Henry Fayol is known as the Father of “Administrative Management”. He contributed fourteen management principles on the basis of his experience. According to Fayol, the business operations of an organization can be divided into six activities: Technical, Commercial, Financial, Security, Accounting & Managerial. These fourteen principles are: Specialisation of Labour, Authority, Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interests, Remuneration, Centralization, Scalar Chain, Order, Equity, Personal Tenure, Initiative & Esprit de corps (SADUSRCSOEPIE). Weber believed that bureaucracy was the most efficient way to set up & manage an organization, and absolutely necessary for larger companies to achieve maximum productivity with many employees & tasks. The idea of Bureaucracy Favors efficiency, uniformity & a clear distribution of power. Weber argued that bureaucracy constitutes the most efficient & rational way in which human activity can be organised. Hierarchies are necessary to maintain order, to maximise efficiency & to eliminate favouritism. The Hawthorne Studies (Experiments) were conducted from 1927-1932 at Western Electric Hawthorne Workers in Chicago ; which was engaged in producing bells & other electrical equipment for telephone industry. George Elton Mayo (1880-1949) was born on 26th December, 1880 in Adelaide, Australia. He is known for his research including the “Hawthorne Studies”, & his book “The human problems of an Industrialised civilization”. The conclusion of the study is the work performance of people is dependent on both social issues & job content. He suggested a tension between workers’ “logic of sentiment” & managers “logic of cost & efficiency” which could lead to conflict within organizations. Mayo has conducted a series of experimental observations in plant & interview of employees. These are: Illumination Experiment (1924-27) Relay Assembly Test Room Experiments (1927) Mass Interviewing Programme (1928-31) Bank Wiring Observation Room Experiments (1931-32) Chester Irving Barnard was a telecommunication executive looked at systems of the organization. The author focused on two basic theories: the theory of Authority & theory of initiatives. Both are seen in the context of a communication system. Everyone should know the channels of communication. Everyone should have access to the formal channels of communication. Lines of communication should be a short & as direct as possible. Mary Parker Follett has focused on dynamics of the organization & groups. She has advocated “Pull” rather than “Push” approach for employee motivation. She has differentiated between “Power Over” & “Power With” and given ideas on negotiation, conflict resolution, power sharing etc. Conflict resolution through integration often results in a win-win situation. Integration refers to identifying & meeting each party’s underlying & often compatible need.

1. EVOLUTION OF
MANAGEMENT THOUGHTS
BY: Dr. Debajani Palai
Pre-Classical Theories
Classica Theories
Behavioural Theories
Modern Theories

2. PRE-CLASSICAL THEORY OF
MANAGEMENT
 In Pre-classical theory the structure of the organization is mechanical.
 Its main focus is on work.
 It emphasizes on order, rules & regulations.
 The practice of leadership is authoritarian.
 It focuses on 5Ps: Power, Position, Production, Profit & Punishment.
 It results workers’ dis satisfaction.
 As a result Industrial Revolution got its root

3. TYPES OF CLASSICAL APPROACHES
 Classical Theory emphasizes on both orders & rationality. It consists of basic rules
& regulations for smooth running of the organizations.
Classical approaches can be explained in the following manner.
 Scientific Management by F.W. Tayler, Frank & Gilbreth & Henry Gantt.
 Administrative Management by Henri Fayol.
 Bureaucratic Management by Max Weber

4. SCIENTIFIC MANAGEMENT THEORY
 Frederick Winslow Taylor was an American engineer who is known as the Father of
“Scientific Management” which studies the application of science in management.
 According to Taylor there is “One Best Way” to do each thing.
 He stressed on involvement of science for each element of man’s work to replace
the old rule-of-thumb method.
 Scientific training & development helped workers to perform in a better manner
than allowing them to choose their own task & perform.
 There was the development of spirit of hearty cooperation between workers &
management.
 Each group was assigned the task for which it was best fitted.

