[Commerce Class Notes] on Management as an Art, Science and Profession Pdf for Exam

Have you ever heard people around talking about other people’s managerial skills or admired someone as a Management Professional? So is Management an Art, Science or a Profession? To your surprise, it can take up any role depending on its area of application. ’s subject matter experts in commerce have brought this write-up to explain to you precisely this. 

 

The thought regarding ‘is Management an Art or Science’ has always been conflicting. Therefore, students must understand how Management can be an Art, Profession, or Science depending upon its relevant features. 

 

Management as Science

To qualify as a Science, Management needs to stand true to various criteria which make any field scientific. Below are qualities of Management that prove that it is a type of Science.   

Scientific principles are universally accepted principles and can be applied across all situations, locations, and times. For example, Newton’s law of motion applies to every object in motion irrespective of its location and state. Similarly, Management as well comprises specific fundamental principles that are accepted worldwide. For instance, the principle of unity of command applies to all organizations, large and small.

 

In Science, every cause results in an effect. This phenomenon is known as causality. To put it simply, every event occurs due to reason. For instance, rusting of iron is due to the reaction between iron and oxygen in the presence of water molecules. Similarly, Management follows the same rule. Every action has consequences, like if employees aren’t treated well, then productivity will degrade. Conversely, an organization can attain increased productivity if the workers are given a bonus and satisfactory remuneration.

 

Science is all about facts and logic and deduces results through experimentation and observation. The principles of Management have been formed along the same lines. For instance, equal work opportunities and fair remuneration for the work are known to improve one’s productivity at work. This idea was derived through scientific observation.

 

Every scientific principle and law is tested for validity and can be verified at any given point in time, and it shall provide a similar result each time. Likewise, one can test the principles of Management and expect the same results every time. Consider two companies A and B. Let’s say, company A has one boss who administers that company’s operations, whereas company B has two bosses and they both try to manage the organization as per their judgment. An experiment will show that company A performs better with one superior to direct all. 

 

Subsequently, the answer to the question ‘is Management an Art or Science’ is Science if not both. But in reality, Management can act as both. Here’s how that is possible. 

 

Management as an Art

To qualify as Art Management needs to adhere to some basic traits of Art. Such traits associated with Management are given below: 

Art is personalized, and the style of every Artist is different. Each Artist has a different perspective, style, and a different approach to a job. Likewise, one can successfully manage their organization only with their skills. Here, one’s approach to the tasks at hand will be different from another, and hence Management can be considered an Art. 

 

Every Artist is creative, and similarly, managers need to show creativity and innovation in the decisions they make for their business to stand out and gain a competitive edge. Hence, creativity and innovation in Management help managers take unique yet effective decisions.

 

Art supports and believes the importance of theoretical knowledge and hence most of the Art classes, whether it is music, painting, or dance also carry theoretical papers for students to study. And evidently, practical knowledge forms the basis of Art. In Management, the significance of theoretical and practical knowledge is not new. With a theoretical understanding of Management principles and their subsequent practice, managers can perform better in managing their organizational goals.

 

An Artist becomes seasoned with years of practice and dedication towards their work. Management as Art speaks the same terms. Managers have to go through this trial and error method before they can become seasoned managers who can make appropriate decisions.

 

An Artist never works on their piece of Art without any goals in mind; goals make them more focused and act accordingly for its fulfillment. The same holds for Management. A manager must set objectives and work towards achieving them to become proficient in their endeavor. 

 

From the above speculations, it can be derived that Management as an Art and Science is a plausible claim. 

 

Multiple Choice Questions 

1. Choose the appropriate option concerning Management, it is 

  1. Art, Science, math

  2. Art, Science, Profession

  3. Art, social Science, and Profession

  4. Art, Science, and commerce

Answer: b

 

2. Management can be termed as a creative as well as a ___________ process. 

  1. Continuous 

  2. Democratic 

  3. Technical 

  4. None of the above 

Answer: a 

 

3. At which level of organization Management exists?

  1. Top 

  2. Middle 

  3. Lower 

  4. All of the above 

Answer: d

 

4. Principles of Management are made by 

  1. Rule of thumb 

  2. Customer experience 

  3. Observation and experimentation 

  4. Laboratory experiments 

Answer: c

 

Management as a Profession

Management can be carried off as a Profession by individuals who have gained proper education and graduated the relevant tests. Students are taught essential concepts of Management and need to pass pArticular exams so that they can work as a manager in future. They also need to qualify for an entrance examination to get enrolled in an institution for an educational degree. 

