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Modern Approach to Management

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Everything you need to know about the modern approach to management. The modern approach to management was developed around the year 1950.

This approach is an improvement upon both the classical and neo-classical approach to management.

Modern approach to management has three basic pillars: I. Quantitative Approach II. System Approach III. Contingency Approach.


Modern Approach to Management: Quantitative Approach, System Approach, Contingency Approach and Other Approaches

Modern Approach to Management – Quantitative Approach, System Approach, Contingency Approach and Other Approaches

The modern approach to management was developed around the year 1950. This approach is an improvement upon both the classical and neo-classical approach to management.

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This approach has three basic pillars:

I. Quantitative Approach,

II. System Approach, and

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III. Contingency Approach

I. Quantitative Approach:

The quantitative approach was propounded by C. W Churchman and his colleagues around the year 1950. This approach is also known by the name of Operational Research or Operational Analysis.

The classical approach lays stress upon the physical resources while the neo-classical approach gives importance to human resources. Both these approaches are silent about some of the most serious problems usually faced by the managers.

The quantitative approach to management makes some suggestions to solve different problems facing the managers. It tells the managers to solve their problems with the help of the mathematical and statistical formulas. Some special formulas have been prepared to solve managerial problems.

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For Example:

(i) Theory of Probability,

(ii) Sampling Analysis,

(iii) Correlation / Regression Analysis,

(iv) Time Series Analysis,

(v) Ratio Analysis,

(vi) Variance Analysis,

(vii) Statistical Quality Control,

(viii) Linear Programming,

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(ix) Game Theory,

(x) Network Analysis,

(xi) Break-Even Analysis,

(xii) Waiting Line or Queuing Theory,

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(xiii) Cash-Benefit Analysis, etc.

The main objective of the quantitative approach is to find out a solution for the complex problems facing the big companies. The help of a computer is usually taken in order to make use of the above mentioned techniques.

The chief advantage of the approach is to solve complex problems quickly. But the chief disadvantage is that this approach offers an alternative to decision and cannot take decision.

II. System Approach:

This is a newly developed approach which came existence in 1960. This approach was developed by Chester I. Bernard, Herbert A. Simon and their colleagues.

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The system approach means a group of small inter-related units. A group of different units which means a complete unit is called a system, while the small units are themselves independent, but somehow or the other is connected with the sub-systems of the related system. All the sub-systems influence one another. For example- a scooter is a system which has many sub-systems in the form of engine, shaft, gear, wheels body, etc.

All these sub-systems are inter-related with one another and if one of them fails the whole system stops working. Therefore, the success of the system depends on the cooperation and efficiency of the sub-systems.

It can, therefore, be said that a system means different inter-related parts which work n cohesion simultaneously to achieve a particular purpose.

According to the system approach, the whole organization is a system and its various departments are its sub-systems. All the sub-systems work in unison. Then and only then the objective of the organization can be achieved. Therefore, when manager taken some decision regarding a particular sub-system, he should also take into consideration the defect of his decision on the other sub-systems.

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Key Concepts of System Approach:

The following are the chief characteristics of the System Approach:

(1) Sub-Systems:

Every system happens to be a combination of many sub-systems. All the sub-systems are inter-related. It means that whenever we take some decision regarding a particular sub-system, we should always keep in mind the possible effect of the decision might have on the other sub-systems. In the context of a company, all its departments (e.g. purchase, sale, finance, production, personnel, research and development) happen to be its sub-systems.

All these are created by the major system which happens to be the company itself. Company itself is a sub-system of industry. Industry is a sub-system of a national economy. Similarly, the national economy itself happens to be a sub-system of the world system. Therefore, it is clear that various sub-systems constitute a major system.

(2) Holism:

A major characteristic of the System Approach is that it is looked upon as a whole. It clearly means that a decision taken with regard to a particular sub-system does influence or affect the other sub-systems. Therefore, every decision is taken keeping in view the entire organisation, meaning thereby, that all the sub-systems are kept in mind while taking a decision. If that is not done, the major system is certainly damaged and it cannot work properly.

For example- if the sales department is aiming at doubling its sales, it shall have to take care of the fact whether the purchase department would be in a position to purchase the requisite amount of raw material.

Again whether the personnel department will be able to provide the required man-power. Yet again whether the finance department will be able to provide the required financial support. It can, therefore, be said that no decision is possible in respect of any particular sub-system alone. That is why the system approach is called holistic.

