Modern Management Theory

This theory came into force because of the growing complexities in organizations.

FEATURES:

1. Management is responsive to environmental changes.

2. Business organizations are dynamic institutions composed of inter related divisions and sub divisions.

3. Business firms have multiple objectives. Managers balance economic and non economic objectives and maximise the interests of diverse groups of shareholders like customers, suppliers etc.

4. Management is multi disciplinary in nature

Modern Management Theory

comprises of:

1. Quantitative Theory

Management Science

Operations Management

Management Information System.

2. Systems Theory

3. Contingency Theory

4. Operational Theory

Quantitative Theory This theory is also known as Operations Research Theory,

decision Theory or management science Theory. It became an acceptable theory during World War-II .When Britain wanted to solve the problems of War. The problem was that the radar system did not perform well at field sites as it performed at the testing station. On site scientific observation was thus called during actual operation.

1. MANAGEMENT SCIENCE

“ Management Science is an approach that aims at increasing decision effectiveness through the use of sophisticated mathematical models and statistical methods”.

It uses mathematical models such as linear programming, PERT,CPM, games theory, probability sampling theory,capitalbudgeting etc to solve organisational problems.

The management calls for a team of experts from relevant disciplines which analyses business problems and frames a mathematical model by collecting relevant data(cost of machine,cost of raw material,selling price of the product etc.)

Management science and operations research are often considered indistinguishable.

“ While operations research tends to focus on formulation and manipulation of mathematical models for common operational processes, management science tends to focus on the use of models in the practice of management”

2. Operations Management

It is the function or field of expertise, that is primarily

responsible for managing the production and delivery

of an organization's products and services.

Techniques like forecasting, inventory analysis,

statistical quality control methods are used.

3. Management Information Systems

MIS is the field of management that focuses on

designing and implementing computer based

information for use by the management.

Evaluation of Quantitative TheoryThe quantitative theory ( or the management science

theory) has considerable impact on solving complex business problems . Its features are:

1. It establishes relationships amongst quantifiable variables of a decision- making situation and facilitates disciplined thinking.

2. Mathematical models help to derive precise and accurate results by analyzing complex statistical data.

3. Decisions are based on data and logic rather than intuition and judgement

Systems Theory The systems approach takes a broader view of

management where the organization is viewed as a unified and purposeful entity composed of different parts. It assumes that each part bears relationship with every other part of organization and therefore the manager must view the company as a whole consisting of several inter related parts.

This theory views organization as a whole which operates in the external environment and has an internal environment consisting of various departments(production, marketing, finance etc) inter related to each other in a manner that input output conversion is done in the most efficient manner.

Features It considers the organization as a dynamic and

inter related set of parts.

It considers the impact of both near and distant future on organizational activities.

It integrates goals of different parts of the organization( sub systems or departments) with the organization as a whole.

It enables the organizations to frame policies that promote business objectives and social objectives.

Contingency Theory The contingency view point developed in 1950’s

when a research team headed by Joan Woodward, an industrial sociologist, undertook a study of 100 British firms of different sizes producing different products. It was concluded that difference in performance was not because of principles of classical theories but because of better technology to produce goods. This developed a theory “ appropriate actions by mangers often depend on( or are contingent on) the situation.

“ Contingency theory is a viewpoint that argues

that appropriate managerial action depends on

the particular parameters of the situation. Hence

rather than seeking universal principles that apply

to every situation,contingency theory attempts to

identify contingency principles that prescribe

actions to take depending on the characteristics

of the situation”

Features of Contingency Theory

Management is situational in nature. The

technique of management depends on complexity

of the situation.

It is the “ if” and “then” approach to management.

Management principles are not universal in

nature as there is no best style of management.

Operational Theory

The operational approach to management theory

and science draws together the pertinent

knowledge of management by relating it to

managerial job that mangers do. It tries to

integrate the concepts, principles and techniques

that underlie the task of managing.

Rather than applying on one approach , it picks

up the relevant aspects of different theories that

can practically apply to a given situation.

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