Running head: A HISTORICAL PERSPECTIVE ON THE EVOLUTION OF MANAGEMENT

THEORY 1

A Historical Perspective on the Evolution of Management Theory

Mark Thilo Williams

Goldey-Beacom College
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Abstract

This paper provides an overview of the three major schools governing management theory:

classical management theory, neo-classical management theory and modern management theory.

In addition, it highlights the major perspectives—the modern perspective, the interpretative-

symbolic perspective, and the postmodern perspective—that evolved in tandem during the

development of the three management theories. The construct of this paper follows a time-line of

the three management theories, along with a brief description of the binding perspectives that

began to take form. The paper concludes with example on how variations in perspectives can add

value to the design and management of an organization, followed by a personal statement about a

perspective of choice. Relevant scholarly literature was researched and applied were applicable.
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A Historical Perspective on the Evolution of Management Theory

In their article, Bort and Kiesser found that lack of popularity of theoretical topics

constrains the dissemination of concepts/theories worthy of publication (2011). The authors cite

Miller in professing that new theories are not given ample opportunities to become published

(2011). However, despite Miller’s conclusions, the authors concede that new, inspiring theories

nonetheless find a way to spread (2011). This is evident in the evolution of the various schools of

management theory: since F.W. Taylor and Max Weber and their ground breaking work that

introduced Classical Management Theory; to the Neo-Classical Management theories of Elton

Mayo, Talcott Parsons and Alvin Gouldner; and to the Modern Management theories of Herbert

Simon and James March. These theorists all became popular not simply because their works

were revolutionary, but also because of the evolution of the common perspectives shared by

scholars, practitioners and the public.

According to Hatch, Adam Smith is credited for publishing the first theory of

organization in 1776 in his book, An Inquiry into the Nature and Causes of Wealth of Nations

(1997 & 2018). Smith explains the process of how division of labor produces economic

efficiency (Hatch, 1997 & 2018 ). In 1867, Karl Marx’s popularity begins to take shape as he

introduces his theory on capitalism, which reintroduces Smith’s sentiment on achieving

efficiency thru division of labor (Hatch, 1997 & 2018 ). Around this time, the open frontiers were

closing, and industrialization was making inroads to such an extent that new concepts were

required to contend with the ensuing new challenges (Rosenthal, 2018), for example, the

disparity between optimal machine efficiency and actual production (Peltonen, 2016). One of the

causes for this disparity was the lack of effective management techniques, coupled with the fact

that the available labor pool at the time was still rooted in agriculture processes (Peltonen, 2016).

It was while working for a steel mill in Pennsylvania that F. W. Taylor noticed and began

to study the uncomfortable relationship between the line workers, most of whom were former
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farmers, and the new, industrial machines in the factory (Peltonen, 2016). In his book, Principles

of Scientific Management, Taylor introduced concepts to maximize output for an (industrial)

organization (Uddin & Hossain, 2015). His theory was based on his scientific observations of the

worker-machine relationship (Peltonen, 2016), which he determined could be improved by

efficiently managing the human factor, which consequently, would improve overall production

(Uddin & Hossain, 2015). His theory of scientific management included establishing set rules,

procedures and tasks for each worker (Uddin & Hossain, 2015); replacing instincts with

scientifically proven methods (Peltonen, 2016); dividing responsibility between managers and

workers, such as planning and execution; and providing financial incentives for producing

outputs above the norm (Kwok, 2014). But Taylor’s theory had drawbacks, most notably, in how

it regarded workers. His theory was criticized for its mistreatment of workers. For instance, in a

scholarly writing in 1918 by historian Ulrich Philips and during a congressional inquiry into

scientific management, Taylor’s theory was condemned as slavery (Rosenthal, 2018).

Around the same time in Europe, Henri Fayol finally codified his theory on general

management practices for large organizations in his book, Administration Industrielle et

Générale. He provided specifics for optimal manager-to-worker ratio; outlined principles of

delegation, principles of departmentalization, and the scalar principle; and with his concept of

esprit de corps, raised the discussion of humanity in the workplace (Hatch, 2018). However, he

turned seventy-five by the time any of his work was first published, and his administrative

principles were still not yet popular in the U.S. (Peltonen, 2016).

