Unit 3: Evolution of

Management Thought

-Rupendra Gopali
Introduction
› Management is as old as human civilization. However, management
is a systematic body of knowledge in the twentieth century
› It has been practiced long time back. It was evolved and existed from
very long and has been changed considerably over a period of time
› Without the knowledge of management, one cannot imagine to run
his/her organization in a smooth, efficient and effective way
› The real development of management thought has begun with the
scientific management approach given by F.W. Taylor
› Though some of the concepts have been developed by thinkers
earlier to Taylor

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› Early management thoughts have come from Roman Catholic
Church, military organizations, the Cameralists, a group of German
and Austrian public administrators and intellectuals during sixteenth
to eighteenth centuries
› Their concepts of management were mostly related to
specialization, selection of subordinates and their training,
simplication of administrative procedures, unity of doctrine etc
› The industrial Revolution led to the emergence of industrialization in
Western Countries
› Big Factories were established in Europe and the USA with great
potential for mass production of goods
› However, very little was understood about these factories and their
functioning

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› There was very little idea about how such organizations should
be managed
› Hence, the need for knowledge about the management of
such organizations soon became apparent
› The early approaches to the study of management, thus,
concerned themselves with the productions systems
› These early theorists and practitioners explained the essential
nature of management and its relationship to the productions
processes

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› The evolution of management thoughts can be classified into
“Six Management Theories”
1. The Classical Theory
2. Behavioral Theory
3. The Decision Theory
4. The Management Science Theory
5. The Systems Theory
6. The Contingency Theory

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1. The Classical Theory
› The classical theory includes three theories.
› Two theories-the Scientific Management and The
Administrative Management Theory developed
separately but at the same time period.
› Another important classical theory is Bureaucratic
Theory

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 1. The Scientific Management Theory
› Frederick Winslow Taylor (F.W. Taylor: 1856-1915) is widely
known as Father of Scientific Management
› Taylor Joined Midvale Steel Company and later became
supervisor there
› Afterwards, he joined Bethlehem Steel Company. After
retirement, he worked as a consultant
› At both companies, he experimented to increase the efficiency
of men at work and developed a new philosophy known as
„Scientific Management‟
› His best premise was that there was one best way to do a job
and that this way should be discovered and put into operation

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› Fundamentally, the scientific management is an attitude and
philosophy of discarding the old rule of thumb
› It means scientific investigations should be taken to solve the
problems of industrial management
› Scientific investigations include research and experimentation,
collection and analysis of data and formulation of certain
principles on the basis of such analysis
› Scientific management seeks to maximize the efficiency of the
plant using the principles
› Broadly ,it is the art of knowing exactly what is to be done and
the best way of doing it

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› Basically, Scientific management was developed to solve two
major problems:
I. How to increase the output of the average worker and
II. How to improve the efficiency of management
› Scientific management is defined as “that kind of
management, which conducts a business by standards by
facts or truths gained through systematic observation,
experiment, or reasoning”
› Scientific management, thus, advocated the application of
scientific methods to analyze work and to determine how to
complete production tasks efficiently

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Principles of Scientific Management
› The industrialists and managers of that time in the USA welcomed
Taylor‟s views
› His ideas became the standards of practice
› By applying his principles, many organizations achieved major gains in
their efficiency and productivity. The main principles of Taylor‟s scientific
management approach are:
 Standardization: Standards of work, equipment, and process should be fixed by
scientifically studying the nature of work. Previously, workers used the “rule-of-
thumb” method
 Time and Task Study: Time and task study should be used to determine the
standards for worker. There should be one best way to do the work. Previously, no
standards for time and task were in use

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Systematic Selection and Training: The operatives should be
selected, taught, trained and developed scientifically. Previously,
workers chose work and trained themselves as best they could
Pay Incentives: The output should be linked with pay for employee
motivation. Each worker should be paid for the amount of work done
by him. Effort-reward relation should be maintained for increasing
productivity. Previously, workers used to get equal pay, irrespective of
their output
Close Cooperation between Managers and Operatives:
Cooperation between managers and the operatives should be
encouraged to accomplish work in accordance with the scientific
method, division of work, and incentive system. Previously,
management and workers were in continual conflict.

