Rational organization theory is the idea that an organization, such as a business, is a tool for achieving a definable goal or set of goals. A rational organization uses a formal structure to define the role of each member of the organization. In a business where roles and goals are clearly defined, the process of management should be rational and predictable, according to Babson College.
The Rational Organization
For a small business owner, the potential appeal of rational system theory is the clarity and simplicity of viewing a business as a rational system. For instance, the goal of a car dealership is to make a profit by selling cars. Every employee of the dealership has a clearly defined role in this process.
The salespeople meet with customers and sell the cars. The manager is in charge of training, motivating and supervising the salespeople. In theory, the individual personalities of the people who work at the dealership should not be a major factor because each person has a place in the system and only has to fulfill his own role correctly.
Political Organization
Although it is possible to describe almost any organization as a rational system by listing the goals and the formal job titles, many organizations are more political than rational, according to Economics Discussion. In a political organization, personal influence and people skills count for more than formal titles. Organizations are more political and less rational when different parts of the organization have potentially conflicting goals.
For example, the customer service department at a car dealership might have the goal of ensuring high customer satisfaction levels even if that results in fewer sales, but the salespeople might have the exact opposite goal. To manage both departments effectively, the manager of the dealership must find a balance between the conflicting goals of the two departments.
Decision-Making
In rational system perspective, the decisions made by each individual member of the organization are determined by his place in the formal hierarchy, with only limited room for individual opinion. In theory, if the manager tells the salespeople to focus on selling a less popular model of car even though it pays the same commission as a more popular model, the salespeople just have to work harder and sell the less popular cars.
In reality, many salespeople will not work harder just to make the same amount of money regardless of what they are told to do by management. In this situation, rational behavior for the individual differs from rational behavior for the organization. Not everyone will behave rationally even under ideal circ*mstances. For instance, if two coworkers just don't like each other, they can make a department inefficient even in the most well-structured workplace.
Applying Rational Organization Theory
Even though no organization is completely rational in the real world, business owners can effectively apply the theoretical viewpoint of a rational system in some situations. If the business owner can clearly define what she hopes to accomplish with a certain course of action, what the alternative choices are, and what the likely outcomes are, she can probably ignore workplace politics and simply rely on the formal structure of the company to carry out her orders. If there isn't enough available information to do all of these things, the owner will get better results by building consensus than by giving orders.
FAQs
A rational organization system has two significant parts: (1) specificity of goals and (2) formalization. Goal specification provides guidelines for specific tasks to be completed along with a regulated way for resources to be allocated. Formalization is a way to standardize organizational behavior.
What is the rational approach in organization? ›
The rational system perspective focuses on the formal structures of an organization and sees the organization as a group of people who work together to pursue specific goals. The natural system perspective advances the idea that informal and interpersonal structures within an organization are more important…
What is the rational theory of management? ›
Rational choice theory mandates that the possible impact of participation in profit (or returns) and management decisions should be considered separately. In large organizations 'profit sharing', unless computed on an individual contribution basis, is liable to free rider problems.
What is the rational choice theory in organizational behavior? ›
Rational choice theory (RCT) is based on the premise of individual self-interested utility maximization. Organizational theory (OT) is based on the premise of efficient functioning of organizations through means/ends rationality within organizations.
What is the purpose of the rational theory? ›
Rational choice theory can be helpful in understanding individual and collective behaviors. It helps to pinpoint why people, groups and society as a whole move toward certain choices, based on specific costs and rewards. Rational choice theory also helps to explain seemingly “irrational” behavior.
What is rational explanation theory? ›
The rational expectations theory is a concept and modeling technique that is used widely in macroeconomics. The theory posits that individuals base their decisions on three primary factors: their human rationality, the information available to them, and their past experiences.
What is rational approach with example? ›
Some examples of rational decision-making are often found in serious life choices. Examples like a student choosing what to do after high school, a business decision involving a large purchase, or a family deciding where to move.
What does rational approach mean? ›
A rational approach is one that seeks to be logical and objective. Now, it's impossible to be fully rational about a situation at hand. However, an approach that is largely rational than irrational (or brash) will still be considered as rational.
Why is the rational approach important? ›
By adopting a rational approach, you are more likely to consider all relevant factors, weigh the pros and cons, and make informed choices. This can lead to better outcomes and minimize the chances of making impulsive or emotionally driven decisions.
What are the key concepts of rational theory? ›
Rational choice theory looks at three concepts: rational actors, self interest and the invisible hand. Rationality can be used as an assumption for the behaviour of individuals in a wide range of contexts outside of economics. It is also used in political science, sociology, and philosophy.
Rational choice theory is the assumption that the person making a decision or taking an action will do so based on rational choices that will result in an outcome that benefits them or is in their own self-interest. That assumption means that people make a choice where the reward is equal to or greater than the reward.
What is an example of a rational choice theory? ›
For example, you determine that in looking at all of your needs, a new car is your top priority. It is in your best interest to use your savings to purchase this new car. The idea that you make choices that make you better off is the basis of the theory of rational choice.
What is the focus of the rational choice theory? ›
The main goal of rational choice theory is to explain why individuals and larger groups make certain choices, based on specific costs and rewards. According to rational choice theory, individuals use their self-interests to make choices that will provide them with the greatest benefit.
What are the strengths of the rational choice theory? ›
One of the main strengths of Rational Choice Theory is that it provides a rigorous framework for analyzing individual behavior. By assuming that individuals act rationally, the theory provides a clear and systematic way to analyze the motivations and decisions of individuals.
What is rational decision making? ›
Rational decision making is a problem-solving methodology that factors in objectivity and logic instead of subjectivity and intuition to achieve a goal. The goal of rational decision making is to identify a problem, pick a solution between multiple alternatives, and find an answer.
What is the rational model approach? ›
Definition. Being the opposite of intuitive decision making, rational model of decision making is a model where individuals use facts and information, analysis, and a step-by-step procedure to come to a decision.
What is an example of an organizational theory? ›
An example of an organizational theory is the application of contingency theory, which argues that there is no one size fits all approach to management. An international company may adopt different structures in different countries, depending on the social and economic environment.
What is the rational leader theory? ›
Rational leaders win the esteem of the people around them because they always explain their thinking, not just give orders. They emphasise goals and let people choose how to achieve them. A rational leader is interested in the opinions of others and evaluates them lucidly, without prejudice.