Max Weber was still relatively unknown in the U.S at the time, and notably unpopular in

Germany because of the disconnect between his theories, the monarchical establishment and the

feudal landscape in his native Germany (Peltonen, 2016). His theory of bureaucracy explained

the significance of establishing a hierarchical structure with clear divisions of roles and

responsibilities where tasks were assigned to skill level; formal skills, rules and procedures were
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codified; and information was readily exchanged (Kwok, 2014). When his theory was finally

published in German in 1924 (Hatch, 1997), Talcott Parson started to adopt Weber’s view and

began to translate Weber’s works into English (Peltonen, 2016).

Academic literature considers the works of Taylor, Fayol and Weber to be foundations for

classic management theory because of their pioneering efforts along with the similarities in their

theories (Robbins & Coulter, 2012). For instance, their theories emphasized achieving optimal

organizational efficiency through implementing rational and detailed concepts (Robbins &

Coulter, 2012); each separated the role and responsibilities of labor (i.e. between managers and

workers); and to varying degrees, each ignored the influence of humanity on an organization

(Yang, et al., 2013), for example, paying little, if any, attention to worker behavior and the

impact such negligence had on an organization (Kwok, 2014). As a result, as Peltonen (2016)

points out, “the most important problem is (was) not efficiency, but achieving organizational

homogeneity, unity, and cohesion in a situation where a modern division of labor has (had)

separated individuals and systems far away from each other.” (p. 59).

Classic management theory successfully exemplified a framework for managing

organizations, particularly in the wake of a technological revolution and culture transformation,

even facilitating the process by fracturing the prevailing agriculture and artisan communities

(Peltonen, 2016). However, along with success came criticism as well, like scrutiny over the lack

of attention on the behavioral factors impacting an organization. This pathed the way for the

development of new theories to address this void.

According to Peltonen, a team of Harvard scientists, led by Elton Mayo, Fritz

Roethlisberger and William Dickson, conducted an extensive study at the Hawthorne factory for

Western Electric in Chicago (2016). While it initially started out as a study in accords with the

school of Classic Management theory, Mayo, Roethlisberger & Dickson noticed the influential

impact the workers had on the operations at the factory (Peltonen, 2016). One of the key
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conclusions from the study determined that an informal organization exists within the formal

organization (Peltonen, 2016). Also, workers were prone to irrational behavior due to lack of

attention to their psychological needs (Peltonen, 2016). This was a complete shift in thought, as

classical management theory assumed all actors in an organization were rational (Peltonen,

2016). As a result of this shift and the conclusions drawn from the study, Mayo’s interpretations

led to the concepts behind the human relations movement, and a realignment of focus that

brought humanity into perspective to successfully manage an organization (Peltonen, 2016).

By the time Mayo completed his interpretations, Parson had translated much of Weber’s

work and had become a major advocate for Weber in the U.S. of Weber (Oyedokun, 2016). Soon,

however, Parson began to separate his views, for example, instead of defining social action as the

interaction of an organization within a universe, Parson began to redefine his perspective of

social action according the interaction of an organization the coexists with other interdependent

conditions (Oyedokun, 2016). Parson wrote many scholarly articles on this topic and, in fact, his

most distinguished accomplishment was his theory on structural functionalism, which explains

how an organization and other social systems coexist based on the task or functions they perform

and the impact of the relationship (Oyedokun, 2016). This set the stage for a change in

perspective.

Because of their efforts to place human behavior at the center of organizations, the works

of Parson and May are considered pillars of Neo-Classical theory (Uddin & Hossain, 2015;

Peltonen, 2016). Neo-Classical theory attempts to understand the behaviors in an organization

because it considers the human factor as the integral component to direct organizational

outcomes (Peltonen, 2016; Kwok, 2014; Hatch, 1997 & 2018; and Yang et al., 2013). They reject

insinuations that reduce workers to assets on a balance sheet, as implied by classical

management theorists (Peltonen, 2016; Kwok, 2014; Hatch, 1997 & 2018; and Yang et al.,

