Evolution of Management Thoughts

(Managerial Function)
Management is studied in business academics since earlier times and it is

considered as an integral part to understand business operations. People have

been changing and redesigning organizations for centuries. Though the 20th

century is noticeable in history as an 'Era of scientific management', still it does

not indicate that management tactics were not used in yester years. Many

studies indicated that Management theory evolved with "scientific" and

"bureaucratic" management that used measurement, procedures and routines as

the basis for operations. Firms developed hierarchies to apply standardized rules

to the place of work and penalized labour for violating rules. With the "human

relations" movement, companies emphasized individual workers. Modern

management theories, including system theory, contingency theory and chaos

theory, focus on the whole organization, with employees as a key part of the

system.

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The evaluation of management can be categorized in to different parts:

 Pre-Scientific Management Era (before 1880),

 Classical management Era (1880-1930),

 Neo-classical Management Era (1930-1950),

 Modern Management era (1950-on word).

Classical Management includes Scientific Management School, Administration

Management School, and Bureaucracy Management. Neo- classical

Management includes Human relation school and Behavioural Management

School. Modern Management includes Social system school, Decision theory

school, Quantitative Management School, System Management School, and

Contingency Management School.

evaluation of

management 

Early Management Thought

The period of 1700 to 1800 emphasizes the industrial revolution and the factory

system highlights the industrial revolution and the importance of direction as a

managerial purpose. Thus, the development of management theory can be

recognized as the way people have struggled with relationships at particular

times in olden periods. Many economic theorists during this period described the

notion of management. Adam Smith and James Watt have been recognized as

two theorists who launched the world toward industrialization. Adam Smith

brought about the revolution in financial thought and James Watt's steam engine

provided cheaper power that revolutionized English commerce and industry. Both

provided the base for modern concepts of business management theory and

practice. Adam Smith explicated the concept of division of labour and Jacques

Turgot described the importance of direction and control. Smith stated that

market and competition should be the controllers of economic activity and that

tax policies were destructive. The specialization of labour was the basis of

Smith's market system. According to Smith, division of labour provided managers

with the maximum opportunity for improved output. In the period of 1771–1858,

Robert Owens studied for concern for the workers. He was repulsed by the

working conditions and poor treatment of the workers in the factories across

Scotland. Owen became a reformer. He reduced the use of child labour and used

ethical influence rather than physical punishment in his factories. He reproached

his fellow factory owners for treating their equipment better than they treated their

workers.
In quantitative approach of early management thought, Charles Babbage (1792–

1871) is recognized as the supporter of operations research and management

science. Babbage's scientific innovations are mechanical calculator, a versatile

computer, and a punch-card machine. His projects never became a commercial

reality. However, Babbage is considered the creator of the concepts behind the

present day computer. The most popular book of Babbage, On the Economy of

Machinery and Manufacturers, described the tools and machinery used in

English factories. It discussed the economic principles of manufacturing, and

analysed the operations and the skills used and suggested improved practices.

Babbage considered in the benefits of division of labour and was a supporter of

profit sharing. He developed a method of observing manufacturing that is the

same approach utilized today by operations analysts and consultants analysing

manufacturing operations. Other theorists who contributed in quantitative

approach of early management thought were Robert Owen, Andrew Ure and

Charles Dupin, Henry Robinson Towne.

Another theorist Baptiste, explained the significance of planning. But

management is appeared as a different discipline in the second half of 19th

century with the beginning of Joint Stock Company. This type of enterprises

separated management of business from their ownership and gave emphasis to

labour incompetence and improper systems of wage payments. To resolve such

problem, people began to identify management as a separate field of study.

During 20th century, Management has become more scientific discipline with

standard principles and practices.

The Classical Approach

The classical approach is the earliest thought of management .The classical

approach was associated with the ways to manage work and organizations more

efficiently. The classical approach are categorized into three groups namely,

scientific management, administrative management, and bureaucratic

management.

I. Scientific Management: Scientific management which is also referred to

Taylorism or the Taylor system is a theory of management that evaluates and

synthesizes workflows, with the aim of improving labour productivity. In other

words, conventional rules of thumb are substituted by accurate procedures

developed after careful study of an individual at work. Universal approaches of

Scientific management are developed for Efficiency of workers, Standardization

of job roles/activities and Discipline - the role of managers and the business

hierarchy. The scientific management theory had an enormous impact on the

business industry at the beginning of the 20th century. Many big and victorious

organizations, such as McDonalds hamburger chain or call centres, utilised a

modern version of scientific management. Among famous theorist, Taylor's

contribution in the area of scientific management is invaluable. The components

of scientific management are determination of the task, planning, proper

selection and training of workers improvement in methods, modification of

organization and mental revolution such as 'job specialization'. As a result, it

became more concerned with physical things than towards the people even

though increased the output. Scientific Management focuses on worker and

machine relationships. Organizational productivity can be increased by

enhancing the competence of production processes. The competence viewpoint

is concerned with creating job that economizes on time, human energy, and

other productive resources. Jobs are planned so that each worker has a

specified, well controlled task that can be performed as instructed. Principle of

scientific management are replacement of old rule of thumb method, scientific

selecting and training, labour management co-operation, maximizes output,

equal division of responsibility. There are four scientific management systems

such as develop a science for each element of the job to replace old rule of

thumb method, Scientifically select employees and then train them to do the job

as described in step, supervise employees to make sure they follow the

prescribed method for performing their job and continue to plan the work but use

worker to actually get the work done.

Taylor's Scientific Management: Academic records indicated that F.W. Taylor

and his colleagues developed the first systematic study in management. He

initiated an innovative movement in 1910 which is identified as scientific

management. Frederick Taylor is known as the father of Scientific Management

and he published Principals of Scientific Management in which he proposed work

methods designed to boost worker productivity. Taylor asserted that to succeed

in these principles, it is necessary to transform completely the part of

management and labour. His philosophy was based on some basic principles.

The first principle is separation of planning and doing. In the pre-Taylor era, an

employee himself used to choose or plan how he had to do his work and what

machines and equipment would be necessary to perform the work. But Taylor

divided the two functions of planning and doing, he stressed that planning should

be delegated to specialists. Second principle of Taylor's management approach

is functional foremanship. Taylor launched functional foremanship for

administration and direction. Under eight-boss-scheme of functional foremanship,

four persons like route clerk, instruction card clerk, time and cost clerk and

disciplinarian are associated with planning function, and the remaining four

speed boss, inspector, maintenance foreman, and gang boss are concerned with

operating function. Third principle is elements of scientific management. The

main constituents of scientific management are work study involving work

important and work measurement using method and time study, standardization

of tools and equipment for workmen and improving working conditions, scientific

Selection, placement and training of workers by a centralized personal

department. Fourth principle is bilateral mental revolution. Scientific management

involves a complete mental change of employees towards their work, toward

their fellow-men and toward their employers. Mental revolution is also necessary

on the part of management's side, the foreman, the superintendent, the owners

and board of directions. Fifth principle is financial incentives. In order to

encourage workers to give better performance, Taylor introduced differential

piece-rate system. According to Taylor, the wage should be based on individual

performance and on the position which a worker occupies. Economy is other

principle of management devised by Taylor. According to him, maximum output

is achieved through division of labour and specialization. Scientific Management

concentrates on technical aspects as well as on profit and economy. For this

purpose, techniques of cost estimates and control should be adopted. Taylor

concluded that science, not rule of thumb, Harmony, not discord, Cooperation

and not individualism, Maximum output, in place of restricted output.

(ii) Administrative Management: Administrative Management emphasizes the

manager and the functions of management. The main objective of Administrative

management is to describe the management process and philosophy of

management. In contradiction of scientific management, which deals mainly with

jobs and work at individual level of scrutiny, administrative management gives a

more universal theory of management.

Henry Fayol's Administrative Management (1841–1925): Henri fayol is known

as the father of modern Management. He was popular industrialist and victorious

manager. Fayol considered that good management practice falls into certain
patterns that can be recognized and analysed. From this basic perspective, he

devised a blueprint for a consistent policy of managers one that retains much of

its force to this day. Fayol provided a broad analytical framework of the process

of management. He used the word Administration for Management. Foyal

categorized activities of business enterprise into six groups such as Technical,

Financial, Accounting, Security, and Administrative or Managerial. He stressed

constantly that these managerial functions are the same at every level of an

organization and is common to all firms. He wrote General and Industrial

Management. His five function of managers were plan, organize, command, co-

ordinate, and control. Principal of administrative management: 1.Division of

labour, 2.Authority & responsibility, 3.Discipline, 4.Unity of command, 5.Unity of

direction, 6.Subordination of individual interests to general interest,

7.Remuneration of personnel, 8.Centralization, 9.Scalar chain, 10.Order,

11.Equity, 12.Stability of tenure, 13.Initiative and14 .Esprit de corps (union of

strength). These 14 principles of management serve as general guidelines to the

management process and management practice. His principles of management

are described below.

1. Division of work: This is the principle of specialization which is detailed by

economists as an important to efficiency in the utilization of labour. Fayol goes

beyond shop labour to apply the principle to all kinds of work, managerial as

well as technical.
2. Authority and responsibility: In this principle, Fayol discovers authority and

responsibility to be linked with the letter, the consequence of the former and

arising from the latter.

3. Discipline: This discipline denotes "respect for agreements which are

directed at achieving obedience, application, energy and the outward marks of

respect". Fayol declares that discipline requires good superiors at all levels,

clear and fair agreement, and judicious application of penalties.

4. Unity of command: This is the principle that an employee should receive

orders from one superior only.

5. Unity of direction: Fayol asserted that unity of direction is the principle that

each group of activities having the same objective must have one head and

one plan. As distinguished from the principle of unity of command, Fayol

observes unity of direction as related to the functioning of personnel.

6. Subordination of individual interest to general interest: In any group the

interest of the group should supersede that of the individual. When these are

found to differ, it is the function of management to reconcile them.

7. Remuneration of personnel: Fayol recognizes that salary and methods of

payment should be fair and give the utmost satisfaction to worker and boss.

8. Centralization: Fayol principle of centralization refers to the extent to which

authority is concentrated or dispersed in an enterprise. Individual

circumstances will determine the degree of centralization that will give the best

overall yield.
9. Scalar chair: Fayol believe of the scalar chair as a line of authority, a

'Chain of Superiors" from the highest to the lowest ranks and held that, while it

is an error of subordinate to depart 'needlessly' from lines of authority, the

chain should be short-circuited when scrupulous following of it would be

detrimental.

10. Order: Breaking this principle into 'Material order' and 'Social Order', Fayol

thinks of it as the simple edge of "a place for everything (everyone), and

everything (everyone) in its (his) place". This is basically a principle of

organization in the arrangement of things and persons.

11. Equity: Fayol perceives this principle as one of eliciting loyalty and

devotion from personnel by a combination of kindliness and justice in

managers dealing with subordinates.

12. Stability of tenure of personnel: Finding that such instability is both the

cause and effect of bad management, Fayol indicated the dangers and costs

of unnecessary turnover.

13. Initiative: Initiative is envisaged as the thinking out and execution of a plan.

Since it is one of the "Keenest satisfactions for an intelligent man to

experience", Fayol exhorts managers to "Sacrifice Personal Vanity" in order to

permit subordinates to exercise it.

14. Esprit de corps: This is the principle that 'union is strength' an extension of

the principle of unity of command. Fayol here emphasizes the need for

teamwork and the importance of communication in obtaining it.

(iii) Bureaucratic Management:.
Bureaucratic management denotes to the perfect type of organization. Principal

of Bureaucracy include clearly defined and specialized functions, use of legal

authority, hierarchical form, written rules and procedures, technically trained

bureaucrats, appointment to positions based on technical expertise, promotions

based on competence and clearly defined career paths. The German sociologist,

Max Weber recognized as father of modern Sociology who appraised

bureaucracy as the most logical and structure for big organization. With his

observation in business world, Weber summarized that earlier business firms

were unproductively managed, with decisions based on personal relationships

and faithfulness. He proposed that a form of organization, called a bureaucracy,

characterized by division of labour, hierarchy, formalized rules, impersonality,

and the selection and promotion of employees based on ability, would lead to

more well-organized management. Weber also argued that authoritative position

of managers in an organization should be based not on tradition or personality

but on the position held by managers in the organizational hierarchy.

Max Weber (1864-1920) devised a theory of bureaucratic management that

emphasized the need for a firmly defined hierarchy governed by clearly defined

regulations and lines of authority. He considered the perfect organization to be a

bureaucracy whose activities and objectives were reasonably thought out and

whose divisions of labour were clearly defined. Weber also believed that
technical capability should be emphasized and that performance evaluations

should be made completely on the basis of merit. Presently, it is considered that

bureaucracies are huge, impersonal organizations that put impersonal

competence ahead of human needs. Like the scientific management theorists,

Weber sought to advance the performance of socially important organizations by

making their operations predictable and productive. Although we now value

innovation and flexibility as much as efficiency and predictability, Weber's model

of bureaucratic management evidently advanced the development of vast

corporations such as Ford. Bureaucracy was a particular pattern of relationships

for which Weber saw great promise. Although bureaucracy has been successful

for many companies, in the competitive global market of the 1990s organizations

such as General Electric and Xerox have adopted bureaucracy, throwing away

the organization chart and replacing it with ever-changing constellations of

teams, projects, and alliances with the goal of unleashing employee

creativeness.

Chester I. Barnard: Chester Barnard (1886-1961) also devised components to

classical theory such as Follett that would be further developed in later schools.

Barnard, who became president of New Jersey Bell in 1927, used his work

experience and his wide reading in sociology and philosophy to devise theories

about organizations. Barnard stated that people join in formal organizations to

accomplish such goals that cannot be fulfilled by working alone. But as they
follow the organization's goals, they must also gratify their individual needs.

Barnard came to conclusion that an enterprise can operate efficiently and survive

only when the organization's goals are kept in balance with the aims and needs

of the individuals working for it. Barnard denotes a principle by which people can

work in stable and mutually constructive relationships over time. Barnard

believed that individual and organizations purposes must be in balance if

managers understood an employee's zone of indifference that is, what the

employee would do without questioning the manager's authority. Apparently, the

more activities that fell within an employee's zone of indifference the smoother

and more cooperative an organization would be. Barnard also believed that

managers had a duty to inspire a sense of moral purpose in their employees. To

do this, they would have to learn to think beyond their narrow self-interest and

make an ethical promise to society. Although Barnard emphasized the work of

administrative managers, he also focused substantial attention on the role of the

individual employee as the basic strategic factor in organization.

Modern Management Approaches

Behavioural Approach: Numerous theorists developed the behavioural

approach of management thought as they observed weaknesses in the

assumptions of the classical approach. The classical approach emphasized

efficiency, process, and principles. Some management scholars considered that

this thought ignored important aspects of organizational life, particularly as it

related to human behaviour. Therefore the behavioural approach concentrated

on the understanding of the factors that affect human behaviour at work. This is

an improved and more matured description of human relations approach. The

various theorists who have great contribution in developing principles of

management in this are Douglas Mc Gregor, Abraham Maslow, Curt Levin, Mary

Porker Follelt, Rensis Likert. Behavioural Scientists hold the classical approach

as highly mechanistic, which finds to degrade the human spirit. They choose

more flexible organization structures and jobs built around the capabilities and

talent of average employees. The behavioural approach has based the

numerous principles.

1. Decision-making is done in a sub-optimal manner, because of practical

and situational constraints on human rationality of decision-making. The

behaviourists attach great weight age on participative and group decision-

making.

2. Behavioural Scientists promote self-direction and control instead of

imposed control.

3. Behavioural Scientists believe the organization as a group of individuals

with certain goals.

4. Behavioural scientists perceive that the democratic-participative styles of

leadership are enviable, the autocratic, task oriented styles may also be

appropriate in certain situation.

5. Behavioural scientists propose that different people react differently to the

same situation. No two people are exactly similar and manager should tailor

his attempts to influence his people according to their needs.

6. Behavioural scientists identify that organizational variance and change are

predictable.

Approach of Mary parker follett: Mary Parker Follett (1868-1933) developed

classic structure of the classical school. However, she initiated many new

elements particularly in the area of human relations and organizational structure.

In this, she introduced trends that would be further developed by the talented

behavioural and management science schools. Follett was persuaded that no

one could become a whole person except as a member of a group. Human

beings grew through their relationships with others in organizations. In fact, she

explained management as "the art of getting things done through people." She

took for granted Taylor's statement that labour and management shared a

common purpose as members of the same organization, but she considered that

the artificial difference between managers and subordinates is vague in this

natural partnership. She believed in the power of the group, where individuals

could combine their diverse talents into something bigger. Moreover, Follett's

"holistic" model of control took into account not just individuals and groups, but

the effects of such environmental factors as politics, economics, and biology.

Follett's model was significant precursor of the idea that management meant

more than just what was happening inside a particular organization.

Maslow's theory of self-actualisation: His theory is recognized as Hierarchy of

Needs. It is illustrated in a pyramid and elucidates the different levels and

importance of human's psychological and physical needs. It can be used in

business by managers to better understand employee motivation. The general

needs in Maslow's hierarchy include physiological needs (food and clothing),

safety needs (job security), social needs (friendship), self-esteem, and self-

fulfilment or actualisation. Maslow's Hierarchy of Needs relates to organizational

theory and behaviour because it explores a worker's motivation. Some people

are prepared to work just for money, because of friends, or the fact that they are

respected by others and recognized for their good work. The final level of

psychological development that can be achieved when all basic and mental

needs are fulfilled and the "actualization" of the full personal potential takes

place. In the organizational situation, if an employee's lower need on the

hierarchy is not met, then the higher ones are ignored. For example, if

employees are worried that they will be fired, and have no job security, they will

be concerned about friendship and respect.

Douglas McGregor theory of management suggested that there is need to

motivate employees through authoritative direction and employee self-control

and he introduced the concept of Theory X and Y. Theory X is a management

theory focused more on classical management theory and assumes that

workforce need a high amount of supervision because they are inherently lazy. It

presupposes that managers need to motivate through coercion and punishment.

Theory Y is a management theory that assumes employees are determined, self-

motivated, exercise self-control, and generally enjoy mental and physical work

duties. Theory Y is in line with behavioural management theories. Theory X and

Theory Y relates to Maslow's hierarchy of needs in how human behaviour and

motivation is the main priority in the workplace in order to maximize output.

Theory X: The theory that employees are inherently lazy and irresponsible and

will tend to avoid works unless closely supervised and given incentives,

contrasted with Theory Y. Theory Y: The theory that employees are capable of

being ambitious and self-motivated under suitable conditions, contrasted with

Theory X.

An influential theorist in behaviour approach of management thought was Likert.

His principles based on four System such as supportive relationships between

organizational members, multiple overlapping structures, with groups consisting

of superiors and their subordinates, group problem solving by consensus within

groups and overlapping memberships between groups by members who serve

as linking pins.

Human Relations Approach: The human rationalists which is also denotes to

neo-classicists, focused as human aspect of business. These theorists

emphasize that organization is a social system and the human factor is the most

vital element within it.

There are numerous basic principles of the human relations approach that are

mentioned below:

1. Decentralization: The concept of hierarchy employed by classical

management theorists is replaced with the idea that individual workers and

functional areas (i.e., departments) should be given greater autonomy and

decision-making power. This needs greater emphasis on lateral

communication so that coordination of efforts and resources can occur. This

communication occurs via informal communication channels rather than the

formal, hierarchical ones.

2. Participatory Decision-Making: Decision-making is participatory in the

sense that those making decisions on a day-to-day basis include line workers

not normally considered to be "management." The greater sovereignty afforded

individual employees and the subsequent reduction in "height" and increase in

span of control of the organizational structure requires that they have the

knowledge and ability to make their own decisions and the communication skill

to coordinate their efforts with others without a nearby supervisor.

3. Concern for Developing Self-Motivated Employees: The importance on a

system of decentralized and autonomous decision-making by members of the

organization necessitates that those members be extremely "self-motivated".

 Goal of managers in such an organization is to design and implement

organizational structures that reward such self-motivation and autonomy.

Another is to negotiate working relationships with subordinates that foster

effective communication in both directions.

Therefore, the human relations approach implies modifications in the structure of

the organization itself, in the nature of work, and in the association between

manager and assistant. Each of these changes depends upon assumptions

about the individual, the organization, and communication, just like any other

theory of organizations. Elton Mayo and others conducted experiments that was

known as Hawthorne experiments and explored informal groupings, informal

relationships, patterns of communication, and patterns of internal leadership.

Elton Mayo is usually popular as father of Human Relations School. The human

relationists, advocates the several factors after conducting Hawthorne

experiments which are mentioned below.

1. Social system: The organization in general is a social system consists of

numerous interacting parts. The social system established individual roles and

establishes norms that may differ from those of formal organization.

2. Social environment: The social climate of the job affects the workers and is

also affected.
3. Informal organization: The informal organization does also exist within the

frame work of formal organization and it affects and is affected by the formal

organization.

4. Group dynamics: At the place of work, the workers often do not act or react

as individuals but as members of group. The group plays an important role in

determining the attitudes and performance of individual workers.

5. Informal leader: There is an appearance of informal leadership as against

formal leadership and the informal leader sets and enforces group norms.

6. Non-economic reward: Money is an encouraging element but not the only

motivator of human behaviour. Man is diversely motivated and socio

psychological factors act as important motivators.

Behavioural Science: Behavioural science and the study of organizational

behaviour emanated during 1950s and1960s. The behavioural science approach

was a natural development of the human relations movement. It concentrated on

applying conceptual and analytical tools to the problem of understanding and

foresees behaviour in the place of work. The behavioural science approach has

contributed to the study of management through its elements of personality,

attitudes, values, motivation, group behaviour, leadership, communication, and

conflict, among other issues.

Contingency Approach: This approach of management thought focuses on

management principles and concepts that have no general and universal

application under all conditions. Joan Woodward in the 1950s has contributed to

develop this approach in management. Contingency school states that

management is situational and the study of management recognize the important

variables in the situation. It distinguishes that all the subsystem of the

environment are interconnected and interrelated. By studying their

interrelationship, the management can find resolution to specific situation.

Theorists stated that there is not effective way of doing things under all business

conditions. Methods and techniques which are extremely effective in one

situation may not give the same results in another situation. This approach

proposes that the role of managers is to recognize best technique in particular

situation to accomplish business goals. Managers have to develop situational

understanding and practical selectivity. Contingency visions are applicable in

developing organizational structure, in deciding degree of decentralization, in

motivation and leadership approach, in establishing communication and control

systems, in managing conflicts and in employee development and training. The

contingency approach is associated with applying management principles and

processes as dictated by the sole characteristics of each situation. It depends on

various situational factors, such as the external environment, technology,

organizational characteristics, characteristics of the manager, and characteristics

of the subordinates. Contingency theorists often implicitly or explicitly disapprove

the classical approach as it focuses on the universality of management

principles.
The Quantitative Approach Of Management
Thought
The quantitative approach aimed at enhancing the process of decision making

through the use of quantitative techniques. It is evolved from the principles of

scientific management.

1. Management Science (Operations Research): Management science

which is also known as operations research utilized mathematical and

statistical approaches to resolve management issues. It was developed during

World War II as strategists attempted to apply scientific knowledge and

methods to the intricate troubles of war. Industry started to apply management

science after the war. The introduction of the computer technology made many

management science tools and concepts more practical for industry

2. Production and Operations Management: This approach emphasizes

the operation and control of the production process that changes resources

into manufactures goods and services. This approach is emerged from

scientific management but became a specific area of management study after

World War II. It uses many of the devices of management science. Operations

management underlines productivity and quality of both manufacturing and

service organizations. W. Edwards Deming exercised a great influence in

developing contemporary ideas to improve productivity and quality. Major

areas of study within operations management include capacity planning,

 facilities location, facilities layout, materials requirement planning, scheduling,

purchasing and inventory control, quality control, computer integrated

manufacturing, just-in-time inventory systems, and flexible manufacturing

systems.

Systems Approach Of Management Thought

The systems approach deals with the thoroughly understanding the organization

as an open system that converts inputs into outputs. The systems approach has

great impact on management thought in the 1960s. During this period, thinking

about managing practices allowed managers to relate different specialties and

parts of the company to one another, as well as to external environmental

factors. The system approach focuses on the organization as a whole, its

communication with the environment, and its need to achieve equilibrium.

System approach
To summarize, there are important theories of Management and each theory has

distinct role to knowledge of what managers do. Management is an

interdisciplinary and global field that has been developed in parts over the years.

Numerous approaches to management theory developed that include the

universal process approach, the operational approach, the behavioural approach,

the systems approach, the contingency approach and others. F W Taylor, Adam

Smith, Henry Fayol, Elton Mayo and others have contributed to the development

of Management concept. The classical management approach had three major

categories that include scientific management, administrative theory and

bureaucratic management. Scientific management highlighted the scientific study

of work methods to improve worker efficiency. Bureaucratic management dealt

with the characteristics of an perfect organization which operates on a rational

basis. Administrative theory explored principles that could be used by managers

to synchronise the internal activities of organizations. The behavioral approach

emerged mainly as an outcome of the Hawthorne studies. Mary Parker Follet,

Elton Mayo and his associates, Abraham Maslow, Douglas McGregor and Chris

Argyris were main players of this school.

Abstract
Management theories have been the subject matter view for over the decades as there are schools of thoughts that
affirms certain ways of managerial practices whereas other contradicts them. Three distinctive schools of thoughts
included in this essay are namely, classical management theory, neo-classical management theory and modern
management theory respectively. Classical theories emphasise heavily on scientific methods, administrative
approach and bureaucratic structures for managerial practices while focusing on the task efficiency. On the other
hand, neo-classical school of thoughts looked at the human’s individual needs, their relations at work, behavioural
aspects and motivations behind effectiveness. Lastly, the modern management school found “no one fit method for
all situations” by considering systems, contingent approaches while organisational humanism and management
science as core concept to operate in the dynamic environment. Additionally, the latest work of Foucault and
Bourdieu is used to explain the modernity of management. The present trends and issues in the management
practices are also addressed at the end. Keywords: Classical Management School, Neo-Classical School, Modern
Management Theory, Management Schools Of Thoughts, Issues And Trends In Management Practices

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Special Issue on Business and

Organization Research
Makale Geçmişi / Article History
Başvuru Tarihi / Date of Application
: 20 Ekim / October 2019
Kabul Tarihi / Acceptance Date
: 6 Kasım / November 2019
Management
Theories: The
Contribution of
Contemporary
Management
Theorists in Tackling
Contemporary
Management
Challenges
Nadeem Hussain, University of Wales
Trinity Saint David, UK,
hussain.nadeem4545@gmail.com
Orcid No: 0000-0002-5853-8917
Adnan ul Haque, University of Wales
Trinity Saint David, UK,
adnan@sribp.com
Orcid No: 0000-0003-2051-8635
Akhtar Baloch, University of Karachi,
Pakistan, abaloch@uok.edu.pk
Orcid No: 0000-0002-3216-9164

Abstract:Management theories have been the

subject matter view for over the decades as there
are schools of thoughts that affirms certain ways
of
managerial practices whereas other contradicts
them. Three distinctive schools of thoughts
included in this essay are namely, classical
management
theory, neo-classical management theory and
modern management theory respectively.
Classical theories emphasise heavily on
scientific methods,
administrative approach and bureaucratic
structures for managerial practices while
focusing on the task efficiency. On the other
hand, neo-classical
school of thoughts looked at the human’s
individual needs, their relations at work,
behavioural aspects and motivations behind
effectiveness. Lastly,
the modern management school found “no one
fit method for all situations” by considering
systems, contingent approaches while
organisational
humanism and management science as core
concept to operate in the dynamic environment.
Additionally, the latest work of Foucault and
Bourdieu is
used to explain the modernity of management.
The present trends and issues in the
management practices are also addressed at the
end.
Keywords: Classical Management School, Neo-
Classical School, Modern Management Theory,
Management Schools Of Thoughts, Issues And
Trends In Management Practices
1. Introduction
Wilson and Thomson (2006) argued
that 'History matters' and therefore, it
is essential to develop better
understanding
about the present-day emerging trends
and stages in the management since
19th century so that holistic view
could be
attained. To larger extent, there is an
agreement that the management
practices and approaches have altered
with the
passage of time (Bartol and Martin,
1998; Naranjo-Gil, Sánchez-Expósito
and Gómez-Ruiz, 2016; Hodge,
2002).
However, different school of thoughts
have accredited it to several factors
namely; globalization (Stros,
Bukovinski and
Coner, 2014), intense
competition/survival of the fittest
(Ferreira and Kittsteiner, 2011),
connectedness (Pham et al,
2018), multiplicity (Cooper et al,
2017), socially constructed realities
(Morgan, 1986) and so on. Having
said that, the
roots of management lies in the earlier
management theories and therefore
remains vital for tackling the
contemporary
management challenges.
After introduction, there are further
three sections in this article.
First section contains the critical
evaluation of management school of
thoughts. Starting with the ‘classical
management theory’ that includes
notable work such as scientific
management theory, administrative
management and
bureaucratic organisations. We
explored that the core thought of this
school emphasised on the
management as ‘scientific’
way to attain economic efficiency by
motivating employees via monetary
rewards. Next school of thought
discussed in
this section is ‘neo-classical theory’
argued that motivation is always
resulting from monetary rewards.
Notable work of
this school include; Maslow need of
hierarchy, human relations and
behavioural school, X-and-Y theory,
and two-factor
theory. It is found that the
physiological and mechanical features
being highly emphasized by the
traditionalist led to a
reaction from neo-classical school
that focused more on human-
orientation and largely paid attention
to drives, time
needs, attitudinal and behavioural
aspects of workers. Lastly, the
‘modern management theory’ is
discussed by looking
into work of modern theorists such as ,
system theory, contingence theory,
and organisational humanism. This
school of
thought argued that complexities,
connectedness and context are
contributing factors to organisations
and therefore
formed the modern management
theory. This school considered logic
and viewed management applicability
to distinctive
situations.
Second section explored the issues and
trends in present management. The
challenges faced by the modern-day
managers are discussed through
connectedness, complexities, and
context.
Last section is a conclusion drawn
from the critical review of the
different management schools of
thoughts and it
is observed that the purpose of
management theories remained on the
effective and efficient management of
resources in
order to retain best talent and survive
in the dynamic environment by using
the approach and style that is in the
best of
organisational interest.
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157

2. Management and Schools of

Thoughts
In simple terms, Drucker (1963)
defined management as the product of
effectiveness and efficiency where
“doing things
right” is regarded as ‘efficiency’ while
“doing the right things” is considered
as ‘effectiveness’ (cited from Robbins
and
Coulter, 2012). The theme of
Drucker's definition is based on
“knowledge work” (McGrath, 2014).
On the other hand,
Fayol defined it as, “to manage is to
forecast and to plan, to organise, to
command, to co-ordinate and to
control” (cited
from Prasad and Gulshan, 2011).
Different scholars have classified the
management theories differently, such
as Koontz (1988) divided it into six
groups, namely, (i) The management
process school, (ii) the empirical
school, (iii) the human behavioural
school, (iv)
the social system school, (v) the
decision theory school and (vi) the
mathematical school respectively. On
the other hand,
Hitt et al. (1979) categorized it into
three broader groups, such as (a)
Classical management theory, (b) neo-
classical
management theory and (c) modern
management theory. Following
Sridhar's (2017) approach, this report
considered
second strategy and use three broader
groups to explore and examine the
distinctive theories under each school
of thought.
2.1. Classical Management Theory
2.1.1 Scientific Management Theory
Classical theory is also known as
traditional theory of management. The
first among this school of thought
(classical
management perspective) is “scientific
management perspective” where
Frederick W. Taylor is known to be a
“father of
scientific management” for proposing
'one best way to do things' or
scientific management/Taylorism
(Ghuman and
Aswathapa, 2010). Time and motion
were a scientific analysis of task for
examining the physical movements
and
requirements for the completion of
task (Khurana, 2009). The idea of
Taylorism is found to be consistent
with the
concerns of Adam Smith that
emphasized division of labour
bringing specialization, which leads to
enhanced productivity
(Khurana, 2009; Robbins and
Coulter, 2012). In doing so the
humans are treated as machines
while ignoring the
demoralizing and inhuman effects of
tasks on the workers (Ghuman and
Aswathapa, 2010). In addition to that,
Taylor
also commenced another study
“science of shovelling” for
determining the optimal weight to be
lifted by the workers,
thus, the optimal shovels were
introduced to increase productivity
while reward as increase in the pay
was motivator
(Ghuman and Aswathapa, 2010).
The major notion of the motivation for
employees under scientific
management were seen as money
(Khurana,
2009). According to Furnham (2012),
“money is an effective, powerful and
simple motivator but it is not always
motivator
for everyone because at times it has
power to demotivate” (p. 152).
Additionally, Katzenbach and Khan
(2010) argued
that majority of the successful
entrepreneurs agreed that major
motivation is to be built upon
something lasting rather
than on the notion of making huge
money. Furthermore, “Certainly great
professional leaders like Marvin
Bower, who
built McKinsey & Co., John
Whitehead, the former Goldman Sachs
senior partner, and Supreme Court
Justice John Paul
Stevens explained that that their
motivation came from the work itself,
and that the lasting respect of others
was far greater
than money as a measure of
accomplishment. And very few great
artists are in it for the money. Money
is a by-product,
and usually a secondary one at that,
for such achievers” (cited from
Katzenbach and Khan, 2010).
Nevertheless, for lower
level jobs, still money is often use as a
basic needs (key motivator), reflecting
that the scientific management is still
applicable in the modern-day
management.
During the same era, Frank and Lillian
presented “applied motion study”
focusing on reduction in the number
of
motions in a task in order to increase
efficiency to have profit and
satisfaction of a worker (Caramerla,
2018). Meanwhile,
Henry L. Gantt developed a Gantt
Chart to measure the productivity and
working efficiency along with the task
and bonus
system of wages (Sheldrake, 2003).
Gantt Chart also offered a graphical
daily balance to ensure efficiency is
routine
manner (Sheldrake, 2003). Both above
mentioned works were inspired by the
concept of Taylorism. In the modern
day,
project management tools and
techniques are used by organisations
to ensure there is elimination of
waste while
attainment of most efficient results
indicating the use of ‘applied motion’
in operations (Caramela, 2018).
Program and
review technique (PERT) charts are
another modern-day managerial tool
offering visual methods to administer
time and
resources of project (Sullivan, 2017).
Nowadays, same scientific
management approach is used with
modifications as of
now multiple websites offer online
solutions through interactive sessions,
free tutorials and blogs discussion,
which are
all based on Henry Gantt management
theory (Sullivan, 2017). Harrignton
Emerson stated twelve principles of
efficiency
that enables manager in defining
objectives, developing scientific
methods for evaluation, forming
standardized
procedures and rewarding employees
(Sridhar, 2017). The major drawback
of this school of thought is that it
treats and
views worker from only the lens of
economics whereas workers’
behaviours are not always directed by
financial needs
as there are other needs such as social,
security and esteem needs (Sridhar,
2017). In addition to that, there
multiple
methods to commence task rather than
relying on “one best way” because the
situation differs and even two
individuals
could carry out similar job differently
(Sridhar, 2017).
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158

2.1.2. Administrative

Management
Under same classical school of
management, the contemporary
school of thought to scientific
management are the
‘administrative management’ and
‘bureaucratic organisations’ (Robbins
and Coulter, 2012; Sridhar, 2017).
This school
of thought is based on traditional or
administrative principles of
management while prominent
exponents include Henri
Fayol, Chester Barnard and Colnel
Urwick (Sridhar, 2017). Henri
Fayol is considered as the father of
modern
management for his contribution in the
administrative management field
primarily focusing on the operational
approach
through 14 principles of
management. “Fayol introduced
unified concept by focusing on
managerial levels and the
organisation as a whole” (Sridhar,
2017). All business activities could be
split into six groups namely;
administrative,
security, accounting, financial,
commercial and technical while
focused on the “managerial
activities of manager
including, planning, organizing,
directing, coordinating and
controlling” (Robbins and Coulter,
2012). Key principles
include “division of work, authority
and responsibility, discipline, unity of
command, unity of direction,
subordination
of individual interest to general
interest, remuneration, centralization,
scalar chain, order, equity stability of
tenure of
personnel, initiative and esprit de
corps” (Robbins and Coulter, 2012).
Fayol's heavily emphasized on
rationality, logic
and consistency (Sridhar, 2017).
Interestingly, “Taylor worked from
the bottom of the hierarchy upward,
whereas Fayol worked from the apex
downwards, with ‘management
centred’ philosophy”, which is the
difference between two classical
schools of thoughts
(Sridhar, 2017). On the other hand,
Chester Barnard argued that effective
communication is essential for
cooperation and
there should be a balance between
rewards and contributions among
workers (Robbins and Coulter, 2012).
Colonel
Urwick assembled the principles of
Taylor, Fayol and other management
scholars and suggested that
management is a
dynamic process to perform
organisational activities (Sridhar,
2017). This school of thought also has
limitations as many
of the principles have dilemmas and
are contradictory. For instance,
limited span of control and division
of labour
contradicts number of organisational
levels being smaller or principle of
specialization is contradicted by
unity of
command (Sridhar, 2017). In addition
to that, when seeking specialization, it
is not possible to follow
simultaneously all
modes. There is lack of empirical
testing of these principles at
organisational setting. Moreover, all
principles being valid
under all situations is not practically
applicable. Lastly, mechanistic
organisational structure develops due
to the outcome
of these principles, that are insensitive
to psychological and social needs of
the employees (Sridhar, 2017).
Nevertheless,
Brown (2014) argued that Henri
Fayol's 14 principles of management
promoted efficiency through division
of work,
which are still recognised idea in the
present day. Additionally, “Fayol
acknowledged employees’ needs
through adequate
remuneration, stability of tenure,
equity, team spirit and initiative are all
essential albeit coming from top down
direction”
(Brown, 2014). Hence, Fayol has not
ignored the employee perspective in
the organisational context but yet the
major
criticism Fayol attracted is that it is
flatter in present era (Ibid). However,
although, it appears less applicable to
some
extent in modern day work
environments. Moreover, even in
modern era, Fayol offers a good start
for the managers and
organisation to learn about
approaches, structures and managerial
functions (such as planning,
forecasting, organising,
directing, coordinating and
monitoring) (Brown, 2014). Having
said that, these were further taken into
consideration by
theorists from human relation school.

