12 MANAGEMENT THEORIES
By Steve Smith
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Managers and supervisors in both large and small businesses are responsible for leading and
motivating their teams. To get the best out of their workforce, they may pull from a particular
management theory or a range of them in order to get the job done.
In this discussion, we will define what a management theory is, provide a detailed description
of 12 different management theories and their defining elements, and look at the benefits of
each theory when it’s applied in the modern workplace.
What is Management Theory?
Management theories are collections of ideas that influence how an organization, business or
team is guided and run. Leaders in business management are primarily responsible for laying
out strategies to help their teams meet their goals. This often requires finding ways to
motivate their team and pool resources for them.
It’s up to managers to apply the management theory that best suits their organization’s
culture. They can also select specific characteristics from different theories to arrive at a style
that makes sense for them, their company culture, their employees and the work at hand.
Benefits of Management Theory
By studying established management theories managers may be able to find ways to increase
productivity and improve their team members’ performance, simplify decision making and
increase collaboration.
Theories like the ones we’ll discuss in the next section may also help leaders maintain
objectivity, and make informed, data-supported changes rather than relying exclusively on
their own judgment or preferences.
Types of Management Theories
Although some management theories were conceptualized long ago, their principles can still
be applied effectively in today’s technologically advanced business landscape.
Let’s take an in-depth look at 12 theories you should be aware of:
1. Scientific management theory
In the late 1800s, Frederick Taylor was one of the first to take a scientific approach
to management theory in terms of how to maximize productivity. His principles suggested
that the scientific method should be used to perform workplace tasks, rather than a system
that relied upon team members’ judgement or personal discretion.
Taylor theorized that by simplifying tasks, training team members thoroughly and
encouraging cooperation between supervisors and employees, productivity could be
increased.
2. Administrative management theory
This 19th-century theory was developed by mining engineer and senior executive Henri Fayol,
who believed that managers should utilize a specific set of values to get the most out of their
workforce.
Fayol outlined 14 principles for managers to use to organize and interact with their teams:
Division of work: Delegating responsibilities of a project to different team members
allows them to focus on one specialized task, instead of dividing their attention
across many.
Authority and responsibility: A balance between authority, or the right to make
management decisions, and the employee’s responsibility over their tasks should
exist to obtain the best results.
Unity of command: This principle asserts that employees receive direction from a
single supervisor to avoid conflicting requests and to maintain hierarchy.
Unity of direction: This principle ensures that employees working on the same
project are working toward the same objectives. Departmental managers are
responsible for coordinating and communicating clear directions to their teams.
Equity: The equity principle was meant to cultivate an environment where everyone is
treated equally and with kindness.
Order: This principle ensures that things run smoothly, by pairing the right person
with the right job, improving the working atmosphere and boosting productivity.
Discipline: This principle encourages order within the organization, and outlines rules
that the workforce should follow. It also encompasses managers showing
disciplined behavior and leading by example.
Initiative: This principle allows for employees to develop and launch initiatives that
inspire them, as long as they do not conflict with organizational rules or values.
Remuneration: This refers to fair remuneration, or payment, for employees,
promoting productivity and loyalty. It can also encompass the value employers feel
that they are getting from their workforce.
Stability: The stability principle asserts that employees must feel they have job
security to function efficiently, which will encourage them to stay at the company
longer and be more productive. This includes being given time to adjust to their
positions, not being moved between teams too frequently and being able to develop
their work rhythms.
Scalar chain: This ensures that employees know who to contact to communicate up
the management chain and establishes company hierarchy.
Subordination of interest: Harmony must exist throughout an organization.
Managers should prioritize the interests of the organization as a whole over any one
individual’s needs.
Esprit de corps: This phrase expresses a feeling of pride. Managers should look for
ways to encourage teamwork, generate enthusiasm among their teammates and
direct reports, and reward outstanding performance to make this feeling grow.
Centralization and decentralization: Centralization typically has a select few making
decisions for the many, often at the highest levels of leadership. Decentralization is
when decisions are made by an organization as a whole. According to Fayol’s
philosophy, an effective organization delegates the ability to make decisions to
different employees, thereby maintaining balancing centralization and
decentralization.
