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Neoclassical Theory of Management

Neoclassical theory of management refers to an extended version of the classical management theory, which arose as a consequence of the critization of classical theory. Additionally, the theorist worked on using classical theory as the foundation by centering more on the relationships between humans and behavioral science. Further, the neoclassical perspective also highlighted the significance of social aspects of organizations, recognizing that workers were not just passive resources but active contributors to the organization. The implications of this perspective on the management of an organization are numerous and far-reaching, and they comprise variations in communication channels, leadership styles, motivation, and organizational culture.


One of the key substantial insinuations of the neoclassical perspective on management is the requirement for a change in leadership styles (Rowlinson, 2020). The move towards a more participative leadership style in neoclassical management thinking is entrenched in acknowledging that workers are not just passive resources but active contributors to the organization. This means that their input and thoughts can be valuable resources for the organization, and they can be driven to contribute more when they feel that their thoughts and contributions are respected. Participative leaders check in with workers on subjects that affect their work, value their input, and inspire them to make decisions. By doing so, workers feel empowered to take accountability for their work and feel more invested in the outcomes of their conclusions. This sense of ownership and accountability is indispensable for fostering worker commitment and loyalty to the organization. In contrast, an authoritarian leadership style can lead to a sense of helplessness and disengagement among staff.

When decisions are made without input or consideration for workers’ thoughts, workers may feel that their contributions are not valued, leading to abridged motivation and job gratification. This can result in high turnover rates, lower productivity, and amplified organizational costs (Sridhar, 2017). Managers in neoclassical organizations must build relations with their workers to understand their needs and aspirations. This encompasses being open to feedback, offering personal and professional development prospects, and showing genuine interest in workers’ well-being. Employees who feel valued and supported are more likely to be driven to work hard and contribute to the organization’s success. In addition to fostering operative participation, participative leadership styles can inspire innovation and creativity in the organization. Leaders can tap into their varied perspectives and ideas by encompassing workers in decision-making processes, leading to new and innovative explanations for organizational challenges.

Communication Channels

The neoclassical perspective on management identifies the confines of formal communication channels in enabling effective communication among workers. While formal communication channels such as official emails, memos, and meetings are significant, informal communication channels such as gossip and grapevine communication can also substantially convey information among workers. Gossip and grapevine communication can offer workers information that may not be accessible through formal channels, leading to greater awareness and understanding of organizational matters (Sridhar, 2017). Managers must, therefore, recognize and apply informal communication channels to ease effective communication in the organization. However, managers must also be cautious of the potential negative effects of informal communication channels. Gossip and rumors can spread misinformation and lead to conflicts and misunderstandings in the organization. It is, therefore, significant for managers to monitor and manage informal communication channels to guarantee that they do not cause harm to the organization.

Group dynamics also play a crucial part in the neoclassical approach to management. Managers must encourage the formation of workgroups or teams to allow workers to work together effectively. Group work fosters collaboration and communication, leading to higher productivity and job gratification (Rowlinson, 2020). Workgroups or teams can also facilitate employee participation in decision-making, leading to better worker empowerment and organizational commitment. However, managing workgroups or teams can also pose challenges for managers. It is significant for managers to guarantee that group dynamics are positive and that all members contribute equally to the group’s objectives. Managers must also recognize and address conflicts within workgroups or teams to thwart them from creating organizational tension or disruption.

Organization culture

The neoclassical perspective recognizes the significance of organizational culture and its impact on worker conduct and motivation. A positive organizational culture fosters employee satisfaction and commitment, enriching organizational performance. Managers must, therefore, center on creating a positive work environment that fosters worker satisfaction and commitment. In addition to promoting group dynamics, managers in neoclassical organizations must also center on building a positive organizational culture that inspires teamwork and collaboration. Organizational culture refers to the shared values, principles, and behaviors that shape the organization’s identity and influence worker behavior (Rowlinson, 2020). A positive organizational culture that values collaboration and teamwork can increase worker engagement, job satisfaction, and productivity. Managers can foster a positive organizational culture by setting a positive tone, promoting open communication, identifying and rewarding worker contributions, and encouraging worker development and growth. By promoting a positive organizational culture, managers can produce a work setting conducive to employee productivity, well-being, and organizational success. Another way to develop a positive organizational culture is by encouraging employee involvement in decision-making processes. When workers feel that their thoughts and contributions are valued, they are more likely to be committed to the organization. Managers must also ensure that the organization’s values and mission are aligned with worker values and aspirations. This alignment fosters a sense of belonging and commitment among workers.


The neoclassical perspective identifies the significance of human motivation in the workplace. Managers must, therefore, center on creating a work environment that fosters worker motivation (Mueller, 2018). This encompasses offering workers challenging and meaningful work, prospects for progress and development, and suitable compensation. Managers must also identify the significance of inherent motivation, the drive within an individual. Inherent motivation is driven by the aspiration for personal progress and development, a sense of achievement, and a desire to make a difference. Managers must, therefore, centers on creating a work environment that fosters intrinsic motivation, such as providing workers with prospects for self-directed work and autonomy.

In conclusion, the neoclassical perspective on management has far-reaching implications for the management of an organization. It highlights the significance of human associations, leadership styles, communication channels, organizational culture, and motivation in accomplishing organizational objectives. Managers must recognize the significance of these features and center on creating a positive work environment that fosters worker gratification and commitment. This approach will eventually lead to enhanced organizational performance and a more engaged labor force.


Mueller, D. C. (2018). Corporate governance and neoclassical economics. International Journal of the Economics of Business25(1), 47-64.

Rowlinson, M. (2020). Business history and organization theory. In Management and Industry (pp. 7–38). Routledge.

Sridhar, M. S. (2017). Schools of management thought. Retrieved from.


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