 

Further, they can work as Professionals and manage various activities in an organization. With the learnt principles of Management, they put their knowledge to a test and use various tried and tested methods and innovative ways to achieve effective Management.

 

Management as an Art, Science, and Profession can help businesses achieve their goals effectively. And hence, students need to acquire in-depth knowledge of the topic to improve their academic performance. 

 

Students can go through the Management Science notes and acquire a profound knowledge of the subject. They will also be able to use this theoretical knowledge later to gain experience in the field. For other such topics, students can access the study materials available at ’s app and website.

Conclusion

Reading this Article on Management as an Art, Science and Profession, MCQs and FAQs complete your introduction to the field of Management. Management is something that is not just restricted to the domain of academics, but it can stretch further into our daily and Professional lives as well.

It teaches you that unlike the popular belief that goes around Management is not just a Profession but is also an Art and Science. It is an extremely practical field of work knowledge of which would be incomplete only with theoretical knowledge. 

Reading this essay prepared by ‘s subject matter experts will not just help you score excellent marks in your board exams but also during higher studies that you will pursue in the future. You may refer to other ’s websites to gain more knowledge on other topics of commerce.  

[Commerce Class Notes] on Meaning, Calculation of Average Due Date Pdf for Exam

Average Due Date Formula

Talking about the current scenario of businesses, there are a great number of payments and receipts that get involved even if it is related to just one party. And all these may or may not occur at the same point of time. For simplifying the interest calculations that are involved in these transactions, methods like calculating the average due date come very handy. According to this concept, the person clears their dues on a specific date in such a way that neither the creditor nor the debtor suffers any kind of gain or loss by way of interests. This date is referred to as the average due date or ADD.

Meaning Calculation of Average Due Date in Various Situations

Average due date is usually used in situations as mentioned below.

  1. To calculate the interest of the drawings of partners.

  2. To settle accounts between agent and principle.

  3. To settle contra accounts wherein parties sell product to one another.

  4. To make a lump sum payment against several bills that are drawn on varying dates with different due dates.

Average Due Date= Base date ± [frac{text{Total of the Products}}{text{Total of the Amounts}}]

Case 1: When Just one Party is Involved

According to this Method, the Average due date is Calculated in the Following Manner.

1. The first due date is taken as the starting day or O day or base date.

2. The number of days from the base date are counted up to every due date.

3. Then the number of days are multiplied by the amounts.

4. The amount and the products are then added.

5. The product total is divided by the amount total and the result obtained is approximated to a whole number.

6. The number of days are added to the base date for finding the average due date. Hence, the average due date formula is given by:

Average Due Date= Base Date ±  [frac{text{Total of the Products}}{text{Total of the Amounts}}]

Note: To calculate the number of days, the number of days in every respective month involved are individually considered.

Case 2: When there are Inter-Transactions Between Two Parties

Under this case there is an involvement of more than one party. Here, the first party purchases from a party and sells it to the other. An example of this is Raymond Clothes and Cello Co. Raymond Clothes sells its clothes to Cello for the use of their employees and in return buys pens from them. In this case, they pay the net amount and not the gross amount. Hence, net amount, which is the difference of the amounts is taken into consideration and the earliest date taken for both the parties is the base date.

Case 3: When the Amount is Paid in Instalments

Under this scenario, the amount is to be lent in a single lump sum and the repayment is done in several installments. The steps given below are followed in this case.

  1. The number of days from the lending date to the date of every payment are calculated.

  2. The total number of these days or months or years are calculated.

  3. The quotient would be the total number of days by which the average due date tends to fall away from the loan commencement date.

  4. In case the installments are the same, simple mean concept is used wherein the days are divided by the total number of products.

Formula:

[text{Average Due Date = Date of Loan } pm frac{text{Sum of days/Months/Years From the Lending Date to the Installment Repayment}}{text{Total Number of Installments}}]

Case 4: To Calculate the Average due Date to Calculate Interest on the Drawings

When there are drawings, the owner tends to draw the amounts from the businesses of different dates but can settle them on a single date. If different amounts are due on various dates but settled on a single date, the interest gets calculated with the help of the average due date method. 

Solved Example

Example:

Determine the Average Due Date from the Following Amounts.

