BUS 312: Management Theory

Wk 3
Topic: The Major Classifications of
Management Theory
 Approaches to Management
There are 3 major classifications of management theory
which are:

1. Classical Management Theory

2. Behavioural Management Theory and
3. Modern Management Theory

These classifications represents a different era in the

evolution for management theories. Each of these
classifications further contain multiple sub-theories.
Classical Management Theory
This is the oldest management theory.

Classical Management Theory focuses on operations and

the creation of standards to increase production output.

A manager practicing Classical Management Theory would

be focused on improving output and rewarding high-
performing employees through wages or bonuses, focus is
on profit maximization.
Classical Management Theory comprises three primary theories:

1. Scientific management (Frederick Taylor)

• This theory emphasises efficiency (achieving more with less,
synergy) and effectiveness (the extent to which something is used to
produce a desired result) and measures output and productivity
• Division of labour is to the core
• The goal is to reduce waste and increase production time
• There is no focus on employees
2. Administrative Management (Henri Fayol)
This theory attempts to find a way to design an
organisation as a whole. It calls for a formalised
administrative structure. The focus is on the
work.
Henri Fayol proposed a theory of general management which is
applicable to all types of fields and administration. He divided all
activities of an industrial enterprise into the following six groups:

1. Technical activities pertaining to production

2. Commercial activities (buying/selling)
3. Financial activities pertaining to the optimum utilization of
capital
4. Accounting activities (final accounts, costs, statistics, etc.)
5. Security-related activities (protecting the premises)
6. Managerial activities
He grouped managerial functions around the activities of planning,
organizing, commanding, coordinating, and controlling.

He suggested the following 14 principles of management:

1. Division of Labour: to ensure optimum performance with minimal effort.
2. Authority and Responsibility: Every authority comes with certain
responsibilities.
3. Discipline: Employees must respect and obey their superiors.
4. Unity of Command: Every employee must receive orders from only one
senior.
5. Unity of Direction: If there are a group of tasks with a common objective,
then there must be a single head and a single plan.
6. Subordination: Individual interest is secondary to the general interest.
7. Remuneration: Wages must afford maximum satisfaction to the
employees and the firm.
8. Centralization: The organization must decide about the amount of authority
that the higher levels would retain or dispersed in the organization.
9. Scalar Chain: The relations between the superiors and subordinates should
be short-circuited and not detrimental to the business.
10.Order: All employees and process must have an appointed place.
11.Equity: Managers must strive for equity and equality of treatment while
dealing with the employees. They must display a combination of kindness
and justice.
12.Stability of Tenure of Personnel: Managers must try to reduce employee
turnover.
13.Initiative: Managers must take initiatives.
14.Esprit de Corps: There must be an emphasis on teamwork and effective
communication for achieving it.
2. Bureaucracy Theory (Max Weber)
By definition, bureaucracy is the exercise of control based
on knowledge, expertise, and/or experience.

This theory emphasizes formal authority systems, unity

and the authority of organizational hierarchies.

He also recommended that professional managers must

supervise the organization rather than company owners.
Here are some principles to guide the management of an
organization:
They can also be known as characteristics of bureaucracy
1. Qualification-based hiring – Hire employees based on their
educational qualification or technical training.
2. Merit-based promotion – Managers decide on promotions and
base their decisions on experience or achievement.
3. Chain of command – Organizations must have a structure wherein
each position reports and is accountable to a higher position. Also,
create a complaints process to protect the rights of workers in
lower positions.
4. Division of labor – Responsibilities, tasks, and
authority is equally divided and clearly defined.
5. Impartiality – Regardless of the position or status of
an employee, all rules and regulations must apply to
all members of the organization.
6. Recording in writing – Record every single
administrative act, decision, rule or procedure in
writing.
7. Owners are not managers – The owners of a company
should not manage it.
Behavioural Management Theory
Management theories began to include more
people-oriented methods. Human behavior and
satisfying the interpersonal needs of employees
became more central to management. A
manager practicing Behavioral Management
Theory might motivate teamwork through
fostering a collaborative atmosphere.
There are two major theories that make up
Behavioural Management Theory:
1. Human Relations Theory
Human Relations Theory considers the organization
as a social entity. This theory recognizes that
money alone is not enough to satisfy employees.
Morale is considered to be integral to employee
performance. The major weakness of this theory is
that it makes several assumptions about behavior.
2. Behavioural Science Theory
Behavioural Science Theory combines elements
of psychology, sociology, and anthropology to
provide a scientific basis. It examines why
employees are motivated by specific factors,
such as social needs, conflicts and self-
actualization. This theory recognizes individuality
and the need for managers to be sociable.
Modern Management Theory
Modern organizations must navigate constant change
and exponential complexities. Technology is an
element that can change and upend businesses very
rapidly. Modern Management Theory seeks to
incorporate these elements with human and
traditional theories. A manager practicing Modern
Management Theory might use statistics to measure
performance and encourage cross-functional
cooperation.
The major modern theories comprises the following:

1. Quantitative Theory
Quantitative theory states that the process of
management should be carried out mathematically
and statistically i.e with the use of figures so that it can
be condensed fast and quick. E.g quantitative courses -
statistics, analysis for business decision making,
quantitative techniques, operations management.
2. Systems Theory
This theory sees organisation as a system with a
number of interrelated subsystems.
It reconciles both the classical and behavioural
approach by focusing on the total organisation in
terms of structure and behaviour.
The idea is that any part of an organisation
activities affect all other parts. (input and output
process)
 Some Key Concepts in Systems Theory
• SYNERGY: Synergy means that departments that
interact cooperatively are more productive
than they would be if they operated in
isolation. These resources are called as inputs.
These inputs are converted into products
using technology, systems and methods.
This approach is more useful in the sense that
It provides a framework through which
organisation interacts and analyses its environment
which contributes for effective decision-making.
• CLOSED SYSTEM; A system that does not
interact with its environment A closed
system has fixed boundaries, its
operation is relatively independent of the
environment outside the system.
• OPEN SYSTEM; A system that interacts
with its environment. Thus an open
system is one which constantly comes
into contact with the environment.
3. Environmental Theory
This theory states that an organisation interacts
and its also affected by the its environment
which consists of individuals, institutions,
government, stakeholders etc and some
uncontrollable phenomena such as change of
weather, climate, flood etc. an organisation can’t
be successful without interacting with its
environment. Social responsibility is part.
4. Contingency Theory
This states that there is no one best way of making a
decision or leading an organisation. Instead the course of
action depends on the internal and external situation and
the environment in which the organisation operates.
The organisation must be flexible in its operation and be
willing to adopt new methods when other method seems
not to work depending on the internal condition.

An organisation that has a suggestion box must be willing

to modify their operation in response to the feedback.
5. Information Technology Theory
Includes tangible investments like computer hardware,
software, data management, networks, as well as the
staff who are hired to maintain them.

This entails many of the basic management functions,

like budgeting, staffing, change management, and
organizing and controlling, along with other aspects
that are unique to technology, like software design.