Management Theories

 Management theory

Management theories are sets of ideas and rules that are designed to help in management. They Facilitate proper management planning, organisation, leadership and control. The four main types of management theories that we studied are:-

1-Classical school.
It is one of the first management theories developed which emphasis on the structure of business and the hierarchy . Henry Fayol is one of the main developers of this time of management. He mentioned these important notes for the success of the business

·         Division of work: Division of work and specialization produces more and better work with the same effort.

·         Authority and responsibility: Authority is the right to give orders and the power to exact obedience. A manager has official authority power

·         Discipline: Obedience and respect within an organization are absolutely essential.

·         Unity of command: An employee should receive orders from only one superior.

2-Human relations school.
Elton Mayo is the main developer of this theory

The research he carried established the following suggestions for the success of business

• Employee behaviour depends primarily on the social and organisational circumstances of work.
• Leadership style, group cohesion and job satisfaction are major determinants of the outputs of the working group.
• Employees work better if they are given a wide range of tasks to complete.
• Standards set internally by a working group influence employee attitudes and perspectives more than standards set by management.

The usefulness of the human relations approach

The school recognised the role of interpersonal relations in determining workplace behaviour, and it demonstrated that factors other than the pay factor can actually motivate workers.

However, the approach overestimates the commitment, motivation and desire to participate in decision making of many employees.

3-Systems approach

The system approach to management is a concept which views company as a relationship purposive system that consists of several business sections. The system can be divided into 3 simple parts which are input, process and output.

input involves the raw materials, funds and technology for example
The process refers to the activities related to management
Output are simply the products or the results

4-Contingency theory

Contingency theory is a behavioral theory that claims that there is no single best way to design organizational structures. It states that the best way of organizing a company is contingent upon the internal and external situation of the company.

Management Styles

1- Autocratic leadership: is a leadership style characterized by individual control over all decisions and little input from group members. Autocratic leaders typically make choices based on their own ideas and judgments and rarely accept advice from followers. Autocratic leadership involves absolute control over their group.

Characteristics of Autocratic Leadership

Some of the primary characteristics of autocratic leadership include:

• Little or no input from group members


• Leaders make the decisions


• Group leaders dictate all the work methods and processes


• Group members are rarely trusted with decisions or important tasks

Benefits of Autocratic Leadership

Autocratic leadership can be beneficial in some instances, such as when decisions need to be made quickly without consulting with a large group of people. Some projects require strong leadership in order to get things accomplished quickly and efficiently.

Downsides of Autocratic Leadership

While autocratic leadership can be beneficial at times, there are also many instances where this leadership style can be problematic. People who abuse an autocratic leadership style are often viewed as bossy, controlling, and dictatorial, which can lead to resentment among group members. Staff do not get the chance to contribute with their ideas leaving them unmotivated.

2- Democratic: is a type of leadership in which members of the group take a more participative role in the decision-making process. Researchers have found (Publisher James Ryan) that this learning style is usually one of the most effective and lead to higher productivity, better contributions from group members, and increased group morale.

Characteristics of Democratic Leadership

Some of the primary characteristics of democratic leadership include:

• Group members are encouraged to share ideas and opinions, even though the leader retains the final say over decisions.


• Members of the group feel more engaged in the process.


• Creativity is encouraged and rewarded.

Benefits of Democratic Leadership

Because group members are encouraged to share their thoughts, democratic leadership can leader to better ideas and more creative solutions to problems. Group members also feel more involved and committed to projects, making them more likely to care about the end results. Research on leadership styles has also shown that democratic leadership leads to higher productivity among group members.

Downsides of Democratic Leadership

While democratic leadership can be described as one of the most effective leadership styles, it does have some potential downsides. In situations where roles are unclear or time is of the essence, democratic leadership can lead to communication failures and uncompleted projects. In some cases, group members may not have the necessary knowledge or expertise to make quality contributions to the decision-making process.

Porter’s 5 Forces Analysis

A firm’s leadership team will often combine PESTLE Analysis with Michael Porter’s 5 Forces Analysis to get a more rounded view of the immediate business operating environment before setting out the firm’s strategy.

As with PESTLE Analysis, Business people can apply Porter’s 5 Forces Analysis to gain a greater understanding of their customer’s world.

The following five forces combine to form the market environment that the firm must respond to and use its capabilities to create unique, sustainable value within if it is to succeed:

·         the firm’s customers

·         the firm’s suppliers

·         the threat from existing competition

·         the threat from (and of) new entrants

·         the threat from (and of) substitute products

Each of these forces have several determinants. Here are some examples:

The firm’s customers

·         bargaining

·         expectations

·         location and geographical distribution

·         price sensitivity

·         complexity and cost to service

The firm’s suppliers

·         importance of volume to supplier

·         location and geographical distribution

·         bargaining leverage

·         number of suppliers & alternatives

·         relationship with firm’s competitors

The threat from existing competition

·         number of competitors

·         rate of industry growth

·         exit barriers

·         Advertising expenses

The threat of (and from) new entrants

·         the existence of barriers to entry

·         capital requirements

·         learning curve advantage

·         existing competition

·         government policies

The threat of (and from) substitute products

·         New technical alternative

·         buyer propensity to substitute

·         relative price performance of substitutes

Pestel Analysis

In combination with a PESTLE Analysis, which reveals drivers for change in an industry, 5 Forces Analysis can reveal insights about the potential future attractiveness of a given industry and form an excellent basis for a strategic review by a firm’s leadership team. Expected political, economic, socio-demographic, technological, legal and environmental changes can influence the five competitive forces and thus have a significant impact on industry structures.

A PESTLE analysis considers a range of external trends and factors that can help business leaders make sense of their organisation’s external environment when devising strategic plans and reviews.

By conducting a PESTLE analysis, business leaders can ensure that their firm’s objectives are positively aligned with the powerful forces of change in the external environment.

By analysing changes to the external environment (and the opportunities and threats this represents), a company is much more likely to realise success as it will be encouraged to break free from existing assumptions and to adapt to the realities of a dynamic operating environment.

P – Political factors:

These are mainly current or potential influences that are politically driven and can include (amongst many others):

·         Import and export quotas and tariffs

·         War

·         Terrorism

E – Economic factors:

·          Taxation

·         Inflation

·         Foreign exchange rates

·         employment level

S – Social factors:

·         Changes in the tastes of the buying public

·         Changes in fashion

T – Technological factors:

·         Telecommunication and computing networks

·         New chemical opportunities

·         New methods and techniques of energy collection and storage

·         Innovations and inventions

L – Legal factors:

These might be laws that have actually been passed or are to be imminently passed, as well as decisions in courts that affect the interpretation of existing legislation, for example:

·         Health and safety

·         Working directives

·         Human rights

·         Environmental responsibilities

E – Environmental factors:

·         The impending effects of global warming and climate change

·         Pollution

·         Natural disasters