Management theories can be classified into four main schools of thought: 1. Pre-Scientific Management Theory 2. Classical Theory 3. Behavioural Theory 4. Modern Management Theory.
1. Pre-Scientific Management Theories:
If we look at recorded history, a number of monumental examples of management can be traced. The Sumerian civilisation, Egyptian, Chinese, Greek and Roman civilizations represent significant practices in management.
They represent management concepts that helped in smooth administration of these civilizations. Though famous even today, they do not provide significant information about the way these civilizations were managed.
These concepts did not provide important insight into management of business (or economic) institutions. No important techniques were available to solve organisational problems until the end of 15th century. It was in 1494 that the technique of double entry book-keeping was introduced to maintain financial records of the business. In 1800s, management theories developed as a systematic field of knowledge. Until formal management theories developed, pre-scientific management theories contributed to the management thought.
Contribution made by some of the management thinkers is as follows:
1. Charles Babbage:
One of the early British thinkers on management, Babbage, was the forerunner of scientific management. His work was closely related to that of Adam Smith (an economist), as he emphasised on work measurement, cost determination, bonus plans and profit sharing specialisation (dividing the work into various jobs) to increase managerial efficiency. His findings are also reflected in Taylor’s scientific management. He introduced methods like work measurement, cost determination, bonus plans and profit sharing to improve industrial productivity.
2. James Montgomery:
He was a textile owner-manager in Scotland. He focused on planning, organising and controlling of business and wrote management texts for their efficient working.
3. Robert Owens:
He was a textile entrepreneur and is known as the father of Personnel Management. His emphasis was not on the process of industrialisation or division of labour but on development of people. He advocated that workers should be treated as human beings and their values and beliefs should be respected. If working conditions and needs of the workers are satisfied, they work to achieve the organisational goals.
He advocated improving living conditions (both factory and domestic conditions) of employees by upgrading the streets, houses, sanitation facilities etc. He also brought social and educational reforms for the employees.
He believed that higher wages for workers, participation in managerial decision-making and positive motivation can increase productivity. His ideas on management to coordinate economic performance with human relations are found in Hawthorne experiments also.
4. Andrew Ure:
He was an English industrialist and focused on educating managers through training and moral education to make them contribute to organisational goals.
5. Charles Dupin:
He was an industrial educator in France. According to him, besides technical knowledge for contributing to organisational output, managers also needed broader management skills to maximise industrial output. He emphasised more on management education than technical education.
Evaluation of Pre-Scientific Management Theories:
These theories were primarily related to the organisational environments. They focused on specific organisational problems in specific ways. As each manager had his own way of viewing the organisation, some emphasised on production and others on human relations.
There was no single universally accepted management theory that could apply to all organisations at all times. It was by the end of the 19th century that management became a systematic field of study. The early contributions include those made by Taylor in the early 20th century as scientific management.
2. Classical Theory:
It is the oldest theory of management and is, therefore, called the traditional theory of management. The classical viewpoint finds ways to manage business organisations effectively. It includes management theories that provide foundation to the study of management. It is the first step towards the study of management as a distinct field of study.
With increase in complexity of organisations, the need to have systematic approach to management became inevitable. The focus was on industrial production. Financial incentives were considered important contributors to organisational output.
Features:
1. It includes some of the early works on management which provide foundation to the modern management theory.
2. It attempts to find methods that increase output of workers.
3. Employees have strong economic needs which can be satisfied through financial incentives.
4. It stresses on formal structure of jobs and work schedules to satisfy individual and organisational needs.
5. It views organisations as closed systems which do not interact with the external environment.
6. It develops a set of ‘management principles’ which universally apply to all organisations : business and non-business.
Three main theories that developed in the classical school of thought are:
a. Taylor’s Scientific Management Theory,
b. Fayol’s Classical Organisation Theory and
c. Weber’s Bureaucracy Theory.
a. Taylor’s Scientific Management Theory:
During the beginning of the 20th century, skilled labour was scarce in the United States. This affected industrial productivity. Efficiency of workers had to be increased and, thus, management thinkers worked on how to increase labour efficiency to increase productivity. They thought of deleting or combining the operations of work.
At that time, Frederick W. Taylor (1856-1915) introduced scientific management theory. Taylor is also known as the father of Scientific Management. It was called scientific management because Taylor focused on solving managerial problems in a scientific way.
