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What is Modern Management Theory?

Posted by Glassdoor Team

Career Advice Experts

Last Updated June 29, 2021

Guide Overview

What are management theories?Modern Management TheoryBenefits of the Modern Management TheoryOther popular management theories

Guide Overview

Management theories in the workplace

Finding a management theory that suits your workplace can totally change the working environment for the better. In this article, we'll focus on the Modern Management Theory and how its mix of hard data and human emotions can become an efficient model for leadership. We'll also cover other management theories and see how they compare to the Modern Management Theory. 

What are management theories?

Management theories are ideas about how people manage employees in an organization. In order to lead a business, people must understand what motivates and directs employees in a company. Management theories explain what motivates employees and how leaders can use these motivators to control and guide them. Management theories provide management strategies, frameworks, and guidelines that employers can implement in the office. Companies need different management for different work settings. For hundreds of years, theorists have researched the best forms of management for different companies. Now we can use the frameworks given in these management theories to create a framework for management in companies today.

Modern Management Theory

Modern Management Theory was created in direct response to the Classical Management Theory that states employees are only motivated by money. The Modern Management Theory recognizes that workers are complex and have many reasons for wanting to succeed in their job. The Modern Management Theory also believes that rapidly changing technology can both cause and solve many problems in the workplace. 

This theory combines mathematical analysis with an understanding of human emotions and motivation in order to create a working environment that is maximally productive. A manager using the Modern Management Theory will use statistics to measure employee performance and productivity and also try to understand what makes their employees satisfied at their jobs. 

Modern Management Theory is actually comprised of three other management theories — Quantitative Theory, Systems Theory, and Contingency Theory.

Quantitative Theory

This theory based on efficiency and mathematical equations came out of the necessity for managerial excellence in World War II. This is a simple number-based theory that relies on calculating the risks, benefits, and drawbacks of any action before it is taken. This approach applies statistics, computer simulations, information models, and other quantitative techniques to the management of a company. This theory is usually not used to manage a business on its own. Instead, the Quantitative Theory must be used with more humanistic theories, in order to run a company. 

Systems Theory

This theory treats companies like a living organism, with all parts necessary for the company to survive. Developed by Ludwig von Bertalanffy, this theory states that all parts of a company, from the CEO to the entry-level employee, must work in harmony for the company to survive. Companies using this theory think that departments and employees must work as a collective group and not an isolated unit. Synergy and interconnectedness between departments are key with this theory. 

While striving for harmony between departments is important in a company, most companies don’t need to rely on synergy so much for their day-to-day functions. For example, the accounting department of a small company doesn’t need to be totally in sync with the HR department. This management theory is more of a way you can view the company, not an exact management style.

Contingency Theory

The Contingency Management Theory holds that every situation requires a different leadership style, and therefore no one theory can work for an entire office. Created by Fred Fiedler in the 1960s, this theory states that it is up to the leaders of a company to assess a situation and use the best leadership strategy. Fiedler believed there are three main variables for determining what leadership strategy to employ — organization size, technology being used, and the overall style of leadership in the company. 

This theory puts a lot of responsibility on the leaders of a company. Fiedler believed that a leader’s traits directly affected how they managed people. This theory is also a more useable theory for modern workplaces, as it understands that as technology and companies change, so must the leadership styles.


Benefits of the Modern Management Theory

Modern Management Theory is a great management theory for the modern world because it recognizes and respects the changes that come with technology. This theory understands that technology changes the workplace and leaders must be able to incorporate these changes efficiently. For example, a manager that uses the Modern Management Theory will look at a development such as working from home on two fronts. They will analyze the costs and benefits of having employees work from home, and they will also ask individuals how working from home benefits their own lifestyle. 

This two-pronged approach to management allows for the straight facts of hard data, and the more introspective and personal approach to leadership. This theory treats employees as complex individuals who are concerned with more than just their salary, while also allowing for some company decisions to be made by rational and statistical analysis. 

Some management theories have been around for over 100 years. Here are some of the most common management theories and why they may or may not work in the modern office.

Classical Management Theory

The Classical Management Theory system of belief states that employees are only motivated by physical and economic needs. It calls for a clear structure of management where the workforce is divided into owners, middle management, and supervisors. This theory views the workplace as an assembly line, with each worker completing a specialized task instead of multitasking. People who utilize this theory believe workers are motivated by financial rewards based on the competency of their work. When companies put this theory to practical use, they will often see an increase in productivity. It can help streamline a company and make employees focus on the bottom line. However, as the theory does not consider social needs, job satisfaction, and human relationships, it can also lead to a sizable amount of burnout among employees. This model exerts a great deal of control over human behaviors and treats employees as a machine. For many companies, Classical Management Theory fell out of favor in the past 60 years as more modern theories emphasized the humanity of the workforce.

Scientific Management Theory

Fredrick Taylor came up with this theory at the end of the 19th century. He believed that using the scientific method will get the best results out of workers in the office. First, use the scientific method to determine the best way to perform a specific task. Next, you assign workers to tasks that match their abilities and train them to maximize their output. Then you must monitor the workers constantly to ensure they are using the most efficient methods. Finally, managers should spend their time training and planning for future work. Parts of the Scientific Management Theory are still in use today. Managers should offer help and advice when needed, and they should always look towards the future. However, now workers get more say about how they think their job should be done and are usually not hired to perform just one specific task. The Scientific Management Theory was best suited to large companies at the turn of the century, not small modern offices.

Bureaucratic Management Theory

The Bureaucratic Management Theory, created by Max Weber in the late 1800s, states that companies should be structured in a hierarchical system with clear rules, roles, and procedures. This theory stresses bureaucracy in six main areas — hierarchical structure, task specialization, formal selection, rules, advancement based on achievement, and an impersonal working environment. Under this theory, promotions are not about personal character or relationships, but strictly based on performance. This management theory has become less popular in the century due to its rigid structure. While in theory it makes sense for an office to have rules and standards which everyone must follow, in practice there will always be emotions and personal relationships in an office which will go against these bureaucratic guidelines.

Theory X and Theory Y

This theory, proposed by Douglas McGregor in 1960, believes that there are two main management styles and leaders must choose which style to employ based on the perceived motivation of their employees. Leaders should use Theory X when dealing with a workforce that is unmotivated and dislikes work. Managers who use Theory X must use an authoritarian work style to get anything done. Managers should use Theory Y when they believe their workforce is engaged, self-motivated, and enjoy their job. Managers who use Theory Y use a more participatory style of management. While this theory provides two different options for management, both options are quite extreme. Employees fall somewhere between Theory X and Theory Y, and managers must adjust their management style accordingly. This theory of management has become less popular over time as managers viewed their employees in less stark terms and tried to understand their employees.

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