Date of Graduation

5-1970

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Management

Advisor

Robert D. Hay

Committee Member

Warren E. Banks

Second Committee Member

James P. Modisette

Keywords

Formal organization, business concepts, co-equality, authority, responsibility

Abstract

Formal organization theory has evolved from the traditional school of thought through the scientific management and behavioral schools and into what is currently called open system theory. In spite of voluminous writing by the academician, no school of thought or no theory has been universally accepted. This may be due to the failure to consult the businessman who interprets and applies theoretical concepts to the practical situation. The purpose of this study was to help clear the theory jungle by determining the extent to which a sample of business practitioners agreed with basic factors of a comprehensive theory of formal organization developed by Dr. Robert D. Hay.The Hay theory states that organizations are established to satisfy human needs and wants. Various goods and services are created by organizations to satisfy the many groups which contribute to the organization. The contributors are customers, management, nonmanagerial employees, creditors, suppliers, owners, government, and community. The goods and services have value (because of the production cost and utility) to each of the contributors. The creation of these values becomes the objectives of the organization. The managerial philosophy of determining these objectives is influenced by various environmental forces—legal-political, social-cultural, religious-ethical, and economic. If the perception of value by contributors differs and thereby causes the personal objectives of the 2 contributors to conflict, it is the responsibility of management to determine priorities in meeting these objectives. Once organizational objectives are known, it is possible to determine the organizational structure with its managerial and operative functions necessary to achieve the objectives. To carry out the functions the delegation of authority, of responsibility, and of accountability is required. Authority may be obtained through the position held or through personal leadership. Proper and effective use of authority, responsibility, and accountability permits mental and physical activities to be performed which results in the creation of the goods and services to satisfy the needs and wants of contributors to the organization. Data was gathered by personal interviews with a top level executive in twenty organizations. The sample was structured to include managers from five business fields, owners and professional managers, and managers from large and medium size organizations. The data required for this study was highly qualitative. Because some questions were theoretical and did not deal with concepts normally considered by businessmen, the interviewer occasionally had to interpret the expressed as well as the implied opinions. Sample size and subjectiveness of the data were not conducive to statistical analysis. The conclusions of this study may not be true of the universe. Except occasionally, there was very little difference among the responses of managers of various business fields, owners and professional managers, and managers of large and medium size organizations. 3 On some theoretical points the level of agreement with the theory tended to be moderate. This may be partly attributed to the fact that these were points not normally considered by the interviewees. These purely theoretical points especially related to the determination of value, the role of value in determining organizational objectives, the tie-in of types of utility to line, service, and staff functions, and the possibility of superiors receiving authority from subordinates. The highest acceptance levels concerned theory facets with which the managers frequently worked, e.g., identification of typical personal objectives of contributors, internal objective hierarchy, factors influencing managerial philosophy, and most facets of authority, responsibility, and accountability. The over-all conclusion was that the Hay theory is generally accepted and does provide a logical, organized framework around which both theoretical and practical developments may be formulated.

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