This article throws light upon the top twelve theories of management thought developed by famous management thinkers. Some of the theories are: 1. Theory of Peter F. Drucker 2. Theory of Michael Porter 3. Theory of Tom Peters 4. Theory of Michael Hammer 5. Theory of Peter Senge 6. Theory of C.K. Prahlad 7. Theory of Mary Parker Follett 8. Theory of Chester I. Barnard and Others.
1. Theory of Peter F. Drucker (1909-2005):
Peter F. Drucker, born in 1909, wrote extensively on subjects like foreign affairs, economics, history (American and European), religion, education, psychology, sociology, management and many other areas. Though his contribution in these subjects is marked, he is more popularly known as the ‘Father of Modern Management’.
He is famous for his contribution in the field of management as he focused on many managerial problems and their solutions. He wrote numerous books on management some of which are: The Practice of Management (1954), Managing by Results (1964), The Effective Executive (1967), The Age of Discontinuity (1969), Management: Tasks, Responsibilities and Practices (1974), Managing in Turbulent Times (1980), Management Challenges for 21st Century (1999).
He asserted that needs of the society (from pin to plane) can be fulfilled through business institutions and, therefore, these institutions must perform well. He focused on managers and management for effective functioning of business institutions.
Contribution to Management Thought:
His main contribution to management is as follows:
(i) Management is a Profession:
Every society has institutions that provide employment to its members and fulfill their needs. Management of these institutions affects their performance and survival. Managers are different from owners and have specialised skills to perform the managerial tasks. Drucker, thus, considers management as a profession.
However, management is not a profession in its true sense. It is a liberal profession. It takes knowledge from arts, as managers need skills and techniques to deal with business problems from different perspectives. Management is also a discipline with a defined set of tools, techniques and skills which help in putting things at place.
(ii) 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 and business is the most important economic institution. Practice of management can be justified by the economic results it produces. Besides, management can also reform Government and society and promote values, customs and beliefs of the society.
(iii) Synthesis of Classical and Behavioural Thoughts:
Management aims at making work productive and worker achieving. The work should be productive and result-oriented. It should not be considered different from the worker. The worker should be considered as human being with physiological and psychological needs and management should fulfill these needs.
Management is, thus, a profession and discipline which achieves organisational tasks along with satisfaction of human wants. Management, thus, synthesizes classical and behavioural schools of management thought.
(iv) Systems Approach to Management:
Every institution is part of the society and cannot ignore its impact on society and vice versa. The systems approach to management is also considered by Drucker for managing the business organisations. Management deals with quantitative and qualitative aspects of business as it interacts with the society.
As regards quantity, business should provide the right quantity of goods and services to the society and as regards quality it should look after social responsibilities like quality goods, clean environment, job opportunities, cultural and ethical promotion of society etc. Management is a great contributor in enabling the business to discharge the quantitative and qualitative social responsibilities. It, thus, justifies the systems approach to management.
(v) 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 synthesizes with organisational performance. This promotes self-analysis and self-control and directs the efforts of everyone toward goals of the company.
According to him, MBO helps to overcome four major organisational problems:
(a) The specialised work of most managers,,
(b) The hierarchical structure of management,
(c) The differences in vision and work, and
(d) The compensation structure of the management group.
Management by objectives helps in directing the efforts of everyone at every level towards a unified direction. Everyone contributes towards goals of the business. Managers control their performance in favour of organisational performance. Managers feel motivated to work which also increases their inner strength (morale) to be productive towards organisational goals. It changes the focus from external control to self-control.
(vi) Management Skills:
Managers should have the following skills to make management effective:
(a) Skills to make effective decisions,
(b) Skills to communicate in and outside the organisation,
(c) Skills to make proper use of controls and measurements, and
(d) Skills to make proper use of analytical tools, that is, the management sciences.
(vii) 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 advocates both scientific management and human relations doctrine. Drucker did not favour bureaucratic structure as it affects the creative and innovative skills of employees.
He advocated a structure with the following characteristics:
(i) The enterprise should be organised for business performance.
(ii) It should have minimum number of managerial levels.
(iii) It should enable training of managers to make them top managers in future. Young managers should be given responsibility so that they can assume important managerial positions in future.
