. An example would
be an organization that forms a common-purpose coalition
with other organizations. 2) The offense domain involves
expanding on the activities that the organization already
does well. 3) Creating new domains consists of
diversification activities. 4) The consolidation domain
involves reducing the scope of activities by cutting back
to core products and services. 5) The substitution domain
involves replacing one set of activities with another.
In contrast to these theories, Harrigan (1980, 1981,
1982) and Porter (1980) have looked at how organizations
respond to decline as a result of environmental
limitations (i.e., k-extinction). Organizational
activities often involve attempts to focus on a specific
market niche in which the organization might have a
competitive advantage. Another approach is to rapidly
liquidate the organization, and extract as much remaining
value as possible, although Harrigan (1982) notes that
there are often financial, legal, structural, and
emotional obstacles to this strategy.
The most common response to organizational decline is
retrenchment. Whetten (1987) identifies three sequential
stages involved in the process. The first is one of
identification. Management must be sensitive to problems
when they first appear, and be able to meet the problems
head on. The second is one of communication. Management
must communicate a clear message of the organization's
situation and instill confidence in its ability to meet
the crisis. The third stage involves the implementation
of a downsizing program.
Sutton (1983) surveyed managers to examine their
beliefs regarding how employees would react to an
organizational closing. It was found that managers had
several inaccurate perceptions. For example, managers'
incorrectly believed that productivity and quality would
plummet, employee sabotage and theft would increase, and
there would be increases in conflict. On the other hand,
Sutton's study did offer evidence that rumors were
abundant, the best employees sought different employment,
and that employee's had trouble accepting the closing.
The Learning Organization
Peter Senge (1990) defines learning as enhancing ones
capacity to take action. "So learning organizations
are organizations that are continually enhancing their
capacity to create." (p. 127) Senge believes that
organizations are evolving from controlling to
Senge (1990) discusses learning disabilities in
companies. One of the most serious disabilities is when
people form a strong identification with their position.
What they do becomes a function of their position. They
see themselves in specific roles, and are unable to view
their jobs as part of a larger system. This often leads
to animosity towards others in the organization,
especially when things go wrong. Another disability is
that we are slow to recognize gradual changes and
Senge (1990) refers to several other learning
disabilities as "myths". He discusses the
"myth of proactiveness", where
"proactiveness is really reactiveness with the gauge
turned up to 500%." (p. 129) Another myth is that we
"learn from experience". Senge maintains that
we actually only learn when the experience is followed by
immediate feedback. Another myth is that management teams
can provide creative and beneficial solutions. Senge
maintains that the result of management teams is
"skilled incompetence, where groups are highly
skilled at protecting themselves from threat, and
consequently keeping themselves from learning." (p.
Senge (1990) believes that new organizations can be
built by adopting a set of disciplines, where a
discipline is defined as a "particular theory,
translated into a set of practices, which one spends
one's life mastering." (p. 131) Thus, mastering a
discipline becomes a life-long learning process.
According to Senge, there are five disciplines
important to the learning organization. The first
discipline is "building a shared vision".
"Building" involves an ongoing process, and
"shared" implies that the vision is held in
common by individuals. A second discipline of
"personal mastery" demonstrates a commitment to
the vision. A third discipline involves the idea of
mental models, where we construct internal
representations of reality. An important element of using
mental models is the need to balance inquiry and
advocacy. A fourth discipline in that only shared mental
models are important for organizational learning. The
fifth discipline is a commitment to a systems approach.
Gozdz (1992) believes that learning organizations are
centered around the concept of community. "An
organization acting as a community is a collective
lifelong learner, responsive to change, receptive to
challenge, and conscious of an increasingly complex array
of alternatives." (p. 108) Communities provide safe
havens for its members and foster an environment
conducive to growth. Gozdz describes the community as
group of people who have a strong commitment to
"ever-deepening levels of communication." (p.
M. Scott Peck (1987) describes the process of building
a community in The Different Drum. An organization
goes through a four-stage process. The first stage is one
of denial. Group members ignore differences in power, and
pretend that they are a community. Decision-making
processes go unchallenged. The next stage occurs when
differences between members become apparent. Attempts are
made to restore the situation to what has worked in the
past by eliminating differences. An organization enters
the third stage when members realize that their efforts
to control differences have failed. They begin
communicating and true collaborative efforts emerge. In
the final stage, there is the true spirit of community.
Differences are embraced. Decisions are made
collectively. Learning and innovation comes from the
group as a whole
Many organization experience brief periods of
community, but they are not able to sustain those
periods. Gozdz (1992) describes this failure as a lack of
discipline and commitment.
There is an illusion that once a sense of
community occurs within an organization it will
remain constant. This is not the case. The sense of
community or flow state is repeatedly lost. It can be
deliberately regained at ever greater levels of
organizational maturity, but only when sustaining
community is seen and accepted as a path to
developing mastery. This path is community as a
discipline. (p. 114)
According to Gozdz (1992), the job of the leaders in
the process of community building is to keep peoples'
attention focused on the process. The four stages of
community development are repeated over and over again.
New situations and contingencies arise that initiate new
cycles in the growth process.
The classical view of organizational responsibility is
best illustrated by Adam Smith's (1937) belief that an
"invisible hand" directs all activities towards
the public good, and that the responsibility of an
organization was only to maximize profits within the
constraints of the law. The free market system was seen
as a self-controlling mechanism, whereby an organization
producing the best goods and services would prosper. Any
interference with the free market system was viewed as an
affront against the best interests of society.
The accountability concept states that organizations
receive their charter from society as a whole, and
therefore their ultimate responsibility is to society.
Environmental and worker protection laws reflect the
belief that maximization of profits is secondary to the
health of society. The extensive proliferation of laws
restricting business demonstrates a growing skepticism
concerning the morality and ethics of corporate
Some theorists believe that organizations have the
social responsibility "to take actions which protect
and improve the welfare of society as a whole along with
their own interests" (Davis and Blomstrom, 1980, p.
6). Others take a more narrow approach, and believe that
social responsibility extends only to "social
problems caused wholly or in part by the
corporation" (Fitch, 1971, p. 38).
Linda Stark (1989) discusses the five stages of
corporate moral development, although she is quick to
point out that progression through the stages is neither
linear or one direction. An amoral corporation pursues
profit at any cost. A legalistic corporation follows the
letter of the law, but not the spirit. A responsive
corporation makes ethical decisions based on long-term
economic decisions. An emergent ethical corporation
recognizes its social responsibility and balances ethics
and profitability. The ethical corporation places social
responsibility at its center and bases its existence on
Environmental awareness has evolved to become a major
ethical consideration in many corporations. During the
1950's, science and technology were viewed as the answer
to the world's problems. The ecological ramifications of
that era became apparent in the 1960's. The 1970's began
with the organization of the first Earthday. The
Environmental Protection Agency (EPA) and the
Occupational Safety and Health Administration (OSHA) were
created to monitor the environment and worker safety.
During the 1980's, many corporations began to take
proactive conservation measures. Environmental
considerations began to be addressed at the manufacturing
level so that harmful materials and waste were minimized
or removed from the production process. Citizen action
groups became increasingly effective in forcing
corporations to examine their environmental impact. In
the 1990's, many corporations have adopted the policy of
"sustainable development." The key issue is
that environmental protection is one of the highest
priorities of every business.
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