Maneka observes that a majority of her team members have been unhappy for the past couple of weeks. She takes them out on a team lunch, hoping that they would start responding better. However, the employees continue to display low morale. This further impacts the overall efficiency and there’s a delay in meeting project deadlines.

For gauging employee expectations and improving business management, Maneka can rely on organizational change theories. Such theories came into existence to study the existing patterns and structures of organizations. Additionally, they help identify problems and maximize efficiency and productivity. Let’s explore the different types of organizational theories in detail.

  1. The Importance Of Organizational Theories

  2. Different Types Of Organizational Theories

  3. Putting The Theories In Action

The Importance Of Organizational Theories

Organizational theories help you study an organization, its corporate designs, structures and behavior of individuals or groups. They aim to provide an overview of how organizations function and the things they need to improve efficiency and profitability. By studying the impact of internal and external business environments, organizational theories provide a lens to address critical questions about how a business works or operates.

An ideal example of organizational change theories in action is the creation of assembly lines. Henry Ford, the founder of Ford Motor Company, implemented this innovative design by modifying factory production. The assembly line method—new parts are added at every workstation—is still used in many modern factories. Such developments are possible because organizational theories help identify solutions that meet a stakeholder’s needs.

Different Types Of Organizational Theories

Over time, various kinds of organizational theories emerged that explained and predicted processes and patterns in workplace environments. There were three major schools of thought, namely:

  • Classical Organizational Theory

  • Neo-classical Organizational Theory

  • Modern Organizational Theory

Success depends on the way you lead your employees and improve management practices. Let’s look at these different types of organizational theories in detail and see how they contribute to effective management and business success:

  1. Classical Organization Theory



Classical theorists viewed organizations as machines and humans as an extension of that machine. They believe that overall efficiency can be increased by making individuals more efficient. Therefore, it’s the organization’s responsibility to make changes for better performance.

Some recurring characteristics of the classical theory include:

  • Organizations are integrated and centralized systems where authority lies with the central figure

  • The focus is on outputs or results rather than inputs provided by employees

  • Labor is standardized and isn’t subject to change; labor doesn’t depend on the role

While the classical theory helped standardize the management process and increase efficiency, it met several criticisms. The theory didn’t apply to complex organizational structures and doesn’t factor in social and psychological aspects of employees.

  1. Neoclassical Organization Theory


The neoclassical theorists viewed organizations as a social system where human actions and interactions have a direct impact or effect on performance. Therefore, humans are at the center of this theory and social relationships and interactions are instrumental to organizational efficiency.

A few common characteristics of the neoclassical school include:

  • Focus is on human behavior and their relationships with one another

  • Teamwork is essential for the smooth functioning of organizations and it’s only possible through effective communication and feedback

  • Employees have different needs and expectations, there are diverse factors motivating them to perform better

Although the Neoclassical Theory moves away from traditionalist views where humans are treated like machines, it has some limitations. It ignores the environment in which an organization operates.

  1. Modern Organization Theory


Modern organizational theory has attempted to overcome the shortcomings of previous theories and was developed in the early 1960s. It integrates the classical model with behavioral science and even considers the environment it’s in. Some essentials of this theory are:

  • An organization is an open system that interacts with its environments (internal and external) to develop and grow in the market

  • It encompasses multiple aspects and levels of organizational environments—micro- and macro-environment

  • An organization is a dynamic system that responds and adjusts to the changing environment

While the modern theory solved several persisting challenges of the past, it was criticized for the absence of unified knowledge. Nevertheless, these organizational theories hold relevance in modern workplaces and are instrumental for influencing change.

Putting The Theories In Action

Correctly applying organizational theories has several benefits. It’s also evident from these theories that relationships among individuals—whether in internal or external environments—are crucial for influencing the overall performance of an organization. If you want to encourage teamwork and improve collaborative efforts, Harappa’s Establishing Trust course will help you. Learn how to build and maintain trust-rich relationships by focusing on credibility and openness, honoring commitments, being empathetic and prioritizing the needs of your team. Show your team that you’re trustworthy and they can implement effective change by working with you. Give Harappa a shot!

Explore Harappa Diaries to learn more about Organizational Behavior, What Is Organizational Behavior And Why Is It Important, Theory Of Leadership In Organizational BehaviorMotivation in Organizational Behavior to build strong professional networks.