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Organization theory includes the approaches for analyzing the organization and its related stakeholders. Organization is defined as a social unit of individuals which is created and managed to fulfill the specific needs and to practice common objectives. The field of organization theory is regarded as a body of knowledge management by involving many theories to know about and describe the organizational structure and its activities. In modern business management studies, there are various scholars and researchers who state that arguments among organizational concepts and theories show the competition level of their opinions and ideas. Some researchers suppose that these theories are derived from the findings of practical research and implemented to resolve the issues in real life business world. This essay answers the question that “is it possible to reconcile all competing theories into a universal organizational theory”.
There is the discussion about how the determinist theories such as resource dependence theory, institutional theory and population ecology theory make contribution to the design 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 results for company. After analyzing the contribution of agency and determinist theories, it can be said that it is very difficult to merge these theoretical concepts into a single concept. In the first part of essay, there is the discussion about the primary dimensions of organizational designing and actions. Furthermore, it includes the arguments on all three theories of organization. At the end, the essay analyzes three theories such as resource dependence theory, population ecology theory and institutional theory critically.
Fundamental Dimensions of Organization Design
An organization is a business entity that comprises various people who work for a collective purpose and it is connected to an external environment and its factors. Organization can be defined as the combination of people who work together to attain mutual objectives by dividing the staff and their roles and responsibilities. As per open system theory, a business entity is a system that changes the efforts from business environment by the actions with modern technology and management. In this context, Tran & Tian (2012) stated that an organization is formed by different people with a collective goal of attaining the effects which a single person can’t attain (Tran and Tian, 2012). In their paper, both of the authors described organizational structure as a frame and system of coordination among organization’s different departments. Moreover, March and Simon (2009) entailed that organization is a formal structure of tasks and responsibilities which supervises and evaluates how the team of its employees coordinate with each other and utilize its available resources to attain mutual goals. It can be managed and transformed by utilizing firm designing process. Today’s organizations utilize different types of organizational structure like centralization, matrix and line (Simon and March, 2009).
To develop and improve activities of a company, its management looks at three fundamental dimension of organizational design such as complexity, centralization and formalization. Among all, the most significant dimension of organization design is formalization that is emphasized on the procedure to create formal structure and consists of management of that system. Centralization is another important dimension in which entity takes the decisions by focusing on a single issue of the company. In this, top level management takes all the important decisions of company. Furthermore, complexity is the process of differentiating the organization based on different levels such as vertical, horizontal and spatial (Miner, 2015).
Summary of Theories
In an organization, its structure defines the methodology of the business and its reaction to the marketplace and existing competition. There are two types of general theories of organizational structure i.e. deterministic and strategic. These theoretical concepts can be distinguished based on the flexibility level which they assume to run in the market. This paper describes the deterministic theories only that define the company’s strategies can be determined by its external forces. In this essay, three types of organizational theories are described i.e. resource dependence theory, institutional theory and population ecology theory (Nilsen, 2015).
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 (Biermann and Harsch, 2017).
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 (Davis and Cobb, 2009). 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. Thus, the organizations may confront the challenges and risks when adopting this theory of organizational design. To mitigate these risks, Security Company requires finding more firms so that it can decrease the extent of dependency on a particular company. 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 (Drees and Heugens, 2013).
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 (Mahalingam and Levitt, 2007).
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 (Suddaby, 2015). 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 (Schiele, et al, 2015).
In addition to above theories, modern organizations can use Population Ecology Theory that was introduced by Pfeffer and Aldrich in the year 1976. It is open system concept which consists of environment of company (Rockwood, 2015). This is a significant theoretical framework which answers the question that why some companies survive while other fail. Population Community 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. This approach reduces the significance of individuals and groups because it focuses on large population (Eomnicki, 2018).
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 changed its organizational structure and used political forces to influence the public policy in an effective manner that guarantees the growth and success for organization. About this, it can be stated that this concept can be difficult in some situations as it is unable to respond pragmatic events (Nienhüser, 2008).
From the above summary of organizational design theories, it can be stated that above theories of organizational action can be implemented by any organization. These theories indicate the connection between company design and workplace environment. The analysis of above theories shows that there are both similarities and dissimilarities among these theoretical concepts. As stated above, resource dependence concept emphasizes on a single company. It focuses on the impact of agents showcasing the principles to respond the organizational changes. The work of agent is significant to the company and changes in the contingencies. Thus, it is vital to formulate most appropriate strategies by evaluating whole environment. Institutional and population ecology theories centers on top level position that includes population of company by focusing on environmental forces like political and legal forces (Eomnicki, 2018).
The major similarity between population ecology and institutional theory is that both theories recommend that companies are determined by the selection of environment and its factors. Institutional theory defines that factors of macro-environment are major factors that can form an effective structure of company. Similarly, population ecology is accountable for prominence of validity for the companies to stay competitive and successful.
Various management authors claimed that there are no major differences between population ecology and institutional theories. Some stated that both are different perspectives like institutional concept is responsible for group impact while population ecology theory undertakes that validity is clear outcome of population size. Furthermore, resource dependence concept studies the relationships of firms with dependencies. It emphasizes on using the agents’ power to ensure that there is a significant growth in the resources from its external environment. Population ecology gives a company the most suitable company structure that can be selected by environment. It helps in safeguarding the competencies and resources (Abbott, Green and Keohane, 2016).
In this way, this essay discovers that resource dependence concept can be regarded the most compelling theory for strategic choice and determinism. 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. As a most compelling theory, resource dependence theory may direct the company’s management to organize the firm by using different modes such as joint ventures and mergers.
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 resource based theory is best theory among three 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.
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