Topic: Critically contrast the approach to organisations of the classical management theorists with that of the contingency theorists. Which do you think has had the greatest impact on management today and why?
Topic: Critically contrast the approach to organisations of the classical management theorists with that of the contingency theorists. Which do you think has had the greatest impact on management today and why?
The management field is characterised by a wide variety of theories, schools and directions. This essay examines the classical and contingency schools of thought -- the approaches to organization that have had the greatest impact on management today. Firstly the essay delineates and criticises the important theories propounded by classical writers. The essay continues with an account of the contingency school, and finally evaluates its impacts on managerial thought.
Up until about the late 1950s academic writing about organisational structure was dominated by the classical management school. This held that there was a single organisational structure that was effective in all organisations. (Clegg & Handy, 1999). According to Holt (1999), the classical school is characterised by "being highly structured, with emphasis on the formal organisation with clearly defined functions and detailed rules, autocratic leadership, a rigid chain of command and control by superiors" (Holt, 1999, p.137). The three greatest proponents of classical theory were Taylor, Fayol, and Weber. Each identifies detailed principles and methods through which this kind of organisation could be achieved.
Taylor (1947) developed a systematic approach to called 'Scientific Management', which focused on efficient production. Through the study of task movements, or 'time and motion studies' as it was known, he recognized matching the correct worker to the task was crucial to increasing work efficiency. Under this so-called Taylorism, emphasis is placed on power confered to those in control. According to Morgan (1997), this approach to work design is found in traditional forms of assembly-line manufacturing and in production processes.
Another major sub-field within the classical perspective is 'Administrative Management,' set forth by Fayol (1949). While Scientific Management took a micro approach, Fayol saw the macro concepts, a body of knowledge which emphasised broad administrative principles applicable to large organizations. In Fayol's account, management is conceptualised as consisting of five elements, namely planning, organizing, command, co-ordination, and control. He also developed 14 principles of management or organisation, the best-known being division of work, unity of direction and scalar chain or hierarchy. In contrast to Taylorism, Fayol emphasizes that the principles could be applied in any type of organization (e.g. government, military, hospitals, banks) and at any level of management (Grey, 1999).
The last important contributor to classical theory is Weber (1947) who observed the mechanisation of industry. Through his work he identified the first comprehensive definition of bureaucracy as a form of organisation that emphasises precision, speed, clarity, regularity, reliability, and efficiency. These are achieved through the creation of fixed division of tasks, hierarchical supervision, and detailed rules and regulations.
Overall, the classical approach is characterised by division of work, establishment of hierarchy of authority, and span of control. For classical theorists, these components were of utmost importance in the achievement of an effective organisation (Cole, 2004). If we implement these principles, as Morgan (1997) suggests, we arrive at an organisation with a pattern of precisely defined jobs organised in a hierarchical manner through precisely defined lines of command or communication.
There are is shortage of critiques of this classical approach. Firstly, it is significant that the classical theorists gave relatively little attention to the human aspects of organisation (Morgan, 1997). In particular, they can result in mindless and unquestioning bureaucracy; and can have dehumanising effects upon employees (Morgan, 1997).
Secondly, the classical theory has its limitation for practical use. Woodward (1980) insisted that bureaucratic-mechanistic organisation might be appropriate for firms employing mass-production technologies but that firms with unit, small-batch, or process systems of production need a different approach.
Thirdly, Katz and Kahn (1978) pointed out that the classical theories have tended to view the human organisations as a "closed" system. Closed systems are "those, which, for all practical purposes, are completely self-supporting, and thus do not interact with their environment" (Cole, 2004, p.74). According to Katz and Kahn, this closed system has led to a ...
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Secondly, the classical theory has its limitation for practical use. Woodward (1980) insisted that bureaucratic-mechanistic organisation might be appropriate for firms employing mass-production technologies but that firms with unit, small-batch, or process systems of production need a different approach.