(3) Synergy:

It means that the whole is greater than the sum of its parts. This can be better understood with the help of an example. Suppose there are five persons in a group. Everybody has a capacity to carry a load of five quintal each. When they are told to lift a load of one quintal, everybody will be able to lift only one quintal of load. But if that are told to lift the weight collectively, they would certainly be able to lift a load in excess of five quintal.

It is thus, clear that if job is performed collectively rather than individual, it is certainly well-performed with better results. Here, the pointer happens to be towards coordination. When all the parts of a system work keeping in mind the interests of others, the performance turns out to be decidedly better results.

(4) Closed and Open System:

A system can be of two types:

(i) Closed system and

(ii) Open system

(i) Closed System:

This is a system that remains unaffected by the environmental factors. Traditional management experts consider an organisation as a closed system. They believed that an organisation worked without being influenced by the outside factors, e.g., a watch is not influenced by the outside factors and it works continuously without getting interrupted. This is a good example of the closed system.

(ii) Open System:

An open system means a system which remains constantly in touch with its environment and is influenced by it. Modern management experts consider an organisation as an open system. Environment is a combination of many factors.

The chief factors of the environment of an organisation happen to be raw material, power, finance, machine, man-power, technique, market, new products, government policies, etc. All these factors of environment enter an organisation as Input. Within the organisation, they are converted into products through the process of various activities.

Then they walk out of the organisation in the form of output and once again mingle with the environment. At this time, they happen to be in the form of goods, services and satisfaction. All the factors of input and output influence the organisation. That is why an organisation is called an open system.

(5) System Boundary:

This means a certain dividing line which separates a system from its environment. The dividing line in a closed system is rigid while in respect of open system, it is flexible. It is not easy to determine the dividing line in respect of physical and biological systems, e.g., a dividing line can easily be drawn between the two pieces of land.

It is, however, difficult to do so in respect of a social system and an organisation is a social system. System boundary makes it clear as to which factors are related to the system and which factors are related to the environment. Consequently, it makes control easier.

In conclusion, it can be said that there have been revolutionary changes in the process of decision-making because of concept of system approach. However, some critics feel that it is difficult to study the relations between sub-systems of a particular system. Therefore, this concept is not practical.

III. Contingency or Situational Approach:

Contingency approach to management is an important modem approach. This approach originated in around 1970. According to it, the managers should take decisions not according to principles but according to the situations. It means that there cannot be any single principle / formula / managerial activity which can be suitable in all the situations. Its chief reason is the constantly changing nature of environment. Here environment means the sum total of all the factors which influence the organization.

These factors are both internal and external. The internal factors include objectives, policies, organization structure, management information system, etc. The external factors include customers, suppliers, competitors, government policies, political set-up, legal system, etc. All these factors are subject to change that is why the environment of an organization is called dynamic.

The system approach has failed to establish a relationship between the organization and environment. The contingency approach has made an attempt to remove this weakness. It is, therefore, the basic duty of the managers to analyse the environment and they should take decision on the basis of their analysis. The managers should always keep in mind that no single method can be suitable for doing any work. Its suitability depends on the situations.

It is quite possible that a particular method of doing a thing may be futile and to hope that these principles would be suitable or successful in one situation, but the same may not be the case in some other situation. So far as the different principles of management are concerned, they simply guide the mangers, and in the present dynamic environment, it would be futile to hope that these principles would be suitable or helpful in all the situations.

For example- single style of leadership cannot be applied to all the situations. Similarly, there are many methods of motivation and control, but a single method cannot be applied to all the situations.

Features of Contingency Approach:

The following are the main features of the contingency approach:

1. The managerial action influences the environment.

2. The managerial action changes according to the situations.

3. There is essentially coordination between the organization and environment.

Limitations of Contingency Approach:

The following are the limitations of the contingency approach:

1. It is not sufficient to say that the managerial action depends on the situation. It is essential to say what action should be taken in a particular situation.

2. A situation can be influenced by many factors. It is difficult to analyse all these factors.

Conclusion:

In conclusion, it can be said that this approach advises the managers to be alert and suggests that the approach and system of work should be suitably changed in view of the situations confronting them.

IV. Other Approaches:

(1) Decision Approach:

Apart from some expert economists who developed the Decision Theory Approach, C.I. Barnard and Herbert Simon happen to be the chief exponents of this approach.