2.1.3. Bureaucratic Organisation

With the expansion of organisations,
the operations become further
complex giving “authoritarian-
paternalistic pattern”
way that enhances functional
specialization within the distinctive
layers of management to have
smooth operations
(Sridhar, 2017). This led to
bureaucratic approach towards
organisational structure and Max
Webber proposed a theory
of bureaucracy for organisational
efficiency based of organisational
systems functioning on set of rules,
policies and
hierarchy of authority (Ibid). Biggest
fain of this approach is that it excludes
the conflict or overlapping duties,
which
offers clear direction so that
organisational operations gain
efficiency in productivity. The
approach offers consistency in
patterns to ensure higher precision in
tasks to avoid waste of resources
(Sridhar, 2017). This is effectively the
theme of
modern-day organisations too to have
structural and patronized functions in
order to avoid wastage of resources
and
enhance operational efficiency
(Brown, 2014). However, the major
focus of this theory remains on
positions rather than
individuals (Sridhar, 2017).
Organisations would even continue its
functionality even if workers quit,
which is visible in
modern day to some extent that
organisation stays while employees
come and go (Brown, 2014).
Excessive red tapism
and paperwork often creates
unpleasant experience as well as delay
smooth operations (Sridhar, 2017).
Higher emphasis
of policies and procedures develop the
cautious approach and as a result
employee avoid risk and show less
creativity,
initiative and growth (Ibid). In
addition to that, humans are not
machine and therefore would differ in
their approach and
performances while this school of
thought expects behavioural
conformity at the expense of
performance.
The classical school of
thoughts/traditionalists considered
theories of management could be
deduced by means of
observation and analysing managers
do while empirical findings have
distilled in reaching for specific
principles (Sridhar,
2017). Furthermore, this school is
criticized for executing practices of
past, which include outmoded and
mediocrity.
Despite that, it is the leading school of
thought and largely prevalent in
managerial practices (Ibid).
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159

2.2. Neo-Classical Theory

Neo-classical school of thoughts
argued that traditional theory and its
principles are contradictory, only
focused on
motivation through monetary rewards
and proposed approaches to carry out
operations without taken into
consideration
the time factor, which is subject to
alteration (Sridhar, 2017). The
physiological and mechanical features
being highly
emphasized by the traditionalist led to
a reaction from neo-classical school
that focused more on human-
orientation and
largely paid attention to drives, time
needs, attitudinal and behavioural
aspects of workers. Human relations
school and
behavioural school formed under neo-
classical theory (Robbins and Coulter,
2012; Sridhar, 2017).
 2.2.1. Human Relation

School
Elton Mayo is the main champion
along with the Frank Roethlisberger
and William Dickson of human
relations
movement that later transformed into
organisational behaviour. They argued
that inter-relationships within the
group
members are vital aspect at the
organisational settings (Robbins and
Coulter, 2012). Their study known as
“Hawthorne
experiment” proved as paradigm
shifter in the management studies.
In actual, “Hawthorne Effect” is a
term explaining the phenomenon of
individuals work and demonstrate
better
performance when they are observed
(Cherry, 2018). Since the experiment
took place at Western Electric's
Hawthorne
company therefore phenomenon is
termed after the location (Ibid). The
experiment was conducted to assess
whether there
is a correlation between productivity
and work environments (such as light,
break duration and length of day
work). It
was evident that employee’s
productivity tends to enhance due to
change during the experiment
however, it declines
when experiments ends. The
experiment proved vital in
establishing the key notion that
increased attention from the
head/supervisor is reason for
improved performance (Robbins and
Coulter, 2012).
Follow up interviews with the workers
revealed that individuals do not leave
their attitude, emotions and feelings
back home as they do not only work
for economic gain. Their motivation to
work was not only confined to
economic
benefits but a good treatment, healthy
work environment and autonomy to do
things in their own way motivates
them to
do better at work (Robbins and
Coulter, 2012). “The two important
conclusions drawn from this
experiment were (a)
existence of strong informal groups
and (b) behaviour of employees at
work is significantly affected by non-
economic
factors” (Sridhar, 2017). Hence, this
work contradicts the earlier work of
classical theory that argued employees
are
economic and rational beings whereas
human relations school revealed
employees' social person view.
Additionally,
social person view opposed rational
economic view as study revealed
social needs motivate employees,
interpersonal
relationship develops sense of identity
among employees, fatigue and
boredom enhance due to repetitive
routine and
structured tasks, social forces make
employees more responsive towards
work rather than management control
and
incentives, and participative
management increases employee
motivation towards assigned tasks
(Robbins and Coulter,
2012).
Due to this theory, the concept of
social managers emerged and evolved
which is why at present the managers
role
is visible as coach or helpers to
manage employees at workplace.
Thus, the recent trends of human
relations are widely
visible in the modern day of
managerial approach. The theory
also proved a milestone in looking
beyond
organisational/environmental factors
by exploring the social and individual
psychology of workers working at
workplace
(Robbins and Coulter, 2012).
Furthermore, the experiment revealed
that individual's psychological needs
have a vital role
on the individual and collective
performances. People orientation is
essential as employees given attention
performs better
irrespective of the working conditions
(Ibid). In summation, the greater
output is resultant of employees'
satisfaction of
needs and desires. As the theory
focused on better communication and
concept of powering the employees to
participate
in decisions results in organisational
success. These are largely evident in
the present day too as now the
organisations
such as Google, LaFosse and Pets at
Home uses the concepts of human
relations to ensure greater output
(Goldfingle,
2012). Although, this study rejected
the concept of Taylorism's degree of
specialization, structured programme
and rigid
hierarchical control but it does not
oppose all ideas of classical school,
therefore, it is regarded as neo-
classical school.
Interestingly, Sridhar (2017)
concluded the notion of human
relations approach as, “this school
emphasized that
treat employees as if they are
important and give the workers the
feeling of participation” (p. 10).
One of the key
limitations of this theory is that it
keenly focuses on human variables as
most important critical attribute while
ignoring
all other attributes. Additionally,
focuses on symbolic rewards while
ignores role of material rewards
(Sridhar, 2017).
The approach focuses on
individuals and small groups
instead of large organisations.
Moreover, the effective
communication and interpersonal
relationship is effective for lower
level of organisation rather than other
layers of
management (Robbins and Coulter,
2012). “It could be argued that the
movement of this approach has
accepted several
assumptions of traditionalists and does
not accomplished a major
breakthrough in management theory”
(Sridhar, 2017).
However, it contributes to open a
passage for behavioural school of
thought.

2.2.2. Behavioural Schools

As stated earlier, the Hawthorne
experiment led to the inclined interest
in behavioural science within the
management,
leading to transform human relations
approach into modern behaviourism
(Robbins and Coulter, 2012).
Psychological
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160

considerations remain key aspect

while suggesting that primary
economic objectives are attained
through completion of
emotional needs. Interestingly, Sridhar
(2017) stated that behavioural schools
could also be taken into consideration
under
the modern organisational humanism
within modern management theory.
Thus, this indicates that most of the
aspects of
behavioural schools are relevant in the
modern-day management theories.
There are number of scholars such as,
Abraham
Maslow, Douglas McGregor,
Frederick Herzberg, Kurt Lewin,
Mary Parker Follet and so on who
had contributed to
behavioural school (Haynes, 2013;
Robbins and Coulter, 2012; Rogers,
2006; Sridhar, 2017). However, not all
of them
could be specifically classified as
neo-classical theorists because several
of those scholars have contributed
towards
modern management theories either in
general perspective, modern
humanism, or social system theory.
Some of the most
widely studied are discussed in this
report.

2.2.3. Maslow's Hierarchy of

Needs
Abraham Maslow categorized as well
as prioritized the total five types of
employee needs. The pyramid of
needs had the
most basic needs at the bottom and
term them as “physiological needs”
such as, sleep, eat, water, sex,
breathing and other
physical needs (McLeod, 2018;
Robbins and Coulter, 2012). With the
attainment of these needs, second
need arise
namely, “safety needs” as the previous
needs do not remain motivators. The
basic safety, protection, stability and
no fear
remain the concerns of the individual.
If a person's safety needs are not
satisfied then they work as motivators
(McLeod,
2018). On the other hand, Robbins and
Coulter (2012) argued that Maslow
explained that security needs include
the
protection for physical as well as
emotional harms that arise
physiological needs are met.
“Belonging and love
needs/social needs” develops after the
physical and safety needs of an
individual has been satisfied (McLeod,
2018). This
is a need of an individual that he/she
wants a social support and acceptance,
love, and friendship in the society
(Robbins
and Coulter, 2012). It is also
considered as the prime motivator for
the individual after physical and
security needs remain
no longer motivator, and therefore,
he/she develops a meaningful
relationship with others.
The internal esteem attributes
including, autonomy, self-respect
and achievement needs external
esteem like
attention, recognition, and status
work as motivators for the
individuals under “esteem needs”
(Robbins and Coulter,
2012). In order to attain this need,
individual requires to develop self-
confidence so that glory, fame, status
and reputation
could be achieved (McLeod, 2018).
The esteem needs are often the key
motivator for employees working in
the
organisations. “Self-actualization
needs are related to attainment of one's
own potential, growth and self-
fulfilment that
drive him/her to become what he/she
is capable of becoming” (Robbins and
Coulter, 2012). Maslow argued that
after the
satisfaction of one need, individuals
inclined to another level of need while
only one type of need work at a time
(Robbins
and Coulter, 2012). Alderfer (1969)
criticized the work of Maslow by
stating that multiple needs can work
together rather
than one need at a time (Robbins and
Coulter, 2012). For instance,
physiological and security needs can
both work at a
time on individuals. In addition to
that, Maslow ignored the
environmental factors by considering
the needs occurring in
static manner whereas in actual,
environmental factors tend to vary due
to constantly change in the dynamics.

2.2.4. Theory X and Theory Y

Douglas McGregor in his book,
“human side of enterprises”
published in 1960 argued that there
are two types of
individual in the organisation,
respectively X and Y type (Robinson,
2010). Theory X managers have a
negative view of
workers and perceived them as
untrustworthy, lazy, and lacking the
initiative to take responsibility
(McGregor, 1960;
Robinson, 2010). Therefore, such
types of managers are more
autocratic and rigid in their
respective approach. The
employees are seen to have low or no
motivation to take initiative by their
own, thus, require set of directions to
execute
tasks. On the other hand, Theory Y
managers view employees are
trustable and have the potential to take
a charge of
responsibility. Furthermore, the
employees are highly self-motivated
(Robinson, 2010). The Y type
managers are
participative and democratic in their
style and thus motivates employees by
involving them actively in their
routine tasks
(Ibid). In modern era also there are
examples of theory Y managers. For
instance, WL Gore and Associates is
an
organisation that highly encourage
managers to work as coach in
encouraging employees to be creative
and self-initiators.
Festejo (2012) argued that employees
tend to perform better when allowed
to exhibit their creativity with no
restriction.
Smith (2010) argued that for
lower/operational level employees
Theory X managers/supervisors are
more effective
because the productivity to achieve
specific unit production is attained
when there are directions given from
the top.
Grandey (2004) argued that Theory
X managers mainly focus on task
accomplishment while Theory Y is
keen on
fulfilling employees' motivational
needs but still the focus is to achieve
productivity rather than measuring the
well-being
of employees. Furthermore, Theory Y
also comes under the criticism that it
is a deliberate approach to take more
out of
employees so that there is increased
productivity (Grandey, 2004). Care for
employee is subject to their
productivity at
work and economic benefits of the
organisation. Barnett (2017) argued
that in the 21st century still the theory
is practically
visible as there is higher focus on self-
managed workers and as a result they
are involved in such programs so that
they
are more creative and willing to take
initiatives, which are aligned with the
aspects of Theory Y.
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161

2.2.5. Herzberg’s Two Factor Theory

Two factor theory is also regarded as
motivation-hygiene theory and dual-
factor theory proposed by Frederick
Herzberg
in 1959 (Robbins and Coulter, 2012).
The main notion of the theory is that
there is an association between
intrinsic factors
and job satisfaction while linkage is
between extrinsic factors and job
dissatisfaction (Herzberg, 1966;
Robbins and
Coulter, 2012). Traditionally, it was
viewed that satisfaction and
dissatisfaction were the two ends of
one node, but
Herzberg altered this by proposing
that “satisfaction” and
“dissatisfaction” are the two different
ends of two distinctive
nodes (Ibid). This means that it is not
necessarily right that a person who is
not satisfied is always dissatisfied and
vice
versa. To support this argument, he
proposed 'hygiene factors' as one set
that takes employees from
dissatisfaction to no
dissatisfaction while 'motivators" are
another aspect that takes employees
from no satisfaction to satisfaction
(Robbins
and Coulter, 2012). In other words,
Herzberg argued that an elimination of
dissatisfying attributes related to job
would
not always make job further satisfying
and vice versa. Thus, to motivate
employees, there should be motivators
(such as,
achievement, recognition, work itself,
responsibility, advancement and
growth) because hygiene factors
(supervision,
company policy, relationship with
supervisor, salary, working conditions,
relationship with peers and
subordinates, status
and security) would only help in
removing dissatisfaction while
motivators would alter the
behavioural aspect of
employees to be more committed and
satisfied, that would eventually
improve the organisational
productivity (Ibid).
One of the most relevant examples of
two factor theory is evident in the fact
of Siemens where hygiene factors as
well as motivators are used to retain
employees (Tuttle, 2003). The
motivators are specifically used to
ensure employees
remain committed and engaged to
their assigned tasks while given
substantial space to demonstrate their
own creativity
(Ibid). The involvement of emplyoees
in the task improves their capabilities
and enhance the level of satisfaction
that
further improves the organisational
efficiency (Tuttle, 2003). The flexible
work environment and improved
working
conditions brought positive results
for Siemens through introduction of
hygiene and motivating factors in
the job
description and specification (Ibid).
Thus, it could be said that this
theory is still relevant in the 21st
century of
management of employees at
workplace. However, this theory also
has its lacking and one of the major
criticisms this
theory has received is that is rather
simplistic in its procedures and
methodology (Robbins and Coulter,
2012). Yet, this
is the most important theory that is
incorporated practically in the
organisations at present by using it in
designing job. It
helps in job enrichment to ensure
the workers have the set of both
hygiene and motivators when
working in the
organisational setting.

2.2.6. The Management

Theory of Lateral Process Within

Hierarchy
Marry Parker Follet is regarded as the
“Mother of Modern Management”
because of her contribution to the
management
field (Caramela, 2018). The epicentre
of her theory is that “management is
the art of getting things done through
people”
(Caramela, 2018). Direct contact,
early stages, reciprocal relationships,
and continuous process were the
practices of
coordination that enabled Follet’s
management theory to have lateral
movement within the organisational
hierarchy
(Caramela, 2012). According to
Follet’s theory, it is essential to have a
direct contact between the managers
and workers
in order to have smooth relationship
while avoiding the misunderstandings
and conflicts that hinder the
organisational
process as well as efficiency (Ibid).
Additionally, theory also proposed the
meetings at regular interval and
constructive
discussions at workplace are key to
practically implement smooth
operations. Furthermore, at the very
early stage,
coordination should be developed so
that there is no waste of resources
such as time, money and energy
(Ibid).
Coordination is essential to ensure that
all employees feel equally important
and are prepared for the next stage in
order
to support and complement one
another. Another practice is to have
reciprocal relationship at workplace so
that every
employee irrespective of the
hierarchical position is responsible for
doing the task and integrating with the
organisation’s
other remaining parts/departments
(Ibid). This is the lateral movement
within the hierarchy that results
from the
coordination and direct contact among
employees and the management. It is
also essential that all workers are
doing equal
to have a team effort, in case of
anyone doing more of less would shift
the burden on few, leading to unstable
operations
(Caramela, 2018). Lastly, it is
essential to ensure coordination is a
continued process, if it is only carried
for specific time
then the disturbance would develop
(Ibid). It is important to channel the
coordination in every dimension and
every step
that management takes for its
operations.
Known for her mediating tactics,
Follett developed her management
theory on the principles of integration,
power
with and group power (Robbins and
Coulter, 2012). The principles of
According to Follett’s theory, it is
important that
employees at all layers of the
management are integrated with the
organisational goals. This helps in
eliminating conflicts
and a conscious effort is used to work
as a team and move in one direction
rather than being in a freefall stage
(Caramela,
2018). The desired results are attained
by the organisation due to such
integration. Often the organisation
also expands
through horizontal integration by
adding different units to build a
successful enterprise. Furthermore, it
is also vital that
rather than having rigid hierarchy,
there should be delegation of power to
specific people, who have the ability
to make
fruitful decisions (Caramela, 2018).
The concept of Follett is “co-active
power” as this way team feel better
that they are
valued and take own initiative rather
than being directed to do tasks (Ibid).
However, at the same time, Follett
also argued
that structural hierarchy is equally
important for the organisation.
Moreover, Follett argued that instead
of personal power,
there should be group power because
organisations are not existing to
benefit one person, but to be beneficial
for all the
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workers (Ibid). Due to this thought

process, there is higher team work
rather than competition among
workers (Caramela,
2018).
Follett’s theory is applicable in the
present day too because there are
evidences of organisations b eing
successful
due to higher integration and power
sharing (Caramela, 2018). For
instance, Walt Disney Company uses
horizontal
integration by buying distinctive
sources of creative things such as
Lucasfilm, Marvel Comics and Jin
Henson Studios,
which helped the company in creating
successful and iconic characters
(Hanks, 2018). This happened due to
integration
within the different units of the
organisation.

2.3. Modern Management Theory

The complexities, connectedness and
context are the three main features of
the organisation that have shaped the
modern
management theory (Haque, Aydin &
Uysal, 2017; Sridhar, 2017). In
addition to that, the individual and
organisational
diverse needs, aspirations, motives
and potential equally play their part in
the modern management theory
(Robbins and
Coulter, 2012). Thus, this is the reason
for flux, interdependence, ambiguity
and multiplicity are the elements that
has
expanded the complexities in the
dynamics where organisations operate
and functions (Maznevski and
Medenhall, 2004).
The consequence of these aspects
is that having one universal
management principles template for
all types of
organisations and individuals become
rather impractical and inapplicable
(Sridhar, 2017). Hence, such
complexities drive
the organisations to develop flexible
strategies and managerial principles to
deal with work and workers at
workplace. In
addition to that, the modern
management theory considers
complex employee view that is
opposing to rational economic
man view of classical theory and neo-
classical theory’s social person view
(Sridhar, 2017).
Organisation-centre was the theme of
classical theory revolving around
efficiency along with functional
approach
following deductive reasoning. On
the other hand, person-centric
approach was focus on neo-classical
school
emphasizing on experimental
descriptive aspects following higher
deductive reasoning. Nevertheless,
revisionists
followed behavioural and
quantitative dimensions while
adopting inductive reasoning with
rigorous complete
experimentations. The modern school
of management largely considered
logic and viewed management
applicability to
distinctive situations (Sridhar, 2017).
In the era of digitalization and
computer usage, quantitative methods
were used to
assess the role of management in
modern day organisations (Hodgetts
and Altman, 1981).

2.3.1. System Theory

As discussed earlier, both; classical
and neo-classical theory have largely
focused on one aspect at the expense
of other.
For instance, the ‘efficiency’,
‘structure’ and ‘task’ are the core
theme of classical theory whereas
‘people’ is centre theme
of neo-classical theory. Considering
the limitations of both, modern theory
intakes the balanced root to investigate
the
management practices. The first
theory in modern school of
management is system theory that
offers a holistic view –
“organisation as a whole” (Sridhar,
2017). System as an entity reflects
coherent whole (Ng, Maull and Yip,
2009),
implying an exchange of dialogue
between "holism" and
"reductionism" (Mele et al. 2010).
Thus, it conveys the
multidisciplinary viewpoint from
several context including, economic,
society, nature, information
technology and
institutions (Mele et al. 2010). The
management’s problems are tackled
through the integrated approach
where focus
remains on systems serving people.
The prominent authors of this theme
include; Chester Barnard, George
Homans,
Philip Selznick and Herbert Simon
(Sridhar, 2017). Two or more
interdependent parts constitute a
system where all
interlinked parts function to make
things work. In fact, organisation is
viewed as a human body where all
parts function
together to function properly. Hereby,
interdependent parts are very
significant and indicates that the
emphasis of the
managers or supervisors shall not be
limited to one specific single cause but
consider the holistic view as different
factors
combine cause problem (Sridhar,
2017). Open and closed are two types
of systems. According to Sridhar
(2017), “An
open system interacts with its
environment such includes; all
biological, human and social systems
whereas several
mechanical and physical systems are
regarded as closed systems”.
Interestingly, organisation as a closed
system is view
of traditional organisational theorists
whereas organisation treated as an
open system is a viewpoint of modern
theorists
(Sridhar, 2017). It reflects that
modern-day organisations are
consistently interacting with its
environment on regular
basis. In other words, “an organization
is an open system that interacts
regularly with external forces namely,
government
agencies, suppliers and customers”
(Sridhar, 2017). These different
stakeholders affect the practices of the
organisations.
Mele et al. (2010) argued that system
theory applications in management
could be found in several dimensions
such
as it focuses on complexity, adaption,
relationships, environment, quality,
value and knowledge. The
organisation viewed
as learning system reflects the vision
of knowledge produced through set
of skills and competencies (Nonaka
and
Tacheucki, 1995). “Knowledge is at
the core of an autopoietic process
of resource generation, creating
resource-
behaviour-resource cycles where
cognitive schemes allow the entire
system to function” (Mele et al.
2010, p. 130).
Considering value approach, “the
organisation is viewed as a holistic
system with higher degree of
integration between
the factors intervening in the process
of value creation” (Grant, Shani and
Krishnan, 1994). It indicates the that
sub-
systems such as R&D activities,
routine research, feedback, and quality
management are results of network
(Polese, 2004)
resulting from different system actor's
(stakeholders) contribution (Alter,
2008). The focus of organisation on
quality
links the system thinking with the
concept of total quality management
(Kim and Burchill, 1992). The focus
on quality
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strengthens the relationship between

different parts of system enhances
tendency to achieve goals (Mele and
Colurcio,
2006). If an organisation is a system at
micro level, then at macro level
environment is a system (Mele et al.
2010). The
action of employees amplifies for
survival when operating at micro and
macro level. In a viable systems
approach (Barile
and Polese, 2010) in order to survive
in the continual dynamic process
organisation, need to adapt to internal
changes
(following adaptation). This reflects
that the modern organisations to larger
extent still follows the earlier theorists'
notion
of focusing on “set of skills and
competencies”, “quality”, and
“specialization” to ensure tasks are
carried out in effective
and efficient manner.
 2.3.2. Contingency Theory
Effectiveness is contingent as it
depends on the interplay between
managerial applications and
behaviours and particular
situation (Fielder, 1970).
Organisational behaviour is studied
through contingency theory approach
by elaborating on
contingent factors namely, culture,
technology and external environment
affecting the functionality and design
of the
organisation (Islam & Hu, 2012).
Sridhar (2017) argued that modern-
day organisations are more complex
and therefore
one specific managerial strategy
could not be applied to all types of
situations. Hence, the emphasis of
contingency
approach is on the adaption of
managerial strategies as per the need
of situation. In other words, each
situation should be
viewed separately, and the plans
should be made while taking into
consideration a wide range of internal
and external
factors to administer the context,
connectedness and complexities of the
dynamic environment. Based on the
scenario, a
best fit of the managerial approach for
the situations should be implemented.
This theory emphasises on the
postulate that
organisational outcomes are resultant
of a fit between two or several factors
(Van de Ven & Drazin, 1985; Islam &
Hu,
2012). Nevertheless, the focus of this
theory remains on the organisational
design (Luthans & Stewart, 1977).
Interestingly, Sridhar (2017) explains
that as per this approach, theorists
have made an attempt to assimilate
several
thoughts of various management
schools because it was obvious that
alone those concepts and principles
would not be
universally applicable under all
situations. Thus, it could be argued
that considering the contingent
approach, the practices
of modern-day organisations have
roots from the earlier schools of
management because the integration
of various schools
of management are combined to
enable the managers for effective
managerial practices in distinctive
situations. As a
result, this theory also stressed on the
importance of development of
managerial skills to deal with
situational factors
(Sridhar, 2017). One of the notable
works is of Hersey & Blanchard's
(1969) “Life Cycle Theory of
Leadership”, which
argued that the role of
manager/supervisor reduces with the
increase learning capabilities and
efficiency of the employees.
In other words, as the situation vary,
so does the role of manager also
change because of the maturity of the
employees
and change in the organisational
dynamics. In other words, practical
selectivity and situational sensitivity
should be
developed by the managers (Sridhar,
2017). Presently, the contingent
approach is practiced ensuring there is
structural
organisation while leading the
workforce through motivating them
(Sridhar, 2017). On the other hand,
planning
information decision systems, control
systems, development of
communication channels,
decentralized decision-making
and employee training and
development are some of the potential
areas where contingent approach is
evident (Sridhar,
2017). Thus, it indicates that the
theory focuses on the behavioural
motivation, which is the focus of neo-
classical school
and the results of such motivation is
driven from the interactions with the
different environmental factors. Those
factors
play its part in motivating employees
to demonstrate individual excellence
so that organisational goals are
attained in
effective and efficient ways, hinting
towards focus of task-orientation
(reflecting the traditionalists’ school
of thought).
Contingency approach argued that
flexibility in leadership style and
acting according to the need of
situation lead
to influence employees do well at
workplace (Islam & Hu, 2012). It
indicates the motivational factor of
Herzberg’s theory
that interpersonal relationship leads to
productive workforce. Therefore, the
root of this approach is largely linked
with
the earlier school of thoughts of
management. Sridhar (2017) stated
that the champions of this theory
confirmed that
environment is complex and dynamic,
which requires flexibility in the
organisational design and structure
and therefore,
bureaucratic structure could not be
effective in such situation. Although,
this approach has widened the scope
of
leadership practices but the theory
comes under the criticism that this
approach is more straightforward
while situations
could be tricky as number of factors
could emerge in the middle of process
and in search of perfect solution there
could
be wastage of invaluable resources
such as time and money. At times
there could be superficial decisions
due to time
limit rather than going deeper into the
situation. Since, it takes a situational
context, there is a problem that what
leaders
do is based on the situation. Hence at
hindsight what may appear viable in a
particular situation might not be the
best for
the company in a long run because of
change in the situations. Thus, this
approach is not feasible in all
situations.

2.3.3. Modern Behavioural

School/Organisational Humanism
Sridhar (2017) argued that
organisational humanism is the
extension of neo-classical theory’s
behavioural school due to
larger commonalities between them.
The modern behavioural school has
more worked from the champions
such as
Abraham Maslow, Douglas McGregor
and Chris Argyris as the school is
based on their philosophies (Sridhar,
2017).
Doucet (2017) argued that higher
emphasis of organisational humanism
is on the usage of intrinsic
motivation for
personnel's growth, which leads to
increase organisation's economic
efficiency. The philosophical stance of
this school
largely rests on the individual needs
driving to use their creative skills and
capabilities in the organisational
setting.
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Hence, the foundation of this school
rests on “self-actualization view”
(Doucet, 2017). As per this view, self-
actualization
drives the individuals to exhibit their
best at work because they are valued
and have the maturity to take initiative
by
being self-controlled and self-
motivated (Sridhar, 2017). Hereby, the
inner potential of the employee is
known to him
and it is used effectively to achieve
the organisational goals (Doucet,
2017). Moreover, this school of
thought also
considers that structural tasks and
routine jobs as part of rational
organisational design limits the
motivated potential and
creative skills of employees. Thus, in
order to remain consistent with the
human nature, organisations should
avoid the
rigid design, unimportant rules and
inflexible supervision (Sridhar, 2017).
Higher freedom at workplace leads to
have greater satisfaction (Doucet,
2017). The organisational benefits are
produced by highly motivated self-
actualized employees, which are not
likely achievable under bureaucratic
organisations. This school also
emphasis on the manager’s role in
strengthening the decision-making
abilities of the
employees while giving them
opportunity to take initiatives and
challenging them. As stated earlier,
the internal motivator
of the employee for growth is key
feature of humanist approach, which is
also opposite to external pressures
such as
organisational play and social
acceptance that are prominent themes
of traditionalist and neo-classical
schools of thoughts.
Individual needs and the fulfilment of
those needs are the focus of
organisational humanism. However,
this approach
comes under a criticism that it
considers each and every single
employee in the organisation looks for
self-actualization
in the organisational setting (Sridhar,
2017). As previously, the work of
McGregor (1964) showed that there
are X type
and Y type individuals, so it is highly
likely that all individuals look for self-
actualization at workplace. In addition
to
that, organisational humanists argued
that in several ways individual at
workplace can make work entertaining
by making
their jobs interesting (Sridhar, 2017)
whereas this could be agreed to certain
extent but not always because some
tasks
are time bounding creating higher
stress and focus of the employees is on
the completion of task rather than
making it
interesting. For instance, in the
project-based organisations, there is a
certain deadlines and employees
cannot focus on
making it entertain instead of
completing it in timely manner.

2.3.4. Management Science

Core concept of the Management
Science school of thought is
“Operational Research Teams to deal
with complexities,
connectiveness and context” (Sridhar,
2017). One should not confuse
management science with scientific
management
classical school as the two are
different. Nevertheless, management
science intakes quantitative approach
evolved from
scientific management techniques’
applications (Sridhar, 2017). Due to
the organisational complexities, a
modern-day
manager requires more calculative
approach and information to take
rationale and effective decisions
(Luthans & Stewart,
1977). Hence, this approach proposes
the quantitative techniques for making
such decisions (Luthans & Stewart,
1977).
Different quantitative tools and high-
speed computers are used for dealing
with voluminous data to be computed
in a
manner so that information is analysed
to give appropriate options for making
decisions (Sridhar, 2017). Operations
Research Teams included scientists
from interdisciplinary groups during
the World War II so that complex
problems of
war could be tacked in appropriate
manner (Sridhar, 2017). Under this
approach, mathematical models were
constructed
to deal with real life problems while
altering the variables’ values so that
the effect of change could be
calculated for
making rationale decision-making
(Sridhar, 2017). Quality control tools,
inventory-control, PERT, CPM,
simulation
models, queuing theory, and linear
programming tools are used under this
approach because of the higher
emphasis on
rational and objective decision-making
(Sridhar, 2017).
“Objective rationality reflected the
capacity and readiness to undertake a
largely scientific, which is
unemotional
and based on reasoning linking the
means with ends while consider the
the impact of decision on environment
in totality
aspect” (Sridhar, 2017). Thus, it could
be argued that this approach is more
focusing on perfection and precession
by
expressing the relationship between
variables through quantitative mode.
However, widely the applications of
management science are evident in the
managerial practices especially in
planning and controlling activities,
but, yet it
could not be attributed to all types of
managerial process. For instance,
staffing, leading, and organizing by
nature are
more human instead of technical so
the quantified applications cannot be
applied to them in all aspects. This is
one of the
biggest limitations of management
science approach.
However, modern management
theories are more dramatic
developments since 1900 (Sridhar,
2017). Open systems,
managerial actions with degree of
contingency, organisational designs
shaped by wide range of individual
needs and the
usage of sophisticated quantitative
tools for managerial decisions are
some of the most important concepts
of the modern
management theory, having roots in
the traditionalist and neo-classical
theories (Sridhar, 2017).

2.3.5. Post-modern to Modernity

Era
In the modernity era, there is a shift
from post-modern management
(Bazrkar, Heravi and Abedzadeh,
2014). With the
capitalism's emergence as
manifestation modernism developed
on the concept of “reason” to deal
with micro and macro
level social influence (Rahman Serest,
1998). In short, modernity is the era of
knowledge of human and depends on
various principles of “best practices”
(Bazrkar et al. 2014). Michel
Foucault, Jean-Francois Lyotard,
Charles Jenks, Ahab
Hassan and Gilles Deleuze are
main thinkers of postmodern era
(Thompson, 2004). Within social
sciences,
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postmodernism often emphasizes on

the desires and instincts along with
factors such as reason and counter
reasoning and
motivation (Thompson, 2004).

2.3.6. Foucault Management

and Organization Theory

In is essential to examine the
subjectivation perspective of
Foucault's philosophy (Bazrkar et al.
2014). According to
Foucault (1994), “way a human being
turns him or herself into a subject” (p.
126). Various ways are used by
societies
while providing the distinct
prescriptions for people
transformation into subjects (Bazrkar
et al. 2014). Subjectivations is
a power technique that enables the
people transformation into subjects
(Bazrkar et al. 2014). Foucault (1994)
explained
subjects have two meaning, that
include firstly, “control and
dependence” and later “identity and
conscience”. Hence, it
reflects that subjects are treated as
controlled and dominated objects that
institutions and society wanted them
to be
(Bazrkar et al. 2014). Moreover,
identity and conscience tied subjects
although they are free and
independent, but society
and institutions construct their
identity and conscience (Bazrkar et
al. 2014). Additionally, Foucault
considered
individualizing technique in relation to
subjectivation that differs from power
technique as “oriented toward
individuals
and intended to rule them in a
continuous and permanent way”
(Foucault, 1994, p. 181). McKinlay
and Starkey (1998)
argued that Foucault Management
and Organization theory explains the
techniques and observation along
with the
performance appraisal and measuring
effectiveness in the private sector
modern organisations. Hence, in this
regard,
“Weber's metaphor of ‘iron cage’ of
modern rationality that simultaneously
materially enriches Western
civilization and
spiritually improves the capital
individual” (Thompson, 2004). In
other words, Foucault's work
considers technologies
important aspect for theoretical
construct that affect the subjects while
internationalization of power is
through modern
subject (Thompson, 2004).
Foucault is a clear thinker from
“postmodern” school by reflecting the
organisational contemporary life is not
always
“part of some modernist march to a
better tomorrow” (Thompson, 2004).
Another important development of
Foucault in
criticizing to organisational
rationalization by stating that, “the
development of disciplines of
knowledge shaped almost
wholly by the ‘disciplinary gaze’ of
surveillance” that formulates the
categorization of “individuals or
bodies … through
diverse and localized tactics of
ratiocination” within modern
organizations” (Clegg, 1998).
Nevertheless, discipline is
essential attribute of the Foucault's
theory that is effective in the
improvement, development, training
and transformation
of body so it could be adequately used
(Thompson, 2004). Modern man is
constructed through tool of modern
society
'discipline' which transformed him/her
in to productive, submissive, trained
and educated individual (Bazrkar et al.
2014).
Interestingly, early organisations
consider time and space in ensuring
human body is disciplined in
transforming into
docile body, thus, enclosure and
partitioning is vital in facilitating
communication between workers and
the authorities
(Thompson, 2004). On the other hand,
modern organisation uses
examination, normalizing judgement
and hierarchical
observation for training discipline to
create docile bodies (May, 1998).
These attributes bring effective
control and
maximum efficiency in the operations
through balanced power, discipline,
identity and consciences.

2.3.7. Management and

organisation studies- Pierre Bourdieu

Bourdieu’s work is regarded as
“theory of practice” that contributes to
the field of management and
organisation through
habitus, capital and field and it also
proved path-breaking into the area
of organisational field and social
capital
(Greenwood and Meyer, 2008). “His
work contributes towards the
overcoming of binary opposition
between objectivism
and subjectivism through a
structuralist constructivism” (Ozbilgin
and Tatli, 2005). Bourdieu used
applied stance as a
practical lens for setting strategy-as-
practice community (Splitter and
Seidl, 2011). Bourdieu argued that
culture and
society are mainstream to explain
structuralist and hermeneutic details
(Ozbilgin and Tatli, 2005). Moreover,
he explains
that habitus, practice and structure
have a relationship while power has a
vital role in conceptual planning of
structure
and habitus. The use of dualistic
transition of objectivism and
subjectivism has been criticized by
others stating that it is
a superficial attempt to bridge social
phenomena’s rational properties
(Ozbilgin and Tatli, 2005).
Interestingly, Bourdieu
advanced a case against
deconstructionist approach of post-
modernism within social sciences by
stating reality doesn't
change due to theory (Bourdieu,
2000).
Using the concept of habitus,
Bourdieu explained the internalized
mediating mechanism while
transformation and
changes in structural principle of
culture are due to observed autonomy
(Bourdieu, 2003). Furthermore,
Bourdieu (2003)
that argued reflective practices within
the research to consider both
epistemological stance and
methodological questions
related to social inquiry. This led to
the formulation of “an alternative
conceptual framework for multilevel
organisational
research” (Ozbilgin and Tatli, 2005).
The introduction of social bias and
logic of practice to negotiate abstract
structures
within organisations (Ozbilgin and
Tatli, 2005). Moreover, the relational
philosophy is refined by Bourdieu for
using
concept and actions of different type
for capital, fields and habitus
(Ozbilgin and Tatli, 2005). The
symbolic capital's
conceptualization interlinks the
objective and subjective features by
interlinking the two so that they
together develop the
shared meanings of worth and value
(Ozbilgin and Tatli, 2005). Bort and
Kieser (2011) argued that Bourdieu's
work is
not applicable to all parts of theory
because it offers fewer concepts that
are only sufficient to define
subcategories of
theories.
Hussain, N., Haque, A., Baloch, A. /
Journal of Yasar University, 2019, 14
(Special Issue), 156-169
166

3. Issues and Trends in Present

Management
Management theories are subject
matter view because there are
conflicting and contradictory
arguments in favour and
against all schools of thoughts. This
leads to a situation of which approach
to be used by the practitioners in
professional
work setting. There is no unified
management theory, which is the
reason Koontz (1961) argued “the
management jungle
theory”. Modern management
theorists aimed at higher level of
comprehensive and flexible approach,
thus, at certain
points it collides while other times
flow with the scientific and human
relations movement. Hence, it is very
unlikely to
agree upon unification of various
management schools of thoughts
because they have their own
distinctive viewpoints.
Sridhar (2017) concludes the reason
by stating that, “the problem lies in
semantics (everyone saying the same
thing but
using different terminology), tunnel
vision of schools own distinctive
viewpoint and differences in
definitions of
management” (p. 16).
Practitioners have realized the notion
that use of the specific approach or
style is not based on the rational alone
(Lee & Cassell, 2011). Context is the
most important attribute for selection
of approach to use the knowledge of
distinctive
fields as per the requirement and need
of the situation (Lee & Cassell, 2011).
With the emergence of globalization,
there
has been rapid growth in the
technologies and interconnectedness
that has posed several types of
challenges for the
managers to deal with the culturally
diversified workforce. Additionally, in
the recent trends, managers assess
themselves
as well as the environment in order to
select a particular style or approach.
However, it is also essential that
managers
also learn to de-select their style or
approach because with the change in
the dynamics, it is necessary to use a
different
approach. In other words, adaptability
is important factor in modern day
management. The latest challenge for
managers
also includes the ability to see what
suits the employees because having
the focus on suiting self would limit
their
functionality in the complex business
world.
Ganson (2013) argued that retention
of talent and survival of the business
are two important challenges for the
managers in the recent times. Viewing
those challenges, it is essential that the
managers focus on the balanced
approach
while dealing with the workers in the
dynamic and competitively intense
business environment. Nowadays,
managers
and practitioners are less worried
about the management’s
categorization into schools while
more focused on the
challenges arising in various
distinctive situations. However,
though, it appears that there is a
transcend from traditionalist
to modern management school but still
the principles of traditionalist and
human relations school serve the
foundation
for dealing with the challenges of
complexities, context and
connectedness. Management theories
have a problem in
providing proper explanation as well
as the predictions in subject matters
that are likely to change drastically in
real-life
situations (Sridhar, 2017). In modern
day, flux and multiplicity combined in
the dynamics that creates a challenge
for the
management theorists to deal with the
emerging concepts and subject that
have individual as well as collective
impact on
the work, worker and workplace.
Another inherent challenge is that
management’s applied science
nature could not be separated when
opting for
managerial and non-managerial
implications because all aspects
including, organisational design,
structure, personalities,
group dynamics and learning
capabilities vary. Hence, it is a
challenge for the managers to operate
with a balanced yet
effective approach. Not all
management theories’ applicability
could be used for all types of
organisations and individuals
in all types of situations. The trends of
recent times led to the focus on
comparative management theory that
focused on
cross-cultural studies and sub-
variations within the cultures such as
“across the boundaries between
nations or cultural
groupings of nations, as well as in the
different organisational context”
(Sridhar, 2017).

