UNIT - 2

Management
Theory
BBA - I

MEENAKSHI KUMARI
Evolution of Management Concept
• can be traced back to the days when man
started living in groups.
• History reveals that strong men organized the
masses into groups according to their
intelligence, physical and mental capabilities.
• management in some form or the other has
been practiced in the various parts of the
world since the dawn of civilization.
Evolution of Management Concept
• 1700- 1800-( Industrial Revolution)
• From small firms or shops to big factories
• Reasons :- power, machinery innovations,
good transport
• Emerging problems:
• Large group of labour workers
• People working with machinery
• Increasing pace of industry
Pre-scientific Management Period
•  industrial revolution in the middle of the 18th
century had its impact on management.
• It brought about a complete change in the
methods of production, tools and equipments,
organization of labour and methods of raising
capital.
• Employees went to their work instead of receiving
it, and so, the factory system, as it is known today,
become a dominant feature of the economy. 
Pre-scientific Management Period
• Professor Charles Babbage- Professor of Mathematics-
 He felt that the methods of science and mathematics
could be applied to the solution of methods in the place
of guess work for the solution of business problems.
• Prof. Charles Babbage, James Watt Junior and Mathew
Robinson Boulton, Robert Owen, Henry Robinson
Towne and Rowntree were, no doubt, pioneers of
management thought.
•  impact of their contributions on the industry as a
whole was meagre.
 Classical Theory
•  F.W. Taylor, H.L. Gantt, Emerson, Frank and
Lillian Gilberth etc., laid the foundation of
management, which in due course, came to
be known as scientific management.
•  The contributions of the pioneers of this age
have had a profound impact in furthering the
management know-how and enriching the
store of management principles.
Figure 2.1 Major branches in the classical approach
to management
Frederick W. Taylor (1856- 1915)

• founder of scientific Management

• one of the first people to study the behavior and

performance of people at work
• was a manufacturing manager
• became a consultant and taught other managers how
to apply his scientific management techniques
• believed that by increasing specialization and the
division of labor, the production process will be more
efficient.
 Scientific management
• In 1878 at Midvale Steel Co.  he was working
as a chief engineer
• Apply scientific management at micro level
• Shifting customized working pattern to
standardized
• Time and motion study
 Objective
• Higher Productivity
• Cost Reduction
• Elimination of Wastes
• Quality Control
• Right Men for Right Work
• Incentive Wages
 Elements
• Separation of planning and doing
• Functional foremanship
• Job analysis
• Standardization
• Scientific selection and training
• Financial incentives
 Principles
• Science, Not Rule of Thumb
• Harmony, Not Discord
• Cooperation, Not Individualism
• Maximum, not Restricted Output
• Equal Division of Responsibility between
Management and Workers
 Henri Fayol’s 14 Principles Of
Management
1949- General and Industrial
Management
Father of Administrative
Management
Focus on managerial level
French Engineer- have cross the
phase of industrial revolution
 Fayol’s Principles
• Henri Fayol, developed a set of 14 principles:
1. Division of Labor: allows for job specialization.
• Fayol noted firms can have too much specialization leading to
poor quality and worker involvement.
2. Authority and Responsibility: Fayol included both formal
and informal authority resulting from special expertise.
3. Discipline: obedient, applied, respectful employees needed.
4. Unity of Command: Employees should have only one boss.

5. Unity of Direction: One plan of action to guide the

organization.
 Fayol’s Principles
6. General interest over individual interest: The
organization takes precedence over the individual.
7. Remuneration of Personnel: The payment system
contributes to success.
8. Centralization: the degree to which authority rests at
the very top.

9. Scalar Chain : a clear chain from top to bottom of the

firm.
 Fayol’s Principles
10. Order: Each employee is put where they have the most
value.

11 . Equity: Treat all employees fairly in justice and respect.

12. Stability of Tenure: Long-term employment is important.

13. Initiative: Encourage innovation.

14. Esprit de corps: Share enthusiasm or devotion to the

organization.
 Henry Fayol’s Theory Vs F.W. Taylor’s Theory

• Principles of Management are the guidelines that

govern the decision making and behaviour in an
organization. 
• Henry Fayol is a French Mining Engineer, who
developed the concept of general theory of
administration and given 14 principles of management.
• F.W. Taylor is an American Mechanical Engineer, who
advanced the concept of Scientific Management and
given 5 Principles of Management.
 BASIS FOR HENRY FAYOL F.W. TAYLOR
COMPARISON
Meaning Henry Fayol, is a father F.W. Taylor, is a father
of modern of scientific
management who laid management who
down fourteen introduced four
principles of principles of
management, for management, for
improving overall increasing overall
administration. productivity.

Concept General theory of Scientific Management

administration
Emphasis Top level management Low level management

Applicability Universally applicable Applies to specialized

organizations only.
Basis of formation Personal Observation and
Experience Experimentation

Orientation Managerial Production and

function Engineering

System of Wage Sharing of profit Differential

Payment with managers. Payment System

Approach Manager's Engineer's

approach approach
Administrative Management Theory

Max Weber - a German scientist

_ defines bureaucracy as a highly structured,
formalized, and also an impersonal
organization.
– Developed the principles of bureaucracy as a
formal system of organization and administration
designed to ensure efficiency and effectiveness.

