These are a collection of ideas which set forth general rules on how to manage a business or
organization. Management theory addresses how managers and supervisors relate to their
organizations in the knowledge of its goals, the implementation of effective means to get the goals
accomplished and how to motivate employees to perform to the highest standard.
1. F.W Taylor’s scientific management Theory
Frederick Taylor's theory of scientific management developed techniques for improving the
efficiency of the work process. Based on a systematic study of people, tasks and work behavior,
Taylor's theory broke the work process down into the smallest possible units, or sub-tasks, in an
effort to determine the most efficient method possible for completing a particular job. Some
developments of this theory guides for improved productivity by increased employee incentive,
widespread improvements in quality control and Better personnel practices.
2. Max Weber’s Bureaucratic Theory
Bureaucracy is an administrative system designed to accomplish large-scale administrative tasks
by systematically coordinating the work of many individuals. Weber has observed three types of
power in organisations: traditional, charismatic and rational-legal or bureaucratic. He has
emphasised that bureaucratic type of power is the ideal one. The basic feature of bureaucratic
organisation is that there is hierarchy of positions in the organisation. Hierarchy is a system of
ranking various positions in descending scale from top to bottom of the organisation. In
bureaucratic organisation, offices also follow the principle of hierarchy that is each lower office
is subject to control and supervision by higher office. Thus, no office is left uncontrolled in the
organisation. This is the fundamental concept of hierarchy in bureaucratic organisation. This
hierarchy serves as lines of communication and delegation of authority. It implies that
communication coming down or going up must pass through each position. The main features of
this theory signifies that employees are only selected for the organizational purpose for full time
and paid wherein they have no priority interest, their position, development, tenure and salary
is maintained by rules and regulation.
3. Henry Foyol’s 14 principle of management:
1. Division of Work
2. Authority and Responsibility
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual Interest
8. Degree of Centralization
9. Scalar Chain
12. Stability of Tenure of Personnel
14. Esprit de Corps
4. Theory X and Theory Y
The management theory an individual chooses to utilize is strongly influenced by beliefs about worker attitudes.
Managers who believe workers naturally lack ambition and need incentives to increase productivity lean toward
the Theory X management style. Theory Y believes that workers are naturally driven and take responsibility.
While managers who believe in Theory X values often use an authoritarian style of leadership, Theory Y leaders
encourage participation from workers.
5. Chaos Theory
Change is constant. Although certain events and circumstances in an organization can be controlled, others
can't. Chaos theory recognizes that change is inevitable and is rarely controlled. While organizations grow,
complexity and the possibility for susceptible events increase. Organizations increase energy to maintain the
new level of complexity, and as organizations spend more energy, more structure is needed for stability. The
system continues to evolve and change
Management theories and Globalization
All the business success primarily depend on right persons in an organization for which the
Human Resource Management of a Company may apply the Classical management theory of F.
W Taylor which tells the process of defragmented work with better techniques to achieve
quality control by better personal practice and motivation by financial incentives. On the other
hand Max Weber’s theory which emphasize rigid rules and regulation for recruitment, selection
and placement. Then, Henry Fayol’s Theory of management can be applied for systematic
analysis of management process by planning, organizing, commanding, coordinating and
controlling the system. It expanded further with the development of System Based theory that
states that organizations are like living organisms, made up of numerous component
subsystems that must work together in harmony and relies on synergy, interrelations and
interdependence between different subsystems.
The Institutional Theory, Contingency theory and Transaction cost theories are
belonging to the Systems theory.
Institutional theory emphasizes on the scanning of external and internal environment to
formulate HRM model to enable employees matched with the demand of globalization.
Moreover, due to the developmental challenges like environmental, political, cultural,
economical and ethical conflicts and dilemma as the result of globalization, the
organization has to implement Contingency Theory which describes that the
relationship between the HRM policies and the performance will vary according to the
influences such as company size, age and technology, capital intensity, degree of
unionization, sector ownership and location. Another key concept in strategic HRM for
business success is the cost leadership, which can be formulated by Transaction cost
theories, that assumes that businesses should develop organizational structures and
systems through HRM metrics that economize the operative expenses.
However in the quest of the situational demands in the era of globalization, MNCs need the
application, according to the ‘Global strategic Rivalry Theory’ the competitive advantage is
achievable and sustainable for a firm if firm’s resources are valuable, rare and costly to imitate.
It also states that every multinational business organization must have to earn sustainable
competitive advantages to survive in the competition for which the unique business processes
or a method as well as extensive experience in the industry is of utmost importance. It involves
creating multiple levels of motivated workers to improve productivity and needful adoption of
HRM approaches. Importantly by the application of Resource-based theory of HRM the Global
business organization primarily established Human Resource as the most valuable one that has
to be created, used effectively and retained. Also, the application AMO theory of HRM ensures
the performance to create by the combination of employee’s motivation, ability and
opportunities. In a brief, the motivation is achieved by applying Organizational behavior theory
that advocates for more strength of an individual’s identification with, and involvement in, a
Personnel Management or PM is the traditional method to manage workforce within a company and
assumes people as unit for production. It is driven by a Personnel Manager, who imposes basic rules and
regulation over the work force, less provision of training and development, based on job design on the
basis of division of labor. On the other hand HRM is modern method of managing people, particularly
engaged with staffing, Performance management, compensation and training and Development.
Human capital Management
What does a human resources Manager do?
Human resources managers plan, direct and coordinate the administrative functions for best
use employees’ talents, for recruiting, screening, interviewing and placing workers. They may
also handle employee relations, payroll and benefits and training.
They also oversee specialists in their duties; consult with executives on strategic planning; and
link a company’s management with its employees thus resolve issues between management and
employees. They also advise managers on policies like equal employment opportunity and
sexual harassment. Other duties are:
Coordinate and supervise the work of specialists and staff
Oversee recruitment and hiring process
Direct disciplinary procedures
Strategic Human resources planning
It is a process that identifies current and future human resources needs for an organization to
achieve its goals by serving as a link between human resources management and the overall
strategic plan of an organization. It consists of strategic creation of employer brand, retention
strategy, absence management strategy, flexibility strategy, talent management strategy, and
recruitment and selection strategy.
Strategic Human Resource Management
It is shortly known as SHRM is a function of management which entails development of policies,
programs and practices related to human resources, which are then aligned with business strategy, so as
to achieve strategic objectives of the organisation. Its primary purpose is to improve the performance of
the business and maintain a culture that encourages innovation and works continuously to gain
Key Differences between HRM and SHRM
The differences between HRM and SHRM can be drawn clearly on the following grounds:
1. The governance of manpower of the organisation in a thorough and structured manner is
called Human Resource Management or HRM. A managerial function which implies framing
of HR strategies in such a way to direct employees efforts towards the goals of an
organisation is known as SHRM.
2. The process of HRM is reactive in nature. On the other hand, SHRM is a proactive
3. In human resource management, the responsibility of manpower lies with the staff
specialists, whereas in strategic human resource management, the task of managing the
workforce, is vested in the line managers.
4. HRM follows fragmented approach, which stresses on applying management principles
while managing people in an organisation. As against this, SHRM follows an integrated
approach, which involves lining up of business strategy with the company’s HR practices.
5. Human resource management emphasises on employee relations, ensuring employees
motivation, and also the firm conforms to the necessary employment laws. Conversely,
SHRM focuses on a partnership with internal and external constituent groups.
6. HRM supports short-term business goals and outcomes, but SHRM supports long-term goals
and results of business.
7. In human resource management, the human resource manager plays the role of change
follower, i.e. he/she responses to change, hence pursues transactional leadership style. As
opposed to SHRM, the human resource manager is a change leader, i.e. an imitator, thus
seeks transformational leadership.
8. The primary element in HRM is the capital and products, but people and their knowledge
are the building blocks of SHRM.
9. If we talk about accountability, a conventional HRM is a cost centre. Unlike a strategic HRM
which is an investment centre.
10. In human resource management, stringent control over employees is exercised. As against
this, in strategic human resource management, no such control is imposed, rather the rules
for managing manpower is lenient.
HRM vs HCM
1. Human resource function performs work according to the law and company
directives and HCM is related to all employees’ issues and other elements such as
employment, utilization, compensation and development.
2. Uses simple bench marking techniques but HCM uses evaluation techniques.
3. HCM is viewed as a comprehensive business management strategy that is
integrated with every aspect of the organization and takes a more people-centred
and strategic approach to business than human resources management (HRM).