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CHAPTER TWO

Development of
Management Thought
Historical Roots of
Contemporary
management Theories

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Management School of Thought:
During the present century, certain schools of
management thought have developed. Each school
reflects the problems of the period during which
they were popular.
Herold Koontz was the first who have attempted to
classify the various approaches on the management
in the schools of management theory. Based on the
writings of some of the scholars and Koontz, the
management thoughts, have been classified in the
following schools of management theory.

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Development of Management Thought
Section 1. Pre Classical Contributors
Section 2. Classical Viewpoint
- Scientific Management
- Administrative Management
- Bureaucratic Management
Section 3. Behavioral Viewpoint
- Human Relation
- Human Behavioral
Section 4. Management Science view points
- Quantitative management
- Operation management
- Total Quality Management
- Management Information system
Section 5. Contemporary Viewpoint
- System Theory
- Contingencies Theory
- others
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EVOLUTION OF MANAGEMENT
THOUGHTS &
MANAGEMENT THOUGHTS PERIOD
Early Contributions Upto 19th century
Scientific Management 1900-1930
Administrative/operational 1916-1940
management
Human relations approach 1930-1950
Social systems approach 1940-1950
Decision theory approach 1945-1965
Management science 1950-1960
approach
Human behavior approach 1950-1970
Systems approach 1960s onwards
Contingency approach 1970s onwards

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MANAGEMENT THEORIES

Pre Classical Classical Behavioral Management Contemporar


Contributors Viewpoint Viewpoint science y Viewpoint
Viewpoint

Operations System
Human Theory
Relations Research
Scientific
Management
Management
Operations Contingenci
Management es Theory
Human
Administrati Behaviour
ve approach
Management Management Quality
Information management
Bureaucratic Science
Management

Other
Total quality Emerging
management Views
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Why Study Management Theory?
 A Theory is an explanation for how or why something occurs.
 Theory is a systematic grouping of interdependent concepts
and principles that give a framework to, or tie together, a
significant area of knowledge.
 In the field of management, then, the role of theory is to
provide a means of classifying significant and pertinent
management knowledge.
Function of theory:
- To Describe
- To Explain
- To Predict
- To Control

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Section 1. Early Contribution
/Up to the 20th century/ Pre classicists
 a. Ancient massive construction (Pyramids and Walls)
500 to 5000years ago!
 b. Adam smith’s contribution to the field of management
 c. Industrial revolution’s influence on management practices

a. Early human kind cooperative effort search for food,


shelter and safety needs require some kind of
management.
As families grew into tribes and tribes evolved into
nations, more complex forms of management was
required and did evolve.
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Ancient massive construction (Pyramids and Walls)
The ancient Babylonian cities
The Egyptians to build pyramids
Constructing China wall
In the Old Testament, Moses to lead Israel people
The city-states of Greece
The Roman Empire

are tangible evidence that projects of tremendous scope,


employing tens of thousands of people were involved in
construction.
But
Who directed each one what to do?
Who ensured there would be enough stoned at the site to keep
all workers busy?
Management is the answer to such questions.

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b. Adam Smith’s Contribution (18th century
economist 1776)
 The general popularity today of job specialization is undoubtedly due
to Smith’s view about division of labor
Division of labor is the breakdown of jobs into
narrow, repetitive tasks.
◦ Observed that firms manufactured pins in one of two
different ways:
 Craft-style—each worker did all steps.
 Production—each worker specialized in one step.
◦ Realized that job specialization resulted in much higher
efficiency and productivity
 Breaking down the total job allowed for the division of labor in
which workers became very skilled at their specific tasks.

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c. The Industrial Revolution’s Influence On Management
Practices
 Industrial Revolution has originated in late-18th-century
Great Britain, and crossed the Atlantic to America by the end
of the Civil War.
 Robert Owen (1771 - 1858)
 Charles Babbage (1792 - 1871)
 Henry R. Towne (1844 - 1924)

Industrial revolution
Machine power began to substitute for human power
- Lead to mass production of economical goods
Improved and less costly transportation systems became available
- Created larger markets for goods.
Larger organizations developed to serve larger markets
- Created the need for formalized management practices.

