In this article we will discuss about the evolution of management thought. This article will further help you to learn about:

  1. Evolution of Management Thought from Classical to Modern
  2. Evolution of Management Thought Notes
  3. Evolution of Management Thought in Principles of Management
  4. Stages in Evolution of Management Thought
  5. Neoclassical Theory of Management
  6. Classical Theory of Management
  7. Modern Management Theory

Evolution of Management Thought: Classical Theory, Neo-Classical Theory and Modern Theory of Management

The evolution of management thought may be divided into three stages:

1. The Classical Theory of Management

2. The Neo-Classical Theory of Management


3. The Modern Theory of Management

Evolution of Management Thought # 1. The Classical Theory of Management (With Features):

Thinking on management as a separate field of learning and practice began early in the 19th century. It was at this time that persons like Robert Owen, Charles Babbage, Metcalf, Henry Robinson Towne, James Watt Jr., Mathew Boulton, Max Webber, F.W. Taylor and Henry Fayol etc. expressed their ideas on the ways and means of making management practices effective and efficient.

This approach is also known as traditional approach or empirical approach. It was developed through three streams such as – (1) Scientific Management developed by F.W. Taylor, Harrington Emerson, Henry Ganlt etc. (2) Administrative Theory developed by Henry Fayol, Lyndall, Urwick etc. (3) Bureaucracy developed by Max Webber.

The main features of this classical approach are:


1. Management is a systematic network (process) of interrelated functions.

2. Formal education and training is emphasized for developing management skills.

3. People are motivated by economic gains.

4. Stress was given to the formal organization structure.


5. Many principles have been developed for the practicing executive.

6. Functions, principles and skills of management are considered universal.

The contributions of some thinkers in this area are discussed here:

1. Robert Owen (1771 – 1858):


He managed a group of textile mills in Lanark (Scotland) during 1800 – 1828. He carried out many experiments and introduced many social reforms. He emphasized that workers’ performance was influenced by the total environment in which they worked. He said employees are Machines and their maintenance is necessary. Throughout his life he worked for the building up of a spirit of cooperation between the workers and management.

He suggested that investment in human resources is more important than the investment in physical resources. He introduced new ideas of human relations, e.g., shorter working hours, housing facilities, education of children, provision of canteen, rest pauses, training of workers in Hygiene etc. He began cooperative movement in 1828 in Rochdale, England. He is rightly called the father of Modern Personnel Management.

2. Charles Babbage (1792 – 1871):

He was a professor of mathematics at Cambridge University. His best known book is “on the economy of machinery and manufactures” published in 1832. He found that manufactures were using traditional methods of work, relying more on guess work and based decisions on old opinions. He perceived that the methods of science and mathematics could be applied to the operations of factories.


His main contributions are as follows:

i. Use of Science and Mathematics in improving manufacturing operations.

ii. There should be division of work and workers should be assigned work as per their skills.

iii. The decisions should be based on investigation and accurate knowledge.


iv. Applying the Mechanism of time and motion study for improving the performance on machines.

v. He emphasized the necessity for reducing cost through the discovery of improved methods of work.

vi. He suggested that the interests of management and workers must be closely linked through profit sharing and participative decision making.

vii. He invented calculating Machine – The Fore runner of the modern calculator.


He laid emphasis on specialization, work measurement, optimum utilization of machines, cost reduction and wage incentives. He laid the foundation for formulation of scientific study of management.

3. Henry Vamun Poor:

He was the editor of the American Railroad Journal. During that period he closely studied functioning of the American Railroad system. He stressed upon the need for effective management.

He advocated three Principles – organization, communication and information for Railroad managers. He observed the need for a managerial system with a clear organization structure. He suggested a kind of leadership to overcome the rigidities of the formal organization.

4. Henry Robinson Towne (1844 – 1924):

He was a President of a lock manufacturing company. He has taken interest in the better management of business and has applied his ideas successfully in his company. In 1886, he has presented a paper entitled “The Engineer as an Economist.” In this paper he urged the combination of engineers and economists as industrial managers. He also suggested organized exchange of experience among managers and an organized effort to gather the accumulated knowledge in the art of workshop management.


5. James Watt and Mathew Rabinson Boulton (1796 – 1848) (1770 – 1842):

They were the sons of the distinguished inventors of steam engine.

They applied several management techniques such as:

(1) Market research and forecasting.

(2) Standardization components and parts.

(3) Production Planning.


(4) Scheme for developing executives.

(5) Maintenance of advance control report and cost accounting procedures.

(6) Elaborate statistical records.

(7) Planned Machine for better work flow.

(8) Provision of employee welfare with sickness benefit scheme.

6. Max Webber (1864 – 1920) (Bureaucratic Model):


He was the chief exponent of the Bureaucratic model. He emphasized on the recognition and exercise of authority is the fundamental question. For answering this question he has classified authority structures into three categories. They are charismatic, traditional and Bureaucratic. A charismatic leader’s authority is expected by virtue of some exceptional innate qualities.

The authority which flows from generation to generation or hereditary is called traditional authority. The authority which comes from the position in the organization is called Bureaucratic authority. This authority will have a clearly defined set of rules, procedures and roles.

This model includes the following:

(i) There is clearly separation between superior and sub-ordinate.

(ii) There is a division of labour based upon competence and functional specialization.

(iii) There is a clear divorce between personal and official matters.


(iv) There is a system of rules, regulations and procedures.

(v) There is a hierarchy in positions based on legal authority and power.

Benefits of Bureaucracy:

The following are the benefits of this model:

i. The rules and procedures are decided for every work which in turn leads to consistency in employee behaviour.

ii. The duties and responsibilities of each job are clearly defined with which overlapping of duties can be removed.


iii. The selection process and promotion procedures are based on merit and expertise.

iv. The division of labour helps workers in becoming experts in their jobs.

v. Organization does not suffer when some persons leave it.

Disadvantages of Bureaucracy:

They are as follows:

i. This system suffers from too much of red tape and paper work.

ii. The employees may not have belongingness to the organization.

iii. Too much dependence on rules and regulations and sticking to these policies lacks initiative and growth of the employees.

7. Fredrick Winslow Taylor (1856 – 1915):

Father of scientific management. In his experiment he has concluded that the main reason of general inefficiency and wastage in factories was ignorance on the part of both workers and management. He made efforts to replace the primitive rule of thumb methods by modern scientific methods based on investigations, analysis and measurement. He defined management as “the art of knowing exactly what you want men to do and seeing that they do it in the best and cheapest way”.

He gave the following principles of scientific management:

i. Every job should be broken into elements and a scientific method to perform each element should be established.

ii. Scientific selection, training and development of workers for each job.

iii. Management should cooperate with workers to maximize efficiency and productivity.

iv. The work and responsibility should be scientifically distributed between workers and management.

Scientific management has the following applications:

i. The efforts to be utilize to the maximum, wastages should be eliminated.

ii. Use of monetary and other incentives for improving the productivity of workers.

iii. Establishment of performance standards.

