Assignment On

The Evolution of Management Thoughts and Theories

 Submitted To:

Md. Kazi Raihan Uddin,

Assistant Professor,

Department of Management,

University of Dhaka.

Submitted By:

Md. Rashedur Rahman,

Department of Management,

Section: A

Batch: 23rd Roll: 054

Course Name & Code:

Development of Management Thoughts (MGT-401)

Date of Submission: 30th August, 2020.

1. Introduction 

Knowing the story behind the evolution of management thought and the evolution
of theories is essential. If you are familiar with them, including the development
that brought about the current practices in business, then you will have a better
understanding of management principles that can help you to manage people more
effectively.

The point is that a lot has changed about management. Emphasis on structure and
authority is no longer as strong as it used to be in the past. Now the focus is on
employees. However, there are theories on the factors that motivate employees,
but understand that knowing how these theories came about can give you the
needed knowledge to manage your employees appropriately. Read to understand
the evolution of management thought and management theories.

The point is that management has been practiced in one way or the other since
civilization began. If you want a good example where advance management
principles where applied, consider the organization of the olden days Roman
Catholic Church, military forces as well as ancient Greece. These are all excellent
examples. But the industrial revolution brought drastic change. And suddenly, the
need to develop a more holistic and formal management theory became a
necessity.

2. Evolution of Management Thought

The evolution of management thought may be divided into three stages:  

1. The Classical Theory of Management  

2. The Neo-Classical Theory of Management  

3. The Modern Theory of Management  

2.1 The Classical Theory of Management

This approach is also known as traditional approach or empirical approach. It was

developed through three streams such as – (1) Scientific Management developed by
F.W. Taylor, Harrington Emerson, Henry Ganlt etc. (2) Administrative Theory
developed by Henry Fayol, Lyndall, Urwick etc. (3) Bureaucracy developed by Max
Webber.  

The main features of this classical approach are:  

1. Management is a systematic network (process) of interrelated functions.  

2. Formal education and training is emphasized for developing management skills.  

3. People are motivated by economic gains.  

4. Stress was given to the formal organization structure.  

5. Many principles have been developed for the practicing executive.  

6. Functions, principles and skills of management are considered universal.  

The contributions of some thinkers in this area are discussed here:  

1. Robert Owen (1771 – 1858):  

He managed a group of textile mills in Lanark (Scotland) during 1800 – 1828. He

carried out many experiments and introduced many social reforms. He emphasized
that workers’ performance was influenced by the total environment in which they
worked. He said employees are Machines and their maintenance is necessary.
Throughout his life he worked for the building up of a spirit of cooperation between
the workers and management.  

He suggested that investment in human resources is more important than the

investment in physical resources. He introduced new ideas of human relations, e.g.,
shorter working hours, housing facilities, education of children, provision of
canteen, rest pauses, training of workers in Hygiene etc. He began cooperative
movement in 1828 in Rochdale, England. He is rightly called the father of Modern
Personnel Management.  

2. Charles Babbage (1792 – 1871):  

He was a professor of mathematics at Cambridge University. His best-known book is

“on the economy of machinery and manufactures” published in 1832. He found that
manufactures were using traditional methods of work, relying more on guess work
and based decisions on old opinions. He perceived that the methods of science and
mathematics could be applied to the operations of factories.  

He laid emphasis on specialization, work measurement, optimum utilization of

machines, cost reduction and wage incentives. He laid the foundation for
formulation of scientific study of management.  

3. Henry Vamun Poor:  

He was the editor of the American Railroad Journal. During that period, he closely
studied functioning of the American Railroad system. He stressed upon the need for
effective management.  

He advocated three Principles – organization, communication and information for

Railroad managers. He observed the need for a managerial system with a clear
organization structure. He suggested a kind of leadership to overcome the rigidities
of the formal organization.  

4. Henry Robinson Towne (1844 – 1924):  

He was a President of a lock manufacturing company. He has taken interest in the

better management of business and has applied his ideas successfully in his
company. In 1886, he has presented a paper entitled “The Engineer as an
Economist.” In this paper he urged the combination of engineers and economists as
industrial managers. He also suggested organized exchange of experience among
managers and an organized effort to gather the accumulated knowledge in the art
of workshop management.  

5. James Watt and Mathew Rabinson Boulton (1796 – 1848) (1770 – 1842):  

They were the sons of the distinguished inventors of steam engine.  

They applied several management techniques such as:  

(1) Market research and forecasting.  

(2) Standardization components and parts.  

(3) Production Planning.  

(4) Scheme for developing executives.  

(5) Maintenance of advance control report and cost accounting procedures.  

(6) Elaborate statistical records.  

(7) Planned Machine for better work flow.  

(8) Provision of employee welfare with sickness benefit scheme.  

6. Max Webber (1864 – 1920) (Bureaucratic Model):  

He was the chief exponent of the Bureaucratic model. He emphasized on the

recognition and exercise of authority is the fundamental question. For answering
this question he has classified authority structures into three categories. They are
charismatic, traditional and Bureaucratic. A charismatic leader’s authority is
expected by virtue of some exceptional innate qualities.  
The authority which flows from generation to generation or hereditary is called
traditional authority. The authority which comes from the position in the
organization is called Bureaucratic authority. This authority will have a clearly
defined set of rules, procedures and roles.  

This model includes the following:  

(i) There is clearly separation between superior and sub-ordinate.  

(ii) There is a division of labour based upon competence and functional

specialization.  

(iii) There is a clear divorce between personal and official matters.  

(iv) There is a system of rules, regulations and procedures.  

(v) There is a hierarchy in positions based on legal authority and power.   

7. Fredrick Winslow Taylor (1856 – 1915):  

Father of scientific management. In his experiment he has concluded that the main
reason of general inefficiency and wastage in factories was ignorance on the part of
both workers and management. He made efforts to replace the primitive rule of
thumb methods by modern scientific methods based on investigations, analysis and
measurement. He defined management as “the art of knowing exactly what you
want men to do and seeing that they do it in the best and cheapest way”.  

He gave the following principles of scientific management:  

i. Every job should be broken into elements and a scientific method to perform each
element should be established.  

ii. Scientific selection, training and development of workers for each job.  

iii. Management should cooperate with workers to maximize efficiency and

productivity.  

iv. The work and responsibility should be scientifically distributed between workers
and management.  

Scientific management has the following applications:  

i. The efforts to be utilize to the maximum, wastages should be eliminated.  

ii. Use of monetary and other incentives for improving the productivity of workers.  

iii. Establishment of performance standards.  

It has been criticized due to the following factors: 

i. It ignored the human side of organization and was devoid of a human touch.  

ii. The incentives to workers were not commensurate with the increase in
productivity.  

iii. Specialization makes the work repetitive and monotonous.  

8. Henry Fayol (1841 – 1925):  

Henry Fayol wrote a book on General and industrial management. This book is
considered to be one of the best classics in management.  

His contributions to management may be analyzed under the following heads: 

Classification of Business Activities: 

According to him, all activities of a business enterprise could be divided into six
categories- (i) Technical Activities (production), (ii) Commercial activities (buying,
selling and exchange), (iii) Financial activities (search for and optimum use of
capital), (iv) Security activities (protection of property and persons), (v) Accounting
activities (including statistics), (vi) Managerial activities. 

