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 Administrative
Management Theory
 Henry Fayol (1840-1925)
§ HenryFayol, a French industrialist and mining
engineer by profession, developed the theory of
administrative management. He tried to develop
a comprehensive conceptual framework and
general organization and management that are
applicable to all organizations. Administrative
Theory is concerned with the entire range of
managerial performance
● Henry Fayol has divided all industrial
activities into six groups, which are named
below:

Technical activities Security activities

Accounting activities
Commercial activities

Managerial activities
Financial activities
q Division of work: This principle of Henry Fayol emphasizes that the
activities of an organization should be divided into different groups on the
basis of their nature such as production, marketing, financing, etc.

q Discipline: Discipline means obedience to the superiors and fulfillments

of system of the organization. It involves specified rules, regulations, working
procedures and systems.

q Unity of command: The unity of command principle concentrates that a

subordinate must get order and instruction from only one superior at a time.
It makes employees responsible for the accomplishment of assigned jobs.
q Authority and Responsibility: Authority and responsibility are two
interrelated terms in management. Authority is the power and right in a
managerial positions whereas, responsibility is the obligation to accomplish
assigned jobs.

q Unity of Direction: Unity of direction means similarity to guidance. Fayol

emphasizes that each group of activities having the same goals must have
one manager and one plan.

q Subordinates of Individual Interest to General Interest:

Individual interest means fulfillment of employee's objectives whereas
general interest means the achievement of organizational objectives. The
first emphasis should be given to organizational objectives rather than
individual objectives.
q Remuneration of Personnel: Remuneration is the price
payable to the employees for their devotion of time and effort.
Remuneration to be paid to the employees on the basis of their
skill, offices and resources of the organization.

q Centralization: Centralization means to reserve decision-

making authority at the top level of management. There must be
the provision of centralization and decentralization on the basis
of the nature of the work and the size.

q Scalar chain: In the organization, there may be various levels

of authority from top level management to subordinate levels. It
refers to the unbroken chain of relation ranking from top-level.
q Order: This principle of management concentrates on the
systematic arrangement of organizational resources. It helps for the
smooth functioning of the organizational activities. This principle is
essential wastages and bring smoothness in organizational activities.

q Equity: There must be kindness and justice to all the members of

the organization which is called equality. It helps for the long-term
successful functioning of the organization.

q Stability of Tenure: This principle is concerned with job security

and the long term functioning of workers in the organization. It
supports the overall development of organization efficiency.
q Initiative: This principle emphasizes providing freedom and
preference to subordinates for planning and its implementation.
It should be given to subordinates to think out a plan and its
implementation.

q Esprit de corps: Esprit de corps is the proverb that union is

strength. It refers to the strength associated with a group or
team spirit.
So, here are some of the contributions and limitations of
Administrative:
Contributions
q Administrative management laid heavy emphasis on universal
principles.

q This theory laid has provided the conceptual framework for

management process.

q This theory has isolated and analyzed management as separate

discipline.

q It serves as the guide to modern management.

Limitations

q This theory has not paid proper attention to the human

behavioral aspects.

q This theory is inconsistent. It has not considered the

situational factors.

q There is no clear difference between the structure and

process of the organization.

q This principle is based on personal experience and little

observation.
Bureaucratic Management
 Max Weber (1864-1920)
§ Max Weber, a German sociologist, developed a
theory of bureaucracy. Bureaucracy is a form of
organization characterized by division of labor.
The bureaucracy theory of Max Weber is most
common in large organizations and government
institutions. According to him, there should be a
clear division of work, authority and
responsibility and all the employees should be
responsible.
Principle of Bureaucracy Theory
q Max Weber has introduced the principle of bureaucracy which is taken
as the most effificient management principle.