It has been criticized due to the following factors:

i. It ignored the human side of organization and was devoid of a human touch.

ii. The incentives to workers were not commensurate with the increase in productivity.

iii. Specialization makes the work repetitive and monotonous.

8. Henry Fayol (1841 – 1925):

Henry Fayol wrote a book on General and industrial management. This book is considered to be one of the best classics in management.

His contributions to management may be analysed under the following heads:

Classification of Business Activities:

According to him, all activities of a business enterprise could be divided into six categories- (i) Technical Activities (production), (ii) Commercial activities (buying, selling and exchange), (iii) Financial activities (search for and optimum use of capital), (iv) Security activities (protection of property and persons), (v) Accounting activities (including statistics), (vi) Managerial activities.

Functions of Management:

He divided the key (unction of administration into five sub-groups such as- (i) Planning (to foresee and provide means for the future), (ii) Organizing (provides everything useful to its functioning, raw material, tools, capital, personnel). (iii) Coordinating (binding together – unifying and harmonizing all activity), (iv) Commanding (lead the personnel in a better way), (v) Controlling (ensuring everything goes as per plans).

Principles of Management:

He gave 14 principles of management- (i) Division of work (ii) Authority and responsibility (iii) Discipline (iv) Unity of command (v) unity of direction (vi) Sub-ordination of individual to general interest (vii) Remuneration of personnel (viii) Centralization (ix) Scalar chain (x) Order (xi) Equity (xii) Stability of tenure of personnel (xiii) Initiative (xiv) Esprit de Corps.

Managerial Qualities and Training:

Fayol stressed that management skills can and should be taught first in the class room and then at the work place.

He identified the following skills which persons desirous of entering management career should learn:

(i) Physical (health, vigour and address),

(ii) Mental (ability to understand and learn, judgment and adaptability),

(iii) Moral (energy, firmness, initiative, loyalty, tact and dignity)

(iv) General education (general acquaintance with matters not belonging exclusively to the function performed)

(v) Special knowledge (peculiar to the function being performed)

(vi) Experience (knowledge arising from work proper)


The following are the merits:

i. It is a comprehensive theory of management applicable to all organizations.

ii. He has given functions of the management and principles.

iii. He stressed the universal character of management and the need for formal training.


Following are the demerits:

i. His theory is considered to be too formal.

ii. This approach pay less attention to workers.

iii. There is a vagueness and superficiality about some of his terms and definitions.

Distinction between Taylor and Fayol:

We have seen that both F. W. Taylor and Henry Fayol have contributed to the science of management. There are points of similarity and dissimilarity in the works of both of these pioneers.

Thus sum up the points of similarity and dissimilarity between the two as follows:


i. Both of them realized the universality of management.

ii. Both applied scientific methods to the problems of management.

iii. Both realized the importance of personnel and its management at all levels.

iv. Both wanted to improve the management practice.

v. Both of them developed their ideas through practical experience.

vi. Both of them expressed their ideas through their books.

vii. Both of them emphasized mutual co-operation between employers and employees.


i. Taylor focused his attention on the problems of shop floor while Fayol concentrated on the functions of managers at top level.

ii. Taylor worked from the bottom of the industrial hierarchy upwards, while Fayol concentrated on the chief executive and worked downwards.

iii. The main aim of Taylor was to improve productivity of labour and eliminate wastages. Fayol attempted to develop a universal theory at management.

iv. Taylor called his philosophy or work as ‘Scientific Management’ whereas Fayol described his work as ‘General Theory of Administration’.

v. Taylor is known as Father of Scientific Management and Fayol as the father of Principles of Management.

vi. Taylor’s philosophy has undergone a big change under the influence of modern developments, but Fayol’s principles of management have stood the test of time and are well accepted even in the present days.

vii. Fayol looks to the management in the wider aspect as compared to Taylor.

Evolution of Management Thought # 2. The Neo-Classical Theory of Management:

This theory deals with the human factor. Elton Mayo and Mary Parker Follett are the main contributors of human relations approach. This approach also causes ‘Behavioural Science Management’ which is a further refinement of human relations approach.

Human Relations Movement:

This approach deals with the factors which encourage higher performance on the part of workers. The productivity can be increased in the organization by improving the working conditions, lowering of hours of work, by establishing social relations among managers.

The contributions of some thinkers in this area are discussed here:

a. Elton Mayo (1880 – 1949):

He was an Australian by birth. He was a professor of industrial research at the Harvard Graduate School of Business Studies. Elton Mayo and his associates contributed much to this approach. Mayo is called as father of human relations approach. He is known for his work which is commonly referred as the Hawthorne studies. These studies conducted to study the relationship between workers’ output and physical conditions in the organization.

This study revealed that an organization is not only a formal arrangement of men and functions but also a social system which can be operated successfully only with the application of the principles of psychology and other behaviour sciences.

He observed that the performance of workers in the organization can be improved by considering the following factors- (1) Less restrictive methods of supervision (2) giving independence to workers (3) allowing the formation of small cohesive sub-groups of the workers (4) creating good conditions to improve themselves and (5) a good cooperation between management and workers.

Distinction between Taylor and Elton Mayo:

Both of them have focused on increasing production and reducing industrial conflicts.

But they have differed in the following way:

Taylor’s Scientific Management Theory:

i. Financial incentives have been given much importance to increase the satisfaction of employees.

ii. Workers are considered as ‘individuals’ so far as their contribution to organizational output is concerned.

iii. This theory has considered management from the point of view of managers.

iv. It has applied all scientific methods to increase production.

v. Here lower order needs of workers are given more importance than higher order needs.

Elton Maya’s Human Relations Theory:

i. Non-financial incentives have been given importance.

ii. Workers are considered as part of the group.

iii. This considered from the point of view of workers.

iv. This has given importance to human relations to increase productivity.

v. Here, higher order needs are given more priority than lower order needs.

b. Mary Parker Follett (1868 – 1933):

(i) Another thinker associated with this approach is Mary Parker. She favoured participation of workers in the decision-making process. She was also favoured for professionalization. She interpreted classical management principles in terms of human factors. She has a reputation as a pioneer of human relations approach.

(ii) Behavioural Sciences Movement- Many sociologists and psychologists like Maslow, Douglas McGregor, Resins Likert, Keith Davis, Chester Bernard etc., have made contributions to the development of this approach. This approach has concentrated on inter-personal roles and responsibilities.

The basic features of this approach are- (1) an organization is a socio-technical system (2) there should the relationship between organizational goals and human needs (3) many factors will influence inter-personal and group behaviour of people in the organization (4) conflicts are inevitable in the organizations.


Following are the merits of this approach:

(1) This approach recognizes the quality of leadership as a critical factor in management success.

(2) It recognizes the role of individual psychology and group behaviour in organizational effectiveness.


The following are the limitations:

(1) It errs by almost identifying management with the study of social and industrial psychology.

(2) This approach neglects the economic dimension of work satisfaction.

