Management Theories

and Practice
MBA 611
Gebre Sorsa (PhD)

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 Contents of the course
● MANAGEMENT: AN OVERVIEW
● THE DEVELOPMENT OF MGT THOUGHT
● MANAGERIAL DECISION MAKING
● THE PLANNING FUNCTION OF MANAGEMENT
● THE ORGANIZING FUNCTION OF MANAGEMENT
● THE STAFFING FUNCTION OF MANAGEMENT
● THE DIRECTING FUNCTION OF MANAGEMENT
● THE CONTROLLING FUNCTION OF MANAGEMENT

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 Course Objective
This course enables students to:
● Define the term management, basic concepts and
principles of management.
● Explain the general overview of management in
relation to its importance, roles, skills and
universality
● Understanding the historical development of
management thought.
● Acquire sound understanding of the nature and
practice of management.
● Develop a comprehensive understanding of basic
concepts of management functions.
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CHAPTER
TWO
EMERGING OF MANAGEMENT THOUGHT

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Objectives

After a thorough study of this unit, you will be able to:

● Assess the significance of studying management thought
● Define management thought, theories and principles
● Understand the contribution of early antiquity to management thought
● Understand the management school of thoughts.

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What is management theory?
Theories are perspectives with which people makes sense of their world
experience.
● A set of principles that explains or accounts for relationship between
two/more observable facts or events.
o But there is no universally accepted management theory.
o The school of management thought are the theoretical framework for
the study of management.
o Management theories in early period were not really theories, but
some discrete practices and experiences.

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Cont.…
● Management theories in the present centuries are not totally free from
certain problems.
● For this purpose, a sound theoretical and conceptual framework is
essential for the theory to take the shape.
● The chaos caused by proliferation of management theories is aptly called
the management theory jungle’ and a strong need for a unified and
integrated theory of management was felt a number of theoretical
approaches with varying hypothesis, assumptions, propositions have
emerged.
● Management is an applied science; it lacks a coherent theoretical
concepts of its own.

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Evolvement of theories in management
● One of the keys to successful management is the ability to understand
and apply modern management principles and techniques effectively.
● Managers must develop an in-depth knowledge of part and present
models, theories and processes in order to manage effectively and
intelligently.
● History of management extends to several thousand years in the past. But
get prominence in the late of 19th century as a formal discipline.
● The practice of management is as old as human race but its theories and
conceptual framework are of recent origin.

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 Evolution and school of management thought
Neo-classical/
Pre-scientific Classical
behavioral Modern theory
management theory
theory
• System
•Ancient civilizations • Scientific • Hawthorne • Contingency
•Military management experiment • Theory Z
organizations • Administrative • Theory X & Y and TQM
• Quantitative
•Writers i.e. C. • Bureaucratic
• Maslow’s approach
Babbage, J. Watt model
hierarchy
•Industrial revolution

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2.1 THE ERA OF CLASSICAL MANAGEMENT
I. The Scientific Theory of Management: Frederick W. Taylor
● The systematic study of relationships between people and tasks for the
purpose of redesigning the work process to increase efficiency.
● The process of approaching various aspects of organizations in a scientific
manner using scientific tools such as research, management, and analysis.
● It is the art of knowing what exactly you want from your men to do & then
seeing that it is done in best possible manner.
● In simple words it is just an application of science to management.
● Basic Assumption: People Are Rational
● People will rationally consider the opportunities available to them and do
whatever is necessary to maximize their economic gain.

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Taylor’s Contribution To Management
● Frederick Winslow Taylor (20 March 1856-21 March 1915), widely known as F. W.
Taylor, was an American mechanical engineer who sought to improve industrial
efficiency.
● He is regarded as the father of scientific management, and was one of the first
management consultants.
● Develop a science for every job, including
o Rules of motion, standardized work implements, and proper
working conditions.
o Carefully select workers with the right abilities for the job.
o Carefully train these workers and provide proper incentives.
o Provide these workers with the necessary support.
o Analyzing the work – One best way to do it.
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Principles Of Scientific Management
● Science, not the rule of thumb: scientific investigation should be used for
taking managerial decisions instead of basing on opinion, institution or
thumb rule.
● Harmony, not discard/ cooperation between employers and employees:
o Harmonious relationship between employees and employers.
o Cooperation of employees that managers can ensure that work is
carried in accordance with standards.

