NOTES

Max Weber’s Contribution to Management

Born in 1864, Max Weber was a German sociologist and the author of The Protestant Ethic
and the Spirit of Capitalism (1905). He took a keen interest in industrial capitalism and was
curious to know why it worked in certain countries and didn’t in others. Industrial capitalism
is a type of economic system in which industry is controlled by private organizations and the
main objective is to earn profit.
Weber travelled to the US in 1904 and studied the nation’s economy. There, he got the
opportunity to witness capitalism in full flow. He observed that in the US, capitalism was
characterized by innovation and competition. His experiences in the country eventually led to
the origination of the Max Weber theory of bureaucracy.
Comparing the capitalist spirit of the US with that of Germany, he noted that in the US,
businesses were operated by professional managers and they shared economic relationships.
On the other hand, in Germany, small groups of people with power were the true rulers of the
economy. Germany valued tradition and the economy controllers were usually the people
with high social status and businesses were connected through family and social
relationships.
He didn’t like the idea that in Germany, authority was not a result of experience and ability
but gained through social standing. Also, business resources were used for the benefit of the
owners and managers rather than for the growth and development of the organization.
What Is the Max Weber Theory of Bureaucracy?
Max Weber, of course, is the author of Weber’s theory of bureaucracy, which details the
concept of bureaucratic management. He coined the term ‘bureaucracy’ and defined it as
well.
After studying the capitalist industries of Germany and the US, Weber concluded that a
rational organization is the best way to set up an organization. He named this ‘rational
organization’ as bureaucracy. This Weberian bureaucracy is an improved version of the
traditional structures of an organization. In bureaucratic management, all members of the
organization are treated equally and division of labor is clearly defined.
Max Weber’s theory of bureaucracy also states that the Weberian model of bureaucracy will
be governed by top-quality people with high competency and skills and not by people with
high social standing.
What Is Max Weber’s Bureaucracy?
The definition of Weberian bureaucracy as provided by Max Weber is: ‘Bureaucracy is an
organizational structure that is characterized by many rules, standardized processes,
procedures and requirements, number of desks, the meticulous division of labor and
responsibility, clear hierarchies and professional, almost impersonal interactions between
employees.’
According to Max Weber’s bureaucratic management theory, Weberian bureaucracy is a
structure that must be implemented in all big organizations. He proposed this to ensure the
structural operation of all tasks by a huge number of employees. Furthermore, in Max
Weber’s bureaucracy, qualifications and competence are the only basis for the hiring and
promotion of workers.
Max Weber’s Six Principles of Bureaucracy
There are specific features of Max Weber’s bureaucracy, which are also known as Max
Weber’s six principles of bureaucracy.
Here are the six major Max Weber characteristics of bureaucracy:

1. Task Specialization
2. Formal Selection
3. Impersonal (Impersonality and Personal Indifference)
4. Hierarchical Layers of Authority
5. Rules And Regulations
6. Career Orientation

1. Task Specialization
The Max Weber Theory of Bureaucracy Proposes That All Business Tasks Must
Be Divided Among the Employees. The Basis for The Division of Tasks Should
Be Competencies and Functional Specializations. In This Way, The Workers Will
Be Well Aware of Their Role and Worth in The Organization and What Is
Expected of Them.
The Theory States That the Division of Labor Based on Expertise and Skills Is
Immensely Beneficial for Any Business. This Also Ensures That Each Department
Has Specific Tasks and Workers to Oversee Those Tasks.
The Tasks Are Carried Out Smoothly and Easily in This Manner Because
Managers Know Who Is Working on Exactly What. The Accountability of Each
Task and Each Department Is Transparent. In Max Weber’s Bureaucracy, Each
Employee Is Aware of Their Responsibilities, And Going Beyond Your Specialty
or Helping Your Colleagues Is Not Allowed.

2. Formal Selection
Hiring And Onboarding of Employees in The Bureaucracy Are Done Exclusively
According to The Specialties and Technical Skills of The Candidates. These Skills
May Have Been Acquired by The Candidates Through Education, Training, and
Experience.
After Onboarding, Workers Must Be Compensated for Their Services, Which
Depends on Their Position in The Organization. Their Contract Must Be Designed
According to The Rules and Regulations Of The Organization And The Employee
Can’t Hold Any Ownership Interest In The Organization.

3. Impersonal Relationships
Another Principle of The Bureaucratic Theory Is That the Relationships Among
Employees And Between Managers And Employees Must Be Impersonal. They
Should Only Be Of A Professional Nature And, Thereby, Distant. Weber Included
This Principle In His Theory Because He Felt It Would Eliminate Nepotism,
Politics And Outsider Involvement.
 The Impersonal Relationships Are A Prominent Feature Of Max Weber’s
Bureaucracy. Employees Are Not Allowed To Interfere With The Affairs Of Other
Employees, Managers And The Organization. Communication Among The
Employees Should Not Involve Emotions, Personal Sharing And Feelings. The
Decision-Making Process Must Only Involve Rationality Instead Of Emotions.

4. Hierarchical Layers Of Authority

In Bureaucratic Management, The Managerial Structure Is Organized Into
Hierarchical Layers. Each Layer Of Management Has A Team Of Employees
Under Them. These Managers Are Responsible For The Performance Of Their
Team.
These Hierarchical Positions In Bureaucratic Organizations Are Essentially The
Trademark And Foundation Of Max Weber’s Bureaucracy. In This Hierarchy Of
Authority, Positions Are Ranked In Order Of Precedence And The Highest
Position In The Ladder Generally Has The Highest Authority In The Organization.
The Bottom Hierarchical Layers Are Generally The Positions That Are Supervised
By Higher Layers.
Such Hierarchy In A Bureaucracy Reflects The Degree Of Delegation And Gives
A Clear Picture Of The Division Of Authority And Responsibilities.