2013).
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While it may be arguable that a divide exists between classical and neo-classical

management theory, the popularity of Neo-Classical theory brought to light a mutual perspective

between theorists of the two schools of thought. Hatch refers to this mutual perspective as the

modern perspective (1997; 2018). According to Hatch, a modern perspective attempts to uncover

precedents impacting an organization using methods that induce objectiveness, for example,

quantitative methods (2018). Hatch asserts that the ontology surrounding the modern

perspective is that reality is objective and unshakable; that the world is yet to be discovered and

exists with or without an understanding of it; and that to effectively understand the world

requires a structured and methodical approach (i.e. those of a scientific nature) in order to

accurately analyze and measure the phenomena of interest (2018).

By the 1950s, the popularity of management theory amplified, which can be attributed to

the publication of Mayo’s writings on the experiment at the Hawthorne factory (Peltonen, 2016;

Hatch, 1997& 2018). Being a Harvard professor, his works cascaded into the teaching doctrines

at university’s school of business, influencing other acclaimed professors there, for example,

Parsons, future scholars as well (Peltonen, 2016). According to Peltonen, Parson taught several

students who themselves later became professors and published significant scholarly works

regarding organization theory (2016). One of Parson’s students was Robert Merton, who would

become a renowned organization theorist himself. As a professor at Columbia University, Merton

taught acclaimed theorist, Phillip Selznick and Alvin Gouldner (Peltonen, 2016).

After studying at Columbia, Gouldner worked at a plant studying worker behavio (Caron,

2013). Over the course of his research and several publications, Gouldner constantly switched

between empirical studies and theoretical models while developing and refining models of his

own (Caron, 2013). He also began to focus squarely on leadership and bureaucracy, which he

developed from studying worker strikes, particularly wildcat strikes (Caron, 2013). As a result of

his research and interests, he began to question Weber and soon thereafter, Parson (Caron, 2013).
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Gouldner produced several works on leadership and bureaucracy, including his own

interpretations of Weber and Parson’s theories (Caron, 2013). However, what is most noteworthy

about Gouldner is the constant transition between methods, i.e. from his early days of relying on

empirical studies to relying on theoretical models, to relying on his interpretation (Caron, 2013).

Gouldner’s works and his unique approach began to lay the foundations of a new

approach called the interpretative perspective (Yang, et. al, 2013). The modern perspective in

classical and neo-classical management theories was simply incapable of explaining changes

under dynamic conditions (Hatch, 1997 & 2018; Peltonen, 2016). On the other hand, the

interpretative perspective is guided by the researcher’s belief system that accommodates multiple

meanings and ways to understanding (Levers, 2013). The focus of the interpretive perspective is

to recognize and describe the meaning of human behavior and interactions as they are observed,

and to maintain an objective view while studying the phenomena of interest—usually with

qualitative methods (e.g. participant observations and interviews). According to Meyers,

interpretative perspectives are “generalizations derived from experience and are dependent upon

the researcher, his or her methods, and the interactions with the subject of study” (as cited in

Kroeze, 2012, p. 47). According to Hatch, the ontology of the interpretative perspective is that

reality is subjective and only the world we are aware of exists, thus truth depends on the

collective interpretation of others (1997 & 2018). Because the actors always change, the

interpretations will change as well (Hatch, 1997 & 2018).

Gouldner’s work is certainly characterized by these tenets. The type of studies he

conducted—particularly participant studies and interviews while studying strikes—and the fact

that his critiques of Weber and Parson included his own interpretations, led him on further quests

of understanding; constructing his theory on reflexive industrial sociology; and his repetitive

loop from the empirical, to theoretical, to interpretive (Peltonen, 2016). In addition, Gouldner

realized it was possible to analyze and study transformations in bureaucratic organizations with
A HISTORICAL PERSPECTIVE ON THE EVOLUTION OF MANAGEMENT THEORY 9

qualitative case studies, suggesting he believed that reality is objectifiable (particularly through

interpretation) and not simply objective (Peltonen, 2016).

