Neo-Classical Theory

of Management


Aquino, Kristel-Anne M.
Organization & Management – Dr. Mateo
 Background Study of
Neo-Classical Theory

 It began with the Hawthorne Studies in the 1920’s-1940’s

 George Elton Mayo is considered as the founder of Neo-Classical Theory

 Abraham H. Maslow, Douglas Mc Gregor, Frederick Herzberg, Keth

Davis and Rensis Likert conducts the study of Human Relations
Movement

 Chris Argyris, Homans Kurt Lewin, R.L. Katz, Kahn developed the field
of Organizational Behavior

 2 Major Theoretical Approach on Neo-Classical

 Human Relation Approach
 Behavioral Science Approach
 Neo-Classical Theory

 Neo-classical theory deals with the human factor. It
was an attempt at incorporating the behavioral
sciences into management thought in order to
modify the Classical Theory.

 Emphasized understanding human behavior, needs

and attitudes in the workplace.
Principles of the Neo-classical Approach


The neoclassical approach introduced an informal organization
structure and emphasized the following principles:
1. The Individual - An individual is not a mechanical tool but a
distinct social being, with aspirations beyond mere fulfillment
of a few economic and security works.
2. The Work Group - The neoclassical approach highlighted the
social aspects of work groups or informal organizations that
operate within a formal organization.
3. Participative Management - Participative management or
decision-making permits workers to participate in the
decision-making process.
 Theoretical Approach on Neo-Classical Theory


1. Human Relations Approach
 Hawthorne studies gave rise to a new movement which
is known as the Human Relations Movement.
 The credit for the development of Human Relations
Approach is given to Elton Mayo. And the other
contributors are Maslow, McGregor and Herzberg.
 Human relation movement argued that workers
respond primarily to the social context of the
workplace, including social conditioning, group norms
and interpersonal dynamics.
 Hawthorne Experiments (1924-32)

 It was conducted by Elton Mayo and
Fritz Roethlisberger during the 1920’s.
 It was developed with the workers of
the Hawthorne plant of Western
Electric Company
 4 Phases of Hawthorne Studies
1. Illumination Experiments (1924-27)
2. Relay Assembly Test Room Study (1927-29)
3. Mass Interviewing Program (1928-30)
4. Bank Writing Observation Room Experiment
(1932)
 Hawthorne Experiments (1924-32)

Phase 1. Illumination

Experiments
 Illumination Experiments
were conducted to find out
how varying levels of
amount of light (a physical
factor) affects the
productivity.
Assumption:
Higher illumination = Increase in
Productivity
Phase 1. Illumination Experiments

Experimental Group Control Group

(exposed to Varying Illumination) (exposed to Constant Illumination)

• They made changes to the • Illumination remained constant

illumination
Results: Results:
 Increase in Illumination =  Constant Illumination = Increase
Increase the Productivity in Productivity
 Decrease in Illumination =
Increase the Productivity
 Moonlight Illumination =
Decrease the Productivity

Conclusion:
It was concluded that illumination did not have any effect on productivity
 Hawthorne Experiments (1924-32)

Phase 2. Relay Assembly Test Room
Experiment
 It was designed to determine the
effect of changes in various job
conditions on group activity.
 Researchers set up a relay assembly
test room which involved assembly
of telephone rays
 Output is depended on the speed
and continuity with which the
women worked
Phase 2. Relay Assembly Test Room Experiment

The experiment started when they introduced various changes.

1. Incentives System Was Changes
Result: Productivity Increased
2. Two Five Minutes Rest
Result: Productivity Increased
3. The rest period was reduced to 5 mins. but frequency was increased.
Result: Slightly Decreased in Productivity
4. The number of rest was reduced into two of 10 mins each with snack.
Result: Productivity Increased
5. Changes in working hours and workday were introduced.
Result: Productivity Increased

Conclusion:
It was concluded that productivity increased not because of positive changes
in physical factors but because of a change in the girl's attitude towards work and
their work group.
 Hawthorne Experiments (1924-32)

Phase 3. Mass Interviewing Programme
 To Study the human behavior in the company
 To determine the employee's attitudes towards company,
supervision, insurance plans, promotion and wages
 They conduct Direct Interviewing and Non-Direct Interviewing
Conclusion:
The Interview program gave valuable insights about human behavior in the
company
1. Workers behavior was influenced by group behavior.
2. The Social Demand of a worker are influenced by social experience in
groups both inside and outside of the work plant.
 Hawthorne Experiments (1924-32)

Phase 4. Bank Wiring Observation Room Experiments
 It was conducted to analyze the functioning of small group and
its impact on individual behavior.
 The hypothesis was that in order to earn more, workers should
produce more.
Conclusion:
It suggested that informal relationship are an important factor in
determining the human behavior
Characteristics of Human Relations Approach


 Organizations is a social system composed of many
interacting groups.
 Human relations has a great impact on the behavior
of theorganization.
 Monetary gains alone cannot motivate workers
 Employees participation in decision making boosts
morale and productivity.
Theories under Neo-Classical Approach


2. Behavioral Science Theory
 Behavioral science theory lays emphasis on inter-personal
roles and relationships
 McGregor, Arguris and Likert believed that self-actualized
man would contribute to the development of management
 Develop new insights and brings about a congenial
environment in the factory whereby new thinking and
new techniques put forward by employees are welcome.
 Thank You !


Reference:
 https://bizfluent.com/info-8181344-pros-cons-neoclassical-theory-management.html
 http://www.fao.org/3/w7503e/w7503e03.htm#exhibit%201:%20organization%20theories
 https://bizfluent.com/info-8120176-organizational-theories.html
 https://www.researchgate.net/publication/224952289_Schools_of_Management_Thought?fbclid=IwAR1089VKz3napw0giXerlYoR1
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 https://businessjargons.com/neoclassical-theory.html
 https://www.civilserviceindia.com/subject/Management/notes/classical-neoclassical-and-Contingency-approaches-to-organizatio
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