Some of the contributions under this approach are discussed as follows:

A. Abraham Maslow:

He has propounded a general theory of motivation known as Need Hierarchy Theory. The features of this theory are- (1) Human needs are multiple, complex and interrelated. (2) Needs form a particular structure or hierarchy. (3) As soon as one need is satisfied, another need emerges, (4) A satisfied need is not a motivator. (5) Various need levels are inter-dependent and overlapping.

He classified the needs as follows:

i. Physical Needs – These are biological needs required to preserve human life such as food, cloth and shelter.

ii. Safety Needs – These consists of physical safety against murder, fire, accident, security against unemployment etc.

iii. Social Needs – Needs refer to need for belonging, need for acceptance, need for love and affection etc.

iv. Esteem Needs – These are the needs derived from recognition, status, achievement, power, prestige, etc.

v. Self Actualization Needs – It is the need to fulfill what a person considers to be his real mission in life.

B. Douglas McGregor (1906 – 1964):

He has developed a theory of motivation on the basis of hypotheses relating to human behaviour. According to him the function of motivating people involves certain assumption about human nature. There are two alternative sets of assumptions which he has described as theory X and theory Y. Theory X represents the traditional and narrow view of human nature. That is the average worker is lazy and dislikes work, his unambitious, avoids responsibility and prefers to be led. He gave theory Y as an answer to such situations.

C. Rensis Likert (1903 – 1972):

He was the director of the institute of social research at the University of Michigan (USA). He conducted research in the field of leadership. He has summarized the research by conducting that the most effective managers engage in both dimensions of leadership behaviour by getting employees involved in the operation of their developments or divisions in a positive and constructive manner, setting general goals, providing fairly loose supervision and recognizing their contributions. He called these managers employee-centered leaders.

Less effective leaders are mostly directive in their approaches and most concerned with closely directing employees, explaining work procedures and monitoring progress in task accomplishment, there he called job centered leaders.

So he is best known for his classification of management styles into four categories:

i. Exploitative Autocratic – Subordinates are given no participation in decision-making because leaders have no confidence in them.

ii. Benevolent Autocratic – Management has condescending confidence in sub-ordinates just as a master has towards a servant.

iii. Participative – Employees are allowed to participate meaningfully in decisions affecting their lives.

iv. Democratic – Leaders have full confidence in sub-ordinates. Therefore, participation is meaningful.

He developed the concept of ‘linking pin’ to integrate individual and organizational goals. Lender this approach each group is integrated with other groups in the organization by means of persons who are members of more than one group. Such members are known as ‘linking pins’. So he will be a leader for the lower level unit and a member in the upper level unit. He and his associates also developed a measuring instrument for evaluating leadership styles of individual managers.

D. Chester I. Barnard (1886 – 1961):

He was the President of new Jerry Bell Telephone Company. His important publications are “The Functions of the Executives”, “Organization and Management” and “Elementary Conditions of Business Morals”.

The main contributions of Barnard are given below:

i. He defined organization as a ‘system of consciously coordinated activities of two or more persons’. He highlighted three characteristics of the organization i.e., – (a) the persons are able to communicate with each other (b) they are willing to- contribute to the action (c) there is a common purpose.

ii. He has also divided the organization into formal and informal and he said that informal organization is an important part of formal organization.

iii. He has divided the functions of executive into three categories- (a) The maintenance of organizational communication (b) Securing essential services from individuals in the organization (c) formulating and defining the purpose.

iv. He has also concentrated on the acceptance of authority for achieving organizational goals.

v. He has contributed towards the establishing the relationship between formal and informal organizations.

vi. He stressed the complexity of organization processes and human motivation.

vii. He considered that leadership is the most important factor in an organization. So his contributors to management thought have been outstanding.

Human Relations Theory and Behaviour Science Theory- A Comparison:

Human Relations Theory:

i. It has concentrated on individual behaviour.

ii. This considers group conflict as a negative force that affects organizational efficiency.

iii. It views the workers as a ‘Social Man’.

iv. It gives importance to formal organization structure.

v. It views organization as social system.

vi. It does not provide scientific vision to study human behaviour.

vii. Self-direction and self-control techniques are used in a limited extent.

viii. It permits group decision-making to a limited extent i.e., only to the routine decisions.

Behavioural Science Theory:

i. It has concentrated on group behaviour.

ii. This considers group conflict as source of new and innovative ideas.

iii. It views the workers as a ‘Self-Actualizing Man.’

iv. It emphasises on comparatively a flexible organization structure.

v. It views as socio-technical system.

vi. It provides scientific understanding of human behaviour.

vii. Self-direction and self-control techniques are used to increase group efficiency.

viii. It encourages group decision-making for both routine and important matters.

Evolution of Management Thought # 3. The Modern Theory of Management:

Under modern management thought, streams of thinking have been noticed since 1960.

These approaches are discussed as under:

1. Quantitative Approach or Mathematical Approach:

It is also known as Management science approach or decision theory approach. It was developed by W.C. Churchman and others. It focused on use of mathematical and statistical techniques in management. It also focused on finding right answers to management problems.

The basic features of this approach are – (1) Management is a series of decision-making (2) Mathematical models can be developed by quantifying various variables of the problems (3) Mathematical symbols can be used to describe managerial problems (4) Organizations exist for the achievement of specific and measurable economic goals.


The following are the merits of this approach- (1) It emphasizes the great importance of the study of diverse decision situations and the means of perfecting them. (2) It stresses the replacement of intuition and hunch by factual data and logical analysis in the decision-making process.


They are – (1) The data available in the business may not always be upto date and it may lead to wrong decision-making (2) It errs by arguing that management has no other functions except decision-making (3) This approach is based on unrealistic assumptions i.e., all related variables are measurable and have a functional relationship.

2. System Approach:

This approach is based on the generalization that an organization is a system and its components are inter-related and inter-dependent. The effectiveness of the system mainly depends upon the inter dependence and inter- relatedness of the various sub systems.

The features of this approach are- (1) An organization is a system consisting of several sub-systems (2) All sub-systems are mutually related to each other (3) All sub-systems should be studied in their inter­relationship rather than in isolation from each other (4) The organization is responsive to environment effect.


The following are the uses of this approach- (1) It provides a unified focus to organizational efforts (2) It provides a strong conceptual framework for meaningful analysis and understanding of organizations (3) It recognizes the interaction and inter-dependency among the different various of the environment (4) This approach is better than others because it is close to reality (5) It treats organization as an open dynamic system.


The following are the limitations- (1) This system is oftenly called abstract and vague and cannot directly and easily be applied to practical problems (2) It does not offer specific tools and techniques for the practicing executive (3) It is not clearly specifying the nature of interactions and inter-dependencies specially between an organization and its external environment.

3. Contingency or Situational Approach:

This approach was developed by J. W. Lorsch and P. R. Lawrence. This is new approach to management. The basic essence of this approach that organizations have to cope with different situations in different ways. So managers should develop variable methods, tools and action plans as per the required situation.