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Contributions and Limitations
› The contributions of the scientific management approach can be
listed as follows:
1. Scientific management is the foundation stone of modern management
theory and practice. It represents a key milestone in the development of
management thought. It provided a framework from which later theories
developed
2. Scientific management provided valuable insights into production
efficiency and devised techniques of reducing wastages
3. Scientific management emphasized on improved working conditions by
reducing fatigue and redesigning machines and tools
4. Scientific management developed many management tools like time
study, motion study, fatigue study, and flow charts. These tools have significant
application in production activities even today

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Limitations of Taylor‟s Scientific Management
1. Exploitation of Workers:
– Taylor‟s Scientific Management put unnecessary pressures on
the employees to perform the work faster
– Importance was given to productivity and profitability
– This resulted in exploitation of the employees
– Therefore, many employees join trade unions
2. Problem of Unity of Command:
– Taylor used functional foremanship. So, the workers have to
report to eight super-ordinates
– This breaks the principle of unity of command, where the
workers have to report to only one boss

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3. Mechanical Approach:
– Taylor‟s approach was a mechanical approach
– He gave too much importance to efficiency
– He did not consider the human elements of employees
– Taylor considered workers as robots, which could speed up the work at
any cost
4. Wrong Assumptions:
– Taylor assumed that workers are motivated only by financial gain
– However, in reality, workers are motivated not by financial incentives
but also by social needs and personal egos

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5. Narrow Application:
– Taylor‟s Scientific Management has narrow application
– It can be applied only when the performance of the workers can be
measured quantitatively
– It can be applied only for factories
– It cannot be used in the service sector where the performance of a
person cannot be measured quantitatively

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2. The Administrative Management Theory
› Henry Fayol is considered to be the Father of Administrative
Management Theory
› He focused on the development of broad administrative
principles applicable to general and higher managerial levels
› He was a French mining engineer and became managing
director and successful industrialist
› He took the functional approach to management. In 1916 he
published his famous book in French language „Administration
Industrielle Generale‟ which was translated into English in 1929
under the title „General and Industrial Management‟

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› Fayol provided a broad analytical framework of the process of
administration
› He used the word „administration‟ for „management‟
› A contemporary to Taylor, Fayol for the first time attempted a
systematic analysis of the overall management process
› He looked at the problem of managing organization with the
management point of view
› Fayol‟s contributions are generally termed as administrative
management
› His contribution to management can be discussed under the
following four heads:

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a. Division of Industrial Activities:
– Fayol observed the organizational functioning from manager‟s point
of view
– He found that all activities of the industrial enterprise could be divided
into the following six groups
I. Financial
II. Commercial
III. Technical
IV. Managerial (Planning, Organizing, Command, Accounting, Control)
V. Accounting
VI. Security

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b. Managerial qualities and Training:
– Fayol has enumerated certain managerial qualities
– He emphasized that managers should posses these qualities to be
effective in their job. These qualities are given below:
a. Physical (Health, Vigor and dress)
b. Mental (Ability to understand and learn, judgment, mental vigor and adaptability)
c. Moral (Energy, firmness, willingness to accept responsibility, initiative, loyalty, tact
and dignity)
d. Educational (General acquaintance with matters related to general functioning);
e. Technical (Peculiar to the functions being performed); and
f. Experience (Arising from the work)

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c. Principles of Management:
– Fayol‟s contribution to management is perhaps the most revolutionary
and constructive which have ever been made
– He emphasized that management principles are universal
– Fayol has developed fourteen principles of management
– Any effective management should be based on these principles
– Fayol‟s principles of management are as follows:
1. Division of Work
2. Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction

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6. Subordination of Individual Interest to General Interest
7. Remuneration of Personnel
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure
13. Initiative
14. Espirit de Corps

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d. Elements of Management:
– Fayol regarded elements of management as its functions
– He focused his work on managerial or administrative function
– According to Fayol, to manage is to forecast and plan, to organize , to
command, to coordinate and to control
– Thus, Fayol classified elements of management as planning,
organizing, commanding, coordinating and controlling functions
– Fayol observes that planning is the most important and difficult
managerial task
– Creation of organizational structure and commanding function are
necessary to make sure that everyone is working together, and control
ensures that everything is proceeding according to plan

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3. Bureaucratic Theory
› Max Weber (1864-1920) propounded the bureaucratic the theory of organization
and management
› He was a German sociologist and contemporary of Taylor and Fayol
› Weber developed the bureaucratic model of organization, which is essentially a
universal model of efficient management
› He developed the „principles of bureaucracy‟ – a formal system of organization
and administration designed to ensure efficiency and effectiveness
› Bureaucracy was defined as ideal system wherein positions and tasks were clearly
defined, division of labor was precise and clear, objectives were explicit, and a
clear chain of command was maintained
› Weber viewed bureaucracy as “the most efficient form or that could be used most
effectively for complex organizations business, government military, for example
arising out of the needs of modern, society.”

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› The important contents of Weber‟s theory of bureaucracy are
as follows:
1. Job Specialization: Jobs are broken down into simple, routine, and
well defined tasks

2. Authority Hierarchy: Officers or positions are organized in a

hierarchy, each lower one being controlled and supervised by a
higher one

3. Formal Selection: All organizational members are to be selected on

the basis of technical qualifications demonstrated by training,
education, or formal examination

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4. Formal Rules and Regulations: To ensure uniformity and to regulate
actions of employees, managers must depend heavily on formal
organizational rules

5. Impersonality: Rules and controls are applied uniformly, avoiding

involvement with personalities and personal preferences of employees

6. Career Orientation: Managers are professional officials rather than

owners of the units they manage. They work for fixed salaries and pursue
their careers within the organization.