5. OBJECTIVES OF SCIENTIFIC MANAGEMENT
 His studies helped to improve the working conditions of industrial workers & were
instrumental in enhancing the productivity of the organization.
 He propounded sound management practices by stressing on division of labor,
scientific selection, placement & training of workers.
 Taylor was also instrumental in introducing the differential piece rate system in
organization.
 His studies helped to improve the working conditions of industrial workers & were
instrumental in enhancing the productivity of the organization.
 He propounded sound management practices by stressing on division of labor,
scientific selection, placement & training of workers.
 Taylor was also instrumental in introducing the differential piece rate system in
organization.

6. MANAGERIAL PRACTICES OF TAYLOR
 Piece Rate-Incentive System: Incentives are being received according to the
maximum pieces produced.
 Time-&-Motion Study: Jobs are broken down into various small tasks or motions &
unnecessary motions are removed to find out the best way of doing a job.
 Scientifically performing the job with proper selection & training.
 Harmony between management & employees to perform the task.
 Mental revolution towards the thought of workers who are not the mere wage
earners. They are the assets.

7. CONTRIBUTION OF FRANK & GILBRETH
 The father of “Motion Study” are Frank & Gilbreth which involves finding the best
sequence & minimum number of motions needed to complete a task.
 Both were mainly involved in exploring new ways for eliminating unnecessary
motions & reducing work fatigue.
 They introduced the concept of “Therbligs” which consists of different basic
motions like: Search, Select, Position & Hold.
 Both are very famous for their experiment of reducing the number of motions in
“Bricklaying”, by analyzing brick layers jobs & reducing the number of motions in
bricklaying from 18.5-4.

8. CONTRIBUTION OF HENRY LAURENCE
GANTT
 Henry Laurence Gantt was a mechanical engineer & management consultant who is the
most famous personality for developing “Gantt Chart” in 1910.
 He is one of the associate of F.W. Taylor & his contribution is very helpful in project
management task.
 Gantt Chart is used for scheduling multiple overlapping tasks over a time period.
 He focused on leadership qualities along with motivational schemes & emphasized the
greater effectiveness of rewards for good work rather than penalties for poor
performance.
 He developed a “Pay Incentive System” with a guaranteed minimum wage & bonus for
workers. If the workers completed their task before the standard time they would
receive bonus definitely.

9. THE GANTT CHART
 The Gantt Chart is accepted as the most important project management tool until
today. The chart is used as Program Evaluation & Review Technique (PERT).
 It is a popular type of bar chart that illustrates a project schedule which consists of
start & finish dates of the terminal elements & summary elements.
 Terminal & summary elements comprise the work breakdown structure of the
project.
 It provides a graphical mechanism of planning, controlling work & recording the
progress of workers towards the task standard.

10. CONT…
 The chart compares actual & planned performance.
 It indicates the production in terms of time rather than quantity.
 The horizontal axis consists of time, work schedule & work completed.
 The vertical axis consists of individuals & machines assigned.

11. LIMITATIONS OF SCIENTIFIC
MANAGEMENT
 The scientific management focuses problems at the operational level only.
 Taylor & his followers overlooked the social needs of workers & overemphasised
their economic & physical needs.
 It ignored the human desire for job satisfaction.

12. ADMINISTRATIVE MANAGEMENT
 Henry Fayol is known as the Father of “Administrative Management”. He
contributed fourteen management principles on the basis of his experience.
 According to Fayol, the business operations of an organization can be divided into
six activities: Technical, Commercial, Financial, Security, Accounting & Managerial.
 These fourteen principles are: Specialisation of Labour, Authority, Discipline, Unity
of Command, Unity of Direction, Subordination of Individual Interests,
Remuneration, Centralization, Scalar Chain, Order, Equity, Personal Tenure, Initiative
& Esprit de corps (SADUSRCSOEPIE).

