It is built on the base of classical theory.

It modified, improved and

extended the classical theory. Classical theory concentrated on job
content and management of physical resources.
Neo-Classical theory gave greater emphasis to man behind the
machine and stressed the importance of individual as well as group
relationship in the plant or workplace.

Neo-Classical approach may be analysed in three parts, namely — 1.

Hawthorne Experiment 2. Human Relation Movement 3. Behavioural
Approach.

Additionally, learn about the modern approach, elements and features

of neo-classical theory.

Neo-Classical Theory of Management:

Hawthorne Experiment, Human Relations
Movement and Behavioural Approach
Neo-Classical Theory of Management – Hawthorne
Experiment, Human Relation Movement and
Behavioural Approach (With Modern Approach)
The Neo-Classical approach was evolved over many years because it
was found that classical approach did not achieve complete production
efficiency and workplace harmony. Managers still encountered
difficulties and frustrations because people did not always follow
predicted or rational patterns of behaviour.
Thus, there was increased interest in helping managers deal more
effectively with the ‘people side’ of their organisation. The neo-
classical theory reflects a modification over classical theories.
The basic features of neoclassical approach are:
(i) The business organisation is a social system.
(ii) Human factor is the most important element in the social system.
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(iii) It revealed the importance of social and psychological factors in

determining worker productivity and satisfaction.
(iv) The behaviour of an individual is dominated by the informal group
of being a member.
(v) The aim of the management is to develop social and leadership
skills in addition to technical skills. It must be done for the welfare of
the workers.
(vi) Morale and productivity go hand-to-hand in an organization.

Hawthorne experiment led to the development of human relations

approach. It revealed the importance of social and psychological
factors in determining workers, productivity and satisfaction. This
movement is marked by informal grouping, informal relationship and
leadership Pattern of communication and philosophy of industrial
humanism.
The values of human relation are exemplified in the work of Douglas
McGregor and A. H. Maslow. Human relation approach is a social
psychological approach and suggests business enterprise is a social
system in which group norms play a significant role.
Financial incentive was less of a determining factor on a workers
output than were group pressure and acceptance and the concomitant
security. It ushered an era of organisational humanism. Managers
would no longer consider the issue of organisation design without
including effects on work groups, employees’ attitudes, and manager-
employee relationships.
Elton Mayo, Mary Parker Follett and Douglas McGregor,
Roethlisberger, Dickson, Dewey and Lewin, etc., were the main
contributors that led to the development of Human Relations
Movement.
Usually, most people identify the NeoClassical Theory with the human
relations movement which Elton Mayo had pioneered. Mayo and his
associates conducted the Hawthorne experiments which formed the
basis of this theory. In this article, we will talk about the NeoClassical
Theory of organizations.

The Difference Between a Classical Management Theory &

a Human Relations Theory

Classical management theory and human relations theory represent two views of
management on the opposite ends of the spectrum. One view focuses on looking at
workers solely as a means to get work done, while the other focuses on developing an
organization and the behaviors and motivations of employees. Most managers find
that a combination of the two theories serves them best in their businesses.

Tip

Classical management theory involves creating multiple levels of workers to improve

productivity. While some components of the theory, such as designing procedures for
completing a task and keeping personal issues out of business, help an organization
focus on the job at hand, the theory fails to recognize the differences among
employees. Human relations theory, also known as behavioral management theory,
focuses more on the individuals in a workplace than the rules, procedures and
processes.

What is Classical Management Theory?

Classical management theory involves creating multiple levels of workers to improve
productivity. Employees at the lowest levels find their tasks overseen by supervisors
who, in turn, are overseen by managers. At every level, employees are expected to
perform tasks according to specific procedures designed to maximize productivity. In
addition, this theory focuses on an impersonal side of business.

Employees and managers should not allow friendliness and personal interactions to
become involved with the organization. Rules must be followed exactly, and the hiring
and firing of employees must relate only to the skills they possess.

Pros and Cons of Classical Management Theory

Classical management theory is not used in many organizations because of its
shortcomings. While some components of the theory, such as designing procedures
for completing a task and keeping personal issues out of business, help an
organization focus on the job at hand, the theory fails to recognize the differences
among employees. When employee feelings and opinions are not taken into account,
the business may not grow or may experience high levels of employee turnover as
employees fail to develop a relationship with the business and leave in search of a
more satisfying job.

What is Human Relations Theory?

Human relations theory, also known as behavioral management theory, focuses more
on the individuals in a workplace than the rules, procedures and processes. Instead of
directives coming directly from management, a human relations theory provides
communication between employees and managers, allowing them to interact with one
another to help make decisions. Instead of giving workers quotas and requiring certain
procedures, workers are exposed to motivational and emotional tactics to get them to
increase productivity. The focus of this style is creating fulfilled, productive workers
and helping workers invest in a company.

Pros and Cons of Human Relations Theory

While many companies operate based on the human relations theory, this type of
management has dangers. Companies risk workers becoming too social or easily
swayed by personal emotions and opinions when making decisions, rather than
relying on hard data. It may be more difficult to reprimand employees for poor
performance or dismiss them once they have become invested in the company.

Despite these risks, human relations theory has the potential to increase employee
retention rates and productivity. As employees feel more valued by a company, they
invest in that company and its greater goo

Difference # Human Relations Approach (HRA):

1. HRA is narrower in scope. It is concerned with humanization or

2. HRA considers organisation as a social system, with a culture of its

own.
3. HRA studies individual behaviour

4. Under HRA all individuals are treated alike, without regard to their
personal attitudes, perceptions, beliefs etc..

5. HRA considers organisational and personal conflicts as natural, and

destructive.

Difference # Behavioural Sciences Approach (BSA):

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1. BSA is wider in scope. It is concerned not only with humanization or

socialisation aspects of managing; but also recommends a study of
behavioural sciences towards analysing complex human behaviour
systematically.

2. BSA considers organisation as a socio-technical system; as it also

analyses behavioural aspects of work environment, specially
technology.

3. BSA studies individual behaviour as also group behaviour.

4. BSA recognises differences among individuals on the basis of their

personal attitudes, perceptions, beliefs etc..

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5. BSA not only considers organisational and personal conflicts as

natural; but also recommends to use such conflicts for constructive
purposes.