Management Concepts & Applications PDF

Management Concepts & Applications Dr. Rishiraj Sarkar  Unit 1: Introduction and Development of Management Approaches  Characteristics of Management Management is a Goal oriented process Different organisations have different goals Goals should be simple and cle...

Management Concepts & Applications Dr. Rishiraj Sarkar  Unit 1: Introduction and Development of Management Approaches  Characteristics of Management Management is a Goal oriented process Different organisations have different goals Goals should be simple and clearly stated Unites the efforts of all individuals in achieving the goals Management is all pervasive Common to all organisation types – economic / social / political Common to all departments within the organisation Management is multi-dimensional Management of work – quantum of work translated in to goals to be achieved and assigns means to achieve the same Management of people – employees as individuals / individuals as group of people; making their strengths effective and their weaknesses irrelevant Management of operations – production process – flow of raw materials – production technology – desired output for consumption – interlinked with work and people Management is a continuous process Continuous, composite separate functions like planning organising, staffing, directing & controlling Management is a group activity Collection of diverse individuals with different needs Coordination of individual efforts into achieving common organisational goal Management is a dynamic process A dynamic function – has to adapt itself to changing environment External environment – social, economic and political factors Management is an intangible force Cannot be seen but its presence can be felt Effect can be seen – where targets are met, employees are happy, orderliness everywhere instead of chaos  Definition of Management:  Traditional Definition: Henri Fayol stated: “to manage is to forecast and to plan, to organise, to command, to coordinate and to control.” Mary Parker Follet stated: “Management is the art of getting things done through people.”  Modern Definition: Harold Koontz & Weirich stated: “Management is the creation and maintenance of an internal environment in an enterprise where individuals, working in groups, can perform efficiently and effectively towards the attainment of group goals.”  Effectiveness Vs Efficiency:  Two sides of a coin  Achieving goals (Completion of task on time) = effectiveness  With minimum resources (Completion of task with minimum cost) = efficiency  High efficiency + high effectiveness = aim of all managers  Inefficiency + ineffectiveness = poor management Significance of Management:  Achieving Group Goals: Management encourages collaboration and coordination amongst workers. A general control must be provided to the organizational and personal objectives in order to favourably accomplish the aims.  Increases Efficiency: Management improves productivity by managing resources in a reliable conceivable way in order to decrease cost upscale potency.  Creates Dynamic organization: Management undertakes the conditions by assuring that these variations are well accepted privately and that objection to change is controlled.  Achieving personal objectives: Management promotes leadership and furnishes motivation to the employees to operate effectively in order to accomplish their personal aims while working towards the organizational goals.  Development of Society: Management helps in the enhancement of community by manufacturing reliable quality commodities, establishing employment chances and fostering innovative technologies.  Various ways to understand the Management:  Is Management a Science or an art or both? Management as Science: SCIENCE MANAGEMENT Systematised body of knowledge – Has its own theory and principles which have based on cause and effect relationship been developed over a period of time Draws principles from other disciplines like economics, sociology, psychology etc Principles based on Experimentation Principles have evolved after repeated experimentation and observation in different type of organisation Can be called “Inexact “ science because it deals with human beings which cannot be predicted or replicated Universal validity and application Since management is inexact science, their application is not universal. They have to be modified according to the situation. But these principles provide basic standardised techniques which can be used by all for training and development purpose. Hence it can be concluded that Management is an “Inexact” Science  Is Management a Science or an art or both? Management as Art: ART MANAGEMENT Existence of theoretical Existence of theoretical knowledge knowledge Lots of literature available based on study, observations and experience A good manager practices the art of management based on the materials available in various areas Personalized application A good manager works through a combination of practice , creativity, imagination, initiative and innovation Based on practice and One can achieve perfection after long practice and creativity based on his own creativity Involvement in the activities of the organisation, study of critical situation and formulation of theories unique to the situation in concern All management practices are based on the same set of principles. Distinguishing factor between a successful and less successful manager is the level of application and the art of applying these principles.  