Rational, Natural and Open Systems Perspectives of

Organizations
There are three key theoretical perspectives of organizations: rational, natural and open
systems. Understanding these different perspectives is critical because each makes important
points about organizations. Additionally, the three perspectives embody the historical
development of the science of organizations. This historical development reveals why the three
perspectives focus on particular aspects of organizations. Modern organizational theory can be
described as a combination of these three main perspectives

Rational systems are perhaps the most common organizational type, owing to their
creation at the origin of modern organizations in the mid-19th century with the then popular
idea that organizations were like machines with parts that could be individually engineered and
then assembled into more complex apparatuses (Hoskin & Macve, 1994). Frederick Taylor’s
‘scientific management’ is perhaps the most recognizable example of rational systems
ideology. With links between ideas in scientific management and Gilbert’s formulations
(Chyung, 2005), we have reason to say that the very foundation of HPT is also affected by
these ideas.

Rational systems are at their strongest when the operating characteristics of an organization
and all components of the surrounding systems can be controlled. While Frederick Taylor’s
ideas were mostly limited to workgroups and corporate systems, he promoted his ideas to the
U. S. Congress in an effort to have it impose controls on society so that scientific management
could work its hypothetical magic (Taylor, 1972). However, when internal or external
conditions change beyond the ability of a rational system to be adapted, it becomes weaker. In
such a case, the rational system may at best simply remain efficient at doing things that no
longer have to be done.

The science of organization emerged in the early 1900s. In response to the increased rationality
of modern life, early researchers focused on the legal rational rules and regulations governing
organizations. From the rational system perspective, "Organizations are collectivities oriented
to the pursuit of relatively specific goals and exhibiting relatively highly formalized social
structures" (Scott 2003:27). Rational systems theorists focus on formalization and goal
specificity of organizations because they are critical elements of the rationality of
organizations. Important rational systems theories include:
 Scientific Management (Taylor 1911):
Scientific management takes a rational systems approach to organizations. This
perspective, pioneered by Frederick Taylor (1911), attempts to quantify and develop
more efficient work procedures through formal mechanisms. Through case studies at
Bethlehem Steel, Taylor (1911) found productivity can be maximized through
managerial control of the production process. He argues companies should use
scientific management rather than follow ordinary management principles. Scientific
management differs from ordinary management by: (1) developing a science
(measurable rules, regulations and procedures) for the working process instead of using
the rule-of-thumb method, (2) workers are scientifically selected, and trained rather
than the worker having control over the production process, (3) management cooperates
with workers to ensure workers follow set procedures to set standards, and (4) work
and responsibility is split between worker and management rather than it being
primarily the responsibility of the worker (Taylor 1911). In short, scientific
management aimed to increase efficiency by calculating the variables influencing the
production process within organizations and using that scientific knowledge to ensure
productivity is maximized through formal managerial control of individual tasks.
 Administrative Theory (Fayol 1919):
Administrative theory also takes a rational systems approach to organizations.
However, unlike scientific management, which focuses on the social psychological
level of analysis, administrative theory focuses on the structural level of the
organization. From this perspective (Fayol 1919), formal procedural change is best
made from the top-down (changes at the level of the work structure that will affect
individual tasks), rather than the bottom-up (changes at the level of individual tasks that
will affect the larger work structure). Administrative theory focuses on two parts of the
organization's structure: coordination and specialization. Coordination is the
hierarchical organizational form controlling the relations between organizational
participants. Specialization is how activities are grouped among work groups.
Administrative theory moved beyond scientific management by looking beyond the
individual and focusing on the organizational structure. However, like scientific
management, it is fixated on studying formal aspects of organizations in an effort to
maximize efficiency.
 Decision Making Theory (Simon 1945):
 Another rational systems perspective, decision making theory, also focuses on the
formal aspects of organizations. Like scientific management (and unlike administrative
theory), Simon's decision making theory focuses on the individual, rather than the
structure. However, Simon critiqued scientific management assumptions of the
economically rational worker. Although workers may seek to maximize their self-
interest, they often do not know what is in their self-interest and they do not know all
other possible options (Simon 1945). Organizations simplify decisions by setting goals
and premises. Decision making theory expanded understanding of how the worker
makes decisions by accounting for organizational constraints and gaps in knowledge.
Never the less, like other rational perspectives, it focuses on the formal structures used
to achieve set tasks.
 Bureaucratic Theory (Weber 1968):
Weber's analysis of legal rational authority and bureaucratic ideal types contributes to
rational perspectives of organizations (Scott 2003). According to Weber (1968), there
are three main types of authority: traditional authority (i.e. authority based on
traditions), charismatic authority (i.e. authority based on the perceived extraordinary
powers of an individual), and legal rational authority (i.e. authority based on written
rules and procedures). Each authoritative type is associated with a particular
administrative structure. As such, legal-rational authority relates to the bureaucratic
ideal type. An ideal type is a construct or abstraction describing distinguished features
of a specific form, but rarely found in society. There are particular characteristics which
make up the bureaucratic ideal type: (1) a set of rules and regulations, such as routine
activities, the authority to give commands and regulated expectations and
qualifications, (2) a hierarchy with ordered authority and turnover management, (3) a
written charter and documentation of organizational activities, (4) effective
management through expert training, (5) operates at full working capacity, and (6)
management is based on a stable and teachable set of rules. In addition, there are certain
features associated with the ideal type of a bureaucratic worker or official: (1) officials
are pursuing a vocation that requires certain trainings, (2) officials are are appointed by
superiors and are held accountable which is associated with a perceived higher status,
(3) officials have tenure, (4) officials receive a salary, and (5) officials are pursuing a
career (Weber 1968). Bureaucracies and officials differ in regards to their purpose and
scope. In modern society, bureaucracies flourish because they increase calculability and
 can be used to level social differences. As such, bureaucracies, with their formal rules
and regulations, are currently the most efficient method of social organization.