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Cont.…
● Scientific selection of training and development: selection means to
choose the best employee according to the need. Their skill and
experience must match the requirement of the job.
● Scientific development refers to criteria for promotions, transfers etc.. So
that work is done with full efficiency.
● Division of work/responsibility: The responsibility of workers and
management should be properly divided & communicated so that they
can perform them in an effective way and should be rewarded for the
same.

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Cont.…
● Mental revolution: Acc. To Taylor, the workers and managers should have a
complete new outlook; a mental revolution in respect to their mutual
relations.
● Workers should be considered as a part of Organization.
● Employers shouldn’t treat workers as mere wage earners.

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Principles Of Management
● Or Taylor’s four principles of ● Taylor created planning
management are; departments, staffed them with
1. The development of a true engineers, and gave them the
science. responsibility to:
2. The scientific selection of the 1. Develop scientific methods for

workman. doing work.

2. Establish goals for productivity.
3. The scientific education and
3. Establish systems of rewards for
development of the workman.
meeting the goals.
4. Intimate and friendly
4. Train the personnel in how to use
cooperation between the
the methods and thereby meet the
management and the men.
goals.
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Four Principles Of Scientific Management
To Increase Efficiency
1. Study the way workers perform their tasks, gather all the informal job
knowledge that workers posses, and experiment with ways of improving
how tasks are performed.
2. Codify the new methods of performing tasks into written rules and
standard operating procedures.
3. Carefully select workers who possess skills and abilities that match the
needs of the task, and train them to perform the task according to the
established rules and procedures.
4. Establish a fair or acceptable level of performance for a task, and then
develop a pay system that provides a reward for performance above the
acceptable level.
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Criticisms
● Employer centered
● Alienation of workers to society
● Reduced opportunity to workers
● Denied “human community” in workplace/ dehumanizes the worker
● Neglected the environment (a closed system view)

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Problems With Scientific Management
● Managers frequently implemented only the increased output side of
Taylor’s plan.
● Workers did not share in the increased output.
● Specialized jobs became very boring, dull.
● Workers ended up distrusting the Scientific Management method.
● Workers could purposely “under-perform.”
● Management responded with increased use of machines and
conveyors belts.

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How Do Today’s Managers Use
Scientific Management
1. It was important because it could raise countries’ standard of living by
making workers more productive and efficient.
2. Also it’s important to remember that many of the tools and techniques
developed by the scientific management practitioners are still used in
organizations today.

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II. Henri Fayol: Principles of Administration
● Henri Fayol is claimed to be the real father of
modern management. He was a Frenchman born in 1841 and was
working as an engineer with a mining company.
● From his practical experience, he developed some techniques.
● He brought out some 14 basic management principles, which he
felt, could be used in all management situations, irrespective of
the organizational framework.
● According to Henri Fayol specialization promotes efficiency of the
workforce and increases productivity.
● In addition, the specialization of the workforce increases their
accuracy and speed.

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Henri Fayol’s 14 Principles Of Management
1. Division Of Work 2. Authority
o Specialization allows the o The right to issue commands,
individual to build up along with which must go the
experience, and to balanced responsibility for its
continuously improve his function.
skills. Thereby he can be 4. Unity Of Command
more productive. o Every employee should
3. Discipline receive orders from only one
o Obedience to authority, superior. There should be a
adherence to the rules of clear-cut chain of command
service and norms

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Henri Fayol’s 14 Principles Of Management
5. Unity of Direction 6. Subordination of individual
o People engaged in the same interest
kind of activities must have the o Management must see that
same objectives in a single the goals of the firms are
plan. This is essential to ensure always paramount.
unity and coordination in the Organizational interests are
enterprise. Unity of command more important than those of
does not exist without unity of
the individuals.
direction but does not
necessarily flows from it.