Amount

Due Date

1000

1600

2000

3rd April

2nd July

11th September

Solution:

Considering that 3rd April is the starting day, a table is prepared as follows:

Due Dates

Amount

No. of Days from 3rd July

Products

3rd April

1000

0

0

2nd July

1600

90

144000

11th September

2000

161

322000

4600

466000

[Commerce Class Notes] on Meaning And Importance Of Business Correspondence Pdf for Exam

Whenever the topic of business correspondence surfaces, the most important question is what is business correspondence. The meaning of correspondence is a letter. Anyone associated with any business expresses themselves in terms of business correspondence. The importance of business correspondence is immense in any business. They can express their ideas, question or raise concerns about any aspect of the company through business correspondences. Business correspondences do not only refer to individual letters but also the letters exchanged between the companies or organizations. It can be a letter of complaint, an inquiry letter, a letter to any supplier, an application letter for jobs, etc.

 

Business Correspondence Letter

 

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Whenever we need to contact any person, we send them letters or texts. A similar approach is followed in businesses as well. Such a kind of communication in business is called business correspondence. Business correspondence can be defined as the means of expressing in terms of business. 

 

The letters written during such business transactions are called business correspondence letters. Such written documentation is required since no one can remember all the details of the business for the entire length of the business. Therefore, they prefer to write down the details, which is known as business correspondence. 

 

Why do we need a Business Correspondence Letter?

For the smooth running of any business, business correspondence is necessary. The utmost importance of business correspondence is that it eases reaching out and communication between different parties. For any business deal, meeting delegates in person might be a hectic task. Therefore, it is better to exchange correspondences in this regard.  Business correspondence meaning lies in helping and achieving the goal of the company. Some of the company goals achieved through business correspondences are:

Running a business is a tedious task. There are so many aspects of any business that the business owners hardly find any extra time to interact with the clients and the associated parties on a personal basis. In general, as a business grows, it is impossible to reach out to all the parties in person. Under such circumstances, it is necessary to communicate through business correspondence.  Such a means of communication in terms of business correspondences helps to strengthen the business relationship. Modern business correspondences like PDF can also be shared amongst the parties. Such activities improve internal communication and make them precise and clear. Maintaining a good relationship with all associated parties is considered the prime importance of business correspondence. 

Documentation of all important communications is necessary for keeping track of the growth of relations between different parties. It is important to maintain all these documents as proof of such communication so that the business owners can revert to them whenever needed as references. Moreover, such documents can be used to file lawsuits against those parties who will not act as per the terms and conditions allowed in the correspondences.

For any business to thrive, it is imperative to generate goodwill amongst the parties. Having every conversation in the record creates a professional impression that is appreciated by all parties. The company must accept all letters related to inquiries, complaints, suggestions and feedback related to the services of the company.  Such approaches by the company help to generate and maintain the goodwill of the company.

Business correspondences are considered to be the most convenient and cheapest form of business communication. It only requires an exchange of letters amongst the parties.

Any kind of business communication is considered between two parties. It can be between two business partners, the employer and the employee and the sellers and the buyers. The language used in these business correspondences, like the advanced business correspondence PDF, is logical, concise and formal. Such an approach helps to do away with any kind of ambiguity and is considered to be acceptable and followable by all parties. The precise nature of the letters outlines the importance of business correspondence.

Having formal correspondences related to the business ensures that the business can reach all its targets. Therefore, it allows the business to expand and set newer goals for them. Through such business correspondences, novel information about the market for any specific product can be obtained. Business correspondences can also be used to spread the news of business expansion.

 

Different Types of Business Correspondence

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There are different types of business correspondence letters. The types and functions of business correspondence include:

  • Internal Correspondence- The exchange of information in the form of correspondence between different individuals, departments, sectors or branches of the same company.

  • External Correspondence- It exists between two individuals but not from the same company. It can be between the producer and the suppliers, collaborators, etc.

  • Routine Correspondence- Business correspondences made routinely are called routine correspondences. These include order, inquiries, replies, acknowledgements, etc.

  • Sales Correspondence- It is related to the sales of the company. These include sale reports, sale letters, confirmation of orders, invoices, etc.

  • Personalized Correspondence- Such letters contain emotional inputs. Letter of recommendation, request, or congratulatory letters are examples of personalized correspondence.

  • Circular Correspondence- business correspondences that are issued in common for a large number of people are called circulars. These include notices, tenders, news, announcements, etc.

The first three types of business correspondence are major. More information on the business correspondence can be obtained through business correspondence and report writing PDF free download.

[Commerce Class Notes] on National Income – Measurement of National Income Pdf for Exam

National income refers to the monetary value over a period of time of the output flow of goods and services produced in an economy.

