3.5 Organizational Psychology
Problem #1: Organizational Structure
Chapter 13: Organizational theory and design – Jex & Britt
An organizational theory is really just a way of organizing purposeful human action. One of the most
common used methods for investigating organizations, is the use of metaphors to describe and
understand organizational structures.
Major organizational theories
1. Classical Organizational Theories
Models that were developed from the early 20 th century until mid-1940s. The best known of these
classical theories were scientific management, ideal bureaucracy and administrative management.
Scientific management: those who design the work should be separate from those who
actually perform the work. It implies that there should be distinct status or hierarchical
differences among employees. And work should be broken down into the smallest and
simplest components possible and employees performing very similar tasks should be
grouped together. The best way to manage these groups of employees is to create
departmental structures that are based on these highly specialized activities.
Ideal bureaucracy: Rewards should be based on one’s contributions to the organizations and
there should be a rule or procedure covering almost any situation that employees may
encounter. Employees should be very closely supervised because then it will be easier for
supervisors to meet the need of their subordinates. Also, employees have only one direct
supervisor. Information within a bureaucratic organization flows in one direction—typically,
from the top of the organization down to lower levels (unity of direction).
Administrative management: the major functions of managers included planning, organizing,
commanding, coordination, and controlling. Among the unique principles that Fayol added
were: stability of personnel, encouraging people to take initiative, and having a high level of
cohesion and camaraderie among employees.
2. Humanistic Organisational Theories
McGregor made a distinction between two types of managers: Theory X and Theory Y. Theory X
managers operate under the assumption that most people have an inherent dislike for work and, as a
result, need to be coerced and monitored very closely and people have little ambition, are not self-
directed, and value security. The Theory Y manager operates under the assumption that work is a
natural part of people’s lives, and most people seek greater meaning in it. As a result, individuals are
capable of some degree of self-control and will work toward the goals of the organization to the
extent that they find doing so to be personally rewarding and under the right conditions, many
people will seek out responsibility and will creatively solve organizational problems.
Critics on Theory Y: rather naïve to assume that all employees want to achieve personal
growth through their work experience and that everyone can work with only minimal
supervision. Also, greater potential for confusion and conflict regarding employees’ roles and
responsibilities because lines of authority are not as clear.
Likert proposed that organizations could be classified into four different types, which corresponded
to System 1 through System 4:
System 1: exploitive authoritarian type, similar to Theory X because it is characterized as
having very little trust in employees, little communication between employees and
management, very centralized decision making, and control achieved in a very “top-down”
manner. This type of organization would result in largely dissatisfied employees and,
ultimately, a low level of organizational performance.
System 2: benevolent authoritative, much like System 1 but with a few differences: there is
some level of trust in employees, and, at times, management uses their ideas. There is also
more communication in this type of organization, and, on occasion, employees have an
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opportunity to communicate their ideas to upper management. Employees in this type of
organization may derive some moderate level of satisfaction toward their work, and
organizational performance may be “fair to good.”
System 3: consultative. In System 3, those at the top of the organization set broad policies,
and more specific operational decisions are made by those at lower levels. Greater trust,
ideas of employees are used a great deal more and there is more overall communication. The
consultative organization is capable of “good” performance, although it may never reach a
level of extremely high excellence.
System 4: participative group, the complete opposite of System 1. Managers have complete
trust in subordinates and are always seeking their input prior to making decisions.
Communication in this type of organization is free-flowing in all directions, and there is often
a great reliance on teamwork. Decision making occurs at all organizational levels and with a
high level of involvement. The participative group organization is the only one of the four
that is truly capable of “excellent” performance.
Likert and Araki (1986) proposed that there is also a System 5. The System 5 organization is
essentially identical to System 4, but differs in one important respect: in a System 5 organization,
leadership is truly a shared enterprise. Essentially, the organization has no “bosses.”
3. Contingency Organizational Theories
Organizations should be designed in ways that are congruent not only with an organization’s
strategy, but with other factors as well, including the work that an organization does, characteristics
of the individuals within the organization, and the informal processes within the organization.
Determinants of organizational design:
1. Strategy: long-range goals and tactics it uses to reach the goals. According to Galbraith (1995),
the aspects of organizational structure that tend to have the greatest impact on strategy
implementation include the level of specialization, the shape of the organization, the distribution
of power within the organization, and the departmental structure.
Specialization refers simply to the types and numbers of specialties that an organization uses
in performing its work.
Shape: reflected by the number of people who form departments at each hierarchical level.
A narrow organization is one that has a relatively large number of levels but relatively few
individuals at each level. In contrast, a very flat organization is one that has a relatively few
number of levels, but each level is comprised of a large number of employees.
Distribution of power: reflected in the manner in which decisions are made: Vertical
distribution of decision-making power reflects the extent to which the decision making in an
organization is centralized versus decentralized. Centralization would be present if the
headquarters of an organization made all important decisions; decentralization would be
present if decision making was pushed down to the level of those who either produce the
product or directly interact with the customers. Horizontal distribution of power is reflected
in whether managers shift decisionmaking power to the department or unit that has the best
information or is in the best position to make a decision.