Scientific management is the forerunner in the study of management. It developed because of the need to increase productivity. To compensate for short supply of skilled labour at that time, this theory developed to increase efficiency of the workers.
Taylor found that work was not being done scientifically in many organisations which led to wastage of human and non-human resources. Time and work studies were not followed so that ‘how much work should be done in a day and how much should be paid for each day’s work’ was not scientifically planned.
He felt that workers produced much less than what they could as they followed traditional methods of production. ‘Hit and trial’ approach was used for combinations of work schedules. Scientific ways (or the best way) of work were not adopted.
In this regard, Taylor was confronted with many questions:
1. Could the existing work schedule be reorganised by adding or deleting some of the operations?
2. Could the sequence of existing operations be changed?
3. Was there ‘one best-way’ of doing the work?
Taylor worked on these lines and provided scientific ways of doing the work. He conducted various experiments and developed the theory of scientific management.
The theory focused on:
i. The best way of doing each task/job by eliminating operations that resulted in wastage of men and materials.
ii. Time and motion studies to find optimum time and nature of operations for successful completion of each task.
Taylor’s theory is based on experience in three companies:
i. Midvale Steel,
ii. Simonds Rolling Machine Company and
iii. Bethlehem Steel.
(i) Midvale Steel:
Taylor joined Midvale Steel as a worker and became its chief engineer in 6 years.
During his tenure at Midvale, he observed that workers did not work at their full capacity because of the following reasons:
1. Wages were paid on daily basis so that workers were present in the factory but their output was low.
2. Workers feared to work fast because they thought that if they finished the work fast, they would be turned out by the management or their wages would be lowered.
3. General methods of work were based on ‘Rule of Thumb’ or ‘Hit and Trial’. Scientific approach to work was not followed.
(ii) Simonds Rolling Machine Company:
Taylor worked as management consultant in this company. In one of their projects, workers inspected bicycle ball bearings. Management felt that since this work involved long hours and was also not innovative, efficiency was low. Taylor studied and timed the movement of best workers and motivated and trained the rest of the workers to improve their performance upto that level.
For this, he adopted the system of ‘differential rate’ and introduced improvements in their working schedule including rest hours. This changed the quantity and quality of production, and workers’ earnings and management’s profits, both rose up.
(iii) Bethlehem Steel:
At Bethlehem Steel, Taylor conducted two important experiments of Pig-iron Handling and Shoveling. In the Pig-iron experiment, he studied the time and movement of workers who unloaded raw materials from the incoming railcars and loaded finished goods on the outgoing ones. He observed that one worker could load about 12 ½ tons per day and earn $1.15 each day. Taylor selected the most efficient worker, studied his time and motion and changed the way of work.
He introduced rest periods during the long working hours and offered incentive plans to workers who achieved the targeted performance. He set the target of 47 ½ tons per day and a wage rate of $ 1.85 per day for those who met this standard. It was found that workers managed to meet this standard and loaded almost 48 tons of goods each day.
b. Henri Fayol’s Classical Organisation Theory (Management Process Theory):
While Taylor emphasised on productivity at the shop level, Fayol focused on the organisation as a whole. Fayol was concerned with general management and control of the entire organisation and not just supervision and control of operations at lower levels of management. His focus was on management of the organisation and not simply individual jobs. His work was, thus, related more to the top level of management. He was regarded as the first person to systematize the administrative approach to management.
Fayol (1841-1925) worked with the French Coal and Iron Company as a junior executive and promoted as director in the same company. He retired in 1918. There was a general belief at that time that ‘managers are born, not made’, that is, only those who had inherent qualities of being a manager can become managers. Managers cannot be made through formal knowledge and training.
This view was opposed by Fayol who said that managers need not necessarily be born; fundamental principles underlying the managerial theory can be taught and, thus, managers can be made. He believed that “management could be taught, once its underlying principles were understood and a general theory of management was formulated.”
His work on general management was first published in 1916 in French as General and Industrial Management. This was translated in English in 1929 and then a second English translation was done in 1949 in the United States. His ideas became famous in the field of management after his work was translated in English.
His work can be found in business even today and, therefore, Fayol is aptly called the father of modern management theory. His theory can be understood under the following headings:
(a) Activities of a business:
Fayol divided business activities into six groups:
1. Technical:
It relates to production and manufacturing of goods.