Organisation structure is determined through:
(a) Activity analysis:
It identifies total number of activities to be performed and emphasis to be placed on each activity.
(b) Decision analysis:
It identifies the importance of various decisions at various levels, the variables (qualitative and quantitative) that will affect the decisions and the impact of decisions on other organisational activities.
(c) Relation analysis:
It identifies how organisation structure is to be defined, organised and staffed to achieve the stated objectives.
(viii) 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 organisation to stay in business but management is responsible for its functions to the society.
Profit is the necessity of business, not its objective. Profits and social responsibilities should be considered together. Drucker specified eight areas where organisations have objectives (see point 12). These areas represent an optimum mix of profitability and social responsibility.
(ix) Development of Managers:
Managers represent a business. They shape future of the business. Therefore, there should be constant development of managers, through training and development programmes.
Decision-making is the foundation of organisational working. Every activity is based on decision-making at every level. Tactical decisions represent decisions at the middle-level and strategic decisions are taken at the top level. Risk, economy of efforts, training and constraint of resources affect decisions to solve the problems.
Technological developments are taking place at a fast rate and organisations along with their work force have to be quick in adopting these changes for their survival. Change is inevitable and not adopting change is not an option. Organisational success depends largely on how fast it can accept environmental changes. This requires organisations to be dynamic with focus on knowledge workers, vision and executive development.
(xii) Key Result Areas:
According to Drucker, marketing, innovation, human organisation, financial resources, physical resources, productivity, social responsibility and profit requirements are the eight important business areas where objectives should be rationally set.
Drucker’s work on management was highly appreciated by subsequent management thinkers. According to William Dowling, Drucker’s work “shows a rare combination of qualities: inspired common sense and constant testing of the logical against the real’. His contribution in the areas of MBO, concern for society, role of management in improving the quality of life, role of marketing and innovation in improving organisation’s efficiency are valid even today.
Critics, however, assert that “Drucker is one of the few management authors who seem to be writing about management as it is rather than as it ‘should be’.” His work deals with practical situations in business organisations; it cannot be theorized and put into practice by business firms.
The criticism is, however, not practical. His work on management is recognised even today and will continue to guide managers, academicians and management thinkers in the times to come. His work on management has and will continue to provide basic knowledge to management thinkers.
2. Theory of Michael Porter (Born on May 23, 1947):
Michael Porter has authored 18 books and many articles on competitive strategy and competitive advantage of nations. He is one of the most cited authors in business and economics. Michael Porter’s core field is competition and company strategy. He is recognised as the father of the modern strategy. Michael Porter views organisations as open systems that actively interact with the environment.
Contribution to Management Thought:
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 in making optimum decisions.
He describes the following forces that determine competition in the industry:
(a) Threat of new competitors:
When new firms enter the industry, they bring new resources of production. This increases cost and decreases sales of existing firms. However, if there are barriers to new entry, these threats can be reduced.
The following barriers can reduce the threat of new entry:
i. If existing firms are operating at large scale, new firms have to enter either at a large scale or face cost disadvantage.
ii. In case existing firms are selling high brand, loyalty, it becomes difficult for new firms to enter the market unless they extensively sell the products at high cost.
iii. In case of firms with huge capital outlay and long gestation periods, new firms will enter only if they can afford huge capital budgeting (investment in fixed assets) expenditures.
iv. Existing firms usually have cost advantage as they have been in the trade for long time period. Their experience and other factors (economies of scale, location, access to sources of raw material etc.) is normally a barrier to new firms which may not be able to operate at the cost at which existing firms are operating.
v. Existing firms have the distribution channels which may not be available to new firms. This acts as a barrier for entry to new firm unless they have their own distribution outlets.
vi. Entry barriers can be imposed by the Government when it wants to regulate balance between demand and supply of a particular product. Restrictions like licensing, control over prices of raw material, safety regulations etc. can act as barriers to entry of new 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 the prices.
Buyers have high bargaining power in the following cases:
i. They buy in large volume.
ii. They buy standardised goods which have alternative substitutes.
iii. They buy costly goods and are selective about their purchase, for example, cars, jewellery or electronic goods.
iv. They are price sensitive.
v. They buy quality goods.