Gouldner and Mayo’s efforts also set the stage for a new school of thought in

organization, called Modern Management Theory (Caron, 2013; Hatch, 1997 & 2018), and

possibly a third perspective after Gouldner’s theory on reflexive industrial sociology (Caron,

2013). Shortly after many of Gouldner and Mayo’s works were published, organization theory

became more rational and analytical, especially after WWII and the introduction of computers;

for instance, Parson realigned his efforts towards developing a general systems theory (Peltonen,

2016). In addition, Herbert Simon and James March began to make significant inroads while

constructing the theory of decision-making. In their book, Organizations, Simon and March

studied the collective organization theories published to that point, and developed the conclusion

that organizations look to make rational decisions to benefit their financial interest; but human

factors, whether purposely or not, inhibit optimal outcomes (Hatch, 1997). As a result, because

rational decisions were not possible, the effective outcome and not the optimal outcome should

be the goal during the decision-making process (Hatch, 1997). They also added that any

sensibility of aiming for a rational outcome required applying very restrictive conditions and

rules to the process (Hatch, 1997). The book became a cornerstone for modern management

theory.

After the publication of their book and its popularity, Simon noted the assumptions of

their rational model: decision makers know of alternatives, but have imperfect information about

the alternative; and sine there is no internal conflict, everyone knows of and agrees to the

decision rules (Hatch, 1997). Peltonen submits that an assumption Simon and March do not

mention is that the formal organization is the structure in the background (2016). In later years,

others contributed to modern management theories, though with variations in perspective, for

example, David Silverman and his theory of organizations, and Karl Weick and his sensemaking
A HISTORICAL PERSPECTIVE ON THE EVOLUTION OF MANAGEMENT THEORY 10

framework (Peltonen, 2016). However, while their works contributed to modern management

theories, their studies were intertwined with Gouldner and the interpretative perspective

(Peltonen, 2016).

After researching and analyzing the origins of the three management theories, especially

the neo-classical and modern theories, the number of discrepancies in academic literature

between who impacted which, what and when suggests that scholars find it very difficult to

pinpoint the exact origins. Peltonen points out the difficulty in pinpointing the origins in citing

several different movements contributed to the beginning of postmodern perspective (2016).

Hatch provides an understanding of the postmodernist perspective by stating that the focus is to

renew modern theories by invoking past styles and reinterpreting with new material (1997 &

2018). Peltonen adds that the focus is goals and not methods; from production to contribution,

and information becomes a commodity (2016). One of the key ontologies of the postmodernist

perspective is that because knowledge is so fragmented, expectations for a solitary view are

irrational; and that reflexivity is the ideal means to address assumptions (Hatch, 1997 & 2018).

While this paper credits Gouldner for starting the interpretive perspective, he can arguably also

be credited for inspiring the Postmodern perspective as well, especially after his theory on

reflexive industrial sociology. However, the names of Jean-Francois Lyotard, Michael Foucault

and Jaques Derrida (and his deconstruction methods for reading) are typically uttered as starting

the postmodernist perspective (Peltonen, 2016; Hatch, 1997).

These three perspectives, modern, interpretative and postmodern, allow organizations to

create a range of possibilities for designing and managing an organization. For one, a fusion of

these three perspectives to create an integrated management approach can reduce risks caused by

worker behavior, e.g. the affects from agency theory. In addition, it can create a dynamic process

that parallels the evolution of the project. Not to mention, by including multiple perspectives,
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processes may become more efficient because of the increase in detail surrounding the issues and

subsequent resolutions facing an organization (Rodney, Ducq & Breysse, 2015).

Kroeze provides a detailed account of the merits of addressing various perspective as he

asserts that because of postmodernist perspectives in Information Communication Technologies,

(ICT), new opportunities have been identified that otherwise may have gone unnoticed; for

example, integrating human characteristics into software and robotics in order to reflect

emotions, whereas before, the modernist perspectives reduced technology to display qualities in

a cold, precise and logical manner (2012). The author quotes Hohmann in providing an insight

into the future benefits in ICT as a result of the postmodernist perspective: “the change from a

technology that replaces people to a technology that supports people” (as cited in Kroeze, 2012,

p. 55).