Departmental structure: departments may be formed according to a number of criteria:
function, product line, customer segments, geographical areas, or work flow processes.
o Function: high level of specialization <> overwhelmed more products + no cross ideas
o Product-based: the product groupings, diverse set of products <> double work.
o Markets: customers or industries, can change quickly <> double work.
o Geographic location: when regional differences are important, adapt <> double work,
hard to maintain consistency.
o Work-flow: based on processes. Less double work & forces to take a good look.
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2. Level of environmental uncertainty
One obvious factor that impacts environmental uncertainty is the number of years an organization
has been in existence. Another important factor is the level of competition. A related factor
impacting uncertainty is the degree of stability in an organization’s competitive environment. A third
factor impacting an organization is the extent to which its markets are affected by external factors
such as government regulations.
Uncertainty is related to organizational design because the degree of uncertainty often impacts the
speed at which organizations must adapt to external conditions.
3. Beliefs and assumptions of those in power
One of the fundamental judgments that managers in organizations must make is whether their
employees can be trusted. Organizations that are run by managers who place little trust in their
employees will likely favour organizational designs that allow for high levels of managerial control. A
related issue is the extent to which managers respect their employees’ job-related skills or believe in
their competence. A final belief or assumption of those in power that may impact organizational
design is the level of organizational performance that is expected or desired.
4. Organizational size
As organizations grow in size, the level of formalization in organizational structure needs to increase.
The ability and/or willingness to adopt a more formal organizational structure often distinguish new
businesses that succeed from those that fail. Unfortunately, many organizations face a competitive
environment that is not well served by having a highly bureaucratic organizational structure. Many
organizations deal with this issue by creating what may be described as a “hybrid” type of structure,
in which the organization as a whole might be described as a bureaucracy. However, within smaller
organizational units, the structure and culture are more like those of a humanistic organization.
5. Major technologies
Technology is defined as the primary means by which inputs from the environment are converted
into something tangible that can be returned to the environment. An organization’s primary
technology is related to organizational design in several ways. At the most general level, the two
must be compatible.
Recent innovations in organizational design
In this section, we examine four of the most common recent innovations in organizational design:
(1) the team-based organization: teams as a basis for the structure. Important here is to implement a
reward systems to create a team feeling.
(2) the matrix organization: two structures: traditional & secondary such as brands or markets.
(3) the virtual organization: contracting with other firms to provide a key part of a product mostly for
cost reduction and focus on own core business.
(4) network organizations: consists of a central entity or node. Best known is franchise form, others
are hierarchical contractor (house) and starburst network (Pixar).
Chapter 14: Organizational Culture and Climate
Schein (2010) stated that culture is “a patterned set of basic assumptions learned by a group as it
solved its problems of external adaptation and internal integration, which has worked well enough to
be considered valid and, therefore, to be taught to new members as the correct way to perceive,
think, and feel in relation to those problems”.
Culture is the ‘view of the world’ and therefor a lens & culture does not randomly develop,
rather it serves a purpose.
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Three levels of culture:
(1) Artifacts, technology and behavior patterns;
(2) Shared values (less visible to outsiders);
(3) Basic believes and assumptions (very integrated and unconscious).
Models of organizational culture
1. The O’Reilly, Chatman, and Caldwell Model: The Organizational Culture Profile (OCP)
Cultures can be distinguished based on the predominant values that are reinforced within a
particular organization. Much of the research on the O’Reilly et al. model has been focused on
the fit between organizational culture and personalities of individual employees.
Values are: innovation, stability, respect for people, outcome orientation, attention to detail,
team orientation and aggressiveness.
2. The Denison Model: Denison Organizational
Culture Model (DOCM)
The basic idea is that organizational culture
can be described according to the four
general dimensions of Adaptability,
Mission, Involvement, and Consistency.
Each of these general dimensions, in turn,
can be described in terms of three
subdimensions.
3. Human Synergistics Model
This model focused primarily on employee
perceptions of the norms present within an
organization. Specifically, it is proposed that
any organization can be characterized by
three general normative patterns:
Constructive: achieving, self-actualizing, humanistic, and affiliative. Good places
Passive/Defensive: emphasis placed on approval, conventionality, dependence, and
avoidance. More negative outcomes but these relationships were rather weak,
Aggressive/Defensive: being oppositional, having an emphasis on power, and being both
competitive and perfectionistic. Can be successful under certain conditions but mostly not.
Manifestations of organizational culture
What exactly contributes to differences in the “feel” of different organizations?
What? Definition? Example?
Symbols Objects, acts, relationships, or linguistic formations that Physical layout office
stand ambiguously for a multiplicity of meanings, evoke
emotions, and impel men to action
Artifacts Represent a more direct attempt to convey cultural Uniform army
meaning, whereas symbols are more indirect
Rites Relatively elaborate, dramatic, planned sets of activities that Office Christmas party
strengthen various forms of cultural expressions into one
event, which is carried out through social interactions.
Rituals A standard, detailed set of techniques and behaviors that Standard lunch ritual
manage anxieties, but seldom produce intended, technical or the type of
consequences. socializing after work
Stories Narratives based on true events—often a combination of
truth and fiction
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