The context of organizational theories is characterized as an uneven body of knowledge with different competing theoretical concepts to describe the actions of organization. There are two types of organizational theories i.e. strategic choice and deterministic theory. Further, the three deterministic theories about organization to introduce in late 1970s and early 1980s were resource dependence theory, institutional theory and population ecology theory. Different theories address different theories so every concept makes its own norms and claims that come with its own strengths and weaknesses. There are various authors who entitled that differences and debates among these three theories showcase the competitiveness of theories. Strategic theory is the theory of organizational structure design that describes the roles and responsibilities of leaders and managers play in affecting a workplace by making the choices in dynamic political process. Deterministic theory is developed from combination of three theories i.e. resource dependence theory, institutional theory and population ecology theory. Resource dependence concept shows the study of how organization’s external resources impact the organizational behavior. Institutional theory considers different rules, norms and regulations which affect the social behavior of an organization. There are various scholars who believe that all of these organizational theories are originated from the findings of pragmatic research and implemented to overcome the issues faced by real world businesses and individuals.
The purpose of this essay is to answer the question that “which theory is the most compelling among all three theories”. In the essay, the opinions and ideas of different authors are analyzed critically. Moreover, all the theories are described by reviewing a literature. Later, a paradigmatic controversy is started and advantages and disadvantages of these theories are identified. On the basis of this assessment, the question is answered and then all the ideas are concluded.
Among the theories of organizational design and action, one of the most important theories is strategic choice theory which defines the duties and roles which the leaders need to play so that they can influence the company by developing different choices. This is the theoretical concept that is totally emphasized on the organizational people and different groups to generate alternatives. These strategic options formed the component of workplace learning process that adapted to both external and internal environment of business. This theory of organizational structure is studies with the relation to responses of people to everyday conflicts. In order to resolve these conflicts, both the respondents and complainants can use various strategies. This theory is both advantageous and disadvantageous for the organization. One of the biggest advantages of this theory is that it assists in defining many choices which a company can make for getting better results from marketplace. With the assistance of strategic choice theory, a business entity can distinguish its operations and functions in the external environment by using available strategic choices. The major benefit of this theory is that businesses have many alternatives available in environment and they can select the most appropriate one.
Apart from above advantages, there is a major disadvantage that this theory is not an approach with predetermined goals and pre-specified actors. This theory separates the organizations from their external environment and marketplace so they are unable to know about their competing brands. It can affect the business growth and performance of organization in perspective industry. However, it provides the businesses opportunity to select from available options, but it can cause conflicts among available options and among organizational individuals. There may be possibility that organizational fail to analyze the changes in market and market trends. In this way, this theory is both advantageous and disadvantageous for the organizations which are applying strategic theory.
In today’s competitive business environment, it is very important for each and every organization to adopt organizational theories for their effective management. Organizational theories can be divided into two categories i.e. strategic and deterministic theories. Management scholars differentiate these theories based on the degree of flexibility that they supposed to run in market. There are various authors who have introduced three theories of deterministic concept i.e. population ecology theory, resource dependence theory and institutional theory. According to Bozkurta, Kalkanb and Armancm (2014), all three theories have the potential to give answer to different question like institutional theory replies how the companies politically created by their institutional environment. Secondly, population ecology theory identifies that why some organizations fail and others exist for longer time. Lastly, resource based theory states how companies interact with their environments and surrounding people.
First and foremost theory of organizational design and action is resource dependence theory which is introduced by Gerald and Jeffery. According to Nienhüser (2008), this theoretical concept mainly lays emphasis on explanation of power-seeking features of business entities. It looks at the connection between the firm and its resource holder on which the firm depends completely. Moreover, this theory states that organizational agents are implored to look at different priorities for needful resources that are required by the companies. It identifies the major suppliers of the firms on which company is dependent for resources like raw materials, human resources, financial resources etc. Then, these firms adopt many strategies and techniques related to the resource requirements so that they can abolish its dependencies on other firms.
In this relation, Pugliese, Minichilli & Zattoni (2014) stated that each and every organization holds various resources such as tangible resources, intangible resources, financial resources, raw materials, final products and some other related resources. While any business entity plans to manage its assets and other resources, another company completely depends on other one. This reliance on other companies can lead the organization towards uncertainty in the business outside environment. In this way, organization needs to plan its operations very effectively so that they can eliminate different risks and challenged faced in the process of resource and operational planning.
