Modern and Others Schools of Management Thought

Schools of Management Thought

Apart from classical, neo-classical and modern theorists, there are some other experts who have significantly contributed in the field of management. Let us study about these contributors.

• Peter F. Drucker
• Michael Porter
• C.K. Prahalad

Peter F. Drucker

Peter F. Drucker, born in Vienna in 1909, has made the most out- standing contributions in the field of management. He was a teacher for numerous disciplines such as Professor of Philosophy and Politics, Professor of Management and Professor of Social Sciences. Hence, he was a leading management consultant and a great management thinker.

Some of the important contributions made by Peter Drucker in field of management are as follows:

• He originated the concept of Management by Objectives (MBO).
• He was considered as the father of modern management.
• He advocated the concept of federalism.
• He considered management as both a discipline as well as a profession
• He defined the basic functions of a manager which include setting objectives, organising and motivating.
• He defined three characteristics of an effective organisation, namely:
  • Organising for performance
  • Least number of managerial levels
  • Training and testing of managers for future
• He advocated the development of dynamic organisations which can easily adapt to organisational changes.

Michael Porter

Michael Porter was a contemporary management thinker, Harvard professor and a prominent expert on competition. He developed the theory of competitive strategy. The theory defines the way managers can influence conditions in industry while they interrelate as buyers, rivals, suppliers, and so on. In his book ‘The Competitive Advantage of Nations’, he has advised that countries with strict norms and regulations related to environment have more competitive advantage at the global level.

He further explained that such firms can remain competitive while firms having no strict environmental regulations must find and develop innovative ways to satisfy strict laws and face competition. Michael Porter has categorised an industry setting in five forms in his book, ‘Competitive Advantages Creating and Sustaining Superior Performance’.

These are as follows:

• Fragmented industries
• Emerging industries
• Industries undergoing a transition to maturity
• Declining industries
• Global industries

C.K. Prahalad

C.K. Prahalad was born in India and graduated from Loyola Col- lege, Chennai and did his post-graduation from the Indian Institute of Management, (IIM), Ahmedabad. He also did Doctor of Business Administration (DBA) from the Harvard Business School.

He was a famous management educationist and proactive thinker. C.K. Prahalad contributed to the development of management in numerous ways. He is looked upon as an influential thinker on strat- egy. C.K. Prahalad became predominantly known for the work he conducted with Gary Hamel.

They carried out scientific and empirical research related to concepts of strategy and core competencies of organisations. He gave strategic concepts that are much different from traditional strategic thinking. ‘Competing for the Future’ is his outstanding work on strategy, a book written in association with Gary Hamel.

The major contributions of C.K. Prahalad are as follows:

• Core Competence
• Bottom of the Pyramid (BoP)
• Strategic intent
• Dominant Logic

Core Competence

The process of competence building is aimed for developing core competence. Core competence allows small organisations to face larger and financially strong organisations. C.K. Prahalad has provided a new viewpoint, orientation and shape to strategic thinking. Prahalad’s work received huge recognition specifically in the US. He provided a new orientation and shape to strategic thinking.

In order to develop the core competence concept, C.K. Prahalad related the diversified company as tree, major limbs of tree as core products, smaller businesses as branches of tree and business units as leaves, fruits as end products and the root system which nourishes and stabilises all things as core competencies. He believed that while framing strategies, organisations should concentrate on their core competencies.

Each organisation may have one or more competencies but the ideal core competency is the competency that creates a distinction between the company and its competitors. Core competency results from a specific set of skills or production techniques that deliver value to customer.

Bottom of the Pyramid (BoP)

He elaborated the idea of BoP during an interview and mentioned it in the book, ‘The fortune at the bottom of the pyramid’. He believed that traditional methods such as higher sales and lower margins can be used to explore BoP. He focused on the concept of exploring BoP by working backward from what the customers are willing to shell out for the product and then work on the costs by keeping the amount in consideration.

Strategic intent

According to C. K. Prahalad, the strategic intent comprises three things: sense of direction, sense of discovery and sense of destiny. He stated that strategic intent is nothing but a dream or an aim that motivates and provides energy to the organisation towards success. ‰‰Co-creation: He developed the concept of co-creation with the help of Venkat Ramaswamy in the book,

The Future of Competition in 2004. He suggested that the customers should be involved in every step of the value chain of the product offered by a company that is design, functionality, service, etc. This will provide new experience to the customer. The company should also be willing to allow the customers to be unconditionally involved and access information along with a high degree of transparency.

Dominant Logic

Bettis and Prahalad in 1986 introduced their notion of “dominant logic” as an explanatory variable for determining the success of diversification. It denoted a representation of mental maps developed through past experience. This is used as a lens by managers through which they can look at new businesses. Dominant logic relates to the main resources a company uses to make a profit.

