MANAGEMENT

Neo-Classical Theory of Management

The Neo-Classical Theory of Management, often referred to as the Human Relations
Movement, is a school of thought in management that emerged in the early 20th century as a
reaction to the classical management theories of Frederick Taylor and Henri Fayol. Neo-
Classical theorists recognized that classical management principles, which emphasized strict
hierarchical structures, task specialization, and economic incentives, had limitations in
understanding and managing human behavior in organizations. This led to a shift in focus
towards the human aspect of management. Key features of the Neo-Classical Theory of
Management include:

1. Emphasis on Human Needs and Motivation: Neo-Classical theorists, such as Elton

Mayo and Abraham Maslow, emphasized the importance of understanding human
needs, social interactions, and motivation as drivers of employee performance. They
believed that satisfied and motivated employees are more productive.

2. Hawthorne Studies: The Hawthorne studies, conducted at the Western Electric

Hawthorne Works in Chicago between the 1920s and 1930s, played a pivotal role in
the development of the Neo-Classical theory. These studies revealed that worker
productivity was influenced by social and psychological factors, such as group
dynamics, attention from supervisors, and peer pressure.

3. Informal Organizations: Neo-Classical theorists recognized the existence of

informal organizations within formal organizations. Informal groups and social
interactions among employees could significantly impact work performance and
productivity.

4. Communication and Leadership: Effective communication and leadership were

considered essential for creating a positive work environment and fostering employee
morale. Managers were encouraged to be more approachable and understanding of
their employees' needs.

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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

5. Employee Participation: Neo-Classical management advocated for greater employee

involvement in decision-making processes. This approach was seen as a way to
empower employees, boost their morale, and improve organizational outcomes.

6. Teamwork and Collaboration: The Neo-Classical perspective emphasized the

importance of teamwork and collaboration among employees. Managers were
encouraged to create a sense of community and cohesion within the organization.

7. Human Needs Hierarchy: Abraham Maslow's Hierarchy of Needs, which includes

physiological, safety, social, esteem, and self-actualization needs, was integrated into
Neo-Classical management thinking. This model highlighted that people have
different needs that must be met for them to perform at their best.

8. Critique of Scientific Management: Neo-Classical theorists critiqued the

mechanistic and rigid principles of scientific management, arguing that they ignored
the human element of work and that workers should not be treated as mere cogs in a
machine.

Hawthorne Experiment
The Hawthorne experiments refer to a series of studies conducted at the Western Electric
Hawthorne Works in Chicago, Illinois, from the late 1920s to the early 1930s. These
experiments are often considered one of the most significant events in the history of industrial
and organizational psychology. The studies were conducted by a team of researchers led by
Elton Mayo, an Australian psychologist.

The main objective of the Hawthorne experiments was to understand the relationship between
workplace conditions and worker productivity. The studies began with a focus on the impact
of lighting on worker productivity but evolved to explore broader aspects of the work
environment and its effects on employee performance and job satisfaction. Here are some key
findings and phases of the Hawthorne experiments:

1. Illumination Studies: The initial phase of the experiments, conducted from 1924 to
1927, examined how changes in lighting conditions affected worker productivity.

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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

Surprisingly, the results showed that regardless of whether lighting levels were
increased or decreased, worker productivity improved. This phenomenon came to be
known as the "Hawthorne effect," where workers' productivity increased simply
because they were being observed and made to feel special.

2. Relay Assembly Test Room Studies: This phase of the experiments, conducted from
1927 to 1932, focused on a group of female workers in a relay assembly room.
Researchers made various changes to their working conditions, such as rest breaks,
work hours, and group incentives. Again, productivity increased, and it became
evident that social factors, including teamwork, communication, and job satisfaction,
played a significant role in employee performance.

3. Interviewing and Counseling: Researchers began to conduct interviews with

workers to understand their feelings and attitudes towards work. They found that
workers valued being listened to and having their concerns addressed, which
contributed to higher job satisfaction and, consequently, increased productivity.

4. Bank Wiring Observation Room: In the final phase of the experiments, which
occurred from 1931 to 1932, a group of male workers wiring electrical components
was observed. The workers were allowed to set their own piecework rates, resulting in
increased output and cooperation among team members.

Overall, the Hawthorne experiments highlighted the importance of social and psychological
factors in the workplace. The studies showed that employee motivation and productivity are
influenced not only by physical working conditions but also by the way workers are treated,
their social interactions, and their feelings of being valued by their employers.

The Hawthorne effect itself is a significant concept in the field of organizational psychology,
emphasizing the impact of awareness and attention on employee behavior and performance.
It suggests that individuals may change their behavior when they know they are being
observed or when they feel that their efforts are being recognized and appreciated.

The Hawthorne experiments yielded several important conclusions and insights into the
workplace and employee behavior. These conclusions continue to have a lasting impact on
the fields of management, organizational psychology, and industrial sociology. Here are some
key conclusions drawn from the Hawthorne experiments:
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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

1. The Hawthorne Effect: The most famous and immediate conclusion from the
Hawthorne experiments is the Hawthorne effect itself. This phenomenon refers to the
tendency of individuals to improve their performance or behavior when they know
they are being observed or when they feel special attention is being paid to them. It
highlighted the role of psychological and social factors in influencing worker
productivity.

