Theoretical Basis of an Organization

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21 September 2015

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An organization refers to a conscious human activity that links and coordinates different processes to achieve the objectives set; it the combination of production agents aimed at realizing specific goals (Daft, 2010). In essence, an organization is an association of people who bring efforts together to come up with results. The ability to organize and coordinate elements towards achieving the goals and objectives set is what conceptualizes an organization (Daft, 2010). An organization is an amalgamation of diverse concepts defining the different realms of execution in meeting its expectations. Since the inception of organizational culture, theoretical frameworks have contributed immensely in defining the internal and external environments of organizations. For example, the principles of communication, span of control, authority and hierarchy stem from the theoretical underpinnings that define an organization. Theoretical frameworks of organizations have had significant transitions in explaining the interrelations between different elements of an organization.

Classical, Neoclassical and Modern organizational theories have had a profound impact in organizational culture by underscoring on imperative aspects that affect the functionality of organizations. A critical look at the organizational theories shows that organizations are based on theoretical tools that define their operations. This paper analyzes classical, neoclassical and modern organizational theories by evaluating the concepts proposed by their proponents in respect to organizational effectiveness and productivity. This will form a solid grounding of the theoretical basis of the organization and the theoretical transitions that have occurred in the realm of organizations. Certainly, interrelations are significant in organizations, and it is through grasping the theoretical basis of such interrelations that one can have a good view of organizational functionality. Classical, neo-classical and modern organizational theories describe the diverse concepts that affect functionality and productivity in an organization.

Classical organizational theories

        Classical organizational theories aimed at enhancing the efficiency of management in an organization; they emphasized on the formal running of the organization (Hiriyappa, 2009). The Taylor’s scientific management approach sought to focus on the planning aspect of an organization in order to realize specialization, efficiency and simplification (Hiriyappa, 2009). The approach by Fredrick Taylor argued that productivity in an organization stems from the trust developed between its management and its employees. Taylor argued that the physical stress is a deterrent of productivity in an organization, and should be dealt with, through feasible channels. According to Hiriyappa (2009), the interrelationships in the internal and external realms of an organization should advance systems of reducing stress and anxiety in order to increase efficiency. Moreover, the scientific management approach advanced trainings are imperative in enhancing the capacity of employees. Consequently, with adequate training, workers will have the capacity to increase their functionality levels for an organization.

According to Taylor’s approach, it is only through a scientific method that organizational members can be chosen, trained and developed. This implies that organizational productivity comes from the ability of management to identify members and inputting deliberate measures of increasing their capacity. The management’s collaboration with its employees is crucial in creating a culture of efficiency in meeting organizational goals and objectives (Lynch and Dicker, 2012). The premise developed by Taylor proposes that there should be a degree of conformity between the two parties in order to enhance an organization’s productivity. In essence, according to the approach, the management and the human resource have an obligation to cooperate in achieving organizational objectives instead of courting conflicts. The theoretical basis advanced by Taylor proposes that productivity in an organization does not stem from a vacuum but from the collaborative efforts of enhancing the internal cohesion of the organization.

Max Weber’s bureaucratic classical organizational approach views the organization as a division of the whole; in conceptualizing the formal aspect of an organization, Weber put forward important principles to explain his premise (Lynch and Dicker, 2012). The principle of structure advanced that organizations have distinct hierarchical positions with different roles and responsibilities. The principle of structure, as advocated for by Weber, proposed that efficiency in an organization is brought by the strategic organization of the members (Lynch and Dicker, 2012). Weber’s principle of specialization proposed that duties in an organization should be based on functionality and separated through a specialization basis. This aims at increasing the usefulness of a task by assigning the tasks to the relevant people. Moreover, the bureaucratic approach advanced that rules and obligations governing the running of the organization are critical in enhancing its formal structure. This increased the effectiveness of running the organization. The system of rules is imperative in creating stability and predictability in an organization. It fosters constancy and effectiveness in the achievement of organizational goals (Lynch and Dicker, 2012). Weber also advanced the rationality approach arguing that an organization’s personnel should be selected without partiality; responsibility and authority in an organization should be based on merit as opposed to persons. The bureaucratic theoretical basis proposed by Weber explains the relationship between organizational duties and the personnel in increasing productivity.

The administrative theory as advanced by Henri Fayol sought to explain the relationship between the accomplishment of tasks, the administrative elements in an organization and the function of management (Tsoukas and Knudsen, 2003). Firstly, the administrative theory posited that responsibility and authority are essential in enabling an organization to achieve its goals and objectives. The right to give orders and the obligation to accept the results of using authority as directed by Fayol are principles of management that control the internal processes of an organization. Secondly, discipline in an organization is significant in sensitizing members to comply with the regulations set (Tsoukas and Knudsen, 2003). According to Fayol, maintaining discipline in an organization fosters a sense of purpose towards achieving of organizational goals.