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Henri Fayol’s 14 Principles Of Management
7. Remuneration 8. Centralization (Or
o The remuneration paid to the Decentralization)
employees of the firm should o This is a matter of degree
be fair. depending on the condition
o It should be based on of the business and the
general business conditions, quality of its personnel.
cost of living, productivity
and efficiency of the
concerned employees and
the capacity of the firm to
pay.

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Henri Fayol’s 14 Principles Of Management
9. Scalar chain (Line of Authority)
o Scalar chain refers to the number of levels in the hierarchy from the
ultimate authority to the lowest level in the organization.
o The orders or communications should pass through proper channels
of authority along the scalar chain.
o It should not be over-stretched and consist of too-many levels.
o A hierarchy is necessary for unity of direction. But lateral
communication is also fundamental, as long as superiors know that
such communication is taking place.

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Henri Fayol’s 14 Principles Of Management
10. Order 11. Equity
o The management should o In running a business a
observe the principle of 'right ‘combination of kindliness and
place for everything and for justice’ is needed. It requires
every man.’ managers to be free from all
o Both material order and social prejudices, personal likes or
order are necessary. The dislikes.
former minimizes lost time and
useless handling of materials.
The latter is achieved through
organization and selection.

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Henri Fayol’s 14 Principles Of Management
12. Stability of Tenure of Personnel 13. Initiative
o Employees work better if job o Allowing all personnel to show
security and career progress their initiative in some way is a
are assured to them. An source of strength for the
insecure tenure and a high organization. Initiative is to
rate of employee turnover will think and implement a plan.
affect the organization
adversely.

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Henri Fayol’s 14 Principles Of Management
14. Esprit de Corps
o Management must foster the morale of its employees. This means team
strength. He further suggests that: “real talent is needed to coordinate effort,
encourage keenness, use each person’s abilities, and reward each one’s merit
without arousing possible jealousies and disturbing harmonious relations.”

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Cont...
● Henri Fayol's management theory is a simple model of how
management interacts with personnel.
● Fayol's management theory covers concepts in a broad way, so almost
any business can apply his theory of management.
● Today the business community considers Fayol's classical management
theory as a relevant guide to productively managing staff.

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Cont...
● The management theory of Henri Fayol includes 14 principles of
management. From these principles, Fayol concluded that
management should interact with personnel in five basic ways in order
to control and plan production/ Fayol's definition of management roles
and actions distinguishes between Five Elements:
1. Planning. According to Fayol's theory, management must plan and schedule
every part of industrial processes.

2. Organizing. Henri Fayol argued that in addition to planning a manufacturing

process, management must also make certain all of the necessary resources
(raw materials, personnel, etc.) came together at the appropriate time of
production.

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Cont...
3. Commanding. Henri Fayol's management theory states that
management must encourage and direct personnel activity.

4. Coordinating. According to the management theory of Henri Fayol,

management must make certain that personnel works together in a
cooperative fashion.

5. Controlling. The final management activity, according to Henri Fayol, is

for the manager to evaluate and ensure that personnel follow
management's commands.

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iii. Max Weber: The Bureaucratic Theory: 1864-1920
● An organization is viewed as a type of social relationship that:
o has regulations enforced,
o Has a few people at the top, making decisions and a chain of middle
managers and lower-level people below them carrying out specific
functions.
● Max Weber analyzed bureaucracy as the most logical and rational structure
for large organizations.
● Orders come from top down in a manner mimicking the military creating
consistency and precision.
● Rules rather than people form the basis of an organization.

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iii. Max Weber: The Bureaucratic Theory: 1864-1920
● Efficiency in bureaucracies comes from:
1. clearly defined and specialized functions;
2. use of legal authority;
3. hierarchical form;
4. written rules and procedures
5. technically trained bureaucrats
6. appointment to positions based on technical expertise
7. promotions based on competence
8. clearly defined career paths.

