DEVELOPMENT OF

MANAGEMENT THOUGHT
Introduction – historical context
Primary sparks due to industrial revolution
Issues due to industrial revolution
Problems to address???
 Solution to the problems
• Early classical approach / classical approach
classical management theory
– Scientific management theory – Taylor
– Administrative management theory – Fayol
– Bureaucratic model – Weber
• Neo classical theory / behavioural theory
• Modern theory / modern approach
– Contingency approach
– Systematic approach
 Classical management theory
• Developed during the industrial revolution
when new problems related to factory system
appear.
• Managers were unsure of how to train
employees or deal with increased labour
dissatisfaction.
• They began to test solutions and find one best
way to perform and manage the tasks.
 Classic management theory
• Consists of three parts:
– Scientific management theory – Taylor
– Administrative management theory – Fayol
– Bureaucratic model – Weber
 Scientific management theory
• Contributors are F.W. Taylor, Henry gantt,
Frank gillberths and lillian gilbreths.
• This theory is defined as the use of the
scientific method to define “one best way” for
a job to be done.
• This theory is developed to satisfy the need
for increasing the productivity and efficiency.
 F.W.TAYLOR – Principles of scientific management

• Scientific management is based upon four basic

principles:
– Study each part of the job scientifically and develop
the best method to perform it.
– Select the workers and train them to perform the job
using scientifically developed method.
– Ensure that the workers use the proper scientifically
developed method.
– Divide work and responsibility
• Management – planning work methods using scientific
principles.
• Workers – responsible for executing the work accordingly.
F.W.TAYLOR – Elements of scientific management

• Planning the task

• Scientific task and rate setting (work study)
• Scientific selection and training
• Standardisation
• Specialisation
• Financial incentives
• Economy
• Mental revolution
 Planning the task
• Separation of planning from actual doing.
• Supervisor should do the planning.
• Workers only concentrate on doing the work.
 Scientific task and rate setting
• Work study:
– Defined as the systematic, objective and critical examination of all
factors governing the efficiency of any specified activity in order to
obtain effetive improvement which can be determined by method
study, motion study, time and fatigue studies.
• Method study: study the method of doing the work.
• Motion study: study the movement of operator in performing
the work.
• Time study: determines the proper minimum time for
performing the work.
• Fatigue setting: determines the amount and frequency of rest
required in completing the job.
• Rate setting: more salary for good worker performing as per the
work study and less salary for the workers those who are not
upto the standard.
 Scientific selection and training
• Select the workers in a systematic manner so
that the worker is fit for the job both physical
and technical.
• Then train the worker in the proper method.
 Standardisation
• Standards to be maintained with respect to
– Equipments and tools
– Materials
– Period of work
– Amount of work
– Working conditions
– Cost of production
 Specialisation
• Functional foremanship – specialised peoples
involved in the work.
• Planning and doing are separated.
• Functional foreman are specialists who join
with the heads to assist in the planning and
directs and controls the workers.
 Financial incentive
• Wages based on performance and not the
position.
• This wage and incentive motivate the workers
and bring maximum efforts.
 Economy
• Scientific management enhances profit and
economy.
 Mental revolution
• Co-operation between management and
workers for the benefit of both.
 Benefits of scientific management
• Use of scientific technique
• Proper selection and training of workers
• Incentive wages to workers
• Elimination of waste and rationalisation
• Standardisation of work place and condition
• Detailed instruction and guidance
• Good relationship between the workers
• Better utilisation of various resources
• Higher productivity at lower price
Administrative management theory - Fayol
• Scientific management focus on productivity of individuals.

• Administrative management focus on developing organisation

structure which leads to high efficiency and effectiveness.

• Organisation structure is the system of task, authority and

relationships that controls how the employees use the resources
to achieve the goals.

• This concentrates on the development of managerial principles.