Is Management a Science or an art or both? Management as Profession: PROFESSION MANAGEMENT Well defined body of Management has a systematic body of knowledge knowledge comprising well defined principles Restricted entry There is no restriction. Anyone can become a manager irrespective of his educational qualification Professional association AIMA – All India Management Association but no compulsion for managers to become members of such association Ethical code of conduct There is no specified ethical code of conduct Service motive In modern parlance, along with profit maximisation, an organisation also has to serve the society where it is located – providing basic amenities, education, etc. Management cannot be fully regarded as a profession but has some features of profession. Theo Haimann, in his book Professional Management- Theory and Practice’, has used the term ‘management, in three different senses:  As a noun – Group or body of personnel having supervisory and policy making responsibilities, and having commanding and controlling power. E.g. Executive council of University, Board of Directors, Board of Trustees, Management Committee etc.  As a process – Functions of Management (POSDC), and  As a discipline – A subject or body of knowledge and practice.  Function of Managers: Managers have several functions within an organization. Understanding them can help you identify your strengths and areas of need to choose the proper training to improve your skills :-  Planning The first function of a manager is to set goals. These goals may be for individual employees, departments, or the entire organization, depending on the manager's level of responsibility. In addition to setting goals, managers often develop action items along with strategies and resources to complete tasks and meet goals.  Organizing Meeting organizational goals requires putting the right people in the right places. Managers can play an important role in choosing workers for positions and projects. Knowing how to group people and help them build relationships often significantly affects how well the group works together. Sometimes managers need to train employees for specific tasks to ensure they have the knowledge and skills they need to succeed.  Motivating Managers help motivate employees to show up and stay productive. This includes sharing a common vision, encouraging them to develop their strengths, and inspiring them to do their best work at all times. Having effective communication skills is essential for filling this role.  Evaluating Managers typically spend time measuring the success of their teams and how well they meet goals. The more they understand what works and doesn't work, the better prepared they are to make decisions in the future. Managers must understand and adjust strategies to meet company goals.  Levels of Management and Role of Managers: The term “Levels of Management’ refers to a line of demarcation between various managerial positions in an organization. The number of levels in management increases when the size of the business and work force increases and vice versa. The level of management determines a chain of command, the amount of authority & status enjoyed by any managerial position. The levels of management can be classified in three broad categories:  Top level / Administrative level  Middle level / Executory  Low level / Supervisory / Operative / First-line managers  Coordinating the activities of different departments Welfare & survival of the organisation Overall goals and strategies for the organisation Framing policies Responsible for the activities of the business Interpret the policies framed by the organisation Ensure that their department has required personnel Assign necessary duties and responsibilities Motivate them for higher productivity to achieve desired objectives Cooperate with other departments for smooth functioning of the organisation Interact with the actual workforce and communicate the instructions of the middle management directly oversee the work of the personnel Quality maintenance, minimised wastage of material etc., Maintains discipline and communicate workers grievances Maintains the work area and working conditions Functions of Each level  Managerial Skills: The term ‘managerial skill’ means the personal ability put to use by a manager for the accomplishment of organisational goals. The job of a manager has become very complex. He requires different types of skills to manage a large organisation in the fast changing environment. The managerial skills required as such can be broadly divided into three basic types:  Technical skills: proficiency related with specific kind of activity particularly the ones involving methods, processes, procedures and techniques.  Human/People skills: ability to work effectively as a group member and to build cooperative effort within the team.  Conceptual skills: ability to see organisation as a whole and recognise various functions and their independence on each other within the organisation as well as analyse and administer various activities based on insight gaining capabilities, improving overall effectiveness of the organisation.  