A Business Encyclopedia

Organizational Theory

Definition: The Organizational Theory refers to the set of interrelated concepts, definitions that explain the behavior of individuals or groups or subgroups, who interacts with each other to perform the activities intended towards the accomplishment of a common goal.

In other words, the organizational theory studies the effect of social relationships between the individuals within the organization along with their actions on the organization as a whole. Also, it studies the effects of internal and external business environment such as political, legal, cultural, etc. on the organization.

The term organization refers to the group of individuals who come together to perform a set of tasks with the intent to accomplish the common objectives. The organization is based on the concept of synergy, which means, a group can do more work than an individual working alone.

Thus, in order to study the relationships between the individuals working together and their overall effect on the performance of the organization is well explained through the organizational theories. Some important organizational theories are:

  1. Classical Theory
  2. Scientific Management Theory
  3. Administrative Theory
  4. Bureaucratic Theory
  5. Neo-Classical Theory
  6. Modern Theory

An organizational structure plays a vital role in the success of any enterprise. Thus, the organizational theories help in identifying the suitable structure for an organization, efficient enough to deal with the specific problems.

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