Babiera, Roliel E.

EDUC 206: Organizational & Management of Educational Institution

Prof: Dr. Nick Pañares

April 22, 2023

1. Compare and contrast the Classical Theory and the Neo-Classical Theory of
management. How did the Neo-Classical Theory build upon the Classical
Theory, and what are the key differences between the two approaches? Which
theory do you think is more relevant in today's business world and why?

Classical and Neo-classical theory made a great contribution to the

development of management approaches. The classical approach recommends
that managers continually strive for organizational efficiency to increase
production. It assumes that employees work to satisfy their physical and
economic needs. It does not discuss job satisfaction and other social needs.
However, it emphasizes specialization of labor, centralized leadership, and
decision-making. Hierarchical structure, specialization, and incentives are very
imminent in this approach To some extent, the classical management theory
adheres to an authoritarian leadership paradigm, which is seen as the core
element of the management system. Additionally, it provides a clear
management structure, the duties and responsibilities of each employee, and the
division of labor to boost production. Meanwhile, if the classical approach is
focused on jobs and machines, the Neo-classical theory made a significant
contribution to an understanding of human behavior at work and in the
organization. Thus, the neoclassical theory is an alteration and improvement of
classical management theory. This theory lies in the concepts of flat structure
which provide a wide span of control, decentralization which allows autonomy
and initiative at the lower level, and informal organization which is necessary to
find flaws of formal organization and to satisfy the social and psychological
needs of employees. Furthermore, the neo-classical management theory analyzes
human behavior in terms of how organizations work. Additionally, this paradigm
gives human needs—such as job satisfaction and other social needs—a higher
emphasis.

In retrospect, the key difference between classical and neo-classical theory is

that the classical theory assumes that a worker’s satisfaction is based only on
physical and economic needs, whereas the neoclassical theory considers not only
physical and economic needs, but also job satisfaction, and other social needs.

In today’s business world, I think the Neo-classical theory has become

relevant. Given that, the business system has a high regard for empowering
human capacity by looking into their needs to perform well. Various
organizations have already established team-building and support systems such
as providing wellness breaks to give importance to the needs of the employees.
Moreover, several companies go with a decentralization type of work, one known
work is the virtual assistant that maximizes creativity and autonomy in giving
service which saves up space for a physical office and the duties of the
employees while continuing the work. Flexible work schemes and establishing an
employee-driven organization have been making a huge impact on improving
sales or business performance. Thus, the neo-classical approach streamlines the
active pace of the organization’s work by boosting human resources.
2. To what extent did the Neo-Classical Theory represent a departure from the
Classical Theory of management? What were the main criticisms of the
Classical Theory that the Neo-Classical Theory sought to address, and how did
it propose to address them? In your opinion, how successful was the Neo-
Classical Theory in overcoming the limitations of the Classical Theory?

Though classical and neo-classical theories do not describe incompetency,

neo-classical theory departed from the consideration of physical and economic
needs to satisfy an employee to consideration of extending these needs to make
ways for job satisfaction and carrier development.

Classical theory has been criticized on several counts, including the theory
is too formal. Next, it is more appropriate for a stable and simple organization
than for today’s dynamic and complex organizations. And it is often prescribed
universal procedures that are not appropriate in some settings. Neo-classical
sought to address it by shifting towards the human side of management. It has
generated awareness of the overwhelming role of the human factor in the work
industry. It recognized the importance of group dynamics, leadership,
motivation, participation, and job environment. It changed the view that
employees are tools and is further believed to be valuable resources.

Neo-classical overcomes the limitation of classical theory by shifting to

valuing human resources in increasing production. This has become common
across organizations and results in the betterment of the attainment of goals
and works which address the limits held by the classical approach. Thus, neo-
classical remains to improve over time and has become eminently used until
now.