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Bureaucratic Principles

Written rules

System of task A Bureaucracy Hierarchy of

relationships should have authority

Fair evaluation
and reward
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Principles Of The Theory Of Bureaucracy:
Developed By Max Weber (1864-1920), A German Professor Of Sociology.
Principle 1:
● In a bureaucracy, a manager’s formal authority derives from the
position he or she holds in the organization.
● Authority - the power to hold people accountable for their actions and
to make decisions in reference to the use of organizational resources.
● In today’s business models, this type of theory is not very common.
Nowadays, we see more of an informal authority approach in which
there is personal expertise, technical knowledge, moral worth, and the
ability to lead and to generate commitment from subordinates, without
the use of this absolute power from one individual.

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Principles Of The Theory Of Bureaucracy:
Principle 2:
● In a bureaucracy, people should occupy positions because of their
performance, not because of their social standing.
● Some organizations and industries are still affected by social networks in
which personal contacts and relations, not job-related skills, influence hiring
and promotional decisions.
● The old ways, of not what you know, but who you know, are still around in
today’s society, but it can only get you so far.
● In today’s business world, what you know and educational knowledge, play a
very important part in moving up the corporate latter and being able to
maintain a managerial position requires the utilization of staying current on
up to date techniques and information.

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Principles Of The Theory Of Bureaucracy:
Principle 3:
● The extent of each position’s formal authority and task responsibilities, and
its relationship to other positions in the organization should be clearly
specified.
● When the task and authority associated with various positions in the
organization are clearly specified, managers and workers know what is
expected of them and what to expect from each other.
● Most organizations should and are clearly defining task and position
responsibilities. Job descriptions should include all facets of an employee
held position. Clarification of one’s job expectations is essential for all five
business functions in order to manage and maintain a high level, and
measurable level of success for all organizations.

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Principles Of The Theory Of Bureaucracy:
Principle 4:
● Authority can be exercised effectively in an organization when positions are
arranged hierarchically, so employees know whom to report to and who
reports to them.
● Managers must create an organizational hierarchy of authority that makes it
clear who reports to whom and to whom managers and workers should go if
conflicts or problems arise.
● Today’s business models utilize the initiative factor in which employees are
given the ability to act on their own, without direction from a superior. This
empowerment of employees relieves the stress of constant supervision and
allows supervisors and managers to concentrate more on other
administrative duties. The balance between a vertical and horizontal
organizational structure is more widely used in today’s business models.

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Principles Of The Theory Of Bureaucracy:
Principle 5:
● Managers must create a well defined system of rules, standard operating
procedures, and norms so that they can effectively control behavior within
an organization.
● Standard Operating Procedures (SOPs) are specific sets of written
instructions about how to perform a certain aspect of a task.
● Most companies have SOPs and require employees to learn and follow
them. We have seen how in addition to following rules and regulations, many
organizations have allowed for creativity and innovation to supersede the
common way of conducting business where it was once said, “rules are rules
and they could never be broken”.
● Guidelines are needed and common sense is always important, but have an
open line of communication to new ideas and thoughts is essential in
today’s business society.
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Characteristics Of The Bureaucratic Model
Fixed division of labor and specialization
● All responsibilities in an organization are specialized, with each area
having a specific set of official duties and rights.
● Employees in the area have the expertise to carry out the task
● In hospital, specific parts of patient care (the job) are assigned to
different individuals or groups
● Eg nurses, dieticians, laboratory workers, and doctors all provide a part
of care which the patient needs

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Characteristics Of The Bureaucratic Model
Hierarchy of offices
● Employees are organized and ranked according to their degree of
authority within the organization.
● Top positions administer and control the lower positions.
● However, lower offices should maintain a right to appeal decisions made
higher in the hierarchy.
● Each hierarchy has its own sphere of competence, allowing for a clear
chain of command, control and order organization.
o E.g. the hospital director/superintendent and the chief
matron/nurse manager are the top most hospital hierarchies, while
patient attendants and cleaners are at the bottom.

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Characteristics Of The Bureaucratic Model
Rational-legal authority
● Authority is given to officials based on their skills and formal positions
given to them and not on individual aspects of authority like wealth,
position, ownership, heritage etc. Management is separated from the
ownership of the organization-career official work for a salary and do
not own what they administer.