Thirdly, Katz and Kahn (1978) pointed out that the classical theories have tended to view the human organisations as a "closed" system. Closed systems are "those, which, for all practical purposes, are completely self-supporting, and thus do not interact with their environment" (Cole, 2004, p.74). According to Katz and Kahn, this closed system has led to a disregard of differing organisational environments and the nature of organisational dependency on environment. It has led also to an overconcentration on principles of internal organisational functioning, with consequent failure to develop and understand the processes of feedback which are essential to survival.
To solve this inadequacy, Luthans (1977) argued that an 'open' systems view is needed to cope better with the increased complexity. Open, as opposed to closed, systems are "those which do interact with their environment, on which they rely for obtaining essential inputs and for the discharge of their system outputs" (Cole, 2004, p.74). As the key features of the open-systems approach, Morgan (1997) described that much attention has been devoted to understanding the immediate "task" or "business environment", defined by the organisation's direct interactions with customers, competitors, suppliers, labor unions, and government agencies, as well as the broader "contextual" or "general environment". This open-systems view suggests that managers should always organise with the environment in mind. These insights are now marshaled under the perspective known as 'Contingency Theory'.
Contingency theory approach to management, developed in the 1950s, states that there is no "one best way" to organise or manage (Herbert, 1977). Instead, this view contends that management strategies, structures, and processes that cause high performance depend on important contingencies of the situation (Cole, 2004). There are several contingency factors: strategy, size, task uncertainty, and technology. Contingency theory sees the optimal structure is an organisation that can adapt to their external environment (Luthans, 1973).
The contingency theory on the relationship between an organisation's 'strategy' and its structure was firstly propounded by Chandler (1998). The term, 'strategy' is defined as the determination of the basic long-term goals and objectives of an enterprise (Robbins and Barnwell, 2002). Chandler's research concluded that as the firm moves to a multi-product strategy, the firm adapts a divisional structure. On the other hand, the efficient structure for an organisation with a single-product strategy is one that is simple: high centralisation, low formalisation and low complexity (Robbins and Barnwell, 2002).
However, Robbins and Barnwell (2002) emphasised that Chandler's theory has some distinct restrictions. First, Chandler looked only at very large and powerful industrial business firms which dominated their industries. Whether Chandler's findings would be applicable to small-and medium-sized organisations, service companies or those in the public sector could not be answered in this sample. Second, when Chandler used the term 'strategy', he really meant 'growh' strategy. His definition of strategy, based on product differentiation, is far from all-inclusive.
Another critique on the strategy imperative lies in questioning the degree of discretionary latitude that managers actually have. The impact of strategy would be greater in the early development period of an organisation. Once a firm becomes established, it cannot change easily. Moreover, the strategy imperative deals with a lag factor: when management implements a new strategy, there is often no immediate change in structure (Robbins and Barnwell, 2002).
The other thorists who focus on strategy-structure relationship is Bartlett and Ghoshal (1991) who proposed that each of these strategies required specific organisational structural characteristics to be effective. To be successful, they not only had to have an appropriate strategy for their product but they also needed a structure that fitted the strategy. Ghoshal put forward the transnational organisation concept as a managerially sophitisicated ideal type towards which cross-national organisations will have to develop in order to obtain and retain global competitiveness. In the transnational company there is developed an integrated network structure in which neither centralisation nor decentralisation is embraced as a principle, but selective decisions about location and authority have to be made (Pugh & Hickson, 1996).
Theories focusing on the relationship between 'size' and organisational structure is studied by Blau (1971). Organisational size is generally defined as the total number of employees. On the basis of studies of government agencies, universities, and department stores, Blau concludes that larger organisational size promotes structural differentiation and that as the size of an organisation increases, the marginal influence of size on differentiation decreases. He also found that increasing size promotes structural differentiation, but at a decreasing rate.
Referring to Argyris's critique, Robbins and Barnwell (2002) noted the limitation of Blau's theory. The critical point is that Blau choosed the government agency as his subject of research. Government agencies have unique organisation and strongly influenced by regulations. Therefore, Blau's theory is luck of generalisability.
Another famous studies about size-structure relationship was done by Aston Group1. According to Donaldson (1999)'s description, Aston Group asserted that size was tha major determination of strucrure. Larger organizations are more structured, and decentralization is higher in larger organizations which are independent. They also found that increased size was associated with greater specialisation and formalisation. Their conclusion was that 'an increased scale of operation increases the frequency of recurrent events and the repetition of decisions', shich makes standardisation preferable.
