Modern Management Theory

What are main management theories?

There are three major classifications for management theories: Classical Management Theory, Behavioral Management
Theory and Modern Management Theory. These classifications represents a different era in the evolution for
management theories.

What are modern management theories?

Management theories represent ideas that provide recommendations for management strategies, frameworks and tools that
organizations can implement to aid their workforce or culture. Leaders can use these theories as guidance to meet
organizational goals or motivate employees. They can also apply ideas from different theories rather than solely relying on
one management theory. Modern management theory represents one of the numerous theories used by organizations. This
theory recognizes that today's organizations face rapid change and added complexities, with technology serving as both a
potential cause and solution for these factors.

When implementing this theory, managers use technology and mathematical techniques to analyze their workforce and
make decisions. This theory serves as a response to classical management theory, which believes workers solely work for
monetary gain. The modern management theory believes that employees work for numerous reasons, including to achieve
satisfaction, happiness and desired lifestyles. With this theory, managers understand employees' behaviors and needs and
can implement strategies to meet those needs and support their skill development over time.

Related: Q&A: What Is the Classical Management Theory?

Benefits of the modern theory of management

Here are the benefits of incorporating modern management theories:

 Boosts productivity: Modern management theory uses mathematical and statistical methods to assess
performance within an organization. Managers can use this data to understand employee behaviors and develop
solutions that maximize the potential of their workforce. For example, they may implement processes that make
employees' tasks more efficient or offer training programs to improve their skills.
 Aids decision-making: Modern management theories often provide managers insights into the factors they need to
examine, which they can use to evaluate their organization or department. When managers know what to look for, it
can help them identify problems and begin coming up with potential solutions. The use of mathematical techniques
also enables them to use data to support those solutions and final decisions.
 Improves employee engagement: As mentioned, the modern management theory examines employees'
motivation for working beyond financial gain. Managers who utilize this theory can then identify and implement
processes or procedures that take employees' varying needs into account. If employees feel satisfied at work, it can
boost their morale and engagement and make them want to continue working for the organization.
 Promotes objectivity: The modern management theory emphasizes the use of mathematical techniques. These
techniques allow managers to make decisions based on data and evidence rather than personal opinions or
feelings. They also enable the testing of different options to assess which one best supports the organization. As a
result, managers can implement more effective solutions.
 Enables adaptability: Modern management theory recognizes that today's organizations often existing within
rapidly changing environments. This theory emphasizes the importance of recognizing the influence of internal and
external factors on business and encourages managers to use several techniques and approaches to work with
them. For example, managers can use new technology to streamline processes or perform statistical modeling when
developing solutions.

Related: 12 Common Management Challenges and How To Overcome Them

Types of modern management theories
There are several different modern management approaches that managers can implement within an organization.
Managers can choose to use a combination of these approaches as guidance for leading their teams and supporting
organizational objectives. The three approaches of modern management are:

Quantitative approach
The quantitative approach to management uses statistics and mathematical techniques to solve complex problems.
Depending on the business area, managers may use techniques like computer simulations or information models to assess
performance. This analysis enables them to understand what is working and what is not within the business, then develop
solutions to solve or improve the issues they find. Managers can also use these techniques and data to determine the
benefits or risks of different ideas. This approach can help managers make objective decisions based on data and facts,
rather than personal opinions or feelings, that support the business.

This modern management approach often consists of three branches:

 Management science: Management science focuses on the use of mathematical and statistical methods to form
effective business solutions and achieve goals. Examples of these tools include the Program Evaluation Review
Technique (PERT), the critical path method (CPM) and sampling. Managers can use these tools in various
situations, including project management, budgeting and developing schedules.
 Operations management: In operations management, managers implement practices that help make business and
production processes more efficient. Depending on the situation, this method may require managers to restructure
or redesign their processes. Some of the tools they use include forecasting, quality control methods and project
planning. Often, these managers aim to make more or better products through the more efficient processes they
implement.
 Management Information System: A management information system (MIS) represents a database that organizes
an organization's data, and managers use this system to support informed decision-making. This system collects
and stores real-time data, allowing managers to run reports on areas like financials, timelines, personnel and
inventory. Managers can then monitor this information and use it to assess performance and make improvements or
develop solutions as needed.