4. Conclusion
The scientific management school has
focused on the ‘one best way’ to do
task with economic and monetary
rewards.
This school focused on scientific
methods to measure the efficiency. On
the other hand, human relations school
largely
focused on human side of enterprise. It
focuses on individual needs that drives
people to do well at workplace. It is
also
concluded that despite changes in the
contemporary life still management
practices of the modern day revolve
around the
earlier schools of management
including; classical and neo-classical
schools of thoughts. There is a shift in
paradigm
from “task-orientation”, “efficiency”,
“structural patterns” and “one fit for
all” to “people-orientation”,
“effectiveness”,
“flexibility” and “situational stance”.
Nevertheless, although, the challenges
of the modern-day management
appear to
be largely altered to some due to
increased complexities, context and
connectedness, but the management
practices are
largely driven from the traditionalists
and human relations school of
thought. The modernity management
focused on the
cultural aspect such as bridging
objectivism and subjectivism through
fields, habitus and practices along
with the use of
power, discipline, conscience and
identity to ensure efficiency and
effectiveness.
Today the managers are using the
pragmatic approach to deal with the
contemporary management challenges
by
using the mix of strategy resulting
from the classical and neo-classical
schools of management by using the
situation as
a context, organisation as a system,
individual needs as part of
organisational humanism, and
contingent approach to
manage workforce through wide range
of managerial practices that are driven
from early schools of management.
Lastly, this is established that the
purpose of management theories
remained on the effective and efficient
management
of resources in order to retain best
talent and survive in the dynamic
environment by using the approach
and style that is
in the best of organisational interest.
The schools of management thought are theoretical frameworks for the study of
management. Each of the schools of management thought are based on somewhat
different assumptions about human beings and the organizations for which they work.
Since the formal study of management began late in the 19th century, the study of
management has progressed through several stages as scholars and practitioners
working in different eras focused on what they believed to be important aspects of good
management practice. Over time, management thinkers have sought ways to organize
and classify the voluminous information about management that has been collected and
disseminated. These attempts at classification have resulted in the identification of
management schools.
Disagreement exists as to the exact number of management schools. Different writers
have identified as few as three and as many as twelve. Those discussed below include
(1) the classical school, (2) the behavioral school, (3) the quantitative or management
science school, (4) the systems school, (5) and the contingency school. The formal
study of management is largely a twentieth-century phenomenon, and to some degree
the relatively large number of management schools of thought reflect a lack of
consensus among management scholars about basic questions of theory and practice.
Table 1 provides a brief summary of five major schools of management thought, their
approximate dates of origin, and their relative areas of emphasis. The following sections
discuss each of the management

Table 1
Five Major Schools of Management Thought

MANAGEMENT Beginning
Emphasis
SCHOOLS Dates
Managing workers and organizations more
CLASSICAL SCHOOL
efficiently.
   Scientific
1880s
Management
   Administrative
1940s
Management
   Bureaucratic
1920s
Management
BEHAVIORAL Understanding human behavior in the
SCHOOL organization.
   Human Relations 1930s
   Behavioral Science 1950s
QUANTITATIVE Increasing quality of managerial decision-
SCHOOL making through the application of mathematical
  Management 1940s and statistical methods.
MANAGEMENT Beginning
Emphasis
SCHOOLS Dates
Science
   Operations
1940s
Management
   Management 1950s—
Information Systems 1970s
SYSTEMS SCHOOL 1950s Understanding the organization as a system
that transforms inputs into outputs while in
constant interaction with its' environment.
CONTINGENCY 1960s Applying management principles and
SCHOOL processes as dictated by the unique
characteristics of each situation.
schools in more detail. In addition, three contemporary management perspectives are
discussed.

THE CLASSICAL SCHOOL

The classical school is the oldest formal school of management thought. Its roots pre-
date the twentieth century. The classical school of thought generally concerns ways to
manage work and organizations more efficiently. Three areas of study that can be
grouped under the classical school are scientific management, administrative
management, and bureaucratic management.

SCIENTIFIC MANAGEMENT.
In the late 19th century, management decisions were often arbitrary and workers often
worked at an intentionally slow pace. There was little in the way of systematic
management and workers and management were often in conflict. Scientific
management was introduced in an attempt to create a mental revolution in the
workplace. It can be defined as the systematic study of work methods in order to
improve efficiency. Frederick W. Taylor was its main proponent. Other major
contributors were Frank Gilbreth, Lillian Gilbreth, and Henry Gantt.
Scientific management has several major principles. First, it calls for the application of
the scientific method to work in order to determine the best method for accomplishing
each task. Second, scientific management suggests that workers should be scientifically
selected based on their qualifications and trained to perform their jobs in the optimal
manner. Third, scientific management advocates genuine cooperation between workers
and management based on mutual self-interest. Finally, scientific management
suggests that management should take complete responsibility for planning the work
and that workers' primary responsibility should be implementing management's plans.
Other important characteristics of scientific management include the scientific
development of difficult but fair performance standards and the implementation of a pay-
for-performance incentive plan based on work standards.
Scientific management had a tremendous influence on management practice in the
early twentieth century. Although it does not represent a complete theory of
management, it has contributed to the study of management and organizations in many
areas, including human resource management and industrial engineering. Many of the
tenets of scientific management are still valid today.

ADMINISTRATIVE MANAGEMENT.
Administrative management focuses on the management process and principles of
management. In contrast to scientific management, which deals largely with jobs and
work at the individual level of analysis, administrative management provides a more
general theory of management. Henri Fayol is the major contributor to this school of
management thought.
Fayol was a management practitioner who brought his experience to bear on the
subject of management functions and principles. He argued that management was a
universal process consisting of functions, which he termed planning, organizing,
commanding, coordinating, and controlling. Fayol believed that all managers performed
these functions and that the functions distinguished management as a separate
discipline of study apart from accounting, finance, and production. Fayol also presented
fourteen principles of management, which included maxims related to the division of
work, authority and responsibility, unity of command and direction, centralization,
subordinate initiative, and team spirit.
Although administrative management has been criticized as being rigid and inflexible
and the validity of the functional approach to management has been questioned, this
school of thought still influences management theory and practice. The functional
approach to management is still the dominant way of organizing management
knowledge, and many of Fayol's principles of management, when applied with the
flexibility that he advocated, are still considered relevant.

BUREAUCRATIC MANAGEMENT.
Bureaucratic management focuses on the ideal form of organization. Max Weber was
the major contributor to bureaucratic management. Based on observation, Weber
concluded that many early organizations were inefficiently managed, with decisions
based on personal relationships and loyalty. He proposed that a form of organization,
called a bureaucracy, characterized by division of labor, hierarchy, formalized rules,
impersonality, and the selection and promotion of employees based on ability, would
lead to more efficient management. Weber also contended that managers' authority in
an organization should be based not on tradition or charisma but on the position held by
managers in the organizational hierarchy.
Bureaucracy has come to stand for inflexibility and waste, but Weber did not advocate
or favor the excesses found in many bureaucratic organizations today. Weber's ideas
formed the basis for modern organization theory and are still descriptive of some
organizations.
THE BEHAVIORAL SCHOOL
The behavioral school of management thought developed, in part, because of perceived
weaknesses in the assumptions of the classical school. The classical school
emphasized efficiency, process, and principles. Some felt that this emphasis
disregarded important aspects of organizational life, particularly as it related to human
behavior. Thus, the behavioral school focused on trying to understand the factors that
affect human behavior at work.

HUMAN RELATIONS.
The Hawthorne Experiments began in 1924 and continued through the early 1930s. A
variety of researchers participated in the studies, including Clair Turner, Fritz J.
Roethlisberger, and Elton Mayo, whose respective books on the studies are perhaps
the best known. One of the major conclusions of the Hawthorne studies was that
workers' attitudes are associated with productivity. Another was that the workplace is a
social system and informal group influence could exert a powerful effect on individual
behavior. A third was that the style of supervision is an important factor in increasing
workers' job satisfaction. The studies also found that organizations should take steps to
assist employees in adjusting to organizational life by fostering collaborative systems
between labor and management. Such conclusions sparked increasing interest in the
human element at work; today, the Hawthorne studies are generally credited as the
impetus for the human relations school.
According to the human relations school, the manager should possess skills for
diagnosing the causes of human behavior at work, interpersonal communication, and
motivating and leading workers. The focus became satisfying worker needs. If worker
needs were satisfied, wisdom held, the workers would in turn be more productive. Thus,
the human relations school focuses on issues of communication, leadership, motivation,
and group behavior. The individuals who contributed to the school are too numerous to
mention, but some of the best-known contributors include Mary Parker Follett, Chester
Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human
relations school of thought still influences management theory and practice, as
contemporary management focuses much attention on human resource management,
organizational behavior, and applied psychology in the workplace.

BEHAVIORAL SCIENCE.
Behavioral science and the study of organizational behavior emerged in the 1950s and
1960s. The behavioral science school was a natural progression of the human relations
movement. It focused on applying conceptual and analytical tools to the problem of
understanding and predicting behavior in the workplace. However, the study of
behavioral science and organizational behavior was also a result of criticism of the
human relations approach as simplistic and manipulative in its assumptions about the
relationship between worker attitudes and productivity. The study of behavioral science
in business schools was given increased credence by the 1959 Gordon and Howell
report on higher education, which emphasized the importance to management
practitioners of understanding human behavior.
The behavioral science school has contributed to the study of management through its
focus on personality, attitudes, values, motivation, group behavior, leadership,
communication, and conflict, among other issues. Some of the major contributors to this
school include Douglas McGregor, Chris Argyris, Frederick Herzberg, Renais Likert,
and Ralph Stogdill, although there are many others.

THE QUANTITATIVE SCHOOL

The quantitative school focuses on improving decision making via the application of
quantitative techniques. Its roots can be traced back to scientific management.

MANAGEMENT SCIENCE AND MIS.

Management science (also called operations research) uses mathematical and
statistical approaches to solve management problems. It developed during World War II
as strategists tried to apply scientific knowledge and methods to the complex problems
of war. Industry began to apply management science after the war. George Dantzig
developed linear programming, an algebraic method to determine the optimal allocation
of scarce resources. Other tools used in industry include inventory control theory, goal
programming, queuing models, and simulation. The advent of the computer made many
management science tools and concepts more practical for industry. Increasingly,
management science and management information systems (MIS) are intertwined. MIS
focuses on providing needed information to managers in a useful format and at the
proper time. Decision support systems (DSS) attempt to integrate decision models,
data, and the decision maker into a system that supports better management decisions.

PRODUCTION AND OPERATIONS MANAGEMENT.

This school focuses on the operation and control of the production process that
transforms resources into finished goods and services. It has its roots in scientific
management but became an identifiable area of management study after World War II.
It uses many of the tools of management science.
Operations management emphasizes productivity and quality of both manufacturing and
service organizations. W. Edwards Deming exerted a tremendous influence in shaping
modern ideas about improving productivity and quality. Major areas of study within
operations management include capacity planning, facilities location, facilities layout,
materials requirement planning, scheduling, purchasing and inventory control, quality
control, computer integrated manufacturing, just-in-time inventory systems, and flexible
manufacturing systems.

SYSTEMS SCHOOL
The systems school focuses on understanding the organization as an open system that
transforms inputs into outputs. This school is based on the work of a biologist, Ludwig
von Bertalanffy, who believed that a general systems model could be used to unite
science. Early contributors to this school included Kenneth Boulding, Richard Johnson,
Fremont Kast, and James Rosenzweig.
The systems school began to have a strong impact on management thought in the
1960s as a way of thinking about managing techniques that would allow managers to
relate different specialties and parts of the company to one another, as well as to
external environmental factors. The systems school focuses on the organization as a
whole, its interaction with the environment, and its need to achieve equilibrium. General
systems theory received a great deal of attention in the 1960s, but its influence on
management thought has diminished somewhat. It has been criticized as too abstract
and too complex. However, many of the ideas inherent in the systems school formed
the basis for the contingency school of management.

CONTINGENCY SCHOOL
The contingency school focuses on applying management principles and processes as
dictated by the unique characteristics of each situation. It emphasizes that there is no
one best way to manage and that it depends on various situational factors, such as the
external environment, technology, organizational characteristics, characteristics of the
manager, and characteristics of the subordinates. Contingency theorists often implicitly
or explicitly criticize the classical school for its emphasis on the universality of
management principles; however, most classical writers recognized the need to
consider aspects of the situation when applying management principles.
The contingency school originated in the 1960s. It has been applied primarily to
management issues such as organizational design, job design, motivation, and
leadership style. For example, optimal organizational structure has been theorized to
depend upon organizational size, technology, and environmental uncertainty; optimal
leadership style, meanwhile, has been theorized to depend upon a variety of factors,
including task structure, position power, characteristics of the work group,
characteristics of individual subordinates, quality requirements, and problem structure,
to name a few. A few of the major contributors to this school of management thought
include Joan Woodward, Paul Lawrence, Jay Lorsch, and Fred Fiedler, among many
others.

CONTEMPORARY "SCHOOLS"
OF MANAGEMENT THOUGHT
Management research and practice continues to evolve and new approaches to the
study of management continue to be advanced. This section briefly reviews two
contemporary approaches: total quality management (TQM) and the learning
organization. While neither of these management approaches offer a complete theory of
management, they do offer additional insights into the management field.
TOTAL QUALITY MANAGEMENT.
Total quality management (TQM) is a philosophy or approach to management that
focuses on managing the entire organization to deliver quality goods and services to
customers. This approach to management was implemented in Japan after World War II
and was a major factor in their economic renaissance. TQM has at least four major
elements. Employee involvement is essential in preventing quality problems before they
occur. A customer focus means that the organization must attempt to determine
customer needs and wants and deliver products and services that address them.
Benchmarking means that the organization is always seeking out other organizations
that perform a function or process more effectively and using them as a standard, or
benchmark, to judge their own performance. The organization will also attempt to adapt
or improve the processes used by other companies. Finally, a philosophy of continuous
improvement means that the organization is committed to incremental changes and
improvements over time in all areas of the organization. TQM has been implemented by
many companies worldwide and appears to have fostered performance improvements
in many organizations. Perhaps the best-known proponent of this school of
management was W. Edwards Deming.

LEARNING ORGANIZATION.
The contemporary organization faces unprecedented environmental and technological
change. Thus, one of the biggest challenges for organizations is to continuously change
in a way that meets the demands of this turbulent competitive environment. The
learning organization can be defined as one in which all employees are involved in
identifying and solving problems, which allows the organization to continually increase
its ability to grow, learn, and achieve its purpose. The organizing principle of the
learning organization is not efficiency, but problem solving. Three key aspects of the
learning organization are a team-based structure, empowered employees, and open
information. Peter Senge is one of the best-known experts on learning organizations.

Read

more: https://www.referenceforbusiness.com/management/Log-Mar/Management-

Thought.html#ixzz7qqnEOFJ8

The History of Management

The concept of management has been around for thousands of years. According to
Pindur, Rogers, and Kim (1995), elemental approaches to management go back at least
3000 years before the birth of Christ, a time in which records of business dealings were
first recorded by Middle Eastern priests. Socrates, around 400 BC, stated that
management was a competency distinctly separate from possessing technical skills and
knowledge (Higgins, 1991). The Romans, famous for their legions of warriors led by
Centurions, provided accountability through the hierarchy of authority. The Roman
Catholic Church was organized along the lines of specific territories, a chain of
command, and job descriptions. During the Middle Ages, a 1,000 year period roughly
from 476 AD through 1450 AD, guilds, a collection of artisans and merchants provided
goods, made by hand, ranging from bread to armor and swords for the Crusades. A
hierarchy of control and power, similar to that of the Catholic Church, existed in which
authority rested with the masters and trickled down to the journeymen and apprentices.
These craftsmen were, in essence, small businesses producing products with varying
degrees of quality, low rates of productivity, and little need for managerial control
beyond that of the owner or master artisan.

The Industrial Revolution, a time from the late 1700s through the 1800s, was a period of
great upheaval and massive change in the way people lived and worked. Before this
time, most people made their living farming or working and resided in rural
communities. With the invention of the steam engine, numerous innovations occurred,
including the automated movement of coal from underground mines, powering factories
that now mass-produced goods previously made by hand, and railroad locomotives that
could move products and materials across nations in a timely and efficient manner.
Factories needed workers who, in turn, required direction and organization. As these
facilities became more substantial and productive, the need for managing and
coordination became an essential factor. Think of Henry Ford, the man who developed a
moving assembly line to produce his automobiles. In the early 1900s, cars were put
together by craftsmen who would modify components to fit their product. With the
advent of standardized parts in 1908, followed by Ford’s revolutionary assembly line
introduced in 1913, the time required to build a Model T fell from days to just a few
hours (Klaess, 2020). From a managerial standpoint, skilled craftsmen were no longer
necessary to build automobiles. The use of lower-cost labor and the increased
production yielded by moving production lines called for the need to guide and manage
these massive operations (Wilson, 2015). To take advantage of new technologies, a
different approach to organizational structure and management was required.

The Scientific Era – Measuring Human Capital

With the emergence of new technologies came demands for increased productivity and
efficiency. The desire to understand how to best conduct business centered on the idea
of work processes. That is, managers wanted to study how the work was performed and
the impact on productivity. The idea was to optimize the way the work was done. One of
the chief architects of measuring human output was Frederick Taylor. Taylor felt that
increasing efficiency and reducing costs were the primary objectives of management.
Taylor’s theories centered on a formula that calculated the number of units produced in
a specific time frame (DiFranceso and Berman, 2000). Taylor conducted time studies to
determine how many units could be produced by a worker in so many minutes. He used
a stopwatch, weight measurement scale, and tape measure to compute how far materials
moved and how many steps workers undertook in the completion of their tasks (Wren
and Bedeian, 2009). Examine the image below – one can imagine Frederick Taylor
standing nearby, measuring just how many steps were required by each worker to hoist
a sheet of metal from the pile, walk it to the machine, perform the task, and repeat,
countless times a day.  Beyond Taylor, other management theorists including Frank and
Lilian Gilbreth, Harrington Emerson, and others expanded the concept of management
reasoning with the goal of efficiency and consistency, all in the name of optimizing
output. It made little difference whether the organization manufactured automobiles,
mined coal, or made steel, the most efficient use of labor to maximize productivity was
the goal.

  

The necessity to manage not just worker output but to link the entire organization
toward a common objective began to emerge. Management, out of necessity, had to
organize multiple complex processes for increasingly large industries. Henri Fayol, a
Frenchman, is credited with developing the management concepts of planning,
organizing, coordination, command, and control (Fayol, 1949), which were the
precursors of today’s four basic management principles of planning, organizing, leading,
and controlling.

Employees and the Organization

With the increased demand for production brought about by scientific measurement,
conflict between labor and management was inevitable. The personnel department,
forerunner of today’s human resources department, emerged as a method to slow down
the demand for unions, initiate training programs to reduce employee turnover, and to
acknowledge workers’ needs beyond the factory floor. The idea that to increase
productivity, management should factor the needs of their employees by developing
work that was interesting and rewarding burst on the scene (Nixon, 2003) and began to
be part of management thinking. Numerous management theorists were starting to
consider the human factor. Two giants credited with moving management thought in
the direction of understanding worker needs were Douglas McGregor and Frederick
Herzberg. McGregor’s Theory X factor was management’s assumption that workers
disliked work, were lazy, lacked self-motivation, and therefore had to be persuaded by
threats, punishment, or intimidation to exert the appropriate effort. His Theory Y factor
was the opposite. McGregor felt that it was management’s job to develop work that gave
the employees a feeling of self-actualization and worth. He argued that with more
enlightened management practices, including providing clear goals to the employees
and giving them the freedom to achieve those goals, the organization’s objectives and
those of the employees could simultaneously be achieved (Koplelman, Prottas, & Davis,
2008).

Frederick Herzberg added considerably to management thinking on employee behavior

with his theory of worker motivation. Herzberg contended that most management
driven motivational efforts, including increased wages, better benefits, and more
vacation time, ultimately failed because while they may reduce certain factors of job
dissatisfaction (the things workers disliked about their jobs), they did not increase job
satisfaction. Herzberg felt that these were two distinctly different management
problems. Job satisfaction flowed from a sense of achievement, the work itself, a feeling
of accomplishment, a chance for growth, and additional responsibility (Herzberg, 1968).
One enduring outcome of Herzberg’s work was the idea that management could have a
positive influence on employee job satisfaction, which, in turn, helped to achieve the
organization’s goals and objectives.

The concept behind McGregor, Herzberg, and a host of other management theorists was
to achieve managerial effectiveness by utilizing people more effectively. Previous
management theories regarding employee motivation (thought to be directly correlated
to increased productivity) emphasized control, specialized jobs, and gave little thought
to employees’ intrinsic needs. Insights that considered the human factor by utilizing
theories from psychology now became part of management thinking. Organizational
changes suggested by management thinkers who saw a direct connection between
improved work design, self-actualization, and challenging work began to take hold in
more enlightened management theory.

The Modern Era

Koontz and O’Donnell (1955) defined management as “the function of getting things
done through others (p. 3). One commanding figure stood above all others and is
considered the father of modern management (Edersheim, (2007). That individual was
Peter Drucker. Drucker, an author, educator, and management consultant is widely
credited with developing the concept of Managing By Objective or MBO (Wren &
Bedeian, 2009). Management by Objective is the process of defining specific objectives
necessary to achieve the organization’s goals. The beauty of the MBO concept was that it
provided employees a clear view of their organization’s objectives and defined their
individual responsibilities. For example, let’s examine a company’s sales department.
One of the firm’s organizational goals might be to grow sales (sometimes referred to as
revenue) by 5% the next fiscal year. The first step, in consultation with the appropriate
people in the sales department, would be to determine if that 5% goal is realistic and
attainable. If so, the 5% sales growth objective is shared with the entire sales department
and individuals are assigned specific targets. Let’s assume this is a regional firm that has
seven sales representatives. Each sales rep is charged with a specific goal that, when
combined with their colleagues, rolls up to the 5% sales increase. The role of
management is now to support, monitor, and evaluate performance. Should a problem
arise, it is management’s responsibility to take corrective action. If the 5% sales
objective is met or exceeded, rewards can be shared. This MBO cycle applies to every
department within an organization, large or small, and never-ending.

The MBO Process

Drucker’s contributions to modern management thinking went far beyond the MBO
concept. Throughout his long life, Drucker argued that the singular role of business was
to create a customer and that marketing and innovation were its two essential functions.
Consider the Apple iPhone. From that single innovation came thousands of jobs in
manufacturing plants, iPhone sales in stores around the globe, and profits returned to
Apple, enabling them to continue the innovation process. Another lasting Drucker
observation was that too many businesses failed to ask the question “what business are
we in?” (Drucker, 2008, p. 103). On more than one occasion, a company has faltered,
even gone out of business, after failing to recognize that their industry was changing or
trying to expand into new markets beyond their core competency. Consider the fate of
Blockbuster, Kodak, Blackberry, or Yahoo.

Management theories continued to evolve with additional concepts being put forth by
other innovative thinkers. Henry Mintzberg is remembered for blowing holes in the idea
that managers were iconic individuals lounging in their offices, sitting back and
contemplating big-picture ideas. Mintzberg observed that management was hard work.
Managers were on the move attending meetings, managing crises, and interacting with
internal and external contacts. Further, depending on the exact nature of their role,
managers fulfilled multiple duties including that of spokesperson, leader, resource
allocator, and negotiator (Mintzberg, 1973). In the 1970s, Tom Peters and Robert
Waterman traveled the globe exploring the current best management practices of the
time. Their book, In Search of Excellence, spelled out what worked in terms of
managing organizations. Perhaps the most relevant finding was their assertion that
culture counts. They found that the best managed companies had a culture that
promoted transparency, openly shared information, and effectively managed
communication up and down the organizational hierarchy (Allison, 2014). The well
managed companies Peterson and Waterman found were built in large part on the
earlier managerial ideas of McGregor and Herzberg. Top-notch organizations succeeded
by providing meaningful work and positive affirmation of their employees’ worth.

Others made lasting contributions to modern management thinking. Steven Covey’s The

Seven Habits of Highly Successful People, Peter Senge’s The Fifth Discipline, and Jim
Collins and Jerry Porras’s Built to Last are among a pantheon of bestselling books on
management principles. Among the iconic thinkers of this era was Michael Porter.
Porter, a professor at the Harvard Business School, is widely credited with taking the
concept of strategic reasoning to another level. Porter tackled the question of how
organizations could effectively compete and achieve a long-term competitive advantage.
He contended that there were just three ways a firm could gain such advantage: 1) a
cost-based leadership – become the lowest cost producer, 2) valued-added leadership –
offer a differentiated product or service for which a customer is willing to pay a
premium price, and 3) focus – compete in a niche market with laser-like fixation (Dess
& Davis, 1984). Name a company that fits these profiles: How about Walmart for low-
cost leadership. For value-added leadership, many think of Apple. Focus leadership is a
bit more challenging. What about Whole Foods before being acquired by Amazon?
Porter’s thinking on competition and competitive advantage has become timeless
principles of strategic management still used today. Perhaps Porter’s most significant
contribution to modern management thinking is the connection between a firm’s choice
of strategy and its financial performance. Should an organization fail to select and
properly execute one of the three basic strategies, it faces the grave danger of being
stuck in the middle – its prices are too high to compete based on price or its products
lack features unique enough to entice customers to pay a premium price. Consider the
fate of Sears and Roebuck, J.C. Penny, K-Mart, and Radio Shack, organizations that
failed to navigate the evolving nature of their businesses.
 

The 21st Century

Managers in the 21st century must confront challenges their counterparts of even a few
years ago could hardly imagine. The ever-growing wave of technology, the impact of
artificial intelligence, the evolving nature of globalization, and the push-pull tug of war
between the firm’s stakeholder and shareholder interests are chief among the demands
today’s managers will face.

Technology

          Much has been written about the exponential growth of technology. It has been
reported that today’s iPhone has more than 100,000 times the computing power of the
computer that helped land a man on the moon (Kendall, 2019). Management today has
to grapple with the explosion of data now available to facilitate business decisions. Data
analytics, the examination of data sets, provides information to help managers better
understand customer behavior, customer wants and needs, personalize the delivery of
marketing messages, and track visits to online web sites. Developing an understanding
of how to use data analytics without getting bogged down will be a significant challenge
for the 21st century manager. Collecting, organizing, utilizing data in a logical, timely,
and cost-effective manner is creating an entirely new paradigm of managerial
competence.  In addition to data analytics, cybersecurity, drones, and virtual reality are
new, exciting technologies and offer unprecedented change to the way business is
conducted. Each of these opportunities requires a new degree of managerial competence
which, in turn, creates opportunities for the modern-day manager.

Artificial Intelligence

Will robots replace workers? To be sure, this has already happened to some degree in
many industries. However, while some jobs will be lost to AI, a host of others will
emerge, requiring a new level of management expertise. AI has the ability to eliminate
mundane tasks and free managers to focus on the crux of their job. Human skills such as
empathy, teaching and coaching employees, focusing on people development and
freeing time for creative thinking will become increasingly important as AI continues to
develop as a critically important tool for today’s manager.

Globalization

Globalization has been defined as the interdependence of the world’s economies and has
been on a steady march forward since the end of World War II. As markets mature,
more countries are moving from the emerging ranks and fostering a growing middle
class of consumers. This rising new class has the purchasing power to acquire goods and
services previously unattainable, and companies around the globe have expanded
outside their national borders to meet those demands. Managing in the era of
globalization brought a new set of challenges. Adapting to new cultures, navigating the
puzzle of different laws, tariffs, import/export regulations, human resource issues,
logistics, marketing messages, supply chain management, currency, foreign investment,
and government intervention are among the demands facing the 21st century global
manager. Despite these enormous challenges, trade among the world’s nations has
grown at an unprecedented rate. World trade jumped from around 20% of world GDP in
1960 to almost 60% in 2017.

Trade as a Percent of Global GDP

Despite its stupendous growth, globalization has its share of critics. Chief among them is
that globalization has heightened the disparity between the haves and the have-nots in
society. Opponents of globalization argue that in many cases, jobs have been lost to
developing nations with lower prevailing wage rates. Additionally, inequality has
worsened with the wealthiest consuming a disproportionate percent of the world’s
resources (Collins, 2015). Proponents counter that on the macro level, globalization
creates more jobs than are lost, more people are lifted out of poverty, and expansion
globally enables companies to become more competitive on the world stage.

Since the election of Donald Trump as President of the United States in 2016 and Great
Britain’s decision to exit the European Union, the concept of nationalism has manifested
in many nations around the globe. Traditional obstacles to expanding outside one’s
home country plus a host of new difficulties such as unplanned trade barriers, blocked
acquisitions, and heightened scrutiny from regulators have added to the burdens of
managing in the 21st century. The stage has been set for a new generation of managers
with the skills to deal with this new, complex business environment. In the 20th
century, the old command and control model of management may have worked.
However, today, with technology, artificial intelligence, globalization, nationalism, and
multiple other hurdles, organizations will continue the move toward a flatter, more agile
organizational structure run by managers with the appropriate 21st century skills.

Stakeholder versus Shareholder

What is a stakeholder in a business, and what is a shareholder? The difference is
important. Banton (2020) noted that shareholders, by owning even a single share of
stock, has a stake in the company. The shareholder first view was put forth by the
economist Milton Friedman (1962) who stated that “There is one and only one social
responsibility of business – to use its resources and engage in activities designed to
increase its profits so long as it engages in open and free competition, without deception
or fraud” (p. 133). In other words, maximize profits so long as the pursuit of profit is
done so legally and ethically. An alternate view is that a stakeholder has a clear interest
in how the company performs, and this interest may stem from reasons other than the
increase in the value of their share(s) of stock. Edward Freeman (1999), a philosopher
and academic advanced his stakeholder theory contending that the idea was the success
of an organization relied on its ability to manage a complex web of relationships with
several different stakeholders. These stakeholders could be an employee, a customer, an
investor, a supplier, the community in which the firm operates, and the government that
collects taxes and stipulates the rules and regulations by which the company must
operate. Which theory is correct? According to Emiliani (2001), businesses in the United
States typically followed the shareholder model, while in other countries, firms tend to
follow the stakeholder model. Events in the past decade have created a shift toward the
shareholder model in the United States. The financial crisis of 2008/2009, global
warming, the debate between globalization and nationalism, the push for green energy,
a spate of natural disasters, and the world-wide impact of health crises such as AIDS,
Ebola, the SARS virus and the Coronavirus have fostered a move toward a redefinition
of the purpose of a corporation. In the coming decades, those companies that thrive and
grow will be the ones that invest in their people, society, and the communities in which
they operate. The managers of the 21st century must build on the work of those that
proceeded them. Managers in the 21st century would do well if they heeded the words
famously used by Isaac Newton who said “If I have seen a little further, it is because I
stand on the shoulders of giants” (Harel, 2012).

Approaches to Management:
Classical, Modern, Scientific and
System Approach
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Some of the approaches to management are:-

1.Quantitative Approach 2. IT Approach to Management 3. Systems

Approach 4. Contingency or Situational Approach 5. Scientific
Management approach 6. Management Process or Administrative
Management Approach 7. Human Relations Approach 8. Behavioural
Science Approach.

Everything you need to know about the approaches to management.

In recent years, as the interest, needs and importance of
management have grown; different approaches and viewpoints to
the study of management have come into being.
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Management affecting people, technology, values and human wants

has attracted the attention of psychologists, anthropologists,
sociologists, mathematicians, economists, politicians, scientists,
physicists, biologists, business administration scholars and even
practising managers.
As a result, various schools of management thought, each employing
certain beliefs, views and disciplines, have come into existence.

Approaches to
Management: Classical, Modern, Scientific,
System and Behavioural Science Approach
Approaches to Management – Developed to Explain
the Nature and Technique of Managerial Practices
A number of approaches have been developed to explain the nature
and technique of managerial practices.
They are briefly described below:
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1. The Empirical or Case Approach Management by Custom

School:
This is based on the belief that, experience is the best guide to
knowledge. This approach analyses management by studying the case
histories of successful managers. A study of the successes and failures
of outstanding managers is made. Whenever a problem arises, the
managers would seek guidance by referring to the experience of those
managers who would have solved similar problems. Thus, no new
strategy is evolved and little effort is made to blaze new trails. Further,
it is forgotten that what fits one enterprise may not fit another.
2. The Interpersonal Behaviour Approach (Behaviour
School):
Since management involves getting things done through people, this
approach concentrates on the human aspects of management. This
school believes that when people work together to accomplish
objectives, people should understand one another. This seeks to solve
problems by applying psychology to management. Thus, this approach
lays emphasis on the importance of leadership, motivation of people at
work and the influence of work environment.
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3. The Group Behaviour Approach (Social School):

This approach is concerned primarily with the behaviour among
individuals. Persons belonging to a particular social group have
common feelings and attitudes and they form an informal
organization. Problems created by them cannot be resolved by
authorities in the formal organization. This school of thought,
therefore, attaches importance to the need for cooperation and
positive interaction among such groups of people so that work flow
will be smooth.
4. The Operational Approach (Management Process School):
This approach views management as an activity based on certain
unique management functions. Management is regarded as a process
for getting things done through the functions of planning, organizing,
staffing, leading and controlling. It involves coordination of human
and material resources.
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These functions of management are universal regardless of the type of

enterprise. According to this school of thought, management no doubt
makes use of other social and biological sciences; but they are made
use of only to the extent they are relevant and that the fundamental
functions of management as stated above constitute the core of
management study.
5. The Decision Theory Approach:
This approach concentrates on the decision making function of
management. According to this, the central focus of management is on
decision making. The decision of what to achieve, and how to achieve
it are the real challenges before a manager. It is concerned not only
with making of decisions but also with everything that precedes a
decision and everything that follows it.
6. The Communication Centre Approach:
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This approach views management as a centre receiving information,

processing it and disseminating it thus emphasizing the role of
communication in management of business.
7. Systems Approach to Management (Systems Management
School):
This approach regards an enterprise as a system. A system is
composed of related and interdependent elements forming a unitary
whole. Every system is made up of several subsystems. Similarly an
organization is also viewed as a system made up of several parts in the
form of departments while each department is independent and
accomplishes specific predetermined goals; all are coordinated by the
top management.
For example, to decide on expanding the productive capacity, data
from other departments in charge of product planning, market
research, finance etc., are collected because the action of one
department influences the action of others. Thus, the main focus of
systems approach is on the interdependence and interrelatedness of
the various subsystems. Each aspect should not be studied in isolation
but must be examined in relation to the entire system as a whole.
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8. The Mathematical or ‘Management Science’ Approach:

This school believes that managing or planning or decision-making
can be expressed in mathematical symbols and relationship. Modern
managers face problems arising out of increase in the size and
complexity of organizational structures. In the United States of
America and other industrially advanced countries, executives are
turning increasingly to computer applications for finding solution to
their problems. The scientific and technological advance has thus
brought management and mathematics closer to each other.
The main features of this school of thought are:
i. Since management is concerned with problem solving, it has to
make use of mathematical tools and techniques.
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ii. The different problems are capable of being quantified and

expressed in the form of models (equations).
iii. Management problems can be described in mathematical symbols.
Operations Research, mathematical tools, simulation and model
building are the basic methodologies developed by this school of
thought. But with all these advantages, one must be conscious of the
limitations of this school of thought. Mathematical models can never
replace sound judgement. They can at best serve as tools helping the
process of judgement. There are other complicated areas of
management which involve people. They cannot be reduced to any
mathematical formula. Human factor in management is no less
important.
9. The Socio Technical Systems Approach (E.L. Trist):
This approach is based on the belief that personal attitudes and group
behaviour are influenced by the technical system in which people
work. This approach thus lays emphasis on production, office
operations, etc. Change in the technical system is called for, if the
social and technical systems do not go hand in hand.
10. Contingency Approach:
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This approach is the very latest approach of existing approaches.

According to this approach, there is no single way or best way to
address a given problem situation. This approach is opposed to one
size fits all formula approach. Managers should not labour under the
notion that managerial principles and techniques have universal
applicability.
They have to deal with different situations differently. The approach
one should adopt depends on characteristics or requirements of the
situation in which a problem crops up. For example, when there is low
productivity in a facility, classical theory prescribed higher wages for
workers while neo-classical theory favours enhancing the morale,
motivation and job satisfaction of workers.
But manager pursuing a contingency approach shall not apply either
theory for the entire manpower. He would increase the wage for low
skilled and unskilled workers while he would introduce alternative
work options, participative management and employee empowerment
for talented employees.
Similarly autocratic leadership is workable in the case of illiterate
workers whereas, participative leadership may work wonders in the
case of skilled and talented workers and lease faire leadership is
suitable to employees in R&D wing. Likewise financial incentive is
more appropriate for employees at the lower level of organizational
hierarchy while, non-financial incentives like ESOP, variable pay,
career advancements and so on may prove to be highly effective for
knowledge workers and employees at the higher echelons of
management.
Thus, contingency approach with situational emphasis and integration
of environment into management and practice seems more
appropriate in the contemporary context. However, critics point out
that there is no theoretical base for contingency approach. Further, it
is stated that efficacy of contingency approach depends on capability
of managers to understand a given situation and choose appropriate
technique instead of situation itself.

