The practice of management is as old as human civilization when people started
living together in groups. As societies developed, the practice of management
started in all business and non-business organizations like churches, temples,
hospitals, Government, etc. With Industrial Revolution in the 18th century, a
new era of Industrialisation came into existence. Use of both, machines and
labour force increased. Need for integrating the two arose and, thus, the need
for more comprehensive management was felt. With further advancement, business
houses became so large that their financial requirements could not be met by
the owners. They raised money from outside through shares and debentures.
Since ownership became diverse and it was not possible for owners to manage
their businesses, managers were appointed to look after business affairs.
There was, thus, separation of ownership from management and by the end of
19th century, management theory was recognised as a formal theory for managing
business enterprises.
“Management thought refers to the theories and principles that guide the
management of people in organisations.”
“Management theories are explanations of why a particular practice is
effective or ineffective.”
These theories developed initially out of experience of practicing managers.
Management principles were based on practical experience of managers.
Subsequently, management theories borrowed ideas from other fields of study
like sociology, economics, philosophy, anthropology, etc. This chapter
will help you to understand and analyse the evolution of management thought on
the formal lines under the groups of classical theories, neoclassical theories
and modern approach.
Learning Outcomes
After studying this chapter. the learner,
- explains the development of management.
- identifies various approaches to management.
- recognizes the various classical theories of management.
- compare the classical approach of management with the neo-classical and modern
approaches.
identifies the need for human relations from Hawthorne experiments.
correlates the various needs of human beings from Maslow's need hierarchy
recognizes the importance of environment in the modem approach of
management.
Management Theories
Management theories can be classified into three main schools of thought
● Classical approach
- Taylor's Scientific Management
Theory
- Fayol's Administrative Management
Theory
- Weber's Bureaucracy Theory
● Neo-classical approach
- Human Relations Theory
- Behavioural Science Theory
● Modern Approach
- Systems Theory
- Contingency Theory
2.1. Classical Approach
traditional theory of management. It includes management theories that
provide foundation to the study of management. It is the first step towards
the study of management as a distinct field of study.
Three main theories that developed in the classical school of thought are
discussed below:
2.1.1. Taylor's Scientific Management Theory
The concept of scientific management was introduced by Frederic Winslow
Taylor in USA in the beginning of 20th century. Scientific management was
concerned essentially with improving the operational efficiency at the
shop-floor level. According to Taylor “scientific management is concerned
with knowing exactly what you want men to do and seeing that they do it in
the best and cheapest way.”
Since Taylor has put the emphasis on solving managerial problems in a
scientific way, often, he is called as 'father of scientific management' and
his contributions as the principles of scientific management. Though his
contributions have become traditional in present day context, still the
label is used for his contributions. In fact, management as a science has
been taken much later than the contributions of Taylor.
Taylor joined Midvale Steel Company in USA as a worker and later on became
supervisor. During this period, he continued his studies and eventually
completed his M.E. (Master of Engineering). Subsequently, he joined
Bethlehem Steel Company. At both these places, he carried experiments about
how to increase the efficiency of people. Even after his retirement, he
continued to develop scientific management. On the basis of his experiments,
he published many papers and books and all his contributions can be
described in two parts: elements and tools of scientific management and
principles of scientific management.
Assessment Activity
- Who is known to be the father of
Scientific Management?- Which is the oldest theories of
Management ?- Scientific Management focused on
improving the operational efficiency at the................level.
2.1.2. Fayol's Administrative Management Theory
While Taylor emphasised on productivity of workers at the shop level, Fayol
focused on managing the organisation as a whole. Fayol was concerned with
general management and overall control of the organisation and not with
supervision and control of operations at lower levels of management. His
work was, thus, related more to the top level of management. Perhaps the real
father of modern operational management theory is the French industrialist
Henry Fayol.
Fayol worked with the French Coal and Iron Company as a junior executive and
was promoted as Director in the same company. He retired in 1918. There was a
general belief prevailing at that time that 'managers are born, not made',
that is only those who had inherent qualities of being a manager can become
managers. This view was opposed by Fayol who said that managers need not
necessarily be born; fundamental principles underlying the management theory
can be taught to people and, thus, managers can be made. He believed that
“management could be taught, once its underlying principles were understood
and a general theory of management was formulated.” His work on general
management was first published in 1916 in French as General and Industrial
Management.
