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+1 Management Unit 2 Text Evolution of Management Thought

The practice of management is as old as human civilization when people started living together in groups. As societies developed, the practice of management started in all business and non-business organizations like churches, temples, hospitals, Government, etc. With Industrial Revolution in the 18th century, a new era of Industrialisation came into existence. Use of both, machines and labour force increased. Need for integrating the two arose and, thus, the need for more comprehensive management was felt. With further advancement, business houses became so large that their financial requirements could not be met by the owners. They raised money from outside through shares and debentures. Since ownership became diverse and it was not possible for owners to manage their businesses, managers were appointed to look after business affairs. There was, thus, separation of ownership from management and by the end of 19th century, management theory was recognised as a formal theory for managing business enterprises. 

“Management thought  refers to the theories and principles that guide the management of people in organisations.”

“Management theories are explanations of why a particular practice is effective or ineffective.”

These theories developed initially out of experience of practicing managers. Management principles were based on practical experience of managers. Subsequently, management theories borrowed ideas from other fields of study like sociology, economics, philosophy, anthropology,  etc. This chapter will help you to understand and analyse the evolution of management thought on the formal lines under the groups of classical theories, neoclassical theories and modern approach. 

Learning Outcomes

After studying this chapter. the learner,
  1. explains the development of management.
  2. identifies various approaches to management.
  3. recognizes the various classical theories of management.
  4. compare the classical approach of management with the neo-classical and modern approaches.
  5. identifies the need for human relations from Hawthorne experiments.
  6. correlates the various needs of human beings from Maslow's need hierarchy
  7. recognizes the importance of environment in the modem approach of management. 

Management Theories 

Management theories can be classified into three main schools of thought

Classical approach
  • Taylor's Scientific Management Theory
  • Fayol's Administrative Management Theory
  • Weber's Bureaucracy Theory
Neo-classical approach
  • Human Relations Theory
  • Behavioural Science Theory
Modern Approach
  • Systems Theory
  • Contingency Theory

 2.1. Classical Approach 

It is the oldest theory of management and is, therefore, called the traditional theory of management. It includes management theories that provide foundation to the study of management. It is the first step towards the study of management as a distinct field of study. 

Three main theories that developed in the classical school of thought are discussed below: 

2.1.1. Taylor's Scientific Management Theory 

The concept of scientific management was introduced by Frederic Winslow Taylor in USA in the beginning of 20th century. Scientific management was concerned essentially with improving the operational efficiency at the shop-floor level. According to Taylor “scientific management is concerned with knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.”

Since Taylor has put the emphasis on solving managerial problems in a scientific way, often, he is called as 'father of scientific management' and his contributions as the principles of scientific management. Though his contributions have become traditional in present day context, still the label is used for his contributions. In fact, management as a science has been taken much later than the contributions of Taylor. 

Taylor joined Midvale Steel Company in USA as a worker and later on became supervisor. During this period, he continued his studies and eventually completed his M.E. (Master of Engineering). Subsequently, he joined Bethlehem Steel Company. At both these places, he carried experiments about how to increase the efficiency of people. Even after his retirement, he continued to develop scientific management. On the basis of his experiments, he published many papers and books and all his contributions can be described in two parts: elements and tools of scientific management and principles of scientific management. 

Assessment Activity 

  • Who is known to be the father of Scientific Management?
  • Which is the oldest theories of Management ?
  • Scientific Management focused on improving the operational efficiency at the................level.

2.1.2. Fayol's Administrative Management Theory 

While Taylor emphasised on productivity of workers at the shop level, Fayol focused on managing the organisation as a whole. Fayol was concerned with general management and overall control of the organisation and not with supervision and control of operations at  lower levels of management. His work was, thus, related more to the top level of management. Perhaps the real father of modern operational management theory is the French industrialist Henry Fayol. 

Fayol worked with the French Coal and Iron Company as a junior executive and was promoted as Director in the same company. He retired in 1918. There was a general belief prevailing at that time that 'managers are born, not made', that is only those who had inherent qualities of being a manager can become managers. This view was opposed by Fayol who said that managers need not necessarily be born; fundamental principles underlying the management theory can be taught to people and, thus, managers can be made. He believed that “management could be taught, once its underlying principles were understood and a general theory of management was formulated.” His work on general management was first published in 1916 in French as General and Industrial Management.  