 The Uses of National Income Statistics

Measuring the level and rate of growth of national income (Y) is essential to keep track of:

  • The rate of economic growth

  • Changes to living standards

  • Changes to the distribution of income b/w groups

 

Gross Domestic Product

The total value of output in an economy is the Gross Domestic Product (GDP) and is used to measure economic activity changes. GDP encompasses the production of foreign-owned enterprises located in a country following the foreign direct investment.

 

There are three different ways to calculate GDP that should all add up to the same amount: The national output is equal to national expenditure (Aggregate demand) which in turn is equal to national income.

 

The equation for GDP using this approach is 

GDP = C(Household spending) + I(Capital investment spending) + G(Government spending) + (X(Exports of Goods and Services)-M(Imports of Goods and Services)

The three different ways to measure GDP are – Product Method, Income Method, and Expenditure Method.

 

These three calculating GDP methods yield the same result because National Product = National Income = National Expenditure.

 

  1. The Product Method:

In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and industrial real estate and property ownership of residential and commercial services and public administration and defence and other services (or government services). It is, in other words, the amount of the added gross value.

 

  1. The Income Method:

In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.

  1. Expenditure Method:

This approach focuses on products and services generated during one year within the region.

GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.

Thus GDP by expenditure method at market prices is net export, which can be positive or negative.

  1. GDP at Factor Cost:

GDP is the amount of net value added by all producers within the country at the cost factor. Since the net value added is allocated as revenue to the owners of production factors, the sum of domestic factor incomes and fixed capital consumption is GDP (or depreciation).

Thus, 

GDP at Factor Cost is equal to the sum of  Net value added and Depreciation.

GDP at factor cost includes –

Compensation of employees, i.e., wages, salaries, etc.

Operational surplus, which is both incorporated and unincorporated companies’ business profit. 

Mixed-Income of Self- employed.

 

Conceptually, GDP at the cost factor and GDP at the market price must be equivalent since the cost factor (payments to factors) of the products produced must be equal to the final value at market prices of the goods and services. The retail value of products and services, however, varies from the earnings of the output factors.

  1. Net Domestic Product (NDP):

The NDP is the value of the economy’s net production throughout the year. During the manufacturing process, some of the country’s capital equipment wears out or becomes redundant each year. A certain percentage of the gross expenditure removed from GDP is the amount of this capital consumption. 

Net Domestic Product = GDP at the expense of Factor – Depreciation

  1. Nominal and Real GDP:

It is referred to as GDP at current prices or nominal GDP when GDP is calculated based on the current price. On the other hand, if GDP is measured in a given year based on fixed costs, it is referred to as GDP at constant prices, or actual GDP.

Nominal GDP is the value of the goods and services produced in a year, calculated at the current market) prices in terms of rupees (money). 

Three Important Methods for Measuring National Income

There are three techniques to compute national income:

 

Income Method

National income is calculated using this method as a flow of factor incomes. Labor, capital, land, and entrepreneurship are the four main components of production. Labour is compensated with wages and salaries, money is compensated with interest, the land is compensated with rent, and entrepreneurship is compensated with profit.

 

Furthermore, certain self-employed individuals, such as doctors, lawyers, and accountants, use their own labour and capital. Their earnings are classified as mixed-income. NDP at factor costs is the total of all of these factor incomes.

National Income is calculated as a flow of income in this case.

NI can be calculated as follows:

 

Employee compensation + Operating surplus (w + R + P + I) + Net income + Net factor income from overseas = Net national income.

 

Where,

Wage stands for wage and salaries

R stands for rental income.

P stands for profit.

I stand for mixed-income.

 

Product/ Value Added Method

National income is calculated using this method as a flow of goods and services. During a year, we determine the monetary value of all final goods and services generated in an economy. The term “final goods” refers to goods that are consumed immediately rather than being employed in a subsequent manufacturing process.

Intermediate goods are goods that are used in the manufacturing process. Because the value of intermediate products is already included in the value of final goods, we do not count the value of intermediate goods in national income; otherwise, the value of goods would be double-counted.

To avoid duplicate counting, we can use the value-addition approach, which calculates value-addition (i.e., the value of the end good plus the value of the intermediate good) at each stage of production and then adds them together to get GDP.

The sum-total is the GDP at market prices since the money value is measured at market prices. The methods outlined before can be used to convert GDP at market price.

The flow of goods and services is used to calculate national income.

