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Modern Management Theories

The systems approach views the organization holistically as an interconnected system comprising interdependent parts. It considers the organization's relationship with the external environment. Contingency theory argues there is no universally best way to manage and the most effective approach depends on situational factors. It emphasizes adapting internal structures and processes to match external conditions for organizational survival.

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Elizabeth Heartfelt
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330 views20 pages

Modern Management Theories

The systems approach views the organization holistically as an interconnected system comprising interdependent parts. It considers the organization's relationship with the external environment. Contingency theory argues there is no universally best way to manage and the most effective approach depends on situational factors. It emphasizes adapting internal structures and processes to match external conditions for organizational survival.

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Elizabeth Heartfelt
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MODERN MANAGEMENT

THEORIES
Systems Approach/Theory

Contingency Approach/Theory
Modern Theories
• The classical / neo-classical approaches as a
whole were criticized because they (1) ignored
the relationship between the organization and its
external environment, and (2) usually stressed
one aspect of the organization or its employees
at the expense of other considerations.
• In response, during the 1950s management
scholars attempted to understand organization
as a whole system. (Bateman & Snell, 2007).
Modern: Systems Approach/Theory
• Systems Approach – view of the
organization as a unified, directed system
of interrelated parts (Stoner, 1989).

• System – is a set of interrelated parts that


function as a whole to achieve a common
purpose (Daft, 2005).
The Systems Approach to management attempts
to view the organization as a unified, purposeful
system composed of interrelated parts. Rather
than dealing separately with the various segments
of the organization, the systems approach gives
managers a way of looking at an organization as a
whole and as a part of the larger, external
environment. In so doing, systems theory tells us
that the activity of any segment of an organization
in varying degrees affects the activity of every
other segment (Stoner, 1989).
Systems theory calls attention to the dynamic and
interrelated nature of organization and the
management task. Thus, systems theory provides
a framework within which we can plan actions and
anticipate both immediate and far reaching
consequences; at the same time, it allows us to
understand unanticipated consequences as they
may develop. With a system perspective, general
managers can more easily maintain a balance
between the needs of the various parts of the
enterprise and the needs and goals of the firm as a
whole (Stoner, 1989).
Some ideas in systems theory (Daft, 2005)

• Open system – a system that interacts with the


external environment.
• Closed system – it does not interact with the
external environment.
• Entropy – the tendency for a system to run down
and die.
• Synergy – the whole is greater than the sum of
its parts.
• Subsystems – parts of a system that depend on
one another for their functioning.
Systems theory: Contributions
• Provides a total/integrative/holistic
framework for organization theory &
management practice.
• Recognizes the importance of the
organization’s relationship with the
environment and encourages all managers
to identify and understand the environment
in which the system operates.
Systems theory: Contribution
Example: Avoid common pitfall like building strong
sales but ignoring product quality
-It helps managers to see the critical variables and
constraints and their interaction with each other.
It forces managers to be constantly aware that
one single element, phenomenon, or problem
should not be treated without regard for its
interacting consequences with other elements
(Koontz, 1990).
Systems theory: limitation
• Seen as intellectual appeal and short of
verifiable facts and practice. “Recognizing
that the social organization is a contrived
system cautions us against making an
exact analogy between it and physical and
biological systems” (Kreitner, 1989).
Systems theory: Limitation
• Following and observing systems
approach in a strict sense may tend to
make things appear more complicated
than they actually are.
• Does not provide specific guidance on the
functions of managers.
Systems theory: Insight
• Systems approach has its values and
limitations. Thus, “the systems approach is
an instructive way of thinking rather than a
collection of final answers to managing,
modern organizations” (Kreitner, 1989).
Modern: Contingency theory
• The theory developed during the 1970’s
• Derived from the study of leadership and
organization structures by Fred E. Fiedler

“Contingency Theory of Leadership


Effectiveness” – first and most popular
situational theory to be advanced.
Modern: Contingency theory (Stoner, 1989)

• Contingency theory (It all depends theory)


- the view that the management technique
that best contributes to the attainment of
organizational goals might vary in different
types of situations or circumstances.
Depending on the contingencies, a
manager may categorize the situation and
use the proper competitive strategy,
organization structure, or management
process for the circumstances.
Contingency theory (Bateman & Snell, 2007)

• It is pragmatic rather than dogmatic. Rather than


searching for universally valid principles, the
approach suggests it is more fruitful to ask what
works best in a particular situation.
• It refutes universal principles of management by
stating that a variety of factors, both external
and internal to the firm, may affect the
organization’s performance. Thus, there is no
one “best way” to manage because
circumstances vary.
Modern: Contingency theory

• It contends that different situations require


different practices and advocates the use
of the traditional, behavioral and systems
viewpoints separately or in combination to
deal with various problems. Managers’
task is to identify which technique will, in a
particular situation, under particular
circumstances, and at a particular time,
best contribute to the attainment of
management goals.
Contingencies (Bateman & Snell, 2007)

• Contingencies are situational


characteristics:
1. Circumstances in the organization’s
external environment.
2. The internal strengths & weaknesses of
the organization.
3. The values, goals, skills, & attitudes of
managers & workers in the organization.
Contingencies:
4. The types of tasks, resources, and
technologies the organization uses.

With an eye to these contingencies:


- manager may categorize the situation
- choose the competitive strategy,
organization structure, or management
process for the circumstances.
CONTINGENCY APPROACH

 Main theme is that organizations must


adapt their INTERNAL structures and
processes to match the conditions in the
outside world if they are to survive.
(Boddy, 2002)
Contingency theory: Contribution
• Argued against universal principles of
management. Recognized the existence of
variables or contingencies that help
managers identify and understand
situations, and managers can then fit
solutions to the particular situations.
Example: Management practice in a
rapidly changing industry will be very
different from that in a stable one.
Contingency theory: Limitation
• Theory may not be applicable to all
managerial issues.
• Some managers may not resolve to formal
education in management because they
rely heavily on contingencies.
• Not all important contingencies have been
identified.

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