Natural systems follow Elton Mayo’s ‘human relations’ school of management, which
in turn was partly based on the theory that organizations (and societies) are like organisms with
multiple components similar to organs in a metaphorical body. In order for the
organization/body to thrive, each component/organ must adapt so that it can fulfil its role even
as the overall organism adapts to changes from its environment. The idea is similar to Spencer’s
concept of social evolution (Adams & Sydie, 2002) where each component must adapt to
remain fit; otherwise it fails in terms of the surrounding ecology.

Natural systems became more prevalent following WW2 when countries tried to rebuild
themselves even with limited numbers of able-bodied individuals. Great Britain turned to
academics at the Tavistock Institute who developed counselling-based practices such as the
‘Tgroup’, and where techniques of team work and team-based innovation were developed to
keep workers motivated, productive and somewhat self-managing even through very difficult
times. TQM, process improvement, and other recent innovations arose from natural systems
ideas.

Natural systems are at their best when knowledge and skills of members can be applied to the
creation and maintenance of systems responsive to and responsible for their members and
surrounding social system. However, when individuals turn inwardly and exert more effort
pursuing their own interests rather than adapting the system to changing conditions, natural
systems begin to falter.

While rational systems perspectives focus on the formal aspects of organizations, natural
systems perspectives examine its informal aspects. Natural systems perspectives emerged in
the 1930s in response to rational system approaches to organizations. Although the formal
structure of modern organizations is important, often individuals in organizations do not adhere
to formal rules. From the natural system perspective, "Organizations are collectivities whose
participants are pursuing multiple interests, both disparate and common, but who recognize the
value of perpetuating the organization as an important resource. The informal structure of
relations that develops among participants is more influential in guiding the behavior of
participants than is the formal structure" (Scott 2003:28). Natural systems theorists focus on
goal complexity and informal structure. Important natural systems theories include:

 Cooperative Systems (Barnard 1938):