Approaches to Management – Quantitative Approach,

IT Approach, Systems Approach and Contingency or
Situational Approach
There are several approaches to understand what management is. We
can understand how managers take decisions through the decision-
making approach. Empirical or case study approach helps us to know
what management is through the experiences of various successful
managers. Even the failure stories unfold certain mystery and this
forms a part of management lessons.
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Contingency or situational approach explains the managerial practices

in the event of a contingency or situation. Socio-technical system
approach explains that every organisation has a social and a technical
dimension. It is important to design managerial roles considering the
technical and social dimensions in the organisation.
Mere technology cannot make the organisations successful. This
approach states that the aspirations of the individual employees and
also of the society at large need to be considered. Systems approach
considers that functions of management are sub-systems and the
organisation is a system where all these functions are interrelated.
This approach is explained further here.
Modern management theory can be traced from 1960s to today and it
can be viewed more closely through three contemporary approaches to
management, i.e., quantitative approach, simulation approach and
contingency or situational approach.
1. Quantitative Approach:
Morale and productivity though are closely related, there are other
factors as well that impact productivity. Quantitative approach
explores the linkage between man and machine with a focus on fine-
tuning the principles of management. The ownership and
management is separated. The hired management professionals are
given more control and this has resulted in the wider use of scientific
methods of management.
Quantitative approach is also called mathematical approach or
management science approach. This involves use of mathematical or
quantitative approach for decision making more often called
Operations Research.
This considers management as a system of mathematical models and
processes and involves interdisciplinary approach. Here, managerial
decisions are based more on the scientific techniques for providing
quantitative base. Here management is viewed as a system of logical
process.
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Techniques such as – linear programming, simulation, queuing,

project crashing, etc., extensively use mathematical symbols,
relationships and models in analysing the management problems such
as – cost minimisation, profit maximisation, resource optimization,
etc.
This approach has one serious limitation. Not all management
problems can be expressed in terms of mathematical models and these
models cannot be considered to provide judicious decisions. As Harold
Koontz observed, mathematics is just a tool and it cannot be viewed as
school or a separate approach to management theory.
2. IT Approach to Management:
The current trend is that every manager embraces Information
Technology (IT) solutions for delivering quality services with
improved administration. IT empowers everyone to perform
effectively and efficiently, for instance, retailers adopt new
technologies, such as – the self-scanners; Indian Railways adopt surge
pricing wherein the railway tickets cost more when there is heavy
demand – if the demand is less, the tickets cost less.
Increasing volumes and value of e-transactions these days, is an
indication of wide acceptance of IT in both government and non-
government circles including social sector. Automation is the current
buzzword everywhere whether the organisation is in the agriculture,
manufacturing or service sector.
In other words, IT has become an integral part of our lives. Virtually
there is no sector which is not revolutionized by IT. IT is extensively
deployed to develop IT applications, business solutions and devices.
The extent has been so widespread that one can switch on the air
conditioner even while sitting at the office.
Every organisation, irrespective of its size, today earmarks certain
budget to embrace the new IT technologies so that they can delight
their customers with quality service. IT approach to management has
directly triggered cost reduction and profit maximisation besides
increasing service efficiency.
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Social media, mobile technologies, analytics and cloud technologies

(SMAC) are the leading technologies in IT space besides artificial
intelligence, big data analytics, machine learning, robotics, etc.
IT approach to management has contributed to improvement in
quality of life, shortening of transaction time, large number of jobs in
both software and hardware. IT approach is also known for loss of
jobs, but, it is observed that new jobs and software are created. This
means that everyone must keep learning about new IT technologies on
a continuing basis.
Self-service kiosks in restaurants, airports, retail establishments, etc.,
facilitate the customer to complete the transactions faster. Companies
like Uber and Ola revolutionised the erstwhile overcrowded transport
market through integration of customers, channel partners (Auto/cab
drivers are called channel partners) and other regulatory agencies
through Global Positioning System (GPS), one of the super formats of
IT approach to Management.
The IT approach to management delivers a unique experience to every
stakeholder including customer, employee, team leaders,
management, owners, and general public and regulatory agencies.
3. Systems Approach:
One of the modern approaches to understand management is the
systems approach. Here, the organisation is viewed as a system. Every
department of the organisation is considered as a sub-system. It is also
possible that every department can be viewed as a system and every
section in the department can be viewed as a sub-system. Thus,
systems approach helps to study the basic features and functions of
the organisation to its minutest detail.
A system, by concept, is a collection of interrelated parts called sub-
systems, which constitute one whole unit. Systems approach facilitates
the study of each of these parts in detail to have a close understanding
of the whole system. Human body is often cited as the best example
for a system.
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In human body we have different sub-systems such as – digestive

system, central nervous system, and so on. Every part of the body such
as – the eyes, brain, heart, and so forth, can also be viewed as a sub-
system. A study of each of the parts of the body is necessary to
understand the whole body.
From the systems point of view, the functions of management are –
i. Interlinked.
ii. Interdependent.
iii. Complex and intertwined that each function of management can be
found in other functions.

Figure 2.3 explains the feature of interdependence among the

functions of management. Though, in the chart, it is shown that
planning is the first function and control is the last function, in reality,
there is no such starting and ending function.
The first task is the identification of managerial problem and the last
one is reaching the solution for a given problem. The dotted line
represents feedback line. In the process of control, if there is any
deviation from the plans or targets, it can be corrected by verifying
each of the earlier functions and identifying where things could have
gone wrong.
In Figure 2.4, the letters P (planning), O (organising), S (staffing), D
(directing), and C (controlling) represent the functions of the
manager. It shows that in the planning function (shown horizontally
across or vertically down), there are other functions of management
such as – organising, staffing, directing, and controlling. The letter X
shows the overlapping area, and hence, it is to be ignored. Figure 2.3
shows that each of the management functions can be f6und in the
other functions also.
For instance, the planning and control functions are inseparable. Any
attempt to control without plans is meaningless. It is because; plans
form the basis for control. In other words, there is ‘planning in control’
and there is also ‘control in planning’. Similarly, there is ‘organising in
planning’, and also, vice versa.
With the result, the manager cannot say, ‘Yes, the planning function is
over, now I can start the organising function’. The manager has to
carry out some of the functions simultaneously while keeping track of
other functions.
Chester Barnard and H. Simon are the pioneers who advocated for
systems approach to management. Here, organisations are viewed as
open and organic system and every department in the organisation is
viewed as a subsystem. All subsystems interact and are
interdependent. According to systems approach, management is
viewed as a system that is made of subsystems integrated into a unity
or orderly totality.
Systems approach is so flexible that it can be comfortably applied to
every context. For instance, the word economy can be viewed a system
and every nation can be viewed as a subsystem. Similarly, a particular
village can be viewed as a system and every household there in can be
viewed as subsystem. An industry is a system and every firm or a
company operating therein is a subsystem.
A firm or company can also be viewed as a system and the subsystems
there include HR, Finance, Marketing, R&D, Operations, IT, etc. The
system works based on the information, material or energy from other
subsystems as inputs. The input so received from each system gets
processed and moves to other systems as output.
The overall effectiveness of each system is determined by the
effectiveness of the subsystems. Systems approach facilitates a close
examination of problem in each sub-system and organization-wide
solutions can be designed and delivered better where the process
approach fails. However, this approach also is criticized for not
providing any tool or technique for problem solving and thus
considered to be abstract and vague.
4. Contingency or Situational Approach:
Organisations behave as situation demands. In other words, decision
making is contingent on situations. As situation changes, the solutions
also differ. This is the latest approach to problem solving. Case study
approach which is widely followed in today’s premier business schools
across the world has emanated from this thinking. Management
problems vary with situation and require to be handled differently as
situation demands. Where the problems are of repetitive nature, this
approach proves very useful.
However, all problems are not likely of the same nature and hence this
approach also has limitations. The functioning of organisations is not
a matter of the manager’s choice. It is contingent on external or
internal environment or both. Under this approach, managers identify
the variables that critically influence managerial behavior in particular
and organisational performance in general, and address the problems
associated with these variables. This way, it is an improvement over
the systems approach.

Approaches to Management – Top 9 Approaches

1. Scientific Management approach.
2. Management Process or Administrative Management approach.
3. Human Relations approach.
4. Behavioural Science approach.
5. Quantitative or Mathematical approach.
6. Systems approach.
7. Contingency approach.
8. Operational approach.
9. Empirical approach.
1. Scientific Management Approach:                                
The industrial revolution in England gave an immense impetus for the
scientific management approach. It brought about such an extra
ordinary mechanisation of industry that it necessitated the
development of new management principles and practices. Bringing
groups of people together for the purpose of working in the factory
posed problems for the factory owners.
The establishment of formal organisation structure, formal lines of
authority, factory systems and procedures had to be undertaken for
coordinated effort. In order to deal with these problems, a
management movement known as ‘Scientific Management’ was born.
Frederick Winslow Taylor (1865-1915) was the first to recognise and
emphasise the need for adopting a scientific approach to the task of
management. The introduction of the concept of standard time,
standard output, standard cost, standardisation of production process,
change in the attitude of management and workers to bring about the
mutuality of interests are the important landmarks of scientific
management. This approach was supported and developed by Henry
L. Gantt, Frank Gilbreth, Lillian Gilbreth, Harrington Emerson, etc.
2. Management Process or Administrative Management
Approach:
The advocates of this school perceive management as a process
consisting of planning, organising, commanding and controlling. In
the words of W.G. Scott, “It aims to analyse the process, to establish a
conceptual framework for it, to identify principles underlying it, and to
build a theory of management from them”.
It regards management as a universal process, regardless of the type of
the enterprise, or the level in a given enterprise. It looks upon
management theory as a way of organising experience so that practice
can be improved through research, empirical testing of principles and
teaching of fundamentals involved in the management process.
The process school is also called the ‘traditional’ or ‘universalist’
school as it believes that management principles are applicable to all
the group activities, Henry Fayol is regarded as the father of this
school. Oliver Shelden, J.D. Mooney and Chester I. Barnard are
among the other important contributors to this approach.
3. Human Relations Approach:
The human relations approach is concerned with the recognition of
the importance of human element in organisations. Elton Mayo and
his associates conducted the world famous Hawthorne Experiments
and investigated the myriad of informal relationships, social cliques,
patterns of communication and patterns of informal leadership. As a
result of these experiments, a trend began which can be phrased as
‘being nice to people’. This trend was eventually termed as ‘the human
relations movement’.
The human relations approach revealed the importance of social and
psychological factors in determining workers’ productivity and
satisfaction. It was instrumental in creating a new image of man and
the workplace. It put stress on interpersonal relations and the
informal groups. “It’s starting point was in individual psychology
rather than the analysis of worker and work. As a result, there was a
tendency for human rationalists to degenerate into mere slogans
which became an alibi for having no management policy in respect of
the human organisation.” Nevertheless, this school has done a unique
job in recognising the importance of human element in organisations.
4. Behavioural Science Approach:
The ‘behavioural science’ approach utilises methods and techniques of
social sciences such as psychology, sociology, social psychology and
anthropology for the study of human behaviour. Data is objectively
collected and analysed by the social scientists to study various aspects
of human behaviour.
The pioneers of this school such as Gantt and Munsterberg reasoned
that in as much as managing involves getting things done with and
through people, the study of management must be centred around the
people and their interpersonal relations.
The advocates of this school concentrated on motivation, individual
drives, group relations, leadership, group dynamics and so forth. The
noted contributors to this school include Abraham Maslow, Fredrick
Herzberg, Victor Vroom, McGregor, Lawler, Sayles, and Tannenbaum.
5. Quantitative or Mathematical Approach:
This approach stands for using all pertinent scientific tools for
providing a quantitative basis for managerial decisions. The abiding
belief of this approach is that management problems can be expressed
in terms of mathematical symbols and relationships. The basic
approach is the construction of a model because it is through this
device that the problem is expressed in its basic relationships and in
terms of selected objectives. The users of such models are known as
operations researchers or management scientists.
Linear programming, Critical Path Method, Programme Evaluation
Review Technique, Breakeven analysis, Games Theory and Queueing
Theory have gained popularity for solving managerial problems these
days. These techniques help the managers in improving their decisions
by analysing the various alternatives in a scientific manner.
The application of mathematical techniques is particularly useful in
solving the physical problems of management such as inventory and
production control. They can never be substitute for knowledge,
experience and training necessary for understanding the human
behaviour.
6. Systems Approach:
A system is composed of elements or subsystems that are related and
dependent on each other. The system approach is based on the
generalisation that an organisation is a system and its components are
inter-related and inter-dependent. This approach lays emphasis on the
strategic parts of the system, the nature of their interdependency,
goals set by the system and communication network in the system.
Another basic feature of the systems approach is that attention is paid
towards the overall effectiveness of the system rather than the
effectiveness of subsystems. Under system approach, the overall
objectives and performance of the organisation are taken into account
and not only the objectives and performance of its different
departments or subsystems.
The spiritual father of this school of management was Chester I.
Barnard. The systems theory lays emphasis on the interdependency
and interrelationships between the various parts of a system.
It stresses communication and decision processes throughout the
organisation. It follows an open system approach. The organisation as
an open system has an interaction with the environment. It can adjust
to the changes in the environment.
7. Contingency Approach:
The latest approach to management is known as ‘contingency’ or
‘situational’ approach. Underlying idea of this approach is that the
internal functioning of organisations must be consistent with the
demands of technology and external environment and the needs of its
members if the organisation is to be effective.
This approach suggests that there is no one best way to handle any
management problem. The application of management principles and
practices should be contingent upon the existing circumstances.
Functional, behavioural, quantitative and systems tools of
management should be applied situationally.
There are three major parts of the overall conceptual framework for
contingency management – (a) environment; (b) management
concepts, principles and techniques; and (c) contingent relationship
between the two. The environment variables are independent and
management variables (process, quantitative, behavioural and systems
tools) are dependent. Every manager has to apply the various
approaches of management according to the demands of the situation.
8. Operational Approach:
Koontz and O’Donnell have advocated operational approach to
management. This approach recognises that there is a central core of
knowledge about managing which exists in management such as line
and staff, patterns of departmentation, span of management,
managerial appraisal and various managerial control techniques. It
draws from other fields of knowledge and adapts within it those parts
of these fields which are specially useful for managers.
“The operational approach regards management as a universally
applicable body of knowledge that can be brought to bear at all levels
of managing and in all types of enterprises. At the same time, this
approach recognises that the actual problems managers face and the
environments in which they operate may vary between enterprises and
levels”. The application of science by a perceptive practitioner must
take this into account in finding solutions to management problems.
9. Empirical Approach:
According to this approach, management is the study of the
experiences of managers. The knowledge based on experiences of
successful managers can be applied by other managers in solving
problems in future and in making decisions. Thus, the empirical
school is based on analysis of past experience and uses the case
method of study and research.
Managers can get an idea of what to do and how by studying
management situations of the past. They can develop analytical and
problem-solving skills. They can understand and learn to apply
effective techniques in comparable situations.
No one can deny the value of analysing past experience to obtain a
lesson for the future. But management, unlike law, is not a science
based on precedent, and future situations exactly resembling those of
the past are unlikely to occur. Indeed, there is a positive danger in
relying too much on past experience…….. for the simple reason that a
technique found “right” in the past may be far from an exact fit for a
somewhat similar situation of the future.
Approaches to Management – Developed by Scholars
and Practitioners on Management 
Though the theories developed by scholars and practitioners on
management are aimed at finding the best way of doing things; the
management theory and science does not advocate ‘one’ best way to do
things in every situation. Hence effective management is always
situational management.
The literature on management post World War II, has grown at a
rapid pace which on one hand has greatly helped in improving
research, teaching and practice but also created differences of opinion
and controversies.
The management theory has identified various approaches:
(i) Empirical Approach
(ii) Interpersonal Behaviour Approach
(iii) Group Behaviour Approach
(iv) Decision Theory Approach
(v) Mathematical Approach
(vi) Operational Approach
(vii) System Approach
In the following paragraphs, a brief review of some
approaches to management analysis is discussed as under:
(i) Empirical Approach:
Earnest Dale was the founder of this school and it started around
1952. Empirical means based on real experiences and observation
rather than theory. The empirical school believed in experience and
research. This school is based on the evidence that management
problems could be solved in a better way depending on the
experiences of the managers.
The scholars belonging to this school believe that to understand
management clearly one must study and make comparison of;
successes and failures of managers in various situations and their ways
to solve specific problems, and then the learning derived from such
observation can be applied to a similar real situation would result in
same outcome.
They believe a theory can only be developed by the study and analysis
of cases and comparative approach. Through the case studies some
generalizations are made resulting in theories as useful guides for
other managers.
(ii) Interpersonal Behaviour Approach:
Elton Mayo was the founder of this school. It was started during 1930.
According to Mayo the study of management must be interpersonal
relationship oriented. It must emphasize on “people” as a part of
management.
According to this school, management is getting things done through
people; hence managers should understand human relations. So,
management must study interpersonal relations among people.
This approach is termed as ‘behavioral science’, ‘leadership’ or ‘human
relations’ approach by different group of scholars. The approach gives
significance to Interpersonal relations, Personality Dynamics and
Cultures of individuals and groups.
The Interpersonal Behaviour Approach puts emphasis on human
aspect of management, with the focus on individuals and their
motivations as socio-psychological being.
(iii) Group Behaviour Approach:
Chester Barnard was the founder of this school. It is closely related to
human relation school. Any organized enterprise where individual
come and work as a group can be seen as a social organism; hence the
group behaviour puts its emphasis on learning’s through group
dynamics.
Group Behaviour approach is closely related to interpersonal
behaviour approach, but is focused on studying the behavioural
patterns and dynamics of individuals as ‘members of small or large
groups’ in an organization.
Group Behaviour approach studies authority, influence of formal
organization and social factors. The understanding of these factors has
greatly helped management practitioners in real life situations. The
aim of this approach is to find ways of achieving relatively effective
organizational behaviour.
(iv) Decision Theory Approach:
The believers of this approach emphasize that decision-making is the
core of management. The Decision theory school was developed
during the management science era. The decision theory emphasized
on rational approach to decision i.e. it is a selection of a possible
alternative course of action Decision making approach studies the
persons / organizational groups making the decision, and the decision
making process. Management is essentially a decision-making
function.
The members of the organization are decision-makers and problem-
solvers. The motive behind development of decision theory is not only
to make better economic decisions but also to gain better
understanding of social and psychological aspects and environment of
the decisions and the decision-makers.
(v) Mathematical Approach:
Although any school of management can use Mathematical tools,
some management scholars and practitioners see management
exclusively as a system driven by mathematical models and processes.
Operation researchers and analysts primarily belong to this group.
This school emphasizes that the organization or decision making is a
logical process and it can be expressed in terms of mathematical
symbols and relationships. Since, management is concerned with
problem solving so it must make use of mathematical tools and
techniques for this purpose.
Mathematical approach believes that planning, decision-making,
organizing, etc., can be done through logical processes and can easily
and appropriately be represented using mathematical equations and
models. The approach is closely related to decision theory approach
but differs in a sense that it heavily depends on use of mathematics in
management.
(vi) Operational Approach:
This school is developed during the scientific management era.
According to this school, management is the study of functions of
managers and the functions of managers are the same irrespective of
the type of organization.
Operational approach has taken from all possible disciplines, which
have direct or indirect effect on human behaviour and organizational
functioning and developed its concepts.
The operational approach recognizes that “there is a central core of
knowledge about managing which exists only in managements” and
which can be applicable to all levels of management regardless of the
type and size of the organization. Thus, the management process
consisting of planning, organizing, staffing, directing and controlling
was considered to be universal irrespective of the type of enterprise.
Operational approach takes into account that with the nature, size and
level of enterprise the problems faced by the executives and managers
in their real life vary.
(vii) Systems Approach:
“System is a set of things interdependent or connected together to
form a complex unit. A whole composed of parts which are arranged in
an order as per a scheme or plan”. Prior to World War II Systems
approach was considered applicable & meaningful only to physical
sciences.
It defines organization as a complex whole consisting of mutually
interdependent parts or sub-systems, which interact with environment
(Markets, government regulations, competitors, technology etc.) of
which it is a part and as an open, adaptive system subject to all the
pressures and conflicts of the environment and which continuously
adjusts so as to keep efficiently working as per the changes in the
environment.
Systems approach views management as a system of inter-
relationships involving the processes of decision making,
communication and balancing.
Chester I Barnard viewed executive as a component of a formal
organization and latter as a part of entire cooperative system involving
physical, biological, social and psychological elements. The systems
approach allows us to see the critical variables and constants (those
elements which do not change) and their interaction with one another.
Development of Management Theory:
Organized cooperation has been concerned since beginning of
civilization. Organization and management were recognized in the
Buddhist order ‘Sangha’ as far back as 530 B. C. Roman Catholic
Church and ‘Military Organizations’ also offer good examples of
various functions of management.
Importance of Management Theory:
The knowledge of management theory and techniques is
important in order to:
i. Increase efficiency.
ii. Crystallize the nature of management.
iii. Improve research in management.
iv. Coordinating the efforts of people so that objectives of individuals
get translated into social accomplishments and social goals of the
organization can be attained.
The evolution of management theory can be studied under
the following three parts:
1. Classical Theory.
2. Neo-Classical Theory
3. Modern Theory
Scientific Management:
Scientific Management approach is also known as the productivity or
efficiency approach. The credit for pioneering and developing
Scientific Management approach is primarily given to F. W. Taylor. He
is recognized as the Father of Scientific Management.
Frederick Winslow Taylor has defined, “Scientific management means
knowing exactly what you want, men to do and seeing that they do it in
the best and the cheapest way”.
Frederick Taylor:
Frederick Taylor known as the ‘father of scientific management’. He
started his career as a trainee in a small machine shop and was
promoted to the level of an engineer. His writings revealed the
practical wisdom and work experience; the main concern of his
writings was on management at shop level and with efficiency of
workers and managers at the production level.
His primary concern was to increase productivity through greater
efficiency in production and increased pay for workers, through the
application of the scientific method.
The major principles and elements of his scientific
management may be summarized as follows:
(i) Separation of planning and execution.
(ii) Equal division of work and responsibility between management
and labour.
(iii) Replacement of old rule of thumb method of management by
scientific method, i.e., scientific determination of each element of a
man’s job.
(iv) Scientific selection and training of workers.
(v) Absolute cooperation between labour and management in work
performance.
(vi) Determining time standard for each job through stopwatch study
of all the essential elements of the job.
(vii) Introduction of the system of functional foremanship at
supervisory level.
(viii) Differential piece rates of wage payment — workers attaining or
exceeding the standard drawing their pay at the higher rate and those
falling short of it compensated by lower wage rate –
a. The scientific management movement early in the twentieth century
was hailed as a “second industrial revolution”.
b. Scientific management brought a change in form of innovation in
the field of management; this change generated tremendous resistance
during the life time of Taylor.
c. Public criticism and opinions forced him to appear before the
special Congressional Committee hearings in 1912.
d. The industrial psychologists challenged the Taylor’s assumption of
‘one’ best method of job performance.
e. Although Taylor explained management as a separate and
identifiable discipline, his stress of time and motion study and on
efficiency at the shop level seemingly overlooked other aspects of
management, having influence particularly in the U.K. and the U.S.A.
f. Therefore, Taylors and scientific management to an extent
overshadowed the work of Henry Fayol.
Other Contributors to Scientific Management:
Henry Lawrence Gantt:
He corrected Taylor’s ‘differential piece rate’ to ‘task and bonus plan’
He suggested a wage inceptive plan in which high efficiency is
rewarded, for production which is above the set standard; by
providing a percentage bonus.
Franck Gilberth & Lillian Gilberth (Wife):
They gave greater importance to minute details of work. Developed the
principle of motion economy, which was intended to eliminate
redundant motions and produce a rhythm by scientific development of
essential motions.
Henry Fayol /Administrative Theory of Management:
Though administrative theory of management is based on the
contributions of many scholars and practitioners like Henry Fayol,
Max Weber, Sheldon, Mooney, Allen and Urwick, etc. But major part
of it relates to Fayol’s work.
Henry Fayol regarded as father of modern management theory, for
creating theory of general management applicable equally to all kinds
of administration and in all fields i.e. social, political or economic.
Born in 1841 in France he was graduated in mining engineering in
1860 and got appointed as an engineer in a coal mining company,
where through gradual promotion finally became the managing
director of the company in 1888.
When Fayol got the position of managing director at that time the
company was almost bankrupt and when Fayol retired from his
services, it became one of the leading organization in the coal business
in France. During the latter period of his service, Fayol used to deliver
lectures on administration.
In year 1916, he published his well-known work in French entitled
“Administration Industrielle et Generate” (Industrial and General
Administration) which was translated in English in the year 1929 with
few hundred copies distributed in U.K. Fayol wanted to establish a
separate philosophy for management applicable generally to all
human organizations. Fayol retired in 1918 officially, however his
name continued to exist in the Board of Directors of the company till
his death in 1925.
His theory can be understood under the following headings:
(i) Activities of a business
(ii) Functions of a Manager.
(iii) Principles of management.
(i) Activities of Business:
Fayol divided all activities of industrial enterprises into six groups.
They are as follows:

(ii) Functions of Manager:

He defined management in terms of five functions: planning,
organising, commanding, coordinating and controlling. Henry Fayol,
the father of functional or administrative management remarked: “To
manage is to forecast and plan, to organize, to command, to
coordinate and to control.”
Fayol believed that as one goes up the levels of management hierarchy
the importance of managerial ability also goes up. Fayol also stressed
on training in management, which could not be done without
development of management theory.
(iii) Fayol’s Principles of Management:
Based on his own experiences and foresight into the field of
management, Fayol suggested the fourteen principles of
management as follows:
1. Division of Work:
Work should be divided among individuals and groups, so that
everyone can focus on special portion of the task. Fayol believed work
specialization is the best way to use the human resource in an
organization.
2. Authority & Responsibility:
Authority and responsibility are closely related. As per Fayol, authority
is the right to give orders and the power to get obedience,
Responsibility is about being accountable, and hence both Authority
and responsibility are co-extensive.
3. Discipline:
To ensure obedience and respect for superiors, and rules, procedures
and policies. Fayol declares that discipline requires good superiors at
all levels.
4. Unity of Command:
An employee should receive orders from one senior (superior/boss)
only. If one employee receives commands from several superiors, it
can lead to confusion and disorder.
5. Unity of Direction:
A group of activities with common objectives should have one plan
and be headed by one person (manager). Unity of directions is
different from unity of command.
6. Subordination:
The interests of one person should not take priority over the interests
of the organization as a whole.
7. Remuneration:
All the employees should be paid fairly and based on the work done,
skills, knowledge, experience, cost of living and other factors yielding
satisfaction to both employee and the firm.
8. Centralization:
Fayol defined Centralization as lowering the importance (authority) of
the subordinate role and Decentralization as increasing the
importance. The degree to which centralization or decentralization
adopted should be based on the specific organization.
9. Scalar Chain:
It is the chain of superiors and subordinates from the highest level to
the lowest level for the purpose of communication. It decides the issue
of authority i.e. who is superior to whom. It refers to superior-
subordinate relations throughout the organization. The existence of a
scalar chain and obedience to it are necessary for the organizational
success.
10. Order:
Order relates to arrangement of things and people. Everything should
be in its place and there should be a place for everything. Every man in
the organization should be properly placed i.e. right man in the right
place. On the contrary, disorder would lead to confusion, inefficiency
and failure to achieve the set objectives.
11. Equity:
Management must treat everyone with equality, which is achieved
through a combination of kindliness and justice.
12. Stability of Tenure of Personnel:
Management should retain employees who are skilled and efficient in
their work and provide them clarity about their tenure so that both;
the work and the employee are stable.
13. Initiative:
Management should encourage employees taking initiative i.e. doing
things out of their regular scope of work with self-direction and
motivation.
14. Espirit de Corps:
Management should strive to achieve team spirit and teamwork
amongst the employees. Team spirit is of great importance to
accomplish tasks.
Fayol did not make this list as an exhaustive and all-encompassing list;
hence we need to have an understanding that there could be more
principles added based on increased understanding of the subject.
Comparison of Taylor and Fayol:

Contribution of the Behaviourists, Sociologists and

Psychologists:
As per Behaviourists:
“The study of management should be concerned with human
behaviour in organizations and related matters; organizational
effectiveness depends on the quality of relationships among people
working in the organization; good management rests on the ability of
managers to develop interpersonal competence among members and
to support collaborative efforts at all levels of the organization.”
Behaviourists pay major emphasis on human relations, informal group
communication, employee motivation and leadership styles
Hawthorne Experiments (1928-32) conducted by Elton Mayo and his
associates gave recognition to the contribution of behaviourists.
People who have contributed include Psychologists like A. H. Maslow,
McGregor, Leavitt, Chris Argyris, Herzberg and McClelland and
Sociologists like Bakke, Dubin, Katz, Gouldner and Etzioni.
Systems Approach:
This school is of recent origin having developed in late 1960’s. Prior to
World War II Systems approach was considered applicable &
meaningful only to physical sciences. System is derived from Greek
word called ‘systema’ which means interrelated and interdependent
components arranged in a systematic manner to get the objectives.
System works for a common objective. An organization takes the input
in the form of various resources such as men, machine, money and
material.
The process of the organization is the various methods and techniques
through which input is converted into required output. This process
totally depends upon the type of output required. Output may be in
the form of product or services, product is the output which we can see
and services are the output which we can’t. Feedback is taken in order
to compare the output with the targeted result. If any changes or any
deviations are found then those deviations are corrected.
Why Organisation Acts as a System?
The features of an organization as a system are as under:
(1) Common Objective – Organisation stands for the achievement of
common objective whatever may be the efforts of system. It is towards
the achievement of a common objective.
(2) Systematic Arrangement – The elements of the system are
arranged in a systematic and peculiar way for the achievement of the
result.
(3) Interaction and Inter-Relation – The elements of system are
interrelated to each other and works in co-ordination and cooperation
to get the output.
(4) Inter-Dependent – Each element is interdependent to each other
and unless and until the previous one is not carried out, the second
one can’t be started.
The system can be open or closed. An open system is one which is
affected by its environment and a close system is one in which
environment has no influence on the organization.
Contingency Management:
The contingency approach believes that it is impossible to select one
way of managing that works best in all situations. As there is no one
best way to do things, practice and solution of various problems
depends upon the circumstances. Management should be prepared for
all the possibilities (contingencies) and the internal functioning of the
organization should be in accordance to the demands of organizational
objectives, requirements of the external environment.
Different organizations with different objectives and different
competitive environments require different plans. The task of manager
is to apply his knowledge to realities in order to attain desired results
i.e. managers must try to find the approach that is the best for them in
a certain given situation, so they can achieve their goals.
It is important to note that the contingency approach focuses on the
need for managers to examine the relationship between the internal
and external environment of an organization.

Answer No.2

What Is a Team Structure?

By Staff WriterLast Updated March 27, 2020
Highways Agency/CC-BY 2.0
A team structure, in a business setting, involves groups of people who form
teams that work toward a common goal of the overall structure. Ideally, each
team has members that complement each others abilities; individual teams
are less hierarchical. Teams can change over time, but the overall goal is the
same for all of the teams.

One organizational chart for team structures in a business includes one top
manager that supervises lower managers; each lower manager supervises a
team that generally lacks ranks. Each team member has a specific role to fill
and a specific task to work toward a common goal with other team members.
One team has a specific task to accomplish, while another team that has the
same rank works on another task. Both teams are part of a larger goal.

To start, teams must learn to work together quickly, and managers must
assign tasks right away. Managers must also work out differences among
personalities on the team. Sometimes, teams rotate tasks to prevent boredom
or to bring fresh ideas to a project. Team structure can also work in a
classroom setting for group assignments.

Teams in team structure theory need to have cohesion in order to work

together, a term sometimes known as synergy. The goal of managers in
a team structure is to take this synergy to motivate teams to achieve a
common goal. WHAT IS A TEAM STRUCTURE?
While a legal business structure defines how your company operates in
relation to federal and state governments and how you pay your taxes,
a team structure affects the way the people within your organization
work with each other. The organizational structure of a business includes
the chain of command in addition to the individual roles and
responsibilities of each employee.
The type of structure you choose for your business will help to define a
hierarchy of employees. It will help those on your team to understand to
whom they report and who reports to them. When roles are defined within
a team structure, employees have a solid understanding of their job
description and what they are responsible for doing while at work.
There are two main types of team structures: centralized and
decentralized. A centralized organizational structure has a distinct chain
of command. Often, centralized structures are pyramid models, where
one person is at the top of the hierarchy followed by several layers of
management who oversee a large group of people at the bottom of the
hierarchy. The decisions for the entire organization are made by those at
the top of the hierarchy.
In contrast, a decentralized organization is where the major decisions of
the business are made by mid-level employees, not those at the top of
the hierarchy. This format is common in startup businesses. Having a
decentralized team structure enables the business to remain fast and
agile.
HOW THE RIGHT TEAM STRUCTURE CAN HELP
There are many benefits to picking the right team structure for your
small business. Primarily, an effective organizational structure helps the
business to achieve its objectives. Having the right people in the right
roles and departments ensures that the company can effectively sell
products and services to its customers.
Planning and communication are easier to facilitate when the team is
organized in a way that aligns with the company’s goals. When the flow
or authority is clearly identified, so too is the flow of information. As a
result, there is less ambiguity and more clarity around what needs to be
done and by whom.
In addition, having a strong organizational structure helps to eliminate
conflicts among employees. When the responsibilities and roles are
clearly outlined, employees have more ownership of their tasks and
spheres of expertise.
1. FUNCTIONAL ORGANIZATIONAL STRUCTURE
The functional team model is one of the most common types of
organizational structures. This model follows the traditional pyramid top-
down approach, where the few people at the top manage the many
people near the bottom of the pyramid. It’s common for the CEO or
business owner to be at the top of the pyramid, followed by vice
presidents, directors, managers and then frontline employees. The
number of layers of management depends on the size of the
organization.
The departments within a functional team structure are organized based
on their primary job function. For example, all marketing employees are
grouped together in the marketing department, which is managed by
the marketing manager, and all sales employees are grouped together in
the sales department, which is managed by the sales manager.
The main advantage of this approach is that it enables employees to
have a high degree of specialization in their area, which they can use to
help grow the business. This model is also easy to scale as the business
expands. One of the primary disadvantages is that it can create barriers
and rivalries between different departments and limit the knowledge
employees have of other departments. The functional team structure is
common in many small- and medium-sized businesses as well as in
larger corporations.
2. PRODUCT OR DIVISIONAL ORGANIZATIONAL STRUCTURE
A product or divisional team structure is an organizational model that is
best for companies that have different product lines or product divisions.
In this pyramid structure, employees are grouped by function within their
own product line. For example, if a company has clothing, shoes and
jewelry product lines, then each division will have its own product
development, marketing, sales and shipping departments.
This organizational structure helps businesses that have multiple
divisions to cut their time to market. When each area of the business has
its own functional departments, the company is able to shorten product-
development cycles and reach consumers sooner. It also helps
employees to have a high degree of specialization in their respective
areas.
On the flip side, it can be difficult for businesses to scale using this
structure. The business is not as efficient when it begins to grow because
there can be a duplication of resources in each division. This can affect
the company’s profitability and stunt its growth.
3. MATRIX ORGANIZATIONAL STRUCTURE
A matrix team structure is unique because the reporting structure is set
up as a grid. As a result, employees usually have two or more reporting
structures. Typically, in a matrix structure, there is a functional reporting
line where employees are grouped by departments, such as sales or
customer service. On top of that, employees are also part of product or
project groups, so they have an additional manager who oversees that
line of work.
When there are dual reporting structures, one area is primary, and there
is a direct line of reporting. The secondary area does not have as much
authority as the other line of reporting. This complexity is one of the
major disadvantages of a matrix team structure. Employees can be
confused about to whom they report, especially if their two managers
have differing priorities and goals.
The key advantage of the matrix organizational structure is that it
offers balanced decision making since there is not just one layer of
authority. Business groups can share resources and communicate more
effectively in a matrix structure as well. This kind of organizational
structure is best for larger organizations that have long-term projects on
the go at all times.
4. GEOGRAPHIC ORGANIZATIONAL STRUCTURE
Similar to a divisional structure, in this case, the team is organized based
on location. Each location, which can be a large geographic region,
country or small district, has its own functional departments. This is
typically best for companies that need to be physically close to groups of
customers or sources of supply.
One of the biggest advantages of this structure is that it enables the
regions to make decisions based on what is best for them. They may
have specific market requirements or customer needs, for example. On
the downside, this type of decentralization can cause duplication of
resources and lack of cohesiveness with the corporate brand.
5. CIRCULAR ORGANIZATIONAL STRUCTURE
The circular team structure is ideologically different from the functional,
divisional, matrix and geographic structures. While there is still a
hierarchy in this model, the goal of the executive team is not to share
their directives down the chain of command. Instead, the goal of the
executives is to sit at the center of the company and share their ideas
and vision outward to the rest of the employees.
The major advantage of this team structure is that it
enables communication to flow more easily among work groups. While
employees still have distinct roles and responsibilities, they are not
grouped by function or division — everyone is on the same team. A
disadvantage of the circular team structure is that it is confusing, as
employees don’t have a clear chain of command and do not have a deep
understanding of how their job fits into the organization.
Circular structures work well for small companies where the roles of
employees and managers require them to communicate well with one
another and share responsibilities. It is a difficult structure to scale.
6. FLAT ORGANIZATIONAL STRUCTURE
On the other end of the organizational spectrum is the flat team
structure, which is organic in nature and does not have multiple layers of
management like a pyramid structure. In the flat organizational model,
there may still be a hierarchy with team leaders, but in general, all
employees have more authority and agency than in a traditional model.
The key advantage of a flat structure is that employees are more agile
and able to act more quickly on their decisions since there is less of a
hierarchy. The management team is seen as equals to frontline employees
and shares authority and decision-making power with them.
The major disadvantage of the flat team structure is that it can
be difficult to resolve conflicts when there is no chain of command. It can
be confusing for employees to determine with whom they need to speak
 to get approval for specific tasks. This kind of team structure is best for
companies that need to take action quickly, such as tech startups.
KNOWING WHEN YOU MAY NEED TO RESTRUCTURE YOUR
BUSINESS
Deciding which team structure to use for your business depends on a
number of factors, such as the goals you want to achieve, the resources
you have available and the number of people on your team. However,
there may come a time when your current organizational structure stops
working. If that happens, you may need to pivot your team structure so
you can more effectively meet your business goals.
You may need to restructure your team if your employees are no longer
able to help your business succeed in their current structure:
 Reacting to a change in the market: If a competitor develops a new
product line with which your business wants to keep up or if there is a
marked change in consumer behavior toward a specific manufacturing
process, for example, you may need to restructure your organization in
order to more effectively meet market demands.
 Improving employee communication: Communication is the
lifeblood of a team. If team members are no longer communicating
effectively, it may be as a result of the organizational structure. For
example, managers may not have the time to share important
information with frontline employees, or employees may be forced to
make every decision by committee.
 Changing organizational size: If your company is rapidly growing or
needs to resize, then you may need to restructure your team to meet
your changing needs. Not all organizational structures can easily scale,
so you may need to shift direction in the way your employees report to
each other.
 Changing span of control: Sometimes, the duties of a manager may
grow so large that he is no longer able to oversee all of his staff. In this
case, you may need to restructure the company to accommodate the
expanding roles. This may mean adding more layers of management or
shifting responsibilities to other roles within the organization. 
what is a functional organization?

Functional is the most common type of organizational design. In this type of

structure, the organization is grouped into departments where people with
similar skills are kept together in forms of groups, such as the sales
department, marketing department and finance department. This helps
companies ensure that each group or department performs at its peak.

