Theories of Management

Ten machinists in a Pune auto-parts plant make the same bracket, each in his own way. Some make 60 a shift and some 90, and nobody knows which method is best. The classical school was built to answer questions like that.

The school has three streams. Each looks at a different level of the organisation.

How the differential piece-rate works. Taylor paid a higher rate per piece to workers who reached a standard set by time study, and a lower rate to those who fell short. As an illustration, say the standard is 80 brackets a shift, paid at ₹6 a piece at or above standard and ₹5 below it.

• A machinist who makes 90 earns 90 × ₹6 = ₹540.
• One who makes 75 earns 75 × ₹5 = ₹375.
• If the second machinist reaches 80, pay jumps to 80 × ₹6 = ₹480. Five more pieces bring ₹105 more.

The jump at the standard is the point: it gives a strong reason to learn the best method.

Don't confuse Taylor with Fayol. Taylor worked from the bottom up: one task, one worker, one best method. Fayol worked from the top down: what every manager does (planning, organising, commanding, coordinating and controlling) and the principles for running the whole organisation.

Where it breaks. The school treated workers as economic beings moved mainly by pay, and ignored their social needs. Many workers and unions resisted time study as a speed-up. Fayol's principles came from experience, not testing. Herbert Simon later called such principles "proverbs", because pairs of them contradict each other.

In practice. Standard work, time standards on assembly lines and target handling times in call centres all come from this school. It suits routine, repeatable work.

For exams. Match each tool to Taylor or Fayol. Taylor is called the father of scientific management; Fayol, of administrative management.

Two people apply for the same trade licence at a municipal office. One knows the clerk; the other does not. In a bureaucracy as Max Weber described it, that should make no difference.

Max Weber (1864–1920), a German sociologist, described bureaucracy as the most rational way to organise large-scale work. It rests on rational-legal authority: people obey rules and offices, not persons. Weber set it against two older kinds of authority.

An example. A public-sector bank branch handles a loan by the book. The customer fills a set form, the officer checks it against a list, and sanction limits rise with rank. As an illustration, the branch manager might approve loans up to ₹10 lakh, while larger ones go to the regional office. Every step is recorded in the file.

Weber's model is an ideal type: a pure model to compare real organisations against, not a description of any one office.

Strengths: predictability, fairness, accountability and efficiency in routine work; the model still shapes most governments. Weaknesses: rigidity, red tape, slow response to change, and routine that dulls initiative and leaves people feeling apart from the organisation's purpose.

Don't confuse Weber's bureaucracy with "bureaucracy" as an insult. In everyday speech the word means red tape. Weber meant a technically efficient form of organisation; red tape is what happens when it goes wrong.

Where it breaks. Robert Merton argued that staff trained to follow rules can come to treat the rules as ends in themselves. This is often called goal displacement. Bureaucracy also fits badly where work changes fast or needs judgement, a point the contingency approach takes up.

In practice. Use bureaucratic rules where fairness and consistency matter more than speed: recruitment, payroll, tax, examinations. Loosen them where people must adapt to each case.

The office, not the person; the rule, not the mood.

Suppose a textile mill raises its piece rates, yet output stays flat. The workers have agreed among themselves what a fair day's work is. Pay alone did not move them.

The Hawthorne studies (next block) found that productivity follows social and psychological factors, not physical conditions alone. Employees are social and emotional beings, so participative leadership and attention to relationships matter.

An example. A branch manager notices that a team's speed depends on one senior clerk whom everyone trusts. Instead of issuing a new rule, she asks him to help plan the change. That is the human relations idea at work: the informal leader matters as much as the formal one.

Many textbooks stretch the neoclassical label to a later behavioural science stream, from the 1950s. It includes McGregor's Theory X and Theory Y, covered below.

Don't confuse neoclassical management with neoclassical economics. In economics, "neoclassical" means the marginal analysis of Marshall and others. In management, it means the human relations school that followed Taylor and Fayol.

Where it breaks. A happy worker is not always a productive one: research finds a real but only moderate link between job satisfaction and performance. Critics also said the school neglected structure, technology and genuine conflicts of interest. Attention to feelings can slide into manipulation if nothing else changes.

For exams. Expect Mayo, the Hawthorne studies, and the shift from the economic worker to the social worker.

Engineers at a factory turned the lights down in a test room and waited for output to fall. It rose. Explaining why changed management thinking.

The Hawthorne studies (1924–1932) at the Western Electric Company's Hawthorne Works near Chicago began as engineering tests and ended as a finding about people. Elton Mayo, Fritz Roethlisberger and William Dickson led the later phases.

The lesson: workers are social beings. Informal groups, attention and recognition influence output as much as pay and physical conditions. The tendency of people to change their behaviour when they know they are being studied is now called the Hawthorne effect.

An everyday example. A regional manager announces a visit to a bank branch. That week the queues move faster and the files are tidier. Nothing about the work changed except that someone was watching.