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Section 2
Classical Management Approach
The serious study of management began in the
late 19th century with the need to increase the
efficiency and productivity of the workforce.

Classical management theory can be divided into


three perspectives distinguished by the issues and
problems that they address.
Scientific Management
Administrative Theory
The Theory of Bureaucracy

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Scientific management
Scientific management emerged because of the need to increase
productivity and efficiency. The emphasis was on trying to find the
best way to get the most work done by examining how the work
process was actually accomplished and by scrutinizing the skills of
the workforce.
At the turn of the 20th century, business was expanding and
creating new products and new markets, but labor was in short
supply.
The solutions were (1) substitute capital for labor or
(2) use labor more efficiently.
The systematic study of the relationships between people and tasks
for the purpose of redesigning the work process for higher efficiency.
The theory of scientific management developed by F.W.Taylor and
others

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Background of That Time
When F.W.Taylor worked as an apprentice at the Midvale Steel
company, he observed workers producing far less than capacity
in steel firms. He recognized their were no studies to determine
expected daily output per worker in the form of work standards
and the relationship between these standards and wages.

There were no clear concepts of responsibilities to workers


and managers.
No effective work standards existed.
Management decisions were based on guess and intuition.
Workers were placed on jobs with little or no concern for
matching their abilities and aptitudes with the tasks required.
Managers and workers considered themselves to be in continual
conflict—any gain by one would be at the expense of the other.

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Then he tried to find the one best way to
do a job, determining the optimum work
pace, the training of people to do the job
properly and successful rewards for
performance but using an incentive pay
system.
The best way to increase the volume of
output was to have workers specializing in
specific tasks just like how a certain machine
would perform a particular function.

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Frederick W. Taylor -the father of
Scientific management

He started the theory of modern management. He advocated a change from the old
system of personal management to a new system of scientific management

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Fedrick w Taylor (1966-1915) rested his
philosophy on 4 basic principles.
Principle 1. Study the way workers perform their tasks,
- gather all the informal knowledge that workers possess, and
- experiment with ways to improves the performance of tasks.
Principle 2. Codify the new methods of performing tasks into
written rules and standard operating procedures.
- Teach to all workers the new method.
Principle 3. Carefully select workers so that they possess
skills and abilities that match the needs of the task and train
them to perform according to rules and procedures.
Principle 4. Establish a fair or acceptable level of
performance for a task and then develop a pay system that
awards acceptable performance.

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F.W. Taylor's Contribution
Clear delineation of authority
Responsibility
Separation of planning from operation
Incentive schemes for workers
Task specialization

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Problems with Scientific Management
◦ Managers often gave attention only to
increasing output. They ignored the human
side of organization.
◦ They did not allow workers to share in the
benefits of increased output.
◦ Specialized jobs became very boring & dull.
◦ Workers ended up distrusting Scientific
Management
Scientific management failed to recognize the
social needs of workers and the importance of
working conditions and job satisfaction

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Administrative theory
Focuses on managing the whole
organization.
Henry Fayol emphasized on the
importance of managerial functions and
principles for universal application.
Fayol’s argued that management was an
activity common to all human
undertakings in business, in government,
and even in the home.
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Henri Fayol was the first to identify Five
Elements of Management- Managerial
Functions/ Objectives:
◦ Planning
◦ Organizing
◦ Command
◦ Coordination
◦ Control
He also stated 14 principles of
management—fundamental or universal
truths.

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Fayol’s 14 Management principles
 Division of Work: allows for job specialization.
◦ Work should be divided among individuals and groups.
 Authority and Responsibility
◦ Authority right to give orders
◦ Responsibility involves being answerable
Whoever assumes authority assumes responsibility
 Discipline

◦ Common efforts of workers. Penalties


 Unity of Command
◦ Employees should have only one boss and receive order from one boss.
 Unity of Direction
◦ A single plan of action to guide the organization.
 Subordination of individual interests to the general interests of organization
 Remuneration

◦ Remuneration paid to workers should be fair, reasonable, satisfactory and


rewarding that motivates contributes to organizational success.
 Centralization

◦ The degree to which authority rests at the top of the organization.