13. 1: SPECIALIZATION OF LABOUR
 Specialization allows the individual to build up experience, & continuous
improvement in skill, thereby the person can be more productive.
 This principle is best for both the managerial as well as a technical work level.
 Henri believes that segregating work in the workforce amongst the worker will
enhance the quality of the product.
 Achieving the maximum efficiency from labour through specialization across all
aspects of organization: production, finance, accounting, human resource etc. is the
main aim of specialization.
 Fayol has concluded that the division of work improves the productivity, efficiency,
accuracy & speed of the workers.


14. 2: AUTHORITY & RESPONSIBILITY
 Authority facilitates the management to work efficiently & Responsibility makes
them accountable for the work done.
 Authority is the right to issue commands, along with which must go the balanced
responsibility for its function.
 Authority is the right to give order & the power to exact obedience.
 According to Fayol without authority managers can not manage the organization &
workers.

15. 3: DISCIPLINE
 The workers should be obedient & respectful for the organization, but this is two
sided: employees will obey orders if management play their part by providing
good relationship.
 Discipline involves the idea of no bending of rules. Rules are in place for a good
reason and deviation from them leads weak organizational structure.
 In practice discipline involves standards, consistency of action, adherence to rules
& values.
 Without discipline nothing can be accomplished. It is the core value for any project
or any management.
 Good performance and sensible interrelation make the management job easy &
comprehensive which is possible with proper discipline.

16. 4: UNITY OF COMMAND
 Unity of command means an employee should have only one boss & follow his/her
command.
 Order from many creates confusion & leads to conflict.
 The tension & dilemma arises where report to two or more bosses. Matrix structure
faces such type of problems.

17. 5: UNITY OF DIRECTION
 Unity of direction follows the principle of single plan. People engaged in the same
activity must have the same objective and single plan.
 This refers to all the persons working in a company should have one goal & they
are united to achieve the goal.
 It important that an united group of activities are essential to obtain unity of
action, coordination of strength & focusing on efforts.

18. 6: SUBORDINATION OF INDIVIDUAL
INTEREST
 Subordination of individual interest indicates a company should unitedly work
towards the interest of a company rather than personal interest.
 Management must see that the goals of the firm is always important & the goal of
a single employee should not prevail over the organization aswhole.

19. 7: REMUNERATION
 Remuneration states that employees should receive a fair payment for their
services which is also a motivational tool for workers.
 Remuneration whether it is monetary or non-monetary enhances morale of
employees.

20. 8: CENTRALIZATION
 Centralization deepens upon the size of the organization.
 According to Fayol there should be a balance between hierarchy & division of
power. The level of centralization is a matter of proportion as is the division of
labour.
 Large organization having proper coordination & competent employees opt for
decentralization rather than centralization.
 Decentralization refers to distribution of power.

21. 9: SCALAR CHAIN
 Scalar chain means the line of authority or levels of hierarchy. In hierarchy the steps
should be from top to bottom. Or from highest to lowest.
 This is necessary as an employee should be able to know his/her immediate senior.
 It also focuses on lateral communication.

22. 10: ORDER
 Order focuses that a company should maintain a well-defined work order to have a
favourable work culture.
 The positive atmosphere in the workplace will boost more positive productivity.
 Both material & social order are necessary for the smooth functioning of the
organization.
 The proper order of materials minimises time loss while handling materials & the
proper social order can be achieved through proper selection process.
 At the same time the policies, rules, instructions & actions should be
understandable & understood.
 Orderliness implies steady evolutionary movement rather than wild, anxiety
provoking & unpredictable movement.

23. 11: EQUITY
 Equity focuses on kindness & justice which is the foundation of any business.
Treating employees equally is very important for the smooth running of the
organization.
 All employees of the organization should be treated equally & respectfully. It is the
responsibility of the manager to avoid the chances of discrimination.

24. 12: STABILITY/PERSONNEL TENURE
 Employees work better if job security & career progress are assured to them.
 An insecure tenure creates high labour turnover which adversely affect the
organization.
 Both staff & management require suitable induction programs to familiarise
themselves with new work habits & situations. Fayol also focuses on effective
personnel planning & management development programs to reduce employee
turn over.

