Classical & Neo classical theory of management

Detailed Presentation on Classical and Neo classical theory of management

1. Contents Introduction Classical Theory Approach Definition of classical approach Scientific Management Theory Definition of scientific management 4 principles of F.W Taylor Techniques of scientific management Administrative Management Theory About Henri Fayol Division of industrial activities Qualities of an effective manager Functions of management 14 principles of management

2. Bureaucratic Management Definition of bureaucracy Characteristics of bureaucratic management Principles of bureaucratic management Neo- classical Theory Of Management Definition f neo-classical theory Elements of neo-classical management Human Relation Theory Definition of human relation theory Hawthorne experiment Behavioral Science Approach Definition of behavioral science approach Contribution of behavioral science approach

3. Introduction At the end of 19 th century, when factory production became pervasive and large scale organization raised, people started looking for the ways to motivate employees and improve productivity . A need of management idea came up, which directed to classical contributors such as F.W Taylor ,Henri Fayol and max generating management theories such as scientific management , administrative management and Bureaucratic management. As a reaction to approaches of classical theory which over – emphasized the mechanical and physiological character of management , came up the school of neo-classical theory with a more human – oriented approach.

4. Classical Theory Approach

5. Definition of classical approach Classical approach is the oldest formal school of thought which began around 1900 and continued into the 1920 ’s. Its mainly concerned with the increasing the efficiency of workers and organization based on management practices, which were an outcome of careful observation. Classical approach mainly looks for the universal principles of operation in the striving for economic efficiency.

6. SCIENCETIFIC MANAGEMENT THEORY F.W Taylor is the father of Scientific Management theory. He is the person who have given importance on efficiency for that reason he has published a book known as Piece Rate theory system. Born into a wealthy family in the US in 1856 Graduated from Stevens Institute Technology as a mechanical engineer in 1853 . Frederick Winslow Taylor (1856-1915)

7. Definition of Scientific Management Scientific management  is a theory of management that analyzes and synthesizes workflows. Its main objective is improving economic efficiency, especially labor productivity. It was one of the earliest attempts to apply science to the engineering of processes and to management. The Principles of Taylor's Scientific Management introduced systematic selection and training procedures, it provided a way to study workplace efficiency, and it encouraged the idea of systematic organizational design.

8. THE 4 PRINCIPLE OF F.W. TAYLOR

9. TECHNIQUES OF SCIENTIFIC MANAGEMENT

10. ADMINISTRATIVE MANAGEMENT Administrative management attempts to find a rational way to design an organization as a whole. The theory generally calls for a formalized administrative structure , a clear division of labor , and delegation of power and authority to administrators relevant to their area of responsibility. According to this theory, you should design an organization using a very formalized structure with clear lines of authority from the top to down. This is hierarchical structure

11. About Henri Fayol Life Time: 1841 - 1925 Profession: Mining engineer and management theorist . Education: Graduated from mining academy at st. Entinne in 1880. Position Held: Founded a mining company and became its managing director . Contribution: Mainly 14 Principles of management.

12. Fayol’s contribution to management are divided in four section: Division of Industrial Activities Quality of an effective manager Functions of management Principles of management

13. Division of industrial activities Technical Activities Commercial Activities Financial Activities Security Activities Accounting Activities Managerial Activities

14. Qualities of an effective manager Physically fit Mental Qualities (Smart) Moral Qualities Educational Qualities Technical Qualities Experience

15. Functions of management

16. 14 Principles of management

17. 14 Principles of management

18. BUREAUCRATIC MANAGEMENT The German sociologist Max Weber argued that bureaucracy constitutes the most efficient and rational way in which human activity can be organized and that systematic processes and organized hierarchies are necessary to maintain order, maximize efficiency, and eliminate favoritism

19. Definition of Bureaucracy “Bureau and Kratos” refers to the office the Greek suffix “kratia or kratos” means power or rule “Is a non personal of organisation that follows a formal structure, where rules, formal legitimate authority and competence are characteristic of appropriate management practice” : a large group of people who are involved in running a organisation but who are not elected : a system of government or business that has many complicated rules and ways of doing things : a system of administration marked by officialism, red tape and proliferation

