CURRENT THEORY AND MANAGEMENT PRACTICE

Management theories in the workplace

Finding a management theory that suits your workplace can totally change the working environment for
the better. In this article, we'll focus on the Modern Management Theory and how its mix of hard data
and human emotions can become an efficient model for leadership. We'll also cover other management
theories and see how they compare to the Modern Management Theory. 

What are management theories?

Management theories are ideas about how people manage employees in an organization. In order to
lead a business, people must understand what motivates and directs employees in a company.
Management theories explain what motivates employees and how leaders can use these motivators to
control and guide them. Management theories provide management strategies, frameworks, and
guidelines that employers can implement in the office. Companies need different management for
different work settings. For hundreds of years, theorists have researched the best forms of management
for different companies. Now we can use the frameworks given in these management theories to create
a framework for management in companies today.

Modern Management Theory

Modern Management Theory was created in direct response to the Classical Management Theory that
states employees are only motivated by money. The Modern Management Theory recognizes that
workers are complex and have many reasons for wanting to succeed in their job. The Modern
Management Theory also believes that rapidly changing technology can both cause and solve many
problems in the workplace. 

This theory combines mathematical analysis with an understanding of human emotions and motivation
in order to create a working environment that is maximally productive. A manager using the Modern
Management Theory will use statistics to measure employee performance and productivity and also try
to understand what makes their employees satisfied at their jobs. 

Modern Management Theory is actually comprised of three other management theories — Quantitative
Theory, Systems Theory, and Contingency Theory.

1. Quantitative Theory

This theory based on efficiency and mathematical equations came out of the necessity for managerial
excellence in World War II. This is a simple number-based theory that relies on calculating the risks,
benefits, and drawbacks of any action before it is taken. This approach applies statistics, computer
simulations, information models, and other quantitative techniques to the management of a company.
This theory is usually not used to manage a business on its own. Instead, the Quantitative Theory must
be used with more humanistic theories, in order to run a company. 

1.1 Management Science:

“Management science is an approach that aims at increasing decision effectiveness through the
use of sophisticated mathematical models and statistical methods.”
According to R.M. Hodgetts, “The Quantitative School, which is also called Management Science
School, consists of those theorists who see management as a body of quantitative tools and
methodologies designed to aid today’s manager in making the complex decisions related to
operations and productions.”

Management science also known as operations research uses mathematical models such as
linear programming, PERT, CPM, games theory, probability, sampling theory, capital budgeting,
financial structure theories and symbols to solve organisational problems.

Whenever management has a problem, it calls a team of experts from relevant disciplines which
analyses business problems and frames a mathematical model by collecting the relevant data
(like cost of machine, cost of raw material, selling price of the product etc.) and tries to
maximise the output and minimise the cost, Computers have simplified application of these
models to deal with various problem-solving situations.

By changing values of variables in the model, different equations can be solved through
computers and the OR team can find the effect of each change on the dependent variable to
arrive at the optimum and rational solution to managerial problems.

Management science and operations research are often considered indistinguishable. “While
operations research tends to focus on formulation and manipulation of mathematical models
for common operational processes, management science tends to focus on the use of models in
the practice of management.”

1.2 Operations Management:

“Operations management is the function, or field of expertise, that is primarily responsible for
managing the production and delivery of an organisation’s products and services.” In 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.

1.3 Management Information System (MIS):

“MIS is the field of management that focuses on designing and implementing computer-based
information systems for use by management.” Large amount of information is quickly processed
(conversion of raw data into useful information) to make useful business decisions.
 Problem-solving process in the quantitative theory is depicted below:

Assumptions of Quantitative Theory:

1. Organisations are decision-making units which make efficient decisions through mathematical
models.

2. Business problems can be solved through joint efforts of a team that consists of experts from the
fields of mathematics, statistics, accountancy, engineering etc.

3. Business problems can be expressed in mathematical models where relevant factors can be quantified
in numerical terms. Management is seen as mathematical process expressed in terms of mathematical
symbols and relationships.