Don't confuse the Hawthorne effect with the halo effect. The Hawthorne effect is about the people being observed: they change because they are watched. The halo effect is about the person judging: one good trait colours the rating of all the others.

Where it breaks. The test groups were tiny, a handful of workers in a room. Critics pointed out that the relay room also changed how the group was paid and replaced two workers, which could explain part of the rise. Later reanalyses of the original data found the effects smaller and less clear than first reported. The lasting contribution is the question the studies raised, more than their proof.

For exams. Know the four phases in order, with what each found. The findings were reported in Roethlisberger and Dickson's Management and the Worker (1939).

Go deeper for practitioners

A decision. You pilot a new branch layout at one branch. Head office watches closely, staff know they are part of a trial, and service time falls by a fifth in a month. Before rolling it out to every branch, ask how much of the gain came from the layout and how much from the attention.

How to tell. Run the trial long enough for the novelty to wear off. Compare with a similar branch that also gets attention but not the new layout. Measure again after the observers leave.

Links. The bank wiring room's output norm is the same idea as group norms in the chapter on group behaviour (Unit 2). The interviewing programme is an early case of upward communication (Communication, this unit).

Two branch managers take over similar teams. One checks every file and every hour; the other sets targets and lets people plan their own day. Each is acting on a belief about what people are like.

Douglas McGregor, in The Human Side of Enterprise (1960), argued that a manager's style follows from the manager's assumptions about people.

Assumptions tend to prove themselves. A manager who assumes X watches closely and gives no room. People then wait to be told, which seems to confirm X. A manager who assumes Y gives room, and people who use it seem to confirm Y.

Theory Z names two later ideas. William Ouchi's Theory Z (1981) described a model drawn from Japanese management: long-term employment, collective decision-making, slow evaluation and promotion, and concern for the whole employee. Ouchi contrasted typical American firms (Type A) and Japanese firms (Type J), and called American firms with Japanese-style features Type Z. Earlier, Abraham Maslow (1969) had used the name for a dimension of work beyond Theory Y, concerned with meaning and self-transcendence.

Don't confuse Theory Y with having no control. McGregor's point was that people control themselves when they are committed to goals they share. Targets still matter; the question is who does the checking. And Theory Z is not McGregor's third step: it is Ouchi's separate model.

Where it breaks. McGregor offered assumptions, not tested findings. Neither theory fits every person or situation: a new, unskilled worker in a crisis may need clear direction. Ouchi's model was hard to transplant, and Japanese long-term employment applied mainly to core staff in large firms.

In practice. Check your own assumptions. Do you explain reasons, delegate whole tasks and ask for ideas? Or do you check every step?

For exams. Book and year (McGregor, 1960; Ouchi, 1981), and which assumption belongs to X or Y.

X controls, Y trusts, Z commits for the long term.

A Pune auto-parts plant's sales team promises a big customer delivery in half the usual time. Production runs overtime, stores run short of steel, the wage bill rises and quality slips. One decision moved every department.

The organisation is an open system of interdependent subsystems (production, finance, HR and others) interacting with its environment. A change in one subsystem affects the rest. Key words: interdependence, integration, coordination, feedback, synergy. Think of the whole, not isolated parts.

Seen as a system, an organisation has five parts:

• Inputs: materials, people, capital, information, technology.
• Transformation process: work and management activities.
• Outputs: products, services, financial and human results.
• Feedback: results that shape the next inputs.
• Environment: what the organisation draws from and serves.

Synergy means the whole achieves more than the parts could separately. A plant whose sales, production and stores plan together can promise dates it can keep. The same departments working apart cannot. Ludwig von Bertalanffy, a biologist, developed general systems theory; Chester Barnard described the organisation as a cooperative system. Daniel Katz and Robert Kahn applied open-system thinking to organisations in 1966.

Don't confuse the systems approach with the contingency approach. The systems approach says the parts connect and the environment matters. The contingency approach goes a step further: it asks which arrangement fits which situation. And don't confuse open with closed systems: the classical school, in effect, treated the organisation as closed.

Where it breaks. The approach is abstract. It tells you that everything connects, but not which link matters most or what to do. Managers found it easier to agree with than to apply.

In practice. Before a change, trace its effect on the other departments and on customers and suppliers. Cross-functional meetings and shared targets put the idea to work.

For exams. The five parts of a system, open and closed systems, synergy, and the names Barnard and Bertalanffy.

A rulebook that runs a steady assembly line well can choke a team designing a new electric scooter. The same method of managing gave opposite results in two places.

There is no single best way to manage. Effectiveness depends on the fit between structure, environment, technology and people. The manager analyses the situation, adapts the approach, and improves results.

An example. A kirana store run by its owner needs no organisation chart: one person decides, on the spot. A retail chain with 200 stores needs written procedures, regional managers and a central buying team. Both are well run; each fits its situation.

