Course Outlook

• The classical philosophy (scientific

management, administrative management and
bureaucratic management),
• Behavioural management philosophy (human
relation movement and Hawthorne studies),
• System and contingency philosophy and
• Emerging issues and challenges in Nepalese
business.

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 Meaning of Theory
A supposition or a system of ideas intended
to explain something especially one based on
general principles independent of the thing to
be explained.

Management theories are the organization or

system of management thoughts designed to
describe any phenomenon or relation between
events.
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THE CLASSICAL PERSPECTIVES IN MANAGEMENT
• Classical perspectives are those which were propounded
early days of management thoughts.

• After the establishment of huge factories in Europe and the

USA for the purpose of mass production of goods,
industrialists and technicians were in search of special ideas
and knowledge to manage those factories effectively and
efficiently.

1. Scientific Management Theory

2. Administrative Management Theory
3. Bureaucratic Theory
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i.Scientific Management Theory (Frederick Winslow
Taylor, 1856-1915)
Scientific management means knowing exactly
what you want men to do and seeing that they
do it in the best and cheapest way.
Scientific management involves in :
• Studying each activity to be done
• Identifying the best way of doing things for
economy and efficiency

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Principles of Scientific Management
• Development of a science for each work
• Scientific selection, training and development of
workers
• Close cooperation between management and
workers
• Equal division of work and responsibility
between management and workers
• Maximum output in place of restricted output
• Mental Revolution
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Contribution of Scientific Management
• Helps to increase production with adopting new machines
and tools
• Helps to minimize cost of production with close
supervision, training & development of workers
• Helps to make employees loyal and morale

Limitations of Scientific Management

• Lays to much emphasis on technical aspects of job which
ignores human sentiments
• Does not allows personal and social life
• Employees are forced to work speedily beyond their
capacity
• Lack of creativity of employees as supervisors plan,
instruct and guideKECthe
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ii. Administrative Management Theory (Henry
Fayol, 1840-1925)
- Provides a comprehensive conceptual
framework and general theory of management
that are applicable to all organizations.
- Management need to involve in some
administrative functions like to forecast and to
plan, to organize, to command, to coordinate
and to control.

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 Division of work
Authority and Responsibility
Discipline
Unity of command
Unity of direction
Subordination of individual interest
Remuneration of personnel
Centralization
Scalar chain
Order
Equity
Stability of Tenure
Initiative
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Contribution of Administrative Theory
• Universally applicable principles
• Foundation of mgmt. functions like planning,
organizing, staffing, directing and controlling
• Provides conceptual framework for analyzing
the management process

Limitations of Administrative Theory

• Ignores human behavior and sentiments
• Ignores the situational factors
• Not applicable in all organizations.
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 Difference between Scientific Management and
Administrative Management
Basis of Scientific Management Administrative Management
Difference
Human Aspect No any consideration on Due consideration on human
human elements elements with principles of
elements i.e. sentiments initiation, Espirit De Corps,
equity etc.

Efficiency & Stress on efficiency Stress on administration

Administration
Approach Micro-approach as Macro-approach as focuses
focuses only on factory on every field

Scope of the Applicable only for Applicable in all types of

principles production activities organizations and activities
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 iii. Bureaucratic Theory of Management (Max
Weber 1864-1920)
• Bureaucracy is a form of organization characterized by division
of labour, a clearly defined hierarchy, detailed rules and
regulations and impersonal relations.

Principles of Bureaucratic Theory

1. Hierarchical structure
2. Functional specialty
3. Clearly defined rules and regulations
4. Purposely impersonal
5. Formal selection of employees
6. Career development

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Contribution of Bureaucratic theory
• Useful to manage big and complex organization like government,
army, multinational and global organizations
• Decisions can be made rationally based on a clear rules and regulation.
• Specialization helps to increase the organizational productivity.
• Formal selection process of employees to ensure right person at right
job.

Limitation of Bureaucratic theory

• Rigid system. It cannot be applicable in all organizations.
• Low priority on human sentiments and relations.
• Lengthy and time consuming process cannot increase
productivity.
• Rigid rules, regulation and procedures may not be practical
• Lacks innovations and flexibility.
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 B. Human Relation and Behavioral Theory
1. Human Relation Approach
2. Behavioral Approach
– Abraham Maslow : Need Hierarchy Theory
– Douglas McGregor : Theory X and Y
– Frederick Herzberg : Two Factor Theory

These theories stress on managerial ability to understand

and work with and through people who differ in culture,
perceptions, needs and aspirations.

