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Comparison of Different Management Theories
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Running Head: COMPARISON OF DIFFERENT MANAGEMENT THEORIES
Comparison of Different Management Theories
Saima Malik
Prof Joaa Baek
Goldey Beacom College
1
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
1
Abstract
Over the years, several management theories have evolved which can be categorized
into three styles of management, Classical, Neoclassica, and Modern management theory. This
purpose of this paper is to critically evaluate and compare these three schools of management
theories and compare Apple and Microsoft’s leadership styles, and it identifies and mentions the
perspectives of these theories. Also, the assumptions underlying the management of
organizations from these theoretical perspectives will be discussed. Additionally, this report has
also analyzed how these perspectives can help create ways to design and manage organizations.
After an in-depth analysis, it has been concluded that modern management theory is most helpful
in enabling organizations to do effective management.
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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Management is the ongoing process of planning, leading, organizing and controlling a
group of people, and organizations can achieve business goals without proper management and
leadership style (Nadrifar, Bandani, & Shahryari, 2016). Therefore, it is important for leaders to
have an adequate understanding of basic management theories, and what is best to achieve most
for the employer and employees’. Such understanding and training would allow firms to make
best decisions that use of business resources and produce outputs efficiently (Nadrifar, Bandani,
& Shahryari, 2016). Similarly, Ehiobuche and Tu (2012) argued managers need to fully
understand the key concepts of management techniques and principles for successful
management of an organization. In this paper, in the light of different leadership’s comparison,
Apple and Microsoft’s leadership techniques and styles will be discussed. .
The classical management theories and approach were more production centric approach
and were developed in 19th and 20th century when the factory system was introduced, and
machines and labors were used for production (Kitana, 2016). The classical management
approach system created many challenges for the management team in relation to managing
employees and business operations (Kitana, 2016). When problems arose, managers developed
solutions to increase management efficiency under the following three categories: administrative
principles, implementation of bureaucratic organizational structures and scientific management
(Kitana, 2016). Whereas, the neo-classical management theory is extended version of the
traditional classical theory (Sarker, Rafiul, & Khan, 2013). Neoclassical theorists recognized the
role of human behavior and concerns in managing organizations. They merged behavioral
sciences with the management school of thought in an attempt to solve the problems caused by
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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the practices in the classical theory practices in terms of not considering human emotions and the
distinct and specific needs of organizations (Nhema, 2015).
Notably, the theories of Max Weber, Henri Fayol, and Lyndall Urwick played a
fundamental role in the development of the classical theory (Nadrifar, Bandani, & Shahryari,
2016), as they presented scientific management, bureaucratic theory and administrative
approaches respectively. The theories are based on a pyramid organizational structure and
autocratic management style, clear chain of command, centralization of authority, organizational
rules and regulations, and narrow spans of control (Ehiobuche & Tu, 2012; Nadrifar, Bandani, &
Shahryari, 2016). Still, many technological companies like Apple and Microsoft require the
autocratic leadership styles because the area of mistake is really small, and efficiency is required
to complete the projects. Steve Job’s was the pioneer of Apple, and Bill Gates lead the Microsoft,
both were innovators but with different leadership styles. Steve Jobs had an autocratic leadership
style, and continuously improved the technology since the inception of Apple incorporation.
When customers think about Apple products, they expect innovation and convenience.
Comparatively, Bill Gates delivered a more participative approach to it employees. Gates was an
innovator and delivered his ideas to the team to work on those idea. Comparing leadership
styles of both Steve and Gates, Steve Jobs was comparatively risk taker, and was learning
through his mistakes.
To become an effective and great leader, it is required that leaders have the vision and are
passionate, inspire other employees through innovative ideas and contribute as a team member.
Steve Jobs had a vision and was an innovator, who brought touch screen smart phones into
existence and introduced convenience to the customers. He made it sure that his employees are
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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understanding his vision. Steve Jobs not only explain his vision, he brought everyone into the
table and worked with employees as a team and showed his time and commitment.
Comparatively, Bill Gates had a vision and hired a team to work. Both Bill Gates was autocratic
leadership styles, however, Steve Jobs was more participative comparatively.