Fayol has divided his approach of studying management into three parts:
(1) managerial qualities and training,
(2) general principles of management, and
(3) elements of management. 

2.1.3. Weber's Bureaucracy Theory 

Max Weber, a German sociologist, made significant contributions in the fields of management, economics, philosophy and sociology. In the field of management, his most significant contribution is his work on bureaucratic management. 

At the time when managers had traditional authority (authority by virtue of belonging to a particular class by birth) or charismatic authority (authority by virtue of their appeal and social power), Weber propagated the need for organisations to be managed in a more rational-legal authority system. The system was rational because organisations with formal authority-responsibility structures aimed to achieve a set of pre-determined goals. It was legal because authority was exercised by a person not by virtue of his appeal, class or reference but by his position in the organisation and was bound by a system of well-defined rules and regulations. Weber evolved an ideal type of bureaucracy which was a superior form of organisation with features of efficiency, objectivity, unity, discipline etc. 

Assessment Activity

  • Who is known to be the father of modern management?
  • Bureaucratic approach was propounded by ..............................

2.2. Neo-classical Approach 

Now you are aware that the management theories developed one after the other dependent upon the needs of the environment, this section introduces you to the new era of humanism which was the result of the criticism of classical theory for being too mechanistic. This era proved to be a transition era. 

2.2.1. Human Relations Theory 

Though the classical theory has been successful in bringing mass production leading to increased productivity and efficiency but has also brought monotony with it. It made people feel that they became machines or mere cogs in machines. And then the human relations approach emerged in the scene of management. The interest was increasing in helping managers to deal more effectively with the “people side” of the organizations. Several theorists strengthened the classical organisation theory using the insights of sociology and psychology. The human relations movement arose because of the systematic early attempts to discover the social and psychological factors that would create effective human relations.  

Elton Mayo, an organisational scientist and consultant, is recognized as the founder of Human relations Movement because of being at the forefront of this orientation. This movement sprang out of a famous series of studies conducted by Elton Mayo and his associates. It came to be known as the “Hawthorne Studies” as many of them were performed at Western Electric Company’s Hawthorne plant near Chicago during 1924 - 1933.

Hawthorne Studies 

Elton Mayo conducted a series of experiments at the Hawthorne plant of the Western Electric Company to study the impact of human factors on productivity. He conducted various experiments in four phases with each phase attempting to answer the question raised by the previous phase. The four phases were as follows: 

  • Experiments to determine the effects of changes in illumination on productivity, illumination experiments, 1924-27;
  • Experiments to determine the effects of changes in hours and other working conditions on productivity, relay assembly test room experiments, 1927-28;
  • Conducting plant-wide interviews to determine worker attitudes and sentiments, mass interviewing programme, 1928-30; and
  • Determination and analysis of social organisation at work, bank wiring observation room experiments, 1931-33.

Illumination Experiments 

The effect of lighting on two groups was studied; one whose lighting conditions were changed and the other, whose lighting conditions remained constant. For the first group of workers when lighting conditions improved, productivity went up but surprisingly, even when the lighting conditions declined, productivity went up. For the second group of workers also the output increased as the first group's lighting conditions were altered though there was no change in lighting conditions of this group. This made Mayo conclude that there was something more than just the lighting conditions that contributed to industrial production. Therefore, another phase of experiments was undertaken. 

Relay Assembly Test Room Experiments 

In this experiment, a small group of 6 girls was asked to work in a test room. Changes in working conditions were tried on them as, less working hours, improved working conditions, better wages, rest periods, free interaction amongst members etc. The supervisor acted as their friend and provided friendly and informal supervision. All these factors increased productivity but surprisingly, once again, when these conditions were withdrawn, the productivity did not go down. It was concluded that something other than these factors was important and Mayo attributed this to satisfaction of social and psychological needs of the workers, such as sense of acceptance, recognition, participation in decision making, freedom to work, interaction amongst group members, informal relationships etc. The concept of 'rational man' (motivated by financial incentives) was replaced by 'social man' (motivated by non-financial incentives like morale boost up, fulfillment of social needs, management-employees relationships etc.) 

