Organizational theories are the approaches which can be used for analyzing the organization. Organizations can be defined as the people’s social units which are developed and managed to fulfill a requirement or to practice the mutual objectives. Some of the scholars claim that arguments among different organizational theories indicate the competition level of these theories. Some authors suppose that these theories are resulted from research findings and implemented to resolve real-world issues.
The objective of this essay is to answer the question that “can different organizational theories can be reconciled into a single theory of organization”. In this essay, it is done by critically analyzing different theories and identifying the opinions of different authors. There are three different theories of organization i.e. institutional theory, population ecology theory and resource dependency theory. All of these are popular as deterministic theories which contribute to the organizational actions and design. Firstly, the paper provides a brief introduction about three major dimensions of organizational design. Secondly, a paradigmatic controversy is initiated and all three theories are analyzed critically. At the end, the above stated question is answered and conclusion is given.
In modern business environment, organization is like an open system as it affects and gets affected by their internal and external environment. It works as a social unit of persons which is organized and structured to reach its collective goals. An organization has a management structure which determines the relationship between different members and actions. This structure divides and allocates the responsibilities, roles and authority to practice different tasks. In this context, open system concept states that organization is defined as a system that converts inputs from external atmosphere through transformation mechanism with the production technology and management to specific results. This transformation is provided by the components inside the company that includes many related stakeholders like employees and managers. According to Gurianova and Mechtcheriakova (2015) described organizational structure as a framework and model of interactions and relations between different parts and sections of an entity. In today’s organizations, there are different types of structure that are generally utilized by company’s management team. Because of differences in the components and aspects, the differences of many organizational structures exist. To create the organizations, there are 3 basis and major dimensions which need to be considered such as centralization, formalization and complexity.
According to Simon and March (2009), formalization is the most important dimension of organization that focuses on the developing formal organizational structure. The authors stated that formalization can be analyzed by the level that regulations, rules and instructions are noted in an organization and the extent of bylaws are practiced, applied and monitored. Moreover, Mihm et al, (2010) stated that centralization can be defined as the extent which decisions are created at a single point in the company. It entails the power range in independent decision making and choice for an organizational position. Third organizational dimension is complexity that refers to an organization’s denotative level that means isolation of components to structure organizations. Often, organization’s complexity showcases the differentiation in vertical, spatial, geographical and horizontal.
In a company, organizational structure describes the business operations methodology and their response to the competition in the industry and market. Hillman, Withers and Collins (2009) stated that there are two different types of organizational theories. One is known as strategic and another is known as deterministic theories. Generally, the authors differentiate these theories on the basis of flexibility level that they think to operate in the marketplace. There are three deterministic theories such as institutional theory, population ecology theory and resource dependence theory. Werner (2009) stated that each and every theory answers different questions: population ecology examines why some of the companies fail or other firms succeed. Secondly, institutional theory answers how the firms poetically formed by their official atmosphere. Last theory, resource dependence theory expresses how firms communicate with their surroundings. The author defined that each and every theoretical concept makes its own assumptions and claims that comes with its own weaknesses and strengths.
One of the most important deterministic theories is resource dependency theory. According to Delke (2015), initially, resource dependence theory is introduced by Jeffery and Gerald that majorly emphasizes on the description of power-seeking behavior of firms. This theoretical concept considers the link between the organization and dependent resource holder. As per this theory, the agents are entreated to figure out priorities for dependent resources which are needed by the firms and which suppliers are. The management team should have an obvious understanding about the supply chain, rare resources and balance needed resources by the firms. Later, they can implement different techniques and strategies on the needs of resources to eliminate the dependencies.
In this context, Cobb and Davis (2010) have expressed their opinions that an organization possesses different kinds of resources like financial resources, raw materials, intangible, tangible resources, human resources, finished goods and other required resources. When a firm manages its resources, other firm will be totally dependent on the first one. This dependency among different entities can cause uncertainty in external environment of business. Thus, there is a need of operational planning and they need to make additional efforts to overcome different challenges and risks.
One of the best examples to understand this theory is ACME Company that is working as an IT form. Currently, it is offering its services to a media company, named as XYZ multimedia firm. This example showcases that IT firm totally depends on XYZ Company as it is the only way that supports it to generate great revenues. In this situation, the companies may face different risks and challenges while implementing the concept of resource dependence. In order to overcome these challenges and risks, ACME Company needs to look for other entities so that it can decline the dependency level on XYZ multimedia. For using different resources and organizational assets, the agents and managers need to apply and utilize different techniques like mergers, joint ventures, acquisitions and other methods. In this way, it can be recognized that resource dependence theory provides the basis for knowing about the behavioral impacts of company.