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Max Weber‟s Bureaucratic Principles
1. A formal hierarchical structure
2. Management by rules
3. Organization by functional specialty
4. An “up-focused” or “in-focused” mission
5. Purposely impersonal
6. Employment based on technical qualifications

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1. A formal hierarchical structure
– Hierarchy is the formal relationship of level of organization
– Each level controls the level below and is controlled by the level above
– A formal hierarchy is the basis of central planning and centralized
decision making

BOD

CEO

GM

Manager

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2. Management by rules
– Controlling by rules allows decisions made at high levels to be
executed consistently by all lower levels
– This principle stressed on no arbitrary judgment and ensures that
decisions are made by rule
3. Organization by functional specialty
– Work is to be done by specialists, and people are organized into units
based on the type of work they do or skills they have
– It focuses on specialization rather than generalization of work
– The top level executive should be well knowledgeable, skilled, trained
and learned to carry out the different functions in an organization

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4. An "up-focused" or "in-focused" mission
– If the mission is described as "up-focused," then the organization's
purpose is to serve the stockholders, the board, or whatever agency
empowered it
– If the mission is to serve the organization itself, and those within it,
e.g., to produce high profits, to gain market share, or to produce a
cash stream, then the mission is described as "in-focused."
5. Purposely impersonal
– The idea is to treat all employees equally and customers equally, and
not be influenced by individual differences
– So, this principle states that all the stockholders from businessman to
general customers should be treated fairly and equally without any
prejudice

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6. Employment based on technical qualifications
– Jobs should be designed on the basis of the requirement of the
technical qualification and employees should be selected on the basis
of the skills and qualification
– This helps to protect the job and employees from arbitrary dismissal

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› The main advantage of bureaucracy are establishment of
rules for decision making, clear chain of command, explicit
objectives and promotion of people on the basis of ability and
experience
› This is useful to manage big and complex organizations like
government, army, global business and international
organizations
› Decision making is rational based on clear-cut objectives,
rules, procedures and authority.
› Technical competence in employees facilitates specialization
and right person in right job.

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Limitations of Bureaucracy Theory:
› It lacks innovation and flexibility; it cannot change with the
dynamic changes in the environment
› It emphasizes efficiency at the cost of human needs
› Rules and procedures become arbitrary, rigid and red tape
› Means are often confused with ends
› Communication is slow and distorted
› Role conflicts occur due to outdated systems of authority and
control

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 2. Behavioral Theory
› The classical theories viewed the organization from a
mechanistic point of view
› They placed emphasis on the design and performance of work
and the process of the management
› They had either ignored or over-simplified the human factor
› In contrast Behavioral theory(Behavior approach) evolved in
recognition of the importance of human behavior in
organizations
› The behavioral theory developed partly because practicing
managers found that following the ideas of classical theory did
not achieve total efficiency and workplace harmony

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› Its primary emphasis was on improving management through
understanding the psychological makeup of people
› They studied different factors associated with workers‟ efficiency,
happiness and productivity
› If managers understand their people and adapt their organizations to
them, organizational success will usually follow:
– The behavior theory(approach) to management has two branches. The
first branch is Human relations approach . This approach calls
attention to the importance of the individual within the organization
– The other category is Behavioral Science theory. This approach
integrates the fields of psychology, sociology and anthropology to
explain interpersonal relations and behavioral patterns of workers.

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1. Human Relations Theory
› Human relation approach is the modified and extended
form of classical theory
› This approach has emphasized on social and
psychological factors at work
› Human relation is generally related to the interaction of
managers with his subordinates
› Human relation refers to act humanly with human
› It is the George Elton Mayo who laid foundation for human
dimension in an organization

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1. Hawthorne experiments:
– This experiment were first of its kind that showed a systematic
analysis of human behavior in the organization
– Hawthorne experiments were conducted at Western Electric
Company, Chicago, which was manufacturing telephone system bells
and employing about 30,000 workers
– Elton Mayo and his associates (Fritz Roethlisberger and William
J.Dickson) conducted research in four phases as
I. Illumination experiments (1924-27)
II. Relay assembly test room experiments (1927-28)
III. Mass interviewing program (1928-30)
IV. Bank wiring observation experiments (1931-32)

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I. Illumination Experiment:
 This experiment was started on November 1924 and was designed to test
the effect of lighting intensity on workers productivity
 In this experiment, two groups were formed
 In one group illumination was manipulated while the other group was held
constant
 However, they found that as the level of light was increased in the
experimental group, output for both group increased
 Then, much to the surprise of the engineers, as the light level was
decreased in the experimental group, productivity continued to increased in
the both groups
 In fact, a productivity decrease was observed in the experimental group
only when the level of light was reduced to that of a moonlight night
 This concluded that lighting intensity was not directly related to group
productivity, and that something else must have contributed to the results