(c) Threat of substitute products:
Substitute products restrict the prices at which firms can sell the goods. Substitutes of branded packing material, leather goods, garments, wooden furniture etc. have affected growth of these industries. Firms whose products are vulnerable to substitute products should remain aware of such products in the market.
(d) Bargaining power of suppliers:
Suppliers have strong bargaining capacity when prices are fixed. While dealing with such firms, suppliers may raise their prices or reduce the quality of supplies.
Suppliers can affect firms in the following ways:
i. They are concentrated and do not have too many competitors.
ii. They sell unique products.
iii. They sell products with no substitutes.
iv. They diversify through forward integration.
v. The firm is not an important client of the suppliers.
(e) Rivalry among existing firms:
Rivalry amongst existing firms also increases costs and lowers profit margins. Greater the intensity of rivalry, less attractive is the market for competing firms.
Competition amongst existing firms considers the following facts:
i. Who are the major competitors of the firm?
ii. What is their market share?
iii. What are their strengths and weaknesses?
iv. What are their target group of customers?
v. What are their pricing policies, distribution channels and promotion policies?
vi. What is their brand image?
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 competes by reducing the cost, reducing the selling price and increasing its sales volume. High profits are earned by reducing the costs (production, research & development, advertising etc.) below the competing firms. This keeps competition out and protects the firm against strong bargaining power of buyers and suppliers. This also protects the firm against substitute products and rivalry with existing firms.
(b) Differentiation strategy:
In this strategy, firm increases its market share by keeping the prices of products same or even more than those of competitors. It changes the product features like colour, shape, design or size and creates customer appeal and brand image for the products. Since product features are different from those of competitors, it creates brand loyalty amongst customers and without reducing the costs, increases the sales volume and profits.
Differentiated products help to:
1. Compete with existing firms,
2. Create brand loyalty and compete with new competitors,
3. Earn high profits and deal with suppliers, and
4. Overcome bargaining power of buyers as buyers are not price sensitive to branded goods.
(c) Focus strategy:
In this strategy, the firm increases its market share 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 specific 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. The firm, thus, competes by focusing on a narrow market rather than competitors who may be focusing on broader market.
(iii) Value Chain Analysis:
Michael Porter popularized the concept of value chain in 1985 in 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 value to attract and retain customers. Firms provide value by transforming raw material and other resources into productive goods or services and provide them, where, when and how the customers want.
Converting resources into outputs that customers value 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 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) Coordination and collaboration:
There must be coordination and collaboration amongst all members of the value chain. Members 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 system that links all organisational activities, work planning and scheduling software, customer relationship management systems, e-business connections 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 work is done. Managers evaluate 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.
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 every 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 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 should identify employees who are able to learn and adapt to changing customers’ needs.
(iii) On going 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 training to make employees 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.
3. Theory of Tom Peters (Born on November 7,1942):
Top Peters worked as a management consultant at Mckinsey & Company from 1974 to 1981. In 1981, he left Mckinsey and became an independent management consultant. He gave ideas on solving business problems and empowering decision-makers at multiple levels of a company.
Ideas on Management:
Tom Peter’s ideas on management are as follows:
1. He advocates ‘liberation management’ which challenges the rigid organisation structure that inhibits 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.
2. 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. Power and individual liberty are linked together. Managers who exercise power encourage group members to develop the strength and competence as individuals and members of the organisation.
3. Jobs should be made rewarding and redefined to include greater, legitimate and expert authority. Empowerment indicates what managers do in these jobs.
Ways to Redesign Jobs:
Two empowering ways to redesign jobs are:
(a) Job enlargement:
It means increasing the job’s 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 pace, correct their errors and decide the best way to perform the tasks. As the work becomes more challenging and responsibility of workers increases, their enthusiasm and motivation also increases.
4. Organisational members should rethink how they relate to their customers and make rethinking a part of their organisational practices.
5. All organisations should operate according to rules and procedures. Managers and employees should deal with customers according to rules.
6. Organisations should be flexible with management’s 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.”
4. Theory of Michael Hammer (1948-2008):
Michael Hammer was an American engineer, management author and a former professor of computer science at Massachusetts Institute of Technology (MIT). He is known as one of the founders of the management theory of Business Process Re-engineering. Hammer is known as the father of re-engineering.
Ideas on Management:
His ideas on management are as follows:
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 costs low at each step or part.” This involves dividing 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.
