Key Theories of Management

POM
Avadhesh Kumar Singh(FD)
Batch – A
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 What is Management?
• A set of activities
planning and decision making, organizing, leading, and
controlling

• Directed at an organization’s resources

human, financial, physical, and information

• With the aim of achieving organizational goals in an

efficient and effective
manner.
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Basic Purpose of Management

EFFICIENTLY
Using resources wisely and
in a cost-effective way

EFFECTIVELY
Making the right decisions and
successfully implementing them
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 Definition of “Management”

• By Griffin:
“A set of management functions directed at the
efficient and effective utilization of resources
in the pursuit of organization goals.”

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 Definition….contd….

• By Koontz and Weihrich:

“Management is the process of designing and
maintaining an environment in which
individuals working together in groups,
efficiently accomplish selected aims.”

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 Peter F. Drucker - Father of Modern
Management

• Management is an organ, organs can be

described and defined only through their
functions

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Why Study Management Theory ?
• We have stated that the world we live in is a complex
one – theories help us make sense of that complexity

• Management is a complex issue – management

theory helps us to make sense of the complexities

• Theory – a coherent set of assumptions which explain

the relationship between 2 or more observable facts

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• Theories provide a stable focus for
understanding what we experience and
provides criteria for determining what is
relevant – e.g. for a business to be viable a
good product and compliant workforce are
essential
• Theories enable us to communicate
efficiently and move into more complex
relationships with others

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• Theories enable us to continue learning
about our world
• Theories have boundaries i.e. there is only
so much that can be covered by any
particular theory

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Key Management Theories: An Overview

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Labour WW1 WW2 Protest movements IBM AT&T

Shortage 1914 - 1918 1941 - 1945 1960 – early 1970s PC Divestiture

SCIENTIFIC MANAGEMENT SCHOOL CLASSICAL ORGANISATIONAL THEORY SCHOOL

THE BEHAVIOURAL SCHOOL

MANAGEMENT SCIENCE

THE SYSTEMS APPROACH

THE CONTINGENCY
APPROACH

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The Evolution of Management Theory
• Management and organizations are
products of their historical and social
times and places.
• Management theory therefore
addressed issues of relationships
particular times

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The Scientific Management School

• Scientific Management Theory – body of

principles that addresses the efficiency of
workers
• Devised by F.W. Taylor, H.L. Gantt, F.
Gilbreth and L. Gilbreth

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 F. W. Taylor
Based his philosophy on 4 principles:

• The true science of management, so that the best method

of performing each task could be determined
• The scientific selection of workers, so that each worker is
given the responsibility for a task for which he is best
suited
• Scientific education and development of workers
• Intimate, friendly cooperation between management and
workers

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Henry Laurence Gantt (1816-1919)
• Educated from John Hopkins College
• Engineer, as draughtsman and later Asst.
engineer
• His publications: Work, Wage and Profits
(1910); Industrial Leadership(1916); and
Organizing for Work.(1919)

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 Gantt’s Thoughts….
• Task and Bonus Plan
• Daily Balance Chart (Gantt Chart)
• Humanizing Science of Management
• Important of Leadership
• Training of Workers
• Social Responsibility of Business

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 Contributions by Frank Gilbreth
• Motion study
• Time Study
• One best way
• Training of personnel
• Three position plan of promotion (each worker should be
considered to occupy three positions: a. the job he held
before promotion to his present position b. his present
position and c. the next higher job
• Part of his work, then would be teaching the man below him
and learning from the man above him. In this way, he would
qualify for promotion himself and help to provide a
successor to his current job.

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 Contributions of Lillian Gilbreth
• It should be noted that FBG was greatly assisted by Lillian
Gilbreth whom he married in 1904
• Both of them used motion picture films to analyze and
improve motion sequences
• Both developed the process of chart and the flow diagram to
record process and flow patterns used in a work situation
• They emphasized written instructions to avoid confusion and
misunderstanding (the white list card system)
• The Gilbreths urged that the POM and motion analysis could
effectively be applied to huge untapped area of self-
management. They started to search into the area of fatigue
and its impact o health and productivity.

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Scientific Management Theory (SMT)
• At the time Taylor felt that the success of these principles
required a mental revolution on the part of management and
worker
• Rather that focus on profit both management and labour
should focus on increasing production
• SMT is based on production time-line studies – finding the
quickest and best method to perform each component of a
task
• In this way the amount of work that an employee was able to
perform with the amount of materials and equipment
available was established
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Scientific Management Theory (SMT)

Employers are encouraged to pay the

more productive workers at a higher rate

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 Contributions of SMT

• Faster finished products

• Efficiency techniques applied to non-
industrial organizations – e.g. training of
medical personnel, fast food outlets

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Limitations of Scientific Theory
• SMT led to dramatic increases in production and higher
pay for some.
• Trade unions opposed SMT – they felt that working
efficiently would exhaust all the work available and lead
to retrenchments
• Critics of SMT felt that it put workers under to perform
in unrealistic time expectations – this exploitation led to
more workers joining trade unions
• This led to decades of distrust between labour and
management (NB the relationship issue)

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 Scientific Management Theory
• Evolution of Modern Management
– Began in the industrial revolution in the late 19th century
as:
• Managers of organizations began seeking ways to better satisfy
customer needs.
• Large-scale mechanized manufacturing began to supplanting
small-scale craft production in the ways in which goods were
produced.
• Social problems developed in the large groups of workers
employed under the factory system.
• Managers began to focus on increasing the efficiency of the
worker-task mix.

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Classical Management Perspective

Focuses on managing the whole organization

rather than individuals.