Cooperative systems theory takes a natural systems approach recognizing the informal
aspects necessary for organizations to exist. According to Barnard (1938:96): "An
organization comes into being when (1) there are persons able to communicate with
each other (2) who are willing to contribute action (3) to accomplish a common purpose.
The elements of an organization therefore (1) communication (2) willingness to serve
and (3) common purpose." Individuals within organizations must be induced to
contribute, often through informal means. As such, the informal aspects of
organizations is critical to understanding how organizations work.
 Human Relations (Buroway 1979; Roethlisberger and Dickson 1939):
Human relations theory also takes a natural systems approach to organizations. From
this perspective, the behavior of individuals in organizations is influenced by the social
context. Human relations theory developed out of a series of studies conducted at the
Hawthorne Plant, starting in the 1930s. Like scientific management, human relations
theory focused on the individual level. However, unlike scientific management, it
focuses on the informal aspects affecting productivity. According to human relations
theory, the behavior of individuals within organizations is influenced by organizational
ideology, defined as: "the system of ideas and beliefs by means of which the values of
both the formal and informal aspects of the social organization are expressed and the
symbols around which these values are organized" (Roethlisberger and Dickson 1939:
81). Organizations are social systems in which groups are interdependent and rely upon
organizational ideology to justify social relations. As such, problems within
organizations are primarily due to conflict between the organizational ideology and
actual work processes. Likewise, in another study of the Hawthorne Plant, Buroway
(1979) found informal aspects, rather than written rules and regulations, have a major
influence on the behavior of individuals in organizations. Unlike rational systems
models, Buroway conceptualizes internal conflicts within organizations- individuals
within organizations have competing goals different to the formal goals of the
organization. Internal conflict is mediated through an ideology of competitiveness. In
short, from the perspective of human relations theory, ideology (a key informal aspect
of organization) has a major influence on individuals within organizations.
Open systems Both rational and natural systems perspectives tend to focus on factors
within the organization and hold the environment constant, meaning they take a closed systems
approach. However, organizations do not operate in a bubble, they are effected by their external
environment. Open systems perspectives emerged in the 1960s to explain interrelationships
between organizations and their external environment. From the open systems perspective,
"Organizations are congeries of interdependent flows and activities linking shifting coalitions
of participants embedded in wider material-resource and institutional environments" (Scott
2003:29). More recent organizational perspectives combine open system models with rational
and natural perspectives (Scott 2003).

For instance, open system rational models include theories such as:

 Bounded Rationality (March and Simon 1958):

Bounded rationality takes an open systems rational approach to organizations, meaning
it focuses on the formal rational aspects of organizations while accounting for the
external environment. Building upon Simon's (1945) decision making theory, bounded
rationality examines the influence of the environment on decision making within
organizations. Individual understanding is limited and related to environmental
contexts. According to March and Simon (1958:137): "The organization and social
environment in which the decision maker finds himself determines what consequences
he will anticipate, what one he will not; what alternatives he will consider, what ones
he will ignore. In a theory of organization these variables cannot be treated as
unexplained independent factors, but must themselves be determined and predicted by
the theory." Environmental stimuli serve as the foundation upon which routine activities
within organizations are built. As such, the external environment is critical to
understand rational decision-making within organizations.
 Contingency Theory (Lawrence and Lorsch 1967):
Like bounded rationality, contingency theory supports an open-rational systems
perspective of organizations. However, whereas bounded rationality focuses on the
social-psychological level of analysis, contingency theory focuses on the structural
level. Like other rational, open systems approaches, contingency theory accounts for
the effect of the external environment on the rational behavior of organizations. From
this perspective, the external environment provides different constraints and
opportunities for organizations. Lawrence and Lorsch (1967) find environmental
 uncertainty influences decision-making within organizations and relates to the internal
formal structures of organizations. Organizational structures change in response to
rational decisions made in contexts to environmentally dependent constraints and
opportunities.
 Transaction Cost Theory (Williamson 1975):
Transaction costs theory also takes an open, rational systems approach to organizations.
Transaction costs theory contributes to our understanding of the effect of the external
environment on the rational behavior of organizations by examining the cost of
performing an economic exchange, i.e. transaction costs (Williamson 1981).
Organizations attempt to minimize the costs of coordinated social activity (Coase 1937)
Transaction costs influence organizational structure and the decisions of organizational
participants. As such, the transaction is the ideal level of analysis for organizational
research (Williamson 1981). Like other open rational systems approaches, transaction
costs theory assumes organizational behavior is rational and influenced by the external
environment. However, unlike other perspectives, transaction costs theory focuses on
the ecological level, meaning it looks at groups of organizations (Scott 2003).