They are – (1) Management is entirely situational so the application and effectiveness of any technique is contingent on the situations. (2) Policies and procedures should be according to environmental conditions (3) Managers should understand that there is no one best way to manage. They must not consider management principles and techniques universal.


The following are the uses of this approach- (1) This approach takes a realistic view in management and organization. (2) It dispels the universal validity of principles. (3) Managers are advised to be situation oriented. (4) Managers become innovative and creative. (5) This approach has a wide applicability in organization. (6) It is an improvement over the systems theory, as it not only examines the relationships between sub-systems of an organization but the relationship between the organization and its environment too.


They are as follows- (1) It lacks theoretical base (2) A manager is required to think through all possible alternatives before taking action which is not always possible.

4. Operational Approach:

Koontz and O’Donnell have advocated this approach to the management. This approach recognizes that there is a central core of knowledge about managing which exists only in the field of management. Such as line and staff, departmentation, managerial appraisal and various managerial control techniques, span of management etc. In addition, the operational approach derives knowledge from other fields like systems approach, decision approach, motivation and leadership theories, theories of communications and cooperation.

This approach regards management as a universally applicable body of knowledge that can be brought to bear at all levels of managing and in all types of enterprises. At the same time, the approach recognizes that the actual problems manages face and the environment in which they operate may vary between enterprises and levels and it also recognizes that application of science by a perceptive practitioner must take this into account in designing practical problem solutions.

The above decision reveals that management thought is an outcome of many contributions of many management thinkers.

Some other Contributions to Management:

1. Theory of Peter F. Drucker:

He born in 1909. He is more popularly known as the ‘Father of Modern Management’. He is famous for his contribution in the field of management.

His contribution to management is discussed below:

a. Management is a Profession:

Every society has institutions which provide employment to its members and fulfill their needs. Management of these institutions affects their performance and survival. Managers are different from owners and possess specialised skills to perform the managerial tasks. He, thus, considers management as a profession.

b. Focus on Business Organisations:

Amongst various institutions, the focus of management is on business institutions because efficiency of management can be judged through economic results that it produces and the most important economic institution is the business institution. Besides, management can also reform Government and society and promote values, customs and beliefs of the society.

C. Synthesis of Classical and Behavioral Thoughts:

Management aims at making work productive and worker achieving. The work should be result-oriented. It should not be considered different from the worker. The worker should be considered as a human being with physiological and psychological needs and management should fulfill these needs. Management is, thus, a profession which achieves organisational tasks along with satisfaction of human wants. Management, in this sense, synthesises classical and behavioural schools of management thought.

d. Systems Approach to Management:

Every institution is a part of society and cannot ignore its impact on business institutions and vice versa. The systems approach to management is also considered by Drucker for managing the business organisations.

e. Management by Objectives:

Drucker originated the concept of Management by Objectives (MBO). It stresses on participative management where managers at all levels participate in the goal setting process so that individual performance synthesises with organisational performance.

According to him, MBO helps to overcome four major organisational problems:

(i) The specialised work of most managers

(ii) The hierarchical structure of management

(iii) The differences in vision and work and

(iv) The compensation structure of the management group.

f. Management Skills:

Drucker advocated that managers must have the following skills to make management effective:

(i) Skills to make effective decisions

(ii) Skills to communicate in and outside the organisation

(iii) Skills to make proper use of controls and measurements and

(iv) Skills to make proper use of analytical tools, that is, the management sciences.

g. Organisation Structure:

Rather than focusing on task-oriented or person-oriented approach to management, Drucker focused on organisation structure that is both task-focused and person- focused. He, thus, advocates both scientific management and human relations doctrine.

h. Social Responsibilities:

According to Drucker, profits are necessary for business but they should not be the goal of the business. “There is only one valid definition of business purpose, to create a customer”. Profit is the test of business efficiency and the reason for an organisation to stay in business but management is also responsible for its functions to the society.

Profits and social responsibilities should be considered together. Drucker specified eight areas where organisations have objectives. These areas represent an optimum mix of profitability and social responsibility.

i. Development of Managers:

Represent a business. There must be constant development of managers, through training and development programmes so that business organisations secure their present as well as future.

j. Key Result Areas:

Marketing, Innovation, human organisation, financial resources, physical resources, productivity, social responsibility and profit requirements are the eight important business areas where, according to Drucker, objectives must be rationally set.

2. Theory of Tom Peters:

Tom Peters ideas on management are presented below:

i. Tom Peters advocates the concept of ‘liberation management’ which challenges the rigid organisation structure that inhibits people’s creativity. Organisation structures should be flexible. Modern managers are concerned with not only what happens inside the organisation but also with what happens outside the organisation.

ii. Organisational members should be empowered to generate new ideas, products and relationships. This empowerment is called liberation management by Peters. Power involves how people view their relationships with each other. The concept of power and individual liberty are linked together. Managers who exercise power encourage group members to develop the strength and competence as individuals and as members of the organisation.

iii. Jobs should be made rewarding and redefined to include greater, legitimate and expert authority. Empowerment indicates what managers do in these jobs.

Two empowering ways to redesign jobs are:

(a) Job Enlargement:

It means increasing the jobs scope. Work from two or more positions may be combined to restore wholeness of the job. This breaks the monotony of a routine job and makes it interesting and challenging.

(b) Job Enrichment:

It increases depth of the job by adding work activities from vertical line of the organisational unit. Jobs in vertical line are combined into one position to give employees more autonomy on the job. This develops a sense of accountability by allowing workers to set their work place, correct their errors and decide the best way to perform various tasks. As the work becomes more challenging and responsibility of workers increases, their enthusiasm and motivation also increases.

iv. Organisational members should rethink how they relate to their customers and make rethinking a part of their organisational practices.

v. All organisations should operate according to rules and procedures. Managers and employees should deal with customers according to rules.

vi. Organisations should be flexible with management attitude biased towards creative human efforts. According to Peters, “Those who would survive, managers and non- managers alike, will simply have to make their own firm, create their own projects.”

3. Theory of Michael Porter:

Michael Porter views organisations as open systems that actively interact with the environment.

His contribution to management thought can be studied under the following headings:

i. Five Force Analysis:

He provides techniques to analyse environmental forces that help managers in making optimum decisions.

He describes the following forces that determine the nature of competition in the industry:

(a) Threat of Entry of New Competitors:

When new firms enter the industry, they bring new resources of production. This increases marketing cost and decreases sales of existing firms.

(b) Bargaining Power of Buyers:

When buyers form a powerful group, they influence industry competition by affecting product quality, prices etc. When they demand high quality goods and services, it increases industry competition and forces the firms to reduce their prices.

(c) Threat of Substitute Products:

Substitute products in the market restrict the prices at which firms can sell their products. Firms whose products are vulnerable to substitute products must remain aware of such products in the market.

(d) Bargaining Power of Suppliers:

Suppliers have strong bargaining capacity when firms’ prices are fixed. While dealing with such firms, suppliers may raise their prices or reduce the quality of the supplies.

(e) Rivalry among Existing Firms:

Rivalry amongst existing firms also increases costs and lower profit margins. Greater the intensity of rivalry, less attractive is the market for competing firms.