Fayol has divided his approach of studying management into three parts:
(1)
managerial qualities and training,
(2) general principles of management, and
(3) elements of management.
2.1.3. Weber's Bureaucracy Theory
Max Weber, a German sociologist, made significant contributions in the fields
of management, economics, philosophy and sociology. In the field of
management, his most significant contribution is his work on bureaucratic
management.
At the time when managers had traditional authority (authority by virtue of
belonging to a particular class by birth) or charismatic authority (authority
by virtue of their appeal and social power), Weber propagated the need for
organisations to be managed in a more rational-legal authority system. The
system was rational because organisations with formal authority-responsibility
structures aimed to achieve a set of pre-determined goals. It was legal
because authority was exercised by a person not by virtue of his appeal, class
or reference but by his position in the organisation and was bound by a system
of well-defined rules and regulations. Weber evolved an ideal type of
bureaucracy which was a superior form of organisation with features of
efficiency, objectivity, unity, discipline etc.
Assessment Activity
- Who is known to be the father of modern management?
- Bureaucratic approach was propounded by ..............................
2.2. Neo-classical Approach
Now you are aware that the management theories developed one after the other
dependent upon the needs of the environment, this section introduces you to
the new era of humanism which was the result of the criticism of classical
theory for being too mechanistic. This era proved to be a transition
era.
2.2.1. Human Relations Theory
Though the classical theory has been successful in bringing mass production
leading to increased productivity and efficiency but has also brought monotony
with it. It made people feel that they became machines or mere cogs in
machines. And then the human relations approach emerged in the scene of
management. The interest was increasing in helping managers to deal more
effectively with the “people side” of the organizations. Several theorists
strengthened the classical organisation theory using the insights of sociology
and psychology. The human relations movement arose because of the systematic
early attempts to discover the social and psychological factors that would
create effective human relations.
Elton Mayo, an organisational scientist and consultant, is recognized as the
founder of Human relations Movement because of being at the forefront of this
orientation. This movement sprang out of a famous series of studies conducted
by Elton Mayo and his associates. It came to be known as the “Hawthorne
Studies” as many of them were performed at Western Electric Company’s
Hawthorne plant near Chicago during 1924 - 1933.
Hawthorne Studies
Elton Mayo conducted a series of experiments at the Hawthorne plant of the
Western Electric Company to study the impact of human factors on productivity.
He conducted various experiments in four phases with each phase attempting to
answer the question raised by the previous phase. The four phases were as
follows:
- Experiments to determine the effects
of changes in illumination on productivity, illumination experiments, 1924-27; - Experiments to determine the effects
of changes in hours and other working conditions on productivity, relay
assembly test room experiments, 1927-28; - Conducting plant-wide interviews to
determine worker attitudes and sentiments, mass interviewing programme,
1928-30; and - Determination and analysis of social
organisation at work, bank wiring observation room experiments, 1931-33.
Illumination Experiments
The effect of lighting on two groups was studied; one whose lighting
conditions were changed and the other, whose lighting conditions remained
constant. For the first group of workers when lighting conditions improved,
productivity went up but surprisingly, even when the lighting conditions
declined, productivity went up. For the second group of workers also the
output increased as the first group's lighting conditions were altered though
there was no change in lighting conditions of this group. This made Mayo
conclude that there was something more than just the lighting conditions that
contributed to industrial production. Therefore, another phase of experiments
was undertaken.
Relay Assembly Test Room Experiments
In this experiment, a small group of 6 girls was asked to work in a test room.
Changes in working conditions were tried on them as, less working hours,
improved working conditions, better wages, rest periods, free interaction
amongst members etc. The supervisor acted as their friend and provided
friendly and informal supervision. All these factors increased productivity
but surprisingly, once again, when these conditions were withdrawn, the
productivity did not go down. It was concluded that something other than these
factors was important and Mayo attributed this to satisfaction of social and
psychological needs of the workers, such as sense of acceptance, recognition,
participation in decision making, freedom to work, interaction amongst group
members, informal relationships etc. The concept of 'rational man' (motivated
by financial incentives) was replaced by 'social man' (motivated by
non-financial incentives like morale boost up, fulfillment of social needs,
management-employees relationships etc.)
