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.

IOM - Module 1

Module 1
CONCEPT OF ORGANISATION

Definition:

Organization can be defined as the process of
1. Identifying and grouping the work to be done,
2. Defining and delegating responsibility and authority and
3. Establishing relationships.

Need for Organization:

1. Contributes to the continuity and success of the enterprise.
2. Facilitates Administration
3. Facilitates Growth
4. Stimulates Creativity
5. Optimum use of resources
6. leads to specialization
7. minimizes corruption
8. prevents confusion
9. helps in training and management

Characteristics of organization
1. It is a group of people small or large
2. Works under a leadership
3. toll of management
4. leads to division of work and responsibility
5. defines rules and regulations
6. establishes relationships

Elements (components) of Organization
1. Objectives
2. Coordination of people
3. Division of labor
4. defined policies and procedures
5. Effective system of communication

Process of Organization (Managerial Functions)

1. Determination of Objectives
2. Deciding Various activities
3. Grouping of activities
4. Assignment of responsibilities
5. Delegation of authority
6. Providing physical facilities.

Organizational Theory

OT can be defined as the study of structure functioning performance of organization, behavior of groups and individuals working in the organization.

Different Org Theories
1. Classical (Not in syllabus)
2. Neo Classical (Not in syllabus)
3. Modern /Scientific Org Theory (Important).

Modern or Scientific Theory
- Developed in the sixties and flourished in the seventies
- Analytical base
- Empirical research
- Integrating nature.

Important questions answerd by this:

1. What are the strategic parts?
2. Nature of interdependency?
3. Process?
4. Goals?

1. Strategic Components or parts.
-individuals
-formal org
-informal org
-status and roles
-Physical Environment

2. Interdependency
-Interpart Interactions
-Intrapart Interactions

3. Linking Processes
-Communication
-Decision making
-Balance

5. Goals
-growth
-stability
-adaptability




Comparison between formal and informal Org:

Formal Or:
1. Pre Formatted structure for individuals to follow
2. Contains rules, regulations and policies.

Informal Org
1. Consists of relationships, sentiments etc.
2. Has it’s own separate goals
3. Satisfies some unsatisfied social needs.

Modern theory is appreciated on the basis that it is
- an open system
- importance of survival
- dynamic nature
- both macro and micro in nature
- Multi motivated
- Multi disciplinary.


Princilples of Organisation.

- General Truth or a rule applied to similar types , conditions of organization globally
1. Consideration of Objectives
2. Relationship b/w basic components
3. responsibility and authority
4. span of control
5. dividing and grouping work
6. effective delegation
7. communication
8. line and staff relationships
9. balance stability and flexibility

Responsibility and authority

1. Responsibility Means accountability and obligation
2. Authority means right to command
3. both must go hand in hand
4. When an employee is authorized to take up a job, he is responsible also for doing to rightly.




Span of Control:
- Refers to the number of subordinates who report to an executive.
- If large then it will be hard to handle
- If span is small then the executive will feel bossy
- Normally span is between 2 to 20.

Organizational Structure:
- Systematic arrangement
- Framework of job and people

Two tools used to design a structure are:
1. Org Chart = For simple and small enterprises
2. Org Manual- for large enterprises

For design of Organizational Structure Refer fig 3.1 in Op Khanna Text Book

Types of structure:

1. Line, Military or scalar
2. Functional Org – by FW Taylor-
3. Line and staff Structure
4. Project Organization
5. Matrix Organization
For types of Organizational Structure (above all), chart, manual etc refer figures in OP Khanna Text Book chapter 3.

1. Line Structure:
-Simple
- Scalar type or linear type
- Workers have just one Foreman or supervisor above them to report to.
- Diagram required

2. Functional
- Each section is specifically divided life clerical, shop floor etc
- Each section has individual foremen to whom the workers report to
- workers have to report to different foremen for different issues hence one worker has too many foreman to report to at a time
Because of it’s complexity it is now obsolete.
- Diagram required


3. Line and staff structure.
- Line activities refer to the primary activities
- Staff activities refer to the supporting activities
- Diagram required
-

4. Project Organization
- When and already existing organization has a specific problem a project org is formed
- It is temporary
- Division of problem into sub projects
- Specialists are brought together
- Diagram required
-

5. Combination of matrix Org or superimposing project org and functional org produces Matrix org.
- Diagram required

Delegation of authority??
Departmentation??
Committees??

Business Organization (forms of ownership, industrial ownership)

- Based on the Capital providing factor
- Ownership means- titled to, or the person who possesses the asset is the owner who invests and harvest.
Types:
1. Single Ownership
2. Partnership
3. Joint Stock
4. cooperative Org
5. Public Sector- state and central owned Org

1. Single Ownership:
Investmet and control by a single person.

Advantages:
- Easy to handle
- Profit can be single handedly handled
- Less legal formalities
- Simple nature
- Owner is free to modify
- Can be discontinued any time when needed by the ownere

Disadvantages:
- Owner is responsible for loss
- Gets only limited resources and money
- has limited life

Applictaion: small retail shops

2. Partnership:

When a small company grows owner canned handle it alone hence it is partnered by few.
Partnership: can be defined as the relationship between persons who agree to share the profit.
1. Active partners
2. Sleeping partners

Advantages:
1. Large capital available
2. Good legal structure
3. Can handle losses boldly

Disadvantage:
Danger of disagreement between the partners.

Types of partnership:

General partnership
Limited partnership.

Partnership is applied to medical clinics, law firms etc.

3.Joint Stock Company:

More people join to provide capital by means buying the shares of the company.
Larger type of partnership firm as the company grows.
Two Types:
1. Private Ltd
2. Public Ltd.

4.Cooperative Organizations:

- Same as a joint stock firm but mostly works for the public without a self centred profit for it self
- tries to work for the welfare of the people.

Eg : Cooperative Banks, Milk Societies etc.






4. Public Sector Enterprises:

State Govt Owned
Central Govt Owned

The bad effects of Capitalism (From Industrial Revolution) gave rise to socialism which is the basis of a Public Enterprise:

Owned by the State
Managed by the state
Owned and managed by the state

Introduction to the Lecture Notes

Hi Every One,

So I don't know how you came to know about this page but I hope this is useful and easy to understand. The main aim of designing this blog is just to make sure that STUDENTS feel comfortable with my class notes, ie every detail which I discuss in class has been portrayed here point wise.

So this is not a site which gives any detail information for in depth study and research but a page which provides a site into my lecture notes.

All the Best !!