NI can be calculated as follows:

 

G.N.P. – COST OF CAPITAL – DEPRECIATION – INDIRECT TAXES = NATIONAL INCOME

Expenditure Method

National income is calculated using this method as a flow of expenditure. The gross domestic product (GDP) is the total of all private consumption expenditures. Government consumption expenditure, gross capital formation (public and private), and net exports are all factors to consider (Export-Import).

As said above, the flow of expenditure is used to calculate national income.

The Expenditure technique can be used to calculate NI as follows:

 

NationalIncome+NationalProduct+NationalExpenditure=National Income+National Product+National Expenditure=National Expenditure.

So, the ideas of National Income were thoroughly discussed above. Students who are preparing for various exams such as UPSC and SSC.

[Commerce Class Notes] on Monopoly Firm, Monopolistic Competition and Oligopoly Pdf for Exam

In the case of imperfect competition, a market structure is required, which comes in the form of monopoly and oligopoly. The sheer geographical size of the market can determine which structure exists. A particular company could control the industry in a specific area with no other alternatives, whereas other similar companies could choose to operate in other countries. This is the main difference between monopoly and oligopoly. Let us delve deeper into the three main market structures: monopoly, oligopoly, and monopolistic competition.

What is a Monopoly?

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Monopoly typically refers to a single company producing a product or providing service with no other substitute. This means that this company acts as a dominant force in its offerings. With enough power to ensure that other substituting establishments or institutions do not come close to their price points, services, and brand quality. Such companies stand as a force to reckon within the market structure. Monopolies usually exist to provide ultimate benefits to the consumer and often possess information that no other companies have.

What is Oligopoly?

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In such type of a market structure, a cluster of companies, which can range from two or more, control the demand in the market. This means that unlike in a monopoly, where only one company is the godfather, different establishments sell similar products to cater to the consumer in an oligopoly. The price points in such a market are often reasonable due to the competition, and the costings are often similar to the companies feed off of each others’ offerings to stay within that price range.  More often than not, companies tend to collude with their competitors instead of competing with them to ensure that an overall balance in the business remains.

Difference Between Monopoly and Oligopoly with Examples

Let us have a look at an example of monopoly oligopoly with relevant examples;

Example of Monopoly:

The country’s primary monopolies are government-run such as the Indian Railways (IR) – Lifeline of the nation. Due to the operation at minuscule economic scales, there is no room for another aspiring company to even begin to compete with IR. Not only that, additional restrictions issued by the government of India further prevent aspiring companies to even attempt to compete. This is a classic example of a monopoly.

Did you know? Your favourite fast-food chain McDonald’s is an example of a monopoly and the monopolistic competition in market structure.

Example of Oligopoly:

With a few powerful companies dominating smaller entrants, classic examples of oligopoly are airlines. Two of the top airlines, namely IndiGo and Air India, have taken over the airway world with their impeccable price points and services but offering similar benefits. They have the largest market shares and can often merge their services and prices to offer similar advantages for the consumers without wiping each other out, trying to outshine one another.

Did you know? Popular soda companies Coca-cola and Pepsi are examples of oligopoly.

Monopolistic Competition

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A market structure that combines the factors of monopoly, as well as other competitive markets, is termed as monopolistic competition. This type of market structure gives the freedom of entering as well as exiting at their convenience. This factor alone offers a malleable demand curve, allowing it to set its prices. However, this advantage can also lure more institutions to enter the market with the prospect of making higher profits. A few of the key features of monopolistic competition are:

  • The entry of several firms.

  • Complete freedom to enter and exit.

  • Different companies offer different products.

  • An inelastic demand resulting in curating comfortable price points.

  • Normal profits can be achieved in the long term goal.

  • Companies involved in such a market structure can be quite inefficient.

Some well-known monopolistic competition companies in India are ITC limited, Hindustan Unilever Ltd., and Procter and Gamble, among others.

In conclusion, the three market structures, namely, monopoly, oligopoly, and monopolistic competition generate large revenue for a different type of firms and companies looking to do business and make a profit as per their convenience. An oligopoly will allow more than one honcho to co-exist, and a monopolistic competition will allow several players to enter into the market, while a monopoly will essentially be the one that stands apart and rules the entire demand and supply chain in the particular field of selection.

[Commerce Class Notes] on Neo-Classic Organization Theory Pdf for Exam

Neoclassical theory (also referred to as human relations of thoughts) was introduced based on classical theory. It has added, modified, and in some way extended classical theory. The basic assumption of this theory is that the physiological and social aspects of a worker as an individual and his workgroup ought to be focused on. In classical theory, the organization emphasized order, structure, economic factors, formal organization, and objective rationality. Whereas neo-classical theory emphasized social factors and emotions at work.  Human relation is a general term that is frequently used to describe how a manager interacts with their employees. The importance of human relations is included in two aspects: The organization situation should be observed in social terms as well as economical and technical terms, and in terms of clinical method, it is similar to the doctor’s diagnosis of the human organisms.

