It details how managers, supervisors and employers motivate employees to perform at their best and achieve company goals. Generally, those in leadership positions apply concepts from different management theories depending on the company culture and their employees. A vast majority of these theories were established decades ago. However, some still provide a valuable framework, despite changing work environment norms. Understanding management theories and applying their best practices can help you become a more effective leader and direct your team to achieve the business’s objectives. They can encourage communication, innovation and better decision-making. But it can take time, and some trial and error, to perfect your style.
What Are the Goals of Management Theory?
While management theories offer an entire philosophy to leading a team, the primary goals are to:
Increase productivity Improve morale Offer an objective lens through which to assess the business Simplify decision-making
Increase Productivity
Management theories are designed to teach leaders how to get the most from their team. A leader with a good management style will have an exceptional team that works well together, communicates openly and delivers great results. Before making any changes to a company, such as new equipment or a new advertising strategy, employers should evaluate their leaders to ensure they are using the right combination of theories.
Improve Morale
Management theories created over the past few decades encourage collaboration and interpersonal relationships. A leader who uses these theories will allow their team to make more decisions. Having this type of freedom and trust improves motivation and morale.
Offer an Objective Lens
Management theories have both theoretical and practical elements, both of which are backed up by science. These theories urge leaders to make scientifically informed changes that facilitate growth.
Simplify Decision-Making
A management theory that flattens the hierarchy encourages innovation and speeds up decision-making. Businesses that lack creativity and fail to make quick decisions often do so because they have too many middle-management positions. For a cohesive work environment, there need to be a small amount of effective leaders and a workforce capable of making decisions.
Top 10 Management Theories to Use in the Workplace
There are many management theories in the world, some with multiple interpretations. Below are the 10 most popular management theories used across all industries and professions.
1. Systems Theory
Systems theory, or the systems approach, was created in the 1940s by biologist Ludwig von Bertalanffy. His theory is that everything works as a system. Both internal and external factors can help the system grow or damage it. For example, the digestive system works together with the immune system, and the brain needs other organs. When we’re sick, we can’t function properly. When your arm is broken, you can’t use it. Equally, when we eat nutritional food, we feel much better, and our body is healthier. In the business world, departments and employees work together to create something great. If one department is underperforming, the entire business system suffers, like a broken arm. Externally, the COVID-19 pandemic forced a lot of businesses to close; a broader-scale example of an employee with the flu forcing them to stay at home. When employers begin to look at their company as a system, they are faced with concepts such as:
Entropy – Where the system dies Synergy – Where the system works together to produce something great Subsystem – Where your business is built on multiple layers of systems that all have a function
As Systems Theory is a way of looking at the business rather than being a process, it can be used alongside other management theories.
2. Bureaucratic Management
Bureaucratic management was created by Max Weber in the early 1900s. He believes that the ideal business should use the following simple rules and procedures to organize itself:
A clear division of labor and specializations A clearly defined hierarchy Separation of personal and business assets Hiring based on qualifications and experience, not personal relationships Accurate and constant record keeping Consistent regulations, rules and requirements
Some of this theory still makes sense in today’s working world. Records should be kept, and some businesses need regulations, especially where safety is involved. People should be hired based on skill rather than whom they know in the company. However, these rules all lack emotion, and some can be difficult to implement. For example, are uniform standards inclusive of all genders and religious beliefs? If a mother needs to take extra parental leave after a complicated birth, will you allow it? Under Weber’s theory, uniform standards must stand regardless. If the maternity policy is three months, no exceptions can be made. While it’s true that emotions can lead to bad decisions, empathy is essential for any leader. While the bureaucratic theory does not always fit into modern working environments, the organizational principles still form the structure of many of today’s businesses.
3. Scientific Management Theory
Frederick Taylor published his theory on scientific management in 1909. He was one of the first to view performance from a scientific perspective. Taylor believed that scientific methods should be used when performing tasks, rather than personal judgment or discretion. Scientific management theory encourages leaders to simplify tasks and assign them based on abilities. It also emphasizes that thorough training and supervision are key to productivity. The underlying belief in the theory is that forcing employees to work hard will result in a productive workplace. As Taylor’s theory doesn’t consider the humanity of employees, it is no longer practiced in its entirety. However, elements such as adequate training, teamwork and collaboration are seen in work environments worldwide.
