1. Sensitivity: Confidential
MODERN MANAGEMENT
THEORY- SYSTEMS THEORY
PRESENTED BY: NITU NATHANI & REKHA.M

2. Sensitivity: Confidential
MODERN MANAGEMENT THEORY (1960-TILL PRESENT)
• THE CLASSICAL THEORY GAVE IMPORTANCE ON ECONOMIC NEEDS AND MACHINES
AND THE NEO-CLASSICAL THEORY GAVE MORE IMPORTANCE ON THE SOCIAL NEEDS OF
THE EMPLOYEES THAN THE MACHINES AND PRODUCTIVITY.
• BOTH OF THESE THEORIES WHERE FOCUSING ONLY ON ONE SIDE OF FACTORS OF
STUDY THAT IS EITHER ON PRODUCTIVITY AND MACHINES AND ANOTHER WAS PURELY
ON HUMANISTIC APPROACH. SO DUE TO LACK IN THE FIRST TWO THEORIES THE
MODERN THEORY OF MANAGEMENT CAME FORTH, AS THE MODERN MANAGEMENT
FOCUSED TO GIVING EQUAL IMPORTANCE FOR BOTH MEN AND MACHINE WHICH
FOCUSED ON EACH AND EVERY ASPECT OF ORGANIZATION AS WELL AS THE WORKERS
• THE MODERN THEORY OF MANAGEMENT CAME FORTH WITH CERTAIN THEORIES LIKE
QUANTITATIVE THEORY, SYSTEMS THEORY, CONTINGENCY THEORY AMONG WHICH
THE SYSTEMS THEORY AND CONTINGENCY THEORIES ARE FAMOUS.

3. Sensitivity: Confidential
SYSTEMS THEORY
• IN TODAY’S PRESENTATION, OUR CENTER OF FOCUS IS SYSTEMS THEORY.
• SYSTEMS THEORY REFERS TO THE INTERDISCIPLINARY THEORY WHICH HELPS TO UNDERSTAND OR
KNOW THE SYSTEM OF A NATURE OR SOCIETY FROM WHICH ONE CAN INVESTIGATE AND DESCRIBE THE
RESULT PRODUCED BY ANY GROUP OF OBJECTS THAT WORK TOGETHER.
• SYSTEMS APPROACH CONSIDERS THE ORGANIZATION AS A SYSTEM THAT TRANSFORMS INPUTS INTO
OUTPUTS WITH A CONSTANT INTERACTION WITH ENVIRONMENT, AND IT IS BASED ON THE ASSUMPTION
THAT EVERYTHING IS INTER-RELATED AND INTER-DEPENDENT BECAUSE THE ORGANIZATIONS ARE
ALWAYS INTER-DEPENDENT ON VARIOUS FACTORS SUCH AS EMPLOYEES, ENVIRONMENT, GOVERNMENT,
SHAREHOLDERS, CUSTOMERS, SUPPLIERS, CULTURE, MARKET CONDITIONS AND LAWS
• THE SYSTEMS THEORY VIEWED THE ORGANIZATION AS AN OPEN SYSTEM WHICH IS COMPOSED OF
INTERACTING AND INTERDEPENDENT PARTS CALLED SUBSYSTEMS. IT IS BASED ON THE
GENERALIZATION THAT EVERYTHING IS INTER-RELATED AND INTER-DEPENDENT BECAUSE IT IS
BELIEVED THAT A SYSTEM DOES NOT EXIST BY ITSELF BUT IT RECEIVES INFORMATION, MATERIAL AS
INPUTS FROM OTHER SYSTEMS
• THESE INPUTS UNDERGO A TRANSFORMATION PROCESS WITHIN THE SYSTEM AND LEAVE THE SYSTEM
AS OUTPUT TO OTHER SYSTEMS

4. Sensitivity: Confidential
SAILING AWAY: THE INFLUENCES ON AND MOTIVATIONS OF GEORGE CASPER
HOMANS- JEFFREY MULDOON, ERIC.W, JOSHUA BENDICKSON.
AND
SOCIAL BEHAVIOR AS EXCHANGE: GEORGE.C.HOMANS