Functions of Management / Functional Areas of Management:  According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting. But the most widely accepted are functions of management given by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.  For theoretical purposes, it may be convenient to separate the function of management but practically these functions are overlapping in nature i.e. they are highly inseparable. Each function blends into the other & each affects the performance of others.  Planning:  It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals.  According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do. It bridges the gap from where we are & where we want to be”.  A plan is a future course of actions. It is an exercise in problem solving & decision making. Planning is determination of courses of action to achieve desired goals.  Overall, planning is a systematic thinking about ways & means for accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.  Organizing:  It is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals.  According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”.  To organize a business involves determining & providing human and non-human resources to the organizational structure. Organizing as a process involves: 1. Identification of activities. 2. Classification of grouping of activities. 3. Assignment of duties. 4. Delegation of authority and creation of responsibility. 5. Coordinating authority and responsibility relationships.  Staffing:  It is the function of manning the organization structure and keeping it manned.  Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc.  The main purpose o staffing is to put right man on right job i.e. square pegs in square holes and round pegs in round holes.  According to Kootz & O’Donell, “Managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal & development of personnel to fill the roles designed un the structure”.  Staffing involves: 1. Manpower planning (estimating man power in terms of searching, choose the person and giving the right place). 2. Recruitment, Selection & Placement 3. Training and Development 4. Remuneration 5. Performance Appraisal 6. Promotions & Transfer  Directing:  It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work.  Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals.  Direction has following elements: 1. Supervision 2. Motivation 3. Leadership 4. Communication  Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers.  Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.  Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction.  Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding.  Controlling:  It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards.  An efficient system of control helps to predict deviations before they actually occur.  According to Theo Haimann, “Controlling is the process of checking whether or not proper progress is being made towards the objectives and goals and acting if necessary, to correct any deviation”.  According to Koontz & O’Donell “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”.  Therefore controlling has following steps: 1. Establishment of standard performance. 2. Measurement of actual performance. 3. Comparison of actual performance with the standards and finding out deviation if any. 4. Corrective action.  Coordination:  Co-ordination is the unification, integration, synchronization of the efforts of group members so as to provide unity of action in the pursuit of common goals.  It is a hidden force which binds all the other functions of management.  According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of common goals”.  According to Charles Worth, “Co-ordination is the integration of several parts into an orderly hole to achieve the purpose of understanding”.  Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management.  Co-ordination is the essence of management and is implicit and inherent in all functions of management.  Management and Administration:  Administration: According to Theo Haimann, “Administration means overall determination of policies, setting of major objectives, the identification of general purposes and laying down of broad programmes and projects”. It refers to the activities of higher level. It lays down basic principles of the enterprise. According to Newman, “Administration means guidance, leadership & control of the efforts of the groups towards some common goals”.  Management:  Management involves conceiving, initiating and bringing together the various elements; coordinating, actuating, integrating the diverse organizational components while sustaining the viability of the organization towards some pre-determined goals.  It is an art of getting things done through & with the people in formally organized groups.  Practically, there is no difference between management & administration. Every manager is concerned with both - administrative management function and operative management function as shown in the figure. However, the managers who are higher up in the hierarchy denote more time on administrative function & the lower level denote more time on directing and controlling worker’s performance i.e. management.  