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II. Relay Assembly Test Room Experiment:
– In this experiment six female workers, who assembled telephone relays, were put
in separate rooms
– The experiment was conducted in 1927 and over five years changes were made
and they were monitored for production and morale
– In one group frequent changes were made like working hours, refreshment, rest
breaks , wage incentives etc where as in other group no any changes were made
– After sometime the physical facilities were withdrawn
– But, surprisingly the productivity and morale of the employees were not reduced
– They remained constant. So, this concludes that the socio-psychological factors
work more than the physical facilities to increase the productivity of the
employees
– It concludes that interrelationships are important contributing factors to worker
productivity

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III. Mass Interviewing Program:
– In this phase 20,000 workers were interviewed in order to determine
basic factors responsible for human behavior at work
– Initially direct questions were asked relating to the type of supervision,
working conditions , living conditions etc
– The researchers observed that the replies were guarded
– Hence , they changed to non-directive type of interview giving more
time to speak about the favorite topics related to their work
environment
– This study revealed that the worker‟s social relations inside the
organization had influence on the attitudes and behavior

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IV. Bank Wiring Observation Room:
– In this experiment, 14 male workers were formed into a small works
group and observed for some months.
– The main objective of the study was to make detailed analysis of the
social relationship in a work group and to study the influence of
informal groups on employee‟s performance
– After the experiment, it was found that labor would work hard if they
believe that the management was concerned more about their welfare
– It was also concluded that social groups can influence production and
individual work behavior.

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Contributions and Limitations of Human Relations
Theory
› Hawthorne experiments revealed that an organization is
more than a formal structure of positions and authority –
responsibility relationships
› The major contributions of Human Relation Theory
(movement) are as follows:
1. Social System
2. Production Norms
3. Group Dynamics
4. Non-financial rewards
5. Informal Leader
6. Two Way Communication
7. Employee participation
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1. Social System:
– An organization being a social system is influenced by social factors
– The social system defines individual roles and establishes norms
– Hence , the management has to provide social satisfactions to the
workers to improve their productivity
2. Production Norms:
– Production norms for workers are set by their group and not by formal
structures or by time and motion study
– Those workers who deviate from the group norm of production are
isolated , harassed and penalized by their coworkers

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3. Group Dynamics:
– At the work place, the workers often do not act or react as individuals
but as members of groups
– Worker has group influence and the management should not deal with
them as individuals but as member of the group
– The group plays an important role in determining the attitudes and
performance of individual workers
4. Non-financial rewards:
– A worker does not work for money only
– Non-financial rewards such as affection and respect of his coworker
play a significant role in influencing his behavior and productivity
– People are diversely motivated and socio-psychological factors act as
important motivators

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5. Informal Leader:
– Informal leader of the group is rather more influential than the superior
appointed by the organization
– Management must develop cooperative attitude and not rely merely on
command
6. Two Way Communication:
– Two way communication is an important aspect of organization, which
carries information downward to the functioning of the organization
and transmits suggestion and grievances of people who work in it.
7. Employee participation:
– Employee participation in decision making results in greater job
satisfaction as well as productivity

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The limitations of Human Relations are as follows:
I. The Human Relations Theory emphasizes the human variable only
and ignores other variables
II. This theory over-emphasizes the importance of symbolic rewards and
undermines the role of material rewards. Practically such rewards fail
to achieve their objectives of higher productivity
III. This theory has emphasized the importance of informal groups by
describing them as a major source of satisfaction for industrial workers.
But many research studies have revealed informal group can only
make the worker‟s day more pleasant and not his task
IV. The Human Relations Theory cannot work properly in emergency,
where quick decisions are necessary

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Behavioral Science Theory
› Behavioral Science approach is the improved form of human relation
approach that studies the humans behavior in organization
› It is concerned with scientific investigation and analysis of human
behavior in an organization
› Human behavior is the complex phenomenon that needs lots of
strengths to find out the behavior of human
› Human behavior is compared with the ice-berg phenomenon where
much part of the ice-berg remain beneath the water surface
› Similarly much part of the human behavior is not known to human
› About 10% is seen & 90% lies within

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› Behavior science is categorized into three branches:
1. Psychology: It studies the human behavior
2. Sociology: It studies human behavior in group
3. Anthropology: It studies the physical, biological & cultural
influences on human behavior
› This theory emphasizes on the study of motivation,
leadership, communication, group dynamics, participative
management etc in a scientific manner
› There are no. of behavioral scientists who have contribution
a lot in the field of management theory & practices
› Some of them are Abraham Maslow, Douglas McGregor and
Frederick Herzberg and so on.
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Maslow‟s Need Hierarchy Theory
› Maslow , a psychologist, studied and analyzed human needs
› His work on human motivation is considered as of vital
significance to understand human behavior in organizations
› He classified human needs into five different categories:
physiological, safety, social, ego and self-actualization
› According to him, as the lower level needs are satisfied, they
are no longer motivating factors and the higher level needs
become dominant
› However, a need at one level does not have to be completely
satisfied before the next need emerges

