Subject Name:-Principles of Management

Course:- BBA/ BBA LLB 1st sem.

Unit No.:- 1
Topic Name :- Approaches of Management:
Neo- Classical Approach and Modern approach

Dr. Honey Gupta

MUIT, Noida

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Neoclassical Theory of Management
 The Neoclassical theory was an attempt at
incorporating the behavioral sciences into
management thought in order to remove the defects
of classical theory practices. Neo-classical theory
deals with the human factor.
 Elton Mayo pioneered the human relations to

improve levels of productivity and satisfaction. This

approach was first highlighted by the improvements
known as ‘Hawthrone Experiments’.
 Elton Mayo and Mary Parker Follett are the main

contributors of human relations approach

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 Human Relations Movement.

 The classical school did not give importance

to the human aspects of the workers.
Therefore, they did not achieve a high level of
production efficiency and co-operation
between the management and workers. The
failure of the classical approach led to the 
human relations movement.
 Elton Mayo (1880-1949) called as father of Human
Relations Movement
 The human relations experts tried to
integrate (combine) Psychology and Sociology
with Management.
 According to them, organisation is a social

system of interpersonal and inter group

relationships.
 They gave importance to the management of

people. They felt that management can get

the work done from the workers by satisfying
their social and psychological needs.
Principles of Human Relations Approach

 The basic principles of human relations approach are :-

 Human beings are not interested only in financial gains.

They also need recognition and appreciation.

 Workers are human beings. So they must be treated like

human beings and not like machines. Managers should try

to understand the feelings and emotions of the workers.
 An organisation works not only through formal relations,

but also through informal relations. Therefore, managers

should encourage informal relations in the organisation
along with formal relations.
 Workers need a high degree of job security and job

satisfaction. Therefore, management should give job

security and job satisfaction to the workers.
 Workers want good communication from the
managers. Therefore, managers should
communicate effectively without feelings of
ego and superiority complex.
 In any organisation, members do not like

conflicts and misunderstandings. Therefore,

managers should try to stop conflicts and
misunderstandings among the members of
the organisation.
 Workers want freedom. They do not want
strict supervision. Therefore, managers
should avoid strict supervision and control
over the workers.
 Employees would like to participate

in decision making, especially, in those

matters affecting their interests. Therefore,
management must encourage workers'
participation in management. This will
increase productivity and job satisfaction.
Human Relations Movement

 Elton Mayo (1880-1949) called as father of Human Relations Movement.

 Hawthorne Studies
I. Illumination Experiments: The mere practice of observing the people’s
behavior tends to alter their behavior.
II. Relay Assembly Test Room:
1. Relationship between workers and their supervisor are powerful.

III. Bank Wiring Observation Room

IV. Social groups can influence production and individual work behavior
V. Mass Interviewing Program
VI. Workers were asked for opinions, told for they mattered and positive
attitudes towards company increased

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 Conclusion
I. Impact of Social Factors
II. Importance of Informal Groups
III. Leadership
IV. Proper Communication
V. Balanced Approach

 Criticism
I. Lacks Validity 
II. More Importance to Human Aspects 
III. More Emphasis on Group Decision-making 
IV. Over Importance to Freedom of Workers 

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Behavioral Sciences Movement

 Behavioral science movement is regarded as a further

refinement of human relations movement.
 It covered wider aspects in inter-personal roles and

responsibilities.
 It laid emphasis on the application of the methods and

findings of general and social psychology, sociology

and anthropology for understanding the organizational
behavior.

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Features

 Motivation
 Organization as a social system.
 Leadership
 Communication for better understanding
in the organization.
 Upgrading of employee and managerial

skills.

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MODERN APPROACH
 The modern approach to management was
developed around the year 1950.
 This approach is an improvement upon both the
classical and neo-classical approach to
management.
 Modern approach to management has three basic
pillars:
1. Quantitative Approach
2. System Approach
3. Contingency Approach.
  
MODERN APPROACH

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The Quantitative Approach

 The quantitative approach was propounded by C. W

Churchman and his colleagues around the year 1950.
This approach is also known by the name of
Operational Research or Operational Analysis
 It involves the application of modern quantitative or

mathematical techniques for solving managerial

problems.
 These quantitative tools and methodologies are

designed to add in decision-making relating to

operations and production.

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 The quantitative approach to management
makes some suggestions to solve different
problems facing the managers. It tells the
managers to solve their problems with the
help of the mathematical and statistical
formulas. Some special formulas have been
prepared to solve managerial problems.
  