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1. Human Relation Approach
• Elton Mayo and his associates conducted series of experiment
during 1924-1932 at Hawthrone plant of Western Electric
Company in Chicago.
 Illumination experiment 1924-1927
 Relay assembly test room experiment
 Mass interviewing program
 Bank wiring observation room experiment

• People i.e. workers are more important in

organization. They should not be considered as
machine but should be treated as human asset.
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 Hawthorne studies
• Elton Mayo and his research team from Harvard University
conducted a series of research studies during 1922 to 1932
among several group of workers at the Hawthorne Plant of the
Western Electric Company in Chicago.
• The Hawthorne studies were part of a refocus on managerial
strategy incorporating the socio-psychological aspects of
human behavior in organizations.
• Illumination experiment (1924)
• Relay-assembly tests (1927-1932)
• Mass interviewing programme
• Bank wiring observation room experiment (1931-1932)

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 Conclusion of Hawthorne studies
1. Social unit
2. Group influence
3. Group behavior
4. Motivation
5. Supervision
6. Working conditions
7. Employee morale
8. Communication
9. Balanced approach
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Contribution of Human Relation Theory
• Personal and social factors are emphasized for
employee motivation.
• Managers are encouraged to establish interpersonal
and group relation on the job.
• Effective supervision helps to maintain high morale and
productivity of employees.
Limitations of Human Relation Theory
• Over emphasis on interpersonal and group relation lacks
adequate focus on work.
• Only focus on human dimension may neglect the economic
dimension of work satisfaction.
• Poor discipline is possible which may lead to poor quality,
productivity and effectiveness.
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2. Behavioral Science/Approach
• Behavioral approach focuses on behavioral
aspects of workers and their productivity.
• It aims to mitigate the weaknesses of human
relation theory as human relation theory has not
addressed on behavioral aspect of workers.
• It is more improved version of human relation
theory.
• There are main three dimensions of behavioral
sciences as psychology, sociology and
anthropology.
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i. Abraham Maslow : Need Hierarchy Theory, 1943
• People have complex set of needs which are
basic reasons of motivation
• Needs form a basic hierarchical pattern from
most basic level to the highest level.
• Physiological needs, Security needs, Social
needs, Esteem needs and self actualization
needs.

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 Higher Order Needs

Self Actualization Needs

Esteem/Ego Needs

Social/Affiliation Needs

Security Needs

Physiological Needs

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Contribution of Maslow’s need hierarchy theory
• Different motivational techniques can be used to motivate
employees having different needs.
• Managers can work out to create new needs to motivate
employees.
Limitation of Maslow’s need hierarchy theory
• Employees may have different level needs at a time.
• Without satisfying needs, job satisfaction will be low and
hence employee turnover and absenteeism rate becomes
high which further decreases the motivation level.
• People have deprived lower level needs but they may
have self-actualization needs in the real sense.
• This theory does not explain the direct relationship
between need and behavior of the people.
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ii. Douglas McGregor: Theory X and Y
• Two distinct views of human beings : Negative dimensions
(Theory X) and Positive dimensions (Theory Y)
• Theory X : Pessimist approach Theory Y : Optimist
approach
• Theory X : Based on traditional assumptions as
 Employees inherently dislike work and avoid it
 Employees must be corrected, controlled or
threatened/punished to attain goals
 Employee ignore/avoid responsibility so they need
formal direction
 Most workers place securities above all other factors
associated with work and will display little ambition.
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• Theory Y : Positive and intrinsic motivation
assumptions
 People like work naturally as game or rest
 Employees accept and seek responsibilities
 People have imagination, ingenuity and creativity
 Employees get job commitment when they get
rewards
 Employees are self-directed and self-controlled

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iii. Frederick Herzberg’s Two Factor Theory
• In the decade of 1950, American management export
Fredrick Hertzberg propounded the theory by
studying what satisfies human being ? And what
dissatisfies the human being?
• Herzberg proposed two types of factors satisfying the
employees and motivating them.
Hygiene factors : Hygiene factors satisfy employees but
they don’t motivate.
• In the absence of hygiene factors, employees get
dissatisfied but the presence of this factor doesn’t
lead to motivation.
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• These factors are also known as dissatisfier.
• Hygiene factors are related to job context.
• Following factors are considered as hygiene factors :
• Company policy and administration
• Work condition
• Relationship with peers
• Position
• Supervision
• Relationship with supervisor
• Salary
• Personal life
• Security
• Relationship with subordinates
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Motivation factors : Those factors which motivate
employees are known as motivation factors.
• The presence of these factors provides self-satisfaction to
employees and motivates them for better performance.
• These factors are related to job content. Following
factors are considered as motivation factors :
• Achievement
• Challenging job
• Recognition
• Accountability
• Advancement
• Job growth

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Contribution of Herzberg’s Two Factors Theory
• This theory stresses upon guaranteeing the
hygiene factors to avoid employee
dissatisfaction.
• This theory encourages managers to make the
job stimulating and rewarding.
• This theory emphasize upon job-enrichment i.e.
Non-financial rewards for employee motivation.
• Focusing on the motivational factors can
improve work-quality.

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Limitations of Herzberg’s two factors theory
• This theory overlooks situational variables.
• This theory neglects the economic dimension of
job satisfaction.
• Over emphasis on behavioural science rather
than management practices.
• It has low validity through research act.