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1. Physiological Needs:
– Physiological needs are the first needs that people want to fulfill
– It includes food, cloth, shelter , sex etc. These are also known as
basic needs
– People want to fulfill these needs for the survival and maintenance
(continuation) of human life
– Therefore, these needs are first satisfied. It lies at the bottom of the
need pyramid which means there are large number of people who
wants to fulfill the basic needs

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2. Safety Needs:
– Once the physiological needs are fulfilled then people go for the second needs that is
safety or security needs
– It includes safety of person, business, job etc
– For the safety needs, the insurance benefits highly works
– Without satisfying the first need they can‟t imagine to have the second needs
3. Social or Affiliation Needs:
– After fulfilling the security needs, the man enters into the next need that is social
needs as man is a social human being
– In this part, he needs to have friendship, belongingness, affection, recognition etc
from the society
– Therefore, an organization must work towards fulfilling the social needs
– When they are not socially recognized, the two needs that they have fulfilled become
useless or meaningless

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4. Esteem or Ego Needs:
– After fulfilling the social needs, people move to the next level of satisfaction that is
ego needs in which people get self-satisfied, self-confidence, self-respect etc
– In other words, they want high respect from the public
– It makes them feel superior in the society due to recognition, appreciation, power and
prestige
5. Self-Actualization Needs:
– It is the final level of satisfaction. According to Maslow this self-actualization needs lie
at the top of the hierarchy
– This is the need „to be what one is capable of becoming‟, and includes needs for
optimum development
– This implies the desire to become what one can become
– In this level, people use their abilities and potentialities fully to realize the need

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Douglas McGregor: Theory X and Y
› McGregor developed the most influential approach
› He contributed to management thinking through his work on work attitudes
› He observed that some people have sympathy, kindness and love for
others
› Others have tendencies toward cruelty, hate and destruction
› McGregor introduced such a dual nature of people into management theory
› He proposed that two different sets of assumptions dominate the way
managers think about people
› He named these contrasting sets of assumption Theory X and Theory Y

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Theory X („Authoritarian Management‟ Style)
› The average person dislikes work and will avoid it he/she can
› Therefore most people must be forced with the threat of
punishment to work towards organizational objectives
› The average person prefers to be directed; to avoid
responsibility ; is relatively unambitious and wants security
above all else

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Theory Y („Participative Management‟ Style)
› Effort in work is an natural as work and play
› People will apply self-control and self-direction in the pursuit of
organizational objectives, without external control or the threat
of punishment
› Commitment to objectives is a function of rewards associated
with their achievement
› People usually accept and often seek responsibility
› The capacity to use a high degree of imagination, ingenuity
and creativity in solving organizational problems is widely, not
narrowly, distributed in the population

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Theory X: Theory Y:
Some traditional assumptions about people Some modern assumptions about people

• Most people dislike work, and they will avoid it when they • Work is a natural activity, like play or rest
can
• Most people must be coerced ad threatened with • People are capable of self-direction and self-control if
punishment before they will work. They require close they are committed to objectives
direction

• Most people prefer to be directed. They avoid • People will become committed to organization objectives
responsibility and have little ambition. They are interested if they are rewarded for doing so
only in security

• The average person can learn to both accept and seek

responsibility
• Many people in the general population have imagination,
ingenuity and creativity

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Frederick Herzberg: Two Factor Theory
› Frederick Herzberg developed two – factor theory for job motivation.
According to Herzberg, there are two factors namely motivating
factory and Hygiene factor in working environment of an organization
1. Hygiene Factor:
– Hygiene factor are the dissatisfiers that are external to the job
– Hygiene factors include company policy, working conditions ,supervision,
salary etc.
– These are called dissatisfiers as the presence of these factors do not motivate
the workers, but the absence of these factors cause dissatisfaction
– These factors are necessary for the workers to maintain a minimum level of
satisfaction of work place

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2. Motivating factors:
– These are the job external factors that cause the high level of
motivation & motivate employees to greater, productivity
– The presences of these factors motivate the employees to a greater
satisfaction & absence do not cause dissatisfaction
– It includes achievement, recognition, desire to take more responsibility
, personal growth etc.