25. 13: INITIATIVE
 The management should support & encourage the employees to take initiatives in
an organization. It will help them to increase their interest & make them worthy.
 Allowing personnel to show their initiative in some way is a source of strength for
the organization.
 Therefore workers should be encouraged to contribute to the organization in terms
of development & new ideas.

26. 14: ESPRIT DE CORPS
 Esprit de Corps signifies harmony, cohesion among personnel & team work i which
is a great source of strength of the organization.
 It is the responsibility of the management to motivate their employees & be
supportive of each other regularly.
 Developing trust & mutual understanding will lead to a positive outcome & work
environment.

27. BUREAUCRATIC MANAGEMENT
 Weber believed that bureaucracy was the most efficient way to set up & manage
an organization, and absolutely necessary for larger companies to achieve
maximum productivity with many employees & tasks.
 The idea of Bureaucracy Favors efficiency, uniformity & a clear distribution of
power.
 Weber argued that bureaucracy constitutes the most efficient & rational way in
which human activity can be organised.
 Hierarchies are necessary to maintain order, to maximise efficiency & to eliminate
favouritism.

28. CHARACTERISTICS
 Major characteristics of Weber’s Ideal Bureaucracy can be explained in the
following manner.
 Work specialization & division of labour
 Abstract rules & regulations
 Impersonality of managers
 Hierarchy of organization structure

29. LIMITATIONS OF BUREAUCRATIC &
ADMINISTRATIVE MANAGEMENT
 Weber’s theory destroyed individual creativity & flexibility to respond to complex
changes in the global environment.
 The classical theory ignored important aspects of organizational behaviour.
 They did not deal with problems of leadership, motivation, power and informal
relations.
 Classical theories failed to consider impact of external environment upon employee
behaviour in organizations.

30. NEO-CLASSICAL THEORY
 Neoclassical Theory has made significant contributions to wards understanding of
human behaviour at work.
 It has generated awareness of the overwhelming role of human factor in industry.
 This approach has given following new ideas towards business. These are:
 The business organization is a social system.
 Human factor is the most important element in the social system.
 It has revealed the importance of social & psychological factors in determining
worker productivity & satisfaction.

31. HAWTHORNE STUDY BY ELTON MAYO
 The Hawthorne Studies (Experiments) were conducted from 1927-1932 at Western
Electric Hawthorne Workers in Chicago ; which was engaged in producing bells &
other electrical equipment for telephone industry.
 George Elton Mayo (1880-1949) was born on 26th December, 1880 in Adelaide,
Australia. He is known for his research including the “Hawthorne Studies”, & his
book “The human problems of an Industrialised civilization”.
 The conclusion of the study is the work performance of people is dependent on
both social issues & job content. He suggested a tension between workers’ “logic
of sentiment” & managers “logic of cost & efficiency” which could lead to conflict
within organizations.

32. EXPERIMENT OF HAWTHORNE STUDIES
 Mayo has conducted a series of experimental observations in plant & interview of
employees. These are:
 Illumination Experiment (1924-27)
 Relay Assembly Test Room Experiments (1927)
 Mass Interviewing Programme (1928-31)
 Bank Wiring Observation Room Experiments (1931-32)

33. ILLUMINATION EXPERIMENTS (1924-27)
 Illumination Experiment (1924-27), was done to determine the effect of different
levels of illumination on workers’ productivity.
 In this experiment two groups of workers were located in separate rooms, but each
group was performing the same task.
 The rooms were equally illuminated with stabilised room temperature, humidity.
etc. but slowly the effect of illumination was changed .
 After a period of time, it was concluded that illumination did not affect productivity
of workers.

34. RELAY ASSEMBLY TEST ROOM (1927)
 Relay Assembly Test Room Experiment (1927) was conducted to observe the effects
of various changes in working conditions on the workers’ output & morale.
 It aimed to find out the effects of changes in working conditions & hours of work.