2. Commercial:
It relates to buying raw materials and selling or exchanging the finished goods.
3. Financial:
It relates to search, acquisition and optimum use of financial resources.
4. Security:
It relates to protecting human and non-human resources.
5. Accounting:
It relates to:
(i) Keeping accounts such as Profit and Loss account and balance sheet,
(ii) Minimising costs, and
(iii) Maintaining statistics.
6. Managerial:
It relates to functions performed by a manager. Fayol believed that first five activities of business (operating activities) were followed in the organisations but they were lacking in managerial skill and, therefore, based his theory on managerial activities of business organisations.
(b) Functions of a manager:
Fayol classified the following functions of managers:
1. Planning:
To determine goals of the organisation and devise a course of action to achieve them.
2. Organising:
To coordinate human and non-human resources of the organisation to put the plans into action.
3. Commanding:
To direct and guide the workers to perform their duties well.
4. Coordinating:
To synthesise the resources and activities of the organisation to achieve the goals.
5. Controlling:
To ensure that plans are effectively carried out and discrepancies are checked.
(c) Abilities of managers:
These refer to the skills of managers at different levels of the organisation, like managerial skill, technical skill, human skill etc.
These skills vary according to the:
1. Level at which managers work, and
2. Size of the organisation.
According to the level: At higher levels, managers exercise more of managerial skills and at lower levels they exercise more of technical skills. Top level managers perform managerial activities more than technical activities and lower level managers perform more of technical work.
Importance of managerial ability increases as one moves up the hierarchy. Fayol, therefore, advocated sound management principles that enhance the ability of top managers to manage the organisation effectively.
According to size of the organisation:
Managers at the same level perform duties of higher skills in a large-sized organisation and lower skills in a small-sized organisation. For example, general managers of a large business have managerial skills but those of a small business have technical skills along with managerial skills to achieve the organisational goals.
Fayol identified the qualities of managers as:
1. Physical – Health and vigour,
2. Mental – Ability to analyse, interpret and arrive at conclusions,
3. Moral – Willingness to accept responsibility, loyalty and dignity,
4. General education – Knowledge of overall affairs of the organisation,
5. Special knowledge – Knowledge of a specific activity; technical, commercial or financial, and
6. Experience – Knowledge gained over a period of time while working in the specific functional area.
(d) Principles of management:
Fayol listed fourteen principles of management based purely on his experience. He described these principles as flexible and not exhaustive. They can be changed according to situations and usually apply in most business situations. They were considered as indispensable for every business and non-business organisation. The word ‘principles’ was used by Fayol to describe their flexibility.
In his words, “I prefer the word principles in order to avoid any idea of rigidity, as there is nothing rigid or absolute in administrative matters; everything is a question of degree. The same principle is hardly ever applied twice in exactly the same way, because we have to allow for different and changing circumstances, for human beings who are equally different and changeable, and for many other variable elements. The principles, too, are flexible and can be adapted to meet every need; it is just a question of knowing how to use them.”
Significance of Administrative Management:
Fayol’s theory has greatly contributed to the modern management practices. His principles apply in the managerial world. Managers are not born but can be made holds true as management theory is taught in various management institutions.
Positive attributes of Fayol’s theory are:
1. Fayol pioneered in distinguishing management functions from other functions/ activities of a business.
2. He was the first to highlight the universality of management principles.
3. His contribution to management theory is the foundation to development of management thought. His functions of management provide systematic understanding to the process of management. His theory is also known as management process approach.
Limitations of Administrative Management:
Fayol’s theory has the following limitations:
1. This theory is not well suited to modern business organisations which operate in the fast changing environment. In this process, they may not follow the principles of management at all times. The principle of centralisation, for example, where subordinates are not part of the decision-making process may not enable the organisations to adapt to the changing environment. In fact, workers’ participation in management is the feature of modern day organisations. The concept of universality of management, therefore, does not hold true.
2. It over-emphasises formal structure of the organisation and ignores informal needs of the workers.
3. The impact of external environment is not taken into consideration. This theory was introduced when environment was more or less stable. Contemporary management cannot work without active interaction of organisations with the external environment. Despite the limitations, Fayol’s contribution to management is important. Though not always applicable in every situation, his principles are generally in widespread use today.