5. Rules And Regulations

Max Weber’s Theory Of Bureaucracy Clearly Lays Out That Every ‘Rational
Organization’ Must Have A Set Of Rules And Regulations. These Rules And
Regulations Must Be Followed Without Any Fault. This Ensures Uniformity In
The Business And The Staff Members Know What Is Expected Of Them.
Strict Rules Allow Better Coordination Of Employee Performance And Efforts.
Administrative Processes Should Also Be Clearly Defined In The Official Rule
Book Or Reports. When New Rules Are Introduced In The Organization, The
Senior Management Must Be Notified. They Will Then Pass On The Information
To Their Respective Departments.

6. Career Orientation
The Weberian Model Of Bureaucracy Selects Employees On The Basis Of
Technical Skills, Which Helps Optimize Human Capital. According To Max
Weber, Selecting Candidates According To Their Competency And Skills Ensures
That The Right People Are In The Right Jobs.
Consequently, Max Weber’s management theory states that through the formation of a
bureaucracy, people can build a career upon their expertise and competency. A bureaucracy
offers lifetime employment and the right division of labor lets employees improve their
expertise in a given field.
NEO CLASSICAL APPROACH OF MANAGEMENT:

The neoclassical theory of management is an extended version of the classical management

theory. It arose out of the critique of classical theory. Theorists worked on a new approach by
using classical theory as the bedrock by focusing more on human relations and behavioral
science. People also refer to neoclassical theory as ‘behavioral theory of organization‘ or
‘human relations’ or ‘new classical theory of management.’
Due to its new approach, neoclassical organizational theory is the working principle behind
most modern theories of organizations.

What Is Neoclassical Theory?

As the name suggests, neoclassical consists of two parts: neo and classical. Neo means new,
and classical refers to the work done by a group of economists in the 18th and 19th centuries.
In the classical theory, management focus was on job content and physical resources.
Classical management theorists considered humans as an appendage to a machine. However,
critics were of the view that this theory lacks compassion toward people. The organizations
working on this principle are keeping emotional beings in the same category as machines.
With neoclassical organizational theory, theorists put forward incorporating behavioral
sciences into management to address the shortcomings of classical theory.
The essential features of the neoclassical approach of management are:

1. The Business Organization Is A Social System

2. The Human Factor Is The Most Critical Element In This Social System
3. Social And Psychological Factors Play A Crucial Role In Determining
Productivity And Employee Satisfaction
4. The Management Should Also Develop Social And Leadership Skills Apart From
Technical Skills. They Should Think More About The Welfare Of Workers
5. Productivity In An Organization Is Directly Related To Employee Morale.
Elton Mayo, Chester Barnard and Herbert Simon are some of the famous neoclassical
theorists. They are responsible for introducing and experimenting with the neoclassical
approach..
Here’s how three theorists worked on the new classical theory of management:

Elton Mayo
In 1927, the Western Electric Company invited a group of researchers led by Elton Mayo to
join their Hawthorne plant in Chicago. The researchers carried out experiments at the plant
that later became popular as the ‘Hawthorne Experiment.’
The objective of the experiment was to study if workers would be more productive depending
upon different levels of illumination in the factory. Based on the findings in the initial three
years of this experiment, researchers saw increased worker productivity when lighting
conditions improved. They claimed that workers’ motivation increased due to interest shown
by the company in them and their well-being. It indicates the importance of using
a neoclassical approach of management.
Also, the solidarity among workers increased satisfaction in the work. Mayo and his team
revealed that managers should also focus on social factors such as employee relationships.
Else, they would have to deal with resistance and lower performance.
You must also pay heed to the fact that Elton Mayo’s findings have their share of critics.

Chester Barnard
Chester Barnard published his famous book ‘The Functions of the Executive in 1938. The
book provided a base for the formation and development of various management theories.
In his book, Chester explains a comprehensive theory of behavior in formal organizations that
pivots around cooperation. He underlines that people in executive roles must foster a sense of
purpose, moral codes, ethical visions and create formal and informal communication systems.
According to Chester, people should cooperate. There is no place for conflicts among
workers. In both classical and neoclassical organization theory, conflict has no place in an
organization.

Herbert Simon
Herbert Simon found out that classical organizational theories are inapplicable to several
administrative situations facing managers.
Herbert tried to apply classical theories to current situations of his time, but they didn’t fit. He
also contradicted Henri Fayol’s work in management, proving them to be mere proverbs of
administrations rather than principles.
Two Movements In The Neoclassical Theory Of Management
The neoclassical organizational theory talks about ways and ideas that focus on the emotional
beings of the organization. There are two primary sources of the neoclassical theory of
organization: the human relations movement and the behavioral science approach.
The human relations movement regarded organization as a social system. Social physiologists
and sociologists put focus on group dynamics and promoted people-management skills in
addition to technical skills.
The behavioral science approach considers human behavior in organizations and promotes
the development of human beings and its benefits at the individual and organizational levels.
Let’s take a look at how the work of these various sociologists and psychologists
promoted neoclassical organizational theory.

Human Relations Movement

This resulted from Elton Mayo and Fritz J. Roethlisberger’s Hawthorne studies. According to
them, social and psychological factors are important in determining worker productivity and
satisfaction. The movement shows that efficient leaders are employee-centric, democratic and
follow a participative style.