Porter’s thoughts on competition in the industry provide information to assess forces that affect inter-firm and inter-industry competition. It helps in making competitive strategies where they foresee the environment and achieve their objectives.

ii. Generic Competitive Strategies:

Prof. Michael E. Porter has suggested the following strategies to deal with five competitive forces:

(a) Cost Leadership Strategy:

In this strategy, the firm increases its market share by reducing the cost of its products, reducing the selling price and increasing its sales volume. Higher profits are earned by increasing sales in the present market by reducing the costs (production, research &C development, advertising etc.) below the competing firms. This keeps competition out and protects the firm against bargaining power of buyers and suppliers.

(b) Differentiation Strategy:

In this strategy, firm increases its market share by keeping the prices of its products same or even more than those of its competitors. It changes the product features like colour, shape, design or size and creates customer appeal and brand image for its products. Since the product features are different from those of the competitors, it creates brand loyalty amongst customers and without reducing the costs, increases the sales volume and profits.

(c) Focus Strategy:

In this strategy, the firm increases its market share, sales volume and profits by focusing on a specific section rather than the entire market. The focus may be on a group of customers (males or females) a specific product (one product rather than the whole product line) or a specified area (only northern region rather than the whole country). The aim is to sell more in a narrow market.

This can be done through cost reduction (lower prices), production differentiation (better customer appeal), or both. By serving in the narrow strategic market, the firm faces competitors serving the broader market area.

iii. Value Chain Analysis:

Michael Porter popularised the concept of value chain in 1985 ii his book Competitive Advantage – Creating and Sustaining Superior Performance. Every organisation depends on customers for its survival and growth. Customers exchange money for the value they derive from goods and services. “Value is the performance, characteristics, features and attributes and any other aspects of goods and services for which customers are willing to give up resources (usually money).”

Customers want value from goods and services and organisations provide that value to attract and retain customers. Business firms provide value by transforming raw material and other resources into goods or services that customers want and provide them, where, when and how they want. Converting resources into outputs that customers value and pay for involves a wide set of inter-related activities performed by different participants (suppliers, manufacturers, distributors and the customers themselves).

“The value chain is the entire series of organisational work activities that add value at each step beginning with the processing of raw materials and ending with finished product in the hands of end users.” Using the concept of value chain that defines the power of suppliers, manufacturers, distributors and customers, managers find that unique combination of value chain in which customers are offered goods at a rate and price that competitors cannot.

A good value chain provides a sequence of participants who work as a team, each adding some component of value, like faster assembly, accurate information, better customer response, better customer service etc. When value is created for customers and their needs are satisfied, everyone along the value chain gets benefited.

Requirements of a Value Chain Management:

A successful value chain management has six main requirements:

(a) Co-Ordination and Collaboration:

There must be co-ordination and collaboration amongst all members of the value chain. Members must identify things that customers value as important. Value chain partners share and analyse information through open communication.

(b) Technology Investment:

In a successful value chain management, significant investment is made in information technology. It requires a software system that links all organisational activities, work planning and scheduling software, customer relationship management systems, e-business corrections with trading network partners etc. Investment in information technology is used to restructure the value chain to serve the customers.

(c) Organisational Processes:

A successful value chain management requires radical changes in the organisational processes, that is, the way organisational work is done. Managers should evaluate their organisational processes and use their capabilities and resources (core competencies) to eliminate non-value adding activities and determine areas where value is to be added. The aim of evaluating organisational process is improvement in flow of material and information, better configuration of products, improvement in customer services etc., in every organisational task.

(d) Leadership:

Successful value chain management requires strong and committed leadership. Managers at each level should support, facilitate and promote value chain management practices. They should clarify each employee’s role in the value chain.

(e) Employees/Human Resources:

Human resources (employees) are the most important component of value chain management.

For a successful value chain management, there are three human resource requirements:

(i) Flexibility of Job Design:

Employees perform jobs that provide value to customers. Jobs should be flexible to the creation and delivery of customer value. Employees should perform those jobs that maximise customer value.

(ii) Hiring Process:

Flexible jobs require flexible employees. Employees perform different tasks depending on what customers want. There are no standardised job processes; therefore, employees’ ability to perform those jobs must be flexible. The hiring process must identify employees who have the ability to learn and adapt to changing customers’ needs.

(iii) Ongoing Training:

In order to be flexible, employees should be trained to use information technology software, improve the flow of materials in the chain, make better decisions, improve work activities etc. Managers should make significant investment in employees’ training to make them efficient at their jobs.

(f) Organisational Culture and Attitudes:

A successful value chain management requires a supporting organisational culture and attitude that includes sharing, collaborating, openness, flexibility, mutual respect and trust amongst parties, internal and external to the organisation.

4. Theory of Peter Senge:

Peter Senge introduced the concept of learning organisation and presented his ideas on management in his famous book. ‘The Fifth Discipline’.

His ideas on management are presented below:

i. Changes constantly take place in and around organisations to overcome the lethargy and stagnation in business organisations. Organisational members are so occupied with their routine work that they have no energy to create new ideas, products and relationships. To overcome this stagnation, members should cope with changes in and around them.

ii. He distinguishes between adaptive learning and generative learning. Adaptive learning means coping with change. Generative learning means creativity. It comes from joint efforts amongst organisational members. Generative learning is the greatest hope for organisations of the modern century. He calls organisations with generative learning organisations.

iii. He advocates that workers are more directly involved in work situations and have better solutions than management. This type of learning can lead to much greater teamwork and more effective organisation.

iv. Innovations in information and computer technology have rendered the past management guidelines and principles obsolete. In the 21st century, organisations will be successful if they learn and respond to changes quickly.

v. In order to be adaptive, managers should challenge the conventional knowledge base, recognise value of accumulated knowledge, share it with others in the organisation, manage that knowledge base and make the necessary changes. The focus is on positive attitude towards change and new ideas. It holds everyone in the organisation responsible for innovation and not just the R&D department.

The main fear lies in not learning and not adapting to changes. A firm’s competitive advantages, thus, lies in its ability to learn, accumulate knowledge and expertise and enable others to acquire them.

Peter Senge suggests the following for creating a learning organisation:

i. Systems Thinking:

Organisation is an open system that interacts with environment and has its own learning patterns and processes. Managers should identify patterns that lead to repetitive thinking and delimit organisation’s growth. They should understand how the organisation works in order to improve it.

ii. Personal Mastery:

People should open with others, enhance their capability to make their future, develop a sense of vision, create successful learning and accomplish the results they want. They learn to master themselves. Personal growth leads to organisational growth.

iii. Mental Models:

People should unlearn the old ways of working and enhance driving forces that promote organisations values and principles.

iv. Shared Vision:

People should develop a shared vision, that is, a vision that completely coordinates individual goals with organisational goals. People should work as a team. Team and individuals should be considered the same. This will lead to innovation, creativity, members’ personal growth and organisational growth.

v. Team Learning:

People should work as a team to achieve the goal of shared vision. There should be extensive dialogues and discussions to arrive at the best decision for generating adaptive learning.