In core, it is an explanation of how a company has succeeded. It describes the cultural norms and beliefs that the company advocates. Dominant logic can be useful when applied to corporate diversification. In this sense, dominant logic is a common way of thinking about strategy across different businesses.

Modern Management Approach

The modern approach to management was given in the 1950s. The approach focused mainly on employee satisfaction. According to this approach, employees do not necessarily work for money. They like to receive affection and respect of co-workers, which further increases their productivity. This helps an employee to contribute more towards the success of an organisation.

Modern approaches can be classified under the following three categories:

• Quantitative approach
• Systems approach
• Contingency Approach

Quantitative approach

The quantitative approach focused on managerial decision making. This approach is also known as management science approach. It was developed during World War II to find the problems of warfare.

The quantitative approach can be studied under three areas, which are:

• Operations research: It is a discipline that lays emphasis on improving the effectiveness of management decisions by using advanced analytical techniques. It is sometimes considered to be a subfield of mathematics as it involves extensive calculations. Some of the commonly used operations research techniques are linear programming, querying, waiting line, routing and distribution models, etc.
  
  
• Operations management: It is an area of management that involves supervising and controlling the production process. For this, various techniques are used, such as inventory analysis, statistical quality control and networking.
  
  
• Management Information System (MIS): This is a computerised management system used to provide information required by organisations for their effective management. MIS facilitates the decision-making process of an organisation by providing meaningful information about its business processes.

Systems approach

It was developed in the late1960s with an aim to provide an integrated approach to solve management problems. According to this approach, a system can be defined as a set of components that are interacting regularly or are interdependent, thus making a single unit.

The systems approach focuses on the following points:

• A system comprises units and subunits.
• Each part of a system needs to be thoroughly understood in order to analyse it.
• A system always has boundaries to define its beginning and ending.
• Every system is developed to achieve a specific goal.
• No system can exist in isolation.

Contingency Approach

This approach is also known as situational approach wherein an organisation determines problems by ana- lysing its conditions and environment. According to this approach, there is no single set of rules that is applicable in solving all types of problems in organisations. Therefore, managers need to analyse every problem and various aspects associated with it, and define different ways to solve the problem.

Herbert A. Simon-systems Approach

Herbert Simon, an Economist and a noble prize winner studied the Urwick’s and Guflick’s principles of management. He found manage- ment principles ambiguous, inconsistent and contrary. He termed these principles as ‘homely proverbs’, ‘slogans’, and ‘myths’. Simon observed organisational problems in the socio-psychological context as a whole. He further observed that organisational decision making takes place in the context of socio-psychological aspect.

Simon’s contribution in the field of management is considered as one the greatest contributions. Simon’s notable contribution in relation to management includes the concept of organisation, decision making, bounded rationality, administrative man and organisational communication.

The major contributions of Herbert Simon in the field of management include the following:

• Organisation concept
• Decision making
• Bounded rationality
• Organisational communication

Organisation concept

Simon illustrated a complex network of decisional processes as an organisation. The organisational decisions are influenced by the behaviour of employees. He also illustrated that an organisation contains distribution and allocation of decision-making functions.

Simon also stated that the organisation influences decisions of its employees. Hence, to analyse an organisation, it is best to know the source of decision making in the organisation.

Decision making

Decision making is viewed as core part of man- agement; hence, it is also regarded synonymously with manage- ment. He stated that the process of decision making can be divided into three successive steps:

• Intelligent activity: It is the initial phase that requires probing into the prevailing environment so as to know the conditions that need decisions.
  
  
• Design activity: It is the second phase that requires invention, development and analysis of a possible course of action to take place.
  
  
• Choice activity: It is the final phase of making selection of a particular course of action from the available choices.

Bounded rationality

Simon criticised the theories that assumed man being a complete rational. He viewed man not as entirely rational. He promoted the bounded rationality principle. He stated that there is no way for managers to aim for maximum satisfaction of a decision due to various constraints and limitations. Hence, managers have to be satisfied with good enough satisfaction achieved from a decision.

Simon’s administrative man model (Administrative model of decision making): According to Simon, an administrative man is one who has limited rationality.

Simon used the model of administrative man as a model of decision making which is based on the following assumptions:

• Administrative man does decision making on the basis of sat- isfying approach rather than using the maximising approach.
• He remains content with simplification.
• He makes choices without screening and judging all possible alternatives available for decision making.
• He uses his force of habit, tricks of trade and simple rule of thumb concepts to do decision making.

Organisational communication

The role of communication in an organisation is also of significant importance. As per Simon, transmittal and receipt of information are three stages in the com- munication process. Certain barriers may also occur at any of these stages.

Management Topics