Development of Manage11

fhought

1ing Objectives
II/dying !//is cl/apter, you should be able to understand the to
rssicaf Theory
811reaucracy
'cientific Management
'ministratlve Theory
ique of Classical Theory
:sica/ Theory
·a/ Sciences Approach
~Approach
oroach
Theory
 CHAPTER 3 Development of Management Thought ■ 47

a flight back to Bangalore from the U S .. when he bumped into I nfy Chairman - N. R. Narayana Murthy - on
boarding the airport shuttle. Murthy, Devashish says, understandably, did not immediately place him, but when
the EX-employee jogged his memory a bit, India's best-known tech ambassador broke into a broad smile.
'He immediately enquired about me and my family,' recalls Devashish. 'Not only was he carrying his luggage
himself, but when I offered him my seat in the crowded bus, he politely declined. Humility, respect, affection
and genuine concern for the fellow human being. Murthy had lost none of it despite all the success. If you have
to understand why Infosys and its HR practices are unique,' Devashish continues, 'you have to understand the
DNA of its promoters and how this has percolated down the organisation.·
• As a devastating cyclone struck Bhubaneswar in early 2000, it killed several people, destroyed property worth
several hundred crores, and generally decimated everything in its path. Several hundred kilometres away,
K. Sunita, then a software engineer based out of Chennai with Infosys Technologies. was worried about the
fate of her parents who lived in Orissa's capital Bhubaneswar. Communication lines had been cut-off and there
was no way to reach her parents.
As news about the scale and nature of the cyclone began to trickle down, Infosys swung into action and set
up a help-desk to assist employees and their families located in Bhubaneswar. Apart from this, lnfoscions
went around helping their colleagues and families. The company chartered aircraft to airlift its employees and
their families to safety. 'It is this kind of commitment,' says Sunita, seated at one of the hundreds of cubicles
in Infosys' campus buildings, 'why I can't think of moving to a different company, despite having spent eight
years at Infosys.'
• When terror attacks took place in London in July, 2004, the company ensured that every UK-based employee's
family members in India were kept posted. Whatever help - emotional, monetary or otherwise - that the
distressed employees needed was provided. 'That has become kind of routine to us. Whether it is a personal
emergency or a natural disaster or any other issue that affects the welfare of the employee and his family, we
are always ready to lend a hand,' says Bikramjit Maitra. Vice President and Head of HR at Infosys.
Yes, even after 35 years of its existence in the corporate jungle, Infosys stands very tall and still believes in doing things
right - always. Not surprisingly, it won the Best Employer in India recognition from Business Today (Jan 2011 ).

Introduction
The art of management has ancient roots. It is as old as civilisation. The Egyptian pyramids, the Great Wall of
China, the Qutab Minar in Delhi, the Taj Mahal at Agra indicate that large projects requiring managerial skills were
undertaken thousands of years ago. The construction of a single pyramid, interestingly, occupied more than one
lakh workers for over 20 years! The construction of Taj Mahal started in the year, I 631 , and it took approximately
22 years to build it. An epitome of love, it made use of the services of 22,000 labourers and 1,000 elephants. It was
built entirely out of white marble, which was brought-in from all over India and central Asia, after an expendirure
of approximately 32 million rupees. Completing these 'wonders of the world' would certainly require a significant
amount of planning, organisation and management of labour. More than 200 years ago, Adam Smith described the
advantages of division of labour and specialisation. However, the study of management as a science began recently,
especially. after the Industrial Revolution . There has been a deluge of research during the last few decades in the field
of management. It has attracted the attention of psychologists, sociologists, anthropologists, mathematicians, political
scientists, economists and so o n. Unfortunarc:ly, the approaches developed by these scholars have created chaos and
resulted in a 'confused and destructive warfare'. No wonder, HaroU Koontz described the present state of management
theory as a J11ngll According to Koontz, there are I I approaches fo r studying management. Way back in 1966, Stogdill
identified not less than 18 approaches for studying management. H11tchi11so11 has given five approaches in his article
in the Jo1m1al ofthe Academy ofManagement in I 97 I. Thus, different writers have provided different categorisation
schemes for studying management. In order to facilitate easy understanding, can be identified three broad approaches
namely, the classical theory, neo-classical theo ry and modern theory.

Classical Theory
The term 'classical' means something traditionally accepted or long-established. It docs not mean that classical views
arc static and rime bound that must be dispensed with. Some of the clements of classical theory arc still with us, in
one form or another:
• lnttrrtlated functions: Management consists of several interrelated and interdependent functions (planning,
organising, staffing, directing and controlling) which are exercised in a sequential form. T his is repeated over
and over again to bring order out of chaos.
• Guiding principles: In order co crystallize the ever-increasing knowledge and thinking in the field, classical
writers have developed certain principles (to aid executive thinking and action) based on practical experience.
48 ■ Management: Text & Cases

• Bureaucratic structurr. Traditional theory prescribed that organisation be built around the work to be done.
For maximum efficiency, chis theory specified chat the work muse be logically divided into simple, routine and
repetitive tasks. These tasks should then be grouped according co similar work characteristics and arranged in
the form of departments headed by an executive who has a limited number of subordinates reporting directly
to him. Also, command should flow from only one individual; everyone should have one and only one boss.
Work must be assigned to individuals based on job demands and the individual's ability to do the job. The
organisation has complex mechanisms, rules, regulations and procedures. Human action within this framework
is explained mechanistically, by the obligations of position in the hierarchy. The threads of control are held by
common superiors, working at the cop of the hierarchy. Behaviour is regulated by directives, rules and regulations
which specify the exact manner in which the duties arc co be performed. The whole structure rakes the shape of
a pyramid. As the organisation grows and develops, operatio ns grow in size; communication becomes complex;
more policies, procedures and further formalisation is demanded; there would be constant pressures for greater
departmentation; mo re staff may be needed to coordinate activities - it would inevitably acquire a bureaucratic,
pyramidal structure, as shown below:

Elements
• The Hierarchy
Top Management
• Specialisation and
Division of Labour
• The Scalar Principle
• Unity of Command
• Departmentalisation
Middle Management
• Span of Control
• Parity of Authority
and Responsibility
• Centralisation vs
Supervisory Decentralisation
Management _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ • Line and Staff
Relationship

Pyranid Structure and Elements of Cla;sical Theory

• Reward-punishment nexus: 'Follow the rules, obey the orders, show the results and get the rewards'. More or
less, classical theory emphasised the above philosophy. If you lag behind in the race, you will become a second-
class citizen and not entitled co receive extra benefits. G reat emphasis was put on efficient use of resources while
producing resulrs.
Surprisingly, the classical theory developed in three streams: Bureaucracy (Weber), Administrative Theory (Fayol),
and Scientific Management (Taylor). Lee us examine the classical theory more closely.

Bureaucracy
Max Weber ( 1864-1920) introduced most of the concepts o n bureaucratic o rganisations. The word bureaucracy implies
an organisation characterised by rules, procedures, impersonal relations, and elaborate and fairly rigid hierarchy of
auchoriry-rcsponsibiliry relationships. In simple terms, it implies rhc proposition char rhc organisation has a structure.
People work within their boundaries. The work is processed with the help of rules and regulations. People follow these
rules while processing work. Persons with proper qualifications arc selected so that the work is done efficiently.

Elements of Bureaucracy
Weber has provided a number of features of bureaucratic stru cture. These arc given below:
• Hierarchy: Hierarchy is a way of ranking vario us positions in descending order from rop ro bottom of an
organisation. In a bureaucratic srruccure, each lower office is under the supervision and control of higher one.
Ulcimatcly, no office is left uncontrolled in the organisation.

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 CHAPTER 3 Development of Management Thought ■ 49

• Division ofwork: T he to tal wo rk is d ivided into s pecialised jo bs. Each person's job is broken d own into simple,
routine and well-defined tasks. Each employee knows his boundaries. By d oing the same type of wo rk a number
of times, he becomes an expert in course of rime .
• Rules, regulations and procedures: The behavio ur of employees is regulated thro ugh a set of rules. The
emphasis is on consistency. Employees are expected to follow these rules strictly. They have: to be applied in an
impersonal, objective m anner.
• Records: Proper records have to be kept for everything. Files have to be m aintained to record the decisions and
activities of the organisation on a d ay-to-day basis for future use.
• Impersonal relationships: Everything sho uld proceed according to rules. There is no room fo r personal
involvement, emotions and sentiments. If an employee comes late, whether he is a manager o r a peon, the rule
must be same fo r all. T he decisions must be governed by rational considerations rather than personal factors.
• Admi11istrativt class: Bureaucracies generally, have administrative class responsible for coordinating the work.
Known as bureaucrats, these officials are selected o n the basis o f their competence and skills. They arc sclc:cced
according to merit, receive special training for their poses, and enjoy corporate tenure. They arc paid salary,
which increases according to age and experience, and receive a pension when they retire. Prom otion is based o n
senio rity and achievement, decided by judgement of superiors.

•Milli Advantages and OisadvantatJes of Bureaucra::y

Advantages Disadvantages

• Specialisation: Bureaucracy offers a valid basis
for dividing work. The organisation is divided
into different functional departments. People can
specialise in their respective fields and show
improved performance.
• Rationality: 'Bureaucracy brings rationality to an
organisation. Judgements are made according to
an objective and generally agreed upon criteria.
Further, by structuring the duties, responsibilities
and reporting relationships in a command hierarchy,
bureaucracy provides form or substance to an
organisation. Such logical structuring of activities
brings about orderly execution of assigned tasks'.
• Predlctabllity: The rules, regulations, training,
specialisation, structure and other elements of
bureaucracy enable it to provide predictability
and stability to an organisation. For example,
bureaucracy enables a fresh student to predict
with high confidence that his university will still be
in existence three years later when he expects to
receive a degree from it. He is also sure about the
curriculum he will be required to take and he knows
much about the university's rules and regulations
that will govern his behaviour.
• Democracy: In bureaucratic organisations, decisions
are arrived at, according to an acceptable criterion.
Rules and regulations bring about consistent
behaviour within the organisation. Activities are
taken up on a priority basis, according to a time
schedule. People are selected on the basis of merit.
Patronage, favouritism and other arbitrary bases
are not given weightage. Because the opportunity
to train, apply and be selected for a job is open to
every citizen, a significant degree of democracy is
achieved.
• Rigidity: Critics of bureaucracy claim that it is
rigid, static and inflexible. strict adherence to rules
produces timidity, conservatism and technicism. In
the name of following rules, people may even shirk
away from their responsibilities.
• Impersonality: Bureaucracy emphasises mechanical
way of doing things. Rules and regulations are
glorified in place of employee needs and emotions.
That is why bureaucracy is labeled as 'an organisation
without persons'.
• Displacement of objectives: As organisational
procedures become more formalized and individuals
more specialised, means often become confused with
ends. Specialists, for example, may concentrate on
their own finely tuned goals and forget that their goals
are a means for reaching the broader objectives of
the organisation.
• Compartmentallutlon of activities: Strict
categorisation of work restricts people from performing
tasks that they are capable of doing. For example,
a pipe fitter can install a pump, but is prohibited by
work rules from making the electrical connection even
if he is totally qualified to do so. Bureaucracy would
also encourage a tendency to perpetuate existing
jobs even when they become redundant. The typical
bureaucracy tries to preserve all the old jobs and add
new ones for new requirements, resulting in wastage
of scarce inputs.
Contd...
50 ■ Management: Text & Cases

• Emplr.bulldlng: Bureaucracies often turn managers

into empire builders. They try to enhance their status
and power by adding more people, more space, more
physical facilities -whether they are required or not.
As pointed out by Weber, once it is fully established, it
is hard to destroy bureaucracy even if it has outlived
its usefulness.
• Red tape: Bureaucracies are paper mills. Everything
is recorded on paper. Files move through endless
official channels, resulting in inordinate delays.
Communication is reduced to a feeble walk and
members, while trying to adhere to rules, may
discount the value of arriving at prompt decisions.
By encouraging conformity to rules and regulations,
bureaucracies leave nothing for original and innovative
behaviour.