Mass Interviewing Programme
Thousands of workers were interviewed to get information about their
superiors, jobs and job conditions. Responses revealed if employees were
allowed to represent their views and problems openly to mangers, their morale
and productivity went up. The importance of social factors was once again
validated through this interview.
Bank Wiring Observation Room Experiments
A group of 14 workers was selected to attach a wire to switches for some
equipment that was used in telephone exchange. No changes were made in their
working conditions as were made in earlier experiments. Impact of social
pressure was studied on working of this group. Management declared an hourly
wage rate based on average output of each worker and bonus based on average
output of the group. They thought that workers would produce more to earn more
wages and would help each other as a group to earn higher bonus. However, this
system of wage payment did not work. It was observed that without formally
declaring the day's work, the group members laid their standard target which
was less than the company's target. Social pressures were created by group
members to ensure that no member exceeded the group target. In case they did,
they were boycotted by their co-members. Informal relationships were, thus,
considered important in determining the human behaviour.
These studies indicate that productivity con be increased by understanding the
human behaviour and fulfilling their higher-order needs of ego satisfaction
and self-actualisation and not by merely applying principles of management
(propounded by classical theorists) and providing financial incentives.
Acceptance Theory to Authority
Management theorist Chester Barnard believed organizations need to be both
effective and efficient. Effective means meeting organizational goals in a
timely way. Efficient, in his opinion, means the degree to which the
organization can satisfy the motives of its employees. In other words, the
organizational goals will be accomplished and authority will be accepted when
workers feel satisfied that their individual needs are being met. This is
known as the acceptance theory of authority.
Acceptance theory of authority states that a manager's authority rests on
workers' acceptance of his right to give orders and to expect compliance.
Workers have to believe that the manager can legitimately give orders and
there is a legitimate expectation that the orders will be carried out. There
are a few reasons for this expectation:
- Workers will be rewarded for
compliance - There will be discipline for
non-compliance - Workers respect the manager for his
experience
Assessment Activity
- The era of humanism was introduced in ......................... theories.
- The founder of Human Relations approach is ...........................
- Hawthorne Studies was conducted in Hawthorne plant of
...........................company.- Acceptance theory was introduced by ....................
2.2.2. Behavioural Science Theory
This approach is an improvement over Human Relations theory. Human relations
theory lacked scientific vision to the study of human behaviour. This was
considered in the behavioural science theory. The researchers applied the
concept of social sciences or behavioural sciences (Psychology, Sociology and
Anthropology) to understand the behaviour of human beings. Psychology is the
study of individual human behaviour. Sociology is the study of human behaviour
in groups. Anthropology is the study of human behaviour as individual and
members of groups. Thus, these researchers came to be known as 'behavioural
scientists' rather than 'human relations theorists'.
“The behavioural science approach emphasises on scientific research as the
basis for developing theories about human behaviour in organisations that can
be used to develop practical guidelines for managers”. Some behavioural
scientists, like Maslow and McGregor believe that more than a 'social man'
worker is 'self-actualising man'. Generally, workers want their lower-level
needs to be satisfied before higher-order needs, but there are people who work
for their higher-order needs even at the cost of their job security. The
behavioural scientists, therefore, motivate people according to their need
perceptions.
Maslow's Need Hierarchy Theory
The need hierarchy theory is formulated by Abraham Maslow. He advocates that
every individual has a complex set of exceptionally strong needs and the
behaviour of an individual at a particular moment is usually determined by his
strongest need. According to psychologists, human needs have a certain
priority. As the more basic needs are satisfied, the individual seeks to
satisfy the higher needs. If the basic needs are not satisfied, efforts to
satisfy the higher needs will be postponed. Maslow stated that people have
five basic levels of needs which they tend to satisfy in a hierarchical
fashion. He proposed that human needs can be arranged in a particular order
from the lowest level need to the highest level need. This hierarchy of human
needs is shown in the following figure:
 |
| Maslow's Need Hierarchy Theory |
This need hierarchy can be explained as follows:
(a) Physiological Needs: These are
basic needs that people want to satisfy comprises the need for food, clothing,
shelter and other necessities of life. Human beings first try to acquire these
basic necessities of life, only then they tend to move to the second level of
needs.
(b) Safety Needs: Full or part
satisfaction of physiological needs arouses safety needs in an individual.