• Henri Fayol (1845–1925)

– Was first to identify the specific management functions of
planning, organizing, leading, and controlling.
• Max Weber (1864–1920)
– His theory of bureaucracy is based on a rational set of
guidelines for structuring organizations.

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Fayol’s Principles of Management
• Division of Labor: allows for job specialization.
– Fayol noted jobs can have too much specialization
leading to poor quality and worker dissatisfaction.
• Authority and Responsibility
– Fayol included both formal and informal authority
resulting from special expertise.
• Unity of Command
– Employees should have only one boss.

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Fayol’s Principles of Management
(cont’d)
• Line of Authority
– A clear chain of command from top to bottom of
the firm.
• Centralization
– The degree to which authority rests at the top of
the organization.
• Unity of Direction
– A single plan of action to guide the organization.
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Fayol’s Principles of Management
(cont’d)
• Equity
– The provision of justice and the fair and impartial
treatment of all employees.
• Order
– The arrangement of employees where they will be of the
most value to the organization and to provide career
opportunities.
• Initiative
– The fostering of creativity and innovation by encouraging
employees to act on their own.

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Fayol’s Principles of Management
(cont’d)
• Discipline
– Obedient, applied, respectful employees are necessary
for the organization to function.
• Remuneration of Personnel
– An equitable uniform payment system that motivates
contributes to organizational success.
• Stability of Tenure of Personnel
– Long-term employment is important for the development
of skills that improve the organization’s performance.

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Fayol’s Principles of Management
(cont’d)
• Subordination of Individual Interest to the
Common Interest
– The interest of the organization takes
precedence over that of the individual
employee.
• Esprit de corps
– Comradeship, shared enthusiasm foster devotion
to the common cause (organization).

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 Max Weber

Developed the concept of bureaucracy as a formal

system of organization and administration
designed to ensure efficiency and effectiveness.

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 Weber’s
Principles of
Bureaucracy

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 Weber’s Five Principles of
Bureaucracy
• Authority is the power to hold people accountable
for their actions.
• Positions in the firm should be held based on
performance, not social contacts.
• Position duties are clearly identified so that people
know what is expected of them.
• Lines of authority should be clearly identified such
that workers know who reports to who.
• Rules, standard operating procedures (SOPs), and
norms guide the firm’s operations.
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Behavioral Management Theory
• Behavioral Management
– The study of how managers should behave to
motivate employees and encourage them to
perform at high levels and be committed to the
achievement of organizational goals.
– Focuses on the way a manager should
personally manage to motivate employees.

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 Behavioral Management
• Mary Parker Follett
– An influential leader in early managerial theory
– Held a horizontal view of power and authority
in organizations
• Suggested workers help in analyzing their jobs for
improvements—the worker knows the best way to
improve the job.
• If workers have relevant knowledge of the task, then
they should control the task.

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 The Hawthorne Studies
• Studies of how characteristics of the work
setting affected worker fatigue and
performance at the Hawthorne Works of the
Western Electric Company from 1924-1932.
– Worker productivity was measured at various
levels of light illumination.
– Researchers found that regardless of whether the
light levels were raised or lowered, worker
productivity increased.

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 The Hawthorne Studies
• Human Relations Implications
– Hawthorne effect—workers responded to the
attention they received and were more productive.
– Managers should be behaviorally trained to manage
subordinates to elicit their cooperation and increase
their productivity.
– Groups impose informal performance norms on
their members (both “rate busters” and “chiselers”)
– Gave rise to the field of Organizational Behavior

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 Theory X and Theory Y
• Douglas McGregor proposed the two different sets of
assumptions about workers.
– Theory X assumes the average worker is lazy,
dislikes work and will do as little as possible.
• Managers must closely supervise and control through
reward and punishment.
– Theory Y assumes workers are not lazy, want to do a
good job and the job itself will determine if the
worker likes the work.
• Managers should allow workers greater latitude, and
create an organization to stimulate the workers.

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Theory X versus Theory Y

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 Theory Z
• William Ouchi researched the cultural differences
between Japan and USA.
– USA culture emphasizes the individual, and managers
tend to feel workers follow the Theory X model.
– Japan culture expects worker committed to the
organization first and thus behave differently than
USA workers.
• Theory Z combines parts of both the USA and Japan
structure.
– Managers stress long-term employment, work-group,
and organizational focus.

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 The Systems Approach
• What is a System?
– A collection of parts that operate interdependently to
achieve a common purpose.
• Systems Approach
– Posits that the performance of the whole is greater
that the sum of the performance of its parts.
– Analytic versus synthetic thinking: outside-in thinking
versus inside-out thinking.
– Seeks to identify all parts of an organized activity and
how they interact.

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 The Systems Approach
• Chester I. Barnard’s Early Systems Perspective
– Wrote Functions of the Executive.
– Characterized all organizations as cooperative
systems (but are they?).
– Principal organizational elements
• willingness to serve.
• common purpose.
• communication.
– Strong advocate of business ethics.

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 Management Science Theory
• An approach to management that uses rigorous
quantitative techniques to maximize the use of
organizational resources.
– Quantitative management—utilizes linear programming,
modeling, simulation systems.
– Operations management—techniques to analyze all
aspects of the production system.
– Total Quality Management (TQM)—focuses on
improving quality throughout an organization.
– Management Information Systems (MIS)—provides
information about the organization.
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 The Contingency Approach
• Contingency Approach
– Try to determine which managerial practices
are appropriate in specific situations.
• Different situations require different managerial
responses.
• E.g., under which environmental conditions should
you increase/decrease departmentalization in an
organization’s structure?

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The Contingency Approach (cont’d)

• Lessons from the Contingency Approach

– Approach emphasizes situational
appropriateness rather than rigid adherence to
universal principles.
– Approach creates the impression that an
organization is captive to its environment.

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