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The Decision Theory
› Management consists largely of making decisions
› Launching new product, selecting new employees, adjusting the
organizational structure, setting the goals, deciding to select the
banker, purchase equipment, and the like need managerial decisions
› Every action at least implicitly represents a decision under
uncertainty: in a state of partial knowledge, something has to be
done, even if that something turns out to be nothing
› Managers in the past used to make decisions on the basis of
common sense or intuition, using a kind of educated guess
› The Decision theory of management led by Herbart Simon looks
management process as a decision making process

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› The focus of the decision theory is on managerial decisions
› Decision theory is a set of concepts, principles, tools and
techniques that aids the decision maker in dealing with
complex decision problems under uncertainty
› Today decision science is a well-developed field of study
› The technologies available, at present have enabled managers
to collect volumes of data to perform precise mathematical
calculations and analyze as substitution for intuition
› Managers are often faced with uncertainty and
nonprogrammed decision making situation

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› Simon‟s decision model is based on two concepts: 1)
Bounded rationality and 2) Satisficing
› The manager who seeks to take logical and rationale approach
to decision can follow the following six step:
1. Recognize and define the decision situation
2. Identify appropriate alternatives
3. Evaluate each alternative
4. Select the best alternative
5. Implement the alternative , and
6. Evaluate the results and follow up

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› The main contributions of decision theory can be presented as
follows:
1. Concept of Organization:
– Organization is a complex network of decisional process
– The best way to analyze an organization is to find out where and by
whom decisions are taken in the organization
2. Decision Making:
– The most important task of management is decision making
– Hence , management and decision making may be regarded
synonymous

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3. Bounded Rationality and Satisficing:
– Simon has advocated the theory of bounded rationality and satisficing
– The decision-maker‟s rationality is limited by many limitations; the
cognitive limitations of their minds, and the finite amount of time they
have to make a decision
– Hence, managers usually satisficer , one seeking a satisfactory
solution rather than the optimal one
– By satisficing the decision-maker selects the first solution alternative
that satisfies some minimal set of outcome expectations

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4. Alternative Available:
– The decision maker makes his choice without considering what is best
among alternatives available
– Simon does not believe that the alternatives known are in fact all the
alternatives
5. Communication:
– Simon has emphasized the role of communication in the organization
– He admitted that there might be blockage in the communication and in
such case problems may be solved through informal communication
– Hence, he attached less important to formal communication

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Management Science Theory
› Management Science Theory gives a quantitative basis for decision making
› It specially deals with the development of mathematical models to aid in decision
making and problem solving
› This theory holds that managing is a logical and rationale process, so it can be
expressed in terms of mathematical models
› It is also called „Operation Research‟, „Mathematical School‟ or „Quantitative
Approach‟
› Today, management science thinking is being widely used in solving planning,
production, operations, inventory and transportation related problems
› The developments taking place in computer and information technology have
extended the application of management science approach to many other areas of
business

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› The techniques commonly used for managerial decision-
making include linear programming, critical path method,
program evaluation review technique, games theory, queuing
theory and break-even analysis
› The focus of this approach is, thus, on planning, designing and
implementing strategies through mathematical models and
determining how best can forthcoming problems be predicted
and solved
› Therefore, this theory focuses on solving technical rather than
human behavior problem

66
› Today , there are three main branches of management science:
Quantitative management, which utilizes mathematical techniques, such as
linear programming, modeling, queuing theory, etc to help managers make
right decision
Operations management (or operations research), which provides
managers with a set of techniques that they can use to utilize an
organization‟s production system to increase efficiency
Management Information System, which helps managers design
information systems that provide information about events occurring within
and outside an organization

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Contributions
› It encourages disciplined thinking while defining the
problems and establishing relations among variables
› It has provided managers with plenty of decision-making
tools and techniques
› It emphasizes the replacement of intuition and hunch by
factual data and logical analysis in decision making
process
› The most important contribution of this theory has been in
areas of production and operations management

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Limitations
› The management science approach promotes an
emphasis on only the aspects of the organizations that can
be computed in numbers. It ignores the importance of
people, relationships and other non-quantifiable factors
› The over-emphasis on management science techniques
may retard development of other managerial skills
› This approach is not a substitute for management. The
techniques are useful but cannot solve all problems
› The quantitative models are not suitable for non-routine or
unpredictable management decisions
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The System Theory
› The classical, human relations, and management science theorists studied
management in parts and in a fragmented way
› The views of organization provided by these theorists were incomplete and did not
provide a comprehensive picture
› They ignored the relationship of the organization and its external environment
› In response to these shortcomings, management scholars during the 1950s
attempted to understand organization as a whole system
› These efforts were based on a general approach called systems theory
› The system theory studies management by putting all parts of an organization
together.
› Thus, system theory is the unified view of management and looks at an
organization in its totality

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› A System is defined a “ a group of interrelated parts acting
together to accomplish a goal”
› An organization today is described as a system. It is viewed as
a group of interrelated parts with unified purpose
› All systems are composed of three basic elements- input into
the system, process of the input, and generation of the output
of the system
› Organization systems import inputs (raw materials, equipment,
human resources, finance, technology, and information) from
external environment, converts these (through the
organizational and managerial processes), and exports
outputs (goods and services) to the external environment.

