-Pranav Upadhyay(BE/5647/07)

Vivek Shankar(BE/5708/07)
Nikhil Khobragade(BE/5672/07)
Sumit Kant(BE/5589/07)
The classical organization theory which focused attention on the
physiological and mechanical variables of organizational
functioning was tested in the field to increase the efficiency of the
organizations. Surprisingly, positive aspects of these variables
could not evoke positive response in work. They discovered that
the real cause of human behavior was somewhat more than mere
physiological variables. Such an approach is referred to as
'behavioural theory of organization', 'human view of organization',
or 'human relations approach.

The essence of behavioral approach is contained in two points:

(i)organizational situation should be viewed in social as well as in
economic and technical terms.
(ii)the social process of group behavior can be understood in terms
of clinical method analogous to the doctor's diagnosis of human
organism.
 It views organization as a combination of both formal and informal
forms of organization. The latter form as missing in classical
approach. Another contribution of behavioral approach is the
introduction of behavioral since in analyzing the nature of
organization. Through the use of this science, behavioral writers have
demonstrated how the pillars of classical doctrines-division of labor,
specialization, structure, and scalar an functional processes-are
affected and modified by human actions. Since this approach has
suggested only modifications in the basic postulates of classical
theory, it is referred to as neoclassical theory.
 Neoclassical Theory and Organizational Design
1. Flat Structure. Neoclassical organization theory suggests flat
structure as against the tall structure suggested by classical
theory. Flat and tall structures are extension of the span of
control concept of classical theory and relate to the vertical
structures arrangement for the whole organization. There are
certain problems in tall structure with narrow span of control.
These are: communication problem, increased difference
between decision-makers and implementers, motivation
problem, and expensive. As against this, flat structure with wide
span of control is more suitable for motivating human beings in
the organization. In this structure, communication chain is
shorter. People prefer flat structure because it is more free of
hierarchical control. They feel more autonomy and develop
independent spirit. Flat structure thus is more in accordance
with the assumptions of Theory Y of McGregor.
2. Decentralization. The neoclassical organization theory
suggests decentralization in organization structure.
Departmentation, although mentioned by classical theory and
associated with its concept of specialization, is broader and
more analytical in neoclassical theory and relates to the
horizontal organization at one level of hierarchy.
Decentralization is closely related to flat structure as wide span
will result more in horizontal increase in people. The
decentralized structure offers various advantages and is more in
accordance with the various characteristics and propositions of
human beings in the organization, as identified by the
neoclassical theorists.
3. Informal Organization. A noteworthy point of neoclassical
theory is the informal organization. This aspect has been left
altogether by classical theory. In order to understand the
Organizational functioning fully, both formal and informal
aspects of the organization must be studied. Formal
organization structure represents as closely as possible the
deliberated intention of its framers for the purpose of
interactions that are expected to take place among its members.
The informal organization, on the other hand, is created
because of the limitation of the organization to fulfill the
members' needs, particularly the psychological ones. Actual
organization behavior is determined with interaction of these
two.
 Classical and Neo-Classical Theories of Management
There are three well-established theories of classical
management: Taylor’s Theory of Scientific Management, Fayol’s
Administrative Theory, Weber’s Theory of Bureaucracy.
Although these schools, or theories, developed historical
sequence, later ideas have not replaced earlier ones. Instead,
each new school has tended to complement or coexist with
previous ones.

The importance of the function of management was first

recognized by French industrialist Henri Fayol in the early
1900s.

In contrast to the purely scientific examination of work

and organizations conducted by F W Taylor, Fayol
proposed that any industrial undertaking had six
functions: technical; commercial; financial; security;
accounting; and managerial.
 Of these, he believed the managerial function, ‘to forecast and plan, to
organize, to command, to coordinate, and control’, to be quite distinct
from the other five. Fayol also identified general principles of
management: division of work; authority and responsibility;
discipline; unity of command; unity of direction; subordination of
individual interest to general interest; remuneration of personnel;
centralization; scalar chain of authority; order; equity; stability of
tenure of personnel; initiative; and esprit de corps.

 Fayol's views on management remained popular throughout a large

Evolution of Classical Approach to Management
Traditional process of learning is either through observation and
experiment. Nature or environment is considered uniform and when
we observe certain phenomenon or events uniformly leading to the
same result or results, we conclude a cause and effect relationship
between the two. This is learning by observation or in other words by
experience.
 Basic Postulates of the Classical Approach by Max Weber

Management of an organization is considered as a chain of inter-

related functions. The study of the scope and features of these
functions, the sequence through which these are performed and their
inter-relationship leads one to draw principles of management
suitable for universal application.
Learning principles of management is done through the past
experiences of actual practicing managers.
As business environment consists of uniform cycles exhibiting an
underlying unity of realities, functions and principles of management
derived through process of empirical reasoning are suitable for
universal application.
Emerging new managers through formal education and case study
can develop skill and competency in management concepts and
practices.
 The classical approach also recognized the importance of economic
efficiency and formal organizational structure as guiding pillars of
management effectiveness.

 Business activity is based on economic benefit. Organizations should

therefore control economic incentives
 Neoclassical theory of management
There are 3 neoclassical theories:

Human Relations theory :

Explains the modern advancement of Human Relations

Management theory which takes into account human
factors like the employer-employee relationship.
The important strand in the development of modern
management was the increase in attention to the human
factors, which has become known as the 'human relations
school of management.’ The core aspect of Human
Relations Theory is that, when workers were being
observed and included in the research, they felt more
important and valued by the company. As a result, their
productivity levels went up significantly.
Behavioral theory :

The behavioral management theory is often called the

human relations movement because it addresses the
human dimension of work. Behavioral theorists believed
that a better understanding of human behavior at work,
such as motivation, conflict, expectations, and group
dynamics, improved productivity.

The theorists who contributed to this school viewed

employees as individuals, resources, and assets to be
developed and worked with — not as machines, as in the
past. Several individuals and experiments contributed to
this theory.
Social systems theory.:

Five major contributions to a theoretical foundation of HRM

are identified.

the conceptualization of organizing and managing human

resources as social processes, thus overcoming an individualistic
angle.
the new importance of individuals as essential element in the
system's environment.
the abstention form far reaching or highly unrealistic
assumptions about the 'nature' of human beings.
the interaction between various levels and units of analysis built
into the theory which is essential for comprehensive and in-
depth analyses of HR phenomena.
the openness for additional theories for which social systems
theory provides the overall framework.