4. Administrative Management Theory
Henri Fayol’s administrative management theory suggests there are six functions that work in combination with 14 management principles. The six functions are:
Forecasting Planning Organizing Commanding Coordinating Controlling
Essentially, employers need to plan for the future, gather the necessary resources, tell employees what to do and ensure they are all doing as commanded. The 14 principles are:
Division of work – Assigning employees tasks that match their skill set Authority – Achieving a balance between authority and responsibility, the right to give instruction and the responsibility of the employee to do their assigned tasks Discipline – Employees obeying commands, rules and regulations Unity of direction – All employees striving to achieve company goals, values and mission statements Unity of command – Employees are answerable to their managers. There should be no confusing managerial levels or unnecessary people involved in decision-making Subordination of individual interests – The team and the goals come before individual needs Compensation – Either financial or through other benefits to motivate employees Centralization – Striking a balance between decision-making, where directors or CEOs should not overpower lower-level managers Scalar chain – A clear chain of command for communication Order – Office environments should be clean and organized Equality – All employees should be treated well and fairly Stability of tenure of personnel – A company should do what it needs to limit employee turnover by supporting their professional growth Initiative – Employees should be free to share and discuss their ideas, and innovation should be rewarded Esprit de corps – Leaders should do what is necessary to keep employees engaged and motivated
The majority of these principles are still in use today. Receiving payment for work and equality are legal requirements for all businesses. Allowing employees the freedom to express ideas is essential for innovation. Leaders should support professional growth with constructive feedback. However, some of the principles are no longer essential. Modern company structures allow for a less rigid hierarchy. Some companies trust employees to make their own decisions rather than assigning managers. After several experiments, Mayo concluded that productivity didn’t improve because the working environment was improved, but rather because employees felt heard and valued. This theory supports the idea that employees are motivated when appreciated, listened to and part of a supportive group.
6. Theory X and Y
Social psychologist Douglas McGregor created Theory X and Theory Y in the 1960s. Theory X is more authoritarian, while Theory Y encourages collaboration. He argued that leaders would switch between these theories depending on their employees. If a manager believes their team dislike their work or are indifferent, they are more likely to use Theory X, which uses micromanaging. Those who have self-motivated, committed teams will use Theory Y. These theories are still present in some companies today. Where there are many employees, Theory X will keep everyone focused on company goals. In smaller or new businesses, Theory Y will encourage creativity, collaboration and innovation. For leaders today, it may be necessary to use Theory X to keep certain employees focused on their work. However, if they have a team they can trust, Theory Y is more appropriate.
7. Classical Management
This theory uses the idea that employees only have physical needs, which can be satisfied with money. As such, classical management theory focuses only on the economics of running a business. The seven key principles are:
Profit maximization Labor specialization Centralized leadership Simplified operations Focus on productivity Minimal or one decision-maker Focus on the end result
When this theory was first published, these principles worked well. Societal norms at the time were to make lots of money and buy all the nice things you wanted. A management system focused on making money facilitated these values. However, as this theory ignores personal needs that encourage job satisfaction, it is not fully applicable in today’s world. Today, our motivations extend beyond the figures in our pay packet. The only principles acceptable today are:
Clearly defined employee roles Clearly defined managerial structure Division of labor to suit employees’ skills
8. Contingency Management
Fred Fiedler created the contingency management theory in the 1950s and 1960s. The theory is based on the idea that good leadership correlates to the leader’s traits in a given situation; leadership styles need to change depending on external and internal needs. From there, he concluded that three variables affect leadership style:
Organization size Technology Leadership at all levels
Leaders who adopt this theory must be able to identify the appropriate style for each situation and apply it quickly and effectively. Essentially, this theory claims that there is no single effective leadership style.
9. Modern Management
Modern management theory was designed as a response to classical management theory. In the modern business world, employers and leaders are faced with constant changes in trends, norms, behaviors and technologies. The main principles are:
Using mathematical techniques to understand manager/employee relationships Understanding that employees don’t just work for money
Those leaders who adopt the modern management theory incorporate technology into the human elements of their company, thus combining the scientific and social variables. The theory understands that people’s motivations are complicated and change over time. It also explains that skills can be developed through on-the-job training and development programs. The mathematical element comes from using ROI, statistics, cost and revenue to make informed decisions. Combined with classical management, these principles could create an ideal managerial structure.
10. Integral/Holistic Management
Holistic management theory is a framework that encourages leaders to make economically, environmentally and socially sound decisions. It asks you to get clear on your vision for the future and make decisions that support that vision. Originally designed for agriculture, this framework can be applied to any industry. Classical management focuses only on money, whereas modern management incorporates the human elements necessary for success. The two together make a cohesive management structure. When applying theories in practice, no single theory suits all. You should take the elements from each that suit your business and employees. However, when these theories were created, the social norms were very different to today. As such, not all the principles of each theory should be applied. Exploring different leadership styles is an excellent way to improve and develop your leadership skills. However, when applying these theories, not every principle will be appropriate. For example, the administrative management theory offers 14 principles by which you should run your business. Some are still relevant today, such as:
Division of labor Compensation for work Equality Supporting growth and initiative
However, rigid hierarchies and communication channels may not be essential for your business. It is possible to manage well without using a management theory, but there is no harm in considering how they relate to your business and how they can improve your leadership style.
