(MMS) - BA

Module 5

MANAGEMENT THEORIES
 Table of Contents

Chapter 5.1

Theories of Management

Aim

Learning Objectives

Learning Outcomes

1.1.1. Classical Organisational Theory

While scientific management theory focuses on workers and task, classical organisational
theory focuses on efficiency. It is a combination of administrative, scientific and bureaucratic
management.

Bureaucratic management is based on a rational range of structuring guidelines, e.g.,

procedures, hierarchy, policies, division of labour, etc.

Classical organisation theory focuses on effective organisational structuring. The crux of this
theory was to determine how a larger number of employees could be optimally organised into
the entire structure.

Many great scholars have contributed to this theory, such as, Max Weber, Henri Fayol,
Lyndall Urwick, etc.
Max Weber referred to as the Father of
Modern Sociology proposed
bureaucratic form of structure.
Bureaucracy is said to be the most
rational and logical form of structure as
it is based on a set of guidelines, such as
laws and rules.

Figure 1: Max Weber

 1.1.1(i) Classification of Organisation:
Max Weber classified the organisation into three categories according to the nature of
legitimacy:
Charismatic authority: This category is based on the outstanding characteristics of
an individual.
Traditional authority: The core of this point is respecting the customs.

Rational legal authority: This is based on laws, legal procedures and rules, etc.

1.1.1(ii) Neo-classical Theory:

Neo-classical theory is associated with the human
factors. Elton Mayo (an Australian born
psychologist, industrial researcher and
organizational theorist) was the pioneer of human
relations to enhance the productivity level and
satisfaction. This approach was first made obvious
through a set of improvements named as
Hawthorne Experiments. This experiment was
carried out between 1927 and 1932 at Illinois
Plant of Western Electric Company.
Figure 2: Elton Mayo

Elton Mayo and Mary Parker Follett (an American management consultant and
F. W. Taylor an American
organizational mechanical
theory engineer
and behaviour pioneer) are considered as the chief contributors
and management consultant
to human relationsapproach.
is referredNeo-classical
to as approach leads to Behavioural Science
the FatherManagement,
of Scientific Management. He
which is the refined product of human relations approach.
developed several innovative techniques to
enhance productivity at the work place. Taylor
1.1.2. Scientific Management
introduced piece rate pay system, rather than
time pay, this increased productivity at the
workplace.
 Figure 3: F.W. Taylor

He shared his various ideas and methods with numerous companies while working as a
consultant. Scientific Management Theory is the product of his experiences.

Scientific Management was one of the first approaches that focused on the study of
management. This approach was recognised by people in the 1900s. Since then, many
scholars such as Henry Gantt (an American management consultant and mechanical engineer)
and Lillian Gilbreth (an American industrial engineer and psychologist) have contributed to
this subject.

1.1.2(i) Principles of scientific management:

To develop true science:-
F. W. Taylor states that for every element of mans work, scientific method should be
developed to replace the rule of thumb.
Scientific selection of workman:-
According to the principles, employee should be selected scientifically.
Scientific education and development of workman:-
Once employees are selected scientifically, then there should be a scientific method to
educate and train them.
Scientific harmonious cooperation between management and employee:-
Taylor realised that the responsibilities and works are divided among the robust
combination of management and employee. Thus, it is essential to maintain a
scientific and harmonious cooperation among all management and employees.
 1.1.2(ii). Henry L. Gantts Contribution to Scientific Management
Gantt and Taylor were close associates and had worked
on various projects together. Henry Gantt also added to
the conventional piece rate payment system and
declared that anyone who would complete a days
workload would get a 50% bonus. Bonus was also
declared for supervisors on every employee who
completed his daily tasks. Moreover, there would be an
extra bonus if all workers did a better job.

Figure 4: Henry Gantt

Henry Gantt invented a charting system, now known as Gantts Chart, which was used by
him for production scheduling. The charting system served as the basis for Critical Path
Method (CPM) and Program Evolution and Review Technique (PERT).

1.1.2(iii) Frank B. and Lillian M. Gilbreths Contribution to Scientific Management:

Frank B. and Lillian M. Gilbreth was a husband
and wife duo, who also contributed to the
Scientific Management Theory. Through
rigorous research on the subject, they came up
with one best method of accomplishing a task,
while also helping the employees to reach their
full potential.