 For Example:
 (i) Theory of Probability,
 (ii) Sampling Analysis,
 (iii) Correlation / Regression Analysis,
 (iv) Time Series Analysis,
 (v) Ratio Analysis,
 (vi) Variance Analysis,
 (vii) Statistical Quality Control,
 (viii) Linear Programming: it is the method to find out
how to do something in the best possible way in given
limited resources 
 ( ix ) Break-Even Analysis
 Features
I. Rational decision-making.
II. Mathematical models.
III. Computer applications.
IV. Evaluation criteria.
V. Quickly solve complex problem

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Systems Approach
 What is Systems Approach?
 Systems approach is a management

perspective which advocates that any

business problem should be seen as system
as a whole which is made up of an hierarchy
of sub-systems. So rather than seeing the
problem in parts it should be seen as whole.
Systems approach can be applied to all the
business domains like administration,
insurance, banking, hospitality etc.
 This is a newly developed approach which came
existence in 1960. This approach was developed by
Chester I. Bernard, Herbert A. Simon and their
colleagues.
 The system approach means a group of small inter-

related units. A group of different units which means a

complete unit is called a system, while the small units
are themselves independent, but somehow or the other
is connected with the sub-systems of the related system.
 All the sub-systems influence one another. For

example- a scooter is a system which has many sub-

systems in the form of engine, shaft, gear, wheels body,
etc.
 The following are the chief characteristics of
the System Approach:
 (1) Sub-Systems:
 Every system happens to be a combination of

many sub-systems. All the sub-systems are

inter-related. It means that whenever we take
some decision regarding a particular sub-
system, we should always keep in mind the
possible effect of the decision might have on
the other sub-systems.
 (2) Holism:
 A major characteristic of the System Approach is
that it is looked upon as a whole. It clearly
means that a decision taken with regard to a
particular sub-system does influence or affect
the other sub-systems
 For example- if the sales department is aiming
at doubling its sales, it shall have to take care of
the fact whether the purchase department would
be in a position to purchase the requisite
amount of raw material.
 (3) Synergy:
 It means that the whole is greater than the sum

of its parts.
 Example. Suppose there are five persons in a

group. Everybody has a capacity to carry a load

of five quintal each. When they are told to lift a
load of one quintal, everybody will be able to lift
only one quintal of load. But if that are told to
lift the weight collectively, they would certainly
be able to lift a load in excess of five quintal.
 Here, the pointer happens to be towards
coordination. When all the parts of a system work
keeping in mind the interests of others, the
performance turns out to be decidedly better results.
 (4) Closed and Open System:
 A system can be of two types:
 (i) Closed system and
 (ii) Open system
 (i) Closed System:
 This is a system that remains unaffected by the

environmental factors
 (ii) Open System:
 An open system means a system which

remains constantly in touch with its

environment and is influenced by it
 Modern management experts consider an

organisation as an open system.

 All the factors of input and output influence

the organisation. That is why an organisation

is called an open system
 (5) System Boundary:
 This means a certain dividing line which

separates a system from its environment. The

dividing line in a closed system is rigid while
in respect of open system, it is flexible.
 System boundary makes it clear as to which

factors are related to the system and which

factors are related to the environment.
Consequently, it makes control easier.
Contingency Theory –

 Contingency approach to management is an

important modem approach. This approach
originated in around 1970. This is a
decision-making theory of management.

 According to it, the managers should take

decisions not according to principles but
according to the situations. It means that
there cannot be any single principle /
formula / managerial activity which can be
suitable in all the situations.
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Its chief reason is the constantly changing nature of
environment. Here environment means the sum total of all
the factors which influence the organization.

The internal factors include objectives, policies,

organization structure, management information system, etc
.
The external factors include customers, suppliers,
competitors, government policies, political set-up, legal
system, etc. All these factors are subject to change that is
why the environment of an organization is called dynamic.
 The system approach has failed to establish a
relationship between the organization and
environment.
 The contingency approach has made an

attempt to remove this weakness.

 It is, therefore, the basic duty of the

managers to analyse the environment and

they should take decision on the basis of
their analysis.
 Features of Contingency Approach:
 The following are the main features of the

contingency approach:
 1. The managerial action influences the

environment.
 2. The managerial action changes according

to the situations.
 3. There is essentially coordination between

the organization and environment.

Limitations of Contingency Approach:

 The following are the limitations of the

contingency approach:
 1. It is not sufficient to say that the

managerial action depends on the situation. It

is essential to say what action should be
taken in a particular situation.
 2. A situation can be influenced by many

factors. It is difficult to analyse all these

factors.