Famous Management Theories

Vrooms Expectancy Theory deals with motivation & management. It is based on following three
beliefs:
o Valence (it refers to the emotional orientations people hold with respect of outcomes). Mgmt
must discover what employee value
o Expectancy (employee has different expectations & levels of confidence about what they are
capable of doing). Mgmt must discover what resources, training, or supervision employee
need.
o Instrumentality (the perception of employees whether they are capable of doing). Mgmt
must ensure that promises of rewards are fulfilled & that employees are aware of that.

McGregor Douglas Theory X Theory Y:

o Theory: X Assumptions:
Humans inherently dislike working & will try to avoid it if they can
Because people dislike work they have to be coerced or controlled by mgmt
Average employee wants to be directed
People dont like responsibility
Average humans need security at work
o Theory: Y Assumptions:
People view work as being as natural as play & rest
Provided people are motivated, they will be self directing to the aims of the
organization. Control & punishment are not the only mechanisms to make people
work
Job satisfaction is key to engaging employees and ensuring their commitments
People learn to accept & seek responsibility
People are imaginative & creative. Their ingenuity should be used to solve problems
at work

William Ouchi Theory-Z:

o Long-term employment collective decision making individual responsibility slow
evaluation & promotion informal control moderate specialized career paths - & a holistic
concern for the employee, including employees family etc. effect people performance at work

Management by Objectives (MBO): Peter Drucker

According to Peter Drucker, managers should avoid the activity trap, getting so involved in their
day-to-day activities that they forget their main purpose or objective. All the employees should be
encouraged to participate in the strategic planning process, and setting goals in order to successfully
implement project plans
MBO principles are:
o Cascading of organizational goals and objectives
o Specific objectives for each member
o Participative decision making
o Explicit time period, and
o Performance evaluation and feedback

MBO also introduced the SMART method:

o Specific
o Measurable
o Achievable
o Realistic
o Time-method
Benchmarking methods (based on Kaizen)

Benchmarking method is used for professionalizing the organization / processes. It is a systematic

comparison of organizational process and performance to create new standards or improve processes.

There are four types of Benchmarking methods:

o Internal between business units, and departments
o Competitive between competitors
o Functional between similar processes within industry
o Generic between unrelated industries
Typically benchmarking involve following steps:
o Scope defining
o Choose benchmarking partners
o Determine measurement methods, units, indicators & data collection methods
o Data collection
o Analysis of discrepancies
o Present the results and discuss implications / improvement areas or goals
o Make improvement plans or new procedures
o Monitor progress and plan ongoing benchmark

Brainstorming method
Brainstorm method is a semi-structured creative group activity, used most often in ad-hoc business
meetings to come up with new ideas for innovation or improvement. The idea behind it is that a group
of people can achieve a higher (synergy) level of creativity than a sum of the participants separately.
Rules for conducting brainstorming:
o Participants should be encouraged to come up with new ideas, however wide they are
o No judgment should be passed on any idea until the end of the session, whether negative or
positive; and
o Participants should be encouraged to build on each others ideas, creating unlike combinations
and taking each one in unequal directions
Brainstormings are most effective to generate lot of ideas in a short timeframe.

Maslows Hierarchy of Needs:

o Physiological needs: These are very basic needs such as; air, water, food, sleep, etc. When
these are not met we fee sickness, irritation, pain, discomfort etc. These feelings motivate us
to alleviate them as soon as possible.
o Safety needs: These have to do with establishing stability & consistency in a chaotic world.
o Love & belongingness needs: Human has a desire to belong to groups such as, work-groups,
clubs, religious groups, family, etc.
o Self esteem level needs: (level-1: Physiological needs, Level-2: Safety needs, Level-3:
Belonging need, Level-4: Self-esteem need, & Level-5: Self-actualization need)
There are two types of esteem needs:
First is self-esteem which results from competency or mastery of tasks
Second, theres the attention & recognition that comes from others. This is similar to
the belongingness level of need hierarchy; however, wanting admiration has to do
with the need for power.