This theory has both advantages and disadvantages to the organization and organizational behavior. This improves the resource availability for the firms when they need. This concept does not view the organization and its workplace as a passive actor. Moreover, it claims that companies are not very cooperative as they are featured by conflict over resources and power. The concept of resource based theory can be critically analyzed by looking at the example of ACME organization that has its operations in information technology sector. This company is providing its products and services to a media entity i.e. XYZ. Using this technique, the company is generating significant profits and revenues. This situation can cause various threats and risks in the process of resource dependence implementation. To overcome it, first company should see for other alternatives which will reduce its degree of dependency on XYZ. For effective utilization of organizational resources, the managers should implement different strategic techniques such as mergers and acquisitions, strategic partnerships, collaborations and joint venture. Thus, the above theory assists to understand the behavioral effects of firm. It can be concluded that this theory is very strong and influential but it is characterized by the disputes over the resources and power.
Moreover, second theory of organizational design and action is institutional theory. According to Mahalingam & Levitt (2007) institutional theory is a concept on the stronger and deeper aspects of organization’s social structure. This theory considers the processes by which different structures consisting of norms, rules and schemes become recognized as influential guidelines for social behavior. This theory focuses on the set of norms and values which support in the development of organizational behavior. In this context, authors believe that firms incline to become similar as they are shaped by their institutional atmosphere. According to this theory, institutional environment of a company comprises of different rules, norms and regulations to which entities must comply with for managing the legitimacy and correctness. Consequently, designing of organization is identified by the legality needs of the company. About this, Greenwood et al. (2017) have given various values and principles which assist the organization to improve situations of workplace. To survive in the competitive business environment, the firms require complying with the applied regulations and bylaws. There are many management scholars who have stated that institutional theoretical concept can be analyzed by looking at three forces such as coercive, mimetic and normative forces. When an organization operates its business as successful, then it can direct to mimetic pressure. Moreover, legal and political forces are resulted from coercive pressures. Socio-cultural expectations and requirements can result in the normative pressure. This theory recommends that success of firm can have cohesive models and frameworks to comply with. When the firm is unable to comply with the rules and laws, it can lead it to failure. The example of transportation firms is the best example to understand this theory. The companies implement this concept that enables them to manage the safety of ships and follow all the security standards.
However, this theory offers the businesses opportunities that they comply with the rules, regulations and norms of marketplace but it has an adverse impact on the organizational behavior. Institutional myths and beliefs have negative impact on the organization and its individuals. This theory is failed to explain the changes and differentiation among organizations. About this theory, it can be concluded that it attempts to explain the relationship between companies and their external environment but it confirms that companies can divert from their core activities and goals due to institutional environment.
As per Jones and Salimath (2011), another organizational theory is population ecology theory that was first pro-founded by Aldrich and Pfeffer in the year 1976. This theory conducts the study on the alterations in organizational groups. This theory inspects the changes in the organizational culture and structure, business life cycle and competitive business environment. About this, it can be said that population ecology makes emphasis on the changes in people in process than the differences of population adapting changing and complex contingencies. In enduring changes, structural indolence may proliferate with emergence of companies that can be a great barrier repelling changes to workplace. The major reason of structural indolence can be due to various reasons such lack of sufficient information, lack of investment and internal political barriers in an organization. This structure inertia can lead to the organizational changes to become incompatible with the atmosphere. This condition is very challenging and risky that may cause the companies losing rivalry with new entrants better reacting to atmosphere. At this viewpoint, this concept does not agree with the structural contingency approach that the firms are adaptive to changes. It can be stated that this theory explains three potential situations i.e. selection, variation and retention. Variation refers to that new companies will produced by the emergence of new opportunities and industries. Retention showcases that only the surviving companies are covered in the population. General Motors is the most appropriate instance to understand this concept because this firm has made changes in the organizational activities and implemented institutional factors to impact the policies of public. The major advantage of this theory is that Population theory gives a good company structure that can be selected by its people. It can support in safeguarding the core competencies, capabilities and resources. Apart from this, this concept can create issues in some situations as it does not give response to pragmatic situations.
From the above critical analysis, it can be stated that among above four theories, resource based theory is more compelling theory in comparison to others. The chief reason behind this is that this concept explains the competencies of organization and their relationship with external and internal environment. However, strategic choice theory also provides various benefits to the company. Thus, it can be considered as most persuasive theory of organizational design and action.
Conclusion
From the above essay, this can be concluded that different authors have given different theories which help organizations to develop a good business environment. There are three theories like institutional theory, resource based theory and population ecology theory which support the firms to create an effective organizational structure. By doing a critical analysis, differences and similarities in all the concepts are determined. The essay answers the above identified question. After analysis, resource based theory is determined as the best and most compelling theoretical concept of organizational design.
References
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