3. Bureaucratic management theory
In creating his bureaucratic management theory, German sociologist Max Weber thought that
the ideal business structure was based on a hierarchy with a clear chain of command. He also
believed this structure should feature:
A clear division of labor with specialized employees for each task.
A hierarchal structure where clear communication, delegation and responsibility are
prioritized.
Worker selection based on education, their experience and their technical skill alone.
Consistent regulations and rules where everyone knows what is expected of them and
their work.
Impersonal working relationships, so favoritism, nepotism or outside forces cannot
influence decision making.
Achievement-based advancement to recognize hard work and competence while
disregarding personality traits or rewarding personal favors.
4. Human relations theory
Developed by Australian psychologist and researcher George Elton Mayo, this management
theory was the result of experiments for how to improve workplace conditions and
productivity. Mayo’s work advanced the theory that employees may be more motivated by
receiving personal attention and having a sense of belonging than they are by favorable
working conditions or compensation alone.
5. Systems management theory
The systems management theory asserts that for a large organizational system to function at
an optimal level, its multiple components must all work together in harmony. That means the
employees, departments, work groups and business units all play a crucial role in the
system’s success. To ensure success, collaboration between managers and business units
should be prioritized.
6. Contingency management theory
Developed in the 1960s, the Fiedler’s contingency theory is based on the belief that managers
need to be flexible, as different situations demand different leadership traits. Rather than
applying a single theory to every situation in every organization, variables like the
organization’s size, technology used and leadership at all business levels should be considered.
Managers subscribing to this theory must be flexible and ready to identify the management
style that suits a particular situation as new conditions in the market, business and team
emerge, and to apply that style quickly and effectively.
7. The X and Y theories
In his book, The Human Side of Enterprise, social psychologist Douglas McGregor introduced
the X and Y theories. His conclusion was that managers are guided by their perception of their
team members’ motivations, and therefore use two different theories.
Managers who conclude employees are apathetic or not happy in their work use Theory X,
which is a more authoritarian approach. Managers who see employees as responsible, self-
motivated and committed use Theory Y, which leads to a more collaborative work
environment.
McGregor’s conclusion was that large organizations may rely on Theory X as a means of
keeping everyone focused on meeting their organization’s goals, while smaller businesses
tend to use Theory Y, which he preferred, and may be a better fit for their inclusive and
creative culture.
8. Classical management theory
Focusing exclusively on the economics of workforce management, classical management
theory tends to view employees as parts of a machine. The rationale behind this theory is that
the physical needs of workers can be met with compensation, so social needs or job
satisfaction are not prioritized.
In short, classical management theory states that employees will work harder and produce
more if they are incentivized by higher wages or bonuses. Instead, profit maximalization, an
emphasis on productivity, streamlined operations and a clear leadership hierarchy are its
central tenets.
While certainly not an ideal management theory by the standards of today’s business
environment, a few aspects like a clear managerial structure, division of labor and clear
definition of employee roles can be beneficial.
9. Modern management theory
In sharp contrast to the classical, the modern management theory is built on the idea that
employees don’t work for money alone, but are motivated by happiness, satisfaction and
work that supports their lifestyles.
Managers using this style use technology to make decisions about their employees and to
analyze their needs, which can help them put measures in place that support their needs and
further develop their abilities.
10. Quantitative management theory
Quantitative management theory was developed post World War II, resulting from a need to
make strategic and tactical decisions backed by data.
This approach to management prioritizes disciplined thinking, and centers around finding an
optimal solution to a problem and focused decision making. Mathematical models may be
used to collect data to assist in those decisions, coupled with scientific reasoning strategies.
11. Holistic management theory
Sometimes called the integral theory or the organizations as learning systems theory,
the holistic management theory is based on the idea that businesses are stronger when all
parts are integrated and working together.
In this theory, management’s responsibility is to provide transparency, provide clear goals
and align their workforce toward a common purpose. Under this theory, learning and change
are the order of the day, with an emphasis on teamwork, information sharing and
empowerment of the individual.
12. Knowledge worker theory
Developed by Peter Drucker, the knowledge worker management theory became popular in
the latter half of the 20th century as organizations began incorporating his ideas of balancing
business needs with community.
In his theory, the employee is seen as an asset, with skills that must be managed and
developed. Management is responsible for training employees or providing learning
pathways through outside resources to close skill gaps.