The duo majorly focused on the welfare of

employees and believed that there is a relation
between motion and fatigue. Figure 5: Lillian M. Gilbreth &
Frank B.
Every motion that was eliminated reduced fatigue to a certain extent. Using their motion
picture camera, they detected that fatigue can be reduced by, lightening loads, introducing
rest periods and spacing work.
1.1.3. Bureaucratic approach:
Bureaucratic approach is Max Webers idea of more formalised structure of the organisation.
Webber created the idea of bureaucratic management which is a more authoritative,
structured and rigid form of organisational management.

1.1.3(i) Factors that make Bureaucracies effective:

Clearly defined as well as specialised functions.

Using legal authority.

Hierarchy.

Set rules and procedures.

Trained bureaucrats.

Assigning tasks and employment based on technical expertise.

Competency-based promotions.

Cleary defined path.

1.1.4. Administrative management

Administrative management is associated with design as well as management of an
organization. Administrative management theory focuses on discovering a rational way of
designing organisational structure as a whole. It usually focuses on ensuring appropriate
formalised administrative structure, division of labour and authority delegation.

Administrative management theory attempts to find a rational way to design an organization

as a whole. The theory generally calls for a formalized administrative structure, a clear
division of labour, and delegation of power

1.1.4(i)Theorist who Contributed to Administrative Management

Henri Fayol is among the renowned theorist who contributed to the Administrative
management theory with approximately 14 administrative principles for structuring
organisation and management.
James D Mooney (1884-1957), was a mechanical engineer and vital member of General
Motors top management.

Luther H Gulick (1892-1993) was the Dean of Public Administration. He applied the
principles of administrative management theory to the government.

1.1.5 Behavioural Theory:

Behavioural Theory or Behavioural Management Theory is considered as the future
refinement of the human relations movement. It covers broader aspects of responsibilities and
interpersonal roles.
The theory focuses on application of findings and methods of social as well as general
sociology and psychology in order to understand organisational behaviour.

1.1.5(i). Important Aspects of Behavioural Approach:

Motivating employees to enhance productivity.

Considering the organisation as a social system.

Leadership-study related to managerial behaviour.

Enhancing communication to promote better understanding in the organisation.

Upgrading managerial skills and employees-welfare.

1.15(ii) Contributions to Behavioural Theory

There have been many contributions made to the behavioural theory. Here are some major
contributors to the subject.

1.1.6. The Hawthorne Experiment:

Mayo is recognised for his work on the project commonly called as the Hawthorne Studies
or Hawthorne Experiments. A widespread investigation was established in 1927, at the
Hawthorne plant of the Western Electric Company, Illinois. These studies were held to
understand the effect of improved physical facilities on workers performance. A range of
experiments were done on the employees to find out the effect of different scenarios on their
competency.
The first stage of these experiments included five girls assigned to do electrical assembly
testing. These girls were separated from the other workers and were allotted a separate room
for work, called as Relay Assembly Test Room. A supervisor was assigned the task to
maintain a record of their performance and ensure a friendly atmosphere. This experiment
continued for approx 42 years. Changes such as extended rest periods, reduced working hours
from 48 to 42 hours, etc., showed considerable improvement in their performance.

Figure 6: Hawthorne Experiments Relay Assembly Test Room

All the improvements, which were introduced earlier, were removed systematically. Though
the output decreased insignificantly, it was still more than the output recorded before the
experiment.

The improvements were then introduced again. The output dramatically increased; even 42
hours of work had significant enhancement than the previous records.
The researchers were bewildered as it was difficult to explain the reason for such a change.
It was later suggested that the awareness of the ongoing experiment made workers conscious
and their performance improved.

The girls under the experiment became a group and operated with researchers happily. The
attention received for being a part for research motivated them.
The last stage of the experiment was to investigate the work practice on the rest of the group
which were not experimental. This group consisted of 14 men and 4 supervisors posted in
the Bank Wiring Observation Room.

It was understood that there was a definite code of conduct among employees, which
restricted the output between producing too much (rate-busting) and producing too little
(chiselling).

It was understood that attachment to the informal organisation was greater than the desire for
earnings and formal requirements.

According to Hawthorne Experiments, it was understood that an organisation does not only
contain a formal arrangement of employees and functions, but also a social system. This
social system could be effectively operated through the application of behavioural science,
such as the principles of psychology.

1.1.6(i).Conclusion of Hawthorne Experiment

The Hawthorne Study provided outcomes:

Social factor:
It was studied that social factors have great impact on the performance of the worker. Elton
Mayos description for organisation states that, it is a social system, and social norms play a
crucial role in employee motivation. Restructuring of social relationships was the main cause
of enhancement in productivity.

Informal group:
It was realised that employees created informal groups to deal with the inadequacy of formal
groups. Informal groups were important as they had a significant influence on the employees
attitude and productivity. Informal groups pressure and social pattern had a greater influence
on productive work than management demands.

