Schools of Management Thought
III. The Decision theory School
1. The decision theory school of management, led by Simon, looks upon the management process as a decision making process. In the view of the decision theorists, since the performance of various management functions involves decision making, the entire field of management can be studied from the study of the process of decision making. They have expanded their area of theory building from the decision making process to the study of the decision, the decision maker, and the social and psychological environment of the decision maker. The decision theorists start with the small area of decision making and then look at the entire field of management through this keyhole.”
2. It is true that decision making is central to managing, and whatever a manager docs, he does through making decisions. But the totality of managing is something more than decision making. The most important tasks of a modern manager are innovating, integrating the organization with its external environment, and creation of an organizational climate conducive to the optimum performance by its members. No doubt he does all this by making decisions. But that is not all. Integrating the organization with the environment and integrating the employees and their groups with the organization require the art of managing and leadership. To attempt to study the entire area of organization and management through the study of the decision, the decision making process, the decision maker and his environment is very much like the attempt to study the functioning of the human body through the study of circulate/, system. Moreover, as observed by Koontz, the decision theorists might as well extend their area of enquiry to the whole field of human knowledge rather than limit it to the field of management.
iv. The Management Science School
The management scientists, led by operations researchers and systems analysts, sec management as “a system of mathematical models and processes”. They hold that since managing is a logical and rational process, it can be expressed in terms of mathematical relationships and models. The basic assumption underlying management science is that an organization is a system with its parts in interactional and interdependent relationships. These interactions and interdependencies can be expressed in terms of models and equations. This will lend exactness to management processes and substitute “certainty for guesswork, knowledge for judgment, ‘hard facts’ for experience”.
There is no doubt that management science has made significant contributions by applying the tools of mathematics to the solution of various complex problems of management. They have successfully built models in several areas, particularly, quality control, inventory control, production scheduling, machine loading, warehouse operations and resource allocation. But in doing all this, management scientists have not made any contribution to the theory of management. All they have done is that they have made available to managers quantitative tools of analysis, decision making and control. But this is not sufficient to lend the management scientists the status of a school of management theorists. As observed by Koontz, “it is hard to see mathematics as truly a separate school of management theory, any more than it is a separate ‘school in physics”.
V. The Systems Theory School
The systems theory approach to organization and management appeared around I960, and soon acquired a dominant position in management literature and practice. Its early contributors include Ludwig von Bertalanffy, Lawrence J. Henderson, W.G. Scott, Daniel Katz, Robert L. Kahn, W. Buckley and J.D. Thompson. They viewed organization as an organic and open system, which is composed of interacting and interdependent parts, called subsystems.
Organization as an Open and Organic System
Organizations are open systems in that they are in a continuous interactional relationship with other systems. These other systems comprise markets, suppliers, bankers, trade unions, government, educational and research institutions and other similar enterprises, industry, economy, etc., which constitute its environment.
Organizations are also organic systems or living systems as they must satisfy three conditions for their continuing survival. First, an organization should be stable in the sense that its various parts should be in balance with one another. Second, it should grow and mature like other living entities. Finally, it should adapt to environmental changes. It is characterized by homeostasis tendency of maintaining equilibrium by constant adjustment in response to changes in its environment.
Parts of the System
As a system, an organization is composed of a number of subsystems :
(i) production sub-system,
(ii) supportive subsystem,
(iii) maintenance subsystem,
(iv) adaptive subsystem,
(v) managerial subsystem,
(vi) individuals, and
(vii) informal groups.
The production subsystem is concerned with the process of conversion of inputs including materials, finances, man-hours worked, etc., into outputs of goods and services. It includes technology, production facilities and physical layout of the plant.
The supportive subsystem performs the function of acquiring various inputs from the environment and marketing the final products in the form of goods and services. It also concerns with maintaining a favourable relationship with its environment for facilitating the performance of organizational functions and activities.
The maintenance subsystem concerns with hiring, indoctrinating, socialising, rewarding and punishing the employees. It also pertains to the maintenance of favourable patterns of employee attitudes and behaviour with the aim of motivating them to make their optimum contribution to organizational goals. The adaptive subsystem of the organization performs the crucial function of relating the organization to its environment. It anticipates and responds to, as well as influences the environment.
The managerial subsystem consists of planning, organizing, staffing, directing, coordinating and controlling the activities of the various subsystems.
Individual employees also comprise a subsystem of the organization. They bring a set of attitudes and needs to the organization which influence their work behaviour.
Finally, every organization is characterised by the existence of a variety of informal groups which arise spontaneously out of the interactions among employees. Group and intergroup behaviour have an important bearing on the functioning of an organization.
Intra subsystem Interactions
Each of these subsystems or parts of the organization is in itself a system made up of its unique subsystems or parts. For instance, managerial subsystem is a system composed of managers, objectives, policies, strategies, status and role relationships, managerial philosophy and values. All these parts of the managerial subsystem operate in an interactional and interdependent relationship with one another. Objectives, polities and strategies all affect each other inasmuch as one objective or policy reinforces or conflicts with others. They also interact among them so that their implementation and results influence each other. Similarly, “individuals interact with individuals, and small groups with other small groups’.
All the parts of an organization are also in an interactional and interdependent relationship with each other. For example, production subsystem interacts with, and is dependent on supportive subsystem for procurement of materials, sale of its products and institutional relations. It is in a similar relationship with maintenance subsystem for tying people in their functional roles; with adaptive subsystem for changes in products and production technology; with managerial subsystem for direction, coordination and control, and with individuals and groups for their cooperative efforts. Similarly, all the other parts of the organization system are in an interdependent and interactional relationship with one another.
Interaction with Supersystems
As mentioned earlier, an organization, as an open system, is in an interactional and inter-dependent relationship with its environment composed of numerous systems such as society, religious, cultural and social norms and values, markets, government, suppliers, bankers, etc. As observed by Katz and Kahn, “From a societal point of view the organization is a subsystem of one or more larger systems, and its linkage or integration with these systems affects its mode of operation and its level of activity.”
The various parts of an organization are linked with one another through its communication network, decisions, authority-responsibility relationships and other dimensions of managerial subsystem, including objectives, policies, plans, procedures and other aspects of coordinating mechanism.
Organizations have a variety of goals. The supreme goal of an organization is survival. All other goals depend on the achievement of this one goal. Another goal, which is intimately correlated with survival goal, is the goal of adaptation and integration with environment. Generally speaking, organizations, like other systems, also seek growth. Growth is a sign of development, promise and opportunity—all valued commodities in our society.
The conceptual framework for understanding and analysing organizations and management, provided by systems theory is too abstract to be useful to practising managers. “What is necessary for the manager is to know how the subsystems of a specific organization are uniquely related in a given environment and how to deal with a particular problem. Contingency theory focuses on the analysis of the inter-and intra-part interdependence, as well as organization – environment interactions with a view to providing guidance to managers in dealing with their unique problems. It hypothesizes that effectiveness of management is intimately related to operating situations.