 Henry fayol
• Published a book called
“The general and industrial administration”
The book consists of two parts
Part one: Theory of administration
Part two : 14 Principles of management.
Part one: Theory of administration
• Fayol divided the total industrial activities into
six categories:
– Technical: production and manufacture
– Commercial : buying, selling
– Financial : optimum use of capital
– Security: Protection of person and property
– Accounting: balance sheet, cost statistics
– Management : 6 functions of management
Part two: 14 principles of management
 Division of work
• Divide the work in a proper way with
reference to the available time.
• Worker on the same job and manager on the
same duty improves their efficiency and
accuracy.
 Authority and responsibility
• Authority: It is the power given to a person to
get work from his subordinates.

• Responsibility: It is the kind and amount of

work expected from worker by a superior.
 Discipline
• Discipline is essential for the smooth running
of organisation.
• Discipline results from good leadership.
 Unity of command
• An employee must receive orders and
instructions from one superior only.
Centralisation and decentralisation
• Centralisation: The power is concentrated with
one person.
• Decentralisation: Power is fully distributed to
the sub-ordinates, the organisation is
decentralised.
• This results in effective management.
• Helps to take decision quickly.
 Unity of direction
• Unity of direction implies that each group of
activities having the same objective with one
head and one plan.
 Scalar chain
• This principle states that instructions and
orders should be sent from top management
to bottom management.
 Stability of tenure
• Employee turnover rate should be less and
empolyee retaining in the company should be
high for effective functioning of any
organisation.
 Remuneration
• Fair payment of wages to employees and
employers.
 Order
• Materials order:
– A place for everything and everything in its place.
• Social order:
– A place for everyone and everyone in its place.
 Initiative
• When employees come forward with new
ideas, they must be encouraged by the
superiors.
• It will create the morale of the employees.
 Sub –ordination of individual interest to
general interest
• Every employee is working in an organisation
and his interest is to earn money to meet his
personal needs.
• This individual interest has to be combined
with the organisation’s development and
progress.
• Employee should give importance to general
interest and then to personal interest.
 Equity
• Treatment of employees equally which helps
to achieve the organisation goals without any
dispute.
 Espirit De corps
• This means union is strength.
• There should be unity among the employees.
 Bureaucratic management theory
• Developed by weber.
• Three types of authority exist in nature:
– Traditional:
• Sub-ordinate obedience based upon tradition.
• King or queen.
– Charismatic:
• Subordinate obedience based upon personal qualities of a person.
• Political leader – gandhi, nehru.
– Rational – legal:
• Sub-ordinate based upon the position held by superiors within
organisation.
• Police officers, executives, supervisors
 Principles of Bureaucratic management
theory
• A well defined hierarchy.
• Division of labour and specialisation.
• System of written rules and regulations.
• Impersonal relationships between managers
and employees.
• Selection and evaluation system.
• Records.
 A well defined hierarchy
• All the positions in the organisation are
properly arranged in such a manner that
higher position control lower position people.
• Hierarchy should be clear so that the
employees should know whom to report and
who will report to them.
 Division of labour and specialisation

• The labours were divided as per their

expertise and accordingly work will be allotted
to them to do best.
System of written rules and regulations

• Organisation must create a well defined

system of rules, standard operating
procedures and norms for
– Effective control
– Good co-ordination
Impersonal relationships between managers
and employees
• Managers should maintain impersonal
relationship with employees so that no
favourism and personal interest should not
influence decision.
 Selection and evaluation system
• Selection of employees and evaluation of their
performance should be based on their output
and performance in the work.
 Records
• A bureaucracy needs to maintain complete
files regarding all its activities.
 Neo-classical management theory or
behavioural management theory
• Classical management theory is not useful in the
case of many management situations.
• Also it does not explain the behaviour of
individual employees.
• Classical theory ignores employee behaviour.
• In neo-classical theory, classical theory is
modified, improved and extended which includes
psychology and sociology in understanding the
behaviour of individual and group.
 Hawthorne studies
• Four part of experiments were conducted.
– Illumination experiment.
– Relay assembly test room experiment.
– Bank writing test room experiment.
– Mass interview programme
 Illumination experiment
• Purpose: to establish a relationship between
lighting levels to worker productivity.
• As the intensity of lighting increased,
productivity also increased and vice versa.
• The illumination plays a minor role and entire
role.
Relay assembly test room experiment
• This experiment aims at knowing the impact of length of
working day, rest hours and other physical conditions.