Functions of Management:  

He divided the key (unction of administration into five sub-groups such as- (i)
Planning (to foresee and provide means for the future), (ii) Organizing (provides
everything useful to its functioning, raw material, tools, capital, personnel). (iii)
Coordinating (binding together – unifying and harmonizing all activity), (iv)
Commanding (lead the personnel in a better way), (v) Controlling (ensuring
everything goes as per plans).  

Principles of Management:  

He gave 14 principles of management- (i) Division of work (ii) Authority and

responsibility (iii) Discipline (iv) Unity of command (v) unity of direction (vi) Sub-
ordination of individual to general interest (vii) Remuneration of personnel (viii)
Centralization (ix) Scalar chain (x) Order (xi) Equity (xii) Stability of tenure of
personnel (xiii) Initiative (xiv) Esprit de Corps.  

Managerial Qualities and Training:  

Fayol stressed that management skills can and should be taught first in the class
room and then at the work place.  

He identified the following skills which persons desirous of entering management

career should learn:  
(i) Physical (health, vigour and address),  

(ii) Mental (ability to understand and learn, judgment and adaptability),  

(iii) Moral (energy, firmness, initiative, loyalty, tact and dignity)  

(iv) General education (general acquaintance with matters not belonging exclusively
to the function performed)  

(v) Special knowledge (peculiar to the function being performed)  

(vi) Experience (knowledge arising from work proper)  

  

2.2 The Neo-Classical Theory of Management:  

This theory deals with the human factor. Elton Mayo and Mary Parker Follett are the
main contributors of human relations approach. This approach also causes
‘Behavioral Science Management’ which is a further refinement of human relations
approach.  

Human Relations Movement:  

This approach deals with the factors which encourage higher performance on the
part of workers. The productivity can be increased in the organization by improving
the working conditions, lowering of hours of work, by establishing social relations
among managers.  

The contributions of some thinkers in this area are discussed here:  

a. Elton Mayo (1880 – 1949):  

He was an Australian by birth. He was a professor of industrial research at the

Harvard Graduate School of Business Studies. Elton Mayo and his associates
contributed much to this approach. Mayo is called as father of human relations
approach. He is known for his work which is commonly referred as the Hawthorne
studies. These studies conducted to study the relationship between workers’ output
and physical conditions in the organization.  

This study revealed that an organization is not only a formal arrangement of men
and functions but also a social system which can be operated successfully only with
the application of the principles of psychology and other behaviour sciences.  

He observed that the performance of workers in the organization can be improved

by considering the following factors- (1) Less restrictive methods of supervision (2)
giving independence to workers (3) allowing the formation of small cohesive sub-
groups of the workers (4) creating good conditions to improve themselves and (5) a
good cooperation between management and workers.  

Distinction between Taylor and Elton Mayo:  

Both of them have focused on increasing production and reducing industrial

conflicts.  

But they have differed in the following way:  

Taylor’s Scientific Management Theory: 

i. Financial incentives have been given much importance to increase the satisfaction
of employees.  

ii. Workers are considered as ‘individuals’ so far as their contribution to

organizational output is concerned. 

iii. This theory has considered management from the point of view of managers. 

iv. It has applied all scientific methods to increase production. 

v. Here lower order needs of workers are given more importance than higher order
needs. 

Elton Maya’s Human Relations Theory:  

i. Non-financial incentives have been given importance. 

ii. Workers are considered as part of the group. 

iii. This considered from the point of view of workers. 

iv. This has given importance to human relations to increase productivity. 

v. Here, higher order needs are given more priority than lower order needs. 

b. Mary Parker Follett (1868 – 1933): 

(i) Another thinker associated with this approach is Mary Parker. She favoured
participation of workers in the decision-making process. She was also favoured for
professionalization. She interpreted classical management principles in terms of
human factors. She has a reputation as a pioneer of human relations approach.  

(ii) Behavioural Sciences Movement- Many sociologists and psychologists like

Maslow, Douglas McGregor, Resins Likert, Keith Davis, Chester Bernard etc., have
made contributions to the development of this approach. This approach has
concentrated on inter-personal roles and responsibilities.  
The basic features of this approach are- (1) an organization is a socio-technical
system (2) there should the relationship between organizational goals and human
needs (3) many factors will influence inter-personal and group behaviour of people
in the organization (4) conflicts are inevitable in the organizations.  

Merits: 

Following are the merits of this approach:  

(1) This approach recognizes the quality of leadership as a critical factor in

management success.  

(2) It recognizes the role of individual psychology and group behaviour in

organizational effectiveness.  

Limitations:  

The following are the limitations:  

(1) It errs by almost identifying management with the study of social and industrial
psychology.  

(2) This approach neglects the economic dimension of work satisfaction.  

Some of the contributions under this approach are discussed as follows:  

A. Abraham Maslow:  

He has propounded a general theory of motivation known as Need Hierarchy

Theory. The features of this theory are- (1) Human needs are multiple, complex and
interrelated. (2) Needs form a particular structure or hierarchy. (3) As soon as one
need is satisfied, another need emerges, (4) A satisfied need is not a motivator. (5)
Various need levels are inter-dependent and overlapping.  

He classified the needs as follows:  

i. Physical Needs – These are biological needs required to preserve human life such
as food, cloth and shelter.  

ii. Safety Needs – These consists of physical safety against murder, fire, accident,
security against unemployment etc.  

iii. Social Needs – Needs refer to need for belonging, need for acceptance, need for
love and affection etc.  

iv. Esteem Needs – These are the needs derived from recognition, status,
achievement, power, prestige, etc.  
v. Self Actualization Needs – It is the need to fulfill what a person considers to be his
real mission in life.  

B. Douglas McGregor (1906 – 1964):  

He has developed a theory of motivation on the basis of hypotheses relating to

human behaviour. According to him the function of motivating people involves
certain assumption about human nature. There are two alternative sets of
assumptions which he has described as theory X and theory Y. Theory X represents
the traditional and narrow view of human nature. That is the average worker is lazy
and dislikes work, his unambitious, avoids responsibility and prefers to be led. He
gave theory Y as an answer to such situations.  

C. Rensis Likert (1903 – 1972): 

He was the director of the institute of social research at the University of Michigan
(USA). He conducted research in the field of leadership. He has summarized the
research by conducting that the most effective managers engage in both dimensions
of leadership behaviour by getting employees involved in the operation of their
developments or divisions in a positive and constructive manner, setting general
goals, providing fairly loose supervision and recognizing their contributions. He
called these managers employee-centered leaders.  

Less effective leaders are mostly directive in their approaches and most concerned
with closely directing employees, explaining work procedures and monitoring
progress in task accomplishment, there he called job centered leaders.  

So he is best known for his classification of management styles into four categories:  

i. Exploitative Autocratic – Subordinates are given no participation in decision-

making because leaders have no confidence in them.  

ii. Benevolent Autocratic – Management has condescending confidence in sub-

ordinates just as a master has towards a servant.  

iii. Participative – Employees are allowed to participate meaningfully in decisions

affecting their lives.  

iv. Democratic – Leaders have full confidence in sub-ordinates. Therefore,

participation is meaningful.  