Leadership:
Group activities can be directed through leadership. A supervisor selected by the management
may not be able to achieve set goals. However, behavioural pattern of the employees may be
significantly influenced by an informal leader who is acceptable to the informal group.

Communication:
An effective communication system plays a crucial role in developing better understanding
between the employees and management. It was recorded through Hawthorne Experiments
that explaining to the employees the logic of decision-making and their participation in
decision, leads to better results.

Balanced approach:
The study also explained that a balanced approach to the situation can have better outputs.
Considering just one factor or emphasising on just one aspect of the scenario would not lead
to an effective solution to workers problems. Better results can be obtained by discussing all
factors and taking appropriate decisions.

1.1.7. Abraham Maslows Contribution to Behavioural Theory

Abraham Maslow, a prominent psychologist, contributed a theory of motivation called as
Need Hierarchy Theory, in 1943.
1.1.7(i) Maslows Observations:
(i) People have a broad range of needs which serves as a motivation to them.
(ii) Human needs can be segregated into various categories.
(iii) Human needs can be hierarchically arranged.
(iv) Humans start to fulfil their needs step-wise.
(v) Humans do not get motivated by a need which is already satisfied.

1.1.7(ii) Classification of Human Needs by Maslow:

 Figure 7: Maslow's Human Needs Pyramid

Physiological needs:
These needs are associated with survival as well as maintenance of life, such as food,
clothing, shelter, etc.
Safety needs:
These involve physical safety against events, such as, murder, fire, accident and
security against unemployment, etc.
Social needs:
These are also known as affiliation needs. These include need for love, affection,
longing, etc. It also includes association of family, friends as well as social groups,
etc.
Ego or esteem needs:
These needs include being recognized, having higher status, sense of achievement,
gaining power, having prestige, etc.
Self-fulfilment or self-actuation needs:
This category involves needs that are perceived to be mission of life. It aids the
individual to realise his personality.

1.1.8. Theory X and Theory Y

 Figure 8: Theory X and Theory Y

The style of management is highly influenced by beliefs and assumptions on things that
motivate your team members. Douglas MCGregor - professor at the MIT Sloan School of
Management and president of Antioch College introduced the Theory X and Theory Y.
According to this theory, if it is assumed that employees dont like the work, the managers
often follow an authoritarian style of management. In case of employees proudly perform
their work the managers adopt participative style of management.

1.1.8(i) Theory X
Theory X assumes that employees do not enjoy work and are unmotivated. This causes the
managers to adopt authoritarian management style. This type of management is based on
assumption that:

Workers dislike working.

Workers avoid responsibilities and need to be controlled or directed

They may have to be forced or threatened to deliver results

Workers need to be supervised and controlled

They may have to be enticed in order to work as needed and produce results.

1.1.8(ii) Theory Y
Theory X explains about participative management style. This theory assumes that workers
are happy and self-motivated to do their work. In this style of management, it is assumed that:
Workers take responsibility and take initiative to fulfil their tasks

The take initiative to do work and do not need much direction or control

Such workers often considered work as the part of their and creatively solve problem
associated with work.
They can take right decisions

1.1.9. Quantitative Approach to Management

Quantitative management approach integrates several numeric and analytical technique into
management. The goal of this approach is to have precise formulas which can be used on
information to get solutions to common management issues.

1.1.9(i) Features of Quantitative Theory features

Management involves decision-making at every level of the organisation. Therefore,

it is crucial to getting optimal input for appropriate decision making.
The theory involves developing a decision situation which would serve as a prototype
by presenting variables in mathematical model. It consists of functional equations,
which sets inter-relation among variables.

The best solution to a model is obtained through accurate formulation of model and
correct equation solution.

Goals of organisations are majorly based on measurable and specific economic goals.

There are several factors that should be considered while evaluating formulated
decision-making mode, such as cost reduction, scheduling meeting time and return on
investment.

1.1.9(ii) Branches of Quantitative approach to management:

Management science is one of the three branches of quantitative management which is also
called as operations research. The aim of this approach is to enhance effectiveness of decision
making through use of statistical methods and sophisticated models. Management science is
not a term that can be synonymously used with Scientific management.
Operations Management is the second branch of quantitative management relates to the
area of expertise associated with production and delivery of products and services.

Management information system, abbreviated as MIS, is the term used to refer to activities
performed by management in order to design and implement computer based information
system to be used by the management.

1.1.10. Modern approach

The field of management includes major ideas and contributions about managing and
organisation emerged since 1950s.