Related: What Is a Management Information System?

Contingency approach
The contingency management approach states that there is not just one management approach that fits every organization.
It believes that the optimal management style depends on the situation. Leaders who utilize this theory do not adopt a single
management style and instead must identify and use different styles for different situations. As a result, these leaders also
develop additional traits and skills that ensure they can employ various management approaches effectively. The use of
diverse styles can help make these leaders more flexible and adaptable in the workplace.

This theory outlines three variables that it believes influence an organization's structure: the organization's size, the
technology it uses and the leadership styles. An effective manager understands these factors and how they may impact
performance. For example, a small organization may represent more flexibility and less separation between departments,
whereas a large organization may be more complex and divided. Managers in smaller organizations can have more control
over processes due to their flexibility and potentially make changes to them more easily.

Related: Understanding the Contingency Theory of Leadership

Systems approach
The systems approach of management states that organizations represent a complex collection of various components that
work together to reach a common goal. An organization is made up of numerous subsystems, such as different
departments. Managers using this theory examine how these subsystems interact with and affect one another, rather than
analyzing them separately. They must also consider their surrounding environment and external factors that influence or
affect these systems. The systems approach further defines an organization by dividing it into different components. These
components demonstrate how different parts of the organization work together toward a common goal:

 Inputs: Inputs represent the factors that are needed to create goods and services. For example, inputs may include
raw materials, capital, technology or information.
 Transformational process: Transformational processes represent the activities or abilities that convert the
organization's inputs into outputs. For example, these processes may include employees' work tasks or operational
activities.
 Outputs: Outputs represent the results produced by an organization. These outputs may include products, services
and financial results, such as profits.
 Feedback: Feedback represents information related to the organizations' outcomes or outputs. Leaders can use
this information to influence or make decisions related to the organization's inputs.

In the systems approach, management staff members develop goals and processes that support their organization's overall
objectives and performance. For example, department managers can look to the department above them in the hierarchy to
determine their department's purpose and priorities. They may implement deadlines for their team that ensure that the other
department can begin and complete its necessary tasks. Aligning their department's activities with the next department's
goals can help processes run more smoothly and efficiently throughout the organization.
What is modern management theory?
The modern management theory believes that employees work for numerous reasons, including to achieve satisfaction,
happiness and desired lifestyles. With this theory, managers understand employees' behaviors and needs and can
implement strategies to meet those needs and support their skill development over tim

What are the three modern management theories?

Modern Management Theory is actually comprised of three other management theories — Quantitative Theory, Systems
Theory, and Contingency Theory.
 What do we mean by Management Theories?
Management theories are the set of general rules that guide the managers to manage an
organization. Management theories (also known as "Transactional theories") focus on the role of
supervision, organization, and group performance. Theories are an explanation to assist
employees to effectively relate to the business goals and implement effective means to achieve
the same. In this article, we will discuss the historical context of management, diverse views on
management, and finally the theories of management.

Early management theories base leadership on a system of reward and punishment. Managerial
theories are often used in business; when employees are successful, they are rewarded; when
they fail, they are reprimanded or punished.

Types of Management Theories

Management theories can be classified into three types.

1. Classical Management Theory

2. Behavioral Management Theory
3. Modern Management Theory

These management theories are explained below:

1. Classical Management Theory

Classical management theory is based on the belief that workers only have physical and
economic needs and prescribes specialization of labor. Classical theories recommend centralized
leadership and decision-making and focus on profit maximization. Three streams of classical
management theory are - Bureaucracy (Weber), Administrative Theory (Fayol), and Scientific
Management (Taylor).
2. Behavioral Management Theory
The behavioral management theory is focused on the human aspects of work. They are also often
referred to as the human relations movement. These theories aspire to gain a better
understanding of human behavior at work to improve productivity. It focuses on behavioral
aspects like motivation, conflict, expectations, and group dynamics.
3. Modern Management Theory
Modern management theory emphasizes the use of systematic mathematical techniques to
analyze and understand the inter-relationship of management and workers in all aspects. Three
streams of modern management theories are - Quantitative Approach, System Approach,
and Contingency Approach.