These troubling criticisms compelled many writers to dismiss bureaucracy as a hopelessly outdated and unwanted
creature in the present day world. Writers have also labelled it as a 'continental nuisance', a 'structural dinosaur', and an
'impersonal monster'. le is said co be an o rganised system for not getting things done effectively. Bureaucrats are experts
in wasting time, money and energy and arc called ' hopeless company men'. Despite these negative pronouncements,
bureaucracy remains an essential feature of modern civilisatio n. Business organisations, schools, government and o ther
organisations, largely, are based on bureaucratic concepts even today. There is no use wishing it away. Many of the
problems of bureaucracies could be avoided, if the individual needs and characteristics ofevery o rganisational member
are remembered and considered in making managerial decisio ns.

Scientific Management - Taylor: The Father of Scientific Management

Scientific m anagement arose, in part, from the need to increase productivity. In the United States, especially, skilled
labour was in short-supply at the beginning of twentieth century. To increase productivity, ways had to be found to
increase the efficiency of workers. C ould some portions of the work be eliminated or som e parts of the operatio ns
combined? Could the sequence of these tasks be improved? Was there 'one best way' of doing a job? In his pursuit
of answers to such questions, Frederick W. Taylor slowly built the body of principles that constitute the essence of
Scientific Management (1890-1930). Taylo r did most of his work at the Midvale and Bethlehem Steel Companies in
Pennsylvania. His early years at Midvale were particularly disgusting. H e was constantly appalled at the inefficiency
of workers. Employees used vastly different techniques to do the same job. They were prone to 'raking it easy' on the
job. Taylor firm ly believed chat worker did o nly about one-chi rd of what was possible. There were no effective work
standards. Workers had no incentive to produce mo re because they were paid an ho urly rare. Workers were afraid
to work fast because they believed their rare of pay would be lowered or they wo uld be laid-off if they completed
their tasks too quickly. Workers were asked ro rake up jobs unrelated ro rheir abilities and aptitudes. Management
decided things based o n hunch and intuition. Most importantly, management and workers viewed themselves to be
in continual conAict.

Taylor's Medicine
Taylor set o ur to correct rhe situation by employing the scientific method to workers o n the sho p floor. He emphasized
that work wo uld not be taken for granted but sho uld be taken serio usly. Productivity is no t harder work, but smarter
work, that is an understanding and systematic analysis of work. M uch ofTaylo r's published work was based on his
report o n work improvement tests performed at Bethlehem Steel - emphasising 'one best way' philosophy. Taylor
reported that t he company had abo ut 75 men employed to load pig iron freight cars. He selected a Pennsylvania
Dutchman, named Schmidt (real name H enry Nolle), and offered him an increase in pay fro m $ 1.1 5 per day to
$ 1.85 per day, if he would follow his orders with no back talk. Taylor projected that following orders would increase
Schmidt's productivity from about 12 tons a day to more than 47 tons. Schmidt agreed to the proposal. Consequently,
on some days he wou ld k<'<'P his legs straight and US<' his back to life with. Taylor exp<"rim<"nt<'d with r<'st p<"riods,
walking speed, carrying positions, and oth er variables. Afrer a long period ofsciencifically trying various combinations

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 CHAPTER 3 Development of Management Thought ■ 51

of procedures, techniques and tools, Taylo r su cceeded in finding o ut 'one best way' to perform the task and realised the
goals set by him. Taylor claimed co have trained the other workers until the entire crew had raised their productivity
in chis manner.
Thus, by purring rhc right person o n the job with correct tools and equipment, by having the workers follow Taylor's
instructions exactly, and by motivating workers through the economic incentives of a significantly higher daily wage,
Taylor achieved significant improvements in productivity. Taylor explained these ideas and techniques in his two
books (Shop Management and The Principles ofScientific Management) and these ideas found favour in USA, France,
Germany, Russia and Japan, in course of time.

Ba.1ics of Scientmc Management

The concept of scientific management implies rhe application of science ro management. le is based on four basic
principles:
• Each cask must be scientifically designed so chat it can replace the o ld, rule-of-thumb methods
• Workers muse be scientifically selected and trained so that rhey can be more productive on their jobs
• Bring the scientifically designed jobs and workers together so that there will be a march between them
• There must be division of labour and cooperation between management and workers
Taylor stressed the importance of employee welfare as well as production efficiency. To boost up productivity, wage
incentives based on performance (differential piece rate system) were introduced. The emphasis was on maximum
output with minimum effort through elimination of waste and inefficiency at the shop Aoor level.

Key Concepts
I. Scientific task planning: Scientific task is the amount of work an average worker can perform during a day
under normal working conditions (called as a fair day's work). Management should decide in advance as ro what
work is to be done, how, when, where and by whom. The ultimate goal is to see chat work is done in a logical
sequence promoting maximum efficiency.
2. Time and motion studies: Time and motion studies have been advocated by Taylor with a view to isolate the
wasteful and unproductive motions o n the job. The cimc srudy would indicate the minimum time required
to do a given job. The time taken by workers to do a job is being recorded first and chis information is being
used co develop a time standard. Time standard is che period of time chat an average worker should cake co do
a job. Motion study is carried out to find out the best sequence of motions to do a job. The aim is to eliminate
unnecessary, ill-directed and wasteful motions and find our the one hest w2y of doing a jo h. In this study, finger
movements, hand movements, arm movements and shoulder movements arc studied, through photographic
evidence. In addition, fatigue studies arc also carried out to find out the extent of boredom and m onotony
caused by a job. Taylor and his colleagues (Gilbrerhs, Gantt) advocated fatigue srudies so as to find ou t the best
synchro nisation between time, work and rest pauses needed co do a piece of work. Managers, in the end, are
charged with the task of planning the work through the above studies and workers arc expected to implement
the same.
3. Standardisation: Under scientific management, standards have to be set in advance fo r the task, materials, work
methods, quality, time and cost, working conditio ns, etc. This helps in simplifying the process of production,
reducing wasteful use of resources, improving quality of work, etc.
4. Differentialpitce rate system: In order co motivate workers, wage incentives were developed in most scientific
management programmes. Taylor advocated differential piece race system based on actual performance of the
worker. In this scheme, a worker who completes the no rmal work gets wages at higher rate per piece than a
worker who fails co complete the same within rhc rime limit sec by management. For example, each worker
who produced IO machine nurs (normal work) would be paid the standard wage off 2 per piece, and chose
below che normal work may gee f 1.5 per piece. Thus, there is considerable difference in wages between chose
who c;umplete th e job am! t h ose who J u nul. Eac;h worker is pineJ a~ainsl every other worker in an unheal1hy
competitive scheme co make more and earn more. ln the lo ng-run, chis will have a celling effect on the health of

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52 ■ Management: Text & Cases

the worker. More damagingly, this scheme would divide the working class permanently. Though the differential
piece rate system is opposed by unions and workers alike, the essential merit in Taylor's suggestion char wages
must have a linkage with performance: of employees should nor be discounted altogether.
5. Functionalfornnanship: In o rder to achieve better production control, Taylor advocated functional foremanship
where the factory is divided inco several components, each in-charge of a specialist, namely, route clerk, instruction
card clerk, cost and rime clerk, gang boss, speed boss, inspc:ccor, repair boss and shop disciplinarian. These
functional specialists perform the planning function and provide expert advice to workers. T hey plan the work
for employees and help employees in improving results. The workers arc expected to implement the commands
of functional specialists. The idea of a divorce between planning and doing function, unfortunately, suggests
that workers arc incapable of chinking independently. Drucker dubbed chis principle as an undemocratic one
because it overshadows rhe independence and initiative of workers completely.

Contributions
According co Gilbrc:rhs, rhe primary bcnc:6r ofscientific management was 'conservation and saving, making an adequate
use of every ounce of energy of any type: that is expected'. In the modern assembly line, conveyc:r belts bring co each
employee the parts needed co perform o ne specific job and they carry the completed work to the next employee on the
line. Specialisacion and division of labour have brought about che second lnduscrial Revolucion in America and ocher
developing nations. The: American production 'miracle:' is said to be: the legacy of scientific management. T he: time
and motion techniques have shown clearly as co how to organise the tasks in a more efficient and rational way. The
role of scientific selection and dc:vdopmc:nt of workers in increasing worker dfecrivcncss is also recognised. The stress
it placed on work design encouraged managers to pursue the 'one best way' philosophy and achieve che tasks with the
minimum effort and cost. Scientific management no t only developed a rational approach co solving organisational
problems but also pointed the way co che professionalisation of management.