2. Social and Psychological Factors Matter: The experiments underscored the

importance of social and psychological factors in the workplace. Researchers found
that factors such as teamwork, communication, group dynamics, and job satisfaction
significantly impacted employee performance. Workers' attitudes, feelings, and
relationships with colleagues and supervisors were found to be critical in determining
productivity.

3. Employee Involvement and Participation: The studies demonstrated that involving

employees in decision-making processes and allowing them to have a say in their
working conditions can lead to increased job satisfaction and productivity. When
employees felt that their opinions were valued and they had some control over their
work, they tended to be more motivated and committed.

4. Individual Differences: The Hawthorne experiments highlighted the individual

differences in worker responses to changes in the work environment. Not all workers
reacted the same way to alterations in lighting, rest breaks, or other conditions. This
recognition of individual variability emphasized the need for a personalized approach
to m anagement.

5. Management and Leadership Styles: The studies emphasized the role of

management and leadership in shaping the work environment. Managers and
supervisors who showed concern for their employees and provided positive feedback
and support were more likely to elicit higher levels of productivity and job
satisfaction.

6. Interconnected Variables: The experiments demonstrated the complexity of the

relationships between different variables in the workplace. It became clear that
changes in one aspect of the work environment could have unintended consequences

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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

on other factors. This highlighted the need for a holistic and systems-based approach
to managing and improving the workplace.

7. Long-Term Implications: The Hawthorne experiments had a lasting impact on

management theory and practice. They contributed to the development of the human
relations movement in management, which emphasized the importance of
understanding and addressing the human needs and social dynamics in the workplace.

In conclusion, the Hawthorne experiments were a pivotal moment in the study of

organizational behavior and management. They revealed that employees are not merely cogs
in a machine but are influenced by a complex interplay of social, psychological, and
environmental factors. These findings continue to shape modern management practices,
emphasizing the importance of employee engagement, motivation, and satisfaction in
achieving organizational success.

In summary, the Neo-Classical Theory of Management shifted the focus from a purely
mechanistic and task-oriented approach to a more human-centered perspective. It highlighted
the importance of understanding and addressing the social and psychological aspects of work
to enhance employee motivation, satisfaction, and productivity. This approach had a
significant influence on modern management practices and laid the groundwork for theories
of organizational behavior and human resource management.

The Neo-Classical School of Management and the Classical School of Management are
two distinct approaches to understanding and managing organizations. Here are the key
differences between the two:

1. Time Period:

• Classical School: The Classical School of Management emerged in the late

19th and early 20th centuries, with major contributors like Frederick Taylor,
Henri Fayol, and Max Weber. It laid the foundation for modern management
principles.

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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

• Neo-Classical School: The Neo-Classical School developed in the mid-20th

century as a response to the limitations of the Classical School. It includes
thinkers like Elton Mayo and Chester Barnard.

2. Focus on Employees:

• Classical School: The Classical School often viewed employees as tools or

resources to be controlled and directed. It emphasized efficiency,
standardization, and task specialization.

• Neo-Classical School: The Neo-Classical School recognized the importance of

human factors in organizations. It emphasized the role of motivation, human
relations, and social interactions in improving productivity and employee
satisfaction.

3. Management Approach:

• Classical School: Classical management thinkers, such as Frederick Taylor,

advocated for scientific management and emphasized principles like division
of labor, hierarchy, and strict top-down control.

• Neo-Classical School: Neo-Classical management thinkers, like Elton Mayo,

promoted the human relations approach, which emphasized the social and
psychological aspects of work. They argued that treating employees with
respect and understanding their needs could lead to improved performance.

4. View of Motivation:

• Classical School: Classical management primarily relied on extrinsic

motivators, such as financial incentives and job specialization, to increase
employee performance.

• Neo-Classical School: Neo-Classical management recognized the importance

of intrinsic motivation, emphasizing factors like job satisfaction, social
interactions, and recognition as motivators.

5. Communication and Leadership:

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Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow
MANAGEMENT

• Classical School: Classical management emphasized a hierarchical structure

with clear lines of authority and communication flowing from the top down.

• Neo-Classical School: Neo-Classical management stressed the importance of

open communication, participative leadership, and collaboration between
managers and employees.

6. Organizational Structure:

• Classical School: The Classical School favored rigid, mechanistic

organizational structures with centralized decision-making.

• Neo-Classical School: The Neo-Classical School advocated for more flexible

and organic organizational structures that could adapt to changing
circumstances.

7. Criticisms:

• Classical School: The Classical School has been criticized for its mechanistic
and authoritarian approach, which often led to employee dissatisfaction and
limited consideration of human needs.

• Neo-Classical School: The Neo-Classical School addressed some of the

shortcomings of the Classical School but has also faced criticism for being
overly idealistic and lacking clear guidelines for management.

In summary, while the Classical School of Management focused on efficiency and control,
the Neo-Classical School placed greater emphasis on human aspects, employee motivation,
and social interactions within organizations. These two schools represent different eras in
management thought and have influenced the development of modern management theories.

7
Dr. Reetika Singh
Asst. Professor
Department of Commerce
University of Lucknow