Along with above theory, institutional theory is another theory that plays a vital role in development of organization’s actions and design. According to Thoenig (2011), institutional theory is an organizational theory that emphasizes on the set of values and norms that develops organizational behavior. Generally, the scholars think that companies tend to be same because of shaping by their official environment. This theory states that institutional environment of a firm includes the regulations, rules and norms to which companies must abide for maintaining support and legitimacy. Subsequently, organizational design is determined by the legitimacy requirements. In this context, Scott (2015) explained that different standards and morals help in enhancing organizational behavior in the workplace environment. In order to stay competitive, the companies need to comply with imposed laws and regulations. There are various authors who described the concepts of institutional theory by using three pressures like normative, coercive and mimetic pressures. It can be assessed form an organization that the political and legal pressures are the outcome of coercive pressures. Additionally, normative pressure is originated from the socio-cultural needs and expectations. Operating business as successful business entities can lead to the mimetic forces. The theoretical concept of organization suggests that company’s success may have unified patterns and models to follow. If the company fails to follow different rules and regulations then it may meet the failure. Instead, companies get the values and norms that need widely implementation across the sector. This theory can be understood by looking at the example of transportation companies. These firms adopt this theory which allows them for maintaining the security of ships and increase the following of different codes and safety management standards.
According to Salimath and Jones (2011), firstly, population ecology theory is introduced by Pfeffer and Aldrich (1976) that studies the changes in the organizational groups. This organizational theory examines the organizational life cycle, changes in company’s structure with the population in long term and competitive atmosphere of firms. It can be stated that this model focuses on population changes in selection process rather than variation of people accepting complex and changing contingencies. In long run changes, structural inactivity may proliferate with the organizational growth that can work as a biggest obstacle which may resist the organizational change. There may be various reasons behind structural inertia like internal and political constraints, restricted investment and information etc. This inertia directs to organizational changes to unharmonious with the business atmosphere. This circumstance in a workplace is very risky that may ultimately cause the companies losing the rivalry with companies better reacting to the atmosphere. At this point, this concept discards the approach of structural contingency that companies are adaptive to changes. Basically, this organizational theory explains three potential scenarios for firms i.e. selection, retention and variation. In this, variation refers to that new companies will produce revenues by developing new opportunities in the market. Retention shows that survivors can be covered in the overtime population. Moreover, selection recommends that the fittest companies are chosen by the external environment. To understand this theory, the example of General Motors can be taken as the company has changed its organizational settings and adopted political forces to affect public policies. It has positive impact on the growth and success of a company. In context of population ecology theory, it can be said that this organizational theory can be problematic in various circumstances because it cannot respond to the practical events.
The above summary of organizational design and action indicates that these theories have both differences and similarities when they are adopted by the companies. All of these concepts show the linkage between business environment and organizational design. As mentioned in above paragraph, resource dependence theory stresses on a single firm. It emphasizes on agents’ effects revealing the ideologies to react to the changes proposed in the organization. Agent’s work plays a crucial role in implementing contingencies’ changes. In this way, this is important for the firms to create suitable policies and strategies by conducting environmental analysis. Both institutional and population ecology theory emphasize on the viewpoint that the population and sets of companies majorly focus on the environmental pressures. Both of these concepts recommend that firms are identified by the most appropriate environment selection. Moreover, institutional concept believes that the main factors of developing organizational structure and culture are present in the macro-environment. Other two approaches inspect the internal links of companies with different emphasis. It leads to utilize the power of agents to make sure that there is a great development in assets and resource from external atmosphere. Apart from this, concept of population ecology provides an effective organizational structure which can be chosen by surroundings and population. This theory may assist the organization to protect its different resources and core competencies.
Thus, the above essay found out that among all the theoretical concepts, resource dependence theory is considered as the most compelling theory for determinism. The main cause of choosing this theory is that it describes the organizational resources and its environment efficiently. This focuses on all the vital core competencies and resources like human resources, brand image, good will, financial resources and intellectual property rights etc. whereas other concepts only target the environmental factors and people. Being a most persuasive theory, this concept may lead the management of company to organize its activities by adopting various methods like mergers, partnerships and joint ventures.
Conclusion
Thus, it is hereby concluded that there are three academic theories of organization which assist the companies to get a better business environment in organization. It defines how the fundamental dimensions can assist the organization to develop organizational structure. In this essay, three theories, resource dependent theory, institutional theory and population ecology are critically analyzed. By this critical analysis, both similarities and differences are identified. The essay answers that it is not an easy task to compile all the theoretical concepts. Among all, resource based theory is most compelling theory. In an organization, the managers need to consider the recent situation of organization so that they can choose the most appropriate strategy.
References
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