He developed the concept of ‘linking pin’ to integrate individual and organizational

goals. Lender this approach each group is integrated with other groups in the
organization by means of persons who are members of more than one group. Such
members are known as ‘linking pins’. So he will be a leader for the lower level unit
and a member in the upper level unit. He and his associates also developed a
measuring instrument for evaluating leadership styles of individual managers.  
D. Chester I. Barnard (1886 – 1961): 

He was the President of new Jerry Bell Telephone Company. His important
publications are “The Functions of the Executives”, “Organization and Management”
and “Elementary Conditions of Business Morals”.  

The main contributions of Barnard are given below:  

i. He defined organization as a ‘system of consciously coordinated activities of two

or more persons’. He highlighted three characteristics of the organization i.e., – (a)
the persons are able to communicate with each other (b) they are willing to-
contribute to the action (c) there is a common purpose.  

ii. He has also divided the organization into formal and informal and he said that
informal organization is an important part of formal organization.  

iii. He has divided the functions of executive into three categories- (a) The
maintenance of organizational communication (b) Securing essential services from
individuals in the organization (c) formulating and defining the purpose.  

iv. He has also concentrated on the acceptance of authority for achieving

organizational goals.  

v. He has contributed towards the establishing the relationship between formal and
informal organizations.  

vi. He stressed the complexity of organization processes and human motivation.  

vii. He considered that leadership is the most important factor in an organization. So

his contributors to management thought have been outstanding.  

Human Relations Theory and Behaviour Science Theory- A Comparison: 

Human Relations Theory:  

i. It has concentrated on individual behaviour.  

ii. This considers group conflict as a negative force that affects organizational
efficiency.  

iii. It views the workers as a ‘Social Man’. 

iv. It gives importance to formal organization structure. 

v. It views organization as social system. 

vi. It does not provide scientific vision to study human behaviour. 

vii. Self-direction and self-control techniques are used in a limited extent. 

viii. It permits group decision-making to a limited extent i.e., only to the routine
decisions. 

Behavioural Science Theory:  

i. It has concentrated on group behaviour. 

ii. This considers group conflict as source of new and innovative ideas.  

iii. It views the workers as a ‘Self-Actualizing Man.’  

iv. It emphasises on comparatively a flexible organization structure.  

v. It views as socio-technical system.  

vi. It provides scientific understanding of human behaviour. 

vii. Self-direction and self-control techniques are used to increase group efficiency. 

viii. It encourages group decision-making for both routine and important matters. 

2.3 The Modern Theory of Management:  

Under modern management thought, streams of thinking have been noticed since
1960.  

These approaches are discussed as under:  

1. Quantitative Approach or Mathematical Approach:  

It is also known as Management science approach or decision theory approach. It

was developed by W.C. Churchman and others. It focused on use of mathematical
and statistical techniques in management. It also focused on finding right answers to
management problems.  

The basic features of this approach are – (1) Management is a series of decision-
making (2) Mathematical models can be developed by quantifying various variables
of the problems (3) Mathematical symbols can be used to describe managerial
problems (4) Organizations exist for the achievement of specific and measurable
economic goals.  

Merits: 

The following are the merits of this approach- (1) It emphasizes the great
importance of the study of diverse decision situations and the means of perfecting
them. (2) It stresses the replacement of intuition and hunch by factual data and
logical analysis in the decision-making process.  

Limitations:  

They are – (1) The data available in the business may not always be upto date and it
may lead to wrong decision-making (2) It errs by arguing that management has no
other functions except decision-making (3) This approach is based on unrealistic
assumptions i.e., all related variables are measurable and have a functional
relationship.  

2. System Approach:  

This approach is based on the generalization that an organization is a system and its
components are inter-related and inter-dependent. The effectiveness of the system
mainly depends upon the inter dependence and inter- relatedness of the various
sub systems.  

The features of this approach are- (1) An organization is a system consisting of

several sub-systems (2) All sub-systems are mutually related to each other (3) All
sub-systems should be studied in their interrelationship rather than in isolation from
each other (4) The organization is responsive to environment effect.  

Uses:  

The following are the uses of this approach- (1) It provides a unified focus to
organizational efforts (2) It provides a strong conceptual framework for meaningful
analysis and understanding of organizations (3) It recognizes the interaction and
inter-dependency among the different various of the environment (4) This approach
is better than others because it is close to reality (5) It treats organization as an open
dynamic system.  

Limitation:  

The following are the limitations- (1) This system is oftenly called abstract and vague
and cannot directly and easily be applied to practical problems (2) It does not offer
specific tools and techniques for the practicing executive (3) It is not clearly
specifying the nature of interactions and inter-dependencies specially between an
organization and its external environment.  

3. Contingency or Situational Approach:  

This approach was developed by J. W. Lorsch and P. R. Lawrence. This is new

approach to management. The basic essence of this approach that organizations
have to cope with different situations in different ways. So managers should develop
variable methods, tools and action plans as per the required situation.  
Features:  

They are – (1) Management is entirely situational so the application and

effectiveness of any technique is contingent on the situations. (2) Policies and
procedures should be according to environmental conditions (3) Managers should
understand that there is no one best way to manage. They must not consider
management principles and techniques universal.  

Uses:  

The following are the uses of this approach- (1) This approach takes a realistic view
in management and organization. (2) It dispels the universal validity of principles. (3)
Managers are advised to be situation oriented. (4) Managers become innovative and
creative. (5) This approach has a wide applicability in organization. (6) It is an
improvement over the systems theory, as it not only examines the relationships
between sub-systems of an organization but the relationship between the
organization and its environment too.  

Limitations:  

They are as follows- (1) It lacks theoretical base (2) A manager is required to think
through all possible alternatives before taking action which is not always possible.  

4. Operational Approach:  

Koontz and O’Donnell have advocated this approach to the management. This
approach recognizes that there is a central core of knowledge about managing
which exists only in the field of management. Such as line and staff,
departmentation, managerial appraisal and various managerial control techniques,
span of management etc. In addition, the operational approach derives knowledge
from other fields like systems approach, decision approach, motivation and
leadership theories, theories of communications and cooperation.  

This approach regards management as a universally applicable body of knowledge

that can be brought to bear at all levels of managing and in all types of enterprises.
At the same time, the approach recognizes that the actual problems manages face
and the environment in which they operate may vary between enterprises and
levels and it also recognizes that application of science by a perceptive practitioner
must take this into account in designing practical problem solutions.  

The above decision reveals that management thought is an outcome of many

contributions of many management thinkers.  
Some other Contributions to Management:  

1. Theory of Peter F. Drucker:  

He born in 1909. He is more popularly known as the ‘Father of Modern

Management’. He is famous for his contribution in the field of management.  

