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NeoClassical Theory

The Neoclassical Theory extended the Classical Theory of management by incorporating behavioral sciences to account for human factors. It views the organization as a social system where human actions impact performance. While Classical Theory focused on physiological and mechanical variables, Neoclassical Theory recognized these did not fully explain work behavior. Researchers then studied human behavior at work, leading to a theory primarily focused on people in organizations, known as the behavioral or human relations approach. The Neoclassical Theory posits that organizations have both formal and informal structures and that individual and organizational interests can conflict, requiring integration. It also asserts that individuals have diverse motivations and seek to fulfill needs through communication and teamwork.

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7K views3 pages

NeoClassical Theory

The Neoclassical Theory extended the Classical Theory of management by incorporating behavioral sciences to account for human factors. It views the organization as a social system where human actions impact performance. While Classical Theory focused on physiological and mechanical variables, Neoclassical Theory recognized these did not fully explain work behavior. Researchers then studied human behavior at work, leading to a theory primarily focused on people in organizations, known as the behavioral or human relations approach. The Neoclassical Theory posits that organizations have both formal and informal structures and that individual and organizational interests can conflict, requiring integration. It also asserts that individuals have diverse motivations and seek to fulfill needs through communication and teamwork.

Uploaded by

Vita Bonum
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NeoClassical theory

Definition: The NeoClassical Theory is the extended version of the classical theory wherein the
behavioral sciences gets included into the management. According to this theory, the
organization is the social system, and its performance does get affected by the human actions.

The classical theory laid emphasis on the physiological and mechanical variables
and considered these as the prime factors in determining the efficiency of the
organization. But, when the efficiency of the organization was actually checked, it
was found out that, despite the positive aspect of these variables the positive
response in work behavior was not evoked.

Thus, the researchers tried to identify the reasons for human behavior at work.
This led to the formation of a NeoClassical theory which primarily focused on the
human beings in the organization. This approach is often referred to as
“behavioral theory of organization” or “human relations” approach in
organizations.

The NeoClassical theory posits that an organization is the combination of both


the formal and informal forms of organization, which is ignored by the classical
organizational theory. The informal structure of the organization formed due to
the social interactions between the workers affects and gets affected by the
formal structure of the organization. Usually, the conflicts between the
organizational and individual interest exist, thus the need to integrate these
arises.

The NeoClassical theory asserts that an individual is diversely motivated and


wants to fulfill certain needs. The communication is an important yardstick to
measure the efficiency of the information being transmitted from and to different
levels of the organization. The teamwork is the prerequisite for the sound
functioning of the organization, and this can be achieved only through a
behavioral approach, i.e. how individual interact and respond to each other.
In the early 1920s, a shift away from classical management theory took place as theorists began to
consider the human side of an organization and the social needs of employees. In this lesson, you
will learn about the evolution of the neoclassical theory of management and its two sources: the
human relations movement and the behavioral management movement.

A Shift Away from Classical Management Theory


In the early 1920s, classical management theorists, such as Frederick Taylor, Henry Gantt, and
Frank and Lillian Gilbreth, spent their time researching how a specific job was done, what steps were
taken by an employee to complete the work, and the amount of time it took a worker to complete a
task using different methods. They then used this information to determine the most effective way of
completing a task. While these individuals focused on the science of creating specialized work
processes and workforce skills to complete production tasks efficiently, critics began to scrutinize
classical management theory for its potentially harmful effects on workers.
It was not so much the methodology of finding the most efficient way to complete a task that
concerned critics, but the underlying assumption of classical management theorists that managers
and workers would meet halfway on their attitudes towards standardization. However, many believed
that placing too much emphasis on standardization of jobs and workers had not created this 'mental
revolution' that Taylor and his associates had hoped for, but rather had inadvertently created an
attitude among managers at the time that employees were nothing more than an appendage to a
machine. While machines and processes could be standardized, critics argued that it was unrealistic
to expect that standardization among emotional beings; the two needed to be looked at individually.
So, as Taylor and other classical management theorists continued their work on standardization,
others started to conduct research on the worker, and thus, the neoclassical theory of
management was born.

The Emergence of the Neoclassical Theory of


Management
The neoclassical theory was an attempt at incorporating the behavioral sciences into management
thought in order to solve the problems caused by classical theory practices. The premise of this
inclusion was based on the idea that the role of management is to use employees to get things done
in organizations. Rather than focus on production, structures, or technology, the neoclassical theory
was concerned with the employee. Neoclassical theorists concentrated on answering questions
related to the best way to motivate, structure, and support employees within the organization.
Studies during this time, including the popular Hawthorne studies, revealed that social factors, such
as employee relationships, were an important factor for managers to consider. It was believed that
any manager who failed to account for the social needs of his or her employees could expect to deal
with resistance and lower performance. Employees needed to find some intrinsic value in their jobs,
which they certainly were not getting from the job that was highly standardized. Rather than placing
employees into job roles, where they completed one specific task all day with little to no interaction
with coworkers, employees could be structured in such a way that they would frequently share tasks,
information, and knowledge with one another. The belief was that once employees were placed into
this alternate structure, their needs for socialization would be fulfilled, and thus they would be more
productive.

Two Movements in the Neoclassical Theory


The neoclassical theory encompasses approaches and theories that focus on the human side of an
organization. There are two main sources of neoclassical theory: the human relations
movement and the behavioral movement. The human relations movement arose from the work of
several sociologists and social physiologists who concerned themselves with how people relate and
interact within a group. The behavioral movement came from various psychologists who focused on
the individual behavior of employees. To better understand these movements, let's take a look at
how the work of these various sociologists and psychologists influenced management thought.

Human Relations Movement


The human relations movement was a direct result of Elton Mayo and Fritz J. Roethlisberger's
Hawthorne studies, which were

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