Organization theory includes the approaches for analyzing the organization and its related stakeholders. The term Organization can be defined as a shared entity of various individuals that is created and organized for meeting the specific needs and to practice common objectives. The field of organizational theories is regarded as a knowledge structure by involving many concepts to know about and describe the organizational structure and its activities. In modern business management studies, there are many authors and researchers who state that opinions among different theories and concepts of organization show the competition level of their thoughts and opinions. Some of the scholars suppose that these organizational theories are derived from the results of practical research and implemented to resolve the issues in real life business world. This essay answers the question that “which is the most compelling theory between strategic and deterministic theories”.
This essay includes the discussion about how different deterministic theories such as resource dependence theory, institutional theory and population ecology theory make contribution to the structuring and activities of organization. In this essay, the theories are analyzed by conducting a critical analysis of the thoughts and ideas about the managers’ roles in generating positive consequences for the firm. After analyzing the contribution of deterministic and agency theories, it can be stated that it is complex to combine these theoretical models in one concept. The first part of the report includes the discussion about both strategic choice and deterministic theories. Moreover, it consists of the arguments on all three theories of organization. At the end, the essay critically analyzes three theoretical concepts such as resource dependence theory, population ecology theory and institutional theory.
As per the opinion of Okasha, Elsaid & Abdelghaly (2013), organizational structure is a model that highlights how the business activities are directed for achieving the goals of organization. These business activities include rules, roles and responsibilities of employees. There are two theories of organizational structure i.e. strategic choice and deterministic theories. Both of these concepts are distinguished on the basis of adaptability level that they suppose in affecting the market. Strategic choice theory is a system theory that emphasizes on the decisions to be made in any particular situation. This concept states about the roles of leaders and managers in generating diverse choices in a continuous process. Other theory of organizational structure is deterministic concept which describes that external market and environment have a significant monitoring and control on business processes. As per this theory, businesses are forced to accept the changes in the market. There are three theories under determinism concept i.e. resource dependency theory, institutional theory and population ecology theory. These theories have different impacts on the organization and its structural design.
Considering the explanation of both the theories, it can be noted that deterministic theory is more compelling as it focuses on the availability of resources and environmental impact on business. It creates more compelling effect on organizational behaviour.
Looking at both strategic choice and deterministic theories, it should be noticed that deterministic theory is more compelling than strategic choice as area of this theory is wider than another one. On one side, strategic choice is a concept which explains the roles and responsibilities of leaders in the making impact on its staff and available dynamic options. In opposite to this, deterministic theory of organizational action provides the organizational structure and culture which has less control on organizational functions. As per this concept, market and external environment has more control on the businesses. However, it is dependent on an organization which organizational structure they want to choose to operate their business activities. Among these theories, deterministic theory would be best fit as it helps the organization to know about both its internal and external environment. It will be good for both for-profit and not-for-profit businesses because it indicates less control on actions and these are defined and controlled by external market.
Among deterministic theories, resource dependence theory is one of the most crucial theories that direct the companies to work as per the availability of resources. The companies may take the support of other firms for resource availability. Before introducing anything new, the companies need to analyze the external market and they need to accept the market trends and changes. Institutional theory is another theory of determinism that imposes different rules and norms which the companies need to comply with to operate their business successfully. It is more appropriate than strategic choice theory as it develops the potential and capacity to businesses so that they can adopt and work according to the environmental changes. It is more compelling as it provides more opportunities to businesses in order to develop an effective organizational structure.
As the above arguments states that deterministic theories are more compelling than strategic choice theory so it is very important to understand the concepts and ideas about these three theories i.e. resource dependency theory, population ecology theory and institutional theory. Among these organizational theories, the major deterministic theory is the resource dependence concept that describes that how the companies interact with the external environmental factors and how they gather and use the resources so that they can be utilized for organizational benefits. This theory recommends that a firm should manage its external environment for acquiring the resources as per the organizational requirement for extensive future growth. This theory was given by Jefferey and Gerald which emphasizes on power-practicing faces and behavior of organization. This concept focuses on the link between a company and its resource holders. This theoretical concept suggests that the managers at workplace should possess a great understanding about needed resources of manufacturing and logistic process. In addition to this, they should have the information if there is resource scarcity in the organization. It supports them to formulate different strategies and tactics as per the needs and demands of resources. It can reduce the resource dependencies in the organization.