Thirdly, unity of command is an important theoretical framework in enhancing stability within an organization. The theoretical basis argues that subordinates should be answerable to one superior (Tsoukas and Knudsen, 2003). Fayol affirmed that having more than one superior creates disorder and weakens the much-needed authority in an organization. Hence, unity of command boosts productivity by maintaining order between the employees and their superiors. In addition, the administrative theory pointed out that there should be unity of direction among the members of the organization. What Fayol implied in this principle is that productivity and efficiency in an organization can only be possible if the members of the organization are united towards achieving their organizational goals. In other words, unity of direction is a management principle that ensures the collaboration of the personnel in realizing organizational goals.

While placing emphasis on the principle of unity of direction, the administrative theory posits that the interests of individuals should not override organizational interests. Tsoukas and Knudsen (2003) assert that employees should comprehend the value of organizational objectives, and their collective responsibility in achieving organizational goals. In this respect, according to Fayol, the interests of the employees and the organization should not supersede each other. Therefore, Fayol’s administrative theory emphasized on the achievement of tasks, through the articulation of management functions; the management of an organization has a huge role to play in improving organizational efficiency.

Neoclassical theories

        According to neoclassical theorists, the individual is extremely important in understanding productivity in organizations; investment in individual employees and human relations surpass the impact of change in working conditions. Neoclassical theorists asserted that organizational productivity and efficiency stemmed from the morale deposited in employees (Tsoukas and Knudsen, 2003). The individual attention that employees get is tantamount to the level of productivity that an organization reaps; without deliberate attention on workers, achieving organizational goals will be a far-fetched idea.

The Principles of neo-classical theories on organizational functionality

        Unlike the classical organizational theories, the neo-classical theories focused on the imperative aspect of human nature. According to neo-classical theorists, the mechanistic nature of classical theories did not put into account the concepts of the individual employee, and human relations. The neo-classical organizational theories advanced an informal structure of organizational behavior to address productivity from a human relations perspective.

I. The Individual

        The neo-classical approach recognizes the individual as part of a large enterprise, which has distinct individual goals and needs. Neo-classical theorists put out that people are not unconscious elements, but beings that have social aspirations to pursue (Daft, 2010). In this respect, recognition of the individual as interacting with social and economic factors makes him an important part of an organization; individuals pursue different desires; hence, considering the diverse nature of individuals is critical in maximizing their usefulness, and consequently, this fosters the productivity of an organization.

II. The Work Group

        Within an organization, there are informal groups that contribute significantly in enriching employees’ social orientations; they play a pertinent role in enhancing human relations, which, consequently, boost their morale and participation in the organization’s objectives (Tsoukas and Knudsen, 2003). Identifying social groups in an organization and investing in them for the purpose of developing individuals is important in creating the much-needed synergy in realizing the effectiveness. The ability of employees to function effectively depends on how an organization responds to their social needs (Daft, 2010). Advancing human relations in an organization is utterly imperative in developing a viable framework for ensuring productivity. Neo-classical theorists posit that investing in work groups is beneficial to the individual and the organization. Thus, unlike the classical theories that advanced the utilization of tasks in increasing productivity, the neo-classical theorist observed that increasing capacity for human relations is ultimately significant in influencing the functionality of employees.

III. Participative management

        The decision-making process is central in the progress and development of any organization. Decisions are integral in the implementation of goals and objectives for the organization. Based on a neo-classical approach in organizational operations, involving employees in the decision-making process is important in increasing organizational functionality and productivity (Daft, 2010). Allowing workers to be part of the decision making platform makes them own the process, and gives them the thrust to place more input in achieving the aims and goals of the organization. Participative management, as a theoretical basis for organizations, recognizes employees as significant members of the organization and gives them an opportunity to influence its growth. Employees have the capacity to influence the internal and external environments of an organization; hence, giving them strategic functions will ultimately increase organizational functionality. It is worth noting that the classical organizational theories focused on the work produced by the workers in bringing productivity while the neo-classical organizational approach focused on the workers in increasing productivity.

Modern theories

        In the contemporary approach to the organization, theorists posit that organizations have had revolutions and developments; hence, they have to respond to multi-disciplinary factors (Farazmand, 2002). Organizations have to respond to changes in organizational culture; communications structures, organizational and employee interests are major elements that organizations should adapt to in the modern age. Modern theories advance that an organization is a system of processes, which bring individuals together for the achievement of organizational goals. Therefore, ensuring feasible functionality and productivity in an organization calls for adaptation to the dynamic elements defining organizations today.