1.1.10 (i) System Approach

The classical approach focuses on the technical aspect of the organisation, irrespective of
people. On the other hand, human relations approach focuses on the psychological and
social aspects of human needs.

The systems approach is an attempt to combine the two aforementioned approaches, i.e.,
Classical approach and human relations. It concentrates on the entire process,
organisation-structure, behaviour as well as the range of variables in an enterprise. It provides
a general view of the organisation portrayed as an entire system.

Figure 9: System Approach Model

Material, human, informational and financial are some types of inputs that an organisation
receives from the external environment. These inputs are processed by the organisation and
provided back to the environment as products, services, profits/losses, employee behaviour or
additional information. Thus, the organisation receives feedback from the environment
irrespective of these outputs.

In systems approach, the organisation is viewed as a whole. It involves the study of the
enterprise pertaining to relationship between technical and social variables of the system.
Changes in one part technical or social will cause change in another part as well as the
entire system.

1.1.10.(ii) Contingency Approach

Contingency approach should be viewed as a new practice, focusing on the importance of

structure. It is believed that the structure has a significant influence on the enterprises
performance. The efficiency of the structure of an organisation is based on the environmental
influence and the nature of tasks with which it is developed.

According to the contingency approach, the activity should not suggest a single best way for
managing and structuring an organisation. It should rather provide an insight of situational as
well as contextual factors, which would serve as a guideline for managerial decision-making.

In simpler terms, this approach is a problem-solving technique, which considers that there is
no universally applicable solution to a particular problem. The solutions should be tailored
according to the context of the problem. This is because humans may have different reactions
to a factor.

A need or factor that motivates one person may not have a similar effect on another one. E.g.,
if an organisation desires to motivate a set of employees working on the same task, then one
may be motivated by increased salary and another one may be motivated by promotion. Thus,
there should be a rich and diverse range of rewards, so that it appeals to different people
differently.
1.1.11. Fayols Principles of Management
There are fourteen principles of management laid by Henri Fayol a French mining engineer
and founder of Fayolism. Though these are traditional principles being used in business, it
is crucial to understand how important these principles are for the contemporary business.
The following is the abstract from a journal called Fayols 14 Principles of Management.
Then and Now- A Framework For Managing Todays Organisations Effectively developed by
Carl A. Rodrigues of Mont Clair State University.

Figure 10: Fayol's 14 Principles of Management

1.1.12. Henri Fayol and F.W. Taylor - Difference

Henri Fayol and Frederick Winslow Taylor are two renowned personalities from the history
who have enormously contributed significant ideas to the concept of management. Their
contributions have served as the foundation for present day management. Here are some
differences between contributions made by Henri Fayol and F.W. Taylor.
1.1.13. Contribution to Management by Indian Gurus

Figure 11: C.K. Prahlad

1.1.14. Emerging Approaches:
As past introductions of management serves as the foundation of management, current affairs
in management also plays a crucial role.

1. Globalisation: Organisational operations have crossed the geographic border and

become globally available. Globalisation opens a wider area for business but it also
brings-on various challenges for the management.

2. Entrepreneurship: It refers to process wherein individual or group of individual

employ organised efforts and methods in order to pursue business opportunities. There
are three important elements of entrepreneurship, innovation, pursuing opportunities
and growth.

3. E-business management:
E-business is term used to refer to the electronic business. It is a comprehensive
concept of how organisations operate using electronic means and linkages in order
to effectively achieve its goals.

E-Commerce or electronic commerce is any business exchange wherein parties

execute the transaction through electronic means. Internet serves as the platform
for almost all electronic transactions.

4. Quality Management:
Total Quality Management is one of the branches of Quality Management
Systems, which is considered as a philosophy driven by needs and expectations of
customer. It focuses on continuous enhancement in the operations or work
process.

5. A learning organisation and managing knowledge:

In this continuously changing environment a success organisation is one which is
flexible in learning and will be able to respond promptly to the environment.
A learning organisation has the ability to consistently adapt to the change. Knowledge
management is the process of developing a learning culture with the organisation
where members could systematically gain knowledge and share the same to achieve
better performance.