There is usually a manager or a top-level executive managing a particular

department, handling all decisions related to budget, resources, decision-
making and staffing. A functional structure works best for those companies
that operate in one location with a single product category. It also works well
for small teams and small projects because resources can be more easily
controlled and managed.

are there any drawbacks?

Functional organizational design tends to be difficult to adopt by larger

companies that have many geographical locations because of expense and
the difficulty of containing resources. Work also takes place in a silo, which
means that sometimes team members don't have access to people outside of
their division.
Some naysayers of functional organizational design say a big problem is
incoherence. Most functional teams are good at many things but great at
nothing. These teams often struggle to meet the needs and demands of their
clients and managers, juggling an endless, and sometimes conflicting list of
demands from various departments. As a result, they find it difficult to build
the type of advantage or differentiation that is required for long-term success.

how do matrix organizations work?

A combination of two or more types of organizational structures, the matrix

organization can help companies improve efficiency, readiness and market
adaptation. This type of structure works best for startups and other companies
operating in a dynamic environment since they often can respond faster to
market or customer demand while decreasing the lead time to create a new
product.

The authority of a functional manager moves vertically downwards, and the

authority of the project manager moves sideways. Since these authorities flow
downward and sideways, this structure is called the matrix organization
structure. A manager in a matrix organization has two or more upward
reporting lines to bosses who each represent a different business dimension,
such as product, region, customer, capability or function. It’s often a response
to corporate silos.
Skills are better utilized under a matrix structure, so companies can select the
most capable employees in order to deliver projects. In addition, matrix
structures can serve global customers by integrating business functions and
responding to customer demands quickly.

potential downsides of matrix structures

Managing a matrix structure can be complicated and challenging. A common

complaint about this business model is that it increases upward reporting and
slows decision making. The opposite should be true in a well-functioning
matrix because it pushes down operational decision-making in a controlled
way.

Furthermore, the blurred authority that characterizes this organizational

structure may lead to conflicts and slow things down. Managers at opposite
ends of the matrix may find it difficult to reach an agreement, creating
confusion among employees. Additionally, the workload tends to be high and
the resources scarce.

Another drawback is that work responsibilities are not always clear. The sales
manager, for example, is often responsible for various operations, such as
customer relations and digital marketing. He may or may not be specialized in
each area. Wearing multiple hats is common in small companies, but it can
affect day-to-day operations and overall performance in larger organizations.

THE NEED FOR PROJECT ORGANIZATIONAL STRUCTURE IN

SMALL BUSINESS
Some companies are project-focused, where groups of people work
on specific initiatives together for a set amount of time. In these cases, a
project organization might be beneficial to the company. The project
team consists of people who are dedicated to working on that specified
initiative until completion regardless of which department they are in or
their regular function.
For example, in a construction company, a group of employees may be
working on a residential housing project together. The team can be
made up of employees from different departments, such as project
management, architecture, design, engineering and construction, but
they are all working on the project together as part of the same team.
They will be managed by a project supervisor for the duration of the
project. In some cases, they may also still report to their departmental
manager in addition to the project supervisor.
BENEFITS AND DISADVANTAGES OF THE PROJECT
ORGANIZATIONAL STRUCTURE
One of the key benefits of the project organizational structure is that it
makes it easy for the team to communicate and stay up to date on day-
to-day tasks since they are in the same organizational group and have
the same manager. Another key advantage is that the team has a strong
sense of identity since they are all focused on achieving the same
goal and the successful completion of the project.
From a management perspective, the project organizational structure
enables the company to better manage resources for the project since the
supervision is centralized to one group. There are less chances of
duplication of tasks and resources. The project manager can also
schedule her team more efficiently since she knows ahead of time who is
 responsible for completing the project and doesn’t have to compete with
other company tasks.
The project structure meaning also includes some disadvantages of
which businesses need to be aware when deciding how to structure the
company. First, the project structure can be expensive since the business
needs to dedicate resources to a specific initiative. Since the employees
in the project structure only work on one project at a time, this can limit
the amount of projects the company can take on. Once a project is
complete, the employees may be in a position to lose their jobs if the
company does not have another project for them to take on.
OTHER ORGANIZATIONAL STRUCTURES TO CONSIDER
There are a number of different organizational structures that can be
effective for small businesses. These include:
 Traditional or pyramid: The business leader is at the top of the
hierarchy, followed by a small number of managers. The majority of the
workforce is at the bottom of the hierarchy.
 Functional: The people in a functional model are grouped by their
main task. For example, all marketing employees are in one department,
overseen by a marketing manager.
 Product: In large businesses, each product line has its own
functional organization. For example, the shoes product has a marketing,
sales and production department, and the hats product has its own
marketing, sales and production department.
 Matrix: Two or more structures are combined in this model, where
employees report to more than one manager for the duration of a
specific project or initiative in addition to their functional manager.
 Flat: Unlike traditional models, these structures have no
hierarchies. All employees are seen as equal, and they self-manage
themselves.
 Flatarchies: A combination of the pyramid hierarchy and the flat
structure, this organization is dynamic in nature. The company may have
an existing structure that they can change based on an initiative so
employees can work in an equal setting.
 Halocratic: This model focuses on distributed decision making,
where groups of people work in their areas of expertise together.
UNDERSTANDING PRODUCT ORGANIZATION IN BUSINESS
A common organizational model is the functional structure, in which
employees are grouped by the main tasks they're responsible for. For
example, all sales employees are in the sales department, which is
headed by the sales manager and sales director. They are grouped
because they share the same functional role of selling goods to the
company’s customers. Likewise, marketing employees are in the
marketing department, and manufacturing employees are in the
manufacturing department.
The product organization utilizes the functional approach but creates
large business units within the company for each major product the
company offers. As such, each of those product division units consists of
functional departments required to support that product.
For example, if a company has a bakery division and clothing division,
each of those product-based divisions will have its own sales
department, marketing department, manufacturing department and
other functional groups. The product-based organizational structure is
best for businesses that have distinct product groups that
require specialized functional teams to support each product.
LOOKING AT PRODUCT DIVISION STRUCTURE ADVANTAGES
There are several benefits, both for employees and businesses, to
utilizing a product-based organizational structure. From a business
standpoint, one of the key advantages is that with a product model,
failure in one division doesn’t necessarily affect other company divisions.
If the bakery division of the company is losing sales, the clothing division
can still be successful and have the resources it needs to grow. This can
help businesses manage overall risk for the company.
The product-based organizational model also enables businesses to
operate with more flexibility, as each business division can follow the
unique processes they need for each product without having to
accommodate processes for the other divisions. This can enable the
company to shorten their development and manufacturing cycles and
bring products to market faster to beat the competition.
From an employee perspective, the product-based organizational
structure allows employees to specialize in their function for a specific
industry. This enables employees to learn new skills and gain expertise in
niche areas, which can help them further their career goals within the
company so they can take on leadership roles. The unique experience
can also provide employees with new opportunities in their product
industry.
AVOIDING THE PITFALLS OF PRODUCT ORGANIZATIONAL
STRUCTURE
Like any organizational structures, there are disadvantages to consider.
This particular structure is only useful for larger businesses with
diversified product lines. Otherwise, this organizational model can cause
problems. One of the key disadvantages to avoid are operational
inefficiencies. Because each division functions independently, there may
be several employees or whole departments that perform duplicate
functions, causing a loss of profitability and productivity.
As a result of the product-based organizational structure, there may not
be any effective lines of communication between divisions. This makes it
difficult for employees to share information on important lessons to
keep in mind or specific training and learning materials. When one
marketing department learns something important, they may have no
process in place for sharing it with the other marketing department.
It can be difficult for a product-based organizational structure to scale
without increasing redundancy within the organization. If each product
division requires a functional department for marketing, sales,
production and accounting, the company needs to find efficiencies so as
not to lose profitability.
IS PRODUCT ORGANIZATION RIGHT FOR YOUR BUSINESS?
Consider the product organizational structure advantages and
disadvantages before deciding whether or not this model is right for you.
 There are several factors to research and investigate if you’re thinking
about implementing this model for your business:
 Diversity of products: Are the products you offer different enough
to warrant their own divisions? Are they manufactured using the same
process? Do they have the same target market? Be sure to establish just
how different your products are. If they're too similar, you may end up
with many operational inefficiencies in your processes.
 Structure of each division: Will your product divisions require
unique functional structures or will they all be structured the same way?
Does one product require a manufacturing department while another
product requires a research and development arm? You may be a good
contender for a product division.
 Employee expertise: Does your company already have employees
who specialize in one product or will you need to staff your new divisions
with new employees? Keep in mind that hiring and ramping up
employees takes time and resources.
 Communicate strategies: How will your product divisions share
information? Poor communication between product groups can cause
companies to lose profitability and productivity. Be sure to have a
process in place so functional counterparts can share information as
necessary.
 Scaling opportunities: Will your product divisions be able to scale
without causing additional redundancies? Establish how much
redundancy your company can handle before it becomes a problem.
Would you consider sharing resources between divisions if that
improved profitability?
While there are many benefits to utilizing a product-based
organizational structure in business, it’s best to be aware of the
disadvantages so that you can actively avoid them.
OTHER TYPES OF ORGANIZATIONAL STRUCTURES TO
CONSIDER
If the product-based organizational structure isn’t right for your business,
there are many other types of organizational structures you can utilize.
 Each structure comes with its own advantages and disadvantages, so it’s
critical to understand which organizational model can best help your
company to reach its objectives.
Consider these other organizational models:
 Pyramid: The business leader is at the top of the hierarchy and
oversees a small number of directors and managers. Those employees
then oversee a large number of employees who are at the bottom of the
hierarchy. Depending on the size of the company, there may be several
layers of management.
 Flat: There are no hierarchies in this model. All employees are on
an equal level, and they have the processes to self-manage themselves
to help the company reach its goals.
 Functional: Employees are grouped by their main tasks and are led
by a business leader who oversees those tasks. For example, all customer
service employees are in a customer service department that's overseen
by a customer service manager.
 Project: Employees from different functional teams are grouped
into a project department that's overseen by a project manager. They
work together to complete the project successfully.
 Matrix: Two or more organizational models are combined in this
structure based on initiatives the company is working on. It’s most
common to combine functional and product structures on a project
basis.
 Market: If a company serves multiple distinct consumer bases, it's
beneficial to organize divisions based on the kinds of customers it serves,
such as wholesalers, end consumers and corporate businesses.
 Flatarchy: A combination of flat and pyramid structures, this model
is dynamic. Employees can shift from being in a hierarchy to a flat model
for the purposes of a project and vice versa.
features of the hybrid structure
A matrix or hybrid structure is an organizational model that combines two or
more reporting structures. It’s best suited for work environments that are
dynamic, as hybrid structures can shift from project to project.

Most commonly, the hybrid structure combines the functional and product
organizational structures. A functional structure is where the company is
organized by what people do. For example, all marketing personnel are
overseen by a marketing manager, and all sales personnel are overseen by a
sales manager. In a product organization, the business is divided by lines of
business, such as a baby food manufacturer having specific groups for dry
snacks, jarred food and toddler meals.

In a hybrid structure, if the baby food manufacturer was establishing a new

product line, it could take functional expertise from various groups such as
marketing, research and development and sales to create a product launch
team. Those employees would report to their functional managers as well as
the project manager for the product launch team.

benefits of matrix departmentalization

There are many benefits of the hybrid organization. The main advantage is
that working groups get functional expertise from across the organization. The
company can share highly skilled resources for different projects, maximizing
the value of their employees.

The employees get to work on a variety of projects and broaden their skill sets
in addition to learning new processes and systems within the company. This
helps them to expand the scope of their careers within the business. In large
organizations, employees may work on several projects at a time, further
adding to their knowledge base.

Matrix structures are known to create company loyalty, as employees feel

more invested in their position in the organization because they are
contributing to multiple areas of the business. This also increases productivity
and efficiency within the organization.

disadvantages of matrix departmentalization

There are also some disadvantages of hybrid business models. Since

employees report to two or more managers, conflicts in scheduling and
priorities may arise. If both managers have equal authority, the employee may
be pulled in multiple directions. The managers themselves may have a conflict
about who holds the most authority and where resources should be directed.
Often, the overhead costs for a matrix structure are high because there are
more managers than in a functional or product structure.
If the roles and responsibilities of all employees and managers within a matrix
structure are not clearly identified and communicated, there can be confusion
about the projects on which people should be working. This can lead to a lack
of productivity or delays in the schedule. The workload in a matrix
organization is generally high, as employees have to complete their functional
responsibilities in addition to their project tasks. Employees can burn out or
feel overwhelmed by the amount of work they need to do.

creating a hybrid structure for your business

When considering a hybrid structure for your business, carefully plan out the
responsibilities of each employee and manager. This way, you can ensure
there aren’t any redundancies or duplication of tasks. Similarly, you’ll need to
ensure that employees don’t become overworked. In addition, it’s important to
outline which manager has higher authority in case conflicts arise.

TRADITIONAL VERTICAL REPORTING STRUCTURE

One of the most common reporting structures is a traditional vertical
organization, where the person at the top has the most authority. This
person can be the CEO, business owner or other executive. He guides the
people underneath him, who further manage the employees at the
bottom of the organizational chart. Visually, this kind of reporting
structure looks like a pyramid, with the most powerful person at the top
and the least powerful people at the bottom.
The number of layers within the pyramid will depend on the size of the
business. For many small businesses, there may only be two layers: the
business owner and all the employees. There may not be any need for
middle management if the business has few employees because the
business owner may be able to oversee them all. As the business
expands, the owner may wish to add a layer of management between
herself and the employees so she can focus on other elements of the
business aside from overseeing employees.
FUNCTIONAL REPORTING STRUCTURE
A variation of the traditional vertical reporting structure is the functional
reporting relationship. In this kind of organizational model, people
are grouped by the kind of job they do. People who work on similar kinds
of tasks are overseen by a manager who has expertise in that particular
function of the organization.
For example, all marketing employees are overseen by a marketing
manager, and all research and development employees are overseen by
a research and development manager.
The marketing manager may report to a marketing executive who may
report to the CEO. Like the traditional reporting structure, the functional
reporting structure can have as many or as few layers of management as
needed. In a small business, for example, there may be a customer
service department of two people who are overseen by a customer
service manager who can also be the business owner.
DIVISIONAL OR PRODUCT REPORTING STRUCTURE
For larger organizations that have different products or sales channels, a
divisional reporting structure might work best. This is also a variation on
the traditional vertical reporting structure. However, in this case, the
company is organized based on product line or product division.
For example, the consumer packaged goods division may have its own
vertical hierarchy, and the clothing division may have its own completely
separate vertical hierarchy. The leaders of both groups would then report
to an executive team that manages the entire organization.
Business chain-of-command titles in this case may include Marketing
Associate – Consumer Packaged Goods, Marketing Manager – Consumer
Packaged Goods and Marketing Director – Consumer Packaged Goods.
The clothing division would have similar titles like Marketing Associate –
Clothing and Accessories, Marketing Manager – Clothing and
Accessories and Marketing Director – Clothing and Accessories. The two
Marketing Directors might then report to the same Marketing VP who
would hold authority for all marketing in the company.
LINE-AND-STAFF REPORTING STRUCTURE
The line-and-staff reporting structure is a variation on the vertical
hierarchy that also includes horizontal authority. Line refers to positions
within the business that are involved in daily operations required to run
the company, such as sales or manufacturing. As a result, sales
departments and manufacturing or production departments are line
positions with line personnel and line managers.
Staff refers to positions within the company that indirectly support the
daily operations of the business and those with line roles. Human
resources departments, legal departments and marketing departments
are usually categorized as staff and are composed of staff personnel and
staff managers.
Staff roles can have indirect authority over line roles, as they provide
functional expertise that is required to run the business. For example, in a
small business, there may be one human resources professional. While
he may not directly manage the sales teams, he is there to provide
support and expertise to that department. If the sales manager wanted
to hire another salesperson, she would likely have to clear it with the
human resources professional and get his approval.
FLAT REPORTING RELATIONSHIP
A flat reporting structure is when decision making is spread throughout
an organization. This means that there are no managers or senior-level
employees. Everyone in the organization has equal authority. This kind of
organizational model is easier to implement in small- and medium-sized
businesses rather than larger ones.
Flat organizations are sometimes called self-managed companies, which
means that each employee takes responsibility for ensuring she meets
her company goals. In order for a flat organization to succeed, a sense of
equality needs to be rooted in the company culture, mission and values.
Sometimes, informal hierarchies can take place based on employee
expertise or seniority.
In a small business, a flat structure can be successful if each employee
brings specific functional expertise and experience. For example, if a
bakery has a cake specialist and a bread specialist plus a customer
service specialist, a flat business model ensures they all have equal reign
over their respective areas and have to work together to meet the goals
of the bakery.
MATRIX ORGANIZATIONAL STRUCTURE
Matrix reporting structures combine at least two different kinds of
organizational models based on the current business needs. This kind of
reporting structure is a dynamic one that changes according to the
company’s current projects and objectives. Most commonly, matrix
reporting structures combine the functional and divisional reporting
structures. Sometimes, matrix structures also include a geographical
component.
Matrix structures, which are also called hybrid structures, are best suited
for larger businesses that have multiple products, divisions or campaigns.
For example, if a business is launching a new product line for pet snacks,
they may create a matrix reporting structure. The marketing manager
may report to the pet snacks product director for the duration of the
product planning and launch period in addition to her own marketing
director. This way, when working on the launch, she can directly
communicate with both directors to ensure greater visibility and control.
CREATING A COMPANY REPORTING STRUCTURE FOR YOUR
BUSINESS
Regardless of which reporting structure you choose for your business, it’s
important to ensure it aligns with your current and future business
goals. If you are planning on growing the business, for example, be sure
to use an organizational model that can scale with you. It’s also
important to provide stability and clarity for employees so they always
know what their job description is and how they fit into the company as
a whole.
FEATURES OF LINE AND STAFF ORGANIZATION
The terms "line" and "staff" refer to specific roles within a company.
"Line" refers to roles that are involved in achieving the key objectives of
the company. Line personnel usually include sales and production, as
without those two departments, businesses cannot produce or sell their
offerings. Marketing is also sometimes included as a line role depending
on the activities the department performs.
Within each line group are managers and employees. The employees
follow the directives of the managers. The line group as a whole is seen
as a function that is essential to the business.
Staff positions are those that indirectly support line functions in the
organizations. Like line positions, staff positions also consist of managers
and employees. While line personnel contribute to the main workflow of
the business, staff personnel provide support to the line through
resources, service and quality control. Staff groups often include human
resources, legal and research and development.
LEVELS OF AUTHORITY
There are different levels of authority within this kind of line and staff
organization. In most organizations that use this model, vertical
hierarchies exist within each department or division. For example, sales
representatives are headed by a sales manager, and production
employees are managed by a production manager.
Employees with line authority can direct those within staff roles. For
example, a sales manager can direct the human resources team to hire
additional salespeople to cover more ground and increase sales.
Employees with staff authority can advise those with line authority to
complete specific activities that further the goals of the business. For
example, the quality control department can counsel the production
team on what the acceptable levels of quality are for the business and
what needs to be improved or altered.
ADVANTAGES AND DISADVANTAGES
As with any kind of organizational structure, there are benefits and
setbacks to the line and staff model. One of the key advantages is that
this structure provides line personnel with expertise from staff groups. As
a result, the key decision makers in the organization are well-informed
and armed with specialized knowledge. For example, the line staff in a
marketing group can gain legal advice from their legal department on
using copyright materials within their messaging.
Emerging conflict is one the major disadvantages of this organizational
structure. Staff personnel can sometimes resent their lack of authority
within an organization. Line personnel can disregard the advice of staff
groups even though they are aware of the specialized knowledge they
bring to the business.
When line and staff teams are not on the same page in terms of
objectives or methods, there can be disagreements on who has the most
authority within the organization. In some cases where the business fails
to meet its objectives, line employees can blame their actions on the
advice they received from staff positions, or staff employees can blame
line employees for making the wrong decisions.
ENSURING SUCCESS WITHIN LINE AND STAFF MODELS
In order to minimize conflict and ensure that the line and staff teams
realize the full benefits of the structure, it’s important to integrate people
from both groups into project teams with a clear directive to achieve a
business goal together. In addition, it’s critical to identify and define the
roles, authority and goals of each group so there is no confusion over
who is responsible for which task.
DEFINITION
A matrix organizational chart describes the areas of communication on a
matrix-shaped chart. It couples hierarchy with multiple levels of
communication responsibilities. This structure is more complex than
traditional structures, but allows for better understanding of
organizations where various levels may answer to more than one
department head. The matrix contains two axes of power--one vertical
and one horizontal.
COMPARED TO TRADITIONAL ORGANIZATION CHARTS
While most organizational charts are pyramid shaped, a matrix
organizational chart describes levels of hierarchy in a matrix-shaped
diagram. Traditional organizational charts keep authority positions
higher on the pyramid, where the matrix organization chart may keep
authority levels on similar lateral lines. This is to better illustrate lines of
communication rather than authority.
USEFULNESS
In organizations where there are multiple departments that share
authoritative responsibilities, a matrix organizational chart is the most
effective way to demonstrate communication. An example of this is a
company that may have a a sales force that answers to legal
departments, corporate management and advertising executives.
STREAMLINING TEAMS
Project management often requires a variety of departments and teams
to work in conjunction with each other to effectively complete the task.
Without a clear level of how department leaders interact with each other
and lower-level team members, time is lost, mistakes are made and
clients go elsewhere. A matrix organizational chart maintains the quality
of functional performance through streamlining team structure.
DISADVANTAGE
Because a matrix organizational chart is working with a more complex
communication structure and hierarchy, it needs to be structured
properly. One that isn't properly thought out and executed can be
dysfunctional by creating confusion rather than clarity. Confusing
communication is always a detriment to the organization or a team.
Firms have organizational structures that show the
relationship between the company’s employees and the
responsibilities of said employees. Each firm’s organizational
structure is different and depends on its specific needs. A
large manufacturing firm with multiple factories is likely to
have a different organizational structure than a financial
services firm with only one office. However, there are some
basic types of organizational structures, each with its own
advantages and disadvantages.