Behavioral Movement
This had contributions from various sociologists and psychologists such as A.H. Maslow,
Douglas McGregor, Argyris, F. Herzberg, Rensis Likert, J.G. Likert, Kurt Lewin and Keith
Davis. It is a more mature version of human relation theory. The theory proposes ideas about
how managers should behave to motivate the employees. And the aim is to encourage
employees to perform at the highest level and achieve organizational goals.
Elements Of Neoclassical Theory Of Management
There are three elements of neo-classical theory:

1. The Individual
The Neoclassical Theory Of Organization Emphasized Individual Differences
Ignored Earlier In The Classical Theory. Every Individual Has Emotions, Feelings,
Hopes, Aspirations, And Expectations. They Have Got Their Own Merit.

2. Work Groups
Workers Are Not Isolated But Part Of Certain Groups, Which Are Informal
Organizations. Management Must Integrate These Informal Organizations With
The Formal Ones.

3. Participative Management
The Neoclassical Approach Of Management Suggests The Participation Of
Workers In Management.
As The Neoclassical Theory Is Employee-Oriented, Workers’ Participation In
Planning Job Contents And Operations Will Improve Productivity.

Some of the major phases of Hawthorne experiments are as follows: 1. Illumination

Experiments 2. Relay Assembly Test Room Experiments 3. Mass Interviewing Programme 4.

Bank Wiring Observation Room Experiment.

1. Experiments to determine the effects of changes in illumination on productivity,

illumination experiments, 1924-27.

2. Experiments to determine the effects of changes in hours and other working conditions on

productivity, relay assembly test room experiments, 1927-28

3. Conducting plant-wide interviews to determine worker attitudes and sentiments, mass

interviewing programme, 1928-30; and

4. Determination and analysis of social organisation at work, bank wiring observation room

experiments, 1931-32.

1. Illumination Experiments:
Illumination experiments were undertaken to find out how varying levels of illumination

(amount of light at the workplace, a physical factor) affected the productivity. The hypothesis

was that with higher illumination, productivity will increase. In the first series of

experiments, a group of workers was chosen and placed in two separate groups. One group

was exposed to varying intensities of illumination.

Since this group was subjected to experimental changes, it was termed as experimental group.

Another group, called as control group, continued to work under constant intensities of

illumination. The researchers found that as they increased the illumination in the

experimental group, both groups increased production. When the intensity of illumination

decreased, the production continued to increase in both the groups.

The production in the experimental group decreased only when the illumination was

decreased to the level of moonlight. The decrease was due to light falling much below the

normal level.

Thus, it was concluded that illumination did not have any effect on productivity but

something else was interfering with the productivity. At that time, it was concluded that

human factor was important in determining productivity but which aspect was affecting, it

was not sure. Therefore, another phase of experiments was undertaken.

2. Relay Assembly Test Room Experiments:

Relay assembly test room experiments were designed to determine the effect of changes in

various job conditions on group productivity as the illumination experiments could not

establish relationship between intensity of illumination and production. For this purpose, the

researchers set up a relay assembly test room two girls were chosen.

These girls were asked to choose for more girls as co-workers. The work related to the

assembly of telephone relays. Each relay consisted of a number of parts which girls

assembled into finished products. Output depended on the speed and continuity with which
girls worked. The experiments started with introducing numerous changes in sequence with

duration of each change ranging from four to twelve weeks.

An observer was associated with girls to supervise their work. Before each change was

introduced, the girls were consulted. They were given opportunity to express their viewpoints

and concerns to the supervisor. In some cases, they were allowed to take decisions on matters

concerning them.

Following were the changes and resultant outcomes:

1. The incentive system was changed so that each girl’s extra pay was based on the other five

rather than output of larger group, say, 100 workers or so. The productivity increase as

compared to before.

2. Two five- minute rests one in the morning session and other in evening session were

introduced which were increased to ten minutes. The productivity increased.

3. The rest period was reduced to five minutes but frequency was increased. The productivity

decreased slightly and the girls complained that frequent rest intervals affected the rhythm of

the work.

4. The number of rest was reduced to two of ten minutes of each, but in the morning, coffee

or soup was served along with the sandwich and in the evening, snack was provided. The

productivity increased.

5. Changes in working hours and workday were introduced, such as cutting an hour off the

end of the day and eliminating Saturday work. The girls were allowed to leave at 4.30 p.m.

instead of usual 5.00 p.m. and later at 4.00 p.m. productivity increased.

As each change was introduced, absenteeism decreased, morale increased, and less

supervision was required. It was assumed that these positive factors were there because of the

various factors being adjusted and making them more positive. At this time, the researchers
decided to revert to original position, that is, no rest and other benefits. Surprisingly,

productivity increased further instead of going down.

This development caused a considerable amount of redirection in thinking and the result

implied that productivity increased not because of positive changes in physical factors but

because of the change in girls’ attitudes towards work and their work group.

They developed a feeling of stability and a sense of belongings. Since there was more

freedom of work, they developed a sense of responsibility and self-discipline. The

relationship between supervisor and workers became close and friendly.

3. Mass Interviewing Programme:

During the course of experiments, about 20,000 interviews were conducted between 1928 and

1930 to determine employees’ attitudes towards the company, supervision, insurance plans,

promotion and wages. Initially, these interviews were conducted using direct questioning

such as “do you like your supervisor?” or “is he in your opinion fair or does he have

favorites?” etc.

this method has disadvantage of stimulating antagonism or the oversimplified ‘yes’ or ‘no’

responses which could not get to the root of the problem, the method was changed to non-

directive interviewing where interviewer was asked to listen to instead of talking, arguing or

advising. The interview programme gave valuable insights about the human behaviour in the

company.

Some of the major findings of the programme were as follows:

1. A complaint is not necessarily an objective recital of facts; it is a symptom of personal

disturbance the cause of which may be deep seated.