5. Sensitivity: Confidential
• IN THIS RESEARCH PAPER JEFFREY MULDOON BRINGS OUT THAT HOMAN’S JOURNEY INTO THEORIZING HIS
EARLY CAREER, PERSONAL BACKGROUND AND SOCIAL CAPITAL INTERACTED WITH SEVERAL FACTORS BEYOND
HIS CONTROL WHICH LED TO HIS INTEREST IN SOCIAL EXCHANGE PROCESSES.
• SOCIAL EXCHANGE THEORY
• GEORGE CASPAR HOMANS: HOMANS IS CONSIDERED AS THE FATHER OF SOCIAL EXCHANGE THEORY.
• HOMANS SOCIAL EXCHANGE THEORY SAYS THAT PEOPLE ARE CONSTANTLY DETERMINING PERSONAL BENEFIT
FROM ACTIONS I,E WE FORM RELATIONSHIP IF IT IS REWARDING OR PROFITABLE.
• HOMANS STATES THAT HUMAN RELATIONSHIPS ARE FORMED BY THE USE OF AN INTERNALIZED COST BENEFIT
ANALYSIS ON THE PART OF EACH INDIVIDUAL INVOLVED.
• ANY RELATIONSHIP IS SAID TO BE PROFITABLE WHEN THEY MAXIMIZE SOCIAL BENEFITS AND MINIMIZE COSTS,
SO IT CAN BE SAID AS PROFIT= BENEFIT – COST
WHERE BENEFIT IS WHAT I GET OUT OF IT, COST IS WHAT I PUT INTO IT AND PROFIT IS MY NET GAIN OUT OF IT.

6. Sensitivity: Confidential
• GEORGE CASPAR HOMANS(1910-1989): HOMANS IS CONSIDERED AS THE FATHER OF
SOCIAL EXCHANGE THEORY.
• HOMANS SOCIAL EXCHANGE THEORY SAYS THAT PEOPLE ARE CONSTANTLY
DETERMINING PERSONAL BENEFIT FROM ACTIONS I,E WE FORM RELATIONSHIP IF IT IS
REWARDING OR PROFITABLE.
• HOMANS STATES THAT HUMAN RELATIONSHIPS ARE FORMED BY THE USE OF AN
INTERNALIZED COST BENEFIT ANALYSIS ON THE PART OF EACH INDIVIDUAL
INVOLVED.
• ANY RELATIONSHIP IS SAID TO BE PROFITABLE WHEN THEY MAXIMIZE SOCIAL
BENEFITS AND MINIMIZE COSTS, SO IT CAN BE SAID AS PROFIT= BENEFIT – COST
WHERE BENEFIT IS WHAT I GET OUT OF IT, COST IS WHAT I PUT INTO IT AND PROFIT IS
MY NET GAIN OUT OF IT

7. Sensitivity: Confidential
HERBERT SIMON IN MANAGEMENT
JU – 11012020

8. Sensitivity: Confidential
PAPERS COVERED
• BROWN, R. (2004). CONSIDERATION OF THE ORIGIN OF HERBERT SIMON'S THEORY OF
“SATISFICING”(1933-1947). MANAGEMENT DECISION, 42(10), 1240-1256.
• KERR, G. (2011). WHAT SIMON SAID: THE IMPACT OF THE MAJOR MANAGEMENT WORKS
OF HERBERT SIMON. JOURNAL OF MANAGEMENT HISTORY, 17(4), 399-419.
• SIMON, H. A. (1979). RATIONAL DECISION MAKING IN BUSINESS ORGANIZATIONS. THE
AMERICAN ECONOMIC REVIEW, 69(4), 493-513.
• AUGIER, M. (2004). MARCH'ING TOWARDS “A BEHAVIORAL THEORY OF THE FIRM”
JAMES G. MARCH AND THE EARLY EVOLUTION OF BEHAVIORAL ORGANIZATION
THEORY. MANAGEMENT DECISION, 42(10), 1257-1268.

9. Sensitivity: Confidential
SIMON – THE ORIGIN OF “SATISFICING”
• ROOTED IN HIS UPBRINGING, EDUCATION AND WORLD VIEW
• SELECTION OF AN ALTERNATIVE THAT LEADS TO GREATEST ACCOMPLISHMENT
WITH LEAST EXPENDITURE. THUS RATIONALITY AS “PREFERRED BEHAVIOR”. A
CHOICE MADE.
• SIX KINDS OF ORGANIZATIONAL RATIONALITY
• POSITIVISTIC APPROACH TO ORGANIZATION AND EMBED VOLUNTARISM IN IT .
HE ADDS DISCUSSION OF ORGANISATIONS IN TERM OF ROLES – THE CULTURAL
VALUE.
• ALTERNATIVE ARE EVALUATED SEQUENTIALLY UNLIKE THE “ECONOMIC MAN”
WHO EVALUATE ALL ALTERNATIVES