5. Theory of Hammer:

Hammer is known as the father of re-engineering. His ideas on management are presented below:

i. Re-Engineering:

He advocated the practice of re-engineering the organisation. Re- engineering improves the quality and lowers the cost of product by “analysing the operations of the product or service, estimating the value of each operation and attempting to improve that operation by trying to keep cost low at each step or part.”

This concept involves division of a product into parts, estimating cost of each part, identifying each part’s contribution to the final product and finding alternatives for parts which have high cost and low value.

ii. Re-Assessing:

He advocates re-engineering the organisation by reassessing it. Managers should ask themselves a basic question. “If I were recreating this company today, given what I know and given the current technology, what would it look like?” Managers should imagine they are starting from scratch.

iii. Re-Thinking:

Organisational members (managers and non- managers) should not focus on immediate jobs and departments. They should focus on larger pattern of relationships in which they work and influence the lives of others. These relationships should connect organisational members with people outside the organisation.

According to Hammer, “Re-engineering means radically rethinking and redesigning those processes by which we create volume (for customers) and do work.”

Rethinking helps companies determine their core competencies (abilities and skills) in areas where they should operate and diversify and put their plans into action to meet customers’ desires and expectations.

iv. Improvements:

To do things differently, companies should focus on speed, quality and overhead costs as important competitive issues. “The hallmark of a really successful company is its willingness to abandon what has been successful in the past. There is no such thing as a permanently winning formula.” Managers need to replace old ways of doing things with new ways. They should unlearn the old principles and develop more innovative and flexible business processes.

v. Revolutionary Change:

His ideas on re-engineering focus on revolutionary change and not orderly change. Re-engineering brings dramatic and radical shift in the way the organisation performs its work. It discards old ways of doing things and starts over again by redesigning the way work is done. It helps to determine customers’ needs and redesign work processes to best meet these needs.

vi. Participative Decision-Making:

Re-engineering is extensive in nature. It is therefore, initiated by top management. However, it advocates participative decision- making by managers and workers at all levels as the process requires important information from managers and workers.

The process of re-engineering is a significant improvement over continuous quality improvement programmes. Quality improvement programmes focus on continuous, small and incremental changes. The change efforts improve the current work activities. As the focus is on current activities, participative decision-making works from bettor to top for planning and implementing the quality improvement programmes in the organisation.

Re-engineering does not just aim at improving the current work processes. It throws away the old ways of doing things and starts over again in redesigning the way work is done. It disregards what is and focuses on what should be. This is important for organisations to remain flexible and adaptive in the turbulent and dynamic environment.

Differences between continuous quality improvement and re- engineering are as follows:

Continuous Quality Improvement:

i. Continuous incremental change.

ii. It fixes and improves the current work processes.

iii. Its focus is on ‘as is’.

iv. It works from bottom to top in business organisations as individuals continuously look for ways to improve their work activities.


i. Radical and revolutionary change.

ii. It redesigns the entire process and starts over again — It starts from scratch.

iii. Its focus is on ‘what can be’.

iv. It is initiated by top management. Participative decision-making is, however, important.

6. Theory of Mary Parker Follett (1868 – 1933):

Though she worked during the era of classical theorists, her emphasis was mainly on the behavioral approach to management theory. Follett was a social worker and studied issues related to working conditions of employees. She believed in group behaviour and mutuality of interests between employers and employees. She advocated the concept of group dynamics and emphasised on social relationships amongst people in business organisations.

According to her, harmonisation and co-ordination of group efforts is more important than formal authority-responsibility relationships to achieve organisational tasks. Her ideas on human relationships were advocated before the Hawthorne experiments were conducted by Elton Mayo.

Her theory is characterised by the following features:

i. Better performance is shown by employees by focussing on group tasks rather than individual tasks.

ii. Organisational members are influenced by group actions. The group works better through self-control rather than control being exercised from the top managers.

iii. Leadership should be based on qualities and abilities of leaders and not on the hierarchical authority.

iv. Power, which she defines as “the ability to influence and bring about change” should not be viewed as a coercive way of getting things done through sub-ordinates. Rather, power should be jointly developed by managers and sub-ordinates.

v. She aimed at resolving conflicts through coordinated or integrated efforts of superiors for efficient attainment of organisational goals.

vi. Organisation is a single unit with interrelated and integrated parts to contribute towards the overall goals.

vii. Open system of communication should be followed in the organisation rather than formal lines of authority.

viii. Decisions should be taken jointly by superiors and sub-ordinates rather than accepting them as orders of superiors.

ix. Co-ordination has synergical effects. Continuous and effective co-ordination through contact with people at early stages of their work schedules of different managerial activities of different units produce results greater than the sum of each individual unit.

7. Theory of C. K. Prahlad:

Prahlad’s ideas on management focus primarily on firm’s core competence. Core competence is an organisational skill and capability which is not possessed by competing firms. It is a bundle of skills and technologies that enables a company to provide a particular benefit to the customers.

These ideas are reproduced below:

a. Organisations that exploit their core competence outperform competitors and excel in their performance. Business firms must, therefore, concentrate in areas of core competence and outsource other areas to outside agencies.

b. It helps concentrate on matters of strategic importance like statistical quality control, total quality management, production planning and control etc. Core competence provides competitive advantage to business firms. A firm’s core competence is a set of skills, competence and expertise possessed by all its people (managers and non- managers).

c. It does not relate to a particular product or business unit. It spreads to the complete product line and varieties in each product. Proctor & Gamble has a wide product line of food items, pharmaceuticals, cosmetics etc. In the line of cosmetics, it manufactures detergents, soaps, shampoos etc. Its core competence is reflected in every product (detergents, soaps etc.) it produces in all the product lines (cosmetics, pharmaceuticals etc.).

Prof. C. K. Prahiadi’s known as management guru by the management fraternity.

His ideas on are competence help to achieve the following:

a. Industry leaders and entrepreneurs need to focus on the strengths of people and processes to capitalise them in the global marketplace. This will help companies face international competition in the changing business environment.

b. A firm can leverage its competence, visualise emerging strategic options and create new businesses. Knowledge leveraging occurs when a firm applies its existing knowledge elements to current or new market opportunities in ways that do not require qualitative changes in the firms’ assets or capabilities.

c. The current business scenario is dynamic, integrative and competence driven. Companies are facing and responding to uncertainty and changing customer preferences. Telecommunication revolution, information networks, global financial markets etc. have integrated the business corporate.

d. Managers, like consumers, are a heterogeneous lot. They differ in how they access information, how they develop insights and how they build consensus for action. He proposes that individualization, not customisation is the answer to the dilemma of managerial heterogeneity. Managers need to access, visualise and use knowledge in their unique ways.

e. According to him, “don’t look at the poor and say there is no hope. Selling to the poor may be more profitable than selling to you and me. This is where the future is. Opportunities are everywhere. This is not about lack of opportunity; it is about lack of imagination.”

