Neoclassical Theories of Organization

The classical organization theories concentrated on discipline and the economic well-being of people. They ignored their morale and desires.  Neoclassical organization theories while accepting the merits of classical theories have given more importance to human relations and behavioral sciences. The neoclassical theories of organization modified, added and extended the classical theories by realizing the fact that management exists in a social system wherein human factors have cognizant roles to perform. Employees can play crucial roles in the decision-making process.

Approaches of  Neoclassical Theories of Organization

Human Relations and Behavioral Science have become two important approaches of neoclassical theories.

1. Human Relations Theory

The human relations theory was developed by Elton Mayo and his associates from 1924 to 1932 at the Hawthrone plant of Western Electric Company.   They experimented in four phases: Illumination experiment, relay assembly test, interviewing programs and the bank wiring observations room experiments.

Elton Mayo
Elton Mayo

Illumination experiments revealed that light had no significant impact on the productivity of workers.   The intensity of light did not influence the productivity of telephone relays.   The relay assembly test provided several facilities to telephone relay assemblers wherein it was observed the special attention and treatment caused employees to increase their productivity.   It was termed as the Hawthorne effect, where people feel the pride of belonging to a group.   The interviewing program was tested on human relations rather that on favorable physical conditions.   It revealed that employees are unwilling to answer direct questions.   They gave important clues towards the management style when asked indirectly.   The bank wiring room experiment gave sufficient freedom to an informal group.   It revealed that employees were not only economic beings but social and psychological beings as well.   Their productivity is influenced by sentiments, beliefs and the group behavior of employees.   The Hawthrone experiments brought about the conclusions that the business organization also includes social and psychological factors.   It considered organization as a social process where feelings, sentiments and attitudes were given due importance.   Mayo and Roethlisberger of Harvard Business School postulated that efficiency and productivity could increase if the attitudes of employees were well regarded.

2. Behavioral Science Theory

The behavioral science theory believes in inter-personal relations.   While human relations concentrate on morale and productivity, behavioral science lays emphasis on inter-personal roles and relationships. F. Herryberg and V. Vroom suggested motivational models after Abraham Maslow who developed the need hierarchy model.   Sociologists and psychologists contributed significantly to the area of behavioral science for treating the human element as a social system. Group behavior was given more importance.   McGregor, Arguris and Likert believed that self-actualized man would contribute to the development of management.   They emphasized democratic values and human motivation.   The task itself is the primary source of satisfaction and self-motivation.   Unlike the beliefs of the classical theory, behavioral science believes that human beings like work but it should not be super-imposed and should instead be self-realized.   They enjoy work and believe in self-discretion and self-control.   They are interested in their own jobs and creativity in a healthy, safe, comfortable and congenial environment.   People consider themselves to be important persons and like to be treated as important people by their superiors.   The behavioral science theory tries to develop new insights and brings about a congenial environment in the factory whereby new thinking and new techniques put forward by employees are welcome.

Contribution of Neoclassical Theories

The neoclassical theories of organization have contributed significantly to organizational behavior in the following fields.

  • Individual Behavior — Behavior of individual employees has been considered important in the field of management.   Individual work behavior is influenced by their respective feelings, perception, learning and personality.   People view jobs as per their attitudes, beliefs, and the social set up, technical and managerial skills.   Inner feelings, crazes and sentiments have more influence on work behavior which ultimately shapes the efficiency and productivity.   Human relations based on individual behavior, economic and social factors are considered important factors for the success of management.
  • Group Behavior — It was rightly postulated by sociologists and psychologists that the cultural and social backgrounds of employees have a significant role to play in management.   People work together to accomplish the corporate objective, i.e., group objectives.   There is need for cooperative and purposeful group inter-relationships.   The influence of informal organization has been well regarded in this context because the workers are not isolated and unrelated individuals.   Workers are social beings and should be regarded as such.   Sociocultural organizations have a great influence on the behavior of individual employees.   The group has a systematic approach to work.   Group dynamics and industrial psychology are developed on the basis of informal organization.
  • Task — The neoclassical theorists have not ignored the tasks to be performed.   The classical and neoclassical people think alike about design and performance of jobs.   The neoclassical theories laid emphasis on coordinated activities, while division of work was preferred for getting specialization.   They have developed processes for identifying and grouping the work.   Technological development has also given due importance to the effective performance of a task, while giving due importance to coordinated efforts and achievement.
  • Participative Management — The theory has given birth to participative management wherein employees have the right to take part in management decisions.   Giving opportunities to labor in the management process will help increase productivity and efficiency.   The recognition of human values and human behavior is for increasing productivity.   If they are separated, they will be meaningless.   Productivity and satisfaction have therefore to be achieved by the behavioral approach.   The techno-economic system mixed with social system has developed people and production.
  • Motivation — Neoclassical theories were propagated for self-motivation and job satisfaction.     According to them, the management should learn development of co-operative attitudes. While a democratic set up is more useful, the authoritarian approach may not be totally discarded, because when people have developed an attitude against the management while the management has been honest and helpful to them, the authoritarian approach would be more effective for managerial success. The authoritarian approach as developed by classical theorists needs to be modified and remolded for selective use.   Monetary and non-monetary incentives should be used for motivating people.   Employees development and worker satisfaction contribute significantly to production.
  • Communication — The neoclassical theories of organization have given more importance to effective communication.   Two-way communication is essential to establish a common flow of understanding in any organization.   Formal and informal communications are exercised for managing people, although informal communication has more impact on management success.   Group communication, team spirit, man-to-man relations and group harmony have been realized by new classical theorists.   Coordination, co efforts, co workmanship and communication have been considered the key factors of organizational behavior.

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