Evaluation of Quantitative Management:

The quantitative theory (or management science theory) considers solving complex business problems
in financial management, inventory valuation, inventory control, production scheduling, human
resource planning and other areas where quantifiable data can be obtained.

Some of the positive attributes of this theory are:

1. It establishes relationships amongst quantifiable variables of decision-making situations and facilitates

disciplined thinking.

2. Mathematical models help to derive precise and accurate results by analysing complex statistical data.

3. This approach is useful in areas of planning and control where data is available in quantitative terms.
Decisions are based on data and logic rather than intuition and judgement.

4. Computers have facilitated analysis of almost every variable that affects the workplace that might
otherwise have been overlooked. Statistical packages are available which facilitate analysis of qualitative
data also (dummy variables are used to analyse the non-quantifiable data).

Limitations of Quantitative Management:

Despite its widespread use in the business world, its application is restricted in certain areas. All
managerial problems cannot be solved by mathematical models.
This theory, therefore, suffers from the following limitations:

1. Its application is restricted in areas that deal with human behaviour. Human behaviour cannot be
predicted through mathematical equations. Use of behavioural techniques is more appropriate in such
situations.

2. Amongst different functions of management, its use is limited in organising, staffing and directing. It
applies more in planning and control functions.

3. Even where this theory is applicable, it does not eliminate risk but only attempts to reduce it. In fact,
in many situations mathematical models may just be used as models for analysing the results rather
than used as the basis for making decisions.

4. This approach assumes that all the variables affecting the problem can be quantified in numerical
terms which is not always true.

5. In some cases, managers are constrained by time, cost and technological considerations in collecting
data relevant for decision-making. Decisions in such cases are based on availability of limited
information. Such decisions are not optimum decisions but only ‘satisfying decisions’. Though this theory
has restricted use in certain areas, it is of immense use in areas where data can be obtained in
quantitative terms.

Systems Theory

Developed by Ludwig von Bertalanffy, this theory states that all parts of a company, from the CEO to
the entry-level employee, must work in harmony for the company to survive. This theory treats
companies like a living organism, with all parts necessary for the company to survive. Companies
using this theory think that departments and employees must work as a collective group and not an
isolated unit. Synergy and interconnectedness between departments are key with this theory. 

While striving for harmony between departments is important in a company, most companies don’t
need to rely on synergy so much for their day-to-day functions. For example, the accounting
department of a small company doesn’t need to be totally in sync with the HR department. This
management theory is more of a way you can view the company, not an exact management style.

Features of System Approach:

Following are the important features of systems approach to management thought:

1. System approach considers the organisation as a dynamic and inter-related set of parts. Each
part represents a department or a sub-system. Each department has its sub-system.
Continuous and effective interaction of sub-systems helps to attain goals of the larger system.
Thus, every sub-system is a system and has sub-systems which together make an organisation
a set of mutually dependent parts and their sub-parts. (For example in a manufacturing
organization, if the purchasing department does not acquire the right quantity and quality of
 inputs or raw materials, the production department wont be able to do its job which is
provide a good quality products and affects the sales and marketing dept.)

2. It considers the impact of both near and distant future on organisational activities. Organisations
constantly respond to changes in the internal and external environmental conditions. They also act as
market leaders in the dynamic, competitive environment.

3. System approach integrates goals of different parts of the organisation (sub-systems or

departments) with the organisation as a whole. It also integrates goals of the organisation with goals
of the environment or society in which it operates. Integration of goals maintains equilibrium or
balance and enables organisations to grow in the dynamic environment. (example situation when
Covid 19 strike. In effect of the pandemic all companies changes some policies and goals to adapt on
the current situation which is the new normal. Incorporate health and safety)

4. It synthesizes knowledge of different fields of study such as biology, sociology, psychology,

information systems, economics etc. As business organisation deals with different components of
society, it makes best use of different fields of study to improve interaction with its counterparts.

5. System approach enables organisations to frame policies that promote business objectives and
social objectives. Business operates in the social system and social values, culture, beliefs and ethics
are important constituents of business operations.