Comparison of Taylor’s and Fayol’s Theories:
Points of similarities:
Taylor’s and Fayol’s theories are similar to each other with respect to the following:
1. Both the theories represent pioneering work in the study of management. They are the foundation to the study of management.
2. Both Taylor and Fayol found ways to increase the output.
3. They emphasise on financial needs which can be satisfied through financial incentives.
4. They focus on formal jobs and work schedules to satisfy individual and organisational needs.
5. They view organisations as independent units with little or no interaction with the external environment.
6. They develop a set of management principles important for industrial progress.
7. Both the theories are developed on practical experience in their respective companies.
8. Both emphasise that managerial qualities can be acquired. Therefore, organisations should attempt to develop these qualities.
Points of differences:
While Taylor focused on efficiency of operating workers, Fayol aimed at improving efficiency of the organisation as a whole. Fayol’s theory, therefore, has wider applicability.
The theories differ from each other on the following grounds:
1. Taylor is known as the father of scientific management while Fayol is known as the father of modern management. He introduced the Administrative Management Theory.
2. Taylor emphasised on increasing productivity at the workers’ level while Fayol emphasised on managing the organisation as a whole.
3. Fayol’s principles of functional management focus on the entire enterprise while Taylor’s principles of scientific management focus on a segment of the enterprise — operating level.
4. Taylor emphasised on organisational productivity through increase in worker’s efficiency while Fayol emphasised on overall administration of the organisation.
Taylor (Father of Scientific Management):
1. The aim is to increase production at the shop level.
2. The focus is on improving output through work simplification and standardisation.
3. The theory studies management from bottom to top.
4. It is based on scientific observation and measurement.
5. It covers narrow perspective of management theory.
Fayol (Father of Principles of Management):
1. The aim is to increase overall production of the organisation.
2. The focus is on developing principles that can be applied to coordinate internal activities of the organisation.
3. Management is viewed from top to bottom.
4. It is based on personal experience later translated into universal truth.
5. It has wider perspective and, therefore, wider applicability.
c. Weber’s Bureaucracy Theory:
Max Weber (1864-1920), a German sociologist, made significant contribution in the fields of management, economics, philosophy and sociology. In the field of management, his most significant contribution is his work on bureaucratic management.
At the time when managers had traditional authority (authority by virtue of a particular class by birth) or charismatic authority (authority by virtue of appeal and social power), Weber propagated the need for organisations to be managed in a more rational manner. He introduced rational-legal authority system (rather than charismatic and traditional authority) to manage business organisations.
The system was rational because organisations with formal authority-responsibility structures aimed to achieve a set of pre-determined goals. It was legal because authority was exercised by a person not by virtue of his appeal, class or reference but by position in the organisation and was bound by a system of well- defined rules and regulations.
He identified a set of characteristics of large organisations which helped in their rational operation. Such organisations were known as bureaucratic organisations. Weber evolved an ideal type of bureaucracy which was a superior form of organisation with features of efficiency, objectivity, unity, discipline etc.
Contribution of Classical Theory to Management Thought:
1. Classical theory was the first to focus on management as a separate field of study.
2. It provided a groundwork for development of later theories. It highlighted basic organisational problems to the management.
3. Many principles (job specialisation and scientific methods of work) and functions of management of the classical theory hold true even today.
4. It provides a set of management principles and functions based on experiments and scientific methods which can be applied to a large number of business and non-business organisations.
Limitations of Classical Theory:
1. This theory originated when organisations had stable and simple structures. They had very little interaction with the environment. The modern organisations are complex and changing in form and, therefore, do not fully comprehend the principles of classical theories. The theory was, therefore, more practical in the past than in the present.
2. The principles of management are not universally applicable in the organisations today. The ‘universality of concepts’ does not always hold good. The principle of unity of command, for example, does not apply in organisations where jobs are highly specialised. There is extensive division of work and people receive orders from various functional heads.
3. Employees are viewed as tools rather than resources for contributing to management objectives. Their social and psychological needs are altogether ignored.
4. The focus of theory is more on task than people; human behaviour and desires are ignored.
5. Monetary rewards are more important than non-monetary rewards. This is not always true. Non-monetary rewards like status, power, recognition etc. can be more powerful than money in many cases.
6. Initiative and creativity of employees are totally ignored. Overemphasis on rules made these rules an end. People strictly followed rules forgetting why these rules were framed.
