Tuesday, July 28, 2009

Classical and Neo-Classical Theories of Management

Classical management theory
There are three well-established theories of classical management: Taylor,s Theory of Scientific Management, Fayol’s Administrative Theory, Weber’s Theory of Bureaucracy. Although these schools, or theories, developed historical sequence, later ideas have not replaced earlier ones. Instead, each new school has tended to complement or coexist with previous ones.
Theory recognizing the role that management plays in an organization. The importance of the function of management was first recognized by French industrialist Henri Fayol in the early 1900s.
In contrast to the purely scientific examination of work and organizations conducted by F W Taylor, Fayol proposed that any industrial undertaking had six functions: technical; commercial; financial; security; accounting; and managerial. Of these, he believed the managerial function, ‘to forecast and plan, to organize, to command, to coordinate, and control’, to be quite distinct from the other five. Fayol also identified general principles of management: division of work; authority and responsibility; discipline; unity of command; unity of direction; subordination of individual interest to general interest; remuneration of personnel; centralization; scalar chain of authority; order; equity; stability of tenure of personnel; initiative; and esprit de corps. Fayol's views on management remained popular throughout a large part of the 20th century.

Evolution of Classical Approach to Management
Traditional process of learning is either through obsevation and experiment. Nature or environment is considered uniform and when we observe certain phenomenon or events uniformly leading to the same result or results, we conclude a cause and effect relationship between the two. This is learning by observation or in other words by experience.
Earlier thinkers on management followed this approach in developing theories of management. Learning principally is through emphirical process and through analysis of the data collected through observation. Draw the principles of managment by looking at and anyalysing the jobs that all managers commonly do. This approach served as a starting point for pioneers on management science to verify the validity and improve the applicability of the principles and practices of management. Analysis of observd data is what constitute a case study. The observational method of case study helps arriving at logical conclusions about past experience and to test the same as standards for future events.
The German sociolists, Max Weber followed the classical approach and developed his theory of Bureaucracy, which portrays the structure anddesign of organisation charqacterised by a hierarchy of authority, formalised rules and regulations that serve to guide the coordinated functioning of an organization.
Basic Postulates of the Classical Approach by Max Weber
1. Management of an organization is considered as a chain of inter-related functions. The study of the scope and features of these functions, the sequence through which these are performed and their inter-relationship leads one to draw principles of management suitable for universal application
2. Learning principles of management is done through the past experiences of actual practicing managers
3. As business environment consists of uniform cycles exhibiting an underlying unity of realities, functions and principles of management derived through process of empirical reasoning are suitable for universal application
4. Emerging new managers through formal education and case study can develop skill and competency in management concepts and practices
5. The clasasical approach also recognised the importance of economic efficiency and formal organizational structure as guiding pillars of management effectigveness.
6. Business activity is based on economic benefit. Organizations should therefore control economic incentives
Neoclassical theory of management
There are 3 neoclassical theories:
Human Relations theory :
Explains the modern advancement of Human Relations Management theory which takes into account human factors like the employer-employee relationship. Human relations theory is largely seen to have been born as a result of the Hawthorne experiments which Elton Mayo conducted at the Western Electrical Company.
The important strand in the development of modern management was the increase in attention to the human factors, which has become known as the 'human relations school of management.’ The core aspect of Human Relations Theory is that, when workers were being observed and included in the research, they felt more important and valued by the company. As a result, their productivity levels went up significantly. This represented a significant departure from many of the classical theories, particularly Fordism, as it went against the notion that management needed to control workers, and remove their autonomy at every step. Instead, it showed that by engaging with workers and considering their requirements and needs, company’s could benefit from increased productivity.
Behavioral theory :
The behavioral management theory is often called the human relations movement because it addresses the human dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as motivation, conflict, expectations, and group dynamics, improved productivity.
The theorists who contributed to this school viewed employees as individuals, resources, and assets to be developed and worked with — not as machines, as in the past. Several individuals and experiments contributed to this theory.

Social systems theory.:
Developed by Niklas Luhmann is an option for the theoretical foundation of Human Resource Management (HRM). After clarifying the advantages of using a grand (social) theory as the basic theoretical perspective, the roots of this social systems theory - the deterministic view of systems as machines, the open systems approach and non-linear systems theory - are addressed. Based on the view of social systems as autopoietically closed systems, five major contributions to a theoretical foundation of HRM are identified: (1) the conceptualisation of organising and managing human resources as social processes, thus overcoming an individualistic angle; (2) the new importance of individuals as essential element in the system's environment; (3) the abstention form far reaching or highly unrealistic assumptions about the 'nature' of human beings; (4) the interaction between various levels and units of analysis built into the theory which is essential for comprehensive and in-depth analyses of HR phenomena and (5) the openness for additional theories for which social systems theory provides the overall framework.
George Elton Mayo was in charge of certain experiments on human behavior carried out at the Hawthorne Works of the Western Electric company in Chicago between 1924 and 1927. His research findings have contributed to organizational development in terms of human relations and motivation theory.
Elton Mayo's contributions came as part of the Hawthorne studies, a series of experiments that rigorously applied classical management theory only to reveal its shortcomings. The Hawthorne experiments consisted of two studies conducted at the Hawthorne Works of the Western Electric Company in Chicago from 1924 to 1932. The first study was conducted by a group of engineers seeking to determine the relationship of lighting levels to worker productivity. Surprisingly enough, they discovered that worker productivity increased as the lighting levels decreased — that is, until the employees were unable to see what they were doing, after which performance naturally declined.
A few years later, a second group of experiments began. Harvard researchers Mayo and F. J. Roethlisberger supervised a group of five women in a bank wiring room. They gave the women special privileges, such as the right to leave their workstations without permission, take rest periods, enjoy free lunches, and have variations in pay levels and workdays. This experiment also resulted in significantly increased rates of productivity.
In this case, Mayo and Roethlisberger concluded that the increase in productivity resulted from the supervisory arrangement rather than the changes in lighting or other associated worker benefits. Because the experimenters became the primary supervisors of the employees, the intense interest they displayed for the workers was the basis for the increased motivation and resulting productivity. Essentially, the experimenters became a part of the study and influenced its outcome. This is the origin of the term Hawthorne effect, which describes the special attention researchers give to a study's subjects and the impact that attention has on the study's findings.