The Figure below clearly shows the degree of administration and management performed by the different levels of management:  Evolution of Management Thoughts / Theories of Management / Approaches to Management:  For better understanding, the evolution of management thought can be classified into four different stages. These include:  Pre-scientific management period: 1. Charles Babbage [Emphasized on work measurement, cost determination, bonus plans and profit sharing specialization (dividing the work into various jobs) to increase managerial efficiency] 2. Robert Owens (Father of Personnel Management) 3. Charles Dupin (Emphasized more on management education than technical education)  Classical theory: 1. F.W Taylor (Scientific Management Theory) 2. Henri Fayol (Administrative Management Theory) 3. Max Weber (Bureaucratic Theory)  Neo-classical theory or behavioral approach: 1. Elton Mayo (Human Relations Theory) 2. Abraham Maslow, Fredrick Herzberg, Victor Vroom, Mc Gregor, Lawler, Sayles and Tannenbaum and others (Behavioral Science Theory)  Modern Theory: 1. Systems Theory 2. Contingency Theory 3. Quantitative Theory (management as a system of mathematical models and processes) 4. Operational Theory (Operations management is concerned with controlling the production process and business operations in the most efficient manner possible)  Scientific Management Theory:  Fredrick Winslow Taylor is the Father of Scientific Management Approach and also, he popularized as Father of Industrial Engineering and Efficiency Movement.  The Principles of Scientific Management (1911) is perhaps the single most important book on the subject.  Several authors like Gantt, Thompson, Gilbreth etc. has also contributed to this theory.  Scientific Management Principles: 1. Science, not the Rule of Thumb: Adoption of scientific approach to decision making. The principles suggest thinking before doing. 2. Harmony, not Discord: An organization constitutes by two groups i.e. ‘workers’ and ‘management’. They must create the ‘Give and Take’ relationship in the workplace. They should share the opinions and ideas of each other. 3. Co-operation, not Individualism: It shows the importance of each other (management and workers). Management should reward and appreciate the employees for their helpful suggestions. At the same time, employees also cooperate with the management for the improvement of the organization. 4. Development of Each and Every Person to his/her Greatest Efficiency and Prosperity: Employees should be properly trained and selected in a scientific manner. 5. Maximum, not Restricted Output: Maximum productivity is the basic purpose of an organization.  Techniques of Scientific Theory: 1. Work-Study / Determination of Workload (time study, method study, motion study, and fatigue study) 2. Planning of industrial operations (what, how, where, and when work shall be done) 3. Development of Functional Foremanship (Separating the functions of planning and implementation between two sets of foremen) 4. Improvement of methods of work: a. Standardization of Tools and Equipment b. Regulation of speed of machines c. Improvement of work environment 5. Scientific Selection, Placement, and Training (By centralized personnel department) 6. Introducing Costing System (Differential piece wage system, average worker and efficient worker concept) 7. Mental Revolution (mental outlook of both employers and employees)  Criticism: 1. Not appreciated by workers and unions demanding for more humanistic approach than mechanistic one. 2. Time consuming and expensive. 3. Criticism of ‘one best way’ approach.  Administrative Management Theory:  Henri Fayol is said to be the father of Management Process or Administrative Management School.  He was born in 1841 of a French family. He was a Mining Engineer who rose to the rank of Chief Executive. He was a prolific writer on technical and scientific matters as well as management.  His most outstanding writing was ‘General and Industrial Administration’ published in French in 1916 which was later translated into English in 1949.  He classified all the business/ industrial activities into 6 groups:- 1. Technical (Production, manufacture, adaptation) 2. Commercial (buying, selling and exchange) 3. Financial (search for, and optimum utilization of capital) 4. Accounting (including balance sheets, costs and statistics) 5. Security (protection of property and persons) 6. Management activities (planning, organization, command, coordination and control)  According to Henri Fayol, there is the five function of management following administrative theory:- 1. Planning 2. Organizing 3. Commanding 4. Coordinate 5. Controlling  Administrative Theory (14 Principles of Management): Administrative Theory or 14 principles of management are following: 1. Division of Work: Every person should be limited to performance of single leading function. 2. Authority and Responsibility: Manager must be able to give the order. Authority gives this right. Responsibility arises from authority. The two are co-extensive and parity should be maintained. 3. Discipline: Employees must obey and respect the rules and regulations which governs the organization. 