Don't confuse the contingency approach with Fiedler's contingency model. The approach is a general view of management. Fiedler's model is one leadership theory within it: it matches a leader's style to how favourable the situation is. Hersey and Blanchard's situational leadership is another.

Where it breaks. "It depends" is true but can be vague. The approach names many factors, but says little about how to weigh them when they pull in different directions. Measuring a situation, such as how uncertain an environment is, is itself hard.

In practice. Diagnose before you prescribe. Ask how stable the market is, how routine the work is, how large the unit is and how skilled the people are. Then choose the structure and style.

For exams. "No one best way" is the phrase to recognise; Fiedler, Lawrence and Lorsch are the names.

Go deeper for practitioners

The research behind it. Tom Burns and G. M. Stalker (1961) studied British firms and contrasted mechanistic structures, with rigid roles and central control, and organic ones, with flexible roles and lateral communication. Mechanistic structures suited stable conditions; organic ones suited changing markets and technology.

Joan Woodward (1965) studied manufacturing firms in England. She found that the structure of successful firms varied with their technology: unit and small-batch production, mass production, or continuous process production.

Paul Lawrence and Jay Lorsch (1967) showed that departments facing different environments become different from each other (differentiation). The more uncertain the environment, the more effort the firm needs to coordinate them (integration).

A decision. Your auto-parts plant runs its main line on tight procedures. It now sets up a small team to design parts for electric vehicles. Should the team follow the plant's procedures? The contingency answer is no: give it an organic structure, with fewer approvals and direct contact with customers. Keep the main line mechanistic, and appoint someone to link the two.

A Pune plant ships 1,000 brackets a day and finds 20 faulty at final inspection. Throwing them away fixes today's batch. Finding out why they fail fixes every batch after.

Two streams. Total Quality Management: continuous improvement and customer satisfaction through teamwork. Knowledge management: create, share and use knowledge so it becomes a competitive resource. Together they stress learning culture, innovation, adaptability, customer trust and employee contribution.

Quality. In the example, the defect rate is 20 ÷ 1,000 = 2%. Inspection only sorts good from bad after the work is done. TQM asks the people who make the brackets to find the cause, perhaps a worn tool, and fix the process. Deming taught these ideas to Japanese managers after the Second World War; the Japanese word kaizen is used for continuous improvement.

Knowledge. Some knowledge is explicit: it can be written down, as in a manual. Much is tacit: it lives in experience and is hard to put into words. Ikujiro Nonaka showed how firms create knowledge by turning one into the other and back. Peter Drucker coined the term "knowledge worker" for people who work mainly with what they know.

An example. A senior clerk at a bank branch knows which documents most often hold up loan applications. If she retires without passing it on, the branch loses that knowledge. A checklist she helps write makes it explicit; pairing her with a new officer passes on the rest.

Don't confuse TQM with inspection, or knowledge management with an IT system. Inspection catches defects after they happen; TQM prevents them and makes quality everyone's job. A database stores information; knowledge management is about people sharing and using what they know, much of it tacit.

Where it breaks. Many TQM programmes fade into forms and slogans when leaders lose interest. Small, steady improvements can miss the need for a big change. Knowledge databases go unused where people are not rewarded, or do not trust each other enough, to share.

For exams. Deming and PDCA, kaizen, tacit and explicit knowledge, Nonaka, and Drucker's knowledge worker.

Each school of management was a fix for the blind spot of the one before. Read in order, the five tell one story.

The sequence reads as a series of shifts: from tasks and structure to people; from people to the interconnected organisation; from one system to situation-specific management; and from adaptation to continuous improvement and knowledge.

Why each shift happened. The classical school made work efficient but ignored people, and the Hawthorne studies exposed that. The human relations school studied people but neglected structure and the world outside, which the systems view brought in. The systems view said everything connects but not what to do, so the contingency approach asked what fits where. Faster competition then put quality and knowledge at the centre.

One problem, five lenses. Customers complain about long queues at a bank branch.

• Classical: study the steps of each transaction and remove the wasted ones.
• Neoclassical: ask whether staff morale has dropped, and listen to them.
• Systems: check whether a slow server at head office is holding up the counter.
• Contingency: ask whether this branch, with its customers, needs a different set-up from the others.
• Contemporary: measure waiting time weekly and improve it step by step, with staff ideas.

Don't read the schools as replacing each other. A modern firm uses time standards (classical), written rules (Weber), attention to teams (neoclassical), a view of the whole (systems), fit to circumstances (contingency) and quality cycles (contemporary) at once.

Where it breaks. The neat order is a teaching device. The dates overlap: Barnard's systems thinking, for example, appeared in 1938, a year before the main Hawthorne report was published.

For exams. Expect questions that ask you to put the schools in order, or to match a name or idea to its school.

Tasks, people, the whole, the situation, improvement.