3. Behavioural Theory:
Management thinkers of this approach focused on human relations and attributed organisational success to:
1. Organisational goals, and
2. Satisfaction of personal needs of human beings.
When principles of classical theory were put to practice, the responses at the work place were not very positive. When researchers tried to analyse human behaviour at work, they found that classical theorists viewed people as means of production and suggested ways to increase production. But unfortunately, managers could not achieve the targets of production as people at the work place did not always behave rationally. The focus was on mechanical side of the organisation and human side of the organisation was totally ignored.
In behavioural theory, the focus shifted from workplace conditions to human side of the organisation. The focus changed from job to workers who performed those jobs. ‘Production-oriented’ approach was substituted by ‘people-oriented’ approach. Behavioural theory is a “perspective on management that emphasises the importance of attempting to understand the various factors that affect human behaviour in organisations.”
It recognises that employees’ behaviour is not affected by job conditions alone. Internal reactions to the job situation also affect their behaviour.
Two main theories which promote this idea are:
a. Human Relations Theory
b. Behavioural Science Theory
a. Human Relations Theory:
This theory analyses the impact of ‘what is achieved, how it is achieved and why it is achieved on people in the organizations’ (Terry and Franklin). The approach emphasises that “management does not do, it gets others to do”. When focus of management is human beings and human relations, it boosts the morale of employees and productivity and efficiency of the organisations increase.
“Human relations refer to the ways in which managers interact with their subordinates.” Managers should know the factors that motivate the employees so that good human relations are developed in the organisations.
The theory considers organisation as social system that looks after socio-psychological needs of the workers. It looks beyond rewarding employees by financial incentives alone. Workers have to feel satisfied at the work place and, therefore, managers adopt participative decision making, job enrichment, cordial work relationships etc. This will promote individual goals, provide them work satisfaction and positively contribute to organisational goals.
Evaluation:
1. The human relations theory focused on promoting organisational efficiency through satisfaction of social and psychological needs of workers more than other needs.
2. Workers are part of the group where informal rather than formal communication and leadership are more effective.
3. Managers get better results by changing their management style; participative approach is better than authoritarian approach; managerial skills are more important than technical skills.
4. Financial incentives are not always as rewarding as non-financial incentives in affecting the human behaviour.
Limitations:
This theory suffers from the following weaknesses:
(i) Design of the theory:
The theory is based on experiments on a group of people which is not representative of the general population. Social and psychological needs are not always as important as emphasised upon. They are secondary to physiological needs and unless workers are satisfied with their pay packages and working conditions, they are not motivated to work for their social needs.
(ii) Analysis of the theory:
It analyses group dynamics and decision-making as more important variables than unity of command to increase productivity. This may not always hold true.
(iii) Interpretation of the theory:
It over-emphasises the fact that objectives can be achieved if cordial relations are maintained in the organisation. Differences of opinion amongst people can also generate new ideas and innovations.
(iv) Human relations philosophy:
It says that informal groups satisfy workers and promote productivity which is not always true. It is proved empirically that informal groups at the work place is a very simple assumption about workers’ contribution to their jobs. Factors like motivation, communication and leadership also contribute to organisational efficiency. These factors are considered in the behavioural science theory.
(v) Scientific method and human relations approach:
Human relations approach is not based on scientific methods. Workers are viewed as mere means to contribute to organisational goals. The needs they want to fulfill through work and work environment are ignored.
Despite the shortcomings, hawthorne studies are important contributors to the study of social factors on industrial production. It pioneered in changing the managerial focus from task to people. Workers should be treated as human beings and not as hired labour. People have to be treated with dignity and respect. Their values and beliefs have to be respected. John G. Adair comments: “No other theory or set of experiments has stimulated more research and controversy nor contributed more to a change in management thinking than the Hawthorne Studies and the human relations movement they spawned.”
b. Behavioural Science Theory:
Human relations theory lacked scientific vision to the study of human behaviour. This was considered in the behavioural science theory. Elton Mayo and other researchers applied scientific methods to study human behaviour at their work place.
While human relations theorists take simple view of human behaviour (they focus on interpersonal relations), behavioural theorists take complex view of the work situation (they focus on the performance of individuals and groups). The approach focuses not on individual behaviour (human relations approach) but on group behaviour and relationship amongst different groups affected by varied social and cultural beliefs.