4. Unity of Command: Every employee should receive order or direction from only one upward or superior. 5. Unity of Direction: Each group of the organization should be directed by one manager using one plan. 6. Subordination of Individual Interests to the General Interest: The management must see that the aims of the businesses are always supreme. 7. Remuneration of Personnel: The labors must be paid a reasonable salary for their work. 8. Centralization: Concentration of authority in a single person is called centralization. Everything which decreases the importance of subordinates leads to centralization and vice-versa. Aim should be to have appropriate balance. 9. Scalar Chain: Line of authority from top management to the lower ranks represents the hierarchy or scalar chain. This chain should follow. However, It creates communication hurdles which should be removed through utilization of ‘gang planks’ 10. Order: people and materials should be in the right place at the right time. 11. Equity: In running a business, a combination of kindness and justice is needed. 12. Stability of Tenure of Personnel: Staff works well if job safety and career improvement are guaranteed to the team. 13. Initiative: Allowing all personnel to show their initiative in some way is a source of success for the organization. 14. Esprit de Corps: It refers to ‘team spirit’. Promoting team spirit will build unity and harmony within the organization.  Criticism: 1. The administrative theory is strategic management-oriented. (Too broad) 2. The administrative theory gives essential only to the formal organization structure, not for informal organization structure. 3. The administrative theory has a mechanical approach. It does not sound ideal with some of the crucial aspects of management such as motivation, communication, and leading. Note: You can memorize easily the 14 principles through a short mnemonic :- ‘DAD U SEE USSR OIC’  Bureaucratic Theory:  At the end of the 19th century, it was German sociologist Max Weber who was the first to use and describe the term bureaucracy.  The theory given by him is also known as the bureaucratic theory of management, bureaucratic management theory or the Max Weber theory.  He believed bureaucracy was the most efficient way to set up an organization and administration.  In a bureaucratic organization, everyone is treated equal and the division of labour is clearly described for each employee.  Bureaucracy definition: “Bureaucracy is an organizational structure that is characterized by many rules, standardized processes, procedures and requirements, number of desks, meticulous division of labour and responsibility, clear hierarchies and professional, almost impersonal interactions between employees”.  The following three elements support bureaucratic management: 1. All regular activities within a bureaucracy can be regarded as official duties; 2. Management has the authority to impose rules; 3. Rules can easily be respected on the basis of established methods.  Max Weber’s six characteristics of the bureaucratic theory:  The 6 bureaucracy characteristics are: 1. Task specialization (Specialization and Division of Labour): Tasks are divided into simple, routine categories on the basis of competencies and functional specializations. Every employee is responsible for what he/she does best and knows exactly what is expected of him/her. 2. Hierarchical layers of authority: Managers are organized into hierarchical layers, where each layer of management is responsible for its staff and overall performance. 3. Formal selection: All employees are selected on the basis of technical skills and competences, which have been acquired through training, education and experience. 4. Rules and requirements: Formal rules and requirements are required to ensure uniformity, so that employees know exactly what is expected of them. All administrative processes are defined in the official rules. 5. Impersonal (Impersonality and Personal Indifference): Regulations and clear requirements create distant and impersonal relationships between employees, with the additional advantage of preventing nepotism or involvement from outsiders or politics. Decisions are solely made on the basis of rational factors, rather than personal factors. 6. Career orientation: In a bureaucracy, it is possible to build a career on the basis of experience and expertise. As a result, it offers lifetime employment. The right division of labour within a bureaucratic organization also allows employees to specialize themselves further.  Contribution of Classical Approach: 1. Study of formal organization and organization structure 2. Study of managerial experience 3. Concept of ‘Economic Man’ 4. No conflict between individuals and organization. 5. Emphasizes formal education and training.  Criticism of Classical Approach: 1. Ignores human relation aspect 2. Views organization as a closed system 3. Over-simplified assumptions 4. Focuses on strict adherence of rules and regulations 5. Emphasizes Universality of management principles.  Neo-Classical Theory:  Human Relations Theory:  1950 saw a change to this discourse with the introduction of the Human Relations Theory.  This movement saw workers in a different light; they were now seen as thinking beings with needs, who liked to receive attention.  