Mass Interviewing Programme 

Thousands of workers were interviewed to get information about their superiors, jobs and job conditions. Responses revealed if employees were allowed to represent their views and problems openly to mangers, their morale and productivity went up. The importance of social factors was once again validated through this interview. 

Bank Wiring Observation Room Experiments 

A group of 14 workers was selected to attach a wire to switches for some equipment that was used in telephone exchange. No changes were made in their working conditions as were made in earlier experiments. Impact of social pressure was studied on working of this group. Management declared an hourly wage rate based on average output of each worker and bonus based on average output of the group. They thought that workers would produce more to earn more wages and would help each other as a group to earn higher bonus. However, this system of wage payment did not work. It was observed that without formally declaring the day's work, the group members laid their standard target which was less than the company's target. Social pressures were created by group members to ensure that no member exceeded the group target. In case they did, they were boycotted by their co-members. Informal relationships were, thus, considered important in determining the human behaviour. 

These studies indicate that productivity con be increased by understanding the human behaviour and fulfilling their higher-order needs of ego satisfaction and self-actualisation and not by merely applying principles of management (propounded by classical theorists) and providing financial incentives. 

Acceptance Theory to Authority 

Management theorist Chester Barnard believed organizations need to be both effective and efficient. Effective means meeting organizational goals in a timely way. Efficient, in his opinion, means the degree to which the organization can satisfy the motives of its employees. In other words, the organizational goals will be accomplished and authority will be accepted when workers feel satisfied that their individual needs are being met. This is known as the acceptance theory of authority.  

Acceptance theory of authority states that a manager's authority rests on workers' acceptance of his right to give orders and to expect compliance. Workers have to believe that the manager can legitimately give orders and there is a legitimate expectation that the orders will be carried out. There are a few reasons for this expectation:  

  • Workers will be rewarded for compliance
  • There will be discipline for non-compliance
  • Workers respect the manager for his experience

Assessment Activity

  • The era of humanism was introduced in ......................... theories.
  • The founder of Human Relations approach is ...........................
  • Hawthorne Studies was conducted in Hawthorne plant of ...........................company.
  • Acceptance theory was introduced by ....................

2.2.2. Behavioural Science Theory 

This approach is an improvement over Human Relations theory. Human relations theory lacked scientific vision to the study of human behaviour. This was considered in the behavioural science theory. The researchers applied the concept of social sciences or behavioural sciences (Psychology, Sociology and Anthropology) to understand the behaviour of human beings. Psychology is the study of individual human behaviour. Sociology is the study of human behaviour in groups. Anthropology is the study of human behaviour as individual and members of groups. Thus, these researchers came to be known as 'behavioural scientists' rather than 'human relations theorists'. 

“The behavioural science approach emphasises on scientific research as the basis for developing theories about human behaviour in organisations that can be used to develop practical guidelines for managers”. Some behavioural scientists, like Maslow and McGregor believe that more than a 'social man' worker is 'self-actualising man'. Generally, workers want their lower-level needs to be satisfied before higher-order needs, but there are people who work for their higher-order needs even at the cost of their job security. The behavioural scientists, therefore, motivate people according to their need perceptions. 

Maslow's Need Hierarchy Theory 

The need hierarchy theory is formulated by Abraham Maslow. He advocates that every individual has a complex set of exceptionally strong needs and the behaviour of an individual at a particular moment is usually determined by his strongest need. According to psychologists, human needs have a certain priority. As the more basic needs are satisfied, the individual seeks to satisfy the higher needs. If the basic needs are not satisfied, efforts to satisfy the higher needs will be postponed. Maslow stated that people have five basic levels of needs which they tend to satisfy in a hierarchical fashion. He proposed that human needs can be arranged in a particular order from the lowest level need to the highest level need. This hierarchy of human needs is shown in the following figure: 

Maslow's Need Hierarchy Theory

This need hierarchy can be explained as follows: 

(a) Physiological Needs: These are basic needs that people want to satisfy comprises the need for food, clothing, shelter and other necessities of life. Human beings first try to acquire these basic necessities of life, only then they tend to move to the second level of needs.