He advocates re-engineering the organisation by reassessing it. Managers 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 imagine they are starting from scratch.
Organisational members (managers and non-managers) do not focus on immediate jobs and departments. They focus on larger pattern of relationships in which they work and influence the lives of others. These relationships should connect 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 to determine core competencies (abilities and skills) in areas where companies should operate and put their plans into action to meet customer desires and expectations.
Rethinking involves abandoning the old rules and assumptions to redesign the organisation around its critical processes.
To do things differently, companies 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 replace old ways of doing things with new ways. They unlearn the old principles and develop more innovative and flexible business processes to meet competition in the changing environment. Managers bring radical improvements rather than marginal improvements.
(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 organisation performs the work. It discards old ways of working and starts over again by redesigning the way work is done. It determines customers’ needs and redesigns work processes to best meet these needs. It believes in reinvention and not reworking through improvements or modifications.
(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 bottom to top for planning and implementing the quality improvement programmes.
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 he. This enables the organisations to remain flexible and adaptive in the dynamic environment.
Differences between Continuous Quality Improvement and Re-Engineering:
Differences between continuous quality improvement and re-engineering are as follows:
Continuous Quality Improvement:
1. Continuous, incremental change.
2. It fixes and improves the current work processes.
3. Its focus is on ‘as is’.
4. It works from bottom to top as individuals continuously look for ways to improve their work activities.
1. Radical and revolutionary change.
2. It redesigns the entire process and starts over again – It starts from scratch.
3. Its focus is on ‘what can be’.
4. It is initiated by top management. Participative decision-making is, however, important.
5. Theory of Peter Senge (Born in 1947):
Peter Senge emerged as an important figure in 1990s in Organisation Development when he wrote his book ‘The fifth Discipline’ in 1990. He developed the notion of learning organisation which views organisations as dynamic systems which are in a continuous state of adaptation and improvement.
According to him, learning organisations are those where:
1. People continually expand their capacity to create the results they desire.
2. New and expansive patterns of thinking are nurtured.
3. Collective aspiration is set free.
4. People continually learn to see the whole together.
In order to be a learning organisation, two conditions must be present in the organisations:
1. The organisation should have the ability to design in a way that it can achieve the desired outcome.
2. The organisation should have the ability to correct the mismatch between its initial direction and desired outcome.
His ideas on management are as follows:
1. Changes constantly take place in and around organisations to overcome the lethargy and stagnation in business organisations. Members are over-occupied with their work to create new ideas, products and relationships. To overcome this stagnation, members should cope with changes in and around them.
2. 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 as learning organisations.
3. 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.
4. 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.
5. 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 advantage, thus, lies in its ability to learn, accumulate knowledge & expertise and enable others to acquire them.
Peter Senge suggests the following for creating a learning organisation:
1. 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.
2. 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.
3. Mental models:
People should unlearn the old ways of working and enhance driving forces that promote organisation’s values and principles.
4. Shared vision:
People should develop a shared vision, that is, a vision that completely coordinates individual goals with organisational goals. It is the vision of the team and not individual members. People should work as a team. Team and individuals should be considered the same. This will lead to innovation, creativity, personal growth and organisational growth.
5. 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.
In order to work together (team learning) to achieve a common goal (shared vision) people should unlearn old ways of working, (mental models) open with others, (personal mastery), and identify the organisation as an open system to understand its actual working (systems thinking).
6. Theory of C.K. Prahlad (1941 -2010):
C.K. Prahlad became famous as a management guru. He is popularly known for his book ‘The Core Competence’, co-authored with Gary Hamel. Prahlad’s ideas on management focus primarily on 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.
His ideas are reproduced below:
1. Organisations exploit their core competence to outperform competitors and excel in their performance. Business firms must concentrate in areas of core competence and outsource other areas to outside agencies.
2. 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 firms. Core competence is a set of skills, competence and expertise possessed by all its people (managers and non-managers). It does not represent skills of an individual but represents collective learning of everyone (all levels in all functional areas) in the organisation.
3. 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. It reflects core competence in every product (detergents, soaps etc.) it produces and all the product lines (cosmetics, pharmaceuticals etc.).
4. Firms take maximum advantage of their core competence as it is their distinctive competence which cannot be copied easily by others. Even if other companies copy it, the firm would have already captured the major share of the market.