2. Objects, persons or events are carriers of social meanings. They become related to

employee satisfaction or dissatisfaction only as the employee comes to view them from his

personal situation.
3. The personal situation of the worker is a configuration, composed of a personal preference

involving sentiments, desires and interests of the person and the social reference constituting

the person’s social past and his present interpersonal relations.

4. The position or status of worker in the company is a reference from which the worker

assigns meaning and value to the events, objects and features of his environment such as

hours of work, wages, etc.

5. The social organisation of the company represents a system of values from which the

worker derives satisfaction or dissatisfaction according to the perception of his social status

and the expected social rewards.

6. The social demands of the worker are influenced by social experience in groups both inside

and outside the work plant.

During the course of interviews, it was discovered that workers’ behaviour was being

influenced by group behaviour. However, this conclusion was not very satisfactory and,

therefore, researches decided to conduct another series of experiments. As such, the detailed

study of a shop situation was started to find out the behaviour of workers in small groups.

4. Bank Wiring Observation Room Experiment:

These experiments were conducted to find out the impact of small groups on the individuals.

In this experiment, a group of 14 male workers were formed into a small work group. The

men were engaged in the assembly of terminal banks for the use in telephone exchanges.

The work involved attaching wire with switches for certain equipment used in telephone

exchanges. Hourly wage for each worker was fixed on the basis of average output of each

worker. Bonus as also payable on the basis of group effort.

It was expected that highly efficient workers would bring pressure on less efficient workers to

increase output and take advantage of group incentive plan. However, the strategy did not

work and workers established their own standard of output and this was enforced vigorously
by various methods of social pressure. The workers cited various reasons for this behaviour

viz. fear of unemployment, fear of increase in output, desire to protect slow workers etc.

The Hawthorne experiments clearly showed that a man at work is motivated by more than the

satisfaction of economic needs. Management should recognise that people are essentially

social beings and not merely economic beings. As a social being, they are members of a

group and the management should try to understand group attitudes and group psychology.

The following were the main conclusions drawn by Prof. Mayo on the basis of

Hawthorne studies:

1. Social Unit:

A factory is not only a techno-economic unit, but also a social unit. Men are social beings.

This social characteristic at work plays an important role in motivating people. The output

increased in Relay Room due to effectively functioning of a social group with a warm

relationship with its supervisors.

2. Group Influence:

The workers in a group develop a common psychological bond uniting them as £ group in the

form of informal organisation. Their behaviour is influenced by these groups. Pressure of a

group, rather than management demands, frequently has the strongest influence on how

productive workers would be.

3. Group Behaviour:

Management must understand that a typical group behaviour can dominate or even supersede

individual propensities.

4. Motivation:

Human and social motivation can play even a greater role than mere monitory incentives in

moving or motivating and managing employee group.

5. Supervision:
The style of supervision affects worker’s attitude to work and his productivity. A supervisor

who is friendly with his workers and takes interest in their social problems can get co-

operation and better results from the subordinates.

6. Working Conditions:

Productivity increases as a result of improved working conditions in the organisation.

7. Employee Morale:

Mayo pointed out that workers were not simply cogs, in the machinery, instead the employee

morale (both individual and in groups) can have profound effects on productivity.

8. Communication:

Experiments have shown that the output increases when workers are explained the logic

behind various decisions and their participation in decision making brings better results.

9. Balanced Approach:

The problems of workers could not be solved by taking one factor i.e. management could not

achieve the results by emphasizing one aspect. All the things should be discussed and

decision be taken for improving the whole situation. A balanced approach to the whole

situation can show better result.

Behavioral Science Theories(approach)

Unlike the traditional scholars, the behavioral scientist advocated the importance of peoples'
behavior for effectiveness of management. The developed the concepts of motivation,
leadership, communication teamwork, and reward.

Maslow's Needs
Maslow's need hierarchy (priority) theory is one of the most popula theories of motivation in
the management literature. This theory is based o human needs, comprising a five-tier model
depicted as hierarchichal levels within a pyramid. The needs lower down in the hierarchy
must be satisfied before one can attend to the needs higher up. Maslow believed that once a
given level of need is satisfied, it no longer serves to motivate a man. Then, the next higher
level of need emerges.
There are five different levels of Maslow's hierarchy of needs. Each of them is discussed
below:-

1. Physiological/biological needs: These include the most basic needs that are vital for
human survival. Some examples of physiological needs include air, water, food, clothing,
shelter, and sex.

2. Safety/security needs: Once physiological needs are satisfied, people move toward safety
needs. Every person wants security, safety and stability. Safety needs include physical,
environmental and emotional safety and protection. For instance- Job security, financial
security, protection from animals and natural calamities, family security, and health security.

3. Social needs: The next need in the hierarchy involves feeling loved and accepted. It
includes the need for love, affection, care, belongingness, and friendship. At this level, the
need for emotional relationships drives human behavior. People desire to feel loved and
accepted by other people to avoid problems such as loneliness, depression, and anxiety.

4. Esteem/Ego needs: They are higher order needs and also called egoistic needs. They are
related to the prestige and status of a person. According to Maslow, there are of two types of
esteem needs.
Self-esteem: It is inside the person, hence intrinsic. It includes self confidence, achievement,
competence, self-respect, independence and freedom which are self-realized.
Esteem of others: It is outside the person hence extrinsic. It includes status, recognition,
attention, and appreciation which are achieved through others.
It is difficult to satisfy the esteem needs as compared to lower order needs. If satisfied, they
produce feelings of confidence and worth. However, modern organizations offer fewer
opportunities for the satisfaction of these needs to the people working in the lower level.