Separation of personal from official property and rights

● Officials do not own the resources necessary for the performance of
their assigned functions but are accountable for their use. Official and
private business and income are strictly separated. Offices or resources
cannot be inherited, sold, etc.
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Characteristics Of The Bureaucratic Model
Creation of rules to govern performance
● Rules and procedures guide all daily organizational activities. They
should be easily understood and leaders should not change them
anyhow. Administrative acts and decisions are recorded in writing.
o E.g. procedure and policy manuals prescribe types of behavior for
performing a procedure to policies to be followed. These will also
act as guidelines when taking disciplinary actions against an
employee.

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Characteristics Of The Bureaucratic Model
Selection based on qualifications
● Officials are recruited based on professional qualifications, not on their
relation with the leader or social rank , and are appointed, not elected,
to the office. People are compensated with fixed salaries which should
match with their qualifications and not with benefits such as rights to
land, power.
Clear career paths
● Employment in the organizations should be seen as a career for
officials. Their work is rewarded by prospects of career advancement
and promotion is granted according to seniority and/or achievement.
After an introduction period, the employee is given tenure, which
protects the employee from unwarranted dismissal.
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Characteristics Of The Bureaucratic Model
● Bureaucracy
o Hierarchy
o Division of Labor
o Consistency
o Qualification
o Professional–Private Separation
o Devotion to Purpose
o Advancement / Seniority

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Characteristics Of The Bureaucratic Model
Hierarchy Highest
Office
● Authority and its flow
● subordination
● “Such a system High Office High Office
offers the governed
the possibility of
appealing the
Low Office Low Office Low Office
decision of a lower
office to its higher
authority” Lowest Lowest Lowest Lowest
Office Office Office Office

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Characteristics Of The Bureaucratic Model
Division of Labor Executive
● Specialization
● Separation of
roles and Policy &
Operations
duties Planning

● “’higher’
Policy Regional
authority [is Strategic
Developme Manageme
not] Planning
nt nt
authorized to
take over the Special Legislative Office Maintenanc
Projects Relations Staffing e
business of
the ‘lower’”
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Characteristics Of The Bureaucratic Model
Consistency Not
● Rules regulate Special
all matters
“abstractly.” Not Not
Special Special
● i.e. no one is
special
Not Not Not
● Management Special Special Special
● Duties
● The
“Governed” Not Not Not Not
Special Special Special Special

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Characteristics Of The Bureaucratic Model
Qualification
PhD
● Training and
qualification is
the number Master’s Master’s
one requisite.
● How to Bachelor’ Bachelor’ Bachelor’
manage s s s
● How to carry
out duties
Associate Associate Associate Associate
● Knowledge of
’s ’s ’s ’s
the rules

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Characteristics Of The Bureaucratic Model
Separation of Professional & Private Orders filtering of
web surfing
The bureau is
separate from
Always makes personal calls on Loves work as a break
the “private personal cell phone from the family
domicile of
the official” I certainly did not use my Loves being Wouldn’t even
office’s copier to print able to leave think of stealing
resources
these notes for you work at home pens
time
Treats company Wouldn’t even
Never uses Glad s/he doesn’t think
car much better
photocopier for have to live in this of stealing
than personal
own tax forms cubicle rubber
POS cleaning gloves

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Characteristics Of The Bureaucratic Model
Devotion to Purpose/Duty
Devoted to Bureau
● Devotion is to Management

your work and

role, not to Devoted to Division Devoted to Division
Management Management
person above
you.
Devoted to Devoted to Devoted to
● “[official] is not Planning Policy Region
considered
the personal
Devoted to Devoted to Devoted to Devoted to
servant of a Project Schmoozing Office Toilets
ruler”

51
Characteristics Of The Bureaucratic Model
Advancement and Seniority Promoted here 6 months ago
(and don’t know what the Hell
● The unspoken I’m doing)
agreement...
1. you hang Promoted here 7
years ago
around
2. you climb the
Promoted here
ladder 17 years ago
3. you get taken
care of
Started here
● Salary and 25 years ago
Pension