Companies realized that attention motivated employees and even allowed them to get more out of themselves for the benefit of the organization.  What is the Hawthorne Experiment?  Elton Mayo is considered the founder of the Human Relations Theory.  Prior to this trend, Elton Mayo already started an experiment in the Hawthorne plant (Western Electric Co.) known as the Hawthorne experiments (1927-32). There was a great deal of discontent among the 30,000 workers in the Hawthorne plants in Chicago in the early twenties of the last century. This was somewhat peculiar, because this phone parts plant already acted extremely progressively towards its workers (through pensions and sickness benefits), something which was almost unthinkable in this period.  Elton Mayo and his assistants, including Fritz Roethlisberger, Dickson, Dewey and Lewin etc. conducted research into changing working conditions.  They experimented with light, duration of breaks and working hours. An overview can be drawn from following experiments:  Illumination Experiment:  Purpose: To assess the effect of illumination on employee output.  Conclusion: Illumination/Lighting was a minor factor and there were other important factors influencing the output.  Relay Assembly Test Room Experiment:  Purpose: To assess the effect of change in working condition on productivity of workers.  Conclusion: Socio-Psychological factors e.g# special attention, recognition and sense of group belonging exercise greater influence on productivity than working conditions.  Bank Wiring Observation Room Study:  Purpose: To assess the effect of individual and group dynamics on output.  Conclusion: Group develops its own norms of performance irrespective of any incentive given for performance.  Mass Interview Programme:  Purpose: To understand the attitude and opinions of workers on factors influencing productivity.  Conclusion: Opportunity to freely talk on things important to workers has a positive effect on morale and productivity.  Behavioral Science Theory:  Classical theory ignored employee motivation and behavior. As a result, the behavioral school was a natural outgrowth of this revolutionary management experiment.  It is an expansion over the traditional Human relations theory.  The behavioral Management/ Science theory is often called the human relations movement because it addresses the human dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as motivation, conflict, expectations, and group dynamics, improved productivity.  The theorists who contributed to this school viewed employees as individuals, resources, and assets to be developed and worked with — not as machines, as in the past.  Several individuals and experiments contributed to this theory such as Abraham Maslow, Fredrick Herzberg, Victor Vroom, Mc Gregor, Lawler, Sayles and Tannenbaum and others.  Some specific contributions of Human Relations or Neo-Classical approach are:  Social System: An organization is a psycho-social system; with a culture of its own.  Social Environment: Social Environment affects and gets affected by the workers. Management is not the only variable important.  Informal Organization and Group Dynamics: Informal structure present within formal organizational structure. Informal groups have a serious impact on workers’ productivity.  Conflict: There are conflicts between the organization and the individuals goals. Integration necessary.  Leadership: Friendly supervision has a favorable influence on human efficiency at work. Informal leadership emphasized.  Communication: Free flow of communication, in the organization makes for good human relations.  Role of money: Money is not sole motivator of human behavior.  Criticism of Neo-classical approach: 1. Lack of Scientific validity 2. Not Universal with limited application 3. Limited focus on work 4. Over-concern with happiness 5. Other half of classical theory  Modern Theory:  Systems Theory/Approach:  In the 1960, an approach to management appeared which try to unify the prior schools of thought. This approach is commonly known as ‘Systems Approach’. Its early contributors include Ludwing Von Bertalanfty, Lawrence J. Henderson, W.G. Scott, Deniel Katz, Robert L. Kahn, W. Buckley and J.D. Thompson.  Systems approach is based on the generalization that everything is inter-related and inter­dependent. A system is composed of related and dependent element which when in interaction, forms a unitary whole. A system is simply an assemblage or combination of things or parts forming a complex whole. One its most important characteristic is that it is composed of hierarchy of sub-systems. That is the parts forming the major system and so on.  Open vs. Closed System:  Open System: Open/Organic system has an active interface with the environment through input-output process. It can respond to the changes in environment through the feedback mechanism. For example, the world can be considered to be a system in which various national economies are sub-systems. In turn, each national economy is composed of its various industries, each industry is composed of firms’ and of course a firm can be considered a system composed of sub-systems consisting of production, marketing, finance, accounting and so on.  