5. Self-actualization needs: The final need under Maslow's model is the need for self-
actualization. Self-actualization may be described as the full use and exploitation of talents,
capabilities, and potentialities. Self actualizing people are self-aware, concerned with
personal growth, less concerned with the opinions of others, and interested fulfilling their
potential.
Self-actualization needs are unique in nature. They can never be fully satisfied. People have
limited opportunity for these needs to be satisfied.

Contributions/Advantages of Maslow's Need Hierarchy Theory

The main contributions of Maslow's Need Hierarchy Theory are as:

 This theory highlights why a person behaves differently in different situations.

 It provides a comprehensive view of human needs.
 It allows managers to analyze the unsatisfied needs of employees for motivation
purpose.

Limitations/Disadvantages of Maslow's Need Hierarchy Theory

The following are the main limitations of Maslow's need hierarchy theory are :-

 It is almost a non-testable theory.

 It must be viewed as a theoretic statement or base rather than an abstraction from
field research.
 It is clinically derived theory and its unit of analysis is individual.
 The model is based on a relatively small sample of subjects. The need classification is
somewhat artificial.
 Needs cannot be classifie into 5 steps hierarchy.
 The need priority model may not apply at all times in all places. In case of some
people, the level of need may be permanently lower (individual differences).
Herzberg’s Two-Factor Theory of Motivation
In 1959, Frederick Herzberg, a behavioural scientist proposed a two-factor theory or the
motivator-hygiene theory. According to Herzberg, there are some job factors that result in
satisfaction while there are other job factors that prevent dissatisfaction. According to
Herzberg, the opposite of “Satisfaction” is “No satisfaction” and the opposite of
“Dissatisfaction” is “No Dissatisfaction”.

FIGURE: Herzberg’s view of satisfaction and dissatisfaction

Herzberg classified these job factors into two categories-

1. Hygiene factors- Hygiene factors are those job factors which are essential for
existence of motivation at workplace. These do not lead to positive satisfaction for
long-term. But if these factors are absent/if these factors are non-existant at
workplace, then they lead to dissatisfaction.

In other words, hygiene factors are those factors which when adequate/reasonable in a
job, pacify the employees and do not make them dissatisfied. These factors are
extrinsic to work.

Hygiene factors are also called as dissatisfiers or maintenance factors as they are
required to avoid dissatisfaction. These factors describe the job environment/scenario.
The hygiene factors symbolized the physiological needs which the individuals wanted
and expected to be fulfilled. Hygiene factors include:

 Pay: The pay or salary structure should be appropriate and reasonable. It must
be equal and competitive to those in the same industry in the same domain.
 Company Policies and administrative policies: The company policies
should not be too rigid. They should be fair and clear. It should include
flexible working hours, dress code, breaks, vacation, etc.
 Fringe benefits: The employees should be offered health care plans
(mediclaim), benefits for the family members, employee help programmes,
etc.
 Physical Working conditions: The working conditions should be safe, clean
and hygienic. The work equipments should be updated and well-maintained.
 Status: The employees’ status within the organization should be familiar and
retained.
  Interpersonal relations: The relationship of the employees with his peers,
superiors and subordinates should be appropriate and acceptable. There should
be no conflict or humiliation element present.
 Job Security: The organization must provide job security to the employees.
2. Motivational factors- According to Herzberg, the hygiene factors cannot be regarded
as motivators. The motivational factors yield positive satisfaction. These factors are
inherent to work. These factors motivate the employees for a superior performance.

These factors are called satisfiers. These are factors involved in performing the job.
Employees find these factors intrinsically rewarding. The motivators symbolized the
psychological needs that were perceived as an additional benefit. Motivational factors
include:

 Recognition: The employees should be praised and recognized for their

accomplishments by the managers.
 Sense of achievement: The employees must have a sense of achievement.
This depends on the job. There must be a fruit of some sort in the job.
 Growth and promotional opportunities: There must be growth and
advancement opportunities in an organization to motivate the employees to
perform well.
 Responsibility: The employees must hold themselves responsible for the
work. The managers should give them ownership of the work. They should
minimize control but retain accountability.
 Meaningfulness of the work: The work itself should be meaningful,
interesting and challenging for the employee to perform and to get motivated.

Limitations of Two-Factor Theory

The two factor theory is not free from limitations:

1. The two-factor theory overlooks situational variables.

2. Herzberg assumed a correlation between satisfaction and productivity. But the
research conducted by Herzberg stressed upon satisfaction and ignored productivity.
3. The theory’s reliability is uncertain. Analysis has to be made by the raters. The raters
may spoil the findings by analyzing same response in different manner.
4. No comprehensive measure of satisfaction was used. An employee may find his job
acceptable despite the fact that he may hate/object part of his job.
5. The two factor theory is not free from bias as it is based on the natural reaction of
employees when they are enquired the sources of satisfaction and dissatisfaction at
work. They will blame dissatisfaction on the external factors such as salary structure,
company policies and peer relationship. Also, the employees will give credit to
themselves for the satisfaction factor at work.
6. The theory ignores blue-collar workers.

Despite these limitations, Herzberg’s Two-Factor theory is acceptable broadly.

Implications of Two-Factor Theory

The Two-Factor theory implies that the managers must stress upon guaranteeing the
adequacy of the hygiene factors to avoid employee dissatisfaction. Also, the managers must
make sure that the work is stimulating and rewarding so that the employees are motivated to
work and perform harder and better.

This theory emphasizes upon job-enrichment so as to motivate the employees. The job
must utilize the employee’s skills and competencies to the maximum. Focusing on the
motivational factors can improve work-quality.