This approach can be better understood with the help of the following mathematical equation:

Management Minus Decision-Making is Zero

This equation makes it clear that if we take away decision out of management, nothing remains except zero. It means that, management is nothing but decision making. A manager has to take decisions at every step. Decision becomes absolutely necessary when there are many alternatives available to solve a particular problem.

After analysing the various alternatives, a rational decision has to be taken. The process of decision-making is a continuous process. The chief reason for it is that the managers have to face problems one after the other and they have to take decision to solve those problems.

Features:

The following are the chief characteristics of the decision theory approach:

(1) Decision is the soul of management.

(2) The study of various factors influencing decision is management.

(3) This approach lays stress on taking rational decisions.

(4) This approach considers decision-making as the centre of the study of management.

(5) Decision-making is a continuous process.

(6) The success of the organisation depends on the quality of the decisions.

(7) This approach recommends the use of quantitative methods in the process of decision-making.

(8) According to this approach, the system of communication has a vital role to play for the success of the process of decision-making.

(9) According to this approach, a manager is recognised as a person known for his problem solving capability.

(10) This approach lays stress on the study of the economic, political, social and practical aspects in case of decision making.

Criticisms:

The following are the major points of criticism of this approach:

(1) Narrow Concept:

This is a narrow approach of management. Decision-making can be an important function of management but not the whole of it.

(2) Rational Decision not Possible:

This approach takes about taking rational decisions, but it is not possible. Various types of information are needed to make rational decisions possible but this is not available or even if it becomes available, its purity is not ensured or granted.

(3) Use of Quantitative Methods not Possible:

There are many occasions when the use of Quantitative Methods is not possible. In such situations a manager makes use of his knowledge and experience rather than some formulae.

On the basis of the above details, it can be said that undoubtedly decision-making is the essence of management, but not the entire management.

(2) McKinsey’s 7-s Approach:

In 1970, Tom Peters and Robert Waterman advocated the theory of 7-S. They made this achievement while they were working as consultants with McKinsey & Co. They conveyed their 7-S approach to the managers through their published article “Structure is Not Organisation.”

The advocates of this approach decided to study the secret of the success of the well-reputed organisations and managers. On the basis of this study, they found out seven important factors on which the effectiveness of an organisation depended.

These factors are the following:

(1) Strategy

(2) Structure

(3) System

(4) Style

(5) Staff

(6) Skill

(7) Shared value

According to this approach the, effectiveness of an organisation is influenced by these seven factors. The chief characteristic of these factors is that they are inter-related. Each factor influences the other factors and is influenced by others. Therefore, nothing can be decided about any particular factor separately. When managers take any decision regarding any one particular factor, they have to take into consideration the effect it will have on the other factors.

A brief description of these factors is as follows:

(1) Strategy:

Strategy is a sort of planning that establishes a favourable relationship between the environmental opportunities and threats and the organisational strengths and weaknesses. It makes it possible to achieve success chiefly through its medium in the face of competition.

(2) Structure:

Structure makes it possible to establish coordination among the people in the organisation. Structure signifies the organisation structure plus, the organisation manual. Under the organisation structure, the positions are determined. It is also decided as to who will report to whom. In the organisation manual rules and regulations necessary for the successful functioning of the organisation are laid down.

Organisation structures can be of various types:

(i) Line organisation

(ii) Line and staff organisation

(iii) Functional organisation

Organisation structure also determines the limits of delegation of authority, centralisation and decentralisation.

(3) Systems:

In order to run the daily activities of an organisation, unimpeded various systems are laid down.

The major business systems are the following:

(i) Business System

(ii) Management Information System

(iii) Performance Management System

(iv) Financial System

(v) Communication System

(vi) Reward System

(vii) Customer Satisfaction Monitoring System.

(4) Style:

Style signifies the attitude or behaviour of a manager with the help of which he establishes his influence over his subordinates. In other words, style means the way which we present ourselves before others. For example- a manager treats his subordinates lovingly in order to leave his impact on them. On the other hand, some other manager treats his subordinates harshly to achieve the same purpose.

Thus, we can say that getting the work done in a mild manner or harsh manner are both the styles of the managers.

(5) Staff:

Staff signifies the man-power working in an organisation. Here, the attention is chiefly concentrated on the education, training, development and encouragement of the employees. Attention also remains focused on the career development of the employees and the plans that the company formulates for this purpose.

(6) Skill:

Skill means the ability of an individual which converts knowledge into the realms of practicality. Skill is not necessarily a born quality. It can be acquired with practice.

In order to perform his role effectively, a manager should have the following three types of skills:

(i) Conceptional Skill – It is related to ideas.

(ii) Human Skill – It is related to people.

(iii) Technical Skill – It is related to things.

(7) Shared Value:

Shared values are those assumptions, beliefs and mindsets which brings recognition to an organisation in the field of business. This factor is highly important and remains constant among the other six factors. It is very important to maintain high level of shared value. Shared value can also be called superordinate goal. Superordinate goal is the objective for the attainment of which all the employees put in their best efforts, e.g., maintaining the existence of the organisation is a superordinate goal.

All the employees would certainly desire to achieve it under all circumstances. If the existence of the organisation is threatened or obliterated their own existence will be blown away.


Modern Approach to Management – System Approach, Contingency Approach and Operation Research Approach

The modern approach to management represents the latest development in the field of management that took place after 1950.

The modern approach has three streams, namely:

(i) System approach

(ii) Contingency approach

(iii) Operation research approach.

(i) System Approach:

A system is a set of interacting subsystems (i.e., components) that constitute a united whole. Organization is composed of elements that are dependent on one another. These elements (or components) are viewed as subsystems of a larger system. These subsystems interact with each other by getting influenced and influenc­ing others.

Every business organization is a system of its environment. Again, the main parts of the ‘manage­ment system’ are organizational inputs, organizational transformation process, and organizational outputs. The cycle of inputs, transformation, and outputs is continuous. It is an open system that interacts with its environment. It is subject to changes from within and outside to meet the needs of an organization.

A whole system cannot be understood without the knowledge of the subsystems (or parts) that make up the whole. It is also essential to know the relations among different subsystems of the organization. The study in any area is based on the assumption that it is a part of the larger whole system.

For instance, the ‘solar system’ is a complete system of which ‘earth’ is a subsystem. Again, ‘earth’ is a whole system of which our country ‘India’ is a part. Again, ‘India’ is a complete system of which a particular State ‘West Bengal’ is a part and so on. Likewise, in every ‘business organization’ there are many subsystems known as ‘departments’. These departments are separate but interdependent on others. Major contributors in this field are L. V Bertalanffy, C. I. Bernard, H. A. Simon, R. A.Johnson, F. E. Kast, K. Boulding, and others.

(ii) Contingency (or Situational) Approach:

Management techniques that are effective in one situation may not be effective in another situation. In other words, effective management principles and practices vary with the situation in which the organization oper­ates. It is a systematic attempt to determine package of management techniques, approaches, and practices that are appropriate in a specific situation.

Manager should have flexibility and freedom for devising a course of actions that are effective and efficient for a particular situation. It may also be considered as common sense approach. The key to a manager’s success lies in his ability to perceive and analyse every situation and to apply management principles accordingly.

The application of this approach requires the managers to have thorough knowledge of the situation in terms of situational variables and external factors. It places more emphasis on appropriateness of man­agement tools and techniques for a specific situation. This approach is pragmatic in nature and encourages multivariable analysis. Managers must do what the situation demands.

In other words, managers’ actions must be contingent upon the organizational situation or environment. There is no ready-made solution to the problems of every situation. Managers should apply correct principles and/or techniques depend on the pre­vailing situation. Main contributors of this approach are J. Woodward, H. M. Carlisle, Lorsch, and Lawrence.

(iii) Operation Research (or Quantitative) Approach:

This approach is also known as ‘Management Science Approach’. It is based on the approach of scientific management. It offers a systematic and scientific analysis and solution to the problems faced by managers. It aims at achieving a high degree of precision, perfection, and objectivity in solving a managerial problem. It uses mathematical and statistical tools for solving complex problems.

This approach uses quantitative tools of decision-making known as ‘operation research’. Linear programming, game theory, queuing theory, sim­ulation, etc., are often used for making rational decisions. It uses computer aided technology for handling problems on production, finance, storage, transportation, etc.

The approach to solve, complex problems using management science consists of the following stages:

i. Formulating the problem and dividing the same into small simple components;

ii. Gathering required information on each component;

iii. Constructing a mathematical model to represent the system under study;

iv. Finding the solution to the problem at hand;

v. Establishing controls over the solution;

vi. Putting the solution to work implementation.

Major contributors in this field are H. Simon, C. Barnard, K. Arrow, Newmann, Leontieff, and others. This approach believes that the management’s main job is decision-making and organization is a decision-making unit. Organizational efficiency depends on the quality of managerial decisions. Management science tech­niques increase the effectiveness of managers’ rational decision-making.


Modern Approach to Management – With Evaluation

Management thought was developed due to the contributions of many intellectuals who have different background. These contributions have not been suitably and adequately integrated to give a unified theory of management. Hence, various approaches for management analysis have been developed over the passage of time. The management techniques were developed from the stage of human beings started living and working together in groups. The wonders of the world (Pyramids of Egypt, the Chinese wall etc.,) could not be possible without the application of management techniques.

There are many approaches in management thought. Each approach tries to explain the nature and content of management separately and has different beliefs and views. Some of the approaches are closely related with others and others have only little relationship among them.

No one can clearly count the number of approaches in management practices. The reason is that new approaches are developed due to changes in the business environment. In 1961, only six approaches was developed and followed in management thought.

In 1966, Stogdill had classified the approaches into eighteen. But Koonty O’Donnel and Weihrich have identified eleven approaches for studying management. They are empirical or case approach, operational theory approach, interpersonal behaviour approach, managerial role approach, group behaviour approach, contingency or situational approach, co-operative social systems approach, mathematical or management science approach, socio-technical systems approach, systems approach and decision theory approach. Thus, there is neither uniformity over the number of approaches nor clarity regarding the suggestion of a particular approach. Hence, Koontz describe this situation as – “Management theory jungle”.

Therefore, approaches are selected for brief discussion:

1. Systems Approach:

Systems approach was developed only after 1950’s and has attracted the attention of many management thinkers at present. This approach is based on the empirical data. Initially, Weiner had created a seed for the development of systems approach. Later, Ludwig Von Bertalanffy and Kenneth Boulding evolved the General System Theory (GST). Besides, Lawrence J.Henderson, A.K.Rice, W.G.Scott. E.L.Trist, Deniel Katz, D. S. Pough, Robert, L.Khan, W. Buckley and J.D.Thompson have made significant contributions to the development of the systems approach. They viewed an organisation (main system) as an organ which is composed of interacting and interdependent parts called subsystems.

Meaning of a System:

A system is a set of inter-connected and inter-related elements or components parts which are arranged in order and operate together to achieve certain goals.

One of the most important characteristic of a system is that it is composed of hierarchy of sub-systems. For example, the major system of national economy has various industries as sub-systems.

Definition of a System:

Richard A. Johnson defined, “a system is an organised or complex whole, an assemblage or combination of things or parts forming a complex unitary whole”.

Manmohan Prasad defined, “a system is an established arrangement of components which leads to the accomplishment of particular objectives as per plan”.

The systems approach is to identify the parts of the organisation and to discover how these parts operate interdependently.

Parts of a System:

A system has three parts. They are input, process, and output.

These parts are briefly explained below:

1. Input – A system is operated to achieve the specified objectives. The nature of input is based on the objectives to be achieved. Hence, the inputs may be raw materials or informations.

2. Process – A mechanical process is carried on to convert the shape or form of raw materials. An information is to be interpreted and analysed in a systematic way to get clear cut idea or conclusion.

3. Output – The input of raw materials is available as finished goods in output. The input of information is available as alternatives or conclusions in output.

Kinds of Systems:

There are four types of systems.

They are discussed below:

1. A Closed System:

A system is operated without any interaction from the outside environment. The closed system does not require any element from outside to operate. The closed systems approach was represented by principles such as unity of command, span of control and equal authority and responsibility and concentrated on internal relationship and consistency. The closed systems approach ignores the effect of the external environment

2. An Open System:

The operation of a system is dependent on the outside environment for survival. All organisational systems are depend upon the outside environment for feedback and resources and for disposal of the finished product. The management must analyse the external factors of resource availability, current technological trends, market trends and social changes.

3. General Systems:

The general systems approach to management has a relation with formal organisation and technical socio-psychological and philosophical concepts.

4. Specialised System:

The specialised system includes the areas of organisation structure, job design, computerised information and the like. The systems analysts are required not only by traditional organisations but also by modern organisations due to their actual occupational position.

The basic of system theory is that a manager cannot give more importance to any one aspect of the organisation and ignore other aspects of organisation.

Elements of Systems Approach:

The main elements of systems approach are as follows:

1. An organisation is a unified and purposeful system. An organisation as a system is consisting of several interconnected, interacting and interdependent parts.

2. The parts and sub-parts of a system have mutual relationship with each other. The nature of mutual relationship may be more, less, direct or indirect. Therefore a change in one part has an impact on other parts according to the nature of relationship.

3. An organisational system has a boundary that determines which parts are internal and which are external.

4. The parts and sub-parts of a system are arranged in an orderly manner. The reason is that systems approach is oriented towards the accomplishment of objectives.

5. A subsystem gets its strength by its association and interaction with other sub­systems. As a result, the contribution of whole organisation is greater than the aggregate of individual contribution of its sub-systems.

6. System transforms inputs into outputs. This transformation has three processes. They are – inputs, mediator and outputs. This process is essential for the survival of the system. The reason is that there is a restoring the in inputs in this process. Here, the restoring refers to earning profit.

7. The reaction of the outputs environment is known as feedback. Feedback is useful in evaluating and improving the functioning of the system.

The attention is paid towards the overall performance of the system rather than the performance of the sub-systems. The interdependence of the sub-systems is taken into account. According to Fred Luthana, “A system may provide the impetus to unify management theory and the systems approach may succeed where the process approach has failed to lead management out of the theory of jungle”. Chester I Barnard was the first person to utilise the systems approach in the field of management.

Features of Management as System:

Management is regarded as a system, under the systems approach, on account of the possession of the following features:

1. Social System:

Management is a social system since the management has all the characteristics of social system. To be a social system, the management has many divisions (many sub-systems) which are integrated to constitute an entity.

2. Open System:

Management has the interaction with the environment. Management takes various resources, allocates and combines these resources to produce desirable outputs which are exported to the environment. Therefore, it is understood that management has no freedom to decide the things on its own. But, at the same time, due weightage has to be given to the environmental factors affecting the management of an organisation.

3. Adaptive:

Adaptive means continuous adjustment to changing environment for survival. The management has made internal modification of organisational functioning to meet the needs of the changing world. The internal modification is made on the basis of feedback mechanism.

4. Multidisciplinary:

Management draws and integrates knowledge from various disciplines and schools of thought like economics, psychology, sociology, anthropology, mathematics, statistics and so on. It takes only the relevant aspects from these disciplines and the integration of relevant knowledge from these disciplines.

5. Dynamic:

Always, management moves towards growth and expansion. For which, there is a need of effectiveness of management. Both, internal processing process and interaction with external environment are determining the effectiveness of management.

6. Integrated Approach:

Happening of an event is due to many factors. Management tries to identify such factors and reasons. At the end, management tries to integrate the various factors to find out the reasons behind an event.

7. Probability:

Management has the character of probability. The reason is that the outcome of an action can be predicted accurately to some extent in management. For example, There is a pay cut for an unauthorised absent. If so, nobody absent without prior permission. Hence, the management can make forecast very clearly to a certain degree.

8. Multivariable:

There is no simple and single cause – effect phenomenon. Generally, an event may be the result of so many variables. These variables themselves are interrelated and interdependent.

9. Multidimensional:

Management has both macro and micro approach. At macro level, the whole business organisation is taken into consideration for approach. At micro level, part of a business organisation is taken into consideration for approach. Thus, both parts and whole are equally important in managing.

Evaluation of Systems Approach:

Systems approach helps in studying the functions of complex organisation and bring out the inter-relationship prevailing among the various functions like planning, organizing, directing and controlling. It highlights inter-dependence between different elements of an organisation as well as between an organisation and its environment. Under this approach, a problem is analysed in relation with other problems. Likewise, no problem is analysed in isolation. Systems approach provides clues to the complex behaviour of people in an organisation.

This approach cannot be easily applied to large and complex organisations. At the same time, there is no tools and techniques provided to the managers. It cannot directly and easily be applied to practical problems. Systems approach is not suitable for small organisations. Looking into these short comings of systems approach, researchers and management experts have tried to modify the systems approach. Hence, situational or contingency approach is emerged.