Limitations
Scientific management was criticised on several grounds:
1. Exploitative device: Scientific management had two objc:ccivc:s: increasing workers' productivity and improving
workers' economic welfare. Scientific management helped in realizing the first objective. The second objective
was never realised because management did not share the benefits of increased productivity with workers.
2. Depersonalized work: Scientific management supplied standardised jobs co workers. Everything was sec in a
straitjacket. Workers were made co repeat the same operations daily. This produced boredom and monotony.
Workers did not like the idea of becoming glorified machine tools.
3. U11psychologicah Scientific management was dubbed 'unpsychological' because there is no accurate information
as co how rhc wages arc co be given, how the worker's efficiency is to be measured and so on. Taylor's choice of
terminology was also poor. The idea char maximum productivity could be achieved o nly by employing 'first
class men' was equally deplorable.
4. U11democratic: Drucker questioned the idea of managers planning the operations and workers implementing
the same. In ocher terms, one group always performed challenging, novel casks whereas the other one is loaded
with boring, routine and standardised jobs. Scientific management is, chus, undemocratic because it overshadows
workers' independence. Ir treats workers as unthinking animals.
5. Anti-sociah Scientific management is regarded anti-social because workers arc treated as glorified economic
cools only. They are pc:rmiccc:d co participate: in matters affecting their lives. According to Dr. C.S. Myers, it is
anti-social because, ir aims at excluding the average workman from chc field of work as far as possible.
6. Unoriginal: People such as Hoagland questioned the originality ofTaylor's ideas and felt chat his contribution had
been somewhat overrated and overemphasized. Later research into Bethlehem Steel's records, Taylor's published
and unpublished revisions of his own work and ocher sources indicated that Taylor's report on Bc:thlehc:m Scc:c:I
was almost completely a lie.
7. U11realistic: Taylor believed chat employees arc motivated by material benefits. He, therefore, concc:ncraced on
physical and financial needs, completely ignoring the social and ego needs of people. As current research indicates,

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 CHAPTER 3 Development of Management Thought ■ 53

e mployees do not w o rk for m o ney alo ne. T hey seek jo b s:itisf:ic tion , growth o ppo rtunities, c h:ille ng ing w o rk,
recognitio n, etc., apart from econo mic incentives from wo rk.
Despite these limitatio ns, Taylo r is still regarded as a hero ic figure in the history of management because of certain
genuine reasons: (i) He is the first o ne to advocate planning of work, scientific selection of people, putting right man
on the job, rewarding the effo rts of employee in adequate measure, waging a war against inefficiency, etc. (ii) He gave
a concrete shape to his ideas and reduced managerial thinking to a set of p rinciples that have stood the test of time
over the years.

Henri Fayol 's Admin istr ative Th eory

Abo ut the time when F. W. Taylo r was develo ping the principles o f scientific management in the United States, Henri
Fayol was revo lutio nizing managerial thinking in France. Trained as a mining engineer, Fayo l mad e his mark as an
industrialist with the French coal and iron combine o f Commentary- Fo urc hambault, where he spent his entire working
career. He joined the firm as a junio r executive in 1860 and rose quickly through the ranks, retiring as a d irecto r o f
the company in 1918. When the company had been near bankruptcy in 1888, he had taken it over and transformed
it into a fin ancially stro ng organisatio n. Based o n his own experiences as C EO, Fayol develo ped the administrative
theory, which explained the process of managing an organisatio n fro m the top managerial perspective.
• Fayol's Six Activities: In setting o ut to develop a science of management, Fayol began by classifying business
operations into six majo r activities: technical (productio n); commercial (buying and selling) ; financial (use of
capital}; security (pro tection of pro perty); accounting (keeping financial records) and managerial. Since the
first five activities we re commo nly understood by many practitio ners at chat time, Fayol devo ted his attention
to the last activity.
• Managnnent Functions: At the managerial level, Fayo l argued that managers sho uld perform the following
functions: planning, organising, commanding and controlling. This conception of managing has had, and
continues to day to have, a d ecisive impact o n managerial tho ught, education and practice. Many business
o rganisatio ns even today, find the functional view of managing useful for purposes of in-house managerial
training and develo pment.
• Principles ofManagement: At the operational level, Fayol asserted that managers should apply 14 principles.
According to him, these principles can be applied in all types, functions, levels and sizes of organisa tions. This
had earned him the tide of Universalise. These arc given in Box 3.1.

Box 3.1 ❖ Fayol's 14 Principles of Management

1. Division of work: Divide work into specialised tasks and assign responsibilities to specific individuals.
Specialisation increases output by making employees more efficient.
2. Authority and responsibility: Authority is the right to give orders and the power to obtain obedience. Managers
must be able lo give orders and authority gives them this right.

3. Discipline: Employees must obey and respect the rules that govern the enterprise.

4. Unity of command: An employee should receive commands from only one superior.
5. Unity of dlrectlon:This principle calls for 'one manager one plan' for all operations having the same objective.
For example, the personnel department in a bank should not have two directions, each with a different
recruitment policy. The unity of direction principle, when applied properly, ensures unity of action and facilitates
coordination.

6. Subordination of Individual Interest to the common good: In any organisation, the interests of employees
should not take precedence over the interests of the organisation as a whole.
7. Remuneration of personnel: Compensation for work done should be fair lo both employees and employers.
Fayol did not favoured profit-sharing plan for workers but advocated it for managers.
8. Order: Materials and people should be in the right place al the right time.
Contd...

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54 ■ Management: Text & Cases

9. Centralisation: Decreasing the role of subordinates in decision-making is centralisation increasing their role is
decentralisation. Whether decision making is centralised (to management) or decentralised (to subordinates)
is a matter of proper proportion. Fayol felt that managers should retain final responsibility but also need to give
their subordinates enough authority to do their jobs properly.
10. Scalar chain: The graded chain of authority from top to bottom through which all communications flow is
termed as 'scalar chain'. However, if following the chain creates communication delays, cross-communication
(gangplank principle) can be permitted, if agreed to by all parties and superiors are kept informed.
11. Equity: Managers should be fair in dealing with employees. Equity is the combination of justice and kindness.
The application of equity requires good sense, experience and good nature for soliciting loyalty and devotion
from subordinates.
12. Stab/1/ty of tenure: Management should provide systematic human resource planning and ensure that
replacements are available to fill vacancies.
13. Initiative: Employees must be encouraged to think through to implement a plan of action, even though some
mistakes may result. The opportunity to perform independently is an essential component of employee growth
and development.
14. Esprit de corps: Promoting team spirit will build harmony and unity within the organisation.

• U11iversality ofManagement Principia: Since m anagement is universal among all o rganisatio ns; Fayol argued
that those who acquire a general knowledge of managerial functions and principles can m anage all types of
o rganisations. He argued that anyone interested in managing an enterprise could learn these principles and apply
successfully. In order to become a manager, however, certain qualities of head and heart are needed (physical
health, mental vigour, character, etc).
• Managerial Skills: Fayol emphasized the need for managers to acquire certain unique skills in order to do their
work properly. He listed the folJowing qualities of a manager:
❖ Physical (health and vigour)
❖ Mental (ability to understand, learn, apply judgement and adapt to different situations)
❖ Moral (energy, initiative, firmness, loyalty, tact and dignity)
❖ Educational (acquaintance with matters not related to the function performed)
❖ Technical (specialised knowledge relating to one's area of specialisation, especially about machines, work
processes, ere.)
❖ Experience (relating to the work carried out).
According to Fayol, there is nothing mystical about managerial skills and knowledge. This can be ac9uired through
formal study and training.

Contributions of Fayol
Fayol's contribution to management is unique and valuable. H e provided a conceptual framework for analysing the
management process. He (i) proposed chat all operations in a business can be classified into six major heads where
management is rhc most impo rtant one; (ii) listed planning, organising, commanding, coordinating and contro lling as
the main clements of management; and (iii) proposed 14 principles of management, which could be applied universally.
A number of current ideas and practices in management can be: directly linked to the contributions of Fayol. Till recently,
many management textbooks were written along the guidelines provided by Fayol. By emphasising that management
skills arc universal, Fayol has done a signal service to the propagation of management concepts. Fayol always believed
that managerial ability could be applied ro rhe home, the church, rhe military, rhe school, politics, as well as ro industry.
This has ultimately led to the mushrooming growth of management institutions throughout the globe.

Limitations
Administrative theory (as propagated by Fayol, Mooney and Reiley, Urwick and Barnard) is criticised on the follow ing
grounds:
• Lacko/empirical evidence: The theory is nor supported by empirical evidence. Some of the terms and concepts
have nor been properly explained by Fayol. For example, the principle of specialisation does nor tc:U us the: way

OYlll.:J t-, I ")'"':.'C I

 CHAPTER 3 Development of Management Thought ■ 55

to divide the tasks. The so-called princ iples of management have b een dubbed by c ritics (Simon, Stephenson)
as 'proverbs' comparable to folklore and folk wisdom.
• Neglect ofhuma,ifactor: The theo ry views human being as passive and capable of reacting only to organisational
rules and economic incentives. Human attributes such as emotion, artitude, and creativity have been totally
igno red.
• False assumptions: The theory assumes rhat all organisatio ns can be m anaged by rhe same ser of rules and
principles. Ir does nor recognise rhe differences in tasks and problems rhar confro nt organisations. Formal
authority, again, is not sufficient for m anagers to contro l employees. T hey must act differently in different
situations, assessing their own strengths, organisational needs, unio n pressures, competitive reactions, etc.
fro m time-to-rime. Rules have to be applied carefully looking at the: internal and external dynamics of the
o rganisatio ns.
• Pro-ma,iagement bias: It suffers from pro-management bias. Ir is more concerned with what managers sho uld
know and do rather than with a more general understanding of managerial behavio ur. Ir does no t offer guidelines
as to when, where and how the principles have to be applied.
• Historical significance: Ir has only historical significance. It is mo re appro priate for the past (where the
e nvi ro nme nt was stable, predic table) tha n for the present (where the e nvironme nt is turbulent, competitive
and continually changing). As we all know, gcrring work from subordinates through the use of commands,
instructions and force is not possible in the modern world.

Taylor vs. Fayol

The works ofTaylor and Fayal, however, are essentially complementary, because of che following:
1. Both believed chat proper management of personnel and ocher resources was a key to organisational success.
2. Borh applied scientific methods to the problems of management.
3. Both had the experience of industry and develo ped rheir ideas thro ugh practical training and experience.
The major difference in their approaches is centred around their orientation. Taylo r was a scientist, who came through
the ranks and concentrated on the operarive level. Fayol was a practitio ner. He spent m ost of his time in executive
positions and had more of a top management perspective. Taylor paid m ore attention to rhe technical side of work
(job design, Standardisation of procedures, proper placement of people, pro per training, etc.) to improve efficiency of
work. Fayol placed more emphasis on the administrative side of work. He laid mo re emphasis on the functions and
principles of management in general.

•fffH Taylor vs. Fayol

Basis of Comparison Taylor Fayol
Perspective Operative and shop floor level. Top level.

Focus Technical side of work. Administrative side of work.