35. MASS INTERVIEWING PROGRAMME (1928-
31)
 Mass Interviewing Programme (1928-31) was conducted to explore the employees’
feelings: human attitudes & sentiments by the social group of workers in informal
organization.
 The workers were asked to express freely & frankly their likes & dislikes on the
programmes & policies of the management, working conditions & behaviour of
their boss with workers etc.
 After interviewing 21-126 workers, & analysing their complaints, it was found that
there was no correlation between the nature of complaints & facts.
 After a few days there was a change in the attitude of the workers because the
workers thought that the working conditions were changed because of their
complaints. They also felt that the wages were better although the wage scale
remained at the same level.

36. CONT…
 Workers develop a feeling that the conditions in the working environment were
changed to be better although no such change took place.
 Subordinates should be allowed to comment freely about their superior.
 It is difficult to understand the real problems, personal feelings & sentiments of the
workers which are derived from employees’ personal history & social situations.

37. BANKWIRING EXPERIMENT (1931-32)
 Bank wiring Experiment was done to observe & analyse social aspects of work
organizations.
 For experiment, a number of employees consisting of three groups of workmen whose
work was inter-related were chosen. Their job was to solder, fix the terminals & finish
the wiring.
 Wages were paid on the basis of a group incentive plan & each member got his share
on the basis of the total output produced by each group.
 It was found that workers had a fixed clear-cut standard of output, which was lower than
management target, however they were capable of increasing their output.
 It was also found that the group did not allow its members to increase or decrease the
output. They were highly integrated with their social structure & informal pressure.

38. IMPLICATIONS OF EXPERIMENT OF MAYO
 Elton Mayo opened a new chapter in management by suggesting good human
relation to management. The implications of Mayo can be explained through social
factor in output, group influence, leadership, supervision & communication.
 Social Factors: An organization is not merely a formal structure where production is
determined by official prescriptions. It is a structure in which production norms are
set by social norms.
 Group Influence: Management can not deal with workers as individuals, but as
members of work group: influenced by the group.

39. CONT…
 Leadership: After the Hawthorne experiment, it was observed that a superior is
more acceptable as a leader if he can associate himself with the workers.
 Supervision: It is an important element in determining output of an organization.
Productivity would be more if supervisor is friendly, attentive, genuine &
empathetic.
 Communication: It was observed that communication plays an important role in
any organization. Through communication, workers can be sought in decision
making, problems faced by them can be identified and attempts can be taken to
solve them.

40. CONCLUSION
 Workers are not like machinery. They are sensitive factors of production.
 Managers should believe in employee oriented approach as the organization is a social
system which consist of employees..
 Employees should also understand the group attitude.
 The morale of employees as an individual or as a member of a working group has got a
direct impact on the productivity of an enterprise.
 The socio-psychological factors at workplace, not the physical conditions of the
workplace determine the employees’ morale & output.
 Non-economic rewards & sanctions significantly affect the workers’ behaviour, morale
& output.
 The workers have a tendency to form small informal groups. The production norms &
pattern of behaviour are set by such groups.

41. CRITICISMS
 This theory lacks scientific base.
 This theory neglects the nature of work and focuses on interpersonal relation.
 It ignores the economic dimension & focuses on socio-psychological concept.
 It does not consider effects of conflicts & tension.
 It gives much attention to informal relations, but a little formality is required always
to make employees productive & disciplined.

42. CONTRIBUTION BY CHESTERUN BARNARD
 Chester Irving Barnard was a telecommunication executive looked at systems of the
organization.
 The author focused on two basic theories: the theory of Authority & theory of
initiatives. Both are seen in the context of a communication system.
 Everyone should know the channels of communication.
 Everyone should have access to the formal channels of communication.
 Lines of communication should be a short & as direct as possible.

43. CONT…
 In the theory of authority four conditions must be fulfilled. These are:
 The communication from the boss to subordinate to be authoritative & it should
be clear & understood by the subordinates.
 Secondly, it should be possible to the subordinate to comply.
 Thirdly the subordinate has to see no incompatibility between the communication
& his/her own goals.
 Fourth; the subordinate has to see no incompatibility between the communication
& the objectives of the organization.
 In incentive theory the author has focused on tangible incentives & persuation.

