The 5 Basic Management Theories Every Business Person Needs to Know

No matter what business you’re in, whether you’re the owner or just an employee, it’s helpful to have an understanding of the main management theories out there. From these theories, you’ll get an idea of which strategy fits your business goals and style best, allowing you to adapt your decisions and improve your overall effectiveness as a manager. These are the five main management theories every business person needs to know about.

1) What Is Scientific Management?

Scientific management is a theory of management developed by Frederick W. Taylor in the early 1900s. It focuses on finding ways to increase efficiency and productivity through the use of methods such as time and motion studies, which involve studying how employees complete tasks and make improvements. 

This theory emphasizes that there is a single best way to do each job, and it's the manager’s job to determine what this best way is and to get the workers to follow it. Scientific management also includes incentives such as higher wages for increased productivity. These incentives are meant to motivate employees to work harder and smarter. By increasing efficiency, businesses can increase their profits and become more competitive. 

In addition to improving efficiency and productivity, scientific management also seeks to reduce workplace conflict by reducing workers’ autonomy and by creating uniform rules and processes that everyone must follow. This is done in order to make sure that everyone is doing the same task in the same way. 

Scientific management is still widely used today in many organizations, though some of its core principles have been criticized for reducing workers’ autonomy and not taking into account the complexity of work. Nevertheless, it remains an important management theory to understand for any business person.

2) What Is the Bureaucratic Approach?

The bureaucratic approach to management is a traditional and often rigid approach that is focused on rules, processes, and hierarchy. This management theory was first introduced by German sociologist Max Weber in the early 20th century and it has been an influential approach to management ever since.

At its core, this theory focuses on structuring an organization into a hierarchical system with clearly defined roles and responsibilities. This approach is typically implemented with a top-down structure, meaning that the most senior employees are the decision-makers and those at the bottom of the hierarchy follow instructions from those above them. 

The bureaucratic approach also emphasizes rules, processes, and procedures that guide the organization’s operations. These rules and processes are intended to be consistent and fair so that all employees within the organization understand their roles and how they can contribute to the overall success of the organization. 

Finally, this management theory encourages high levels of efficiency by relying on detailed protocols, processes, and systems to get tasks done quickly and accurately. By adhering to these standards, organizations can reduce the number of mistakes that occur and increase productivity. 

Although the bureaucratic approach has been highly influential in management, it does have its drawbacks. For example, this approach can be overly rigid and may not always work well with creative or innovative tasks. It can also lead to a lack of motivation among employees who feel like their contributions are not valued.

3) What Is the Human Relations Movement?

The human relations movement is an approach to management that focuses on improving the relationships between managers and employees. It emphasizes the importance of recognizing and valuing individual differences, promoting teamwork, and creating an environment where employees feel empowered to take initiative and make decisions. 

This approach was developed in the early 20th century by influential sociologist Elton Mayo and psychologist Mary Parker Follett, who suggested that organizational success depends on the health of employee-manager relationships. 

In practice, this means that managers should strive to create an open, collaborative work environment in which employees are encouraged to communicate their ideas, opinions, and concerns. The idea is that this kind of communication will result in increased employee morale, job satisfaction, and productivity. 

Additionally, fostering a positive work culture that encourages meaningful relationships between employees and managers can also result in higher customer satisfaction, as well as improved problem-solving and innovation.

In today's workplace, many organizations have adopted the human relations approach, recognizing the importance of building relationships between employees and managers for both productivity and job satisfaction. Employers are now more likely to reward workers for their ideas and contributions, as well as recognize their unique strengths and weaknesses.

They may also offer rewards and incentives for successful team projects or individual achievements. By encouraging effective communication between employees and managers, organizations can ensure they’re getting the most out of their teams.

4) What Is Contingency Theory?

Contingency theory is a branch of management theory that emphasizes the idea that there is no one-size-fits-all approach when it comes to managing an organization. This theory suggests that different management techniques must be applied in different situations, depending on the needs of the organization at the time. The idea is to be prepared and able to react quickly to changes in the environment so that the organization can remain competitive.

The key components of contingency theory are adaptability and flexibility. It encourages managers to recognize that there is no one right way to manage a company and that different approaches may be necessary depending on the situation. It also suggests that managers should have contingency plans in place in case certain factors change, such as market conditions or employee motivation. By being prepared for such changes, organizations can quickly pivot and remain competitive.

Overall, contingency theory is an important part of management theory, as it encourages organizations to remain flexible and adaptive. By being open to new ways of approaching issues, organizations can stay ahead of the competition and keep their employees engaged and motivated.

5) What Is Systems Theory?

Systems Theory is a management theory that looks at how different parts of an organization interact with each other to create a more efficient whole. It emphasizes the importance of seeing the organization as a living system, rather than simply a collection of departments and individuals. 

In Systems Theory, organizations are viewed as dynamic systems in which various factors are constantly interacting with each other in order to maintain balance and produce the desired results. This includes both internal and external factors such as resources, technology, culture, environment, and more. The aim of Systems Theory is to identify and analyze these factors in order to optimize the performance of the organization. 

In order to do this, Systems Theory looks at how different parts of the organization relate to one another and how they interact with the environment. This approach helps managers make better decisions by understanding how different aspects of the organization are interconnected. With Systems Theory, managers can also see how changes in one part of the organization can affect other parts, allowing them to make strategic decisions that optimize the performance of the entire system. 

Ultimately, Systems Theory is an important tool for businesses to ensure that their internal processes are efficient and effective. By understanding how different parts of an organization interact with each other, managers can improve communication, reduce costs, and increase productivity.