VERTICAL ORGANIZATIONAL STRUCTURE

A vertical organizational structure is based on the reporting chain from
the head of the company down. It establishes the reporting relationships
between people and their span of control. One disadvantage to this sort
of structure is that it tends to be bureaucratic and does not foster
communication between people at different levels. Decision making may
be one-sided, too, as the views of the lower ranks may not to be taken
into account. The advantages include faster decision-making and better
coordination of the company’s activities.
HORIZONTAL ORGANIZATIONAL STRUCTURE
A horizontal structure is a flatter organizational structure that groups
together people based on their skills or functions. The organizational
structure could group those who work in a specific department together,
or the grouping could be based on those who work in a functional area
such as finance or marketing. One advantage of this sort of flatter
hierarchy is that it is easier for employees to communicate with each
other and it facilitates learning. Disadvantages are that as the company
grows, there may be a lack of integration across the different functions
or departments leading to inefficiencies.
MATRIX ORGANIZATIONAL STRUCTURE
Businesses working on a specific project could also have a matrix
organizational structure that sets up the relationship among the people
working on the project. The matrix type of project management system
involves putting together people from different functional areas, such as
marketing and systems, to work together for the project time frame. One
advantage of the matrix organizational structure is that people across
different functional areas have a better understanding of their coworkers
in other areas. A disadvantage is that employees are responsible to their
project team as well as to their functional areas. This can create some
conflict.
INFORMAL ORGANIZATIONAL STRUCTURE
Whatever an organization’s formal organizational structure, there is an
informal organizational structure that develops. This informal structure,
also known as the "company grapevine," influences how information
flows within the company. One advantage of such a grapevine is that
employees who interact outside the confines of the formal organizational
structure often cooperate better, benefiting the organization. A
disadvantage is that rumors and gossip can spread through the
grapevine.
COMPANY SIZE
Small companies usually have more horizontal or flat organizational
structures. Companies do not really need to consider an organizational
structure when they have less than 15 employees, according to The-
Business-Plan.com, an online business reference site. With less than 15
employees, most managers likely have diverse functions. For example,
you may have accounting, finance, marketing and research and
development managers or directors all on the same level, one step down
from the top executive or company owner. Each manager or director
may be performing work himself or doling projects out to vendors.
Hence, they have no employees reporting to them. Therefore, there is no
need for an organizational structure. Everyone knows their
responsibilities and reports to the top executive.
FUNCTIONAL ORGANIZATIONAL STRUCTURE
In a functional organizational structure, management teams are divided
into various functions like marketing research, product management,
business development and sales. Heads of these functional areas, such as
directors, have managers, associates and clerical people reporting to
them in a department setting. That way work can be dispersed and
shared based on people's expertise. Departments with shared skills and
expertise to varying degrees enable companies to work more efficiently.
The synergism of the department management team can make better
management decisions and get more done. A disadvantage of the
functional organization structure is that company goals may be sacrificed
somewhat for department goals.
SALES ORGANIZATIONAL STRUCTURE
In some companies, many functional areas report to the sales
department. For example, the marketing manager may report to the
senior vice president of sales. Additionally, accounting, finance and other
managers may also report to the senior vice president of sales. Sales
organizational structures are used when a company's sales department is
the major thrust of the company. Companies using sales organizational
structure often have hundreds of salespeople working for them.
Additionally, sales representatives report to sales managers. And sales
managers may, in turn, report to area sales managers. A regional sales
manager may oversee each division. An advantage of a sales
organizational structure is that all managers and employees support the
selling efforts of the company. On the downside, creativity and talents of
other functional areas can be sacrificed to some degree.
MATRIX ORGANIZATIONAL STRUCTURE
A matrix organizational structure is a type of hybrid organizational
structure. For example, a company that uses a functional organizational
structure may temporarily create a product organizational structure,
another type of structure that emphasizes products. Hence, managers
from different functional areas may work together to research, develop
and introduce a new line of products to the market. Companies that use
matrix organizational structures take advantage of the efficiencies of
functional teams and the product expertise of product teams. However,
matrix structures are more ad hoc in nature. They may last six months to
a year or two. Companies will then disassemble them once the project is
completed.
TOP-DOWN HIERARCHICAL ORGANIZATIONAL STRUCTURES
Traditional organizational structures take a top-down approach, and there
are a few variations on this kind of structure. In smaller companies, an
executive can manage the entire staff, with a clear line of authority from
himself to each individual. In medium and large companies, executives
can oversee managers, who then oversee teams. The number of
management layers depends on the size of the organization and the way
the individuals are organized.
If employees are organized by geographic location, then a manager can
oversee everyone in a single location. If employees are organized by
function, then a manager may oversee all employees who complete a
similar role within the organization. For example, all customer service
representatives can be overseen by the same manager, and all marketing
personnel can be overseen by a marketing manager.
In larger organizations that have diversified portfolios with different lines
of business, employees can be organized by product, service or channel.
This is called a product or divisional structure. For example, if a company
makes jarred baby food and dry baby snacks, each product line could
have its own traditional hierarchy instead of grouping all marketing
personnel together.
FLAT ORGANIZATIONAL STRUCTURES
Characteristics of hierarchy are dependent on the functions within a
company but also on the values of a company. In many start-up
businesses, especially in the technology space, flat organizations are
commonplace because the businesses value teamwork, equality and
collaboration. In a flat organization, there are no hierarchies or
managers. Sometimes, these kinds of organizations can also be called
self-managed. All employees are seen as equal in flat organizations. This
kind of structure is easier to implement in small businesses than it is in
larger corporations.
MATRIX ORGANIZATIONAL STRUCTURES
The matrix structure is a complex one and varies widely from company to
company. It groups employees based on multiple factors, usually
function and division or product. It also sometimes takes geography into
account. The matrix structure can also shift from project to project. For
example, if a marketing employee is working on a new product launch,
she may report to that product’s manager in addition to her marketing
manager for the duration of the project.
EMERGING FORMS OF ORGANIZATION
There are a number of new characteristics of organizational structure in
today's business environment. Halocratic structures use distributed
decision making. People are organized into groups based on skill set and
function, but there are no individual managers.
A flatarchy is a kind of organizational structure that is a combination of a
traditional and flat model. Employees are organized in a dynamic way
and can change to reflect the project on which they are working or goal
they are trying to achieve.
A self-organizing structure is one of the forms of organization where
employees group together on their own to accomplish a goal based on
their values. In learning organizations, managers don’t provide directives
to their team members but instead offer new information and
experiences that enable them to learn and build new skills.
UNDERSTANDING SUPERVISOR RESPONSIBILITIES
In most cases, the role of supervisor is an entry-level management
position. Supervisors oversee a small team of employees and are
responsible for ensuring that the tasks of the team members are
completed properly and efficiently. Sometimes, a supervisor may have
previously held the role of one of the team members, so he is intimately
familiar with the tasks that need to be completed. He may have been
promoted due to his leadership skills or work ethic. Generally,
supervisors perform the same tasks as their subordinates while taking a
leadership role.
Supervisory roles are generally internal facing, meaning that they are
concerned with matters within the business. For example, supervisors
may execute plans for rolling out new product placements in the store or
teaching their team new customer service policies. They may resolve
conflicts that arise within their team, or they may conduct on-boarding
training for new employees.
In the general hierarchy of an organization, the supervisor reports to the
manager who then reports to the small business owner. In smaller
companies, there may not be a managerial position, and so the
supervisor may report directly to the small business owner.
LOOKING AT MANAGER RESPONSIBILITIES
A manager is responsible for overseeing the strategic direction of her
department. Part of the job involves making important decisions
regarding the company’s resources, which can include financial budgets
and personnel. Depending on the size of the company, managers may
oversee supervisors within the organization and provide them with plans
that the supervisors can implement with their teams. If the business
doesn’t have a supervisory role, managers can oversee the employees
themselves.
Managerial roles are primarily external facing, unlike supervisory roles.
They are concerned with the strategy and direction of the company as a
whole and how it relates to the industry and the target market. Managers
interact with external stakeholders, including key accounts, business
partners and suppliers, and they establish relationships and trust.
Developing strategies and plans to meet company goals is one of the
major responsibilities of a manager. In addition, managers need to liaise
with other departments within the business to ensure that all areas are
working toward the same goals.
SHOULD YOU HIRE A SUPERVISOR OR A MANAGER?
When deciding what kind of role you need to hire for your business, ask
yourself whether you need someone to make big-picture decisions or
execute tactical plans. Do you need someone to focus his energy
externally or internally? Will this role need to make critical decisions
about the direction of the business, or will he be more focused on the
direction of his department? By having a deep understanding of what
you need the person to accomplish, you’ll have a better idea of the kind
of employee you need.
Other important questions to ask yourself include: Will he need to
allocate resources like finances and personnel, or will he be charged with
ensuring that people are doing their jobs efficiently? Will your employee
need prior management experience or can he be an entry-level
candidate? By answering these kinds of questions, you can determine
whether your business needs a manager or supervisor as a part of your
team to help your business reach its goals.
WHAT IS A FLAT STRUCTURE?
A flat structure blends two different types of business hierarchies: those
of traditional hierarchies in which multiple people report to one leader,
and product hierarchies in which teams are divided based on specific
products, customer base and geography – and report to one overseeing
body. In Nike’s flat setup, teams are divided based on product and report
to separate product managers while also remaining accountable to more
broad department managers. With the flat structure, employees typically
report to a minimum of two managers – one that handles more project-
based assignments and another who manages regulation and policy.
Nike’s flat structure, also known as a matrix structure, consists of several
divisions separated into subsidiaries: Converse, Hurley and others, which
all report to Nike’s global headquarters. The subdivision for EMEA, which
Nike’s European headquarters manages, replicates this structure, while
the U.S., the Americas and Asia Pacific locations are housed within the
global headquarters’ oversight.
Nike’s many divisions operate pseudo-independently within the overall
Nike brand name. This controlled autonomy keeps Nike’s brand
consistent and ensures a certain standard of customer service and
product delivery, while also affording separate regional and product
brands the flexibility to satisfy niche customer needs and demands.
BENEFITS OF A FLAT STRUCTURE
One of the main benefits of this structure is that it makes room for
decision-making to happen without ideas getting trapped in a
traditional, more bureaucratic, chain of command. On average, it takes a
project a year and a half to launch at Nike, from initial design to the
actual crafting of the product. This level of agility also gives Nike teams
the ability to keep their ear to the ground when it comes to trends and
customer preferences and make changes as they see fit.
Another plus of Nike’s flat structure is that it facilitates transparency and
caters to all markets. Managers are responsible for smaller teams and
decisions happen faster and with more collaboration among individual
parties. Nike’s smaller regional teams typically respond more to
customer demand and distribution needs, while overall factory orders
remain within the authority of Nike’s headquarters.
Annually, Nike’s products undergo approximately 30,000 to 40,000
developments. Cosmetic changes in things like color and regular features
occur constantly. Nike branches typically focus on apparel while footwear
remains largely in the realm of global headquarters. The independence
of Nike’s subsidiaries and regional subsets and their singular focus allows
for these changes to happen on a continual basis without interference
from governing bodies or deviation from Nike’s overall brand.
DISADVANTAGES OF NIKE'S MATRIX STRUCTURE
Despite its track record of success, Nike's matrix structure has its flaws.
While this type of organizational structure is based on clear roles and
hierarchies, it can make it harder for employees to climb up the career
ladder. This can affect employee morale and motivation as well as
retention rates.
Another drawback is that communication often gets lost. A division may
have several different departments for the same function, which may
create confusion and slow things down. Furthermore, it increases the
organization's costs.
Even though most departments operate efficiently and are able to make
fast decisions, managers may end up with a heavy workload and take on
more responsibility. Those who are new to the job or lack certain skills
may find it difficult to keep up with the latest changes and handle
complex situations.
SUBSIDIARY MODEL
Owning foreign subsidiaries is one of the most basic structural models of
a multinational company. The subsidiaries are self-contained units with
their own operations, finance and human resource functions. Thus the
foreign subsidiaries are autonomous allowing them to respond to local
competitive conditions and develop locally responsive strategies. The
major disadvantage of this model however is the decentralization of
strategic decisions that makes it difficult for a unified approach to
counter global competitive attacks.
PRODUCT DIVISION
Organizational structure of the multinational company in this case is
developed on the basis of its product portfolio. Each product has its own
division that is responsible for the production, marketing, finance and
the overall strategy of that particular product globally. The product
organizational structure allows the multinational company to weed out
product divisions that are not successful. The major disadvantage of this
divisional structure is the lack of integral networks that may increase
duplication of efforts across countries.
AREA DIVISION
Organization using this model is again divisional in nature, and the
divisions are based on the geographical area. Each geographical region
is responsible for all the products sold within its region. Therefore all the
functional units for that particular region namely finance, operations and
human resources are under the geographical region responsibility.This
structure allows the company to evaluate the geographical markets that
are most profitable. However communication problems, internal conflicts
and duplication of costs remain an issue.
FUNCTIONAL STRUCTURE
Functions such as finance, operations, marketing and human resources
determine the structure of the multinational company in this model. For
example, all the production personnel globally for a company work
under the parameters set by the production department. The advantage
of using this structure is that there is greater specialization within
departments and more standardized processes across the global
network. The disadvantages include the lack of inter department
communication and networking that contributes to more rigidity within
the organization.
MATRIX STRUCTURE
Matrix organizational structure is an overlap between the functional and
divisional structures. The structure is characterized by dual reporting
relationships in which employees report both to the functional manager
and the divisional manager. Work projects involve cross-functional teams
from multiple functions such as finance, operations and marketing. The
members of teams would report both to the project manager as well as
their immediate supervisors in finance, operations and marketing. The
advantage of this structure is that there is more cross-functional
communication that facilitates innovation. The decisions are also more
localized. However there can more confusion and power plays because
of the dual line of command.
TRANSNATIONAL NETWORK
Evolution of the matrix structure has led to the transnational network.
The emphasis is more on horizontal communication. Information is now
shared centrally using new technology such as “enterprise resource
planning (ERP)” systems. This structure is focused on establishing
“knowledge pools” and information networks that allow global
integration as well local responsiveness.
PROBLEMS OF FUNCTIONAL DEPARTMENTALIZATION
The oldest organizational structure is the functional model, and most
large organizations use functional departmentalization to groups jobs by
function; for example, the marketing department, the finance group and
the research and development team. Functional experts are hired to staff
and manage within the department, which can make it easier for
employees to share job knowledge and information.
While this can enable teams to work faster in a smaller company, as the
company grows, alignment by function can result in both a narrow focus
on department goals and a lack of interaction and communication with
other groups. While cross-functional teams can help mitigate these
issues, members can be spread thin across multiple cross-functional
projects, which can lead to late, low-quality or dropped tasks.
PROBLEMS OF PRODUCT DEPARTMENTALIZATION
Larger companies offering multiple products or services sometimes
organize around these offerings. Product departmentalization enables all
team members, regardless of job function, to focus on the product itself,
which creates expertise and team-wide pride in the product.
As with functional departmentalization, however, team members may
become too narrowly focused on their product and can miss the bigger
picture of how their product fits into corporate strategy and the target
customer environment, especially when other company offerings are
involved. Product departments also mean hiring more functional experts,
because these employees are not shared across groups.
PROBLEMS OF CUSTOMER DEPARTMENTALIZATION
Financial institutions are among those businesses that organize around
specific groups of customers; for example, a bank might have a
consumer, business and mortgage teams. As with product
departmentalization, customer departments include employees from
functions across the company who perform their specific jobs to serve
customer needs.
Customer-focused departments often have disadvantages similar to
product-based departments: the team’s focus can be too narrow and
there can be additional cost when hiring a functional expert for each
department. Even when organized to focus on customer acquisition and
satisfaction, a company needs to ensure teams are aware of and working
toward overall corporate strategy.
PROBLEMS OF LOCATION DEPARTMENTALIZATION
Local services, such as hospitals and police departments, are often
organized by location out of necessity. Other companies deliver global
offerings but still choose to organize by location to better serve regional
customer needs and navigate often-confusing local business practices.
As with product and customer departmentalization, location
departmentalization can come with a higher overhead, as functional
experts need to be hired for each location. Since regional departments
can be hundreds and thousands of miles away from headquarters and
one another, teams are more likely to focus on department goals,
sometimes to the detriment of the company.
WHY ORGANIZATIONAL STRUCTURE MATTERS
A famous quote by Hockey Hall-of-Fame inductee Wayne Gretzky says
that we miss 100 percent of the shots we don't take, which in the context
of hockey, life and business means you cannot achieve a goal if you
don't take action, or "the shot_."_ The vision and mission of a company
can be compelling, but without a clearly defined structure, an
organization has no direction, no clear-cut objectives and goals on which
to take action, therefore missing 100 percent of its opportunities to
achieve success. For example, in a haphazard organization, employees
and departments may not understand their role and the importance of
their contributions, which can lead to a lack of morale and burnout.
When a company visually defines its organizational structure, the job
descriptions, relationships and roles of individuals and departments are
clarified, and reaching goals becomes much easier.
As an organization grows, the company organizational structure chart
may need to to be modified to reflect changes within the company as it
evolves. For instance, a startup could begin with a flatarchy chart, but as
they gain momentum, move to a divisional chart as new regions and
sub-brands develop. When your current business structure is not
empowering your teams to fulfill their objectives quickly, seek guidance
to evaluate whether reorganizing your structure would restore
momentum and more quickly achieve your goals.
TYPES OF ORGANIZATIONAL CHART STRUCTURES
An organizational structure chart looks like a map of different people
and departments within an organization; the business equivalent of a
family genogram that depicts the relationships between various
members of a family. Just as a family genogram helps us understand the
structure of a family and the roles of people within the family, an
 organizational structure chart helps us understand the roles of
individuals within a company.
These are the four major types of organizational chart structures that
might reflect your company's current operations or help you restructure
into a different mode of operation:
 Functional: A functional company org chart depicts what most
people would associate with bureaucratic or hierarchical modes of
operation. This is a traditional top-down structure with the C-Suite at the
top, followed by other senior management and middle managers with
the most power and influence in the company. There are relatively few
employees listed at the top of the diagram, with more and more
employees or departments listed toward the bottom of the diagram. The
farther down you go in the organization, the less power people have.
People are divided into departments depending on their function or skill
set within the company. Examples of hierarchical organizations include
the military, most corporations and organized religions. One major
advantage of a functional structure is the ability of each employee and
department to focus only on what they do best, without worrying about
the other working parts of the organization. At the same time, lack of
communication between departments can slow down progress toward
the organization's overall goals, as the right hand often has no idea what
the left hand is doing. 
 Matrix: A matrix company org chart is similar to a functional
company structure chart, except that employees report to at least two
supervisors, depending upon the situation and project. For instance, they
may have one main boss, but then different project managers for three
different projects they are currently working on. This means that they are
responsible for reporting to four different people. While this chart still
shows primarily top-down relationships, you will also see horizontal
relationship lines between people or departments at the same level
because people must report to each other on specific projects. One
advantage of the matrix system is that it allows for easy communication
between divisions. But a disadvantage of the matrix structure is that
 employees can be confused or overwhelmed by having to report to so
many different superiors at once, each with their own management style
and demands. 
 Divisional (includes geographical): A divisional company structure
chart applies to large companies that include several brands or
geographical locations under their umbrella. The Gap is an excellent
example of a divisional organization. On their organizational chart
example, The Gap is listed at the top, and then the brands they manage
are listed on the second level of the chart, including The Gap, Old Navy,
Banana Republic, Athleta and Hill City. Each of these divisions then has
their own functional structure on the organizational chart. Another
company that operates this way is Fabletics, with their name listed at the
top of the chart and then their brand divisions on the second line,
including JUSTFAB, Shoedazzle,  and Fabletics and Fabkids, with each
division having their own functional structure. Divisional charts may
include different types of organizational chart structures under each
division. While one division operates with a functional structure, another
might use a matrix structure, while a newly developing division is best
categorized as a flatarchy. The strength of the divisional structure is that
different divisions within the same company have the power to operate
autonomously as organizations. However, communication between the
divisions can be difficult, and differences in policies and procedures can
make employee experiences radically different from one division to the
next. 
 Flatarchy: In a flatarchy, employees are welcomed to contribute
new ideas or participate in think tanks, regardless of position. The
organizational chart still resembles a hierarchy, in that there are
supervisors, yet supervisors and employees may be lumped together in
categories called, "flat teams," where the ideas of everyone are equally
important. Companies like Google, Linkedin and 3M all welcome their
employees to participate in innovation groups and provide time for
individual creativity and projects that could benefit the entire
organization. Instead of new ideas coming from the top down, new ideas
are welcomed from wherever they are naturally generated. The strength
of the flatarchy lies in the wealth of possibilities that are opened up for
the organization when new ideas are not limited to the minds of a select
few. Nevertheless, a strong mission statement and vision statement are
needed to keep everyone on the same page to avoid pursuing ideas in
too many different directions at once. 
CREATING AN ORGANIZATION STRUCTURE CHART
Once you understand whether your organization operates using a
functional, matrix, divisional or flatarchy structure, you can create an
organizational structure chart that reflects your mode of operations.
Microsoft Office, Airtable, SmartDraw and Insperity OrgPlus are software
offering organizational charting capabilities that allow you to choose
your desired structure and then simply plug in the appropriate
information for each position, department or division within your
organization. This software automatically creates a chart that you can use
to increase communication and efficiency in your organization. Options
range from free to paid versions, with the free versions most appropriate
for smaller businesses and the paid ones more appropriate for larger
organizations or those who want highly customized graphics.
Your finished organizational chart can be helpful for explaining roles to
management, helping employees understand paths to promotion within
the company or communicating plans for the future. Some companies
use their charts for a dual purpose as a company directory, complete
with phone numbers and email addresses.
During a time of organizational transition, drawing up a variety of
organizational structure charts can help you brainstorm by evaluating
each structure and how it could benefit your business – an invaluable
tool for making informed decisions going forward.
HIERARCHY
In the most basic sense, a well-run organization functions like the human
body. The head instructs the various body parts on how to move and
react in unison to perform the simplest of tasks. In a company, this
hierarchical decision making flows from the top (the head of the
organization) down to employees who perform various tasks.
Management is responsible for making the decisions that allow the
company to function efficiently to achieve company objectives. In large
corporations, there are three levels of management: top level, middle
level and first level.
MANAGEMENT
Generally, top-level management, often referred to as senior
management or executives, sets the goals for the entire organization,
directing the company on how to achieve its objectives. Top-level
managers, or C-level managers, include the chief executive officer (CEO),
chief financial officer (CFO) and chief operating officer (COO). Middle-
level managers fall below top managers and often include titles such as
general manager, regional and divisional managers. Their jobs are to
supervise employees grouped together to form departments, units or
divisions. Depending on the size of the company, the number of
supervised employees can range from a few to hundreds. First-level
managers are responsible for the day-to-day supervision of line workers
-- employees who produce the company's products or offer its services.
Typical titles for first-level managers include office manager, supervisor
and crew leader.
STRUCTURE
Depending on the size of the organization and its complexity,
management might opt for a flat (horizontal) or a vertical structure. A flat
organization is one where there are fewer layers of management, making
communication to the top of the organization quicker. A small company
or one operating in a very competitive market could opt for such a
structure. In contrast, a vertical organization has multiple layers,
including top-, middle- and first-level managers, and the decision-
making process is very formal and follows a specific chain of command.
Decision making within a vertical organization follows a regimented
process.
ACCOUNTABILITY
 At its core, the issue of hierarchy within an organization is about
accountability. Without an established structure, managers of all levels
and employees are unable to perform their roles efficiently. In addition,
having a hierarchy establishes protocol that informs everyone within the
organization from the top down on how to address issues that affect the
company. For instance, having a hierarchy holds a floor manager
accountable for the performance of the employees under his supervision.
In turn, the floor manager must report to a higher-level authority who
assesses his work performance based on the results produced by line
employees.
LOOKING AT THE MANY FUNCTIONS OF MANAGEMENT
There are several theories on the aspects of management, which define
what different functions make up the leadership role. While the functions
are organized differently for each theory, they can be summed up in five
common elements:
1. Planning: A critical managerial function, this involves creating a
framework, strategy and detailed plan for how to achieve an
organizational objective. It’s an ongoing task that needs to be reviewed
and completed on a regular basis, such as every month or quarter. For
example, one of your organizational objectives may be to improve
profitability by 10%. In order to do that, the plan may include ways to
decrease cost per customer acquisition by initiating a loyalty program
and switching suppliers to one that can provide more favorable rates.
2. Organizing: This function oversees how the company functions on
a granular level with day-to-day tasks. In order to do this, managers
need to bring together human, financial and technological resources in
order to achieve the company’s goals. By ensuring efficiency and
structure, organizing helps employees to do their jobs more effectively.
For example, if one of the company’s objectives is to run a multi-tiered
marketing campaign, the manager would need to ensure that the
marketing department has the budget it needs to execute the
campaign and the authority, skills and expertise it needs to see it
through.
3. Staffing: Closely related to organizing, this function ensures that
the right people are in the right positions and that the company has the
right amount of employees. For example, if Mark is a strong accountant,
then making him head of marketing may be a mistake because that’s not
where his strengths lie. This function is often seen as a part of
organizing.
4. Directing or leading: This function ensures that employees have the
motivation and inspiration they need to do their jobs in a productive
manner. It may involve meeting with employees on a regular basis to
discuss day-to-day processes and getting their feedback on elements
that can be improved.
5. Controlling: This function is about making sure that the company is
on track to reach its objectives without any deviation. It involves
reviewing key performance indicators (KPIs) on a regular basis and
making changes in the plan as necessary to ensure the company hits its
milestones.
UNDERSTANDING ORGANIZING AS A MANAGEMENT FUNCTION
Organization provides structure to a business by ensuring that the
appropriate resources are in place to best help the company achieve its
goals. Resources can vary, from financial budgets to technical solutions
to employees. It’s about providing the company with
the support and structure it needs to execute its plans and meet its
targets. Some of the critical elements of organizing as a management
function include:
 Well-defined roles: In order for employees to work effectively, they
need to have a clear understanding of their job and the outcomes they
need to achieve. Managers need to outline the expectations of each role.
 Clarified organizational structure: In many organizations, the
hierarchy of the team is a vital element that contributes to productivity.
When employees know who is in charge, they are able to seek guidance
to overcome their obstacles.
 Strong budget administration: A vital part of organizing is to
properly allocate the budget so employees have the resources they need
to complete their tasks.
 Technical proficiency: In almost every industry, technology plays a
lead role. Whether it’s a new software to manage projects or a piece of
warehouse equipment to reduce injuries, managers need to provide their
teams with the support systems they need to succeed.
 Goal setting and communication: In order to bring the team
together, it’s vital for managers to communicate the goals they are trying
to achieve individually and as a team. For example, if a bakery is trying to
increase its sales, each employee has a role to play in achieving that goal.
The cashier has to check out the customers, the bakers have to produce
the product and the customer service representative has to showcase the
product and entice customers to make a purchase.
These notes on organizing in management can help company leaders to
ensure they are effectively providing their teams with the support that is
necessary to meet the key performance indicators. If a manager fails in
one area of the organizing function, the teams may not be able to do
their tasks as effectively, and as a result, the company may fall behind on
its goals.
FOLLOWING THE STEPS OF MANAGERIAL ORGANIZATION
There are four key steps in the organizing function of management.
Managers need to:
1. Identify and divide the tasks: This involves clarifying the different
roles, processes and activities that are required to achieve the goals.
Dividing the work into smaller units helps create tasks for each individual
team or employee. Activities may include greeting customers and
answering questions, cashing out customers and stocking shelves.
2. Assign resources: Once the tasks are defined, it’s time to assign
them to individual employees and teams and provide those people with
the financial or technological support they need to execute those tasks.
For example, all tasks related to advertising and promotions can be
 assigned to marketing employees, whereas all tasks related to storing
and shipping products can be assigned to the warehouse team.
3. Create responsibility and authority: It’s vital for employees to know
who is leading them. This may involve assigning a team leader or middle
manager to ensure that all the tasks are completed. The manager doesn’t
need to hold all authority himself. He can delegate authority to other
senior employees. For example, one of the customer service
representatives can be promoted to team leader, holding the
responsibility of ensuring that the others complete their tasks.
4. Coordinate responsibility and authority: This is a key step in
managerial organization, ensuring that all of the functions are aligned
within the company. Managers need to communicate who has authority
and responsibility for the major directives throughout the organization.
For example, if two employees in different departments are in charge of
improving customer satisfaction, they need to work together with their
teams. Managers may also need to coordinate with other managers who
are at the same level or higher in the hierarchy to ensure that there are
no conflicts and that goals are aligned.
TRYING DIFFERENT WAYS OF ORGANIZING
There are several principles of organization as a management function.
Businesses can select one or more to develop the organizational
structure that meets their needs. For example, the specialization
principle is about dividing work based on skill and quality of work. On
the other hand, the functional principle is about dividing work based on
the major roles of each department. For example, any accounting tasks
should be designated to the accounting department.
The span of control principle looks at the number of employees who can
be overseen by a single manager. In a narrow span of control, the
manager doesn’t control many people. This is useful for teams where the
subordinates have their own areas of expertise, such as trades or crafts.
In a wide span of control, the manager oversees a large group of
employees, resulting in less overhead and better coordination.
The unity of command principle is about improving communication and
using resources effectively. One subordinate reports to one manager at a
time, so there is a linear chain of command.
WHAT ARE ORGANIZATIONAL SYSTEMS?
An organizational system is the structure of how an organization is set
up. That structure defines how each division of a business is set up, the
hierarchy of who reports to whom and how communication flows
throughout the organization. Broken down even further, an
organizational structure defines how each role in an organization
functions. With a well-defined organizational structure in place, all
employees know what is expected of them and to whom they report.
Business owners should think long and hard about which system to
choose, as each organization has unique needs. An organizational
structure that is right for one company will not be right for another.
EXAMPLES OF ORGANIZATIONAL SYSTEMS IN BUSINESS
There are four main types of organizational structures: functional,
divisional, matrix and flat. Each system has unique features.
Functional organizational structure: A functional organizational structure
is a traditional hierarchy. Many companies, especially larger corporations,
follow the functional structure. This system features several specialized
divisions such as marketing, finance, sales, human resources and
operations. Then a senior manager oversees all the specialized divisions.
The reporting flow is clear. Each employee reports to their senior,
including division heads, who report to the senior management. Senior
management oversees the entire structure. Because the company
remains split up into specialized divisions, employees tend to become
specialized as well. This causes a clear path for promotion and growth.
However, the divisions can have trouble communicating with one
another. Because all departments report upwards, there is little
horizontal communication between them, leaving little space for holistic,
whole-company thinking, except at the top management level. This
makes the functional organizational system slow to adapt to change.
Divisional organizational structure: A divisional organizational structure
divides the business up into teams based on the projects the employees
are working on. This system includes many different types of teams,
including legal, public relations, research and business development.
Further, teams are created around specific projects. For example, a
pharmaceutical company might have separate teams dedicated to each
medication they manufacture. Each project team has a director or vice
president and exercises a certain level of autonomy within the
organization. The divisional structure allows employees to become
deeply familiar with their team’s work. However, divisions are often
unaware of what other teams are doing, and do not communicate with
each other. Employees may not be able to work effectively across
divisions when necessary. Ultimately, this system can be challenging to
manage due to its spread-out structure.
Matrix organizational structure: A matrix system is a cross between a
functional structure and a divisional structure. From a birds-eye
perspective, the business is set up in a functional structure, with a
traditional hierarchy and specialized divisions. However, when you look
at those divisions up close, they are each set up in a divisional
organizational structure. This means they are split up into projects and
smaller teams. The matrix type of organizational structure is quite
complex and requires a lot of planning, not to mention strong systems of
communication across the organization. However, when the matrix
structure works well, it eliminates a lot of the issues that pop up with
divisional or functional-only organizations. Communication can travel to
the right people, which increases productivity and holistic thinking.
Further, employees are exposed to other departments and projects,
encouraging cross-collaboration. On the downside, the matrix structure
can quickly become confusing for employees when there are too many
managers, and it’s not clear who to report to.
Flat organizational structure: Flat organizational structure flattens much
of the hierarchy and allows employees more autonomy over their work.
Often, flat organizations are split up into temporary teams, although they
usually do not have formal structures. There are still some top-down
dynamics in a flat system. Often, there is at least some senior leadership
steering the ship. However, this system is predicated on disrupting the
traditional hierarchical structures of businesses. Many startups and tech
companies tend towards a flat organization, as it encourages innovation
and employee input. The thinking is that when employees are not
tamped down by red tape, they will think freely and generate fresh,
profitable ideas. This increases communication across teams and
eliminates some of the communication issues that can happen when
messages travel up a top-down structure. Unfortunately, a flat system is
difficult to maintain as a company grows, and the need for more
structured communication systems comes into play. Further, employees
in a flat organization can become overwhelmed with doing too many
different tasks, and do not have a lot of room to grow or be promoted.
WHY BUSINESSES NEED ORGANIZATIONAL SYSTEMS
Organizational systems are important for businesses of every size.
Having a solid, well-defined structure in place erases confusion and lays
out simple processes for employees to follow. Each worker should know
exactly who they report to. Without some type of hierarchy or structure
in place, a workplace can become chaotic. Employees may not
understand who is responsible for what, causing important things to fall
through the cracks. A solid organizational structure streamlines a
company and keeps everyone on the same page.
An organizational system puts every person in their correct place, able to
contribute their part to the company. Having a system improves overall
efficiency, heightens productivity and provides clarity to everyone in the
organization. Every department can work better when roles are clearly
defined and objectives are shared. Further, the proper organizational
system can improve decision-making, as information flows throughout
the organization. Upper-level managers can collect information from all
divisions, giving them greater insight into the entirety of a company’s
operations.
A solid organizational system eliminates many business problems,
including the duplication of work and conflicts between positions. If a
business has been well-thought-out, each employee has a distinct role,
and roles do not overlap with one another. There is no “runaround”
where nobody is sure who is responsible for a particular task or project.
Because of this, cooperation is increased and employees feel a sense of
pride in their work. Workers avoid the frustration of having ever-shifting
roles and goal posts. They can focus on what they do best.
Choosing the proper organizational system can take your business to the
next level. For example, if your business is product-based, a matrix or
divisional structure will likely be ideal. These are project-based structures
that focus on specialized teams. Small startups, on the other hand, may
consider a flat structure to allow all employees to contribute their skills
and expertise without the hierarchy interfering.
EXAMPLES OF BUSINESSES WITH ORGANIZATIONAL SYSTEMS
Examples of the functional system: Functional organizational systems have
historically been used by the military, universities and government
entities. Over the years, functional hierarchies have become less popular,
and many organizations have moved away from them. However, they are
still in use by certain businesses. One example of how this type of
organizational system might be used is in a traditional factory setting.
The factory manager oversees the different divisions of the factory, which
are each specialized. Each division has its own manager, all of which
report directly to the overseeing factory manager. Another example
could be a retail store. A store manager oversees the operations from the
top of the pyramid. Below are different departments. Perhaps there is
one for inventory, one for customer service and one for marketing and
promotions. Each has its own supervisor, and all report to the general
manager.
Examples of the divisional system: Divisional systems are popular with
large, multinational corporations. For example, Johnson & Johnson has a
divisional structure. Each of Johnson & Johnson’s brands operates as its
own company, with its own leadership and internal structure. All of those
brands report to the parent company. Another example of a divisional
organizational structure is General Electric. The CEO sits at the top, and
beyond that, the company is split up into different groups. There are
some operational groups, such as those for finance, legal, public
relations and global research. Some teams are devoted to specific
projects, including aviation, energy, health care and more.
Examples of the matrix system: A matrix organizational system is
complex, and therefore mostly adopted by large, well-established
companies. One famous example of a matrix company is Starbucks. The
world’s largest coffee company uses a functional structure to split its
business up into divisions, including HR, financing and marketing. These
departments are located at the brand’s corporate headquarters and
report to the upper levels of management. The HR department, for
example, creates policies that affect all Starbucks locations across the
board. Next, Starbucks has separate divisions for each geographic
region. These regions include the Americas, China and Asia-Pacific,
Europe, Middle East, Russia and Africa. The Americas region, being the
most popular for the company, is further split into four smaller divisions.
Starbucks also has product-based divisions. For example, there is one
division for merchandise like the Starbucks mugs and another for baked
goods. At the lower levels of the organization, Starbucks has teams of
employees, especially at the store level. This complex matrix structure
serves the coffee giant well, allowing the company to operate thousands
of stores across the country successfully.
Examples of the flat system: Flat systems are popular among startups and
tech companies. One famous example of the flat system is Zappos. In
2013, the massive shoe company's CEO announced a new management
structure called holacracy, a setup to encourage collaboration by
eliminating workplace hierarchy. The company banned manager titles. It
would no longer have job titles and there would be no bosses. Every
employee would be in charge of their own work. The company hoped to
spark innovation and creation by doing away with the red tape involved
 in hierarchy and decision-making. However, Zappos struggles to keep
operations truly flat.
This is a struggle of many large companies that implement a flat
structure. Many startups have spoken about the difficulty of maintaining
a flat organizational structure when experiencing exponential growth.
Studies find that employees find hierarchical structures comforting and
practical. So, a flat organizational structure is perhaps a good option for
a business that is in its early stages, to spur innovation and growth.
However, most larger companies move away from a flat system as it can
become cumbersome to manage over time.

51 7.4 Contemporary Forms of

Organizational Structures
Learning Objectives
1. Explain what a matrix structure is and the challenges of working in a structure
such as this.
2. Define boundaryless organizations.
3. Define learning organizations, and list the steps organizations can take to
become learning organizations.

For centuries, technological advancements that affected business came in slow waves.
Over 100 years passed between the invention of the first reliable steam engine and the
first practical internal combustion engine. During these early days of advancement,
communication would often go hand in hand with transportation. Instead of delivering
mail hundreds of miles by horse, messages could be transported more quickly by train
and then later by plane. Beginning in the 1900s, the tides of change began to rise
much more quickly. From the telegraph to the telephone to the computer to the
Internet, each advancement brought about a need for an organization’s structure to
adapt and change.

Business has become global, moving into new economies and cultures. Previously
nonexistent industries, such as those related to high technology, have demanded
flexibility by organizations in ways never before seen. The diverse and complex
nature of the current business environment has led to the emergence of several types
of organizational structures. Beginning in the 1970s, management experts began to
propose organizational designs that they believed were better adapted to the needs of
the emerging business environment. Each structure has unique qualities to help
businesses handle their particular environment.

Matrix Organizations
Matrix organizations have a design that combines a traditional functional structure
with a product structure. Instead of completely switching from a product-based
structure, a company may use a matrix structure to balance the benefits of product-
based and traditional functional structures. Specifically, employees reporting to
department managers are also pooled together to form project or product teams. As a
result, each person reports to a department manager as well as a project or product
manager. In a matrix structure, product managers have control and say over product-
related matters, while department managers have authority over matters related to
company policy. Matrix structures are created in response to uncertainty and
dynamism of the environment and the need to give particular attention to specific
products or projects. Using the matrix structure as opposed to product departments
may increase communication and cooperation among departments because project
managers will need to coordinate their actions with those of department managers. In
fact, research shows that matrix structure increases the frequency of informal and
formal communication within the organization (Joyce, W. F., 1986). Matrix structures
also have the benefit of providing quick responses to technical problems and customer
demands. The existence of a project manager keeps the focus on the product or
service provided.

Figure 7.8
An example of a matrix structure at a software development company. Business analysts, developers, and
testers each report to a functional department manager and to a project manager simultaneously.

Despite these potential benefits, matrix structures are not without costs. In a matrix,
each employee reports to two or more managers. This situation is ripe for conflict.
Because multiple managers are in charge of guiding the behaviors of each employee,
there may be power struggles or turf wars among managers. As managers are more
interdependent compared to a traditional or product-based structure, they will need to
spend more effort coordinating their work. From the employee’s perspective, there is
potential for interpersonal conflict with team members as well as with leaders. The
presence of multiple leaders may create role ambiguity or, worse, role conflict—being
given instructions or objectives that cannot all be met because they are mutually
exclusive. The necessity to work with a team consisting of employees with different
functional backgrounds increases the potential for task conflict at work (Ford, R. C.
and Randolph, W. A., 1992). Solving these problems requires a great level of patience
and proactivity on the part of the employee.

The matrix structure is used in many information technology companies engaged in

software development. Sportswear manufacturer Nike is another company that uses
the matrix organization successfully. New product introduction is a task shared by
regional managers and product managers. While product managers are in charge of
deciding how to launch a product, regional managers are allowed to make
modifications based on the region (Anand, N. and Daft, R. L., 2007).

Boundaryless Organizations
Boundaryless organization is a term coined by Jack Welch during his tenure as CEO
of GE; it refers to an organization that eliminates traditional barriers between
departments as well as barriers between the organization and the external environment
(Ashkenas, R., et, al., 1995). Many different types of boundaryless organizations
exist. One form is the modular organization, in which all nonessential functions are
outsourced. The idea behind this format is to retain only the value-generating and
strategic functions in-house, while the rest of the operations are outsourced to many
suppliers. An example of a company that does this is Toyota. By managing
relationships with hundreds of suppliers, Toyota achieves efficiency and quality in its
operations. Strategic alliances constitute another form of boundaryless design. In this
form, similar to a joint venture, two or more companies find an area of collaboration
and combine their efforts to create a partnership that is beneficial for both parties. In
the process, the traditional boundaries between two competitors may be broken. As an
example, Starbucks formed a highly successful partnership with PepsiCo to market its
Frappuccino cold drinks. Starbucks has immediate brand-name recognition in this
cold coffee drink, but its desire to capture shelf space in supermarkets required
marketing savvy and experience that Starbucks did not possess at the time. By
partnering with PepsiCo, Starbucks gained an important head start in the marketing
and distribution of this product. Finally, boundaryless organizations may involve
eliminating the barriers separating employees; these may be intangible barriers, such
as traditional management layers, or actual physical barriers, such as walls between
different departments. Structures such as self-managing teams create an environment
where employees coordinate their efforts and change their own roles to suit the
demands of the situation, as opposed to insisting that something is “not my job”
(Dess, G. G., et. al., 1995; Rosenbloom, B., 2003).

Learning Organizations
 A learning organization is one whose design actively seeks to acquire knowledge and
change behavior as a result of the newly acquired knowledge. In learning
organizations, experimenting, learning new things, and reflecting on new knowledge
are the norms. At the same time, there are many procedures and systems in place that
facilitate learning at all organization levels.

In learning organizations, experimentation and testing potentially better operational

methods are encouraged. This is true not only in response to environmental threats but
also as a way of identifying future opportunities. 3M is one company that
institutionalized experimenting with new ideas in the form of allowing each engineer
to spend one day a week working on a personal project. At IBM, learning is
encouraged by taking highly successful business managers and putting them in charge
of emerging business opportunities (EBOs). IBM is a company that has no difficulty
coming up with new ideas, as evidenced by the number of patents it holds. Yet
commercializing these ideas has been a problem in the past because of an emphasis on
short-term results. To change this situation, the company began experimenting with
the idea of EBOs. By setting up a structure where failure is tolerated and risk taking is
encouraged, the company took a big step toward becoming a learning organization
(Deutschman, A., 2005).

Learning organizations are also good at learning from experience—their own or a

competitor’s. To learn from past mistakes, companies conduct a thorough analysis of
them. Some companies choose to conduct formal retrospective meetings to analyze
the challenges encountered and areas for improvement. To learn from others, these
companies vigorously study competitors, market leaders in different industries,
clients, and customers. By benchmarking against industry best practices, they
constantly look for ways of improving their own operations. Learning organizations
are also good at studying customer habits to generate ideas. For example, Xerox uses
anthropologists to understand and gain insights to how customers are actually using
their office products (Garvin, D. A., 1993). By using these techniques, learning
organizations facilitate innovation and make it easier to achieve organizational
change.
Key Takeaway
The changing environment of organizations creates the need for newer forms of
organizing. Matrix structures are a cross between functional and product-based
divisional structures. They facilitate information flow and reduce response time to
customers but have challenges because each employee reports to multiple managers.
Boundaryless organizations blur the boundaries between departments or the
boundaries between the focal organization and others in the environment. These
organizations may take the form of a modular organization, strategic alliance, or self-
managing teams. Learning organizations institutionalize experimentation and
benchmarking.

Boundaryless Organization Definition and 4

Examples
Written by MasterClass

Last updated: Mar 30, 2022 • 4 min read

A boundaryless organization breaks down the traditions, locational constraints, and hierarchies
of more traditional company structures. Employees at these types of organizations can expect a
flexible business environment and a team of coworkers that transcend geographic boundaries.
Learn more about what makes for a boundaryless organization.

What Is a Boundaryless Organization?

A boundaryless organization is a company that rejects the external boundaries and internal
hierarchies of more traditional organizations.

Due to the concurrent rise of economic globalization and quantum leaps forward in technology,
various management experts and company heads—like Jack Welch, Ron Ashkenas, and Steve
Kerr—decided a new company structure was necessary for today’s workforce. Their concept of a
boundaryless organization is one that uses technology to connect teams from different locations
(both inside and outside of the same countries) while also empowering these employees to set
their own schedules and manage their own productivity.

Boundaryless organizations exist in various iterations. Some might keep certain aspects of
traditional organizational structure and buck other elements, while others will discard any and all
such constraints in pursuit of a business environment that is as open and flexible as possible.

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4 Types of Boundaryless Organizations

There are multiple ways to set up a boundaryless organization, and it’s common to mix different
strategies. Here are four types of organizations in which the structure works well:

1. 1. Learning organizations: This type of organizational structure places a high emphasis

on using new data and information to positively change a company’s existing approach.
As employees in a learning organization discover what works best alongside the pain
points in any given process, they inform other members about their findings. This differs
from waiting for management to implement these sorts of changes from the top down.
These discoveries then improve the function of the entire learning organization.
 2. 2. Modular organizations: If a company outsources all the different parts of its business
aside from the most essential ones, odds are it’s aiming to be a modular organization.
Modular organizations preserve the most essential aspects of a business while throwing
the doors open to forge partnerships with other companies, rather than trying to keep
everything internal.
3. 3. Network organizations: Network organizations break down both internal and external
barriers by subverting traditional task assignments and making strategic alliances with
outside companies. These sorts of companies aim to assign tasks to the most suitable
candidate, regardless of where they rank in a company’s hierarchy. As far as allying with
outside companies, some network organizations even go so far as outsourcing their
human resources or accounting teams.
4. 4. Virtual organizations: This style of organizational design relies on virtual
collaboration. Teams use communication software to work together across various
geographical boundaries. Virtual organizations often encompass multiple different
companies, all of which share relevant and useful information with each other
organically.

Tips for Building a Boundaryless Organization

Building a boundaryless organization empowers employees and increases innovation. Keep these
five tips in mind if you hope to build one of your own:

 Aim for maximum flexibility. Since boundaryless organizations eschew rigid structure
for a constant state of flux, adaptability and flexibility are paramount for success. Be
open-minded to ways you and your cohorts can improve and change your workflow.
Allow employees to work when and how they want, so long as they remain responsible
for completing their tasks in a timely manner and assisting their coworkers when
necessary.
 Coalesce around a strong vision. The free flow of information becomes far more useful
when it centers around a cohesive goal. When you bring multiple employees or even
entire companies together, set out a strong vision to inform everyone’s work. Senior
managers can still raise awareness for the organizational mission, but there’s a greater
need for all employees to step up to the plate in boundaryless organizations than in more
traditional ones.
 Embrace new technologies. With each passing year, technological innovations make it
easier and easier to work across previously unbreachable boundaries than ever before in
history. Use video conferencing in place of face-to-face communication to facilitate team
communication from disparate parts of the globe. Messaging apps built for company use
specifically can also prove helpful.
 Grant employees plenty of freedom. Cross-functional teams make boundaryless
organizations possible, so invest in every employee’s empowerment and education.
Everyone should be able to contribute to decision-making in these types of companies, as
well as to do so on their own terms. This requires employers to grant their workers
freedom and employees to use that freedom responsibly. In other words, a flexible
working schedule still needs to translate into a productive one.
  Set achievable goals. Boundaryless organizations rely on flexible schedules and spread-
out teams, so set concrete short-term and long-term goals for all stakeholders.
Communicate constantly across multiple channels to ensure everyone remains in the loop
about how to best move forward

Matrix Organizational Structure: Pros and

Cons for Using It
By Indeed Editorial Team
Updated October 12, 2022
Published December 12, 2019

The Indeed Editorial Team comprises a diverse and talented team of writers,
researchers and subject matter experts equipped with Indeed's data and
insights to deliver useful tips to help guide your career journey.
When a business initiates a project, it's important to have an organizational structure in
place to define all the aspects of the task. These different aspects of a project can
include a variety of activities and processes, from task allocation to budgeting. The
matrix organizational structure can offer flexible ways for businesses to work on
projects, however, it may be difficult to initially implement due to the multiple aspects of
a project.

In this article, we discuss what a matrix organizational structure is, what roles it
includes, and the pros and cons of using this template for organizing a project.

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What is a matrix organizational structure?

The matrix organizational structure is a combination of two or more different kinds of
organizational structures, such as project management or functional management.
Additionally, the matrix structure is composed of both a traditional hierarchy of
management, where employees are managed by a functional manager, as well as
additional project managers who can manage employees across different departments.
These two or more managerial systems intersect on a grid or matrix.

How did the matrix organizational structure originate?

The matrix organizational structure originally arose out of the aerospace industry in the
1960s when firms who wanted to contract with United States government employees
needed to create specific charts to show the structure of the project management team.
The matrix structure has been adopted by organizations that take on large-scale and
complex projects that may not be efficiently completed within a single department in the
organization.

However, even if some projects aren't classified as large-scale, they can still be
incredibly complex. The matrix organizational structure allows for more collaboration
between departments rather than searching for solutions from the top down. Drawing
from different departments can allow an interdisciplinary team to view a complex project
from a variety of professional angles and work together to come up with dynamic
solutions to different problems.

How to use a matrix organizational structure

Within the matrix organizational structure, the functional manager might manage their
team by department, typically outlined vertically on the matrix. For example, if you work
in administration, you might report to the administrative manager, who may then report
to an executive director.

In addition to the vertical and functional outline, the project manager might manage their
teams across different departments, generally outlined horizontally within the matrix. For
instance, the project manager might draw their team members from the administrative,
human resources and marketing teams. Both the functional and project managers
oversee members of the same project team, which means that team members
effectively have two bosses who they may report to directly.

The matrix structure may oftentimes be adopted by companies that need to manage
daily operations in conjunction with ongoing projects. It can allow a company to maintain
its departmental structure while projects are in progress. Similarly, the matrix structure
may include employees from different departments to work collaboratively on projects.
All projects the team members may be working on can eventually be completed while
their functional roles within the organization are permanent.

Roles within the matrix organizational structure

The matrix organizational structure provides an outline for a project that may demand a
more global approach. Additionally, such a project may necessitate the skills and
expertise of different employees in other departments to find dynamic solutions to
complex problems. In an outlined matrix structure, both the functional manager and
project manager have equal authority over project team members, and each may have
roles outlined within the matrix.

Read more: How To Be a Good Manager

Managerial roles

Both functional and project manager roles can be outlined in the matrix organizational
structure. Outlined in a grid fashion, the functional managers and project managers are
role-specific and are included within the matrix. Functional managers oversee entire
departments of an organization. For example, a company could have human resources,
marketing, operational and finance departments. Each employee within the human
resources department, for example, might report to the human resources department
manager.

The project managers work across the matrix, or horizontally, bringing together team
members from different departments to work on and offer input on a single project. For
instance, the marketing and finance department may be consulted for working on the
budget and any strategies for a new ad campaign. A project manager could also draw
team members from all the organization’s departments for a single project.
Additionally, the matrix structure allows the managerial roles to be changed depending
on the company’s needs and its current projects. In some cases, for example, a project
manager might play more of a coordinating role. In other cases, the project manager
may have as much superiority as (or sometimes more than) a traditional functional
manager.

Functional and project managers may be required to communicate with each other to
clarify what each manager expects from their employees. Additionally, weekly or daily
communication with employees can be necessary to clarify any questions or
misunderstandings, as well as give actionable feedback to employees as they do their
work.

Team members

Team members may need to perform their functional roles within the company and
perform separate tasks for the project manager. When team roles are outlined using a
matrix structure, employees may often be required to communicate consistently with
both managers, detailing their overall progress and clarifying any misconceptions of
what work they are responsible for.

Related: 6 Tips for Effective Teamwork

Advantages of the matrix organizational structure

There are several advantages to using the matrix organizational structure. One benefit
of the matrix structure is that it allows cross-collaboration between staff and
departments that may not always have opportunities to work together. There are several
other key advantages as well:

1. Collaboration between different departments

Perhaps the biggest advantage of a matrix structure is that it brings together highly
skilled team members from different departments, allowing the organization to capitalize
on the resources it already has rather than seeking expertise and recruiting project team
members from outside of the organization.

2. Combines project and functional management structures

The matrix structure combines the project management structure with the functional
management structure to increase efficiency, adapt to changing markets and respond
more quickly to market demand.

3. Allows interdepartmental communication

The matrix structure also allows for better interdepartmental communication and
collaboration. By allowing different departments to work together, the matrix structure
fosters a more open work environment, ultimately making the organization more
dynamic. 

4. Employees can develop new skill sets

The matrix structure can offer employees the opportunity to strengthen their
interpersonal skills, communication skills and new skill sets due to the nature of utilizing
more than one manager. Working outside of a traditional or hierarchal structure can
benefit employees by helping them develop new skill sets and gain valuable experience
from working with different departments.

5. Team members and managers keep their functional roles

Projects will always continue to come to an end, but project team members and
managers may keep their functional roles throughout the project. When a project ends,
both managers and team members can avoid misconceptions about their job security or
searching for new projects as a contractor, as they may simply assume their functional
roles. Additionally, team members may also participate in future projects.

Read more: The Essential Functions of Management

Disadvantages of the matrix organizational structure

Conversely, the matrix structure may sometimes be difficult in achieving total structure
in an environment where managers hold equal superiority over their shared team
members. Additionally, team members might have misconceptions about how they are
expected to divide their time between their functional duties and their project
responsibilities. There can sometimes be several key disadvantages to using a matrix
structure:

1. Managerial roles may not be clearly defined

One common disadvantage of the matrix structure can appear as confusion among
managers who are involved with projects that are outlined by the matrix. Since the
power dynamics between the functional manager and the project manager may not be
as clearly defined within the matrix, confusion about the specific managerial roles may
arise.

2. Team roles may not be clearly defined

Another issue is when team members’ roles aren’t clearly defined in the project or the
division of responsibilities between employees’ functional roles and project roles isn’t
clear.
3. The decision-making process can be slowed down

Because of the nature of the matrix involving more than one manager, decisions that
may be required to pass through both managers can sometimes take longer to process
than in a traditional structure. Furthermore, with the integration of multiple managers
and team members, decisions that require multiple steps, for instance, in quality
assurance, can be slowed down when guided by the matrix.

4. Too much work can cause overload.

The matrix organization structure can also sometimes lead to work overload on team
members since their project workload is often in addition to their regular functional
duties. Employees might suffer burnout or overlook or fail to complete tasks or have
their quality of work suffer due to time constraints.

5. Measuring employee performance might become difficult.

Oftentimes, when implementing a matrix structure, it may be difficult to gauge employee

performance when working on a project. This is in part because team members may be
essentially performing more than one role, both functionally and the tasks within the
project.

Ultimately, with careful planning, clear expectations and open, effective communication,
the matrix organizational structure can be an advantageous method of organizing
multiple roles and departments when undertaking a large-scale project.