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Scalar Chain
◦ Is a chain of superior ranging from the ultimate authority to the lowest
◦ Communication should follow this chain. However, if following the chain creates delays, cross-
communication can be allowed if agreed to by all parties and superiors are kept informed.
Order
◦ The arrangement of employees where they will be of the most value to the
organization and to provide career opportunities

Equity
◦ The provision of justice and the fair and impartial treatment of all employees.
Stability of Tenure of Personnel
◦ Long-term employment is important for the development of skills that improve the
organization’s performance.
◦ Employee should not be moved frequently from one job position to another i.e. the
period of service in a job should be fixed.
Initiative
◦ The fostering of creativity and innovation by encouraging employees to act on their
own.
Esprit de corps
◦ It refers to team sprit i.e. harmony to the work groups, and mutual understanding
among the members.
◦ Importance of a shared commitment and enthusiasm in an effective organization.
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Fayol also found that activities on industrial
organization could be divided in to 6 groups
such as:
1. Technical (related to production)
2. Commercial (buying, selling and exchange)
3. Financial (search for capital and its optimum
use)
4. Security (protection of property and person)
5. Accounting (including statistics)
6. Managerial (planning, organizing, command,
coordination, control)
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The Theory of Bureaucracy
Developed by The German sociologist, Max
Weber
theory of Bureaucracy, which portrays the
structure and design of organization
characterized by a hierarchy of authority,
formalized rules and regulations , clear division of
labor and detailed procedure that serve to guide
the coordinated functioning of an organization.
Weber developed a theory of authority structures
and described organizational activity on the basis
of authority relations
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The Theory of Bureaucratic Management
 Max Weber

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Bureaucracy is a system characterized by division of labor, a clearly defined
hierarchy, detailed rules and regulations and impersonal relationships.
Max Weber described an ideal type of organization that he called a
bureaucracy, characterized by seven characteristics/ principles
 Rules—formal guidelines for the behavior of employees on the job
 Impersonality Impersonal relationships between managers and employees/
employees are evaluated according to rules and objective data
 Division of Labor—splitting work into specialized positions
Hierarchical Structure— All positions within a bureaucracy are structured
in a way permitting the higher positions to supervise and control the lower
positions.
- Authority—who has the right to make decisions of varying importance
at different organizational levels
- Lifelong Career Commitment—both the employee and the
organization view themselves committed to each other over the working
life of the employee
- Rationality—the use of the most efficient means available to accomplish
a goal
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Limitations of Bureaucratic Management and
Administrative Theory
 Not universally applicable to today’s
complex organizations.
 Fayol’s principles like that of specialization
were frequently in conflict with the
principle of unity of command.
 Principle characteristic of bureaucracy
changes in the global environment.
 Classical theorists ignored the problems of
leadership, motivation, power or
information relations.
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In General Contributions of the Classical
Approach
The greatest contribution of the classical approach was
the identification of management as an important
element of organized society.
The identification of management functions: planning,
organizing and controlling provided the basis for
training new managers and was a valuable practice.
Many management techniques used today: time and
motion analysis, work simplification, incentive wage
systems, production scheduling, personnel testing,
and budgeting are techniques from the classical
approach

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Section 3
Neoclassical management:
 The behavioural school emerged partly because the classical approach
did not achieve sufficient production, efficiency and workplace
harmony.
 People did not always follow predicted or expected patterns of
behavior. Thus there was increased interest in helping managers deal
more effectively with the people side of their organizations.
 Neoclassical theorists recognized the importance of individual or
group behaviour and emphasized human relations.
 In the past, managers considered workers as machinery that could be
bought and sold easily. To increase production, workers were subjected
to long hours, miserable wages and undesirable working conditions.
The welfare of the workers and their need were disregarded. The early
twentieth century brought about a change in management.
 The behavioral approach to management has two (2) branches: the
Human relations approach from the 1950’s and the behavioral science
approach.
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1. Human Relations Approach
In the human relations approach managers must know why their
subordinated behave as they do and what psychological and social factors
influence them.

Human relations theory is characterized by a shift in emphasis from TASK


to WORKER
Focuses on dealing effectively with the human aspects of organizations
Emphasis on working conditions
Workers wanted respect
Workers formed unions to bargain with management
Social Relationships are at the heart of organizational behavior--
effectiveness is contingent on the social well-being of workers
Workers communicate opinions, complaints, suggestions, and feelings to
increase satisfaction and production

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The experiment by Elton Mayo and associates with a group of
five women in the bank wiring room

They were supervised

Wages were increased

Rest periods of varying length were introduced,

The workday and work week were shortened.