20. CHARACTERISTIC OF BUREAUCRATIC MANAGEMENT Specialization of labor A formal set of rules and regulations Well-defined hierarchy within the organization Impersonality in the application of rules

21. . A formal hierarchical structure   – In a bureaucratic organization, each level controls the level below it. Also, the level above it controls it. A formal hierarchy is the basis of central planning and centralized decision-making. Rules-based Management  – The organization uses rules to exert control. Therefore, the lower levels seamlessly execute the decisions made at higher levels. Functional Specialty organization   – Specialists do the work. Also, the organization divides employees into units based on the type of work they do or the skills they possess. Up-focused or In-focused Mission   – If the mission of the organization is to serve the stockholders, board, or any other agency that empowered it, then it is up-focused. On the other hand, if the mission is to serve the organization itself and those within it (like generating profits, etc.), then it is in-focused.

22. NEO CLASSICAL THEORY OF MANAGEMENT

23. INTRODUCTION The term classical refers to work done by a group of economists in 18 th and 19 th centuries. The word neo means “New”. Much of these work was developing theories about the way markets and markets economists and the are generally termed “Neo-classical economists”. The neo classical approach was set out by Alfred Marshall in his principles of economics, published in 1890 .

24. . It may be noted here that the theories stated by Taylor and Fayol are called by writers as classical theories while the theories stated by writers as classical theories the human relations movement and the behavioural science movement are called new-classical theories.

25. Elements of Neo-classical theories 1 .Individual 2. Work Group 3 .Participative management 4 .Oreintation 5 . Motivation 6 . Leadership 7 . Employee Development

26. Individual Neo-classical theory recognized the individual differences which were ignored by the classical theory. Every individual has emotions, feelings, attitudes, hopes, aspirations, and expectations. The new-classical theory advocated a package deal of motivation, including financial and non financial incentives, to make the workers feel at ease at work and increase their productivity.

27. Work Group An individual in a group develops Social wants. As he is a social being, he develops a desire to belong & to be accepted by his work group. Participative Management Neo-classical theory suggested workers participation in management for improving their productivity.

28. Orientation Classical theory was job oriented while neo-classical theory is employee oriented. There is a shift in managerial style from product oriented approach to employee and group centred approach. classical theory was concerned with the basic needs of organization and society whereas neo-classical approach tried to satisfy the personal security and social needs of workers.

29. Motivation No-classical writers considered business organization as a social system, The employees could be motivated by social and psychological wants and not solely by economic incentives. Leadership Democratic style of leadership is essential to develop co-operative attitude of employee towards management.

30. Employee Development As there is a close connection between moral and production, neo-classical writers emphasized that management that must take greater interest in employee development workers satisfaction.

31. Neo Classical theory of management Human relation movement Behavioral system

32. Human relation theory of management The human relation theory of management began development in the early 1920 ’s during the industrial revolution At that time productivity was the focus of business . Professor Elton mayo began his experiment(the Hawthorne studies) , to prove the importance of people for productivity not machine

33. Human relation theory of management The human relations management theory is a researched belief that people desire to be part of a supportive team that facilitates development and growth . Therefore , if employees receive special attention and are encouraged to participate , they perceive their work has significance , and they are motivated to be more productive , resulting in high quality

34. Hawthorne Experiment George Elton Mayo( 1880-1949 ) was an Australian born psychologist , researcher and organizational theorist. Mayo is known as the founder of the human relations movement. The research he conducted under the rubric of the Hawthorne Studies in the late 1920 s and early 1930s showed the importance of groups in affecting the behaviour of individuals at work. He carried out a number of investigations to look at ways of improving productivity

35. Hawthorne Effect The Hawthorne effect is the idea that “behaviour during the course of an experiment can be altered by a subject’s awareness of participating in an experiment”. The initial Hawthorne effect took place in the Hawthorne plant of western electric company in the 1920 ’s and 1930 ’s. The studies were composed of many long “investigations into the importance for work behaviour and attitudes of a variety of physical , economic and social variables”.

