Pros and Cons of the Neoclassical Theory of Management

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The neoclassical theory of management attempted to integrate behavioral science, psychology and sociology into the study of business management. It shifted the focus of management theory from the organization as a whole to the individual employee. Instead of examining the technological and structural components of management, the founders and students of neoclassical theory concentrated their efforts on determining the most effective methods to motivate and support employees.

Treats Workers As Humans

  • A major advantage of the neoclassical theory over the classical model is that the former school viewed workers as emotional beings, rather than as functional components that serve the organization. Students of the neoclassical theory believe that if employers gain a better understanding of their employees' needs and adjust their organizational structures to those needs, the organization will achieve greater success.

Democratic and Informal

  • The neoclassical theory also stresses a democratic and informal relationship between employer and employee. In one of the major studies conducted on neoclassical theory methods during the 1920s, employees at Western Electric's Hawthorne Works factory were monitored to see how their productivity fluctuated with changes in working conditions. The study found that workers developed strong personal bonds with one another and their managers as they learned how to work together under the new conditions.

Group Conflict

  • A noticeable drawback of neoclassical theory lies in its inherent optimism in the ability of workers and management to cooperate when management treats workers as peers. In the real world, conflicts arise between employees and managers, or among employees and their co-workers, on subjects ranging from compensation to job duties to organizational goals. Neoclassical theory lacks the structure to address these conflicts and assumes that both sides will unite to achieve the company's objectives.

Impact on Productivity

  • Although the Hawthorne Works study proposed the idea that neoclassical methods and an increased focus on the employee would increase productivity, later scientists disputed these findings. While most casual observers believe that happier employees are often more productive, the same conditions that lead to group conflicts can also contribute to decreases in productivity. An employee-focused approach also makes it more difficult for management to remove problematic employees or to resolve recurring employee problems.

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