Groups choose their own rest periods and have given an opportunity a
say in other suggested changes.
Mayo’s Finding:
 Behavior and sentiments are closely related.
 Group influences significantly affect individual behavior.
 Group standards establish individual worker output.
Individuals behave or perform better than unsupervised individuals
for a limited time if they suspect or know about the observation.
However, the effect diminishes over time.
Money is less a factor in determining output than are group
standards, group sentiments, and security
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2. Human Behavioural Approach
Behavioural Scientist: Maslow (1908-
1970)
Maslow was a psychologist who developed a theory of motivation.
His ideas had a significant impact on management.
Maslow believed that individuals fulfill lower-level needs before
seeking to fulfill higher-level needs. That is, people satisfy their need
for food before they seek self-fulfillment. Because one set of needs
must be met before another is sought, Maslow referred to this as a
hierarchy of needs.

According to Maslow, -the needs that people are motivated to satisfy-


(Physiological needs, Security needs, Social Needs, Esteemed
Needs, Self Actualisation Needs) fall into a hierarchy.

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MASLOW’S NEEDS THEORY
Self-
• Achieve full potential,
Actualization Fulfillment

Esteem/Ego
• Self-Respect, Self-Esteem,
Needs Respected by Others

• Affection, Acceptance,
Social Needs Inclusion, love
(Love & Belonging)

• Security, Protection, Stability,


Pain and risk Avoidance,
Safety
Routine/Order

Basic Human Needs • Food, shelter, Air,


(Physiological) Water, Sex, Clothing
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Applying Maslow’s Theory to Management
At the lowest level, workers are motivated by basic needs, such as the
needs for wages or salary. Basic needs also include the physical
conditions in which a person works, such as heating, lighting, and noise.
Once these basic needs are met, employers can address the next level of
needs—safety or security needs. Some of these security needs can be
met by providing employees with insurance, retirement benefits, and job
security. Employees need to know that in the workplace, they are safe
from physical, psychological, or financial harm.
Managers meet workers’ social needs by providing work environments in
which colleagues interact by providing opportunities for co-workers to
socialize with one another by providing lunch rooms or allowing
employees to attend company retreats.
Status needs can be met by providing employees with signs of recognition
that are visible to others, such as job titles, awards, designated parking
spaces, and promotions.
Managers can meet employees’ need for self-fulfillment by providing
them with opportunities to be creative at work or allow them to become
involved in decision making.
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Behavioural Scientist: McGregor (1906-
1964)

He distinguished two alternative basic assumptions about


people and their approach to work. These two assumptions,
which he called Theory X and Theory Y take opposite
views of peoples commitment to work in organizations.

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Theory X Assumptions
People do not like work and try to avoid it.
People do not like work, so managers have to
control, direct, coerce, and threaten employees
to get them to work toward organizational
goals.
People prefer to be directed, to avoid
responsibility, and to want security; they have
little ambition.
 X = pessimistic, negative view of workers (workers are
irresponsible, unresponsive to change, lack ambition, hate work)

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Theory Y Assumptions
 People do not naturally dislike work; work is a natural part of their lives.
 People are internally motivated to reach objectives to which they are
committed.
 People are committed to goals to the degree that they receive personal
rewards when they reach their objectives.
 People seek both seek responsibility and accept responsibility under
favorable conditions.
 People have the capacity to be innovative in solving organizational
problems.
 People are bright, but under most organizational conditions their
potentials are underutilized.
 Y = optimistic, positive view of workers (workers are capable of accepting
responsibility, self-direction, and self-control and of being imaginative and
creative)

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ASSUMPTIONS:
THEORY X - THEORY Y
 Dislike work, avoid it  Work - natural and enjoyable
 Don’t want responsibility  Seek responsibility, prefer self-
 Prefer to be directed direction
 Unconcerned about
 Willing to work for
organizational needs organizational goals
 Resist change
 Potential to develop change
 Not intelligent or creative
 Intelligence and creativity of
workers untapped
 Managers must control,
reward and punish
 Work can allow workers to
employees achieve

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Contribution of Behavioral Approach
Provided important insights into
motivation, group dynamics, and other
interpersonal processes.
Focused managerial attention on these
critical processes.
Challenged the view that employees are
tools and furthered the belief that
employees are valuable resources.