They adopt concepts from various disciplines and test them in business organisations and laboratories before they are accepted as management theories. Behavioural science theorists take wider view of organisational behaviour. They apply the concepts of social sciences or behavioural science (Psychology, Sociology and Anthropology) to understand the behaviour of human beings.
Psychology is the study of individual human behaviour. Sociology is the study of human behaviour in groups. Anthropology is the study of human behaviour as individuals and members of groups. Thus, these researchers came to be known as behavioural scientists rather than ‘human relations theorists’.
This theory is, thus called the behavioural science theory. “The behavioural science approach emphasises on scientific research as the basis for developing theories about human behaviour in organisations that can be used to develop practical guidelines for managers.”
Some behavioural scientists, like Maslow and McGregor believe that more than a ‘social man’, worker is a ‘self-actualizing man’. Generally, workers want their lower-order needs to be satisfied before higher-order needs (ego and self-actualization), but there are people who work for higher-order needs even at the cost of their job security.
The behavioural scientists motivate people according to their need perceptions. They believe that people differ with respect to their needs, values, attitudes and perceptions and, therefore, act differently in similar situations. Managers understand these needs and values, satisfy them through motivators and synchronize their individual goals with organisational goals.
Features:
1. It emphasises on participative and group decision-making rather than individual decision-making.
2. It emphasises on self-direction and self-control rather than control by managers.
3. It suggests positive measures to improve the performance of sub-standard workers rather than taking negative actions against them.
4. It considers organisation as a group of individuals and identifies the reasons why individuals join groups and factors that influence the group behaviour. Informal groups and group norms are considered important.
5. Behaviour of people is different as members of group than as individuals.
6. While working together, people form informal groups which have their own norms. Group norms have powerful influence over organisational efficiency.
7. It introduces the concept of ‘complex man’ over ‘social man’ with varied needs. According to behavioural scientists, human behaviour is need-based and, therefore, people react differently to different situations.
8. It appreciates conflict in the organisation. Conflict of opinion is considered desirable for human development. The sociological approach to behavioural science theory recognises interaction amongst people of social groups, their cultural relations and coordinates organisational activities with social and cultural values of members of groups. It accepts that informal organisation co-exists with formal organisation (characterised by formal leadership and well-defined authority- responsibility relationships).
The theory also asserts that since people do not react to same situation in the same way, general principles of management cannot always be applied to organisations. Managers should create social and friendly environment at the work place, allow participative decision-making and integrate individual goals with organisational goals so that employees cooperate with managers as a group to increase productivity.
Contributors:
Sociologists like Blake, Selznick, Durkheim, Pareto, Dalton and many others have also contributed to sociological aspect of the behavioural theory.
Evaluation:
Behavioural scientists have scientifically contributed to the human element; their needs and working environment, interpersonal relationships, group behaviour and need for motivation, leadership and communication in guiding organisational behaviour and solving group conflicts. It satisfies social and psychological needs of employees, emphasises on interpersonal relations and group dynamism.
Though this approach has significantly contributed to management theory, it is not always practical to deal with human behaviour the way the theory suggests because of the complex nature of human beings. Human nature is not predictable, it is not guided by the same motivational forces.
Group norms may not always supersede organisational norms, group decision-making may not always be better than individual decision-making and social or human relations approach may not always be better than technical aspects of work.
4. Modern Management Theory:
With increasing complexities of organisations, modern management theory developed as a synthesis of quantitative theory, systems theory, contingency theory and operational theory of management.
The modern management thought is characterised by the following features:
1. Management is responsive to environmental changes. Successful organisations adapt to environmental changes as part of the management practices.
2. Business organisations are dynamic institutions composed of inter-related divisions and sub-divisions.
3. Firms have multiple objectives. Managers balance economic and non-economic objectives and maximise the interests of diverse groups of stakeholders like shareholders, customers, suppliers etc.
4. Management is multi-disciplinary in nature. It draws knowledge from various disciplines and synthesizes it to solve managerial problems.
5. Management is future oriented. It forecasts environment through scientific techniques and discounts it to make decisions in the present. Effective forecasts reduce risk and increase organisation’s adaptability to changing environmental variables.
a. Quantitative Theory:
It became an acceptable theory during World War II when Britain had to solve the problems of war (Researchers wanted to increase the efficiency of bombing and find procedures for detecting enemy supplies). The problem was that the radar system did not perform well at field sites as it performed at the testing stations. On-site scientific observation was, thus, called during actual operation.