52
Advantages of bureaucratic approach:
● Protects employees from unfair rulings from leaders which gives a
greater sense of security to the employees.
● Creates an opportunity for employees to become specialists within one
specific area, increasing the effectiveness and efficiency in each area of
the organization.
● Creativity and stability are promoted within their respective duties and
sub-tasks

53
Disadvantages of bureaucratic approach:
● It is difficult to determine who is responsible for having made the
decision, creating a feeling of powerlessness amongst employees.
There is diffusion of responsibility and subsequent refusal to make a
decision. Eg To get something done you need 6 different approvals on 6
different forms and each refusing to give approval until the other 5 have
given theirs
● Organizational structure is too inflexible to effect necessary changes
efficiently. It is too difficult to determine specific individual contribution
to successful patient care outcome. The top bottom hierarchy does not
utilize specialized lower level to make decisions in their field of
specialty

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Disadvantages of bureaucratic approach:
● Overspecialization, makes individuals not aware of larger consequences
of their actions. Not allowing people to use common sense, as
everything must be as is written by the law. There is rigidity making
decision-making slow or even impossible when facing some unusual
case, and similarly delaying change and evolution

55
 QUESTION TIME
1. is regarded as the father of scientific
management, and was one of the first
management consultants.

a. Henry Fayol
b. F.W. Taylor
CREDITS: This presentation template was created by
c. A.including
Slidesgo, Maslow icons by Flaticon, infographics &
images by Freepik
d. Max Weber

56
2.2 Elten Mayo: The Human Relations Approach
● Although many in industry were quick to embrace the classic
theoretical approach, its implementation commonly left employees
unfulfilled.
● The Hawthorne Studies only served to raise further questions
concerning the employee’s role in the organization.
● These events then set the stage for the emergence of another
organizational communication approach: the Human Relations (HR)
approach.

57
2.2 Elten Mayo: The Human Relations Approach
Classical Approach Doesn’t:
o Account for individual needs of employees
o Non-financial reward
o Social interaction
● The Behaviorists Took Management Another Step Forward
o They focused on employees
o As individuals
o As parts of work groups
o As persons with needs to be met by the organization

58
Making A Case For Human Needs:
The Hawthorne Studies
● The Hawthorne Studies entail a research program conducted by Elton
Mayo and his colleagues at the Western Electric Plant in Cicero, Illinois
from 1927 to 1932.
● The plant’s manager asked Mayo and his team of researchers to help
increase employee morale and overall productivity at the Hawthorne
Plant.
● Their findings asserted that employee morale and productivity
improved when workers were allowed to interact and an overseer was
present.
● Influenced transitions from classical approach to human relations
approach

59
Making A Case For Human Needs:
The Hawthorne Studies
● Hawthorne Studies
● Mayo interested in how changes in work environment would impact
productivity
● Hawthorne Effect
● The more attention given to someone, the more likely their behavior will
change
● Social factors influence productivity

60
Making A Case For Human Needs:
The Hawthorne Studies
● The role that Mayo had in the development of management is usually
associated with his discovery of;
● Social man and the need for this in the work place
● Mayo found that workers acted according to sentiments and emotion
● He felt that if you treated the worker with respect and tried to meet
their needs than they would be a better worker for you and both
management and the employee would benefit.
● The Hawthorne Studies (or Hawthorne Experiments) were conducted
from 1927 to 1932 at the Western Electric Hawthorne Works in Cicero,
Illinois (a suburb of Chicago)

61
Making A Case For Human Needs:
The Hawthorne Studies
● The experiments
● There were four main phases to the Hawthorne experiments:
o The illumination experiments
o The relay assembly test room
o The interviewing program
o The bank wiring observation room

62
1.The illumination experiments:
Variations In Light Levels
The workers were divided into two
groups

A. experiment group B. control group

Performance Recording Device

63
2.The relay assembly test room:
Determine the effect of changes in various job conditions on group
productivity
● The experiment was divided into 13 periods during which the workers
were subjected
● to a series of planned and controlled changes to their:
A. Conditions of work
B. Hours of work
C. Rest pauses
D. Provision of refreshments