ERG Theory of Motivation

To bring Maslow’s need hierarchy theory of motivation in synchronization with empirical
research, Clayton Alderfer redefined it in his own terms. His rework is called as ERG theory
of motivation. He recategorized Maslow’s hierarchy of needs into three simpler and broader
classes of needs:

 Existence needs- These include need for basic material necessities. In short, it
includes an individual’s physiological and physical safety needs.
 Relatedness needs- These include the aspiration individual’s have for maintaining
significant interpersonal relationships (be it with family, peers or superiors), getting
public fame and recognition. Maslow’s social needs and external component of
esteem needs fall under this class of need.
 Growth needs- These include need for self-development and personal growth and
advancement. Maslow’s self-actualization needs and intrinsic component of esteem
needs fall under this category of need.

Implications of the ERG Theory

Managers must understand that an employee has various needs that must be satisfied at the
same time.

According to the ERG theory, if the manager concentrates solely on one need at a time, this
will not effectively motivate the employee. Also, the frustration-regression aspect of ERG
Theory has an added effect on workplace motivation.

For instance – if an employee is not provided with growth and advancement opportunities in
an organization, he might revert to the relatedness need such as socializing needs and to meet
those socializing needs, if the environment or circumstances do not permit, he might revert to
the need for money to fulfill those socializing needs. The sooner the manager realizes and
discovers this, the more immediate steps they will take to fulfill those needs which are
frustrated until such time that the employee can again pursue growth.
Theory X and Theory Y
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of
human behaviour at work, or in other words, two different views of individuals (employees):

1. one of which is negative, called as Theory X and

2. the other is positive, so called as Theory Y

According to McGregor, the perception of managers on the nature of individuals is based on

various assumptions.

Assumptions of Theory X

 An average employee intrinsically does not like work and tries to escape it whenever
possible.
 Since the employee does not want to work, he must be persuaded, compelled, or
warned with punishment so as to achieve organizational goals. A close supervision is
required on part of managers. The managers adopt a more dictatorial style.
 Many employees rank job security on top, and they have little or no aspiration/
ambition.
 Employees generally dislike responsibilities.
 Employees resist change.
 An average employee needs formal direction.

Assumptions of Theory Y

 Employees can perceive their job as relaxing and normal. They exercise their physical
and mental efforts in an inherent manner in their jobs.
 Employees may not require only threat, external control and coercion to work, but
they can use self-direction and self-control if they are dedicated and sincere to achieve
the organizational objectives.
 If the job is rewarding and satisfying, then it will result in employees’ loyalty and
commitment to organization.
 An average employee can learn to admit and recognize the responsibility. In fact, he
can even learn to obtain responsibility.
 The employees have skills and capabilities. Their logical capabilities should be fully
utilized.

In other words, the creativity, resourcefulness and innovative potentiality of the

employees can be utilized to solve organizational problems.

Thus, we can say that Theory X presents a pessimistic view of employees’ nature and
behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and
behaviour at work.

If we correlate it with Maslow’s theory, we can say that Theory X is based on the assumption
that the employees emphasize on the physiological needs and the safety needs; while Theory
X is based on the assumption that the social needs, esteem needs and the self-actualization
needs dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he
encouraged cordial team relations, responsible and stimulating jobs, and participation of all in
decision-making process.

Implications of Theory X and Theory Y

 Quite a few organizations use Theory X today. Theory X encourages use of tight
control and supervision. It implies that employees are reluctant to organizational
changes. Thus, it does not encourage innovation.
 Many organizations are using Theory Y techniques. Theory Y implies that the
managers should create and encourage a work environment which provides
opportunities to employees to take initiative and self-direction. Employees should be
given opportunities to contribute to organizational well-being.

Theory Y encourages decentralization of authority, teamwork and participative

decision making in an organization.

Theory Y searches and discovers the ways in which an employee can make significant
contributions in an organization. It harmonizes and matches employees’ needs and
aspirations with organizational needs and aspirations.

Need theory, also known as Three needs theory,proposed by psychologist David

McClelland, is a motivational model that attempts to explain how
the needs for achievement, affiliation, and power affect the actions of people from
a managerial context. This model was developed in the 1960s, two decades after Maslow's
hierarchy of needs was first proposed in the early 1940s. McClelland stated that we all have
these three types of motivation regardless of age, sex, race, or culture. The type of motivation
by which each individual is driven derives from their life experiences and the opinions of
their culture. This need theory is often taught in classes concerning management or
organizational behaviour.

Need for achievement

People who have a need for achievement prefer to work on tasks of moderate difficulty in
which results are based on their efforts rather than on anything else to receive feedback on
their work. Achievement based individuals tend to avoid both high-risk and low-risk
situations. Low-risk situations are seen as too easy to be valid and the high-risk situations are
seen as based more on the luck of the situation rather than the achievements that individual
made. This personality type is motivated by accomplishment in the workplace and an
employment hierarchy with promotional positions.

Need for affiliation

People who have a need for affiliation prefer to spend time creating and maintaining social
relationships, enjoy being a part of groups, and have a desire to feel loved and accepted.
People in this group tend to adhere to the norms of the culture in that workplace and typically
do not change the norms of the workplace for fear of rejection.This person favors
collaboration over competition and does not like situations with high risk or high uncertainty.
People who have a need for affiliation work well in areas based on social interactions like
customer service or client interaction positions.

Need for power

People who have a need for power prefer to work and place a high value on discipline. The
downside to this motivational type is that group goals can become zero-sum in nature, that is,
for one person to win, another must lose. However, this can be positively applied to help
accomplish group goals and to help others in the group feel competent about their work. A
person motivated by this need enjoys status recognition, winning arguments, competition, and
influencing others. With this motivational type comes a need for personal prestige, and a
constant need for a better personal status.

