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EVOLUTION OF EVOLUTION OF MANAGEMENT THOUGHTS MANAGEMENT THOUGHTS

MBA I Year MBA I Year

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Three Waves That Changed the World

• AgricultureUntil the late nineteenth century, all economies were

agrarian.

• IndustrializationFrom the late 1800s until the 1960s, most developed

countries moved from agrarian societies to industrial societies.

• Information Information technology is transforming society from its

manufacturing focus to one of service.

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The Changing Economy

Old Economy

• National borders serve to limit competition

• Job opportunities are for blue-collar industrial workers

• Population is relatively homogeneous

• Customers get what business chooses to give them

New Economy

• National borders no longer define an organization’s operating boundaries

• Job opportunities are for knowledge workers

• Population is characterized by cultural diversity

• Customer needs drive business

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The Industrial Revolution’s Influence On Management Practices

• Industrial revolutionMachine power began to substitute for human power

Lead to mass production of economical goods Improved and less costly transportation systems

became available Created larger markets for goods.

Larger organizations developed to serve larger markets Created the need for formalized management practices.

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Classical Contributions

• Classical approachThe term used to describe the hypotheses of the

scientific management theorists and the general administrative theorists. Scientific management theorists

– Fredrick W. Taylor, Frank and Lillian Gilbreth, and Henry Gantt

General administrative theorists– Henri Fayol and Max Weber

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Scientific Management

• Frederick W. TaylorThe Principles of Scientific Management (1911)

Advocated the use of the scientific method to define the “one best way” for a job to be done

Believed that increased efficiency could be achieved by selecting the right people for the job and training them to do it precisely in the one best way.

To motivate workers, he favored incentive wage plans.

Separated managerial work from operative work.

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Taylor’s Four Principles of Management

• Develop a science for each element of an individual’s work, which replaces the old rule-of-thumb method.

• Scientifically select and then train, teach, and develop the worker. (Previously, workers chose their own work and trained themselves as best they could.)

• Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed.

• Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers. (Previously, almost all the work and the greater part of the responsibility were thrown upon the workers).

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Frederick W. Taylor

• Common Objective of Increasing Productivity for both Management and Workers

• Both should focus on increasing Production • Increased Production to lead to Increased Profits • Breaking job into components and devising s

quicker n best way of doing the same • Differential Rate System

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Contributions of Scientific Management

• Modern Assembly Line • Efficiency Techniques application to wide range

of service sector industries like Fast Food

Limitations of Scientific Management

•Workers and Unions suspicion of Work Exhaustion

•Exploitation of Management on Productivity and Profitability issue

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Scientific Management Contributors

• Henry Gantt Incentive compensation systemsGantt chart for scheduling work operations Improvement on Taylor’s Incentive SystemEach Worker to win 50 cent bonus for finishing

assigned work load Supervisor to earn bonus for each worker who

reached daily standard plus an extra bonus if all workers reached it

Publicly rating of each worker’s progress by black and red chart

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Administrative Management

• General administrative theoristsWriters who developed general theories of what

managers do and what constitutes good management practice

Guidelines for managing complex organizationsHenri Fayol (France)

Fourteen Principles of Management: Fundamental or universal principles of management practice

Max Weber (Germany) Bureaucracy: Ideal type of organization characterized

by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships

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Henri Fayol (France)

• Identify the principles and skills that underlie effective management

• Blueprint for cohesive doctrine of Management• Focus on Total Organization and Management• Most Frequent Applied Management principles • Focus to break the misconception “Managers are

born, not made”• Advocated Management was a skill like any

other ----once that could be taught

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Fayol’s Fourteen Principles of Management

• Division of work

• Authority

• Discipline

• Unity of command

• Unity of direction

• Subordination of the individual Interest

• Remuneration

• Centralization

• The Hierarchy

• Order

• Equity

• Stability of tenure of personnel

• Initiative

• Esprit de corps

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Fayol’s Fourteen Principles of Management

• Division of Labor:Specialization leads to efficiency

• Authority: Exercise of Formal and Personal Authority

• Discipline: Members in orgn need to respect rules and agreements that govern orgn.

• Unity of Command: Each Employee must receive instructions from from only one person

• Unity of Direction:Operations within the orgn having same objective should be directed by one manager

• Subordination of Individual Interest to the common good: Interest of the organization should be primary

• Remuneration: Compensation of the work done should be fair to both employees & employers

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Fayol’s Fourteen Principles of Management

• Centralization:Balance b/w Centralization and Decentralization

• The Hierarchy: The line of authority in the organization : Top management to Lowest Level

• Order: Materials and People should be in the right place at the right time

• Equity:Managers should be friendly & fair to their subordinates

• Stability of Staff: A high employee turnover rate undermines the efficient functioning of an organization

• Initiative:Subordinates should be given the freedom to conceive and carry out the plans

• Espirit de Corps: Promoting Team spirit will give the orgn a sense of unity.

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Weber’s Ideal Bureaucracy

• Theory of Bureaucratic Management that stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority

• Bureaucracy:Formal & Hierarchical Structure Rationally Thought out Activities and Objectives Explicit spelling out Division of Labor Emphasizing Technical Competence Performance Evaluation to be solely on merit

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Weber’s Ideal Bureaucracy

• Division of Labor• Authority Hierarchy• Formal Selection• Formal Rules and Regulations• Career Orientation

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Classical Management Perspective

Contributions Laid the foundation for later developments

Identified important management processes, functions, skills

Focused attention on management as a valid subject of scientific inquiry

• Limitations

More appropriate for traditional, stable, simple organizations

Prescribed universal procedures not appropriate in some

settings

In some cases, viewed employees as tools rather than

resources

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The Behavioral School

More Effective ways to Manage people in the organization

People did not always follow predicted or expected patterns of behavior

Increased interest in helping managers deal more effectively with “People Side of the Organization”

Emphasizes individual attitudes and behaviors and group processes

Recognizes the importance of behavioral processes in the workplace

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Human Resources Approach

• Robert OwenClaimed that a concern for employees was profitable

for management and would relieve human misery.

• Hugo MunsterbergCreated the field of industrial psychology—the

scientific study of individuals at work to maximize their productivity and adjustment.

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Human Resources Approach

• Mary Parker Follett Recognized that organizations could be viewed from

the perspective of individual and group behaviorNatural believer in the power of the group Combining diverse talent into something bigger Effect of environmental factors as Politics, Economics

& Biology Management includes broader set of relationships I.e

Inside the organization and across orgn borders

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Human Resources Approach

• Chester BarnardSaw organizations as social systems that require

human cooperationExpressed his views in his book The Functions of the

Executive (1938)An Enterprise can function efficiently when orgn goals

are kept in balance with the aims and needs of individuals

Individuals zone of Indifference

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Hawthorne Studies

• A series of studies done during the 1920s and 1930s that provided new insights into group norms and behaviorsHawthorne effect

Social norms or standards of the group are the key determinants of individual work behavior.

• Changed the prevalent view of the time that people were no different than machines.

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Hawthorne Studies

• Two Experiments:Lighting Variation Wages and Rest Periods Variation

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Hawthorne experiments

•A Western Electric factory, late 1920sexperiment to find optimal level of lightingwork groups of 6, in separate rooms

•Experimental group & control group no change in lighting for control group

•Findings: increasing brightness raises productivity reducing brightness raises productivity members of the control group also increased

productivity

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Hawthorne experiments

•Outcome of first experiments: puzzled engineers

•Next round of studies: try to understand what’s going on in these groupschange work schedules: length & timing of

breaksproduction kept going up, even when back to

the original (no rest break) schedule

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Hawthorne Experiments

•Further investigation showed thatwork teams regulated the pace of work of

their membersthe foremen (not in the room most of the

time) had no idea of the extent of this self-regulation

the group raised its productivity because it felt involved in the project, and

listened tobecause the experimental conditions

presented it with a challenge

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Hawthorne experiments

• Lessons For managers, the importance of

Teams, not just individuals Workers aren’t machines, they make choices, and

their choices are affected by how others treat them Expert-specified tasks still have a lot of room for

improvement (slack), and workers often know where that slack is

These findings contributed to the development of the human relations approach to management

For researchers

people participating in an experiment are likely to behave differently than they do at other times (Hawthorne effects)

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Human Relations Movement

• Based on a belief in the importance of employee satisfaction—a satisfied worker was believed to be a productive worker.

• Advocates were concerned with making management practices more humane.

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The Quantitative Approach

• Operations research (management science)Evolved out of the development of mathematical and

statistical solutions to military problems during World War II.

Involves the use of statistics, optimization models, information models, and computer simulations to improve management decision making for planning and control.

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The Process Approach

• Management theory jungle (Harold Koontz) The diversity of approaches to the study of

management—functions, quantitative emphasis, human relations approaches—each offer something to management theory, but many are only managerial tools.

• Planning, leading, and controlling activities are circular and continuous functions of management.

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The Systems Approach

• Defines a system as a set of interrelated and interdependent parts arranged in a manner that produces a unified wholeClosed system : a system that is not influenced by

and does not interact with its environmentOpen system: a system that dynamically interacts

with its environmentStakeholders: any group that is affected by

organizational decisions and policies

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The Organization and its Environment

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The Contingency Approach

• The situational approach to management that replaces more simplistic systems and integrates much of management theory

• Four popular contingency variablesOrganization sizeRoutineness of task technologyEnvironmental uncertainty Individual differences