THEORIES OF MANAGEMENT:

NEO-CLASSICAL AND MODERN

MANAGEMENT THEORIES
 INTRODUCTION
Management theories are the set of general rules that
guide the managers to manage an organization. With the
evolution of management, we have three approaches:
● Classical Approach
● Neo-classical Approach
● Modern Approach
 NEO-CLASSICAL THEORIES
● Role of management is to use employees to get things
done in organizations
● Productions, structures or technology is given least
importance
● Improving interpersonal relationships and providing a
conducive environment leads to excellent
performance
NEO-CLASSICAL THEORIES(Contd..)

● Believes in employees in sharing tasks, information

and knowledge with one another
● This alternate structure provides a platform for
employees to fulfill their need to socialize, making
them more productive
● Two main sources
1. Human Relations Movement
2. Behavioural Movement
HUMAN RELATIONS MOVEMENT
● Focuses on the behaviour of people in groups.
● Focus on the effects of social relations, motivation
and employee satisfaction on factory productivity
● Workers are dealt in terms of their psychology and
their fit with the company
● Theories of Elton Mayo lays the foundation
HUMAN RELATION MOVEMENT
 THEORIES OF ELTON MAYO
● The need for reciprocal communication, in which
communication is two way, from worker to chief
executive, as well as vice versa.
● The development of high quality leadership to
communicate goals and to ensure effective and
coherent decision making
● The power of natural groups, in which social aspects
take precedence over functional organizational
structures.
 BEHAVIOURAL MOVEMENT
● A mature version of human relational movement
● Shows how managers should behave to motivate the
employees and encourage them to be committed to
the achievement of the organizational goals.
● Understanding of human behavior at work improves
productivity
● Employees -individuals, resources, and assets to be
developed and worked with — not as machines
 ELEMENTS OF NEO-CLASSICAL
THEORY
● Individual
➔ Neo-classical theory recognised the individual differences
which were ignored by the classical theory.
➔ Every individual has emotions feelings attitudes hopes
aspirations and expectations.
● Work group
➔ An individual in a group develop social wants.
➔ As he is a social being, he develops a desire to be
accepted by his own group
ELEMENTS OF NEOCLASSICAL THEORY
(CONT..)
● Participative management
➔ Participation in management for improving
productivity
● Orientation
➔ Classical -job oriented
➔ Neo classical-employee oriented
● Motivation
➔ Motivated by social and psychological wants and
not solely by economics incentives
● Leadership
● Employee Development
 MODERN THEORIES
● Modern management theory refers to emphasizing the use
of systematic mathematical techniques in the system with
analyzing and understanding the inter-relationship of
management and workers in all aspect.
● Modern management theories started after 1950s.
● Modern view consists that a worker does not work for only
money. They work for their satisfaction and happiness
with good living style.
TYPES OF MODERN MANAGEMENT
APPROACHES
➔ System Approach
➔ Operational Approach
➔ Quantitative Approach
➔ Contingency Approach
➔ Total Quality Management
➔ Theory Z
 SYSTEM APPROACH
● Organisation is a system consisting of 4 subsystems.
➔ Task
➔ Structure
➔ People
➔ Environment
Decisions are based on the subsystems.
● Based on the generalization that everything is interrelated
and interdependent.
● Two types of subsystems:
1. Internal
2. External
LEVELS OF SYSTEMS
 CHARACTERISTICS
1. Dynamic
2. Adaptive
3. Multilevel and multidimensional.
4. Manages will have good view.
5. Forecasts consequences and plans actions.
 ADVANTAGES
O Closeness to reality
O This approach can be utilised by any other
approach
 DISADVANTAGES
O Complex when used in large organisation
O Increased difficulty for managers.
 OPERATIONAL APPROACH
Systematic management of all processes to achieve world
class performance by

● efficient ulilisation of tools

● optimisation of resources
● elimination of process wastes and inefficiencies

Leads to a continuous improvement and standardisation in

the process
OPERATIONAL APPROACH (Contd.)
In 1911, Frederick Taylor published his principles of
scientific operations management, characterized by four
specific elements:
● developing a true science of management
● scientific selection of an effective and efficient
worker
● education and development of workers
● an intimate cooperation between management and
staff
CHARACTERISTICS
● Uses the least amount of resources necessary

● Meets customers' requirements to the highest

standard economically viable
 THEORIES OF OPERATIONAL
APPROACH
Modern operations management revolves around four
theories:

● business process redesign (BPR)

● reconfigurable manufacturing systems
● six sigma
● lean manufacturing
 QUANTITATIVE APPROACH
● Provide the decision makers with systematic and
powerful means of analysis, based on quantitative
data, for achieving predetermined goals.

● Also called Mathematical Approach or Management

Science Approach
 CLASSIFICATION
● Statistical Techniques
● Programming Techniques
 STATISTICAL TECHNIQUES
● Methods of collecting data
● Classification and tabulation of collected data
● Probability theory and sampling analysis
● Correlation and regression analysis
● Time Series analysis
● Interpolation and extrapolation
 PROGRAMING TECHNIQUES
● Linear Programming
● Decision Theory
● Theory of Games
● Queuing Theory
● Inventory Planning
● Simulation
● Network analysis/PERT
 LIMITATIONS
● There are inherent limitations concerning
mathematical expressions
● High costs are involved in the use of quantitative
techniques
● Quantitative techniques do not take into
consideration the intangible factors
● Quantitative techniques are just the tools of analysis
and not the complete decision making process
 CONTINGENCY APPROACH
● Latest approach to the existing management
approaches
● Developed by J.W. Lorsch and P.R. Lawrence during
the 1970’s
● To overcome the drawback of other theories which
presuppose one best way to manage a situation
● Also called situational approach
 DEFINITIONS
● A contingency approach is an approach, where
behaviour of one subunit is dependent on its
environment and relationship to other units or
subunits that have some control over the sequences
desired by that sub-unit.
INTERNAL CONTINGENCY
FACTORS
EXTERNAL CONTINGENCY
FACTORS
 FEATURES
● Does not accept the universality of management
theory
● Stresses that there is no one best way of doing things
● For managerial policies and practices to be effective,
must adjust to changes in environment
● Diagnostic skills are improved so that one can
anticipate and be ready for environmental changes
● Managers should have sufficient human relations skill
to accommodate and stabilise change
 ADVANTAGES
● Contingency approach takes a realistic view in
management and organisation. It discards the
universal validity of principles.
● Executives are advised to be situation oriented and not
stereo-typed. So executives become innovative and
creative.
 DISADVANTAGES
● Does not have theoretical base
● An executive is expected to know all the alternative
courses of action before taking action in a situation
which is not always feasible.
TOTAL QUALITY MANAGEMENT
Definition
● Total Quality Management (TQM) is the integration of
all functions and processes within an organization to
achieve continuous improvement of the quality of
goods and services.
● The goal is customer satisfaction.
 CONCEPT OF TQM
● Produce quality work the first time
● Focus on the customer
● Have a strategic approach to improvement
● Improve continuously
● Encourage mutual respect and teamwork
PRIMARY ELEMENTS OF TQM
● Customer-focused
● Total employee involvement
● Process-centered
● Integrated system
● Strategic and systematic approach
● Continual improvement
● Fact-based decision making
● Communications
 ADVANTAGES AND
DISADVANTAGES
Advantages Disadvantages
● Cost reduction ● Initial introduction cost
● Customer satisfaction ● Benefits may not be seen
● Defect reduction for several years
● Morale ● Workers may be resistant
to change