44. CONTRIBUTION BY MARY PARKER FOLLETT
 Mary Parker Follett has focused on dynamics of the organization & groups. She has
advocated “Pull” rather than “Push” approach for employee motivation.
 She has differentiated between “Power Over” & “Power With” and given ideas on
negotiation, conflict resolution, power sharing etc.
 Conflict resolution through integration often results in a win-win situation. Integration
refers to identifying & meeting each party’s underlying & often compatible need, as
opposed to meet the frequent –incompatibility expressed desire of each.
 In Mary Parker Follett Leadership Theory, genuine power is not coercive “Power Over”,
but coactive “Power With”.
 According to her “True Leaders” create group power rather than expressing personal
power.

45. CONTRIBUTION BY MASLOW NEED
HIERARCHY
 Maslow’s Hierarchy of Needs (1943-54) is a motivational theory which is a five-tier model of human
needs and depicted within a pyramid.
 From the Bottom of the Hierarchy Upwards, the needs are: Physiological, Safety, Social, Esteem &
Self-Actualization.
 According to Maslow people are motivated to achieve certain needs & that some needs take
precedence over others.
 Our most basic need is for physiological or survival needs and this will be the first thing that
motivates our behaviour. Once that level is fulfilled the next level of safety by family & society is
takes its place.
 The social needs or the need of love & belongingness is the 3rd layer of the hierarchy. For example
friendship, intimacy, trust, acceptance, affiliation & being a part of the community or group.
 Esteem need is based on dignity & achievement, status & prestige whereas the Self-Actualization
need is the highest level need in the hierarchy. It is the person’s potential & self-fulfilment. In this
stage the person acts as a leader & others follow him/her.

46. CONTRIBUTION BY Mc GREGOR
 Douglas McGregor in his book, “The Human Side of Enterprise” in 1960, has
discussed on two basic theories. These are Theory-X & Theory-Y.
 Both of the theories begin with the premise that the role of management is to
assemble the factors of production including people for the economic benefit of
the firm.
 Theory X & Theory Y describe two views of people at work & may be used to
describe two opposing management styles.

47. ASSUMPTIONS OF THEORY-X
 Human beings inherently dislike working & will try to avoid to work.
 Therefore to achieve the goals of the organization the management punish, coerce
& threaten to workers.
 As employees do not want to take responsibility they want to be directed by the
managers.
 Application: It is applicable in Shop Floor, Mass Manufacturing, Production Workers.
 Conducive to: It is conducive to Large scale efficient operations.
 Management Style: The Management Style of leaders believing in Theory-X is
Authoritarian & Hard Management.

48. ASSUMPTIONS OF THEORY-Y
 People view work as being as natural as play & rest. People love to work & enjoy it by
putting both physical & mental effort.
 The leaders provide autonomy to the employees to achieve the goals of the
organization as employees are self directed.
 Job satisfaction is the key to engage employees & ensure their commitment.
 Employees are risk takers & responsible enough to be innovative & creative.
 They are imaginative & have problem solving and decision making skill.
 Application: Theory-Y is applicable in Professional Services & Knowledge Organizations.
 It is conducive for complex problem solving organizations & the style of management is
Participative.

49. CONTRIBUTION BY HERZBERG
 Frederick Herzberg (1923-2000) has focused on satisfaction & dissatisfaction at
work always arise from different factors.
 He has proposed two basic factors: Hygiene & Motivators in workplace.
Dissatisfaction is a result of a lack of hygiene factors whereas satisfaction &
psychological growth are a result of motivation factors.
 Hygiene Needs are: Better Pay, Conducive Working Condition, Amicable Relation
with Superior, Cordial Peers & Company Policy.
 Motivational Needs are: Challenging Task, Autonomy, Intrinsic Reward, Creative
Opportunities & Personal Growth.