General Management Theories

 There are four general management theories.

 Frederick Taylor – Theory of Scientific Management

 Henri Fayol – Administrative Management Theory
 Max Weber - Bureaucratic Theory of Management
 Elton Mayo – Behavioral Theory of Management (Hawthorne Effect)

1. Frederick Taylor’s Theory of Scientific Management:

Taylor’s theory of scientific management aimed at, improving economic efficiency, especially
labor productivity. Taylor had a simple view about, what motivated people at work, - money. He
felt that workers should get a fair day's pay for a fair day's work, and that pay should be linked to
the amount produced. Therefore he introduced the differential piece rate system, of paying
wages to the workers.

Taylor's Differential Piece Rate Plan:

 If Efficiency is greater than the defined Standard then workers should be paid 120 % of the
Normal Piece Rate.
 If Efficiency is less than standard then workers should be paid 80% of the Normal Piece Rate.

Principles of Scientific Management

Four Principles of Scientific Management are:

 Time and motion study: - Study the way jobs are performed and find new ways to do them.
 Teach, train, and develop the workman with improved methods of doing work. Codify the new
methods into rules.
 The interest of the employer & employees should be fully harmonized so as to secure mutually
understanding relations between them.
 Establish fair levels of performance and pay a premium for higher performance.

2. Henri Fayol’s Administrative Management Theory:

Henri Fayol known as the Father of Management laid down the 14 principles of Management.
These 14 principles of management are used to manage an organization and are beneficial for
prediction, planning, decision-making, organization and process management, control, and
coordination.

 Division of Work: Improves productivity, efficiency, accuracy, and speed

 Equity: Employees should be treated equally and respectfully
 Discipline: Makes the management job easy and make progress
 Initiative: support and encourage employees taking initiatives
 Authority and Responsibility: Efficient delivery of work with defined responsibility
 Esprit de Corps: Develop trust and mutual understanding
 Subordination of Individual Interest: Company over personal interest and respect the chain of
command
 Stability: offer job security to their employees
 Remuneration: motivating factor linked to the individual’s efforts
 Unity of Direction: Unified goals and motives for all personnel working in a company
 Centralization: Balance between the hierarchy and division of power
 Scalar Chain: Hierarchy steps should be from top to the lowest
 Unity of Command: More than one boss brings a conflict of interest and confusion
 Order: the positive atmosphere in the workplace boosts productivity

3. Max Weber’s Bureaucratic Theory of Management:

Weber made a distinction between authority and power. Weber believed that power educes
obedience through force or the threat of force which induces individuals to adhere to regulations.
According to Max Weber, there are three types of power in an organization:-

 Traditional Power
 Charismatic Power
 Bureaucratic Power or Legal Power.

Features of Bureaucracy:

 Division of Labor.
 Formal Hierarchical Structure.
 Selection based on Technical Expertise.
 Management by Rules.
 Written Documents.
 Only Legal Power is Important.
 Formal and Impersonal relations.

4. Elton Mayo’s Behavioral Theory of Management:

Elton Mayo's experiments showed an increase in worker productivity was produced by the
psychological stimulus of being singled out, involved, and made to feel important. Hawthorne
Effect can be summarized as “Employees will respond positively to any novel change in a work
environment like better illumination, clean work stations, relocating workstations, etc. Employees
are more productive because they know they are being studied.

5 Relationship Theories or Transformational Theories of

Management
Relationship theories (also known as "Transformational theories") focus upon the connections
formed between leaders and followers. These leaders motivate and inspire people by helping
group members see the importance and utility of the task. Transformational leaders are focused
on the performance of group members, but also want each person to fulfill his/her potential.
These leaders often have high ethical and moral standards.