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 Theory Z
• Theory Z is the name applied to Japanese Management Style
(based on Edwards Deming’s fourteen principles) popularized
during the period of Asian economic boom of 1980s.
• Theory Z focused on increasing employee loyalty towards the
organization.
• This theory believes on job for life with a strong focus on the
well-being of the employee both on and off the job in order
to motivate employees.
• Theory Z emphasizes that management must promote stable
employment for high productivity, high employee morale and
satisfaction.

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 DECISION THEORY
• Herbert Simon propounded decision science theory in 1986; Other
contributors of this theory are Luther Gulik and Lyndall Urwick.
• Managers should be involved in decision making process while defining
organizational structure, setting goals, finalizing plans, launching new
product, selecting new employees, purchasing fixed assets and many
others day to day activities.
• Decisions of managers must be rational.
• Quality of decisions highly affects on managerial effectiveness,
organizational productivity and efficiency.
According to this theory, managers must follow the following steps rational
decisions:
• Defining the problem clearly
• Defining decision premises
• Identifying relevant or potential alternatives
• Evaluating of the alternatives
• Selecting the best course of action
• Implementing the selected alternatives and
• Evaluating and reviewing
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 C. Management Science Theory
• Developed during second world war to solve
military problems by UK and the USA.
• Primary concern on decision making.
• Management science theory emphasizes on use of
mathematics and statistics for taking decisions and
for solving management problems.
• Linear programming, game theory, sampling theory,
probability theory, simulations, etc. are common
techniques used management science theory.

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 Contd…
• Use of knowledge from different areas.
• Main focus on solving technical problems
rather than human relation problems.
• Operational team is formed to analyze the
most complex management problem and
develop most suitable solution

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Contributions of management science theory
• Encourage in use of knowledge from different
disciplines.
• Complex relations among variables can be expressed
more effectively.
• Decisions can be more precise with the use of
mathematical approach.
• Replacement of intuition and hunch by factual data
and logical analysis.
Limitations of management science theory
• Ignores the human relation aspects.
• All the assumptions cannot be realistic.
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Data and facts may not be available all the time.
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 D. System Theory of Management
• Propounded by Ludwing Von Bertalanffy, Kenneth
Boulding and co-workers
• A system is a set of interrelated and interdependent
parts associated in logical manner to produce
desired output.
• A system may consists of several subsystems
composed to produce a complete system
• Input – Processing – Output – Feedback mechanism
surrounded by environment
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 External Environment

Input Processing Output

• Human Resource • Planning & Decision • Employee behaviour
• Capital Resource making • Profit/Loss
• Physical resources • Organizing • Goods/ Service
• Information • Leadership
• Control

Feedback

External Environment

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Element of System Theory
• Goal orientation
• Subsystem
• Synergy
• System boundary
• Flow of factors
• Feedback
• Open or closed system

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Contributions of System Theory
• Provides meaningful conceptual framework for analysis of
management and organization
• Advocates various parts of interdependent and interrelated
systems to produce desired output so that managers can
focus on appropriate parts
• Provides easy way of locating problems and identifying
solutions
• Integrates human relation aspects, behaviour aspect as well
as environmental considerations in single approach
Limitations of System Theory
• Too much abstract which has no easy application
• Does not offer any tools or techniques to integrate
organization and environment
• Lacks unified body of knowledge
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 E. Contingency Theory/Approach
• Also called situational or practical approach
• Propound by Paul Lawrence, Jay Lorsch, Tom
Burns, John Woodard, James Thomson, …
• Every organization is unique and and way of
managing should be unique
• There is no unique solution for every problem
applicable in each organization
• The way of planning, organizing, leadership
and controlling varies with situation.
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• Four contingency variables
• Size of organization : Number of employees and
stakeholders in organization
• Routineness of task technology: Organizational
structure, leadership style, and control system to
transform input into output.
• Environment uncertainty : Inflexibility of political,
economic, socio-cultural and technological variables
• Individual difference: Individual differences in desire
of growth, autonomy, tolerance of ambiguity and
expectation.
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Features of contingency theory
• Integrative approach of management
• Focus on intellectual capability of managers
• Requires high level of knowledge for
environmental scanning
• Assumes the organization to interact in open
system

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Contributions of contingency theory
• Managers can use better and new way of managing in
complex situation.
• Managers become more innovative and creative
• Managers can enhance capacity to think in analytical, critical
and multidimensional ways.
• Managers become more sensitive and alert.
Limitations of contingency theory
• Ignores the universally applicable management principles.
• More focus on situation but not on developing tools and
techniques
• Ignores human aspects
• Suggests only few contingency variables.

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EMERGING MANAGEMENT ISSUES IN NEPALESE BUSINESS

• Workforce Diversity
• Outsourcing
• Knowledge Management
• Learning Organization
• Business Process Reengineering
• Conflict Management
• Stress Management
• Participative Management
• Green Management
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