Neo-classical Theory

Scientific theory analyzed activities of workers whereas administrative and bureaucratic theory focused on the activities of managers. Both theories forget the importance of individual as well as group relationships in an organization. The neo-classical theory tries to find out social factors affecting the working of an organization.

The neo-classical theory comprises of Human relations theory or Hawthrone studies. These studies discovered that the real cause of human behavior was somewhat more than mere physiological variables. Since the behavioral approach or human relations approach has suggested only modifications in the basic postulates of classical theory, it is referred to as neo-classical theory.

The three key theories are

1. Hawthrone Effect
2. Human Relation Approach
3. Behavioral Science Approach.

Each theory is described below in brief.

1. Hawthrone Effects:

Studies on human behavior in work situations were conducted at the 'Western Electric Company's Hawthrone plant' near Chicago. These experiments were conducted by Elton Mayo. The outcome of the study was that - "possibility that selected individuals for a study may improve their performance, not because of improved physical conditions, it is because of  the added attention they receive from the researchers, feeling of group pride stimulated which increases the sense of belongingness and job satisfaction."

Bank Wiring Room Experiment of Hawthrone 14 male workers was formed into a small workgroup and intensively observed for 7 months in a small wiring room. The employees in the group were paid not only on the basis of their individual performance but incentives based on the group performance. The researcher found that the group has established its own standards of output, workgroup norms, sentiments. This has a great impact on individual behavior than did the economic incentives offered by the management. Elton mao conducted Hawthorne experiments.

2. Human Relation approach:

It was founded after Hawthrone's experiments. This approach does not have any universal principles. This is because employees aren't treated as machines. They believed that scientific standard rules cannot be applied to humans as they differ from each other. There is no one best way to increase the productivity of all workers.

It focused on building a positive environment where there are opportunities for open communication, feedback, reward linked with performance and clearly defined goals. This approach focuses on using motivation leadership and group dynamics. It laid stress on people management skills and urged organizations to be people-oriented. The organization must fulfill the psychological and social needs of its employees in order to increase productivity.

3. Behavioral Science Approach:

It considered an organization as a socio-technical system. Individuals working together tend to form their own informal groups. It is an advanced theory as compared to the human relation approach. The human relation approach focused on individual interpersonal interaction whereas the behavioral approach lays stress on group or organizational behavior.

It has drawn its roots from various sciences such as psychology, sociology, which study human behavior. It states that an employee may behave differently when in a group and in isolation. Individuals are different from others on the basis of value systems, perceptions and attitudes. Interpersonal relations are affected by a wide range of factors. hence, behavioral approach in an improved version of Hawthrone experiments and human relation aprroach.