Formal Rules and Supervision by a Higher

Regulations Authority

All Decision should be

Functional specialization
Recorded

Technical competence Interpersonal Relation

Well Defined Hierarchy of

Authority
q Formal Rules and Procedures: In every organization, there must be
a system and procedures for the completion of define work. All the
members of organization has to follow these rules and procedures.

q Functional Specialization: Work should be divided among the

employees on the basis of their functional specialization. Such division
contributes to utilizing organizational resources in an effective manner.

q Well Defined Hierarchy of Authority: It emphasizes the scalar chain

of authority from top-level to subordinate level. This principle supports for
division of labor to develop the feeling of responsibility among the
employees.
q Supervision by a Hierarchy Authority: Higher level Authority has
to supervise the subordinates to know about their achievement and
problems.

q Technical Competence: It is essential to minimize wastage of

resources and maintain close relations among employees of the
organization.

q All Decisions should be Recorded: Actions and decisions should be

recorded in a separate book for future separations. It is helpful for future
decisions.

q Interpersonal Relations: Interpersonal relations should be maintain

among employees on the basis of rules and regulations. It should not be
taken in personal relation.
Here are the advantages and disadvantages of Bureaucratic
Theory:
q Advantages: q Disadvantages:

o Focus on Chain of Command o Rigid Rule and Regulation

o Proper Division of Work o Ignores Innovation

o Specific Procedures o Lack of Effective Communication

o Relationship Based on Position o Problem of Role Conflict

o Focus on Technical Competency o Ignores Informal Relationship

o Job Security
Behavioral Perspectives
§ These theories believes that successful management largely depends
on a manager’s ability to understand and work with and through
people who differ in culture, perceptions, need and aspiration.
§ Human relation and behavioral science theory emphasized social and
psychological factor at work and emotions.
§ These theories can be studied by:
1. Human relation approach
2. Behavioral science approach
Human Relation Approach

§ “Human Relation” is generally use

to describe the ways in which
manager’s interact with their
subordinates.
§ This theory was introduced by
father of human relation approach
Elton Mayo and his colleagues.
§ Mayo and his colleagues did
experiment in a Hawthrone plant
where 29000 employee were
working from 1924-1932.
1.Illumination Experiment
§ This experiment was started in 1924 to 1927in Hawthrone Plant.
§ Illumination means work place.
§ In this experiment illumination was manipulated for one group of
workers and held constant for another group but in both, the
conditions productivity increase.
§ The conclusion was illumination did not have any direct effect on
productivity but something must have a deepest effect.
2.Relay Assembly Test Room Experiment
§ Experiment was stared from 2027-2028 in order to determine
working condition.
§ In this experiment, two group of six female telephone relay assembles
were put in a separate room.
§ For one group frequent change were made in their working
conditions such as hours of work, hot lunches, rest periods, wage
incentive, supervision etc. and no change made for another group.
§ The result was socio-psychological factors such as feelings of
importance, recognition, participation and non directive supervision
are key to high worker productivity.
 3. Mass Interviewing Program
§ 20000 workers was interviewed to elicit information on their perceptions
of working life focusing human relation rather than on physical working
§ conditions from 2028to2030.
§ The result was informal relations, social and psychological needs influence
the workers behavior and their productivity.

4. Bank Wiring Observation Room Experiment

§ A group of 14 male worker were formed and observed for seven months in
the bank wiring room from 2031 to 2032.
§ The purpose of the research was to make a more detailed analysis of the
social relationships in a work group.
§ Moral and satisfactory relationships between management and workers
can improve the productivity.
• Contribution of Human Relation Theory
§ Employee are not motivated solely by money.
§ Informal leaders plays an importance role in setting and enforcing
group norms.
§ Management must understand and recognize interpersonal and
group relation on job.
§ Effective supervision plays an importance role in increase In
productivity.
Limitations
§ It lacks adequate focus on work
§ It neglect the economic dimension satisfaction.
§ It is anti-individualist where the boss is simply replaced by the
discipline of the groups.
 Behavioral Science Approach
vBehavioral science theory focuses on human behavior in an
organization and seeks to promote verifiable propositions for
scientific understandings of human behavior in organizations.
v There are main three branches of behavioral sciences ;
psychology, sociology and anthropology.
v Numbers of behavioral scientists have made notable
contributions to management theory and practice. Some of
them are Abraham Maslow, Douglas McGregor, Frederic
Herzberg, Mary Parker Follet etc.
ØThis theory has defined the role of human element
in the organizations,
It emphasis non-financial rewards,
Ø It recognizes the quality of leadership as an
important factor for the success of management,
Ø It greatly emphasis the role of individual
psychology and group behavior for organizational
effectiveness.
ü This theory neglects the economics dimension
of job satisfaction,
ü It has considered situational variables,
ü It views management as nothing but applied
behavioral science,
üIt has a clinical bias and lacks scientific validity.
ü Theory of human needs was developed in 1943 A.D.

