CLASSICAL MANAGEMENT THEORY

Serious attention to management began in the early years of this century. One of the critical
problems facing managers at that time was how to increase the efficiency and productivity of
the work force. The effort to resolve these issues marked to beginning of the study of modern
management. It was eventually labeled the classical approach, as is usually the case with the
beginning efforts of every field of study.

The classical approach to management can be better understood by examining it from two
perspectives. These two perspectives are based on the problems each examined.
One perspective concentrated on the problems of lower level managers dealing with the
every day problems of managing the work force. This perspective is known as scientific
management.

The other perspective concentrated on the problems of top managers dealing with the
everyday problems of managing the entire organization. This perspective is known as
classical organization theory.

2.2.1 Scientific Management

At the turn of the 20th century, business was expanding and creating new products and new
markets, but labor was in short supply. Two solutions were available; (1) substituting capital
for labor or (2) use labor more efficiently. Scientific management concentrated on the second
solution. Significant contributions were made to scientific management by Fredrick Winslow
Taylor, Henry L. Gantt, and Frank and Lillian Gilbreth.

Frederick Winslow Taylor (1856 - 1915

Frederick Winslow Taylor, an American engineer, was the founder of the scientific
management school of thought. He spent the greater part of his life working on the problems
of achieving greater efficiency on the shop-floor. The solutions he came up with were based
directly on his own experience at work, initially as a shop-floor worker himself and later as a
manager. His career began as an apprentice in engineering. He later moved to the Midvale
Steel Company and in the course of 11 years he rose from laborer to shop superintendent. In
1889 he left Midvale to join the Bethlehem Steel Company, where he consolidated his idea
and conducted some of his most famous experiments in improving labor productivity.
As stated earlier, at the beginning of the 20th century skilled labor was in short supply,
especially in the U.S. To expand productivity, ways had to be found to increase the efficiency
of workers. In an effort to address these problems, Taylor built the body of principles that
now constitute the essence of scientific management.

The real trouble, Taylor decided on reflection, was that no one knew how much work it was
reasonable to expect a man to do. Either employers gauged a "fair day's work" by a general
impression gained from observation or, as in his case, by actually working on some of the
jobs themselves - or they had a record of the shortest time in which certain jobs had ever been
performed. And there was plenty of room for argument about either standard.
Taylor based his managerial system on production-line time studies. Instead of relying on
traditional work methods, Taylor analyzed and timed steel workers' movements on a series of
jobs. With time study as his base, Taylor broke each job down into its components
("elements") and designed the quickest and best methods of operation for each part of the job.
He thereby established how much workers should be able to do with the equipment and
materials at hand. Taylor also encouraged employers to pay more productive workers at
higher rates than others. The increased rate was carefully calculated and based on the greater
profit that would result from increased production.
Thus, workers were encouraged to surpass their previous performance standards and earn
more pay. Taylor called his plan the differential rate system. Under this system, a man
received on piece rate if he produced the standard number of pieces and another rate if he
surpassed the standard, and in the latter case, the higher rate would be applied to all the
pieces he produced, not merely to those over the standard.

Example of the differential rate system

Regular rate per piece = $0.50
Differential rate per piece = $ 0.60
Standard production rate per day = 3 pieces

Case 1: If the worker produced 3 pieces a day, he would get $1.50, which is 3x0.50.
Case 2: If the worker produced 4 pieces a day, he would get $2.40, which is 4x0.60.
Case 3: If the worker produced 2 pieces a day, he would be fired.
Management, Taylor said, could well afford to pay the higher rates because of the economies
achieved through better methods and the elimination of slowdowns.
Taylor also called for a drastic reorganization of supervision. His system embodied two new
concepts: (1) separation of planning and doing and (2) functional foremanship.

When Taylor first entered industry, it was customary for each man to plan his own work,
generally following a pattern he had learned by watching others when he was an apprentice.
The order, in which the operations were performed, for example, was entirely up to the man
insofar as it was not dictated by the nature of the job: so was the selection of the tools. The
foreman or gang boss simply told the worker what jobs to perform, not how to do them
except, possibly, in the case of new work.

Taylor's plan also supplemented the gang boss with a number of functional foremen, each of
whom was a specialist in one type of work - for example, in the use of a lathe or a grinder.
The specialists occupied a "Planning room", and each gave orders to the workmen on his
specialty. Thus, if the gang boss assigned a worker to a job that called for several different
operations, the man would be told how to proceed by seven or eight other bosses.

But the essence of scientific management, Taylor believed, lay in none other than what called
"mental revolution". If workmen were paid handsome amounts for producing more and were
shown how to do so, they would cease their slowdowns. Since management would be
enjoying the fruits of increased productivity, it would be happy to pay the higher wages.
Interests of management and labor would be identical, and there would be no reason for strife
between them. Neither side would be interested in getting the larger percentage of the pie
because both would profit so much more by working together to increase its size. This would
automatically mean bigger slices for both, and relative shares would be unimportant.

He believed that workers, who met the higher standards, need not fear of layoffs because
their companies benefited from the increase in productivity. The higher payments would
continue because they were ‘scientifically correct’ rates set at a level that was best for the
company and for the worker. At the same time, no one would be hurt by the differential
system. Workers who fell below the standard in productivity would find other work "in a day
or two", as he put it, because of the existing labor shortage.
By 1893, Taylor decided he could best put his ideas into effect as a private consulting
management engineer. He was soon able to report impressive improvements in productivity,
quality, worker morale, and wages while working with one client Simonds Rolling Machine
company. In one operation, Simonds employed 120 women workers to inspect bicycle ball
bearings. The work was tedious, the hours were long, and there seemed little reason to
believe improvements could be made. Taylor proved otherwise. First, he studied and timed
the movement of the best worker. Then he trained the rest in the methods of their more
effective co-workers and transferred or laid off the poorest performers. He also introduced
rest periods during the workdays, along with his differential pay rate system and other
improvements. The results were impressive: expenses went down while productivity, quality,
earnings, and worker morale went up.

Although Taylor's methods led to dramatic increases in productivity and to higher pay in a
number of instances, workers and unions began to oppose his approach. Like the workers at
Midvale, they feared that working harder or faster would exhaust whatever work was
available and bring about layoffs. The fact that workers had been laid off at Simonds and in
other organizations using Taylor's methods encouraged this fear. As Taylor's ideas spread,
opposition to them continued to grow. Increasing numbers of workers became convinced that
they would lose their jobs, if Taylor's methods were adopted.

By 1912, resistance to Taylorism had caused a strike at the Watertown Arsenal in USA, and
hostile members of the US Congress called on Taylor to explain his ideas and techniques.
Both in his testimony and in his two books, Shop Management and The Principles of
Scientific Management, Taylor outlined his philosophy. It rested, he said, on four basic
principles:
1. The development of a true science of management, so that the best method for
performing each task could be determined.
2. The scientific selection of the workers, so that each worker would be given
responsibility for the task for which he or she is best suited.
3. The scientific education and development of the worker.
4. Intimate, friendly co-operation between management and labor.

Taylor also contended that in order for these principles to succeed, "a complete mental
revolution" on the part of management and labor was required. Rather than quarrel over
whatever profits there were, they should both try to increase production and profits to be
shared.
In short, Taylor believed that management and labor had a common interest in increasing
productivity. And increasing productivity is the explanation for the development of western
economy.

FOLLOWERS OF TAYLOR
Henry L. Gantt

Gantt was a contemporary and colleague of Taylor's at the Bethlehem Steel Company, and he
strongly supported the ideas of scientific management propounded by Taylor. He also
emphasized the concept of mutuality of interests between management and workers. He
stressed the need to appreciate that" in all problems of management, the human element is the
most important".

Gantt made improvement in Taylor's incentive system, and developed what is known as the
"task and bonus plan". This is the foundation of many incentive plans in our times. Under
this incentive plan, the worker is paid a guaranteed daily wage whether or not he completes
the standard work. But if he completes four’s work in three hours or less, he is paid for four
hours.

Gantt is perhaps best known for his development of graphic methods of describing plans and
making possible better managerial control. He emphasized the importance of time, as well as
cost, in planning and controlling work. This led eventually to the famous Gantt chart-a chart
used for planning and following up work progress against time. The Gantt chart is regarded
by some social historians as the most important social invention of the twentieth century.
Frank and Lillian Gibreth
Frank and Lillian Gilbreth, a husband and wife team have been regarded as important
contributors to scientific management. Frank Gilbreth became interested in motion study and
reduced the number of movements in bricklaying from eighteen to five. This increased the
productivity of bricklayers from 120 to 250 bricks per hour. Frank emphasized the need of
developing or discovering the "one best way of doing a given task", whereas Lillian
concerned herself with the human aspects of management. The Gilbreth held that the most
important cause of workers dissatisfaction was the lack of management's interest in them.
They emphasized that management should understand their needs and personality.
Frank Gilbreth's system became known as 'speed work', and the speed came not from
rushing the workers to work faster but from cutting down unnecessary motions. He identified
eighteen on-the-job motions and called them THERBLIGS. (Therbligs is Gilbreth spelt
backwards with the transposition of one letter). The on-the -job motions are: (i) search, (ii)
find, (iii) select, (iv) grasp, (v) position, (vi) assemble, (vii) use, (viii) disassemble, (ix)
inspect, (x) load transport, (xi) pre-position, (xii) release load, (xiii) transport empty, (xiv)
wait when avoidable, (xv) avoidable delay, (xvi) rest for overcoming fatigue, (xvii) plan, and
(xviii) hold.

Frank Gibreth also invented a flow chart which showed the progress of an entire operation
through time and various tasks involved in it.
Every operation is broken down into tasks which enable the identification and elimination of
unnecessary motions.

2.2.2 Classical Organization Theory

Another body of ideas developed at the same time as scientific management. These ideas
focused on the problems faced by top managers of large corporations. Since this branch of the
classical approach focused on the management of organizations while scientific management
focused on the management of work, it was labeled classical organization theory. Its two
major purposes were to (1) develop basic principles that could guide the design, creation, and
maintenance of large corporations and (2) identify the basic functions of managing
organizations.

Engineers were the prime contributors to scientific management; practicing executives were
the major contributors to classical organization theory. As with scientific management there
were many contributors to the classical organization theory. Henri Fayol is singled out for
discussion, however, because his ideas reflect classical organization theory.
Henri Fayol (1841 - 1925)
Henri Fayol, the celebrated French industrialist and theorist, began his working life as young
mining engineer at the age of 19. He spent his entire working life with the same company,
rising to Managing Director at the age of 47and only retiring after his 77th birthday. Under his
leadership the company prospered despite its near-bankrupt state when he took over.
He published a book entitled Administration Industrielle et Generale(The prince) in 1916
and that brought to light the distillation of his lifetime’s experience of managerial work.
The works of Taylor and Fayol are essentially complementary. They both realized that the
problem of human resources and their management at all levels is the key to business success.
Both applied scientific method to this problem. Taylor worked primarily on the operative
level, from the bottom of the organizational hierarchy upward. Fayol concentrated on the
managing Director (his term) and worked downward. Fayol was perhaps the first individual
to discus management as a process with specific functions that all managers must perform.
He proposed planning, organizing, commanding and controlling as the four management
functions.
Fayol found that activities of an industrial undertaking could be divided into six groups
technical (production), (2) commercial (buying, selling, and exchanging), (3) financial
(search for, and optimum use of, capital), (4) security (protection of property and persons),
(5) accounting (including statistics), and (6) managerial (planning, organization, command
coordination, and control). Pointing out that these activities exist in businesses of every size,
Fayol observed that the first five were well known, and consequently he devoted most of his
book to an analysis of the sixth.

Fayol developed fourteen managerial principles for which he became known. He stated that
principles of management are flexible, not absolute, and must be usable regardless of
changing and special conditions.
In concluding discussion of his principles of management, Fayol observed that he had made
no attempt to be exhaustive but had tried only to describe those he had the most occasions to
use. The fourteen general principles of management developed by Fayol are presented below.
Fayol's General Principles of Management are:

i. Division of work. This is the specialization that economists consider necessary

for efficiency in the use of labor. Fayol applies the principle to all kinds of work,
managerial as well as technical.
ii. Authority and responsibility. Here Fayol finds authority and responsibility to be
related, with the latter arising from the former. When authority is exercised,
responsibility arises. He sees authority as a combination of official factors, driven
from the manager's position, and personal factors, "compounded of intelligence,
experience, morale worth, past service, etc."
iii. Discipline. "Seeing discipline as respect for agreements which are directed at
achieving obedience, application, energy, and the outward marks of respect" Fayol
declares that discipline requires good superiors at all levels. Discipline is
absolutely essential for the smooth running of business and without discipline no
enterprise could prosper.
iv. Unity of Command. This means that employees should receive orders from one
superior only.
v. Unity of Direction. According to this principle, each group of activities with the
same objective must have one head and one plan. As distinguished from the fourth
principle, it relates to the organization of the "body corporate" rather than to
personnel.
vi. Subordination of individual to General Interest. This is self-explanatory; when
the two are found to differ, management must reconcile them.
vii. Remuneration. Remuneration and methods of payment should be fair and afford
the maximum possible satisfaction to employees and employer.
viii. Centralization. Without using the term 'centralization of authority,' Fayol refers
to the extent to which authority is concentrated or dispersed. Individual
circumstances will determine the degree that will "give the best overall yield."
ix. Scalar Chain (line of authority). The scalar chain is the chain of command
ranging from the highest to the lowest ranks. In short, it is line of authority.
Adhering to the chain of command helps implement unity of direction, but
sometimes the chain is too long and better communication and better decisions
can result from two or more department heads solving problems directly rather
than referring them up the chain until a common superior is reached.
x. Order. Both equipment and people must be well chosen, well placed, and well
organized for every thing and everything in its place." For people "A place for
every body and everybody in his place."
xi. Equity. Kindness and justice will encourage employees to work well and be loyal.
xii. Stability of Tenure of Personnel. Changes in employee assignments will
necessary, but if they occur too frequently, they can damage morale and
efficiency.
xiii. Initiative. Thinking out a plan and carrying it out successfully can be deeply
satisfying. Managers should encourage employees to do this as much as possible.
 xiv. Esprit de corps. This is the principle that "in union there is strength," as well as
an extension of the principle of Unity of command, emphasizing the need for
teamwork and the importance of communication in obtaining it.
2.2.3 Bureaucratic Theory
The advocates of the bureaucratic theory contributed yet a third, widely divergent stream of
thought - a concern for how the overall structure of an organization influences managerial
effectiveness. The chief advocate of the bureaucratic organization was Max Weber (1846-
1920).
A wealthy German intellectual, Max Weber described what he believed was the ideal or pure
form of organization. Weber's "pure form" of organization is characterized by rationality and
impersonality. The parts of rationally structured organizations are designed and coordinated
to achieve specific ends. Rationality implies goal directedness. Impersonality implies
objectivity in interpersonal relations. Human resource decisions in bureaucracies were to be
strictly impartial - based on qualifications and work demands rather than on a caste system or
the personal preferences of decision makers.

The building blocks of organizations are clearly defined offices (positions) organized into a
hierarchy with a fixed chain of command. Weber's ideal bureaucratic organization was
designed for efficiency, predictability, and the reign of rules". To Weber the rational
structuring of organizations was a reaction against the unwarranted influence of political
control and the power of charismatic personalities of royalty.

Bureaucracy is characterized by:

 Hierarchy,
 Impersonality,
 Written rules of conduct,
 Promotion based on achievement,
 Specialized division of labor, and
 Efficiency
According to Weber, bureaucracies are goal-oriented organizations designed according to
rational principles in order to efficiently attain their goals. Offices are ranked in a hierarchical
order, with information flowing up the chain of command, directives flowing down.
Operations of the organizations are characterized by impersonal rules that explicitly state
duties, responsibilities, standardized procedures and conduct of office holders. Offices are
highly specialized. Appointments to these offices are made according to specialized
qualifications rather than ascribed criteria. All of these ideal characteristics have one goal, to
promote the efficient attainment of the organization's goals.
The major advantages of bureaucracy is that precision, speed, unambiguity, knowledge of the
files, continuity, discretion, unity, strict subordination, reduction of friction, and of material
and personal costs are raised to the optimum point. Its major disadvantages lie in red-tape
(excessive procedure), rigidity, and neglect of human factor.

2.3.4 Contributions and Limitations of the Classical Management Approach

Contributions
The greatest contribution of the classical approach was that it identified management as an
important element of organized society. Management has increased in importance. The facts
that management skills must be applied in schools, government, and hospitals, as well as
business firms, are stressed. Advocates of the classical approach believed that management,
like law, medicine, and other occupations, should be practiced according to principles
managers can learn.
The identification of management functions such as planning, organizing, and controlling
provided the basis for training new managers. The manner in which the management
functions are presented often differs, depending upon who is presenting them. But any listing
of management functions acknowledges that managers are concerned with what organization
is doing, how it is done, and whether it was done.
The contributions of the classical approach, however, go beyond the important work of
identifying the field of management and its process and functions. Many management
techniques used today are direct outgrowth of the classical approach. For example, time and
motion analysis, work simplification, incentive wage systems, production scheduling,
personnel testing, and budgeting are all techniques derived from the classical approach.

Limitations
One major criticism of the classical approach is that the majority of its insights are too
simplistic for today's complex organizations. Critics argue that the scientific management and
classical organization theory are more appropriate for the past, when the environments of
most organizations were very stable and predictable. The changing environment, changing
worker expectations, and changing expectations of society today are tremendous.

2.3 NEO-CLASSICAL THEORIES

Neo-classical theory is built on the basis of classical theory. It modified, improved, and
extended the classical theory. The neo-classical approach to management has two branches.
The first branch, the human relations approach, became very popular in the 1940s and 1950s.
The second branch, the behavioral science approach, became popular in the 1950s and still
receives a great deal of attention today.
2.3.1 The Human-Relations Approach
The term human-relations refer to the manner in which managers interact with subordinates.
To develop good relations, followers of this approach believed, managers must know why
their subordinates behave as they do and what psychological and social factors influence
them. While scientific management concentrated on the physical environment of the job,
human relations concentrated on the social environment.
The very significant contribution to the human-relations school of thought came from
Professor Elton Mayo, an Australian by birth and a Psychologist by training. He has been
described as the founder of the human-relations movement, whose advocates have stressed
the need for managerial strategies to ensure that concern of people at work is given the
highest priority.
The Hawthorne Studies
The Hawthorne Studies made one of the early important contributions to the human-relations
approach. These were studies conducted at the Hawthorne plant of the Western Electric
Company in Chicago, USA, between 1927 and 1932, in a number of different stages .
The main conclusions to be drawn from these studies are:

i. Individual workers cannot be treated in isolation, but must be seen as members of

a group;
ii. The need to belong to a group and have status within it is more important than
monetary incentives or good physical working conditions;
iii. Informal (Unofficial) groups at work exercise a strong influence over the behavior
of workers;
 iv. Supervisors and managers need to be aware of these social needs and cater for
them if workers are to collaborate with the official organization rather than work
against it.
What the Hawthorne studies dramatized was that humans are social-that business operations
are a matter not merely of machinery and methods but also of gearing these with the social
system to develop a complete sociotechnical system. These experiments led to the
recognition that managers operate in a social system. It should not be inferred from this that
prior to the Hawthorne experiments successful managers did not recognize the importance of
the human factor, or that management theorists overlooked it But what the work of Mayo and
his associates did underscore was the need for a greater and deeper understanding of the
social and behavioral aspects of management.
2.3.2. The Behavioral Science Approach
Other individuals who were university trained in social sciences such as psychology,
sociology, and anthropology began to study people at work.
They had advanced training in applying the scientific approach to the study of human
behavior. These individuals have become known as behavioral scientists and their approach
is considered to be distinct from the human relations approach.
The individuals in the behavioral science branch of the behavioral approach believe that man
is much more complex than the “economic man” descriptions of the classical approach and
the “social man” description of the human relations approach. The emphasis of the behavioral
science approach concentrates more on the nature of the work itself, and the degree to which
it can fulfill the human need to use skills and abilities. Behavioral scientists believe that an
individual is motivated to work for many reasons in addition to making money and forming
social relationships. They also focused on communication, motivation leadership areas.
Contributions and Limitations of the Neo-Classical Theory
Contributions
For the student of management, the neo-classical approach has contributed a wealth of
important ideas and research results on the people-managing aspect of the discipline of
management. The basic rationale is since management must get work done through others,
management is really applied behavioral science, because a manager must motivate, lead, and
understand interpersonal relations.
Limitations
The basic assumption that managers must know how to deal with people appears valid. But
management is more than applied behavioral science. For the behavioral approach to be
useful to managers, it must make them better practitioners of the process of management. It
must help them in problem solving situations. In many cases, this objective has not been
achieved because of the tendency of some behavioral scientists to use technical terms when
trying to communicate their research finding to practicing managers. Also, in some situations,
one behavioral scientist (a psychologist) may have a different suggestion than another (a
sociologist) for the same management problem. Human behavior is complex and is studied
from a variety of viewpoints. This complicates the problem for a manager trying to use
insights from the behavioral sciences.
2.4 MODERN THEORIES
Modern management theories indicate further refinement, extension, and synthesis of all the
classical and neo-classical approaches to management. Classical approach satisfied the basic
economic needs of the organization and the society.
Neo-classical approach is trying to satisfy personal security, and social needs of workers.
Both approaches must be suitably integrated to emphasize the need not only for recognition
of human values but also for recognition of productivity simultaneously. Modern
management must have the twin primary objectives of productivity (classical approach) and
satisfaction (neo-classical approach). Under the modern management theory, we have the
following streams.
i. The Systems Approach, and
ii. The Contingency Approach.

2.4.1 The systems approach

The systems theory of management views the elements of an organization as interconnected.
The approach also views the organization as linked to the environment. Organizational
effectiveness, even survival, depends on the organizations interaction with its environment.
Systems have the following features:
Subsystem: - A set of related parts that work together to achieve an objective as one
component of a larger system. For example, the human body’s circulatory system, nervous
system, respiratory system etc. are subsystems of the human body.
Open and closed Systems:- Two extremes on a continuum, open systems interact freely with
their environments, closed systems interact much less. A large, publicly held, internally
flexible organization would be a relatively open system, as demonstrated by its many
interactions with stockholders, governments, customers, and others. These are intra-
subsystem interactions, inter-subsystem interactions, and interactions with super systems.
Input-Transformation-Output Model: - An open system receives inputs from its
environments (such as money, material, personnel, and technology) which it transforms into
outputs (such as goods and services) in interaction with environmental variables (market
conditions, world affairs, and so forth).
System Boundary: - In closed systems the boundaries (lines of demarcation) between an
organization and its environment are difficult to penetrate (for example, the boundaries of a
secretive, bureaucratically structured, closely held corporation).
Steady State: - A steady state is the dynamic equilibrium, homeostasis, or balance an
organization maintains (with suppliers and customers for example) to maintain health, and
prosperity
System Goals: - 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.
Feedback: - Every business system has an inherent feedback mechanism that provides
various types of useful information to management. Management makes use of this
information in controlling the performance at different stages of work. Feedback is also
helpful in improving the quality of the products being manufactured, and services rendered
by an organizational unit.
Psycho-social system: A business organization is a psycho- social system in the sense that
people working in a firm develop social relationships and they constantly interact with one
another.
Creativity: Business system is creative in the sense that it fruitfully converts the available
resources in to useful products. Business system creates various forms of utility and hence
adds value to the input.
Interdependence: Various subsystems of a business system are interdependent and
interacting. Different departments are linked together in one way or other to achieve specified
goals. Interdependence exists between different firms and industries also in addition to
interdependence between different departments within a firm.

An organization, according to the systems view, is :

i. A subsystem of its broader environment;
 ii. Goal oriented: people with a purpose of maximization of profits and shareholders’
wealth, survival of organizational unit, supply of goods and services to the
consuming public, meeting the society’s expectation, etc.;
iii. A technical subsystem using knowledge, techniques, equipment and facilities; and
iv. A structural subsystem, people working together on interrelated activities.
2.4.2 The Contingency Theory Approach
Contingency theory has been developed mainly in the 1970s. It builds on the major premises
of the systems theory that organizations are organic and open systems, a relationship of
interdependence between an organization and its environment, as well as within and between
its subsystems. The contingency theorists aim at integrating theory with practice in a systems
framework
When an organization behaves in response to forces in its environment, its behavior is said to
be contingent on the forces. Hence, a contingency’ approach is an approach where the
behavior of one sub-unit is dependent on its environmental relationship to other units or sub-
units that have some control over the consequences desired by the sub-unit. Thus behavior
within an organization is contingent on situations, and if a manager wants to change the
behavior of any part of the organization, he or she must attempt to change that part of its
environment that is influencing it.
Contingency approach emphasizes that there is no one best way to design organizations and
manage them. Management is situational, and mangers should design organizations, define
objectives, and formulate strategies, policies, and plans in accordance with the prevailing
environmental conditions. Secondly, managerial policies and practices, to be effective must
respond to changes in the environment. Thirdly, since managements’ success significantly
depends on its ability to cope with its environment, it should sharpen its diagnostic skills so
as to anticipate and comprehend environmental changes. Fourth, managers should have
adequate human relations skills to accommodate change, and abilities to manage transition, as
well as stabilize change.
Finally, it should use the contingency model in designing the organization, developing its
information and communication system, adopting its effective leadership styles and
formulating suitable objectives, strategies, policies and practices. Thus, contingency theory
provides a method of analysis as well as a way of integrating organization with its
environment.