Frederick Herzberg Two Factor Theory and KITA:

People are influenced by two factors.
o

Motivation factors: Satisfaction and psychological growth is a motivation factors. These

factors include:
Achievement
Recognition for achievement
Responsibility for task
Interest in the job
Advancement to higher level tasks
Growth

Hygiene factors: Dissatisfaction is the result of hygiene factors. These factors include:
Working conditions
Quality of supervision
Salary
Status
Security
Company
Job
Company policies and administration
Interpersonal relationship

o
o
o
o

High hygiene + high motivation: Employee satisfied & motivated (Ideal situation)
High hygiene + low motivation: Employees have less complaints, but not motivated.
Low hygiene + high motivation: Employees have high complaints, though motivated.
Low hygiene + low motivation: worst situation

Theory of Constraints (TOC) (Eliyahu Goldratt)

The essence of the TOC approach is that if you want more of a goal, you must:
o Identify your constraints
o Focus on the constraints (A company must first know its goal and necessary conditions for
achievement. Then it must clarify constraint(s), that is/are limiting the level of achievement of
that goal)
o Follow it through.

Root Cause Analysis (RCA):

RCA is a structured step-by-step technique that focuses on finding the real cause of a problem and
dealing with that, rather than continuing to deal with symptoms?
Goal of RCA is to find out:
o What happened
o Why it happened
o What can be done to prevent it from happening again
Root cause is one of most basic, or fundamental causes of the condition that we are concerned
with. Since conditions are usually affected by many causes (physical conditions, human behavior,
behavior of system or processes), several root causes are generally found.

Contingency theory: (Fred Fiedler, Heresy & Blanchard, Vroom & Yetton)
Contingency theory is similar to situation theory in that there is no simple one right way or best way of
organizing/leading. An organizational/leadership style that is effective in some situations may not be
successful in others. It shall depend upon many constraints. Four import ideas of Contingency Theory
are:
o
o
o
o

There is no universal or one best way to manage

The design of an organizations & its subsystems must fit with the environment
Effective organizations not only have a proper fit with the environment but also between the
subsystems, &
The needs of an organization are better satisfied when it is properly designed and the
management style is appropriate both to the tasks undertaken and the nature of work group.

Normative decision theory:

According to the model, the effectiveness of decision depends upon a number of aspects of the
situation:
o The importance of the decision quality
o The amount of decision acceptance
o The amount of relevant information processed
o The likelihood that subordinates will accept an autocratic decision
o The likelihood that subordinates will cooperate in trying to make good decision if allowed to
participate
o The amount of disagreement among subordinates with respect to their preferred alternatives

Result-Based leadership theory by Dave Ulrich, Jack Zenger, Norman Smallwood

The theory states that it is a mistake to focus on leadership attributes that managers bring to the office,
such as analytical thinking, working with ambiguity, and personal integrity. Rather, effective leaders
know how to connect these leadership attributes with the leadership results.
o Effective leadership = Attributes x Results
Ulrich offers four criteria for judging whether managers are indeed focused on achieving results:
o Balanced results balance the major dimensions of the organization (employees, customers,
investors) ignoring no one.
o Strategic results link strong to the strategy of the firms and its competitive position,
o Lasting results meet both short-term and not sacrificing long-term goals
o Selfless results support the whole enterprise and transcend the managers personal gain
Executives should actually deliver results for employees, organization, customers, and investors.

Kaizen method: (K means literally change (kai) to become good (Zen))

The Kaizen method of continuous incremental improvements is an original Japanese management
concept. Kaizen philosophy lies behind many Japanese management concepts; such as Total
Quality Control, Quality Control Circles etc. key elements of Kaizen are quality, effort, and
involvement of all employees, willingness to change, and communication.
The foundation of the Kaizen method consists of 5 elements:
o Teamwork

o
o
o
o

Personal discipline
Improved morale
Quality circles, &
Suggestions for improvement

Out of this 3-key factors in K arise:

o Elimination of waste and inefficiency
o Good housekeeping and discipline
o Standardization

Total Quality Management (TQM) 14-points of management: (Edward Deming)

The 14-points of management are:
o Create constancy of purpose for improvement of product and services
o Adopt the new philosophy (regulations representing obstacles must be removed by
organizations)
o Cease dependence on mass inspection (quality must be designed and built into the process,
preventing defects rather than attempting to detect and fix them after they have occurred)
o End the practice of awarding business on the basis of price tags alone
o Improve constantly and forever the system of production and service
o Institute training (at all levels)
o Adopt and institute leadership (managers should lead, not supervise)
o Drive out fear (to encourage people express ideas and ask questions)
o Break down barriers between staff areas (encourage team work)
o Eliminate slogans, exhortations, and targets for the work force (problems with quality and
productivity are caused by the system, not individuals. Posters and slogans generate
frustration & resentment)
o Eliminate numerical quotas/targets (in order to meet targets, people will produce defective
products and reports)
o Remove barriers that rob people of pride of workmanship (individual performance
reviews are a great barrier to pride of achievement)
o Encourage education and self improvement for everyone (continuous learning for
everyone)
o Take action to accomplish the transformation (commitment on the part of top management
and employees is required)