The problem was studied by P.M.S. Blackett, a Nobel laureate of the University of Manchester. To examine several perspectives of the problem and solve complex problems of war, Blackett assembled a team of people from different streams like Mathematics, Physics, Statistics, Engineering and Economics.
This team was known as Operations Research (OR) team. It composed of an astrophysicist, two mathematical physicists, a general physicist, two mathematicians, three physiologists, a surveyor and an Army officer. Specialised knowledge of members of this team helped the British solve their problems.
Subsequently, when Americans entered the war, the US military services also formed an OR team based on models similar to those of the British and applied quantitative methods for effective utilisation of scarce resources.
Mathematicians, engineers, physicists, psychologists and others were recruited to assist the task of military decision-making. Besides improvements in the movements of radar, activities such as anti-submarine operations, aerial mining of the sea, ship maneuvers under aerial attack and statistical analysis of bomb damage were also studied.
After the war was over, the quantitative specialists found jobs in business organisations and applied the inter-disciplinary techniques of OR to industries. Large corporations and government agencies designed research activities to deal with operational problems similar to research efforts directed to product development and marketing.
Operations research is “the application of scientific methods to problems arising from operations involving integrated systems of people, machines and materials.” It involves knowledge of inter-disciplinary research team to provide optimum operating solutions. “The quantitative management viewpoint focuses on the use of mathematics, statistics and information aids to support managerial decision-making and organisational effectiveness.”
b. Systems Theory:
The theories discussed so tar (classical, behavioural and quantitative) focus on one aspect of the organisation; ‘task’, ‘people’ or ‘mathematical decision-making’. They apply under definite set of assumptions. The systems approach takes broader view of management where the organisation is viewed as a whole, unified and purposeful entity composed of different parts.
System means a complex whole, a set of connected parts or an organised body of things. It is a set of parts or things which perform common functions. Rather than analysing parts of the organisation independently, systems theory views the organisation as a whole which operates in the larger external environment.
It assumes that each part bears relationship with every other part of the organisation and, therefore, manager should view the organisation as a whole consisting of several inter-related parts. This theory provides new thinking to the study of organisations and management. It identifies simultaneous variations of mutually dependent variables of the organisation.
System means a set of inter-related parts. According to Fred Luthans, “A system view point may provide the impetus to unify management theory. By definition it could meet the various approaches, such as the process, quantitative and behavioural ones, as subsystems in an overall theory of management.”
This theory views organisation as a whole which operates in the external environment and has internal environment consisting of departments (production, marketing, finance etc.), inter-related to each other in a manner that input-output conversion is done most efficiently. Firms have departments that work as sub-systems, e.g., production, marketing, finance, personnel etc. These departments are inter-dependent and inter-related. If any sub-system stops working, complete working of the organisation comes to a halt.
The organisation itself is a sub-system of the larger environment. Thus, the concept works like a spiral where each inner circle affects and is affected by the outer circle. Inner circle is a system in itself and a sub-system of its outer circle.
In the context of the economy as a whole, with various firms operating in it, this circle can be represented as:
The systems approach, thus, views organisation as a single, integrated system of sub-systems. “It is a set of inter-related parts that operate as a whole in pursuit of common goals. The systems approach as applied to organisations is based largely on work in biology and the physical sciences.”
c. Contingency Theory:
The contingency viewpoint developed in 1950s when a research team headed by Joan Woodward, an industrial sociologist, studied 100 British firms of different sizes producing different products. Better performing companies were compared with average or below- average performing companies to know the reasons why they performed better.
It was concluded that difference in performance of those companies was not because of principles of classical theories but because of better technology to produce goods. This developed a theory that ‘appropriate actions by managers often depend on (or are contingent on) the situation’.
According to classical theory, if management wants to get the best out of workers, it should increase wages or relax working conditions. The behavioural school of thought emphasises on human needs to maximise their contribution to organisational output. Contingency approach is synthesis of the two. It does not advocate either of the two to be universally applicable. It depends on the situation.
If workers are skilled, participative style of management or behavioural theory can be effective but if workers are unskilled or their physiological needs are more important than the higher-order needs (self-actualisation needs), classical theory will be more appropriate.
“Contingency theory is a viewpoint that argues that appropriate managerial action depends on the particular parameters of the situation. Hence, rather than seeking universal principles that apply to every situation, contingency theory attempts to identify contingency principles that prescribe actions to be taken depending on the characteristics of the situation.”
