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Neoclassical Theory of Management

Neoclassical theory of Management


The Neoclassical Theory grew with the Hawthorne studies in the 1920s. It was the result of the limitations of classical theory. In Classical Theory, the main motive was focused on productivity and to achieve targets. But soon after workers resisted this approach as it did not provide social and job satisfaction.

Then few thinkers’ attention shifted towards the human side of management. George Elton Mayo (1890- 1949) is considered to be the father of Neoclassical theory. He conducted the famous Hawthorne Experiments at the Western Electric Company (USA) during 1927-1932. These three elements of the neoclassical theory of management are Hawthorne Experiment, Human Relation Movement, and Organizational Behavior.

Neoclassical Theory

Elements of Neoclassical Theory

Hawthorne Experiments

The Hawthorne studies were a chain of experiments conducted at the Western Electric Company (USA) between 1927 and 1932. This study provided new perceptions of individual and group behavior. The research was conducted by Elton Mayo, which was sponsored by General Electric. The study’s main aim was to focus on human behavior in the workplace.

 In one experiment researchers observed and came to the conclusion that productivity rate changed because of changes in the working environment. The Hawthorne studies and experiments changed perceptions of scientists and they declared that the human element is very important in the workplace.

The Hawthorne experiments were divided into four stages: Illumination experiments, Relay assembly test room experiments, Mass interviewing program, Bank wiring observation room study.

Human relation movement

After the results of Hawthorne Experiments, several theorists conducted research in the field of interpersonal and social relations among the co workers of a particular organization. Interpersonal and social relations are part of human relations.

 The human relation movement advocated that workers responded to the social context of the workplace that included social conditioning, group norms, and interpersonal dynamics. . A series of studies done by Abraham H. Maslow, Douglas Mc Gregor, Frederick Herzberg, Keth Davis, Rensis Likert, and others led human relation movement.

Organizational behavior

Psychologists and sociologists studied group dynamics. Chris Argyris, Homans Kurt Lewin, R.L. Katz, and others developed a new field called Organizational Behavior. This study focused on human attitudes, behavior and performance of individuals and groups in an organization.

This approach is known as the Behavioral Approach. It is an extended version of the human relations movement. It deals with the multidimensional and interdisciplinary application of knowledge drawn from behavioral sciences.  


Assessment of Neoclassical Theory

 The neoclassical theory has made everybody understand the importance of human behavior at work, in an organization. It created awareness among people of the importance of the human factors in the organization. This approach gave a topic to think about different ideas and techniques for a better understanding of human behavior.

 Supporters and Thinkers of this approach recognize an organization as a social system, where sentiments, culture, participation, leadership, motivation, etc constitute the core of the neoclassical theory. This approach changed the view that employees are tools like machines and strengthened the belief that employees are valuable resources.

Classical Theory’s main focus is on productivity and target but neoclassical Theory emphasizes increasing production through an understanding of people. According to thinkers of this theory, if managers understand their workers and keep them happy, then automatically efficiency of work will be increased and the organization will achieve success.


 Neoclassical Theory made has a crucial role in the advancement of management theories and practices. This approach is important as it understands human behavior and does not think of humans as tools or machines. It regards workers as an important element of the organization.

Neoclassical Theory advocates awareness among workers, that they are an important element and cannot be exploited. Management’s views changed regarding their workers.  Production depends on the efficiency of workers and so their needs are to be taken care of by management.

Classical Theory came to an end after the Neoclassical Theory came into existence. Neoclassical Theory became popular as it gave importance to human values and human relations. It gave stressed on human behavior and relations as both of them are important for working efficiently in an organization and to achieve success.


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