Business Process Re-engineering method (BPR): (Hammer and Champy)

Five-step approaches to the BPR model to redesign the organizational processes in order to achieve
drastic improvement of current performances in cost, service, and speed are:
o Develop the business vision and process objectives
o Identify the business processes to be redesigned
o Understand and measure the existing processes
o Identify IT levers
o Design and build a prototype of the new processes

The Balanced Scorecard Framework: (Robert Kaplan, David Norton)

It is a strategic approach and performance management system that enables organizations to
translate a companys vision and strategy into implementation working from 4-perspectives:
o Financial perspective how should we appear to our stakeholders, to succeed financially
o Customer perspective how should we appear to our customers, to achieve our vision
o Business perspective what business processes must we excel, to satisfy our stakeholders &
customers
o Learning and growth perspective how will we sustain our ability to change and improve
to achieve our vision.

Earned Value Management (EVM):

EVM is an integrated program management technique that integrates total work (scope), technical
performance requirements (quality) and resource planning (cost), with schedule (time), while taking
risks into consideration.
All work (scope) is planned, budgeted, and scheduled in time-phased planned value (PV) increments
constituting a Performance Measurement Baseline.
o BAC = Budget At Completion of the total job
o PV = Work scheduled at budgeted cost or resource effort
o EV = Work performed at budgeted cost or resource effort
o AC = Work performed at actual cost or actual resource effort
o Schedule Variance (SV) = EV PV
o Cost Variance (CV) = EV AC
o Schedule Performance Index (SPI) = EV/PV
o Cost Performance Index (CPI) = EV/AC (Resource Utilization Index)
o ETC = Estimate to Complete the balance job
o EAC = Estimate to Complete the total job
o VAC = Variance at Completion
= BAC EAC

3Cs framework of Kenichi Ohmae stresses that a strategist should focuses on following three key
factors for success
o The corporation itself
o The customer, and
o The competition

McKinsey 7-S model: is a value-based management (VBS) that describes how one can holistically &
effectively organize a company. Together these following factors determine the way in which a
corporate operates:
o Shared value (what does an organization stands for and what it believes in. Central beliefs
and attitudes)
o Strategy (plans for the allocation of a firms scarce resources, over time, to reach identified
goals, Environment, competition, customers)
o Structure (organizational structure functional, matrix, or projectized)
o System (the procedures, processes and routines that characterize how important work is to be
done: financial systems, recruitment systems, promotion and performance appraisal systems,
information systems)
o Staff (number and types of personnel within the organization)
o Style (cultural style of the organization and how key managers behave in achieving the
organizations goals)
o Skill (distinctive capabilities of personnel or the organizational as a whole)

Seven Surprises for CEOs: (by Michael Porter, Jay Lorsch, and Natin Nohira)

Following seven surprises are most common for new CEO

o You cant run the company if you focus on daily operations
o Giving orders is very costly your position does not confer the right to lead, but to be
involved in defining organization strategies.
o It is hard to know what is really going on
o You are always sending message
o You are not the boss, to provide services/support
o Pleasing shareholders is not the goal. You need to manage stakeholders expectations
o You are still only human

Corporate Reputation Quotient: Harris-Fombrun model

The business reputation model has the following 6 drivers of corporate reputation with subsequent
20 attributes:
o

Emotional Appeal
Good feeling about the company
Admire and respect the company
Trust the company
Products and Services
Stands behind products/services
Offers high quality products/services
Develops innovative products/services
Offers products/services that are good value
Vision and Leadership
Has excellent leadership
Has a clear vision for the future
Recognizes/takes advantage of market opportunities
Workplace Environment
Is well managed
Looks like a good company to work for
Look like it has good employees
Financial Performance
Record of profitability
Looks like a low risk investment
Strong prospective for future growth
Tends to outperform its competitors
Social Responsibility
Supports good causes
Environmentally responsible
Treats people well