On the other hand, open system natural models include theories such as:

 Organizational Population Ecology (Hannan and Freeman 1977; Hannan and

Freeman 1984):
Like transaction costs theory, organizational population ecology focuses on the
ecological level. However, unlike transaction costs theory, organizational population
ecology takes a natural systems approach to organizations, meaning it does not assume
organizational behavior is rational. It is not organizations that optimize, but the external
environment (Hannan and Freeman 1977). Organizations tend to stay the same due to
structural inertia. According to Hannan and Freeman (1984:149): "Some of the factors
that generate structural inertia are internal to organizations: these include sunk costs in
plant, equipment, and personnel, the dynamics of poliical coalitions, and the tendency
for precedents to become normative standards. Others are external. There are legal and
other barriers to entry and ext from realms of activity. Exchange relations with other
organizations consittue an investment that is not written off lightly. Finally, attempting
radical structural change often threatens legitimacy; the loss of institutional support
may be devastating." Due to these pressures, organizations do not frequently change or
adapt to their environment. In addition, organizational populations tend to be similar
 due to structural isomorphism (Hannan and Freeman 1977): "In each distinguishable
environmental configuration one finds, in equilibrium, only that organizational form
optimally adapted to the demands of the environment. Each unit experiences
constraints which force it to resemble other units with the same set of constraints."
Since similar organizations operate in similar environments with similar pressures, they
tend to have similar structures. In short, organizational structure is not determined by
efficiency, but environmental fit.
 Resource Dependence (Pfeffer and Salancik 1978):
Resource dependence theory also takes a natural open systems approach to
organizations. However, from the resource dependence theory perspective, not only
does the environment influence organizations, organizations also influence their
environment. Organizational structure is not determined by efficiency, but by power
struggles (Pfeffer and Salancik 1978). Organizations rely upon their external
environment to survive. This reliance causes interdependence and competition for
resources within and between organizations. Individuals within organizations scan the
environment for opportunities and threats and use such interpretations to achieve
favorable outcomes, sometimes by changing the external environment.
 Institutional Theory (Selznick 1949; Meyer and Rowan 1977; DiMaggio and
Powell 1983):
Similar to organizational population ecology and resource dependence theory,
institutional theory adopts an open-natural systems approach at the ecology level. Like
other natural systems perspectives, according to institutional theory, formal structure is
distinct from the actual activities of organizations. Similar to March and Simon (1958),
institutional theory accounts for cognitive controls in organizations. However, unlike
bounded rationality (march and Simon 1958), from the institutional theory perspective,
behavior is not the result of formal, rational programs, but institutional myths and
symbols. Organizations are influenced by symbols established in their institutional
environment rather than established formal goals (Selznick 1949). Institutional theory
assumes isomorphism (like organizational population ecology). According to
DiMaggio and Powell (1983:149) isomorphism is "a constraining process that forces a
unit in a population to resemble other units that face the same set of environmental
conditions." Isomorphism occurs through coercive, mimetic and normative pressures
from the external environment (DiMaggio and Powell 1983). Isomorphism has major
implications for organizations: (1) organizations are not based on efficiency, but on
 external legitimacy, (2) the perceived value of structural elements of organizations are
determined by external criteria, and (3) dependence on external organizations reduces
uncertainty and maintains stability (Meyer and Rowan 1977). In short, organizational
behavior is the result of often informal pressures from the external environment.

Open systems concepts arose from the work of biologist Ludwig Von Bertalanffy who
characterized open systems as complex, mutually affecting units (Bertalanffy, 1972). A full
understanding of high-level complex open systems is still beyond our ability. At their most
basic, however, open systems operate as ‘closely coupled’ cybernetic systems like a thermostat
programmed to respond to certain inputs from its environment. Scott and Davis (2007) indicate
that fairly simple cybernetic systems typify virtually all of our current efforts to imagine and
produce open systems. This is because we simply don’t know all of the factors and
interrelations which might affect an organization within a social system. Even our most ‘open’
open systems models are cybernetic based on limited knowledge rather than knowledge and
understanding of the entire ecology. Cybernetic systems can produce problems when factors
unaccounted for begin to affect other subsystems and their members.

Additionally, realization of complex open systems is limited by inertia of an orientation to

economically-bounded ideas which rest on rational and natural systems concepts. Attempts to
control the environment using only rational and natural systems ideas are often problematic
within complex open systems, which are typified by overall adaptation rather than control by
one set of interests.

In conclusion, organizations are understood to be rational, natural and/or open systems. The
historical development of organizational theory explains why each theoretical perspective
focuses on particular parts of organizations. Since it is the foundation of organizational theory,
modern perspectives combine these rational, natural and/or open systems models.