His contribution to management is discussed below:  

a. Management is a Profession:  

Every society has institutions which provide employment to its members and fulfill
their needs. Management of these institutions affects their performance and
survival. Managers are different from owners and possess specialised skills to
perform the managerial tasks. He, thus, considers management as a profession.  

b. Focus on Business Organisations:  

Amongst various institutions, the focus of management is on business institutions

because efficiency of management can be judged through economic results that it
produces and the most important economic institution is the business institution.
Besides, management can also reform Government and society and promote values,
customs and beliefs of the society.  

C. Synthesis of Classical and Behavioral Thoughts:  

Management aims at making work productive and worker achieving. The work
should be result-oriented. It should not be considered different from the worker.
The worker should be considered as a human being with physiological and
psychological needs and management should fulfill these needs. Management is,
thus, a profession which achieves organisational tasks along with satisfaction of
human wants. Management, in this sense, synthesises classical and behavioural
schools of management thought.  

d. Systems Approach to Management:  

Every institution is a part of society and cannot ignore its impact on business
institutions and vice versa. The systems approach to management is also considered
by Drucker for managing the business organisations.  

e. Management by Objectives:  

Drucker originated the concept of Management by Objectives (MBO). It stresses on

participative management where managers at all levels participate in the goal
setting process so that individual performance synthesises with organisational
performance.  

According to him, MBO helps to overcome four major organisational problems:  

(i) The specialised work of most managers  

(ii) The hierarchical structure of management  

(iii) The differences in vision and work and  

(iv) The compensation structure of the management group.  

f. Management Skills:  

Drucker advocated that managers must have the following skills to make
management effective:  

(i) Skills to make effective decisions  

(ii) Skills to communicate in and outside the organisation  

(iii) Skills to make proper use of controls and measurements and  

(iv) Skills to make proper use of analytical tools, that is, the management sciences.  

g. Organisation Structure:  

Rather than focusing on task-oriented or person-oriented approach to management,

Drucker focused on organisation structure that is both task-focused and person-
focused. He, thus, advocates both scientific management and human relations
doctrine.  

h. Social Responsibilities:  

According to Drucker, profits are necessary for business but they should not be the
goal of the business. “There is only one valid definition of business purpose, to
create a customer”. Profit is the test of business efficiency and the reason for an
organisation to stay in business but management is also responsible for its functions
to the society.  

Profits and social responsibilities should be considered together. Drucker specified

eight areas where organisations have objectives. These areas represent an optimum
mix of profitability and social responsibility.  

i. Development of Managers: 

Represent a business. There must be constant development of managers, through

training and development programme so that business organizations secure their
present as well as future.  

j. Key Result Areas:  

Marketing, Innovation, human organisation, financial resources, physical resources,
productivity, social responsibility and profit requirements are the eight important
business areas where, according to Drucker, objectives must be rationally set.  

2. Theory of Tom Peters:  

Tom Peters ideas on management are presented below:  

i. Tom Peters advocates the concept of ‘liberation management’ which challenges

the rigid organisation structure that inhibits people’s creativity. Organisation
structures should be flexible. Modern managers are concerned with not only what
happens inside the organisation but also with what happens outside the
organisation.  

ii. Organisational members should be empowered to generate new ideas, products

and relationships. This empowerment is called liberation management by Peters.
Power involves how people view their relationships with each other. The concept of
power and individual liberty are linked together. Managers who exercise power
encourage group members to develop the strength and competence as individuals
and as members of the organisation.  

iii. Jobs should be made rewarding and redefined to include greater, legitimate and
expert authority. Empowerment indicates what managers do in these jobs.  

Two empowering ways to redesign jobs are:  

(a) Job Enlargement:  

It means increasing the jobs scope. Work from two or more positions may be
combined to restore wholeness of the job. This breaks the monotony of a routine
job and makes it interesting and challenging.  

(b) Job Enrichment:  

It increases depth of the job by adding work activities from vertical line of the
organisational unit. Jobs in vertical line are combined into one position to give
employees more autonomy on the job. This develops a sense of accountability by
allowing workers to set their work place, correct their errors and decide the best
way to perform various tasks. As the work becomes more challenging and
responsibility of workers increases, their enthusiasm and motivation also increases.  

iv. Organisational members should rethink how they relate to their customers and
make rethinking a part of their organisational practices.  

v. All organisations should operate according to rules and procedures. Managers

and employees should deal with customers according to rules.  
vi. Organisations should be flexible with management attitude biased towards
creative human efforts. According to Peters, “Those who would survive, managers
and non- managers alike, will simply have to make their own firm, create their own
projects.”  

3. Theory of Michael Porter:  

Michael Porter views organisations as open systems that actively interact with the
environment.  

His contribution to management thought can be studied under the following

headings:  

i. Five Force Analysis:  

He provides techniques to analyse environmental forces that help managers in

making optimum decisions.  

He describes the following forces that determine the nature of competition in the
industry:  

(a) Threat of Entry of New Competitors:  

When new firms enter the industry, they bring new resources of production. This
increases marketing cost and decreases sales of existing firms.  

(b) Bargaining Power of Buyers:  

When buyers form a powerful group, they influence industry competition by

affecting product quality, prices etc. When they demand high quality goods and
services, it increases industry competition and forces the firms to reduce their
prices.  

(c) Threat of Substitute Products:  

Substitute products in the market restrict the prices at which firms can sell their
products. Firms whose products are vulnerable to substitute products must remain
aware of such products in the market.  

(d) Bargaining Power of Suppliers:  

Suppliers have strong bargaining capacity when firms’ prices are fixed. While dealing
with such firms, suppliers may raise their prices or reduce the quality of the
supplies.  

(e) Rivalry among Existing Firms:  

Rivalry amongst existing firms also increases costs and lower profit margins. Greater
the intensity of rivalry, less attractive is the market for competing firms.  

Porter’s thoughts on competition in the industry provide information to assess

forces that affect inter-firm and inter-industry competition. It helps in making
competitive strategies where they foresee the environment and achieve their
objectives.  

ii. Generic Competitive Strategies: 

Prof. Michael E. Porter has suggested the following strategies to deal with five
competitive forces:  

(a) Cost Leadership Strategy:  

In this strategy, the firm increases its market share by reducing the cost of its
products, reducing the selling price and increasing its sales volume. Higher profits
are earned by increasing sales in the present market by reducing the costs
(production, research &C development, advertising etc.) below the competing firms.
This keeps competition out and protects the firm against bargaining power of buyers
and suppliers.  

(b) Differentiation Strategy:  

In this strategy, firm increases its market share by keeping the prices of its products
same or even more than those of its competitors. It changes the product features
like colour, shape, design or size and creates customer appeal and brand image for
its products. Since the product features are different from those of the competitors,
it creates brand loyalty amongst customers and without reducing the costs,
increases the sales volume and profits.  

(c) Focus Strategy:  

In this strategy, the firm increases its market share, sales volume and profits by
focusing on a specific section rather than the entire market. The focus may be on a
group of customers (males or females) a specific product (one product rather than
the whole product line) or a specified area (only northern region rather than the
whole country). The aim is to sell more in a narrow market.  

