Organizational Behaviour Theories and Their Importance in Management

Organizational Behaviour Theories and Their Importance in Management

6 mins read236 Views Comment
Rashmi Karan
Manager - Content
Updated on May 14, 2024 16:58 IST

Organizational behavior theories play a significant role in understanding and shaping corporate cultures. These study human behavior in the real world – how employees interact with one another and the organization itself. It further helps businesses apply that knowledge and inform them how they should work to improve efficiency, motivate employees and boost profits. Organizational behavior theories provide frameworks and insights that help businesses better understand and manage their employees and organizational dynamics, ultimately leading to improved performance and success.


Insights into Organisational Behaviour in the Workplace
Insights into Organisational Behaviour in the Workplace
Organisational behaviour (OB) entails examining the dynamics of interactions and mutual influence among individuals, groups, and organisations. Learn about it in detail, with types and factors that will enhance more

Organizational Behavior Theories

Some of the most influential organizational behavior theories, with real-life examples, include:

Scientific Management Theory

Frederick Taylor pioneered scientific management theory in 1909. This theory emphasizes efficiency and productivity through systematic workflows and optimizing tasks and processes by breaking down jobs into smaller, more manageable tasks. 

Scientific management theory has been criticized for ignoring workers’ social and psychological needs and being too inflexible, but it is still used in some corporations today.

Example: Fast-food chains like McDonald’s use scientific management principles to create standardized processes for cooking, assembling, and serving food. The corporate culture is focused on efficiency and consistency in delivering products and services.

Explore – Management Courses

Bureaucracy Theory

Max Weber's bureaucracy theory, developed in the late 1800s, outlines principles for organizing and managing large organizations. Weber believed that bureaucracies are the most efficient and effective form of organization, but they can also be criticized for being rigid and inflexible.

Example: The U.S. government has a bureaucratic culture characterized by strict adherence to specified rules and procedures, clearly defined roles for officials, and a hierarchical chain of command.

Hybrid Organization Theory

Hybrid organization theory combines elements of bureaucracy and scientific management, along with other approaches, such as human relations and process management. This theory aims to create a more flexible and adaptable organization that can respond to environmental changes.

Example: Some tech companies, like Spotify, blend hierarchy elements with team autonomy. While a corporate culture emphasizes innovation and creativity, teams have a degree of independence to pursue their projects.

Informal Organizational Theory

Informal organizational theory acknowledges the existence of informal relationships and networks within organizations. These informal structures can significantly impact employee behaviour and organizational performance.

Example: A group of employees who regularly go out for lunch or drinks together is an example of an informal organizational group.

Five Bases of Power Theory

French and Raven proposed the Five Bases of Power Theory in 1959. It is a framework for understanding the sources of power that individuals or leaders can possess within an organization. The theory identifies five primary bases of power: legitimate, reward, coercive, expert, and referent. 

  • Legitimate Power: Managers at this level can make decisions, set priorities, and allocate resources.
  • Reward Power: Executives with reward power can grant performance-based bonuses and stock options to top-performing employees.
  • Coercive Power: The executive with coercive power can reassign or terminate employees who consistently underperform or violate company policies. 
  • Expert Power: Expert power is based on an individual’s specialized knowledge, skills, or expertise.
  • Referent Power: The executive is known for their approachable and personable leadership style. 
  • Corporate cultures can vary depending on which sources of power are predominant.

Human Relations Management Theory

Human relations management theory focuses on the importance of employee satisfaction and morale. This theory suggests that managers can improve productivity by creating a positive work environment where employees feel valued and respected.

Example: Companies like Zappos prioritize employee well-being and happiness as part of their corporate culture, believing that happy employees lead to satisfied customers and business success.

Process Management Theory

Process management theory focuses on identifying and improving organizations’ existing processes. This theory suggests that by optimizing processes, organizations can improve efficiency, quality, and customer satisfaction.

Example: Automotive manufacturers like Toyota are known for their corporate culture of Kaizen (continuous improvement) and process optimization. These businesses encourage employees to identify and address process inefficiencies.

X & Y Management Theory

Theory X and Theory Y are contrasting views of human nature and motivation. Theory X assumes employees are lazy and unmotivated and must be closely supervised and controlled. Theory Y, on the other hand, believes that employees are hardworking and self-motivated and, therefore, thrive in environments where they are given autonomy and responsibility.

Example: Google’s corporate culture is an excellent example of Theory Y. The company provides employees with a high degree of autonomy and flexibility to its employees. It encourages the teams to be creative and innovative. 

