Literature Review Paper


Organizational Theory

Organizational Theory


Multiple theories determine understanding human behavior in an organizational setting through the study of organizational behavior. The organizational theories influence the understanding and interpretation of different behaviors and how the knowledge is used to establish better operational efficiency.

I. Introduction

Organizational theory is the study of organizational structure and analysis of its productivity and performance. Organizational theories are multiple aspects that contribute to understanding human behavior in an organization (Baum & Haveman, 2020). Business analysts and researchers understand the importance of social relationships among structures and employees that encourage productivity.

II. Findings

A. Primary Organizational Theories

The different organizational theories explain how supervisors and managers should address leadership responsibilities and ensure productivity in their organizations.

i. Classical Theory

The classical theory explains the division of tasks in the most effective and efficient way based on professional dynamics. The theory is important in helping the organization create the most beneficial structures which assist the company in achieving its goals. Classical theory is based on four principles; division of labor, scalar and functional processes, structure, and span of control.

ii. Neo-classical Theory

The neo-classical theory emphasizes on psychological and emotional components of people’s behavior where factors like leadership, cooperation, and morale contribute to habits and behaviors. According to the theory, social acceptance and a sense of belonging are important for positive performance, and leaders should work on employees’ interpersonal skills.

iii. Modern Theory

The modern theory involves interactions between people within an organization and surroundings and members’ interpersonal interactions. The theory uses mathematical and statistical information in decision-making while ensuring employee happiness and satisfaction.

iv. Contingency Theory

The theory argues that there is no one right way to make a decision. According to Herbert, employees at higher levels make the most impactful decisions, although decisions are made at all levels of the organization (Francescato & Aber, 2015). The choices made depend on internal and external factors as they differ from one organization to the other.

v. Motivation Theory

The motivation theory involves studying what drives and inspires people to work towards their goals. When the management motivates employees correctly, they work accurately and productively. The theory aims at increasing company productivity because employees are encouraged to work efficiently.

vi. Open System Theory

The theory discusses an organization’s environment and argues that the environment influences how a business performs. The impact on the organization might be from specific factors such as distributors, government agencies, and industry competitors or general factors caused by geographic location. The general factors include cultural values, legal considerations, economic conditions, and education systems (King, et al., 2010).

III. Conclusion,

A. Organizational theory defines the productivity and performance of an organization based on the employees’ actions.

B. There are six organizational theories that discuss how supervisors and leaders should address their responsibilities and ensure efficient results.

IV. Recommendations

A. The study helps one learn the organization, structures, corporate designs, and behavior of groups and individuals.

B. Understanding of what needs to be improved for profitability

C. Recommended that leaders should evaluate businesses regularly and learn areas of weaknesses to ensure they are improved.

V. Suggestions for further study

A. Further study should be done on how organizational culture and leadership are connected.

B. Study should be done one behavioral leadership theory, its different types, and its significance.


Baum, J. A. C., & Haveman, H. A. (2020). Editors’ comments: The future of organizational theory. The Academy of Management Review, 45(2), 268-272.

Francescato, D., & Aber, M. S. (2015). learning from organizational theory to build organizational empowerment. Journal of Community Psychology, 43(6), 717-738.

King, B. G., Felin, T., & Whetten, D. A. (2010). Finding the organization in organizational theory: A meta-theory of the organization as a social actor. Organization Science (Providence, R.I.), 21(1), 290-305.

Kanter, R. M. (2019). The future of bureaucracy and hierarchy in organizational theory: a report from the field (pp. 63-93). Routledge.

Singh, R., & Ramdeo, S. (2020). Organizational-Level Theories. In Leading Organizational Development and Change (pp. 247-260). Palgrave Macmillan, Cham.

Strati, A. (2018). Organizational theory and aesthetic philosophies. Routledge.

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