Likewise, there are two more sources of the neoclassical theory; (1) sociologists and
social psychologists who studied human interaction and relations in the workplace, and (2)
psychologists who studied person behavior and attitudes (Őnday, 2016). The results of
Hawthorne experiment indicated that the neoclassical approach highlighted human relations
between workers and managers (Nhema, 2015; David S. Walonick, 1993). Moreover, they
proposed that changing working conditions had a lesser influence productivity than social
relationships. Neo-classical theorists suggested that high employee morale increased
productivity, which was influenced by the amount of attention the employees received from their
managers (David S. Walonick, 1993).
On the contrary, the theories of modern management stem from the concept that a firm
should adapt its strategies according to market dynamics, and are more transformational in
nature. Integrating individual and organizational interests was re-emphasized by Bernard (1938)
who was the first theorist to provide a modern and comprehensive view of management. He
defined an organization as a system comprised of coordinated activities. He mentioned the role
of executives in creating a cohesive work environment (David S. Walonick, 1993). Subsequently,
Von Bertalanffy made a noteworthy contribution by proposing a basic principle of modern
management theory (McMahon & Patton, 2017). He claimed that organizations are open
systems, that continually adjust to environmental changes (David S. Walonick, 1993).The
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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modern management theories had highlighted four complex human capital theories under
consideration and covered the system and complexities including human needs and behaviors,
and management science (Ehiobuche & Tu, 2012).
The classical theory emphasizes on managerial abilities to monitor and predict the
worker’s behavior. It offers ways to improve and preserve communications and disregard human
relations (Nadrifar, Bandani, & Shahryari, 2016). The principal contributions of classical school
of thought include the introduction of practical management science, development of primary
function of management, and application of certain management principles (Ehiobuche & Tu,
2012). They are generally implemented in simple, small, and stable work environments
(Nadrifar, Bandani, & Shahryari, 2016). Whereas, the key contribution of the neoclassical theory
is the application of behavioral science in the work environment.
The neo-classical theory proposes that a man is interdependent, is diversely motivated,
and wishes to fulfill his vast needs. Additionally, his behavior may be predicted based on social
and psychological factors (Őnday, 2016). It also defines an organization as a social system and
that the social environment affects employee performance. Also, communication is necessary to
acquire information regarding business functions and employee feelings and sentiments. Equally,
a collaborative work environment is central to ensure sound functioning of the firm and business
standards are accomplished by employing behavioral approaches (Őnday, 2016). Similarly, the
modern management theory suggests that intricate managerial strategies guided by custom-made
principles must be employed to deal with such organizational complexities (Ehiobuche & Tu,
2012). Managers have options to use different techniques and styles to manage employees, and
analytical styles can also be applied to use different strategies for management.
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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Traditional classical management theory does not take under consideration motivational
factors for employees, and is based on the historical personal beliefs. (Sridhar, 2017; Ehiobuche
& Tu, 2012). Consequently, the neoclassical theory talks more about human needs which
motivate employees, and highlight important requirements like behavioral issues and time for
employees (Sridhar, 2017). Alongside traditional classical theory, the neo-classical theory
discusses the human factors in organizational design and management (Sridhar, 2017). The
classical approach took into account physiological and mechanical variables and disregarded the
behavioral aspect, therefore, it is also referred as the physiological theory, whereas the
neoclassical theory is known as the behavioral theory. Under a classical approach, the
organizational focus is on the business functions and financial desires of employees, and they are
considered economic tools to maximize remuneration, the neoclassical approach focusses on the
emotion and qualities of employees, and they are viewed as social beings (Nhema, 2015). It
asserts that employees aim to meet company objectives. Similarly, the classical theory suggests
that the management should adopt an impersonal and autocratic style, employer-employee
relationship should be formal, and the organization should have a mechanistic (Nhema, 2015).
However, in neo-classical approach, the company should employ a democratic
management style, the human relations should be informal, and the company should have an
organistic organizational structure (Nhema, 2015).
Furthermore, while the traditional classical theory is based on the rational economic view,
and the neoclassical theory is based on the social person view, the modern management theory is
based on (Kitana, 2016). It identifies complexities in the organization. It also discusses the
complications associated with managing employees including their diverse range of needs,
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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motives, aspirations, and potentials (Ehiobuche & Tu, 2012). It asserts that each organization is
complex in its own manners and consists of employees with varied perspectives, desires, and
ambitions.