Henri Fayol’s 14 Principles of Management with Examples
Henri Fayol’s 14 Principles of Management with Examples
The article explores 14 principles of management by Henri Fayol. Fayol’s 14 management principles are a valuable tool to improve teams' performance. By following these principles, managers can help more

Importance of Organizational Behavior Theories in Management

For managers, understanding organizational behaviour has never been more critical than it is now. Organizational behaviour theories are fundamental for the competitiveness of companies.

Workers value much more than economic compensation when deciding to stay. Many other factors influence talent turnover; companies today need to know all these variables to retain their employees. 

Listed below are the importance of organizational behaviour in understanding and managing human behaviour within companies.  

Predicting Employee Behavior

Organizational behaviour theories help managers understand how individuals and groups behave within organizations. This prediction is vital for making informed decisions, setting expectations, and planning for various scenarios.

Foster Employee Motivation

By comprehending employees' needs and applying organizational behavior and motivational theories, managers can create work environments that address these needs and, in turn, inspire higher levels of employee engagement, commitment, and performance.

Employee Retention Basics
Employee Retention Basics
Employee retention isn’t just a feel-good concept. It’s a strategic approach that offers tangible benefits for organisations. When skilled and dedicated employees choose to remain within the company fold, more

Promote Systematic Leadership

Organizational behaviour replaces intuition and guesswork with systematic study and research. This evidence-based approach leads to more informed decision-making and more streamlined and effective leadership.

Streamline HR Strategies 

Organizational behaviour theories significantly influence HR strategies by providing insights into how individuals and groups function. These theories help HR professionals understand employee motivation, job satisfaction, and team dynamics. These insights can help to tailor HR strategies to optimize recruitment, retention, and talent development efforts. 

Top 10 HR Trends Defining the Future of Work
Top 10 HR Trends Defining the Future of Work
Keeping abreast of these HR trends is crucial for organizations looking to remain competitive and attract top talent. Discover the top 10 HR trends shaping the future of work. more

Employee Engagement

These theories offer tools and concepts to enhance employee engagement and job satisfaction. Engaged employees are more productive, committed, and likely to stay with the organization.

Boost Team Dynamics

Organizational behaviour theories explore team dynamics and the factors contributing to effective teamwork. Understanding the abilities and dynamics of individuals and groups enables organizations to optimize their workforce. Managers can use this knowledge to build and lead high-performing teams. 

Boost Performances

Organizational behavior theories study individuals, groups, and the company’s structure. They help identify and address factors that may hinder success and improve overall corporate performance and effectiveness.

Performance Management and its Importance for Organizations
Performance Management and its Importance for Organizations
The overall organizational growth is the main focus of any organization. This growth is directly proportional to employee performance and motivation. Companies have been concerned with chalking out strategies more

Conflict Resolution

Understanding conflict dynamics and resolution strategies is crucial for maintaining a harmonious work environment. Organizational behavior theories guide how to address and resolve conflicts effectively.

Promote Ethical Behavior

Understanding ethics and values in the workplace is crucial for maintaining ethical standards and corporate social responsibility. Organizational behavior theories provide a framework for ethical decision-making.


Organizational behavior is a critical field of study and practice that provides valuable insights into human behavior within organizations. It contributes to better decision-making, improved employee relations, and enhanced organizational performance. By understanding and applying principles of organizational behavior, businesses can create healthier work environments and increase their chances of success in a competitive world.


What is organizational behavior (OB) and why is it important in management?

Organizational behavior is the study of how individuals and groups behave within organizations. It's important in management because it provides insights into understanding and managing employees, teams, and organizational dynamics, leading to better decision-making and improved performance.

How can organizational behavior theories help improve teamwork and collaboration in organizations?

These theories provide insights into team dynamics, leadership styles, and communication patterns. By applying these insights, managers can enhance teamwork, foster collaboration, and improve team performance.

How can organizational behavior theories help improve teamwork and collaboration in organizations?

These theories provide insights into team dynamics, leadership styles, and communication patterns. By applying these insights, managers can enhance teamwork, foster collaboration, and improve team performance.

What role does organizational culture theory play in shaping company values and behaviors?

Organizational culture theory emphasizes the influence of shared values and norms on behavior. Managers can shape culture to align with desired organizational values and objectives.

What are some fundamental organizational behavior theories, and how do they impact management practices?

Fundamental OB theories include scientific management, human relations, and contingency theory. They impact management practices by offering frameworks for understanding employee behavior and guiding leadership and organizational strategies.

About the Author
Rashmi Karan
Manager - Content

Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio