Neoclassical Theory of Management
- It is built on the base of classical theory.
- It modified, improved and extended the classical theory.
- Classical theory concentrated on job content and management of physical resources.
- Neo-Classical theory gave greater emphasis to man behind the machine and stressed the importance of individual as well as group relationship in the plant or workplace.
The neoclassical theory was an attempt at incorporating the behavioral sciences into management thought in order to solve the problems caused by classical theory practices.
The premise of this inclusion was based on the idea that the role of management is to use employees to get things done in organizations.
Rather than focus on production, structures, or technology, the neoclassical theory was concerned with the employee.
Neoclassical theorists concentrated on answering questions related to the best way to motivate, structure, and support employees within the organization.
Two Movements in the Neoclassical Theory
The neoclassical theory encompasses approaches and theories that focus on the human side of an organization. There are two main sources of neoclassical theory:
- the human relations movement and
- the behavioral movement
Neo-classical theory deals with the human factor. Elton Mayo pioneered the human relations to improve levels of productivity and satisfaction. This approach was first highlighted by the improvements known as ‘ Hawthorne Experiments’ conducted at lllionois plant of western electric company between 1927 and 1932.
Neo-classical approach also causes Behavioural Science Management’ which is a further refinement of human relations approach
The human relations movement arose from the work of several sociologists and social physiologists who concerned themselves with how people relate and interact within a group. The behavioral movement came from various psychologists who focused on the individual behavior of employees.
An intensive and systematic analysis of human factor was made in the form of Hawthorne Experiments. Elton Mayo is generally recognised as the father of human relations approach although a number of professors of the Harvard Business School and managers of Hawthorne Plant of Western Electric Company USA where the experiments Were conducted between 1924 and 1933 had been associated with him. The series of experiments conducted may be classified as:
(i) Phase 1. Illumination Experiments
This experiment was conducted to know the impact of illumination on productivity. The experiment involved the prolonged observation of two groups of employees making telephone relays. The intensity of lfght under which one group worked (test group) systematically Varied while the light was held constant for the second group (control group]. The productivity of the test group and control group increased. The researchers concluded that so many other variables were contaminating the effects of the light changes.
(ii) Phase 2. Relay Assembly Test Group
A small group of workers, was placed in a separate room and a number of variables were altered – like wages were increased, rest periods of varying lengths were introduced, the workday and work week were shortened. The supervisors, who acted as observers, also allowed the groups to choose their own rest periods and members of their own groups and to involve in decision making regarding suggested changes. Performance tended to increase over the period but it also increased and decreased erratically.
(Hi) Phase 3. Interviewing Programme
Mayo initiated a three year long interviewing programme in 1828, covering more than 21,000 employees to find out the causes for increased productivity. The emphasis of this phase was on human relations rather than on working conditions. This programme initially proved to be useless as employees often gave stereotyped responses. This led the interviewers towards asking indirect questions. Then the ‘ employees began to air their feelings freely. The point demonstrated by this – interviewing programme is central to human relations approach. And for the first time, the importance of the informal work group is recognised. Then, the bank wiring room experiment was set up in order to find out how informal work groups operate.,
(iv) Phase 4. The Bank Wiring Observation Room Experiment (1931-32)
In. this experiment, 14 male workers were formed into a work group and intensively observed for seven months in the bank wiring room, engaged in the assembly of terminal banks for the use in telephone exchanges. The employees were paid individual wages and a bonus based on group effort. It was expected that highly efficient workers would bring pressure on others for increased output and high bonus. However, the expected results did not come about and indeed the group developed specific mechanisms to protect themselves based on certain sentiments:
The rate buster sentiment : don’t turn out too much work.
The chiseler sentiment) : don’t turn out too little work.
The squealer sentiment : don’t tell superiors anything that would harm an associate. .
The officious sentiment : don’t act too officious in performing duties, conform rather to work group norms.
Work group norms, beliefs, sentiments had a greater impact in influencing individual behaviour than did the monetary incentives offered by the management. Thus, the Hawthorne Experiments indicated that employees were not only economic beings but social and psychological beings as well.
The researchers concluded that employees would work better had they believed that the management was concerned about their welfare and supervisors paid special attention to them. This phenomenon'(subsequently labelled the Hawthorne effect), has remained quite controversial to this day.
The concept social man, according to Mayo, motivated by social needs, wanting, rewarding, on-the-job relationships and responding more to work-group pressures than to management control – was necessary to complement the old concept of rational man motivated by personal economic needs.
Studies during this time, including the popular Hawthorne studies, revealed that social factors, such as employee relationships, were an important factor for managers to consider. It was believed that any manager who failed to account for the social needs of his or her employees could expect to deal with resistance and lower performance. Employees needed to find some intrinsic value in their jobs, which they certainly were not getting from the job that was highly standardized. Rather than placing employees into job roles, where they completed one specific task all day with little to no interaction with coworkers, employees could be structured in such a way that they would frequently share tasks, information, and knowledge with one another. The belief was that once employees were placed into this alternate structure, their needs for socialization would be fulfilled, and thus they would be more productive.