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Why Is Organizational Theory Important for Business?

Organizational theory is a discipline that provides insights into how businesses and organizations function, develop and adapt to changes in the external environment. It’s an important field of study for managers and leaders who want to optimize their organizational processes, structures and strategies.

Organizational theory encompasses a variety of perspectives and frameworks that examine the behavior, structure and function of organizations. It seeks to explain how different elements within an organization — such as teams, individuals, departments and the overall structure — interact together and influence outcomes. By understanding these dynamics, organizational theory offers valuable information for improving effectiveness, efficiency and performance.

According to MarketBusinessNews, “Organizational theories all address several main questions about how a company works. They assume an organization has structure, goals, and members but focus on the efficiency of the organizations.”

An online Master of Business Administration (MBA) with a concentration in Management from Arkansas State University (A-State) can help students elevate their managerial expertise with leading-edge coursework that combines practical leadership skills with advanced cognitive theories. In this 100% online degree program, students can improve their ability to navigate an organization’s unique environmental, structural and international influences. Students can customize this degree to meet unique personal interests and professional goals with specialized elective courses.

Types of Organizational Theory

There is no one-size-fits-all for organizational theory. Indeed outlines the six most common types and their purposes:

  1. Classical theory: Focuses on how to divide up tasks of a business’ formal structure depending on professional dynamics
  2. Neo-classical theory: Emphasizes the psychological and emotional components of employee behavior and how to build a culture of social acceptance
  3. Modern theory: Considers all interactions among employees that utilize qualitative and quantitative research
  4. Contingency theory: Also called decision theory and considers all kinds of decision-making
  5. Motivation theory: Focuses on the motivational elements of employee goal-setting and behavior
    1. Open systems theory: Emphasizes the environmental factors that influence an organization

    The Importance of Organizational Theory to Businesses

    Below are some of the reasons, according to Indeed, why organizational theory is fundamental to businesses and why it’s beneficial for making informed decisions and implementing changes:

    • Enhancing decision-making. Organizational theory provides companies with a systematic framework for decision-making. It helps managers recognize patterns, analyze complex situations and make informed choices based on the available data and theories. By understanding how different variables and factors interact within the organization, managers can make decisions corresponding to the company’s objectives.
    • Improving efficiency and productivity. Efficiency and productivity are vital to the success of any business. Organizational theory enables companies to streamline processes, identify bottlenecks and optimize resource allocation. By appreciating the relationships between interdependencies and interconnectedness of various parts of an organization, leaders can spot inefficiencies and implement changes that enhance productivity. This can involve redefining roles and responsibilities, improving communication or restructuring individual teams.
    • Fostering innovation and adaptability. In today’s rapidly changing business world, companies must be adaptable and agile. Organizational theory provides insights into how businesses can foster innovation, adapt to new challenges and manage change. When business leaders recognize strengths and weaknesses, they can point out areas for improvement and allocate resources to effectively nurture innovation.
    • Promoting effective leadership and employee engagement. Effective leadership is key for motivating employees, developing a positive work environment and achieving goals. Organizational theory presents significant information regarding communication patterns, employee motivation and leadership styles to create a supportive work environment that encourages employee engagement.

    About A-State’s Online MBA With a Concentration in Management

    This program helps students examine leadership through relevant psychological, strategic and socioeconomic perspectives while learning about the subtleties of data-driven and ethical decision-making in the modern business world.

    Degree candidates in this program will learn how to develop leadership skills and study leadership applications and theories, examine practical implications for managing dynamic organizations and understand the ways teams and individuals work in organizations with an emphasis on practical applications for those in leadership positions. Relevant courses like Organizational Theory and Seminary in Organizational Behavior prepare students with leadership skills necessary for business success.

    Graduates of this MBA program are qualified to pursue careers as a project managers, entrepreneurs, business consultants, human resources directors, business unit directors and more. According to the U.S. Bureau of Labor Statistics, management-related jobs are expected to grow by 8% through 2031, which is faster than average.

    Learn more about Arkansas State University’s online Master of Business Administration with a concentration in Management program.

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