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Input Conversion Output

Feedback

Fig: The Systems View of an Organization

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› The functional approach to the management of a system
involves planning, organizing, directing and controlling
› Each function plays an essential role in the efficient and
effective operation of a system
› Within the system there are processes. The whole process is a
source of energy for the organization
› The important elements of a system are as follows:
Goal orientation: Every system is goal-oriented . It exists for some
purpose. It provides a means for achieving some results of producing
some desired end

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Sub-systems: A particular system has some sub-systems.
Each sub-system interacts with other sub-systems
Open and Closed Systems: A closed system is one , which
does not interact with its environment. It is a self-sufficient
entity
In an open system, there are interactions between the system and its
environment. Open systems respond to change. All business
organizations are open systems
Synergy: Synergy means that the whole is greater than the
sum of its parts. In organizational terms, synergy means that
as separate units within an organization cooperate an interact,
they become more productive than if each had acted in
isolation

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System Boundary: Each system has boundary that
separates it from its environment. In closed system, this
boundary is rigid; in an open system. The boundary is more
flexible
Flow of Information: Information is vital to support the
functioning of the system. The system is looked upon as a
process of converting information into actions and
opportunities
Feedback: Feedback is the key to systems control. As
operations of the system proceed, information is feed back to
the appropriate unit or person so that the work can be
accessed, if necessary, corrected

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Contributions of System Theory
I. Integrated and Holistic View:
– The system theory views parts of an organization as integrated
– No single part exists and operates in isolation from the others.
Thus, in solving problems, managers must view the organization
as holistic, which means that no part of the system can be
accurately analyzed and understood apart from the whole
system
– It considers management in its totality

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II. Integrated Thinking:
– The system theory represents a new thinking on organization and
management
– It stresses that managers should avoid analyzing problems in isolation
– They should develop the ability of integrated thinking
– It provides a strong conceptual framework for meaningful analysis and
understanding of organizations
III. Interrelated and Interdependent:
– This theory recognizes the interrelated and interdependent among
various sub-systems of on organization
– A change in one subsystem can affect other subsystem.
– With a systems perspective, managers can easily achieve coordination
between the objectives of various parts of the organization and the
objectives of the organization as a whole

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Limitations of System Theory
1. This theory does not offer specific tools and techniques
for the practicing manager
2. System theory is criticized as being too abstract and
vague. So , it cannot be applied to practical problems
3. It fails to specify the nature of interactions and
interdependence between an organization and its
external environment

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Contingency Theory
› It is a behavioral theory which claims that there is no single best way
to design organizational structures
› Contingency theory avoids the classical “one best way” arguments
and recognizes the need to understand situational differences and
respond appropriately to them
› It does not apply certain management principles to any situation
› The concepts, tools and techniques, which are highly effective in one
situation, are not all effective in another situation
› Contingency theory is a recognition of the extreme importance of
individual manager performance in any given situation

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› The contingency approach is highly dependent on the
experience and judgment of the manager in a given
organizational environment
› It is also called situational approach, regards the effectiveness
of organizations as dependent, or contingent, on the particular
situation
› The major contingency variables are:
Size of the organization
Task technology
Environmental uncertainty
Individual differences
The geographical spread of the organization
The type of work being done

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 Organization in stable
environment choose a
mechanistic structure
(centralized authority, strict rules
and control, top down approach
to planning)

Determine the design of an

Characteristics of
organization‟s structure and
the Environment conflict systems

Organization in changing
environments choose a organic
structure (decentralization, free
communication, cross-
departmental cooperation and
teamwork)

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› Contingency management recognizes that there is no one
best way to manage
› In the contingency perspective, managers are faced with the
task of determining which managerial approach is likely to be
most effective in a given situation
› For e.g. the approach used to manage a group of teenagers
working in a fast-food restaurant would be very different from
the approach used to manage a medical research team trying
to find a cure for a disease

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Contributions and Limitations
› Because of the contingency thinking, many management
concepts have been now modified
› Contingency theory, thus, represents an important turn in
management theory
› Contingency approaches are now widely adopted in
planning, organizing, leading and motivating functions of
management
› The limitation of the contingency theory is that it fails to
identify all the important contingencies
› This theory may not be applicable to all managerial issues

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Emerging Management Concepts
› Management is a fast growing discipline
› Herald Koontz (1971) called this situation “the management
theory jungle”
› Thousand of books and journals are published every year in
this field worldwide
› Therefore, students and the practitioners are often lost in he
maze of details of these ever expanding concepts and practices
of management
› The writings of scholars and practitioners of management have,
over the years, contributed to our understanding of
management and how they differ on account of their special
circumstances

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› Though the scholars have differed in their approaches, each
one of them has added a link in the chain
› During recent years, many scholars, and practitioners have
brought out exciting new ideas about the practice of
management
› The various emerging concepts of management are:
1. Workforce diversity
2. Outsourcing
3. Knowledge Management
4. Learning Organization

