8+ Most Important Management Theories For Small Business

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There are numerous management theories that circulate in the corporate sector. Some are old, while others are fresh. However, almost all of them are founded, in some way, on one of the top management theories on this list.

What is the significance of this? Shouldn’t you be concentrating on running your business rather than researching ancient concepts? Yes, you should concentrate on growing your business. However, success is heavily dependent on how you lead your people.

That is why management theories are so important: they provide tangible methods for inspiring greatness in your team.

In this post, we’ll offer you a quick introduction of the management theories that every manager should be familiar with. Find one that appeals to you, conduct additional research, and then incorporate it into your business. Leggo!

What Exactly are Management Theories?

Management theories are sets of principles that are intended to govern an organization, corporation, or other group. They can shape the strategies employed to achieve organizational goals as well as the approaches used by managers to motivate staff. Even if how these theories are applied varies, it is vital to note that real-world leaders apply concepts from multiple theories at the same time.

These notions date back centuries, and today’s workplace is more dynamic. Today’s leaders may choose to use a variety of approaches to encourage their personnel and develop strategies to achieve their operational goals.

The Advantages of Using Management Theories

Learning management theories and applying them in the workplace will help you improve workplace functionality and become a better leader. While you are unlikely to stick to just one management theory, there are numerous advantages to understanding and applying various management approaches. Among the advantages are:

#1. Enhanced Productivity

Through motivation and workplace methods, leaders learn how to best employ their team members. As a result, performance and productivity improve.

#2. Decision-making has been simplified.

Theories provide leaders with ideas and tactics on how to act and react in the workplace. This trains leaders to think quickly and effectively solve problems, resulting in speedier decision-making processes and more effective leaders.

#3. Increased collaboration

Leaders learn how to persuade team members to participate and collaborate effectively through management theory studies. Leaders may also learn about dispute resolution, which may improve workplace collaboration.

#4. Enhanced objectivity

Theories provide you with researched and practised approaches to leadership. Management outcomes can become more predictable when theories-based tactics are implemented rather than relying on your own judgment.

Types of Management Theories 

While ideas may overlap within categories, the following management theories appear according to their focus:

#1. Systems Theory

Systems Theory (or The Systems Approach) had nothing to do with business management when it was first developed, and everything to do with biology. That’s because, at the time, biologist Ludwig von Bertalanffy (1901-1972) established general systems theory (GST) in an attempt to reject reductionism and restore scientific coherence.

The basic concept of general systems theory is that a system is made up of interacting pieces that are influenced by their surroundings. The system as a whole can grow (acquire new properties) and self-regulate (correct itself) as a result of this interaction.

When it comes to business, experts abbreviate “general systems theory” to simply “systems Theory.” In reality, Systems Theory is a point of view rather than a completely established discipline. Systems Theory encourages you to recognize that your company is a system regulated by the same principles and behaviors that govern all biological organizations.

#2. Classical Management Theory 

Profit is prioritized in classical management philosophy, and it is assumed that personal gain motivates personnel. It intends to streamline operations and boost productivity.

Specialization, incentivization, and hierarchical organization are all important concepts. The first two contribute to staff motivation and efficiency. A meritocratic chain of command provides order and oversight, but centralized leadership facilitates decision-making. Standardization lowers waste and mistakes at every level.

Classical management theory has several advantages. It brings clarity to both the organization and its employees, and specialization and sound hiring processes place employees in positions they can handle if not master.

#3. Scientific management theory

The scientific management theory was developed by Frederick Taylor. This philosophy advocates adopting the scientific approach to complete tasks in the workplace, which eliminates personal judgment from the decision-making process.

To boost efficiency, Taylor suggested streamlining chores. He also stated that leaders benefit by thoroughly training their employees, placing them in tasks that best fit their skills and competencies, and regularly supervising them to ensure they are efficient in their roles. This emphasizes the significance of workplace efficiency while ignoring the compassion of individuals because they are only seen as production units.

#4. Bureaucratic Management Theory 

Max Weber was a leading scholar of the late nineteenth and early twentieth centuries. He had a significant impact on – and continues to have an impact on – economic, religious, and political sociology. In his posthumously published book “Economy and Society,” he describes bureaucratic management theory.

Weber believed that standard norms and well-defined responsibilities increased an organization’s efficiency. Everyone should be aware of their position’s responsibilities and expectations, as well as their place within a clear hierarchy and overall business regulations. Hiring decisions and rule enforcement should be impersonal, influenced only by logic and established codes.

Weber’s thesis envisions institutions that are orderly and scalable. Most large companies, whether public, private, or profit-driven, have some kind of bureaucracy.

#5. Administrative management theory

The administrative management theory was established by Henri Fayol. According to this view, leaders have five functions: foresee, plan, coordinate, command, and control. His thesis laid forth numerous guidelines for how leaders should organize and connect with their teams. He believed that these principles should not be rigidly applied, but rather understood by each manager in light of their own team and workplace. Among the principles are initiative, equity, scalar chain, and personnel remuneration.

#6. Theories X And Y

Douglas McGregor (1906-1964), a social psychologist, authored The Human Side Of Enterprise in 1960. He outlined two dramatically different management techniques (theories X and Y) in it. Each management style is influenced by the manager’s perceptions of their employees’ motivations.

According to Theory X, employees are apathetic or detest their jobs. Managers who follow Theory X are frequently dictatorial and will micromanage everything since they lack trust in their people.

Employees, according to Theory Y, are self-motivated, responsible, and desire to take ownership of their jobs. Managers who follow Theory Y include their employees in decision-making and promote creativity at all levels.