There are different thoughts on management. According to one school of thought, history is of no
relevance to the real problems faced by modern world managers in today's dynamic
environment. However, both management theory and its history are indispensable tools for
managing complex digitally-enabled organizations in a modern context.

Forces Influencing Management Theories

The following three forces had a major influence on the concept and evolution of management
theories.
Social Forces:
Social forces are the norms and values that characterize a culture. Early social forces allowed
workers to be treated poorly. However, more recent social forces have provided for more
acceptable working conditions for the workforce. Social forces have greatly influenced the
management thought in the areas of motivation and leadership.

Economic Forces
Economic factors have influenced the way businesses developed and designed their
organizational structures, workforce, etc. Examples of these economic forces are Ideas like a
market economy, public enterprise, and private ownership of property, economic freedom,
competitive markets, and globalization.

Political Forces
Political forces such as governmental regulations play a significant role in how organizations
choose to manage themselves. Government actions and political realities often influence the
success and failure of a business and most of the time political factors that affect a business are
often completely out of the company's control. Political forces have influenced management
theory in the areas of environmental analysis, planning, control, and organizational design and
employee rights.
Management theories in the workplace
Finding a management theory that suits your workplace can totally change the working environment for the
better. In this article, we'll focus on the Modern Management Theory and how its mix of hard data and human
emotions can become an efficient model for leadership. We'll also cover other management theories and see
how they compare to the Modern Management Theory.

What are management theories?

Management theories are ideas about how people manage employees in an organization. In order to lead a
business, people must understand what motivates and directs employees in a company. Management theories
explain what motivates employees and how leaders can use these motivators to control and guide them.
Management theories provide management strategies, frameworks, and guidelines that employers
can implement in the office. Companies need different management for different work settings. For hundreds of
years, theorists have researched the best forms of management for different companies. Now we can use the
frameworks given in these management theories to create a framework for management in companies today.

Modern Management Theory

Modern Management Theory was created in direct response to the Classical Management Theory that states
employees are only motivated by money. The Modern Management Theory recognizes that workers are
complex and have many reasons for wanting to succeed in their job. The Modern Management Theory also
believes that rapidly changing technology can both cause and solve many problems in the workplace.

This theory combines mathematical analysis with an understanding of human emotions and motivation in order
to create a working environment that is maximally productive. A manager using the Modern Management
Theory will use statistics to measure employee performance and productivity and also try to understand what
makes their employees satisfied at their jobs.

Modern Management Theory is actually comprised of three other management theories — Quantitative Theory,
Systems Theory, and Contingency Theory.

Quantitative Theory
This theory based on efficiency and mathematical equations came out of the necessity for managerial
excellence in World War II. This is a simple number-based theory that relies on calculating the risks, benefits,
and drawbacks of any action before it is taken. This approach applies statistics, computer simulations,
information models, and other quantitative techniques to the management of a company. This theory is usually
not used to manage a business on its own. Instead, the Quantitative Theory must be used with more
humanistic theories, in order to run a company.
Systems Theory
This theory treats companies like a living organism, with all parts necessary for the company to survive.
Developed by Ludwig von Bertalanffy, this theory states that all parts of a company, from the CEO to the entry-
level employee, must work in harmony for the company to survive. Companies using this theory think that
departments and employees must work as a collective group and not an isolated unit. Synergy and
interconnectedness between departments are key with this theory.

While striving for harmony between departments is important in a company, most companies don’t need to rely
on synergy so much for their day-to-day functions. For example, the accounting department of a small
company doesn’t need to be totally in sync with the HR department. This management theory is more of a way
you can view the company, not an exact management style.

Contingency Theory
The Contingency Management Theory holds that every situation requires a different leadership style, and
therefore no one theory can work for an entire office. Created by Fred Fiedler in the 1960s, this theory states
that it is up to the leaders of a company to assess a situation and use the best leadership strategy. Fiedler
believed there are three main variables for determining what leadership strategy to employ — organization
size, technology being used, and the overall style of leadership in the company.