This can be done through cost reduction (lower prices), production differentiation
(better customer appeal), or both. By serving in the narrow strategic market, the
firm faces competitors serving the broader market area.  

iii. Value Chain Analysis:  

Michael Porter popularised the concept of value chain in 1985 ii his book
Competitive Advantage – Creating and Sustaining Superior Performance. Every
organisation depends on customers for its survival and growth. Customers exchange
money for the value they derive from goods and services. “Value is the
performance, characteristics, features and attributes and any other aspects of goods
and services for which customers are willing to give up resources (usually money).”  

Customers want value from goods and services and organisations provide that value
to attract and retain customers. Business firms provide value by transforming raw
material and other resources into goods or services that customers want and
provide them, where, when and how they want. Converting resources into outputs
that customers value and pay for involves a wide set of inter-related activities
performed by different participants (suppliers, manufacturers, distributors and the
customers themselves).  

“The value chain is the entire series of organisational work activities that add value
at each step beginning with the processing of raw materials and ending with
finished product in the hands of end users.” Using the concept of value chain that
defines the power of suppliers, manufacturers, distributors and customers,
managers find that unique combination of value chain in which customers are
offered goods at a rate and price that competitors cannot.  

A good value chain provides a sequence of participants who work as a team, each
adding some component of value, like faster assembly, accurate information, better
customer response, better customer service etc. When value is created for
customers and their needs are satisfied, everyone along the value chain gets
benefited.  

Requirements of a Value Chain Management:  

A successful value chain management has six main requirements:  

(a) Co-Ordination and Collaboration:  

There must be co-ordination and collaboration amongst all members of the value
chain. Members must identify things that customers value as important. Value chain
partners share and analyse information through open communication.  

(b) Technology Investment:  

In a successful value chain management, significant investment is made in

information technology. It requires a software system that links all organisational
activities, work planning and scheduling software, customer relationship
management systems, e-business corrections with trading network partners etc.
Investment in information technology is used to restructure the value chain to serve
the customers.  

(c) Organisational Processes:  

A successful value chain management requires radical changes in the organisational
processes, that is, the way organisational work is done. Managers should evaluate
their organisational processes and use their capabilities and resources (core
competencies) to eliminate non-value adding activities and determine areas where
value is to be added. The aim of evaluating organisational process is improvement in
flow of material and information, better configuration of products, improvement in
customer services etc., in every organisational task.  

(d) Leadership:  

Successful value chain management requires strong and committed leadership.

Managers at each level should support, facilitate and promote value chain
management practices. They should clarify each employee’s role in the value chain.  

(e) Employees/Human Resources:  

Human resources (employees) are the most important component of value chain
management.  

For a successful value chain management, there are three human resource
requirements:  

(i) Flexibility of Job Design:  

Employees perform jobs that provide value to customers. Jobs should be flexible to
the creation and delivery of customer value. Employees should perform those jobs
that maximise customer value.  

(ii) Hiring Process:  

Flexible jobs require flexible employees. Employees perform different tasks

depending on what customers want. There are no standardised job processes;
therefore, employees’ ability to perform those jobs must be flexible. The hiring
process must identify employees who have the ability to learn and adapt to
changing customers’ needs.  

(iii) Ongoing Training:  

In order to be flexible, employees should be trained to use information technology

software, improve the flow of materials in the chain, make better decisions, improve
work activities etc. Managers should make significant investment in employees’
training to make them efficient at their jobs.  

(f) Organisational Culture and Attitudes:  

A successful value chain management requires a supporting organisational culture

and attitude that includes sharing, collaborating, openness, flexibility, mutual
respect and trust amongst parties, internal and external to the organisation.  
4. Theory of Peter Senge:  

Peter Senge introduced the concept of learning organisation and presented his ideas
on management in his famous book. ‘The Fifth Discipline’.  

His ideas on management are presented below:  

i. Changes constantly take place in and around organisations to overcome the

lethargy and stagnation in business organisations. Organisational members are so
occupied with their routine work that they have no energy to create new ideas,
products and relationships. To overcome this stagnation, members should cope with
changes in and around them.  

ii. He distinguishes between adaptive learning and generative learning. Adaptive

learning means coping with change. Generative learning means creativity. It comes
from joint efforts amongst organisational members. Generative learning is the
greatest hope for organisations of the modern century. He calls organisations with
generative learning organisations.  

iii. He advocates that workers are more directly involved in work situations and have
better solutions than management. This type of learning can lead to much greater
teamwork and more effective organisation.  

iv. Innovations in information and computer technology have rendered the past
management guidelines and principles obsolete. In the 21st century, organisations
will be successful if they learn and respond to changes quickly.  

v. In order to be adaptive, managers should challenge the conventional knowledge

base, recognise value of accumulated knowledge, share it with others in the
organisation, manage that knowledge base and make the necessary changes. The
focus is on positive attitude towards change and new ideas. It holds everyone in the
organisation responsible for innovation and not just the R&D department.  

The main fear lies in not learning and not adapting to changes. A firm’s competitive
advantages, thus, lies in its ability to learn, accumulate knowledge and expertise and
enable others to acquire them.  

Peter Senge suggests the following for creating a learning organisation:  

i. Systems Thinking:  

Organisation is an open system that interacts with environment and has its own
learning patterns and processes. Managers should identify patterns that lead to
repetitive thinking and delimit organisation’s growth. They should understand how
the organisation works in order to improve it.  

ii. Personal Mastery:  

People should open with others, enhance their capability to make their future,
develop a sense of vision, create successful learning and accomplish the results they
want. They learn to master themselves. Personal growth leads to organisational
growth.  

iii. Mental Models:  

People should unlearn the old ways of working and enhance driving forces that
promote organisations values and principles.  

iv. Shared Vision:  

People should develop a shared vision, that is, a vision that completely coordinates
individual goals with organisational goals. People should work as a team. Team and
individuals should be considered the same. This will lead to innovation, creativity,
members’ personal growth and organisational growth.  

v. Team Learning:  

People should work as a team to achieve the goal of shared vision. There should be
extensive dialogues and discussions to arrive at the best decision for generating
adaptive learning.  

5. Theory of Hammer:  

Hammer is known as the father of re-engineering. His ideas on management are

presented below:  

i. Re-Engineering:  

He advocated the practice of re-engineering the organisation. Re- engineering

improves the quality and lowers the cost of product by “analysing the operations of
the product or service, estimating the value of each operation and attempting to
improve that operation by trying to keep cost low at each step or part.”  

This concept involves division of a product into parts, estimating cost of each part,
identifying each part’s contribution to the final product and finding alternatives for
parts which have high cost and low value.  

ii. Re-Assessing:  

He advocates re-engineering the organisation by reassessing it. Managers should

ask themselves a basic question. “If I were recreating this company today, given
what I know and given the current technology, what would it look like?” Managers
should imagine they are starting from scratch.  

iii. Re-Thinking:  
Organisational members (managers and non- managers) should not focus on
immediate jobs and departments. They should focus on larger pattern of
relationships in which they work and influence the lives of others. These
relationships should connect organisational members with people outside the
organisation.  

According to Hammer, “Re-engineering means radically rethinking and redesigning

those processes by which we create volume (for customers) and do work.”  

