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Chapter Five
1. The Modern Era
1. Modern Theories
⚫Modern management theories indicate further refinement
,extension ,and synthesis of all the classical and neo-classical
approaches to management.
⚫Modern management must have the twin primary objective of :
⚫Productivity (classical approach) and
⚫Satisfaction (Neo-classical theory)
⚫The most popular contemporary approaches of management are
as follows
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Cont’d...
5.1.2 The systems approach
⚫The basic notion of a system is simply that it is a set of
interrelated parts.
⚫A firm’s components might include such interrelated areas as
production, marketing, and finance. Coordination of these
subsystems terms allows the business to achieve its objectives.

⚫A system may be defined as an “organized group of parts

,components or subsystems linked together according to a plan
to achieve specific objectives.”

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Cont’d...
System components –the components of a system include the
following
Input –are human and other resources –energy ,machinery ,raw
materials ,component parts descending
And information that are necessary to operate and maintain the
system or subsystem.

 Inputs maybe divided in to two general categories

 Production inputs are those inputs that undergo transformation
and become a part of the system’s output.
 Crude oil is a production input for a petroleum refinery.
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Cont’d...
 Maintenance input-are those inputs that facilitate the
functioning of the system but do not directly become a part of
the system output.
 A steel manufacturing facility has complex mechanisms for
converting iron ore, coke and lime stone into finished steel.
Output-are the products of the system. Two forms of output exist
 Direct output- are those in which the system was originally
established. Example General Motors produces automobiles
 Indirect output- organizations occupy a place in their physical,
economic, and social environments ; and their activities affect

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Cont’d...
 Example –gulf oil ,in the process of producing petroleum products
 Employs thousands of people,provides financial seek to avoid
polluting the environment.
 There are two kinds of system based on the nature of their
boundaries.
Closed system thinking
⚫Is the older approach and dates to the renaissance and research in
the physical sciences.
⚫Closed systems are sets of interacting elements operating without
any exchange with the environment in which they exist.
⚫
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Cont’d...
⚫Truly closed systems possess two defining characteristics
⚫No exchange occurs between the system and environmental
across the system’s boundaries.
⚫Such a system becomes perfectly deterministic or predictable .
Open system approaches
⚫Are of most recent origin and emphasize the interdependence of
the system with its environment.
⚫Such systems are based upon the knowledge that no system is
totally deterministic.

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Cont’d...
Characteristics of system
 Subsystem-a set of related parts that work together to achieve
an objective as one component of a larger system.
 Example –the human body’s circulatory system, nervous
system, respiratory system etc… are subsystems of the human
body.

Open and closed system

 Open systems interact freely with their environments, closed
systems interact much less.
 A large publicly held, internally flexible organization would be a
relatively open system, as demonstrated by its money interactions
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with stakeholders, governments, customers and others.

Cont’d...
Input transformation output model
⚫An open system receives input from its environment (money,
material, personnel and technology) which it transforms into
output (goods and services) in interaction with environmental
variables (market conditions ,world affairs and so forth)
⚫System boundary–in closed systems the boundaries (lines of
demarcation) between an organization and its environment are
difficult to penetrate (for example, the boundaries of a secretive,
bureaucratically structured, closely held corporation.)

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Cont’d...
⚫Steady state-a steady state is the dynamic equilibrium, or
balance an organization maintains (with suppliers and customers
for example) to maintain health and prosperity.

⚫System Goals- the supreme goal of an organization is survival.

⚫All other goals depend on the achievement of this one goal.
⚫Another goal ,which is intimately correlated with survival goal,
is the goal of adaptation and integration with environment.
⚫Feedback every business system has an inherent feedback
mechanism that provides various types of useful information to
management.
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Cont’d...
 Management makes use of this information in controlling the
performance at different stages of work.
 Psycho-social system-a business organization is a psycho-social
system in the sense that people working in a firm develop social
relationships and they constantly interact with one another.
 Creativity- business system is creative in the sense that it fruitfully
converts the available resources in to useful products.

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Cont’d...
 Interdependence-various subsystems of a business system are
interdependent and interacting.

 Different departments are linked together in one way or

another to achieve specified goals.
 An organization, according to the system view, is a subsystem
of its broader environment
 Goal oriented: people with a purpose of maximum of profits
and shareholders’ wealth, survival of organization unit, supply of
goods and services to the consuming public, meeting the
society’s expectation etc.

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Cont’d...
A technical subsystem using knowledge, techniques equipment
and facilities and
 A structured subsystem, people working on interrelated
activities.
5.1.3 Quantitative /management science approach
 It uses decision-making techniques involving mathematical
models and computer technology.
 It originated during WWII in the form of operations research
which is a method of pooling the knowledge of research specialists
 In order to develop quantitative models that behave similarly to
the real world situations confronting decision makers.
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 The management scientists led by operations researchers and
systems analysts see management as” a system of mathematical
models and processes”.
 This will lend exactness to management process and substitute
certainty for guesswork, knowledge for judgment, hard facts for
experience.
 The quantitative approach contributed lots of mathematical
tools for solving problems of management in areas like quality
control, inventory control, production scheduling ,warehouse
operations and resource allocation.
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Introduction to Mathematical Model

Operations research is the study of optimal resource
allocation.
It involves systematic method of problem solving and
decision-making that encompasses a logical mathematical
approach to problem solving.

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Scarce resources need not be wasted

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OR is a branch of applied mathematics that uses different

techniques to arrive at optimal solutions to solve complex
problems.
It is typically concerned with determining the maximum profit,
sale, output, crops yield and efficiency
And minimum losses, risks, cost, and time of some objective
function.
It is an important for different professions.

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Operations Research is the use of mathematical

models in providing guidelines to managers for
making effective decisions

Analysis for Effective

Modeling
Optimal Solution Decisions

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Business Use of OR

Some application areas of OR:

• Product mix optimization problems
• Blending Problems
• Production scheduling problems
• Transportation problems
• Assignment Problem
• Inventory problems
• Project scheduling problems

EXAMPLES
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Cont’d....
5.1.4 The contingency approach
Contingency approach has been developed mainly in the 1970s .
It is built on the major premises of the system theory that
organizations are organic and open systems, a relationship of
interdependence between an organization
and its environment as well as within and between its
subsystems.
The contingency theorists aim at integrating theory with practice
in a systems framework.

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Cont’d...
A contingency is an approach where the behavior of one subunit is
dependent on its environmental relationships to other units or,
Sub-units that have some control over the consequences desired
by the sub-unit
If a manager wants to change the behavior of any part of the
organization, he or she must attempt to change that part of its
environment that is influencing it.
Contingency approach emphasizes that there is no one best way
to design organizations and manage them

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Cont’d...
⚫Management is situational, and managers should design
organizations, define objectives, and formulate strategies,

policies and plans in accordance with the prevailing

environmental conditions.
⚫Thus, contingency theory provides a method of analysis as well
as a way of integrating organizations with its environment.

⚫The contingency view has become more relevant and prominent

because of the following factors :
⚫Increased globalization of enterprise and the need for more
government business alliance to compete internationally

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Cont’d....
⚫Demands for ethical and socially responsive leadership
⚫Changing demographics and skill requirements of the
workforce
⚫The emergence of new organizational structures that emphasize
speed in reacting to environmental changes and
⚫Changing needs, preferences and desires of employees for job
security, participation, ownership, and fulfillment.

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THE END!

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