ü Maslow suggested that people always have needs, and

when one need is fulfilled, other emerge in a predictable
sequence.
ü Human needs follow a basic hierarchical pattern from
the most basic needs to highest level needs.
 Douglas McGregor Theory: Theory X and Theory Y

Douglas McGregor was an

American Management
Professor and also a student of
Abraham Maslow. He proposed
/ formulated two distinct
theories; Theory X and Theory Y
as two different aspects of
human behavior. One theory is
labelled as negative i.e. theory
X and another is positive i.e.
Theory Y.
Theory X
• Theory X is a traditional based
assumption about human behaviour.
• It is stick approach where manager
consider negative motivation about
their employees.
• Managers thinks that employees have
lack of creativity and less responsible.
• Managers thought employees needs
threats and and punishment for their
performance.
Theory Y
• Theory Y is an optimistic view of workers.
• It is carrot approval where manager
consider positive motivation about
employees.
• Managers have believs that employees
are creative and full responsible towards
organisation.
• Managers thought employees need
reward and support for thier better
performance
v This theory is improvement or extension of Maslow’s theory
and also known as dual theory,
v It was developed by American psychologist Frederick
Herzberg(1923-2000),
v It states that there are certain factors in the workplace that
cause job satisfaction while another set of factors cause
dissatisfaction,
v This theory is based on empirical study conducted on around
200 accountants and engineers working in organizations on
around Pittsburgh,(USA).
§ According to Herzberg, Hygiene factors are those factors which
are necessary to maintain a reasonable level of satisfaction in
employee. That is why, these are termed as maintenance factor,
§ Any decrease in the presence of these factor below the
reasonable level will dissatisfy the employees . So these are
known as dissatisfactory,
§ Increase in these presence of these factors above the
reasonable level will not lead to extra satisfaction in employees.
Therefore, there is no use on paying attention or spending
money on these factors after a certain extent,
§ Hygiene factors are not capable of motivating employment,
§ Deficiency or absence in these factor may create dissatisfaction
leading to poor performance.
q According to Herzberg, motivational factors are those
factor which are capable of stimulating employees far
higher performance,
qEnough motivational factor leads to higher productivity,
higher morale and higher job satisfaction,
q However the perceived inadequacy or absence of those
factors may not lead to strong dissatisfaction.
System Perspective Theory

A systems perspective enables the decision

maker to understand interactions among smaller
systems within the larger system and identify
potential synergies or harms that should be
explored before implementation.
System perspective is looking at an entire
organism of an operation, entity or business in
relationship to its environment.
The systems theory of management asserts
that any organization is a single, unified
system of interrelated parts or subsystems.
Each part of the overall system is dependent
on the others and cannot function optimally
without them.
Ludwig von Bertalanffy is the father of
system theory. System theory is new thinking
in management literature. A system which is
a set of interrelated and interdependent
parts that arrange in a systematic manner to
produce a unified whole. The activity of one
segment affects the activity of another
segment that assembles things or parts to
form a complex whole. An organizational
subsystem is classified as physical,
mechanical, biological and social.
 System Theory

Input Processing Output

• Transformation • Product
• Human resource • Operation • Service
• Financial resource • Mgmt. control • Profit & Loss
• Physical resource • Planning • Employee Behavior
• Information • Leadership • Productivity

Feed Back
 An organization get input from external
environment which consists of human,
finance, physical and information.
Competent and experienced personnel,
INPUT good physical infrastructure, and
sufficient capital are essential for the
effective functioning of the
organization to achieve its goals.
Processing is considered as an active
part which involves conversion of raw