10. Sensitivity: Confidential
SIMON, 1979 – DECISION THEORY IN
ECONOMICS
• NOBLE PRIZE LECTURE.
• BOUNDED RATIONALITY – A DEPARTURE FROM THE “RATIONALITY” IN ECONOMICS
• ECONOMICS IS CLOSELY CONNECTED WITH THE ATTAINMENT AND WITH THE USE OF
MATERIAL REQUISITES OF WELLBEING.
• PROBLEMS OF ALLOCATION IN THE FACE OF SCARCITY = OPTIMISATION OF RESOURCES
• THREE MAIN CONCERNS : FULL EMPLOYMENT OF RESOURCES, EFFICIENT ALLOCATION OF
RESOURCES AND EQUITABLE DISTRIBUTION OF ECONOMIC PRODUCT.
• DECISION THEORY => BOUNDEDLY RATIONAL HUMAN BEINGS
• MAXIMIZING VS SATISFICING

11. Sensitivity: Confidential
SIMON 1979, CONTD..
• THE FIRM AND THE ENTREPRENEUR.
• MICROSCOPIC LEVEL OF DECISION MAKING BY AGENTS OR AGGREGATIVE PHENOMENA
OF CONCERN TO POLITICAL ECONOMY.
• WEAK CLASSICAL THEORY SEEN IN FOLLOWING :-
• DEMAND CURVES HAVE NEGATIVE SLOPES
• FIRST DEGREE HOMOGENEITY OF PRODUCTION FUNCTIONS
• THE LONG RUN COST CURVE
• SALARY OF EXECUTIVES GROW WITH THE LOG (CORPORATE SIZE)
• DECISION MAKING UNDER UNCERTAINTY AND IMPERFECT COMPETITION.

12. Sensitivity: Confidential
SIMON – CONTRIBUTIONS AT A GLANCE
• MOST CITED PAPER- SIMON 1955
• RUBRICS EMERGED FROM “ADMINISTRATIVE BEHAVIOR” :
• ORGANISATIONAL LEARNING AND KNOWLEDGE
• SOCIOLOGY OF ECONOMIC ACTIVITY
• TRANSACTION COST ECONOMICS(TCE)
• ORGANIZATIONAL CO-ORDINATION AND DECISION MAKING
• INFLUENCE OF “ORGANIZATIONS”:
• ORGANISATIONAL LEARNING AND KNOWLEDGE BASED VIEW OF FIRM
• INSTITUTIONAL THEORY
• TCE
• ORGANISATIONAL DESIGN
• ORGANISATIONAL CO-ORDINATION AND DECISION MAKING
• THE EMPLOYEE-ORGANIZATION RELATIONSHIPS

13. Sensitivity: Confidential
SIMON IN PUBLICATIONS
• TWO MAJOR MANAGEMENT TITLES:
• ADMINISTRATIVE BEHAVIOR
• ORGANIZATIONS
• AUTHOR OF 20 BOOKS AND A HUNDRED OF ARTICLES OVER A 60 YEAR CAREER.
• POLYMATH- COMPUTER SCIENCE SCIENCES, PSYCHOLOGY, ECONOMICS,
POLITICAL SCIENCE, MANAGEMENT.
• MORE THAN THOUSAND CITATIONS FOR HIS AUTHORED PAPERS

14. Sensitivity: Confidential
MARCH AND SIMON
• MARCH’S FORMAL EDUCATION WAS IN POLITICAL SCIENCE, AS WAS THE EDUCATION OF
HERBERT A. SIMON.
• MARCH’S CENTRAL RESEARCH QUESTION WAS IN MANY WAYS THE SAME AS THE ONES
THAT GUIDED SIMON AND CYERT: “WHAT IS THE PROPER WAY TO UNDERSTAND
HUMAN ACTION AND DECISION MAKING?”, AND, MORE SPECIfiCALLY, “HOW CAN
THEORIES RATIONALITY AND INTELLIGENCE BE ALIGNED WITH THE FACTS OF THE
WORLD?”.
• THE MOST CONSISTENT THEME IN MARCH’S WORK, IS THE STUDY OF ORGANIZATIONS.
• CARNEGIE SCHOOL. MARCH WORKED MOSTLY ON ORGANIZATIONS (MARCH AND
SIMON, 1958, 1993), THE BEHAVIORAL THEORY OF THE fiRM ( MARCH & CYERT).
• ACCOMMODATING BEHAVIOR OF BOUNDEDLY RATIONAL AGENTS.