Neoclassical Theory

Arjun Aryal
Kumari Begam Shah
(MPhil Schoalrs, 2020 Fall, KUSOM)
 Introduction
• The classical approach was mechanical, which stressed the formal
organization and considered human as parts of machine, the
organization

• It ignored major aspects of human nature.

• In contrast, the neoclassical approach introduced an informal

organization structure, which focuses on workers instead of work
 Introduction
• Based on the Hawthorne experiments, the neoclassical approach
emphasizes that the level of attention that the individual and group
receive, their level of morale, and their social or human
relationships affects productivity instead of just changes in working
conditions.

• Recognizes the importance of individual or group behaviour and

emphasizes human relations.
 Principles
• Individual: An individual is not a mechanical equipment but a
unique social being, with aspirations beyond mere fulfilment of a
few economic and security works.

• Work group: The social aspects of work groups or informal

organizations that operate within a formal organization should be
considered.

• Participative management: Participative management or decision

making allows workers to participate in the decision making
process, which contributes increase the productivity.
 Contribution/Value Added
• Flat structure over tall hierarchical structure of classical theory:

• Decentralization because of wider span of control

• Informal organizations within formal ones make them

interdependent
 Criticism…

• The possibility of finding a consensual solution is not true. There

are conflicting interests among various groups that are structural
in character, not merely psychological.

• The organizational structure given by neo- classists may not be a

good fit for all types of organizations.
 Criticism…
• Neo-classical theory is only a modification of classical organization
theory, which has also been criticized as nothing more than “a
trifling body of empirical and descriptive information” as it was
mainly based on Hawthorne Studies conducted by George Elton
Mayo and associates 

• Thus, it suffers from nearly same drawbacks from which classical

theory suffered, eg. incompetency, a short-sighted perspective and
lack of integration among many facets of human behaviour
studied, and lacks unified approach of org.
Thank you!