Rethinking helps companies determine their core competencies (abilities and skills)
in areas where they should operate and diversify and put their plans into action to
meet customers’ desires and expectations.  

iv. Improvements:  

To do things differently, companies should focus on speed, quality and overhead

costs as important competitive issues. “The hallmark of a really successful company
is its willingness to abandon what has been successful in the past. There is no such
thing as a permanently winning formula.” Managers need to replace old ways of
doing things with new ways. They should unlearn the old principles and develop
more innovative and flexible business processes.  

v. Revolutionary Change:  

His ideas on re-engineering focus on revolutionary change and not orderly change.
Re-engineering brings dramatic and radical shift in the way the organisation
performs its work. It discards old ways of doing things and starts over again by
redesigning the way work is done. It helps to determine customers’ needs and
redesign work processes to best meet these needs.  

vi. Participative Decision-Making:  

Re-engineering is extensive in nature. It is therefore, initiated by top management.

However, it advocates participative decision- making by managers and workers at all
levels as the process requires important information from managers and workers.  

The process of re-engineering is a significant improvement over continuous quality

improvement programmes. Quality improvement programmes focus on continuous,
small and incremental changes. The change efforts improve the current work
activities. As the focus is on current activities, participative decision-making works
from bettor to top for planning and implementing the quality improvement
programmes in the organisation.  

Re-engineering does not just aim at improving the current work processes. It throws
away the old ways of doing things and starts over again in redesigning the way work
is done. It disregards what is and focuses on what should be. This is important for
organisations to remain flexible and adaptive in the turbulent and dynamic
environment.  

Differences between continuous quality improvement and re- engineering are as

follows:  

Continuous Quality Improvement:  

i. Continuous incremental change.  

ii. It fixes and improves the current work processes.  

iii. Its focus is on ‘as is’.  

iv. It works from bottom to top in business organisations as individuals continuously

look for ways to improve their work activities.  

Re-Engineering:  

i. Radical and revolutionary change.  

ii. It redesigns the entire process and starts over again — It starts from scratch.  

iii. Its focus is on ‘what can be’.  

iv. It is initiated by top management. Participative decision-making is, however,

important.  

6. Theory of Mary Parker Follett (1868 – 1933): 

Though she worked during the era of classical theorists, her emphasis was mainly on
the behavioral approach to management theory. Follett was a social worker and
studied issues related to working conditions of employees. She believed in group
behaviour and mutuality of interests between employers and employees. She
advocated the concept of group dynamics and emphasised on social relationships
amongst people in business organisations.  

According to her, harmonisation and co-ordination of group efforts is more

important than formal authority-responsibility relationships to achieve
organisational tasks. Her ideas on human relationships were advocated before the
Hawthorne experiments were conducted by Elton Mayo.  

Her theory is characterised by the following features:  

i. Better performance is shown by employees by focussing on group tasks rather

than individual tasks.  
ii. Organisational members are influenced by group actions. The group works better
through self-control rather than control being exercised from the top managers.  

iii. Leadership should be based on qualities and abilities of leaders and not on the
hierarchical authority.  

iv. Power, which she defines as “the ability to influence and bring about change”
should not be viewed as a coercive way of getting things done through sub-
ordinates. Rather, power should be jointly developed by managers and sub-
ordinates.  

v. She aimed at resolving conflicts through coordinated or integrated efforts of

superiors for efficient attainment of organisational goals.  

vi. Organisation is a single unit with interrelated and integrated parts to contribute
towards the overall goals.  

vii. Open system of communication should be followed in the organisation rather

than formal lines of authority.  

viii. Decisions should be taken jointly by superiors and sub-ordinates rather than
accepting them as orders of superiors.  

ix. Co-ordination has synergical effects. Continuous and effective co-ordination

through contact with people at early stages of their work schedules of different
managerial activities of different units produce results greater than the sum of each
individual unit.  

7. Theory of C. K. Prahlad: 

Prahlad’s ideas on management focus primarily on firm’s core competence. Core

competence is an organisational skill and capability which is not possessed by
competing firms. It is a bundle of skills and technologies that enables a company to
provide a particular benefit to the customers.  

These ideas are reproduced below:  

a. Organisations that exploit their core competence outperform competitors and

excel in their performance. Business firms must, therefore, concentrate in areas of
core competence and outsource other areas to outside agencies.  

b. It helps concentrate on matters of strategic importance like statistical quality

control, total quality management, production planning and control etc. Core
competence provides competitive advantage to business firms. A firm’s core
competence is a set of skills, competence and expertise possessed by all its people
(managers and non- managers).  
c. It does not relate to a particular product or business unit. It spreads to the
complete product line and varieties in each product. Proctor & Gamble has a wide
product line of food items, pharmaceuticals, cosmetics etc. In the line of cosmetics,
it manufactures detergents, soaps, shampoos etc. Its core competence is reflected
in every product (detergents, soaps etc.) it produces in all the product lines
(cosmetics, pharmaceuticals etc.).  

Prof. C. K. Prahiadi’s known as management guru by the management fraternity.  

His ideas on are competence help to achieve the following:  

a. Industry leaders and entrepreneurs need to focus on the strengths of people and
processes to capitalise them in the global marketplace. This will help companies face
international competition in the changing business environment.  

b. A firm can leverage its competence, visualise emerging strategic options and
create new businesses. Knowledge leveraging occurs when a firm applies its existing
knowledge elements to current or new market opportunities in ways that do not
require qualitative changes in the firms’ assets or capabilities.  

c. The current business scenario is dynamic, integrative and competence driven.

Companies are facing and responding to uncertainty and changing customer
preferences. Telecommunication revolution, information networks, global financial
markets etc. have integrated the business corporate.  

d. Managers, like consumers, are a heterogeneous lot. They differ in how they
access information, how they develop insights and how they build consensus for
action. He proposes that individualization, not customisation is the answer to the
dilemma of managerial heterogeneity. Managers need to access, visualise and use
knowledge in their unique ways.  

e. According to him, “don’t look at the poor and say there is no hope. Selling to the
poor may be more profitable than selling to you and me. This is where the future is.
Opportunities are everywhere. This is not about lack of opportunity; it is about lack
of imagination.”  

Constantly developing technologies and products in response to customer

requirements can explore untapped markets profitably.  

8. Theory of McGregor (1906 – 1964):  

McGregor’s theory focussed on behavioural management. He contributed to

management thought by developing theory X and Y. This theory helped managers in
motivating their employees. Motivation is an important area of management to
satisfy employees’ needs and improve their performance at work.  

McGregor’s contribution to management is discussed below:  

i. Theory X and Theory Y:  

McGregor emphasised that in order to create effective organisations, managers

should advocate theory Y. They should adopt democratic styles of leadership,
participative decision-making processes and general measures of supervision and
control.  

ii. Professional Managers:  

McGregor emphasised on professionalisation of management. He felt that

professional managers are more efficient in making decisions, solving problems and
administering the organisation. They realised the importance of management by
objectives and self-control to integrate individual goals with organisational goals. A
professional manager can understand social and psychological needs of employees
and relate them with technical needs of the organisation.  

iii. Self-Appraisal:  

McGregor emphasised on self-appraisal and evaluation rather than appraisal by

superiors.  

iv. Management Team:  

He focused on effective management team with the qualities of understanding,

mutual trust, support and agreement.  

v. Co-Operation Rather than Collective Bargaining:  

Management and labour union should cooperate rather than bargain with each
other on labour-management issues.  

vi. Management Responsibilities:  

Management has the responsibility of – (a) increasing organisational profits, (b)

keeping the labour satisfied, (c) renewing plant and machinery and (d) maintaining
productive efficiency.  