(b) Safety Needs: Full or part satisfaction of physiological needs arouses safety needs in an individual. These are the needs to remain free from external dangers of war, destruction,

accidents etc. and internal dangers of losing the job. People want their jobs to satisfy their safety needs. The motivators that can satisfy these needs are the benefits of life insurance, provident fund, health insurance and other retirement benefits. 

(c) Social Needs: Once the second level is satisfied, the human beings strive to satisfy their social needs. Man is a social animal; he wants to belong to a social group where his emotional needs for love, affection, respect and friendship are satisfied. Social needs can be satisfied by being in the company of friends, relatives or other group such as work groups or voluntary groups.

(d) Esteem (Ego) Needs: This is a higher-order need of achieving power and prestige and arises after satisfaction of the lower-order needs. Self esteem needs which are concerned with self respect, self confidence, recognition, appreciation, applause, power etc and these needs give the individuals a sense of self worth an ego satisfaction.

(e) Self actualisation Needs: These needs inspire a person to develop to his maximum potential. They are placed at the top of the need hierarchy. These are the needs of becoming what one really wants to become. People with strong self-actualisation needs do not wait for things to happen they make things happen. Personal and professional growth and achievement are the motives that promote self-actualisation needs of a person.

Two-Factor Theory (Motivation-Hygiene Theory) 

Frederic Hertzberg and his associates developed the two factor theory based on an actual research by interviewing of 200 engineers and accountants of 11 different companies. The purpose of the research was to find out as to what variables are perceived to be desirable goal to achieve and conversely, undesirable conditions to avoid. During the course of the interviews, these men were asked to describe a few previous job experiences in which they felt “exceptionally good” or “exceptionally bad”.

 Hertzberg categorised two sets of factors that provided satisfaction or dissatisfaction to employees. These are: Hygiene factors and Motivators. 

Hygiene factors: These factors are insurance policies, retirement benefit plans, salary structure, bonus, job security, relationship with superiors, working conditions etc. Hertzberg found that the presence of these factors provide no dissatisfaction to employees, that is, presence of these factors do not motivate the workers to perform better but their absence becomes a source of dissatisfaction. They are also called maintenance factors, dissatisfiers or extrinsic factors. 

Motivators: These factors are related to the job content, like achievement and recognition; innovative projects, challenge, opportunities for personal growth, responsibilities etc. Their absence provides no satisfaction or motivation to workers but their presence results in high degree of motivation and job satisfaction. They are also called satisfiers or intrinsic factors. 

According to Hertzberg, hygiene factors must be present (though they do not motivate employees) to prevent dissatisfaction and motivation factors must be present to increase their satisfaction and motivation. 

McGregor's Theory X and Theory Y 

Douglas McGregor introduced these two theories based on two distinct set of assumptions about human behaviour. One set of assumptions is called Theory X and the other set of assumptions Theory Y. 

Theory X : Theory X assumes that people by nature are lazy, dislike work, do not want to assume responsibility, work only if directed by managers and are very little or not ambitious about achieving their higher-order needs. They only want to fulfill their primary needs of food, clothing, shelter, and security. Motivators like money and fringe benefits make them contribute to organisational goals. This is a pessimistic approach of human behaviour. It provides rigid control, close supervision, one way communication and autocratic style of leadership for motivating human beings. 

Theory Y: The other view held by managers about the nature of people is opposite to that of Theory X. McGregor felt that as people continue working in the organisation, their lower-order needs get satisfied over a period of time and they look forward to satisfying their higher-order needs of ego satisfaction and self-actualisation. They want to take part in management decision-making processes accept challenging jobs, look for lucrative and innovative job conditions and are, therefore, self-directed to contribute towards organisational goals. Their aim is not only to maximise personal goals but also organisational goals. 

Assessment Activity 

Link the following       

Theory X     - Workers are self directed

Need Hierarchy Theory    - Frederic Hertzberg

Two-Factor Theory     - Abraham Maslow

Theory Y    - Workers prefer to be directed

2.3. Modern Approach 

Current management thinking wants equal emphasis on man and machine. During this period the principles of management reached a high degree of perfection and reinforcement. The modern business theorists have recognized that management is responsive to environmental changes and the social responsibility of business.   