Attention Increasing productivity through work Improving overall administration by

simplification, time and motion studies. observing certain principles.

Techniques used Scientific measurement of work through Personal e xperiences passed on in the form
e xperimentation and observation. of universal principles of management.

Personality Scientist. Practitioner.

Major contribution Provided a major basis for accomplishments Produced a systematic theory of
on the shop floor. management that can be studied, analysed
and applied.

C, oy11y· I:· :I .,,a·c I

56 ■ Management: Text & Cases
Critique o f C lassical Theory
The principles aro und which classical theory was built have been attacked by management thinkers o n various grounds.
These have been summarised in Table 3.3.
•@ff ii Criticisms of aassical Theory
Theories
1. Static view of organisations theories : Classical
theory takes a static view of the organisation.
When organisations were in a relatively stable and
predictable environment, the classical predictions
seemed sound and valid. Today, with organisational
environments becoming more complex and turbulent,
the classical prescriptions seem less appropriate and
out-of-date.
2. Closed system view : Classicists viewed an
organisation as a closed system. A closed system
perspective is closed-loop. No internal input is
recognised. There is no environment and hence, no
interaction with outside world.
3. Dehumanisation of organisation : Classical
organisation theory has been attacked as an
abstraction that overlooks human behaviour, the
non-rational elements in human conduct and their
implications for operatives. Some even claim that the
theory is incompatible with human nature. Classical
organisation theory views workers as automatons;
they are machines. There is one best way to do
each job and workers were expected to conform to
this rationalised behaviour in performing tasks. Thus,
the theory ignores man as a very complex human
organism. Most of the behavioural aspects have been
Ignored except those relating to profit maximisation.
Under such conditions (boring, dehumanising and
authoritarian), the workers either protest or give in,
at some cost to their psychological well-being. Anger
that does not erupt may be frozen into schizoid,
depressed characters who escape into general
alienation, drugs and fantasies.
4. Anti -democratic bias: Classical organisation
theory stifled people: it robbed individuals of their
self-respect, dignity and personal freedom. It is
assumed that man is weak, sick and incapable of
looking after himself (Theory X). Essentially, he
does not want to flourish but wants to diminish. It
is for his own good he wants to be controlled. On
the other hand, the manager is 'unselfish' and acts
always in the workers' interest. It is, unfortunately, a
fact that 'a manager is healthy while everybody else
is sick. It assumes that the manager is strong while
everybody else is weak. It assumes that the manager
knows while everybody is ignorant. It assumes that
the manager is right, whereas everybody else is
Critics
Keith Davis: Classical organisation theory may be
compared to a roadmap. It gives a static picture of an
ongoing situation. A map does not tell where road repairs
will be, whether a bridge will be washed out or whether a
drawbridge will be up or down when you come to it.
Katz and Kahn : Classical theory · was almost
always inadequate in dealing with the complexities of
organisational structure and functioning".
Katz and Kahn : Classical theory neglected many
types of input-output exchanges. It restricted input to
raw materials and labour power. (Social support of
surrounding structures are ignored). On the output
side, there was a similar exclusion. Again little attention
is paid to the sub-system of organisation with their
differential dynamics and their own interchange within
the organisation.
Keith Davis : Classical organisation theory is strong in
task support; it is weak in psychological support.
Shelly and Carlisle: Classical organisation theory is
too mechanistic and ignores the major facts of human
nature.
Chris Argyris: The formal organisation principles
make demands of relatively healthy individuals that are
incongruent with their needs. Frustration, conflict, failure
and short-term perspective are predicted as resultants
of this basic incongruency.
Pflffner and Sherwood: They listed the following reasons
in support of the anti-democratic view of undemocratic
setup in a classical organisation structure.
• Orders always went down (only managers are
capable of thinking positively and deciding on
appropriate action patterns).
• Politics generated at the top (only managers can
think creatively and decide on an appropriate policy
to govern behaviour).
• Communication was one way (two-way communication
dilutes managers' authority and control). Resistance
Is subversive.
Contd...

stupid' (Peter Drucker). As pointed out by Mason
Haire 'there are implicit assumptions about man
on which classical organisation theory seems to be
based. He is lazy, short-sighted, selfish, liable to
make mistakes, has poor judgement and may even
be a little dishonest'.
5. Classical assumptions and values: The classical
theorists are accused of making too simple and
mechanistic assumptions:
♦ the basic unit of organisation is the position.
♦ organisation is based upon jobs and tasks.
♦ workers are automatons, machines, inert
instruments In the production process.
♦ workers are motivated by rational choice.
♦ workers are relatively homogeneous and
relatively unmodifiable.
❖ emphasis on detection of errors and their
rectification after they have happened.
♦ one best way to do each job.
❖ unhampered authority to superiors to deal with
personnel problems.
♦ one-way communication through the chain of
command.
❖ management values have leaned heavily toward
financial incentives as the major motivation of
mean at work.
❖ organisation (managers) wedded to the value
system of productive efficiency and maximisation
of financial return.
6. Classical principles:Amajorcriticismisthatclassical
organisation principles are too broad, too general to
provide the support for designing an organisation.
At times, some of the principles contradict others
as, for example, unity of command is incompatible
with the principle of division of labour. The principles
of centralisation and decentralisation also offer
examples of contradiction. Moreover, the so called
principles have not been viewed under controlled
repeatable scientific conditions. In the absence of a
rigorous scientific basis, no wonder, Simon dubbed
the principles as proverbs comparable to folklore and
folk-wisdom. In the light of such blistering attacks, the
claim of classical writers regarcing the 'universality
of principles' appears to be ridiculous. They have
only tried to pass on their ideas as universal truths.
The following objections have been raised by critics
against the classical principles:
(a) Division of labour: The division of labour is
the cornerstone among the classical pillars.
According to this principle, work must be broken
down to provide clear areas of specialisation
and to improve the technical performance of the
organisation.
CHAPTER 3 Development of Management Thought ■ 57
• The task is important. Labour is a commodity. So
manager can dispose of people, as he would of goods
and property, if they fail to turn out satisfactory task
performance (workers mere economic tools).
• Unquestioned authority is essential to trample down
resistance from workers/unions (management
ideology authoritarian, undemocratic).
Joe Kelly : Classical values have a certain no-nonsense
let's get-on-with-the-job quality. There are essentially
the underlying beliefs, which collectively help to get
a job done: rationality, perfectibility, work-hard-play-
hard, postpone consumption, and save for a rainy day.
Classical managers are essentially doers who find it
hard to delegate. Over the years, managers have not
abandoned these classical values but rather have added
some of the values from the inexistential system like
achievement, recognition, visibility, etc. Further, executive
values vary along many different dimensions and vary
by organisational level.
Classical values are wedded to productive efficiency
and profit maximisation and they are poorly defined. No
wonder, managers ended up without a chair when the
music stopped.
Shetty and Carlisle: The classical theory is simplistic. It
contains contradictory principles and is normative, rather
than empirical.
Scott and Mitchell and Birnbaum: Classical theory has
built-in, logical contradictions. For instance, rules are
framed lo govern behaviour. However, people frequently
seek to get around rules. To control "deviant behaviour"
additional rules are formulated and the cycle goes on over
and over again resulting in a rule-oriented bureaucracy
that is counterproductive to organisational efficiency. No
wonder, the classical model breaks down under the strain
of its internal consistencies.
Kast and Rosenzweig: Classical concepts were written
by practitioners in management and were based only on
personal experience and limited observations.
Scott, Mitchell and Birnbaum :
• Division of labour causes great functional
interdependency among work activities leading
to stress and strain. Empire building tendencies
develop. Narrow specialisation tends to divide
the organisation into enclaves of authority and
influence.
• The routine and boring nature of work dampens
enthusiasm ; it also depersonalises work as an
Individual finds little meaning in standardised tasks.
Contd...
58 ■ Management: Text & Cases
(b) Departmentation:Alterthe work has been divided
into specialised tasks, classicists prescribed
the grouping of these tasks according to
similar work characteristics. This is called the
principle of departmentation. Common basis
of departmentalion include: function, product,
clientele, and area (called as principles of
departmentation).
(c) The scalar principle: Classicists prescribed a
scalar chain of hierarchy dictated by the members
of the organisation from top to the bottom.
Hierarchical structures demand coordination at
the top. The scalar principle has certain implicit
assumptions:
♦ the part at the top can direct and control the
part at the bottom.
♦ power centralisation should be at the top
level.
♦ man-to-man relationships are more important
than group-to-group relationships.
♦ so far as the delegation process is concerned,
the capacity (ability) of the individual is
equated to the authority of the function
(command and task).
(d) The line and staffprinciple: Classical organisation
theory points out clear-cut, neat division of
authority into line and staff positions.
(e) The span of control principle: The principle of
span of control stipulates that the number of
subordinates supervised directly by one executive
• Most people are not able to see the big picture and
the relationship of their job to it
Rocco Carzo Jr.: The fragmentation and routinisation of
work (demands compliance to rules from organisational
members) has dire implications for organisations.
The organisation may suffer because the rewards for
submissive compliance produce apathy, indifference,
non-involvement and alienation on the part of group
members.
Rocco Carzo Jr.:
• The grouping of persons according to similarities in
their work may be contrary to the natural development
of human organisations.
• The simplicity and rationality of formal structure is
open to doubt. Apart from the form basis suggested
by classicists, other input variables exist which
will affect the actual planning of departmentation
like culture, environment, political factors, type of
persons, etc.
Gullick:
• The principles of departmentation are prescriptive
rather than descriptive. They state how work should
be divided rather than how work is actually divided.
• These principles are difficult to apply to a specific
organisation since they often overlap, are sometimes
incompatible with one another and are quite
vague.
• They neither allow for a realistic analysis of the
existing organisation nor do they in fact provide
workable plans for improvements.
Aygyris: Hierarchy, like specialisation, is basically
incongruent with the needs of mature personalities.
Such a structure makes individuals dependent upon
and subordinate to leaders. They have little control over
environment; their time perspective is shortened.
Rensis Likert: The man-to-man setup impairs
communication system. Each member (department)
tries to filter information to obtain a decision favourable
to himself.
Pfiffner and Sherwood: The formal authority pyramid is
influenced by a number of other social processes, which
clearly leave their mark in organisational behaviour. The
logic of formal relationships is not the only logic prevailing
in human organisations.
Question of unity of command: In reality, multiple
command is the rule not an exception.
Alien and Melville Dalton: Human behaviour disrespects
the best laid organisational plans and the stories of the
line and staff conflicts are part of folklore.
Hicks and Gullets : The division creates status problems.
Line managers are viewed as first-class members and
staff officers are viewed as being subsidiary/overhead,
second class members.
Mason Haire: Critics like Haire are too quick to point
out that mathematically possible relationships among
people are the least important determinants of span.
Contd...
v pyr1;:J t J -i- ·'c I
 CHAPTER 3 Development of Management Thought ■ 59

be limited. Writers like Graicuans, Urwick tried
to restrict the principle to a mathematical
expression.
He calls Gartcuna's analysis of social relationships 'Just
plain silly'.
Herbert A. Simon: Simon points out that adherence to
the principle of span of control conflicts with the principle
that demands a minimum number of organisational levels.
Limited spans widen the administrative distance between
individuals, increase the number of scalar levels leading
to excessive red tape, waste of time and effort.
Waino W. Soiyanen: Span is a fable not a fact.