This theory puts a lot of responsibility on the leaders of a company. Fiedler believed that a leader’s traits
directly affected how they managed people. This theory is also a more useable theory for modern workplaces,
as it understands that as technology and companies change, so must the leadership styles.

Benefits of the Modern Management Theory

Modern Management Theory is a great management theory for the modern world because it recognizes and
respects the changes that come with technology. This theory understands that technology changes the
workplace and leaders must be able to incorporate these changes efficiently. For example, a manager that
uses the Modern Management Theory will look at a development such as working from home on two fronts.
They will analyze the costs and benefits of having employees work from home, and they will also ask
individuals how working from home benefits their own lifestyle.

This two-pronged approach to management allows for the straight facts of hard data, and the more
introspective and personal approach to leadership. This theory treats employees as complex individuals who
are concerned with more than just their salary, while also allowing for some company decisions to be made by
rational and statistical analysis.

Other popular management theories

Some management theories have been around for over 100 years. Here are some of the most common
management theories and why they may or may not work in the modern office.

Classical Management Theory

The Classical Management Theory system of belief states that employees are only motivated by physical and
economic needs. It calls for a clear structure of management where the workforce is divided into owners,
middle management, and supervisors. This theory views the workplace as an assembly line, with each worker
completing a specialized task instead of multitasking. People who utilize this theory believe workers are
motivated by financial rewards based on the competency of their work. When companies put this theory to
practical use, they will often see an increase in productivity. It can help streamline a company and make
employees focus on the bottom line. However, as the theory does not consider social needs, job satisfaction,
and human relationships, it can also lead to a sizable amount of burnout among employees. This model exerts
a great deal of control over human behaviors and treats employees as a machine. For many companies,
Classical Management Theory fell out of favor in the past 60 years as more modern theories emphasized the
humanity of the workforce.

Scientific Management Theory

Fredrick Taylor came up with this theory at the end of the 19th century. He believed that using the scientific
method will get the best results out of workers in the office. First, use the scientific method to determine the
best way to perform a specific task. Next, you assign workers to tasks that match their abilities and train them
to maximize their output. Then you must monitor the workers constantly to ensure they are using the most
efficient methods. Finally, managers should spend their time training and planning for future work. Parts of the
Scientific Management Theory are still in use today. Managers should offer help and advice when needed, and
they should always look towards the future. However, now workers get more say about how they think their job
should be done and are usually not hired to perform just one specific task. The Scientific Management Theory
was best suited to large companies at the turn of the century, not small modern offices.

Bureaucratic Management Theory

The Bureaucratic Management Theory, created by Max Weber in the late 1800s, states that companies should
be structured in a hierarchical system with clear rules, roles, and procedures. This theory stresses bureaucracy
in six main areas — hierarchical structure, task specialization, formal selection, rules, advancement based on
achievement, and an impersonal working environment. Under this theory, promotions are not about personal
character or relationships, but strictly based on performance. This management theory has become less
popular in the century due to its rigid structure. While in theory it makes sense for an office to have rules and
standards which everyone must follow, in practice there will always be emotions and personal relationships in
an office which will go against these bureaucratic guidelines.