Tips for using the matrix organizational structure

If you choose to implement the matrix organizational structure, you might consider how
to address key details as they arise when outlining manager and team roles. Some key
details to consider when outlining your project within the matrix may include:

Manage expectations from different managers

Consider how you will outline each expectation of the managers involved with the
project. For example, the project manager might be expected to report on the overall
progress of the project while the marketing manager might be expected to produce a
result.

Keep employees accountable for their work

When planning projects within a matrix structure, you might consider methods to
increase employee engagement and hold staff accountable for their work. For example,
you might require employees to fill out a weekly report template outlining tasks
completed toward the project.
Maintain communication between managers and employees

Consider setting criteria for communication between the different managers and team
members. For instance, you might consider weekly chats through an office
communication app to get a quick overview of the project’s progress from all
departments involved.

Develop relationships between departments

You might offer opportunities for the involved departments to collaborate so that each
manager and team have a clear understanding of how they may be working together.

Clarify managerial expectations

Consider having managers outline clear expectations of what each of their team
members will be responsible for. For instance, you might suggest the project manager
outline due dates for specific milestones within the project scope.

Give employees the necessary resources

You might also consider which resources and tools employees might need to complete
the project. Additionally, you may consider addressing any employee misconceptions
about what the project entails overall, as well as what tasks they may be responsible
for.

Answer No.3

What are the Principles of Management?

The principles of management can be defined as broad and general guidelines used in
management that are specifically applied in decision-making and human behavior in an
organizational setting. There have been different proponents of principles of management in
scholarly work, and these proponents have included Henri Fayol and Frederick Winslow
Taylor.
The principles of scientific management are principles that were put forward by Frederick
Winslow Taylor and are five in number. These principles, in business and organizations, serve
the purpose of increasing productivity. In Taylor's work, he advocates for science, Harmony,
mental revolution, cooperation, and efficient improvement of every person to their best iteration.
These advocates serve as the principles of Taylor's work in management. When these principles
are actively applied in management, productivity necessarily increases because that is the
primary goal that these principles set out to achieve.
Frederick Winslow Taylor revolutionized management in his practical theory, in which he states
that management should not focus on making people work extremely hard but rather on
optimizing the workflow. In his theory, Taylor asserted that productivity would be increased if
the focus could be shifted to making jobs optimal and simplifying them.

Administrative Management Theory

The administrative management theory is best described as a theory of management that tries to
identify rational ways of designing an organization. Administrative management theory achieves
that by relying on a formal model of administration, discrete and distinct segmentation of labor,
and devolution of power and authority to the administrators to ensure they operate within their
scope of responsibility.
Henri Fayol developed the administrative management theory as he sought to refine and define
the principles of management. Both Fayol and Taylor are united by their origins in the classical
theory movement. In principle, Taylor believed in a scientific approach, while Fayol believed in
an administrative approach focusing on management. Fayol's work sprung from scientific
management theories, which can be seen in Fayol's empirical approach to management. His ideas
focus on measurable standards but deviate from scientific management theories because the
prime focus of his work is on organizational structure and the format of tasks at work.
The main difference between administrative management theory and scientific management
theories is that Fayol's administrative theory focuses on task completion and organizational
efficiency. In contrast, the latter focuses on optimizing individual efficiency and productiveness.
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Who was Henri Fayol?

Henri Fayol was a French mining engineer who started as an engineer and worked his way up to
the position of manager in a mining company in France. He was born in 1841 in Istanbul,
Turkey, to a father who already worked in civil construction.
Fayol's administrative management theory can be described as an approach to management and
increasing productivity by emphasizing organizational structure and human behavior. Fayol's
theory is grounded in the five functions that represent management: planning, organizing,
command, coordination, and control. These functions give rise to the principles of management
developed by Fayol later.
There is some disagreement about the number of functions, with the administrative school of
management being reliant on six functions, or roles, of management. These roles include
forecasting, planning, organizing, commanding, coordinating, and controlling. Planning is a tool
for the achievement of predetermined managerial and organizational goals. Organizing is the
activity responsible for furnishing the organization with everything it needs (raw materials,
personnel, etc.) Command denotes the chain of authority and specifies that a subordinate should
only have one direct superior in their work. Coordination is optimizing time and resources to
ensure everything is there when needed and that everything works well together. Control in the
context of management is about ensuring that there is no deviation from organizational tasks and
objectives.

Fayol's Principles of Management

There are 14 principles of management sprouting from Fayol's functions of management. They
include division of work, authority principle, discipline, unity of command, unity of direction,
subordination of individual interests to the general interest, remuneration, centralization, scalar
chain, order, equity, stability of tenure, initiative, and esprit de corps. They can be explained as
follows:
Five Functions of Management: this article explains the administrative theory of
the Five Functions of Management by Henri Fayol in a practical way. After
reading you will understand the basics of these powerful principles of
management.

Introduction
At the beginning of the last century (1916) the French engineer Henri
Fayol created the first principles of management theory. Henri Fayol is classified
as the founding father of for example the line and staff organization.
Based on his experience as a successful director or a mining company, he
developed several theories that are still relevant today. At the time, managers
had no formal training.

However, the increasing complexity of organizations created a need for

professional management.

What are the five Functions of Management?

Henri Fayol gained world-wide fame for his 14 general principles of management.
He distinguished six general activities for industrial enterprises: technical,
commercial, financial, security, accounting and managerial.
He defined five functions of management for the management component and
these are still seen as relevant to organizations today. These five functions focus
on the relationship between personnel and its management and they provide
points of reference so that problems can be solved in a creative manner

Figure 1 – Five Functions of Management by Fayol

1. Planning
Planning is looking ahead. According to Henri Fayol, drawing up a good plan of
action is the hardest of the five functions of management.
This requires an active participation of the entire organization. With respect to
time and implementation, planning must be linked to and coordinated on different
levels.

Planning must take the organization’s available resources and flexibility of

personnel into consideration as this will guarantee continuity.

2. Organizing
An organization can only function well if it is well-organized. This means that
there must be sufficient capital, staff and raw materials so that the organization
can run smoothly and that it can build a good working structure.

The organizational structure with a good division of functions and tasks is of

crucial importance. When the number of functions increases, the organization will
expand both horizontally and vertically. This requires a different type of
leadership. Organizing is an important function of the five functions of
management.

3. Commanding
When given orders and clear working instructions, employees will know exactly
what is required of them. Return from all employees will be optimized if they are
given concrete instructions with respect to the activities that must be carried out
by them.

Successful managers have integrity, communicate clearly and base their

decisions on regular audits. They are capable of motivating a team and
encouraging employees to take initiative.

4. Coordinating
When all activities are harmonized, the organization will function better. Positive
influencing of employees behaviour is important in this. Coordination therefore
aims at stimulating motivation and discipline within the group dynamics.
This requires clear communication and good leadership. Only through positive
employee behaviour management can the intended objectives be achieved.
5. Controlling
By verifying whether everything is going according to plan, the organization
knows exactly whether the activities are carried out in conformity with the plan.

Control takes place in a four-step process:

1. Establish performance standards based on organizational objectives

2. Measure and report on actual performance
3. Compare results with performance and standards
4. Take corrective or preventive measures as needed
It starts with an overview
Each of these steps is about solving problems in a creative manner. Finding a
creative solution is often more difficult than discovering what the problem is, than
making choices or the decision-making process. It starts with creating an
environmental analysis of the organization and it ends with evaluating the results
of the implemented solution.

Fayol’s Sixth Function

The sixth function of Henri Fayol is mostly managerial. This include activities like
planning, organising, commanding, coordinating and controlling.
Although well understood in their own right, none of the first five of these
functions takes account of drawing up a broad plan of where the business is
going and how it will operate, organising people, coordinating all of the
organisation’s efforts and activities, and monitoring to check that what is planned
is actually carried out.

Fayol’s sixth function acts as an overall function in relation to the five functions.

Five Functions of Management : A Closer look at

organizing
As one of the five functions of management, Henri Fayol divided “organizing” into
five subcategories.
These first five subcategories of management are still important in organizations
today. The first of the five Henri Fayol mentioned was “specialization”; if every
employee is allowed to use their individual skills this will be advantageous to their
area of expertise.
Secondly he mentioned “unity of command”, in which an employee is answerable
to one manager only. The “formal chain of communication” is linked to this so
that the employee will know how and with whom they will have to communicate.

The fourth category is “unity of direction”; all employees must be aware of the
organization’s strategic objectives.

The fifth category is “authority and responsibility” in which managers have the
authority to give orders.

Early Management Theories

LEARNING OUTCOMES

 Differentiate among early team management theories

Once you have a group of people (or a team of people), they will need to achieve goals
and objectives. We know how the group came together, how they will function
effectively and how they will become a team. So let’s talk now about how the group will
be managed.

Management of people didn’t really become a subject of scientific study until the turn of
the twentieth century, when researchers began to understand that there was more to
the motivation and hard work of an employee than just a paycheck. Before that . . . well,
managing people wasn’t exactly an art.

During the Industrial Revolution at the turn of the 19th century, the United States
entered a phase where significant changes occurred in the areas of transportation,
agriculture and manufacturing, allowing us to produce goods quickly and efficiently.
James Watt invented the steam engine, which shortened transportation times and
allowed us to move goods faster. Eli Whitney invented the cotton gin, opening the door
to quicker, more efficient cotton harvesting.

But even as Francis Cabot Lowell invented his water-powered mill, it wasn’t to lessen
the burden of his laborers. Women would work in his plant 12 to 14 hours a day, and
they were paid better than ladies at other textile manufacturers . . . for a while. But when
Lowell wanted to increase his profits and meet customer demands, he cut his
employees’ pay and lengthened their hours. Because of that, trade unions formed,
strikes occurred and the Lowell Female Labor Reform Association was created.

We were a long way from the “take care of your employees and they’ll take care of you”
notion.
There were still management problems, though, and they presented problems for these
new factory owners. Large numbers of people had to be managed, trained, controlled,
and motivated. Materials and tools needed to be supplied. Managers looked to handle
these issues scientifically.

Scientific Management

Frederick Winslow Taylor was an engineer for

Bethlehem Steel in 1889, when he decided to analyze the issue of soldiering, which is
when workers are deliberately working under capacity.

He observed workers unloading iron off of rail cars and loading steel onto them. Taylor
studied the movements, tools, and processes of the workers and determined that, while
they were currently loading about 12.5 tons a day, they were clearly capable of loading
47.5 tons a day. He recommended that workers be provided incentives in the form of
wage increases to meet new loading goals. These recommendations, when followed,
led to increased production for Bethlehem Steel.

The process that Taylor laid out was a template for other organizations:

1. Each task should be studied scientifically to determine the best way to perform it.
2. Workers should be carefully selected and trained to perform the tasks.
3. Managers and workers should cooperate to ensure efficient production.
4. Managers should plan, and workers should be responsible for implementing
those plans.
Bureaucratic Management Approach

Rather than concentrate on increasing worker productivity and efficiency, the

administrative approach to scientific management focused on helping managers
coordinate organizational duties.

Max Weber developed a bureaucratic approach to

management. A German citizen, Weber was interested in industrial capitalism,
particularly how it was successful in some areas and not in others. Weber traveled to
the United States to observe industrial capitalism, and determined that the U.S. used
professional managers, business and economic relationships, whereas in Germany
people were given positions of authority based on social standings and connections,
and businesses were highly linked to family.

In order to help eliminate the practice of social privilege and favoritism prevalent in
family-owned businesses, Weber proposed the bureaucratic approach. Bureaucracies
have a negative connotation today, but in the true definition of the word bureaucracies
are impersonal structures based on clear authority, responsibility, formal procedures
and separation of management and ownership.

In his approach, Weber proposed:

 Hierarchal management structure.

 Division of labor.
 Formal selection process for new employees.
 Career orientation.
 Formal rules and regulations.
  Impersonality.

Weber didn’t anticipate the problems that would come from his approach (division of
labor leading to boredom, formal rules leading to “red tape”), his bureaucratic method is
in practice among many organizations today, and his idea that hiring and promotion
should be based on capability and not social standing is written into US labor laws.

Administrative Management Approach

In his administrative management approach, theorist

Henri Fayol proposed five basic management functions that are still an important part of
management practice today. In his 1916 book General and Industrial Management, he
talked about those functions:

 Foresight: an organizational plan for the future.

 Organization: implementation of the plan.
 Command: select and lead workers.
 Coordinate: make sure all activities are coordinated and helping to reach goal.
 Control: ensure activities are going as planned.

Fayol came to some of these basic concepts when he witnessed the shutdown of a
mine. A horse had broken its leg, and the mine had to be shut down because no one
had the authority to purchase a new one. Seeing this as a failure of management to
provide the right resources, he began his studies of management structures.

Fayol’s studies also produced fourteen principles that could guide management
behavior, but felt that they weren’t rigid or exhaustive. Five of those principles still exist
in current management theory and practice:
  Unity of command.
 Fairness and equity.
 Discipline and order.
 Scalar chain of command.
 Teamwork and subordination of individual interests.

Weber’s bureaucracy approach informs most organizations today and Fayol’s approach
helps us understand the basics of management no matter what the industry or situation.
Now let’s look at some studies and research that bring in the human relations approach.

Humanistic Viewpoint

Mary Parker Follett’s teachings, many of which were

published as articles in well-known women’s magazines, were popular with
businesspeople during her lifetime. But she was virtually ignored by the male-dominated
academic establishment, even though she attended Radcliffe University and Yale and
was asked to address the London School of Economics. In recent years her writings
have been “rediscovered” by American management academics, and she is now
considered the “Mother of Modern Management.”

Follett developed many concepts that she applied to business and management,
including the following:

 A better understanding of lateral processes within organizational hierarchies.

These concepts were applied by DuPont Chemical Company in the 1920s in the
 first matrix-style organization. A matrix organizational structure uses a grid rather
than a pyramidal system to illustrate reporting paths. An individual may report both
to a functional manager (such as sales or finance) and to a product manager.
 The importance of informal processes within organizations. This is related to the
idea of authority deriving from expertise rather than position or status. For
example, an informal group may form in an organization (during or outside of
official work hours) to socialize, form a union, or discuss work processes without
management overhearing.
 Non-coercive power sharing, which she called integration, to describe how
power operates in an effective organization. She wrote about the “group
principle” that characterized the whole of the organization, describing how
workers and managers have equal importance and make equal contributions.
 Coining the term “win-win” to describe cooperation between managers and
workers. She also talked about empowerment and facilitation rather than
control.
 Promoting conflict resolution in a group based on constructive consultation of
equals rather than compromise, submission, or struggle. This is known as
the constructive conflict concept.

Follett devoted her life’s work to the idea that social cooperation is better than individual
competition. In her 1924 book Creative Experience, Follett wrote “Labor and
[management] can never be reconciled as long as labor persists in thinking that there is
a [management] point of view and [management] thinks there is a labor point of view.
These are imaginary wholes which must be broken up before [management] and labor
can cooperate.”

We’ve talked before about Elton Mayo, Fritz Roethlisberger, and the Hawthorne
Studies. They visited the Western Electric Hawthorne Works to determine the affects of
lighting on productivity. As we know, they learned much more about the workers than
just whether they did better in a well-lit atmosphere. They learned that their observation
alone increased worker productivity, that workers value their social relationships and
rely on group norms to restrict their productivity output.

There were several different flaws in the Hawthorne studies and their methodologies,
but it spurred on studies by Abraham Maslow, Douglas McGregor, Frederick Herzberg
and David McClelland, all approaching their research from the source of motivation of
the worker and how that can be manipulated to increase productivity.

Answer no.4
The idea that a manager’s attitude has an impact on employee motivation was originally
proposed by Douglas McGregor, a management professor at the Massachusetts
Institute of Technology during the 1950s and 1960s. In his 1960 book, The Human Side
of Enterprise, McGregor proposed two theories by which managers perceive and
address employee motivation. He referred to these opposing motivational methods as
Theory X and Theory Y management. Each assumes that the manager’s role is to
organize resources, including people, to best benefit the company. However, beyond
this commonality, the attitudes and assumptions they embody are quite different.

Theory X

According to McGregor, Theory X management assumes the following:

 Work is inherently distasteful to most people, and they will attempt to avoid work
whenever possible.
 Most people are not ambitious, have little desire for responsibility, and prefer to
be directed.
 Most people have little aptitude for creativity in solving organizational problems.
 Motivation occurs only at the physiological and security levels of Maslow’s
hierarchy of needs.
 Most people are self-centered. As a result, they must be closely controlled and
often coerced to achieve organizational objectives.
 Most people resist change.
 Most people are gullible and unintelligent.

Essentially, Theory X assumes that the primary source of employee motivation is

monetary, with security as a strong second. Under Theory X, one can take a hard or
soft approach to getting results.

The hard approach to motivation relies on coercion, implicit threats, micromanagement,

and tight controls— essentially an environment of command and control. The soft
approach, however, is to be permissive and seek harmony in the hopes that, in return,
employees will cooperate when asked. However, neither of these extremes is optimal.
The hard approach results in hostility, purposely low output, and extreme union
demands. The soft approach results in a growing desire for greater reward in exchange
for diminished work output.

It might seem that the optimal approach to human resource management would lie

somewhere between these extremes. However, McGregor asserts that neither
approach is appropriate, since the basic assumptions of Theory X are incorrect.

Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied,
no longer motivates. The company uses monetary rewards and benefits to satisfy
employees’ lower-level needs. Once those needs have been satisfied, the motivation
disappears. Theory X management hinders the satisfaction of higher-level needs
because it doesn’t acknowledge that those needs are relevant in the workplace. As a
result, the only way that employees can attempt to meet higher-level needs at work is to
seek more compensation, so, predictably, they focus on monetary rewards. While
money may not be the most effective way to self-fulfillment, it may be the only way
available. People will use work to satisfy their lower needs and seek to satisfy their
higher needs during their leisure time. However, employees can be most productive
when their work goals align with their higher-level needs.

McGregor makes the point that a command-and-control environment is not effective

because it relies on lower needs for motivation, but in modern society those needs are
mostly satisfied and thus are no longer motivating. In this situation, one would expect
employees to dislike their work, avoid responsibility, have no interest in organizational
goals, resist change, etc.—creating, in effect, a self-fulfilling prophecy. To McGregor, a
steady supply of motivation seemed more likely to occur under Theory Y management.

Theory Y

The higher-level needs of esteem and self-actualization are ongoing needs that, for
most people, are never completely satisfied. As such, it is these higher-level needs
through which employees can best be motivated.

In strong contrast to Theory X, Theory Y management makes the following

assumptions:

 Work can be as natural as play if the conditions are favorable.

 People will be self-directed and creative to meet their work and organizational
objectives if they are committed to them.
 People will be committed to their quality and productivity objectives if rewards are
in place that address higher needs such as self-fulfillment.
 The capacity for creativity spreads throughout organizations.
 Most people can handle responsibility because creativity and ingenuity are
common in the population.
 Under these conditions, people will seek responsibility.

Under these assumptions, there is an opportunity to align personal goals with

organizational goals by using the employee’s own need for fulfillment as the motivator.
McGregor stressed that Theory Y management does not imply a soft approach.

McGregor recognized that some people may not have reached the level of maturity
assumed by Theory Y and may initially need tighter controls that can be relaxed as the
employee develops.

If Theory Y holds true, an organization can apply the following principles of scientific

management to improve employee motivation:
  Decentralization and delegation: If firms decentralize control and reduce the
number of levels of management, managers will have more subordinates and
consequently need to delegate some responsibility and decision making to them.
 Job enlargement: Broadening the scope of an employee’s job adds variety and
opportunities to satisfy ego needs.
 Participative management: Consulting employees in the decision-making
process taps their creative capacity and provides them with some control over
their work environment.
 Performance appraisals: Having the employee set objectives and participate in
the process of self-evaluation increases engagement and dedication.

If properly implemented, such an environment can increase and continually

fuel motivation as employees work to satisfy their higher-level personal needs through
their jobs.

The idea that a manager’s attitude has an impact on employee motivation was originally
proposed by Douglas McGregor, a management professor at the Massachusetts
Institute of Technology during the 1950s and 1960s. In his 1960 book, The Human Side
of Enterprise, McGregor proposed two theories by which managers perceive and
address employee motivation. He referred to these opposing motivational methods as
Theory X and Theory Y management. Each assumes that the manager’s role is to
organize resources, including people, to best benefit the company. However, beyond
this commonality, the attitudes and assumptions they embody are quite different.

Theory X

According to McGregor, Theory X management assumes the following:

 Work is inherently distasteful to most people, and they will attempt to avoid work
whenever possible.
 Most people are not ambitious, have little desire for responsibility, and prefer to
be directed.
 Most people have little aptitude for creativity in solving organizational problems.
 Motivation occurs only at the physiological and security levels of Maslow’s
hierarchy of needs.
 Most people are self-centered. As a result, they must be closely controlled and
often coerced to achieve organizational objectives.
 Most people resist change.
 Most people are gullible and unintelligent.

Essentially, Theory X assumes that the primary source of employee motivation is

monetary, with security as a strong second. Under Theory X, one can take a hard or
soft approach to getting results.
The hard approach to motivation relies on coercion, implicit threats, micromanagement,
and tight controls— essentially an environment of command and control. The soft
approach, however, is to be permissive and seek harmony in the hopes that, in return,
employees will cooperate when asked. However, neither of these extremes is optimal.
The hard approach results in hostility, purposely low output, and extreme union
demands. The soft approach results in a growing desire for greater reward in exchange
for diminished work output.

It might seem that the optimal approach to human resource management would lie

somewhere between these extremes. However, McGregor asserts that neither
approach is appropriate, since the basic assumptions of Theory X are incorrect.

Drawing on Maslow’s hierarchy of needs, McGregor argues that a need, once satisfied,
no longer motivates. The company uses monetary rewards and benefits to satisfy
employees’ lower-level needs. Once those needs have been satisfied, the motivation
disappears. Theory X management hinders the satisfaction of higher-level needs
because it doesn’t acknowledge that those needs are relevant in the workplace. As a
result, the only way that employees can attempt to meet higher-level needs at work is to
seek more compensation, so, predictably, they focus on monetary rewards. While
money may not be the most effective way to self-fulfillment, it may be the only way
available. People will use work to satisfy their lower needs and seek to satisfy their
higher needs during their leisure time. However, employees can be most productive
when their work goals align with their higher-level needs.

McGregor makes the point that a command-and-control environment is not effective

because it relies on lower needs for motivation, but in modern society those needs are
mostly satisfied and thus are no longer motivating. In this situation, one would expect
employees to dislike their work, avoid responsibility, have no interest in organizational
goals, resist change, etc.—creating, in effect, a self-fulfilling prophecy. To McGregor, a
steady supply of motivation seemed more likely to occur under Theory Y management.

Theory Y

The higher-level needs of esteem and self-actualization are ongoing needs that, for
most people, are never completely satisfied. As such, it is these higher-level needs
through which employees can best be motivated.

In strong contrast to Theory X, Theory Y management makes the following

assumptions:

 Work can be as natural as play if the conditions are favorable.

 People will be self-directed and creative to meet their work and organizational
objectives if they are committed to them.
 People will be committed to their quality and productivity objectives if rewards are
in place that address higher needs such as self-fulfillment.
  The capacity for creativity spreads throughout organizations.
 Most people can handle responsibility because creativity and ingenuity are
common in the population.
 Under these conditions, people will seek responsibility.

Under these assumptions, there is an opportunity to align personal goals with

organizational goals by using the employee’s own need for fulfillment as the motivator.
McGregor stressed that Theory Y management does not imply a soft approach.

McGregor recognized that some people may not have reached the level of maturity
assumed by Theory Y and may initially need tighter controls that can be relaxed as the
employee develops.

If Theory Y holds true, an organization can apply the following principles of scientific

management to improve employee motivation:

 Decentralization and delegation: If firms decentralize control and reduce the

number of levels of management, managers will have more subordinates and
consequently need to delegate some responsibility and decision making to them.
 Job enlargement: Broadening the scope of an employee’s job adds variety and
opportunities to satisfy ego needs.
 Participative management: Consulting employees in the decision-making
process taps their creative capacity and provides them with some control over
their work environment.
 Performance appraisals: Having the employee set objectives and participate in
the process of self-evaluation increases engagement and dedication.

If properly implemented, such an environment can increase and continually

fuel motivation as employees work to satisfy their higher-level personal needs through
their jobs.

Ouchi’s Theory Z

During the 1980s, American business and industry experienced a tsunami of demand
for Japanese products and imports, particularly in the automotive industry. Why were
U.S. consumers clambering for cars, televisions, stereos, and electronics from Japan?
Two reasons: (1) high-quality products and (2) low prices. The Japanese had
discovered something that was giving them the competitive edge. The secret to their
success was not what they were producing but how they were managing their people—
Japanese employees were engaged, empowered, and highly productive.

Management professor William Ouchi argued that Western organizations could learn

from their Japanese counterparts. Although born and educated in America, Ouchi was
of Japanese descent and spent a lot of time in Japan studying the country’s approach to
workplace teamwork and participative management. The result was Theory Z—a
development beyond Theory X and Theory Y that blended the best of Eastern and
Western management practices. Ouchi’s theory first appeared in his 1981 book, Theory
Z: How American Management Can Meet the Japanese Challenge. The benefits of
Theory Z, Ouchi claimed, would be reduced employee turnover, increased commitment,
improved morale and job satisfaction, and drastic increases in productivity.

Theory Z stresses the need to help workers become generalists, rather than specialists.
It views job rotations and continual training as a means of increasing employees’
knowledge of the company and its processes while building a variety of skills and
abilities. Since workers are given much more time to receive training, rotate through
jobs, and master the intricacies of the company’s operations, promotions tend to be
slower. The rationale for the drawn-out time frame is that it helps develop a more
dedicated, loyal, and permanent workforce, which benefits the company; the
employees, meanwhile, have the opportunity to fully develop their careers at one
company. When employees rise to a higher level of management, it is expected that
they will use Theory Z to “bring up,” train, and develop other employees in a similar
fashion.

Ouchi’s Theory Z makes certain assumptions about workers. One assumption is that
they seek to build cooperative and intimate working relationships with their coworkers.
In other words, employees have a strong desire for affiliation. Another assumption is
that workers expect reciprocity and support from the company. According to Theory Z,
people want to maintain a work-life balance, and they value a working environment in
which things like family, culture, and traditions are considered to be just as important as
the work itself. Under Theory Z management, not only do workers have a sense of
cohesion with their fellow workers, they also develop a sense of order, discipline, and a
moral obligation to work hard. Finally, Theory Z assumes that given the right
management support, workers can be trusted to do their jobs to their utmost ability and
look after for their own and others’ well-being.

Theory Z also makes assumptions about company culture. If a company wants to

realize the benefits described above, it need to have the following:

 A strong company philosophy and culture: The company philosophy and

culture need to be understood and embodied by all employees, and employees
need to believe in the work they’re doing.
 Long-term staff development and employment: The organization and
management team need to have measures and programs in place to develop
employees. Employment is usually long-term, and promotion is steady and
measured. This leads to loyalty from team members.
 Consensus in decisions: Employees are encouraged and expected to take part
in organizational decisions.
 Generalist employees: Because employees have a greater responsibility in
making decisions and understand all aspects of the organization, they ought to be
generalists. However, employees are still expected to have specialized career
responsibilities.
  Concern for the happiness and well-being of workers: The organization
shows sincere concern for the health and happiness of its employees and their
families. It takes measures and creates programs to help foster this happiness
and well-being.
 Informal control with formalized measures: Employees are empowered to
perform tasks the way they see fit, and management is quite hands-off. However,
there should be formalized measures in place to assess work quality and
performance.
 Individual responsibility: The organization recognizes the individual
contributions but always within the context of the team as a whole.

Theory Z is not the last word on management, however, as it does have its limitations. It
can be difficult for organizations and employees to make life-time employment
commitments. Also, participative decision-making may not always be feasible or
successful due to the nature of the work or the willingness of the workers. Slow
promotions, group decision-making, and life-time employment may not be a good fit with
companies operating in cultural, social, and economic environments where those work
practices are not the norm.

What are McGregor’s Theory X and Theory Y?

Theory X describes an authoritarian management style, while Theory Y
is participative. What does that mean?

Theory X – authoritarian
If a manager assumes an employee doesn’t like their work and isn’t
naturally motivated, they’re likely to think that prompts, rewards and
punishments are the only way the employee will focus.

They use their authority to get the job done.

What do Theory X managers assume about their workers?
They:

 Don’t like the work

 Shirk responsibility
 Need to be told what to do and have constant supervision
 Have no ambition or desire to work hard
 Are only motivated by rewards
A Theory X manager might incentivise their employee by offering a
bonus if they hit a particular sales target and keep track of their progress
via appraisals to ensure delivery.
This control-focused style is not common anymore because it is a
pessimistic view and – unsurprisingly – most people do not want to be
micromanaged.

However, some large organisations might not have a choice but to adopt
Theory X techniques simply due to their scale.

Theory Y – participative

Theory Y managers trust that their employees can handle more

responsibility and so encourage them to learn and develop as they work.

They will encourage their employees to participate in collaborative

projects, trusting them to deliver on their objectives.
What do Theory Y managers assume about their workers?
They:

 Find their work satisfying and challenging

 Want to help make decisions
 Motivate themselves
 Take responsibility for their work
 Need very little direction
 Can think outside the box to solve problems
A Theory Y manager could encourage an employee to learn how to
optimise their audience targeting to hit a sales target, which will result in
new skills, more responsibility and even a promotion in the future.

Appraisals might still be part of the process, but more as an open

discussion rather than to keep control of progress.

Theory Y is a much more positive management style than Theory X,

which could explain its popularity. It allows the employee to have some
freedom and responsibility – and the manager to feel less like they need
to pressure their staff.

It can lead to a more meaningful career, where staff are encouraged to

care about more than just their wage – and what’s not to like about that?

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How can managers apply McGregor’s Theory X and

Theory Y to motivate employees and increase
performance?
Managers in high-pressure, high-output organisations will tend towards
Theory X in order to achieve company goals as efficiently as possible.

For example, a manager – let’s call them ‘X’ – needs to reach a certain
level of output for their department per month. Anything above this base
level output will gain X a bonus.

X now has to encourage their team to produce a set amount of product a

day for their department to get the required monthly output.

They have a lot of staff to manage, so to motivate them the company

promises that they’ll get a bonus for achieving more than their target but
a mark on their record for underachieving.

There is no room for learning, and unfortunately X’s employees have no

time to suggest how to better streamline the workflow.

The strict rules and punishment/reward structure makes clear to the

employees what their role is. The targets are met so X and their
employees are rewarded with their respective bonuses.

This is great for employees motivated by money and a consistent role,

but not so good for those who want to develop their thinking or progress
in their career.

Example:
Mo is a production manager in a factory.
He is responsible for getting 400 parts off his production line per week. His boss
tells him that if he can up the ante and produce 100 more parts per week (and
pass the quality checks), his employees will get an extra £50 in their pay that
month.

If they don’t meet the new target, they will be required to have a HR review.

Mo’s staff are largely motivated by rewards, so most of his team are successful,
meet the requirement and win a bonus.

However, two members of staff failed to meet the targets.

One was a new member of staff, who needed more training. The other is after
career progression and Mo suspects they are looking for a new job.

The new target, which delivered a short-term reward, demotivated that

employee who wanted a more meaningful, long-term reward.

This is where Theory Y comes in.

Say a manager – (you can probably guess where this is heading) let’s
call them ‘Y’ – is leading a project to develop a new product which could
result in their promotion.

Y explains the project to their team and together they make a plan of
action and share ideas. Y has a large team, and due to the flexibility of
their workplace their staff are motivated by different rewards.

Some are keen to learn new skills, some are eager to earn a bonus
while others are simply motivated to just see the product succeed. Y
trusts their team, so each employee is free to choose how their skills can
be best utilised.

By working together, learning and improving as they go and having

flexible methods, Y’s team develops a promising new product.

Y has the opportunity to use their experience to gain a promotion, which

leaves their place open for one of their team to progress in their career
too.
The team members are satisfied with the success of their project, and
are more motivated as they see their effort is rewarded in a way that
suits them.

Just like Theory X, Theory Y has good and bad points – for example,
some employees will be motivated by the freedom, but others might take
advantage of Y’s trust and not contribute to the project equally.

Example:
Kalani is a nursery manager in a childminding setting.
One of her playworkers has noticed the children are starting to explore their
sense of self, pointing out their features and comparing them with those of their
playmates, ‘my hair is brown, and your hair is blonde.’

Kalani encourages the playworker to help the children follow their instincts,
ideas and interests, and think carefully about diversity. She remains flexible
about how that goal could be achieved.

The playworker creates a diversity board. It contains self-portraits, drawn by the

children, and the children’s parents have contributed photographs of the
different destinations they have visited around the world, and the friends and
family they have visited.

The children gather to discuss the photos and share experiences once a week.

The playworker’s efforts are rewarded. They’ve thought outside the box to
make self-motivated decisions, positively contributing to the learning week.

Advantages and Disadvantages of McGregor’s Theory

X and Theory Y
Advantages of Theory X
 Some employees thrive on an authoritative management style
 Focus on achieving the company goals
 No room for ambiguity, which makes roles and responsibilities clear
Disadvantages of Theory X
 Some employees do not work well under such strict enforcement
 Not everyone is motivated by financial gain, so they might not make
much of an effort to achieve more
  Can be detrimental to employee learning and development
Advantages of Theory Y
 Much more appealing management style
 Gives employees freedom and responsibility, which allows them to
perform better
 Encourages teamwork, development and creative problem solving
Disadvantages of Theory Y
 Not everyone will be comfortable with undefined working boundaries
 It would be easy to abuse the freedom and trust
 Can be harder to measure success, as there is less focus on quantifiable
metrics
The main disadvantage with both theories is that not all employees will
neatly fit into either category – the workplace is not a “two sizes fit all”
environment.

Luckily there are other management theories that can be used alongside
McGregor’s Theory X and Theory Y, such as:
 Maslow’s Hierarchy of Needs
 Vroom’s Expectancy Theory
 The Psychological Contract
 The Eisenhower Matrix

Is Theory X and Theory Y good for employee

wellbeing?
McGregor’s Theory X and Theory Y is about judging the needs and
character of your people.

Read them well and, normally, they’ll feel confident taking direction
under the parameters of X and Y. They’ll understand your expectations
and feel motivated – those two things promote happiness at work and
contribute to wellbeing.

Regardless of if you’re an X or Y manager, read the room regularly.

Observe individual behaviour and performance and question whether
your style motivates them in the right way.

If you make good choices on their behalf by pursuing Theory X or Y,

you’re advocating for their interests. For example, “I prefer management
style Y, but this employee always meets their targets under Theory X. I
will move, so they will move.”

It’s a self-reflective management approach that will challenge your

biases, and promote conversations, leading you to achieve better
results.

However, the application of either Theory X and Y is driven by your

workplace and its projects. You can acknowledge it your shortcomings, if
a worker is shoehorned into a way of working: “I understand it’s
frustrating working on the same tasks when you’re ready for more
responsibility. Let’s looks for opportunities to develop your skills.”

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What is X-Y Theory of Management?

Douglas McGregor, an American social psychologist, proposed his famous X-Y theory in
his 1960 book 'The Human Side Of Enterprise'. Theory X and Theory Y are still referred to
commonly in the field of management and motivation, and whilst more recent studies
have questioned the rigidity of the model, Mcgregor's X-Y Theory remains a valid basic
principle from which to develop positive management style and techniques. McGregor's
XY Theory remains central to organisational development, and to improving
organisational culture.

McGregor's X-Y theory is a salutary and simple reminder of the natural rules for
managing people, which under the pressure of day-to-day business are all too easily
forgotten.
His ideas suggest that there are two fundamental approaches to managing people:

 Many managers tend toward Theory X and generally get poor results. 

 Enlightened managers use Theory Y, which produces better performance and
results, and allows people to grow and develop.

McGregor's ideas significantly relate to the modern understanding of the Psychological

Contract, which provides many ways to appreciate the unhelpful nature of X-Theory
leadership and the useful constructive beneficial nature of Y-Theory leadership.

Theory X - 'Authoritarian Management' Style

Assumptions made under this theory:

1. The average person dislikes work and will avoid it if he/she can.
2. Therefore most people must be forced with the threat of punishment to work
towards organisational objectives.

3. The average person prefers to be directed; avoid responsibility; is relatively

unambitious, and wants security above all else.

What are the Characteristics of an X-Theory Manager?

Perhaps the most noticeable aspects of McGregor's XY Theory - and the easiest to
illustrate - are found in the behaviours of autocratic managers and organisations
which use autocratic management styles.

Typically characteristics of an X-Theory manager are most or all of these:

 Results-driven and deadline-driven, to the exclusion of everything else

 Intolerant

 Issues deadlines and ultimatums

 Distant and detached

 Aloof and arrogant

 Elitist

 Short temper
 Shouts

 Issues instructions, directions, edicts

 Issues threats to make people follow instructions

 Demands, never ask

 Does not participate

 Does not team-build

 Unconcerned about staff welfare, or morale

 Proud, sometimes to the point of self-destruction

 One-way communicator

 Poor listener

 Fundamentally insecure and possibly neurotic

 Anti-social

 Vengeful and recriminatory

 Does not thank or praise

 Withholds rewards, and suppresses pay and remunerations levels

 Scrutinises expenditure to the point of false economy

 Seeks culprits for failures or shortfalls

 Seeks to apportion blame instead of focusing on learning from the experience

and preventing recurrence

 Does not invite or welcome suggestions

 Takes criticism badly and is likely to retaliate if from below or peer group

 Poor at proper delegating - but believes they delegate well

 Thinks giving orders is delegating

 Holds on to responsibility but shifts accountability to subordinates

 Relatively unconcerned with investing in anything to gain future improvements

  Unhappy

How to Manage an X-Theory Boss

Working for an X-theory boss isn't easy - some extreme X-Theory managers make
extremely unpleasant managers, but there are ways of managing these people upwards.
Avoiding confrontation (unless you are genuinely being bullied, which is a different
matter) and delivering results are key tactics.

1. Theory X managers (or indeed Theory Y managers displaying Theory X behaviour)

are primarily results-oriented, so orientate your discussions and dealings with
them around results - i.e what you can deliver and when.
2. Theory X managers are facts and figures oriented - so cut out the incidentals,
and be able to measure and substantiate anything you say and do for them,
especially reporting on results and activities.

3. Theory X managers generally don't understand or have an interest

in human issues, so don't try to appeal to their sense of humanity or morality. Set
your objectives to meet their organisational aims and agree on these with
the managers; be seen to X-Theory manager sees you are managing yourself
and producing results, the less they'll feel the need to do it for you.

4. Always deliver your commitments and promises. If you are given an unrealistic
task and/or deadline state the reasons why it's not realistic, but be very sure of
your ground, don't be negative; be constructive as to how the overall aim can be
achieved in a way that you know you can deliver.

5. Stand up for yourself, but constructively - avoid confrontation. Never

threaten or go over their heads if you are dissatisfied or you'll be in big trouble
afterwards and life will be a lot more difficult.