Core competence helps to achieve the following:
1. Industry leaders and entrepreneurs need to focus on the strengths of people and processes to capitalize them in the global marketplace. This helps them face international competition in the changing environment.
2. A firm can leverage its competence, visualize 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 assets or capabilities.
3. 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 corporates.
4. 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, visualize and use knowledge in their unique ways.
5. 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.
7. Theory of Mary Parker Follett (1868-1933):
Though she worked during the era of classical theorists, her emphasis was mainly on the behavioural approach to management theory. Follet 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 group dynamics and emphasised on social relationships in business organisations.
According to her, harmonisation and coordination 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 conducted by Elton Mayo.
Her theory is characterised by the following features:
1. Better performance is shown by employees by focusing on group tasks rather than individual tasks.
2. Organisational members are influenced by group actions. The group works better through self-control rather than control being exercised from the top managers.
3. Leadership should be based on qualities and abilities of leaders and not on the hierarchical authority.
4. Power, “the ability to influence and bring about change” is not a coercive way of getting things done through subordinates. Rather, power should be jointly developed by managers and subordinates.
5. She aimed at resolving conflicts through coordinated efforts of superiors for efficient attainment of organisational goals.
6. Organisation is a single unit with interrelated and integrated parts to contribute towards the overall goals.
7. Open system of communication should be followed in the organisation rather than formal lines of authority.
8. Decisions should be taken jointly by superiors and subordinates rather than accepting them as orders of superiors.
9. Coordination has synergical effects. Continuous and effective coordination 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.
8. 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 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.
Contribution to Management Thought:
His contribution to management thought is discussed below:
(i) Elements of Organisation:
Barnard focused on three important elements of organisations: willingness to cooperate, common purpose and communication. Willingness to cooperate refers to collective contribution to organisational activities. All individuals should collectively work towards organisational goals and consider individual goals as subordinate to organisational goals.
Common purpose is the unified goal that all individuals must strive to achieve. People cooperate if there is a common purpose to achieve. Communication refers to exchange of ideas for willingly cooperating to achieve the common purpose.
He emphasised on internal and external balance between forces that affect functioning of the organisation. Internal balance is balance between organisational goals and individual goals. Individuals should derive satisfaction out of their work. This will contribute to organisational goals. Both, organisation and its people should look after the needs of each other accepting that needs keep changing over time.
The needs are dynamic and not static and therefore, organisation and individuals should cooperate with each other. This promotes and maintains balance in the organisational activities in the dynamic environment. External balance refers to adaptability of organisation with its external environment. Organisation should be able to operate in the changing environmental conditions.
Organisation is part of the society and has to accept changes in the society. The organisational balance, internal and external can be achieved through logical reasoning, intuition, scientific analysis, emotions and attitudes.
Barnard introduced the acceptance theory of authority which is an improvement over classical view of authority according to which people obey orders because they are issued by their superiors. He said that superiors have authority to command the subordinates only if it is accepted by the subordinates, Authority does not, thus, necessarily flow from top to bottom.
A subordinate 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 subordinates. 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.
Banard considered incentives as motivating forces to contribute towards organisational goals. He emphasised on financial and non-financial incentives, like money, opportunities for growth, social interaction, participative decision-making, feeling of belongingness etc.
(vi) Formal and Informal Organisations:
Barnard focused on coexistence of formal and informal organisations. While formal organisation is a deliberately designed structure which aims to achieve a common purpose, informal organisation is a spontaneous outgrowth of formal organisation structure.
It arises out of social interactions amongst people in the formal communication network. Informal organisation is not the creation of managers and, therefore, cannot be avoided by them. In fact, it solves many problems that arise in the formal organisation and managers should encourage them to supplement the formal organisation and not substitute it.
It binds the organisational members and makes them more committed to organisational goals by strengthening the informal communication network. It is used to know the reaction and feedback on organisational policies. Informal organisations promote social interactions and through it, formal organisational goals.
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.
Good managers have to be good leaders. Leadership qualities (creativity, imagination, understanding etc.) help to unify individual goals with organisational goals. They also integrate formal organisation structure with the informal one.
Chester Banard’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.