Evaluation of System Approach:

The system approach has the following merits:

1. System approach provides a holistic view of the organisations and emphasises on their adaptive
nature. It increases organisation’s adaptability to environmental changes. The organisation is studied
as a whole and not through its parts. This enables it to adapt to the needs of the environment.
Decisions are made keeping in mind organisation-environment interface.

2. It analyses the system at different levels and inter-relates and integrates it into a unified set of
direction. Starting from individual goals, it focuses on overall organisational goals, synthesizes the two
and converges them into global economy. ( For example is an automobile manufacturing company. If
you have all the parts of an automobile in a room, you do not have an automobile. You only have
parts of an eutomobile. But, if you put all the parts together in the right way, you get something much
greater than the automobile parts; you get transportation. These examples demonstrate the idea
that, what makes an automobile is the actual interaction or combination of their parts, not the simple
sum of the parts themselves.

3. System approach provides a framework for effective interaction of parts of the organisation in a
specific arrangement for attainment of its goals. It does not focus on one part of the organisation.

4. It considers the impact of environment on the organisation and vice versa. Interaction of external
environment with the internal environment is the most significant contribution of systems theory.

System approach, thus, analyses the organisation as an adaptive and dynamic entity.
5. System approach synthesizes the classical (employees are strongly motivated by their physical
needs and more specifically, monetary incentives) and behavioural theories (addresses the human
dimension of work) into a broader framework to solve managerial problems. It, thus, focuses on
organisations as multi-dimensional in nature.

Limitations of System Approach:

1. This approach is somewhat abstract and vague according to Critics . We know the way an
organisation actually works and solves problems is by applying different techniques and
methods. This theory has no techniques and methods
2. It does not specify the nature of interactions and interdependencies. Relationship amongst
parts of the organisation is emphasised upon but the exact nature of inter-dependence is not
defined.

3. Exact relationship between internal and external environment of the organisation is also not
defined.

For example, it specifies that change in economic policies necessitates change in internal policies of
the organisation but what changes are required to match the changes in economic environment is not
talked about.

4. System approach fails to provide uniform approach to management. Management practices change
with changes in environmental variables. No standard set of principles apply to all types of
organisations.

It has added nothing new to the study of management. Even before this approach was introduced,
managerial decisions were taken keeping in mind the environmental variables. No specific decision-
making techniques are offered to deal with specific problems.

5. It fails to provide concepts that apply to all types of organisations. The small organisations are less
adaptive to environmental variables than large organisations. The theory assumes that most of the
organisations are big, complex and open systems. It, thus, fails to provide a unified theory.

Contingency Theory

The Contingency Management Theory holds that every situation requires a different leadership style,
and therefore no one theory can work for an entire office. Created by Fred Fiedler in the 1960s, this
theory states that it is up to the leaders of a company to assess a situation and use the best leadership
strategy. Fiedler believed there are three main variables for determining what leadership strategy to
employ — organization size, technology being used, and the overall style of leadership in the company. 

This theory puts a lot of responsibility on the leaders of a company. Fiedler believed that a leader’s traits
directly affected how they managed people. This theory is also a more useable theory for modern
workplaces, as it understands that as technology and companies change, so must the leadership styles.

Features of Contingency Theory:

1. Management is situational in nature. The technique of management depends on complexity of the
situation.

2. It is the ‘if and ‘then ‘approach to management, ‘If’ represents the independent variable and ‘then’
represents the dependent management variable or the technique to be adopted in that situation. ‘If’
workers have strong physiological needs, ‘then’ financial motivators should be adopted and ‘If’ they
have strong higher-order needs, ‘then’ non-financial motivators should be adopted.

3. Management principles are not universal in nature as there is no best style of management.
Management is situational and managerial actions depend upon the environmental circumstances.

4. It helps in understanding the complex organisations as it focuses on multivariate nature of

organisations. It helps an organisation to operate under different environmental conditions. Rather than
having a specific solution to solve problems, it provides a framework where every solution depends
upon the environmental conditions. Same problem can have different solutions at different points of
time and different problems can have same solution at the same point of time.

5. It provides insight into organisation’s adaptability to both internal and external environment. It is a
matter of fitting the internal environment to its external environment.