50. CONTRIBUTION BY LIKERT
 Dr. Likert has conducted much research on human behaviour within organizations,
particularly in the industrial situation.
 Dr. Likert has examined different types of organizations & leadership styles &
stated that to achieve maximum profit, good industrial relation & high productivity
every organization must make optimum use of their human assets.
 Likert has identified four main leadership styles for organizations. These are:
Exploitative Authoritative, Benevolent, Consultative & Participative.

51. CONT…
 Exploitative Authoritative (Exploitive) System: In this system decisions are imposed
on subordinates & motivation is characterised by threat. There is only downward
communication & no joint team work.
 Benevolent: In this system leadership is like parental as leaders take the decision &
subordinates follow only. Motivation is characterised by reward. There is two way
communication & scope of a little team work.
 Consultative System: Here leaders play the lead role & take decision by consulting
with subordinates. Subordinated are involved in flow of activities & rewarded.
There are both vertical & horizontal communications in such system.
 Participative: in this system leaders have confidence on subordinates &
subordinates are participated to drive optimum solution. Both autonomy &
extrinsic reward motivate employees.

52. MODERN THEORIES
 Under modern management thought three streams of thinking have been
developed. These are:
 Quantitative or Mathematical or Management Science Approach
 System Approach
 Contingency Approach
 Operational Approach
 Decision Theory Approach
 7S McKinsey Model
 Michael Porter

53. QUANTITATIVE/MATHEMATICAL/OPERATIONS
RESEARCH/MANAGEMENT SCIENCE APPROACH
 The primary focus of quantitative approach is the mathematical model or
managerial model which aims to achieve the goals of the organization & solve the
basic organizational problems.
 This approach draws solutions from decision theory approach which provides many
techniques to take rational decision.
 MS includes: decision analysis, optimization, simulation, forecasting, game theory,
networking/transportation forecasting model, mathematical modelling, data
mining, probability & statistics, morphological analysis, project management,
problem structuring method, decision support system etc.

54. SYSTEMS APPROACH
 The main contributors of systems approach are Ludwing Von Bertalanffy, Henderson,
W.G. Scott, Deniel Katz, Robert L. Kahn, W. Buckley & J.D. Thompson.
 A system is a set of interrelated & interdependent parts arranged in a manner that
produces an unified result. It considers management in its totality.
 It is a concept taken from the physical science & applied to organizations.
 The basic idea of this approach is that any object must rely on the method of analysis
involving simultaneous variations of mutually dependent variables like: Input,
Transformation, Output & Feedback.
 Systems can be both Closed (Organizations do not interact with the environment. These
are self-contained & self-maintained & mechanical having narrow feedback system)&
Open (Organization interacts with the environment & collects feedback).

55. CONTINGENCY APPROACH
 During 1970s Contingency Approach has developed by J.W. Lorsch & P.R. Lawrence who
aimed that management problems are different under different situations & these
demand varied solutions rather than the single one.
 One best way of doing is useful for repetitive things, but not for managerial problems.
 The behaviour of an organization is said to be contingent on forces of environment. The
contingency theory aims at integrating theory with practice in system framework &
focuses on the relationship of the organization with its internal & external environment
& analyses sub-systems of the organization.
 This theory also focuses on managerial policies & practices to be effective & flexible
with environmental changes.
 It emphasises that managers should develop diagnostic, communication & leadership
skill & adaptive with changes & challenges.

56. OPERATIONAL APPROACH
 Operational Approach is known as management process approach which consists
of different functions & levels of management along with different entrepreneurs.
 It deals with actual problems faced by the managers & provides effective solutions.
 It states that levels of the organization (Top, Middle & Lower) & functions such as:
planning, organizing, staffing, leading & controlling are universal in nature
irrespective of the type of the organization.
 The conceptual framework of the management can be constructed on the basis of
analysis of the processes of the management.