As far as the assumptions of these theories are concerned, the classical management
theory relies on a rational economic view which assumes that employees act in a way that
increase monetary rewards. Stating differently, employees perform better when they are offered
monetary incentives and that they select actions that yield most financial benefits (Sridhar,
2017). Thus, the theory suggests that to increase productivity, managers should offer monetary
incentives to employees. The theory considers the pessimistic aspects of human nature. It
assumes that employees dislike work and are motivated primarily by rewards that are strictly
monetary. This statement might have been true in the 1900 A.D. and for some people today
(Sridhar, 2017).
Secondly, the classical management theory assumes that one set of principles and
guidelines can be applied to manage all types of organizations. However, with vast differences in
objectives, operations, structures and work environments, organizations may require some
changes in principles to meet their specific requirements and achieve their individual business
goals (Sridhar, 2017). Lastly, the classical theory assumes that employees are tools, rather than
valuable resources that can be used to meet business goals (Pindur, Rogers, & Kim, 1995).
On the other hand, the neo-classical management theory is based on complex aspects of the
organization. It emphasizes several assumptions, including the following; (1) organizations exist
to achieve goals; (2) for each firm, an appropriate organizational structure exists, which can be
adopted to meet goals; (3) firms operate most effectively when they adopt an ethical and rational
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
8
approach; (4) control is best achieved by exercising formal authority; and (5) organizational
problems are often caused by inappropriate structures that can be resolved by redesigning and
reorganizing (Trujillo & Toth, 1987). The modern management theory, however, is based on
complex employee perspective which describes individuals as both complex and variable
(Ehiobuche & Tu, 2012). The modern management theory assumes that employees have several
motives and they learn new dynamic motives as they continue to gain experience, and these
motives differ in different companies. (Ehiobuche & Tu, 2012). So, it can be deduced that
different managerial strategies should be applied to different organizations according to the
conditions in which they operate.
With respect to managing and designing organizations, the classical theory suggests that
there should be a hierarchal organizational structure and multiple levels of management to
increase productivity (Nhema, 2015). Employees are at the lowest levels; therefore, their tasks
and performance are overseen by supervisors who, in turn, are directed by managers (Cole,
2004). It also mentions that employees and managers should have formal personal interactions
within the organization. Rules and regulations must be duly followed by all members of the
company (Nhema, 2015). At each level, employees are expected to follow specific guidelines
and perform tasks accordingly in order to maximize productivity. Thus, the theory emphasizes
the division of labor, impersonal relationships between employees, bureaucratic organizational
structure, and implementation of strict rules (Nhema, 2015) and giving monetary rewards to
increase the productivity of employees (Sridhar, 2017).
However, the assumption that employees are only motivated by financial incentives is not
regarded as correct in today’s world, rather, it is considered to be outdated (Ehiobuche & Tu,
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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2012). The classicists neglected other important determinants of employee behavior which are
non-economic in nature (Nhema, 2015). There has also been a change in the aspirations and
attitudes of people as they now focus more on career development than on wage attainment.
Furthermore, organizations have become more complex, they require employees to be more
creative and offer innovative solutions for intricate challenges (Sridhar, 2017). Nonetheless,
according to the neo-classical theory, the company should adopt an informal structure and treat
employees as treasured assets. It also recommends managers to adopt a transformational
leadership style and aim to create a sense of belongingness among employees (Ferdous, 2017). A
democratic organizational structure should be implemented to ensure equal involvement of
employees. The theory focuses on motivating and supporting employees through non-financial
incentives. For example, managers can satisfy the self- actualization needs of employees through
praise, recognition, job security etc. (Gitman, et al., 2018).
Nevertheless, modern management theory offers two approaches to manage and design
organizations which are the Systems Approach, and the Contingency Approach. The system's
approach gives managers an overview of the entire organization, rather than only focusing on
individual segments (Nhema, 2015). The system's approach suggests that managers are not only
responsible for the activities of his department as in traditional methods, but for the entire
organization. Thus, this can only be accomplished through constant communication with other
departments, employees, representatives and even other associated companies as well. In short,
systems approach makes use of business relationship webs (Nhema, 2015). Moreover, according
to the contingency approach, a manager is expected to select the most appropriate technique
which will best suit the situation under certain circumstances and implement it at a specific time
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
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to best achieve organizational goals (Nhema, 2015). It proposes that managers must develop
skills that assist in identifying key situational factors i.e. situational sensitivity and practical
selectively (Sridhar, 2017).