I. The Systems approach

        The systems approach is a modern theory that presents an organization as a system of mutually dependent components; the sub-systems of an organization are critical in contributing to the whole (Farazmand, 2002). The coherent working of the sub-systems contributes to the yield of the organizational results. In respect to the systems theory, an organization is made up of three elements.

a) The components

        Employees, informal and formal structures of an organization play a pertinent role in building capacity to respond to the dynamic aspects of organizations. Moreover, the behavioral trends emerging from the functional demands and the physical environment of the organization are significant in complementing the sub-systems of the organization.

b) The linking structures

        The linking structures in an organization, according to systems approach, ensure that the components of an organization work towards the functionality of the whole system. The ability of the components in an organization to function in a correlated manner depends on the linking processes of communication, decision making and balance.

c) The goals of organization

        The goals of an organization guide it towards achieving its purpose, and remaining relevant; achievement of the set goals implies that an organization is deriving mutual benefits from the sub-systems that make up the organization.

II. Socio-technical approach

        According to Daft (2010), the social-technical approach advances that in an organization, achieving equilibrium between its social systems and its technical aspect is extremely important. The premise in the socio-technical approach is that in modern organizations, the personnel, technical system and stakeholders are pertinent in defining its functional analysis. On a theoretical basis, it is the internal environment that uses the technical systems to produce goods and services for the customers (Daft, 2010). The ability of an organization to achieve reliable results depends on its ability to integrate the employees with the technical features available. In essence, in the socio-technical approach, investment in technology is vital in increasing the chances of productivity in an organization. Technology is an important organizational tool in increasing the usefulness of the organization by enlarging the external jurisdiction. Therefore, the socio-technical approach bases organizational productivity on the interrelation between the internal environment of an organization (personnel), the technical system and the external environment.

III. The contingency or situational approach

        This approach asserts that organizational systems are related with their environment. The approach further posits that different environments deem it necessary to employ different organizational relationships to increase the effectiveness of an organization (Farazmand, 2002). The approach is founded on the thought that there are no universal frameworks applicable for all organizational situations. Depending on the diverse factors inherent in an organization, the relationships developed by an organization will have to adapt to the factors. The changing nature of organizational elements makes it necessary for organizations to respond differently to different situations (Farazmand, 2002). In this respect, the efficiency of organizations depends on its prowess in responding to the dynamics of changing environments. For instance, the political, social and economic dynamics have the capacity to influence the internal environment of an organization. In order to enhance its productivity, the organization has to employ feasible ways of adapting to the situational changes.


        In conclusion, it is evidently clear that organizations consist of complex structures and systems that define its operations. The amalgamation of processes in an organization makes it possible to derive its functionality and consequently, achieve its objectives. Organizational theories have been used to explain the theoretical foundations of organizations. From the classical to the modern theories of organizational management, the theoretical basis of organizations has undergone transitions explaining the effectiveness of organizations. Based on the organizational theories advanced by different theorists, the factors affecting effectiveness and productivity in organizations have been changing with time.

Based on the classical theories, productivity in organizations was based on the work produced by the employees; the relationship between employees and the systems of management towards producing results was important in defining organizational productivity. The bureaucratic, administrative and scientific methods explored by classical theorists emphasized on the achievement of organizational goals (work produced).The work produced was the ultimate measure of an organization’s productivity and effectiveness. On the other hand, the neo-classical theories advanced that the workers or employees played a leading role in defining the level of productivity in an organization. Investing in employees by increasing the human relations capacity was significant in influencing the functionality of an organization. This implies that without a socially motivated workforce, it is not possible to achieve the much-needed results. The transitions from the classical theorists to the neo-classical theorists explain the diversity of concepts that contribute to organizational productivity and effectiveness. The modern organizational theories advance that organizations are structures that respond to dynamic aspects ranging from economic, political to social factors. In this respect, the management of organizations needs to develop feasible frameworks of responding to the changes affecting organizational functionality. The linkage of organizational components to contribute to the success of the system is significant in increasing the chances of productivity. The interdependency developed by the sub-systems of an organization makes it possible for its internal and external environments to increase their usefulness.

The theoretical basis of an organization describes its relationship with its fundamental elements, and advances frameworks of enhancing effectiveness. The concepts of organizational behavior are critical in understanding the dynamism employed in meeting organizational goals. Thus, the theoretical basis of the organization is imperative in defining its nature of productivity and effectiveness.


Daft, R. L. (2010). Organization theory and design (7th ed.). Cincinnati, Ohio: South-Western College Pub.

Farazmand, A. (2002). Modern organizations theory and practice (2nd ed.). Westport, Conn.: Praeger.

Hiriyappa, B. (2009). Organizational behavior. New Delhi: New Age International.

Lynch, T. D., & Dicker, T. J. (2012). Handbook of organization theory and management the philosophical approach. New York: M. Dekker.

Tsoukas, H., & Knudsen, C. (2003). The Oxford handbook of organization theory. Oxford: Oxford University Press.

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"Theoretical Basis of an Organization" StudyScroll, Sep 21, 2015.

"Theoretical Basis of an Organization" StudyScroll, 21-Sep-2015. [Online]. Available: [Accessed: 4-Oct-2022]

StudyScroll. (2015). Theoretical Basis of an Organization. [Online]. Available at: [Accessed: 4-Oct-2022]

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