Neo-classical Theory
In the 1920s and 1930s, observers of business management began to feel rhe incompleteness and shore-sightedness
in the scienrific as well as administrative management movements. The scientific management movemenr analysed
the activities of workers whereas administrative management writers focused arrenrion o n rhe acriviries of managers.
The importance of rhe man behind the machine, rhe importance of individual as well as group relationships in rhe
workplace was never recognised. The social aspects of a worker's job were tocally ignored; che emphasis was clearly
on discipline and control rather than morale:. The human relations cheery (also called nee-classical theory) cried ro
compensate for rhe deficiencies in classical theory (scientific management and adminisrrarive management) modifying
it wich insights from behavioural sciences like psychology, sociology and anthropology. This theory gained popularity
after rhe famous studies of human behaviour in work situations conducted ar the Western Electric Company from 1924
to 1933. These studies eventually became known as the ' Hawthorne Studies' because many of them were conducted
at Western Electric's H awthorne plane near Chicago.

Hawthorne Experiments
• Illumination e,:periments: The Hawthorne researchers began with illumination experiments with various groups
of workers. This experiment involved prolonged observation of two groups of employees making telephone
relays. The purpose was to determine the effects of different levels of illumination on workers' productivity. The
intensity oflight under which one group was systematically varied (rest group) while rhe light was held constant
(control group) for the second group. The productivity of the test group increased each time the intensity of
the light increased. However, productivity also increased in the control group, which received no added light.
The researchers felt that something besides lighting was inAuencing the workers' performance. In a new set of
experiments, a small group of workers were placed in a separate room and a number of things were changed;
wages were increased, rest periods of varying length were introduced; the wo rkday and workweek were shortened.
The researchers, who now acted as friendly supervisors, allowed the group to choose their own rest periods and
to have a say in ocher suggested changes. Workers in the rest room were offered financial incentives for increased
production. Over the two year period, output went up in both the test and control rooms (surprisingly, since
the control group was kept on the same payment schedule) steadily regardless of changes in working conditions.
Why?
• Hawthorne Effect: Parr of the answer may be amibuted to what has come robe called the ' H awthorne Effect'.
The workers knew they were part of an experiment. They were being given special attention and treatment
because of the experiment. They were consul red about work changes and were nor subject to rhe usual restrictions
imposed from above. The result of this special attention and recognitio n caused rhem co carry a stimulating
feeling of group pride and belongingness. Also, rhe sympathetic supervision received by rhe members might
have brought about improved artirudc:s toward rheir jobs and job performance. Ar rhis stage, the researchers
were interested in finding our clear answers ro rhe question: Why the arrirudes of rhe employees had become
bercer after participation in rhe rest room?
• lnttrviewingprogrammt: Mayo initiated a three year long interview programme in 1928 covering more than
21,000 employees ro find our rhe reasons for increased productivity. Employees were allowed to talk freely
(non-directive interviewing) and air their opinio ns in a friendly atmosphere. The point demonstrated by this
interviewing programme is central to the human relations movement. lf people are permined to talk about

~yt I\J t -, I "l'-:.•c I

60 ■ Management: Text & Cases

things th:1.t are import:1.nt to them , they m:1.y come up with issues th:1.t :1.re :1.t hrst sight unconnected with their
work. These issues may be, how their children are doing at school, how the fami ly is going to meet the ration
expenses, what their friends think of their jobs, and so on. Talking about such m atters to a sympathetic listener
who docs not inrerpret is therapeutic. When researchers began to examine the complaints made by the employees
they found most of the complaints baseless. Many rimes nothing was done about the complaint, yet, after an
interview the complaint was not made o nce again. It became apparent that often workers really did not want
changes to be made; they mainly wanted to talk to an understanding person who did not criticise or advise
about their troubles. Thus, fo r the first time, the importance of informal workgroups was recognised. To find
out more about how the informal groups operated, the bank wiring room experiment was set up.
• Ba11k wiri11g room experiment: In this experiment, I 4 male workers were formed into a small workgroup
and intensively observed for seven months in the bank wiring room. The men were engaged in the assembly
of terminal banks for the use in telephone exchanges. The employees in the group were paid in the regular way
depending on the efficiency rating plus a bonus based on average group effort. Thus, under chis system, an
individual's pay was affected by the output of the entire group and by his own individual output. It was expected
that highly efficient workers would bring pressure to bear o n less efficient workers in an attempt to increase output
and thus take advantage of the group incentive plan. H owever, these expected results did not come about. The
researchers found that the group had established its own standard of output and this was enforced by various
methods of social pressure. Output was not only being restricted but individual workers were giving erroneous
reports. T he group was operating well below its capability and was levelling output in order to protect itself.
Thus, workgroup norms, beliefs, sentiments had a greater impact in influencing individual behaviour than did
the economic incentives offered by management.

Human Relations: Key Concepts

The Hawthorne experiments, thus, indicated that employees were not only economic beings, but social and psychological
beings as well. The man at work is motivated by more than the satisfaction of economic needs. The main emphasis
should be on creating a humanistic or informal organisation in place of a mechanistic or formal organisation. The
organisation must be democratised and people working therein must become part of'one big happy family'. In the
words of Keith Davis, ' Human relations are motivating people in organisations in o rder to develop teamwork which
effectively fulfils their needs and achieves o rganisational goals.' The whole philosophy of human relations is built
around the following ideas:
• The individual: According co human relacionists, each person is unique. Everyone is bringing to the job situation
certain attitudes, beliefs and ways oflifc as well as certain skills - technical, social and logical. Hence, the individual
is not only motivated by economic factors, but is motivated by multifarious social and psycho logical factors.
• The work group: Work is a social experience and most workers find satisfaction in membership in social groups.
Unless managers recognise this, human relations at work will not improve. Good interpersonal and intergroup
relationships among people need to be maintained co obtain productivity gains.
• The work environment: Managers have to create positive work environment where the employee finds it easy
to achieve organisational goals as well as his own personal goals. Positive work environments are chose where:
(i) the goals are clearly defined, (ii) incentives are properly used to improve performance, (iii) decisions are
timely and panicipative, (iv) conflict is confronted openly and squarely, and (v) the work is interesting and
growth-oriented.
• The leader: The leader must behave in a way chat generates respect. He must be able to adjust to various
personalities and situations. He must offer a pleasant work climate where bossism is cotally absent and where
members are allowed to have a say in the decision-making process.
• Participative climate: Participative management o r decision-making, in which workers discuss with supervisors
and influence decisions that affect them, is a major aspect of human relations theory. As Mayo observed, 'Before
every change of programme, rhe group is consulted (Illumination Experiments). Their comments arc listened
to and discussed; sometimes their objections are allowed to negate a suggestion. The group unquestionably
develops a sense of participation.' Researchers interpreted char participation results in higher productivity: 'the
girls have ceased to regard the man-in-charge as a boss. They have a feeling that their increased production is in
someway related co the distinctly freer, happier, and more pleasant work environment.'Thc experiment showed
 CHAPTER 3 Development of Management Thought ■ 61

that a supervisor can contribute significantly in increasing productivity by p roviding a free:, happy and pleasant
wo rk enviro nment where bossism to to tally absent and where members arc allowed to parriciparc in d ecisio n-
making policics. Authoritarian rcndcncics must givc way to dcmocraric valucs. Instruction and coaching must
replace browbcating and driving.

Refinements in Neo-classical Theory

The: neo-classical theory arcempred creatio n o f workforcc wirh high morale: by using dcmocraric means. T he: focus
was o n pcoplc:, inccnrivc:s, dcmocrarisario n o f wo rkp lace:, and social interactio ns in direct contrast ro what the classical
theory cmphasized i.e. o rder, ratio nality, structure:, rules and rc:g ularions, specialisation, econo mic tools, etc. Let's look
into these: d ifferences mo re closely in Table 3.4 and 3 .5 .

•@ifii Refinements In Neo-c:l111lc1t Theory

Basis Classical Theory Nao-classic al Theory
Structure Impersonal, mechanical. Organisation is a social system.
Behaviour Organisational behaviour is a product of Behaviour is a product of feelings, sentiments and
rules and regulations. attitudes.
Focus Primary focus is on work and the economic Primary focus is on small groups, on emotional and
needs of workers. human qualities of employees.
Emphasis People try to maximise rewards emphasis Emphasises personal, security and social needs of
is on order and rationality. workers while achieving organisational goals.
Practices Authoritarian practices, elaborate rules and Democratic practises, participation of employees
regulations employed lo obtain results. in decision-making in order to improve morale
and happiness of employees. It recognises the
importance of human dignity and values.
Results Work alienation, dissatisfaction. Happy employees trying to produce more.

•@ifH Comparison between Human Relations and Scientific Management

Point of Human Relations Scientific Management
Di sti nctlo n
Focus People, groups. Machines, rules.
Philosophy Make workers happy One best way of doing things.
Motivation Man wants company; loves interaction Man is an economic animal.
a nd is guided by group goals.
Basis Inputs drawn from behavioural Inputs drawn from physical sciences.
Sciences.
Principles Groups dominate workplace; individuals To bring order and achieve results, everyone
invariably follow group norms irrespective must adhere lo a set of universal principles in
of what management states. every organisation.
Work life and Mayo wanted to keep workers in good The emphasis on standardisation, specialisation,
environment humour; emphasisedfriendly supervision rules, regulations make work life quite dull and
and monitoring of group norms so as to monotonous.
provide a positive work climate.