Constantly developing technologies and products in response to customer requirements can explore untapped markets profitably.

8. Theory of McGregor (1906 – 1964):

McGregor’s theory focussed on behavioural management. He contributed to management thought by developing theory X and Y. This theory helped managers in motivating their employees. Motivation is an important area of management to satisfy employees’ needs and improve their performance at work.

McGregor’s contribution to management is discussed below:

i. Theory X and Theory Y:

McGregor emphasised that in order to create effective organisations, managers should advocate theory Y. They should adopt democratic styles of leadership, participative decision-making processes and general measures of supervision and control.

ii. Professional Managers:

McGregor emphasised on professionalisation of management. He felt that professional managers are more efficient in making decisions, solving problems and administering the organisation. They realised the importance of management by objectives and self-control to integrate individual goals with organisational goals. A professional manager can understand social and psychological needs of employees and relate them with technical needs of the organisation.

iii. Self-Appraisal:

McGregor emphasised on self-appraisal and evaluation rather than appraisal by superiors.

iv. Management Team:

He focused on effective management team with the qualities of understanding, mutual trust, support and agreement.

v. Co-Operation Rather than Collective Bargaining:

Management and labour union should cooperate rather than bargain with each other on labour-management issues.

vi. Management Responsibilities:

Management has the responsibility of – (a) increasing organisational profits, (b) keeping the labour satisfied, (c) renewing plant and machinery and (d) maintaining productive efficiency.

McGregor’s theory provided a new sight to superior-sub-ordinate relationships. Superiors can adopt management styles depending upon the nature of sub-ordinates. Concern for people means concern for production.

9. Theory of Chester I. Barnard (1886 – 1961):

Chester Barnard’s theory is based on social systems school of thought. It fills the gap between the traditional and modern theories of management. He defines organisation as “system of consciously coordinated activities or forces of two or more persons.” He mainly emphasised on the role of executives in business organisations, small or big. He focused on principles of management (introduced by Henri Fayol) in practical business situations.

His contribution to management thought is discussed below:

i. Elements of Organisation:

Barnard focused on three important elements of organisations:

a. Willingness to cooperate,

b. Common purpose and

c. Communication.

Willingness to cooperate refers to collective contribution to organisational activities. All individuals should collectively make efforts towards achievement of organisational goals and consider their individual goals as sub-ordinate to organisational goals. Common purpose is the unified goal that all individuals must strive to achieve. People will cooperate only if there is a common purpose to achieve. Communication refers to exchange of ideas for willingly cooperating to achieve the common purpose.

ii. Balance:

He emphasised on internal and external balance between various forces that affect functioning of the organisation. Internal balance refers to balance between organisational goals and individual goals. Individuals should derive satisfaction out of their work in terms of monetary and non-monetary incentives. External balance refers to adaptability of organisation with its external environment. An organisation should be able to operate in the changing environmental conditions.

iii. Authority:

Barnard introduced the acceptance theory of authority. He said that superiors have authority to command their sub-ordinates only if it is accepted by them. Authority does not, thus, necessarily flow from top to bottom. A sub-ordinate will accept the authority if – (a) he understands the communication, (b) he believes that it is not inconsistent with organisational goals, (c) it is compatible with his personal goal and (d) he can physically and mentally comply with it.

iv. Decisions and Functions of the Executive:

The executive takes decisions based on his reasoning and intuition. His decisions should be acceptable to sub-ordinates. More than formal command, they should be acceptable commands. His functions include — (a) maintaining communication in organisations, (b) obtaining essential services from individuals through right selection process and providing necessary incentives, (c) formulating objectives for all levels of the organisation.

v. Incentives:

Barnard considered incentives as motivating forces to make people contribute towards organisational goals. He emphasised on the importance of both financial and no financial incentives, like money, opportunities for growth, social interactions, participative decision-making etc.

vi. Formal and Informal Organisations:

Barnard focused on co­existence of formal and informal organisations. He viewed informal organisations as means of promoting social interactions and through it, achieving formal organisational goals.

vii. Communication:

Communication is an important means of telling people the purpose or objectives of the organisation. There should be formal, short and clear channels of communication so that quick and efficient transmission of information takes place throughout the organisation.

viii. Leadership:

Good managers have to be good leaders. Leadership qualities (creativity, imagination, understanding etc.) help managers to unify individual goals with organisational goals.

They also integrate formal organisation structure with the informal one.

Chester Barnard’s work is famous for providing behavioural outlook to business organisations. His concepts synthesised social aspects of people with technical aspects of organisations. He developed the social systems approach to management.

10. Theory of Frank Gilbreth (1868 – 1972):

Frank Gilbreth was a contemporary of Tayol and Fayol. He was a leading management consultant of his times. While working in the construction industry, he conducted studies to eliminate waste and illogical practices.

His contribution to management thought is summarised below:

i. Time Study:

He undertook time studies to find out the best time for completing work activities.

ii. Motion Study:

He conducted motion studies to find out the best way to perform work activities. This reduced the number of working hours per worker and increased output.

iii. Best Way:

He focused on best way of doing the work, irrespective of the time taken. This was described as the one which had least number of motions.

iv. Training:

He attributed worker’s efficiency and success to their training. Well trained workers perform better than untrained ones. According to him, workers should be trained from the beginning of their job tenure.

v. Promotion Plan:

He suggested a three position plan for promotion. Workers considered worthy of promotions should know their present position, position above them and position below them. This is to learn from higher positions and guide lower positions to succeed their present positions on promotion.

Gilbreth’s work focused on human beings by developing motions and best ways of doing the work. According to Urwick “His unique contribution was, however, his emphasis on human effort and the methods he devised for showing up wasteful and unproductive movement.” He applied concepts from social sciences to increase worker’s capacity to work.

11. Theory of Herbert Simon:

Simon advocated the social system school of management thought. He viewed organisations in their social and psychological context. His contribution is best known for decision-making though he has contributed to varied areas of management interests.

Some of his contributions are summarised below:

i. Decision-Making:

Simon regarded each managerial action as decision-making. He considers decision-making as a three step process, – (a) Intelligence activity, that is, finding situations for decision making, (b) Design activity, that is, developing alternative courses of action, (c) Choice activity, that is, selecting a course of action. He and G. March subsequently added a fourth activity (follow up or review activity), that is, follow-up action or correcting deviations. While programmed decisions deal with structured, well defined problems, un-programmed decisions deal with unstructured, ill-defined problems.

ii. Bounded Rationality:

Simon introduced the concept of ‘bounded rationality’. According to him, managers are ‘Administrative men’ rather than ‘Economic men’. As economic men, they can select the best course of action and as administrative men, they select a course of action which is best in the light of constraints like incomplete information, inability of managers to perfectly analyse the information, psychological barriers etc. Decisions are not optimum decisions. They are the most satisfying decisions.

iii. Authority:

It is not the absolute power of managers to make decisions. It is a combination of instructions, suggestions and persuasion.

iv. Communication:

He suggests a strong system of formal and informal communication to enrich the contribution of social relationships to formal organisational goals.

v. Employees Participation:

Simon was a behaviorist. He felt that employees contribute towards organisational goals if motivators are based on their needs.

vi. Informal Relationship:

As a social scientist, Simon felt that social, informal relationships amongst workers help to accomplish formal organisational goals. Managers should synthesise informal organisation with the formal organisation.