36. Hawthorne Experiment The Hawthorne experiment were first conducted in November , 1924 at western electric company’s Hawthorne plant in Chicago. The initial tests were sponsored by the National research council (NRC) of the national academy of sciences. In 1927 , a research team from Harvard business school was invented to join the studies after the illumination test drew unanticipated results. A team of researchers led by George Elton Mayo from the Harvard business school carried out the studies. (General Electric originally contributed funding , but they withdrew after the first trial was completed).

37. Four Parts Of Hawthorne Experiment Part 1-Illumination Experiments ( 1924-27) . Part 2 -Relay Assembly Test Room Study ( 1927-1929). Part 3 -Mass Interviewing Programme ( 1928-1930 ). Part 4 -Bank Wiring Observation Room Experiment ( 1932 )

38. Part 1 – Illumination Experiments (1924-1927) These experiments were performed to find out the effect of different levels of illumination (lighting) on productivity. The brightness of the light was increased and decreased to find out the effect on the productivity of the test group. Surprisingly , the productivity increased even when the level of illumination was decreased. It was concluded that factors other than light were also important.

39. Part 2 – Relay assembly test room study ( 1927-1929) Under these test two small groups of six female telephone relay assemblers were selected. Each group was kept in a separate rooms. From time to time, changes were made in working hours , rest periods, lunch breaks, etc. They were allowed to choose their own rest periods and to give suggestions. Output increased in both the control rooms. It was concluded that social relationship among workers, participation in decision-making, etc. had a greater effect on productivity than working conditions.

40. Part 3 – Mass interviewing programme (1928-1930) 21,000 employees were interviewed over a period of three years to find out reasons for increased productivity. It was concluded that productivity can be increased if workers are allowed to talk freely about matters that are important to them.

41. Part 4 – Bank wiring observation room experiment (1932) A group of 14 male workers in the bank wiring room were placed under observation for six months. A workers' pay depended on the performance of the group as a whole . The researchers thought that the efficient workers would put pressure on the less efficient workers to complete the work. However, it was found that the group established its own standards of output , and social pressure was used to achieve the standards of output.

42. Behavioural science approach

43. Behavioural science theory It is redefined form of human relations approach. This approach focuses on individual behaviour, group behaviour, job design,motivation,leadership and communication. This approach emerged in the later years of 1940s. This approach is the basis of management discipline-organisational behaviour. But this approach is not applicable universally to all the organisations which operate in different social, religious and cultural background.

44. Contributors to behavioural science approach ABRAHAM MASLOW

45. Contributors to behavioural science approach Fredrick Herzberg

46. Contributors to behavioural science approach Douglas McGregor

47. Contributors to behavioural science approach David McClelland Needs theory Need for power : desire to influence or control others ,be responsible and have authority over others. Need for achievement : desire to accomplish something difficult , attain high standards of success , master complex tasks , surpass others. Need for affiliation : desire to form close personal relationships and friendships , avoid conflicts.

48. It believes that- Organisational is a socio-economic and technical system. A variety of factors influence the interpersonal and group behaviour of people in organisations. Individuals working in an organisation have goals which may differ from organisational goals. Conflict is inevitable. Individuals differ in personality , attitude , beliefs , perception , etc. Motivated workers are key to productivity. High performance can be better be achieved by self direction and control. An open and trusting organisational climate improves productivity.

49. Conclusion Classical and neoclassical approaches made a crucial role in the advancement of management theories and practices Though classical theory is now outdated, it is still important as it introduced the concept of management as a subject for intellectual analysis . Neoclassical approach put overemphasis on human variable and symbolic reward . So it is clear that the field of management has some remarkable theories which are underpinned by pragmatic study evidence . The development holds a rather brighter future for the study , research and practice of management .