• In this experiment, a group of five woman worked in

assembling telephone relays for five years.

• These woman were given special privileges such as right to

leave workstation without permission, take rest periods, enjoy
free lunches and have variations in pay levels and workdays.

• Productivity and morale increased considerably during the

period of the experiment.
 Bank wiring test room experiment
• The purpose of the experiment is to find the out the cause which restrict
the output.
• A group of 14 workers were put in a special room and an observer is
placed full time to record everything that happened.
• After the experiment, the production records of the group is compared
with the earlier records.
• The group set its own production target which is lesser than the
management set target.
• Now the workers work towards this new target leisurely and don’t bother
about incentive.
• If anybody works more than the norms, they were isolated, harassed and
punished by the group.
• Result: the workers are more responsive to the social force of their peer
groups than the control and incentives of management.
 Mass interview programme
• The workers were interviewed to check the value of
behavioural theory.

• The employees were asked about the supervisory practices

and employee morale.

• The results proved that upward communication in an

organisation creates a positive attitude in the work
environment.

• The workers are feel pleased that their ideas are being heard.
 General conclusion
• Human relations and social needs of the
workers are crucial aspects of business
management.
• The principle of human motivation helped to
revise the theories and practices of
management.
 Neo – classical theory
• Human relations approach
• Behavioural science approach
 Human relations approach
• Treating workers with dignity.
• Management to be employee centred.
• Encouraging informal organisation.
• Encouragement of two way communication.
 Behavioural science approach
• Self control and self direction.
• Non monetary motivation.
• Democratic style of Leadership.
• Participative management.
 Difference between classical and neo
classical theory
S.No. Description Classical theory Neo classical
theory
1 Basis Management principles Human behaviour is
considered
2 Focus Job oriented Worker behaviour
oriented
3 Individual It treats all man as workers and This considers the
difference extract work difference in human
being and extracts
work
4 Form of Believes in formal authority. Believes in informal
organisation organisation group
among workers.
5 Decision on Target and efficiency fixed by Target and
output management efficiency fixed
informal group of
workers.
 Difference between classical and neo
classical theory
S.No. Description Classical theory Neo classical theory
6 Productivity Facilities and training will Worker needs to
increase productivity. determine to increase
productivity.
7 Treatment of Treated as a worker to attain Treated as a human being
workers goal. who assist in attaining
goals.
8 Incentives Monetary incentives motivate Dignified treatment
employees effectively. motivates effectively.
9 Decision making Top level management makes Workers are allowed to
decision participate in planning.
Given the respect.
Modern theory or modern approach
• Two sub divisions
– System approach
– Contingency approach
 Systems approach
• System is a set of interrelated and interdependent parts
arranged in a manner that produces a unified whole.

• A organisation as a whole is a system, the departments

of the organisation are called as sub system.

• Systems approach says that organisation is a system

composed of sub systems works towards a common
goal.
 Five parts of a system
• Input – feed material
• Transformation process – conversion process
• Output - product produced
• Feed back – results or feed backs to correct
system
• Environment – the working of the system is for
the environment.
 Terminologies of system
• Sub system:
– Parts of a system.
• Synergy:
– The department which works together will give higher
productivity than the department which works alone.
• Open system:
– System which interacts with the environment.
• Closed system:
– System that does not interact with the environment.
• System boundary:
– Each system has a boundary which separates the system from
the environment. Open system is flexible with boundary and
closed system is rigid with boundary.
 Terminologies of system
• Flows:
– Some components which flows into the system
are the information, energy, material and then
they leave the system.
• Feedback:
– Feed back is a part of the system which reviews
the performance of the system and aids for
correction.
 Contingency approach
• This theory uses the word “it depends”.