PROCESSING
materials into finished products in
support of other resources. While
converting raw materials into finished
products or services it is essential to do
may activities in each stage of the
process. To accomplish an effective
process it needs sound planning ,
decision making, good leadership and a
proper controlling system.
Output
Output is the ultimate outcome of system
perspective that obtains product or services,
profit or loss, and employee’s behavior.
Organizations are established to produce
good or services. Goods and services are
supplied in the market and response is
received. If the organization is able to
supply quality goods, the customer have
positive attitude towards the organization.
 Feedback
Management is necessary to evaluate outcomes of
management functions. If the expected output is gained it
would provide guidance to manager for future performance.
Similarly, it is affected by the internal and external
environment. In internal environment it involves owners,
board of directors, employees, organizational resources, and
organizational structure. Where as external environment
consists political and legal, socio-cultural, economic, and
technological environment. The internal environment
involves weakness and strength where as the external
environment provides opportunity and threats.
Contribution of System Theory

• It provides a conceptual frame work of a

meaningful analysis (study) of management &
organization.
• It guides managers to lay proper emphasis
(Special Importance) on the interdependence
and interrelation of various parts or elements of
the organizations as well as between
organizations and their environment.
• It tries to intergrade (series) various
management theories by emphasizing the
physical aspects, behavioral aspects, and
environmental consideration.
• It exhorts(encourage) managers to analysis and
understand every element of problem in the
relation to other elements

10
 Limitation of System Theory

• Failed to specify the precise relationship

between various sub systems
• It does not offer any tools or techniques or
integration and the nature of
interdependencies between organizations and
the environment.
• It does not offer a unified body of knowledge

11
 Contingency
Philosophy
Organizational theory that focuses on situational
factors based on the premise that there is
probably no one best way to solve management
problem in all organizations and in every
situation.
 Contingency theory has sought to formulate broad generalizations
about the formal structures that are typically associated with or best fit
the use of different technologies. Paul Lawrence, Jay Lorsch, Tom Burns,
John Woodard, etc. are the researches who tried to apply this concept
of earlier management theories into practice and developed it.
According to this approach, the
best way to lead, plan, organize and
conduct managerial activities varies
with situation. There are no plans
or control techniques that will fit in
all situations. The manager must
understand the uniqueness and
complexity of each situation.
 Contingency Variables
Determining Management
01 Organizatio Practice
02 Routinen
nWhen
size size ess of
Organizati
of the task
ons apply
technolog
03 company
Environm 04 technolog
Individualy
isental
large y
Differencto
Style
more best Importan
Uncertain transform es
in a stable t when
 This theory is also helpful, as it suggests that
leaders do not have to be effective in all situations
and that there are specific scenarios in which a
leader might not be the perfect fit. The last major
advantage of the contingency theory is that it
provides concrete data on leadership styles, that
is applicable to organizations developing their
own leadership profiles. Hence, management
cannot have ready-made universally applicable
and acceptable principles to be applied to all
situations.
 FEATURES :
• Organizations are open systems and interact regularly with the
environment.
• It is an integrative approach in the sense that it attempts to integrate
into finding other managerial perspectives.
• It is applicable in intellectual dealings in which habits and customs
cannot be taken for granted.
• It requires knowledge of various sets of situations and tools to work
best. It is based on empirical research and has developed its tools on
real.
• Findings in varied situations.
 Contributions of Contingency
Theory
• Managers get help in innovating
new and better approaches to meet
complex situations.
• It gives them the capability to think
in analytical, critical and
multidimensional ways.
• Managers are given more freedom.
• Managers become more sensitive
and alert.
18
 Limitations of Contingency
Theory
• It ignores the universally
applicable principles
• It fails to enlist all contingency
variables
• It focuses on the mere situation but
which tools should be used in what
situation is not specified.
• It ignores human behavior aspects.
 Slide 6
Slide 5
Slide 4
Slide 3
Slide 2
Slide 1
Topics
Challenges In
Emerging Issues &

Nepalese Business
Slide 6

1. Globalization
Slide 5
Slide 4

The introduction of the network in transportation

communication , and economic interdependency
has tied the people of the world together and
Slide 3

caused the globe to shrink. Globalization brings the

concept of keen competition among the
entrepreneurs of the world along with Nepalese
Slide 2

entrepreneurs.