Davis and Cobb (2009) have given their views that there can be different types of assets and resources such as human resources, raw materials, financial resources, tangible and intangible resources and final products. If a business entity attempts to manage its assets then other will be dependent on this. Among companies, very much dependency will generate uncertainty in external business atmosphere. In that situation, managers need to plan the operations and in order to eliminate the associated risks and challenges. The adoption of resource based concept can be known by the instance of ACME organization. ACME is an information technology company that is working for a media firm i.e. XYZ multimedia company. By looking at this example, it can be understood that IT organization is totally dependent on media firm because this is the single manner of producing significant profits. In order to utilize the assets and resources, the managers can use different methods and modes such as joint ventures, mergers and acquisitions. Thus, this can be identified that this concept gives the foundation to understand the impact of behavior power of organization.
Moreover, another theoretical concept of organizational design is institutional theory which provides significant guidelines to evaluate the environment in the workplace and connections with the focus on norms, values, expectations and rules. In this relation, Levitt and Mahalingam (2007) described that these morals and standards assist the workplace organizational behavior. To achieve ability to survive under competitive situation, the firms should follow all the rules, regulations and laws of its environment. It is the process of organizations going towards resemblances such as isomorphism. The theoretical concept of institutional theory can be stated by describing 3 processes such as mimetic, normative and coercive. This can be evaluated from a company that legal and political forces are the result of the coercive forces. Moreover, normative forces are resulted from the cultural expectations. Running business operations as successful firms can direct to the mimetic pressures. This organizational theory recommends that success of company may have implied. The companies may fail when it does not comply with levied regulations and values. For example, there are many transportation firms that implement this approach that enable them to maintain the safety of ships and encourage compliance of different standards and codes of safety management.
Along with the above concepts, modern firms can use Population Ecology Theory which was given by Pfeffer and Aldrich in 1976. It is open system concept that consists of atmosphere of company. This is a significant theoretical framework which answers the question that why some companies survive while other fail. Population Ecology Theory researches the changes in its different divisions. This theoretical concept focuses on the changes in the mass population rather than the changes in person using difficult possibilities. One of the major examples of this is gas and oil producing companies which can be considered as population. It assesses the impact of population’s behavior on company’s results.
In long run, structural inertia can improve with the growth of firms that can be an obstacle. This barrier can resist the changes in company and its workplace environment. In a company, there may be various causes of this structural inertia like financial restraints, limited investment and limited information. This concept covers three situations such as selection, variation and retention. The example of General Motors can help in understanding this theory. This organization has altered its organizational arrangement and utilized political factors to influence the public policy in an effective way which guarantees the development and success for organization.
The above paragraph indicates why this theory is more compelling in organizational design and action. These theories have various strengths which make them more compelling such as these theories indicate the connection between company design and workplace environment. Resource dependence concept emphasizes on a single company. It focuses on the impact of agents showcasing the principles to respond the organizational changes. Similarly, population ecology is accountable for prominence of validity for the companies to stay competitive and successful. Population ecology gives a company the most suitable company structure that can be selected by environment. It helps in safeguarding the competencies and resources. The foremost reason of selecting this approach is that this theory defines the organization and its environment effectively. It looks at all significant resources and competencies of company such as human capital, good will, IPRs, physical resources and financial resources while other theories consist of population and environmental factors only.
However, both the theories i.e. strategic choice and deterministic theories can be effective for the growth of organization but deterministic theory provides more business opportunities to businesses. This theory is less compelling than other organizational theories because this approach is not a theory with the pre-decided objectives and actors. The focus of this theory is on the internal environment of organization which is not enough for a business to survive in highly competitive business environment. All the processes and decisions are controlled by the internal management process so they can change the decisions according to their needs. Thus it can be stated that it isolates the companies from external marketplace and environment. Due to this, the companies will not be able to understand the available competitive pressure in the industry. It may have an adverse impact on the position and growth of business in the market. However, this theory gives the opportunity to choose from different options, but it can raise conflicts among people and available alternatives. Thus, there may be chance that businesses fail to assess the market trends and changes. In this way, it can be noted that strategic choice theory is less compelling than other theories of organizational design.
Conclusion
In the limelight of above discussion, it can be concluded that any organization can use the above-given three theories to develop its actions and structure. These theories are resource dependence theory, population ecology theory and institutional theory. All three theories define the relationship between internal and external environments of the company. In the above essay, all the three theoretical concepts are analyzed critically. This critical analysis indicates that deterministic theory is best theory between two that should be used by every company if it wants to stay competitive and survive in long term. It is difficult to reconcile three theories in a single concept. Companies adopt different concepts in different situations which develop relationship between company and environment. It is a responsibility of the leaders to select most appropriate theory as per the conditions.
References
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