However, Mayer (1972) criticised about size-structure relationship. His findings led him to conclude that 'one cannot underestimate the impact of size on other characteristics of organisations'. In other words, size caused structure but not the reverse and other variables that appeared to affect structure disappeared when size was controlled. Therefore, the effect of size on spatial differentiation is unclear.
Woodward (1980) examined the relationship between 'technology' and organisational structure. Technology refers to the processes and methods that transform inputs into outputs in an organisation. (Robbins and Barnwell, 2002). Woodward focused on production technology and categorised the firms into one of three types of technologies: unit, mass, or process production. Woodward's conclusion was that unit, mass, and process production result in different structural forms and that proper fit within categories increases the likelihood that the organisation will be successful. For instance, where production technology had advanced to large-batch and mass production using more specialized machinery, such as in automobile assembly, work organization was more formalized and mechanistic and more according to the prescriptions of classical management.
Yet, Woodward (1980) dealt with relatively narrow production oriented (unit, mass and process) technology. Robbins and Barnwell (2002) noted that the influence of information technology on structure is inconclusive because it seems to be more widely used as a productive device than Woodward suggested.
There are also studies of relationship between 'environment' and organisation structure. Environment in this context is identified by Robbins and Barnwell (2002) as everything outside an organisation's boundaries. Burns and Stalker (1961) established the distinction between 'mechanistic' and 'organic' approaches to an organization and its environment. The management practices of 20 manfacturing concerns in Scotland and England were compared with respect to the stability of their environments as deternined by rate of change in the relevant markets and in technological innovations in the larger industry. Burns and Stalker argued that where an organization faces a stable environment then the mechanistic structure is effective but where the organization faces a high level of technological and market change then the organic structure is required. In other words, an organisation's structure should be mechanistic in a stable, certain environment, and organic when the environment is turbulent.
Following the emergence of these contingency schools of thought, many articles emphasised that the traditional hierarchy was obsolete (Katz & Kahn, 1978). Yet, the classical school still has an important place in management practice. The process approach as a theoretical base for management remains basically the same as that given by Fayol over fifty years ago (Luthans, 1973). Still today, Fayol's 14 principles of management or organization are important building blocks or guidelines for structuring managerial activities.
Equally, Taylor's approach to management has been extended and refined in many ways, most notably through the development of franchising systems that are faced with the challenge of offering consistent products and services through worldwide operations. McDonald's and many firms in the fast-food industry could be cited as the best examples. They have used the same Tayloristic approach with great effect, centralising the design and development of products or services and decentralising implementation in a highly controlled way (Morgan, 1997).
However, it is true that in the dynamic, complex society of today many organisations benefit from a more organic system. The organisation structure of Sanyo Electric Company embodies the contingency approach to management. In the early time when Sanyo engaged in producing only white appliances, their structure was a typical mass-production model that is characterised by hierarchy, clear line of authority, high formalisation and division of labour. In the Chandler's typology, it was similar to an organisation with a single-product strategy. However, expanding their product lines to such things as personal computers and mobile phones, and their business market worldwide, Sanyo confronted the need for organisational change. In 1999, Sanyo introduced the Company System into their management replacing the existing department system. After this structural change, Sanyo's organisation structure turned into a more divisional structure. Each of the five "companies" (Industrial System, Multimedia, Home appliance, Semi Conductor, Soft Energy) has great autonomy and independence from its management. This transformation could be described as a move towards a multi product strategy. In the contingency view, Sanyo is a company that skilfully manages its organisational change in accordance with their managerial strategy. This kind of transformation based on the contingency approach can be frequently seen in today's activities of global firms.
From this perspective, it can be concluded that a contingency theory of organisation had a great impact on management today. Ketchen (2003) points out that firms become more "organic" (flexible in their structure and operations). While some firms prospered in the new environment by creating highly flexible structures and processes, others fail. This implies each organisation should consider the necessary actions taking into account various contingency factors, and, as a living organism, have the capacity to change its structure appropriately to the environment.
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