Neo-Classic Organization Theory

Usually, most people identify the NeoClassical Theory with the human relations movement which Elton Mayo had pioneered. Mayo and his associates conducted the Hawthorne experiments which formed the basis of this theory. In this article, we will talk about the NeoClassical Theory of organizations.

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Introduction to NeoClassical Theory

The Hawthorne experiments revealed that an informal organization, as well as socio-psychological factors, exercise a much higher influence on human behavior than the psychological variables.

Therefore, these findings focused their attention on human beings and their behavior in organizations.

Hence, the NeoClassical theory is also called the Behavioral Theory of Organizations or the Human Relations Approach.

Browse more Topics under Evolution Of Management Thought

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• Henri Fayol Principles and Techniques of Management
• Bureaucratic Theory by Max Weber
• Classic Organization Theory
• Modern Organization Theory- Systems Theory
• Modern Organization Theory- Contingency Theory

NeoClassical Theory of Organizations

The main propositions are as follows:

• Generally speaking, an organization is a social system. Further, it has several interacting parts.
• An informal organization exists within every formal organization. More importantly, the two affect each other.
• Human beings are interdependent. Hence, the organization can predict its
• behavior if it looks at the social and psychological factors.
• Motivation is a highly complex process. Several socio-psychological factors operate together to motivate people at work.
• Human beings do not always act rationally. In fact, the most irrational behavior is when they seek rewards from work.
• Typically, organizational goals conflict with every individual’s goals. Therefore, a reconciliation of these goals is important.
• Another important aspect of the functioning of an organization is teamwork. However, organizations need to work towards this.

Understand the Bureaucratic Theory by Max Weber in detail

Further, the neoclassical writers offered an organizational design as follows:

1. Flat structure – The scalar chain is shorter. Therefore, communication and motivation are more effective.
2. Decentralization – A decentralized structure allows initiative and autonomy at the lower levels.
3. Informal Organization – A formal organization represents official channels of interactions. However, it has many weaknesses. Therefore, an informal organization can plug these loopholes and satisfy the social and psychological needs of people.

Weaknesses of NeoClassical Theories

While the neoclassical theory improves on its predecessors, it has the following weaknesses:

• The NeoClassical theory offers various structures. However, you cannot apply them to all situations. Also, a single structure does not serve the purposes of all organizations.
• This theory lacks a unified approach. In simpler terms, it is just a modification of the Classical Organizational theory.
• The NoeClassical Theory is based on several assumptions which may not be true. To give you an example, the assumption that it is always possible to find a solution to a problem that satisfies everybody is not true.

Solved Question for You

Q1. What are the main propositions of the NeoClassical Organizational Theory?

Answer: The main propositions are as follows:

• An organization is a social system with several interacting parts.
• Every formal organization has an informal organization within it. Also, the two affect each other.
• Since human beings are interdependent one can predict their behavior by looking at the social and psychological factors.
• Many socio-psychological factors work together to motivate people at work.
• Human beings can act irrationally too, especially when they seek rewards from work.
• Organizational goals can conflict with the individual’s goals. Hence, these goals need to be reconciled.
• Teamwork is essential for the growth of an organization. However, it needs to be developed.