ORGANIZATION AND COMPONENTS OF ORGANIZATION:Open versus Closed Systems, The Hawthorne Studies

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Human Resource Management (MGT501)
Lesson 3
After studying this chapter, students should be able to understand the concepts about:
Components of an Organization
This lecture discusses the organization, its types, and the components of organization. An organization is a
managed system designed and operated to achieve a specific set of objectives. We will also discuss the
components of an organization. Remember Managers operate in organizations.
A. Organization
An organization is not a random group of people
who come together by chance. They consciously
and formally establish it to accomplish certain goals
What is an Organization?
that its members would be unable to reach
individually. A manager's job is to achieve high
performance  relative  to  the  organization's
objectives. For example, a business organization has
objectives to (1) make a profit (2) furnish its
customers with goods and services; (3) provide an
income for its employees; and (4) increase the level
of satisfaction for everyone involved.
An organization is a social entity, which is goal
orients and deliberately structured. Organizations
are not functioning in isolated but are linked to
external  dynamic  environment.  Virtually  all
organization combines (1) Raw material, (2) Capital and (3) labor & knowledge to produce Goods and
Types of organization
Formal: The part of the organization that has legitimacy and official recognition.
Informal: The unofficial part of the organization.
B. Components of Organization:
1. Task
2. People
3. Structure
4. Technology
1. Task: This component can be defined as a mission or purpose of the existence of organization.
Every organization is having a purpose of
existence  that  is  accomplished  by  Organization's basic systems view
producing certain goods and services as
an output, which is termed as task.
2. People: The workforce or human part of
organization  that  performs  different
operations in the organization.
Human, physical,
3. Structure:  Structure  is  the  basic
financial, and
4. Technology:  The  intellectual  and
Feedback loops
mechanical  processes  used  by  an
organization to transform inputs into products or services.
Human Resource Management (MGT501)
Systematic Approach to Management:
A system is an entity with a purpose that has interdependent parts. The systems approach suggests viewing
the organization as a system. All systems have four basic characteristics:  1) they operate within an
environment; 2) they are composed of building blocks called elements, components, or subsystems; 3) they
have a central purpose against which the organization's efforts and subsystems can be evaluated; and 4)
essential systems thinking places focus on the interrelatedness among the subsystems and its environment.
Systematic management emphasized internal operations because managers were concerned primarily with
meeting the explosive growth in demand brought about by the Industrial Revolution. In addition, managers
were free to focus on internal issues of efficiency, in part because the government did not constrain
business practices significantly. Finally, labor was poorly organized. As a result, many managers were
oriented more toward things than toward people.
The influence of the systematic management approach is clear in the following description of one
organization's attempt to control its workers.
Open versus Closed Systems
A closed system does not interact with the outside environment. Although few systems actually take this
form, some of the classical approaches treated organizations as closed systems. The assumption was that if
managers improve internal processes, the organization would succeed. Clearly, however, all organizations
are open systems, dependent on inputs from the outside world, such as raw materials, human resources, and
capital, and output to the outside world that meet the market's needs for goods and services.
Above figure illustrates the open-system perspective. The organizational system requires inputs, which the
organization transforms into outputs, which are received by the external environment. The environment
reacts to these outputs through a feedback loop, which then becomes an input for the next cycle of the
system. The process continues to repeat itself for the life of the system.
As above Figure shows, a system is a set of interdependent parts that processes inputs (such as raw
materials) into outputs (products). Business inputs typically known as resources including human, physical,
financial etc resources. Most businesses use a variety of human, financial, physical, and informational
resources. Manager's function is to transform these resources into the outputs of the business. Goods and
services are the outputs of the business. Some of the major components of the external environment
include customers, competitors, suppliers, and investors.
Efficiency and Effectiveness
The closed-system focus of the classical theorists emphasized the internal efficiency of the organization;
that is, these perspectives addressed only improvements to the transformation process. Efficiency is the
ratio of outputs to inputs. Systems theory highlights another important dimension for managers:
effectiveness. Effectiveness is the degree to which the organization's outputs correspond to the needs and
wants of the external environment. The external environment includes groups such as customers, suppliers,
competitors, and regulatory agencies. Even a firm that has mastered Taylor's scientific management
techniques and become extremely efficient is vulnerable if, it does not consider the effectiveness of its
Systems theory also emphasizes that an organization is one level in a series of subsystems. For instance,
Pakistan Air force is a subsystem of our defense industry and the flight crews are a subsystem of Pakistan
Air force. Again, systems theory points out that each subsystem is a component of the whole and is
interdependent with other subsystems.
Systems theory also popularized the concept of synergy, which states that the whole is greater than the sum
of its parts. For example, 3M have applied its core technology of adhesives to many products, from
industrial sealers to Post-it notes. 3M has not had to start from scratch with each product; its adhesives
expertise provides synergies across products.