What is Neo Classical Theory?

The Neoclassical approach was developed many years ago because it was believed that the classical theory did not achieve complete production efficiency and workplace harmony. Managers still observe the frustrations and difficulties because people always do not prefer to follow estimated or rational patterns of behavior.

Hence, there was a greater interest in assisting managers to deal more effectively with the “people side” of the organization. The neo-classical approach reflects a slight modification over the classical approach. 

The neoclassical approach identifies the importance of physiological and social aspects of workers as an individual and their relationships within and among the group of the organization. The Neoclassical Theory gained importance specifically in the rise of the “Hawthorne Experiment” at Western Electric Company by the father of human relation management named Elton Mayo from 1924 to 1932.

The Inception of Neo-Classical Theory

The neoclassical theory is the extensive version of the classical theory that includes behavioural science in business management. In this theory, the organization is the social system, and its performance is affected by human efforts.

The classical theory emphasized the mechanical and physiological variables and deemed them the primary factor in inferring its efficiency. However, when the efficiency was checked, it was found that the positive aspect of these factors did not evoke a positive response in work behaviour. 

Hence, the researchers tried to specify the reasons for human behaviour at a job. This eventually led to the arrangement of the neoclassical theory of economists. This mainly emphasizes human behaviour in the organization. This approach is often referred to as human relations or behavioural theory of organization. 

The neoclassical theory states that an organization is a mix of both informal and formal aspects of the organization. This aspect was ignored in classical theory. The organization’s informal structure is majorly formed due to the social interaction with workers; this affects and gets affected by an organization’s formal structure. Generally, disputes between the organization and workers often exist but this needs to be resolved immediately as the problems persist.

What are the Features of Neo-Classical Theory?

  • Business Organizations are identified as a social system.

  • Human factors are regarded as the most important elements in the organization.

  • The theory revealed the importance of social and psychological factors in determining the worker’s productivity and satisfaction.

  • The management aims to develop social and leadership skills along with technical skills. It must be done for the welfare of the workers and the organization.

  • Morale and productivity work together in an organization.

Organization Structure in Neo-Classical Theory

The neoclassical writers offered the following organizational structure: 

Flat Structure: In the case of flat structure, the wide span of control in an organization helps in motivating the employees more effectively, a shorter chain of communication and it is free from hierarchical control.

Decentralization: Neo-classical theory adopted a decentralized organizational structure which is close to the flat structure due to the wider span of control. It permits autonomy and initiative at lower levels. It also encouraged people to occupy higher positions in the organization.

Informal Organizations: The neoclassical theorists emphasized the need for both formal and informal organizations. The formal organization indicates the motive of top management for interactions among the people. Informal organization is significant to promote the inadequacy of formal organization and to satisfy the social and psychological needs of people. The management uses informal organization for overcoming resistance to change on the part of workers and also for a fast communication process. Both formal and informal organizations are interdependent upon each other.

The Criticism of Neoclassical Theory

The assumptions on which neoclassical theory is formulated is sometimes not true. Thinking that there is always the possibility to find a solution that is acceptable to all is not always true. There are several conflicting interests among distinct groups that are merely structural and not physiological. This aspect is not covered in neo-classical theory. No specific organizational structure is suitable for all organizations. Various organizational formats introduced by the neoclassicists are not acceptable in all situations.

Neoclassical theory is only a modification of classical organization theory. It also suffered from similar drawbacks from which classical organization theory suffered. It lacked a unified approach to organization. This theory has been criticized by the fact it is nothing more than “ a commonplace of descriptive and empirical information as it has mainly relied on the Harthword Experiment”.

Fun Facts

  • Neoclassical theory is based on the assumption that makes its structure irrelevant for different organisation situations. 

  • This theory is a modified version of the classical theory that includes behavioural sciences in business management.

Conclusion

The neoclassical theory tried to overcome the drawbacks of classical organization theory. It introduced the concept of informal organization and the human behaviour approach in the study of organizational functioning. However, the neoclassical theory is also not free from several drawbacks. Like the classical theory of organization, the neo-classical theory is also suffered from incompetency, a short-sighted approach, and lack of integration among many facts of human behaviour studied by it.