Simon provided an important insight to the way an organisation actually works. He identified scientific techniques to deal with decision making problems. He integrated decision-making processes with administrative behaviour of managers (bounded rationality).

12. Theory of Rensis Likert (1903 – 1981):

Rensis Likert conducted research at the Institute of Social Research, University of Michigan (U.S.A.) and developed theories which moved management.

His contribution to management thought is summarised below:

i. Management Styles:

Likert developed leadership theories based on his observation of leader behaviour in business and non­business organisations. According to him, best supervisors focus on human aspects of their sub-ordinates’ problems.

He developed four leadership styles:

(a) System 1 (Exploitative-Authoritative Style):

All decisions are made by top managers. They have no confidence in their sub-ordinates and the sub-ordinates also, therefore, contri­bute the minimum to organisational output.

(b) System 2 (Benevolent Authoritative Style):

Major decisions are made by top managers. Very few decisions are made by people at lower levels. Leaders have some confidence in their sub-ordinates and the sub-ordinates, therefore, contribute slightly more than system 1 to organisational output.

(c) System 3 (Consultative Style):

Leaders have substantial confidence in their sub-ordinates. All operating decisions are made at lower levels. Sub-ordinates’ contribution to organisational output is good.

(d) System 4 (Participative Style):

Leaders have complete confidence in their sub-ordinates. Managers at different levels make decisions jointly. Subordinates’ contribution to organisational output is also excellent.

ii. Behaviour of Leaders:

Best leaders are those whose behaviour is employee-centred. They help their sub-ordinates solve their problems, allow them to participate in decision-making processes, develop their confidence and merge their individual goals with organisational goals.

iii. Linking Pins:

In order to integrate individual goals with organisational goals, Likert developed the concept of linking pins. Linking pins are people who are member of more than one group. They act as leaders of groups (units) below their units and are members of upper units. They link each work group with rest of the organisation.

iv. Theory of Organisation:

Likert emphasised that satisfaction of individual needs leads to higher production. Workers should not be considered as economic means of production. Managers and workers should support each other and maximise each other’s interests.

v. Management by Group Objectives:

He advocated the concept of Management by Group Objectives (MBGO) rather than Management by objectives (MBO). He suggested that individuals should set their individual goals and group goals. Each individual synthesises his goals with group goals and group goals with organizational goals.

His work is appreciated for its contribution to leadership styles motivational forces.

13. McKinsey’s 7-S Approach:

This approach was developed by McKinsey and Company and became the basis for research for two famous books on management; One, The Art of Japanese Management and Second, In Search of Excellence.

The seven S’s that facilitate management are as follows:

i. Strategy:

It refers to taking a systematic course of action to allocate company’s resources to achieve its objectives efficiently. Strategy is “the determination of the purpose and the basic long- term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these aims.”

ii. Structure:

Organisation structure is “establishing effective behavioural relationships among persons so that they may work together efficiently and gain personal satisfaction in doing selected tasks under given environmental conditions for the purpose of achieving some goal or objective.” It defines authority- responsibility relationships among positions to link the tasks of individuals and groups in achieving organisational goals.

iii. Systems:

This includes various procedures and processes like controlling process and system, controlling techniques and information technology, productivity and operations management etc.

iv. Style:

It represents the way managers behave and collectively spend time in achieving organisational goals. Their efforts are exhibited in their leadership qualities where managers collectively accomplish group goals. Leaders guide people to contribute to organisational goals with zeal and confidence. “Zeal is ardour, earnestness and intensity in the execution of work; confidence reflects experience and technical ability.”

Managers should behave in a style that guides others to action or opinion and take the lead in any movement followed by disciples. Managers as leaders are the most eminent members of a profession. They are persons of eminent position and influence.

v. Staff:

It deals with people in the enterprise and their socialisation into the organisational system. Staffing is “filling and keeping filled, positions in the organisation structure.” It is performing a set of activities that aim at inviting, selecting, placing and retaining people at various jobs to achieve the organisational goals.

It emphasises on the human element to increase organisational efficiency by placing the right person at the right job. This facilitates leadership, control and motivation to work.

vi. Shared Values:

These represent the values shared by organisational members. A shared vision builds corporate culture. Culture is “a shared behaviour which is important for us as it systematises the way people do things, thus avoiding confusion and allowing co-operation so that groups of people can accomplish what no single individual could do alone.”

(a) Shared meaning – It represents common opinion and perception held by organisational members.

(b) Values and norms – All the members have clear understanding of values and norms of the organization. Each one knows what is to be done, when is it to be done and where is it to be done.

(c) Behavioural consistency – It promotes behavioural consistency amongst members. All behave in the same manner reducing interpersonal conflicts and tensions.

(d) Descriptive – It describes how employees perceive an organisation and view it as an independent identity, whether they like it or not.

(e) Organisational philosophy – It clearly defines organisations philosophy in terms of its policies regarding how to deal with customers, employees and other parties.

(f) Clear guidelines – Guidelines that govern organisation’s functioning are clearly laid as rules which must be uniformly followed by all the members, whether existing or those who newly join the organisation.

(g) Sense of belongingness – Organisation culture creates a sense of oneness and belongingness amongst members. Members view themselves as part of the organisation and organisation as their part. They fully agree with organisation’s way of functioning (plans, rules, policies, procedures etc.).

vii. Skills:

These are the distinctive capabilities of an organisation that make it different from its competitors. It represents organisation’s strength that enables it to accept the environmental challenge and improve its competitive position.

Organisation’s strengths can be:

(a) Common strengths

(b) Distinctive competencies

While the common strength is an organisational skill and capability possessed by other organisations also, distinctive competence is an organisational skill and capability possessed by a small number of competing firms. Such competence is not commonly possessed by all the firms. Organisations that exploit their distinctive competence outperform their competitors and attain high level of performance unlike the common strength where the level of performance is only average.

SWOT analysis enables an organisation to discover its distinctive competence and implement strategies that will exploit its strengths and improve its performance above that of competitors.

This approach is a complete and comprehensive philosophy of management as it identifies various aspects of management and shows their inter-relationship for positive contribution to management theory. Though it is too elaborate and comprehensive in its framework, it has positively contributed to the management thought in every area of its application.

Its positive contribution underlies in its following features:

1. It has been extensively studied by the consultants of McKinsey in many companies and is being taught in most of the business schools. The theory and practice, thus, support and complement each other in the study of management. It is used by both practitioners and academicians.

2. The seven S’s exhibit a complete philosophy of management. They cover the entire range of management functions- planning (strategy, skills), organising (structure, shared values), staffing (staff), directing (style) and controlling (systems).