• The managers, consultants and researchers developed the

contingency approach.

• According to the contingency approach, the manager’s task is

to identify which technique will best contribute to the
attainment of management goals in a particular situation,
under particular circumstances and at particular time.

• The contingency approach is highly dependent on the

experience and judgement of the manager in a given
organisational environment.
Basic forms of business ownership
• Sole proprietorship
• Partnership
• Joint stock company
• Co-operative organisations
 Sole proprietorship
• A business organisation where individual invests
his own capital uses his own skills and
intelligence in managing the business.

• The individual is responsible solely for the results

of its operations.

• The business is run by the individuals and he gets

assistance from his employees.
 Partnership organisation
• It is defined as the relation between the
persons who have agreed to share profits of a
business carried on by all or any of them.
• Characteristics:
– Start of a business
– Two or more persons involved
– Contractual relationship
– Profit motive
 Features of partnership
• Formation:
– Partnership agreement
• Financing:
– Investment contribution by all partners
• Control:
– Lies in all partners as everybody are active in a partnership firm
• Management:
– All partners have rights to take part in the management activities
• Duration:
– Partnership continues as long they wish to work together
 Types of partnership
• General partnership
– Liability of all the partners in unlimited.
• Partnership at will:
– Partnership for indefinite period
• Particular partnership:
– Partnership for a particular period
• Joint venture:
– Temporary partnership till the formation of a firm or company.

• Limited partnership
– Partnership in which the liability of the partner is limited.
 Types of partners
• Active partner
• Sleeping partner
• Nominal partner
• Partner by estoppel
• Partner by holding out
• Minor
 Joint stock company
• A joint stock company is a artificial person
created by law with a common seal and
perpetual succession.
• It is an association of many persons who
contribute a common stock (capital) and
employ it for a common purpose.
• The persons who contribute it are known as
shareholders.
 Procedure for the formation of company

• Persons who take initial steps to form a company is

called as promoters.
• Promoters conceives an idea of starting business,
investigate the details, meet some rich people to
start the company with them as directors.
• Promoter then make arrangement for incorporation.
• Minimum numbers for a private company is 2 and
public company is 7.
• Private limited and public limited.
 List of documents

• Memorandum of association:
– Most important document.
– Name of the company, state in which registered, object of the company,
declaration of desire to form the company.
• Articles of association:
– Rules and regulations of the internal management of the company.
• Declaration:
– Declaration by chartered accountant or advocate that all legal requirements
are complied with.
• Notice of location:
– Notice regarding the location of registered office of the company.
• List of directors:
– A list of directors.
• Written consents:
– Written consent by directors to act as such in the company.
• Undertaking by directors:
– An undertaking by directors to take up and pay for shares.
 Co-operative organisation

• A co-operative form of organisation is a voluntary

organisation of persons belonging to one homogenous
group on the basis of equality for the promotion of their
common economic interests.
• Characteristics:
– Voluntary association – the members are voluntary.
– Self help and mutual help.
– Equality.
– Democratic management
– Service motive – service to its members
– Disposal of profit – 61% of profit is shared to members
– Cash trading – no debts trading
– Continuous process – the process is continuous. No break
– State control and no income tax
 Types of co-operatives

• Consumers co-operative society.

– Students co-operative store
• Producers co-operative society.
– Co-operative sugar factories
• Co-operative marketing society.
– Marketing of the products of the members.
• Multi purpose societies:
– Combine different business.
• Co-operative credit society.
– Central co-operative bank
• Housing co-operative society.
– To construct house of their own.
• Non trading co-operatives:
– To improve social condition of the member. Health and medical co-
operative.
 Other types of companies
• Government institutions:
– BSNL, Doordarshan, AIR, radio, telegraph.
• Public corporation:
– LIC, RBI, SBI, NLC, State transport corporation
• Government company:
– BHEL, sail, Hindustan photo films, Indian airlines
• Board organisation:
– TNHB, Tamilnadu water and drainage board