McGregor’s theory provided a new sight to superior-sub-ordinate relationships.

Superiors can adopt management styles depending upon the nature of sub-
ordinates. Concern for people means concern for production.  

9. Theory of Chester I. Barnard (1886 – 1961):  

Chester Barnard’s theory is based on social systems school of thought. It fills the gap
between the traditional and modern theories of management. He defines
organisation as “system of consciously coordinated activities or forces of two or
more persons.” He mainly emphasised on the role of executives in business
organisations, small or big. He focused on principles of management (introduced by
Henri Fayol) in practical business situations.  

His contribution to management thought is discussed below:  

i. Elements of Organisation:  

Barnard focused on three important elements of organisations:  

a. Willingness to cooperate,  

b. Common purpose and  

c. Communication.  

Willingness to cooperate refers to collective contribution to organisational activities.

All individuals should collectively make efforts towards achievement of
organisational goals and consider their individual goals as sub-ordinate to
organisational goals. Common purpose is the unified goal that all individuals must
strive to achieve. People will cooperate only if there is a common purpose to
achieve. Communication refers to exchange of ideas for willingly cooperating to
achieve the common purpose.  

ii. Balance:  

He emphasised on internal and external balance between various forces that affect
functioning of the organisation. Internal balance refers to balance between
organisational goals and individual goals. Individuals should derive satisfaction out
of their work in terms of monetary and non-monetary incentives. External balance
refers to adaptability of organisation with its external environment. An organisation
should be able to operate in the changing environmental conditions.  

iii. Authority: 

Barnard introduced the acceptance theory of authority. He said that superiors have
authority to command their sub-ordinates only if it is accepted by them. Authority
does not, thus, necessarily flow from top to bottom. A sub-ordinate will accept the
authority if – (a) he understands the communication, (b) he believes that it is not
inconsistent with organisational goals, (c) it is compatible with his personal goal and
(d) he can physically and mentally comply with it.  

iv. Decisions and Functions of the Executive: 

The executive takes decisions based on his reasoning and intuition. His decisions
should be acceptable to sub-ordinates. More than formal command, they should be
acceptable commands. His functions include — (a) maintaining communication in
organisations, (b) obtaining essential services from individuals through right
selection process and providing necessary incentives, (c) formulating objectives for
all levels of the organisation.  

v. Incentives:  

Barnard considered incentives as motivating forces to make people contribute

towards organisational goals. He emphasised on the importance of both financial
and no financial incentives, like money, opportunities for growth, social interactions,
participative decision-making etc.  

vi. Formal and Informal Organisations:  

Barnard focused on coexistence of formal and informal organisations. He viewed

informal organisations as means of promoting social interactions and through it,
achieving formal organisational goals. 

vii. Communication:  

Communication is an important means of telling people the purpose or objectives of

the organisation. There should be formal, short and clear channels of
communication so that quick and efficient transmission of information takes place
throughout the organisation.  

viii. Leadership:  

Good managers have to be good leaders. Leadership qualities (creativity,

imagination, understanding etc.) help managers to unify individual goals with
organisational goals.  

They also integrate formal organisation structure with the informal one.  

Chester Barnard’s work is famous for providing behavioural outlook to business

organisations. His concepts synthesised social aspects of people with technical
aspects of organisations. He developed the social systems approach to
management.  

10. Theory of Frank Gilbreth (1868 – 1972):  

Frank Gilbreth was a contemporary of Tayol and Fayol. He was a leading

management consultant of his times. While working in the construction industry, he
conducted studies to eliminate waste and illogical practices.  

His contribution to management thought is summarised below:  

i. Time Study:  

He undertook time studies to find out the best time for completing work activities.  
ii. Motion Study:  

He conducted motion studies to find out the best way to perform work activities.
This reduced the number of working hours per worker and increased output.  

iii. Best Way:  

He focused on best way of doing the work, irrespective of the time taken. This was
described as the one which had least number of motions.  

iv. Training:  

He attributed worker’s efficiency and success to their training. Well trained workers
perform better than untrained ones. According to him, workers should be trained
from the beginning of their job tenure.  

v. Promotion Plan:  

He suggested a three position plan for promotion. Workers considered worthy of

promotions should know their present position, position above them and position
below them. This is to learn from higher positions and guide lower positions to
succeed their present positions on promotion.  

Gilbreth’s work focused on human beings by developing motions and best ways of
doing the work. According to Urwick “His unique contribution was, however, his
emphasis on human effort and the methods he devised for showing up wasteful and
unproductive movement.” He applied concepts from social sciences to increase
worker’s capacity to work.  

11. Theory of Herbert Simon:  

Simon advocated the social system school of management thought. He viewed

organisations in their social and psychological context. His contribution is best
known for decision-making though he has contributed to varied areas of
management interests.  

Some of his contributions are summarised below:  

i. Decision-Making:  

Simon regarded each managerial action as decision-making. He considers decision-

making as a three step process, – (a) Intelligence activity, that is, finding situations
for decision making, (b) Design activity, that is, developing alternative courses of
action, (c) Choice activity, that is, selecting a course of action. He and G. March
subsequently added a fourth activity (follow up or review activity), that is, follow-up
action or correcting deviations. While programmed decisions deal with structured,
well defined problems, un-programmed decisions deal with unstructured, ill-defined
problems.  
ii. Bounded Rationality:  

Simon introduced the concept of ‘bounded rationality’. According to him, managers

are ‘Administrative men’ rather than ‘Economic men’. As economic men, they can
select the best course of action and as administrative men, they select a course of
action which is best in the light of constraints like incomplete information, inability
of managers to perfectly analyse the information, psychological barriers etc.
Decisions are not optimum decisions. They are the most satisfying decisions.  

iii. Authority:  

It is not the absolute power of managers to make decisions. It is a combination of

instructions, suggestions and persuasion.  

iv. Communication:  

He suggests a strong system of formal and informal communication to enrich the

contribution of social relationships to formal organisational goals.  

v. Employees Participation:  

Simon was a behaviorist. He felt that employees contribute towards organisational

goals if motivators are based on their needs.  

vi. Informal Relationship:  

As a social scientist, Simon felt that social, informal relationships amongst workers
help to accomplish formal organisational goals. Managers should synthesise
informal organisation with the formal organisation.  

Simon provided an important insight to the way an organisation actually works. He

identified scientific techniques to deal with decision making problems. He integrated
decision-making processes with administrative behaviour of managers (bounded
rationality).  

12. Theory of Rensis Likert (1903 – 1981):  

Rensis Likert conducted research at the Institute of Social Research, University of

Michigan (U.S.A.) and developed theories which moved management.  