These are the needs to remain free from external dangers of war, destruction,
accidents etc. and internal dangers of losing the job. People want their jobs
to satisfy their safety needs. The motivators that can satisfy these needs are
the benefits of life insurance, provident fund, health insurance and other
retirement benefits.
(c) Social Needs: Once the second level
is satisfied, the human beings strive to satisfy their social needs. Man is a
social animal; he wants to belong to a social group where his emotional needs
for love, affection, respect and friendship are satisfied. Social needs can be
satisfied by being in the company of friends, relatives or other group such as
work groups or voluntary groups.
(d) Esteem (Ego) Needs: This is a
higher-order need of achieving power and prestige and arises after
satisfaction of the lower-order needs. Self esteem needs which are concerned
with self respect, self confidence, recognition, appreciation, applause, power
etc and these needs give the individuals a sense of self worth an ego
satisfaction.
(e) Self actualisation Needs: These
needs inspire a person to develop to his maximum potential. They are placed at
the top of the need hierarchy. These are the needs of becoming what one really
wants to become. People with strong self-actualisation needs do not wait for
things to happen they make things happen. Personal and professional growth and
achievement are the motives that promote self-actualisation needs of a person.
Two-Factor Theory (Motivation-Hygiene Theory)
Frederic Hertzberg and his associates developed the two factor theory based on
an actual research by interviewing of 200 engineers and accountants of 11
different companies. The purpose of the research was to find out as to what
variables are perceived to be desirable goal to achieve and conversely,
undesirable conditions to avoid. During the course of the interviews, these
men were asked to describe a few previous job experiences in which they felt
“exceptionally good” or “exceptionally bad”.
Hertzberg categorised two sets of factors that provided satisfaction or
dissatisfaction to employees. These are: Hygiene factors and Motivators.
Hygiene factors: These factors are insurance policies, retirement benefit
plans, salary structure, bonus, job security, relationship with superiors,
working conditions etc. Hertzberg found that the presence of these factors
provide no dissatisfaction to employees, that is, presence of these factors do
not motivate the workers to perform better but their absence becomes a source
of dissatisfaction. They are also called maintenance factors, dissatisfiers or
extrinsic factors.
Motivators: These factors are related to the job content, like achievement and
recognition; innovative projects, challenge, opportunities for personal
growth, responsibilities etc. Their absence provides no satisfaction or
motivation to workers but their presence results in high degree of motivation
and job satisfaction. They are also called satisfiers or intrinsic
factors.
According to Hertzberg, hygiene factors must be present (though they do not
motivate employees) to prevent dissatisfaction and motivation factors must be
present to increase their satisfaction and motivation.
McGregor's Theory X and Theory Y
Douglas McGregor introduced these two theories based on two distinct set of
assumptions about human behaviour. One set of assumptions is called Theory X
and the other set of assumptions Theory Y.
Theory X : Theory X assumes that people by nature are lazy, dislike work, do
not want to assume responsibility, work only if directed by managers and are
very little or not ambitious about achieving their higher-order needs. They
only want to fulfill their primary needs of food, clothing, shelter, and
security. Motivators like money and fringe benefits make them contribute to
organisational goals. This is a pessimistic approach of human behaviour. It
provides rigid control, close supervision, one way communication and
autocratic style of leadership for motivating human beings.
Theory Y: The other view held by managers about the nature of people is
opposite to that of Theory X. McGregor felt that as people continue working in
the organisation, their lower-order needs get satisfied over a period of time
and they look forward to satisfying their higher-order needs of ego
satisfaction and self-actualisation. They want to take part in management
decision-making processes accept challenging jobs, look for lucrative and
innovative job conditions and are, therefore, self-directed to contribute
towards organisational goals. Their aim is not only to maximise personal goals
but also organisational goals.
Assessment Activity
Link the following
Theory X - Workers are self directed
Need Hierarchy Theory - Frederic Hertzberg
Two-Factor Theory - Abraham Maslow
Theory Y - Workers prefer to be directed
2.3. Modern Approach
Current management thinking wants equal emphasis on man and machine. During
this period the principles of management reached a high degree of perfection
and reinforcement. The modern business theorists have recognized that
management is responsive to environmental changes and the social
responsibility of business.