Women in the Relay Assembly

64
3.The interviewing program:
insights about the human behaviour in the company.
20,000 interviews
A. An impartial and non-
judgmental approach
B. Concentrated on listening

It was discovered that workers’

behavior was being influenced by
group behavior.
Interview
s
period

30 90 Factory Cabling Department

min min 65
4.The bank wiring observation room:
Determination and analysis of social organization at work
To find out the impact of small groups on the individuals. 
14 men
● The group developed it’s own pattern of informal social relations and
norms of what constituted proper behaviour

● Group pressures on individual workers were stonger than financial

incentives offered by management

66
Mayo’s conclusion:
● That satisfaction must depend to a large extent on informal social
relationships
● In the group
● Between workers and their managers
● Satisfaction at work influences production
● Group pressures on individual workers were stronger than financial
incentives offered by management
● The group thought that if they increased production, the management
would raise the standard level of piece rate

67
Mayo’s conclusion:
● One of the most important social science investigations into
‘humanising’ work
● Emphasised the importance of:
● The ‘informal’ organisation
● Wider social needs
● Group values and norms, in influencing behaviour at work

68
 QUESTION TIME
Which one is not true about Human Relation
theory?

a. Satisfaction depend on informal social relationships

b. Satisfaction at work influences production
c. Emphasises the importance of ‘informal’ organisation
d. CREDITS:
Emphasizing on social
This presentation factors
template harmsby
was created productivity
Slidesgo, including icons by Flaticon, infographics &
e. All of the above images by Freepik

69
2.3 THE MODERN ERA
A. Systems Approach
● The systems approach stresses that managers should view an
organization as a set of interdependent parts, such as people, structure,
tasks, and technology, that try to attain diverse objectives in a changing
environment.
● A system is defined as a unified whole or set of interrelated and
interacting elements/components.
● The application of systems theory to management has made it easier
for managers to see the organization as an entity of interrelated parts.

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2.3 THE MODERN ERA
A. Systems Approach
● It also has helped to integrate the contributions of the schools that
dominated early management thought.
● A system is an entity composed of interdependent parts each of which
contributes to the characteristics of the whole
● A system consists of several components or subsystems which depend
on each other.
● A system processes input into outputs. Therefore, each system consists
of boundaries, components, interactions between components, inputs
and outputs.

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2.3 THE MODERN ERA
A. Systems Approach
● It views organization as a system composed of interconnected - and
mutually dependent - sub-systems.
● Components: There are five basic, interdependent parts of the
organizing system, namely:
● The individual
● The formal and informal organization
● Patterns of behavior emerging from role demands of the organization,
● Role comprehension of the individual, and
● The physical environment in which individuals work.
● Linking processes: components of an organization are required to
operate in an organized and correlated manner.
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2.3 THE MODERN ERA
A. Systems Approach
● linking processes consist of communication, balance and decision
making.
● Communication: is a means for eliciting action, exerting control and
effecting coordination to link decision centre in the system in a
composite form.
● Balance: is the equilibrium between different parts of the system to
keep a harmoniously structured relationship with one another.
● Decision analysis: is considered to be a linking process in the systems
approach.

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2.3 THE MODERN ERA
The System Approach: Open and Closed Systems
● There are two major types of systems, closed and open.
● An open system is characterized by interaction with the external
environment.
● Managers are concerned primarily with open systems because all
organizations are open systems. All organizations are dependent on the
world outside themselves for survival.
● Energy, information, and material are exchanged with the environment
through the system's permeable boundaries.

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2.3 THE MODERN ERA
The System Approach: Open and Closed Systems
● The system is not self-sufficient but dependent on energy, information,
and materials from outside. In addition, the open system has the
capacity to adapt to changes in the external environment and must do
so to continue operating.
● A closed system has firm, fixed boundaries; its operation is relatively
independent of the environment outside the system.
● A watch is a familiar example of a closed system. The interdependent
parts of a watch move continuously and precisely once the watch is
wound or a battery is inserted. As long as the watch has sufficient
energy stored within it, its system is independent of the external
environment.
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2.3 THE MODERN ERA
B. The Contingency Approach
● The contingency approach stresses that the appropriateness of various
management techniques is determined by the situation.
● Because there are so many factors in both the organization and the
environment, there is no single "best" way to manage.
● The most effective technique in a particular case is the one most
appropriate for that situation.
● The contingency approach tries to match specific techniques or
concepts of managing to the specific situation at hand in order to attain
organizational objectives most effectively.

