What are management theories?

Management theories are a collection of ideas that recommend general rules for how to
manage an organization or business. Management theories address how supervisors
implement strategies to accomplish organizational goals and how they motivate
employees to perform at their highest ability. Typically, leaders apply concepts from
different management theories that best suit their employees and company culture.
Although many management theories were created centuries ago, they still provide
many beneficial frameworks for leading teams in the workplace and running businesses
today.

Related: Management Skills: Definition and Examples

Benefits of management theories

There are several reasons why leaders should study and apply management theories,
including:

 Increased productivity: Using these theories, leaders learn how to make the

most of their team members, improving performances and increasing productivity.
 Simplified decision-making: Management theories give leaders strategies that
speed up the decision-making process, helping those leaders be more effective in
their roles.
 Increased collaboration: Leaders learn how to encourage team member
participation and increase collaboration in the workplace.
 Increased objectivity: Management theories encourage leaders to make
scientifically proven changes rather than relying on their judgment.

Related: Management Styles: Overview and Examples

Types of management theories

Here are seven important management theories to be aware of:

1. Scientific management theory

Developed by Frederick Taylor, he was one of the first to study work performance
scientifically. Taylor’s principles recommended that the scientific method should be used
to perform tasks in the workplace, as opposed to the leader relying on their judgment or
the personal discretion of team members. His philosophy emphasized that forcing
people to work hard would result in the most productive workplace. Instead, he
recommended simplifying tasks to increase productivity. He suggested that leaders
assign team members to jobs that best match their abilities, train them thoroughly and
supervise them to ensure they are efficient in the role. 
While his focus on achieving maximum workplace efficiency by finding the optimal way
to complete a task was useful, it ignored the humanity of the individual. This theory is
not practiced much today in its purest form, but it demonstrated to leaders the
importance of workplace efficiency, the value of making sure team members received
ample training and the need for teamwork and cooperation between supervisors and
employees.

2. Principles of administrative management theory

Henri Fayol, a senior executive and mining engineer, developed this theory when he
examined an organization through the perspective of the managers and situations they
might encounter. He believed that leaders had six main functions, to forecast, plan,
coordinate, command and control, and he developed principles that outlined how
leaders should organize and interact with their teams. He suggested that the principles
should not be rigid but that it should be left up to the manager to determine how they
use them to manage efficiently and effectively. The principles he outlined are:

 Initiative: This refers to the level of freedom employees should have to carry out
their responsibilities without being forced or ordered. 

 Equity: This principle implies everyone in the organization should be treated

equally and that it should be an environment of kindness.

 Scalar chain: This principle says there should be a chain of supervisors from the
top level of management to the lower level and that communication generally
flows from top to bottom. He emphasized that there is no hard rule regarding the
communication process through the chain of command.

 Remuneration of personnel: This principle refers to the assertion that there

should be both monetary and non-monetary remuneration based on performance
levels to create a bond between the employee and the organization.

 Unity of direction: This principle asserts that there should be only one manager
per department who is in charge of coordinating the group activity to attain a
single goal.

 Discipline: According to this principle, employees should be respectful and

obedient, and an organization should outline rules and regulations that clarify
rules, good supervision and a reward-punishment system.
  Division of work: This principle asserts that the overall action of management
should be divided and that team members should be given responsibilities based
on their skills and interests to make them more effective and efficient.

 Authority and responsibility: According to this principle, there should be a

balance between authority—the right to give commands and make decisions—
and responsibility—the obligation of an employee to perform the tasks they’re
designated. 

 Unity of command: This refers to the assertion that employees must get orders
from only one immediate supervisor and be accountable to that person only.

 Subordination of individual interest to general interests: There must be

harmony between the interests of the individual and the organization, although the
organizational interest should be given priority since it will bring rewards for the
individual.

 Centralization: According to this principle, the topmost level of authority should

be centralized to the top level of management, who has the power to make the
most important decisions in an organization.

 Order: This principle asserts that for an organization to run smoothly, the right
person must be in the right job and that, therefore, every material and employee
should be given a proper place.

 Stability of tenure: According to this principle, employees must have job security

to be efficient.

 Espirit de corps: This refers to the belief that there must be a unified team
contribution and that cooperation is always greater than the aggregate of
individual performances.

3. Bureaucratic management theory

Developed by Max Weber, bureaucratic management theory focuses on structuring

organizations in a hierarchy so there are clear rules of governance. His principles for
creating this system include a chain of command, clear division of labor, separation of
personal and organizational assets of the owner, strict and consistent rules and
regulations, meticulous recordkeeping and documentation and the selection and
promotion of employees based on their performance and qualifications. 

This theory has played a key role in establishing standards and procedures that are at
the core of most organizations today.

4. Human relations theory

This theory was developed by Elton Mayo, who conducted experiments designed to
improve productivity that laid the foundation for the human relations movement. His
focus was on changing working conditions like lighting, break times and the length of
the workday. Every change he tested was met with an improvement in performance.
Ultimately, he concluded that the improvements weren’t due to the changes but the
result of the researchers paying attention to the employees and making them feel
valued. 

These experiments gave rise to the theory that employees are more motivated by
personal attention and being part of a group than they are by money or even working
conditions. 

5. Systems management theory

This theory asserts that businesses consist of multiple components that must work in
harmony for the larger system to function optimally. The organization’s success,
therefore, depends on synergy, interdependence and interrelations between
subsystems. According to this theory, employees are the most important components of
a company, and departments, workgroups and business units are all additional crucial
elements for success. 

According to this theory, managers should evaluate patterns and events within the
organization to determine the best management approach. They need to collaborate
and work together on programs to ensure success.

6. Contingency management theory

Developed by Fred Fiedler, this theory’s primary focus is that no one management
approach works for every organization. Fiedler suggested that a leader’s traits were
directly related to how effectively they lead their team. He asserts that there are
leadership traits that apply to every kind of situation and that a leader must be flexible to
adapt to a changing environment.

7. Theory X and Y

American social psychologist, Douglas McGregor, introduced X and Y theories in his

book, “The Human Side of Enterprise,” where he concluded that two different styles of
management are guided by their perceptions of team member motivations. Managers
who assume employees are apathetic or dislike their work use theory X, which is
authoritarian. Theory Y is used by managers who believe employees are responsible,
committed and self-motivated. This is a participative management style that gives rise to
a more collaborative work environment, whereas theory X leads to micromanaging.

He concluded that large organizations may rely on theory X to keep everyone focused
on meeting organizational goals. Smaller businesses, where employees are part of the
decision-making process and where creativity is encouraged, tend to