Modern Theory of Management: Definition, Benefits and Types

Management theories represent ideas that provide recommendations for management

strategies, frameworks and tools that organizations can implement to aid their workforce or
culture. Leaders can use these theories as guidance to meet organizational goals or motivate
employees. They can also apply ideas from different theories rather than solely relying on
one management theory. Modern management theory represents one of the numerous theories
used by organizations. This theory recognizes that today's organizations face rapid change
and added complexities, with technology serving as both a potential cause and solution for
these factors.

When implementing this theory, managers use technology and mathematical techniques to
analyze their workforce and make decisions. This theory serves as a response to classical
management theory, which believes workers solely work for monetary gain. The modern
management theory believes that employees work for numerous reasons, including to achieve
satisfaction, happiness and desired lifestyles. With this theory, managers understand
employees' behaviors and needs and can implement strategies to meet those needs and
support their skill development over time.

Benefits of the modern theory of management

Here are the benefits of incorporating modern management theories:

 Boosts productivity: Modern management theory uses mathematical and statistical

methods to assess performance within an organization. Managers can use this data to
understand employee behaviors and develop solutions that maximize the potential of
their workforce. For example, they may implement processes that make employees'
tasks more efficient or offer training programs to improve their skills.
 Aids decision-making: Modern management theories often provide managers
insights into the factors they need to examine, which they can use to evaluate their
organization or department. When managers know what to look for, it can help them
identify problems and begin coming up with potential solutions. The use of
mathematical techniques also enables them to use data to support those solutions and
final decisions.
 Improves employee engagement: As mentioned, the modern management theory
examines employees' motivation for working beyond financial gain. Managers who
utilize this theory can then identify and implement processes or procedures that take
employees' varying needs into account. If employees feel satisfied at work, it can
boost their morale and engagement and make them want to continue working for the
organization.
 Promotes objectivity: The modern management theory emphasizes the use of
mathematical techniques. These techniques allow managers to make decisions based
 on data and evidence rather than personal opinions or feelings. They also enable the
testing of different options to assess which one best supports the organization. As a
result, managers can implement more effective solutions.
 Enables adaptability: Modern management theory recognizes that today's
organizations often exist within rapidly changing environments. This theory
emphasizes the importance of recognizing the influence of internal and external
factors on business and encourages managers to use several techniques and
approaches to work with them. For example, managers can use new technology to
streamline processes or perform statistical modeling when developing solutions.

Types of modern management theories

There are several different modern management approaches that managers can implement
within an organization. Managers can choose to use a combination of these approaches as
guidance for leading their teams and supporting organizational objectives. The three
approaches of modern management are:

Quantitative approach

The quantitative approach to management uses statistics and mathematical techniques to

solve complex problems. Depending on the business area, managers may use techniques like
computer simulations or information models to assess performance. This analysis enables
them to understand what is working and what is not within the business, then develop
solutions to solve or improve the issues they find. Managers can also use these techniques
and data to determine the benefits or risks of different ideas. This approach can help
managers make objective decisions based on data and facts, rather than personal opinions or
feelings, that support the business.

This modern management approach often consists of three branches:

 Management science: Management science focuses on the use of mathematical and

statistical methods to form effective business solutions and achieve goals. Examples
of these tools include the Program Evaluation Review Technique (PERT), the critical
path method (CPM) and sampling. Managers can use these tools in various situations,
including project management, budgeting and developing schedules.
 Operations management: In operations management, managers implement practices
that help make business and production processes more efficient. Depending on the
situation, this method may require managers to restructure or redesign their processes.
Some of the tools they use include forecasting, quality control methods and project
planning. Often, these managers aim to make more or better products through the
more efficient processes they implement.
 Management Information System: A management information system (MIS)
represents a database that organizes an organization's data, and managers use this
system to support informed decision-making. This system collects and stores real-
time data, allowing managers to run reports on areas like financials, timelines,
personnel and inventory. Managers can then monitor this information and use it to
assess performance and make improvements or develop solutions as needed.

Contingency approach
The contingency management approach states that there is not just one management approach
that fits every organization. It believes that the optimal management style depends on the
situation. Leaders who utilize this theory do not adopt a single management style and instead
must identify and use different styles for different situations. As a result, these leaders also
develop additional traits and skills that ensure they can employ various management
approaches effectively. The use of diverse styles can help make these leaders more flexible
and adaptable in the workplace.

This theory outlines three variables that it believes influence an organization's structure: the
organization's size, the technology it uses and the leadership styles. An effective manager
understands these factors and how they may impact performance. For example, a small
organization may represent more flexibility and less separation between departments,
whereas a large organization may be more complex and divided. Managers in smaller
organizations can have more control over processes due to their flexibility and potentially
make changes to them more easily.

Systems approach

The systems approach of management states that organizations represent a complex

collection of various components that work together to reach a common goal. An
organization is made up of numerous subsystems, such as different departments. Managers
using this theory examine how these subsystems interact with and affect one another, rather
than analyzing them separately. They must also consider their surrounding environment and
external factors that influence or affect these systems. The systems approach further defines
an organization by dividing it into different components. These components demonstrate how
different parts of the organization work together toward a common goal:

 Inputs: Inputs represent the factors that are needed to create goods and services. For
example, inputs may include raw materials, capital, technology or information.
 Transformational process: Transformational processes represent the activities or
abilities that convert the organization's inputs into outputs. For example, these
processes may include employees' work tasks or operational activities.
 Outputs: Outputs represent the results produced by an organization. These outputs
may include products, services and financial results, such as profits.
 Feedback: Feedback represents information related to the organization's outcomes or
outputs. Leaders can use this information to influence or make decisions related to the
organization's inputs.

