Modern Theories

● Modern management theories started after 1950s

● Modern management theory focuses the development of each factors of workers and
organization
● Modern management theory refers to emphasizing the use of systematic mathematical
techniques in the system with analyzing and understanding the inter relationships of
management and workers in all aspect.
● Modern view consists that a worker does not work for only money. They work for
their satisfaction and happiness with good living style

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 Modern management theory composed of three basic approaches
● Quantitative approach
● Systems approach
● Contingency approach
Quantitative approach

• Complex business problems encountered by managers lead to the use

of decision making techniques

• Use statistical and mathematical models to solve business problems

• Provide the decision makers with systematic and powerful means of

analysis, based on quantitative data, for achieving predetermined goals

• Also called Mathematical Approach or Management Science Approach

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 Quantitative approach
• Quantitative approach addressed problems like recourse allocation,
scheduling task and inventory management
• Various approaches used are

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Quantitative approach
1. Operation research perspective

• Another term used for this field is management science

• It is a scientific method of decision making.
• It consists of mathematical model building and other applications of quantitative techniques to solve managerial
problems
 efficient utilization of tools
 optimization of resources
 elimination of process wastes and inefficiencies
• Leads to a continuous improvement and standardization in the process
Operation research perspective
Methodology:
Problem
formulation

Implementing the Construction of

solution mathematical model

Deriving solutions
Establishing controls from the model
over the solution

Testing the model

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2. Operation management perspective

• Operation management refers to the field of management that specializes in

the physical production of goods or services

• Operations management specialists use quantitative techniques to solve

manufacturing problems

• Some commonly used methods are, demand forecasting, inventory modeling,

linear and non linear programming, queuing theory, scheduling, simulation
and break-even analysis
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3. Total Quality Management perspective

• Total Quality Management (TQM) is the integration of all functions and

processes within an organization to achieve continuous improvement of the
quality of goods and services as per the customer needs and expectations

• The goal is customer satisfaction

• Continuous improvement is about accurate measurements, which requires

statistical techniques to measure every critical variable in the organization's
work process
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Concepts in TQM

• Quality is defined by customers' requirements

• Top management has direct responsibility for quality improvement

• Increased quality comes from systematic analysis and improvement of

work processes

• Quality improvement is a continuous effort and conducted throughout

the organization
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 Limitations of Quantitative approach

• There are inherent limitations concerning mathematical expressions

• High costs are involved in the use of quantitative techniques

• Quantitative techniques do not take into consideration the intangible factors

• Quantitative techniques are just the tools of analysis and not the complete
decision making process

• Many aspects in management cannot be modeled

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 System Approach
• A system is an interrelated set of elements functioning as a whole

• A system functions by acquiring inputs from the external environment, transforming them in

some way, and discharging outputs back to the environment

• Based on the generalization that everything is interrelated and interdependent

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 SYSTEMS APPROACH TO MANAGEMENT
• It says that every organization is a system
• It consists of many independent and interacting sub systems within itself
• Every manager should manage the organization after considering all its sub systems and
external environment
• He should ensure that output of the organization should be more than the combined output
of its individual departments
Some ideas in system theory:
• Open and closed systems
• Entropy
• Synergy
• Subsystem interdependencies
 System Approach
• Open system: Interact with the environment
• Closed system: Do not interact with the environment.
• Organisation as a system means a an open system

• Entropy is a universal property of systems refers to run down and die

• If a system does not receive fresh inputs and energy from the
environment it will cease to exist.
• Organisation must adjust to changes, monitor their environment and
continuously bring new inputs
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 System Approach
• Synergy means the cooperation or working together as a whole to
accomplish the tasks rather than individual units working alone.
• Subsystems depend on one another as parts of a system. Changes in
one part of the organization affect the other part.
• Organization works with subsystems in an interdependent manner

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Systems view of organization

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System Approach

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 System Approach
Characteristics
• Dynamic

• Adaptive

• Multilevel and multidimensional

• Managers will have good view

• Forecasts consequences and plans actions

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 System Approach

Advantages Disadvantages

• Closeness to reality • Complex when used in large

• This approach can be utilized by organization

any other approach • Increased difficulty for managers

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Contingency Approach

• Developed by J.W. Lorsch and P.R. Lawrence during the 1970’s

• To overcome the drawback of other theories which pre suppose one

best way to manage a situation

• Also called situational approach

• Appreciation of all previous theories or approaches

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 Contingency Approach

• Each situation is believed to be unique. Learning about management is possible by

experiencing large number of problem situations.

• There are no simplistic or universal rules for managers to follow

• There is no one best way of managing an organization

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External Contingency Factors

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 Contingency Approach

Features
• Does not accept the universality of management theory

• Stresses that there is no one best way of doing things

• For managerial policies and practices to be effective, must adjust to changes in environment

• Diagnostic skills are improved so that one can anticipate and be ready for environmental
changes

• Managers should have sufficient human relations skill to accommodate and stabilize change

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 Contingency Approach

Advantages

• Contingency approach takes a realistic view in management and

organization

• It discards the universal validity of principles

• Executives are advised to be situation oriented and not stereo-typed

• Executives become innovative and creative

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Conclusion

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