In practice, small businesses tend to follow Theory Y, while large businesses follow Theory X.

#7. Human Relations Theory

Elton Mayo (1880-1949), a psychologist, was tasked with increasing productivity among dissatisfied employees in the first quarter of the twentieth century. Mayo aimed to boost worker satisfaction by modifying environmental factors like as lighting, temperature, and break time. All of these modifications were beneficial.

Mayo then experimented with adjusting variables that he believed would have a detrimental impact on satisfaction, such as workday length and quotas (which he raised). He discovered that regardless of the change — good or poor — worker satisfaction improved.

This led Mayo to believe that performance was a product of the researcher’s attention to the workers. In other words, the attention made the employees feel important.

These findings gave rise to Mayo’s Human Relations Theory, which claims that social variables, such as personal attention or being part of a group, motivate employees more than environmental factors, such as money and working conditions.

#8. Behavioral Management Theory 

The person, rather than the procedure, is at the center of corporate operations, according to behavioral management theory. It investigates business as both a social system and a formal structure. Productivity is thus dependent on appropriate motivation, group dynamics, human psychology, and efficient processes.

Business is made more human through behavioral management philosophy. Feelings have an effect on operations. Employees are encouraged to perform better by team spirit, public acknowledgement, and personal pride. Individual relationships are also important. Employees are more willing to go above and above for a supervisor they like and who likes them.

#9. Modern Management Theory 

Modern management theory takes a management approach that combines scientific technique with humanistic psychology. It makes decisions, streamlines operations, and quantifies performance using developing technology and statistical analysis. At the same time, it places a premium on individual job happiness and a positive corporate culture.

This theory category is more comprehensive and adaptable than its predecessors. Data-driven decisions can eliminate human bias while also taking into account employee health and happiness metrics. Instead of positing a single, overarching principle to guide management, modern management theory empowers companies to respond to complicated, fluid conditions with local solutions.

#10. Contingency Management

The contingency management hypothesis was established by Fred Fiedler. According to this notion, no single management strategy is appropriate for every situation. Fiedler believed that the personal characteristics of managers influenced how they led their teams. This approach emphasizes the need of leaders to be adaptable and select the strong attributes that best suit their present work environment.

#11. Quantitative Management

Quantitative Management Theory is a branch of Modern Management Theory that emerged in response to administrative inefficiency during World War II.

This Quantitative Management Theory brings together professionals from several scientific areas to address military staffing, material, logistical, and systems concerns. The straightforward, numbers-oriented approach to management (which also applies to business) aided decision-makers in calculating the risks, advantages, and downsides of various options.

This shift toward pure logic, science, and math is balanced by the assumption that mathematical conclusions should be utilized to supplement, rather than replace, experienced managerial judgment.

#12. Organizations As Learning Systems

When compared to many of the other theories on this list, Organizations As Learning Systems Management Theory is relatively recent. Organizations As Learning Systems Management Theory, sometimes known as Integral or Holistic Management Theory, arose as a postmodern alternative to many of the older management theories still in use today.

It begins with the notion that the business is a system composed of a series of subsystems. To ensure that the business runs smoothly and efficiently, each subsystem must not only function smoothly and efficiently within itself but also with the subsystems around it.

Managers, according to this view, are responsible for managing the cooperation required to guarantee the broader “organism” continues to function successfully.

This paradigm emphasizes learning and transformation, and learning is promoted and made available to everyone – not just middle and senior management. This idea places a premium on collaboration, participation, knowledge exchange, and individual empowerment.

How to Apply Management Theories

Here are some more things to keep in mind while employing any management theory or theories:

  • Invest on employee education.
  • Allow employees to make decisions.
  • Pay attention to the wants and needs of your staff.
  • Evaluate your workplace to see if authoritarian or participative management is more appropriate.
  • Consider which theories best suit you depending on your characteristics, your job environment, and the employees you supervise.
  • Try implementing a few principles from each theory at the same time.
  • Have a set of rules that are clear and consistent.
  • After a period of adopting a new management theory or a collection of ideas from many theories, solicit feedback.

What was Elton Mayo’s Theory?

According to Mayo’s management theory, relational elements such as attention and camaraderie inspire employees considerably more than monetary rewards or environmental factors such as lighting, humidity, and so on. Mayo created a matrix to depict the chances of a certain team’s success.

What are the Theory Management Styles?

Participative, complete quality, and self-management are the three basic management styles. People-oriented management methods include participative and self-management, whereas total quality management focuses on product output.

What is Peter Drucker Theory?

Decentralization, knowledge work (he developed the term “knowledge worker”), management by objectives (MBO), and the SMART goal technique are at the heart of Drucker’s management theory. Decentralization entails management empowering staff by distributing tasks.

What is the Hawthorne Theory of Management?

In management, Hawthorne studies refer to the adjustment of employee behavior depending on the idea that management is watching them. Hawthorne studies are well-known for investigating sociopsychological aspects of human behavior as a tool for staff management in the workplace.

Which Management Theory is Most Used Today?

Systems theory, contingency theory, Theory X and Theory Y, and scientific management theory are some of the most common management theories used today.


It is challenging to change your management idea and approach. However, if you commit to adapting your employees’ attitudes and natural routines, your company will benefit both now and in the future.

Managing your staff in a way that they understand (and find appealing) results in higher morale, lower turnover, and higher employee engagement. Those outcomes were well worth the effort. Today, familiarize yourself with dominating principles and prepare for a new movement tomorrow.


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