2-21
 Characteristics of bureaucracy
• Specialization of labor
• A formal set of rules and regulations
• Well-defined hierarchy within the organization
• Impersonality in the application of rules
Weber’s Principles of Bureaucracy
1) A formal hierarchical structure
2) Rules-based Management 
3) Functional Specialty organization 
4) Up-focused or In-focused Mission
5) Impersonal
6) Employment-based on Technical
Qualifications 

2-23
 CRITICISM
• rules are inflexible and rigid
• Informal groups do not receive any
importance
• involves a lot of paperwork 
• rules and formalities lead to an unnecessary
delay in the decision-making process.
Shifting to Neo-Classical theories
Huma
n
relatio
n
move
ment

Neoclassi
cal
theory

Beha
vioral
move
ment
 The Hawthorne Studies
• Elton Mayo (1880-1949)
• father of Human Relations Movement
•  investigation was started in 1927 at the
Hawthorne plant, near Chicago, of the
Western Electric Company.
• The first phase of these experiments
involved five girls engaged in electrical
assembly testing.

2-26
 The Hawthorne Studies
2nd phase involves effect of change in
illumination upon the performance of
workers.
Human Relations Implications
– Hawthorne effect — workers’ attitudes toward
their managers affect the level of workers’
performance

2-27
 The Hawthorne Studies
Human relations movement – advocates that
supervisors be behaviorally trained to
manage subordinates in ways that elicit their
cooperation and increase their productivity

2-28
 The Hawthorne Studies
Implications
• Behavior of managers and workers in the
work setting is as important in explaining the
level of performance as the technical
aspects of the task

2-29
Behavioral Management Theory
• refinement of human relations movement.
• covered wider aspects in inter-personal roles
and responsibilities.
Behavioral Management
– The study of how managers should personally
behave to motivate employees and encourage
them to perform at high levels and be
committed to the achievement of organizational
goals.
2-30
Behavioral Management
• Motivation of employees for improving
productivity
•  Organisation as a social system
• Communication for better
understanding in the organisation

2-31
 Maslow’s Need Hierarchy Model
• Physiological needs- e.g. air, food, drink, shelter, clothing,
and sleep.
• Safety needs-   protection from elements, security, order,
law, stability, freedom from fear.
• Social needs- friendship, intimacy, trust, and acceptance,
receiving and giving affection.
• Esteem needs-dignity, achievement, mastery,
independence, status and prestige.
• Self-actualization needs- personal potential, self-
fulfilment, seeking personal growth and peak experiences.
 Modern Management Theory
• It has following three Streams-
• Quantitative Approach
• System Approach
• Contingency Approach
 Quantitative Approach
• also called Operation Research
• scientific method
• emphasizes the use of statistical model and
systematic mathematical techniques to solving
complex management problems. 
• Its helps the management to making decisions
in operations.
 Assumptions
• Organisations are decision-making units which make
efficient decisions through mathematical models.
• Business problems can be solved through joint
efforts of a team that consists of experts from the
fields of mathematics, statistics, accountancy,
engineering etc.
• Business problems can be expressed in
mathematical models where relevant factors can be
quantified in numerical terms.
Branches of Quantitative Management
• Management Science- also known as operations research
uses mathematical models such as linear programming,
PERT, CPM, games theory, probability, sampling theory
etc.
• Operations Management- people use quantitative
techniques of forecasting, inventory analysis, statistical
quality control methods, networking models etc. in areas
such as inventory management, production planning,
designing the production process, purchasing raw
materials, storing and selling the final products and
similar areas in manufacturing units.
• Management Information System (MIS)- field
of management that focuses on designing and
implementing computer-based information
systems for use by management.
 Limitations
• All managerial problems cannot be solved by
mathematical models.
• Its application is restricted in areas that deal with
human behaviour.
• Its use is limited in organising, staffing and directing.
It applies more in planning and control functions.
• This approach assumes that all the variables
affecting the problem can be quantified in numerical
terms which is not always true.
 System approach
• developed in late1960s.
• Herbert A. Simon is the father of system
theory.
• A  System is defined as a set of regularly
interacting or inter - dependent components
that create as a whole unit.
• Systems theory treats an organization as a
system. 
 System approach
• An organization is also a system with parts
such as employees, assets, products,
resources, and information that form a
complex system.
•  A closed system is not affected by its
environment.
• An open system is a system that is affected by
its environment.
• Sub-System- department is a sub-system of
the organisation which is a sub-system of the
industry
• Synergy- defines relationships amongst all
parts of the organisation e.g., if production
and marketing departments have independent
sub-departments to provide them finance or
labour, it will be less efficient 
• System Boundary-The world outside the
boundary of the system is its environment.
• Flow- represents the movement of inputs (men,
material, money, machine etc.) into the system
from the environment, their transformation into
outputs (goods and services) and supply of
outputs to the environment.
• Feedback- means response of the environment
to organisational outputs.
Characteristics of system approach
•  system must have some specific components,
units or sub units.
• A Change in one system affects the other
subsystems.
• Every system is influenced by super system.
• All systems along their subsystem must have some
common objectives.
• A system is a goal-oriented.
• A system cannot survive in isolation.
 Contingency Approach
• also knows as situational approach.
• In 1980s, it is recognized as a key to effective
management.
• Fred Fiedler is a theorist whose Contingency Trait
Theory was the precursor to his Contingency
Management Theory. 
• This approach argues that there is no one
universally applicable set of rules by which to
manage organization.  
• Fiedler's Contingency Theory says there is no
one best way to manage an organization.

2. Fiedler's Contingency Theory of leadership

says that a leader must be able to identify
which management style will help to achieve
the organization's goals in a particular
situation
• Contingency theories state that leaders will be
able to exert more influence if they are able to
have good relationships with the employees.
• Management is situational and managerial actions
depend upon the environmental circumstances.
• Same problem can have different solutions at
different points of time and different problems
can have same solution at the same point of time.
 Conclusion
• Modern management theory depends upon
System approach and Contingency approach. 
•  It is an integration of different schools of
thought; classical, behavioural and systems
approach.
• It integrates the principles of different schools
of thought and applies them contingent upon
the needs of the situation.
2 Unit OVER
nd