57. DECISION THEORY APPROACH
 Decision theory approach is an interdisciplinary area of the study which consists of
branches of science, engineering & all social activities.
 It is concerned with the process how real or ideal decisions can be made.
 It focuses on the basic problem, identifies alternative solutions & selects &
implements the best one.
 Hence, factors affecting decision making process are: information, system, social &
psychological perspectives.

58. M.C KINSEY’S GE 9 CELL MATRIX MODEL

59. GE MATRIX: X AXIS: Business Position (BP) & Y
AXIS: Market Attractiveness (MA)
MARKET
ATTRACTIVENESS
HIGH MEDIUM LOW
HIGH Invest (HBP & HMA) Invest (MBP & HMA) Protect (LBP & HMA)
MEDIUM Invest (HBP & MMA) Protect (MBP &MMA) Harvest (LBP & MMA)
LOW Protect (HBP & LMA) Harvest (MBP & LMA) Divest (LBP & LMA)
BUSINESS POSITION…… ……………………………………. …………………………………… …………………………………..

60. CONT…
 Invest or Grow strategy is implemented in High Business Position & High Market
Attractiveness (HBP & HMA), High Business Position & Medium Market Attractiveness
(HBP & MMA) & Medium Business Position & High Market Attractiveness (MBP & HMA).
 Protect strategy is implemented in High Business Position (HBP) & Low Market
Attractiveness (LMA), Medium Business Position (MBP) & Medium Market Attractiveness
(MMA) & Low Business Position (LBP) & High Market Attractiveness (HMA).
 Harvest strategy is implemented in Medium Business Position (MBP) & Low Market
Attractiveness (LMA) & Low Business Position (LBP) & Medium Market Attractiveness
(MMA)
 Divesture strategy is implemented in case of Low Business Position (LBP) & Low Market
Attractiveness (LMA)

61. 7S FRAMEWORK

62. CONT…
 The 7-S framework describes how the strategist can holistically & effectively
organize a company with 7-S factors: shared values, strategy, structure, system,
style, staff & skills.
 Shared Values: The interconnecting center of 7-S model is shared values which
states the central beliefs & attitude on which the organization stands.
 Strategy: It refers to the plans for the allocation of Firm’s scarce resources over a
time period to reach in a identified goal.
 Structure: It is the way the organization’s units relate to each other: centralized,
decentralized, matrix, hybrid, network etc.

63. CONT…
 System: It states about procedures, processes, routines that characterize how
important work is to be done with the help of financial system, human resources,
information system etc.
 Staff: It consists of numbers & types of personnel within the organization.
 Style: Cultural style of organization & how key managers behave in achieving the
goals of the organization.
 Skill: It refers to core competencies. Distinctive capabilities of personnel or of the
organization as a whole.

64. MICHAEL PORTER’S APPROACH TO INDUSTRY
ANALYSIS
.

65. THREAT TO NEW ENTRANTS
 New entrants are newcomers to an existing industry and they are threat to an
established organization.
 They are most concern with the intensity of competition within the industry.
 The basic barriers to entry are:
 Economies of scale & Cost advantage
 Product differentiation
 Capital requirements
 Switching costs
 Quick access to distribution channels

66. THREAT TO SUBSTITUTE
 Substitute product are those products that appear to be different, but can satisfy
the same need as another product.
 According to Porter the substitutes limit the potential returns of an industry by
placing a ceiling on the prices firms in the industry can profitably charge.
 To the extent that switching costs are low, substitutes may have a strong effect on
the industry.

67. RIVALRY AMONG EXISTING FIRMS
 Rivalry is the extent of direct competition in an industry.
 The intense rivalry is related to the presence of the following factors.
These are
 Number of competitors
 Industry growth rate
 Quality of product & services
 Amount of fixed cost
 Diversity of rivals

68. BARGINING POWER OF BUYERS &
SUPPLIERS
 Buyers affect the industry through their ability to force down prices, bargaining for
higher quality or more services & play competitors against each other.
 Suppliers can affect the industry through their ability to raise prices or reduce the
quality or quantity of purchase of goods & services.