The modern management thought is characterised by i) responsiveness to environmental changes; ii) multiplicity of objectives, maximising the interest of diverse groups (stake holders like share holders, customers, suppliers); iii) multidisciplinary in nature (drawing knowledge from various disciplines and synthesising it for solving managerial problems.); iv) future oriented (decision making by forecasting environment through scientific techniques and reducing risks to increase the adaptability of the organisation to changing environmental variables); and v) as dynamic institutions, business organisation are composed of interrelated divisions and sub- divisions.  

We can identify different perspectives on management theory that are growing in importance in the modern times: Management science approach or quantitative theory, the systems approach, the contingency approach, and the dynamic engagement approach. We will discuss systems approach and contingency theory in this section. 

2.3.1. Systems Theory 

The systems approach to management views the organization as a unified whole instead of fragmented segments. A purposeful system is composed of interdependent and interrelated parts and not a mere collection of parts. And it is also a part of the larger, external environment. Each system may comprise several sub-systems and in turn, each sub-system may be further composed of sub systems. According to the theory the activity of any one segment affects, in varying degrees, the activity of every other segment in an organisation. 

Contributions of Systems Approach 

  • The systems approach examines the relationship between different components of the organization.
  • It maintains a balance between different sub-systems so as to ensure the growth of the system.
  • It increases organisation’s adaptability to environmental changes.
  • It permits analysis and synthesis, differentiation and integration, right from micro sub-system level to the macro system level.
  • It provides a strong conceptual understanding of organization.

The system approach to management is diagrammatically represented as follows: 

        An open system view of organization 

2.3.2. Contingency Theory (Situational Approach) 

The contingency viewpoint developed in 1950s when a research team headed by Joan Woodward, an industrial sociologist, undertook a study of 100 British firms of different sizes producing different products. Better performing companies were compared with average or below-average performing companies to know the reasons why they performed better. It was concluded that difference in performance was not because of principles of classical theories but because of better technology to produce goods. This developed a theory that 'appropriate actions by managers often depend on (or are contingent on) the situation'. 

Contributions of Contingency Theory 

  • Contingency approach advocates that managerial actions and organizational design must be appropriate to the given situation and a particular action is valid only under certain conditions.
  • There is no one best approach to management and it all depends on the situation. Managerial action is contingent upon external environment.
  • There is no one best approach for all situations.
  • Contingency theory attempts to analyze and understand these interrelationships with a view towards taking the specific managerial actions necessary to deal with the issue
  • This approach is both analytical and situational, with the purpose of developing a practical answer to the question at hand.

Assessment Activity

  • Which theory emphasizes on equal importance on men and machine ?
  • A unified whole instead of fragmented units is the theme of ...................... theory.
  • “Managerial actions and organizational design must be appropriate to the given situation” is related to ................ theory.

TE Questions

I. Choose the correct answer from the given brackets.

1. Which among the following is a neo-classical approach?

(a) Scientific Management (b) Bureaucratic Management

(c) Behavioural Approach (d) Administrative Management

2. An example for esteem need is ..................

(a)Recognition (b) Food (c) Shelter (d) Affection

3. Need Hierarchy Theory was propounded by ...................

(a) Henry Fayol (b) F W Taylor (c) Abraham Maslow (d) Joan Woodward

II. Fill in the blanks

1. Theories and principles that guide the management of people in organizations is called


2. Hawthorne Studies was conducted by ...........................

3. Theory X and Y were propounded by ..........................

4. Contingency School of management was introduced by ....................................

5. The absence of these factors provides no satisfaction or motivation to workers but their

presence results in high degree of motivation and job satisfaction is known as ...............

III. Short answer questions

1. What is classical approach to management thought?

2. Differentiate between Theory X and Theory Y.

3. What do you mean by Hawthorne studies? Briefly explain the various experiments

conducted by Elton Mayo.

4. What is systems theory? What are the contributions of systems approach?

5. Write a short note on contingency theory. Briefly explain the contributions made by this


6. Explain the Need Hierarchy Theory with the help of a diagram.

7. Explain in detail the classical theories of management.

8. Briefly explain Two-Factor Theory.

9. What do you mean by Acceptance theory of Authority?

10. Write a short note on Bureaucratic Management.

Extended Activity

Conduct a field visit to Technopark, visit various companies there and meet with various

professionals and observe various approaches of management.

PSMVHSS Kattoor, Thrissur
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