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Workforce Diversity
› Workforce diversity means that organizations are becoming
more heterogeneous in terms of gender, race, ethnicity and
other backgrounds
› The participation of women and minorities in the workforce has
been increasing
› Managers should realize that employees come to work with
their cultural values and lifestyle preferences
› The challenge for managers, therefore, is to become more
accommodating to diverse groups of people
› Conflicts are more apparent today. Consensus is more difficult
to achieve because of the diverse backgrounds of employees

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Levels of Diversity
Diversity is found in two levels consisting of surface level and deep level
1. Surface-level diversity:
– It is the initial stage of differences in individual behavior
– At this level employees perceive on another through stereotypes and
assumptions without sharing thoughts and feelings of each other
– They make differences to each others in easily perceived demographic
characteristics such as age, gender, race and ethnicity
– However, mutual interaction and sharing of thoughts employees helps
to understand each other which ensures to minimize surface level
diversity

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2. Deep-level diversity:
– It is found that when people get to know one another, they become
less concerned about demographic differences consisting of age,
gender, race and ethnicity
– When employees interact and share feelings, they are able to
understand each other‟s values, personality and work preferences
– Employees work together as team members to achieve common goals
– In this situation, diversity is not the reason of demographic
characteristics; it may be the reason of difference in values, norms and
personality

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Advantages of Workforce Diversity
› Source of cost advantage
› Source of resource acquisition
› Wider and enhanced markets
› Display creativity and innovation
› Problem solving
› System of flexibility
› Competitive advantage

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Disadvantages of Workforce Diversity
› Source of conflict
› Chance of miscommunication
› Create complexity
› Increase confusion
› Longer decision times
› Lower member morale
› Lower team cohesiveness

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Outsourcing
› Outsourcing is the act of one company contracting with another
company to provide services that might otherwise be performed
by in-house employees
› Often the tasks that are outsourced could be performed by the
company itself, but in many cases there are financial
advantages that come from outsourcing
› Many large companies now outsource jobs such as call center
services, e-mail services
› These jobs are handled by separate companies that specialize
in each service, and are often located overseas
› It is an important means of reducing cost and improving quality

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Advantages of Outsourcing
› Benefits of reengineering
› Access to world-class capabilities
› Increase focus on core activities
› Management of difficult functions
› Making capital fund available
› Reducing operating costs
› Reducing risk
› Access to resources

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Disadvantages of Outsourcing
› Maximize transaction costs
› Loss of control over quality and performance
› Reduced learning and innovation
› Increase dependence on suppliers
› Continuous follow-up and monitoring
› Risks of leakage of confidential information

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 Knowledge Management
› Knowledge is concerned with experience, values, contextual
information and expertise
› In a knowledge-based society, knowledge which is the ability
to create things, determines competitiveness
› Hence individuals and business enterprises in knowledge-
based societies must strive to maintain competitiveness by
acquiring knowledge
› Managers must continue to strive to find new methods of
working
› Perhaps the most important force for change in management
is the growing need for new ideas

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› Knowledge management is a process that helps organization
to identify, select, organize, disseminate and transfer important
information and expertise for organizational prosperity
› The systematic management of knowledge enables
management for effective and efficient problem solving,
dynamic learning , strategic planning and decision making
› According to Clemmons Rumizen, “ Knowledge management
is the systematic process by which knowledge needed for an
organization to succeed is created, captured, shared and
leveraged”

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Features of Knowledge Management
› Knowledge management is concerned to identifying and collecting
of knowledge
› A willingness on the part of one individual or group to communicate
the knowledge is essential
› There should be willingness on the part of the receiver of the
knowledge to listen and learn
› Knowledge sharing should be a natural act, not anything artificial
› The receiver should be able to apply of that learned knowledge to
create value
› The value of knowledge is only realized in the situation of reuse

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Benefits/Importance of Knowledge Management
› Awareness to employees
› Accessibility of information
› Availability of usable knowledge
› Timely available of information
› Improve decision making
› Reducing cost and risk
› Improve strategic planning
› Increase versatility of workforce

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Learning Organization
› Learning organization involves the institution where there is the
provision of continuous learning to adapt with the changing
environment of the business
› To bring new concept in the business, the innovation of new
idea, concept, model, design, structure and technology is
essential
› A business organization performing business at the highest
level today will not remain same in future if there is no provision
of learning
› In learning organization, employees continually acquire and
share new idea and knowledge and using those new concepts
in decision making

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› According to Stephen P. Robbins, “ Learning organization is
an organization that has developed the capacity to
continuously learn, adapt and change”
› The employees need to work together, learn from each other
and support each other at the best way they can in doing work
› In order to cope with changing environment and new
technology, business organizations have qualified employees
with learning capability
› Therefore, management need to hire more intelligent,
knowledgeable and creative employees who produce result for
the success of organization

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Benefits of Learning
› Human resource development
› Understand and predict human behavior at work
› Manage and work in diversity
› Technological adaptation
› Change management
› Increase employee performance

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