Knowledge management involves cultivating a learning culture where organizational

members systematically gather knowledge and share it with others to achieve better
performance.
Summary

Scientific management was one of the first approaches that focused on the study of
management. There are four principles of scientific management that focus on
systemising management.
Henry Gantt invented a charting system, which served as the basis for Critical Path
Method (CPM) and Program Evolution and Review Technique (PERT).
While scientific management theory focuses on workers and task, classical
organisational theory is focused on efficiency. It is a combination of administrative,
scientific and bureaucratic management.
Max Weber classified the organisation into three categories: charismatic authority,
traditional authority and rational legal authority.
Neo-classical theory is associated with the human factors.
Human relations movement focuses on the factors that encourage enhanced
performance of workers.
Hawthorne Experiments was a project conducted for analysing working conditions; it
provided several useful observations.
Theory X assumes authoritarian management while Theory Y involves participative
management.
The Systems Approach is an attempt at combining classical approach and human
relation.
Contingency approach focuses on the importance of structure.
Advancement has lead to several emerging management aspects such as e-business
management, globalisation, etc.
Self -assessment Questions:
1. Scientific Management was one of the first approaches that focused on ____________.
a. Organisational behaviour
b. Business management
c. Study of management
d. Managerial behaviour

2. ________is referred to as the Father of Scientific Management.

a. H. Fayol
b. Abraham Maslow
c. Elton Mayo
d. F. W. Taylor
e. Frank B.

3. Henry Gantt invented a charting system, now known as _____________.

a. Pie diagram
b. Y charts
c. Gantts chart
d. Cyclic Expression

4. Frank. B and Lillian M. Gilbreth were a husband and wife duo, who also contributed
to:
a. Business management
b. Piece rate payment system
c. Scientific management theory
d. Classical organisation theory

5. While Scientific management theory focuses on workers and task, classical

organisational theory focuses on:
a. Managers
b. Managerial behaviour
c. Efficiency
d. Basis of scientific management

6. Max Weber referred to as the Father of Modern Sociology Proposed a/an

_____________ form of structure.
a. Scientific
b. Bureaucratic
c. Divers
d. Aristocratic
7. Which among these is not a type of organisation according to Max Weber
classification?
a. Charismatic authority
b. Scientific authority
c. Traditional authority
d. Rational legal authority

8. The core point of __________ is to respect the customs.

a. Management
b. Traditional Authority
c. Policies
d. Standards

9. _______________ focuses on the factors that encourage enhanced performance of

workers.
a. Behavioural theory
b. Employee motivation
c. Human relations movement
d. Classical organisational theory

10. Mayo is recognised for his work on the project commonly called as:
a. Piece rate payment
b. Gantts chart
c. Hawthorne studies
d. Bureaucratic management

11. __________is considered as the future refinement of the human relations movement.
a. Scientific management
b. Behavioural theory
c. Classical organisation
d. Neo-classical theory

12. According to Maslows theory, humans do not get motivated through need which is
a. Non monetary
b. Already satisfied
c. Short term
d. Official

13. Social needs are also known as

a. Common needs
b. Motivational needs
c. Affiliation needs
d. Primary organisational needs

14. The _________ focuses on the technical aspect of the organisation, irrespective of
people.
a. Classical approach
b. Systems approach
c. Contingent approach
d. IT maintenance

15. The ___________ is an attempt to combine classical approach and human relations.
a. Neo-classical approach
b. Systems approach
c. Contingent approach
d. Classical approach
References
Text Books
Narender, K. Chadha. (2007). Perspectives in Organizational Behavior. New Delhi:
Galgotia Publications Pvt. Ltd.

Prince, Jide Adetule. (2011). The Handbook on Management Theories. Bloomington:

Author House.

Websites
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management-theories-principles-definition.html

Mindtools. Frederick Taylor and Scientific Management. Retrieved June 24,

2015, from http://www.mindtools.com/pages/article/newTMM_Taylor.htm

Business. Management Theory of Frederick Taylor. Retrieved June 24,

2015, from http://www.business.com/management/management-theory-of-
frederick-taylor/

Whatiseconomics. Neoclassical Economics. Retrieved June 24, 2015, from

http://www.whatiseconomics.org/neoclassical-economics

Video Links
Iken Edu.( Sep 4, 2012). Learn Principles of the Scientific Management.
Retrieved June 23, 2015, from https://www.youtube.com/watch?
v=dLUb62LLX9o

AskWiki.( Sep 13, 2013). Explaining Kotter's 8 Step Change Model.

Retrieved June 23, 2015, from https://www.youtube.com/watch?
v=3fOQ_XjCcyA

MindToolsVideos(Mar 5, 2014) Lewin's Change Management Model: Kurt

Lewin's Unfreeze-Change-Refreeze Theory. Retrieved June 23, 2015. From
https://www.youtube.com/watch?v=uhrbO7lrHro

Mathumitha Baskaran (Feb 20, 2015) Hawthorne Studies. Retrieved June

23, 2015, from https://www.youtube.com/watch?v=PcridVlOkeM