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2.3 THE MODERN ERA
B. The Contingency Approach
● The contingency approach focuses on situational differences both
between and within organizations.
● It tries to determine what the significant variables of the situation are
and how they influence organizational effectiveness.
● It emphasizes that “there is no one best way to manage” and that it
depends on various situational factors
● The methodology of the contingency approach can be expressed as a
four-step process.

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2.3 THE MODERN ERA
The Four-step process in contingency approach
1. The manager must become familiar with the tools of the management
profession that have proven effective.
● These include understanding the management process, individual and
group behavior, systems analysis, techniques for planning and control,
and quantitative decision-making techniques.
2. Every management concept and technique has both advantages and
disadvantages, or trade-offs, when applied to a specific situation.
● The manager must be able to predict the probable consequences, both
good and bad, of applying a given technique or concept. To give a
simple example, offering to double the salary of all employees in
exchange for added work would probably increase their motivation
considerably, at least temporarily. Traded off against this are the added
costs, which may cause the organization to go broke.
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2.3 THE MODERN ERA
The Four-step process in contingency approach
3. The manager needs to be able to interpret the situation properly.
• It must be determined correctly which factors are most important
in a given situation and what effect changing one or more of these
variables would probably have.

4. The manager must be able to match the specific techniques with the
fewest potential drawbacks to the specific situation,
● thereby attaining organizational objectives in the most effective
way under the existing circumstances.

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2.3 THE MODERN ERA
C. The Quantitative Approach
● The quantitative approach to management is management by the numbers.
● It began WWII with emphasizes the use of mathematical and statistical
techniques to finding right answers to managerial problems, which are
solved through decision making/efforts to find mathematical and statistical
solutions to military problems.
● Quantitative decision-making is the use of mathematical methods and data
analysis, as the means to analyze and help make educated decisions about
complex problems.
● The theory stresses the importance of diverse decision situations and the
means of perfecting them.
● It recommends the process of optimal decision-making assembling
accurate and reliable data with quantitative precision and perfection.
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2.3 THE MODERN ERA
C. The Quantitative Approach
● The quantitative approach includes such things as:
● Computer simulations: What will the company’s payroll look like in 10 years if
it gives everyone a 10 percent raise every year?
● Optimization models: What’s the best price the company can charge for its
new product, to maximize profit but not scare away potential customers?
(Optimization means to make a system or design as effective as possible.)
● Critical-path analysis: How long will it really take to get the new product to
market, with separate teams working on different parts of the project all at
the same time?
● Techniques such as these are now standard practice in management,
especially in making planning and control decisions.
● Business re-engineering/BPR; BSC; Redesigning’ Reengineering…..
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 QUESTION TIME
3. Which one of the following is different?

a. System Approach
b. Human Relation Approach
c. Contingency Approach
d. Quantitative Approach
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Self Assessment Questions
● Provide a note on various management thoughts and approaches which
are mainly applicable or appropriate in present context.
● Critically examine and explain how political; social; economic; and
technological forces contributed to evolved lessons in management
thoughts.
● Weber’s ideal bureaucracy suggested strict adherence to rules and
regulations, this lead to red-tapism in the organization. Discuss how
strict adherence to rules and regulations causes poor work
environment.

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Self Assessment Questions
● Classical theory viewed organization as closed system in which
environmental dynamics and their effect on management have been
discounted. Provide your professional critics on this view and justify why
it is relevant or irrelevant in the contemporary world.
● Why is it important for every manager to understand the many different
management theories that have been developed? Describe various
School of Thoughts prevalent from time to time. Which school of
management thoughts makes the most sense to you? Why?

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 DISCUSSION POINT
Discuss the difference between classical
and neo-classical school of management
theories on the LMS.

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MBA621 85
 End of Chapter Two

THANK YOU!

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