Theory X and Theory Y

This theory, proposed by Douglas McGregor in 1960, believes that there are two main management styles and
leaders must choose which style to employ based on the perceived motivation of their employees. Leaders
should use Theory X when dealing with a workforce that is unmotivated and dislikes work. Managers who use
Theory X must use an authoritarian work style to get anything done. Managers should use Theory Y when they
believe their workforce is engaged, self-motivated, and enjoy their job. Managers who use Theory Y use a
more participatory style of management. While this theory provides two different options for management, both
options are quite extreme. Employees fall somewhere between Theory X and Theory Y, and managers must
adjust their management style accordingly. This theory of management has become less popular over time as
managers viewed their employees in less stark terms and tried to understand their employees.
 1
MODERN MANAGEMENT THEORIES AND PRACTICES: A
CRITICALOVERVIEWIntroduction
Managing is one of the most important human activities. From the time humanbeings began
forming social organizations to accomplish aims and objectivesthey could not accomplish as
individuals, managing has been essential to ensurethe coordination of individual efforts. As
society continuously relied on groupeffort, and as many organized groups have become large, the
task of managershas been increasing in importance and complexity. Henceforth,
managerialtheory has become crucial in the way managers manage complex organizations.The
central thesis of this paper is that although some managers in different partsof the world could
have achieved managerial success without having basictheoretical knowledge in management, it
has to be unequivocally emphasizedthat those managers who have mixed management theory in
their day-to-daypractice, have had better chances of managing their organizations
moreefficiently and effectively to achieve both individual and organizationalobjectives.
Therefore, managers of contemporary organizations ought toappreciate the important role they
play in their respective organizations if theyare to achieve set goals. Secondly, there is need to
promote excellence among allpersons in organizations, especially among managers
themselves.To address these concerns, the paper will proceed along the following
spectrum:management will be defined for purposes of conceptual clarity; managementobjectives,
functions, goals, and essentiality, will be highlighted; the importanceof managerial skills and the
organizational hierarchy will be sketched; theimportance of women in the organizational
hierarchy will be emphasized;reasons for studying management theory will be enumerated; the
differentmanagement theories, the core of the paper, will be discussed at length; the

2
significance of management as a practice will be contextualized; and ‘the wayforward’ in form
of a conclusion will be offered.
Definition of Management
Management is the art, or science, of achieving goals through people. Sincemanagers also
supervise, management can be interpreted to mean literally“looking over” – i.e., making sure
people do what they are supposed to do.Managers are, therefore, expected to ensure greater
productivity or, using thecurrent jargon, ‘continuous improvement’.More broadly, management
is the process of designing and maintaining anenvironment in which individuals, working
together in groups, efficientlyaccomplish selected aims (Koontz and Weihrich 1990, p. 4). In
its expanded form,this basic definition means several things. First, as managers, people carry
outthe managerial functions of planning, organizing, staffing, leading, andcontrolling. Second,
management applies to any kind of organization. Third,management applies to managers at all
organizational levels. Fourth, the aim ofall managers is the same – to create surplus. Finally,
managing is concerned withproductivity – this implies effectiveness and efficiency.Thus,
management refers to the development of bureaucracy that derives itsimportance from the need
for strategic planning, co-ordination, directing andcontrolling of large and complex decision-
making process. Essentially, therefore,management entails the acquisition of managerial
competence, and effectivenessin the following key areas: problem solving, administration,
human resourcemanagement, and organizational leadership.First and foremost, management is
about solving problems that keep emergingall the time in the course of an organization struggling
to achieve its goals and

3
objectives. Problem solving should be accompanied by problem identification,analysis and the
implementation of remedies to managerial problems. Second,administration involves following
laid down procedures (although proceduresor rules should not be seen as ends in themselves) for
the execution, control,communication, delegation and crisis management. Third, human
resourcemanagement should be based on strategic integration of human resource,assessment of
workers, and exchange of ideas between shareholders andworkers. Finally, organizational
leadership should be developed along lines ofinterpersonal relationship, teamwork, self-
motivation to perform, emotionalstrength and maturity to handle situations, personal integrity,
and generalmanagement skills.
Management Objectives, Functions, Goals, and Essentiality
Management Objectives
There are basically three management objectives. One objective is ensuringorganizational goals
and targets are met – with least cost and minimum waste.The second objective is looking after
health and welfare, and safety of staff. Thethird objective is protecting the machinery and
resources of the organization,including the human resources.
Management Functions
To understand management, it is imperative that we break it down into fivemanagerial functions,
namely; planning, organizing, staffing, leading, andcontrolling.Planning involves selecting
missions and objectives and the actions to achievethem. It requires decision-making – i.e.,
choosing future courses of action fromamong alternatives. Plans range from overall purposes and
objectives to the mostdetailed actions to be taken. No real plan exists until a decision – a
commitment