Each organisation is unique, each problem is unique, each decision is unique and, therefore, the way of tackling every situation is also unique. Every decision or solution depends upon the variables that affect the situation. Different situations call for different decisions. There is no best way of doing things universally in all situations.
The theory developed when managers applied principles of management to different problem- solving situations and concluded that these principles could not be universally applied to all the situations. With increasing complexity of organisations where management has become a multi-disciplinary area which takes into account the impact of psychological, sociological, behavioural, technical and other sciences, no single solution exists to all kinds of problems.
Various principles, mathematical tools like statistics and operations research are situational or contingent in nature. They depend on the particular situation. An international economist, Charles Kindleberger said that answer to any problem in Economics could never be given positively, rather the answer was ‘It depends’.
This applies to management theory also. According to this approach, “the task of managers is to identify which technique will, in a particular situation, under particular circumstances, and at a particular time, best contribute to the attainment of management goals.” Past experience and experience of other firms also help in solving managerial problems.
This theory is an extension of systems theory. It believes that organisation is an open system which continuously interacts with external environment (consisting of parties outside the organisation).
While the internal environment consists of sub-systems or departments of the organisation, external environment consists of social, political, economic, legal and technological factors that affect its working.
According to this theory, managers take note of both these environments to solve various business problems.
The contingency approach considers three important constraints that affect decisions within the organisations:
(i) Technological constraints:
Different organisations require different technology. Some organisations (like iron and steel manufacturing units) require expensive technology which cannot be easily changed to meet the changing demands and to that extent, have limited capacity to adapt to the external environment. Depending on the type of technology used for producing goods in
1. Unit or small batches
2. Masses or large batches
3. Continuous process
elements of organisation (span of control, delegation, centralisation, decision-making etc.) have to be designed in different ways.
(ii) Task constraints:
These constraints arise from the nature of work performed by employees. If employees perform simple, methodical, repetitive tasks, management style is objective in nature, that is, based on policies, standards and rules. If workers perform complex and non-repetitive tasks, management style is subjective in nature, that is, based on judgment, intuition and innovativeness. Managers should know variation in tasks (more or less) while applying the contingency theory.
(iii) Human constraints:
Competence of workers and factors that motivate them to work also affect the management style. If workers are motivated only by economic rewards, their lower-order needs are strong. Managers usually adopt authoritative style of leadership, vertical chain of communication and no involvement of employees in the decision-making process.
If higher-order needs of workers are strong, managers adopt participative style of leadership. Employees participate in the decision-making process and communication is both vertical and horizontal. Keeping these constraints in mind, contingency approach relates organisation’s internal environment with the external environment. It assesses the impact of environmental factors on the organisation and vice versa and arrives at the best solution to the problem in the prevailing situation.
Thus, this approach does not advocate ‘universality of management principles’. Management concepts, principles and theories depend purely on the situation. There is no best style of management. Management style changes with changes in environmental factors. Managers analyse the external environment, their strengths and weaknesses, managerial concepts in the light of environmental factors and choose a concept or theory that best fits the situation.
d. Operational Theory:
“The operational approach to management theory and science draws together the pertinent knowledge of management by relating it to the managerial job that managers do. It tries to integrate the concepts, principles, and techniques that underlie the task of managing.”
Since managerial concepts apply at all levels of management in all kinds of organisations, business or non-business, this theory manages different situations by taking the best from theories (classical, behavioural, systems, quantitative etc.) in different schools of thought and unifies them into one theory. Rather than applying one approach, it picks up the best and relevant aspects of different theories that can practically apply to a given situation.
Since management is a complex task that involves relationships amongst variables that affect internal and external organisational environment, managerial knowledge must be an integration of pertinent knowledge from different schools of management thought.
Operational theory is also regarded as the management process school of thought where management process is considered as a set of management functions (planning, organising, actuating and controlling) which distinguish managers from non-managers. The emphasis on these functions varies with the actual situation. Managers seek knowledge of other theories with process framework as central management functions to be performed.
This theory has practical application today. “Since the activities of a manager are basic, the process school provides an excellent framework not only for the study of management using this fundamental approach but also for using valuable contributions offered by other schools of management. The goal is to take the best from what is available in management thought and work it into a single theory.”