Slide 1
Topics
Slide 6

2. Development of Environmentalism
Slide 5

Environmentalism issues are major issues in

Slide 4

management these days. These issues involve

deforestation, global warming, toxic waste and
Slide 3

pollution of land air and water. The green

movement has spread in Europe, North America,
and other parts of the world to maintain the

Slide 2
environmental ecology.

Slide 1
Topics
Slide 6
Slide 5

3. Quality & Productivity

Quality and productivity are also emerging issues of
Slide 4

the present day business world including Nepalese

business. In the past ,many managers assumed that

Slide 3
they could increase output only by decreasing
quality.

Slide 2
Slide 1
Topics
Slide 6
Slide 5

4. Ethics & Social Responsibility

Slide 4
Ethics and social responsibility have become

Slide 3
growing concerns for Nepalese managers today. It is
developed through family, experience, personal
values and morals, and situational factors.

Slide 2
Slide 1
Topics
Slide 6

5. Workforce Diversity

Slide 5
Ethics and social responsibility have

Slide 4
become growing concerns for Nepalese
managers today. It is developed through
family, experience, personal values and

Slide 3
morals, and situational factors.

Slide 2
Slide 1
Topics
 Slide 6
6. Innovation & Change

Slide 5
The innovation of new knowledge to fulfill the
expectations of skate holders is increasing in

Slide 4
today's world. At present managing change is
critical challenge to Nepalese managers.
Change occur in the attitude and behavior of

Slide 3
stakeholders like competitors, customers,
employees, suppliers, and lenders. It is an

Slide 2
important responsibility of managers to handle
such change in a scientific and practical way.
They need to improve quality of goods and

Slide 1
services to fulfill the changing needs of the
customers.

Topics
 Emerging Issues &
Challenges In
Nepalese Business
Slide 10
Slide 9
Slide 8
Slide 7
 7. Empowerment of Employees
The major element of the internal environment of
an organization are employees. When managers
and employees embrace the same values and
have the same goals, it becomes convenient to
Slide 10
Slide 9
Slide 8

Slide 7
achieve organizational objectives. To maintain
mutual relations between managers and
employees it is essential to delegate the decision-
making authority to subordinate level employees,
which is a challenging task. The employees are the
in-charge of their work and can perform their
work themselves according to their convenience.
 8. Knowledge Management
Knowledge has become power in this
competitive environment. Society expects
Slide 10
Slide 9

Slide 8
Slide 7
new ideas, new things and creativity in
products or services from any organization.
To fulfill such social should be accumulated
expectations, the manager has to
accumulate knowledge and ideas from all
members involved in the organization.
 9. Development
Technology is an ever growing process which tends
to increase aspiration sand expectations of
stakeholders. Modern means of communication
Slide 10

Slide 9
Slide 8
Slide 7
should be used to transform information with
customers.
The most important challenge of present-day
managers is to identify and predict the ever-
developing new technology. It is the of responsibility
of managers to keep pace with the changes in
technology and grab the opportunity to make the
business a success.
10. Multi-cultural Effect
The innovation of new modern communication
and transportation has tied the multi-cultured
people together. The involvement of cross-

Slide 10
Slide 9
Slide 8
Slide 7
cultural professionals in organizations is
continuously increasing. Nepalese management
can become effective only when it is able to
maintain coordination among multi-cultural
professionals.
In the context of Nepal, political instability,
powerful labor unions affiliated with political
parties, rising public expectations and lack of
skilled manpower due to brain drain are the major
challenges for managers. Many Nepalese business

Slide 10
Slide 9
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Slide 7
organizations are operating in a measurable
condition today because of the above challenges in
recent years. This is a serious problem for the
country's economy. In this context, Nepalese
managers need to overcome the above challenges
and the government needs to play the role of a
facilitator.