9. Theory of McGregor (1906-1964):
McGregor’s theory focused on behavioural management. He mainly contributed to management thought by developing theory X and theory Y of motivation.
McGregor’s contribution to management is discussed below:
(i) Professional Managers:
McGregor emphasised on professionalisation of management. He felt that professional managers are more effective in making decisions, solving problems and administering the organisation. They realise 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.
(ii) Self Appraisal:
McGregor emphasised on self-appraisal and evaluation rather than appraisal by superiors. Self appraisal leads to self control and self development. Developed individuals are the assets of an organisation.
(iii) Management Team:
He focused on effective management team with the qualities of understanding, mutual trust, support and agreement.
(iv) Cooperation Rather than Collective Bargaining:
Management and labour union should cooperate rather than bargain on labour-management issues.
(v) 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-subordinate relationships. Superiors can adopt management styles depending upon the nature of subordinates. Concern for people means concern for production.
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 hours per worker and increased the output.
(iii) Best Way:
He focused on best way of doing the work, irrespective of the time taken. This was the work which had least number of motions.
He attributed efficiency and success to training. Trained workers perform better than untrained ones. According to him, workers should be trained from the beginning of their job tenure rather than later stages.
(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 enables them to learn from higher positions and guide lower positions to succeed their present positions on promotion.
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 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 non-business organisations. According to him, best supervisors focus on human aspects of subordinates’ 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 subordinates and the subordinates 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 subordinates and the subordinates, therefore, contribute slightly more than system 1 to organisational output.
(c) System 3 (Consultative style):
Leaders have substantial confidence in subordinates. All operating decisions are made at lower levels. Subordinates’ contribution to organisational output is good.
(d) System 4 (Participative style):
Leaders have complete confidence in subordinates. Managers at different levels make decisions jointly. Subordinates’ contribution to organisational output is also excellent.
(ii) Behaviour of Leaders:
Best known leaders are generally employee-centered. They help the subordinates by solving their problems, allow them to participate in decision-making processes, develop their confidence and merge the 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 members 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:
If personal needs of employees are satisfied, they are committed towards the organisational goals and contribute their best to achieve them. This increases productivity. A satisfied work force creates a productive organisation. 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 people should set individual goals and group goals. Each individual synthesizes his goals with group goals and group goals with organisational goals.
Likert’s work is appreciated for its contribution to leadership styles and motivational forces. His thoughts are similar to those of McGregor’s theory. “We believe that Likert’s theory is basically correct, that it can be translated into organisation development interventions and programmes, and that it represents a significant contribution both to management theory and to the theory of planned change,”— French and Bell
However, his work is criticised by Hersey and Blanchard. They believe that leadership style (employee-centered or task-centered) depends upon maturity level of employees. Democratic leaders may not always prove to be successful. Subject to developments and modifications, Likert’s work is highly appreciated by business managers.
12. Theory of Herbert Simon (1916-2001):
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.
Some of his contributions are as follows:
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, non-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. They are the most satisfying decisions.
Within the constraints of internal and external environmental variables, managers are satisfied with decisions that meet their requirements. Though these are not the optimum decisions, these are the most practical and feasible decisions that can solve the business problems.
(iii) Administrative Man:
Decision-maker is an administrative man rather than economic man in his approach towards decision-making.
Decisions are based on the following assumptions:
a) He is not guided by profit motives and self-interest.
b) He makes decisions by combining rationality with emotions, sentiments and non- economic values held by team members.
c) He follows flexible approach to decision-making which changes according to situations.
d) He makes feasible decisions which are less rational than making rational decisions which are less feasible.
It is not the absolute power of managers to make decisions. It is a combination of instructions, suggestions and persuasion.
He suggests a strong system of formal and informal communication to enrich contribution of social relationships to formal organisational goals.
Effective communication requires that receiver understands the message in the same sense as intended by the sender. It is important to officially recognise informal system of communication that supports the formal communication system rather than obstruct it.
(vi) Employees Participation:
Simon was a behaviourist. He felt that employees contribute towards organisational goals if motivators are based on their needs. If organisation looks after the needs of employees, employees also feel committed towards organisational goals.
(vii) Informal Relationship:
Social and informal relationships amongst employees help to accomplish formal organisational goals. Managers should synthesise informal organisation with the formal organisation. Simon provided 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).