Jiang & Ki highlight some dangers when multiple perspectives are not taken into

account, for example, when analyzing China’s economy: while there are obvious differences

between the regulatory environments between China and USA, gauging the performance

between the two countries may not accurately reflect the current state between the two because

of the differences in the assumptions used to calculate performance. Not to mention, there are

also differences in the behavioral factors that impact an organization domiciled in the US versus

one in China, and so a behavioral study done in one country may not readily translate to the other

(2014).

Finally, considering the demographic composition of organizations since the Taylor,

diversity in organization now exists, and the post-modernist perspective played a part in its

evolution (Hatch, 2018). While the positive impact of diversity continues to unfold, that fact that

it now exists is the product of the evolution of varied collection of theories that have evolved

because of changes to and sharing of perspectives. Therefore, an organization that stifles

variations in perspectives will assuredly stifling progress as well.

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In conclusion, my area of interest is in business, particularly finance. Because of the

origins in management science and consequently, modern management theory (Sridhar, 2016),

coupled with its focus on quantitative methods, I find myself inclined to support the

objectivist/modern perspective, as defined by Hatch (2018), since much of finance deals with

data from accounting to measure and forecast performance (Sauerwein, 2014). I also concur with

Simon to criticize the field of economics for not effectively taking the human factor into account;

and I prefer research to not merely rely on interpretative perspective (Peltonen, 2016). However,

I am assuaged by the prospects of the postmodernist view, particularly given my experiences

with a major short-coming of scientific method: that it relies on historical data to predict the

future. As an investment professional, I find reflexivity to be critical (or at the very least, to ask

questions). Nonetheless, despite the seeming contradiction in these perspectives, for this course, I

stand on similar grounds as Morgan (2012): “I will adopt the role of constructive opportunist,

and focus on the possibilities, prospects and challenges which paradigm diversity poses for the

development of organization studies” (p. 14).

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References

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Hatch, M. (2018). Organization Theory: Modern, Symbolic, and Postmodern Perspectives. (4th

ed.). Oxford, UK: Oxford University Press.

Hatch, M. (1997). Organization Theory: Modern, Symbolic, and Postmodern Perspectives. (1st

ed.). Oxford, UK: Oxford University Press.

Jian, F. & Kim, K. (2015). Corporate governance in China: A modern perspective. Journal of

Corporate Finance. 32, 190-216.

Kroeze, J. (2012). Postmodernism, Interpretivism and Formal Ontologies. In M. Mora, O.

Gelman, A. Steenkamp & M. Raisinghani (Eds.), Research Methodologies, Innovations

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Peltonen, T. (2016). Organization Theory: Critical and Philosophical Engagements. Warrington,

UK: Emerald Group Publishing.

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Onday, O. (2016). Classical to modern organization theory. International Journal of Business

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Notes

The following sections outlines the definition of certain terms used in this paper. One of

the most prevailing terms used throughout is organization. Yang et al. (2013) provides a succinct

definition in that organizations, “are universal phenomena in human social,” (p.4470), and per

March and Simon’s (1958) definition, Yang et al. (2013) add that it is, “a system of coordinated

action among individuals who differ in dimensions or interest, preferences and knowledge.”

(2013, p. 4470). In support, the authors state this definition was suggested by Arrow (1974) and

Mintzberg (1979) as well. Onday (2016) also mentions the above definitions, including Liu’s

(2007) definition that organizations are unified thoughts, goals, and technologies operating

together. For a definition of organization theory, Onday (2016) provides a concise definition

summarized as, a knowledge system (i.e. a set of concepts and methods) that is used to analyze

and understand the composition and activities of an organization, including behavioral factors.

Perspective is defined by the similarities in concepts theorists use in their work (Hatch, 2018).

Ontology is a branch of philosophy that focuses on the assumptions held, particularly about

existence and reality. How does reality exist? With or without our consciousness and experiences

(Levers, 2013)? Epistemology, on the other hand, is the branch of philosophy that examines

knowledge, specifically how knowledge is obtained (Hatch, 1997 & 2018). Therefore,

“epistemology defines the kind of knowledge that can be used to address what ontology

establishes as real” (Hatch, 2018, p. 13).