Modern Theory of

Management

By:
Ms. Dhun
Assistant Professor, IPCW, DU
 Modern approach is an improvement upon both
classical and neo classical approach to
management.

Quantitative System
Approach 1 Approach 2

Contingency
Approach 3
 INTRODUCTION
AboutTO MODERN THEORY
this template

➢ Management theories represent the idea that managers should apply management
strategies, frameworks and tools from different theories rather than solely relying on one
management theory.
➢ Modern management theory recognizes that today's organizations face rapid changes and
complexities, with technology serving as both a potential cause and solution for these
factors.
➢ When implementing this theory, managers use technology and mathematical techniques
to analyze their workforce and make decisions.
➢ In the words of W.G. Scott, ‘The distinctive qualities of modern organization theory are
its conceptual analytical base, its reliance on empirical research data and, above all, its
integrating nature. These qualities are framed in a philosophy which accepts the premise
that the only meaningful way to study organization is to study it as a system.”
➢ Modern Management Theory is actually comprised of three other management theories
— Quantitative Theory, Systems Theory, and Contingency Theory.
SYSTEMS APPROACH
 HISTORY

◉ 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.
◉ They viewed organisation as an organic and open system, which is
composed of interacting and interdependent parts, called subsystems. The
system approach is top took upon management as a system or as “an
organised whole” made up of sub- systems integrated into a unity or
orderly totality.
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System
Approach
According to Cleland and King “A
system is composed of related and
dependent elements which, when in
interaction, form a unitary whole. It is
simply an assemblage or
combination of things or parts,
forming a complex whole.”
 MEANING

◉ 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. For
example, the world can be considered-to be a system in which various
national economies are sub-systems.

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 System
• A system is a combination of parts/things forming a unitary whole.
• Things or parts are known as sub-systems. These sub-systems are closely interdependent
and interrelated so that a change in one sub-part brings changes in other parts also.

Closed Open
system system
Self-dependent i.e. A business organisation may
Active interface with
does not have any environment through be viewed as an open system
interaction with
external environment input-output process created to satisfy society’s
needs and desires by the
production and distribution of
Concentrates on goods and services
internal relationships Influenced by
only i.e. interaction external environment undertaken with a view to
with sub-systems earn profits.

Eg, mechanical Eg, Business

system
 Organization is an open system

• Business has an exchange relation with the environment and that is why it is called an open
system.
• The business system has external environment consisting of economic, political, social, cultural,
technological and other forces which affect business policies and plans.
• A business system is composed of sub-systems such as: Production, Marketing, Finance, Personnel,
Research and Development, Legal and Management. These sub-systems are interdependent,
interrelated and influenced by external environment.
Contributions of
System Approach
01. Open System view of Organization
The organization treated as a closed system in the traditional
approach. It is considered an open system in modern theory, which has
continuous interaction with the environment and gets various resources
from the environment to transform them into outputs desired by the
environment.
02. Adaptive System
An organization is a dynamic system as it is responsive
to its environment. It is vulnerable to changes in its environment such
as government policies, new technology, competition in the market,
etc.
Contributions of
System Approach
03. Interdependent Subsystems
An organization is a system consisting of several subsystems. All the
subsystems are functionally interacting and interdependent. They are tied
together into an organic whole through goals, authority flows, resource
flows and so on.

04. Whole Organization

The systems approach provides a unified focus to organizational efforts. It
gives managers a way of looking at the organization as a whole that is
greater than the sum of its parts.
Synergy
The output of a system is always more than
the combined output of its parts. This is
called the law of synergy. The parts of a
system become more productive when they
function collectively than when they act in
Isolation. 5

Multi-disciplinary
Modern theory of management is enriched by
contributions from various disciplines like psychology,
sociology, economics, anthropology, mathematics,
operations research and so on. The systems theory
provides a framework to understand interaction
between various subsystems and visualize
unanticipated consequences of such interaction. 6
 ADVANTAGES

◉ It increases organisation’s adaptability to environmental changes. The

organisation is studied as a whole and not through its parts. This enables it
to adapt to the needs of the environment. Decisions are made keeping in
mind the macro as well as micro environment.
◉ The focus is on achieving the individual as well as overall goals of the
organisation.
◉ Uniformity in decision making such that no specific domain gets
preferential treatment.
◉ Adaptive and Dynamic.

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Criticism of Systems
Approach
The system approach is not free from limitations. It
has the following deficiencies:
01. The systems approach cannot be considered
a unified theory of organization. This is in no way a
unified body of thought. Systems approach fail to
take a comprehensive study to analyze the
organizations from different angles.

02. The systems approach has failed to specify

the nature of interactions and inter dependencies
between an organization and its external
environment.
03. The systems approach has failed
to spell out the precise relationship
between various subsystems.

04. The systems approach does not

provide action framework applicable
to all types of organizations.

05. The systems approach does not

offer any tools or techniques for
analysis and synthesis of the system
and environment.