Which Perspective Has the Most Utility?
Based on the extensive research performed on the three management schools of thought,
it can be concluded that the modern management theory yields the most utility, and now a days
most big company’s like the Vanguard Group, Charles Schwab, J.P Morgan chase, Apple,
Microsoft and Best Buy believes on modern school of thoughts. Modern management theory
focuses on meeting the individual needs of an organization and solving its complex problems in
the best possible manner. On the other hand, the previous approaches like a classical theory were
more business and production centric, and were more about how to increase efficiency of the
business without consideration of employees as explained by Sridhar (2017), a prime example is
found is in armed forces and military services. Moreover, it took a functional approach based on
deduction and description, whereas, neoclassical theory adopted a person-centered approach,
which was highly experimental, descriptive and deductive (Sridhar, 2017).
The modern management theory offers a more holistic approach to solving management
problems by looking at the organization as a whole (Sridhar, 2017). The classical theory
particularly focuses on tasks, models, and effectiveness and the neoclassical theory focuses
primarily on human being’s emotions and behaviors (Sridhar, 2017). The challenge of classical
and neoclassical theories is that they both focus on one particular aspect, while ignoring the
other. The modern theory, however, provides better descriptions of organizational and managerial
behavior, while not discarding all of the earlier theories (Sridhar, 2017). It considers all key
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
11
aspects of the organization to derive the best possible strategy. This approach attempts to
combine the differing schools of management thought, as the principles of various schools
cannot be universally applicability under all conditions (Sridhar, 2017).
For example, with regards to increasing productivity, a classical theorist may recommend a new
work simplification scheme (Kitana, 2016). In contrast, a behavioral scientist may propose
managers to cultivate a climate that is psychologically motivating and may also suggest some
approach like job enrichment which is a combination of tasks that differ in terms of scope and
responsibility (Kitana, 2016). This will give the employee greater decision-making autonomy.
However, the modern management theorist will suggest the manager to select the best option and
identifies which will work best in the present situation. They decide that when there is a problem
of unskilled and untrained labor available work simplification would be most suitable solution
(Kitana, 2016).
In the extensive research performed on the three management schools of thought, it can
be concluded that the modern management theory yields the most utility. It focuses on meeting
the individual needs of an organization and solving its complex problems in the best possible
manner. Contrarily, the classical theory talks about the efficiency of the process and the
production system overall, It had functional approach that was based on laws and thorough
research. Considerably, neoclassical theory adopted a human focused approach instead of the
organizational overall, which was highly based on behavioral sciences, and resolved issues
created by classical theory. The modern management approach, however, was based on
behavioral and quantitative tools that were highly synthetic and practical approach to compete.
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
12
Also, The modern management theory delivers a more holistic approach to solving management
problems by looking at the organization as a whole, while classical approach and neo classical
approaches are based on task, organizational structure and efficiency; and emotions and human
behavior respectively. The main issue with the classical and neoclassical theory is that both of
the theory protect and defend one factor when another factor is completely ignored. The modern
theory provides better enhancement of the previous theories and provide descriptions of
organizational and managerial behavior, while not discarding all of the earlier theories. It
considers all key aspects of the organization to derive the best possible strategy. This approach
attempts to combine the different schools of management thought, as the principles of various
schools cannot be universally applicability under all conditions. Microsoft Corporation following
modern theory compare to the Apple.
For example, with regards to increasing productivity, a classical theorist may recommend
a new work simplification system. In contrast, a behavioral scientist may propose mangers to
cultivate a climate that is psychologically motivating and may also suggest some approach like
job enrichment which is a combination of tasks that differ in terms of scope and responsibility.
This will give the employee greater decision-making autonomy. However, the modern
management theorist will suggest the manager to select the best option and identifies that will
work best in the present situation. They decide that when there is a problem of unskilled and
untrained labor available, work simplification would be most suitable solutions.
COMPARISON OF DIFFERENT MANAGEMENT THEORIES
13
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