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Limitation of Behavioral Approach
Complexity of individuals makes behavior
difficult to predict.
Many concepts not put to use because
managers are reluctant to adopt them.
Contemporary research findings are not often
communicated to practicing managers in an
understandable form.

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Management Science Approach

This view encourages managers to use


mathematics, statistics, and other
quantitative techniques to aid in
resolving production and operations
problems, thus focusing on solving
technical rather than human behavior
problems to maximize the use of
organizational resources and to make
management decision.
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Cont…
An approach to management that uses
careful quantitative techniques to maximize
the use of organizational resources.
◦ Quantitative management—utilizes linear
programming, modeling, simulation systems.
◦ Operations management—techniques to analyze all
aspects of the production system.
◦ Total Quality Management (TQM)—focuses on
improving quality throughout an organization.
◦ Management Information Systems (MIS)—provides
information about the organization

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Contribution of the Management
Science Approach
Developed sophisticated quantitative
techniques to assist in decision making.
Application of models has increased our
awareness and understanding of complex
processes and situations.
Has been useful in the planning and
controlling processes

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Limitations of the Management
Science Approach
The shortfall of this approach is that
Quantitative management cannot fully
explain or predict the behavior of people
in organizations.
Mathematical sophistication may come at
the expense of other managerial skills.
Quantitative models may require
unrealistic or unfounded assumptions,
limiting their general applicability.
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Contemporary Management Theories
◦ Many new theories since 1900
◦ Often overlapped or contradicted previous
theories
◦ Several paradigms have emerged since the
behavioral school and Quantitative approaches
◦ An approach required which integrate the
previous approaches

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Contemporary Management Theories-
continued
Contingency Approach
Systems Approach

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A. Contingency Approach
The contingency approach (sometimes called the
situational approach)
When methods highly effective in one situation failed
to work in other situations, they sought an explanation.
Why for example, did an organizational development
program work brilliantly in one situation and fail
miserably in another. Advocates of the contingency
approach had a logical answer to all such questions.
Results differ because situations differ.
A technique that works in one case will not necessarily
work in all cases.

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Contingency Approach- continued
According to the contingency approach, the
managers’ task is to identify which technique will
in a particular situation, under particular
circumstances, and at a particular time, best
contribute to the attainment of management goals.
Advocates using traditional, behavioral, or system
viewpoints independently or in combination
The manager trained in the contingency approach
will ask which method will work best here.

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Contingency View
Managerial behavior dependent upon situation.
States that there is no “one best way” to manage an
organization.
Because what works for one organization may not work
for
another
Situational characteristics (contingencies) differ. Their
fore managers must identify the best technique to achieve
goals
Managers need to understand the key contingencies that
determine the most effective management practices in a
given situation
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B. System Approach
Systems theory has had a significant
effect on management science and
understanding organizations.

What is system?
Your Definition

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What is system?
Things do not exist independently, only in
relationships to something else
The whole cannot be understood by simply
understanding each part
Things only function as they do because of the
presence of one another
Nothing is influenced in one direction, all is co-causal.
“System means a grouping of parts that operate
together for a common purpose.” (Watson, 1994).
A system is any group of interacting, interrelated, or
interdependent parts that form a complex and unified
whole that has a specific purpose.

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Example: Human body system

If one part of the system is removed, the nature of the


system is changed as well.
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Systems approach
Organizations, like biological systems such as the
human body is interconnected and have
interrelated and interdependent parts that make up
the whole.
Systems Approach sees the organization as a
complete system in which even small activities,
interventions, or changes in one section have an
effect on other sections, and on the organization
as a whole.
This theory view organization as complex system
of people, tasks, and technology.
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Systems approach
The systems approach to management
which attempts to synthesize and integrate
the various schools of management into
one coherent and cohesive management
theory.
Systems theory blends many different
theories into one common functional
system where all of the activities of the
organization are grouped into processes