Evaluation of Contingency Theory:

This theory has proved useful for practicing managers as:

1. 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. It is pragmatic in nature as solution to every problem is found after analysing the situation.

3. It follows the technique of multivariate analysis. It thinks of all possible variables or factors that affect
the situation and adopts the best.

4. It is adaptive in nature. It does not presume a pre-designed structure of the organisation but adopts a
structure that helps the organisation adapt to the environment.

5. It helps to design the organisation structure and plan the information decision systems. A small-sized
organisation may be centralised and a large-sized organisation may be decentralised in structure.

6. It helps to devise motivational and leadership approaches to motivate the workers. Autocratic style
may be adopted to deal with unskilled workers and participative style to deal with skilled workers.
Contingency approach to management is considered as a leading branch of management thought today.

Limitations of Contingency Theory:

Despite the best that contingency theory offers to the management thought, it is not free from criticism.

The critics assert that:

1. It does not follow the concept of ‘universality of principles’ which often apply to specific management
situations.
2. It is argued that what contingency theory asserts was asserted by Fayol also. He also talked of
flexibility of management principles. Therefore, the theory has added nothing new to the management
thought.

3. As there is no definite solution to a problem, managers think of alternatives to arrive at the right
choice. This is costly in terms of time and money. It also does not provide theoretical foundation upon
which management principles will be based.

4. It is not possible for managers to determine all the factors relevant to the decision making situation.
Because of constraints of time, money and ability, managers can neither collect complete information
about the environment nor analyse it completely.

Besides, it is not possible to establish perfect relationship amongst these factors. Application of this
theory may, therefore, be a complicated task as decisions are based on limited information. These
criticisms are only theoretical in nature. The theory contributes to the development of management
thought if applied rationally.

Benefits of the Modern Management Theory

Modern Management Theory is a great management theory for the modern world because it recognizes
and respects the changes that come with technology. This theory understands that technology changes
the workplace and leaders must be able to incorporate these changes efficiently. For example, a
manager that uses the Modern Management Theory will look at a development such as working from
home on two fronts. They will analyze the costs and benefits of having employees work from home, and
they will also ask individuals how working from home benefits their own lifestyle. 

This two-pronged approach to management allows for the straight facts of hard data, and the more
introspective and personal approach to leadership. This theory treats employees as complex individuals
who are concerned with more than just their salary, while also allowing for some company decisions to
be made by rational and statistical analysis. 

BENEFITS OF MODERN THEORY OF MANAGEMENT

Here are the benefits of the modern theory of management:

1. INCREASES PRODUCTIVITY 

The different theories of modern management educate leaders on maximizing the value of their human
resources. In other words, rather than spending money on new equipment or a new marketing strategy,
businesses should focus on training their employees.

2. STRENGTHENS DECISION-MAKING ABILITIES

When evaluating an organization or a department, managers can use modern management theories as a
guide. Managers who know what to look for are better able to spot issues and begin formulating
solutions. They can also use mathematical techniques to help them come to final decisions and support
their solutions.
 3. INCREASES EMPLOYEE ENGAGEMENT 

The concept of modern management looks at motivational elements other than money. Through this,
managers can identify and implement processes that take into account the needs and wants of their
employees. As a result, employees’ morale and engagement will rise and they’ll be more likely to stay on
with the organization.

4. GIVES MANAGERS AN OBJECTIVE VIEW OF THINGS 

Mathematics plays a vital role in modern management theory. Objective data that’s appropriately
analyzed never lies. On the other hand, using personal feelings to make decisions can backfire.
Moreover, managers can test a variety of options to see which one best serves the organization. As a
result, managers will be much more equipped to implement efficient and effective solutions after
studying the modern theory of management. 

5. INCREASES ADAPTABILITY

Modern management theory understands that organizations today frequently operate in dynamic
environments. According to this theory, managers should be prepared to use various methods and
approaches to deal effectively with their organizations’ internal and external influences. New technology
and statistical modeling can be used to improve processes and develop solutions, for example.

These benefits have made this approach a popular practice for many organizations and their managers.
Usually, a manager would apply one of the three prominent types within their organization.