In the systems approach, management staff members develop goals and processes that
support their organization's overall objectives and performance. For example, department
managers can look to the department above them in the hierarchy to determine their
department's purpose and priorities. They may implement deadlines for their team that ensure
that the other department can begin and complete its necessary tasks. Aligning their
department's activities with the next department's goals can help processes run more
smoothly and efficiently throughout the organization.

6 Major Contributions of Peter Drucker to Management

Some of the major contributions of Peter Drucker are as follows: 1. Nature of Management 2.

Management Functions 3. Organization Structure 4. Federalism 5. Management by

Objectives 6. Organizational Changes.

Among the contemporary management thinkers, Peter Drucker outshines all. He has varied

experience and background which include psychology, sociology, law, and journalism.

Through his consultancy assignments, he has developed solutions to a number of managerial

problems. Therefore, his contributions cover various approaches to management. He has

written many books and papers.

The more important books are; Practice of Management (1954), Managing by Results (1964),

The Effective Executive (1967), The Age of Discontinuity (1969), Management: Tasks,

Responsibilities and Practices (1974), and Management Challenges for 2Century (1999),

1. Nature of Management:

Drucker is against bureaucratic management and has emphasized management with creative

and innovative characteristics. The basic objective of management is to read towards

innovation. The concept of innovation is quite broad. It may include the development of new

ideas, combining of old and new ideas, adaptation of ideas from other fields or even to act as

a catalyst and encouraging others to carry out innovation.

He has treated management as a discipline as well as profession. As a discipline, management

has its own tools, skills, techniques and approaches. However, management is more a

practice rather than a science. Thus, Drucker may be placed in ’empirical school of

management’.

While taking management as a profession. Drucker does not advocate to treat management as

a strict profession but only a liberal profession which places more emphasis that managers

should not only have skills and techniques but should have right perspective putting the

things into practice. They should be good practitioners so that they can understand the social

and cultural requirements of various organisations and countries.

2. Management Functions:

According to Drucker, management is the organ of its institution. It has no functions in itself,

and no existence in itself. He sees management through its tasks. Accordingly, there are three

basic functions of a manager which he must perform to enable the institution to make its

contribution for:

(i) the specific purpose and mission of the institution whether business, hospital or university;

(ii) making work productive and the worker achieving; and

(iii) managing social impacts and social responsibilities.

three functions are performed simultaneously within the same managerial action. A manager

has to act as administrator where he has to improve upon what already exists and s already

known. He has to act as an entrepreneur in redirecting the resources from seas of tow or

diminishing results to areas of high or increasing results.

Thus, a manager has to perform several functions: setting of objectives, making, organising

and motivating. Drucker has attached great importance to the objective setting function and

has specified eight areas where clear objective setting is required. These are: market standing,
innovation, productivity, physical and financial resources, profitability, managerial

performance and development, worker performance and attitude, and public responsibility.

3. Organisation Structure:

Drucker has decried bureaucratic structure because of its too many dysfunctional effects.

Therefore, it should be replaced. He has emphasised three basic characteristics of an effective

organisation structure.

These are:

(i) Enterprise should be organised for performance;

(ii) it should contain the least possible number of managerial levels;

(iii) it must make possible the training and testing of tomorrow’s top managers—

responsibility to a manager while still he is young.

He has identified three basic aspects in organising activity analysis, decision analysis, and

relation analysis. An activity analysis shows what work has to be performed, what kind of

work should be put together, and what emphasis is to be given to each activity in the

organisation structure.

Decision analysis takes into account the four aspects of a decision: the degree of futurity In

the decision, the impact of decision over other functions, number of qualitative factors that

enter into it, and whether the decision is periodically recurrent or rare. Such an analysis will

determine the level at which the decision can be made. Relation analysis helps in defining the

structure and also to give guidance in manning the structure.

4. Federalism:

Drucker has advocated the concept of federalism. Federalism refers to centralised control in

decentralised structure Decentralised structure goes far beyond the delegation of authority. It

creates a new constitution and new ordering principle. He has emphasised the close links

between the decisions adopted by the top management on the one hand and by the

autonomous unit on the other.

This is just like a relationship between federal government and state governments. In a

federal organisation, local managements should participate in the decision that set the limits

of their own authority. Federalism has certain positive values over other methods of

organising.

These are as follows:

(i) It sets the top management free to devote itself to its proper functions;

(ii) It defines the functions and responsibilities of the operating people;

(iii) It creates a yardstick to measure their success and effectiveness in operating jobs; and
(iv) It helps to resolve the problem of continuity through giving the managers of various units

education in top management problems and functions while in an operating position.

5. Management by Objectives:

Management by objectives (MBO) is regarded as one of the important contributions of

Drucker to the discipline of management. He introduced this concept in 1954. MBO has

further been modified by Schleh which has been termed as management by results’. MBO

includes method of planning, setting standards, performance appraisal, and motivation.

According to Drucker, MBO is not only a technique of management but it is a philosophy of

managing. It transforms the basic assumptions of managing from exercising cattalo to self-

control. Therefore, in order to practice MBO, the organisation must change itself MBO has

become such a popular way of managing that today t is regarded as He most modern

management approach. In fact, it has revolutionalised the management process.

6. Organizational Changes:

Drucker has visualised rapid changes in the society because of rapid technological

development. Though he is not resistant to change, he feels concerned for the rapid changes

and their impact on human life. Normally, some changes can be absorbed by the organisation

but not the rapid changes.

Since rapid changes are occurring in the society, human beings should develop philosophy to

face the changes and take them as challenges for making the society better. This can be done

by developing dynamic organizations which are able to absorb changes much faster than

static ones. Drucker’s contributions have made tremendous impact on the management

practices. His contributions have been recognised even by the management thinkers of

Socialist Bloc.