Criticisms
The: H awtho rne: studies and the: human relatio ns school they spawned have: bec:n severely criticised, and the discussio n
wo uld be incomplete without a brief discussio n of these criticisms.
• Philosophy: Several economises claimed 1hae by en cou raging workers to develop loyaleic:s ro anyehing h ue rheir
own self-intereses and by p reaching collabo raeion inseead of compedeio n, human rdaeio ns wo uld uleimaeely lead
to reduced efficiency. No wo nder, rradc unio ns ridiculcd it as a form of 'cow psych ology', which rransformcd
factories into unthinking places o f com fort. Interest in human rc:larions is equated with tender-mindedness,
sentimentality and unrealistic d esire co make everyone h appy. C ritics also ch arged char the human relatio ns

v uyr 1~ t·-· -1 -i- ·'c I

62 ■ Management: Text & Cases

movement, built :i.s it is on :1 philosophy of worker-m:i.nagement harmony, is not only :rncithecic:i.l to :1 vi:i.ble
capitalist system but impracrical as well.
• Scientific validity: The research carried out by Mayo and his associates had many weaknesses of design, analysis,
and interpretation. W hether the researchers' conclusions arc consistent with their data is still a su bjcct of lively
debate and considerable confusion. With respect to the relay assembly test room studies, for example, Alex Carey
pointed out that there was no attempt to establish sample groups representative of any larger population than
the groups themselves, and chat no generalisation is therefore legitimate'.
• Short-sighted: The very fact chat the human relations research is concerned with operative employees bears
ample testimony to the short-sigh redness of the research findings. Further, the approach lacks adequate focus
on work. Ir tends co overemphasize the psychological aspects at the cost of structural and technical aspects. Ir
tends to neglect the economic dimensions of work satisfaction. But as we all know, economic mo tivation is
exceedingly strong and quite often, economic explanations are appropriate for understanding human behaviour.
It is labelled as a short-sighted ventilation therapy.
• Over concern with happiness: The H awthorne studies suggested char happy employees will be productive
employees. This, of course, is a native and simplisric version of the nature of man. Srudics have fai led co show
a consistent relationship between happiness and productivity. It is quite possible co have a lot of happy but
unproductive employees.
• Anti-individualist: The human relations movement is anti-individualist. Herc, the discipline of the boss is
simply replaced by the discipline of the group forcing the individual co sacrifice his personal identity and dignity.
The individual may not find his true self and gain a stimulating feeling of personal freedom by completely
losing himself in a group. Further, there is no guarantee chat groups will always be instrumental in delivering
satisfaction to members.

Contributions
Criticisms like these are not without merit, and it is probably true that the Hawthorne researchers and their critics
overstated their case. Yer, it would be a mistake to disregard the Hawthorne findings as scientifically worthless. By
stressing social needs, the human relarionists improved on the classical theory, which treated productivity almost
exclusively as an engineering problem. They introduced the idea of rhc organisation as an open system in which the
technical and human clements are closely interrelated. They emphasized the importance of employee attitudes in an era,
when wage incentives and physical work conditions were often viewed as the only requirements for high productivity.
They sporlighred rhe importance: of a manager's sryle and thereby, revolutionized management training. More and
more attention was focused on reaching people management skills as opposed to technical skills. Their work led to a
new interest in the dynamics of groups. Managers began chinking in terms of group processes and group rewards to
supplement their former concentration on the individual worker.

Behavioural Sciences Approach

The behavioural sciences approach developed as a natural evolution from the Hawthorne experiments. The Hawthorne
researchers (Elton Mayo and his Harvard colleagues) stressed the importance of emotional clements such as feelings
and sentiments to explain human behaviour and performance in o rganisations. The behavioural approach applies
the knowledge of the behavioural sciences - psychology, sociology and anthropology - for managing people. The
human relationisrs believed char people are social beings who arc motivated by social interactions and that their job
performance will increase when the job gives chem opportunities to socialize. Behavioural scientists felt this co be an
oversimplified model of human motivation and began to undertake serious investigations.
A number of behavioural scientists have contributed to the development of this approach. O ne among the front-
runners was Abraham Maslow, who developed a hierarchy of human needs which became the basis for explaining
work motivation in organisations. According to Ma.slow, people generally have five basic needs (physiological, safery,
social, self-esteem and self-actualisation) and they satisfy these needs in their order of importance. For most people
in our society, che lower-order needs (physiological, safety and social needs) are reasonably well satisfied. Therefore,
chey seek ro satisfy socialisation needs by imcraccing with friends. Once chesc needs arc reasonably mcc, they seek

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 CHAPTER 3 Development of Management Thought ■ 63

to satisfy higher-o rder needs, such as self-esteem a nd self-actualisation, by u si ng their energies, ralents and resources
productively. Behavioural scientists believed that people will be productive if they arc given o pportunities to use their
abilities and creative skills.
Building o n Maslow's theory of human needs, m any behavioural scientists (C hrisArgyris, D ouglas McGrego r, and Rcnsis
Like rt) argued that existing jobs and m anagerial practices sho uld be redesigned and restructured to give employees an
oppo rtunity to satisfy their higher-order needs. Although working independently, chey proposed a common theme:
People are basically good and in order co stimulate their performance, management should humanise wo rk. People
must be treated as assets (hence the name, human reso urces approach). T hey argued, fo r instance, for increased
parcicipacio n by employees in those decisio ns that affected them; demonstratio n by m an agement of greater crust and
co nfidence in people; increased emphasis co be given to integrating individual and o rganisational goals, and allowing
employees co self-mo nitor their own accivities in place of external control measures. These behavioural writers argued
fo r a strong humanist organisation and suggested that managers should deal with 'complex human beings' in different
ways. The aim sho uld be to use chc untapped human po tential in che service of organisatio ns by emphasising things
such as self-direction , self-control and creaciviry.

•iifHHuman Relations vs. Human Resources Approach

Human Relations Human Resources
1. People need to be liked, to be respected, and to 1. In addition to wanting to be liked, respected, and
belong. needed most people want to contribute to the
accomplishment of worthwhile objectives.
2. The manager's basic job is to make each employee 2 . The manger's basic job is to create an environment
believe that he or she is part of the departmental in which subordinates can contribute their full range
team. of talents to the attainment of organisational goals. In
doing so, he or she must attempt to uncover and tap
their creative resources.
3 . The manager should be willing to explain his or her 3 . The manager should allow participation in important
plans to the subordinates and discuss any objection matters as well as routine ones. In fact, the more
they might have. On routine matters, he or she important the decision, the more vigorously he or she
should encourage participation by involving them in should attempt to involve the subordinates.
the planning and decision-making process.
4. Within narrow limits, individuals and groups should 4. The manager should continually try to expand the
be permitted to exercise self-direction and self- suborcinates' use of self-control and self-direction,
control in carrying out plans. especially as they develop and demonstrate increased
insight and ability.
5. Involving subordinates in the communication and 5. As the manger makes use of the subordinates'
decision-making process will help them in satisfying experiences, insights, and creative abilities, the
their needs for belonging and individual recognition. overall quality of decision-making and performance
will improve.
6. High morale and reduced resistance to formal 6 . Employee satisfaction is brought about by improved
authority may lead to improved performance. They performance and the chance to contribute creatively
should, at least, reduce intradepartment friction and to this improvement.
make the manager's job easier.

Contri but ions

Behavioural scientists have made significant contributions to understanding of individual motivation, group behaviour,
interpersonal relatio nships ac work, and chc importance of work co human beings. They have virtually laid chc foundation
for che emergence of an exciting discip line, human resource management, which emphasises on the effective utilisatio n
of human resources in o rganisations.

The concepts of job enrichment (making jobs interesting and challenging), management by objectives (a goal-setting
process conducted jointly by employees and their superiors) and positive reinforcement (rewarding good performance)
w ere resul ts of the behavioural science ap p roach.
64 ■ Management: Text & Cases

Limitations
The behavioural science approach, however, has several limitations. First, rhe self-actualising view (realising one's
potential by using one's talents fully) assumes rhar all employees will seek sdf-acrualisarion at work. Although some
professional and managerial personnel may want self-actualisation, certainly nor every employee has rhe same desire.
People have diverse needs; it cannot be assumed that everyone is motivated by the same need in the same manner.
Second, the behavioural scientists assume a great deal of compatibility between individual and organisational goals.
Bur in reality, an individual's desire to be autonomous and creative can be at odds with rhc organisation's need to be
efficient, o rderly and predictable. Third, this approach discounted the non-h uman aspects of an organisation such as
task, technology and manufacturing. Fourthly, the behavioural approach fell into the same trap as earlier approaches char
searched for the one best way of managing. Ir assumed chat the one best way of managing is humanizing o rganisations.
In the words of Prof. Stoner, 'The models and theories proposed by behavioural scientists to use jargon rather than
everyday language in communicating their findings have also inhibited understanding and acceptance of their ideas.
Finally, because human behaviour is so complex, behavioural scientists often differ in their recommendations for a
particular problem, making it difficult for managers to decide whose advice ro follow'.

Quantitative Approach
Quantitative, scientific and systematic explanations gained popularity during World War II. The sheer magnitude
of the war effort caused the British and then che U.S. military secvices to look for quantitative approaches for help
in deploying resources in the most effective manner. The quantitative viewpoint focuses on the use of mathematics,
statistics, and information aids to support managerial decision-making and organisational effectiveness. For instance,
when managers make budgeting, scheduling, quality control and similar decisions, they typically depend on quantitative
techniques. Three main branches have evolved over the years, which are discussed below:

• Management science: This approach aims at increasing decision effectiveness through the use of advanced
mathematical models and statistical methods. This approach focuses on solving technical rather than human
behaviour problems. The computer has been of great help to this approach because it has enabled analysis of
problems that would otherwise be too complex. For example, most car manufacturers in India and elsewhere use
realistic computer simulations to study collusion damage to cars. These simulations give them precise information
and avoid the costs of crashing so many rest cars.

• Operations management: Ir is the function that is responsible for managing the production and delivery of an
organisation's products and services. It includes fields such as inventory management, production planning, design
and location, work scheduling and quality assurance. Operations management is often applied to manufacturing
settings, in which various aspects of production need to be managed, including designing the production process,
purchasing raw materials, scheduling employees to work and storing and shipping the final products. Linear
programming assists in input-output analysis. Queuing theory helps in inventory control; sampling theory
helps in profit planning, manpower forecasting; information theory helps in system design and data processing.
For example, Rubbermaid and The Home Depot each use operations m anagement techniques to manage their
inventories. Linear programming helps most airline companies to plan their Aighr schedules.

• Management information systems: M IS is the name given ro the field of management char focuses on designing
and implementing computer-based information systems for use by management. Such systems turn raw data
into information that is put to use at various levels of management.