6. If an X Theory boss tells you how to do things in ways that are not comfortable or
right for you, then don't question the process, simply confirm the end result
that is required, and check that it's okay to 'streamline the process' or 'get
things done more efficiently' if the chance arises - they'll normally agree to
this, which effectively gives you control over the 'how', provided you deliver
the 'what' and 'when'.

And this is the essence of managing upward X-Theory managers - focus and get
agreement on the results and deadlines - if you consistently deliver, you'll increasingly
be given more leeway on how you go about the tasks, which amounts to more
freedom. 

Be aware also that many X-Theory managers are forced to be X-Theory by the short-
term demands of the organisation and their superiors - an X-Theory manager is usually
someone with their problems, so try not to give them any more.

Theory Y - 'Participative Management' Style

Assumptions made under this theory:

 Effort in work is as natural as work and play.

 People will apply self-control and self-direction in the pursuit of organisational
objectives, without external control or the threat of punishment.

 Commitment to objectives is a function of rewards associated with their

achievement.

 People usually accept and often seek responsibility.

 The capacity to use a high degree of imagination, ingenuity and creativity in

solving organisational problems is widely (not narrowly) distributed among the
population.

 In industry, the intellectual potential of the average person is only partly utilised.

Douglas McGregor’s Theory X and Theory Y management styles describe management

responses to different work environments. According to McGregor, less driven
employees require the stick of Theory X, and self-motivated employees need the carrot
of Theory Y. Ultimately, the ideal management style usually falls on a continuum
between the two.

Management theories are numerous. Some depend on a manager’s assessment of

employees’ personalities; others are less personal and driven by the logic of an
individual company’s goals. 

Management Theory X and Theory Y are two personality-based styles. 

Is this a good thing or a bad thing? As Jessica Hernandez, an executive resume

writer, puts it, “since your resume’s format is the first impression hiring managers will
have, it’s important to get this right from the start.” This means management forms an
opinion about you – and how to manage you – before meeting you.
Is that fair? Is it wise? Well, it could help employees get a running start at a new
company – managers who understand workers’ strengths and weaknesses can put them
on the right track right away. But they can also pigeonhole employees incorrectly and
apply the wrong management style. 

Let’s take a deeper look at Theory X and Theory Y management styles and their
advantages and disadvantages.  

Origins of Theory X and Theory Y

MIT management professor Douglas McGregor developed the Theory X and Theory Y
management styles. A student of Abraham Maslow – whose major idea, the
famous hierarchy of needs, still holds currency in many managerial schools and
therapeutic approaches –  McGregor’s twin theories aren’t mutually exclusive, although
they describe two very different types of workers.  

What Is Theory X Management? 

Theory X applies to unmotivated workers who require constant supervision, the promise
of rewards, the threat of punishment, and dedicated instruction to get work done.
Theory X workers work for material gain. Their primary motivation is a paycheck; their
performance is of little concern to them. 

There are two variations of Theory X management: 

 The hard approach is characterized by micromanagement, intimidation, anger,

and punishment. But unmotivated employees may require this level of oversight
to get work done. 
 The soft approach, on the other hand, is an effort to change hearts and minds:
Managers attempt to build trust by being more lenient and forgiving. They praise
even the smallest accomplishments and do what they can to improve work
satisfaction by endowing what their workers do with prestige that doesn’t
necessarily characterize the job itself. For instance, a soft-approach Theory X
manager may tell assembly line workers in a potato chip factory that they’re
feeding people and are part of a broader humanitarian effort.

Let’s go over the advantages and disadvantages of each, plus Theory X management in
general. 

Advantages of Theory X Management 

Both hard and soft Theory X management styles have their advantages, and each
reaches a different sort of employee. 
  A hard approach can work well for Theory X managers faced with extreme
laziness or hostility. Sometimes such feelings arise in employees due to a brutal
work environment. It is hard to be self-motivated when it comes to certain
physically taxing jobs, so a micromanagement style may be best to get work out of
your employees. 
 The soft approach may benefit newer workforce employees who almost fit into
the Theory Y category but require some coaching from savvy managers to get
there.

By sliding into one mode or the other, a manager will have an easier time maintaining
productivity.

Disadvantages of Theory X Management 

Whether hard or soft, Theory X management presumes negative characteristics in

employees: laziness, apathy, and a lack of education.

Theory X management can also lead to workplace inequity. LinkedIn blogger Jenn

Tardy, a diversity recruitment trainer and career coach, says that the modern hiring
and working system “was designed to preserve access to the best positions for white,
heterosexual, non-disabled, cis-gender males and exclude everyone else. And through
long-standing policies, practices and behaviors, the hiring system has been preserved.”

This inequity results in attrition, loss of productivity, and the development of toxic
workplace culture, in an era when workplace culture is prized by job seekers.

What Is Theory Y Management?

Theory Y management argues that some workers find inherent meaning and dignity in
work and will therefore perform well for that reason. These workers generate their
energy, a sort of spiritual energy. 

These employees work with minimal supervision and can be trusted to do quality work
out of the sense that people should do a task to the best of their abilities.

Advantages of Theory Y Management

Workers who fall under the Theory Y category tend to have better relationships with
management, and fellow employees, than do their Theory X counterparts. They’re
reliably productive, and management doesn’t have to do much to keep them going.

This makes things easier for managers and results in a happier work environment.

Disadvantages of Theory Y Management 

Theory Y managers can sometimes overlook employees who are closet Theory X types
who require supervision and external motivation. This can hamper workflow and
morale. 

Furthermore, if a manager presumes that Theory Y-type workers’ agreeability indicates

competence, they can overlook systemic errors and misunderstandings, leading to the
loss of productivity and morale. 

In such cases, Theory Y managers may try to switch to Theory X – without proper
training and among a workforce that will generally react poorly to it. This presents a
massive attrition risk. 

When to Use Theory X and Theory Y Management

Styles 
A manager must use a combination of personal intuition, company training, the advice
of higher-ups, and an overall sense of what’s good for a company socially and
economically to conclude what management style to use.

Generally, managers land somewhere in the middle of the Theory X-Theory Y

continuum. 

An across-the-board, one-or-the-other approach isn’t likely to benefit any workforce,

large or small. Managers train to understand the nature of employee motivation, both in
general and as it applies to their company’s goals. 

Discovering Different Management Styles

McGregor’s Theory X and Theory Y aren’t the only management styles. But they provide
a good general guide that takes human motivation and the value of work into account. 

However you decide to manage your employees, considering these theories while
learning the day-to-day subtleties of your particular workplace can help determine how
to be the right manager for the job and the people in your organization.

Top Takeaways

 Management Theory X and Theory Y are different yet complementary. 

 Theory X is hard-lined and authoritarian, while Theory Y is collaborative and
libertarian. 
 Managers seldom act strictly according to one or the other. The ideal
management style is on a continuum between the two. 
 Managerial Belief Systems:
Douglas McGregor’s Theory X
vs Theory Y
 Reading time: about 6 min

 Posted by: Lucid Content Team

 Work is changing. And the approach to and requirements of

leadership are changing with it. The modern manager knows
how to distribute responsibility, instill trust in their employees,
and motivate team members to deliver their best work and ideas.
But there are times when management is less about leadership
and more about the staunch enforcement of rules and
micromanagement of production.

 These differing management styles have been coined in the

academic management community as Theory X and Theory Y.
Let’s break each down and see how they apply in the workplace.

 Theory X vs Theory Y managers

 Because employees have historically been given a flat exchange
of time and energy for income, workplace incentives have often
been rooted in a fear of loss of employment, in earning potential
 from extra productivity, or in acquiescing to managerial
dominance for promotion.

 Theory X managers are likely to believe that employees are lazy,

fear-motivated, and in need of constant direction. These
managers tend to be more present in entry-level jobs where
productivity and process are favored over independence or
innovation, but they may show up at any company level and in
any industry.

 Theory Y managers are likely to believe that employees are

motivated by the value of their contribution. Theory Y managers
favor a more collaborative approach, centering their leadership
on trust, valuing creative problem solving, and managing by way
of providing their employees with tools, opportunities, and
visibility to do their jobs well.


Mind Map Template for Creative Problem Solving (Click on image to modify online)

 Where a Theory X manager might threaten loss of employment

in order to get employees to work on a Saturday, a Theory Y
 manager might appoint a temporary leadership title to anyone
who chooses to show up to work on a Saturday. Where a typical
Theory X manager might require strict work hours, a Theory Y
manager might offer employees a firm deadline, trusting them
with the choice of when and how they will meet a productivity
deadline.

 A thought comparison
 Consider these assumptions from the different managerial styles:

Theory X Theory Y

Work is inherently distasteful

to most people, and they will Most people find happiness in hard
attempt to avoid work
whenever possible.
work under the right conditions.

Most people avoid

responsibility and need People enjoy taking ownership of
constant direction. their work.

People must be constantly

directed, prompted, rewarded, People are self-motivated and
or punished in order to
complete their work.
embrace responsibility.
Theory X Theory Y

Lack of ambition and laziness is

more common than ambition Creativity and problem-solving
and creativity. thrive when employees are trusted.

People are motivated when they

People are motivated by
money and fears about their find value in their contributions
job security. and see an opportunity to realize
their own potential.

 Based on these factors, it is easy to see how Theory X differs

from Theory Y and easy to imagine their potential outcomes in
the workplace.

 The mind behind modern work

 While these contrasting management styles might be easily
recognizable in today’s technology-driven world, they were novel
thoughts at one point, developed through research and
observation by a workplace thought leader. Known as an
influential figure in management theory, organizational
communication, and organizational studies, Douglas McGregor
was a professor at Massachusetts Institute of Technology, where
he was a vocal advocate of the human relations approach.

 He was particularly interested in what motivates people to work

hard, in particular on what belief systems motivate people to
work hard. In short, he studied heavily how our beliefs shape our
 behavior and thus how that behavior shapes the behavior of
those around us.

 His ideas gained most of their momentum in the 1960s, when

the American and Western workforce was at a crucial transition
from factory work of the Industrial Revolution to more
collaborative technology-centered teamwork, aided no doubt by
the Women’s Labor Movement and the dawn of computing
technology. It is to McGregor’s thorough research and curiosity
in behavior and incentive that we owe our current understanding
of Theory X and Theory Y.

 How do Theory X and Theory Y affect

work output?
 What might be less immediately understandable are the differing
effects of Theory X and Y on resulting behavior and productivity.

 Think about a conveyor belt of automotive parts with workers

and machines lined side by side, each tasked with applying a
specific skill to the production process—tightening a bolt,
applying a hinge, taping up a box to be shipped, etc.

 A Theory X management style may be well-suited for this type of

structured, process-driven workplace. Studies have shown that
the Theory X style of management results in tight control, strict
policies, and a punishment and rewards system that reinforces
beliefs. Employees are initially obedient, but eventually
dissatisfied and even rebellious, driving down productivity and
 achieving contradictory outcomes, further reinforcing the belief
that workers are lazy and have to be externally motivated.

 Theory Y results in an arrangement whereby individuals can

achieve their own goals and happily accomplish the
organization’s goals at the same time. Theory Y managers will
make different choices about how to arrange team members and
workflows, how to talk to people, how to reward and incentivize,
etc. Theory Y managers appeal to a higher level of motivation on
Maslow’s famous Hierarchy of Needs, capitalizing on the human
need for esteem and self-actualization.

 Maslow's Hierarchy of Needs (Click on image to modify online)

 Today’s digital workplace, however, is a place of collaboration.

And the most lauded skills, especially in leadership, lie in the
ability to connect seemingly disparate ideas and communicate
those ideas clearly. While Theory X managers may be suited for
some process-driven organizations, a more practical
management style today is that of a Theory Y thinker.

 The present and future of work

 Modern work gets done through the connection of ideas: The
better your ideas and the more efficient your connection, the
better off your company will fare in this rapidly changing
economy and industry.

 Business Process Flow Template (Click on image to modify online)

 Implementing a Theory Y-focused leadership approach requires

modern tools that can complement the collaborative
workplace. Lucidchart makes it easy to share processes,
information, and ideas with a team from a single centralized
location. This unique platform allows team leaders to share
visuals with teammates, work together on projects in real time,
comment on documents and project updates, and work
collaboratively with up-to-the-minute feedback. With a
workplace centered on trust, it’s important not only to instill trust
in your teammates but also in the right technology to get the job
done.

Answer no.5
Perspectives on Information Systems

An information system is a set of interrelated components that collect or retrieve, process, store,
and distribute information to support decision making and control in an organization. Information
systems can also be used to analyze problems, visualize complex subjects, and create new products.

Information is data, or raw facts, shaped into useful form for humans.

Figure 1-3
FIGURE 1-3 DATA AND INFORMATION
Raw data from a supermarket checkout counter can be processed and organized to produce meaningful
information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for
a specific store or sales territory.
Input, processing, and output are the three activities in an information system that produce
the information an organization needs. Input captures or collects raw data from within the
organization or from its external environment. Processing converts this raw input into a
meaningful form. Output transfers the processed information to the people who will use it or
to the activities for which it will be used. Information systems also require feedback, which
is output that is returned to appropriate members of the organization to help them evaluate
or correct the input stage.

Figure 1-4
FIGURE 1-4 FUNCTIONS OF AN INFORMATION SYSTEM
An information system contains information about an organization and its surrounding environment. Three
basic activities—input, processing, and output—produce the information organizations need. Feedback is
output returned to appropriate people or activities in the organization to evaluate and refine the input.
Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory agencies,
interact with the organization and its information systems.
It is important to distinguish information systems, which are designed to produce information
and solve organizational problems, from the computer technology and software that is typically
used to create and manage information systems.

Computer literacy focuses primarily on knowledge of information technology. Information

systems literacy, the understanding of information systems, includes a behavioral and technical
approach to understanding the broader organization, management, and information technology
dimension of systems and their power to provide solutions. The field of management
information systems (MIS) tries to achieve this broader information systems literacy.

Figure 1-5
FIGURE 1-5 INFORMATION SYSTEMS ARE MORE THAN COMPUTERS
Using information systems effectively requires an understanding of the organization, management, and
information technology shaping the systems. An information system creates value for the firm as an
organizational and management solution to challenges posed by the environment.
The dimensions of information systems include organizations, management, and information
technology.

The key elements of an organization are its people, structure, business processes, politics, and
culture. An organization coordinates work through a structured hierarchy and formal standard
operating procedures. Managerial, professional, and technical employees form the upper levels
of the organization's hierarchy while lower levels consist of operational personnel.

Figure 1-6
FIGURE 1-6 LEVELS IN A FIRM
Business organizations are hierarchies consisting of three principal levels: senior management, middle
management, and operational management. Information systems serve each of these levels. Scientists and
knowledge workers often work with middle management.
Senior management makes long-range strategic decisions and ensures the firm's financial
performance. Middle management carries out the plans of senior management
and operational management monitors the firm's daily activities. Knowledge workers such as
engineers and scientists design products and create and distribute new knowledge for the
organization. Data workers such as secretaries process the organization's
paperwork. Production or service workers produce the products or services.

Experts are employed for the major business functions: the specialized tasks performed by
organizations, which consist of sales and marketing, manufacturing and production, finance
and accounting, and human resources.

An organization coordinates work through its hierarchy and business processes. These
processes may be documented and formal, or informal, unwritten work processes, such as
how to handle a telephone call.

Each organization has a unique culture, or fundamental set of assumptions, values, and

ways of doing things, that are accepted by most of its members. Parts of an organization's
culture can be found in its information systems. For example, UPS's organizational focus on
customer service can be found in the package tracking system available to customers.
Information systems may also reflect the organizational politics or conflicts that result from
differing views and opinions in an organization.

Information systems are also a key component in the ability of management to make sense
of the challenges facing a company and in management's ability to create new products and
services, manage the company, and even re-create the organization from time to time.

Information technology is one of the many tools used by management to cope with change.
A firm's information technology (IT) infrastructure is a technology platform or foundation on
which a firm can build its information systems. IT infrastructure consists of:

 Computer hardware: The physical equipment and computing devices used for input,
storage, processing, output, and telecommunications

 Computer software: The detailed, preprogrammed instructions that control and

coordinate the computer hardware components

 Data management software: The software governing the organization of data on

physical storage media

 Networking and telecommunications technology : Hardware and software used to link

the various pieces of hardware and transfer data from one physical location to
another; a computer network links two or more computers together to share data,
such as files, images, sounds, video, or share resources, such as a printer.
The Internet is the world's largest and most widely used network. The Internet is a global
network that uses universal technology standards to connect many private and public networks.
The universal standards and technologies used in the Internet are also used in systems and
networks within the firm. Intranets are internal corporate networks based on Internet
technology, and extranets are corporate networks extended to authorized users outside of the
firm.

The World Wide Web is a service provided by the Internet that uses universally accepted
standards for storing, retrieving, formatting, and displaying information in a page format on the
Internet. Web pages contain text, graphics, animations, sound, and video and are linked to other
Web pages. The Web can serve as the foundation for new kinds of information systems such as
UPS's Web-based package tracking system

From a business perspective, an information system is an important instrument for creating value
for the firm. Information systems enable the firm to increase its revenue or decrease its costs by
providing information that helps managers make better decisions or that improves the execution
of business processes.

Every business has an information value chain in which raw data is systematically acquired and
then transformed through various stages that add value to that information. The value of an
information system to a business, as well as the decision to invest in any new information
system, is, in large part, determined by the extent to which the system will lead to better
management decisions, more efficient business processes, and higher firm profitability.

Figure 1-7
FIGURE 1-7 THE BUSINESS INFORMATION VALUE CHAIN
From a business perspective, information systems are part of a series of value-adding activities for
acquiring, transforming, and distributing information that managers can use to improve decision making,
enhance organizational performance, and ultimately increase firm profitability.
The business perspective calls attention to the organizational and managerial nature of
information systems. An information system represents an organizational and management
solution based on information technology to a challenge or problem posed by the environment.

Some firms achieve better results from their information systems than others. Studies of returns
from information technology investments show that there is considerable variation in the returns
firms receive. Reasons for lower return on investment include failure to adopt the right business
model that suits the new technology or seeking to preserve an old business model that is doomed
by new technology.

Figure 1-8
FIGURE 1-8 VARIATION IN RETURNS ON INFORMATION TECHNOLOGY INVESTMENT
Although, on average, investments in information technology produce returns far above those returned by
other investments, there is considerable variation across firms.
Source: Erik Brynjolfsson and Lorin M. Hitt, "Beyond Computation: Information Technology, Organizational
Transformation and Business Performance." Journal of Economic Perspectives14, no. 4 (Fall 2000).
Information technology investments cannot make organizations and managers more
effective unless they are accompanied by complementary assets: assets required to derive
value from a primary investment. For instance, to realize value from automobiles requires
complementary investments in highways, roads, gasoline stations, repair facilities, and a
legal regulatory structure to set standards and control drivers.

Complementary investments include:

 Organizational assets: These include a supportive business culture that values

efficiency and effectiveness, an appropriate business model, efficient business
processes, decentralization of authority, highly distributed decision rights, and a
strong information system (IS) development team.

 Managerial assets: These include strong senior management support for change,

incentive systems that monitor and reward individual innovation, an emphasis on
teamwork and collaboration, training programs, and a management culture that
values flexibility and knowledge.

 Social assets: These are not made by the firm but by the society at large, other
firms, governments, and other key market actors, such as the Internet, educational
systems, network and computing standards, regulations and laws, and the presence
of technology and service firms.

Research indicates that firms that support their technology investments with investments in
complementary assets, such as new business processes or training, receive superior
returns. These investments in organization and management are also known
as organizational and management capital.

Origin
The systems theory of organization has its roots in biology and systems science.
However, it’s more commonly applied to businesses and other types of
organizations. Ludwig von Bertalanffy  first formalized the theory in the early
1950s. His ideas became the foundation for what we now refer to as systems
theory. This concept broke away from classical management theory that viewed
organizations as machines and moved toward a more holistic view that sees
them as networks of people, procedures and activities. Although Bertalanffy is
most commonly associated with the development of systems theory, this theory
is a product of the collective effort by many individuals who were interested in
understanding how an organization can function effectively and efficiently while
also satisfying individual needs.

The Framework
Systems theory is a theoretical framework for understanding how organizations
work. A system can be defined in different ways, but it’s best characterized as an
entity that has all the elements necessary to carry out its functions. It started as a
way to understand organizations from an outside perspective but has since
become a means of gaining insight into daily operations within an organization.

A computer is a perfect example of how systems theory works. Essentially, a

computer is a system made up of many smaller systems that have to work in
coordination with one another. These individual systems are: the processor,
RAM, motherboard, hard drive and power supply. All these components must
come together to make the computer function. If even just one component isn’t
functioning properly, the system won’t be able to complete any type of task.

Systems Approach To Management

Systems theory can be found everywhere in our world. We see it in science and
medicine, where it has been used to better understand the human body. In the
business world, it’s used to improve the performance and results of businesses.

The systems approach to management looks at a business in the same way. We

can think of an organization as a series of systems and subsystems that interact
with one another to create the overall organizational system. In businesses, a
system refers to a cohesive collection of resources, activities and information. In
the systems approach to management, employees are more focused on
achieving a collective goal for an organization rather than operational output. The
theory was a radical departure from classical management thinking, which
viewed organizations as simple machines that could be easily understood.

The systems theory of management asserts that any organization is a single,

unified system of interrelated parts or subsystems. Each part of the overall
system is dependent on the others and cannot function optimally without them.
Therefore, if factors are present that adversely affect one subsystem within an
organization, it’s likely these factors may adversely affect other subsystems, too.
This can result in impacts on the entire system to a certain extent. This
framework presents an organization as a natural ecosystem, where each
element is interdependent. The systems approach is another term for this
framework.

Various components of a system also interact with each other regularly, which is
true in a modern organization like a business, although this can happen in
different ways. For example, a human resources department is a subsystem of
an organization and probably interacts with every other subsystem. The same
principle applies to the marketing department, although the nature of its
interactions can vary. For example, the marketing department might interact with
the IT department to arrange hardware use, with the accounting department to
manage salaries and with the public relations department to devise press
releases.

Types Of Organizational Systems

According to systems theory, there are essentially two types of systems, namely
open systems and closed systems:

Open system

An open system is one that interacts with its environment. Systems theory
asserts that open systems are the most common type. This is because you can
describe almost anything as a system. For example, a business is an
organizational system, but so too is society. If you’re observing a business, you’d
consider it as the system and its individual departments as subsystems.
Alternatively, you may be observing a country, which is an overall system. Here,
organizations like businesses and others might be the various subsystems within
it.
Since most organizations, businesses or otherwise, rely upon their external
environments to function to some extent, the vast majority are therefore open
systems. They may rely on their environments for material inputs, as a source of
labour or as a market for selling products. Even most countries are open
systems, as they buy and sell products internationally.

Closed system

Contrary to an open system, a closed system is one that has almost no

interactions with its external environment. According to the systems approach,
these are much rarer than open systems, as it’s very difficult for any organization
to operate independently of its environment. Its various subsystems would still be
interdependent and interact constantly, but the overall system is independent
and self-sustaining. It doesn’t rely on its external environment to function. This
can cause the system to encounter limitations, such as input constraints. A
closed system would therefore be autarky, where almost no exchange occurs
between it and external systems.

Components Of An Organizational System

According to the systems approach, an organizational system has several
components that help it function. These components and how they interact with
each other are:

Environment

The environment of an organizational system is the setting or location in which it

operates. This can dictate the resources it has access to, its relationships with
other systems and even the nature of the organization’s activities. If the
organizational system itself is a business, then the environment might be the
country, region, county or city in which it operates. Each would also have its own
environment. Since you can describe anything as a system, the definition of the
environment can change based on what you’re describing as a system.

The only exception to this definition of environment is in the rare case of a closed
system. By definition, these systems have little or no interaction with others
outside of themselves and therefore operate independently of their environment.
These systems are not impacted by the functioning of their external environment,
as they’re entirely self-sufficient. To define the environment of a closed system,
you might consider a subsystem and then describe the overarching elements as
its environment.
Inputs

Almost any organizational system functions to produce something. This could be

something like a product or service, which it may then sell for income. To
achieve this, an organization requires some external inputs to enable it to
conduct certain processes. In the case of a business or company, these inputs
are the major components of production, like labour, raw materials, fuel or
electricity.

For example, a business that builds cars requires the labour of engineers,
materials for car parts, plastic for components like headlights, fabric or leather for
seats, glass for windows and rubber for tyres. An organization typically sources
its inputs from its environment.

Transformation process

Once an organization acquires the necessary inputs, it can begin working to

produce a product or service from them. This is the transformation process and
often represents the primary activity of the organizational system. It’s also
typically the aspect of the organization’s activities that’s least dependent on the
external environment. In the case of a business, the transformation process is
where it combines the labour of its workforce with other inputs to produce the
desired output. This also requires the use of tools, which it may also acquire from
the environment.

In the example of the car manufacturer, it combines labour, raw materials and
other assets to turn raw materials into automobiles. These other assets might be
machines and robots that assemble and paint vehicle components, handheld
tools for personnel and the physical factory itself. You can consider these assets
to be a form of input.

Outputs

Once the transformation process is complete, the organization has successfully

produced its outputs. These are primarily things like the goods or services that it
intends to manufacture and later sell to the market, which is part of the
organization’s external environment. In the case of the car manufacturer, the
primary output is the automobiles that it intends to sell. There are other outputs
that result from this activity. These include the financial results of the sale of its
primary output, information from post-production checks like quality assurance
and reviews from customers.
Feedback

The final component of a properly functioning organizational system is feedback.

It derives this from certain internal and external elements, like customer reviews,
quality assurance audits and financial results. The information that you can
derive from feedback enables you to alter your input requirements, such as new
machinery, alternative materials, different production processes or more efficient
technologies. Although it primarily affects your inputs, this feedback might also
have an indirect effect on your transformation process.

For instance, in the example of the car manufacturer, customer reviews might reveal
that leather seating is generally disliked among buyers in hot climates. The
manufacturer could therefore change its orders from suppliers to use alternative
materials like faux leather or cloth when selling to these markets, thereby changing its
inputs as a result of feedback.

Advantages
Below are some advantages of using the systems approach to management:

 Simplicity: With only five components and a few foundational principles,

it’s easy to understand this approach. The basic concept of
interconnectedness is also quite intuitive and can make sense
 Comprehensive troubleshooting: If you encounter a problem with one
aspect of an organization, systems theory dictates that it might have a
cause elsewhere or that its effects might impact other areas of the
organization. This makes it much less likely that you’d adopt a narrow view
when troubleshooting
 Transparency: When you and others in the organization agree that
everything is interrelated, there’s a greater incentive for cooperation and
transparency.

Disadvantages
Below are some of the key disadvantages of this framework:

 Vague: This approach is so simple that it’s hard to refute. While this

makes it more convincing, it does limit its utility in more complex scenarios
 Not Prescriptive Enough: In the systems approach, managers aren’t
focused on reaching a single goal but on working to make sure that all
units of an organization function together towards a collective goal. In this
 theory, they don’t discourage managers from considering other
approaches when looking for ways to improve their businesses. That could
be a strength, but it could also be a weakness if a manager needs a more
rigid, prescriptive system. If such a problem arises, systems theory has
provided the basis for other management theories such as the balanced
scorecard and total quality management. Managers can look to these for
guidance
 Inadequate for complex organizations: In smaller organizations, you
can usually identify the components of a system quite easily. Conversely,
in large organizations with large departments performing multiple
functions, the distinction between these components becomes less clear
 Limited: Although it can describe the basics of organizational structure
and function, it excludes a lot of elements that you may want to
understand or explain, such as organizational hierarchies or inequalities. It,
therefore, provides no techniques or solutions, only a framework for
describing system elements
 Can Be Hard To Motivate Individuals: Some organizations have tried to
adopt this approach and found it’s not a good fit for them. In a systems
approach to management, they encourage managers to focus on making
sure that all aspects of the organization work together in order to achieve
the collective goal. But this can be difficult to explain to employees, and
not all of them will find inspiration in such an approach either.
 Calls For A Responsive Organization: The systems approach says that
managers should work on not only the outputs of an organization but also
on its underlying processes. Managers should focus on solving problems
and adjusting their units when they don’t work together correctly. This
requires accurate and timely diagnostics and problem-solving, and an
adaptable organization that can be nudged in the right direction

What is the Systems Approach to Management?

The Systems Approach to management theory, commonly
viewed as the foundation of organizational development, views
the organization as an open system made up of interrelated
and inter-dependent parts that interact as sub-systems.
Thus the organization comprises a unified singular system made
up of these subsystems. For example, a firm is a system that
may be composed of sub-systems such as production,
marketing, finance, accounting and so on. As such, the various
sub-systems should be studied in their inter- relationships
rather, than in isolation from each other.
The system as a whole is affected by internal elements (aspects of the sub-
units) and external elements. It is responsive to forces from the external
environment. 

The system is considered open, as organizations receive varied forms of

inputs from other systems. For example, a company receives supplies,
information, raw materials, etc. These inputs are converted to outputs that
affect other systems. 

Generally, the systems approach assesses the overall effectiveness of the

system rather than the effectiveness of the sub-systems. This allows for the
application of system concepts, across organizational levels in the
organization - rather than only focusing upon the objectives and performances
of different departments (subsystems). 

Organizational success depends upon interaction and interdependence

between the subsystems, synergy between the sub-systems, and interaction
between internal components (closed system) and external components
(internal system). 

The systems approach implies that decisions and actions in one

organizational area will affect other areas. For example, if the purchasing
department does not acquire the right quantity and quality of inputs, the
production department wont be able to do its job. 

This approach recognizes that an organization relies on the environment for

essential inputs. Further, the environment serves an outlet for its outputs.
What are the primary Characteristics of an
Organizational System?
The following are the chief characteristics of the System Approach to
Management:

 Sub-Systems - Each organization is a system made up of a combination of

many sub-systems. These sub-systems are inter-related.
 Holism - Each sub-system works together to make up a single whole system.
Decisions made in any subsystem affect the entire system.
 Synergy - The collective output of the whole system is greater than the sum of
output of its sub-systems.
 Closed and Open Systems - The whole organization is an open system made
up of a combination of open and closed sub-systems.
 System Boundary - The organization is separate from the external environment
made up of other systems.

What are the components of an Organizational

System? 
The system approach envisions the organization as made up five
components:

 Inputs - Raw Materials, Human Resources, Capital, Information, Technology

 A Transformational Process - Employee Work Activities, Management
Activities, Operations Methods
 Outputs - Products or Services, Financial Results, Information, Human Results
 Feedback - Results from outputs influence inputs.
 The Environment - These components make up internal and external factors
that affect the system.

What are Closed and Open Management Systems?

An organization is made up of closed systems and open systems. 

Closed systems are the internal sub-units of the organization that do not
interact with the external environment. 
Open systems are internal sub-units that interact with other systems (or sub-
units within other systems) that are outside of the organization. In effect, all
organizations are open systems.

What are General and Specific Management Systems?

The general systems approach to management is mainly concerned with
formal organizations and the concepts are relating to technique of sociology,
psychology and philosophy. 

The specific management system includes the analysis of organizational

structure, information, planning and control mechanism and job design, etc. 

Advantages and Disadvantages of a Systems

Approach 
The advantages of the systems approach include:

 It assists in studying the functions of complex organizations

 It is probabilistic rather than deterministic.
 It has been utilized as the base for the new kinds of organizations like project
management organization.
 It is possible to bring out the inter-relations in various functions like planning,
organizing, directing and controlling.

Negative attributes of the systems approach include:

 This approach is somewhat abstract and vague.

 It can be difficult to apply to large and complex organizations.
 It does not provide any tool and technique for managers.
 It is not a prescriptive management theory, as it does not specify tools and
techniques for practicing managers
 It does not address power and social inequalities and their causes.
 It does not specify the nature of interactions and interdependencies.

Who are the Primary Contributors to Systems Theory?

 Chester Bernard introduced the concept of Cooperative Systems in his book,
Functions of an Executive (1938). 
  Economist, Herbert Simon, introduced in his book, Administrative Behavior
(1947), the concept of systems process in decision-making within organizations.
Notably, he introduced concepts of bounded rationality and satisfying. 
 Biologist, Ludwig von Bertalanffy, introduced principles of General Systems
theory in 1950. 
 Other contributors include: Lawrence J. Henderson, W.G. Scott, Deniel Katz,
Robert L. Kahn, W. Buckley and J.D. Thompson.
The systems theory of organization is a theory that organizations are composed of
many subsystems that aren’t necessarily related to one another and yet work together
to form the whole. This theory is helpful for understanding things like organizational
behavior, organizational change and organizational development.

The systems theory of organization has its roots in biology and systems science.
However, it’s more commonly applied to businesses and other types of organizations. It
was first formalized in the early 1950s by Ludwig von Bertalanffy, whose ideas became
the foundation for what we now refer to as systems theory. This concept broke away
from classical management theory that viewed organizations as machines and moved
toward a more holistic view that sees them as networks of people, procedures and
activities. 

Systems theory allows for an understanding of the connections between various parts of
the organization and how they interact with one another.

Although Bertalanffy is most commonly associated with the development of systems

theory, he isn’t the only person responsible for its creation. It was a collective effort by
many individuals who were interested in understanding how an organization can
function effectively and efficiently while also satisfying individual needs.

1. Systems Theory: A Closer Look

2. What Is The Systems Approach To Management?
3. Importance Of Systems Theory
4. Features Of Systems Theory
5. Drawbacks Of The Systems Approach To Management
6. Systems Theory At Work
Systems Theory: A Closer Look

Systems theory is a theoretical framework for understanding how organizations work. A

system can be defined in different ways, but it’s best characterized as an entity that has
all the elements necessary to carry out its functions. It started as a way to understand
organizations from an outside perspective but has since become a means of gaining
insight into daily operations within an organization.
A computer is a perfect example of how systems theory works. Essentially, a computer
is a system made up of many smaller systems that have to work in coordination with
one another. These individual systems are: the processor, RAM, motherboard, hard
drive and power supply. All these components must come together to make the
computer function. If even just one component isn’t functioning properly, the system
won’t be able to complete any type of task. 

What Is The Systems Approach To Management?

The systems approach to management looks at a business in the same way. We can
think of an organization as a series of systems and subsystems that interact with one
another to create the overall organizational system. In businesses, a system refers to a
cohesive collection of resources, activities and information.

Systems theory can be found everywhere in our world. We see it in science and
medicine, where it has been used to better understand the human body. In the business
world, it’s used to improve the performance and results of businesses.

In the systems approach to management, employees are more focused on achieving a

collective goal for an organization rather than operational output.

The theory was a radical departure from classical management thinking, which viewed
organizations as simple machines that could be easily understood. 

Importance Of Systems Theory

Here are some areas where systems theory can be of help in a modern workplace: 

1. Strategic Planning
Understanding how an organization functions is important for managers who are
involved in strategic planning. They need to know how various departments work
together and affect each other. This is where the systems theory of organization is
very helpful. It allows managers and other decision-makers to look at things like
organizational change and organizational development from a broader
perspective. 

2. Managing Change
Looking at the big picture instead of looking just at the individual functions and
aspects of an organization can be a valuable tool for those who need to make
changes in an organization or who want to implement new initiatives within their
businesses.

3. Project Management
With large, multi-stakeholder projects, a systems approach allows for clear
planning and delegation from the outset. It helps managers account for the
 interdependence between different verticals in an organization and assign
ownership to achieve collective goals.

In large organizations and projects, systems theory forms the basis for many popular
management techniques and practices. 

Features Of Systems Theory

Let’s look at a few distinctive features of the systems approach to management:

1. Holistic
The systems approach to management focuses on a collective view of an
organization. Managers are focused on making sure that all parts of the business
(and sometimes outside organizations) contribute to its success as a whole.

2. Offers Perspective
The systems approach allows you to look at an organization from the different
perspectives of its subsystems, which gives you more insight and control.
Changes can be made to each of the subsystems to make a positive impact on
the entire organization.

3. Change-Friendly
Systems theory is one approach that may be useful for those who are interested in
changing their organizations, or those who are interested in implementing new
programs or initiatives within businesses. It can be highly effective in order to
manage change and achieve desired outcomes through the coordinated use of
scientific management techniques.

We might take systems thinking for granted now, but at the time of its birth it was a
radical way to improve organizational performance and change, and it paved the way
for several management systems still in use today.

Drawbacks Of The Systems Approach To Management

For everything the systems approach gives us, there are some shortcomings too. Here
are a few points to consider when working with a systems approach:

 Not Prescriptive Enough

In the systems approach, managers aren’t focused on reaching a single goal but
on working to make sure that all units of an organization function together towards
 a collective goal. In this theory, they don’t discourage managers from considering
other approaches when looking for ways to improve their businesses. That could
be a strength, but it could also be a weakness if a manager needs a more rigid,
prescriptive system.

If such a problem arises, systems theory has provided the basis for other

management theories such as the balanced scorecard and total quality
management. Managers can look to these for guidance.

 Can Be Hard To Motivate Individuals

Some organizations have tried to adopt this approach and found it’s not a good fit
for them. In a systems approach to management, they encourage managers to
focus on making sure that all aspects of the organization work together in order to
achieve the collective goal. But this can be difficult to explain to employees, and
not all of them will find inspiration in such an approach either.

 Calls For A Responsive Organization

The systems approach says that managers should work on not only the outputs of
an organization but also on its underlying processes. Managers should focus on
solving problems and adjusting their units when they don’t work together correctly.
This requires accurate and timely diagnostics and problem-solving, and an
adaptable organization that can be nudged in the right direction.

As with any theory of management, in practice, there’ll be some bottlenecks. But there
is nothing that can’t be overcome if the organization is geared toward improvement.

Systems Theory At Work

Many companies find innovative ways to employ systems theory, particularly to manage

change in the workplace. Here’s an example of how a business can use it to manage a
problem.

1. Assessing Existing Organizational Processes

Identify the existing system within the company that’s associated with the problem.
We can find this through documentation, interviews, observation or data gathering
from employees and managers.

 
2. Analyzing The Current State Of Things
Analyze the current state of the system in relation to the problem. This includes
processes, alignment with customer needs and expectations, finances, the
structure of responsibilities within departments and employee morale.

3. Do A SWOT Analysis
A SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis will help
you identify the system’s current goals and their impact on the problem. What are
some opportunities and threats that could be created through changes to the
system? Should it be changed?

4. Develop An Action Plan

Develop a plan to implement change in the system (depending on resources
available and time).

5. Communicate With Stakeholders

Communicate this plan to employees, management, and customers. Be sure to
follow up on implementation with regular meetings, reports and feedback.

The systems approach to management is one of the many frameworks that can help
managers tackle problems in the workplace head-on. In the Harappa Structuring
Problems course, you’ll learn to break a problem down, simplify and analyze all your
management challenges. You’ll learn how to use tools such as the Logic
Tree and Ease Impact Analysis to diagnose your issues and solve them effectively.
You’ll never look at a problem the same way again—join today!