Human Relation Approach
Another approach to management, human relations, developed during the early 1930s. This approach aimed
Human Resource Management (MGT501)
at understanding how psychological and social processes interact work situation to influence performance.
Human relations were the first major approach to emphasize informal work relationships and worker
This approach owes much to other major schools of thought.
The Hawthorne Studies
Western Electric Company, a manufacturer of communications equipment, hired a team of Harvard
researchers led by Elton Mayo and Fritz Roethlisberger. They were to investigate the influence of physical
working conditions on workers' productivity and efficiency in one of the company's factories outside
Chicago. This research project, known as the Hawthorne Studies provided some of the most interesting and
controversial results in the history of management.
The Hawthorne Studies were a series of experiments conducted from 1924 to 1932. During the first stage
of the project (the Illumination Experiments), various working conditions, particularly the lighting in the
factory, were altered to determine the effects of these changes on productivity. The researchers found no
systematic relationship between the factory lighting and production levels. In some cases, productivity
continued to increase even when the illumination was reduced to the level of moonlight. The researchers
concluded that the workers performed and reacted differently because the researchers were observing them.
This reaction is known as the Hawthorne Effect.
This conclusion led the researchers to believe productivity may be affected more by psychological and social
factors than by physical or objective influences. With this thought in mind, they initiated the other four
stages of the project. During these stages, the researchers performed various work group experiments and
had extensive interviews with employees. Mayo and his team eventually concluded that the informal work
group influenced productivity and employee behavior.
The Human Relations Viewpoint
Human relations proponents argued that managers should stress primarily employee welfare, motivation,
and communication. They believed social needs had precedence over economic needs. Therefore,
management must gain the cooperation of the group and promote job satisfaction and group norms
consistent with the goals of the organization.
Another noted contributor to the field of human relations was Abraham Maslow. In 1943, Maslow
suggested that humans have five levels of needs. The most basic needs are the physical needs for food,
water, and shelter; the most advanced need is for self-actualization, or personal fulfillment. Maslow argued
that people try to satisfy their lower level needs and then progress upward to the higher-level needs.
Managers can facilitate this process and achieve organizational goals by removing obstacles and encouraging
behaviors that satisfy people's needs and organizational goals simultaneously.
Although the human relations approach generated research into leadership, job attitudes, and group
dynamics, it drew heavy criticism. Critics believed the philosophy, while scientific management
overemphasized the economic and formal aspects of the workplace; human relations ignored the more
rational side of the worker and the important characteristics of the formal organization. However, human
relations were a significant step in the development of management thought, because it prompted managers
and researchers to consider the psychological and social factors that influence performance.
The Challenges of today's organization
Organizations are facing different challenges in
today's environment like:
Only 20 years ago, few workers used fax machines
or e-mail, and computers occupied entire rooms,
not desktops. Advances in information and
communication  technology  have  permanently
altered the workplace by changing the way
information is created, stored, used, and shared.
Diverse Workforce
A diverse workforce refers to two or more groups,
Human Resource Management (MGT501)
each of whose members are identifiable and distinguishable based on demographic or other characteristics
like gender, age group, education etc. Several barriers in dealing with diversity include stereotyping,
prejudice, ethnocentrism, discrimination, tokenism, and gender-role stereotypes.
Multiple Stakeholders
Stakeholders are those who have interests in the organization. Multiple stakeholders for an organization
include the customers, suppliers, consumers, investors, lenders, etc.
An organization has to be responsive to the challenges and threats that it faces from within the internal or
external environment. It requires quick responsiveness to meet the challenges and opportunities arising out
of these changes.
Rapid Changes
Due to changing internal and external environment, rapid changes in the organization occur. Organization
has to be flexible to adjust to those changes.
Managers are faced with a myriad of challenges due to an array of environmental factors when doing
business abroad. These managers must effectively plan, organize, lead, control, and manage cultural
differences to be successful globally.
Key Terms
Diverse Workforce:
A diverse workforce refers to two or more groups, each of whose members are
identifiable and distinguishable
A measure of the appropriateness of the goals chosen (are these the right goals?),
and the degree to which they are achieved
Efficiency is the ratio of outputs to inputs
Organization is a managed system designed and operated to achieve a specific
set of objectives.
Stakeholders are those who have interests in the organization
Structure is the basic arrangement of people in the organization.