The modern management thought is characterised by i) responsiveness to
environmental changes; ii) multiplicity of objectives, maximising the interest
of diverse groups (stake holders like share holders, customers, suppliers);
iii) multidisciplinary in nature (drawing knowledge from various disciplines
and synthesising it for solving managerial problems.); iv) future oriented
(decision making by forecasting environment through scientific techniques and
reducing risks to increase the adaptability of the organisation to changing
environmental variables); and v) as dynamic institutions, business
organisation are composed of interrelated divisions and sub-
divisions.
We can identify different perspectives on management theory that are growing
in importance in the modern times: Management science approach or quantitative
theory, the systems approach, the contingency approach, and the dynamic
engagement approach. We will discuss systems approach and contingency theory
in this section.
2.3.1. Systems Theory
The systems approach to management views the organization as a unified whole
instead of fragmented segments. A purposeful system is composed of
interdependent and interrelated parts and not a mere collection of parts. And
it is also a part of the larger, external environment. Each system may
comprise several sub-systems and in turn, each sub-system may be further
composed of sub systems. According to the theory the activity of any one
segment affects, in varying degrees, the activity of every other segment in an
organisation.
Contributions of Systems Approach
The systems approach examines the relationship between different components
of the organization.
It maintains a balance between different sub-systems so as to ensure the
growth of the system.
- It increases organisation’s adaptability to environmental changes.
It permits analysis and synthesis, differentiation and integration, right
from micro sub-system level to the macro system level.
- It provides a strong conceptual understanding of organization.
The system approach to management is diagrammatically represented as
follows:
 |
| An open system view of organization |
2.3.2. Contingency Theory (Situational Approach)
The contingency viewpoint developed in 1950s when a research team headed by
Joan Woodward, an industrial sociologist, undertook a study of 100 British
firms of different sizes producing different products. Better performing
companies were compared with average or below-average performing companies to
know the reasons why they performed better. It was concluded that difference
in performance was not because of principles of classical theories but because
of better technology to produce goods. This developed a theory that
'appropriate actions by managers often depend on (or are contingent on) the
situation'.
Contributions of Contingency Theory
Contingency approach advocates that managerial actions and organizational
design must be appropriate to the given situation and a particular action is
valid only under certain conditions.
There is no one best approach to management and it all depends on the
situation. Managerial action is contingent upon external environment.
- There is no one best approach for all situations.
Contingency theory attempts to analyze and understand these
interrelationships with a view towards taking the specific managerial
actions necessary to deal with the issue
This approach is both analytical and situational, with the purpose of
developing a practical answer to the question at hand.
Assessment Activity
- Which theory emphasizes on equal importance on men and machine ?
- A unified whole instead of fragmented units is the theme of
...................... theory.- “Managerial actions and organizational design must be appropriate to the
given situation” is related to ................ theory.
TE Questions
I. Choose the correct answer from the given brackets.
1. Which among the following is a neo-classical approach?
(a) Scientific Management (b) Bureaucratic Management
(c) Behavioural Approach (d) Administrative Management
2. An example for esteem need is ..................
(a)Recognition (b) Food (c) Shelter (d) Affection
3. Need Hierarchy Theory was propounded by ...................
(a) Henry Fayol (b) F W Taylor (c) Abraham Maslow (d) Joan Woodward
II. Fill in the blanks
1. Theories and principles that guide the management of people in
organizations is called
.....................
2. Hawthorne Studies was conducted by ...........................
3. Theory X and Y were propounded by ..........................
4. Contingency School of management was introduced by
....................................
5. The absence of these factors provides no satisfaction or motivation to
workers but their
presence results in high degree of motivation and job satisfaction is known as
...............
III. Short answer questions
1. What is classical approach to management thought?
2. Differentiate between Theory X and Theory Y.
3. What do you mean by Hawthorne studies? Briefly explain the various
experiments
conducted by Elton Mayo.
4. What is systems theory? What are the contributions of systems approach?
5. Write a short note on contingency theory. Briefly explain the contributions
made by this
approach.
6. Explain the Need Hierarchy Theory with the help of a diagram.
7. Explain in detail the classical theories of management.
8. Briefly explain Two-Factor Theory.
9. What do you mean by Acceptance theory of Authority?
10. Write a short note on Bureaucratic Management.
Extended Activity
Conduct a field visit to Technopark, visit various companies there and meet
with various
professionals and observe various approaches of management.