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System Thinking
The application of this system theory is
called System analysis
One of the tools of systems analysis is
system thinking
System Thinking is a way of helping a
person to view systems from a broad
perspective that includes seeing overall
structures, patterns and cycles in specific
events within the system.
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Systems Thinking is a growing discipline
designed to tackle complexity and produce
significant results as we strive to understand
and guide organizational change. It is a
structured approach that emphasizes examining
problems more completely and accurately
before developing and implementing solutions.
Systems Thinking is recognized as an
effective approach to help organizations make
sense of the interconnectedness of systems and
develop solutions that are effective, long
lasting, and sustainable.
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Systems Thinking
Systems Thinking focuses on:
• The organization as a whole
• Interactions between parts, not the parts
themselves
• The way systems affect other systems
• Reoccurring patterns rather than just
individual events
• Change over time
• How feedback affects the parts
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System Thinking?
The significant problems we face today
cannot be solved at the same level of
thinking at which they were created.”
Albert
Einstein
Therefore, conventional formulations and
solutions based on the “logic of the day”
are inadequate to deal with new problems.

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Systems thinking involves thinking about the connections between
parts of a system.
Founded in 1956 by MIT professor, Jay Forrester.

System thinking allows people to make their understanding of


social system explicit and improve them in the same way that
people use engineering principles to improve their
understanding of mechanical system.

It is use to:-


• Examining how we create our own problems
• Seeing the big picture
• Structure influences performance
Systems theory views an organization as a complex set of
dynamically intertwined and interconnected elements, including
inputs, processes, outputs, feedback loops, and the environment.
Any change in one element causes changes in other elements.

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Core principles of Systems approach
Systems co-produce each other
Meaning that there is never a single cause to any
problem situation
Systems are made up of interrelated processes
Processes and tasks affect one another in a
variety of complex ways
Improving a process requires understanding
everything that affects it
Individuals and departments at any institution
must always remember that they are
interdependent parts of a larger system.
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Characteristics of a System
Systems have a purpose that defines it as a
discrete entity that holds it together
◦ Purpose of an automobile……

Take
Takeyou
youfrom
fromone
oneplace
placetotothe
theother
other
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Characteristics of a System

◦ All parts must be present for a system to carry out its


purpose optimally
Automobile without its spark plugs……

Car doesn’t work


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Characteristics of a System

The order in which parts are arranged


affects the performance of a system

Automobile with the driver in the


backseat and the tires in the front seat
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Systems attempt to maintain stability
through feedback

Feedback provides information to the system that


lets it know how it is doing relative to some
desired state

Steering car and Feedback


INT.TO MANAGEMENT 66
Some key concepts in system theory
a. Subsystems:
The parts that make up the whole of a system are called
subsystems. And each system in turn may be a subsystem of
a still larger whole. Thus a department is a subsystem of a
plant/firm, which may be a subsystem of a company, which
may be a subsystem of a conglomerate or an industry, which
is a subsystem of the national economy, which is a
subsystem of the world system.
b. Synergy:
Synergy means that the whole is greater than the sum of its
parts. In organizational terms, synergy means that as
separate departments within an organization cooperate and
interact, they become more productive than if each were to
act in isolation.
INT.TO MANAGEMENT 67
Two system Type
c. Open and Closed Systems:
A system is considered an
 Open system if it interacts with its environment,
 it is considered a closed system if it does not
interact with its environment.
All organizations interact with their environment,
but the extent to which they do so varies. An
automobile plant, for example, is a far more open
system than a monastery or a prison.

INT.TO MANAGEMENT 68
The Organization as an Open System

INT.TO MANAGEMENT 69
Some key concepts in system theory
cont…
d. System Boundary
Each system has a boundary that 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
organizations have become increasingly flexible in recent years.
e. Flow:
A system has flows of information, materials and energy including
human energy. These enter the system from the environment as
inputs raw materials, undergo transformation processes within the
system operations that alter them, and exit the system as outputs
goods and services.
f. Feedback:
Feedback is the key to system controls. As operations of the system
proceed, information is fed back to the appropriate people, and
perhaps to a computer, so that the work can be assessed and, if
necessary, corrected.
INT.TO MANAGEMENT 70

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