Companies nowadays use sophisticated mathematical models for use on mainframe, networked and personal computers
in order to measure customer response to various benefits and sccviccs offered to them. Such models help gambling
casinos such as Caesar's Palace, Baily's and Harrah's increase their profits and improve service. High rollers are bombarded
with lots of benefits in the form of food, rooms, and transportation. To reduce the cost of these services and improve
the odds that these people will gamble and probably lose, casino managers deploy sophisticated information systems
char put customer's favourite games, betting patterns, accommodation preferences, food and drink choices and other
habits to close exami nation.

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 CHAPTER 3 Development of Management Thought ■ 65

Benefits and Limitations

The assets and liabilities of the quantitative school may be summarised thus:

•@ijfff Assets and Lia:>ilities of Quantitative Theory

Assets
• Easy to define problems; identify the variables • It erroneously believes that all variables impacting a
Impacting the same and pin-point possible ways of
solving it.
• Promotes disciplined thinking, forcing managers to
take a holistic view of multifarious factors influencing a
decision situation.
• Eliminates subjective element in decision-making by
identifying relationships between influencing variables
and reducing the same to definite mathematical
formulae. It offers valuable quantitative tools and
techniques for making objectively rational decisions.
Liabilities
problem could be identified and measured In a definite
way. Often, vital pieces of information may be missing,
may not be quantifiable and may defy analysis. At
times, it is difficult to establish functional relationship
between identified variables.
• It is overly concerned with decisions; identification of
variables, collection of data; processing of data, etc.
There is no importance given to human relationships
and individual needs and aspirations.
• Inputs for decision-making are not, often, readily
available. At the same time, managers can't postpone
decisions for want of sufficient data.
• Decision quality depends on the data that is being (fed
into the computer) used. If the data is not accurate and
up-to-date, it does not serve any useful purpose.

Systems Approach
The decisions taken by managers have wide ranging impacts. They affect the internal as well as external groups in a
significant way. The decision to shift the location of a plant, to dose down a centre, to throw off workers, to promote
employees on the basis of merit - whatever may be the case - creates a ripple effect. It is Llke throwing a rock into a
quiet pond, creating ripples for a long time. A simple instance of throwing off a lazy worker may invite trouble from
unions and even lead to an unexpected strike. So, when a manager takes a decision, he must understand and anticipate
its repercussions on the entire organisation and the environment. He must appreciate the fact that his organisation is
a complex whole of many interrelated, interdependent parts, put together for achieving certain objectives. This, in a
nutshell, is the very essence of rhe systems concept.

The Concept
Sysrems theory is che 'big-picture' approach char overcomes che common weakness of viewing things in coo narrow
perspective. It attempts to view the organisation as a single, unified, purposeful cnriry, composed of interrelated parts.
Rather than dealing separately with the various parts of an organisation, the systems theory gives managers a way of
looking at an organisation as a whole and as a part of the larger, external environment. In so doing, systems theory cells
us chat the activity of an organisatio n affects the activity of every other part. The job of a manager is to ensure that all
parts of the organisation arc coordinated internally so char rhc: goals can be: achieved. A systems view of management,
for instance, would recognise that, regardless of how efficient the production department might be, if the marketing
department docs not anticipate: changes in consumer castes and work with chc produce development department in
creating what consumers want, the o rganisatio n's overall performance will be hampered.

Systems Vocabulary
Over rhe years, the following terms have found their way into the language of management:

• System: A set of interrelated parts {sub-systems). Each part may have vario us sub-parts. These parts arc mutually
related to each other. Usually, a change in one part would lead to a change in ocher parts.

• Sub-system: The parts char make up rhe whole of a system are called sub-systems and each system may, in
turn, be a sub-system of a still larger whole. Thus, a department may be a sub-system of a plant, which may be
a sub-system of a company, which may be a sub-system of an industry, etc. There arc five sub-systems within

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66 ■ Management: Text & Cases

an organisation: ( I) goal sub-system (individual and group goals); (2) technical sub-system (tools, equipment,
employee skills, knowledge); (3) structural sub-system (authority layers and relationships); (4) managerial
sub-system (managers who plan, lead and control); (5) psycho-social sub-system (psychological and social factors
influencing people at work).
• Synergy: Synergy means that the whole is greater than the sum of its parts. A watch that is d isassembled has
the same number of parts as one chat is properly assembled. However, the assembled watch has a pheno menon
chat the disassembled watch lacks - it keeps time (synergy). When rhc parts of an organisation arc properly
intcrrclaccd (such as an assembly line), the output is much greater than it would o therwise be. Synergy represents
o ne of the basic challenges of management, getting all of the clements of an organisation functio ning together
so that output is optimal.
• Open and closed system: A system is considered an o pen system if it interacts with its enviro nment; it is
considered a closed system ific d oes not. An organisation chat is not adaptive and responsive to its environment
would not survive or grow in any extended period of rime. It has to be responsive to demands placed on ir by
both its internal and external environments.
• System boundary: Each system has a boundary char separates it from its environment. In a closed system , the
system boundary is rigid; in an open system, the boundary is more flexible. The system boundaries of many
companies h ave become more Aexible in recent times. For example, o il companies wishing to engage in offshore
drilling have increasingly had to consider public reactio n to the potential environmental harm.
• Flow: An open system receives inputs from its environment which are transfo rmed into outputs in interaction with
environmental variables. For a business firm, inputs would be m aterial, labour and capital. The transformation
process would turn these inputs into finished produces or services. The system's success depends on successful
interactions with its environment; that is, those groups o r institutions upon which it is dependent. These
might include suppliers, unions, financial institutio ns, government agencies and customers. The sale of o utputs
generates revenue, which can be used to pay wages and taxes, buy inputs, repay loans, and generate profits for
shareholders. If revenues are not large enough to satisfy environmental demands, the organisation shrinks or
dies. Thus, a system has Hows of information, materials and energy. These enter the system as inputs, undergo
transformation processes within the system and exit the system as output as shown in Figure 3.2.

ENV RONMENT

E
N
~PUTS
t
PROCESSES OUTPUTS E
N
V V
Men, Materials
I
R
) Money,
Technology
> Activities,
Operations
) Goals, Sales/
Profits <> R
0 0
N .4~
N
M M
E E
N
T
Remedial
I
Targets -
~
Feedback
N
actions T

E N V R O N M E N T

An Open System

• Feedback: Feedba..:k is <.:entral tu system <.:untruls. As uperatiuns u f the system pru<.:ced, infurmatiun is fed ba<.:k
to the appropriate people or perhaps to a computer so that the work can be assessed, and if needed, corrected.

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 CHAPTER 3 Development of Management Thought ■ 67

Feedback provides warning signals regarding impending dangers. For example, customer complaints may demand
attention to product improvement, customer service, etc.
• Entropy: It is a normal process that leads to system decline. When an operation does not monitor feedback from
its environment and makes an appropriate adjustments, it may fail. The failure of Kmart (a major retailer) is
attributed co the: fact char it failed to revitalize itself and keep pace with changes in its environment.

Relevance and Usefulness of Systems Theory

Systems theo ry makes organisation theorists search for integrative: models rather than be satisfied with making lists
of unrelated principles (Fayol, Taylor). It also emphasises looking at the: forest rather than the: trees. It uses a way
of chinking chat highlights underlying relationships. The practical im plications of systems theory for managers arc:
enormous. Most effective managers operate with a systems mentality even though they may not be consciously aware:
of it. As a matter of course:, c:xc:cucivc:s ask what effects a decision will have: o n others. They chink before: chc:y ace,
implying a process of evaluating the impact of their actions will have. A conscious commitment to systems thinking
requires explicit responsibility for formi ng decisions in terms of the: entire: organisation. Instead of merely looking
at the technical side (scientific management) or activities side (administrative management) or even the human side
(human relations), executives are now forced to look at the totality of the situation and arrive at decisions. They can
now easily maintain a good balance between che needs of che various parts of the enterprise and goals of the firm as
a whole. T hey can respond, in short, to situational requirements in an effective way. The systems approach clearly
indicates the fact that organisations arc nor self-contained. For their survival and growth, they need co look at what
is happening all around chem, for example:, government regulations, environmental demands, competitive moves,
supplier relations, union demands, etc. If a company fails to assess the impact of its actions on internal as well as external
groups, it is certainly on its way co decline:. After all, chc: primary goal of management from a systems perspective is
to continually re-energize the o rganisation to avoid entropy. Organisations, in their own self-interest, must monitor
their environments, adjust to changes, and continuously bring in new inputs in order to survive and Bourish.

Limitations
It is true that systems theory provides a broad philosophical perspective that bridges academic disciplines and mounts
integrated arrack on a variety of problems. Ir is objective and is not inAucnced by catch p hrases like, 'one best way' and
simplistic prescriptions like, 'a manager decides things for others'. However, the conceptual framework for understanding
organisatio ns, provided by the: systems theory, is too abstract. It docs nor attempt to identify situational differences
and factors. Also, it tends to overemphasize 'oneness' , coordination and harmony when, in fact, organisations have
many, natural, in-built conflicts, such as the superviso r as the man-in-the-middle. Providing more specificity in terms
of variables and 'if-then' relationships in a situational context is left to the evaluation of the situational or contingency
approach.

Contingency (Situational) Approach

Introduction
The problem with universal principles of managc:mc:nt, as advocated by early chc:orists, is chat few principles are
universal. Research has shown char management methods used in o ne circumstance: seldom work rhc: same way in
ochers. Parents find chis our quickly when they realise: char spanking one child may yield good results while spanking
another can be emotionally disturbing and disastrous. Some employees are most often motivated by economic gains
while others have greater need for challenging work. Still others care only about protecting their egos. The same:
individual may be morivarcd by different things in a variety of situations.

The Approach
Contingency theory is based o n the premise char situations dictate managerial action; i.e. different situations call
for differenr :tppro:tches. No sing le way of solving prohlems is hesr for all siru:trions. Bec:tuse r:tsh and people in
organisations differ, che contingency theorises (Selznik, Burns and Sralker, Woodward, Lawrence and Lorsch, James
68 ■ Management: Text & Cases

Thompson and others) a rgue tho.t the method of mo.no.ging them must also differ. The c ho ice of a p arric ubr m eth od
of managing largely depends on the nature of the job, che people involved and the situatio n.
According to contingency theory, effective management varies with the organisatio n and its environment. Contingency
theory attempts to analyse and understand these interrelationships with a view cowards taking the specific managerial
actio ns necessary to deal with the issue. This approach is both analytical and situational, with the purpose ofdeveloping
a practical answer to the question at hand.