2. Contingency or Situational Approach:

Management is facing numerical problems everyday under different situations. Hence, there is a need of solving such problems on the basis of the situations prevailing. If a manager wants to change the behaviour of any part of the organisation, he must try to change the situation influencing it.

The basic theme of the contingency is that there is no single best solution to the problems arised in all situations. So, the situational approach is regarded as latest approach to the existing management executives. During the 1970’s contingency theory was developed by J.W. Lorsch and P.R. Lawrence. They say that “contingency approach is an approach where behaviour of one sub-unit is dependent on its environment and relationship to other units or sub-units that have some control over the sequences desired by the sub-unit”.

According to Tosi and Hammer, “when a sub-system in an organisation behaves in response to another system or subsystem, the response is contingent on environment”. Kast and Rosen Zweig say that the contingency, approach seeks to understand the inter-relationships within and among sub-systems as well as between the organisation and its environment and to define patterns of relationships or configurations of variables. Contingency views are ultimately directed toward suggesting organisation designs and managerial actions most appropriate for specific situations.

In one way, contingency approach is treated as the extention of systems approach. Contingency approach spell out the relationship between the organisation and its environment which is absent in systems approach. It is the responsibility of management to analyse the contingencies or conditions peculiar to each situation and then choose the right approach to deal with it.

Contingency approach requires common sense for application and requires the ability to analyse and diagnose a managerial situation correctly. Besides, the contingency approach requires knowledge and understanding of different principles, techniques and styles of management.

Torn Burns, G.W. Stalker, Joan Wood Ward, James Thampson, Paul Lawrence, Joy Lorsch and Jay Galbraith have made significant contributions to contingency approach.

Features of Contingency Approach:

In the light of the above discussion, the contingency approach has the following features:

1. There is no one best way of doing things. Hence, the managers should prepare strategies, policies and plans according to the situation prevailing.

2. Management action is situational to outside the system or sub – system as the case may be.

3. Managerial policies and practices to be effective, if they adjust to changes in environment.

4. No action can be universal because of specific relationship between organisation and environment. The action varies situation to situation.

5. Contingency approach improves diagnostic skills so as to anticipate and ready for environmental changes.

6. Human relations skill is necessary to managers for accommodate and stabilise change.

7. Contingency approach gives contingency model in designing organisation structure. The contingency model is developing effective information and communication system.

Evaluation of Contingency Approach:

The contingency approach discloses the role and performance of manager in an organisation, it exhorts managerial choices to be made in the light of environmental factors. Hence, it alert the managers according to changing situational needs and can stimulate managers to innovate new and better approaches for application.

Contingency approach recognises that managerial functions and principles are useful but should be used with discretion and care to suit the specific situation. This approach has no theoretical base. A manager is expected to know all the alternative course of action before taking an action.

Systems Approach vs Contingency Approach:

Systems Approach:

1. It treats all organizations as same and has no unique nature.

2. The contributors of systems approach are social psychologists.

3. Systems approach is the pioneer to the contingency approach.

4. Systems approach may specify situations under which a particular type of organization can function well.

5. It provides a global theoretical model for understanding organizations.

6. Systems approach is vague and unspecific.

7. The main concepts are input, output process, open system, system boundary, synergy, dynamic equilibrium, entropy and equifinality.

8. Systems approach emphasizes interactions and inter relationships among systems and subsystems.

9. It appears to be neutral and non-committal on the universality of classical principles.

10. Systems Approach suggest definite solutions of problems to a specified organization.

11. It focuses the internal environment of an organization.

Contingency Approach:

1. It treats each organization as unique.

2. The contributors of contingency approach are sociologists.

3. Contingency approach has been built ever systems approach.

4. Management action is situational and no situational is predicted accurately.

5. It provides operational tools and techniques for analyzing and solving problems.

6. Contingency approach is pragmatic, specific and action oriented.

7. There is no specific concept.

8. Contingency approach emphasizes interrelationships and interdepencies and their influence on organizational design and managerial style.

9. It rejects the universality of principles, no one best way of managing.

10. Contingency approach suggests probable and flexible approach to problems.

11. It focuses the external environment of an organization.

Contingency approach has emerged out of the systems approach. Contingency theorists have accepted the basic tenets of systems approach. Managers should not ignore the importance of taking actions according to the needs of the situations. Hence, the managers should use their highest skills for analysing the situations.


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