His contribution to management thought is summarised below:  

i. Management Styles: 
Likert developed leadership theories based on his observation of leader behaviour in
business and nonbusiness organisations. According to him, best supervisors focus on
human aspects of their sub-ordinates’ problems.  

He developed four leadership styles: 

(a) System 1 (Exploitative-Authoritative Style):  

All decisions are made by top managers. They have no confidence in their sub-
ordinates and the sub-ordinates also, therefore, contribute the minimum to
organisational output.  

(b) System 2 (Benevolent Authoritative Style): 

Major decisions are made by top managers. Very few decisions are made by people
at lower levels. Leaders have some confidence in their sub-ordinates and the sub-
ordinates, therefore, contribute slightly more than system 1 to organisational
output.  

(c) System 3 (Consultative Style): 

Leaders have substantial confidence in their sub-ordinates. All operating decisions

are made at lower levels. Sub-ordinates’ contribution to organisational output is
good.  

(d) System 4 (Participative Style): 

Leaders have complete confidence in their sub-ordinates. Managers at different

levels make decisions jointly. Subordinates’ contribution to organisational output is
also excellent.  

ii. Behaviour of Leaders:  

Best leaders are those whose behaviour is employee-centred. They help their sub-
ordinates solve their problems, allow them to participate in decision-making
processes, develop their confidence and merge their individual goals with
organisational goals.  

iii. Linking Pins:  

In order to integrate individual goals with organisational goals, Likert developed the
concept of linking pins. Linking pins are people who are member of more than one
group. They act as leaders of groups (units) below their units and are members of
upper units. They link each work group with rest of the organisation.  

iv. Theory of Organisation:  

Likert emphasised that satisfaction of individual needs leads to higher production.
Workers should not be considered as economic means of production. Managers and
workers should support each other and maximise each other’s interests.  

v. Management by Group Objectives:  

He advocated the concept of Management by Group Objectives (MBGO) rather than

Management by objectives (MBO). He suggested that individuals should set their
individual goals and group goals. Each individual synthesises his goals with group
goals and group goals with organizational goals.  

His work is appreciated for its contribution to leadership styles motivational forces.  

13. McKinsey’s 7-S Approach:  

This approach was developed by McKinsey and Company and became the basis for
research for two famous books on management; One, The Art of Japanese
Management and Second, In Search of Excellence.  

The seven S’s that facilitate management are as follows:  

i. Strategy:  

It refers to taking a systematic course of action to allocate company’s resources to

achieve its objectives efficiently. Strategy is “the determination of the purpose and
the basic long- term objectives of an enterprise and the adoption of courses of
action and allocation of resources necessary to achieve these aims.”  

ii. Structure:  

Organisation structure is “establishing effective behavioural relationships among

persons so that they may work together efficiently and gain personal satisfaction in
doing selected tasks under given environmental conditions for the purpose of
achieving some goal or objective.” It defines authority- responsibility relationships
among positions to link the tasks of individuals and groups in achieving
organisational goals.  

iii. Systems:  

This includes various procedures and processes like controlling process and system,
controlling techniques and information technology, productivity and operations
management etc.  

iv. Style:  

It represents the way managers behave and collectively spend time in achieving
organizational goals. Their efforts are exhibited in their leadership qualities where
managers collectively accomplish group goals. Leaders guide people to contribute to
organizational goals with zeal and confidence. “Zeal is ardor, earnestness and
intensity in the execution of work; confidence reflects experience and technical
ability.”  

Managers should behave in a style that guides others to action or opinion and take
the lead in any movement followed by disciples. Managers as leaders are the most
eminent members of a profession. They are persons of eminent position and
influence.  

v. Staff:  

It deals with people in the enterprise and their socialization into the organizational
system. Staffing is “filling and keeping filled, positions in the organization structure.”
It is performing a set of activities that aim at inviting, selecting, placing and retaining
people at various jobs to achieve the organizational goals.  

It emphasizes on the human element to increase organizational efficiency by placing

the right person at the right job. This facilitates leadership, control and motivation
to work.  

vi. Shared Values:  

These represent the values shared by organizational members. A shared vision

builds corporate culture. Culture is “a shared behavior which is important for us as it
systematizes the way people do things, thus avoiding confusion and allowing co-
operation so that groups of people can accomplish what no single individual could
do alone.” 

(a) Shared meaning – It represents common opinion and perception held by

organizational members.  

(b) Values and norms – All the members have clear understanding of values and
norms of the organization. Each one knows what is to be done, when is it to be done
and where is it to be done.  

(c) Behavioral consistency – It promotes behavioral consistency amongst members.

All behave in the same manner reducing interpersonal conflicts and tensions.  

(d) Descriptive – It describes how employees perceive an organization and view it as

an independent identity, whether they like it or not.  

(e) Organizational philosophy – It clearly defines organizations philosophy in terms

of its policies regarding how to deal with customers, employees and other parties.  

(f) Clear guidelines – Guidelines that govern organization's functioning are clearly
laid as rules which must be uniformly followed by all the members, whether existing
or those who newly join the organisation.  
(g) Sense of belongingness – Organization culture creates a sense of oneness and
belongingness amongst members. Members view themselves as part of the
organization and organization as their part. They fully agree with organization's way
of functioning (plans, rules, policies, procedures etc.).  

vii. Skills:  

These are the distinctive capabilities of an organisation that make it different from
its competitors. It represents organisation’s strength that enables it to accept the
environmental challenge and improve its competitive position.  

Organisation’s strengths can be:  

(a) Common strengths  

(b) Distinctive competencies  

While the common strength is an organisational skill and capability possessed by

other organisations also, distinctive competence is an organisational skill and
capability possessed by a small number of competing firms. Such competence is not
commonly possessed by all the firms. Organisations that exploit their distinctive
competence outperform their competitors and attain high level of performance
unlike the common strength where the level of performance is only average.  

SWOT analysis enables an organisation to discover its distinctive competence and

implement strategies that will exploit its strengths and improve its performance
above that of competitors.  

This approach is a complete and comprehensive philosophy of management as it

identifies various aspects of management and shows their inter-relationship for
positive contribution to management theory. Though it is too elaborate and
comprehensive in its framework, it has positively contributed to the management
thought in every area of its application.  

Its positive contribution underlies in its following features:  

1. It has been extensively studied by the consultants of McKinsey in many

companies and is being taught in most of the business schools. The theory and
practice, thus, support and complement each other in the study of management. It
is used by both practitioners and academicians.  

2. The seven S’s exhibit a complete philosophy of management. They cover the
entire range of management functions- planning (strategy, skills), organizing
(structure, shared values), staffing (staff), directing (style) and controlling
(systems).  
3. Conclusion

The evolution of management thought is a process that started in the early days of
man. It began since the period man saw the need to live in groups. Mighty men
were able to organize the masses, share them into various groups. The sharing was
done accord to the masses’ strength, mental capacities, and intelligence. So, what
we have now is refined and improved management thoughts and theories. But
knowing how this evolution came about is vital. It will help to improve one’s
knowledge of the process and effectively utilize management principles for the
betterment of the organization.