Important Elements of Contingency Theory

Contingency theory has the following features:
I. Managerial actions arc contingent on certain actions o utside the system or sub-system as the case may be.
2. Organisational efforts should be based o n the behaviour of actions o utside the system so that the o rganisatio n
gets smoothly integrated with the environment.
3. Managerial actions and o rganisational design must be appropriate to the given situation. A particular actio n is
valid only under certain conditio ns. There is no one best approach to management. It varies from situation to
situation.

Implications of Contingency Approach

According co che contingency approach, there arc no plans, organisation structures, leadership sryles, or controls that will
fie all situations. T here are few, ifany, universal truths, concepts, and principles that can be applied under all conditions.
Instead, every management situatio n muse be approached with the ' it all depends' artitude. Managers muse find different
ways that fie different situations. They must continually address themselves with the question: which method will
work best here~ Fo r example, in o rder co improve producriviry, classical theorist may prescribe work simplification
and additional incentives; rhe behavioural scientist may recommend job enrichment and democratic participation
of che employees in the decision-making process. Instead, a manager trained in the contingency approach may offer
a solution chat is respo nsive to the characteristics of the total situation being faced. For organisations characterised
by limited resources, unskilled labour force, limited training opportunities, limited produces offered to local markets
work simplification would be the ideal solution. Job enrichment programme would work berter if the organisation
employs skilled labour fo rce. Managerial action, thus, depends upon circumstances within a given situation. Not a
single best approach will work in all situations. Applying a contingency/situational approach requires chat managers
diagnose a given situation and adapt to meet the conditions present.
According to Robert Albanese, the strength of contingency approach rests on two points: (i) First, it focuses attention
on specific situatio nal factors chat inAuence che appropriareness of o ne managerial strategy over another, (ii) Second,
it highlights the importance to managers of developing skills in situational analysis. Such skills will help managers
find our important contingency factors that inAuencc their approach to managing.
T he major implications ofcontingency theory may be summarised thus: management is entirely situational; managerial
actions arc contingent on internal and external factors; managerial actions must be consistent with the requirements
of internal as well as external factors.

Evaluation
The contingency approach is a useful instructional device in the sense that it compels us to be aware of the complexity
in every situation and forces us to take an active and dynamic role in trying co determine that would work best in
each case. Combining the mechanistic (Taylor) and humanistic approaches (Mayo), the contingency theory suggests
that different conditions and situatio ns require applicatio n of different management techniques. It helps in fitting the
classical and behavioural theories in a pro per framework. It is an improvement over the systems theo ry in the sense
that it o nly examines the relatio nships between sub-systems of a specific organisation in a given environment, but also
offers solutio ns co particular o rganisatio nal problems. The systems approach takes a general view of organisational
variables, i.e., technical, social, personal, structural and external variables. The contingency theory, on the other hand,
is concerned with achieving a 'fit' between organisatio n and its environment. Practising managers, however, seem to
find chis theory tenuous because it does not provide any specific set of principles co use.

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 CHAPTER 3 Development of Management Thought ■ 69

•@ijfj:j Systems vs. Contingency Theory

Systems Theo ry Contingency Theory

• Organisation-environment relationship not explained
clearly.
• Takes a general view of organisational variables
(technical , social, personal, structural, external).
• Considers all organisations to be similar.
• Vague and complex.
• Emphasises the synergistic effect of organisations and
recognises the external inputs.
• Merely outlines Interdependencies among systems
and sub-systems.
• Spells out the relationship of organisation to its
environment clear1y.
• Takes a specific view of how the organisation adjusts
to its environmental demands. Mainly concerned
with structural adaptations of organisation to its task
environment.
• Each organisation is unique.
• More pragmatic and action-oriented.
• Relates environment to specific organisation structure
and design. It integrates theory with practice in a
system's framework.
• Tries to identify nature of Interdependencies between
various parts of an organisation, and their impact on
various other things.

Contingency theory is arracked by several theorists o n t he following grounds:

I. Paucity ofliterature: Contingency theory suffers from inadequacy of literature. Ir has nor developed to such
an extent where ir can offer meaningful solutions ro different managerial problems in a specific way. Ir is roo
simplistic to say that 'managerial actio ns depend o n situations'. Instead, it m ust offer, in precise terms, what a
manager should do in a given situatio n.
2. Complex: Contingency theory is theoretically complex. Even a simple problem involves analysing a num ber of
o rganisatio nal com ponents, each of which has innumerable dimensions. Often, m anagers m ay find this to be
a difficult and taxing exercise.
3. Defies empirical testing: The precepts advanced by contingency theorists cannot be p ut to empirical testing in
a concrete way. There are multifario us situational factors robe raken into account while testing the contingency
th eory. For example, a proposit ion that unless the various parts in an organisation m ove in close coordination,
the behaviour at various organisational levels would no t be effective seem s to be a sound one. But when put to
empirical resting, several problems crop u p almost instantaneously.
4. Reactive, not proactive: Contingency theory is also criticised on rhe gro und rhar ir suggests a reactive strategy
in coping with environmental complexi ty. Instead, a proactive strategy is needed where managers would be able
ro steer rhe o rganisation thro ugh complex environments with the ir creative and innovative efforts.
5. In complete: C ritics argue rhar t he contingency approach does no r incorporate all aspects of systems theory and
they hold that it has yet not developed ro rhe point at which it can be considered a true theory. Further, rhe goal
of integrating functio nal, quantitative, behavioural, and systems approaches in the form of a contingency model
may prove robe roo difficult ro realise because of rhe incomplete development of rhe earlier approaches. Critics
also argue rhar there is really not much char is new about rhe contingency approach. For example, rhey point our
that even classical theorists such as Fayol, cautioned rhar m anagement principles require flexible application.
In spire of these: valid critical expressions, contingency theory holds good at the micro-lc:vel, where m anagers arc
forced to look into internal as well as external req uirem ents while managing their organisations. Contingency theory
is welcomed as a ' refreshing breeze' in management lireraru re rhar clears away rhe humanistic and general systems 'fog'.
T he systems theory rakes a general view ofo rganisation variables, i.e., technical, social, personal, structural and external
variables. T he contingency rhc:ory, on rhc: other hand, is concerned wirh achieving a ' fir' bc:rween o rganisation and irs
environment. Kast and Rosenzweig have, therefore, rig htly poi nted our rhar rhe contingency theory 'falls somewhere
between simplistic, specific principles and comp lex, vague notions'.
T he contingency t heory, like the: systems theory, recognises char an organisation is the: product ofinrcractions between
its various constituent parts (sub-systems) and the environment. In addition, as a sort of refinement, it seeks to identify
the exact nature of interrelationships and interactio ns. In contrast to the: vague systems terminology and perspective,
the contingency approach allows us to specifically identi fy t he internal and external variables char typically influence

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70 ■ Management: Text & Cases

m:1nageri:1I :ictions :ind org:1nis:1tional perform:inc<e. Accordingly, what con stirut<es .,ff.,ctivte management varies with
che organisatio n's inu rnaJ as well as external en viro nment and the make-up of the organisational sub-systems. Thus,
the contingency approach falls som ewhere berween simplistic, specific principles (classical theory) and complex, vague
n otions (system s theory). This approach provides a lo ng sought synthesis and brings together the best o f all segments
of what Prof. Koontz has termed 'management theory jungle'. The classical ideas and behavioural modificatio ns
are no t rejected, but they are viewed as incomplete and n ot suited for all organisations. Similarly, the ideas of systems
theory chat emphasise the interrelationship between parts also have not been rejected but they are viewed as vague and
unspecific. As a way of correctio n , the contingency approach provides a p ragmatic method o f analysing o rganisatio n
sub-systems and cries to integrate these with the environment. Contingency views are ultimately directed cowards -
suggesting o rganisatio nal designs and man agerial actio ns m ore suitable for specific situations.

Summary
Management can be studied from various angles. The classical theory has three impo rtant branches. ' Bureaucracy' prescribed
thac an o rganisation be built around the wo rk co be done. The work must be logically divided and assigned to subordinates,
who are expected co report rhe progress to superiors ar various levels. The who le sysrem should have some well-defined rules
so char results can be obtained wirh very lirtle frictio n. Scientific management emphasised rhe importance of work design
and enco uraged managers ro find 'one best way' co do things wirh minimum effort and cost. Administrative theory listed
important clements and principles of management, which can be studied and pur into practise. The classical school of
thought, thus, focused attention on the technical and administrative side of work and ignored the contributions of human
beings complcrcly.
The neo-classical theory tried to correct this deficiency by drawing rich inputs from various behavioural sciences and
practical experiments carried out by Elron Mayo. The theory attempted creation of workforce with high morale through
democratic means. The focus was on people, incentives, democratisation of workplace, and social interactions. The human
resources theory went a seep funhcr by suggestin g that human beings are the most valuable assets in every organisation.
Every attemp t muse, therefore, be made co exploit the latent po tential o f human resources by emphasising things such as
self-direction, self-control and creativity.
To improve the qualiry of decision-making, rhe quanrirative approach has advocated the use of mathematics, statistics and
computers extensively. The variables affecting each problem must be identi-6ed and measured in a definite way. This would
help in solving issues in an objective manner, eliminating the subjective clement in decision-making complcrcly.
The systems approach views the o rganisatio n as a uni-6cd, purposeful entity, consisting of interrelated pares. While deciding
things, executives muse look at rhe to tality o f chc siruarion and chc resultant consequences carefully. They muse strike a fine
balance berween rhe needs o f various parts of the enterprise and rhc goals of rhc firm as a whole.
According to thte contingency appro:ich there are no p lans, o rganis::ttion structures, leadership styles, or contro ls chat will
fi r all situatio ns. There arc few, if any, universal truths, concepts and principles that can be applied under all conditions.
Managers must find different ways chat fie different situatio ns. Their actio ns, in the final analysis, must be consistent with
the requirements of internal as well as external facto rs.

Review Questions
I. Discuss bricAy w rio us schools of man:igement thought.
2. What is bure:iucracy? Outline the features of a bureaucratic form of organisation. Point out its merits and demerits.
3. Explain the principal contributio ns o f F.W. Taylor to the development of management thought.
4. List the Fayol's principles of management.
5. Distinguish between Human Relatio ns Theory and Scientific Management.
6. What arc the major findings of Hawthorne Experiments? Examine their significance for the practising manager.
7. 'The nco-classical approach to the management h:is not provided any such thing as to replace the classical management
theory.' Do you agree with this statement?
8. What are the major contributio ns of the Hawthorne experiments to the present day organisations?
9. Distinguish between human relations approach and human resources approach to organisations.
I 0. What a.re the major limitations o f the neo-classical theory of management? Also point out its superiority over the
classical management theory.

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