Closed System: A Closed system is self-dependent and does not have any interaction with the external environment. It concentrates completely on internal relationship i.e. interactions between sub-systems only. Because of lack of interaction with environment, it is unable to monitor changes occurring in the external environment. For example, Physical and Mechanical systems are closed systems.  Under systems approach organization is seen as an organic and open system against closed system, which is composed of interacting and interdependent parts, called subsystems. The system approach look upon management as a system or as “an organized whole” made up of sub- systems integrated into a unity or orderly totality.  Features of Systems Approach: (i) A system consists of interacting elements. It is set of inter-related and inter-dependent parts arranged in a manner that produces a unified whole. (ii) The various sub-systems should be studied in their inter-relationships rather, than in isolation from each other. (iii) An organizational system has a boundary that determines which parts are internal and which are external. (iv) A system does not exist in a vacuum. It receives information, material and energy from other systems as inputs. These inputs undergo a transformation process within a system and leave the system as output to other systems. (v) An organization is a dynamic system as it is responsive to its environment. It is vulnerable to change in its environment.  In the systems approach, attention is paid towards the overall effectiveness of the system rather than the effectiveness of the sub-systems. The interdependence of the sub-systems is taken into account. The idea of systems can be applied at an organizational level.  The systems approach is considered for both general and specialized systems. The general systems approach to management is mainly concerned with formal organizations and the concepts are relating to technique of sociology, psychology and philosophy. The specific management system includes the analysis of organizational structure, information, planning and control mechanism and job design, etc.  Criticism of Systems Approach:  Not a unified theory and more a way of thinking (Abstract theory).  Does not describes about the nature of interactions and sub-ssystem relationships.  Does not offers any tools or techniques.  Contingency Theory/Approach:  The ‘Contingency Approach to Management’ is relatively a new approach to management.  It is an extension of the system approach. The basic idea of the contingency approach is that the organization has to come up with different situations in different ways. There is no single best way of managing applicable to all situations.  The contingency approach suggests that an organization is a system composed of subsystems and delineated by identifiable boundaries from its environmental supra-system.  In order to be effective, the internal functioning of an organization must be consistent with the demands of the external environment. The managers must keep the functioning of an organization in harmony with the needs of its members and the external forces.  Contingency views are ultimately directed towards: a) suggesting organizational designs, and b) appropriate managerial action for specific situation.  Congruence between Organization & Environment:  There should be congruence between: A) Organization and environment, and B) Among various sub-systems. The appropriate fit between organization and environment and appropriate internal organizational design will lead to greater effectiveness efficiency and stakeholder satisfaction.  Kast & Rosenzweig have analyzed the appropriateness of 2 kinds of structures under different circumstances: A) The stable-mechanistic structure when: 1) Environment is relatively stable and certain. 2) Goals are well defined and enduring. 3) Technology is relatively uniform and stable. 4) Routine activities with focus on productivity. 5) Decision making is programmable and a system with tight hierarchical structure is possible. B) The adaptive-organic structure when: 1) Environment is relatively uncertain and turbulent. 2) Goals are well diverse and changing. 3) Technology is complex and dynamic. 4) Non-routine activities with focus on creativity and innovation. 5) Heuristic decision making and a flexible system with less hierarchical structure is possible.  Features of Contingency Approach:  Action-oriented.  Determines relationship between situations, actions and outcomes.  Management should match or ‘fit’ its approach to requirements of the particular situation.  Significant contribution in organizational design.  Criticism of Contingency Approach:  Costly in terms of time and money. It also does not provide theoretical foundation upon which management principles will be based.  It is not possible for managers to determine all the factors relevant to the decision­making situation. Application of this theory therefore, may be a complicated task as decisions are based on limited information.  It is argued that what contingency theory asserts was asserted by Fayol also. He also talked of flexibility of management principles. Therefore, the theory has added nothing new to the management thought. Thank You!