This concept states that the whole is greater than the sum of its parts
A system is an entity with a purpose that has interdependent parts
This component can be defined as a mission or purpose of the existence of
Table of Contents:
  1. INTRODUCTION TO HRM:Growing Importance of HRM, Road Map of the Course
  2. ESSENTIALS OF MANAGEMENT:Concepts and Essential of Management, Managerís Roles
  3. ORGANIZATION AND COMPONENTS OF ORGANIZATION:Open versus Closed Systems, The Hawthorne Studies
  4. PEOPLE AND THEIR BEHAVIOR:Why to work in organizations?, The Goals of Organizational Behavior
  5. INDIVIDUAL VS. GROUP BEHAVIOR:What Are Roles?, Problem solving Team
  6. PERSONNEL MANAGEMENT TO HUMAN RESOURCE MANAGEMENT:Records and Administration, Competitive Advantage
  7. HRM IN A CHANGING ENVIRONMENT:Productivity, New Trends at Work Place
  8. How organization Cultivate a Diverse Workforce, STEPS TOWARD MANAGEMENT OF DIVERSITY
  9. FUNCTIONS AND ENVIRONMENT OF HRM:Compensation and Benefits, Safety And Health, Interrelationships of HRM Functions
  10. LINE AND STAFF ASPECTS OF HRM:Authority, Line versus Staff Authority, Staff Manager
  11. LEGAL CONTEXT OF HR DECISIONS:Doing the Right Thing, Affirmative Action, Unintended Consequences
  12. HUMAN RESOURCE PLANNING (HRP):Benefits of HR Planning, Forecasting Human Resource Availability
  13. STRATEGIC PLANNING AND HRIS:HRís Strategic Role, Human Resource Information System, Common HRIS Functions
  14. JOB ANALYSIS:Purposes of the job Analysis, Questions Job Analysis Should Answer
  15. JOB ANALYSIS:Methods of Collecting Job Analysis Information, Observation, Source of Data
  16. JOB ANALYSIS (CONTD.):SURPLUS OF EMPLOYEES FORECASTED, Diversity through Recruiting Efforts
  17. SOURCES OF RECRUITMENT:ALTERNATIVES TO RECRUITMENT, Quantity of the Applicants, Quality of the Applicants
  18. SELECTION:Initial Screening, Advantages of Successful Screening
  19. SELECTION TESTS:Characteristics of Properly Designed Selection Tests, Guidelines for Conducting an Interview
  20. SELECTION PROCESSÖ CONTD:Background Investigations, Physical Exam, Selecting Managers
  21. SOCIALIZATION:Compensation and Benefits, Team Membership, Stages in socialization Process, Training and Development Trends
  22. TRAINING AND DEVELOPMENT:Learning, Phases of Training, Why Transfer of Training Fails
  23. MAXIMIZING LEARNING:Following up on Training, Repetition, Feedback, Purposes of T & D
  24. CAREER MANAGEMENT:Individual career planning, Career Planning and Development Methods
  25. PERFORMANCE:Determinants of Job Performance, Why is performance measured?, Performance Management
  28. COMPENSATION SYSTEM:Pay, Job Pricing, Compensation: An Overview, Compensation Surveys
  29. BENEFITS:Total Compensation, Discretionary Benefits (Voluntary), Workplace Flexibility
  30. ROLE OF MONEY IN PERFORMANCE OF EMPLOYEES:Types of Pay-for-Performance Plans, Empower Employees
  31. MOTIVATION:The Motivation Process, Motivational Theories, Challenges of motivating employees
  32. OCCUPATION, HEALTH & SAFETY:Physical Conditions, Accident Investigation, Smoking in The work place
  33. STRESS MANAGEMENT:Symptoms of Stress, Managing Stress,
  34. COMMUNICATION IN ORGANIZATION:Burnout, Social Support at Work & Home, Communication in organization, Meetings
  35. TRADE UNIONS:Collective Bargaining, The HRM Department in a Nonunion Setting, Phases of Labor Relations
  36. CONFLICT AND NEGOTIATION:Transitions in Conflict Thought, Individual Conflict Management Styles
  37. POWER AND POLITICS:Sources of Power, Advantages and Disadvantages of PowerPower and Politics in Context
  38. EMPLOYEE RIGHTS AND DISCIPLINE:Contractual Rights, Management Rights, Disciplining Employees,
  39. DISCIPLINE (CONT...):Factors to Consider when Disciplining, Disciplinary Guidelines, Employee Separations
  40. LEADERSHIP:The Leaderís Behavior, Situational Theories of Leadership, Becoming a Leader
  41. REVISION (LESSON 12-21):Plans, Job Specification, Human resource planning, Selection Process, Corporate Culture
  42. REVISION (LESSON 22-26):Training, Case Study Method, Training, Performance
  43. REVISION (LESSON 27-35):Classification Method, Compensation, Empowerment, Mediation
  44. INTERNATIONAL DIMENSIONS OF HRM:Global Corporation, Type of staff members, Approaches to Global Staffing
  45. CONCLUSION & REVIEW:Strategies for Gaining Competitive Advantage, High-performance Work System